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QUARTERLY ANTITRUST BULLETIN ANTITRUST & COMPETITION
GROUP

DENVER

Bobbee J. Musgrave, Co-Chair
bobbee.musgrave@hro.com

Tracy L. Ashmore
tracy.ashmore@hro.com

Michael J. Hofmann
michael.hofmann@hro.com

Christopher L. Ottele
chris.ottele@hro.com

Steven J. Perfrement
steven.perfrement@hro.com

B. Lawrence Theis
larry.theis@hro.com


SALT LAKE CITY

Jay D. Gurmankin
jay.gurmankin@hro.com


SAN FRANCISCO

Jesse W. Markham, Jr., Co-Chair
jesse.markham@hro.com

Adam Brezine
adam.brezine@hro.com

Meryl L. Macklin
meryl.macklin@hro.com

Robert L. Stolebarger
robert.stolebarger@hro.com



SECOND QUARTER 2008
Authored by Tracy L. Ashmore and Stephen D. Rynerson
Advertising Material
QUARTERLY ANTITRUST BULLETIN
No new United States Supreme Court decisions on antitrust law were released in the
second quarter of 2008. Lower court decisions have principally concerned uncontroversial
applications of traditional antitrust principles. However, there were several decisions which
stood out for their considerations of novel or high profile matters:
The D.C. Circuit delivered its opinion in the latest installment of the long-running
confrontation between the Federal Trade Commission (FTC) and Rambus, Inc.
The Ninth Circuit joined the Second and Fourth Circuit in adopting a two-stage
test for determining under what circumstances federal antitrust law preempts
state law.
The Second Circuit held that the standard for Article III standing was distinct
from the Twombly standard for antitrust standing and that both forms of standing
should be addressed on a motion to dismiss.
The Sixth Circuit concluded that enforcement of a membership-based
organizations non-commercial rules is itself a non-commercial activity, even
if it has financial consequences for the members being punished, so long as
enforcement of the rules is rationally related to the rules purposes.
D.C. CIRCUIT OVERTURNS FTC ORDER IN RAMBUS
The underlying dispute in Rambus, Inc. v. FTC, 522 F.3d 456 (D.C. Cir. Apr. 22, 2008)
has been the subject of considerable reporting since its inception nearly six years ago.
The background, briefly, is that the FTC alleged Rambus had withheld, or otherwise
misrepresented, information concerning its ownership of several patents relating to
synchronous dynamic random access memory (SDRAM) to the Joint Electron Device
Engineering Council (JEDEC), an organization concerned with developing standards
for computer memory products. Id. at 458-60. Rambus had participated in JEDECs
development of industry standards for SDRAM. The FTC alleged that Rambus failed
to comply with all of JEDECs disclosure requirements relating to patent-ownership
interests. Id. at 460. In 2002, the FTC commenced an administrative proceeding under
Section 5(b) of the FTC Act, asserting that Rambus had engaged in deceptive trade
practices, including attempted monopolization, by failing to properly disclose its potential
conflict of interest in promoting the adoption of SDRAM standards that would read on its
patents. Id. at 461. After extensive proceedings, the FTC found Rambus had violated
the FTC Act by engaging in monopolistic acts and imposed a final order compelling
Rambus to license its patents at steeply discounted royalty rates. Id. at 462. Rambus
sought judicial review of the FTCs order in the D.C. Circuit, and the court set aside the
order with directions for further proceedings.
The D.C. Circuit focused specifically on Rambuss argument that, even assuming Rambus
violated JEDECs disclosure policies, the FTC had simply found an injury without finding
an antitrust injury. Id. at 462. The court commenced its analysis by observing that the
FTCs order found a violation of Section 5 of the FTC Act based on an alleged underlying
violation of Sherman Act Section 2. Id. Therefore, notwithstanding the fact that the action
had been brought as a deceptive trade practice administrative proceeding, the FTCs ruling
would still have to be evaluated according to the principles of antitrust law. Id. The FTC
was thus required to present evidence that Rambuss conduct did not merely harm its
competitors or permit it to earn supracompetitive profits, but that the competitive process
was damaged, thereby injuring consumers. Id. at 463-64. The court concluded that the
FTC had failed to present sufficient evidence to support such a conclusion.




2
Central to the D.C. Circuits decision was the fact that the FTC found that if Rambus had fully complied with JEDECs
disclosure policies, then JEDEC either would have excluded Rambuss patented technologies from the JEDEC DRAM
standards, or would have demanded assurances of licensing at a lower royalty rate. Id. at 463 (emphasis added).
Thus, while the court could assume that Rambuss nondisclosure made the adoption of its technologies somewhat more
likely than broad disclosure would have, . . . there was insufficient evidence that JEDEC would have chosen standards
conforming to a different technology had Rambus made a full disclosure of its interests. Id. at 463-64. The court further
noted that if JEDEC had knowingly selected standards reading on Rambuss patent, as the FTC itself suggested was
possible, then Rambus would have had an even greater competitive advantage vis-�-vis its rivals. Id. at 467. Finally,
the court concluded that the FTC had not supported its conclusions by substantial evidence. Id. at 467-69. The court,
therefore, vacated the FTCs orders and remanded the case for further proceedings.
The key takeaway from the Rambus decision is the D.C. Circuits finding that it was insufficient for the FTC to impose
penalties simply because a possibility of antitrust injury flowed from an alleged deceptive trade practice. Instead, the
court determined that when there are multiple plausible outcomes from an initial set of facts, the FTC will be obligated
to demonstrate that it is the anticompetitive outcome which is most likely to occur.
NINTH CIRCUIT ADOPTS TWO STAGE FISHER/MIDCAL INQUIRY ON
PREEMPTION OF STATE LAWS BY SHERMAN ACT
In Costco Wholesale Corp. v. Maleng, 522 F.3d 874 (9th Cir. Apr. 1, 2008), the Ninth Circuit partially reversed and
partially affirmed a lower court decision that had found a substantial part of Washingtons state regulations for the sale of
wine and beer to be preempted by federal antitrust laws. The plaintiff, Costco, is the operator of a chain of membership
warehouses which relies on high sales volumes and a centralized inventory distribution system to offer its members
substantial discounts relative to more traditional sales outlets. Id. at 882. Costco alleged that nine different provisions
of the Washington liquor code and related regulations were in conflict with Section 1 of the Sherman Act as restraints
on trade. They included:
(1) The uniform pricing rule, which required wine and beer makers to sell their products to every distributor
at the same price and, in turn, required each distributor to sell the products to every retailer at the same
price.
(2) The price posting rule, which required distributors to file a price listing for all brands of wine and beer
with the state liquor control board. The price listing would be made publicly available.
(3) The hold rule, which required wine and beer makers to hold their posted prices for at least 30 days.
(4) The minimum mark-up rule, which, with few exceptions, required distributors to price wine and beer at
no less than 10% above their acquisition costs.
(5) A ban on volume discounts.
(6) A ban on distributors selling wine and beer on credit to retailers.
(7) The delivered price rule, which required distributors to sell wine and beer at the delivered price to all
retailers, thus preventing retailers from realizing lower prices by either paying for an alternative shipping
method or picking up the merchandise themselves.
(8) A ban on warehousing, i.e., retailers could not receive or store wine and beer at a central warehouse,
but were obligated to take delivery at their retail location.
(9) A ban, under most circumstances, on retailers selling wine and beer to each other.
522 F.3d at 883-84. The trial court upheld the ban on retailer-to-retailer sales but found the other eight provisions
were preempted by the Sherman Act. On review, the Ninth Circuit affirmed the trial