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The Role of the SBA’s 8(a) Program in Enhancing Economic Opportunities

House Small Business Committee News - Wed, 09/18/2019 - 11:30am

The Committee on Small Business will meet for a hearing titled, “The Role of the SBA’s 8(a) Program in Enhancing Economic Opportunities.” The hearing is scheduled to begin at 11:30 A.M. on Wednesday, September 18, 2019 in Room 2360 of the Rayburn House Office Building.

The SBA’s 8(a) program was designed as a business development program to help disadvantaged businesses compete in the federal marketplace. The program helps thousands of small businesses start and grow by competing for government contracts and in doing so, assists local communities. Nevertheless, the program has faced several challenges throughout the years. The hearing will examine how the program operates, the benefits to entrepreneurs and communities, and steps Congress can take to improve the effectiveness and oversight of the program.

To view a livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witness List 

Witnesses 

Mr. Ralph C. Thomas III
Executive Director Emeritus & Representative of the National Association of Minority Contractors
(NAMC)
Lawyer
Law Offices of Ralph C. Thomas III PLLC
Washington, DC
Testimony 

Ms. Dottie Li
Founder and CEO
TransPacific Communications
Cheverly, MD
Testimony 

Mr. Clarence McAllister
CEO
Fortis Networks
Phoenix, AZ
Testimony 

*Witness testimony will be posted within 24 hours after the hearing’s occurrence



 

Mass Violence, Extremism, and Digital Responsibility

U.S. Sen. Roger Wicker, R-Miss., chairman of the Committee on Commerce, Science, and Transportation, will convene a hearing titled, “Mass Violence, Extremism, and Digital Responsibility,” at 10:00 a.m. on Wednesday, September 18, 2019. In light of recent incidents of mass violence, this hearing will examine the proliferation of extremism online and explore the effectiveness of industry efforts to remove violent content from online platforms. Witnesses will discuss how technology companies are working with law enforcement when violent or threatening content is identified and the processes for removal of such content.

Subcommittee to Hold Hearing on Air Traffic Control System

U.S. Sen. Ted Cruz, R-Texas, chairman of the Subcommittee on Aviation and Space, will convene a hearing titled, “Improving Air Traffic Control for the American People: Examining the Current System,” at 2:30 p.m. on Tuesday, September 24, 2019. The hearing will examine the current state of the United States’ air traffic control (ATC) system. Witnesses will discuss challenges and highlight possible improvements to the efficiency and safety of the ATC system.

WLF Urges En Banc Ninth Circuit to Decertify Multi-Billion-Dollar Privacy Class Action

WLF Legal Pulse - Mon, 09/16/2019 - 11:52am

“A plaintiffs’ class that may obtain billions of dollars in recovery without a showing of actual harm is able to extract an exorbitant settlement amount untethered from the merits.”
—Cory Andrews, Vice President of Litigation

Click HERE for WLF brief.

(Washington, D.C.)—Washington Legal Foundation (WLF) today filed an amicus curiae brief in the U.S. Court of Appeals for the Ninth Circuit, urging it to grant Facebook, Inc’s petition for rehearing en banc. WLF’s brief is highly critical of the appeals court’s August 8, 2019 decision, which threatens to permit large, no-harm class actions whenever plaintiffs can label the alleged statutory violation an “invasion of privacy.”

The case arises under the Illinois Biometric Privacy Information Act (BIPA), a 2008 law that requires companies to obtain written consent before collecting a person’s biometric information. It provides a private right of action allowing a plaintiff to recover up to $5,000 for a single violation. Seeking to represent a class of six million Illinois Facebook users, the plaintiffs sued Facebook claiming that its Tag Suggestions feature—which uses facial-recognition software to suggest that Facebook users tag their friends in photos they upload to Facebook—violates BIPA.

As WLF’s brief explains, the panel’s certification ruling throws open the door to class claims threatening draconian liability, creating irresistible pressure to settle even dubious claims. Such hydraulic settlement pressure—leveraging many billions of dollars in potential recovery—raises serious due-process concerns. What’s more, a class action with so many inherent defects is not “superior” under Rule 23(b)(3).

Celebrating its 42nd year, WLF is America’s premier public-interest law firm and policy center advocating for free-market principles, limited government, individual liberty, and the rule of law.

The post WLF Urges En Banc Ninth Circuit to Decertify Multi-Billion-Dollar Privacy Class Action appeared first on Washington Legal Foundation.

Categories: Latest News

Drug-Label “Highlights”: An Overlooked Avenue to Preemption in Failure-to-Warn Litigation

WLF Legal Pulse - Fri, 09/13/2019 - 8:00am

By James M. Beck, Senior Life Sciences Policy Analyst with Reed Smith LLP in its Philadelphia, PA office, and founder of, and a regular contributor to, the award-winning Drug and Device Law blog.

In 2006 the Food and Drug Administration overhauled drug labeling and created a new section called “Highlights.”  See 21 C.F.R. § 201.57(a) (specifying highlights section requirements).  Such highlights must include “[a] concise summary of any boxed warning.”  §201.57(a)(4).  With respect to all other warnings, contraindications, and adverse reactions, the highlights regulation provides:

(9) Contraindications.  A concise statement of each of the product’s contraindications, as required under paragraph (c)(5) of this section, with any appropriate subheadings.

(10) Warnings and precautions.  A concise summary of the most clinically significant information required under paragraph (c)(6) of this section, with any appropriate subheadings, including information that would affect decisions about whether to prescribe a drug, recommendations for patient monitoring that are critical to safe use of the drug, and measures that can be taken to prevent or mitigate harm.

(11) Adverse reactions.

(i) A list of the most frequently occurring adverse reactions, as described in paragraph (c)(7) of this section, along with the criteria used to determine inclusion (e.g., incidence rate).  Adverse reactions important for other reasons . . . must not be repeated under this heading in Highlights if they are included elsewhere in Highlights. . . .

21 C.F.R. § 201.57(a)(9-11) (emphasis added).

The FDA’s final rule adopting the regulation described the Highlights section:

[T]he final rule requires that the labeling for new and more recently approved products include introductory information entitled “Highlights of Prescribing Information” (Highlights) (§§201.56(d)(1) and 201.57(a)).

The final rule requires the same headings for Highlights as proposed, except that, in response to comments, FDA moved “Most Common Adverse Reactions” from “Warnings and Precautions” (proposed §201.57(a)(10)) to a new heading entitled “Adverse Reactions” (§§201.56(d)(1) and 201.57(a)(11)).  Like the proposed rule, the final rule requires that Highlights, except for the boxed warning, be limited in length to one-half of the page (§ 201.57(d)(8)) (see comment 104).

The agency is also revising its regulations on supplements and other changes to an approved application in §§314.70 and 601.12 (21 CFR 314.70 and 601.12) to require applicants to obtain prior approval of any labeling changes to Highlights, except for identified minor changes (see comment 5).

Requirements on Content & Format of Labeling for Human Prescription Drug and Biological Products, 71 Fed. Reg. 3299, 3925 (FDA Jan. 24, 2006) (emphasis added).

The creation of this Highlights section directly affects preemption in prescription drug product liability litigation.  The U.S. Supreme Court in its October Term 2018 reaffirmed that limits to the preemption of labeling claims for prescription drugs are grounded in the availability of FDA’s changes being effected (“CBE”) regulation, which defeats implied impossibility preemption by allowing certain unilateral label modifications:

[A]n FDA regulation called the ‘changes being effected’ or ‘CBE’ regulation permits drug manufacturers to change a label without prior FDA approval if the change is designed to ‘add or strengthen a . . . warning’ where there is ‘newly acquired information’ about the ‘evidence of a causal association’ between the drug and a risk of harm.  21 C.F.R. §314.70(c)(6)(iii)(A).

Merck Sharp & Dohme Corp. v. Albrecht, 139 S. Ct. 1668, 1673 (2019).  The Court also stated:

[F]ederal law − the FDA’s CBE regulation − permits drug manufacturers to change a label to ‘reflect newly acquired information’ if the changes ‘add or strengthen a . . . warning’ for which there is ‘evidence of a causal association,’ without prior approval from the FDA.  21 C.F.R. §314.70(c)(6)(iii)(A).  Of course, the FDA . . . can reject label changes even after the manufacturer has made them.  See §§ 314.70(c)(6), (7). . . .  But in the interim, the CBE regulation permits changes, so a drug manufacturer will not ordinarily be able to show that there is an actual conflict between state and federal law such that it was impossible to comply with both.

Id. at 1679.

This CBE regulation the Court relied on in Albrecht—21 C.F.R. § 314.70—is precisely the same regulation that the FDA stated it was “revising” in 2006 “to require applicants to obtain prior approval of any labeling changes to Highlights.”  71 Fed. Reg. at 3925 (listing “§314.70”).  The CBE regulation thus has excepted all aspects of the Highlights section from its scope since 2006.

(6) The agency may designate a category of changes for the purpose of providing that, in the case of a change in such category, the holder of an approved NDA may commence distribution of the drug product involved upon receipt by the agency of a supplement for the change. These changes include. . . .

(iii) Changes in the labeling to reflect newly acquired information, except for changes to the information required in §201.57(a) of this chapter (which must be made under paragraph (b)(2)(v)(C) of this section), to accomplish any of the following:

(A) To add or strengthen a contraindication, warning, precaution, or adverse reaction for which the evidence of a causal association satisfies the standard for inclusion in the labeling under §201.57(c) of this chapter;

21 C.F.R. § 314.70(c)(6)(iii)(A) (emphasis added).  This is the Albrecht FDA CBE regulation—down to the last subsection.

The FDA imposed this limitation on changes to Highlights information deliberately—through notice and comment rulemaking.  See Albrecht, 139 S. Ct. 1680 (endorsing the preemptive power of “notice-and-comment rulemaking setting forth labeling standards”).  This amendment was not some nefarious scheme to benefit manufacturers.  To the contrary, as the FDA pointed out, “[m]anufacturers, with some exceptions, were opposed, or strongly opposed, to the inclusion of Highlights.”  71 Fed. Reg. at 3930.

In response to “comment 5,” the FDA stated, in 2006:

[B]ecause Highlights is a summary of the most important information for prescribing decisions and some comments expressed concerns about the difficulty involved in summarizing the complex and often lengthy information in the FPI [full prescribing information], the agency believes that it is essential for FDA to review and approve most proposed changes to the information in Highlights. Accordingly, the agency is revising its regulations on supplements and other changes to an approved application.  Under §§314.70(b)(2)(v)(C) and (c)(6)(iii) . . ., applicants are required to obtain prior approval of any labeling changes to Highlights, except for editorial or similar minor changes. . . .

71 Fed. Reg. at 3922 (emphasis added).  See id. at 3922 (“a sponsor may not use a CBE supplement to make most changes to Highlights.”).

The Federal Register cross-reference for modifications of highlights, 21 C.F.R. § 314.70(b)(2)(v)(C), is to “Changes requiring supplement submission and approval prior to distribution of the product made using the change (major changes).”  See also FDA, Guidance for Industry:  Labeling for Human Prescription Drug and Biological Products – Implementing the PLR Content & Format Requirements (Feb. 2013) (containing detailed information about how changes to Highlights should be made).  Thus, any modification of the language of Highlights is a “major change”—and tort actions demanding major changes are preempted.  A federal appeals court embraced that principle just last year:

Major changes require approval from the FDA prior to implementation, while moderate and minor changes do not.  Controlling case law is clear − and plaintiffs here concede − that if the change they contend state law requires qualifies as ‘major,’ then federal law preempts plaintiffs’ cause of action because defendants cannot lawfully make such a change without prior FDA approval. Our inquiry thus appears, at first glance, straightforward:  Does the change urged by plaintiffs qualify as ‘major’?  If so, our work is done.

Gustavsen v. Alcon Laboratories, Inc., 903 F.3d 1, 10 (1st Cir. 2018) (citations omitted).  See also Yates v. Ortho-McNeil Pharmaceuticals, Inc., 808 F.3d 281, 298 (6th Cir. 2015) (“[Plaintiff’s] post-approval design defect claim is clearly preempted by federal law.  FDA regulations provide that once a drug . . ., is approved, the manufacturer is prohibited from making any major changes”); Batoh v. McNeil-PPC, Inc., 167 F. Supp.3d 296, 320-322 (D. Conn. 2016) (“chang[ing] the active ingredient” would have been a “major change” requiring prior FDA approval).

Preemption cases specifically involving demands to modify Highlights have been uncommon, but have uniformly resulted in preemption.  In In re Zofran (Ondansetron) Products Liability Litigation, 368 F. Supp. 3d 94, 127 (D. Mass. 2019), plaintiffs conceded preemption of any warning claim involving highlights.  The issue was fully litigated in Blackburn v. Shire US, Inc., 2017 WL 1833524, at *5-6 (N.D. Ala. May 8, 2017):

[W]hen sufficient newly acquired information exists in order to support a label change under the CBE process, as has been plausibly pled here, the claim is not preempted.  However, the same cannot be said with respect to Plaintiff’s assertion that a change to the Highlights section would be permitted here.  Where a private party seeks a label change which requires FDA approval, such as a change to the Highlights section, impossibility preemption exists. . . .  The “impossibility” inquiry turns on a private party’s ability to act independently.  It is of no consequence that the FDA may have allowed a change to the Highlights section of [the drug].  Because Defendants could not have independently changed the Highlights section of [the drug] in order to conform to state law, any argument that begins with the theory that Defendants could (or should) have changed the Highlights section of [the drug’s] label ends in preemption.

Id. at *5-6 (citations omitted).

The same result was reached in Patton v. Forest Laboratories, LLC, 2018 WL 5270476 (C.D. Cal. May 10, 2018):

[Defendant] also argues that Plaintiffs’ failure-to-warn claim against it is preempted because: (1) [it] could not have ‘unilaterally or independently change[d] the Highlights section; all changes to that section require FDA’s pre-approval’. . . .

In their Opposition, Plaintiffs do not address [defendant’s] arguments concerning the permissible scope of label changes made by a NDA holder under the CBE process.  Instead, Plaintiffs argue that their failure-to-warn claim is not preempted because ‘Plaintiffs’ contentions are that the Defendants did not comply with their obligations under Federal law regarding the labeling of [the drug]. . . .’

While it is obvious that the FDA, in approving the relevant [drug’s] labeling, disagreed with Plaintiffs’ contention that the labeling violates ‘federal law’ at the time it approved that labeling, even if the FDA were wrong, only the government (i.e., not Plaintiffs) may bring a lawsuit to enforce the FDCA and the FDA’s regulations.  Accordingly, Plaintiffs’ failure-to-warn claim, as presently constituted, is preempted.

Id. at *16-17 (citations omitted).  See id. at *4 (“NDA holders may not make any changes to the Highlights section of a drug’s labeling without prior FDA approval”).  See also Patton v. Forest Laboratories, Inc., , 2018 WL 5269239, at *11 (C.D. Cal. Sept. 19, 2018) (plaintiffs conceded preemption of claims affecting highlights).

“Highlights summarizes the information from the FPI that is most important for prescribing the drug safely and effectively.”  71 Fed. Reg. at 3922.  “[I]t is critical to ensure accuracy and consistency in the information included in Highlights because it contains a summary of the most important information for prescribing the drug safely and effectively.”  Id.  Thus, it would be impossible to maintain “Highlights [as] a concise extract of the most important information,” id., if plaintiffs could demand different or additional warnings in the full labeling that would diverge from what is contained in unmodified, FDA-approved highlights.  Thus, plaintiffs should not be able to evade preemption by ignoring disparities with highlights and demanding only changes to the rest of a drug’s labeling.  This need for consistency is analogous to the “sameness” requirement that drives preemption in generic drug cases—for highlights to serve their intended function, they must convey the same information (in abbreviated form) as is found in the rest of a drug’s label.

Preemption exists “when a party cannot satisfy its state duties without the Federal Government’s special permission and assistance, which is dependent on the exercise of judgment by a federal agency.”  PLIVA, Inc. v. Mensing, 564 U.S. 604, 623-34 (2011).  Thus, the preemptive effect of this “independence principle” extends to any product liability claim demanding a change to a black box warning, contraindication, warning, adverse event (or anything else) that would require a corresponding modification to the drug’s highlights section.  As demonstrated above, the FDA’s current regulatory regime concerning Highlights meets Albrecht’s requirement that “whatever the means the FDA uses to exercise its authority, those means must lie within the scope of the authority Congress has lawfully delegated.”  139 S. Ct. at 1679.

Simply put, “to state a claim for failure-to-warn that is not preempted by the FDCA, a plaintiff must plead a labeling deficiency that Defendants could have corrected using the CBE regulation.”  Gibbons v. Bristol-Myers Squibb Co., 919 F.3d 699, 708 (2d Cir. 2019) (quoting Celexa, 779 F.3d at 41).  That regulation explicitly excludes any label change to the substance of the Highlights section.  Potentially, this involves considerable preemption, much more than suggested in Wyeth v. Levine, 555 U.S. 555 (2009)—which involved an older drug used in 2000, long before Highlights existed.  Such older drugs are not subject to the Highlights requirement at all.  21 C.F.R. § 201.56(b) (new “labeling content and format requirements” apply only to post-2006 drugs).  But the amended CBE provision says what it says, and the Supreme Court has put that sort of objection to rest:

We acknowledge the unfortunate hand that federal drug regulation has dealt [these plaintiffs], and others similarly situated.  But it is not this Court’s task to decide whether the statutory scheme established by Congress is unusual or even bizarre. . . .  But different federal statutes and regulations may, as here, lead to different pre-emption results.  We will not distort the Supremacy Clause in order to create similar pre-emption across a dissimilar statutory scheme.  As always, Congress and the FDA retain the authority to change the law and regulations if they so desire.

Mensing, 564 U.S. at 625-26 (citation, quotation, and footnote marks omitted).

 Preemption of explicit plaintiff demands for changes to the Highlights section of drug labeling is the easy argument to win, and indeed to date it has never lost.  However, now that Albrecht has clarified the standards for preemption, the broader argument should also be pursued, extending preemption to any informational claims that demand substantive changes that would necessarily require also modifying the language of the Highlights section.  Defendants and their counsel should closely examine all allegations of “inadequate” warnings to determine whether such claims would create inconsistencies with Highlights information, and adjust their preemption strategy accordingly.

The post Drug-Label “Highlights”: An Overlooked Avenue to Preemption in Failure-to-Warn Litigation appeared first on Washington Legal Foundation.

Categories: Latest News

Third Circuit Should Reverse Class Certification in In Re Lamictal Antitrust Suit

WLF Legal Pulse - Fri, 09/13/2019 - 8:00am

By Douglas W. Dunham, a Partner and Ellen P. Quackenbos, a Counsel, at Dechert LLP in the firm’s New York, NY office.

The U.S. Court of Appeals for the Third Circuit has granted interlocutory review of a New Jersey-based federal district court’s certification of a class in In re Lamictal Indirect Purchaser & Antitrust Consumer Litigation. The appeal arises from an antitrust lawsuit brought against manufacturers GlaxoSmithKline (GSK) and Teva by direct purchasers of Lamictal or of its generic version lamotrigine.  Plaintiffs allege that GSK and Teva’s settlement of a patent dispute both delayed and suppressed generic competition to Lamictal tablets in violation of the antitrust laws.  Because the district court allowed the plaintiffs to improperly use statistical averaging to meet Rule 23’s requirement that common issues must predominate over individual issues, the Third Circuit should reverse class certification.

In conducting its predominance analysis under Rule 23, the district court ignored the complexities of prescription drug pricing and the highly individualized nature of the purchase transactions.  The prices consumers pay can vary significantly depending on such individual factors as purchasing power, quantities purchased, and the types of discounts offered to various kinds of purchasers—ranging from large wholesalers and distributors to small specialized pharmacies.  A consumer’s price also varies depending on whether she buys generic lamotrigine or brand Lamictal.  Although the price paid is an individualized inquiry for each purchaser, the district court allowed the plaintiffs to satisfy predominance by calculating the average price paid and assuming that each class member paid that price. According to the court, such differences in pricing—and the fact that those differences were not reflected in the plaintiffs’ averaging of data—were relevant only to damages and whether “some generic purchasers were injured more or less strongly than others.”1

However, such differences, which were masked by the plaintiffs’ use of averaged prices, affect whether the alleged anti-competitive conduct injured particular purchasers at all.  Indeed, the defendants’ experts concluded that a significant portion of generic purchasers paid less for generic lamotrigine as a result of the patent settlement and suffered no injury. The district court’s characterization of the issue as one related to damages, rather than antitrust impact, led it to apply the more lenient predominance standard for individual issues of damages, which do not usually stand in the way of class certification, and to disregard individual issues of antitrust injury, which are subject to a more stringent standard.  As the Third Circuit has stated, in antitrust cases, the issue of antitrust injury is “critically important” for the evaluation of the Rule 23(b)(3) predominance requirement because injury “is an element of the claim that may call for individual, as opposed to common proof.”2

In its analysis, the district court declined to conduct a thorough evaluation of the facts relevant to predominance, stating that “a court should not address merits-related issues beyond what is necessary to determine preliminarily whether certain elements will necessitate individual or common proof.”3  Yet, the evaluation appears to have stopped well short of the “rigorous analysis” of factual and legal issues required when determining whether antitrust injury was a common issue that could be resolved on the plaintiffs’ common evidence of average pricing.  The court accepted an averaging of discounts from roughly 20% to 60%, a range that meant individual purchasers could well have paid lower prices than they would have paid in the plaintiffs’ “but-for world.”4

Moreover, in an individual lawsuit, an individual purchaser could not show antitrust injury by relying solely on evidence of average prices and discounts, rather than the individual prices actually paid by the purchaser and the discounts actually received. The Rules Enabling Act prevents Rule 23 from being used to enlarge or reduce an individual plaintiff’s burden. That is why, under the Supreme Court’s decision in Tyson Foods, Inc. v. Bouaphakeo, class-action plaintiffs may not rely on averaged, statistical evidence to establish class-wide proof of injury to a hypothetical average plaintiff if there are significant individual differences among class members.5  The district court’s decision in this case contravenes that holding.

The district court inappropriately suggested that the plaintiffs would somehow be able to ensure that uninjured class members did not recover, but did not explain how that could be done in a way that was both administratively feasible and protective of the defendants’ due process and Seventh Amendment rights.6  The court also suggested, without apparent basis, that the issue was not one of uninjured class members, but of class members who received offsetting benefits from the alleged anti-competitive conduct, again attempting to reduce the issue to one of damages.7  In the same vein, the court suggested that class members who “did not switch … to a generic option after it became available” and therefore, as defendants argued, did not suffer injury, could still rely on the common proof provided by plaintiffs’ expert’s “but-for-world” to show what their “purchase patterns would have been” if generics had been introduced earlier.8  Here, the “but-for” world of averaging and statistics is being extended to hypothesize what specific plaintiffs would have done in different circumstances—surely a topic that in the world of individual litigation would require individual proof from the plaintiff.

The Third Circuit’s resolution of these issues will have important ramifications for antitrust litigation, especially for those involving pharmaceuticals.  If allowed to stand, the district court’s decision will furnish a precedent for class-action trials that permits class certification and trials in antitrust cases on a hypothetical level that ignores real-world variations among individual class members, while also eroding the stringent requirements for proof of antitrust injury.  The Third Circuit should reverse the district court’s flawed class certification in In re Lamictal and reaffirm the principles set forth in decisions such as In re Hydrogen Peroxide, Newton, and Gates.

The post Third Circuit Should Reverse Class Certification in <em>In Re Lamictal</em> Antitrust Suit appeared first on Washington Legal Foundation.

Categories: Latest News

Gundy v. U.S.: Does Decision Signal a Rougher Ride Ahead for the Administrative State?

WLF Legal Pulse - Fri, 09/13/2019 - 8:00am

By Jeremy J. Broggi, an associate, and Bert W. Rein, a founding partner, of Wiley Rein LLP in Washington, DC.

The policymaking power routinely exercised by unelected officials in federal agencies is under pressure from both sides of the ideological spectrum.  On the right, libertarians and regulated businesses rail against the “deep state.”  On the left, there is concern about a deregulatory Executive Branch’s new and revised statutory interpretations by.  Both sides turn to the courts for relief.

A majority of the U.S. Supreme Court under Chief Justice John Roberts has shown some sympathy for the Trump Administration’s revisions of prior regulatory policies but continues to express discomfort with an administrative state that “wields vast power and touches almost every aspect of daily life.”  See Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 499 (2010).  While the Court’s reining in of regulation has so far been limited, an important dissent from Justice Gorsuch in Gundy v. United States, 139 S. Ct. 2116 (2019), may foretell a broader effort.  There, Justices Gorsuch, Roberts, and Thomas articulated a vision for restoring congressional accountability for administrative regimes by revitalizing the long-dormant nondelegation doctrine.  Although their view did not command a majority in Gundy, the dissent may presage a coming sea change in judicial review of agency rules implementing broad Congressional directives.  

The Status Quo

For 35 years, Justice Stevens’ opinion in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), has provided a deferential framework for judicial review of agency actions.  Under Chevron, if a statute is silent or ambiguous on the legal basis of the agency’s action, the reviewing court must defer to an agency’s permissible construction.

The most common application of Chevron is in the rulemaking context.  There, Chevron is premised on a theory of implied delegation: when Congress leaves a statute ambiguous, Congress intends the agency, rather than the courts, to exercise whatever interpretive discretion that ambiguity allows.  Accordingly, under Chevron, a reviewing court must determine whether the statute contains an ambiguity.  If so, the Court will uphold an agency’s “reasonable” interpretation of that ambiguity even if it is not the “best” interpretation.

Litigants challenging agency rulemaking have chafed under Chevron.  And the doctrine has allowed the power of unelected government to expand.  Nevertheless, the Supreme Court has been unwilling to reconsider Chevron.  Moreover, the Court’s refusal last term to overturn Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945)—a case establishing Chevron-like deference for agency interpretations of their own rules (rather than statutes)—has led many to conclude that Chevron is now more entrenched than ever.

A Potential Limit

Gundy may open a new path for curbing Chevron deference without transferring interpretive authority from agencies to the courts.  In Gundy, the Attorney General promulgated rules implementing the Sex Offender Registration and Notification Act (SORNA) under a broad and vague statutory mandate to deal with sex offenders who had completed serving their sentences before its enactment.  Petitioner Herman Gundy, a convicted sex offender in that category who failed to register under the Attorney General’s rules, argued that the rules were void because SORNA unconstitutionally delegated legislative power to the Attorney General.

The Court, led by Justice Kagan, rejected Gundy’s petition in a 5-3 vote, holding that SORNA provided the Attorney General’s with enough policy guidance to draft reasonable rules.  Justice Alito concurred in the result but declined to join Justice Kagan’s opinion.  He expressed sympathy for the dissent and indicated his willingness to change his position in a future case.  Justice Kavanaugh did not participate in Gundy.

Justice Gorsuch authored the dissent.  Relying on two New Deal-era nondelegation decisions long thought consigned to the dustbin of history, Justice Gorsuch argued that SORNA was unconstitutional because it gave the Attorney General too much interpretive discretion on a central policy issue.  He also noted that, even under Chevron, the Court has sometimes refused to defer to agency interpretations of statutes affecting “major questions” of policy:  “Although it is nominally a canon of statutory construction, we apply the major questions doctrine in service of the constitutional rule that Congress may not divest itself of its legislative power by transferring that power to an executive agency.”  Justice Gorsuch laid a doctrinal foundation for the test the Court has employed when rejecting deference to agencies in “big” cases.  At the same time, however, Justice Gorsuch would ensure that the judiciary’s role is a limited one so courts are not tempted to supply the “most reasonable answer” to major policy questions Congress had not resolved.  In his view, the constitutionally correct remedy was to return the responsibility for policy decisions to Congress by voiding the vague statute itself.

In attempting to delineate the contours of a revived nondelegation doctrine, Justice Gorsuch articulated what he deemed the three categories of permissible congressional delegations to the other branches:  (1) delegations of authority to “fill up the details” of defined congressional programs; (2) delegations of authority to make factual determinations that trigger statutorily defined consequences; and (3) delegations of authority to carry out “non-legislative responsibilities” within the scope of functions assigned to the Executive Branch to the courts by Articles II or III of the Constitution.

Future Developments

Were Justice Gorsuch’s dissent to command a future majority with Justices Alito and Kavanaugh, the non-delegation doctrine would reset administrative litigation strategy for both challengers and defenders of agency rules.  Under current law, challengers argue that an agency has departed from a specific congressional directive.  They argue, in other words, that the statute cabins the agency’s discretion and that the agency transcended the limit.  Regulators, on the other hand, typically argue that the statute is ambiguous, because Congress wanted the agency to make an expert, reasonable choice between alternative policy resolutions within a broad area of discretion.  Most challenges are won or lost on this basis; if the analysis turns on the reasonableness of the agency’s decision, the agency almost always prevails.

A revived nondelegation doctrine would force both sides to rethink current strategies.  Challengers unable to establish that Congress mandated a particular legal interpretation may argue that if Congress left interpretation to agency discretion, it evaded its legislative responsibility.  Conversely, agencies may have to contend initially that their regulations merely implement specific congressional directives, thus avoiding nondelegation challenges.  Alternatively, agencies may argue that if Congress delegated discretionary authority to the agency, the delegation fell within the areas Justice Gorsuch recognized as permissible.  Defining the boundaries of those areas will require a case-by-case development of wholly new principles of nondelegation law.  But agencies regulating within those boundaries would have a strong argument that Chevron deference should then apply to support their decisions.

Of course, litigants can have no assurance that Justice Gorsuch’s dissent will become a majority view.  But Justice Alito’s expression of sympathy for the dissent, and similar concerns articulated by then-Judge Kavanaugh at the court of appeals and in his academic writing, strongly suggest that possibility.  Accordingly, where challengers face limited prospects of establishing an express congressional directive, it might even be wise to acknowledge a congressional delegation of authority and then attack the legitimacy of that delegation.

Faced with the prospect of a revitalized nondelegation doctrine, the administrative state would likely seek to expand the categories of permissible delegations with the hope that exceptions will swallow the rule and thus reinter the doctrine.  Agencies could find sympathy in lower courts that want to preserve the full scope of federal government activity and may be sensitive to the potential for paralysis in forcing Congress to make hard decisions.  But Justice Gorsuch’s dissent relies on far more than a technical analysis.  Harking back to the Founders’ philosophy and the importance of making legislation run the gauntlet of checks and balances, Justice Gorsuch sees the separation of powers as an assurance that the federal government would limit the scope of its activity and its intrusions into individual liberty.  Justice Gorsuch clearly seems willing, if not eager, to curb not only agency policy discretion but the scope of federal activity fostered by the ease of delegating authority to a host of “expert” agencies.

The administrative state, having long expanded under the protection of Chevron, may soon be in for a rougher ride.

The post <em>Gundy v. U.S.</em>: Does Decision Signal a Rougher Ride Ahead for the Administrative State? appeared first on Washington Legal Foundation.

Categories: Latest News

Cantwell Presses TSA on Sea-Tac Staffing, Security Measures

WASHINGTON, D.C. – Today, U.S. Senator Maria Cantwell (D-WA), the Ranking Member of the Senate Committee on Commerce, Science, and Transportation, pressed Patricia Cogswell, the Acting Deputy Administrator of the Transportation Security Administration (TSA), on staffing levels and security measures at Sea-Tac Airport.

“As one of the fastest growing airports, if not the fastest growing airport in the nation, the challenges of moving people and making sure that we’re all secure is a very, very important daily task,” Senator Cantwell said.

In her questions for Acting Deputy Administrator Cogswell, Cantwell asked about ongoing efforts to train additional teams to handle the growth in passenger traffic at Sea-Tac.

“I mentioned Sea-Tac and its rapid growth – I think we’re at 135,000 people a day and almost 50 million a year. I noticed that the site for Sea-Tac says it was built in 1949 to accommodate a million people, so the fact that we’re accommodating annually 50 million people shows the stress and strain on the system,” Senator Cantwell said.

“These security measures are of the utmost importance to us in continuing to do a good job at the security layer, as well as moving in a cost-effective fashion,” Cantwell continued. “I wanted to ask you about the new rules for developing third party canine units for explosive detection. When will we see those, and what other initiatives are we pursuing to have fully-trained teams available for deployment?”

Cogswell answered that TSA is continuing its work to address passenger and cargo screening needs.

“We expect to see continued growth and volume in that space; we’ve had a lot of interest in it,” Cogswell said. “In addition to the aspect around the third-party canine, we are also looking at the next round, next review, next enhancement, of technology that could be available for use in screening of cargo.”

“So, it’s safe to say that Sea-Tac will be seeing aggressive use of canines and that TSA will be continuing its own efforts as well as whatever Sea-Tac does on its own,” Cantwell concluded.

Senator Cantwell has long been a leader on aviation security issues in Congress. She authored legislation to help bring more bomb-sniffing dogs, which improve security and decrease passenger wait times, to airports across the country. Cantwell has also worked with TSA to deploy new dogs to Sea-Tac Airport to improve security checkpoint wait times at the airport. She has also worked with her colleagues to oppose cuts proposed by the Trump administration for Visible Intermodal Prevention and Response (VIPR) teams, a critical mass transit security program.

Video of Senator Cantwell’s opening statement is available HERE, and audio is available HERE.

Video of Senator Cantwell’s Q&A is available HERE, and audio is available HERE.

###

Opening Statement

Senator Maria Cantwell 

Opening Statement at Commerce Committee, Science, & Transportation Hearing on Oversight of the Transportation Security Administration 

Witness: Patricia Cogswell, Acting Deputy Administrator, Transportation Security Administration 

September 11, 2019

CANTWELL: Thank you, Mr. Chairman, and let me also welcome Acting Deputy Administrator Cogswell for joining us this morning. And thank you for all the work that TSA does in keeping us safe every day.

On this somber date, we remember the tragic and devastating events of 18 years ago. An adversary motivated by nothing short of an evil attack on our nation and the horrifying grief and loss of life was unimaginable. Establishing the Transportation Security Administration was among several steps that Congress took to ensure the attack would never be repeated. In the last Congress, this committee worked hard to complete the work on the FAA Reauthorization Act of 2018, also including the first comprehensive reauthorization of TSA since the agency was created shortly after the September 11 attacks. Our focus today is on oversight of the agency as it continues its critical mission and seeks to implement the mandates included in last year’s TSA authorization, formerly known as the TSA Modernization Act.

As you know, last year’s TSA Modernization Act focused on improving transportation security by addressing such issues as training and deployment of canines for screening of passengers and cargo, reinforcing efforts the intercept insider threats, and expediting testing and deployment of new screening technologies in various organizations to ensure the effective leadership at the agency. I also want to note here I appreciate the good work of the Pacific Northwest Laboratories in Richland, Washington, who, at airports with the Millimeter Wave Scan, have worked through security and developing, we call it the TSA salute, but nonetheless, this overhead has given us quite the security layer, and yesterday had the chance to talk with Acting Director Cogswell about the next generation of technology we will be deploying at airports. But both at our airports with individual travelers and our cargo containers, the Pacific Northwest Laboratory continues to stay ahead on cutting-edge technology, and we appreciate the work of our R&D labs in helping us maintain security.

I also appreciate your candor regarding a recent diversion of TSA resources to the southern border. I spoke to you about a letter that was sent by my colleague Senator Wicker and I about the diversion of those resources. My guess is we’ll have a chance to ask you in this morning’s hearing about that. Reports indicated at the time that there could be an additional FAMs deployed, with an ultimate goal of sending 175 to support the CBP operations, so I look forward to asking you about those questions this morning.

So, as my colleague said, we’re here to review what we can do to make sure that the TSA remains a strong and viable force. I remain very interested in the canine units’ success and the further deployment of that as one of the fastest growing airports, if not the fastest growing airport in the nation, Sea-Tac, the challenges of moving people and making sure that we’re all secure is a very very important daily task. So thank you for being here to address these issues.

 

Committee Announces Hearing on Mass Violence and Digital Responsibility

U.S. Sen. Roger Wicker, R-Miss., chairman of the Committee on Commerce, Science, and Transportation, will convene a hearing titled, “Mass Violence, Extremism, and Digital Responsibility,” at 10:00 a.m. on Wednesday, September 18, 2019. In light of recent incidents of mass violence, this hearing will examine the proliferation of extremism online and explore the effectiveness of industry efforts to remove violent content from online platforms. Witnesses will discuss how technology companies are working with law enforcement when violent or threatening content is identified and the processes for removal of such content.

<p>This morning we reflect on a somber

This morning we reflect on a somber day in American history. It was exactly 18 years ago that terrorists turned civilian aircraft into weapons killing nearly 3,000 Americans and injuring thousands more. Today, we honor the memories of those who perished and those first responders who ran into harm’s way to help their fellow citizens.

The tragedy of 9/11 led to the creation of the Transportation Security Administration (TSA) within the new Department of Homeland Security. TSA is charged with protecting our nation’s transportation systems from attacks and ensuring freedom of movement of people and commerce. 

I am pleased that Acting Deputy Administrator Patricia Cogswell is here to update the committee on TSA’s progress toward achieving these goals. 

America’s air, land, and marine transportation systems are designed for accessibility and efficiency. The enduring challenge remains how to deter and respond to terrorist attacks without unduly burdening travel, the economy, and civil liberties.

TSA’s workforce also includes Transportation Security Inspectors, Federal Air Marshals, and Visible Intermodal Prevention and Response Teams among other security professionals. 

Congress has worked to support this dedicated workforce by passing the first-ever TSA reauthorization bill – the TSA Modernization Act – in last year’s FAA Reauthorization legislation. The Modernization Act included provisions to:

  • Streamline acquisition;
  • Expand the PreCheck program;
  • Support the Screening Partnership Program;
  • Mandate more rigorous background checks of airport workers,
  • Strengthen airport access controls; and
  • Enhance security in public areas of airports.

Thus far, TSA has done an admiral job of responding to the myriad of directives and reporting requirements of the bill. However, I remain concerned about the pace of TSA’s deployment of new screening technology, the rate of PreCheck expansion, the seeming lack of urgency for implementing Screening Partnership Program reforms, and the absence of a comprehensive plan to integrate the Registered Traveler program with Credential Authentication Technology systems. I hope that our witness today will address the agency’s progress toward implementing the Modernization Act

In addition to this act implementation, the committee will also exercise oversight on reforms to existing security programs, notably the Passenger Screening teams.  In February, Administrator Pekoske briefed the committee on disturbing testing results from the IG and promised to revamp canine training. TSA has also committed to making the Federal Air Marshals program more intelligence-based.

Improving today’s frontline security programs is important, but TSA must adapt to changing threats and technologies. The committee is interested in emerging technology, including biometrics – perhaps we will hear about that today. We understand that TSA has a Biometrics Roadmap, but we certainly need to review this in light of concerns involving privacy, data protection, and civil liberties.  

So, I look forward to a robust discussion today on the vital role that TSA plays.

Utilization Management” Barriers to Care and Burdens on Small Medical Practice

House Small Business Committee News - Wed, 09/11/2019 - 11:30am

The Committee on Small Business will meet for a hearing titled, “Utilization Management: Barriers to Care and Burdens on Small Medical Practice.” The hearing is scheduled to begin at 11:30 A.M. on Wednesday, September 11, 2019 in Room 2360 of the Rayburn House Office Building.

Health care providers want nothing more than to provide their patients the highest quality and most clinically appropriate care. However, due to utilization management programs such as prior authorization and step therapy, doctors are forced to spend their time working with insurance companies and pharmacy benefit managers instead of treating patients. While cost saving efforts are critical to the nation’s health system, such programs are affecting the quality of care and proving burdensome to many small medical practices. The hearing will examine how the programs work and how they are impacting small medical practitioners in a variety of settings.  

To view a livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witness List 

Witnesses 


Dr. Paul M. Harari

Professor
Chairman, Department of Human Oncology
University of Wisconsin School of Medicine and Public Health
Madison, WI
*Testifying on behalf of the American Society for Radiation Oncology (ASTRO)
Testimony 

Dr. David R. Walega, MSCI
Associate Professor of Anesthesiology
Chief, Division of Pain Management
Vice Chair of Research, Department of Anesthesiology
Northwestern University Feinberg School of Medicine
Chicago, IL
*Testifying on behalf of the American Society of Anesthesiologists
Testimony

Dr. John S. Cullen, FAAFP
Family Physician & Partner
Valdez Medical Clinic, LLC
Valdez, AK
*Testifying on behalf of the American Academy of Family Physicians
Testimony 

*Witness testimony will be posted within 24 hours after the hearing’s occurrence



 

Protecting the Nation’s Transportation Systems: Oversight of the Transportation Security Administration

U.S. Sen. Roger Wicker, R-Miss., chairman of the Committee on Commerce, Science, and Transportation, will convene a hearing titled, “Protecting the Nation’s Transportation Systems: Oversight of the Transportation Security Administration,” at 10:00 a.m. on Wednesday, September 11, 2019. This hearing will examine issues related to the Transportation Security Administration (TSA) and provide oversight on TSA’s efforts to enhance transportation security.

Growing the Clean Energy Economy

House Small Business Committee News - Tue, 09/10/2019 - 10:00am

The Committee on Small Business Subcommittee on Rural Development, Agriculture, Trade, and Entrepreneurship will hold a hearing titled, “Growing the Clean Energy Economy.” The hearing is scheduled to begin at 10:00 A.M. on Tuesday, September 10, 2019 in Room 2360 of the Rayburn House Office Building.

From installing solar panels, to building wind farms and revolutionizing the auto industry, the clean energy economy is a driving force for small business innovation and job growth. Energy efficiency jobs make up most of the green economy, supporting at least 2.2 million jobs ranging across various industries. Small businesses are directly involved in this economy in a wide variety of ways. This hearing will bring together some small business innovators in the clean energy and green economy to discuss the importance of their businesses, the challenges they face, and what Congress can do to support small business innovation for the 21st century.

To view a livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witness List 

Witnesses 

*Witness testimony will be posted within 24 hours after the hearing’s occurrence



 

Blog Post—California-Based Federal Court Properly Invokes Personal Jurisdiction to Dismiss Food-Labeling Suit

WLF Legal Pulse - Mon, 09/09/2019 - 9:05am

In law school civil procedure classes, students learn what are seemingly established rules of personal jurisdiction. Corporations are subject to general jurisdiction only in two places—its state of incorporation and the state of its principal place of business. Hertz Corp. v. Friend, 559 U.S. 77, 93 (2010). A corporation is subject to a state’s specific personal jurisdiction when the injury in question occurred in that state or the defendant created or manufactured the allegedly defective product in that state. Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773, 1781-82 (2017).

But as we well know, once in practice, attorneys work to distinguish their case from these rules, to assert newfound theories of jurisdiction, or to change the rules entirely. That’s where we encounter such novel theories of jurisdiction as pendent personal jurisdiction. Plaintiffs’ attorneys can and will take every inch when it comes to winning judgments or extracting settlements on behalf of their clients (and more than lining their own pockets in the process).

Most often when we write about “Food Court” litigation, we’re faced with plaintiffs’ lawyers devising new tactics to game the system and extract large settlements from companies. Often, as was the case in the Southern District of California, plaintiffs from other states attempt to link their claims with plaintiffs from California, trying to take advantage of the typically plaintiff-friendly courts there. An increasing number of these cases are dismissed early in the proceedings under the theory that a “reasonable consumer” could not possibly have been misled by the food label. But in Andrade-Heymsfield, et al. v. Danone US, Inc., Judge Bencivengo also took the opportunity to dismiss an out-of-state plaintiff’s claims on personal jurisdiction grounds before dismissing the California plaintiffs’ claims.

In Danone, three plaintiffs sued Danone alleging that its Coconut Milk labels are deceptive as they market the product as being more nutritious than it actually claims to be. The plaintiffs, two Californians and one New Yorker, brought this putative class action on behalf of all those similarly situated in California and New York. The complaint alleged violations of the Consumer Legal Remedies Act, Unfair Competition Law, False Advertising Law, and breaches of express and implied warranties under California law. The complaint also alleged violations of New York’s Unfair and Deceptive Business Practices Law, False Advertising Law, and breaches of express warranties under New York Law. Bringing the New York claims in California was seemingly an effort to try the case in front of a possibly more plaintiff-friendly California court.

The court dismissed the complaint with prejudice under Rule 12(b)(6) for failure to state a claim, as is typical in these cases. But it first took the opportunity to find that no personal jurisdiction existed over the New York plaintiff’s claims.

Danone argued that the New York claims were barred under the Supreme Court’s holding in Bristol-Myers, because they had no connection to California. The New York plaintiff attempted to distinguish Bristol-Myers under the premise that mass actions are different from class actions. But the court found that distinction is only relevant when involving absent putative class members, not named plaintiffs. And according to the court, “Bristol-Myers should apply where, as here, non-resident class representatives assert state-law claims against non-resident defendants on behalf of multistate classes as opposed to a nationwide class.” Bristol-Myers barred the New York claims because the plaintiff’s claims had no connection to the forum state.

The New York plaintiff also asserted that, despite Bristol-Myers, the district court had general jurisdiction over Danone due to Danone’s business contacts with California. Among other connections, Danone is registered to do business in California, has registered agents in California, and operates multiple facilities there.

But the Supreme Court has made it very clear that a corporation is only at home in its state of incorporation and in the state of its principal place of business. And only in an “exceptional case” will a company be subject to general jurisdiction in another state. Registering to do business in a state, or maintaining facilities and other properties, does not meet the “so continuous and systematic as to render the foreign corporation essentially at home in the forum State” standard. “[T]he general jurisdiction inquiry does not focus solely on the magnitude of the defendant’s in-state contacts.” Daimler AG v. Bauman, 571 U.S. 117, 139 n.20 (2014). Ironically, Danone would be subject to general jurisdiction and thus a class action involving plaintiffs in multiple states in New York, Parra’s home state.

The plaintiff’s last-gasp effort to have the case heard in California was to assert pendent personal jurisdiction over Danone for the claims. Federal courts typically exercise pendent personal jurisdiction in a case where a plaintiff asserts jurisdiction over a defendant for the violation of a federal statute providing for nationwide service of process. Once the court has jurisdiction over that claim, it can then assert jurisdiction over claims that arise from the same set of facts as the original claim. But in Danone there was no federal claim “upon which Plaintiffs [could] hook their state law claims.” The district court refused to assert pendent personal jurisdiction and directed the plaintiff to re-file in an appropriate jurisdiction.

Despite recent setbacks, plaintiffs will continue to engage in “Food Court” litigation and turn over every stone in trying to bring these claims in plaintiff-friendly jurisdictions. The more options defendants have to fight these claims, though, the more likely these suits will eventually be gone for good. Of course, the plaintiffs’ bar won’t stay down for long and it will soon be time for the next fight.

Also published on Forbes.com on WLF’s contributor page.

The post Blog Post—California-Based Federal Court Properly Invokes Personal Jurisdiction to Dismiss Food-Labeling Suit appeared first on Washington Legal Foundation.

Categories: Latest News

Connecting Rural Small Businesses to Broadband: Challenges, Successes, and How to Do Better

House Small Business Committee News - Fri, 09/06/2019 - 3:30pm

The Committee on Small Business Subcommittee on Contracting and Infrastructure will hold a field hearing titled, “Connecting Rural Small Businesses to Broadband: Challenges, Successes, and How to Do Better.” The hearing is scheduled to begin at 3:30 P.M. on Friday, September 6, 2019 at the University of Maine at Machias, Lecture Hall Science 102, 116 Obrien Ave, Machias, ME 04654.

Access to reliable and affordable broadband service is imperative to not only the success of small businesses, but the overall economic development of a region. In many rural parts of the country, however, reliable access is far from guaranteed. Over 24 million Americans, the vast majority of whom live in rural areas, lack access to broadband at benchmark speeds. The hearing will focus on broadband deployment efforts in rural America and the challenges small firms in those areas face without reliable broadband services. Additionally, witnesses will suggest potential policy changes Congress could make to improve broadband access in the nation’s rural areas.

Hearing Notice

Witness List

Hearing Memo


Witnesses

Mr. Mark Ouellette
President & CEO
Axiom Technologies, LLC
Machias, ME
Testimony

Mr. Chris Loughlin
Board Member, Downeast Broadband Utility
Town Manager, Baileyville, Maine
Baileyville, ME
Testimony

Ms. Lisa Hanscom
Co-Manager
Welch Farm & First Selectman
Roque Bluffs, ME
Testimony 

Mr. Timothy R. McAfee
CEO
Pioneer Broadband
Houlton, ME
Testimony 

*Witness testimony will be posted within 24 hours after the hearing’s occurrence

“Big Tech” Review Provides DOJ an Opportunity to Reinforce Established Antitrust Principles

WLF Legal Pulse - Fri, 09/06/2019 - 10:40am

Anthony W. Swisher is a Partner in the Washington, DC office of Baker Botts LLP and serves as the WLF Legal Pulse blog’s Featured Expert Contributor on Antitrust & Competition Policy — U.S. Department of Justice.

Antitrust practitioners often toil in the shadows. Many antitrust matters are just not that interesting to people beyond the parties involved and those of us who practice antitrust law for a living. Occasionally, however, an issue will arise that catches the public’s attention, and antitrust enjoys a moment in the spotlight. The recent public interest in “Big Tech” companies is one such moment. Firms such as Google, Facebook, Amazon, and Microsoft suddenly find themselves the subject of increased antitrust attention. Recent months have seen numerous calls from political leaders and policy pundits to investigate the activities of Big Tech, some even going so far as to call for the firms to be broken up.

It is in this context that the DOJ Antitrust Division recently announced a review of “market-leading online platforms.” According to the DOJ’s press release, its review will consider “whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers.” At first blush, announcing a review in this environment might be risky. An antitrust investigation launched in the context of heightened calls for the government to “do something” risks being incorrectly labeled as advancing questionable antitrust policy in service of a desire to appear proactive.

Many of the objections about Big Tech firms raised by political leaders and pundits—on both sides of the political aisle, it should be noted—are inconsistent with long-established principles of antitrust enforcement. Concerns voiced over impacts on “small business” risk elevating the interests of competitors over those of consumers. Calls to break up firms not because they are exercising market power or engaging in exclusionary conduct, but simply because they are “too big,” risk undoing decades of advancement in antitrust policy. Former Acting FTC Chairman Maureen Ohlhausen cited this trend in recent testimony before the House Judiciary Committee, noting that some believe that “current events have overtaken the hard-won political consensus that antitrust should principally focus on protecting consumers.”

DOJ’s review might, however, provide an opportunity; an opportunity for the Antitrust Division to reiterate that established antitrust principles still hold true, and that firms can continue to order their affairs secure in the knowledge that they will not be labeled an antitrust violator simply because of shifting political winds. Many of the calls to investigate and even break up Big Tech firms seem to disregard at least two long-established antitrust principles: the consumer welfare standard, and the notion that “big” is not necessarily “bad.” These are not partisan principles, but fundamental tenets of antitrust policy that Democratic and Republican administrations alike have relied upon for decades to guide their enforcement efforts. DOJ can take this opportunity to reiterate that these ideas still hold true.

The consumer welfare standard has long been recognized as the guiding principle of U.S. antitrust enforcement. It provides the antitrust enforcement agencies with a standard for enforcement decisions, and it provides guidance to economic actors as to what types of conduct may violate the antitrust laws. As former FTC Chair Tim Muris put it, “[t]here is now general agreement that consumer welfare should be the touchstone of antitrust enforcement.” This idea was echoed by former AAG Joel Klein, who noted that “we are concerned with consumers, not competitors,” and called on antitrust enforcers to “resist the temptation” of using the antitrust laws “to protect competitors rather than competition.” Professor and former Acting Director of the FTC Bureau of Competition Tad Lipsky repeated the idea in his 2017 testimony before the Senate Judiciary Committee, where he correctly asserted that the consumer welfare standard is “the best guide for the millions of businesses throughout our economy in understanding how to comply with antitrust rules.”

A similarly well-established principle of antitrust enforcement is the notion that “big” does not equal “bad.” To violate Sherman Act § 2’s prohibition against “monopolizing,” being “big” is not enough. Even being big and charging high prices won’t get you there. A firm must also engage in some form of exclusionary conduct. As the Supreme Court held (without dissent) in Verizon v. Trinko, “The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. . . . To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct.”

Officials from numerous administrations and on both sides of the political aisle have consistently echoed the Supreme Court’s statement in Trinko. For example, former FTC Commissioner Edith Ramirez noted during her term that, “In many cases, being big is a consequence of being better than rivals at offering customers what they want. We are rightly hesitant to view success, and by extension size, with automatic suspicion.” Commissioner Ramirez’s comments echoed those of AAG Klein, who argued that “it’s important to emphasize that big is not necessarily bad when it comes to antitrust enforcement. Bigness can lead to efficiency – through a synergistic merger, for example – which in turn is good for consumers.” Professor and former Obama administration Antitrust Division chief economist Carl Shapiro wrote in his paper Antitrust in a Time of Populism, “[L]et these inquiries proceed when suspicious conduct can be identified. But in doing so, let us avoid a ‘big is bad’ mentality and let us truly have the interests of consumers in mind.” More recently, AAG Makan Delrahim has repeated the same principle, recognizing that a “crucial element” of a monopolization claim is the requirement that the defendant acquired or maintained monopoly power “through anticompetitive conduct that is ‘exclusionary’ or ‘predatory’ in nature.”

Indeed, both of these principles—the consumer welfare standard and a refusal to treat size alone as an antitrust problem—have been espoused by current Antitrust Division leadership and by enforcers across the political spectrum stretching back decades. To the extent the voices calling for the investigation and break up of Big Tech are encouraging a move away from these principles, they should be rejected. Causing businesspeople to “set sail on a sea of doubt” as to what might constitute an antitrust violation is not sound policy.

The post “Big Tech” Review Provides DOJ an Opportunity to Reinforce Established Antitrust Principles appeared first on Washington Legal Foundation.

Categories: Latest News

CARROTS & STICKS: Trends in White-Collar Compliance and Enforcement

WLF Legal Pulse - Thu, 09/05/2019 - 3:44pm

Featuring

Ira Raphaelson, Senior Counsel, White & Case LLP and Former General Counsel, Las Vegan Sands Corp.

Gregory A. Brower, Shareholder, Brownstein Hyatt Farber Schreck, LLP and Former Deputy General Counsel, FBI

Description:

Over the last two years, the Justice Department and more recently the Treasury Department and increasing numbers of non-US authorities have issued policy statements, guidance documents, and made speeches intending to make white-collar criminal enforcement more transparent. As recent federal prosecutions and consent decrees demonstrate, however, businesses enterprises and their corporate officers should not mistake clarity in the decision-making process for disinterest. Those enforcement actions and DOJ guidance reflect the need for consistent, committed corporate compliance procedures. Our speakers will analyze this year’s most important white-collar developments and trends, forecast future concerns, and discuss key refinements that can improve even the most effective corporate compliance program. 

The post CARROTS & STICKS: Trends in White-Collar Compliance and Enforcement appeared first on Washington Legal Foundation.

Categories: Latest News

Transforming Rural America: A New Era of Innovation

U.S. Sen. John Thune, R-S.D., chairman of the Subcommittee on Communications, Technology, Innovation, and the Internet, will convene a hearing titled, “Transforming Rural America: A New Era of Innovation,” at 1:30 p.m. CST on Thursday, September 5, 2019. This hearing will examine the innovations high-speed broadband services bring to rural America in a variety of sectors such as agriculture, education, health care, and small business. The hearing will also explore the need to bring additional reliable broadband connectivity to rural America.

 Witnesses:

  • The Honorable Brendan Carr, Commissioner, Federal Communications Commission
  • Dr. José-Marie Griffiths, President, Dakota State University
  • Ms. Deanna Larson, President, Avera eCARE
  • Mr. Mark Shlanta, Chief Executive Officer, SDN Communications
  • Mr. Craig Snyder, Chief Executive Officer, VIKOR Teleconstruction
  • Dr. Michael Adelaine, Vice President for Technology and Security, South Dakota State University

*Witness list subject to change

Hearing Details:

Thursday, September 5, 2019
1:30 p.m. CST
Field Hearing
Southeast Technical Institute
2320 North Career Avenue
Sioux Falls, South Dakota 57107

Witness testimony, opening statements, and a live video of the hearing will be available on www.commerce.senate.gov.

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