Antitrust Law Daily Wrap Up, ANTITRUST—2d Cir.: Lack of competitive harm dooms printer conspiracy claims, (Aug 11, 2016)

By Greg Hammond, J.D.

The federal district court in Hartford, Connecticut, erred in denying judgment as a matter of law in an action in which a manufacturer of thermal flexographic processors alleged that a former partner engaged in an anticompetitive conspiracy that damaged the manufacturer’s business and hurt customers. The U.S. Court of Appeals in New York City reversed judgment on the manufacturer’s antitrust claims, finding that the manufacturer failed to present evidence that its former partner’s conduct harmed competition (MacDermid Printing Solutions LLC v. Cortron Corp., August 10, 2016, Cabranes, J.).

MacDermid and non-party E. I. du Pont de Nemours & Co. market thermal flexographic processors, which are used to make plates for printing commercial packaging. MacDermid entered into joint development agreements with Cortron Corp. in 2004, under which MacDermid would pay Cortron to develop a first- and second-generation of MacDermid’s "LAVA" thermal flexographic processor. DuPont filed a patent infringement suit against Cortron in 2008, which was subsequently settled. Under the settlement, Cortron agreed to immediately cease providing service and support for LAVA products, and to give DuPont all technical information relating to LAVA. MacDermid claimed that the settlement amounted to an antitrust conspiracy between Cortron and DuPont. The district court found in favor of MacDermid and awarded nearly $65 million in damages, interest, and attorney fees for the antitrust and other claims. Cortron appealed, arguing that the district court erred in denying Cortron judgment as a matter of law.

The appellate court agreed with Cortron, noting that MacDermid sought to prove an antitrust violation under the rule of reason, but failed to prove an adverse effect on competition. The court held that, in cases where the plaintiff has not proved that the allegedly anticompetitive behavior led to higher prices, reduced output, or lower quality in the market, the plaintiff may not prevail under the "rule of reason" merely by providing that (1) the defendant exercised "market power" and (2) the challenged behavior may have misled consumers to believe that certain products were no longer available, without showing that consumers actually experienced reduced access to those products.

Competitive harm, direct proof. MacDermid did not directly prove an adverse effect on competition, the appellate court first noted. Specifically, MacDermid did not suggest or demonstrate that prices for thermal flexographic processors actually rose after DuPont’s settlement with Cortron. Rather, MacDermid claimed that DuPont would have decreased its prices but for the conspiracy. This amounted to little more than speculation, according to the court, and was not evidence that prices actually increased. MacDermid also failed to produce evidence that the alleged conspiracy led to reduced output in the market. During MacDermid’s transition from using Cortron to using another company, MacDermid always maintained an inventory of LAVA machines, which always exceeded consumer demand, the court stated. MacDermid never argued that the purported conspiracy reduced the overall quality of processors in the market.

Competitive harm, indirect proof. The court also concluded that MacDermid failed to provide any reason to think that the Cortron-DuPont agreement harmed competition in the market as a whole. Allegations that the settlement was inherently anticompetitive because Cortron and DuPont had a competitive relationship at the time were without merit, because Cortron and DuPont did not compete for customers. Rather, Cortron was an upstream supplier of MacDermid and later of DuPont.

MacDermid also claimed that the relevant interbrand market was a duopoly that was grounds alone for finding that the challenged behavior harmed competition. However, the mere fact that a market has few competitors did not transform every action by one of them into an antitrust violation, the court stated. MacDermid was required to offer some other reason to think that the challenged behavior harmed competition. Allegations that the Cortron-DuPont conspiracy harmed competition by reducing the range of options available to consumers were also rejected by the appellate court, because the agreement did not restrict the options available to consumers, who never lost the option of buying LAVA processors.

The case is No. 15-589-cv.

Attorneys: John Richard Horvack, Jr. (Carmody Torrance Sandak & Hennessey LLP) for MacDermid Printing Solutions LLC. John P. Elwood (Vinson & Elkins LLP) and Harry First, New York University School of Law, for Cortron Corp.

Companies: MacDermid Printing Solutions LLC; Cortron Corp.

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