Orrick State Attorneys General Newsletter – July 2021

July.09.2021

  1. State AGs File Another Antitrust Lawsuit Against Google
  2. Federal Court Dismisses State Attorneys General Antitrust Lawsuit Against Facebook
  3. Federal Court Strikes Down Tax Mandate in American Rescue Plan Act
  4. Orrick Attorneys Speak as Experts at Attorney General Alliance Annual Meeting on COVID Legal Issues and Emerging PFAS Litigation and Regulations
  5. North Carolina Attorney General Settles with JUUL for $40 Million
  6. Bipartisan State AGs Send a Letter to Congress Supporting State Antitrust Enforcement Act
  7. Mississippi AG Lynn Fitch Sues Insulin Manufacturers Over Prices
  8. New Mexico Attorney General Sues Baby-Food Makers and Retailers for Allegedly Manufacturing and Selling Food with Toxic Heavy Metals
  9. Ohio Attorney General Yost Files Lawsuit to Declare Google a Public Utility
  10. Attorney General Spotlight – Alabama Attorney General Steve Marshall

1. State AGs File Another Antitrust Lawsuit Against Google 

Thirty-six states and the District of Columbia filed the fourth antitrust lawsuit against Google since October 2020, claiming that Google’s Play store unlawfully quashes competition in the market for Android app distribution. The suit, filed in the Northern District of California on July 7, 2021, alleges Google violated Sections 1 and 2 of the Sherman Act and seeks both monetary and injunctive relief.

Specifically, the complaint scrutinizes the way Google’s agreements with device manufacturers like Samsung and mobile service providers like Verizon restrict Android app developers’ ability to distribute on platforms other than the Play store. The complaint asserts that Google has taken several steps to unlawfully maintain a monopoly including preinstalling the Play store on all Android smartphones, refusing to advertise other app stores on its search engine and YouTube, and showing users false and misleading malware warning prompts whenever they attempt to download apps outside the Play store. Additionally, the attorneys general assert that Google unlawfully ties in-app billing to the Google Play store, which subjects developers to rules and fees, such as a thirty percent commission on transactions set to go into effect in September 2021, that benefit Google. As a result of this anticompetitive conduct, the complaint says, “Google Play Store’s market share — which is well over 90 percent — faces no credible threats, and market forces cannot exert pressure.”

2. Federal Court Dismisses State Attorneys General Antitrust Lawsuit Against Facebook 

In December 2020, 46 states and the District of Columbia, led by New York Attorney General Letitia James, sued Facebook for alleged antitrust violations under Section 7 of the Clayton Act and Section 2 of the Sherman Act. The state AGs alleged Facebook used “two primary tactics” to achieve its monopoly: 1) through a continuing string of acquisitions of all sizes, and 2) exclusionary deployment of its power and position to block potential rivals from access to key inputs. Specifically, the complaint cited Facebook’s acquisition of Instagram and WhatsApp as evidence of the company’s alleged strategy to maintain its monopoly by “constructing a ‘moat’ that [its] competitors could not cross.”

On June 28, U.S. District Court Judge James Boasberg (District of Columbia) granted Facebook’s motion to dismiss. The court held that “under current antitrust doctrine, Facebook’s general policy of refusing to provide API [Application Programming Interface] access to its competitors does not itself violate Section 2.” Additionally, the court held that although specific instances in which Facebook revoked competitors’ API permission might have violated Section 2, the last alleged instance was in 2015 and thus there is no current or pending violation of law for the court to enjoin.

The court also dismissed a similar lawsuit filed by the Federal Trade Commission but gave the FTC 30 days to file an amended complaint.

3. Federal Court Strikes Down Tax Mandate in American Rescue Plan Act 

On March 11, 2021, President Joe Biden signed into law the $1.9 trillion “American Rescue Plan Act of 2021” that provided funding for numerous programs in response to the COVID-19 pandemic. The legislation provided the states billions of dollars. Under a provision of the plan known as the “Tax Mandate,” states are barred from using the money to “directly or indirectly” offset tax cuts or reduce taxes.

Ohio Attorney General Dave Yost filed a preliminary injunction in federal court seeking to enjoin the provision. According to Ohio’s complaint, the conditions contained in the federal legislation present the states with the option of either accepting the stimulus funds or rejecting the money and keeping “their sovereign authority to set tax policy.” The complaint alleged the provision violates the Spending Clause, Article I, § 8 c.1., of the U.S. Constitution. According to the complaint, while Congress has substantial powers to govern the nation directly, the U.S. Constitution does not “confer upon Congress the ability to require the States to govern according to Congress’ instructions.” The complaint further alleges Congress exceeded its authority in passing the Tax Mandate and thus should be enjoined from enforcing the provision.

The U.S. District Court, Southern District of Ohio struck down the Tax Mandate. The court held that the mandate exceeded Congress’s power under the Constitution, and that the legislation fell short of the “clarity the Supreme Court precedent requires for Spending Clause legislation that provides conditional grants to the States.” As a result, the court granted an injunction enjoining the U.S. Secretary of Treasury from enforcing the Tax Mandate against Ohio. Several other states have filed similar lawsuits seeking the same relief.

4. Orrick Attorneys Speak as Experts at Attorney General Alliance Annual Meeting on COVID Legal Issues and Emerging PFAS Litigation and Regulations 

Orrick attorneys Erin Connell and Andy Cook presented as subject matter experts on two different panels at the recent Attorney General Alliance Annual Meeting held in Maui, HI. It was the first bipartisan, in-person attorney general conference since the pandemic began. Twenty-nine state AGs and numerous senior level staff attended the conference.

Ms. Connell shared her expertise about various federal and state COVID regulations businesses have faced since the beginning of the pandemic, as well as issues employers will continue to face as employees return to work settings. Mr. Cook, speaking on behalf of industry, spoke about the emerging litigation and regulation involving chemical compounds known as Per- and Polyfluoroalkyl Substances (PFAS), which are used in numerous products.

5. North Carolina Attorney General Settles with JUUL for $40 Million  

North Carolina Attorney General Josh Stein entered into an agreement with e-cigarette maker JUUL for $40 million to be paid over several years. The agreement also forces JUUL to make changes to its business, including:

  • No marketing that appeals to people under 21.
  • No use of most social media advertising, influencer advertising, outdoor advertising near schools, and sponsoring sporting events and concerts.
  • No claims that compare health effects of using JUUL with the health effects of using combustible cigarettes in its marketing materials.
  • No online sales to anyone not age verified by an independent verification system and making sure third-party sales partners do the same.
  • No retail sales to anyone not age verified using a barcode scanner.
  • Ensure its products are sold behind counters so shoppers cannot access them without a shop employee’s assistance.
  • Maintain a retailer compliance secret shopper program to ensure the measures are followed and hold accountable retailers that fail.
  • No new flavors or nicotine content levels without FDA authorization.

North Carolina is the first state to enter a settlement or obtain a court judgement against JUUL, while numerous other states and local municipalities have cases pending against the company. The consent decree is available here.

6. Bipartisan State AGs Send a Letter to Congress Supporting State Antitrust Enforcement Act 

A large bipartisan group of state and territorial attorneys general have sent a letter to Congress expressing support of H.R. 3460, the State Antitrust Enforcement Venue Act. Under current law, antitrust enforcement actions filed by the U.S. Department of Justice cannot be transferred to a multidistrict litigation, or MDL. Instead, the federal government is allowed to select a venue and remain there.

H.R. 3460 would extend the same rights to antitrust enforcement actions filed by state attorneys general, who do not currently have the same rights when they file such actions. According to the state AGs, “states play an essential role in the enforcement of competition laws in the United States. States should accordingly be on equal footing with federal enforcers in deciding where, when, and how to prosecute cases.”

State AGs increasingly have become active in antitrust enforcement, recently bringing cases against Google, Facebook, and Amazon.

7. Mississippi AG Lynn Fitch Sues Insulin Manufacturers Over Prices  

Mississippi Attorney General Lynn Fitch filed a complaint against three manufacturers of insulin, along with pharmacy benefit managers, over alleged inflated prices of the drug. Attorney General Fitch alleges the manufacturers increased the price of their diabetes drugs by up to 1,000 percent. The complaint alleges the companies violated the Mississippi Consumer Protection Act’s prohibition of unfair or deceptive acts or practices and includes claims for unjust enrichment and civil conspiracy.

The Mississippi complaint seeks an injunction enjoining the companies from continuing to violate the Consumer Protection Act and also seeks civil penalties of $10,000 for each purchase of the insulin drugs that is alleged during the alleged timeframe. In addition, the complaint seeks restitution for consumers.

8. New Mexico Attorney General Sues Baby-Food Makers and Retailers for Allegedly Manufacturing and Selling Food with Toxic Heavy Metals 

New Mexico Attorney General Hector Balderas filed a complaint against a number of baby food makers and retailers for allegedly manufacturing and selling food containing heavy toxic metals, including lead, arsenic, cadmium, and mercury.

Specifically, the complaint alleges the companies violated the New Mexico Unfair Practices Act and False Advertising Act. It includes claims for negligence, design and/or manufacturing defect, and failure to warn. Additionally, the complaint alleges violations of New Mexico’s public nuisance statute and common law public nuisance violations. In addition to injunctive relief, the complaint seeks damages, restitution, civil penalties, and punitive damages.

9. Ohio Attorney General Yost Files Lawsuit to Declare Google a Public Utility 

On June 8, 2021, Ohio Attorney General Dave Yost sued Google in the Common Pleas Court, Delaware County, seeking to declare the tech company a public utility. According to the complaint, Ohio’s interests arise in ensuring Google and its users and entities whose information Google carries, are aware Google Search is a common carrier under Ohio law. The complaint further argues that Ohio has an interest in ensuring Google does not unfairly discriminate against third-party websites, that it carries out responsive search results on an equal basis, and that Google provides the public with ready access to organic search results.

The Ohio complaint seeks the following relief from the court:

  • Declare Google a common carrier and Google Search to be a public utility.
  • Declare that Google Search in Ohio has a duty to carry content from other sources without unfair discrimination as compared to comparable Google content.
  • Permanently enjoin Google from prioritizing the placement of Google products, services, and websites on Results Pages from Google Searches in Ohio without providing equal opportunities for prioritization to non-Google entities.
  • Permanently enjoin Google from including features on Results Pages from Google Searches conducted in Ohio that promote captured-click searches, without providing access to similar features to non-Google entities.

10. Attorney General Spotlight – Alabama Attorney General Steve Marshall  

In each State Attorney General newsletter, Orrick highlights one state AG. In this edition, we highlight Alabama Attorney General Steve Marshall.

Elected in 2016, Steve Marshall became Alabama’s 48th attorney general. Prior to becoming the attorney general, Marshall was the district attorney for Marshall County. According to his biography, General Marshall has “embraced his role as the state’s chief law-enforcement officer and has committed himself to making Alabama a safer place to live.” In January 2018, General Marshall launched the Initiative on Violent Crime with the mission to “help cities reclaim their streets, restore the rule of law, and…see their communities revived.”

General Marshall received his undergraduate education at the University of North Carolina at Chapel Hill and his law degree from the University of Alabama School of Law.