Developments In US Antitrust Litigation'2022 Year In Review

• Jurisdiction: United States,Federal,California
• Law Firm: Arnold & Porter
• Subject Matter: ntitrust/Competition Law, Antitrust, EU Competition
• Author: Mr Daniel B. Asimow, C. Scott Lent, Sonia Kuester Pfaffenroth, Laura Shores, Matthew Tabas and Kevin Chen
• Published date: 25 January 2023

Introduction

In 2022, antitrust case filings were down almost 25 percent from the previous year. According to Westlaw Analytics, 242 cases were filed in federal district courts in 2022 compared with over 300 in 2021 and over 400 in 2020. Notably, plaintiffs continue to prefer California federal courts, with over 30 antitrust cases filed in the Northern District of California alone. While 2022 saw a number of noteworthy private antitrust litigations filed and other high-profile actions continued in discovery, there were also important decisions in government merger litigation challenges in several courts and on class certification from the US Court of Appeals for the Ninth Circuit. In the coming year, antitrust litigation is expected to become more active, following on the heels of aggressive enforcement from the antitrust agencies, and key decisions are expected from federal courts at all levels.

Highlights from 2022

Government Litigation Remained Active, but With Mixed Results

While US antitrust agency leadership has been vocal about its desire to litigate more enforcement challenges to push antitrust jurisprudence in a more progressive direction, they have faced some skepticism from both federal and administrative courts and realized mixed results. Notably, in September 2022 alone, the government suffered key losses in three high-profile merger cases.

On September 1, Chief Administrative Law Judge (ALJ) D. Michael Chappell rejected the Federal Trade Commission (FTC)'s claims that Illumina's proposed acquisition of Grail would substantially reduce competition in the alleged market for research, development, and commercialization of multi-cancer early detection (MCED) tests.¹ The complaint alleged that there was a reasonable likelihood the vertical merger was anticompetitive because Illumina, as the sole provider of a critical input for MCED tests, could harm potential competitors to Grail.² Judge Chappell concluded that the FTC did not bring sufficient evidence to demonstrate that Grail had competitors who were close to making a MCED test commercially available for patients to purchase.³ The ALJ also rejected the FTC's contention that a prima facie Section 7 Clayton Act violation could be established by demonstrating that Illumina would have the ability and incentive to harm Grail's rivals post-acquisition.⁴ In doing so, the court emphasized that the established legal precedent required a court to consider a number of factors when evaluating vertical mergers, such as the nature and purpose of the acquisition. Lastly, the court concluded that Illumina's long-term supply agreements with its US oncology testing customers who purchase next-generation sequencing (NGS) products would constrain Illumina from harming any of Grail's potential competitors, emphasizing that case law supported applying the real-world effects of contractual commitments when determining the likelihood for anticompetitive harm.⁵ Complaint counsel appealed the ALJ's decision and the FTC, sitting as an adjudicative body, heard oral arguments in the appeal in December 2022. The FTC decision on appeal is expected in the first quarter of 2023.

A few weeks later, a court in the US District Court for the District of Columbia rejected the Department of Justice, Antitrust Division (DOJ)'s request to block UnitedHealth's acquisition of Change Healthcare.⁶ DOJ's complaint set forth three theories of competitive harm'one horizontal and two vertical.⁷ Specifically, the government argued that the acquisition would lessen competition in the market for first-pass claims editing. The complaint also alleged that the merger would provide UnitedHealth with control over Change's Electronic Data Interchanges (EDI) clearinghouse and would give UnitedHealth the ability and incentive to (1) use external customers' competitively sensitive information for its benefit and (2) preclude innovation and raise rivals' costs. First, the court held that UnitedHealth's proposed divestitures would resolve any potential anticompetitive effects from a loss of competition between UnitedHealth and Change in first-pass claims editing solutions. Second, the court found that UnitedHealth would not have the ability and incentive to harm its rivals. Notably, the court concluded that DOJ's claims were unsupported by real-world evidence of anticompetitive effects. In particular, the court noted that DOJ could not quantify the amount of new data'or its value'that would be available to UnitedHealth post-merger.⁸ The court also emphasized UnitedHealth's incentives to protect external customers' data and maintain its culture of trust.⁹ Additionally, the court cited UnitedHealth's proposed firewalls and customer contracts as protections against potential foreclosure.¹⁰ When evaluating DOJ's foreclosure theory, the court, similar to Judge Chappell, found that the government's theory was based on the potential foreclosure of EDI-related innovations that did not yet exist.¹¹ In late November, two months after the district court's ruling, DOJ filed a notice of appeal to the DC Circuit.¹²

In late September, the US District Court for the District of Delaware declined to block US Sugar Corp.'s proposed acquisition of Imperial Sugar, disagreeing with both DOJ's market definition and allegations of anticompetitive effects.¹³ DOJ alleged that the proposed merger between the two refined sugar producers would harm customers in the Southeast region of the United States by increasing the price of sugar, reducing quality, and reducing service reliability.¹⁴ The complaint further alleged that the merger could incentivize the few remaining sugar producers to coordinate to raise prices and reduce quality.¹⁵ The parties challenged DOJ's proposed relevant market as being limited to the Southeast, arguing that DOJ's market definition ignored the reality that sales of refined sugar flow readily throughout the United States.¹⁶ After a four-day bench trial in April 2022, the court concluded that DOJ's proposed geographical market was too narrowly defined and the US Department of Agriculture could counteract any anticompetitive effects because the supply of refined sugar in the United States is heavily regulated.¹⁷ Immediately after the district court's decision, DOJ filed an emergency motion to prevent the parties from closing the transaction pending appeal.¹⁸ The US Court of Appeals for the Third Circuit denied DOJ's request and heard oral arguments on January 18, 2023.

While this string of losses was significant, the antitrust agencies had successes in court as well. For example, in March 2022, the Third Circuit upheld the decision of a court in the District of New Jersey granting the FTC's request for a preliminary injunction to pause Hackensack Meridian Health Inc.'s planned purchase of Englewood Healthcare pending an administrative trial.¹⁹ The court confirmed that a showing of price discrimination is not required for a patient-based geographic market.²⁰ Instead, the court affirmed the district court's decision that the FTC verified the patient-based market with a valid application of the hypothetical monopolist test.²¹ Finally, the court upheld the lower court's determination that the FTC established a prima facie case that the merger would be anticompetitive...