In a significant victory to antitrust victims, the United States Court of Appeals for the Second Circuit refused to enforce a bar in arbitration contracts that prohibited collective actions. In re American Express Merchants’ Litigation, No. 06-1871-cv (2d Cir. Jan. 30, 2009) (Amercian Express Merchants Litigation attached). Plaintiffs were merchants who alleged that American Express tied acceptance of its charge card to its credit cards – it required merchants to accept both cards rather than allowing them to choose to accept only the charge card. The merchants claim that this tying scheme allowed American Express to charge them supracompetitive fees on American Express credit card purchases in violation of Section 1 of the Sherman Act. The merchant agreements had an arbitration provision, which also barred class or collective actions whether in arbitration or otherwise. The Second Circuit held that such clauses are unenforceable where as here the amount of the potential claims are so small that it would effectively preclude plaintiffs from bringing antitrust actions or arbitration proceedings on their own. The Court expressly chose not to address whether such restrictions are per se unenforceable in antitrust actions.
Oct
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Posted by : | On : October 6, 2008
The United States Court of Appeals for the Second Circuit recently held that Major League Baseball’s licensing of team logos was subject to rule of reason review under Section 1 of the Sherman Act. The court affirmed summary judgment in favor of MLB because the appellant did not challenge the licensing program under that rule. Major League Baseball Properties, Inc. v. Salvino, Inc., No. 06-1867 (2d Cir. Sept. 12, 2008) (attached MLB Properties v. Salvino). The baseball clubs give (with a few exceptions) exclusive licensing rights to a single entity. According to the MLB’s expert Frank Fisher (a world renowned economist), this system offers many efficiencies including allowing MLB licensing to compete better with other sports licensing; offering one-stop shopping to licensees; centralized management on matters such as quality control, intellectual property rights enforcement and negotiations and sales to licensees. According to Fisher, these efficiencies should result in lower licensing fees. The appellant had offered an expert report from economist Mr. Louis A. Guth, a Special Consultant for NERA, who disputed these efficiencies and asserted that the MLB licensing entity functioned as a cartel unresponsive to demand. The Second Circuit affirmed the exclusion of Guth’s report under Daubert v. Merrell Dow because (unlike Fischer’s report) it was unsupported by evidentiary citations or empirical analysis. The Second Circuit held that the rule of reason and not the per se rule or “quick look” analysis applied because the “arrangement might plausibly be thought to have a net precompetitive effect, or possibly no effect at all on competition.” Through different reasoning, the Second Circuit in this case reached the same result as the Seventh Circuit did in a challenge to a nearly identical licensing program by the NFL. See American Needle Inc. v. Nat’l Football League, No. 07-4006, 2008 WL 3822782 (7th Cir. Aug. 18, 2008) discussed in the Post of September 4, 2008. In that case, the Seventh Circuit held that the NFL teams were incapable of conspiring with themselves under the Copperweld doctrine in these particular circumstances. In this case, the Second Circuit did not address the Copperweld doctrine, but it did observe that the relevant market should include licenses for other professional sports. Therefore, it would be unlikely for the MLB’s licensing activities to have an effect on competition. This case should prove useful for practitioners for its discussion of when the per se rule, rule of reason or quick look analysis applies, the tests used under these analyses and the pitfalls of an inadequate expert report.