In Eaton Corp. v. ZF Meritor LLC et al., the U.S. Supreme Court denied certiorari, refusing to review a Third Circuit decision upholding the imposition of antitrust liability on a truck transmission manufacturer for encouraging its customers to deal with it exclusively by offering low prices.
Most federal circuit courts that have considered whether loyalty discounts should trigger antitrust scrutiny have concluded that dominant companies may offer rebates if the ultimate price paid by the customer is above the provider’s cost. The Third Circuit, by contrast, recently held that long-term loyalty agreements could violate the antitrust laws when companies have market power because the agreements amount to “de facto exclusive dealing contracts” that foreclosed a large portion of the market. Despite the split in the circuits, the Supreme Court refused to hear the case.
In MGA Entertainment Inc. v. Innovation First Inc. et al., the Ninth Circuit Court of Appeals affirmed a lower court ruling dismissing MGA Entertainment Inc.’s lawsuit accusing Innovation First Inc. (IFI) of engaging in an anti-competitive scheme by making false statements about the design for the Hexbug Nano, for lack of personal jurisdiction. In its suit, MGA accused its rival of violating the Lanham Act by making claims that its competitors had stolen design components related to the motor assembly, housing and legs of its popular Hexbug Nano robotic insect toy. MGA further claimed that Innovation made its Hexbug Nano claims to interfere with the sale of MGA’s Legend of Nara Battling Bugs.
In a unanimous, unpublished ruling, the Ninth Circuit held that MGA failed to show that Texas-based IFI had adequate “continuous and systematic” contacts within California to trigger general personal jurisdiction. According to the court, although IFI maintains contacts with various California entities and actively contracts to sell their products in California, the alleged continuous activity is not sufficiently substantial to hold IFI amenable to suits unrelated to that activity.
The European Commission (EC) raided several energy giants, including BP PLC, Statoil, Platts, McGraw Hill Financial – which publishes benchmark price assessments for the energy industry. EC carried out the raids due to concerns that the companies might have colluded on providing distorted prices to a price-reporting agency in order to manipulate the benchmark rates for a variety of oil and biofuel products. EC is also worried that the companies might have blocked other energy companies from taking part in the price assessment process in order to distort the published rates. The probe focuses specifically on the Platts’ market-on-close price assessment process, which includes prices for crude oil, refined oil products and biofuels, according to Statoil. The EC warned that the allegations, if proven true, might end up violating both the bloc’s ban on cartels and restrictive business practices and its rules on abuse of dominance.
These raids are reminiscent of another ongoing EU antitrust probe, where the EC is investigating whether the world’s biggest banks may have colluded to rig a number of benchmark rates used in financial transactions.
In Duty Free Americas Inc. v. Estee Lauder Cos. Inc., Southern District of Florida Judge Robert N. Scola dismissed Duty Free Americas Inc. (DFA)’s suit accusing Estee Lauder Cos. Inc. (ELC) of attempting to force it out of the airport retail business and monopolize the beauty product market in duty-free stores. DFA, which operates duty-free stores in airports and features beauty products, claimed ELC had violated the Sherman Act by conspiring with DFA’s competitors to exclude it from the airport market by influencing airports’ bid process for such stores. In its complaint, DFA alleged that ELC interfered with the concession bid process at certain airports when it submitted a letter stating its preferences for certain stores.
NewarkELC’s letter only stated which duty-free operators are authorized to sell ELC’s products and then promoted these operators. The court added that a more plausible explanation for ELC’s decision to submit the letter to the Newark airport operators was to try to ensure that one of the duty-free operators with which it had a relationship would win the bid. And since the cost to ELC of writing a short, factual letter is small, but the benefit from having the winning bidder being able to sell its products is very large, one could reasonably assume that deciding to write the letter would be an easy business decision, according to the court. This chain of reasonable inferences shows that no conspiracy existed, Judge Scola said. According to the court, without its conclusory allegations, DFA’s complaint reveals allegations of parallel business conduct with little more. Because ELC’s alleged conduct is more likely explained by lawful, unchoreographed free-market behavior, there is no reasonable expectation that discovery will reveal evidence of an illegal agreement, the court held.
The court also dismissed DFA’s claim that ELC violated the Sherman Act by attempting to monopolize the relevant markets, defined as either cosmetics sold in duty-free stores in U.S. airports or skin care products sold in those same stores, calling the company’s allegations “less specific” and “more conclusory” and therefore “insufficient.”
In In the Matter of McWane Inc, and Star Pipe Products Ltd., Federal Trade Commission Administrative Judge D. Michael Chappell dismissed a price-fixing conspiracy claim in FTC’s law suit against McWane Inc., holding that McWane did not conspire with two other competitors — Star Pipe Products Ltd. and Sigma Corp. — to fix prices on small and medium diameter ductile iron pipe fittings. These fittings are sold in the U.S. and are used in municipal water distribution systems. In its complaint, FTC alleged that McWane took certain actions to keep Star from entering the domestic fittings market after the American Recovery and Reinvestment Act (the stimulus) was passed in 2009. The FTC also claimed that a McWane and Sigma’s 2009 distribution deal where Sigma agreed to use McWane as its exclusive source for domestic fittings, was intended to convince Sigma not to enter the domestic market in exchange for a share of McWane’s profits.
In dismissing FTC’s price-fixing conspiracy claim, the court held that the preponderance of evidence did not show a conspiracy among McWane, Star, and Sigma. The court pointed out that this claim is dismissed because the greater weight of the evidence failed to prove the alleged conspiracy, and not because “no price conspiracy existed” in the market or that the “conspiracy theory is implausible.” In the same order, the judge also shot down FTC’s allegations that McWane conspired with the others to exchange “competitively sensitive information.
The judge, however, did rule in favor of the FTC on claims pertaining to a “narrower relevant market” for domestically produced ductile iron pipe fittings used in projects specified as “domestic only.” The court held that McWane had monopoly power over the domestic fittings market and had “implemented an exclusionary policy to forestall Star’s entry” into that market.
In In re: Libor-Based Financial Instruments Antitrust Litigation, Southern District of New York Judge Naomi Riece Buchwald allowed three groups of plaintiffs to move to revive their allegations that Bank of America Corp., JPMorgan Chase & Co., and other top banks violated the Sherman Act and cost plaintiffs billions of dollars by rigging the London Interbank Offered Rate (Libor). In this multidistrict litigation, over-the-counter plaintiffs, exchange-based plaintiffs, and bondholder plaintiffs accused the banks of submitting information to the British Bankers Association (BBA) in an attempt to lower Libor. Libor is used as a reference in setting rates on a range of financial products, from consumer loans to complex derivatives.
The court originally dismissed plaintiffs’ antitrust claims with prejudice, holding that plaintiffs couldn’t point to any actual competition-related injuries because the BBA-rate submission process was not designed to be competitive. But the court later conceded that the stakes were high enough to let the plaintiffs try again. In allowing plaintiffs leave to amend their complaints, the court held that although the proposed antitrust injury allegations that plaintiffs intend to add would probably not change the outcome, given the magnitude of this litigation, the court will proceed deliberately in evaluating plaintiffs’ request. As a result, the judge gave the plaintiffs two weeks to move for leave to amend their complaints to add antitrust injury allegations.
In the same order, the judge instructed The Bank of Tokyo-Mitsubishi, Credit Suisse Group AG and The Norinchukin Bank to try to resolve their concerns about whether the exchange-based plaintiffs’ claims under the Commodities Exchange Act, that the court initially refused to dismiss, should continue on their own.
The court also denied the exchange-based plaintiffs’ request for an interlocutory appeal of whether Libor could be considered a “commodity underlying” certain Eurodollar futures contracts under the CEA, but agreed to let the plaintiffs brief the issue.
In State of Texas et al. v. Penguin Group USA Inc. et al., Southern District of New York Judge Denise Cote has ruled that Penguin Group USA Inc. waived its right to a jury trial on damages claims brought by a group of 30 states against Apple and several publishing companies for fixing e-book prices.
During an October 2012 scheduling conference involving the Department of Justice’s, Antitrust Division’s, suit for injunctive relief and the accompanying suits by 30 states that also sought damages, Penguin agreed to a bench trial that would resolve all of the plaintiffs’ claims. Subsequently, the publisher settled with the DOJ, but the state damages case is on-going against both Apple and Penguin. Apple is the only party that has not settled with the DOJ.
Penguin sought to be excluded from the bench trial, arguing that it had a Seventh Amendment right to a jury trial on the state’s damages claims. Judge Cote rejected the request for a jury trial, holding that Penguin was bound by its earlier agreement to the bench trial. “It is clear that Penguin, along with all other litigating parties,” the court explained, “knowingly and intentionally waived a jury determination of liability on the states’ claims.”
In a May 2012 decision, the Kansas Supreme Court had rejected the U.S. Supreme Court’s decision in Leegin v. PSKS that overturned the per se rule under the federal antitrust laws against minimum resale price maintenance in favor of the rule of reason. The Kansas high court, by contrast, held that, under the state’s own antitrust law, the per se rule would remain in place.
The Kansas legislature has now reversed that decision, bringing Kansas state antitrust law largely in line with federal law. The statute also added a new section to the Kansas Restraint of Trade Act specifying that the state’s courts should general construe that law “in harmony” with the U.S. Supreme Court’s interpretations of federal antitrust law. One exception was recognized, however, for indirect purchasers seeking damages. Those claims would be permitted under the state law even though they are barred by federal law.
In Fresh Del Monte Produce Inc. v. Del Monte Foods Co., Southern District of New York Judge Sidney H. Stein enjoined Del Monte Corp. from mislabeling products in a fashion designed to suggest that they contain fresh fruit when in fact the products do not. The injunction comes approximately one year after a jury awarded $13 million to competitor Fresh Del Monte Produce Inc. – a company that in 1989 Del Monte spun off – in a trademark and false advertising case.
In particular, the court found that labeling food “Must be Refrigerated” when it was in fact “shelf stable” misled consumers as did putting deceptive expiration dates on foods. Stores with existing stocks of offending products were ordered not to sell them under refrigeration. Del Monte was also prohibited from pasteurizing products or adding preservatives without so indicating on the products’ labels.
Del Monte contended that the injunction was unnecessary because it had already stopped engaging in the offending practices that led to the jury verdict. Judge Stein disagreed, because he believed that future violations could occur. He based his decision on his conclusion that Del Monte’s violations were willful and that it did not stop its misleading practices until it had lost at trial. The evidence, the court found, showed that Del Monte executives adopted a “what [they could] get away with” standard in misleading buyers about the freshness of their products.
In In re: Cathode Ray Tube (CRT) Antitrust Litigation, Special Master Charles A. Legge said U.S. District Judge Samuel L. Conti should allow the so-called direct action plaintiffs, which include retail chains such as Best Buy Co. Inc. and Target Corp., to proceed with Sherman Act and several other claims against some of the Cathode Ray Tube (CRT) companies named in the suit, including Hitachi Ltd. and Panasonic Corp. The special master also recommended that the court dismiss claims against LG Electronics Co. and Koninklijke Phillips Electronics NV without leave to amend, and dismiss claims against Samsung Electronics Co. Ltd. with leave to amend.
The underlying suit is a multidistrict litigation (MDL), where direct and indirect purchaser plaintiffs allege price-fixing among companies that sold CRTs. In their motion to dismiss, defendants argued that because the retailers purchased finished products — as opposed to directly buying CRTs themselves — they were really indirect purchasers and, therefore, lacked stranding to bring a federal antitrust claim, as a result of the U.S. Supreme Court’s Illinois Brick Co. v. Illinois ruling.
The special master, disagreed with the defendants and recommended that the court deny defendants’ motion to dismiss because the retailers could qualify for an exception to Illinois Brick that allows indirect purchasers to bring a federal claim if the finished product they bought incorporates an allegedly price-fixed CRT from “an entity owned or controlled by one of the named defendants.”