Spotting and Avoiding Antitrust and Other Unfair Competition Claims and Issues

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1 Spotting and Avoiding Antitrust and Other Unfair Competition Claims and Issues Presented by J. Alexander Hershey, Esq. Hosted by the Association of Corporate Counsel Western Pennsylvania Chapter October 10, 2017

2 MORNING AGENDA SPOTTING AND AVOIDING ANTITRUST AND OTHER UNFAIR COMPETITION CLAIMS AND ISSUES Identify strategies for informing employees and management to identify unlawful conduct. Review of structure and current treatment of antitrust matters. Review related intellectual property and unfair competition issues.

3 THE PURPOSES OF ANTITRUST LAW PURPOSES OF ANTITRUST LAW Protect competition in the market. Promote a free market economy. Promote quality in products and services. Assure choice in services, products, and costs. Protect consumers by protecting smaller firms. Curtail conspiracies that limit commercial activity. Curtail monopolistic business activity.

4 ISSUE AREAS FOR ANTITRUST COMPLIANCE Pricing, procurement, and sales. Distribution arrangements and supply chain. Competitor relationships and trade associations. Monopoly power and behavior. WHO NEEDS TO BE MINDFUL OF ANTITRUST COMPLIANCE Management. Product development. Sales personnel. Distribution channel. Customer service. Everyone.

5 ANTITRUST OBJECTIVES FOR MANAGEMENT AND EMPLOYEES Awareness of commercial practices. Recognition of practices that should be avoided. Response to questionable circumstances. THE STRUCTURE OF U.S. ANTITRUST LAW

6 CERTAIN ANTITRUST LAWS Sherman Act 1 Bars contracts, combinations, and conspiracies in restraint of trade. Sherman Act 2 Bars attempted or actual monopolization or conspiracies to monopolize. Clayton Act Bars acquisitions and mergers that may lessen competition and provides for civil enforcement of the Sherman Act. Robinson-Patman Act Bars price discrimination in sales of goods to similarly situated purchasers. CERTAIN ANTITRUST PENALTIES Sherman Act Criminal felony with fines of up to $100,000,000 for corporations, up to $1,000,000 for individuals, and up to 10 years in prison. Clayton Act Civil liability to plaintiffs for up to three times actual damages plus attorney s fees. Federal Trade Commission Enforcement Federal or State Attorney General Enforcement Canadian Competition Act is generally similar. Limited civil remedies but higher fines in the EU.

7 PER SE UNLAWFUL CONDUCT Effect is demonstrably harmful and conduct is automatically unlawful. Once included a broad range of unlawful activities. Last 20 years have seen this area diminish in size. UNLAWFUL CONDUCT UNDER THE RULE OF REASON Effect on competition may not be harmful and may have pro-competitive justifications. Once included a narrower range of unlawful activities. Last 20 years have seen this area increase in size.

8 HORIZONTAL CONDUCT Dealing With Competitors PER SE UNLAWFUL HORIZONTAL CONDUCT Price fixing agreeing to set or stabilize prices. Bid rigging coordinate pricing or participation. Output limitation agreeing to lower supply. Market division division by territory or industry. Customer allocation agreeing to split buyers. Boycotts refusal of competitors to deal freely. Cartels multilateral conspiracy of producers.

9 LIMITING COMMUNICATION IS KEY Do not engage in discussions with competitors that may affect market behavior, including as to: pricing, costs, or margins of goods, delivery or other discount terms, advertising or market development, customer acquisition or targets, bidding or RFQ opportunities, confidential business strategy. Information can be collected from public sources and, with some risk, from customers. RULE OF REASON HORIZONTAL CONDUCT Research and development agreeing to jointly develop products or intellectual property. Joint ventures undertaking product or market development through combined resources. Licensing arrangements adding market capacity through shared intellectual property. Trade associations allowing for lobbying or other joint industry development efforts. Standard setting product standardization for customer and market benefits.

10 MARKET EFFECT IS KEY Practices assessed under the rule of reason will be accepted, or even encouraged, if they: provide for new entrants into the market, provide for added supply capacity, improve product quality across the market, provided enhanced service through product standardization, constitute government activity, constitute ancillary restraints to pro-competitive practices. VERTICAL CONDUCT Dealing With Supply and Distribution

11 PRICE RESTRAINTS IN VERTICAL CONDUCT Resale Price Maintenance imposition of minimum or maximum prices at which a reseller can sell the supplied goods. Now assessed pursuant to a rule of reason under Federal law, but beware of State law. Minimum Advertised Price Policies unilateral supplier policies limiting advertised prices. Require even application to all distributors, and enforcement should not be discussed. NON-PRICE RESTRAINTS IN VERTICAL CONDUCT Market exclusivity agreement providing that one distributor will be exclusive as to a territory, customer base, or product. Product tying agreement requiring the purchase of one product or service with the purchase or another. Concerted refusal to deal a limitation on selling, licensing, or otherwise interacting with a third party in the marketplace.

12 PRICE DISCRIMINATION IN VERTICAL CONDUCT Price Discrimination charging different prices for the same goods to similarly situated purchasers. Relevant factors include: Price includes discounts, rebates, delivery terms, and financing. Defenses functional availability, meeting competition, and product introduction. DUAL DISTRIBUTION Definition where a supplier sells to and competes with one or more dealers in the sale of a good or service towards end users. Sales quotes and agreements with the end users are horizontal as to the dealers and assessed more strictly under the law. Sales quotes and agreements with the dealers are vertical and assessed more leniently.

13 MONOPOLIZATION Definition possession of or conspiracy to possess market power that is obtained or maintained unlawfully. Market power the ability to raise price or reduce output without a loss of business. Monopoly power exclusive control of supply resulting in an ability to fix prices, to exclude competitors, or otherwise control the market. Unlawful conduct tying arrangements, predatory pricing, monopoly leveraging, exclusive facilities. UNFAIR COMPETITION AND MARKET EFFECTS

14 COMMUNICATION PROTECTIONS Trademark and Trade Dress - Communication that goods or services emanate from a particular source. o Market Effects: Allows for competition by identifying the goods that compete in the marketplace. False Advertising Distribution of false information concerning offerings of speaker or its competitor. o Market Effects: Prevents distortions of consumer choice through misleading actions. TECHNOLOGY PROTECTIONS Patent and Copyright - Sanctioned monopoly that allows control of a technology, method, or work. o Market Effect: Innovative supplier rewarded with control of the marketplace. Trade Secret Misappropriation Improper acquisition or use of information reasonably protected from disclosure. o Market Effects: Monopoly obtained through secret development, maintenance, and use of information.

15 CONTRACT PROTECTIONS Interference With Existing Contracts Prevents the knowing inducement of breach of an existing contract. o Market Effects: Allows for predictability and reliability of commercial relations developed in the market. Interference With Prospective Contracts Prevents the knowing prevention of formation of an imminent contract. o Market Effects: Allows for fair development of commercial relations subject to market competition. Antitrust and Unfair Competition Contact Information J. Alexander Hershey, Esq. Clark Hill PLC, One Oxford Centre, 301 Grant Street, 14th Floor Pittsburgh, PA Direct Dial: Fax: ahershey@clarkhill.com

16 J. Alexander Hershey Member J. Alexander Hershey assists clients with commercial and legal issues through business planning, negotiations, and litigation. Alex is a member of the Litigation practice group and concentrates his practice in areas of law involving unfair competition and business torts, trade secret and employment law, trademark and copyright infringement, distribution and antitrust issues, insurance and health care law, and related commercial disputes. Alex also assists clients in the registration of trademarks and copyrights and counsels clients regarding contractual, intellectual property, and antitrust issues in business transactions. Alex has experience practicing before numerous state and federal courts and before the United States Patent & Trademark Office. Alex undertakes a wide range of efforts on behalf of clients, in both counseling and litigation, with respect to unfair competition and commercial issues, including the following. Analyzing and litigating contract issues, including with respect to distribution and services contracts, employment and confidentiality agreements, brokerage and consulting agreements, managed care and insurance issues, and franchise and licensing agreements. Analyzing and litigating business tort issues concerning unfair competition, trade secrets, fraud, misrepresentation, fiduciary duty, interference with contracts, professional negligence, and defamation. Analyzing and litigating trademark, trade dress, and false advertising claims, including issues concerning the acquisition and strength of rights, likelihood of confusion, actual damages and lost profits, and injunctive relief. Analyzing and litigating copyright infringement claims, including issues concerning protectable subject matter, authorship, infringement, actual or statutory damages, and injunctive relief. Analyzing and counseling clients with respect to the antitrust implications of mergers and acquisitions, distribution and supply arrangements, and health care provider and payor relationships. Analyzing and litigating statutory claims, including under the federal Securities Acts, the RICO Act, the Hobbs Act, the federal Mail and Wire Fraud statutes, and the DMCA, CFAA, and ECPA provisions regulating computer access and online issues. Publications / Presentations Presenter, "ediscovery Symposium Data Breaches Privacy and Liability," Pennsylvania Bar Institute, April 17, 2015 Column, How the Federalist Papers Relate to Data Breach Legislation, Pennsylvania Law Weekly of The Legal Intelligencer, April 7, Column, "Chasing Jim Thorpe: Law, Litigation and the Bounds of Advocacy, Pennsylvania Law Weekly of The Legal Intelligencer, December 23, Column, Courts Weigh in on the Protection of Software Code, Pennsylvania Law Weekly of The Legal Intelligencer, October 21, Column, Supreme Court Diminishes the Role of Prudential Standing, Pennsylvania Law Weekly of The Legal Intelligencer, July 22, Presenter, The Role of Computer Forensics in Data Breach Response, The Cyril H. Wecht Institute of Forensic Science and Law, Duquesne University, March 21, Presenter and Course Planner, Drafting to Avoid or Win Litigation / Litigating Breach of Contract Actions, Pennsylvania Bar Institute, July 30, Affordable Care Act s Medical Loss Ratio Provision: Is There A Private Right Of Action? Communiqué, November Health Plans Commercial Uncertainties Persist After Supreme Court s Decision Upholding the Affordable Care Act s Constitutionality, Communiqué, August Presenter, "Trade Secret Theft Is More Common Than You Think: What a Business Needs To Do To Protect Itself," TRA Seminar, March "The Real Dollars At Stake: Don t Overlook The Value Of Protecting Your Copyrightable Materials," Communiqué, May "E-Commerce: Legal and Practical Issues," Pennsylvania Bar Institute Seminar, December The Dangers of Being a Team Player: Joint Ventures and the Risk of Antitrust Liability, Communiqué, May Presenter, Mock Preliminary Injunction Hearing, 25th Annual ABA Intellectual Property Law Conference, April 10, Presenter, "Mitigating Legal Risk in a Recovering Economy," Financial Executives Institute, Pittsburgh Chapter Meeting, Technical Session, April 8, Author, The Common Law and Secondary Liability: Issues of Culpability and Procedure in Trademark and Copyright Litigation, ABA Intellectual Property Litigation Committee Newsletter, Vol. 21, No. 2, Winter Office Pittsburgh One Oxford Centre 301 Grant St, 14th Floor Pittsburgh, PA (phone) (fax) ahershey@clarkhill.com Education J.D., with Honors, George Washington University Law School, Washington DC, 1999, Notes Editor, The George Washington Law Review B.A., Oberlin College, Oberlin, Ohio, 1994, Politics and Philosophy, Highest Honors in Politics for Thesis and for Written and Oral Honors Examination State Bar Licenses Pennsylvania District of Columbia Court Admissions U.S. District Ct., W.D. of Pennsylvania U.S. Court of Appeals, 3rd Circuit 1 / Clark Hill PLC

17 Presenter, The Fundamentals for Protecting Your Competitive Edge: Using Intellectual Property Law To Protect Your Company s Assets And Fend Off Your Competition, TRA Seminar, March Third Circuit Decision Provides Guidance as to Protectability and Survey Evidence in Trademark Litigation, Communiqué, September Moderator, Local Rule The Judges Speak Out, The Federal Court Section Council of the Allegheny County Bar Association, April 24, "A Victory for Antitrust Plaintiffs: The Third Circuit Issues a Decision Limiting the Plaintiff s Burden in Robinson- Patman Act Claims," Communique, October "Are Your Secrets Confidential, and Will a Court Agree?" In Your Court, November "Supreme Court: Proof of Absence of Confusion is Not Good Faith Defense to Trademark Infringement," In Your Court, March What s New In Pennsylvania: The Pennsylvania Supreme Court Creates An Open Season On Architects And Other Design Professionals, Construction Law News, March Full and Accurate Disclosure: Protecting the Rights of Businesses to Commercial Information, In Your Court, March "The Pennsylvania Supreme Court Partially Solidifies the Claim of Negligent Misrepresentation Under Pennsylvania Law, Communiqué, March "Privilege or Justification: The Ever-Expanding Policy Prong of Tortious Interference With Contract," Business Torts Journal, Fall "Broad Reality, Narrow Words," 67 George Washington Law Review 432, Practices, Industries & Services Automotive & Manufacturing Corporate Restructuring & Bankruptcy Cybersecurity, Data Protection & Privacy Health Care Litigation Areas of Emphasis Antitrust and Trade Regulation Equipment Leasing Intellectual Property Litigation Managed Care Litigation Trade Secret Protection Memberships Allegheny County Bar Association American Bar Association Board Member, Neighborhood Legal Services Association Volunteer Lawyers for the Arts, Greater Pittsburgh Arts Council Volunteer Attorney, HELP Program (Homeless Legal Protection) Honors Pennsylvania Super Lawyers, Rising Star, 2006, 2011, / Clark Hill PLC J. Alexander Hershey