Tuesday, February 13, 2007

Distributor’s Termination Not Result of Price Fixing Conspiracy

This posting was written by Jeffrey May, editor of CCH Trade Regulation Reporter.

A distributor of tile installation products failed to establish that its termination was the result of a price fixing conspiracy, the U.S. Court of Appeals in Chicago has ruled. Dismissal of the distributor's antitrust claims (2006-1 CCH Trade Cases ¶75,167) was affirmed.

The termination of the distributor, following complaints from other distributors, did not establish concerted action among competing distributors such that a reasonable jury could find a horizontal conspiracy, the court decided. That all of the competing distributors complained to the supplier about the terminated distributor's prices did not create a genuine issue of material fact. Such complaints were natural and unavoidable reactions by distributors to the activities of their rivals.

Moreover, distributors' threats to carry competing brands or to stop promoting the supplier's brand did not support the inference that the competing distributors conspired together to boycott the supplier unless it terminated the complaining distributor, the court explained.

The distributor's termination did not establish a per se illegal vertical conspiracy aimed at stabilizing prices. There was no evidence of some agreement on price or price levels, according to the court. Under the proposed post-termination plan, key distributors allegedly were given a “heads up,” so they could be “up and rolling” before the complaining distributor learned of its termination.

There was also evidence of a post-termination sales blitz involving concerted activity between the supplier and the competing distributors. There was no question that the supplier and its other distributors acted in concert regarding non-price issues like retaining customer accounts and promoting the the supplier's product, even going so far as to blitz the market upon the complaining firm's termination.

Nonetheless, a reasonable jury could not have inferred concerted action to fix prices from the fact that the supplier and its other distributors acted in concert in other respects. The evidence did not sufficiently exclude the possibility that the supplier and its non-terminated distributors were acting independently, the court decided.

The decision is Miles Distributors, Inc. v. Specialty Construction Brands, Inc., No.06-1992, decided February 6, 2007 (2007-1 Trade Cases ¶75,584).

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