Opinion ID: 468173
Heading Depth: 2
Heading Rank: 4

Heading: Antitrust Injury Requirement

Text: 11 In Brunswick v. Pueblo Bowl-O-Mat Inc., 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701, the Supreme Court held that in order to maintain an antitrust action plaintiffs must be able to show more than an injury linked to a violation of the antitrust laws; they must prove an antitrust injury. Id. at 489, 97 S.Ct. at 697. Antitrust injury is defined as injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful. Id. Because the only asserted injury in this case is damages from the inability to continue profiting from the anticompetitive acts that comprise the antitrust violation, we hold that they are not recoverable under Sec. 4 of the antitrust laws. 12 In Brunswick, the plaintiffs brought an action under Sec. 7 of the Clayton Act complaining that the defendant Brunswick's acquisition of a rival bowling alley would tend to lessen competition because of Brunswick's deep pocket. The damages claimed were lost profits that would have been made had the competitors been allowed to go out of business. The Court found that what the plaintiffs were really complaining about was increased competition and their inability to profit from increased concentration of the market. Id. at 488, 97 S.Ct. at 1697. In so holding, the Court rejected the Ninth Circuit's ruling that any loss causally linked to the mere presence of the violator in the market was compensable. Id. at 487, 97 S.Ct. at 696 (quoting 523 F.2d at 272-73). The Court reasoned that to allow such recovery would separate antitrust recovery from the purposes of the antitrust laws. Because the plaintiffs had based their entire proof of injury on profits that would have been earned had the acquired centers closed, they were not entitled to recover. Id. at 490, 97 S.Ct. at 698; see also Jack Walters & Sons Corp. v. Morton Building, Inc., 737 F.2d 698 (7th Cir.1984) (loss to plaintiff was a gain to consumers), certiorari denied, --- U.S. ----, 105 S.Ct. 432, 83 L.Ed.2d 359; Car Carrier v. Ford, 745 F.2d 1101 (7th Cir.1984) (acts complained of had pro-competitive effect), certiorari denied, --- U.S. ----, 105 S.Ct. 1758, 84 L.Ed.2d 821. 13 The Supreme Court recently reaffirmed the Brunswick requirement in Associated General, 459 U.S. at 540, 103 S.Ct. at 909. In Associated General two unions brought an antitrust suit against an association of building and construction contractors, alleging that it coerced third parties to enter into business relationships with non-union contractors. The Court analyzed the relationship between the nature of the plaintiffs' injury and the defendant's wrongdoing to determine whether the plaintiffs had standing to bring suit. Id. at 535, 103 S.Ct. at 907. Although Associated General is a case dealing with remoteness, an issue we do not need to address here, the Court discussed Brunswick in its analysis of the nature of the plaintiffs' alleged injury. There the Court held that the unions had not shown a compensable antitrust violation, noting that collective bargaining agreements tended to lessen competition. Id. at 519-20, 103 S.Ct. at 899. The Court recognized that a Brunswick-type analysis was a factor in deciding the remoteness or directness of a particular plaintiff's injury. See supra at 1201. 14 The damages claimed by Local do not present the type of injury that the antitrust laws were intended to remedy. In its complaint, Local attempts to recover lost profits from sales of Lamaur products. Local claims that its termination was a result of Lamaur's desire to maintain prices and pacify local distributors because Local was undercutting the fixed prices. Local was admittedly sub-jobbing. Sub-jobbing is selling at low prices to discounters who then resell to the consumers. In this way Local could avoid additional costs of advertising and promotion and free ride off of the other full-service distributors' efforts. 2 Thus Local's market (discounters) and profits were a direct result of the maintained prices. Local was profiting from the antitrust violation itself. 15 As in Brunswick, the award of damages or an injunction here would be inimical to the purpose of these [antitrust] laws. 429 U.S. at 488, 97 S.Ct. at 697. In Brunswick, the Court focused on competition, noting that plaintiff's damages were the result of greater competition. Therefore, the injury did not flow from that which makes the defendants' acts unlawful. Here, though the damages do not reflect lessened competition, they represent Local's inability to continue to profit from the anticompetitive nature of the violation. Because Local's interests are disserved by enhanced competition (it loses its discounting market), its injury is not the type the antitrust laws were intended to prevent. 16 Several decisions addressing this issue support our decision. In Ohio-Sealy Mattress Mfg. Co. v. Sealy, Inc., 585 F.2d 821 (7th Cir.1978), certiorari denied, 440 U.S. 930, 99 S.Ct. 1267, 59 L.Ed.2d 486, this Court addressed the issue of whether Brunswick forbade Ohio from recovering its profits. In the Ohio-Sealy case, Ohio alleged that Sealy had engaged in antitrust conduct by exercising its right of first refusal to purchase licensees. Ohio argued that the reason Sealy exercised that right was to keep Ohio from competing intrabrand outside its area of primary responsibility (APR). The Court upheld the award of damages to Ohio; but in so doing it noted that to the extent the damages reflected profits made because of its enjoyment of the antitrust violation, e.g., profits from reduced intrabrand competition within its own APR or profits made from intrabrand competition in neighboring APR's, they were not appropriate for compensation as an antitrust injury. Id. at 833. To the extent that Ohio's profits resulted from its success as an interbrand competitor due to the quality and efficiency of Ohio's production (amply demonstrated in the record, see id. at 832), they did reflect a Brunswick injury. Id. The Court went on to hold that the combination of these good and bad damages met the Brunswick test for all damages so long as they involve anticompetitive conduct aimed at the plaintiff. 3 17 Similarly, in W. Goebel Porzellanfabrik v. Action Industries (Goebel), 589 F.Supp. 763 (S.D.N.Y.1984), a defendant counterclaimed against plaintiff's copyright suit alleging that the suit was part of an antitrust violation to limit the quantity of Hummel figures imported into the United States. The district court held that Action had not demonstrated an antitrust injury under a Brunswick analysis because: 18 Indeed, [Action] may actually have been benefited by Goebel's allegedly restrictive trade practices. Assuming that all of the facts in [Action's] counterclaim are true, the prices of Hummel figures were artificially inflated to the point where it was possible for [Action] to purchase the figures in Europe, ship them to the United States and ... still undersell Goebel distributors and make a profit. 19 Thus, in the absence of the complained practices, [Action] would never have had the financial attraction to import Hummel figures. 20 Id. at 766. Thus the Southern District of New York Court recognized the same rule that we do here, viz.: damages based on profits made by a plaintiff because of the existence of an antitrust violation are not recoverable. In Goebel, as here, the plaintiffs' market and profits were attributable to the violation of which they complained. This does not fit with the purpose of the antitrust laws which is to limit the availability of Sec. 4 relief only to those individuals whose protection is the fundamental purpose of the antitrust laws. In re Multidistrict Vehicle Air Pollution M.D.L. No. 31, 481 F.2d 122, 125 (9th Cir.1973), certiorari denied sub nom. Morgan v. Automobile Mfg. Ass'n, 414 U.S. 1045, 94 S.Ct. 551, 38 L.Ed.2d 336. Like these cases, we hold that lost profits from the inability to continue to take advantage of inflated prices due to antitrust conduct are not representative of antitrust injuries recoverable under Sec. 4 of the Clayton Act. Thus Local has failed to demonstrate antitrust injury as required by Brunswick for damages. See Matsushita Electric Industrial Co. v. Zenith Radio Corp., 106 S.Ct. 1348, 1354, 1355-56, 89 L.Ed.2d 538 (1986).E. Injunctive Relief 21 Plaintiff also seeks injunctive relief, requesting that the distributorship agreement be declared a violation of the antitrust laws and that Lamaur be enjoined from carrying out its price-fixing conspiracy. See supra note 1. Section 16 of the Clayton Act, 15 U.S.C. Sec. 26, provides for private equitable relief. The issue we must address is whether the Brunswick antitrust injury requirement applies to Sec. 16 of the Clayton Act. 22 The standing requirements for Sec. 16 relief have been considered less stringent than for Sec. 4 relief, because Sec. 16 is viewed as a more adaptable tool for enforcing the antitrust laws. Hawaii v. Standard Oil Co., 405 U.S. 251, 260-61, 92 S.Ct. 885, 890, 31 L.Ed.2d 184; Weiss v. York Hosp., 745 F.2d 786, 806 (3d Cir.1984); City of Rohnert Park v. Harris, 601 F.2d 1040, 1044 (9th Cir.1979); Yoder Bros., Inc. v. California-Florida Plant Corp., 537 F.2d 1347 (5th Cir.1976), certiorari denied, 429 U.S. 1094, 97 S.Ct. 1108, 51 L.Ed.2d 540. In fact, the Ninth Circuit has held the target area standing test irrelevant for standing analysis under Sec. 16. Parks v. Watson, 716 F.2d 646, 662 (9th Cir.1983); see also Mid-West Paper Products Co. v. Continental Group, Inc., 596 F.2d 573 (3d Cir.1979). 23 However, very few courts have addressed Sec. 16 in light of Brunswick. Despite the broader application of standing requirements under Sec. 16, there is reason for extending the antitrust injury requirement of Brunswick to Sec. 16 claims. In Brunswick the Supreme Court found the need for antitrust injury in the Sec. 4 language requiring injury by reason of anything forbidden in the antitrust laws. 429 U.S. at 485, 97 S.Ct. at 696. Similarly, Sec. 16 allows injunctive relief for threatened loss or damage by a violation of the antitrust laws. The Third, Eighth and our own Circuits have expressly incorporated the antitrust injury requirement to the proximate cause element of Sec. 16. Shoenkopf v. Brown & Williamson Tobacco Corp., 637 F.2d 205, 211 (3d Cir.1980). The court recognized that to allow a lower standing threshold for injunctive relief does not grant carte blanche to those plaintiffs with only incidental injury, and thus requires plaintiffs to demonstrate antitrust injury under Sec. 16 of the Clayton Act. Id. at 210-211; see also Tim W. Koerner & Assocs. v. Aspen Labs, Inc., 492 F.Supp. 294, 301 (S.D.Tex.1980) (the [Brunswick] analysis of proximate cause under Sec. 4    is also applicable to Sec. 16). Another reason given for applying the antitrust injury rule under Sec. 16 is because injunctions may injure consumers just as surely as damages may. Midwest Communications, Inc. v. Minnesota Twins, Inc., 779 F.2d 444, 452-453 (8th Cir.1985). 24 We agree with the above decisions of the Third and Eighth Circuits. A plaintiff seeking equitable relief under Sec. 16 of the Clayton Act should be no less representative of the interests of the antitrust victims than those seeking damages under Sec. 4. See Shoenkopf, 637 F.2d at 210. Accordingly, to bring a claim for injunctive relief under Sec. 16 of the Clayton Act a plaintiff must demonstrate an antitrust injury. Ball Memorial Hospital, Inc. v. Mutual Hospital Insurance, Inc., 784 F.2d 1325, 1334 (7th Cir.1986). Because Local has not met this burden and indeed would be helped by Lamaur's high prices, it may not proceed in its suit against Lamaur. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 106 S.Ct. 1348, 1354, 1355-56, 89 L.Ed.2d 538 (1986).