From John Ralston Saul:

[I]f you can take a number a statistics and you can either halve it or double it and it’s still shocking then you can use it.

The Washington Post reports that:

The proposed merger between Verizon Wireless and rural carrier Alltel to create the nation’s largest wireless company moved a step closer to reality yesterday after the Justice Department signed off on the deal.

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Public interest groups have criticized the plan to join Verizon, the nation’s second-largest carrier, and Alltel, the fifth-largest carrier, saying the unified company would stifle competition and consumers would be have fewer choices among cellphone network operators.  A combined Verizon-Alltel would create the largest wireless operator with 83.8 million subscribers. AT&T would be second with 74.9 million subscribers, followed by Sprint Nextel with 51 million and T-Mobile with 30.8 million.

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To assuage those fears, the Justice Department is requiring Verizon to sell spectrum in 15 more areas than it had previously demanded. Verizon earlier had agreed to divest spectrum in 85 markets.

“The divestitures required are necessary to protect wireless customers and are among the most extensive required by the Department in a wireless case,” said Thomas O. Barnett, head of Justice’s antitrust division.

The Department of Justice’s press release can be found here and the [proposed] Modified Final Judgement can be found here (.pdf).

Yesterday, the U.S. Department of Justice released a statement to announce “the closing of its investigation of the proposed merger of Delta Air Lines Inc. and Northwest Airlines Corporation.”  According to the statement:

After a thorough, six-month investigation, during which the Division obtained extensive information from a wide range of market participants — including the companies, other airlines, corporate customers and travel agents — the Division has determined that the proposed merger between Delta and Northwest is likely to produce substantial and credible efficiencies that will benefit U.S. consumers and is not likely to substantially lessen competition.

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The two airlines currently compete with a number of other legacy and low cost airlines in the provision of scheduled air passenger service on the vast majority of nonstop and connecting routes where they compete with each other. In addition, the merger likely will result in efficiencies such as cost savings in airport operations, information technology, supply chain economics, and fleet optimization that will benefit consumers. Consumers are also likely to benefit from improved service made possible by combining under single ownership the complementary aspects of the airlines’ networks.

In its decision in In re Cipro, the Federal Circuit presents us with what John Ralston Saul calls the “hypnotic clarity of false choices.” Either any “analysis of patent validity is [in]appropriate in the absence of fraud or sham litigation.” Or we have to embark on some form of probabilistic ex ante analysis of patent claims every time a patent holder with market power wants to exclude a competing infringer. That dichotomy makes the preemption theory, i.e., no antitrust claim within the zone of exclusion, unless fraud/sham, more plausible than it is. Or, at least, it makes it look principled and less messy. But antitrust deals with quantitative problems all the time, in fact, the shift from per se categories to rule of reason concepts as the default reflects the willingness of courts to deal with complexity, context, and shades of gray. Consider the general evolution of the rule of reason from a muddled, unweighted multi-factor test in Chicago Board of Trade to a mixture of procedural and substantive criteria, aimed at sorting cases into buckets of (1) lawfulness (e.g., no market power), (2) illegality (e.g., no rebuttal to a plausible theory of harm) and (3) those in which a true balancing of the positive and negative effects cannot be avoided, using the minimum amount of information required to make each such choice. In practice, (1) and (2) have become much more significant than (3). So why is it that we approach the issue of patent validity in the context of an antitrust claim as if the only choice was between patent formalism on the one hand and the IP equivalent of Chicago Board of Trade on the other? A more fruitful inquiry would be one into identifying easily observable proxies for validity and invalidity the presence (or absence) of which would then shift the burdens of persuasion. For example, a successful domestic defense of the validity of the patent in question is certainly a reasonable proxy for validity, raising the bar for those calling the “zone of exclusion” shield in question. Depending on substantive patent standards, a successful defense of the patent abroad may also serve as a proxy for validity. Conversely, reverse payments that greatly exceed the expected profits of the generic challenger may justify a higher burden of persuasion to be placed on the defendant. As always in a rule of reason inquiry, context matters. But to retreat into formalism just because in some sub-set of cases an antitrust trial will have to include a full-fledged patent trial seems unwarranted.

Too often we focus on noisy conflicts, but sometimes the dog that does not bark is just as important (especially for practicing attorneys).  Yesterday, the U.S. Department of Justice announced that it would not challenge a “proposal by a consortium of companies to jointly license patents needed to comply with standards for ultra high frequency radio frequency identification (UHF RFID) technology ….”  PC World reports:

Last November, consortium members — 3M, France Telecom, Hewlett-Packard, LG Electronics, Motorola, ThingMagic and Zebra Technologies — formed a limited liability partnership to jointly license their RFID-related patents using “reasonable and nondiscriminatory terms,” the DOJ said. The companies requested the DOJ conduct a business review to determine that the partnership didn’t break any U.S. antitrust laws.

Under the consortium plan, an independent licensing agent will offer nonexclusive licenses to other companies interested in adopting RFID.

The patents address a UHF RFID standard endorsed in 2006 by the International Organization for Standardization (ISO). The so-called Generation-2 standard was originally created by EPCglobal, a private RFID standards group.

DOJ’s letter (with all 50 footnotes) is available online, as the press release.

Today, the Federal Circuit affirmed the district court’s decision to dismiss the plaintiffs’ claims.  The opnion is available on the Court’s website (pdf).  This is an interesting and important decision that is worth reading.  A few excepts are below to give you a sense of the decision: 

We conclude that in cases such as this, wherein all anticompetitive effects of the settlement agreement are within the exclusionary power of the patent, the outcome is the same whether the court begins its analysis under antitrust law by applying a rule of reason approach to evaluate the anti-competitive effects, or under patent law by analyzing the right to exclude afforded by the patent. The essence of the inquiry is whether the agreements restrict competition beyond the exclusionary zone of the patent. This analysis has been adopted by the Second and the Eleventh Circuits and by the district court below and we find it to be completely consistent with Supreme Court precedent.

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in the absence of evidence of fraud before the PTO or sham litigation, the court need not consider the validity of the patent in the antitrust analysis of a settlement agreement involving a reverse payment.

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We disagree that analysis of patent validity is appropriate in the absence of fraud or sham litigation.

The FTC yesterday granted Early Termination (.pdf) for the $34.9 billion transaction in which Bank of America will buy Merrill Lynch, a deal that was announced just after Lehman Brothers folded.

As previosuly noted, the New York Rangers (i.e., Madison Square Garens, the Rangers’ owner) sued the N.H.L. which was mostly related to control over the Ranger’s website.  The ranger’s motion for a preliminary inunction was denied.  On Friday, the district court - Judge Preska - granted the NHL’s motion to dismiss as to the parts of the complaint that did not relate to the website dispute, but denied it as to the website (or “New Media”) issue.

The Sports Law Blog provides the analysis of the key antitrust issue: 

Judge Preska therefore had to determine if the single entity defense barred MSG’s New Media Strategy Section 1 antitrust claims.  Although Judge Preska recognized that “[w]hat is essentially the same [single entity] argument has been rejected in a similar case by the Court of Appeals,” and that “[m]ost other Courts that have taken up the issue have reached the same conclusion,” Judge Preska concluded that the “Court need not—and will not—resolve the question at this juncture [because] the arguments advanced by the NHL in favor of single entity status require examining facts outside the pleadings.”  In particular, Judge Preska noted that “there is no evidence in the record on the crucial question of market definition, let alone the inquiry into how the NHL actually operates as an economic actor in that market,” and “therefore the NHL’s arguments in favor of dismissal cannot be resolved at the pleading stage.”

Here is the opinion: madison-square-gardens-l1p-v-national-hockey-league.pdf.

As I posted earlier, Whole Foods filed a petition for a rehearing en banc after losing its appeal in the D.C. Circuit. Last month, the FTC responded by filing a brief in opposition (pdf), stating that the D.C. Circuit Court panel “applied established standards to the specific factual setting of this case, and rendered a ruling that focused on the evidenced adduced by the FTC.” Whole Foods is now responding with a reply brief (pdf) written by Ted Olson of Dechert: “As if in a time warp, the [D.C. Circuit Court] Panel eclipsed decades of leading cases — including this court’s decision in Heinz and Baker Hughes, which require an analysis of the competitive effects of a merger under modern economic principles — and dusted off a series of cases dating back to the 1960s that have long been discarded by modern antitrust decisions.” (Here is Whole Foods’ petition for leave to file a reply, since replies are not typically provided for in en banc petitions.)

I’ll have some commentary on the back and forth a little later.

A couple of weeks ago, we passed along a report that several upstream internet service providers (ISPs) ”shunned” Atrivo, a downstream ISP.  The Washington Post’s Security Fix blog reports today that there was a “short-lived but precipitous decline in the level of badness online after Atrivo was shut down …”

Yesterday, the U.S. Department of Justice announced that several shipping company executives had plead guilty and agreed to serve jail sentences “for their roles in a wide-ranging conspiracy to rig bids, fix prices and allocate market shares for customers transporting goods between the continental United States and Puerto Rico by ocean vessel …”  The press release also states that:

The five executives charged today work for large U.S. companies that provide freight shipping services to customers transporting goods between the continental U.S. and Puerto Rico. These companies transport a variety of cargo shipments, such as heavy equipment, medicines and consumer goods, on scheduled ocean voyages between the continental U.S. and Puerto Rico. ….

The four individuals charged with violating the federal antitrust laws have agreed to plead guilty for their roles in a conspiracy that began at least as early as May 2002 and continued until as late as April 2008, the object of which was to eliminate competition and raise prices for the movement of goods in the U.S. to Puerto Rico shipping lane. The Department charged that the executives sought to eliminate competition and raise prices by agreeing not to compete for one another’s customers; agreeing to rig bids submitted to government and commercial buyers; and agreeing to fix the prices of rates, surcharges and other fees charged to customers.

Today’s Wall Street Journal (h/t Danny Sokol) reports that:

Federal prosecutors have opened separate criminal probes into possible price-fixing by major egg producers and California tomato processors, the latest in a series of U.S. investigations of alleged collusion in food and agriculture.

The investigations, which have not been previously reported, add to concerns that beyond the rising cost of fuel and feed, a hidden factor may be driving food prices higher: collusion among farmers, food processors or exporters.

A Justice Department official confirmed that it had opened investigations into tomatoes and eggs. Federal agencies already are pursuing criminal or civil inquiries in markets including fertilizer, cheese and milk, examining whether suppliers worked in league to manipulate prices. The Justice Department said it had also opened a probe last year into the citrus-fruit industry.

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Under U.S. law, it’s a crime for competitors to collaborate on production or prices. However, many farm groups and cooperatives are allowed to work together under antitrust exemptions such as the 1922 Capper-Volstead Act. The act, one of a web of loopholes carved out over the years, was originally meant to help small farms bargain with big processors. Egg and tomato producers say their cooperation is shielded by these exemptions. In stepping up enforcement in food, prosecutors are signaling a new willingness to test these exemptions’ limits.

The Washington Post reports that “Atrivo, a.k.a ‘Intercage,’” an ISP “ceased to be reachable from any points on the Internet early Sunday morning when the ISP’s sole remaining provider - Pacific Internet Exchange (PIE) - stopped routing traffic for the troubled company.”  More details below, including allegations that Atrivo was being used for all sorts of nasty, possibly fraudulent activity.  And, for our law professor readers, with a change or two, this could form the basis of an interesting exam question.

From the Post:

The final blow comes just weeks after Security Fix joined several researchers in publishing evidence that major portions of Atrivo’s network were being used to foist fake security software, Trojan horse programs, and other nastiness. As a result of those reports, several of Atrivo’s upstream providers dropped the company as a client.

PIE agreed to provide routing for Atrivo after three other major upstream providers apparently decided it wasn’t worthy the negative publicity of being associated with the company. …

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For all its years of operation, Atrivo’s Web site consisted of little more than a blue background adorned with a simple “Web Site Launching Soon” banner. Critics took this as evidence that Kacperksi earned the majority of his customers via shady, underground channels.

In an interview last week, Kacperski [Atrivo’s founder] said to the extent that there were bad apples hosted on his network, few of them were ever directly reported in e-mailed complaints. Kacperski claims he receives an average of just five complaints about abusive domains hosted on his network each week.

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In the meantime, a lively debate on Atrivo’s demise has lit up the the mailing list of ISP operators known as the North American Network Operators Group (NANOG), with Kacperski defending his company’s record and vowing to find another upstream provider.

Some have suggested that ISPs and Internet backbone providers should not be allowed to serve as judge, jury and executioner of problematic customers. Dan Goodin of TheRegister.com opined that the multilateral actions against Atrivo amounted to “a temporary and highly imperfect stopgap” orchestrated by “ad hoc malware police.”

Goodin’s stance was echoed by Marcus Sachs, director of the SANS Internet Storm Center. “There are others out there who need to be cut off but we’ve got to find a better way to do it than by creating the virtual equivalent of a lynch mob,” Sachs wrote in a e-mail to Security Fix.

Until that “better way” gains traction, however, it is all but certain that self-interested network providers will persist in efforts to string up the perceived bad actors, said Paul Ferguson, senior researcher at security firm Trend Micro.

“The community must police itself, and this is a fine example of purging badness,” Ferguson said. “Of course, it will pop up elsewhere, but we’re watching.”

Perhaps you need a little relief from watching the distressing news from Wall Street. Here is an article by Jonathan Baker in the New Republic: Turning on Itself: How Dueling Agencies in the Bush Administration Made Mincemeat of Antitrust Regulation Policy. I daresay much will be written about the antitrust legacy of the Bush administration, and the recent Single-Firm Conduct report will be regarded as an effort to leave a tangible legacy of the administration’s impact on antitrust doctrine. Here is a taste from Baker’s article:

There’s no doubt that the non-interventionists at Justice are thoughtful and principled, but in cutting back on antitrust enforcement, they have taken antitrust policy in a dangerous direction. Even the FTC’s counterweight won’t undo the damage because the FTC specializes in different industries. It will take time, of course, to see how the non-interventionist antitrust stance at Justice affects people’s everyday lives–if the small Korean appliance importers can challenge Whirlpool’s dominance, for example. But, with luck, the damage will be minimal, and we can rid the Justice Department of the deregulatory radicalism that allows monopolies to spin out of control if a new administration rolls into town in January.

Both the Washington Post and the New York Times have articles about the disagreements between DOJ and FTC over DOJ’s Section 2 report.  The Washington Post reports:

Sen. Herb Kohl (D-Wis.), chairman of the Senate Judiciary Committee’s antitrust subcommittee, called the report an assault on the Sherman Act, the basis for much U.S. law on monopolies.

“If followed, the Justice Department’s interpretation of this fundamental law written nearly 120 years ago . . . could make it virtually impossible to prevent many forms of abusive conduct by dominant firms, such as predatory pricing and tying” goods to a sale, Kohl said in a statement. “This report represents another anti-competition and anti-consumer decision by this Antitrust Division.”

The report comes as the Justice Department has faced criticism for failing to take a more aggressive stance to foster competition and protect consumers in antitrust matters.

 The New York Times reports:

In a quick response to the Justice Department report, three of the four commissioners on the F.T.C. issued a statement saying that the policy was “a blueprint for radically weakened enforcement” against anticompetitive practices. They said the Justice Department guidelines allowed monopolies to act “with impunity” and “would make it nearly impossible to prosecute a case.”

In nearly eight years under the Bush administration, the Justice Department has brought one case against a business on anticompetitive grounds, seeking to block the purchase of a West Virginia newspaper by a competitor.

Critics considered the new report an attempt, in the last months of the Bush administration, to make formal a pro-business approach to antitrust issues. The policy guidance is not binding on the next administration. Thomas Barnett, the head of the Justice Department’s antitrust division, said in an interview that the latest report provided “clear standards” for determining whether certain types of conduct by big companies violated the Sherman Act and would harm competition.

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The campaign of Senator Barack Obama, the Democratic nominee for president, said the Justice Department’s position reflected the need for a more aggressive approach to antitrust enforcement in the next administration.

“Four more years of the Bush-McCain approach to antitrust will only lead to higher prices for American consumers and a less competitive environment for smaller businesses to thrive,” said Jason Furman, economic policy director for the campaign.

The campaign of Senator John McCain had no immediate comment on the report.

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Senator Herb Kohl, the Wisconsin Democrat who leads the antitrust subcommittee, called the report “yet another example of this Justice Department’s unfortunate record of failing to vigorously enforce antitrust law.”

No matter which side is right in the dispute, “this is part of a growing rift between the F.T.C. and the Justice Department,” said Herb Hovenkamp, an antitrust professor at the University of Iowa who testified as part of the hearings. “It’s warfare, and the level of rhetoric is pretty high.”