Opinion ID: 6335450
Heading Depth: 3
Heading Rank: 1

Heading: Host Fails to Plead Antitrust Standing

Text: Despite the sweeping commands of the Sherman and Clayton Acts, courts have read a limit into their text.4 So while 4 About four decades ago, around 100 years after the Sherman Act became law, the Supreme Court “observed, the lower federal courts have been ‘virtually unanimous in concluding that Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation.’” Associated Gen. Contractors v. Cal. State Council of Carpenters, 459 U.S. 519, 534 (1983) (“AGC”) (quoting Hawaii v. Standard Oil Co., 405 U.S. 251, 263 n.14 (1972)). But that conclusion “is inferred largely from the perception that the courts construing Section 7 between 1890 and 1914 perceived such a congressional intention and implemented it.” John F. Hart, 6 Section 4 of the Clayton Act permits enforcement of the Sherman Act through civil suits for treble damages by “any person who shall be injured in his business or property,” 15 U.S.C. § 15, courts have decided that not every person may sue. See Steamfitters Loc. Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912, 922 (3d Cir. 1999) (citing Blue Shield of Virginia v. McCready, 457 U.S. 465, 477 (1982)). Instead, the cause of action is subject to an additional, a-textual requirement known as “antitrust standing.”5 See Standing Doctrine in Antitrust Damage Suits, 1890-1975: Statutory Exegesis, Innovation, and the Influence of Doctrinal History, 59 Tenn. L. Rev. 191, 255–56 (1992). So too with Section 4 of the Clayton Act’s direct-injury rule, which “depends in turn on the proposition that the courts had adopted such a restriction between 1890 and 1914.” Id. In other words, because courts began to stray from the ordinary best meaning of the statutes, the courts concluded their preferred reading reflected the bills passed by Congress and signed into law. 5 A theory often “stated elliptically and without analytical precision,” meaning “[m]any of the cases cannot be reconciled.” A. Douglas Melamed et al., Antitrust Law and Trade Regulation: Cases and Materials 1173 (7th ed. 2018). Leaving us with “a murky and mushy analytical framework for . . . the standing of a private antitrust plaintiff.” Stephen D. Susman, Standing in Private Antitrust Cases: Where is the Supreme Court Going?, 52 Antitrust L.J. 465, 467 (1983). But see Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 126–28 (2014) (In AGC, “we sought to ‘ascertain,’ as a matter of statutory interpretation, the ‘scope of the private remedy created by’ Congress in § 4 of the Clayton Act . . . . Later decisions confirm that [AGC] rested on statutory, 7 Ethypharm S.A. France v. Abbotts Labs., 707 F.3d 223, 232 (3d Cir. 2013) (quoting City of Pittsburgh v. W. Penn Power Co., 147 F.3d 256, 264 (3d Cir. 1998)). While the name echoes the familiar formulation of Article III, the judicially imposed requirement of antitrust standing is far more limiting. Gulfstream III Assocs., Inc. v. Gulfstream Aerospace Corp., 995 F.2d 425, 429 (3d Cir. 1993). So even though “‘[h]arm to the antitrust plaintiff is sufficient to satisfy the constitutional standing requirement of injury in fact,’ courts must also consider ‘whether the plaintiff is a proper party to bring a private antitrust action.’” Phila. Taxi, 886 F.3d at 343 (quoting AGC, 459 U.S. at 535 n.31). Naturally, determining who is a “proper party” is complicated by a consideration of generalized concepts like “foreseeability and proximate cause, directness of injury, certainty of damages and privity of contract.” Gulfstream, 995 F.2d at 429 (quoting AGC, 459 U.S. at 532–33). And so courts whipped up a list of factors:
violation and the harm to the plaintiff and the intent by the defendant to cause that harm, with neither factor alone conferring standing; (2) whether the plaintiff’s alleged injury is of the type for which the antitrust laws were intended to provide redress; (3) the directness of the injury, which addresses the concerns that liberal application of standing principles might produce speculative claims; (4) the existence of more direct victims of the alleged antitrust violations; not ‘prudential,’ considerations.” (quoting AGC, 459 U.S. at 529)). 8 and (5) the potential for duplicative recovery or complex apportionment of damages. In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1165–66 (3d Cir. 1993) (citing AGC, 459 U.S. at 545).6 But we need not pore over the list, as one, the absence of antitrust injury, is enough to affirm the District Court’s judgment.
“The second [AGC] factor, antitrust injury, ‘is a necessary . . . condition of antitrust standing.’ If it is lacking, [a court] need not address the remaining AGC factors.” Ethypharm, 707 F.3d at 233 (quoting Barton & Pittinos, Inc. v. SmithKline Beecham Corp., 118 F.3d 178, 182 (3d Cir. 1997)). We start our search there, looking for an “injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendant[’s] acts unlawful.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 6 Determining when to dive into this analysis is similarly murky. Compare Hanover 3201 Realty, LLC v. Vill. Supermarkets, Inc., 806 F.3d 162, 171 (3d Cir. 2015) (“We begin with antitrust standing.”), with Lifewatch Servs. Inc. v. Highmark Inc., 902 F.3d 323, 341 (3d Cir. 2018) (addressing antitrust standing after addressing the pled antitrust violation). But rather than getting lost, courts often “assume the existence of a violation and then ask whether the . . . standing elements are shown.” Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application, ¶ 335f (4th ed. 2014). And because we can dismiss solely for lack of antitrust standing, we begin there. See W. Penn, 147 F.3d at 269 (affirming the district court’s dismissal for lack of antitrust standing). 9 U.S. 477, 489 (1977). Somewhat circular, but it means the “challenged conduct affected the prices, quantity or quality of goods or services, not just [the plaintiff’s] own welfare.” Mathews v. Lancaster Gen. Hosp., 87 F.3d 624, 641 (3d Cir. 1996) (quotations omitted). All of which “aims to protect competition, not competitors,” consistent with the judicial gloss on the antitrust laws. Id. And the injury required for antitrust standing must flow from the unlawful nature of defendants’ acts. See 15 U.S.C. § 15(a). Accepting Host’s argument, the District Court reasoned that “the alleged antitrust injury” is “exclusion from PHL.” (App. at 9.) But Host was not excluded; Host chose to walk away from the table because it did not like the lease terms MarketPlace offered. And the conclusion that Host pled a plausible antitrust injury stretches the boundaries of antitrust law too far. First, because a breakdown in contract negotiations is outside the Sherman Act’s scope; second, because injury to competitors, rather than to competition, is beyond the law’s sphere.
is Not an Antitrust Injury Begin with the narrow contours of Host’s claim. MarketPlace selected Host to develop retail space and offered a proposed lease. Host did not like the terms and, weighing its options, declined the offer. It is a scenario that plays out across the nation daily, in transactions big and small. But it is not an antitrust injury because competition has not been suppressed. Host has not been excluded from any market nor forced to purchase non-alcoholic beverages from anyone. 10 True, refusing to deal can sometimes establish an antitrust claim under Section 2.7 Likewise, a group decision among competitors to boycott a firm might constitute a claim under Section 1. And a host of common law claims sounding in contract, quasi-contract, and tort could come into play. See JetAway Aviation, LLC v. Bd. of Cty. Comm’rs, 754 F.3d 824, 855 (10th Cir. 2014) (per curiam) (Tymkovich, J., concurring); E. Food Servs., Inc. v. Pontifical Catholic Univ. Servs. Ass’n, Inc., 357 F.3d 1, 9 (1st Cir. 2004). But Host seeks something novel: recognition that failing to contract for commercial space states a Section 1 claim. We decline that invitation. An objectionable term in a commercial agreement, without more, is not an antitrust violation because “[d]espite [Section 1’s] seemingly absolute language,” only unreasonable agreements in restraint of trade are antitrust violations under the Sherman Act. W. Penn, 627 F.3d at 99 (citations omitted). Host’s Complaint alleges how the exclusive beverage agreement and the PRA are undesirable, but not how they are unreasonable restraints. Host surely prefers a broader set of options for its sublessees, but that does not create a duty on MarketPlace because “[a]s a general rule, businesses are free to choose the parties with whom they will deal, as well as the prices, terms, and conditions of that dealing.” See Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc., 7 But only among competitors, and only if the parties have a history of dealing paired with facts suggesting “a willingness to forsake short-term profits to achieve an anticompetitive end.” Verizon Commc’ns Inc. v. L. Offs. of Curtis V. Trinko, LLP, 540 U.S. 398, 409 (2004) (citing Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985)). 11 555 U.S. 438, 448 (2009). As a result, Host does not have an antitrust injury sufficient to confer standing.
Refusing to agree to a contract also cannot state a plausible Section 1 injury because it is now “axiomatic that the antitrust laws were passed for ‘the protection of competition, not competitors.’” Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 224 (1993) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)). Even if that axiom comes from the courts, not Congress, it is still a binding limitation on our review. The District Court recognized, “[d]espite references of potential harm to others, . . . Host seeks remedy for its injury alone, and that injury is its exclusion from PHL.” (App. at 9.) But, once again, pleading an antitrust injury requires a plaintiff to “prove that [the] challenged conduct affected the prices, quantity or quality of goods or services, not just [its] own welfare.” Mathews, 87 F.3d at 641 (quotations omitted); see also Eisai, Inc. v. Sanofi Aventis U.S., LLC, 821 F.3d 394, 403 (3d Cir. 2016) (citing W. Penn, 627 F.3d at 100).8 Host 8 Host’s speculations do not alter that conclusion. The Complaint references, anecdotally, that a pouring rights agreement “at one airport, . . . resulted in the exclusion of three of four premium brands of bottled water.” (App. at 21). And “[i]n another market study, 17% of respondents indicated it is essential that the water they purchase be natural spring water.” (App. at 22.) Taking both in the light most favorable to Host, we can infer: 1) that a market study was conducted at some airport, somewhere, sometime; and 2) in a separate study, around 1.7 of every ten consumers—perhaps at airports, 12 “estimates [under the PRA] . . . costs at its existing units would increase by over 30%,” noting, for example, “the price increase for regular non-premium water is more than 40% for a smaller serving size.” (App. at 21.) But that is harm only to Host’s “own welfare,” which is not our focus. Mathews, 87 F.3d at 641. Host fails to plead facts tending to show that consumer prices would increase under the PRA because it does not follow that Host’s costs must be passed on to consumers. The PRA might just as easily secure lower or discounted beverage prices for smaller subtenants who could not access volume discounts and decrease prices for consumers. See Eisai, 821 F.3d at 403 (“[E]xclusive dealing arrangements . . . can also offer consumers various economic benefits, such as assuring them the availability of supply and price stability.”); Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 614 F.3d 57, 76 (3d Cir. 2010) (“[I]t is widely recognized that in many circumstances [exclusive dealing arrangements] may be highly efficient—to assure supply, price stability, outlets, investment, best efforts or the like—and pose no competitive threat at all.”) (quoting E. Food Servs., 357 F.3d at 8)). And what is more, Host is not even required to purchase non-alcoholic beverages under the PRA. Host also contends that “MarketPlace and [PHL] have attempted to cause and have in fact caused . . . competitive harm . . . potentially to other lessors/sublessors at PHL, as well as to competing beverage suppliers shut out of the market under pouring rights and consumers of beverages and other products at PHL.” (App. at 28 (emphasis added).) But Host’s perhaps not— really liked spring water. We cannot infer that the quality of non-alcoholic beverages at PHL under the PRA would not be comparable. Or much else for that matter. 13 Complaint lacks any facts alleging harm to other PHL tenants and potential harms do not suffice. To recover treble damages under Section 4 of the Clayton Act, “a plaintiff must make some showing of actual injury attributable to something the antitrust laws were designed to prevent,” not potential injury. J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 558 (1981) (emphasis added). And most importantly, competing beverage suppliers were not “shut out” of the market unilaterally; they participated in a competitive bidding process that PepsiCo simply won.9 Sailing a straight course through the murky waters of antitrust injury challenges courts to avoid the siren songs of illusory harm. That is why the doctrine “requires every plaintiff to show that its loss comes from acts that reduce output or raise prices to consumers” in the relevant market. Chicago Prof’l Sports Ltd. P’ship v. Nat’l Basketball Ass’n, 961 F.2d 667, 670 (7th Cir. 1992) (collecting cases). Host does not and, for that reason, cannot state a claim for relief. 9 It is telling that the same competitive bidding process that resulted in the PRA also awarded Host the two retail concession spaces, (App. at 24–25) a process Host agrees was competitive. (Opening Br. at 15.) Understandably, as “[i]t is well established that competition among businesses to serve as an exclusive supplier should actually be encouraged.” Race Tires, 614 F.3d at 83; see also Menasha Corp. v. News Am. Mktg. In-Store, Inc., 354 F.3d 661, 663 (7th Cir. 2004) (competition to be an exclusive supplier “is a vital form of rivalry, and often the most powerful one, which the antitrust laws encourage rather than suppress.”). 14