Antitrust - Michael Eric Ross and Jeffrey S. Cashdan

• Publication year: 1999

Antitrustby Michael Eric Ross*and

Jeffrey S. Cashdan**

In 1998 the Eleventh Circuit published eight antitrust opinions.¹ Some of these cases turned on procedural issues; some were decided on the merits. As in previous years, defendants generally were successful, but not always. Each of these decisions is briefly summarized below.

Southern Card & Novelty, Inc. v. Law son Mardon Label, Inc.² concerned the legality of a "full-line forcing" arrangement.³ Defendant, Lawson Mardon Label, Inc. ("Lawson"), manufactured postcards, which it sold to distributors throughout North America for resale to retail outlets, which in turn sold them to consumers. Lawson manufactured "local view" postcards depicting nonlicensed local images (for example, in Florida, pictures of beaches or alligators). Lawson also manufactured postcards bearing copyrighted images of Walt Disney Company characters pursuant to what effectively was an exclusive license.⁴ There were at least six other postcard manufacturers that produced postcards specific to areas in Florida.⁵ Plaintiff, Southern Card & Novelty, Inc. ("Southern Card"), was a Daytona Beach, Florida based business that distributed postcards to retailers in central and northern Florida. Southern Card distributed postcards manufactured by Lawson as well as other postcard manufacturers.⁶

In late 1991, Lawson introduced the "Disney Product Plan," which required Southern Card to purchase the same dollar amount of "local view" postcards that it purchased of Disney postcards. To prevent loss of its lone source of Disney postcards, Southern Card began buying Lawson's "local view" postcards in compliance with Lawson's new program. Eventually, Lawson requested that Southern Card buy all of its postcards from Lawson, a request that Southern Card refused. Thereafter, Lawson began recruiting other postcard distributors to distribute its products in competition with Southern Card. Lawson also limited Southern Card's purchase of Disney postcards.⁷

Upset by this turn of events, Southern Card sued Lawson, claiming federal and state antitrust violations based on: (1) alleged unlawful tying of Disney and "local view" postcards; and (2) monopolization and attempted monopolization of the greater Orlando area "market" for "local view postcards."⁸ On defendant's motion for summary judgment, the district court dismissed plaintiff's claims.⁹ In particular, the district court held that plaintiff's antitrust claims were not per se unlawful and that, applying the rule of reason, plaintiff failed to demonstrate that Lawson had unreasonably restrained competition in the "local view" postcard market.¹⁰

The Eleventh Circuit affirmed, explaining that the challenged practice—embodied in Lawson's "Disney Product Plan"—was a "line forcing" arrangement.¹¹ In a line forcing arrangement, a manufacturer compels its dealers to offer for sale some ("representative line forcing") or all ("full line forcing") of the manufacturer's line of products.¹² Generally, such arrangements do not bar the dealer from selling competing product lines, and in such cases these vertical, nonprice restrictions generally pass antitrust muster.¹³ Moreover, as the Eleventh Circuit correctly observed, line forcing arrangements typically do not foreclose choice by an ultimate consumer, and thus, per se illegality treatment is unwarranted.¹⁴

Applying the rule of reason, the Eleventh Circuit concluded that plaintiff's claims could not survive summary judgment.¹⁵ The court rejected as "woefully deficient" Southern Card's proffered affidavit of one of Lawson's competitors designed to show market foreclosure because the affidavit failed to provide even the most basic information necessary to truly evaluate the impact of Lawson's line forcing on its competitors' access to the alleged relevant market.¹⁶ The court likewise rejected Southern Card's expert testimony that consumers were paying higher prices due to Lawson's conduct because the survey on which such testimony was based suffered from "biased" sampling and the failure to take local market factors into account, such as cost of living.¹⁷ Southern Card's proffered evidence was insufficient to prove an antitrust claim under the rule of reason and, therefore, the Eleventh Circuit affirmed the grant of summary judgment.¹⁸

Bankers Insurance Co. v. Florida Residential Property & Casualty Joint Underwriting Ass'n¹⁹ presented the Eleventh Circuit with another opportunity to address the state action doctrine. Once again, the issue before the court related to the definition of a "political subdivision" for purposes of state action immunity.²⁰ Specifically, Bankers Insurance Co. concerned Florida's reaction to the state's post-Hurricane Andrew insurance crisis.²¹ Pursuant to state law, all Florida residential-property insurers were required to form an association to write "involuntary" insurance for citizens who could not obtain coverage in the

"voluntary" insurance market.²² After the association implemented competitive bidding for contracts to service policies written by the association, one of the unsuccessful bidders sued the association and four individuals who worked for it claiming that the association's bid process violated section 1 of the Sherman Act.²³ The district court granted defendants' judgment on the pleadings based on the state immunity doctrine of Parker v. Brown²⁴ and the intra-enterprise conspiracy doctrine of Copperweld Corp. v. Independence Tube Co.²⁵

The Eleventh Circuit affirmed.²⁶ Regarding the Copperweld issue, the court ruled that the individual defendants were agents of the association and, thus, had an alignment of interests such that the "plurality of persons" needed for a section 1 claim was missing.²⁷ The court recognized this issue was "more difficult" for the association itself, but it declined to reach the issue because of its state action immunity holding.²⁸

As for the state action issue, the court held that the association had sufficient "government-like attributes" and "public-entity trappings" to be treated as a political subdivision.²⁹ Among other things, the court observed that the association was subject to Florida's open records ("sunshine") laws, had certain tax exemptions, and operated under a plan approved by the Department of Insurance.³⁰ Moreover, although the association's members were private, competing insurers, the court noted that these members did not compete in the "involuntary" insurance market and, in fact, such members participated in the association only because the law required them to do so.³¹ Because the association is a political subdivision, and the court found the association to have acted pursuant to a clearly articulated legislative policy permitting it to select its contracting parties as it saw fit, the court held the association's conduct to be immune from antitrust liability.³²

Colsa Corp. v. Martin Marietta Services, Inc.³³ affirmed the Eleventh Circuit's prior pronouncement that the Sherman Act is not a panacea for all alleged business wrongs.³⁴ In Colsa plaintiff sued Martin Marietta under section 2 of the Sherman Act for allegedly seeking to create or maintain a monopoly. Colsa's claim arose from Martin Marietta's termination of Colsa's subcontract for services in connection with a government contract awarded to Martin Marietta. The district court granted Martin Marietta summary judgment on the ground that Colsa failed to properly define the relevant market.³⁵

The Eleventh Circuit affirmed.³⁶ Rather than relying on the failure to prove a relevant market, however, the court focused on a more fundamental deficiency—the lack of any alleged anticompetitive conduct.³⁷ The Eleventh Circuit observed that "Colsa cannot claim that Martin Marietta monopolized—or attempted to monopolize—its own contract by terminating a subcontract."³⁸ The Eleventh Circuit correctly determined that Colsa's claims, if any, sounded in contract rather than antitrust law.³⁹

Johnson v. University Health Services, Inc.⁴⁰ related to another offbeat antitrust claim. Plaintiff, Dr. Johnson, asserted a variety of claims, including claims under sections 1 and 2 of the Sherman Act, arising out of a hospital's alleged promise to provide Dr. Johnson with financial assistance to start her own practice.⁴¹ Plaintiff's antitrust claims boiled down to the assertion that defendant hospital was somehow obligated to subsidize her practice and its failure to do so harmed competition.⁴² The district court granted defendant's summary judgment on all counts, including the antitrust counts.⁴³

The Eleventh Circuit affirmed.⁴⁴ The court held that Dr. Johnson's claimed injuries were not the type of harms that the antitrust laws were intended to prevent and, thus, plaintiff lacked antitrust injury.⁴⁵ The better approach would have been to hold that Dr. Johnson's claim failed to state a cause of action under the antitrust laws because the alleged injury did not, and could not, involve harm to competition and consum- ers generally, as opposed to mere injury to Dr. Johnson.⁴⁶ Regardless, the outcome was manifestly correct.

Three years ago, Aquatherm Industries—a manufacturer of solar-powered heating systems for swimming pools—convinced the Eleventh Circuit to reject Florida Power & Light's res judicata defense and to allow Aquatherm to proceed with its federal antitrust claim.⁴⁷ On its second trip to the Eleventh Circuit, Aquatherm Industries, Inc. v. Florida Power & Light Co.,⁴⁸ plaintiff had less success.⁴⁹ Aquatherm claimed that defendant Florida Power & Light ("FPL")—the exclusive provider of electric power for approximately two-thirds of Florida—violated sections 1 and 2 of the Sherman Act by promoting, through direct mailing and advertising, the use of electric pool-heating pumps as an economical way to heat residential swimming pools.⁵⁰ FPL did not sell pool-heating pumps or any other swimming pool equipment.⁵¹ According to Aquatherm, FPUs conduct violated the antitrust laws...