Antitrust Law Daily Wrap Up, ANTITRUST—9th Cir.: Dismissal of tying claims against camcorder maker upheld, (Aug 1, 2016)

By Jeffrey May, J.D.

A putative class action against Canon U.S.A., Inc. for preventing independent repair facilities from obtaining replacement parts necessary to fix its camcorders and improperly tying the sale of replacement parts to the provision of repair services was properly dismissed, the U.S. Court of Appeals in San Francisco has ruled in a not-for-publication decision. The appellate court affirmed dismissal of California Cartwright Act and Unfair Competition Law (UCL) claims raised by the owner of a business who claimed he was no longer able to obtain the parts and manuals necessary to repair certain Canon camcorder models (Bahr v. Canon USA Inc., July 26, 2016, per curiam).

Two-product requirement. The appellate court agreed with the district court that the business owner did not properly allege that replacement parts and services were two distinct products for purposes of a tying claim under the Cartwright Act. The district court noted that in order for service and parts to be considered two distinct products, there had to be sufficient consumer demand so that it was efficient for a firm to provide service separately from parts. The plaintiff failed to did not sufficiently allege that there was such consumer demand for the "two distinct products" at issue: (1) camcorder replacement parts, and (2) camcorder repair services. The court had to assess the plaintiff’s allegation that Canon instituted a policy under which it no longer sold replacement parts separately from repair services in the context of the "small, increasingly cheap, and readily disposable" nature of camcorders.

The district court had rejected the business owner’s argument that the U.S. Supreme Court's 1992 decision in Eastman Kodak Co. v. Image Tech. Servs., 504 U.S. 451, supported an allegation of two separate products. The Kodak case involved repair services for large, complex, and expensive photocopying machines that were not readily discarded and replaced either physically or economically, the court explained. Consequently, copier machine owners were more likely than camcorder owners to shop for repair services and replacement parts to obtain the best combination of price and quality.

Economic power in tying market. Because Canon allegedly folded the sale of replacement parts into the sale of repair services, these products were part of a single market. Thus, the plaintiff also failed to meet the second element of a tying claim: alleging that the defendant had "sufficient economic power in the tying market to coerce the purchase of the tied product." The plaintiff had incorrectly identified a market for repair services, in the district court’s view.

UCL claim. The appellate court also affirmed dismissal of claims that Canon's conduct violated the UCL. With the Cartwright Act claim and a warranty claim under California’s Song-Beverly Act rejected, a derivative claim under the UCL necessarily failed, according to the appellate court.

The case is No. 14-56292.

Attorneys: James C. Shah (Shepherd Finkelman Miller and Shah LLP) for Sherman Bahr. Katherine J. Santon (Santon General Counsel, PC) and Richard H. Silberberg (Dorsey & Whitney LLP) for Canon USA Inc.

Companies: Video One Repair; Canon USA Inc.

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