Strict Scrutiny - BONUS: Jaime Santos on Our Curious Amalgam

Episode Date: February 17, 2020

Jaime Santos joins John Roberti and Christima Ma from Our Curious Amalgam to talk antitrust and the Supreme Court! Follow us on Instagram, Twitter, Threads, and Bluesky

Hey, Strict Scrutiny listeners, it's Jamie. This week, we're bringing you another podcast crossover bonus episode. A few weeks ago, I was asked to join John Roberti and Christina Ma at Our Curious Amalgam, a fantastic podcast about topics in antitrust, competition, consumer protection, data protection, and privacy law. We had a wide-ranging discussion about antitrust

and the Supreme Court. We talked about the Supreme Court's role in shaping antitrust jurisprudence, how Justice Stevens had a huge influence on antitrust Thank you. on our podcast. Thanks to the Our Curious Amalgam team for letting us do this. And strict scrutiny listeners, please check out some of the other episodes of Our Curious Amalgam today. Welcome to Our Curious Amalgam, the weekly podcast brought to you by the antitrust law section of the American Bar Association. Our Curious Amalgam explores the fascinating and increasingly overlapping world of competition, consumer protection, data protection, and privacy law. Each week, we bring you leading global experts on the most compelling issues of the day.

Enjoy the show. Hello, and welcome to Our Curious Amalgam, the podcast from the American Bar Association antitrust Law Section. My name is John Roberti, and today's topic is what the OIA, the current Supreme Court, and antitrust. In American antitrust jurisprudence, as a general matter, our statutes are very, very thin. The Sherman Act, the Key Sherman Act provisions are a number of sentences. But we have this very, very robust doctrine of law. It's all court recreated. And the most important decisions are made in the Supreme Court.

Today, what we're going to talk about is what is the makeup of the Supreme Court? And maybe what can we expect in terms of antitrust law to develop going forward? My co-host is Christina Ma. Hi, Christina. Hi, John. How are you? Good, good.

So, Christina, what are we talking about today? So, today we have a wonderful guest, Jamie Santos, with us, who's an expert on Supreme Court jurisprudence. I hope she won't disagree with that characterization. And she's going to provide us some insight into Supreme Court jurisprudence and competition law. Great. And why is that important? Well, as you mentioned, the Supreme Court is the supreme law of the United States. And so it's very important for practitioners and academics to be aware of what the Supreme Court is saying on antitrust law so that we don't run afoul of it.

And what do we hope to get out of the program today? Well, I personally hope to learn a lot more about the Supreme Court's role historically in antitrust law and what we can expect from the Supreme Court in the years ahead of us with the new makeup of the court. Great. Well, let's bring in our guest, Jamie Santos. Welcome to the program. Hi, John. Hi, Christina. I'm really excited to be here. We're excited to have you. So, Jamie, thank you for joining us today. You're a partner at Goodwin and host of your very own podcast called Strict Scrutiny. That's right. It's a podcast about the Supreme Court and the culture that surrounds it. And I co-host it along with three other wonderful, brilliant women,

Melissa Murray, Kate Shaw, and Leah Lipman. Very exciting. And how would our listenership access your podcast? So you can go to your favorite podcast app. I use Overcast, but, and then just download or subscribe to Strict Scrutiny. Very cool. Very cool. Well, we're excited again to have you. And I'm, you know, as a practitioner in the day to day, we don't talk about the Supreme Court and antitrust law unless it's, you know, up in front of the docket. So tell me a little bit about the Supreme Court's historic role in law and antitrust is no different, decides some of the big picture issues. So the main governing legal standards that then the lower courts apply to the facts or that they flesh out a little more. So the Supreme Court has dealt with these big picture issues like how to plead an antitrust conspiracy. That was the canonical Bell Atlantic versus Twombly case. How to define the relevant market, which is a really critical aspect of any

antitrust case. And we'll talk about one today from last term that dealt with that issue. And then the kind of general frameworks for how to look at restraints. And I think John mentioned earlier, unlike a lot of other areas of law, like ERISA or patent law, the Sherman Act is pretty sparse. And so there's a lot of everything is pretty much judge made. So the entire concepts of the rule of reason and per se restraints, those are all really judicially created. And those are the kinds of big picture things that the Supreme Court decides on. Okay. And I don't want to put you on the spot here, but can you explain a little bit about what the per se standard is and the rule of reason and how, you know, that standard has evolved, you know, over the past couple of decades? Yeah. So the per se standard sets forth, you know, kind of absolute things you're never allowed to do no matter what.

Most of the antitrust cases fit within the rule of reason. So you look at, you're kind of balancing the pro-competitive and anti-competitive effects of a particular course of conduct. And so when I was actually preparing for this podcast, I whipped out my old antitrust outline from law school. And what struck me was the shift from a lot of type of conduct being per se and a slow movement towards things being more viewed under the rule of reason. What was the driver for that in the Supreme Court? So I think a big driver was when Justice Stevens joined the bench in the 70s. So Justice Stevens, he died in the summer of 2019. But he came to the court from an antitrust

background. He was an antitrust lawyer, an antitrust scholar, did antitrust work in government. And he was really interested in this area of law and really fleshed out the rule of reason and gave it some teeth. So I think that before he joined the bench, there in many cases, as soon as the rule of reason applied, it was kind of an automatic win for the defendant. And he started fleshing out that doctrine more and really taking a harder look at the explanations that defendants were providing for why they were doing what they were doing, which I suspect maybe made it a little more palatable to be in rule of reason land rather than in a per se land. And is that pretty common for the interests of a particular justice or a couple

of the justice to drive the docket? I think so. And I think also it is sometimes common for that to be a reason why they were appointed to the bench. So you see Justice Kavanaugh has a really keen interest in administrative law and kind of curbing the power of the administrative state. And I think that's a big reason why he was appointed. And so I don't know that that's the case for Justice Stevens, but certainly the areas people are interested in, they can have a big impact on that area. And in part because to grant for the Supreme Court to vote,

to grant a cert petition, to take up a case, you only need four votes, not five. And so having another person on the bench interested in that area might increase the chances that the court even hears those cases. It can make a big difference in those cert petitions. So that's sort of a great transition to understanding the current composition of the Supreme Court and what we might expect from them in future cases. What struck me as I was reviewing some of the old Supreme Court case law is that there

does seem to be a liberal conservative divide amongst the justices, even on something as seemingly innocuous as antitrust law. Can you explain that a little and how that might play into the current makeup? Yeah, you're exactly right. You don't think of antitrust as being a big political hot button issue. It's not like abortion cases or Second Amendment cases. But we do see a shift or a big divide in the justices. So kind of generally, the more conservative leaning justices tend to vote in favor of making it more difficult to sue large corporations over antitrust issues and the more liberal leaning justices have more of a kind of pro-consumer, more strong protection of antitrust law tendencies. And I think the shift you're talking about is remarkable both in the number of conservative versus liberal justices

has changed and also the conservativeness of each justice has kind of shifted to the right in the past 20 years. So I do think it'll be interesting to see how that impacts antitrust law. And now that Justice Stevens is no longer on the bench, are there any justices today that have an interest in ant court in 2017, has more antitrust background than any justice since Justice Stevens. So Justice Gorsuch spent about 10 years in private practice doing a lot of antitrust work at Kellogg Huber here in D.C. And interestingly, he did a lot of plaintiff side antitrust work. So he obtained a $1 billion verdict against a tobacco company, which is maybe, if I said, guess which justice sued a tobacco company and won a billion dollars, you might not guess it was him. But he has a very strong background in antitrust. Okay. And is his experience distinct from Stevens? How might that affect his views on antitrust versus Justice Stevens?

So it's interesting because I think they they both, you know, had some academic experience. I think Justice Gorsuch had more of a has more of a practical, practical representation experience versus government. And I think Justice Gorsuch is is very interesting because you might expect him to kind of lean more conservative because he's a very much on the conservative wing. But I think his experience on doing plaintiff side work could lead to some really interesting results. And he also, unlike some other justices, he is pretty willing to kind of ignore what we call stare decisis. That's the principle that when a Supreme Court decides an issue, you don't lightly overturn it. So with his kind of maybe slightly more libertarian streak in antitrust cases and his willingness to kind of branch out anew, we could see some interesting decisions from him. Okay. Well, hopefully we'll look forward for that. So I want to shift a little to discussing some recent Supreme Court cases in antitrust. And there's not really been much maybe attributable

to the fact that Stevens is no longer on the bench. But there are three that have come down the pipeline in the last decade or so. There's FTC v. Activist, which was a decision in 2013, Ohio v. American Express, which came out in 2018, and then Apple v. Pepper, which came out in the 2019 term. I want to talk just briefly about those. So let's starting out with the FTC v. Activist case. Tell me a little bit about what that case was about. So that case is about kind of the intersection between patent law and antitrust law. And it implicates what some people call reverse settlements or some people more pejoratively refer to them as pay to delay litigation. So basically, I have to give you a little patent background.

Yeah, I was going to say, what is that? Okay. So basically, the way these involve pharmaceutical companies, these cases do. So you have a brand name drug manufacturer on the market with a product. Product's doing really well, making lots of money. You'll then have a generic drug company which wants to go on the market, but the brand name company has some patents, so it has a right to exclude competition. So what a generic company can do is it can file for FDA approval, and it can indicate during that process that this brand name company has a patent or a number of patents, and I think they're invalid. From there, the brand name company can sue the generic drug company. And before FDA approves the drug or before launch, they can

hash out whether the patents are still good or whether the patents were ever good and whether they're infringed. So then you don't have to wait until after you're on the market and have these massive lawsuits with huge damages. So sometimes that happens and you go through litigation and it reaches a resolution after trial. Other times there's a settlement. But these settlements look a little bit different from settlements usually. So what we'll see is the brand name drug company paying a sum of money to the generic company, which means the plaintiff is paying the defendant to settle. And normally we would see the defendant pay the plaintiff is paying the defendant to settle. And normally we would see the defendant pay the plaintiff, hence the reverse settlement.

Exactly. Exactly. And what we also see then is what the defendant agrees to do is to stay off the market for a period of time. And usually it is a longer period of time than they would have stayed off the market if they had won the patent litigation. But a shorter period of time, then they would have had to stay off the market if you waited until the patent expired. So some compromise in between. A patent lasts, I believe, 20 years. Maybe that's wrong, but let's say 20 years and they agree to say allow the generic to come in at 10 years or 15 years. Yeah, it often depends on how much time is left on the patent, but yes. And so obviously that implicates antitrust law because you're agreeing to for one company to stay off the market. And with the difference between generic and brand name drug prices, it is an extraordinary amount of money that that could put on the table for consumers. So why is that not automatically

an antitrust violation? Well, so it's interesting because when you have a patent, you do actually have a right to exclude people from marketing a product. So if your patents are good patents, you'd be able to exclude people the whole time. But the problem is at the time that you're making the settlement, it's not necessarily decided whether the patents are good or not. So basically the question is, are these companies settling these lawsuits in a way that's reasonable for the right reasons, or are they just kind of conspiring to keep the prices high and the generic company makes some money so they don't care and the brand name company gets to keep making a lot of money and then consumers get lost in the shuffle. So sometimes it can be OK, but other times it can't. And what did what sorry, what did the Supreme Court

hold in FTCV activists regarding these settlements? So before it reached the court, there were a number of courts that had said that there is basically immunity. If there's if you've got a patent, you're immune from antitrust litigation or from antitrust lawsuits. And the court said, no, there's no automatic immunity. We're going to look at this under the rule of reason. And you're going to have to explain why you did what you did. And it has to have basically a good reason. And what has the follow on litigation look like if you're if you're familiar with.

Yeah, I mean, there is a ton of follow on litigation and it implicates all kinds of interesting issues. So any time, you know, almost any time there is one of these there's one of these settlements, there will be multiple lawsuits in many instances from direct purchasers who might be pharmacies and from indirect purchasers who would be consumers. And there could be all kinds of tangled issues like in these lawsuits, who gets to, what evidence are you able to bring forward? And how does that implicate things like the attorney-client privilege? Because you probably are gonna wanna say, look, I settled for a good reason.

There was a good chance I was gonna lose. To say that, you might have to describe some of the legal advice you got. And does that waive privilege totally? So there's a lot of funky and interesting issues that are really percolating that may reach the court someday, but are not quite ready yet. Thank you. So Ohio v. American Express in 2018 addressed ever-changing commercial environment in which we live regarding credit cards, American Express, which we're all very familiar with. Tell me a little bit about what that case was about.

So American Express is one of the big credit card companies. And they have this kind of business model where they require their merchants. So their merchants are their customers, but also consumers are their customers. So they require merchants to sign what's called an anti-steering provision in their agreements. And basically, it prohibits these merchants from trying to steer their customers toward using credit cards that might be cheaper. So American Express has pretty high fees that they take a bigger cut of transactions than other companies.

So if you go to Walgreens and you try to pull out your Amex card and Walgreens says, you know, if you use your visa, I'll give you 10% off, that would violate Amex's anti-steering provision. And so the United States and several other states sued Amex, basically saying that this allowed the company to keep prices higher than they would otherwise be for merchants. And so the issue in this case, the main issue, is about how to define the market.

Are you defining the market just based on looking at the impact of Amex's conduct on merchants? Or do you need to look at two different markets because credit card companies have to appease both merchants and also ultimate consumers or else? And if they make either side unhappy, then the company will fail. So the allegation was that Amex's anti-steering provision effectively raised the cost of fees to of – the free market would basically force Amex to keep its prices cheaper because consumers would use their visas or their MasterCards or their Discovers. And then Amex would have to lower their prices so that merchants would stop guiding people toward other cars. Cards, not cars. And so the plaintiff's theory really focused only on merchants. But what the court said was, no, you can't focus only on merchants.

You have to focus on both merchants and consumers. And the plaintiffs didn't really provide any evidence on how this would have affected the market as a whole. So you never really got past the market definition phase of litigation in this case. And then the most recent Supreme Court case is Apple v. Pepper, and that was from 2019. What was that case about? So that case was about iPhones. But it wasn't the case about the shape of iPhones, which I think was a different case.

So this is about iPhones and iPhone apps. And the question was about whether iPhone owners who purchase apps for their iPhones through the app store have standing. And what that means is that they're allowed to sue basically under the antitrust statute. So do iPhone owners have the right to sue Apple for basically using its monopoly power to force iPhone owners to buy apps only through the App Store, which keeps prices high? And let me explain why that's the case. So Apple, through their contracts with app developers, they have a 30% commission that they charge. And they require that to happen. And app developers generally pass on those prices to consumers.

And if you didn't have to buy your apps through the Apple App Store, you could buy them elsewhere. The kind of other markets may not charge that 30% fee, which means that consumers would probably not have to pay an inflated amount and prices would be cheaper for everyone. But because Apple has the ability to say you buy through the App Store or you don't get apps, they can keep those prices higher than they would be able to otherwise. But the thing that was weird about this case is so these consumers purchase apps from Apple. But what Apple was doing is Apple wasn't necessarily charging consumers more. They were charging developers more and then developers were charging consumers more.

So there was this kind of intermediary. So the question was whether in that circumstance where Apple was really impacting the developers and not the consumers and only the consumers indirectly, could the consumers nonetheless sue. And in legal talk, that means did they have standing to bring a suit? What was the existing law at the time before Apple v. Pepper and has that changed? So I think it depends on if you ask the majority or the dissent. So the existing law said something along the lines of you can sue, you know, direct purchasers can sue. But if there are too many steps along the causal chain, you know, people who are two steps away wouldn't be able to sue. And I believe that what the

majority said was, what are you talking about? There's no steps. You are suing Apple. Apple is the one who is engaged in anti-competitive conduct. So you can sue. What's the problem? And then what the dissenter said is, wait, no, that's too simplistic. We have to really look at what's happening. And there is, even though there's technically consumers give money to Apple, Apple takes the money, there still is this other source. And you don't know if app developers are not forced to pass on that commission. They could just kind of eat it. So what the dissenters thought is that the developers should be the ones to sue Apple and not the consumers. Okay. And that case, I have it written down, Kavanaugh, Ginsburg, Breyer, Sotomayor, and Kagan

were on the majority. Isn't that interesting? Because you don't see a lot of those lineups. And especially when Justice Kavanaugh was going through the confirmation process, there was a kind of big movement against him from some of the more pro-antitrust enforcement bar. They said, basically, if he's on the court, he's going to be in the pocket of big business. It's going to be weak to enforce antitrust laws. And his first, you know, one of his first major opinions is this case siding with the liberal wing and making it easier for consumers to sue one of the biggest and most successful companies in the world. So some of these recent cases, I think it just brings to the forefront

issues that practitioners like John and I deal with this ongoing dialogue and disagreement amongst antitrust practitioners and the like as to whether existing laws, the very, you know, bare bones statutes, jurisprudence, court jurisprudence and guidance rules that the agencies publish are apt to deal with these types of situations, these very complex commercial relationships, big tech, all these evolving things that are happening in the marketplace. Where do you see where do you see the court going as they continue to be kind of faced with these difficult antitrust questions that don't fit in the traditional mold that has governed antitrust law? So I think this is going to be one of the most interesting things to see, because usually what would happen in this situation is that you have

this very detailed statute. And what the justices would do is they would say, you know, I know there are new and new things happening, but I've got this text of a statute here and I have to apply it the way it says. But as you said earlier, the antitrust laws don't really say much. So there's a lot more flexibility for the justices to make it up, I guess. I mean, a lot of antitrust law is really kind of made up. So I think you'll have to look at we'll have to look at the different approaches that the justices take. I think Justice Gorsuch shows a big willingness to kind of use, you know, chart a different path and use use whatever types of tools he thinks are interesting or use kind of pragmatic consequences to kind of shape the law. I think Justice Kavanaugh is much more likely to look at existing doctrine and try

to fit the new circumstances into existing doctrine rather than kind of throw it all out the window. So I think it'll be very interesting to see. And I think there are a couple of categories of cases where we're seeing some interesting developments that could kind of be coming up to therust issues like the DOJ and the FTC. And there's a case involving Qualcomm in which the kind of two agencies are fighting. The FTC is suing Qualcomm and the DOJ is trying to intervene to say, no, you shouldn't sue Qualcomm. The DOJ is actively trying to reverse the FTC's prosecution of Qualcomm. And it's happening in public and it's really fascinating. But it could bring up really interesting issues about agency power. Imagine, for example, that you were being told you're a

large corporation and you're told by the DOJ, what you're doing is fine, totally good. Keep doing what you're doing. You're helping the American market. And then the FTC swoops in and prosecutes you for it. I mean, there could be really interesting constitutional or administrative law implications for this. And that's exactly the kind to say that the court as it sits today is a pro-business court that we should expect that defendants are basically going to win all the cases? No, I don't think so. I think that it's there's a lot more nuance on it. I mean, it's certainly more pro-business than maybe it would have been 15 years ago. And then if there were a Justice Garland and someone else on the court. But I think there's going to be more nuance, especially when it comes to the kind of integration of technology. And one thing I'll be interested to see, we talked about how kind of Gorsuch could be

a question mark and Kavanaugh could be a question mark. I think the chief justice could as well. He's been kind of more pro-business in the past, but he has expressed some concern with new technologies and intrusions of privacy. There's this big Fourth Amendment case, Carpenter v. United States, in which the chief was really concerned about the ability of police officers to, without a warrant, basically track a pull cell site location information and track everywhere you go. And the chief kind of said, wait a minute, this is not what the framers had in mind. Or basically saying, this is not what our current jurisprudence is

able to accommodate. We need to maybe update it and take into account these types of privacy and technology issues. So I could see him maybe joining in some different opinions and being more flexible in how he applies antitrust law based on those concerns. But we haven't seen that yet. But that's somewhere where I'll be interested to see where he goes. So so so, Jamie, let's shift gears a little bit. What is it that's fun about being an appellate lawyer? I think it's because it's like a puzzle. It's like a legal reasoning puzzle. No matter what the case is, no matter how boring it might seem at first glance, there's always

something in it that I can find interesting. And my job as an appellate litigator is to make sure that the court gets as excited about some little rickety part of a procedural issue in a maritime case as I am. So I find it like this really fun puzzle. And also, I think it's kind of the last refuge of generalist litigators. There's this increasing focus on specializing and spending your entire career in this one narrow area of law. And I get too bored doing that. And so I get to skip around from patent case to a case about a 19th century Indian treaty to an ERISA case to an antitrust case. And that I find really, really fun. What advice would you give to somebody coming right out of law school now

about, you know, how to develop their career? I would say meet as many people as you can that do interesting things and talk to them about their career. I think the most valuable insights I've gotten have not been through, you know, listening to Supreme Court cases, which I like doing, but through going to a Supreme Court case and talking to the person in the bar line next to me about what they do and how they got to where they are. So I would do that a lot more. And tell us something that is unexpected or unusual about yourself that we wouldn't know

if we just knew you professionally? So we have a lot of animals in my house, including three tarantulas. And in a very on brand phenomenon, my three tarantulas, it really made my husband's and kids, but I got to name them. And their names are Ruth Spider Ginsburg, Sonia Spider Mayor, and Elena. And I can't, I can't think of a good Elaine Narachnikagan. I can't, I got nothing. If anyone has any ideas, please at me on Twitter. I did not see the, the spider, the spider answer coming. You never see the spiders coming. So if I can, just going back to your podcast for one second, I just want to share a story.

One of my colleagues heard about your podcast and direct me to it. And one of the things that she was really excited was the strict scrutiny gear. Yes, we have swag. We have swag. We have swag. And for a long period of time, she absolutely insisted to me that there were onesies on the site. And I said, oh, you mean like baby onesies? And she insisted that there were adult onesies. Are there any plans to put adult onesies in the strict scrutiny swag? If there are not some already, then I'm going to go and I'm going to I'm going to pursue that.

I will say there are there's dog swag, too. So there are bandanas, but not tarantula swag, though. No, not yet. I mean, it would be really hard to fit it around the neck. It could be a it could be a safety issue. And I don't you know, we need Ruth Spatter Spatter Ginsburg to live a real long time. So. All right. Well, let's go to our final segment, uh, that we call the curious hat. And now it's time for the curious hat.

So in my left hand, I have an actual hat that has actual questions in it. I'm going to pass the hat to Jamie and she's going to choose a question. And then I'm going to read the question. Okay. Jamie, do you have any networking tips or particular ways you enjoy keeping in touch with those you've met during your career? So I have actually, the last couple of years, I've gotten really active on Twitter because it creates this massive community of people that I wouldn't have otherwise seen. And so I would say, try to find a social network because if you're in Kansas, a solo practitioner, or if you're in D.C. stuck in your office until midnight, it's at least some way of interacting with people you may not know. What is your Twitter handle?

It is Jamie underscore A Santos and Strict Scrutiny's Twitter handle? It is Jamie underscore a Santos and strict scrutiny. His Twitter handle is strict scrutiny underscore. Have you ever thought about getting a Twitter handle for one of the tarantulas? I have not, but maybe an Instagram account. All right. And with that, we will end our program. Thank you again. And we will see you next time on our curious amalgam. Thank you for listening to this week's episode of Our Curious Amalgam, a competition, consumer protection, data protection, and privacy law podcast. It is produced and shared around the

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