On February 18, 2009, the United States Court of Appeals for the Tenth Circuit affirmed dismissal of a complaint filed by a ski rental store against the Deer Valley, Utah ski resort operator with its own ski rental operation alleging monopolization and attempted monopolization in violation of Section 2 of the Sherman Act. Christy Sports LLC v. Deer Valley Resort Co., Ltd., No. 07-4198 (10th Cir. Feb. 18, 2009) (Christy Sports v. Deer Valley Resort Decision). Plaintiff had sought to prevent enforcement of a restrictive covenant governing its use of property sold by the ski resort operator. When the ski resort operator sold the parcel of land on which the ski rental store operates, it imposed a restrictive covenant in the deed only permitting the operation of a ski rental business with its permission. For years, the ski resort operator permitted plaintiff to operate accepting a share of the profits in return. Preferring to capture that business in the future, the ski resort operator sought to enforce the restrictive covenant and put the ski rental store out of business. The Tenth Circuit rejected plaintiff’s claims under Section 2 of the Sherman Act for two independent reasons. First, the Court rejected plaintiff’s relevant product market definition of ski rental stores. Rather the Court held that the relevant market was the skiing experience. It reasoned that skiers do not come to the area to rent skis and that ski rentals are just one component of the skiing experience that they seek. It should be of no consequence that the ski resort operator charges more for ski rentals and as a consequence, less for e.g., lift tickets. Second, the Court held that there were no allegations of anticompetitive conduct. The antitrust laws do not forbid a business from imposing a restrictive covenant on a neighboring parcel of land to avoid competition and justify its investment in entry. Accordingly, nothing precludes the enforcement of an otherwise permissible restrictive covenant.
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Posted by : | On : February 23, 2009
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Posted by : | On : July 18, 2008
The Tenth Circuit affirmed summary judgment dismissing a Complaint brought by an owner of a windshield repair shop alleging State Farm’s policy that advises its insureds to replace (rather than repair) windshields with cracks longer than six inches violates Sections 1 and 2 of the Sherman Act and the Colorado Consumer Protection Act. Campfield v. State Farm Mutual Automobile Insurance Co., Nos. 06-1442, 06-1467, 06-1469, 2008 WL 2736656 (10th Cir. July 15, 2008). The Court rejected plaintiff’s Section 1 and 2 claims because he could not establish a relevant product market — a necessary element of both claims. The Court noted that plaintiff alleged State Farm’s misuse of its monopsony power over its insured and therefore the relevant market “is not the market of competing sellers but of competing buyers. This market is comprised of buyers who are seen by sellers as being reasonably good substitutes.” Id. at *4 (citation omitted). Plaintiff alleged a “State Farm insured repairable windshield market, in the geographic area of the United States of America.” Id. The Tenth Circuit rejected this market definition as underinclusive because plaintiff offered no basis why sellers would not view other buyers of repairable windshields as reasonable substitutes. The Tenth Circuit made clear that the rule of reason applied to the Section 1 claim notwithstanding plaintiff’s characterization of State Farm’s conduct as a group boycott. The restraint was vertical in nature and not the classic horizontal group boycott that triggers per se condemnation. The Tenth Circuit rejected the Consumer Protection Act claim because the recommendations to insureds to replace rather than repair windshields were not knowing and intentional concealment or misrepresentations as required under the Act. This opinion is useful for its discussion of limitations on pleading relevant markets as well as the relevant market inquiry in monopsony cases.