|July 2, 2013|
Previously published on June 25, 2013
Conclusary allegations of parallel business conduct which are in the economic self-interest of the actor do not state an actionable antitrust claim. Duty Free Americas, Inc. v. The Estée Lauder Companies, Inc., Case O: 12-cv-60741-RNF (S.D. Fla. May 9, 2013).
Duty Free Americas, Inc. (DFA) is an operator of duty-free beauty products stores in airports. For a period of years, it purchased products from Estée Lauder Companies, Inc. (ELC). ELC is the largest manufacturer of beauty products sold in duty-free shops in US airports. According to a complaint filed by DFA in the U.S. District Court, Southern District of Florida, ELC’s marketshare is “approximately 50% or greater”.
DFA’s complaint alleged that ELC periodically issued suggested resale prices for its airport duty-free shop customers. ELC issued an announcement of a prospective suggested increase in the retail price to be charged in 2008. DFA refused to follow ELC’s suggested prices. Thereafter, ELC, refused to sell further product to DFA.
DFA filed suit filed in the United States District Court for the Southern District of Florida, alleging that ELC violated Sections 1 and 2 of the Sherman Act by conspiring with DFA’s competitors to exclude it from the airport duty-free beauty products market. ELC allegedly did so by influencing the airports to award bids to companies that were purchasers and resellers of ELC cosmetic products.
The complaint alleged that ELC had engaged in exclusionary conduct, in a conspiracy with DFA’s competitors, and attempted to monopolize of the duty-free airport beauty products market by submitting unsolicited letters to Newark, Atlanta, Orlando and Boston airports, which had issued requests for proposals for the right to operate a duty-free beauty products market at the airport. The letters pointed out that DFA did not handle ELC products, and that ELC products were essential to the success of the duty-free store. The letter also highlighted and promoted ELC’s duty-free purchasers, who arguably, also submitted responses to the request for proposals from the airports. DFA thus alleged that ELC had conspired with its purchasers, who were DFA’s competitors for airport duty-free shop establishment, and that it had attempted to squeeze DFA out of the airport duty-free beauty products store market, in violation of Section 1 and 2 of the Sherman Act.
ELC moved to dismiss the complaint for failure to state a claim. In granting the motion, the court went through the now familiar plausibility standard of Twombly and Iqbal. In so doing, the court drew upon a litany of Supreme Court authority that requires an inquiry into whether the challenged anti-competitive conduct “... stem[s] from independent decision or from an agreement, tacit or express”, citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 553 (2007). The District Court noted that the allegations were simply statements of parallel conduct, coupled with bare conclusionary assertions of conspiracy. The court held that such allegations were insufficient to state a claim. Without the “something more” required, allegations of parallel conduct do not warrant an inference of concerted activity actionable under the antitrust laws.
Borrowing from a line of authority from Colgate through Monsanto, the court noted that encouraging duty-free operators to maintain margins is not the same as an agreement to set retail prices. It does not violate Section 1 of the Sherman Act to announce a suggested resale price in advance, and to refuse to deal with those who fail to follow the vendor’s suggestion. See Monsanto Co. v. Spray-Rite Service Corp., 465 US 752, 761 (1984).
The court also noted that the communications to the airports were truthful statements of fact. DFA was not even mentioned in the letters, unsolicited as they may have been. As there were no plausible allegations of communications between ELC and its customers who may also have been responding to the airport RFPs, the letters were simply an exercise of ELC’s legitimate business self-interest. Needless to say, ELC would have a legitimate interest in assisting the award of the RFPs to firms that purchased and resold its products within the airport duty free shop environment.
The court made even shorter shrift of DFA’s attempted monopolization claim. The court noted that one element missing from the complaint were allegations that ELC had engaged in predatory or anti-competitive conduct in seeking the success of its customers in securing the award of the airport’s RFPs. The failure to satisfy this element was a sufficient rationale for granting a motion to dismiss as to the Section 2 claim. It is not unlawful under the antitrust laws for a firm to promote its economic self-interest in unilaterally communicating with the airports that were considering awarding exclusive rights to operate a duty-free beauty products store, as this would clearly benefit the economic self-interest of ELC. One of the hallmarks of a functioning market system is of course the non-predatory securing of customers notwithstanding that this will cause an economic loss to firms who are also seeking their patronage. One trader’s gain will necessarily be another trader’s loss. Another way to characterize the complaint’s fatal deficiencies is the well-oiled axiom that the concern of the antitrust laws is injury to competition, and not simply to a competitor. See, e.g., Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 480-81 (1977). Here, the most that ELC did was to provide additional market information to the companies that independently made the decisions whether to award its RFP to DFA, or to a competitor, who happened to buy ELC’s products for resale.