Types of Antitrust Claims

My Competitor-Supplier Just Decided to Stop Dealing with Me: Do the Federal Antitrust Laws Help Me?

April 18, 2020 | Bona Law PC

Good news––the answer is yes. The bad news, however, is that antitrust laws only help you in very limited scenarios.

As a general rule, “Businesses are free to choose the parties with whom they deal, as well as the prices, terms, and conditions of that dealing” Pacific Bell Tel. Co. v. Linkline Commc’ns, Inc., 555 U.S. 438, 448 (2009). This means that firms, even those enjoying market power, are not typically required to cooperate with rivals by selling them products that would help them compete. Indeed, antitrust laws do not generally impose limitations on a competitor’s ability to “exercise his own independent discretion as to parties with whom he will deal.” Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 411 (2004).

So, most of the time, once your distribution contract expires, your supplier is free to either renew your contract or stop dealing with you. After all, this is what the free market is about: you are free to decide your own commercial strategy in order to make profits and beat your competitors. But this is not always the case, and the recent case from the Seventh Circuit, Viamedia, Inc. v. Comcast Corp., is a very good example of it.

The willingness to forsake short-term profits

Courts have been cautious to recognize an antitrust exception to the general rule that businesses are free to choose the parties with whom they deal, as well as the prices, terms, and conditions of that dealing. The cases below provide a road map to better understand what you would need to succeed.

Aspen Skiing Co. v. Aspen Highlands Skiing Co., 472 U.S. 585 (1985)

The U.S. Supreme Court has stated in the past that even an actual monopolist has no duty to deal with its competitors. A narrow exception to this rule, however, was established in Aspen Skiing. The Court provided some guidance to explain when a monopolist’s refusal to deal becomes contrary to antitrust rules.

In this case, the defendant monopolized the market for downhill skiing services in Aspen (Colorado). Defendant originally agreed to offer a joint lift ticket with plaintiff because it helped attract skiers. But defendant later decided to discontinue the successful joint-ticket program. By doing so, it rejected, for example, selling lift tickets to the plaintiff at full retail price. Defendant’s justifications included several administrative issues such as splitting revenues, suffering brand image injury, and others.

The Court concluded that defendant’s unilateral termination of a voluntary––and thus presumably profitable––course of dealing suggested a willingness to forsake short-term profits to achieve an anticompetitive end: to push plaintiff out of the market and achieve monopoly power to avoid any sort of competition.

Novell, Inc. v. Microsoft Corp 731 F.3d 1064 (10th Cir. 2013)

Microsoft provided independent software vendors access to a pre-release version of Windows 95––the so called “beta” version of the operating system available to all independent software vendors, including Novell––to facilitate their ability to write software for Windows 95. The reasoning behind this was to develop compatible programs while increasing both the utility of the operating system for users and the sales for Microsoft. Later on, however, Microsoft changed its strategy and revoked such access. It decided to give its proprietary applications the “competitive advantage” of “being the first applications useable on Windows 95.” Novell alleged that Microsoft intentionally altered its existing business practice of providing competitors with Windows technical information in order to monopolize the market for operation systems.

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Forgotten But Not Gone—Antitrust, Price Discrimination, and The Robinson-Patman Act in the 21st Century

February 26, 2020 | Bona Law PC

Author: Steven Cernak

When I first started practicing antitrust law in the “80’s, the Robinson-Patman Act was already an object of derision.¹ With Chicago School thinking riding high in academia and the courts and antitrust law’s focus shifting to effects on consumers, not rivals, RP cases seemed to be dwindling down to nothing. My colleagues and I were convinced that RP would soon be dead and we would never again need to deal with its tortured language² and questionable economics.

But not all my colleagues. One insisted that Robinson-Patman would never be repealed—after all, what member of Congress would vote against protecting small business?—and the private right of action would mean that the threat of litigation would always at least affect negotiations even if the federal agencies stopped bring new cases.³ Despite our constant ridicule of his outdated ways, he insisted that I learn the intricacies of the statute and cases, analyze the latest changes to the Fred Meyer Guides, and otherwise prepare to take over from him the counseling of a client that sold goods “of like grade and quality” in at least three overlapping channels.

I’m glad he did. He was right. To this day, suppliers and retailers negotiate in the shadow of RP and require counseling about its sometimes-obscure details. Every year, new private litigation gets filed and generates opinions and even jury verdicts on Robinson-Patman issues.⁴ Fewer than in the “60’s but still greater than zero. So for all the suppliers and the retailers through whom they sell—along with their respective counselors—here is a summary of what you need to know about RP in the 21^st Century:

The Basics of the Robinson-Patman Act

There are two kinds of discrimination that RP is meant to prevent and where some litigation is still filed today. Section 2(a) prohibits the sale of the same commodity at different prices to two competing buyers by one seller if the result is harm to competition. It has several elements that must be met and potential defenses, all of which narrow the scope of its application. Sections 2(d) and 2(e) are per se prohibitions of the discriminatory provision of or payment for certain promotional aids meant to assist in resale of a seller’s commodity. Again, several elements must be met to prove a violation. In addition, Robinson-Patman applies only to commodities sold for use or resale in the U.S.

Section 2(a) Price Discrimination – Elements

The elements of a Section 2(a) claim are usually summarized as prohibiting (1) a difference in price (2) in reasonably contemporaneous sales to two buyers purchasing from a single seller, (3) involving commodities, (4) of like grade and quality (5) that may injure competition.

While price discrimination is “merely a price difference”, actual net prices must be compared, after taking into account all discounts, rebates and other factors affecting price. If the lower price is “functionally available” to the plaintiff but plaintiff chooses not to accept it, courts have held that such proof “essentially negates the discrimination element” of plaintiff’s price discrimination claim.⁵

The two sales at different prices must be reasonably contemporaneous, a question of fact that depends on the seasonal quality of the sales and overall market conditions. Also, those two contemporaneous transactions must be “sales”, not something else like leases, licenses or an offer to sell. Finally, two completed sales are required and so at least one court has held that this element is not met in competitive bid situations where the commodity is only purchased if the dealer’s bid is successful.⁶

Section 2(a), as well as sections 2(d) and 2(e), apply only to “commodities”, a term left undefined by the statute. Courts have consistently interpreted the term to mean tangible products. Intangible items that have been held not to be commodities include medical services, cable television programming, and advertising, including online advertising.

The two commodities sold at different prices must be “of like grade and quality” for Section 2(a) to apply. When interpreting that statutory language, lower courts have followed the US Supreme Court’s lead in FTC v. Borden Co. and focused on physical differences in the products that affect consumer marketability.⁷ In that case, the Court found two varieties of the defendant’s evaporated milk to be “of like grade and quality” because the products were physically identical, even though the higher-price branded version had gained consumer preference over the lower-priced private label version.⁸

The final element of a Section 2(a) violation is whether “the effect of such discrimination may be substantially … to lessen competition or tend to create a monopoly …”, which has been interpreted to mean that a plaintiff need not show an actual adverse effect on competition, only a “reasonable possibility” of such an effect.

Injury to competition generally is found at the level of a rival to the discriminating seller (“primary line injury”) or of the disfavored customer (“secondary line injury”). The Supreme Court’s Brooke Group opinion clarified that a successful primary line claim must meet the same difficult test required of predatory pricing plaintiffs.⁹ As a result, secondary line cases now predominate.

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When Does Fraudulent Concealment Toll the Antitrust Statute of Limitations?

January 27, 2020 | Bona Law PC

Authors: Aaron Gott and Nick McNamara

Antitrust conspiracies, like most conspiracies, are typically carried out in secret and often actively concealed by their participants for many years. But the statute of limitations for antitrust claims is only four years. So what happens if you discover that you were harmed by an antitrust conspiracy years after the fact? The answer could depend on which of the U.S. Court of Appeals has jurisdiction in your case.

Imagine you’re a retail grocer in the business of selling farm-fresh produce. Your store sources all of its carrots from local farms, many of which belong to a trade association of carrot growers (these carrot growers weren’t organized as a farm cooperative, which could provide them with a limited antitrust exemption you can read about here). Since you opened your grocery store several years ago, the price of carrots sold by these farms has been stable and reasonable. Then, all of a sudden, you notice that the price of locally farmed carrots has increased by 10%—overnight and for no apparent reason. Soon after you learn of the price hike, you receive an explanatory letter from the farm that sold the store its most recent batch of carrots. The letter apologizes for the increased price, which it attributes to a virus which has been harming local carrot crops. According to the letter, the farm hired plant biologists who confirmed the presence of the virus in the area.

You have never heard of a virus affecting carrots, but you have little reason to doubt the explanation provided by the farm. You review the scientific documentation attached to the letter and read up about the virus on Wikipedia; it turns out it is indeed a real virus that does affect carrots. You also hear that other grocers in the area have also received similar letters from other local carrot growers (but you didn’t talk to them directly because your antitrust compliance program forbids it). On top of it all, you have always had very cordial business relations with the sales representatives of the carrot farms. You decide to eat the lost profits, knowing that discontinuing the sale of locally farmed carrots would disappoint many loyal customers.

Five years later, you are tipped off by a former employee of one of the local carrot growers that the presence of the virus in the area was a complete fabrication, as was the supporting documentation submitted by the purported scientists. The ex-employee further informs you that the plan was hatched by the carrot growers’ trade association. Feeling cheated, you search the web for the antitrust statute of limitations, which you learn is four years.

But the good news is that the statute of limitations is not necessarily fatal to a claim involving an antitrust conspiracy. In fact, courts have long recognized that the distinguishing feature of illegal conspiracies is that they are almost always hidden from public view by design—and as a result, they often harm unwitting victims unaware they are being harmed. And, in some cases, courts have applied the equitable doctrine of fraudulent concealment to “toll” the statute of limitations in cases where the statute of limitations otherwise would have barred the claim.

You may have heard of a similar doctrine called the “discovery rule.” Under the discovery rule, a claim does not accrue—and the statute of limitations does not begin to run—until a reasonably diligent plaintiff discovers or should have discovered its injury. But there is a key difference: the discovery rule is a legal doctrine governing the point at which a statute of limitations begins to run, while tolling for fraudulent concealment is an equitable doctrine that assumes that the claim has already accrued and the statute of limitations has already run. In practice, the two doctrines have a nearly identical effect, so an antitrust plaintiff can typically plead both in the alternative. Both doctrines also have a due diligence requirement, so you can’t rely on them if, under the circumstances, a reasonable person would have investigated potential claims (for example, an unexplained, sudden price hike could give rise to a duty to investigate).

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Does a Refusal to Deal With a Competitor Create Antitrust Liability?

August 29, 2018 | Bona Law PC

Author: Jarod Bona

Yes, in certain narrow circumstances, refusing to do business with a competitor violates Section 2 of the Sherman Act, which regulates monopolies, attempts at monopoly, and exclusionary conduct.

This probably seems odd—don’t businesses have the freedom to decide whether to do business with someone, especially when that person competes with them? When you walk into a store and see a sign that says, “We have the right to refuse service to anyone,” should you call your friendly antitrust lawyer?

The general rule is, in fact, that antitrust law does NOT prohibit a business from refusing to deal with its competitor. But the refusal-to-deal doctrine is real and can create antitrust liability.

So when do you have to do business with your competitor?

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How do I Know Whether My Company is Abusing its Dominant Position in the European Union?

April 3, 2017 | Bona Law PC

Author: Luis Blanquez

Luis Blanquez is an antitrust attorney at Bona Law with fifteen years of competition experience in different jurisdictions within the European Union such as Spain, France, Belgium and the UK.

You can read our article about the elements for monopolization under U.S. antitrust law here. We also wrote about monopolization on the Bona Law website.

Article 102 TFUE

In the European Union, the Directorate General for Competition of the European Commission (“the Commission”) together with the national competition authorities, directly enforces EU competition rules, Articles 101-109 of the Treaty on the Functioning of the European Union (TFEU).

Article 102 TFEU prohibits abusive conduct by companies that have a dominant position in a particular market.

Here is the language:

Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

First, article 102 TFEU applies to “undertakings,” which is defined by EU case law as including every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed. (C-41/90 Höfner and Elsner v Macrotron [1991] ECR I-1979).

Natural persons, legal persons, and even states are included in the interpretation of undertakings. (So, as in the United States, governments in Europe might violate the competition laws).

Second, to qualify as an undertaking, the entity must be also engaged in an economic activity, i.e. offering goods and/or services within a relevant market.

Third, to fit within Article 102 TFUE’s prohibition, the conduct must have a minimum level of cross-border effect between member states within the EU.

The concept of dominance under EU antitrust rules

As explained above, article 102 TFEU prohibits abusive conduct by companies that have a dominant position in a particular market.

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How Should the Antitrust Laws Analyze Loyalty Discounts and Bundled Rebates?

March 17, 2014 | Bona Law PC

In the most recent issue of The Antitrust Law Journal, attorney Sean P. Gates describes several possible approaches to these discounts, analyzing the good and the bad for each. His article, Antitrust by Analogy: Developing Rules for Loyalty Rebates and Bundled Discounts, is really quite good.

I identified this article as a must-read in a previous blog post, and finally had the opportunity to review it over the weekend (Note: I had been busy starting a new law firm, so fell behind on my reading). I am glad that I did. Since most of the country is having winter this year, I won’t point out that I read it on my San Diego outdoor patio while enjoying the whiff of freshly-cut lawn, the sight of palm trees, and the distraction of whether to eat a delicious orange right off the tree. I won’t mention it even though after many years in Minnesota—I put in my cold time—I would feel justified in doing so.

Anyway, I recommend the article generally, but more specifically for the following people: (1) antitrust attorneys that are into exclusionary conduct; (2) non-antitrust attorneys with clients that sell in a distribution network (including to retailers); (3) business people involved in pricing and marketing decisions for their company; and (4) antitrust law students that are looking for a good review of various types of exclusionary conduct.

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Does My Company’s Loyalty-Discount Program Violate Antitrust and Competition Laws?

January 22, 2014 | Bona Law PC

This article is cross-posted in both English and French at Thibault Schrepel’s outstanding competition blog Le Concurrentialiste. Like most antitrust issues today, questions about loyalty discounts are relevant across the globe as competition regimes and courts grapple with the best way to address them.

Companies like to reward their best customers with discounts. It happens everywhere from the local sandwich shop to markets for medical devices, pharmaceutical products, airline tickets, computers, consumer products, and many other products and services.

Customers like loyalty-discount programs (or rebates) because they get more for less. And the reason so many companies offer them is because they are successful.

Everyone wins, right?

Usually. But the program could very well violate antitrust and competition laws in the United States, the European Commission, or other jurisdictions.

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The Anatomy of a Per-Se-Antitrust Violation

December 15, 2013 | Bona Law PC

The Internet didn’t fall down after my first post, so I thought I’d try another.

In the US, certain conduct is so obviously anticompetitive that antitrust law labels it per se illegal. These restraints lack redeeming pro-competitive value in almost all instances, so the law allows plaintiffs an important short-cut to pleading and proving such a claim.

The short-cut is that a plaintiff asserting a per-se-antitrust claim need not demonstrate anticompetitive harm. The law presumes such harm. This is huge because this element is one of the most difficult and expensive to prove.

Proving anticompetitive harm is often tough. Plaintiffs usually start by defining the relevant product and geographic markets. This is obvious is some cases; difficult and disputed in others.

Within that defined market, the plaintiff will then usually have to show market or monopoly power, then actual competitive harm in that market that exceeds any competitive benefits from the challenged restraint. It doesn’t always go like this, but that is the typical journey.

Proving all of this almost always requires expert economic testimony, which is—again—almost always disputed by defendants’ economic expert.

So this anticompetitive harm element can become quite burdensome and expensive. That is why fitting a case into a per-se-antitrust package is so valuable for a plaintiff, and risky for a defendant.

Price-fixing agreements usually come to mind as the prototypical per se antitrust violation (keep in mind that antitrust views agreements to limit volume as effectively the same thing). Other examples are market-allocation agreements and certain boycotts.

Let’s talk about market-allocation agreements—as price-fixing is a bit too obvious—so we can see how dangerously easy it is for this per-se-antitrust violation to develop.

Market allocation is an antitrust problem because competitors are agreeing not to compete. The most simple market-allocation agreement is geographic—“you take customers West of the Mississippi, and we will take the ones to the East.”

But sometimes it develops more subtly.

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