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.
Posted by : Matthew Wild | On : February 6, 2009
Tags:american express, Antitrust, arbitration, charge card, class actions, collective actions, credit card, honor all cards, matthew s. wild, matthew wild, merchants litigation, second circuit, sherman act, tying
Posted by : Matthew Wild | On : October 20, 2008
In In re Apple & AT&TM Antitrust Litigation, No. 07-CV-05152-JW (N.D. Cal. Oct. 1, 2008) (attached IPhone Decision), plaintiffs alleged that the arrangement in which the Apple IPhone worked exclusively with AT&TM not only for the initial two-year contract period but also for three additional years after their contracts expired with AT&TM violated Section 2 of the Sherman Act. Plaintiffs also alleged that Apple’s restrictions on dowloadable applications for use on IPhones violated Section 2. Plaintiffs alleged Section 2 claims of monopolization and attempted monopolization of the market for IPhone applications and monopolization, attempted monopolization and a conspiracy to monopolize the market for voice and data services to IPhone owners. The Northern District of California held that there were cognizable relevant product markets limited to Apple IPhone customers in these aftermarkets. The court distinguished cases in which customers voluntarily commit to a lock-in through a contract such as when a franchisee agrees to purchase certain products from its franchisor. In this case, the Complaint alleged that the lock-in was created through deceit or unbeknownst to the customers at the time of purchase. The Complaint alleged that the IPhone customers did not know that they could not unlock their IPhones from AT&TM service after the two-year commitment or the limitation on downloadable applications. This case is consistent with the Supreme Court’s approach in determining whether aftermarkets represent separate relevant product markets. The key inquiry is whether the consumer knows or has reason to know of limitations in purchasing products or services in the afermarket before he becomes locked-in by the initial purchase.
Posted by : Matthew Wild | On : July 15, 2008
On July 11, 2008, the Ninth Circuit affirmed dismissal of a franchisee’s tying claim regarding credit and debit card processing services that was nearly identical to a claim that Judge Posner rejected on June 23, 2008 in Sheridan v. Marathon Petroleum LLC. (See July 11, 2008 Post). In Rick-Mik Enterprises Inc. v. Equilon Enterprises, LLC, No. 06-55937, 2008 WL 2697793 (9th Cir. July 11, 2008), a franchisee claimed that the requirement that it use the franchisor’s credit and debit card processing services was tying in violation of Section 1 of the Sherman Act. The Ninth Circuit rejected this claim for the same reasons that the Seventh Circuit did in Sheridan. The Ninth Circuit affirmed dismissal because that the complaint lacked (1) allegations that Equilon had market power in the gasoline franchise market and (2) credit and debit card processing services was not a distinct product from the rest of the Equilon gasoline station franchise.
Posted by : Matthew Wild | On : July 10, 2008
On June 23, 2008, the Seventh Circuit affirmed dismissal of a Marathon gas station franchisee’s claim that requiring the use of Marathon transaction processing equipment for transactions with Marathon gas cards violated the Sherman Act. Sheridan v. Marathon Petroleum Co. LLC, No. 07-3543, 2008 WL 2486581 (7th Cir. June 23, 2008). To state a claim for tying in violation of Section 1 of the Sherman Act, the franchisee had to plead, among other things, that Marathon had monopoly power and that sale of one product (the tying product) is conditioned on the purchase of another product (the tied product). Judge Posner found that the complaint lacked sufficient allegations of market power because “[n]o market shares statistics for Marathon either locally or nationally are given, and there is no information in that complaint that would enable local shares to be calculated.” Id. at *4. Judge Posner also found no tying because “[a]ll that [Marathon] has done is require its franchisees to honor Marathon credit cards and to process sales with them through the system designated by Marathon so that customers who use its cards have the same purchasing experience no matter which Marathon gas station they buy from.” There is no requirement that franchisees use the Marathon processing system for other credit cards. Although the issues in this case are straightforward, Judge Posner’s opinion is very useful in explaining under what circumstances a tying arrangement might be illegal.