Decided: February 4, 2016
The Fourth Circuit affirmed the district court’s ruling.
Plaintiff It’s My Party, Inc. (IMP) brought suit on March 5, 2009, alleging that defendant Live Nation, Inc. (LN) violated § 1 and § 2 of the Sherman Antitrust Act by engaging in monopolization, tying arrangements, and exclusive dealing in the music concert industry. IMP is geographically limited as a regional player that promotes concerts and works with venues in the Washington D.C. and Baltimore areas. LN is a national promoter that provides services throughout the country. Both parties also operate outdoor amphitheaters with IMP managing the Merriweather Post Pavilion in Columbia, Maryland, and LN owning the Nissan Pavilion in Bristow, Virginia. The district court denied LN’s motion to dismiss in July 2009, and an initial motion for summary judgment without prejudice in August 2012. Following briefing and argument, the court granted summary judgment in LN’s favor in February 2015. The district court granted LN’s summary judgment motion based on it declining to adopt IMP’s definition of the promotion market and excluding IMP’s portion of its expert analysis defining the venue market. The district court found there was insufficient evidence that LN engaged in monopolization, tying, or any other anticompetitive behavior. Because the plaintiff failed to define the relevant markets or to demonstrate any anticompetitive conduct, the Fourth Circuit affirmed.
The plaintiff has the burden of defining the market that defendant is accused of monopolizing. This case has two separate but related markets: the market for concert promotion and the market for concert venues. IMP wanted to bolster its claim by arguing for a national market to make IMP’s regional outlet appear modest as compared to LN’s appearance of market power through a nationwide network of promoters and venues. The Court found the market for shows is highly localized so promoters need to target their advertising to the area surrounding a particular venue. This localized market promotion meant that the competition between IMP and LN was a battle only for the Washington-Baltimore area, thus IMP is on equal footing and on its own turf. IMP’s definition of the venue market failed because it limited the venues in a way that only included IMP and LN, distorting the actual market. The lack of a defined market, weakened IMP’s tying and monopolization claims. The tying argument failed because while LN tied performances at Nissan with other LN’s promotion services, IMP could not show LN buyers were coerced into taking the combined package. The Court gave a number of reasons why a buyer would want a combined package without coercion being present. IMP’s last claim boiled down to the argument that LN’s national size rose to the level of monopolization. The Court said this argument would not work as it would punish successful companies and result in any national based company being subject to anti-trust attacks. And even with LN large size, IMP was not put into a position where they could not be competitive as the record showed IMP was able to double its profits from 2006 to 2012.
Accordingly, the Court affirmed the judgment of the district court.
Decided: September 15, 2015
The Fourth Circuit affirmed in part, vacated in part, and remanded.
SD3, LLC and its subsidiary, SawStop, LLC (“SawStop”) together allege that a group of table-saw manufacturers formed a conspiracy to boycott certain SawStop technology to keep it off of the market in a violation of §1 of the Sherman Antitrust Act (“§ 1”). The district court dismissed the case for failure to plead facts that established an unlawful agreement, and this appeal followed.
The Fourth Circuit begins with a discussion of the facts, since, as the appeal is of a motion to dismiss, the only facts it can consider are those in SawStop’s complaint. The Fourth Circuit first addresses what it sees as a problem with the entirety of SawStop’s complaint, that it has filed suit against a broad range of defendants and has not sufficiently alleged specific complaints against each individual defendants, as required in § 1. Specifically, SawStop has included certain corporate parents in the complaint even though it made no factual allegations against them, and so the Fourth Circuit concluded that the district court properly dismissed the claims as to those defendants. The Court next looks at the conspiracy element of §1, specifically looking at how the Act requires more than just “parallel conduct,” because such conduct “is equally consistent with lawful conduct.” In order to move forward with a § 1 claim, SawStop would have to have alleged parallel conduct plus “something more,” categorized as “further circumstances pointing toward a meeting of the minds.” The Court next determined if the district court properly applied the “plausibility-focused standard” derived from case law. Importantly, the Court determined that the district court committed two errors in applying that standard: that it used the incorrect standard as a basis for its ruling by using the standard for summary judgment instead of motion to dismiss, and, in looking at the facts, “applied a standard much closer to probability than plausibility.” This combination of errors, according to the court, meant that the district court imposed an improper heightened pleading requirement.
Since the Court reviewed the case de novo, it proceeded to determine if SawStop pleaded sufficiently to establish a group boycott. The Court concluded that SawStop had adequately alleged parallel conduct, because none of the defendants used SawStop’s technology, and the Court concluded that this was enough similarity to be plausible at the pleading stage. The Court next turned to whether SawStop had alleged the additional “more” that it asserted earlier was required. Because SawStop was able to point to a specific meeting in which the boycott was formed, how the boycott was sealed, and how the defendants intended to implement the boycott, the Court found that it had alleged enough to meet the “more” standard.
The Fourth Circuit then considered whether or not the plaintiff had sufficiently alleged that the conspiracy “produced adverse, anti-competitive effects within the relevant product and geographic market.” However, in looking at the lower court’s decision, it concluded that the issue was inadequately briefed and the district court did not adequately treat the issue, and stated that the defendants would be allowed to raise that issue on remand.
The Court then turned to address the standard-setting conspiracies that SawStop alleged in its complaint. It concluded, however, that SawStop did not adequately establish either of the two additional conspiracies that it alleged, because the facts implied “nothing beyond ordinary participation in lawful standard-setting processes.” It therefore affirmed the district court’s decision to dismiss the standard-setting claims and the group-boycott claims against certain of the defendants, but held that it erred in dismissing the group-boycott claims against the rest of the defendants, and partially remanded.
Decided: May 13, 2014
The Court held that Verizon Virginia, LLC (“Verizon”) was required to offer entrance facilities to CoreTel Virginia, LLC (“CoreTel”) at cost-basis for interconnection; CoreTel’s ports and multiplexers did not qualify as entrance facilities; Verizon did not have to pay reciprocal compensation charges for calls even if it did not provide “EMI data” to CoreTel; and CoreTel did not provide “terminations in the end office of end user lines” because it did not utilize its own facilities to connect its customers by converting incoming calls into Internet data streams.
Congress passed the Telecommunications Act (the “Act”) to reduce the competitive advantages enjoyed by telecommunications carriers, known as “incumbent carriers,” over new market entrants, known as “competing carriers.” Verizon, an incumbent carrier, entered into an agreement (the “ICA”) pursuant to the Act to share network resources with CoreTel, a competing carrier. A dispute arose between CoreTel and Verizon regarding the ICA, with claims and counterclaims between the two parties. The district court organized the various claims into four broad categories: (1) Verizon’s facilities claims relating to its bills for the entrance facilities CoreTel leased; (2) CoreTel’s facilities claims relating to its bills for the entrance facilities that CoreTel contends Verizon leased; (3) Verizon’s reciprocal compensation claims; and (4) Verizon’s claims that CoreTel improperly billed it for services under CoreTel’s tariffs. The district court granted summary judgment in favor of Verizon on all claims; CoreTel appealed.
For the first category of claims, the Fourth Circuit determined that CoreTel was entitled to summary judgment on both parties’ claims for declaratory relief that related to Verizon’s facilities charges. The Court noted that a provision in the ICA authorized CoreTel to lease entrance facilities from Verizon at “rates[, which were listed at cost basis] and charges, set forth in this Agreement.” For the second category of claims, the Court reasoned that CoreTel’s trunk ports and multiplexers are not entrance facilities, Verizon was entitled to summary judgment on CoreTel’s facilities claims. For the third category of claims, the Court reasoned that Verizon did not have to pay reciprocal compensation charges for calls even if Verizon did not provide “EMI data” to CoreTel because Verizon and that data were needed to properly categorize every call. For the fourth category of claims, the Court reasoned that CoreTel did not deploy its own facilities to connect it to its customers by converting incoming calls into an Internet data stream once they reached CoreTel’s office. Accordingly, CoreTel did not provide “terminations in the end office of end user lines” as required by its tariffs. Thus, CoreTel’s general definition of switched-access service that explicitly permitted CoreTel to charge for that service did not override the more specific definition of end-office switched access provided in the Communications Act of 1934.
Decided: April 3, 2014
The Fourth Circuit held that the district court acted properly by denying Kolon Industries’ (Kolon) recusal motion because of timeliness under 28 U.S.C. § 455(b). Further, the Fourth Circuit deferred to the district court’s discovery oversight, and agreed that Kolon failed to raise a triable issue of material fact to prove its claims that E.I. DuPont de Nemours & Co. (DuPont) either attempted, or actually had, a monopoly over the U.S. para-aramid market. Thus, the Fourth Circuit affirmed the district court’s grant of summary judgment for DuPont.
Kolon alleged that DuPont held a monopoly over the para-aramid fiber market in violation of the Sherman Act (§ 2). In the U.S., the three main producers of para-aramid are: DuPont, Teijin Aramid (Teijin), and Kolon. Together, DuPont and Teijin account for 99% of the para-aramid sales in the U.S. Moreover, there are high entry barriers into the para-aramid market. Kolon claimed that it was unable to obtain more than a de minimis share of the market when it entered in 2005 because DuPont executed numerous supply agreements with high-volume customers.
DuPont argued that Kolon failed to penetrate the U.S. market because of its own shortcomings. Specifically, Kolon used only seven sales agents that contacted a small percentage of potential customers, and inadequately invested in product offerings and supply capacity. DuPont sued Kolon, alleging theft and misappropriation of trade secrets, and Kolon counterclaimed with its anti-trust claim. DuPont moved to dismiss the counterclaim, which the district court granted with leave to amend. Kolon filed amended counterclaims, which were also dismissed. Kolon appealed the dismissal, and the Fourth Circuit reversed, and stated that Kolon had adequately pleaded its monopoly claims and remanded for further proceedings. On remand, the district court tried the trade secrets claim separately, resulting in a $919.9 million jury verdict for DuPont. Ultimately, the district court granted summary judgment to DuPont on the anti-trust claims. Kolon then filed an appeal.
On appeal, the Fourth Circuit reviewed Kolon’s argument that the district court judge should have recused himself from the anti-trust and trade secrets cases. The district court judge was a partner at McGuire Woods, which had handled patent lawsuits relating to para-aramid, prior to his appointment to the bench, and represented DuPont in the current litigation. Both parties received notice of the judge’s related financial interest. The parties were given twenty days to file a motion for disqualification, but neither party did. Instead, Kolon filed its motion for recusal after a $920 million dollar award against it—two days prior to the deadline for summary judgment motions in the anti-trust case against DuPont. The district court denied the recusal motion because Kolon filed its motion a year after the alleged conflict, finding that 28 U.S.C § 455, although silent on the matter, includes a timeliness requirement. The Fourth Circuit found that Kolon failed to “raise the disqualification . . . [of the judge] at the earliest moment after [its] knowledge of the facts.” U.S. v. Owens, 902 F.2d 1154, 1156 (quoting Satterfield v. Edenton-Chowan Bd. of Educ., 530 F.2d 567, 574–75 (4th Cir. 1975)).
The Fourth Circuit found no abuse of discretion in the district court’s discovery rulings, and stated that the district court’s discovery denial was justified by its determination that the production of sales, pricing, and margin data would have been “unduly burdensome” on DuPont by requiring compilation of all this information onto one spreadsheet as requested by Kolon. Kolon also appealed the district court’s grant of a protective order that barred a F.R.C.P. Rule 30(b)(6) deposition of DuPont’s use of the supply agreements. The Fourth Circuit found that Kolon violated Local Civil Rule 30(H), which requires eleven days’ advanced notice of a deposition, and Federal Rule of Civil Procedure 30(b)(1), which requires “reasonable notice,” when it gave only five days’ notice for the replacement deposition notice.
Reviewing Kolon’s Sherman Act claim de novo, the Fourth Circuit found that DuPont lacked monopoly power in the U.S. para-aramid market from 2006 to 2009 because DuPont’s 60% market share fell significantly short of monopoly power under E.I. du Pont de Nemours & Co. v. Kolon Indus. (DuPont I), 637 F.3d 435. Further, the Fourth Circuit found that DuPont lacked durable market power because of Teijin’s ascendancy in the market over the past several decades, which led to DuPont’s steady decline in market share. The Fourth Circuit also found that DuPont did not engage in conduct that forecloses competition, gains a competitive advantage, or attempts to destroy a competitor. See Eastman Kodak v. Image Technical Servs., Inc., 504 U.S. 451, 482–83 (1992). Kolon argued that DuPont’s twenty-one supply agreements—out of 1,000 potential consumers in the U.S. para-aramid market—demonstrated that DuPont willfully maintained its monopoly power. However, the Fourth Circuit determined that those agreements did not violate the willful maintenance prong set forth in DuPont I.
With regard to Kolon’s attempted monopolization claim, the Fourth Circuit stated that DuPont’s conduct was not prohibited by Sports, Inc. v. McQuillan, 506 U.S. 447 because its supply agreements did not foreclose a substantial share of the para-aramid market. Furthermore, the Fourth Circuit found that there was no dangerous probability that DuPont would successfully monopolize the market in violation of McQuillan because of Teijin’s growth in market share.
– Alysja S. Garansi
Decided May 31, 2013
The Fourth Circuit Court of Appeals denied the North Carolina State Board of Dental Examiners’ (the Board) petition for review of the Federal Trade Commission (FTC) order finding that the Board violated the FTC Act, 15 U.S.C. § 45, by engaging in unfair competition in the market for teeth-whitening services in North Carolina.
Dentists started providing whitening services throughout North Carolina in 1990. By 2003, non-dentists also started offering the same services, often at a significantly lower price than dentists. After receiving complaints from dentists, the Board opened an investigation into teeth-whitening services performed by non-dentists. As a result of the investigations, the Board issued at least 47 cease-and-desist letters to 29 non-dentist teeth-whitening providers. The Board ultimately expelled all non-dentist providers from the North Carolina teeth-whitening market. On June 17, 2010, the FTC issued an administrative complaint against the Board, charging it with violating 15 U.S.C. § 45, the FTC Act, by excluding non-dentist teeth whiteners from the market. The Board moved to dismiss the complaint, arguing that the FTC lacked jurisdiction over it and, alternatively, that it was exempt from the federal antitrust laws under the “state action” doctrine. Ultimately the Board petitioned the Court of Appeals for review of the FTC’s final order, raising 3 arguments: (1) that it is exempt from the antitrust laws under the state action doctrine; (2) that it did not engage in concerted action under § 1 of the Sherman Act; and (3) that its activities did not unreasonably restrain trade under § 1.
First, the court addressed whether the Board is exempt from the antitrust laws under the state action doctrine. The state action doctrine is where the antitrust laws do “not apply to anticompetitive restraints imposed by the States ‘as an act of government.’” The court then discussed the three ways by which a party may invoke the state action doctrine: (1) a state’s own actions “ipso facto are exempt” from the antitrust laws; (2) private parties acting pursuant to a “clearly articulated and affirmatively expressed as state policy” and their behavior is “actively supervised by the State itself;” and (3) municipalities and substate governmental entities acting pursuant to state policy to displace competition with regulation or monopoly public service. Unlike private parties, municipalities are not required to show active supervision. Further, even in these three circumstances, state-action immunity is disfavored and only recognized when it is clear that the challenged anticompetitive conduct is undertaken pursuant to a regulatory scheme that “is the State’s own.” In this case, the FTC found that the Board was a private party and could not show it was actively supervised by North Carolina. The FTC rejected that the Board was a substate governmental entity not subject to the active supervision requirement. While state agencies such as the Board may in some instances qualify as a substate governmental entity, the FTC found the “Court has been explicit in applying the antitrust laws to public/private hybrid entities, such as regulatory bodies consisting of market participants” like the Board. The operative factor is a tribunal’s degree of confidence that the entity’s decision-making process is sufficiently independent from the interests of those being regulated. Because a decisive majority of the Board was elected by dentists, the Board qualifies as a private party and is required to meet the active-supervision requirement. The Court of Appeals agreed the Board is a “private” actor required to prove active supervision, and also that the Board did not meet the supervision requirement. Because the cease-and-desist letters were sent without state oversight and without the required judicial authorization, it operated without sufficient supervision.
Next, the court addressed whether the FTC properly found that the Board’s behavior violated the FTC Act. The FTC’s factual findings are conclusive if supported by substantial evidence. The FTC Act makes unlawful “unfair methods of competition.” In this case, the FTC determined that the Board’s conduct violated the FTC Act because it was a violation of § 1 of the Sherman Act. Section 1 of the Sherman Antitrust Act prohibits “every contract, combination, or conspiracy, in restraint of trade.” To establish a § 1 violation, a plaintiff must prove (1) a contract, combination, or conspiracy that (2) imposed an unreasonable restraint of trade. Concerted action is satisfied when an agreement exists between “separate economic actors” such that any agreement “deprives the marketplace of independent centers of decision making.” The Board members’ serve on the Board while they remain “separate economic actors” with a separate financial interest in the practice of teeth whitening. Thus, any agreement between the Board members deprives the market of an independent center of decision making. However, to be concerted action, the parties must also have a conscious commitment to a common scheme designed to achieve an unlawful objective. In this case, the sending letters and cease-and-desist orders is suggestive of coordinated action. The Court of Appeals agreed with the FTC that the Board engaged in a combination or conspiracy under § 1.
Finally, the court addressed whether the Board’s actions amounted to an unreasonable restraint of trade under § 1. There are three forms of analysis for determining if conduct violates § 1: (1) per se; (2) quick-look; and (3) rule of reason. The FTC determined the Board’s conduct violated § 1 under both a quick-look analysis and a rule of reason, and the Court of Appeals agreed. Group boycotts are amenable to the quick look approach where “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.” In this case, the court found it was not difficult to understand that forcing low-cost teeth-whitening providers from the market has a tendency to increase a consumer’s price for that service. As a result, the Board’s petition for review was denied.
– Sarah Bishop