Antitrust litigation was developed as a response to the threat of monopolies. Historically, some companies grew to effectively control entire industries. In these instances, every step of the supply chain might be connected, allowing a single company to dominate the industry.
Monopolies are a threat to fair competition in the marketplace. The creation of monopolies can create an uneven playing field, as more wealth is concentrated in the hands of fewer entities. Monopolies shrink the options available to consumers.
Antitrust laws seek to break down monopolies and unfair business practices to foster equal opportunities for business growth and success.
Antitrust litigation involves investigating concerns such as monopoly leveraging, price fixing or predatory pricing, unfair competition, and unfair and deceptive trade acts and practices. Antitrust litigation encourages diversification of holdings.
Blue Cross Blue Shield
Beasley Allen is involved in specific antitrust litigation involving Blue Cross Blue Shield. Providers (hospitals, doctors and other health care centers) and subscribers (policyholders) filed the lawsuit in 2013, alleging that the national insurance heavyweight violated antitrust laws when it divided its service areas. In April 2018, U.S. District Judge David Proctor ruled that the case could proceed, saying there is evidence that may support the Plaintiffs’ claims. The case is divided into two tracts, one for providers and one for subscribers. Beasley Allen lawyers are developing the provider side of the case for trial.
The case involves 36 Blue Cross plans and at the heart of the case is whether an agreement among the different plans to provide service based on geography is legal. The Plans agree to provide health insurance coverage to subscribers within a certain geographic location and agree not to compete.
Monopoly leveraging is defined as the use of monopoly power attained in one market to gain a competitive advantage in another. The definition of this term has been expanding as antitrust policy in general changes in force and complexity.
The area of law dealing with monopoly leveraging is usually applied in the context of Section 2 of the Sherman Antitrust Act. Courts have sometimes used monopoly leveraging to describe the way in which monopolization is attempted or pursued.
Price Fixing and Predatory Pricing
Another major area of antitrust litigation involves price fixing, generally regarded as the act of wrongfully and artificially manipulating the price of goods and/or services to benefit specific companies or individuals. Collusion occurs in these cases when it can be proven that companies agreed to sell competing products for the same price, essentially eliminating competition. This practice enables companies to dictate the price rather than allowing the fair market of supply and demand to determine value.
Predatory pricing is a practice in which a company can lower its prices so far below its competitors as to force them out of business. To do this, a business would have to be able to sustain an economic loss for an extended period of time, selling goods or services at well below market value. Competition would collapse when it is unable to meet the unrealistically low prices. Predatory pricing eliminates fair competition in the marketplace.
Unfair competition falls under the area of law dealing with antitrust regulations. Unfair competition generally involves deceptive business practices that cause economic hardship to an individual, a group of individuals, or another business. Areas addressed in unfair competition legislation include fair competition, honesty in advertising and trademark protections. These cases are usually civil in nature but may sometimes result in criminal charges.
Unfair competition laws may also define the circumstances under which damages may be recovered. Both consumers and competing businesses can claim damages.
Two main areas of unfair competition laws are unfair business practices and deliberate attempts to misrepresent a product. There are federal laws and regulations in place to protect against unfair competition, yet unfair competition claims continue to form the core complaint in antitrust litigation disputes.
Practices that might fall under unfair competition laws include:
- trademark infringement
- false advertising
- selling products by using bait-and-switch techniques
- using similar packaging or a similar name to confuse customers into thinking they are buying a different product
- misstating ingredients or appropriate product use
- badmouthing the quality of a competitor’s product.
Unfair and Deceptive Trade Acts and Practices
Unfair business practices occur when a business acts in a manner that breaches the general consumer trust in such businesses. They can apply to many industries, from the obvious, such as in the purchase of various products and services, to less obvious cases, such as debt collection and tenancy matters.
Usually, matters classified as unfair business practice involve fraud, misrepresentation, or an act that by its commission alone implicates the business in having leveraged terms that are excessively unfair.
Unfair business practice laws are designed to protect consumers. Statutes generally define the type of act that qualifies as an unfair business practice and state the recommended remedy. Restitution is typically the result of a successful resolution, but an injunction to cease the practice in question is another possible outcome.
If the circumstances are particularly egregious, the court may mandate punitive damages or an injunction to cease operations altogether. Many jurisdictions require that anyone filing a claim for unfair business practices suffer some form of tangible financial damage.
Deceptive Trade Practices is a broad term encompassing unfair and injurious consumer practices. These may include false or deceptive advertising or other practices meant to mislead a consumer to that consumer’s detriment. Deceptive trade practices are regulated by the Federal Trade Commission (FTC), but every state has consumer protection statues that allow state attorneys, together with consumers, to file lawsuits over unfair consumer practices.
Bait and Switch
In antitrust litigation, the term “bait and switch” is commonly used when talking about a deceptive trade practice in retail sales. For instance, this term is applied when a retailer promises a customer one type of product or deal in its advertising, but when the customer visits the shop the advertised deal is not available. Generally, at this point, the customer is switched to a more expensive product. The logic is that the retailer lures in the customer with the “bait” of a great deal, then takes advantage of him when he’s already in the store and more likely to settle for something different than what was promised.
A bait-and-switch operation is a form of false or misleading advertising, which is regulated by consumer protection statutes as fraud.
While most commonly seen in the retail sales industry, bait-and-switch tactics also can be found in the following instances:
- Employers who advertise a job opening that gives a misleading impression of duties, working condition or compensation
- Hotels – advertising a lower rate and tacking on hidden fees upon check-in
- Telecommunication Companies – offer services at an introductory price and then escalate the price drastically after that time period
- Contractors – add on extra fees in excess of the service estimate