PROVING ANTITRUST INJURY IN FEDERAL COURT:
THE INJURY TO COMPETITION CONUNDRUM
Presented by:
Katherine M.L. Pratt
Katie is an associate attorney with
BHGR. She can be reached at 303-4021600 and via email at
[email protected]
Experience
Katie handles trial-level litigation and civil appeals in the
areas of employment law, civil rights, antitrust law, and
other commercial litigation. She has litigated to successful
conclusion a wide variety of disputes before administrative
agencies, in federal court and in state court. In addition to
her employment law and civil rights practice, Katie has
extensive experience in antitrust and business competition
matters, both in litigation and counseling roles.
Education
J.D., Loyola University Chicago School of Law, 2002
B.A., Political Science, Miami University Ohio, Magna Cum
Laude, Phi Beta Kappa, 1998
Admissions
Illinois, 2002
Colorado, 2005
Wyoming, 2014
U.S. Court of Appeals for the Tenth Circuit
U.S. District Court, Northern District of Illinois
U.S. District Court, District of Colorado
U.S. District Court, District of Nebraska
Memberships
American, Colorado, and Denver Bar Associations
Key Points
• What is antitrust standing?
• How does antitrust injury fit in to the standing
inquiry?
• What is injury to competition?
• How is injury to competition proved?
Antitrust Injury is a Component of
Antitrust Standing
• Article III of the Constitution requires that there be a live case or
controversy.
• Antitrust cases have an additional standing requirement unique to
antitrust cases.
• The requirements of antitrust standing “are more rigorous than
[those] of the Constitution,” Tal v. Hogan, 453 F.3d 1244, 1253 (10th
Circuit 2006).
• A plaintiff “must show (1) an ‘antitrust injury’; and (2) a direct
causal connection between that injury and a defendant’s violation
of the antitrust laws,” Ashley Creek Phosphate Co. v. Chevron USA,
Inc., 315 F.3d 1245, 1254 (10th Cir. 2003) (quoting Sports Racing
Servs., Inc. v. Sports Car Club of Am., Inc., 131 F.3d 874, 882 (10th
Cir. 1997)) (internal quotation marks omitted).
What is Antitrust Injury?
•
This threshold requirement “ensures that the harm claimed by the plaintiff
corresponds to the rationale for finding a violation of the antitrust laws in the first
place.” JetAway Aviation, LLC v. Bd. of County Comm'rs, 754 F.3d 824, 833 (10th
Cir. 2014) (internal citations omitted).
•
“While antitrust standing determines whether the correct plaintiff is before the
court, the antitrust injury doctrine ensures that injuries redressed by the [antitrust
laws] are injuries against which the antitrust laws were meant to protect.”
JetAway, 754 F.3d at 833 (quoting Yavar Bathaee, Note, Developing an Antitrust
Injury Requirement for Injunctive Relief that Reflects the Probability of
Anticompetitive Harm, 13 Fordham J. Corp. & Fin. L. 329, 331 (2008)).
•
“Very simply, the doctrine of antitrust injury requires a court to examine not
only whether the acts the defendant allegedly committed violate the law but also
why they violate the law.” Ronald W. Davis, Standing on Shaky Ground: The
Strangely Elusive Doctrine of Antitrust Injury, 70 Antitrust L.J. 697, 723 (2003).
What is Antitrust Injury?
• According to the Supreme Court antitrust
injury is an “injury of the type the antitrust
laws were intended to prevent and that flows
from that which makes defendants’ acts
unlawful.” Brunswick Corp. v. Pueblo Bowl-OMat, Inc., 429 U.S. 477, 489 (1977).
• But what does this mean?
What is Antitrust Injury?
• “The injury should reflect the anticompetitive
effect either of the violation or of
anticompetitive acts made possible by the
violation.” Id.
• “It should, in short, be ‘the type of loss that
the claimed violations … would be likely to
cause.’” Id.
What is Antitrust Injury?
•
•
Recall that the antitrust laws were enacted to protect competition, not competitors.
Brunswick, 429 U.S. at 488 (citing Brown Shoe Co. v. United States, 370 U.S. 294, 320
(1962)).
Facts of Brunswick case:
– Brunswick acquired a number of failing bowling alleys when those alleys couldn’t
pay for the equipment they bought from Brunswick.
– Plaintiffs were competing bowling alleys and argued that the acquisitions were
unlawful under section 7 of the Clayton Act.
– Plaintiffs argued that had the failing bowling alleys been allowed to close, they
would have benefited from the increased concentration in the market.
– In other words, the Plaintiffs sought damages for the money they would have
received had competition been reduced.
– So, this was not the type of injury the antitrust laws were designed to prevent.
– The Supreme Court found that Brunswick was entitled to judgment not
withstanding the verdict on the Plaintiffs’ damages claim. Brunswick, 429 U.S. at
490.
What is Antitrust Injury?
• The Supreme Court disagreed with the Plaintiffs’ flawed
logic.
• As the Court pointed out, the Plaintiffs still would have
been “damaged” had the failing bowling alleys obtained
refinancing or been bought out by a smaller company.
• “Thus, [Plaintiffs’] injury was not of ‘the type that the
statute was intended to forestall.’” Brunswick, 429 U.S. at
487-88 (quoting Wyandotte Co. v. United States, 389 U.S.
191, 202 (1967)).
• Takeaway: It’s not enough to show that you, the
competitor, have been harmed; you must also show that
the injury you suffered is the type of injury the antitrust
laws were designed to prevent.
Injury to Competition
• The “criterion to be used in judging the validity of a restraint on
trade is its impact on competition.” Nat’l Collegiate Athletic Ass’n v.
Bd. of Regents, 468 U.S. 85, 104 (1984).
• To show injury to competition, a plaintiff suing for damages must
prove an “actual adverse effect on competition as a whole in the
relevant market.” Stephen D. Houck, St. John’s Law Rev., Vol. 75,
Fall 2001, No. 4, last updated March 2012 (quoting Capital Imaging
v. Mohawk Valley Med. Assoc., 996 F.2d 537, 543 (2d Cir. 1993)).
• Summary: “The private plaintiff must show in addition that the
violation cause it actual injury of the kind that the antitrust laws
were designed to prevent or – in the case of equity relief – the
threat of such injury.” Phillip E. Areeda, Roger D. Blair & Herbert
Hovenkamp, II, Antitrust Law: An Analysis of Antitrust Principles
and Their Application, ¶ 330c (2000).
Injury to Competition
• Remember that “[t]he economics of antitrust
policy is based upon the proposition that
competition ends up, in one way or another,
always being good for consumers. That
proposition is the central proposition of
microeconomics, and, therefore, in my view,
the central proposition of all economics.”
Houck, infra at 596-97 (quoting Franklin M.
Fisher’s testimony from the Microsoft trial).
Injury to Competition
• “The [Sherman Act] directs itself not against
conduct which is competitive, even severely so,
but against conduct which unfairly tends to
destroy competition itself.” Spectrum Sports, Inc.
v. McQuillan, 506 U.S. 447, 458 (1993)
• “If, as the metaphor goes, a market economy is
governed by an invisible hand, competition is
surely the brass knuckles by which it enforces its
decisions.” United States v. Syufy Enters., 903 F.2d
659, 663 (9th Cir. 1990).
How Does One Prove Injury to
Competition?
• Actual consumer harm (but this isn’t required)
– Show consumers paid more
– Show that consumers had fewer options
• Why don’t courts require such proof? Because the effects
are inferred if you can show an injury to competition.
• Prove anticompetitive effects in a properly
defined relevant market
– Price
– Output
– Consumer choice & Innovation (at least in high tech
markets and likely others)
How Does One Prove Injury to
Competition?
• Practices that have the effect of driving up prices
• Practices that have the effect of reducing output
artificially
• Practices that stifle a consumer’s ability to choose
between meaningful alternatives
– E.g., Microsoft forced manufacturers of computers
who wanted to install the Windows operating system
to also install Internet Explorer, even though Microsoft
knew consumers would prefer Netscape Navigator.
How Does One Prove Injury to
Competition?
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Contracts
Threats to cancel contracts or licenses
Witness testimony
Emails and other written correspondence
Business presentations and plans
The business’ own market analysis
Financial records and tax returns