Monday, December 29, 2008

Employee Benefits Company Failed to State Per Se Boycott Claim

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

An employee benefits firm that marketed “an innovative strategy for controlling health care costs” failed to allege that a life insurance company and independent agents engaged in a per se illegal boycott, the U.S. Court of Appeals in Cincinnati has ruled. Dismissal of the antitrust claims (2007-2 Trade Cases ¶75,807) was affirmed.

Boycott Through Horizontal Agreement

Only a group boycott through horizontal agreement could constitute a per se illegal violation, the court explained. There neither was, nor could be, a horizontal relationship among the insurance company and its wholly-owned and controlled companies.

Moreover, there was no horizontal agreement among direct competitors to establish a “hub and spoke” conspiracy that qualified for per se treatment.

Although the complaining firm sufficiently identified the “hub” as the life insurance company and the “spoke” as the independent insurance agents, “the rim holding everything together is missing,” according to the court.

There were no agreements identified between competitors. The complaining firm focused instead on agreements between the life insurance company and other insurance agents, but these were irrelevant because the critical issue for establishing a per se violation with the hub-and-spoke system was how the spokes were connected to each other, the court found.

Relevant Market

The company could not assert a claim under rule-of-reason analysis, because it failed to allege a relevant market, the court held. The rule-of-reason test required a court to analyze the actual effect on competition in a relevant market to determine whether the conduct unreasonably restrains trade.

Without an explanation of the other insurance companies involved—and their products and services—the boundaries of the relevant product market could not be determined, and the case had to be dismissed for failure to state a claim.

The December 22 decision is Total Benefits Planning Agency Inc. v. Anthem Blue Cross and Blue Shield, 2008-2 Trade Cases ¶76,435.

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