Friday, November 05, 2010

Monopoly Claims Against Food Products Company Fail

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

Retailers and other direct purchasers of “Fresh Del Monte Gold” pineapples failed to establish that Del Monte Fresh Produce Company improperly monopolized the market for fresh, whole, extra-sweet pineapples, the U.S. Court of Appeals ruled in a November 3 summary order.

A September 30, 2009, decision of the federal district court in New York City granting summary judgment in favor of Del Monte was affirmed.

In order to succeed on a Sherman Act, Sec. 2 monopolization claim, the plaintiffs had to establish both: possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power. The second element required proof of exclusionary or anticompetitive effects, the court explained.

The complaining purchasers did not raise a triable issue with respect to whether Del Monte’s challenged conduct had the requisite anticompetitive effect of delaying competitors’ entry into the market. They alleged that Del Monte improperly monopolized the market by (1) sending so-called “threat letters” to competitors and others giving the impression that the Fresh Del Monte Gold was patented and (2) engaging in sham patent litigation with respect to a related variety of pineapples.

There was no indication how the patent litigation involving the related variety of pineapples caused anticompetitive effect in a different pineapple market. The court noted that the effects of the threat letters “slightly more complex.” However, an inference that the threat letters had anticompetitive effects was not reasonable where the testimony of Del Monte's competitors showed that factors other than the threat letters delayed competitors’ entry into the relevant market.

Relevant Product Market

The appellate court assumed for sake of argument that Del Monte possessed monopoly power in the market for a particular variety of fresh extra-sweet pineapples; however, the lower court rejected the complaining purchasers’ relevant product market definition.

The district court concluded that the particular type of pineapple was not so unique as to constitute a separate submarket. The complaining purchasers failed to offer sufficient evidence of exceptional market conditions to justify the single brand market. Because the complaining purchasers did not argue that Del Monte had monopoly power in the broader pineapple market, their monopoly claims failed.

The lower court also rejected the plaintiffs’ expert's testimony on the relevant product market because of its insufficient factual basis and its unreliability. The expert's analysis overlooked relevant facts which showed that other types of pineapples were reasonable substitutes. While the expert utilized the 1997 version of the Department of Justice/FTC Merger Guidelines to formulate the market, the guidelines were applied in an overly mechanical fashion, in the court’s view.

Although an analysis of cross-price elasticity of demand (which was not undertaken) was not mandatory in determining a relevant product market, the analysis might have assisted the expert in defining the relevant market.

The November 3, 2010, summary order in American Banana Co. v. Del Monte Fresh Produce Co., No. 09-4561, will appear at 2010-2 Trade Cases ¶77,221.

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