Tuesday, April 17, 2012

KEVLAR Maker’s Supply Agreements Did Not Foreclose Fiber Market

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

The manufacturer of "KEVLAR"-branded aramid fiber, a high-strength fiber used in ballistics applications and protective apparel, did not engage in unlawful monopolization or attempted monopolization of the para-aramid fiber market in the United States by procuring exclusive long-term supply agreements with certain high-volume customers, the federal district court in Richmond, Virginia, has held. Summary judgment against federal antitrust claims asserted by a Korean competitor was therefore granted.

The defending manufacturer, E.I. Du Pont de Nemours & Co. (DuPont), did not possess the requisite monopoly power over the para-aramid fiber market in the United States to have engaged in monopolization, the court held. The highest market share DuPont held during the relevant period was only 59 percent, and that share—which had already been in decline for decades—only further fell over the time span relevant to the suit. Thus, DuPont clearly lacked the power to control prices and exclude competition.

Even if the complaining competitor—Kolon Industries, Inc.—had been able to establish that DuPont had the requisite market power, it still failed to demonstrate illegal maintenance of such power over the relevant market, the court added. The alleged exclusive agreements were not shown to have substantially foreclosed competition in the market.

Kolon did not even attempt to quantify foreclosure of the relevant market or to show how much of the market was closed off by the supply agreements. Its evidence of the degree of foreclosure in three particular segments within the relevant markets was scant at best, but more importantly did nothing to reveal the amount of foreclosure in the market as a whole—which consisted of numerous segments of varying size, and extended well beyond the few segments addressed by the competitor.

In actuality, the degree of foreclosure—if it existed at all—was de minimus, the court determined. The agreements at issue resulted in no more than two percent of the market being foreclosed. Further, examination of the agreements themselves revealed even a two percent estimate to be greatly exaggerated, as many or most of the agreements could not be classified as the sort of exclusive or multi-year pacts at the heart of Kolon’s theory of the suit.

Given DuPont’s moderate market share during the relevant time period, the alleged anticompetitive agreements accounted for an even smaller fraction of the total revenue from para-aramid sales in the United States, the court said.

Kolon put forth no evidence demonstrating that other competitors had been shut out of the market and all the evidence in the record was to the contrary. Customers had no difficulty comparison shopping or switching sellers, and many did business with Kolon during the relevant time period, the court observed.

Attempted Monopolization

Kolon’s failure to show market foreclosure was fatal to its attempted monopolization claim, as well. Kolon failed to establish that the alleged anticompetitive acts, coupled with a presumed alleged intent to monopolize, "presented a reasonable probability that monopolization would sooner or later occur," the court concluded.

The decision is Kolon Industries, Inc. v. E.I. Du Pont de Nemours & Company, 2012-1 Trade Cases ¶77,857.

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