Antitrust Highlights

The California Attorney General’s Office established its Antitrust Section in 1959 and is the preeminent state antitrust enforcement agency. The Section vigorously enforces state and federal antitrust laws, building and protecting a fair and competitive market for California and across the country. The office takes on anticompetitive practices that include business-to-business collusion, illegal monopolization, and anticompetitive mergers. In recent years, the office challenged the megamerger between T-Mobile and Sprint, stopped the acquisition of the Plains All American Pipeline petroleum terminal by Valero, sued Sutter Health for anticompetitive conduct in the healthcare market, recovered more than $26 million for price fixing of auto parts, and over $70 million for agreements among pharmaceutical companies to delay generic competition. Below are brief descriptions of significant recent actions.

Agriculture

United v. Bayer AG and Monsanto Company

On August 10, 2018, the Attorney General led a coalition of states opposing Bayer AG’s $66 billion acquisition of Monsanto Company, a deal that made Bayer the largest seed company in the world. In May 2018, the U.S. Department of Justice cleared Bayer AG’s $66 billion acquisition of Monsanto Company, allowing three companies to control the global food supply. In response, the Attorney General multistate coalition filed a Tunney Act comment urging the federal court to reject the deal. In the letter, the Attorney General argued that the merger would harm competition in agricultural markets. Although the merger was ultimately approved by the court, the Attorney General stood up for the People by arguing that by granting potentially monopolistic power to a foreign company without background in this sector, the merger could profoundly damage family farms, workers in the agricultural sector, innovation research, and American consumers.

Healthcare and Pharmaceuticals

State of California v. Sutter Health

In March 2018, the Attorney General sued Sutter Health, the largest hospital system in Northern California, for anticompetitive practices that resulted in higher healthcare costs. Sutter's practices harmed California’s healthcare market by charging higher prices unrelated to quality or cost of care.

The litigation began in 2014 when a class action suit led by United Food and Commercial Workers International, and Union and Employers Benefit Trust challenged Sutter’s practices in rendering services and setting prices. The lawsuit sought compensation for alleged unlawful, anticompetitive business practices, which caused patients to pay more than necessary for healthcare services and products. The Attorney General’s lawsuit on behalf of the people of California sought injunctive relief to compel Sutter to correct its anticompetitive business practices moving forward. The separate lawsuits were combined by the court into one case.

On the eve of trial, the parties reached a tentative settlement, which received preliminary approval in March 2021. The settlement received final approval in August 2021.

For additional information on the Attorney General’s healthcare matters, see the Healthcare Rights and Access section.

California et al. v. Vyera Pharmaceuticals and ‘Pharma Bro’ Martin Shkreli et al.

The Attorney General joined a lawsuit filed by the New York Attorney General and the Federal Trade Commission in 2020 against Vyera Pharmaceuticals and two of its former CEOs — including ‘Pharma Bro’ Martin Shkreli — for stifling competition to protect exorbitant, monopolistic pricing of the drug Daraprim. Daraprim is a drug used to treat the parasitic disease toxoplasmosis, which poses serious and often life-threatening consequences for those with compromised immune systems. When it purchased the rights to Daraprim in 2015, Vyera Pharmaceuticals became the only Food and Drug Administration-approved source of the medication for this disease in the market. Facing no competition from generic versions of the drug, Shkreli and Vyera Pharmaceuticals raised the price of the drug overnight by more than 4,000 percent, from $17.50 per pill to $750.

Pay-for-Delay Settlements

The Attorney General reached four settlement agreements in 2019 against pharmaceutical companies for entering into collusive “pay-for-delay agreements” that illegally delayed affordable prescription drugs from entering the market. Pay-for-delay agreements allow a brand name drug company to preserve its monopoly by entering into an agreement with a generic drug company. Under the agreement, the brand name company pays the generic drug company to delay the release of the generic drug. Without any generic alternatives, consumers are forced to pay higher prices for the brand name drug.

Together, the settlements forced these pharmaceutical companies to pay nearly $70 million to the state. The settlements included the largest pay-for-delay settlement received by any state, and also marked the first injunctive relief for a state against future pay-for-delay agreements. The first settlement with Teva addresses anticompetitive pay-for-delay agreements that delayed a generic narcolepsy drug, Provigil, from entering the market for almost six years. The three other settlements with Teva, Endo Pharmaceuticals, and Teikoku address similar practices that prevented a generic version of the drug Lidoderm, a shingles medication, from entering the market for almost two years. Pay-for-delay agreements force consumers to pay as much as 90 percent more for drugs shielded from competition.

U.S. vs. Anthem / Cigna

In 2016-2017, the Attorney General joined with the U.S. Department of Justice and other states to successfully block the proposed $48 billion merger of two health insurance companies, Anthem and Cigna. The consolidation of two of the five largest insurers in the U.S. at the same time Aetna and Humana were also attempting to merge would have significantly undercut competition, driving up health care costs for consumers and employers. The proposed merger would have been the largest in the history of the health-insurance industry and would have created the nation’s largest health insurer, with approximately 53 million plan participants.

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Oil and Gas

State of California v. Valero Energy Corporation

The Attorney General sued Valero Energy Corporation in 2017 to stop the oil giant from acquiring the last independent petroleum distribution terminal in Northern California and obtained a final judgment prohibiting the transaction.

Valero had attempted to take over a petroleum distribution terminal in Martinez, California, from Plains All American Pipeline, LP. In State of California v. Valero Energy Corporation, the Attorney General argued that Valero's action could have suffocated open competition and led to higher gas prices for Californians. Had the transaction between Valero and Plains been allowed to proceed, all three critical independent oil distribution terminals in Northern California would have been controlled by giant oil companies. These oil producers would have the interest and opportunity to coordinate and control access to the terminals and the flow of petroleum from them.

In September 2017, three months after the lawsuit was filed, Valero announced that it was abandoning the transaction and shortly thereafter a federal court prohibited the company from acquiring the critical petroleum distribution infrastructure in Martinez and Richmond, California.

State of California v. Vitol Inc. and SK Energy Americas

In February 2015, California’s gasoline supply experienced serious disruptions as a result of an explosion at a large gasoline refinery complex in Torrance, California. The explosion left the refinery in need of extensive repairs, curtailing production at the Torrance facility which normally produced 10 percent of the state’s supply of gasoline. This disruption caused an undersupply of refined gasoline across the state.

Following a multiyear investigation, the Attorney General sued multinational gasoline suppliers in May 2020 for allegedly manipulating California’s gas prices through an illegal trading scheme.

Vitol Inc. and SK Energy Americas Inc. executed oil trades at irrationally high prices to artificially inflate the benchmark price of gasoline in California’s market. This price manipulation scheme generated large profits for the companies as they sold their own product at the inflated prices, in violation of the Cartwright Act and California’s Unfair Competition Law. The lawsuit is pending before the San Francisco Superior Court.

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Technology Companies

US v. Google LLC

The California Department of Justice joined the U.S. Department of Justice in a landmark lawsuit alleging that Google violated federal antitrust laws by entering into exclusionary business agreements that shut out competitors and suppressed innovation. Google’s anticompetitive behavior has unlawfully maintained the company’s monopoly on internet search and search-based advertising at the expense of consumers. Nearly 90 percent of all internet searches in the U.S. are on Google, leaving consumers with little other choice than to accept its less popular privacy practices and data collection policies.

The lawsuit alleges that in violation of the Sherman Antitrust Act, Google pays billions of dollars each year to device makers like Apple and Samsung, and to carriers like AT&T, Verizon, and T-Mobile to make Google their default internet search engine. Some of those contracts prohibit similar agreements with competing search engines. Google is the preinstalled default search provider on all Apple devices and on virtually all devices running the Android operating system, among others. On mobile devices, Google’s exclusionary agreements cover more than 80 percent of all U.S. search queries. Even for search queries not covered by Google’s exclusionary contracts, almost half occur on Google-owned search access points, such as Chrome, its browser, or Pixel, its smartphone.

Google strengthens its monopoly by capitalizing on its immense scale. The Mountain View-based company improves its algorithms through billions of daily internet searches and through tracking smartphone location data, which feeds back into its search and search advertising business. Google then directs its vast profits toward securing even more exclusivity agreements on mobile devices, web browsers, and emerging ‘smart’ technologies like voice assistants. This anticompetitive behavior prevents new market entrants from developing viable alternatives that could improve the options and quality of online searching. Rival search engines, if enabled to gain market share, could also serve as a market check on Google’s practices. The case is pending before the U.S. District Court for the District of Columbia. The case is pending before the U.S. District Court for the District of Columbia.

Utah et al. v Google

The Attorney General, along with the Attorneys General of 35 states and the District of Columbia, filed a multistate lawsuit against Google in July 2021 for monopolizing the market for smartphone applications in violation of state and federal antitrust laws. By leveraging exclusionary, anticompetitive agreements with phone manufacturers and telecommunications carriers, Google can demand a 30 percent cut from third-party app developers for using its Google Play Store and for in-app purchases. This captive market practice raises prices for consumers and limits options for anyone using an Android mobile operating system. The 30 percent commission is ten times higher than competitive prices through third-party payment systems.

The lawsuit alleges that Google violated the federal Sherman Antitrust Act and California’s Cartwright Act, among other statutes, by entering into agreements with smartphone manufacturers to ensure that Android phones offer Google Play as the primary — and often only — app store. The complaint further alleges that Google, in violation of state and federal law, required apps that are distributed through Google Play to use Google Play’s billing system for in-app purchases, and refused to distribute apps through Google Play if they integrated a rival billing system.

By holding Google accountable for illegal monopoly conduct, the lawsuit aims to establish a more competitive app marketplace that could benefit consumers through cheaper and greater features, improved customer service, and enhanced data security. The lawsuit is pending before the U.S. District Court for the Northern District of California.

New York et al. v. Facebook

In December 2020, the Attorney General’s Office, along with 47 attorneys general, filed a multistate lawsuit against Facebook for allegedly violating federal antitrust laws by acquiring emerging competitors to maintain a monopoly. The lawsuit alleges that the tech giant’s $1 billion purchase of Instagram in 2012 and $19 billion purchase of WhatsApp in 2014 left users with fewer options for social networking services, reduced the quality and variety of privacy safeguards, and increased user-facing advertisements.

Emails and testimony from Facebook executives indicate that the company purchased Instagram and WhatsApp to prevent a migration of their users onto those competing platforms. Aided by data obtained through another acquisition, Facebook monitored the projected growth of scores of applications and purchased those it believed posed competitive threats. Without competition, Facebook has enjoyed wide latitude to set the terms for how user data is collected, used, and protected.

The multistate lawsuit was filed in coordination with the Federal Trade Commission, which filed a separate complaint. In June 2021, a district court judge dismissed the states’ case but granted FTC leave to amend. The FTC filed an amended complaint on August 19, 2021 while the multistate coalition has announced their plans to appeal the decision.

United States v. Microsoft Corporation

In 1998, in a landmark action that now is an important precedent for current tech cases, California joined the United States and other states in suing Microsoft for alleged monopolization of the computer operating systems market and related antitrust offenses. In this historic case, Microsoft was found in court to have unlawfully maintained a monopoly in the Microsoft Windows computer operating system. In 2001, the United States and one group of states settled their disputes with Microsoft by a consent decree. Believing a better outcome was possible, California led a group of other states in refusing to settle the matter with Microsoft on the consent decree’s terms. California’s efforts resulted in a court judgment that went beyond the consent decree in ensuring that consumers and businesses were protected from Microsoft’s anti-competitive behavior. The California-led settlement also prevented Microsoft from threatening competitors with retaliation. Microsoft also reimbursed California millions of dollars in legal fees.

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Telecommunications

California, et al v. Deutsche Telekom AG, et al.

In June 2019, the Attorney General co-led a coalition of state attorneys general filing a lawsuit challenging the megamerger of the telecommunications giants T-Mobile and Sprint.In April 2018, T-Mobile announced its third attempt to merge with Sprint, a major wireless telecommunication competitor. California Department of Justice’s lawsuit alleged that the merger was unlawful because it would further consolidate an already uncompetitive market, reducing the market from four national mobile network operators – T-Mobile, Sprint, Verizon, and AT&T – to three and leave consumers with fewer choices, lower quality of service and less price competition.

The coalition forced the companies to defend the proposed merger in court, taking the case all the way through trial. The states argued that the merger would harm consumers nationwide — including more than 13 million Californians served by the merging companies — by reducing competition in the market and putting access to affordable, reliable wireless service at risk. In February 2020, the U.S. District Court allowed the merger to proceed. But despite ruling against the states found that local markets matter in assessing the competitive impact of a merger. In mounting a vigorous challenge, the states made clear that no one should underestimate the role of state antitrust enforcers.

The Attorney General entered into a post-judgment settlement with T-Mobile in March 2020 that included terms to protect low-income subscribers, extend access to underserved communities, protect current T-Mobile and Sprint employees, and create jobs in California. Under the terms of the settlement, T-Mobile paid the states $15 million and is required to make low-cost plans available in California for at least 5 years, protect California jobs by offering “substantially similar employment” to statewide T-Mobile and Sprint retail employees, and to ensure that three years after the merger’s closing date, the total number of new T-Mobile employees would be equal to or greater than the total number of employees of the unmerged Sprint and T-Mobile companies.

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