The Elements of Antitrust Injury: A Two-Prong Test
July 27, 2018
Plaintiffs must establish “antitrust injury” to recover under federal antitrust laws. This means injury of the type the antitrust laws were intended to prevent and that flows from that which makes the defendant’s conduct unlawful.
A plaintiff must satisfy two separate elements to prove antitrust injury:
1. Injury to the plaintiff is of a type that the antitrust laws were intended to prevent
First, the injury to the plaintiff must be of a type that the antitrust laws were meant to prevent. In other words, antitrust injury connects the plaintiffs’ injury to the economic rationale of antitrust laws, or the particular antitrust claim.
For example, in a price-fixing case, a plaintiff may be injured because it paid a higher price for a product than would have prevailed if there had been no price-fixing agreement. In a market-foreclosure case, the competitor plaintiff may be injured because it lost profits because it wasn’t able to participate in a market because of some sort of exclusionary conduct by the defendant.
The 1977 Supreme Court classic case of Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc. is the primary case that most litigants cite for antitrust injury. Here, the plaintiff claimed that the defendant’s acquisition of a failing bowling center violated antitrust law. The Court had to decide whether a competitor had standing to seek damages for its lost profits resulting from the acquisition and continued competition by the bowling center. The Court held that the competitor did not have standing because the antitrust laws are enacted for the protection of competition, not competitors. The plaintiff’s injury was from additional competition from the bowling alley; the antitrust laws were not enacted to protect companies from competition.
Another important US Supreme Court case discussing antitrust injury is Matsushita Electric industrial Co. v. Zenith Radio Corp. (1986). The allegations were that a group of Japanese television manufacturers had conspired over a 20-year period to raise prices in Japan, while predatorily dropping prices in the U.S. to drive domestic manufacturers out of the market. The Third Circuit held that plaintiffs (domestic manufacturers) presented sufficient circumstantial evidence of a conspiracy to survive a summary judgment motion. The Supreme Court, however, stated that even if such a conspiracy existed, plaintiff competitors would lack standing on antitrust injury grounds because, despite claiming threatened injury to their business through increased competition, they would, in fact, stand to benefit from the conspiracy.
Importantly, this antitrust injury requirement applies to antitrust lawsuits for both treble damages and injunctive relief. See, e.g., Cargill, Inc. v. Monfort of Colorado Inc. (1986); Atlantic Richfield Co. v. USA Petroleum Co. (1990).
2. Plaintiff’s injury must flow from that which makes the defendant’s acts unlawful
Once the court determines that the nature of plaintiff’s injury is of a type the antitrust laws are intended to prevent (Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.), the next question is whether plaintiff has satisfied the causation aspect of antitrust injury. To prevail on an antitrust claim, a private party must establish some link between defendant’s alleged anticompetitive conduct and plaintiff’s own injuries (along with injury to competition, of course).
For example, the Ninth Circuit in American Ad Management, Inc. v. General Telephone Co. of Cal., 190 F.3d 1051 (9th Cir. 1999), upheld antitrust injury for an antitrust plaintiff engaged in the resale of Yellow Pages advertising space that lost profits from an alleged conspiracy among directory publishers to cut off a commission that resellers like plaintiff had been using to discount prices to customers. The Ninth Circuit concluded that plaintiff’s injury (lost profits as a result of not being able to benefit from the discount using the commissions) satisfied the causation aspect of antitrust injury because it flowed from the agreement itself to eliminate the discounts—the very conduct plaintiff challenged as illegal under the Sherman Act.
3. Final Remarks
To prove antitrust injury, a plaintiff must satisfy a two-prong test: (i) the injury is of the type the antitrust laws were intended to prevent and (ii) the injury flows from that which makes the defendant’s conduct unlawful. This means that there is no antitrust injury when the alleged conduct increases competition, even if it injures plaintiff and even if it is unlawful.
In addition, please note that courts have been using the term “antitrust injury” to cover two different concepts. The first is the narrower standing concept, which means that the plaintiff must show that its own injury is of a type the antitrust laws were meant to redress. The second is the broader merits concept, which means that the plaintiff must also show actual injury to the market as a whole of a type that the antitrust laws were meant to prevent.
The two concepts are different and both are required to prevail in an antitrust lawsuit.
If you think you might have a potential antitrust issue, please contact Bona law to discuss it further. You can reach us in California at +1 858-964-4589 and in New York at +1 212-634-6861.