District Court Concludes Red Cross Is Exempt From Antitrust Claims Despite DOJ Statement To The Contrary
Antitrust Litigation
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  • District Court Concludes Red Cross Is Exempt From Antitrust Claims Despite DOJ Statement To The Contrary


    On January 19, 2024, Judge Patti B. Saris of the United States District Court for the District of Massachusetts held that American National Red Cross (“ARC”) is not a “person” under the Sherman Act and therefore not subject to the Act’s prohibitions. Verax Biomedical Inc. v. American National Red Cross, 2024 WL 208127 (D. Mass. Jan. 19, 2024). Plaintiff, a manufacturer of tests for detecting bacterial growth in blood platelets, alleged that ARC, the largest supplier of blood platelets in the United States, leveraged its power in the market for platelets to monopolize the market for bacterial growth mitigation services. Specifically, plaintiff brought three claims under the Sherman Act: tying, exclusive dealing and attempted monopolization. But, because the Court found that the Sherman Act does not reach ARC, it dismissed all three antirust claims. Notably, the Court reached this conclusion even after the Antitrust Division of the United States Department of Justice (“DOJ”) filed a statement of intertest with the Court, arguing that ARC can indeed be sued under the Sherman Act.

    As the Court explained, to determine whether a Sherman Act claim is cognizable against a quasi‑governmental entity, courts apply the two-step analysis articulated by the Supreme Court in FDIC v. Meyer, 510 U.S. 471, 484 (1994). Under that framework, courts first ask whether there has been a waiver of sovereign immunity. U.S. Postal Serv. v. Flamingo Indus. (USA) Ltd., 540 U.S. 736, 743 (2004). If so, the court will proceed to the second question and determine “whether the substantive prohibitions of the Sherman Act apply.” The Court quickly answered the first question in the affirmative, observing that “[s]ince 1905, ARC’s statutory charter has stated that ARC may ‘sue and be sued in courts of law and equity, State or Federal, within the jurisdiction of the United States.’” The Court held that the language in ARC’s charter constituted a waiver of sovereign immunity and proceeded to the second step of the analysis.

    Turning to the second question, the Court observed that the Sherman Act imposes liability on any “person,” which includes “corporations and associations existing under or authorized by the laws of … the United States.” Flamingo, 540 U.S. at 744-45 (citing 15 U.S.C. § 7). And it is well settled law that the United States is not an antitrust “person,” and cannot be an antitrust defendant. Accordingly, the key question for the Court was whether, for purposes of the antitrust laws, ARC “is a person separate from the United States itself.” To answer that question, the Court looked to Flamingo, where the Supreme Court scrutinized both the form and the function of the United States Postal Service (“USPS”) and determined it was, in fact, “part of the Government” and therefore “not controlled by antitrust laws.” As to form, the Supreme Court observed that USPS was not set up as a corporation, but rather its enabling statute provided that it was an independent establishment of the executive branch of the Government of the United States. And as for function, the Supreme Court emphasized that “[t]he most important difference” between USPS and private corporations is that USPS “does not seek profits, but only to break even, … which is consistent with its public character.”

    Turning to ARC, and beginning with an analysis of its form, the court acknowledged that ARC, unlike USPS, is indeed a federal corporation. The Court found that ARC’s enabling statue, as modified—only three years after the Flamingo decision—to provide that ARC is “a Federally chartered instrumentality of the United States” that has “the rights and obligations consistent with that status[,]” demonstrated a congressional intent to treat ARC as an instrumentality of the federal government. And as the Court explained, “[o]ne of those ‘rights’ of an instrumentality of the United States is immunity from antitrust suit.” As to ARC’s function, the Court found that “ARC’s ‘goals, obligations, and powers’ support treating ARC as a public rather than a private entity.” The Court emphasized Flamingo’s command that the “most important difference” between USPS and private enterprises was that USPS “does not seek profits.” And of course, as Judge Saris observed, ARC is a nonprofit corporation. What’s more, the Court explained that ARC’s charter requires it to fulfill a variety of public functions, such as effectuating the United States treaty obligations to provide aid in times of war or emergency. The Court recognized that ARC lacked some powers characteristic of Government, such as eminent domain or the ability to enter into international agreements, but found that “on balance, ARC’s public attributes outweigh its private ones for this analysis.”

    Finally, the Court addressed DOJ’s assertion (via its statement of interest) that “[f]ederal courts have repeatedly concluded that … the ARC is a corporate ‘person’ separate from the United States itself,” so the same should follow for the Sherman Act. DOJ pointed to contexts such as the Religious Freedom Restoration Act, the Freedom of Information Act and the Federal Tort Claims Act—all statutes where courts have held that ARC is a separate “person” from the United States. But the Court found that these were “distinct legal regimes and standards[,]” and therefore did not control. And critically, the Court explained that all the decisions analyzing this issue in other statutory contexts predate Congress’s 2007 amendment to ARC’s statutory charter. Having completed its analysis of form and function, the Court concluded that “[b]ecause ARC is an instrumentality of the United States, it is not a ‘person’ separate from the United States under the Sherman Act.” Accordingly, the court dismissed all of plaintiff’s antitrust claims.

    This case demonstrates that parties seeking to bring antitrust claims against government‑chartered corporations will face headwinds particularly where the government‑charted corporation acts as a non-profit organization. Parties must plan accordingly, understanding that courts will conduct a highly functional analysis that looks at the particular characteristics of the entity at issue. Early guidance is critical, as the outcome of this exercise can be difficult to predict. As Judge Saris explained when it came to ARC, “[t]he issue is close.”

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