Night Clubs Allege Antitrust Claims Against Online Music Marketplace, Competing Club

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

Antitrust claims against “Beatport”—an online marketplace that catered to consumers and producers of “Electronic Dance Music”—and a related “Beta” nightclub were adequately alleged, the federal district court in Denver has ruled. Thus, a motion to dismiss claims brought by a group of commonly-owned night clubs comprising Denver’s South of Colfax Nightlife district (SOCO) was denied. The claims of the owner of the complaining clubs were, however, dismissed because the owner lacked standing to pursue the claims individually.

Two of the SOCO night clubs were nationally recognized in the Electronic Dance Music scene. They emphasized Electronic Dance Music and live performance by DJs. The clubs alleged that the defendants engaged in anticompetitve conduct to coerce DJs to boycott the SOCO venues and only perform at Beta.

The court refused to dismiss the SOCO clubs’ claim that Beatport and Beta coerced DJs into performing only at Beta by threatening to remove artists on a DJ’s label from Beatport if they performed at the SOCO clubs. Because access and promotion on Beatport were critical to both a DJ’s and a label’s success, many DJs and agents were allegedly compelled to agree to the defendants’ demands. The complaining clubs alleged that the defendants had sufficient market power in the market for Electronic Dance Music downloads to adversely effect competition for live performances of "A-list" DJs.

Standing

The complaining clubs asserted that they possessed standing to bring antitrust claims by virtue of their status as competitors who were foreclosed from the market for live performance of A-list DJs. The two SOCO clubs that emphasized Electronic Dance Music and live DJ performance alleged antitrust injuries of lost past and future profits, decreased ability to compete, and decreased value of real property.

Additional evidence and facts would be needed to prove harm to the other SOCO nightclubs as the case proceeded, the court noted. However, there were sufficient facts to support the clubs’ antitrust standing for purposes of a motion to dismiss. The owner of the SOCO clubs failed to support a claim that he suffered an injury separate from the injury sustained by the SOCO clubs based on an injury to his reputation or devaluation of real property of the clubs, the court ruled.

Attempted Monopolization

The clubs adequately alleged an attempted monopolization claim against Beta, which controlled more than half the market for live performance by A-list DJs in the Denver metropolitan area. There was a dangerous probability that Beta could achieve monopoly power in the market for A-list DJ performances.

The complaining clubs pled a specific intent to monopolize by stating that Beta and its owner engaged in predatory and anticompetitive conduct, including illegal tying, exclusive dealing, reciprocal dealing, monopoly leveraging, market allocation, group boycott and the concerted combination of these actions.

Conspiracy

Conspiracy claims were not dismissed, despite the defendants’ assertions that, as related entities, they were incapable of conspiring. Although some common ownership existed between Beta and Beatport, it was not sufficient to warrant dismissal under Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 1984-2 Trade Cases ¶66,065, which held that wholly owned subsidiaries were incapable of conspiring. Further, a defending part-owner of Beta had an “independent personal stake” in restraint of trade of the club’s competitors.

The March 14 opinion is Christou v. Beatport, LLC, 2012-1 Trade Cases ¶77,829.