Tuesday, March 24, 2009

Convention Authority’s Preferred Promoter Agreement Might Be Anticompetitive

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

A Michigan county convention/arena authority and the private company that managed its facility could have engaged in a conspiracy in violation of federal antitrust law by entering into a preferred promoter agreement (PPA) with a concert/events promoter that included a reciprocal agreement for sharing arena and promoter revenue at the county’s facility as well as those of competitors, the federal district court in Grand Rapids has ruled.

The court denied a motion by the county authority and private management company to dismiss a competing arena’s antitrust claims.

Plausible grounds existed for an inference that the agreement had illegal anticompetitive effect, the court stated. None of a variety of arguments or scenarios advanced by the defendants was fatal to the competitor’s claim as a whole. Until the details of its antitrust theory were fleshed out and the record was further developed, “dismissal would be based on far greater speculation than would permitting this action to proceed to the next stage, said the court.

Immunity from Suit

Neither the county authority nor the management company was protected from the claims by state action immunity, the court found. Regarding the county authority’s protection as a municipality, it could not be assumed at pleading that the authority’s conduct was authorized by a clearly articulated state policy because it was not clear that the challenged conduct was a foreseeable consequence of what the state law authorized. Moreover, its conduct was not regulatory activity, but instead fell into the less-protected category of commercial market activity.

The arena management company, as a private entity, fell even further from the doctrine’s protection. The company failed to show that the contract was formed pursuant to a clearly articulated state policy that authorized anticompetitive conduct. Any relationship between the statutory authorization that governed the county authority and the competitor arena revenue siphoning provision of the PPA was “tenuous at best,” the court said.

Further, the company did not demonstrate that the State of Michigan could—and did—exercise control over the alleged misconduct. The claims could not be dismissed on the basis of the limited immunity available under the Local Government Antitrust Act either, the court added.

Interlocutory Appeal

On March 4, the court subsequently refused to certify its earlier ruling for interlocutory appeal. The defendants sought review of the court’s rulings regarding (1) whether they were entitled to antitrust immunity as a matter of law; (2) whether the plaintiff’s allegations, if true, constituted legally cognizable antitrust injury; and (3) whether the allegations, if true, established a relevant market, market power, and anticompetitive effects.

Immediate appeal was not warranted because there was no matter of controlling law that created substantial grounds for a difference of opinion about either the legal standard applied by the court for deciding the defendants’ immunity or the adequacy of the plaintiff’s complaint, in the court’s view.

The decisions in Delta Turner, Ltd. v. Grand-Rapids-Kent County Convention/Arena Authority appear at 2009-1 Trade Cases ¶ 76,530 and 2009-1 Trade Cases ¶ 76,531.

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