Monday, August 20, 2007

Tunica Casinos' Shunning of Web Name Owner May Have Been Illegal

This posting was written by Darius Sturmer, Editor, CCH Trade Regulation Reporter.

Eight casino operators in Tunica County, Mississippi, could have acted
unreasonably in restraint of trade, or even engaged in a per se illegal boycott, by jointly refusing to do business with the owner of several Internet domain names related to Tunica, the U.S. Court of Appeals in New Orleans has ruled. The domain name owner brought the suit under both federal and Mississippi antitrust law after its proposals to the casinos--that they each pay it a monthly fee to have visitors to “” redirected to a county tourism Web site advertising the casinos--were repeatedly and uniformly rebuffed. Because the evidence on record of the casinos' conduct was sufficient to create an issue of fact about whether they engaged in concerted action, summary judgment in favor of the casinos (2005-2 CCH Trade Cases ¶75,076) was reversed and remanded.

The casinos' initial decision to reject the domain name owner's proposal was not unreasonable, given the joint nature of that proposal. However, a showing that the casinos had thereafter entered into a “gentlemen's agreement” to not deal with the domain name owner--including, for one casino, a pledge to terminate an ongoing relationship with the domain name owner—signified direct evidence of unlawful conspiracy, the appellate court decided. If evidence of the casinos' actions after the initial meeting in which they decided to reject the joint proposal were credited, it would further indicate the existence of a question of fact regarding concerted action, according to the court. The domain name owner offered evidence that the casinos met a year later and again decided to refuse to advertise on “” in the hope that the value of the domain name would decrease and they could buy it at a later date. If the domain name owner could establish concerted actions by the casinos through this sort of direct evidence, the appellate court held, it was not required to provide circumstantial evidence, such as the details surrounding its later proposals to the casinos, from which a concerted refusal to deal could be inferred. The lower court's conclusion that this evidence did not amount to a legitimate dispute of fact was clearly erroneous, the court added.

The conduct also could constitute a per se illegal horizontal boycott, the court ruled. The casinos' boycott was clearly a horizontal agreement because they were direct competitors of one another. The trial court's conclusion that the boycott could not be per se illegal because none of the conspirators was a direct competitor of the domain name owner was wrong, the appellate court said. Rejected was an argument by the casino operators that certain language from precedential decisions suggested that per se unlawful boycotts were those intended to harm or disadvantage a competitor of the conspirators and that a victim had to be a competitor of at least one member of the alleged conspiracy before the per se rule would apply. Nothing in those cases established a bright-line rule limiting the application of the per se rule to cases in which the victim is a competitor of at least one conspirator, and no such rule was justified under the precedents. Even the U.S. Supreme Court had found a horizontal conspiracy to be per se unlawful where the conspirators were all suppliers--not competitors--of the victim, the appellate court remarked.

The text of the August 13, 2007, decision in Tunica Web Advertising v. Tunica Casino Operators Assn., will appear at 2007-2 CCH Trade Cases ¶75,821.

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