TBJ January 2022

2021: The Year in Review

ANTITRUST AND BUSINESS LITIGATION

Written by Emily Westridge Black and Carrington Giammittorio

This past year was an active one for antitrust litigation, with landmark decisions in both the U.S. Supreme Court and the U.S. Court of Appeals for the 5th Circuit.

Supreme Court Limits FTC’s Ability to Seek Monetary Relief
In AMG Capital Management v. Federal Trade Commission, the Supreme Court unanimously held that Section 13(b) of the Federal Trade Commission Act does not authorize the commission to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.¹ The underlying dispute involved a payday loan company’s challenge to a $1 billion restitution order secured by the FTC, which was affirmed by the U.S. Court of Appeals for the 9th Circuit.

The Federal Trade Commission Act grants two distinct enforcement avenues to the FTC: one under Sections 5 and 19, which allows federal courts to enforce adjudicated administrative orders, and one under Section 13, which allows the FTC to go directly to federal court without first conducting administrative proceedings. Under Section 19, the FTC is specifically authorized to seek “such relief as the court finds necessary to redress injury to consumers,” including “refund of money.” Under Section 13, however, the FTC may merely obtain an injunction against a company that “is violating, or is about to violate, any provision of law enforced by [the commission].” Historically, the FTC has used Section 13’s “direct to court” provisions to seek monetary awards— such as disgorgement and restitution—as well as injunctions without the additional burden of first conducting and fully adjudicating administrative proceedings. However, relying on the plain language of Section 13, which authorizes only “injunctions,” the court unanimously held that in actions initiated under Section 13, the FTC was not authorized to seek equitable monetary relief.

Supreme Court Upholds Injunction of NCAA Restrictions on Athlete Benefits
The court rendered a second unanimous opinion in NCAA v. Alston, holding that the NCAA’s rules limiting “education-related benefits” for student athletes—e.g., laptops, instruments, scholarships, or paid internships—were impermissibly anticompetitive.² As a threshold matter, the NCAA argued that the court should use the deferential standard applicable to joint ventures since its members are required to “collaborate to offer consumers the unique product of intercollegiate athletic competition.” The Supreme Court disagreed given the NCAA’s “monopoly power” in the market and held that the restrictions were subject to scrutiny under the rule of reason. Further, loosening the restrictions around these “educational” benefits would not “blur the distinction between college and professional sports and thus impair demand [for college sports].”

Although the restrictions at-issue in Alston were limited, Justice Brett Kavanaugh authored a separate concurrence in which he noted the existence of “serious questions” about whether non-educational restrictions—including cash compensation to players—“can pass muster” under the analytical paradigm established by the court. A week after the Alston decision, the NCAA suspended a longstanding rule and announced a new policy that allows its athletes to monetize their NIL, or name, image, and likeness.

5th Circuit Rejects Pay-for-Delay
In the first litigated pay-for-delay case since the Supreme Court’s 2013 opinion in FTC v. Actavis, Inc.,³ the 5th Circuit upheld the FTC’s determination that Impax Laboratories and Endo Pharmaceuticals entered an illegal reverse payment agreement pursuant to which Impax delayed its drug’s entry into the opioid market for two-and-a-half years in exchange for more than $112 million.⁴

The 5th Circuit concluded the agreement unreasonably restrained trade under the Sherman Act because: (1) the $112 million reverse payment far surpassed the estimated value of any litigation savings or services to be provided by the generic; and (2) a less-restrictive alternative existed since, given industry practice, economic considerations, and the strength of the underlying patents, the parties could have agreed on delayed entry without the payment provision.

EMILY WESTRIDGE BLACK is a partner in the Austin office of Haynes and Boone, where she focuses on complex commercial litigation, antitrust, and white-collar defense.

CARRINGTON GIAMMITTORIO is an associate in the firm’s Dallas office, where she focuses on complex commercial litigation, antitrust, and white-collar defense.