Continuing a well established trend and reflecting consistency among the federal courts, at least two federal courts in five months have granted summary judgment for lack of antitrust injury where plaintiffs could not show competition had been injured. The two cases briefed here demonstrate that federal courts require that without any accompanying injury to competition, injury to a competitor will not be enough to show antitrust injury and establish standing to assert a claim under the Sherman Act.
(1)Gulf States Reorganization Group, Inc. v. Nucor Corporation
In Gulf States Reorganization Group, Inc. v. Nucor Corporation,1 Gulf States Reorganization Group (“GSRG”) alleged that defendants’ purchase of steel-related assets (“Assets”) in a bankruptcy court-supervised auction violated federal antitrust laws. GSRG bid on the Assets in such an auction and lost to Gadsden Industrial Park, LLC (“Park”), one of three named defendants to the action and an affiliate of defendant Casey Equipment Corporation (“Casey”). GSRG alleged that Nucor violated federal antitrust laws by virtue of its involvement with Casey and, in turn, Park, in connection with the purchase of the Assets.
GSRG had previously complained to the Federal Trace Commission about possible antitrust concerns arising from Nucor’s alleged involvement in Park’s purchase of the Assets. The FTC did not, however, take any action.
Nucor and Casey had a history of doing business together, including the buying and selling of used steel-related equipment, and they entered into an agreement to divide the Assets and split the risk of reselling them. Nucor and Casey described their purchase of the Assets through Park as a “good faith business arrangement” while GSRG contended that the agreement and other facts supported an inference of anti-competitive intent and that Nucor’s backing of Park, which competed against GSRG in the bidding process, engendered an illegal anti-competitive effect. Further, GSRG alleged that the defendants’ unlawfully excluded GSRG from the market.
(a)Antitrust injury at summary judgment: No antitrust injury where only injury is to a competitor
The court characterized GSRG’s lawsuit as “an attempt by a losing bidder to undo its loss in a competitive, free and open bankruptcy auction by exacting treble damages against the winning bidder.”2 Quoting Associated General Contractors, the court stated that to determine whether a plaintiff has antitrust standing, courts must “evaluate the plaintiff’s harm, the alleged wrongdoing by the defendants, and the relationship between them.”3 It then noted the two-prong approach adopted by the Eleventh Circuit for determining whether a plaintiff has antitrust injury. Under that approach, a plaintiff must establish that (1) it has suffered antitrust injury; and (2) it is an efficient enforcer of the antitrust laws.4
In evaluating whether GSRG suffered antitrust injury, the court applied the long-standing holdings of the Supreme Court on antitrust injury, including Brunswick Corp. v. Pueblo-Bowl-O-Mat,5 Cargill v. Monfort,6 and Brown Shoe.7 The court found factual similarity between the facts at bar and those in Brunswick. Like in Brunswick, where the plaintiffs would have suffered the same identical “loss” but no compensable injury had the acquired bowling centers been refinanced or purchased by another, more “shallow pocket” party, GSRG would have suffered the same identical “loss” and no compensable injury had the Assets been acquired by another party. Taking the evidence in the light most favorable to GSRG, the court found that GSRG was simply the losing bidder at a fair and open bankruptcy court-supervised auction.8 Likewise, there was no evidence, the court pointed out, that any of the defendants interfered with GSRG’s financing of its bids for the assets, its ability to make bids at earlier auctions or its ability to make higher, conforming bids at the final auction. The court thus determined that GSRG’s alleged “injury” did not stem from a reduction or elimination of competition but rather, derived solely from a claim that there was “too much” competition at the auction and, because of that competition, it could not purchase the Assets for the price it was willing to pay, which price was, in fact, below market.9
(2)Tri-Gen Inc. v. Int’l Union of Operating Engineers
In a lawsuit decided last January, Tri-Gen Incorporated (“General Drilling”) sued International Union of Operating Engineers, Local 150, AFL-CIO (“Local 150”) in district court for federal labor and antitrust violations.10 Local 150 moved for dismissal and summary judgment on all counts. The Seventh Circuit affirmed the district court’s order granting Local 150’s motion for summary judgment.
Unlike its competitors, General Drilling is a non-union company and was not a signatory of the Northern Illinois Material Producers Agreement (“NIMPA”), a multi-employer association collective bargaining agreement between material producers and Local 150. It was a subcontractor which performed drilling work for Material Service at the latter’s limestone quarries in Northern Indiana. Material Service was a signatory of NIMPA. The union made repeated attempts to induce General Drilling to sign NIMPA, advising the company that it was paying wages below those established in the area by the union and threatening to picket at sites where General Drilling performed work to advertise to the public the company’s inadequate wages. General Drilling refused to sign NIMPA because it would have “hugely” increased its labor costs.
The union kept Material Service informed of its communications with General Drilling, including copying it on a letter sent to General Drilling that had a note stating “Please review and any support would be appreciated.” Upon receiving the letter, Material Service formulated a plan to solicit bids from alternate drillers to avoid interference with its production and sales in the event of picketing. Several months later, Local 150 picketed one of Material Service’s quarries where General Drilling was performing work. Material Service immediately terminated General Drilling and replaced it with another drilling company which charged the same rates as General Drilling. General Drilling then brought suit against the union, claiming that the union violated labor law and restrained trade by forcing Material Service into a conspiracy to terminate it so that one or more of the unionized drillers would get the business and that this suppressed price competition in violation of the Sherman Act.
The Seventh Circuit affirmed the lower court’s finding that General Drilling did not have antitrust standing because it did not demonstrate consumer injury.11 The court noted that Material Service was the consumer of the drilling services provided by General Drilling and pointed out that it was General Drilling, not Material Services, which brought the lawsuit. It rejected General Drilling’s allegation that the injury it suffered as a competitor in the drilling services industry amounted to antitrust injury. The court held that “transfer of business from one company to another without an accompanying effect on competition, cannot be an antitrust violation” because, quoting Brunswick and Seventh Circuit precedent, “the antitrust laws were enacted for the ‘protection of competition, not the competitors.'”12 Furthermore, General Drilling did not have standing because it did not show that “its loss comes from acts that reduce output or raise prices to consumers.”13 The consumer, Material Service, was charged the same price by its alternate driller as General Drilling had charged. Likewise, there was no evidence that the claimed conspiracy reduced output in the market.
General Drilling also failed to show antitrust injury when it was unable to demonstrate that it was excluded from the market. It continued to work at other quarries that had not been picketed by the union and, the next year, Material Service twice invited it back to drill at its quarries.
(3)What Gulf States and Tri-gen Tell Us About Antitrust Injury at the Summary Judgment Phase
Both Gulf States and Tri-gen indicate that federal courts are continuing to follow the well-established trend that began with Brunswick and are consistently interpreting “antitrust injury” to mean injury to competition. The courts will grant summary judgment where it has not been shown that a plaintiff has suffered an injury of the type the antitrust laws were intended to prevent. Injury to competitors without any accompanying injury to competition will not suffice. Thus, unless a plaintiff’s allegations, if assumed to be true, and its evidence, taken in the light most favorable to it, raise a triable issue of fact that a defendant’s conduct has caused injury to the market by increasing prices or reducing output, a plaintiff’s Sherman Act claim will not survive summary judgment.
- No. 1:02-cv-2600-RDP (N.D. Ala., September 30, 2005) (“Gulf States“).
- Id. at 24.
- Associated Gen’l Contractors of Cal. v. Cal. State Council of Carpenters, 459 U.S. 519, 535 (1983).
- Gulf States, No. 1:02-cv-2600-RDP at 25.
- 429 U.S. 477 (1977).
- 479 U.S. 104, 109 (1986).
- Brown Shoe Co., Inc. v. U.S., 370 U.S. 294 (1962).
- Gulf States, No. 1:02-cv-2600-RDP at 8-9.
- Id. at 26-27.
- Tri-Gen Inc. v. Int’l Union of Operating Engineers, 433 F.3d 1024 (7th Cir. 2006) (“Tri-gen“).
- Id. at 1031. The court was applying another Seventh Circuit decision, Wigod v. Chicago Mercantile Exchange, 981 F.2d 110, 1515 (7th Cir. 1992).
- Tri-gen, id.; quoting Brunswick, 429 U.S. at 488 and Midwest Gas Services v. Indiana Gas Co., 317 F.3d 703, 711 (7th Cir. 2003).
- Tri-gen, id., quoting Stamatakis Industries, Inc. v. King, 965 F.2d 469, 471 (7th Cir. 1992).
Heather M. Cooper