Antitrust Law Daily Surescripts’s attempt to get interlocutory review of FTC’s claims fails
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Tuesday, May 26, 2020

Surescripts’s attempt to get interlocutory review of FTC’s claims fails

By Nicole D. Prysby, J.D.

There was no substantial ground for difference of opinion in the issues presented by the FTC’s allegations that Surescripts used exclusive long-term contracts with customers to suppress competition from rivals.

Issues raised in the FTC’s litigation with e-prescribing solution provider Surescripts did not present exceptional circumstances justifying deviation from the standard rule postponing appellate review until after entry of final judgment. The FTC alleged that Surescripts engaged in a long-running anticompetitive scheme to maintain its monopolies over "e-prescribing" markets. In January 2020, the court declined to dismiss the claims and Surescripts moved for the court to certify two questions for interlocutory review. The first question was whether the language and structure of Section 13(b) of the FTC Act preclude the FTC’s lawsuit. The federal district court in Washington, D.C. declined to certify the question, because there was not substantial ground for difference of opinion as to whether this lawsuit is a "proper case" under Section 13(b); "proper cases" may encompass more than just routine violations of the statute. The second question was whether Supreme Court precedent foreclosed the FTC’s argument that Surescripts’s low, but not ‘predatory,’ pricing was anticompetitive. This question was also not appropriate for interlocutory review because it boiled down to Surescripts’s disagreement with D.C. Circuit precedent and did not establish a substantial ground for difference of opinion (FTC v. Surescripts, LLC, May 21, 2020, Bates, J.).

The FTC alleged that Surescripts engaged in a long-running anticompetitive scheme to maintain its monopolies over two separate, complementary markets: electronic prescription routing and eligibility, which are often collectively referred to as "e-prescribing." The FTC alleged that Surescripts used loyalty bonuses in both markets, along with other anticompetitive measures, to foreclose at least 70 percent of each market from competition. The agency’s complaint sought injunctive relief to bar the challenged practices and other equitable relief, including monetary relief, to prevent unfair methods of competition. In January 2020, the claims survived a motion to dismiss. Surescripts moved for the court to certify two questions for interlocutory review.

The first question was whether the language and structure of Section 13(b) of the FTC Act precluded the FTC’s lawsuit. The court declined to certify the question, because there was not a substantial ground for difference of opinion as to whether this lawsuit was a "proper case" under Section 13(b). Surescripts argued that "proper cases" were limited to straightforward violations of the FTC’s substantive statutes, but various other courts previously concluded that "proper cases" encompassed more than just "routine" violations. Surescripts attempted to raise a new argument by highlighting another interpretation of Section 13(b), that read the statute as requiring the existence of a parallel administrative proceeding by the FTC before the agency can pursue a permanent injunction. Surescripts noted that at least one court has read Section 13(b) to require that there be a present or imminent violation before the FTC can pursue a permanent injunction. Surescripts thus argued that the second prerequisite to a temporary injunction, a parallel administrative proceeding, should apply in the permanent injunction context as well. The court rejected that interpretation because Surescripts did not advance it at the pleadings stage and an argument not presented by Surescripts and not relied on by the court could not serve as the basis for certification for interlocutory review.

The second question was whether Supreme Court precedent foreclosed the FTC’s argument that Surescripts’s low, but not ‘predatory,’ pricing was anticompetitive. Surescripts advanced that argument during the motion to dismiss and the court rejected it because it failed to account for the specific nature of Surescripts’s monopolistic position that made its loyalty program effectively exclusionary and, therefore, an impediment to competitors entering the market. And none of the authorities cited by Surescripts stood for the proposition that a plaintiff must allege predatory pricing to succeed on a Section 2 claim. The FTC alleged that Surescripts’s loyalty program, in combination with the company’s dominant monopoly in both routing and eligibility, clearly had a significant effect in preserving its monopoly and kept usage of any competing information system below the critical level necessary for it to pose a real threat" to Surescripts’s monopoly. The court found that this question boiled down to Surescripts’s disagreement with D.C. Circuit precedent and did not establish a substantial ground for difference of opinion sufficient to satisfy the statutory requirements for an interlocutory appeal.

This case is No. 1:19-cv-01080-JDB.

Attorneys: Bradley Albert for the FTC. Amanda P. Reeves (Latham & Watkins LLP) for Surescripts, LLC.

Companies: Surescripts, LLC

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