Thursday, February 23, 2012

Coffee Retailer’s Antitrust Claims Against Supplier of “K-Cups” Fail

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

An online coffee retailer cannot proceed with federal and state antitrust claims against Green Mountain Coffee Roasters, Inc., the company behind Keurig® Single Cup brewing technology, according to the federal district court in Fort Smith, Arkansas. The retailer contended that Green Mountain violated the antitrust laws when it terminated their business relationship.


Green Mountain would not have engaged in monopolization or attempted monopolization in violation of Sec. 2 of the Sherman Act by terminating the complaining retailer, the court ruled. Green Mountain did not have a monopoly on the single-brew business as a whole. There are other products that delivered single-brew coffee, and consumers have a wide variety of Internet and non-Internet sources for single-brew coffee products and supplies.

Refusal to Deal

Moreover, the refusal to deal was plainly not violative of the antitrust laws. There was no indication that the refusal was for anticompetitive purposes or to secure untold profits. A refusal to deal can be unlawful only if a monopolist sacrifices profits today in the hope of reaping greater returns from eliminating competition in the future, according to the court. Green Mountain, however, decided to discontinue its business relationship with the online retailer because of disagreement over the complaining firm’s marketing strategies.

Green Mountain’s representative testified that the company had no contractual relationship with the complaining firm; that the complaining firm could not be licensed as an authorized distributor by virtue of the fact that it had only an online presence; and that the online retailer misused the defending company’s trademark.

The court also rejected a claim under Sec. 1 of the Sherman Act. An agreement between Green Mountain and a distributor to refuse to deal with the online retailer would not constitute a per se antitrust violation. Reviewing the claim under “rule of reason” analysis, there did not appear to be any anticompetitive market effect resulting from the refusal to deal. Because there were so many alternate suppliers of the K-cup, e-commerce consumers would not be adversely affected if they could not purchase K-cups through the complaining online retailer, in the court’s view. The court rejected a relevant product market limited to Green Mountain’s own patented and trademarked K-cups.

State Law Claims

Green Mountain would not have violated the Arkansas Unfair Practices Act by selling K-cup brewing systems at less than cost in order to increase demand for its K-cups, the court ruled. It was not illegal to sell items below cost as a “loss leader” to entice consumers to purchase products. Further, the alleged injury of a complaining operator of an e-commerce website that sold coffee and coffee-related products would have been negligible at best, if such injury occurred at all. The likelihood of competition being affected, let alone destroyed, by any alleged below-cost sales was similarly negligible. The complaining online coffee seller alleged that it was the defending company’s intent to cause it injury; however, the complaining firm benefitted when additional K-cup brewers appeared on customers’ countertops because its sale of K-cups constituted 84% of its business.

A monopolization claim brought under Arkansas state law also failed. There was no private right of action pursuant to the subchapter of the Arkansas Code relating to unfair monopolies. The monopoly statutes were to be enforced by and through the Arkansas Attorney General, the court explained.

The decision is, Inc. v. Green Mountain Coffee Roasters, Inc., 2012-1 Trade Cases ¶77,790.

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