Gun Dealer Failed To State Antitrust Claims Against Village, Trustees Over License Law Changes

This posting was written by Jody Coultas, Contributor to Wolters Kluwer Antitrust Law Daily.

A gun dealer failed to state Sherman Act, Section 1 or Lanham Act commercial disparagement claims against the Village of Norridge, Illinois, stemming from a change in an ordinance that may force the gun dealer to close up shop, according to the federal district court in Chicago (Kole v. Village of Norridge, April 19, 2013, Durkin, T.).


The gun dealer entered into an agreement with the Village in which he agreed to sell guns only over the Internet in return for a license to operate the business in the Village. A revised ordinance terminated gun store licenses altogether and bans gun stores from the Village. Once the agreement and its three-year exemption from the revised ordinance expires, the gun dealer may be forced to close up shop, or at least relocate their business outside the Village.

The gun dealer failed to allege a conspiracy, agreement, or other concerted action to restrain trade in violation of Section 1 of the Sherman Act, according to the court. The Village and its trustees were one entity. Although a single firm’s restraints may directly affect prices and have the same economic effect as concerted action might have, there can be no liability under Section 1 in the absence of agreement.

Commercial Disparagement

Statements made by a Village trustee did not run afoul of the Lanham Act commercial disparagement section, according to the court. One trustee stated to a local newspaper that "the one current Village weapons dealer licensee has agreed that it will cease doing business in the village no later than April, 30, 2013." The gun dealer argued that the statement was commercial disparagement because it false and harmed business because the statement suggested to potential customers that it would soon go out of business.

The Lanham Act section prohibiting commercial disparagement applies only to statements used in commerce and made in commercial advertising or promotion. The statement also did not support the gun dealer’s Illinois Deceptive Trade Practices Act claim.

Arbitral Rejection of Soccer Promoter’s Antitrust Claim Confirmed, Suit Fails

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

An arbitral decision resolving an antitrust suit brought by a defunct soccer match promoter against the United States Soccer Federation (USSF) and Major League Soccer (MLS) in the defendants’ favor was enforceable and was, therefore, confirmed by the federal district court in Chicago. The defendants’ motions to exclude crucial expert testimony and for summary judgment on the antitrust claim also were granted.

The suit claimed that the USSF—the association recognized by the sport’s international governing body, Fédération Internationale de Football Association (FIFA), as the entity responsible for regulating men's soccer in the United States—had engaged in an unlawful antitrust conspiracy with MLS by charging excessive sanctioning fees to the promoter for soccer exhibitions involving international teams and by requiring it to obtain unreasonable performance bonds.

Arbitration

The arbitral decision, reached by a standing committee of FIFA that acted as its dispute resolution body, found that under FIFA statutes and regulations:

(1) USSF had the authority to require matches between foreign national or club teams on U.S. soil to be sanctioned by it;

(2) USSF had the right to charge sanctioning fees for such matches and require the posting of a bond securing those fees; and

(3) USSF had the right to notify FIFA if a FIFA-licensed match agent refused to pay its sanctioning fees or post performance bonds in connection with such games.

The arbitral award did not fall outside of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the court said, because the relevant commercial relationship was not entirely between citizens of the United States, given the necessary involvement of FIFA in the matter. Not only had FIFA issued the match agent license underlying the contracts at issue, but it also had a broad stake in the relationship, the court noted. The federal court was a proper venue in which to confirm the award, pursuant to the forum selection clause in the governing arbitration agreement.

The court rejected arguments by the plaintiff promoter that it was unable to present its case due to alleged discovery violations by USSF, that the arbitral procedure was not in accordance with the laws of the country where the arbitration took place because review was not de novo, and that enforcement of the decision would have violated public policy.

Summary Judgment

The promoter’s antitrust claim could not survive summary judgment because it failed to introduce sufficient evidence in support of its market definition, the court determined. The plaintiff’s market definition largely rested on expert testimony that was inadmissible, the court explained. With that testimony excluded, the promoter failed to carry its burden on the threshold requirement of demonstrating a cognizable relevant market and concomitant market power in the defendants.

The promoter’s market definition expert opined that the relevant market in the case was the promotion of men’s professional, first-division, international soccer matches in the United States. However, the testimony was unreliable and unhelpful in its analysis of both its product and geographic market dimensions. Too great a gap in logic existed between the regression analysis conducted by the expert measuring the effect of a nearby soccer match on attendance at a Major League Baseball game in order to delineate the markets for those products and the conclusions the expert purported to draw from that test, in the court’s view.

As the expert himself noted, other sports and non-sport entertainment were imperfect substitutes for a particular sporting event. Given the considerably smaller size of soccer’s fan and financial base as compared to baseball’s, the expert should have tested substitutability from the perspective of soccer fans rather than baseball fans, namely by measuring whether an increase in the price of soccer match tickets would lead consumers to select other entertainment events.

Further, the expert’s identification of "practical indicia" that a separate market or submarket existed was not sufficiently thorough. It was indisputable that his market definition opinion rested almost entirely on his conclusion that MLS and its marketing affiliate, USSF, and the complaining promoter thought that MPFI match promotion was a separate market. Where an expert focused almost entirely on evidence that an industry recognized a submarket, courts had excluded their testimony as unreliable.

In addition, the geographic scope of the market alleged in the suit—the United States—was not sufficiently coherent from both the supply and demand sides, the court remarked.

The decision is ChampionsWorld, LLC v. United States Soccer Federation, Inc., 2012-2 Trade Cases ¶78,023.

No Errors Made in Trial of Dealer’s Antitrust Claims Against Manufacturer, Other Dealers

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

A federal district court committed no error in evidentiary rulings or jury instructions regarding the evidence of conspiracy in a trial of a truck dealer’s claims that a truck manufacturer had conspired with other dealers to restrain trade in violation of federal antitrust law, the U.S. Court of Appeals in Philadelphia has ruled in an unpublished opinion.

A jury verdict in the defendant’s favor (2009-1 Trade Cases ¶76,660) was upheld.

Evidentiary Rulings

Admission of evidence regarding other litigation ongoing against the complaining dealer, an arrest of its top salesman, and the dealer’s termination for misappropriation of trade secrets was proper, the court decided. That evidence was relevant to the defendant’s presentation of alternative causes for the dealer’s decline in sales, a central element of the case.

Although the court did not explain its exclusion of 15 depositions taken in an unrelated action, that decision was not an abuse of discretion, in the appellate court’s view. Introduction of that evidence would have caused undue delay in the presentation of evidence, confused the issues presented in the action, and wasted the time of the trial court and jury.

Jury Instructions

Regarding the jury instructions on evidence of conspiracy, the trial court complied with an earlier appellate decision in the same case in instructing the jury on direct and circumstantial evidence, the appellate court stated.

The trial court had not improperly limited the evidence that the jury could consider. Contrary to the complaining dealer’s assertion, the court was not required to instruct the jury that it must accept the dealer’s offering of direct evidence as sufficient and credible to determine that the manufacturer conspired to violate Sec. 1, the appellate court added.

The July 7 decision is Toledo Mack Sales & Service, Inc. v. Mack Trucks, Inc., 2010-1 Trade Cases ¶77,084.

Further information about the jury verdict appears in a June 30, 2009 posting on Trade Regulation Talk. Details of an earlier decision of the U.S. Court of Appeals in Philadelphia—ruling that the dealer presented sufficient evidence of horizontal and vertical price fixing to send the matter to the jury—appears in a June 26, 2008 posting on Trade Regulation Talk.

Cable TV Subscribers May Bring Class Antitrust Action Against Provider

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

A proposed class of approximately two million non-basic cable television programming service customers in the Philadelphia area were entitled to proceed as a class with antitrust claims against their cable provider, Comcast Corporation, because they sufficiently demonstrated that common issues of law and fact predominated over individual matters in the litigation, the federal district court in Philadelphia has ruled. The predominance requirement was the only certification issue remaining in dispute.

Sherman Act Claims

The class representatives alleged a per se Sherman Act, Sec. 1 claim based on market allocation and a rule of reason Sherman Act Sec. 1 claim that certain transactions with other programming providers amounted to contracts and conduct in restraint of trade.

In addition, they alleged a Sherman Act Sec. 2 claim of monopolization and attempted monopolization. The attempted monopolization claim was based on anticompetitive conduct not only in the cable transactions, but also in regard to the provider's:

(1) Refusal to deal with a potential competitor,

(2) Substantial interference with the potential competitor's access to the contractors needed to build competing cable systems, and

(3) Pricing campaigns designed to prevent or destroy competition from the potential competitor.

The subscribers had previously been granted class certification in 2007 (2007-1 Trade Cases ¶75,696). Reconsideration of that decision was granted in light of an appellate holding in a hydrogen peroxide price fixing suit (2008-2 Trade Cases ¶76,453), suggesting that trial courts had been applying too lenient a standard of proof to the issue of whether proposed class plaintiffs would be able to use common evidence to prove antitrust impact.

Antitrust Impact

In the instant suit, the proposed class offered sufficient expert testimony to meet its burden of demonstrating that the element of antitrust impact was capable of proof at trial through evidence that was common to the class rather than individual to its members, the court said.

The common evidence of antitrust impact alleged by the class included swaps and transactions in the relevant geographic market that eliminated competition and resulted in increased prices, as well as the clustering of the Philadelphia market and regional sports programming content that led to decreased competition from direct broadcast satellite (DBS) competitors and, consequently, higher prices for all class members.

Geographic and Product Markets

The expert offered ample basis in support of his relevant geographic market definition and his market structure analysis to show that Comcast possessed market power in the geographic and product markets, the court found.

The court did, however, reject the expert’s theory of market allocation based on an allegation that cable companies acquired by Comcast had previously-competed for the award of original cable franchises, as well as a contention that the non-compete clauses contained in the acquisition agreements made reentry by the acquired firms into the Philadelphia market unlikely.

A market performance analysis, which offered several economic explanations for Comcast's ability to charge higher prices, included at least one theory susceptible to proof at trial through available evidence common to the class.

Anticompetitive Effects

The class failed to demonstrate that three of the expert’s contentions regarding the anticompetitive effects of Comcast’s clustering activity could be proven through common evidence:

(1) That its clustering activity made it economically feasible for the company to withhold regional sports programming from its competitors, resulting in reduced penetration rates by DBS competitors;

(2) That it reduced benchmark competition, on which customers rely to compare the prices charged by competitors in a market; and

(3) That it increased Comcast’s bargaining power in its negotiations with its content providers, such as cable networks, which allowed Comcast to negotiate lower prices for its content.

The class met its burden of demonstrating that Comcast’s clustering activity affected prices by reducing the extent of competition provided by overbuilders. The class successfully showed that the presence of an overbuilder constrained cable prices, the court noted.

Damages

Further, the subscribers made an adequate showing that there was a common methodology available to measure and quantify damages on a class-wide basis. Their damages expert's econometric analysis, which estimated benchmark prices against which to compare actual prices during the relevant period in the Philadelphia market, was appropriate, the court decided. His use of the national average DBS penetration rate for Comcast markets was a valid screen for the model.

The decision is Behrend v. Comcast Corporation, 2010-1 Trade Cases ¶76,869.

Jury Rejects Conspiracy Claim Against Heavy Truck Manufacturer

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

A federal jury in Philadelphia decided on June 11 that a truck dealership failed to prove by a preponderance of the evidence that a defending truck manufacturer engaged in a conspiracy in violation of Section 1 of the Sherman Act.

The jury trial followed last year's federal appellate court decision (2008-1 Trade Cases ¶76,189), which permitted the truck dealership to proceed to trial with its claim that a defending truck manufacturer conspired with other dealers to restrain trade.

The U.S. Court of Appeals in Philadelphia decided that the complaining Ohio dealership had presented sufficient evidence of an agreement between competing dealers and the manufacturer for a jury to find an unlawful conspiracy. However, the jury found otherwise.

In light of the jury’s verdict, judgment was entered in favor of the manufacturer.

The case is Toledo Mack Sales & Service, Inc. v. Mack Trucks, Inc., U.S. District Court, Eastern District of Pennsylvania, No. 2:02-cv-4373, June 11, 2009. The civil judgment and verdict slip appear at 2009-1 Trade Cases ¶76,660.

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.