Court filing
Exhibit A — United States v. Visa Inc. and Plaid Inc. (Dkt. 57.1)
Record facts
| Court | U.S. District Court for the Northern District of California |
|---|---|
| Filed | 2020-12-11 |
U.S. District Court for the Northern District of California · No. 4:20-cv-07810-JSW · Doc. 57-1 · 2020-12-11 · Docket on CourtListener
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
Jack P. DiCanio (SBN 138782)
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
525 University Avenue, Suite 1400
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Email: Jack.DiCanio@skadden.com
Steven C. Sunshine (pro hac vice)
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
1440 New York, N.W.
Washington, D.C. 20005
Telephone: (202) 371-7000
Facsimile (202) 393-5760
Email: steven.sunshine@skadden.com
Attorneys for Defendant
VISA INC.
[Additional counsel listed on signature page]
Jonathan M. Jacobson, SBN 1350495
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
1301 Avenue of the Americas, 40th Floor
New York, New York 10019
Telephone: (212) 497-7758
Facsimile: (212) 999-5899
Email: jjacobson@wsgr.com
Justina K. Sessions, SBN 270914
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
One Market Plaza, Spear Tower, Suite 3300
San Francisco, California 94105
Telephone: (415) 947-2000
Facsimile: (415) 947-2099
Email: jsessions@wsgr.com
Scott A. Sher, SBN 190053
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
1700 K Street NW, Fifth Floor
Washington, DC 20006
Telephone: (202) 973-8800
Facsimile: (202) 973-8899
Email: ssher@wsgr.com
Attorneys for Defendant
PLAID INC.
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
OAKLAND DIVISION
UNITED STATES OF AMERICA
Plaintiff,
v.
VISA INC. and PLAID INC.,
Defendants.
CASE NO.: 4:20-cv-7810-JSW
DEFENDANTS’ MEMORANDUM OF
POINTS AND AUTHORITIES IN
SUPPORT OF MOTION FOR JUDGMENT
ON THE PLEADINGS
Date:
Time:
Courtroom: 5, 2d Floor
Before: Hon. Jeffrey S. White
Case 4:20-cv-07810-JSW Document 57-1 Filed 12/11/20 Page 1 of 14
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
TABLE OF CONTENTS
Table of Authorities ........................................................................................................................ ii
Background ......................................................................................................................................1
Argument .........................................................................................................................................2
A. Judgment on the Pleadings Is Warranted When the Movant Is Entitled to
Judgment as a Matter of Law ...................................................................................2
B. Judgment on the Pleadings is Warranted on DOJ’s Sherman Act Section 2
Claim ........................................................................................................................3
C. Dismissal of DOJ’s Section 2 Claim will Streamline this Litigation ......................8
Conclusion .......................................................................................................................................9
Case 4:20-cv-07810-JSW Document 57-1 Filed 12/11/20 Page 2 of 14
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
TABLE OF AUTHORITIES
Page(s)
CASES
Ashcroft v. Iqbal,
556 U.S. 662 (2009) ............................................................................................................ 2, 3
Bell Atlantic Corp. v. Twombly,
550 U.S. 544 (2007) ................................................................................................................ 3
BOC International Ltd. v. FTC,
557 F.2d 24 (2d Cir. 1977)...................................................................................................... 4
Brown Shoe Co. v. United States,
370 U.S. 274 (1962) ........................................................................................................ 3, 4, 5
Cafasso v. General Dynamics C4 Systems, Inc.,
637 F.3d 1047 (9th Cir. 2011) ................................................................................................ 3
Credit Bureau Reports, Inc. v. Retail Credit Co.,
358 F. Supp. 780 (S.D. Tex. 1971), aff’d, 476 F.2d 989 (5th Cir. 1973) ............................... 4
Epic Games, Inc. v. Apple Inc.,
No. 4:20-cv-05640-YGR, 2020 WL 5993222 (N.D. Cal. Oct. 9, 2020) ............................ 3, 7
Fleming v. Pickard,
581 F.3d 922 (9th Cir. 2009) .................................................................................................. 2
Food & Drug Administration v. Brown & Williamson Tobacco Corp.,
529 U.S. 120 (2000) ................................................................................................................ 4
FTC v. Atlantic Richfield Co.,
549 F.2d 289 (4th Cir. 1977) .................................................................................................. 4
FTC v. Steris Corp.,
133 F. Supp. 3d 962 (N.D. Ohio 2015) ................................................................................... 4
FTC v. Qualcomm Inc.,
969 F.3d 974 (9th Cir. 2020) .............................................................................................. 3, 7
Gadda v. State Bar of California,
511 F.3d 933 (9th Cir. 2007) .................................................................................................. 9
Hawaii v. Trump,
859 F.3d 741 (9th Cir. 2017), vacated and remanded on other grounds, 138 S. Ct.
377 (2017) ............................................................................................................................... 4
International Telephone & Telegraph Corp. v. American Telephone & Telegraph Co.,
481 F. Supp. 399 (S.D.N.Y. 1979) ......................................................................................... 4
Oahu Gas Service Inc. v. Pacific Resources Inc.,
838 F.2d 360 (9th Cir. 1988) .................................................................................................. 8
Case 4:20-cv-07810-JSW Document 57-1 Filed 12/11/20 Page 3 of 14
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
Rambus Inc. v. FTC,
522 F.3d 456 (D.C. Cir. 2008) ................................................................................................ 7
United States v. Black & Decker Manufacturing Co.,
430 F. Supp. 729 (D. Md. 1976) ............................................................................................. 4
United States v. Crocker-Anglo National Bank,
223 F. Supp. 849 (N.D. Cal. 1963) ......................................................................................... 4
United States v. Grinnell Corp.,
384 U.S. 563 (1966) ............................................................................................................ 3, 8
United States v. H & R Block, Inc.,
833 F. Supp. 2d 36 (D.D.C. 2011) .......................................................................................... 8
United States v. Marine Bancorporation, Inc.,
418 U.S. 602 (1974) ................................................................................................................ 8
United States v. Microsoft Corp.,
253 F.3d 34 (D.C. Cir. 2001) .............................................................................................. 6, 7
United States v. Siemens Corp.,
621 F.2d 499 (2d Cir. 1980).................................................................................................... 4
United States v. US Airways Group,
979 F. Supp. 2d 33 (D.D.C. 2013) .......................................................................................... 8
STATUTES
15 U.S.C. § 2 ................................................................................................................................... 1, 2
15 U.S.C. § 18 ............................................................................................................................. 1, 2, 3
15 U.S.C. § 25 ..................................................................................................................................... 8
RULES
Rule 12(c) of the Federal Rules of Civil Procedure ............................................................................ 2
OTHER AUTHORITIES
Douglas H. Ginsburg & Koren W. Wong-Ervin, Challenging Consummated Mergers Under
Section 2, Competition Policy International, May 25, 2020 ........................................... 5, 7, 8
Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: an Analysis of Antitrust Principles
and Their Application (5th ed. 2020) .................................................................................. 5, 8
Case 4:20-cv-07810-JSW Document 57-1 Filed 12/11/20 Page 4 of 14
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
Pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, defendants Visa Inc. and
Plaid Inc. move this Court for judgment on the pleadings, dismissing plaintiff’s claim pursuant to
Sherman Act Section 2, 15 U.S.C. § 2, with prejudice.
The Antitrust Division of the United States Department of Justice (“DOJ”) is seeking to
block Visa’s time-critical acquisition of Plaid, a deal that was signed up in January 2020, and one
that the DOJ investigated for nearly ten months. DOJ concedes that Plaid is not a competitor of
Visa’s today; instead, DOJ claims that the proposed acquisition threatens competition because
Plaid supposedly someday hopes to introduce a new type of payment service (not currently
available in the United States) to compete against Visa in an alleged market for “online debit
transactions.” For decades, “potential competition” theories like this one have been evaluated
under Section 7 of the Clayton Act (15 U.S.C. § 18)—the statute specifically designed to address
mergers—and have found almost no traction in the courts. Likely aware that potential competition
cases are extremely difficult to win, DOJ has tacked on a Section 2 Sherman Act claim in the
apparent hope of avoiding unfavorable Section 7 precedent.
The Court should dismiss DOJ’s adventurous and incorrect Section 2 claim and allow this
case to proceed expeditiously as a traditional Section 7 case. DOJ should not be permitted to
invoke its flawed Section 2 claim to broaden discovery and delay determination of this case on the
merits well past the pace of a typical merger challenge. There is no prejudice to DOJ because the
only relief it seeks—blocking the proposed acquisition—is subject to the less stringent standards of
Section 7 of the Clayton Act, which DOJ has also invoked.
BACKGROUND
On November 5, 2020, DOJ filed this action challenging Visa’s proposed acquisition of
Plaid. (ECF 1, Complaint (“Compl.”).) The complaint admits that Visa and Plaid do not currently
compete. (Id. ¶ 8.) Instead, DOJ asserts that the acquisition would eliminate a potential
competitive threat in a purported market for online debit transactions, in alleged violation of
Section 7 of the Clayton Act, 15 U.S.C. § 18, and Section 2 of the Sherman Act, 15 U.S.C. § 2.
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
(Id. ¶¶ 76-77.)1 Both of DOJ’s claims challenge the very same conduct—the proposed
acquisition—in the same putative relevant market and seek the very same relief—a permanent
injunction against the transaction. (Id. ¶¶ 76-79.)
DOJ alleges that Visa is a monopolist in a purported online debit market. (Id. ¶ 68.)
Despite claiming that market is characterized by “significant barriers to entry and expansion” (id. ¶
4), DOJ contends that Plaid is uniquely positioned to enter and challenge Visa by developing a new
“pay-by-bank debit service” that does not currently exist in the United States. (Id. ¶¶ 33-34.) The
complaint states that Plaid has built significant connections with financial institutions and
customers through its financial data aggregation platform (id. ¶¶ 7, 21), and that Plaid “plans to
build on the success of its current services” by “leverag[ing] [its existing] technology” to “creat[e]
an ‘end-to-end payments network.’” (Id. ¶¶ 8, 40.) The complaint notes that Plaid has unspecified
“plans” to enter the money-movement business by the end of 2021 and is currently piloting with
customers certain of its current products (none of which is a debit service), but fails to provide any
other facts regarding Plaid’s efforts or ability to develop an “online pay-by-bank debit service
[that] would compete against Visa’s online debit services.” (Id. ¶¶ 10, 40.)
ARGUMENT
A. Judgment on the Pleadings Is Warranted When
the Movant Is Entitled to Judgment as a Matter of Law
Rule 12(c) provides that “[a]fter the pleadings are closed—but early enough not to delay
trial—a party may move for judgment on the pleadings.” Fed. R. Civ. P. 12(c). Judgment on the
pleadings is proper when the moving party clearly establishes on the face of the pleadings that no
material issue of fact remains to be resolved and that it is entitled to judgment as a matter of law.
Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009).
“Although [Ashcroft v. Iqbal, 556 U.S. 662 (2009),] establishes the standard for deciding a
1 Section 7 of the Clayton Act prohibits mergers, acquisitions, and certain joint ventures where the
effect “may be substantially to lessen competition, or to tend to create a monopoly” in any line of
commerce or activity affecting commerce in any part of the United States. 15 U.S.C. § 18. Section
2 of the Sherman Act makes it unlawful for any person to “monopolize, or attempt to
monopolize . . . any part of the trade or commerce among the several States, or with foreign
nations.” 15 U.S.C. § 2.
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
Rule 12(b)(6) motion, . . . Rule 12(c) is ‘functionally identical’ to Rule 12(b)(6) and . . . ‘the same
standard of review’ applies to motions brought under either rule.” Cafasso v. Gen. Dynamics C4
Sys., Inc., 637 F.3d 1047, 1054 n.4 (9th Cir. 2011) (citation omitted). Thus, for purposes of a 12(c)
motion, the complaint “must contain sufficient factual matter, accepted as true, ‘to state a claim to
relief that is plausible on its face.’” Ashcroft, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). Although the
court must construe all allegations of material fact in the light most favorable to the plaintiff, “a
plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”
Twombly, 550 U.S. at 555 (alteration in original) (citation omitted).
B. Judgment on the Pleadings is Warranted on DOJ’s Sherman Act Section 2 Claim
DOJ’s Section 2 claim fails as a matter of law. Section 2 of the Sherman Act requires DOJ
to prove (i) the possession of monopoly power in the relevant market; (ii) the willful acquisition or
maintenance of that power (also known as “exclusionary conduct”); and (iii) causal antitrust injury.
United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966); FTC v. Qualcomm Inc., 969 F.3d
974, 990 (9th Cir. 2020); Epic Games, Inc. v. Apple Inc., No. 4:20-cv-05640-YGR, 2020 WL
5993222, at *9 (N.D. Cal. Oct. 9, 2020). DOJ has thus far not identified a single case, and
defendants are aware of none, where a court has found that the acquisition of a potential or nascent
competitor constitutes exclusionary conduct for purposes of Section 2.
Acquisitions of potential or nascent competitors are typically evaluated under Section 7 of
the Clayton Act, which prohibits acquisitions the effect of which “may be substantially to lessen
competition, or to tend to create a monopoly.” 15 U.S.C. § 18. Section 7 was enacted at least in
part due to the failings of Section 2 to prohibit a broad range of conduct,2 and the Supreme Court
2 See Brown Shoe Co. v. United States, 370 U.S. 294, 318 n.33 (1962) (“Numerous other
statements by Congressmen and Senators and by representatives of the Federal Trade Commission,
the Department of Justice and the President’s Council of Economic Advisors were made to the
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
recognized decades ago that the standards of the Sherman Act are more demanding than those of
the Clayton Act. See Brown Shoe Co., 370 U.S. at 328-29 (“[T]he tests for measuring the legality
of any particular economic arrangement under the Clayton Act are to be less stringent than those
used in applying the Sherman Act.”).3 As a matter of statutory construction, the prohibitions of
general statutes such as Section 2 must be viewed in the context of subsequently-enacted specific
statutes (here, Section 7).4 Thus, DOJ cannot use Section 2 to circumvent the elements of Section
7 designed to regulate specific conduct.
DOJ’s motivation for invoking Section 2 to circumvent Section 7 here is clear: there exists
a body of Section 7 case law unfavorable to DOJ that expressly addresses acquisitions of potential
competitors, including FTC v. Steris Corp., 133 F. Supp. 3d 962 (N.D. Ohio 2015), a government
loss in the only actual potential competition case to be tried in nearly 40 years.5 In contrast, to
Congress suggesting that a standard of illegality stricter than that imposed by the Sherman Act was
needed.”).
3 See also Int’l Tel. & Tel. Corp. v. Am. Tel. & Tel. Co., 481 F. Supp. 399, 404 (S.D.N.Y. 1979)
(“[S]ection 7 has been interpreted to proscribe a broader range of conduct than that forbidden by
the Sherman Act. . . . Since the market foreclosure in this case does not even approach the level
required under the Clayton Act, it is clearly De minimis under the more stringent standard of the
Sherman Act.”); Credit Bureau Reps., Inc. v. Retail Credit Co., 358 F. Supp. 780, 794 (S.D. Tex.
1971) (“The elements of proof in establishing Section 7 violations are somewhat less stringent than
proving monopolization under Section 2 of the Sherman Act.”), aff’d, 476 F.2d 989 (5th Cir.
1973); United States v. Crocker-Anglo Nat’l Bank, 223 F. Supp. 849, 859 (N.D. Cal. 1963) (“Since
the merger does not violate the Clayton Act, the possibility that it might be held to violate the more
stringent standards of the Sherman Act seems most unlikely.”).
4 See FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 143 (2000) (“The ‘classic judicial
task of reconciling many laws enacted over time, and getting them to “make sense” in combination,
necessarily assumes that the implications of a statute may be altered by the implications of a later
statute.’ This is particularly so where the scope of the earlier statute is broad but the subsequent
statutes more specifically address the topic at hand.” (citation omitted)); Hawaii v. Trump, 859
F.3d 741, 781 (9th Cir. 2017) (holding “well-settled interpretive canons” do not allow for a
“‘narrow, precise, and specific’ statutory provision” to be overridden by a provision “‘covering a
more generalized spectrum’ of issues” (citation omitted)), vacated and remanded on other
grounds, 138 S. Ct. 377 (2017).
5 See also United States v. Siemens Corp., 621 F.2d 499, 507 (2d Cir. 1980) (holding government
failed to prove a reasonable probability of entry into the market); FTC v. Atl. Richfield Co., 549
F.2d 289, 296 (4th Cir. 1977) (holding plaintiff failed to establish reasonable probability of entry
when putative entrant had shown “continuing interest” in entering the industry); BOC Int’l Ltd. v.
FTC, 557 F.2d 24, 28 (2d Cir. 1977) (rejecting Commission finding that there was a “reasonable
probability” of eventual entry as unacceptably speculative); United States v. Black & Decker Mfg.
Co., 430 F. Supp. 729, 758 (D. Md. 1976) (holding government failed to prove potential
competition claim when defendant lacked “the expertise in gasoline technology necessary for a
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
Defendants’ knowledge, no court has ever endorsed the use of Section 2 to enjoin a prospective
merger or to find illegal the acquisition of a potential competitor. Tellingly, the only support DOJ
has offered to date for its Section 2 potential competition claim is a citation to an antitrust treatise
and to an eminently distinguishable out-of-circuit decision addressing non-merger conduct. (ECF
43, Plaintiff United States’ Statement in Support of Administrative Relief for an Expedited Case
Management Conference, at 3.) Neither supports a plausible Section 2 claim here.
First, DOJ points to Professor Herbert Hovenkamp’s Antitrust Law treatise as support for
its contention that the acquisition of an alleged potential competitor violates Section 2. (Id.) That
treatise, however, does not cite a single case holding that an acquisition of a potential competitor
can, standing alone, violate Section 2. Nor does Professor Hovenkamp attempt to square his view
with the Supreme Court’s guidance that the Clayton Act tests are less stringent than the tests
applicable to the Sherman Act, see Brown Shoe Co., 370 U.S. at 328-29, and his argument was
recently criticized by a federal judge who previously ran the Antitrust Division of the Department
of Justice, and a former FTC advisor.6
Even if for the sake of argument one were to accept Professor Hovenkamp’s view that a
potential-competitor acquisition might constitute exclusionary conduct under Section 2, here the
DOJ’s complaint fails to state a claim even under his proposed analytical framework. The portion
of the treatise that DOJ cites hypothesizes that a Section 2 claim might be sustainable where an
alleged monopolist acquires a firm that (i) has made the decision to enter the market; and (ii) but-
for the acquisition, would have entered the market in the “immediate future.”7
Here, DOJ’s complaint is bereft of any allegation that Plaid has made an actual decision to
successful de novo entry” and the government failed to show the absence of other equally-qualified
potential entrants).
6 Douglas H. Ginsburg & Koren W. Wong-Ervin, Challenging Consummated Mergers Under
Section 2, Competition Policy International, May 25, 2020, at 4, available at
https://www.competitionpolicyinternational.com/challenging-consummated-mergers-under-
section-2-2/ (hereinafter “Ginsburg”).
7 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: an Analysis of Antitrust Principles and
Their Application ¶ 912a (5th ed. 2020) (“If the rival has not yet made its first sale, the tendency is
to call the acquisition a ‘potential competition’ or nonhorizontal merger. . . . But even the firm that
is preparing to make its first bid or its first sale must be counted as an ‘actual’ rival once the entry
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
invest in developing an end-to-end Pay-by-Bank (“PBB”) product. Nor does it allege that Plaid has
the economic wherewithal to enter with such a product; that Plaid has undertaken concrete steps
towards doing so; or that the products Plaid is piloting are sufficient to develop an end-to-end
payments network in the “immediate future.” Instead, the complaint includes only vague
allegations that Plaid has unidentified “plans” to enter the money-movement business by the end of
2021 (Compl. ¶¶ 10, 40); that Plaid “is planning to leverage [its existing] technology” (id. ¶ 8),
which “provides an easy interface for fintech apps to collect consumers’ financial data” (id. ¶ 37);
and that Plaid is piloting certain of its products, which in turn, it hopes “to build on . . . by creating
an ‘end-to-end payments network’” (id. ¶ 40). These vague, generalized allegations do not meet
the Section 2 potential-competitor acquisition “standard” advocated by Professor Hovenkamp. Nor
could DOJ amend its complaint to overcome these deficiencies: because PBB does not currently
exist in any significant capacity in the United States (id. ¶¶ 33-34), DOJ cannot possibly allege that
Plaid would have entered the alleged relevant market with a PBB product in the “immediate
future” but for the proposed acquisition.
Second, DOJ’s reliance on Microsoft is similarly misplaced. (Id. ¶ 13 (citing United States
v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001))). DOJ argues that Microsoft permits DOJ to skip
past proving actual anticompetitive effects flowing from the acquisition, and prevail merely by
asserting that the acquisition of Plaid “reasonably appear[s] capable of making a significant
contribution to . . . maintaining monopoly power.” Microsoft, 253 F.3d at 79 (alterations in
original).
As an initial matter, this out-of-circuit decision is plainly distinguishable on the facts as it
involved a host of other types of exclusionary conduct—not an acquisition of a supposedly nascent
competitor as alleged here. See id. at 58-78 (holding that Microsoft engaged in exclusionary
conduct without any countervailing procompetitive justification, including (1) imposing
anticompetitive provisions in Windows licensing agreements; (2) technologically binding Internet
Explorer to Windows; (3) entering into exclusive dealing contracts with internet access providers,
decision has been made. . . . The important point is that the acquisition eliminates an important
route by which competition could have increased in the immediate future.”) (emphasis added).
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
independent software vendors and Apple; (4) deceiving competitor developers; and (5) pressuring
other companies to stop supporting nascent technologies). The Microsoft court concluded that the
government had either successfully proven nearly all strands of the challenged conduct to be
exclusionary, or the defendant had effectively conceded as much. Id.
Moreover, even the DOJ’s oft-cited passage from Microsoft recognizes that a plaintiff must
demonstrate both anticompetitive conduct and causation. Id. at 79 (discussing whether, to establish
Section 2 liability, plaintiff must present proof that a defendant’s continued monopoly power is
“precisely attributable to its anticompetitive conduct”). Courts consider causation only after the
challenged conduct has been found to be exclusionary. See Qualcomm Inc., 969 F.3d at 990-92
(holding conduct can be condemned as exclusionary only if monopolist’s act has an
anticompetitive effect); Epic Games, Inc., 2020 WL 5993222, at *9 (observing that causation is
considered only after plaintiff satisfies the first and second elements of monopoly power and
willful maintenance or acquisition of power in the relevant market). Thus, the DOJ’s position on
what might constitute exclusionary conduct here relies on an opinion where exclusionary
conduct—i.e. conduct having anticompetitive effect without redeeming justifications—had already
been conclusively established.
DOJ’s interpretation of Microsoft has also been rejected by Judge Douglas Ginsburg, a
former Assistant Attorney General in charge of the Antitrust Division, who sat on the en banc
panel that issued the Microsoft decision. In a recent article, Judge Ginsburg rejected the assertion
that Section 2 “does not require proof of anticompetitive effects,” explaining that such a view is
based upon a “misreading” of Microsoft and “conflates the Microsoft court’s standard for proving
competitive effects with its standard for establishing causation.”8 Judge Ginsburg further noted
that for purposes of potential-competitor acquisitions, Microsoft, when read together with the D.C.
Circuit’s later decision in Rambus Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008), stands for the
proposition that “only when anticompetitive effects are shown . . . may the government avoid
having to show that the threat would have become a real competitor but for the alleged
8 Ginsburg at 2.
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
exclusionary conduct.”9 Here, because the only exclusionary conduct challenged in the complaint
is the proposed transaction, and DOJ has not plausibly alleged that Plaid was poised to become a
real competitor in the absence of the proposed acquisition, DOJ has failed to allege a plausible
claim under Section 2 of the Sherman Act.
Eliminating the Section 2 claim leaves the court with more limited yet fully dispositive
issues under Section 7. Case law interpreting Section 7 in the context of potential competition
requires the court to consider whether the relevant market is highly concentrated and whether the
potential entrant has “feasible means” for entering the market.10 In contrast, Section 2 imposes
additional elements beyond those required for Section 7, including the possession of monopoly
power, proof of causation, and consideration of any offsetting efficiencies and valid business
justifications.11 Focusing solely on DOJ’s Section 7 claim would still allow for plaintiff to seek to
obtain the precise relief that it requests.
C. Dismissal of DOJ’s Section 2 Claim will Streamline this Litigation
Dismissing DOJ’s insufficiently-pled Section 2 claim at this early stage will streamline the
litigation and be significantly more efficient for the Court. It is well established that merger
challenges are tried on expedited litigation schedules. See 15 U.S.C. § 25 (providing that in an
injunction action under Section 7 of the Clayton Act, “the court shall proceed, as soon as may be,
to the hearing and determination of the case”).12 Here, however, DOJ has made clear that it views
9 Ginsburg at 4 (emphasis added) (also condemning the risk of adopting Professor Hovenkamp’s
proposal that a potential-entrant acquisition can be exclusionary where the target firm (a) “has the
economic capabilities for entry”; (b) is a “more-than-fanciful possible entrant”; and (c) “is []
different from many other firms in these respects” as outlined in Areeda & Hovenkamp ¶ 701d).
10 United States v. Marine Bancorporation, Inc., 418 U.S. 602, 633 (1974).
11 Grinnell Corp., 384 U.S. at 570-71; see also Oahu Gas Serv. Inc. v. Pac. Res. Inc., 838 F.2d 360,
369 (9th Cir. 1988).
12 See also United States v. US Airways Grp., 979 F. Supp. 2d 33, 35 (D.D.C. 2013) (“Indeed,
because of the need for the prompt resolution of this matter, the Court has set an expedited
discovery and trial schedule.”); United States v. H & R Block, Inc., 833 F. Supp. 2d 36, 44 (D.D.C.
2011) (“[T]he Court entered a scheduling order in this case that provided for an expedited schedule
of fact and expert discovery and briefing on the government’s anticipated motion to enjoin the
transaction.”).
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
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CASE NO. 4:20-cv-7810-JSW
the inclusion of a Section 2 claim as grounds for delaying resolution of this matter on the merits,13
and that Section 2 entitles it to more expansive discovery than would be necessary under the
Section 7 claim—all despite challenging precisely the same conduct (the merger), in the same
purported market, and seeking the same relief for both its Section 2 and Section 7 claims (an
injunction). Dismissing DOJ’s insufficiently-pled Section 2 claim will therefore streamline
discovery and allow this case to proceed to an expeditious resolution on the merits, while allowing
DOJ to continue to pursue the entirety of the relief it seeks under the more appropriate vehicle of a
Clayton Act Section 7 claim.
CONCLUSION
For the foregoing reasons, Defendants respectfully request that the Court dismiss DOJ’s
Section 2 claim with prejudice. See Gadda v. State Bar of Cal., 511 F.3d 933, 939 (9th Cir. 2007)
(“Because allowing amendment would be futile, we hold that the district court properly dismissed
[plaintiff’s] claims with prejudice and without leave to amend.”).
13 See ECF 43 at 1 (claiming defendants’ proposed schedule was faster than schedules “adopted in
the vast majority of merger cases—cases that involved fewer legal claims in less complex
industries . . . .”).
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DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION FOR JUDGMENT ON THE PLEADINGS
CASE NO. 4:20-cv-7810-JSW
DATED: December 11, 2020
By: /s/ Jack P. DiCanio
Jack P. DiCanio
Attorney for Defendant
VISA INC.
Jack P. DiCanio (SBN 138782)
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
525 University Avenue, Suite 1400
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Email: Jack.DiCanio@skadden.com
Steven C. Sunshine (pro hac vice)
Tara Reinhart (pro hac vice)
Julia York (pro hac vice)
Joseph Ciani-Dausch (pro hac vice)
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
1440 New York, N.W.
Washington, D.C. 20005
Telephone: (202) 371-7000
Facsimile (202) 393-5760
Email: steven.sunshine@skadden.com
Email: tara.reinhart@skadden.com
Email: julia.york@skadden.com
Email: joseph.ciani-dausch@skadden.com
Karen Lent (pro hac vice)
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
One Manhattan West
New York, New York 10001
Telephone: (213) 735-3000
Facsimile: (213) 735-2000
Email: karen.lent@skadden.com
By: /s/ Jonathan M. Jacobson
JONATHAN M. JACOBSON
Attorney for Defendant
PLAID INC.
Jonathan M. Jacobson, SBN 1350495
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
1301 Avenue of the Americas, 40th Floor
New York, New York 10019
Telephone: (212) 497-7758
Facsimile: (212) 999-5899
Email: jjacobson@wsgr.com
Justina K. Sessions, SBN 270914
Benjamin S. Labow, SBN 229443
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
One Market Plaza, Spear Tower, Suite 3300
San Francisco, California 94105
Telephone: (415) 947-2000
Facsimile: (415) 947-2099
Email: jsessions@wsgr.com
Email: blabow@wsgr.com
Scott A. Sher, SBN 190053
Michelle Yost Hale (pro hac vice)
Robin S. Crauthers (pro hac vice)
Katie R. Glynn, SBN 300524
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
1700 K Street NW, Fifth Floor
Washington, DC 20006
Telephone: (202) 973-8800
Facsimile: (202) 973-8899
Email: ssher@wsgr.com
Email: mhale@wsgr.com
Email: rcrauthers@wsgr.com
Email: kglynn@wsgr.com
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