More than 120 auto dealers in 17 states are alleging in a new $50 million antitrust suit that they paid higher prices for less reliable vehicle history reports thanks to Carfax’s exclusive dealing arrangements with major players in the auto industry.

Carfax has monopolized the vehicle history reports market and raised prices by making exclusive deal agreements with car manufacturers and used car listing websites, according to the 121 plaintiffs in Hyundai Mazda NYLSI Inc. d/b/a/ Sunrise Toyota et al. v. Carfax Inc., which was filed in the United States District Court for the Southern District of New York.

Many car manufactures have incorporated vehicle history reports into their business by requiring reports for their certified pre-owned programs.  Under the programs, consumers know they are purchasing cars approved for reuse by the automakers. 

Carfax provides marketing support to the manufacturers of 37 car brands in exchange for exclusively using Carfax vehicle history reports in their certified pre-owned programs, the complaint states.  These agreements typically last three years and can be renewed multiple times.

The complaint alleges Carfax created a monopoly by entering into exclusive deals with the most popular used car listing websites: Autotrader.com and Cars.com.  Under the terms of these agreements, the websites will post vehicle history reports only from Carfax.

Plaintiffs argue the exclusivity agreements with both the manufacturers and the websites have forced them to purchase vehicle history reports from Carfax to maintain their auto dealing businesses.   According to the complaint, certified pre-owned vehicles account for 12 percent of all used car sales, and dealers are unable to make these sales if they do not purchase reports from Carfax.

In addition, if a dealer purchases a vehicle history report from a company other than Carfax, there is no weblink to the report, which allegedly causes consumers to get a false “impression” the vehicle has a blemished history and should not be purchased when shopping on a dealer’s online listings.

The plaintiffs also allege that Carfax has used its monopoly power to raise prices to supracompetitive levels.  Unlike other vehicle reporting companies, Carfax sets monthly fees based on a dealer’s entire inventory with prices ranging from $899 per month for small dealerships to $1,549 for larger dealerships.

Bosley Inc., the nation’s largest surgical hair restoration company, has agreed to a consent order settling a Federal Trade Commission (“FTC”) complaint alleging that the company exchanged competitively sensitive information with Hair Club Inc. before the two companies merged.

Bosley, a subsidiary of Aderans Co Ltd., performs hair loss treatments at 22 offices across the United States.  According to the FTC complaint, Bosley’s CEO discussed price floors and discounts, business expansions and operations, and future products with executives at Hair Club Inc. and other competitors for four years.

While the FTC did not find evidence of an explicit agreement between Bosley and Hair Club, Section 5 of the Federal Trade Commission Act authorizes the FTC to bring a complaint if it finds evidence of unfair and anticompetitive acts that could harm consumers.

“The information could facilitate coordination or endanger competition by reducing uncertainty about a rival’s product offerings, prices, and strategic plans.  For example, the information exchanges could lead a competitor to determine not to open facilities or market services in a particular location,” the FTC’s complaint analysis states.

Aderans, a Japanese company, purchased Hair Club Inc. for $163.5 million in July 2012.  The FTC found the anticompetitive communications while conducting investigations to determine whether or not to approve the acquisition.

As part of the agreement, Bosley and Aderans must immediately stop any communications of sensitive, nonpublic information with competitors.  The companies must also implement antitrust compliance programs requiring all employees to participate, including the highest level executives.  Bosley and Aderans will also submit compliance reports to the FTC when they make any corporate changes affecting competition.

The FTC will accept public comment on the consent agreement until May 8, 2013.  Members of the public can submit comments online or they can mail comments to Federal Trade Commission, Office of the Secretary, Room H-113, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

The U.S. Court of Appeals for the Ninth Circuit has revived plaintiffs’ state antitrust claims in In re: Western States Wholesale Natural Gas Litigation, finding that federal regulation of the interstate natural gas market does not preempt state antitrust law claims that energy companies manipulated intrastate transactions.

The Ninth Circuit ruled that Congress intended its amendments to the Natural Gas Act to provide states with the flexibility to regulate the industry – not to preempt such efforts.  Under the law, the federal government can regulate only transportation of natural gas between states, interstate natural gas wholesales, and the energy companies involved in interstate transport or wholesales.

The case arose out of claims that the defendants violated antitrust laws by manipulating the natural gas market and selling natural gas at artificially high prices, leading to the energy crisis of 2000-2002.  These claims were based on admissions by energy companies that their employees reported false data to price index publications.  Buyers and sellers rely on these price indices to set the actual market price for natural gas.  The energy traders also allegedly engaged in “wash sales,” which are prearranged trades involving a sale and a purchase for equal volumes.  Plaintiffs claim the price manipulation limited competition and violated antitrust laws.

Defendants sought to dismiss state antitrust law claims by arguing that such state law claims were preempted by the Natural Gas Act, which gives the Federal Energy Regulatory Commission (“FERC”) the power to set wholesale prices.  The U.S. District Court for the District of Nevada agreed and dismissed the claims.

The Ninth Circuit’s opinion rejected the district court’s analysis of the Natural Gas Act by distinguishing between prices under FERC’s jurisdiction and ones outside its jurisdiction.

The price index publications compile prices across the natural gas industry and include not only prices for interstate transactions – which are regulated by the federal government – but also transactions that occur in a single state.  The court held that the NGA does not preempt plaintiffs’ state antitrust claims because they arise out of price manipulation associated with intrastate transactions falling outside of the FERC’s jurisdiction.

Boycotts, spying and defamation are the Chicago way of snuffing out competition in the prom dress market, according to an antitrust lawsuit filed against Peaches Boutique in the U.S. District Court for the Northern District of Illinois.

Hannah’s Boutique Inc., a prom dress seller in the Chicago market alleges in Hannah’s Boutique Inc. v. Barbara Ann Surdej et al. that established prom dress retailer Peaches Boutique and its principals used hardball tactics in blocking competition from newcomer Hannah’s in violation of the Sherman Act and various Illinois state laws.  According to Hannah’s complaint, Peaches’ suppression of competition has inflated prom dress prices and reduced consumer options.

Hannah’s alleges that during the last 25 years, defendant Peaches Boutique has established “a reputation as one of the most fashionable and customer service oriented” prom dress retailers in Chicago.  Allegedly, Peaches has been able to dominate the market by stocking over 20,000 dresses in every size and color.

According to Hannah’s, Peaches engaged in illicit anticompetitive conduct at formal wear expos, where retailers gather each year to place dress orders for the upcoming season.  Peaches allegedly met with designers at the 2011 and 2012 expos and threatened to no longer carry the designers’ dresses if they continued to do business with Hannah’s.  Hannah’s alleges that the combination of Peaches’ threats and its dominance in the Chicago market forced designers to stop filling Hannah’s dress orders and remove Hannah’s as a vendor on their websites.

Peaches’ owners allegedly slandered Hannah’s (which is owned by a Muslim), asking the designers’ sales representatives, “How can you sell to those Muslims; they barbecue goats.”  Peaches also allegedly falsely accused Hannah’s of selling knockoff dresses and selling below the designers’ discount prices.

Hannah’s alleges that Peaches then sent employees into Hannah’s to take photos and videos of its stock and invoices.  Peaches allegedly used the spying to ensure that designers were following through with a boycott of Hannah’s.

According to Hannah’s, Peaches has also engaged in predatory and anticompetitive behavior against other competitors.  The complaint names five other formal wear boutiques that were allegedly forced out of the Chicago market since 2004.

“Peaches’ espionage and monitoring, orchestration of conspiracies and concerted refusals to deal, and elimination of horizontal competition has no pro-competitive benefits and no legitimate business justification,” the complaint alleges.

Antitrust claims against the main supplier of nutritional additives for infant formula in the United States have been thrown out because the plaintiff’s claims were too speculative to establish standing, a federal judge in Maryland has ruled.

Judge William D. Quarles of the U.S. District Court for the District of Maryland granted defendant Martek Biosciences Corp. summary judgment in BNLfood Investment SARL v. Martek Biosciences Corp., finding that plaintiff BNLfood had failed to show an antitrust injury from Martek’s service agreements and alleged monopoly.

BNLfood alleged that in 2002, Martek began providing infant formula manufacturers – the Mead Johnson Company, Nestle Ltd., Abbott Laboratories, and PBM Products LLC – with nutritional supplements for brain and eye development, known as ARA and DHA.  Martek’s customers controlled over 90 percent of the baby formula market.

According to BNLfood’s complaint, three of the formula makers agreed to sole source agreements, in which they agreed to buy the nutrition supplements from only Martek.  Nestle did not sign a contract, but informally agreed to use only Martek for its ARA and DHA needs.

BNLfood, a Belgian company that extracts ARA and DHA from foods, began expanding to serve larger markets like the United States in 2009.  BNLfood claims that it was turned away by all four of the major U.S. formula companies because the Martek sole source agreements reached into 2016.

BNLfood also argued Martek employees investigated BNLfood by visiting BNL’s new facilities and collecting company information at trade shows.  The complaint included emails between Martek executives discussing how big of a threat BNL posed as a competitor.

The court was unconvinced by BNLfood’s arguments.  Judge Quarles found that BNLfood was only speculating that the sole source agreements were the reason BNLfood’s expansion failed in the U.S.

 “This evidence does not suggest that Martek was specifically targeting BNLfood or trying to exclude it from the U.S. market.  Instead it was trying to determine whether BNLfood was actually a competitive threat,” Judge Quarles wrote.

An Illinois federal judge has dismissed a class action alleging that Live Nation Entertainment Inc. illegally tied mandatory parking fees to concert tickets, finding that neither the $9 fee nor Live Nation’s economic power were significant enough to warrant action under antitrust and consumer protection laws.

Judge Gary Feinerman of the U.S. District Court for the Northern District of Illinois threw out plaintiff’s claims in Batson v. Live Nation Entertainment Inc. et al., after ruling that Live Nation’s $9 parking fee – which is imposed on each concert-goer regardless of whether he or she drives to the concert – does not violate either antitrust laws or the Illinois Consumer Fraud and Deceptive Business Practices Act (the “ICFA”).

Plaintiff James Batson attended a concert by the musical group O.A.R. in July 2010.  Batson’s ticket, which he purchased directly from the Live Nation box office at Chicago’s Charter One Pavilion, stated “$9 PRK PAID”.

Although Batson walked to the concert, the parking fee was included in the price of his ticket.  He was not informed of the fee at the time of purchase, and there was no way for him to transfer the $9 amount to another service or a voucher certificate to park at the venue during a future event.

The original complaint argued Live Nation’s monopoly in the entertainment promotion and ticket sales market allowed it to illegally tie products and charge unnecessary fees in violation of federal antitrust law and the California unfair competition statute.  

After defendants filed their motion to dismiss, Batson amended his complaint to drop the antitrust and California law claims, and to allege that Live Nation’s parking fee violates various public policies (including public policies against tying arrangements and drunk driving), and thus should be considered unfair under the ICFA.

The court held that Batson had failed to show any violation of public policy, and thus could not establish any violation of the ICFA by Live Nation.

Judge Feinerman found Live Nation’s parking fee cannot violate public policy against tying because Live Nation does not have a significant share of the parking market, and the fee does not restrict competition in the parking market.

The court also found that the fee did not violate public policies favoring clean transportation and against drunk driving.  Judge Feinerman did not find it plausible that the $9 fee would cause concert-goers to drink and drive rather than walk to the concert.  “That certainly is not what Batson did; he walked to the concert, bought his ticket, and then did not go back home, pick up his car, and claim his rightful parking space.”

The U.S. Court of Appeals for the Second Circuit has shut down Baltimore’s quest to recoup hundreds of millions of dollars the city lost in the collapse of the market for auction rate securities during the economic downturn in 2008.

The Second Circuit affirmed the dismissal of the class action complaints in Mayor and City Council of Baltimore et al. v. Citigroup Inc. et al., finding that the claims of boycott and refusal to deal in the market for auction rate securities failed to successfully allege a violation of Section 1 of the Sherman Act.

The plaintiffs, who include the Mayor and City Council of Baltimore and three individual investors, accused 11 of the largest financial institutions of conspiring to simultaneously withdraw support bids in the auction rate securities market.   According to the complaints, withdrawing the bids had the same anticompetitive effect as a group boycott and limited competition until the market collapsed.

Before the financial crisis, cities borrowed money through auction rate securities, long-term bonds with short term interest rates.  The defendants periodically organized the bond sales needed to reset interest. 

The auctions usually attracted numerous investors, and the high demand kept interest rates low for nearly three decades.  However with the market collapse, cities now face penalties when auctions fail and high fees to refinance their debt.    

The U.S. District Court for the Southern District of New York found plaintiffs’ antitrust allegations failed because securities law protects some concerted conduct to set interest rates.  

Judge Peter W. Hall’s opinion for the Second Circuit went further, and held that plaintiffs failed to state a claim in the first place.

The appeals court found that the complaint was deficient under the Supreme Court’s 2007 decision in Bell Atlantic Corp v. Twombly, which held that plaintiffs must provide enough evidence to show it is plausible companies made a formal agreement rather than simply taking independent, parallel actions.  “Indeed, Defendants’ alleged actions—their en masse flight from a collapsing market in which they had significant downside exposure—made perfect business sense,” the Second Circuit wrote.

The complaint provided only two instances of communication between the companies, which discussed the state of the market and potential solutions.  Other memos used as evidence were internal and only indicated a “high level of inter firm awareness,” according to the Second Circuit.

There were also warning signs the market was failing as early as the summer of 2007.  “At that point abandoning bad investments was not just a rational business decision, but the only rational business decision,” the court concluded, referring to the banks’ choice to stop the bids.

On top of legal fees, Baltimore has $350 million in auction rate securities debt, and the city could lose an additional $90 million to refinance.

The National Collegiate Athletic Association bylaws escaped unscathed after the U.S. District Court for the Southern District of Indiana dismissed the amended complaint in Rock v. National Collegiate Athletic Association, a class action alleging NCAA limits on athletics-based financial aid violate antitrust laws.

Plaintiffs John Rock, Tim Steward, and Kody Collins each received scholarships for athletic and academic achievement to offset tuition while playing for NCAA teams.  The plaintiffs alleged that although their universities promised them financial aid, the schools eventually asked each student to choose between participation in his respective sport and receiving the scholarship in order to comply with NCAA rules.

According to the amended complaint, NCAA rules on athletic scholarships “artificially restrict” the nationwide market for labor of student athletes.  Until recently, NCAA rules did not allow students to receive athletics-based scholarships for more than one year.  The NCAA’s bylaws also limit the number of scholarships each school can award for each sport and bar Division III schools from awarding athletics-based financial aid at all. 

Judge Jane Magnus-Stinson disagreed with the plaintiffs’ arguments.  Her decision relies largely on Agnew v. National Collegiate Athletic Association, a case in which two football players lost their athletic scholarships due to injury and accused the NCAA of anticompetitive behavior.

In Agnew the U.S. Court of Appeals for the Seventh Circuit held that a “cognizable” market must be affected by the anticompetitive behavior in order for transactions between student athletes and universities to comprise antitrust violations.

Judge Magnus-Stinson found the plaintiffs’ claims failed to define such a relevant market.  First, the market definition did not account for substitute associations, such as the National Association of Intercollegiate Athletics.  Second, the alleged market grouped all student athletes together without consideration for gender, differences among sports, or differences among divisions.

“Even at the motion to dismiss stage, the Court will not “don blinders” and “ignore commercial reality” when analyzing Plaintiffs’ market allegations,” the court wrote.

The court’s opinion also agreed with the NCAA in rejecting plaintiffs’ arguments that the inability of Division III schools to provide financial aid restricts competition.  According to the NCAA’s motion to dismiss, the ban on Division III athletic-based scholarships actually exists to allow more schools to participate.  According to the NCAA, the financial requirements accompanying athletics-based scholarships that had existed prior to the ban had made joining the NCAA difficult for smaller schools.  

Rock, who played at a Division I school, will have 28 days to submit an amended complaint.

NorthStar Energy LLC is suing Encana Corp. and Chesapeake Energy Corp. in the U.S. District Court for the Western District of Michigan, alleging the two companies’ drafting of an agreement violated antitrust laws by rigging the bidding process for NorthStar’s oil and gas leases.

According to the complaint in NorthStar Energy LLC v. Encana Corp. et al., NorthStar Energy was granted the rights to explore thousands of acres of Michigan land with the goal of finding oil or natural gas in the Utica-Collingwood shale formations.  In early 2010, NorthStar determined there were sufficient resources to begin commercial drilling on 9,838 acres, and asked for bids at the market price of $3,000 per acre.

NorthStar claims that Encana and Chesapeake executives negotiated an Area of Mutual Interest Agreement that rigged the bidding process.  NorthStar alleges that comments and edits to the agreement indicate that Encana and Chesapeake conspired not to bid against one another for NorthStar’s leases in six Michigan counties.

According to NorthStar, the agreement originally included a paragraph that provided the two companies could independently bid for NorthStar’s leases even if it meant that the companies would bid against each other.  According to the complaint, in response to this paragraph Chesapeake wrote, “[w]hy have this [paragraph] if the goal is to keep from running the prices up on each other?”

The complaint alleges that as a result of collusion, Chesapeake secured a lease for $2,250 per acre.  Not only was Chesapeake’s price $750 below the alleged market price, but one month earlier NorthStar had sold leases at $3,727.71.

“Absent collusion, NorthStar would have realized substantially higher price terms, more consistent with the market value and similar to or higher than the price terms at which 16 comparable acreage sold at the May 2010 State of Michigan auction,” the complaint states.

The United States Court of Appeals for the Eighth Circuit has decided that arbitration agreements are not necessarily the silver bullet that will dispose of antitrust claims five retail groceries (the “Retailers”) are asserting against two of the largest wholesale grocers in the United States – SuperValu Inc. and C&S Wholesale Grocers Inc. (the “Wholesalers”).

While the Eighth Circuit reversed the ruling of the U.S. District Court for the District of Minnesota in In re: Wholesale Grocery Products Antitrust Litigation that the doctrine of “equitable estoppel” makes the arbitration agreements a bar to the Retailers’ claims against the “Wholesalers,” the appellate court remanded the claims to the lower court to decide if the arbitration agreements might still bar those claims under a successor-in-interest theory.

The Retailers accuse the Wholesalers of inflating prices through an asset exchange agreement, under which they agreed not to compete for customers already under supply and arbitration agreements at the time of the exchange.

While each Retailer had an arbitration agreement with one of the Wholesalers, each Retailer only sued the Wholesaler with which it did not have an arbitration agreement.  The district court dismissed the Retailers’ claims, finding that they were equitably estopped from refusing arbitration because their claims were so intertwined with the arbitration agreements.

However, the Eighth Circuit ruled that equitable estoppel does not apply because the alleged antitrust violations were not sufficiently related to the contracts with the arbitration clauses.  The court found that the Retailers’ antitrust conspiracy claims “exist independent of the supply and arbitration agreements.”  The court also noted that “the Retailers’ antitrust claims are premised on paying artificially inflated prices, but since none of the Retailers’ contracts with the Wholesalers specify price terms, the Retailers’ claims do not involve alleged violation of any terms of those contracts.”

Judge Duane Benton dissented from the decision, arguing that the majority had misread the arbitration agreements.  According to the dissent, the Retailers’ antitrust claims were coved by the arbitration clauses, which required arbitration for “any dispute arising between the parties,” not just disputes related to the supply agreement.

Although the Eighth Circuit reversed the dismissal of the Retailers’ claims, that court left open the question of whether the district court on remand should compel arbitration on a successor-in-interest theory.  Such a theory would make the Retailers’ subject to the arbitration agreements because the Wholesalers essentially inherited each other’s arbitration agreements.  That theory will now be decided by the district court on remand.

On remand, the fate of the Retailers’ claims will be especially uncertain given the district court’s prior rulings.  After dismissing the Retailers’ claims, the district court denied class certification to the remaining plaintiffs, and subsequently granted summary judgment on the remaining plaintiffs’ antitrust claims.  The lower court found that the antitrust claims were not viable because the Wholesalers’ price increases stemmed not from an antitrust violation, but from contract violations that occurred after the Wholesalers swapped facilities.  Both of these orders are being appealed to the Eighth Circuit.