The FTC improperly held that 1-800 Contacts trademark agreements violated the antitrust law, the 2nd Circuit held this AM. They reversed the FTC decision and ordered the complaint be dismissed. Big loss for FTC. More TK.
Second Circuit took issue with two things: First, FTC's use of inherently suspect framework -- essentially a rule of reason shortcut.
The inherently suspect shortcut should be reserved for things where it's really clear they are anticompetitive. Trademark settlements are net procompetitive, the court said, and shouldn't fit into that inherent suspect framework.
"Courts do not have sufficient experience with this type of conduct to permit the abbreviated analysis of the Challenged Agreements undertaken by the Commission."
"The Challenged Agreements, therefore, are not so obviously anticompetitive to consumers that someone with only a basic understanding of economics would immediately recognize them to be so"
Second, 1-800 offered justification for the settlements was to protect their trademark and the FTC gave that short-shrift. The agency argued that 1-800 could have used a "less restrictive alternative" by requiring clear disclosure in ads.
The Second Circuit said the agency didn't take into account how hard that would be to police.
“While trademark agreements limit competitors from competing as effectively as they otherwise might, we owe significant deference to arm’s length use agreements negotiated by parties to those agreements
“Doing so may give rise to collateral harm in a relevant market. But forcing companies to be less aggressive in enforcing their trademarks is antithetical to the procompetitive goals of trademark policy.”
The FTC can choose to appeal, either asking for an en banc review by the 2nd Circuit or Supreme Court. I wouldn't be surprised if they ask for en banc review, though appeals courts don't grant that too often.
This is the THIRD recent case where the FTC's win has been significantly shrunk or overturned on appeal. Qualcomm (9th Circuit); AbbVie (3rd Circuit); now 1-800 Contacts (2nd Circuit) -- though they won at the 5th Circuit in Impax.
1-800 Contacts CEO John Graham statement on their win: "Earlier today, 1-800 Contacts won a complete victory in our challenge to the FTC’s ruling alleging we engaged in anti-competitive search marketing practices.
"We were confident the FTC lacked evidence to justify their claims, and we feel vindicated with the Second Circuit court’s decision. Today’s ruling is another win for consumers and a confirmation of our 26-year mission as a champion of consumer choice in vision care."
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. @energycommerce voted 30-22 to advance a bill to restore the @FTC ability to seek restitution and disgorgement from companies that break the law in the wake of the Supreme Court's AMG decision that the agency didn't have that authority
Before moving the bill, Democrats defeated, 25-28, an amendment offered by Rep. Gus Bilirakis (R-Fla.) that would have reduced to 5 years from 10 years the period of time for which they could seek monetary remedies.
The amendment would also have changed the bill so it would only apply to FTC cases going forward, not any of its pending ones.
Five bills: each covering a slightly different aspect of antitrust/tech platforms.
1) Line of business restrictions. This is the "Glass-Steagall of the Internet" idea that Cicilline has talked up. The legislation takes aim at companies (like Amazon) that operate a dominant platform and promote their own goods or services on it.
The New York Senate voted 43-20 to pass S 933A, legislation to amend the state's antitrust law nysenate.gov/legislation/bi…
One R voted in favor of the bill: Sen. Andrew Lanza, who represents Staten Island. One D voted against the bill: Sen. John Brooks, who reps Long Island/South Shore
From Assemblyman Jeffrey Dinowitz, who is championing the bill in that chamber: "Massive corporations must not be empowered to use their sheer size to circumvent the anti-trust regulations that have been put in place in New York for many years. /1
YGR: the market has to include some substitutes.
Bornstein: It's critical to decide what the product is before you can decide substitutes. The market we defined is the market for app distribution. It's not the in-app purchase.
Bornstein: It's getting the app on your phone.
YGR: Is there any definition that gets to the problem where the market has economic substitutes.
Bornstein: Our view is there is no economic substitute for getting an app on the phone. There are substitutes for the App Store.
YGR: Your market definition doesn't include substitutes because that doesn't reflect reality.
Bornstein: The substitutes would be direct distribution or alternative app stores. We do not believe that distribution of an app on Android or console is an economic substitute.
Our hybrid closings in #epicvapple start in a bit. Today's in-court reporters are @doratki and @mslopatto. I'll be following along again today in case YGR gives some more clues about her thinking.
For Epic, Gary Bornstein will be doing all the talking. For Apple, Richard Doren will discuss remedies; Daniel Swanson will talk about market definition; and Veronica Moye will talk about conduct and effects.
YGR asks each side to give her their top two areas: Bornstein says market definition and remedy; Doren says those are good for Apple to start.