The Ninth Circuit recently affirmed the dismissal of the claims of an antitrust plaintiff on the ground that he lacked the injury-in-fact required for Article III standing. Gerlinger v. Amazon.com Inc. and Borders Group, Inc., 526 F.3d 1253 (9th Cir. 2008). Plaintiff failed to create an issue of fact in response to defendants’ showing on summary judgment that plaintiff had not paid more for books as he claimed in his complaint.
Plaintiff, an individual purchaser of books online, challenged an agreement between Amazon.com, an online seller, and Borders Group, Inc., a brick-and-mortar seller. Borders had previously failed at operating a competitive website.
Under the agreement, the Borders website address directed shoppers to a “mirror” website hosted by Amazon. Borders received a commission for each resulting sale. Borders also agreed to abandon its direct participation in the online market, and agreed that it would not reenter that market during the term of the agreement.
Plaintiff alleged that this part of the agreement constituted horizontal market allocation in violation of Section 1. In his complaint he alleged that, as a result of the agreement, he was forced to pay supracompetitive prices for his books.
Defendants moved for summary judgment or summary adjudication, supported by the declaration of an Amazon vice president showing that prices for books on the Amazon site declined after defendants entered into the challenged agreement. The district court then ordered the parties to file supplemental papers addressing plaintiff’s standing.
Defendants' response included additional declarations showing that the prices for books paid by plaintiff after the agreement became effective were the same or lower than the prices listed by defendants for those books before the agreement. Defendants listed the prices that plaintiff had paid and compared those prices to prices predating the agreement.
Plaintiff sought leave to depose the Amazon vice president who had provided the original declaration. District Court Judge Patel responded by inviting plaintiff to file a five-page brief explaining how the vice president’s testimony would show that plaintiff had suffered an injury. Plaintiff did not file such a brief.
Instead, plaintiff filed supplemental papers in which he asserted that prices would have been still lower absent the agreement; submitted academic articles; and rested on his pleadings, arguing that his injury could not be addressed until the damages phase of the case.
The district court dismissed plaintiff’s antitrust claims with prejudice.
The Ninth Circuit Court of Appeals affirmed, stating that standing requires, inter alia, proof of an injury-in-fact, which requires that plaintiff suffered an injury that bore a causal connection to the alleged antitrust violation. Because defendants had submitted evidence that plaintiff suffered no injury-in-fact, plaintiff could no longer rest on the allegations of his complaint. He was required by Fed.R.Civ.P. 56(e) to provide admissible evidence of specific facts supporting his standing. Gerlinger, 526 F.3d at 1255-56, citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). Plaintiff did not provide such evidence, and so failed to create an issue of fact. He did not show that he had paid a higher price, received poorer service or suffered any other form of injury. The court of appeals held, therefore, that the district court had properly granted summary judgment and dismissed the claim because plaintiff lacked Article III standing.
Plaintiff also attacked a provision in the Amazon-Borders agreement stating that Amazon would not charge higher prices to customers of the mirror site than Amazon charged to customers on its own site. Plaintiff alleged that this was per se price fixing. The Ninth Circuit noted that the arrangement “looks very much like a lawful joint venture or a licensing agreement to share brand names,” but declined to reach the merits of the claim or the issue of antitrust injury. Gerlinger, 526 F.3d at 1256. The court affirmed the district court’s dismissal of this claim for lack of any injury-in-fact.
Authored by:
Thomas D. Nevins
(415) 434-9100
tnevins@sheppardmullin.com
On June 30, the European Commission ("EC") introduced a settlement procedure for cartels which will allow the EC to settle cartel cases through a simplified procedure. Under this procedure, alleged cartels participant having seen the evidence in the EC's file can "choose to acknowledge their alleged involvement in the cartel and their liability for it". In return for this acknowledgement, the EC can reduce the fine imposed on the parties by 10%. The EC's stated aim is to simplify its administrative proceeding stages and reduce litigation before the European Courts in cartel cases which will free up the EC's resources to pursue other cases. The EC analyzed 51 contributions received during the public consultation launched on October 27, 2007, and revised the package in consultation with the Member States' competition authorities. The legislative package consists of a Commission Regulation together with a Commission Notice explaining the new system in detail. EC Competition Commissioner, Neelie Kroes, commented, "This new settlements procedure will reinforce deterrence by helping the Commission deal more quickly with cartel cases, freeing up resources to open new investigations. Companies which are convinced that the Commission can prove their involvement in a cartel, will also benefit from quicker decisions and a fine reduction.” Under the new settlement procedure, the EC neither negotiates nor bargains the use of evidence or the appropriate sanction but can reward the parties’ cooperation to attain "procedural economies". This cooperation is different from the voluntary production of evidence to trigger or advance the EC's investigation which is already covered by the EC's Leniency Notice. Where both the settlement reduction and the leniency reduction are applicable, they are applied cumulatively. It will remain to be seen whether the 10% reduction now decided upon by the EC will be sufficient to encourage companies to participate in this settlement procedure particularly where there is a high risk of follow-on private litigation.
On June 25, the EC imposed fines of €4 970 000 on aluminum fluoride producers for allegedly colluding to fix prices in violation of the ban on cartels and restrictive business practices in the EC Treaty (Article 81) and the EEA Agreement (Article 53). Aluminum fluoride is a chemical used to lower the smelting temperature of aluminum. It thereby reduces energy consumption in the smelting process. During the second half of 2000, the EC alleged that the companies agreed worldwide target prices and divided markets. EC Competition Commissioner, Neelie Kroes said: "This decision shows that the Commission takes all cartels seriously. Whatever the scope of the affected market, the duration of the cartel or the size of the companies involved; there is no safe haven for those who do not play by the rules." This is the fourth cartel decision made by the EC so far in 2008 bringing the total fines imposed this year to over €150 million.
On June 24, the European Commission announced that it had filed cases with the Tribunal de Commerce in Brussels to seek damages from four companies which it found in 2007 to have breached Article 81(1) of the EC Treaty by operating allegedly illegal price-fixing, bid-rigging and market-sharing cartels relating to the installation and maintenance of lifts and escalators in Belgium, Germany, Luxembourg and the Netherlands between 1995 and 2004. The Commission's damages actions relate to the alleged increased prices that it claims were paid as a result of the cartels for the installation and maintenance of lifts and escalators at its own buildings and those of other EU institutions in Brussels and Luxembourg. The Commission's actions raise the unusual prospect of a claimant for damages relying on evidence of infringement of Article 81(1) which it has itself established in a binding decision. In announcing its decision to bring these damages actions, EC Vice-President, Siim Kallas, stated that this "represents an important example of a coherent attitude of the Commission in acting both as market regulator and as diligent administrator of EU tax-payers' money". The EC considers that it is under a duty to seek to recover financial losses (and so expense to the tax payer) resulting from the alleged illegal actions of its contractors. However, the decision to bring these actions would also seem to have been motivated by the EC's work to encourage and facilitate private actions in relation to breaches of competition law, in particular its White Paper on damages actions. The Commission notes that it is open to anyone who has been damaged by these cartels to bring actions before national courts in reliance on the Commission's infringement decision. Neelie Kroes, EC Competition Commissioner, stated that the EC is "leading by example" in bringing the damages action in this case.
On June 11, the UK's Office of Fair Trading (OFT) announced that three businessmen had been sentenced to imprisonment for between two and a half to three years after pleading guilty to committing the cartel offence under section 188 of the Enterprise Act 2002. The men admitted to dishonestly allocating markets and suppliers, restricting supplies, price-fixing and bid-rigging in relation to the supply of marine hose and ancillary equipment in the UK. In addition, the three men have been disqualified as company directors for between five and seven years. This is the first time that convictions have been brought under the UK's cartel offence. The three individuals had been arrested during an operation coordinated between the OFT and the US Department of Justice, in Houston, Texas, and were allowed to return to the UK to face criminal charges as part of a plea agreement with DOJ. They returned to the UK in December 2007 and were arrested at Heathrow Airport by the Metropolitan Police. In announcing these convictions, John Fingleton, OFT Chief Executive, stated that "this first criminal prosecution sends a clear message to individuals and companies about the seriousness with which UK law fives cartel behavior".
New amendments to Egypt's antitrust law have been met with strong criticism after provisions contained in the draft legislation were modified by parliament. The law, adopted in mid-June by the country's parliament, introduces a leniency program into Egypt for the first time. But the press has reported that some commentators have complained that political pressure has rendered the leniency provision ineffective. Under the draft proposals presented to Parliament, companies applying for leniency would have been exempt from fines relating to cartel offences. The Egyptian Parliament rejected this proposal and eventually passed a version of the provision in which leniency applicants will be exempt from a percentage of the fine to be decided by a judge. The draft amendments also contained a provision to raise the level of fines for monopolies to up to 15 per cent of a company's turnover. Parliament also rejected this proposal and instead imposed caps of about €33 million on fines according to media reports. The head of Egypt's antitrust agency, Mona Yassin, said the fining guidelines might not provide a sufficient deterrent to large companies. She added that punishing whistleblowers would act as a disincentive to those who wanted to go to the authorities.
On June 16, the Supreme Brazilian Tribunal of the Federal District upheld a €370,000 fine imposed on São Matheus Lageado for its part in an alleged construction cartel. São Matheus Lageado is one of 17 defendants alleged to have fixed the price of flint chippings, an important raw material sold to civil construction firms. Following a 2005 prosecution by CADE, the specialist competition tribunal, the alleged conspirators were fined between 15 and 20 per cent of their 2002 revenues, totaling more than BRL60 million (€24 million). The case was a milestone in Brazilian antitrust enforcement because it was the first to have been prosecuted using evidence obtained during a dawn raid and supported by sophisticated economic analysis.
On June 17 and 19, Spain's Competition Commission raided 13 cosmetics manufacturers on suspicion of price-fixing. The raids signal the beginning of three separate cartel proceedings into possible price-fixing of shower gel, toothpaste and professional hair care products. The Commission says the investigations will be a priority given the serious and direct consequences the alleged conduct could be having on consumers. This is the largest number of companies ever to have been dawn raided at the same time in Spain. The Spanish Competition Commission has 18 months to come to a decision on the case, and alleged cartel participants can face a maximum fine of 10 per cent of their annual turnovers.
On June 5, the Korean Fair Trade Commission fined Intel Won26bn ($25m) for allegedly abusing its dominant market position in the country and offering discounts to two Korean PC makers in a supposed bid to drive rival Advanced Micro Devices out of the market. The KTFC's ruling followed a three-year investigation. “We took appropriate steps based on facts,” Baek Yong-ho, chairman at the Korean Fair Trade Commission. “Intel stifled competition, using its dominant position.” Intel said it was “disappointed” with the regulator’s ruling and could appeal. “We feel the commission has overlooked or ignored key evidence that demonstrates Intel's business practices have been lawful and pro-competitive…Once we've reviewed the findings in detail, it is possible that Intel will request a further review and, if necessary, an appeal which will permit a court to review the case independently”.
Authored by:
Neil Ray
(619) 338-6595
nray@sheppardmullin.com
