Tuesday, February 08, 2011

Refusal to Sell Parts to Competitor Could Be Monopolization

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

A company in the business of providing heavy lift helicopter services and supplying replacement parts to other owners of several particular models could have engaged in unlawful monopolization or attempted monopolization by refusing to sell parts to a competing operator of heavy helicopter services, the federal district court in Portland, Oregon, has decided.

The defending parts seller/services competitor was obligated to sell parts to other owners of a particular model of heavy lift helicopter under a 14-year-old contract with the manufacturer. The claims were neither time-barred nor insufficient as a matter of law, the court held. The defending company’s motion for summary judgment on the antitrust claims was therefore denied.

Statute of Limitations

Although the complaining helicopter services operator first suffered injury upon the parts seller’s initial refusal to deal following execution of its contract with the manufacturer well before the four-year limitations period applicable to federal antitrust actions, the Sherman Act claims were not barred under the statute of limitations, the court ruled.

Even if the parts seller’s initial refusal to deal was final, any damages suffered within the four-year limitations period were not time-barred unless all of the damages resulted solely from that initial refusal.

Any overt act inflicting damages generally was its own cause of action with a fresh four-year statute of limitations, and any new injury within the limitations period resulting from a continuing violation was a separate cause of action.

Questions of fact existed as to whether the refusal to deal was final and irrevocable or was instead continuing, given allegations that the company had provided some service manuals and updates in prior years and that it had ultimately reversed course and begun providing parts and service again on the heels of an antitrust settlement with another heavy lift helicopter services competitor sixteen years after that initial refusal, the court observed.

Merits of Claims

Even if federal jurisprudence demanded the termination of a prior course of dealing as a prerequisite to finding a refusal to deal illegal under federal antitrust law, the claims against the defendant did not fail on the merits, the court said.

Given that the manufacturer of the parts had provided overhaul manuals and parts to helicopter operators prior to the entry of a contract between itself and the defending parts supplier/helicopter services provider—and that the defendant had thereafter abruptly ceased to sell parts to those operators—a reasonable juror could conclude that the defendant unilaterally terminated a voluntary course of dealing with the complaining competitor, in the court’s view.

The legitimacy of the defendant’s claim that it had decided not to follow the manufacturer’s course—owing to liability concerns—was a factual issue not suitable for summary judgment, the court concluded.

Other disputed questions of material fact also precluded summary judgment, including whether there was a relevant market for heavy lift helicopters, whether the defendant’s decision to not provide parts or manuals was motivated by good business sense or monopolistic intent, and whether it improperly prohibited third-party manufacturers from dealing with the plaintiff.

The January 26 decision is Evergreen Helicopters, Inc. v. Erickson Air-Crane Inc., 2011-1 Trade Cases ¶77,327.

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