August Antitrust Bulletin

August 30, 2013

Market Definition Key to 11th Circuit’s Ruling Affirming Dismissal of Monopolization Claims

On July 16, the 11th Circuit in Gulf States Reorganization Group, Inc. v. Nucor Corp. affirmed an award of summary judgment in favor of steel producer Nucor Corporation in a heated battle over market definition in the context of steel products. The 11th Circuit found that the cross-elasticity of supply for certain steel products defeated the limited product market alleged by the plaintiff. The dispute arose when Gulf States Reorganization Group (GSRG) sued Nucor, a leading manufacturer of black hot rolled coil steel, alleging that Nucor had attempted to monopolize the market for black hot rolled coil steel in the Southeastern United States. Specifically, GSRG alleged that Nucor and the other defendants contracted to purchase the assets of a bankrupt entity to block competition in the black hot rolled coil steel market.

Key to the 11th Circuit’s opinion affirming summary judgment in favor of defendant Nucor was the alleged relevant product market—specifically, the failure of the alleged market to account for an alternative to black hot rolled coil steel, pickled and oiled steel, and the fact that manufacturers of one product could easily switch from production of one to the next. The 11th Circuit emphasized this distinction, stating that “one way to decide if producers or manufacturers can take away from a monopolist… is to analyze the concept of cross-elasticity of supply, which ‘looks at competition from the production end instead of the consumer end.’” Applying the concept to the facts at hand, the 11th Circuit noted that because of the similarities between the two steel products, a potential monopolist of the black hot rolled coil steel market would be thwarted by manufacturers in the pickled and oiled steel market. Consequently, the limited alleged market definition of black hot rolled coil steel was too restrictive and ignored the “actual or potential” economic realities.

Court Rules Consumers May Challenge Exclusive NFL Apparel Agreement; Market Definition Again the Key Factor

On Aug. 2, the U.S. District Court for the Northern District of California in Dang v. San Francisco Forty Niners denied a motion to dismiss a putative class action against the National Football League, its member clubs, NFL Properties and Reebok. The plaintiff’s suit alleged that the agreement to grant Reebok an exclusive license to manufacture NFL-branded apparel violated state and federal antitrust laws. The exclusive licensing agreement, the plaintiff argued, resulted in anticompetitive overcharges.

In their motion to dismiss, the defendants argued that the proposed markets for NFL apparel and NFL apparel licenses were too narrow because there is no market for NFL apparel separate from the market for sports apparel or apparel in general. The court rejected this argument, holding that the alleged market consisted of all 30 NFL teams’ logos, and all of those teams competed with each other for apparel sales throughout the country. The court also determined that non-NFL apparel such as collegiate, MLB or NBA apparel “would not suffice as a reasonable substitute” for NFL apparel. The court reached this conclusion after noting that NFL team logos “may very well be the products themselves that the consumers seek to purchase.” The court ultimately concluded that the alleged market was adequately pleaded as a relevant market because, among other things, NFL teams compete for fans in regions of the country that do not have geographic representation in the NFL, competition exists for apparel in regions that have more than one team and teams utilize apparel to compete for individuals without a team allegiance and for individuals who move from one region of the country to another.

7th Circuit Limits Venue Shopping in Antitrust Cases

On Aug. 2, in KM Enterprises, Inc. v. Global Traffic Technologies, Inc., the 7th Circuit ruled that antitrust plaintiffs are prohibited from picking and choosing jurisdictional rules in order to sue corporate defendants throughout the country. The appeal called upon the 7th Circuit to determine whether the Clayton Act’s provisions for nationwide service-of-process and venue must be read together. If the two provisions must be read together, then venue would only be proper where a defendant is incorporated, “is found” or does business. If the provisions can be split, plaintiffs could pair favorable antitrust personal jurisdiction rules with the normal federal rules permitting venue in any district where a court has personal jurisdiction over a defendant.

Wading in to a circuit split, the 7th Circuit agreed with the approach previously reached by the 2nd and D.C. Circuits and concluded that the provisions must be read together and that antitrust plaintiffs must comply with the specific venue limitations under the Clayton Act. The 7th Circuit reached this result after noting that splitting the rules would create “some very odd results” that would seem to go against congressional intent to create specialized venue rules for cases bringing claims under the Clayton Act.

Federal Jury Finds that Horse Group’s Association Registry Rules Violated Antitrust Laws

On July 30, in Abraham & Veneklasen Joint Venture v. American Quarter Horse Assoc., a jury in the U.S. District Court for the Northern District of Texas found that the organization that runs the world’s largest horse-breed registry violated federal and state antitrust laws by not allowing cloned animals on its prestigious registry. The gravamen of the suit, which was brought by two breeders, was that the association that runs the registry was operating an illegal monopoly by excluding cloned horses. The association argued that its rules were fair because they merely required that each registered horse must have a registered father and registered mother (which necessarily would preclude cloned horses). The association also argued that it had the right to set its own rules so long as they were fair and lawful.

Though the jury did not award the breeders any of the $6 million in damages they sought, it did award the breeders the requested injunctive relief and the court recently affirmed the injunctive relief, giving the association 30 days to add cloned horses to the registry.

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