Antitrust Law Daily Wrap Up, ANTITRUST—C.D. Cal.: Failure to show relevant market doomed refusal to deal claims against UPS, FedEx, (May 1, 2015)

By Linda O’Brien, J.D., LL.M.

Logistics consultant AFMS, LLC, failed to show the relevant market for shipping consultation services to pursue claims against two leading carrier service providers for instituting policies to negotiate directly with shipping customers, rather than through third-party consultants, in order to deprive the consultants of the ability to compete in the market, the federal district court in Riverside, California has decided (AFMS, LLC v. United Parcel Service Co., April 30, 2015, Bernal, J.).

AFMS, LLC is a third-party consultant in the shipping industry that provides negotiating and other advice to customers of shipping and delivery service providers. AFMS filed suit against United Parcel Service Co. (UPS) and FedEx Corporation, alleging that, since 2009, UPS and FedEx conspired to refuse to deal with shippers that used third-party consultants in violation of Sections 1 and 2 of the Sherman Act. Prior to 2009, the freight service companies generally allowed third-party shipping consultants to directly participate in the negotiation of shipper contracts and have access to shipper parcel data and carrier contracts.

The court dismissed AFMS’ complaint and amended complaint. In December 2011, AFMS filed a third amended complaint, alleging the defendants’ refused to deal to any third-party shipping consultants (TPCs) and implemented non-disclosure agreements that restricted customers’ ability to share information with TPCs. In May 2013, UPS and FedEx each filed motions for summary judgment.

Relevant market. The court determined that AFMS failed to provide any evidence of the existence and boundaries of a legally cognizable relevant market for shipping consultation services. The plaintiff defined the relevant market as including business entities that advise shippers regarding the delivery of time sensitive letters, documents, and packages by air or by ground with the United States and to and from the United States to foreign countries.

According to the court, the plaintiff provided no expert evidence to support its market definition. AFMS’ contention that the market for shipping consultation services primarily included the gathering and analysis of a shipper’s past shipping history and the development of a strategy to meet the shipper’s needs and maximize profit was rejected. The court noted that it was unable to define the products and services the plaintiff sought to include in the selected market and, without a definition of the market, there was no way to measure the defendants’ ability to lessen or eliminate competition.

Moreover, there were numerous other consultants that provide advice to shippers to assist with the selection of carrier services, including entities that assist with warehouse location, inventory management, technology solutions, packaging, product returns, and auditing carrier bills. Although the plaintiff contended that none of those entities were included in its market, AFMS provided no factual basis for excluding those services from its alleged market or engaged in analysis to determine whether those services were substitutes for the services the plaintiff included in its market. Without evidence that the plaintiff and defendants offered services within a commercially cognizable relevant market where the services were reasonably interchangeable and there was cross-elasticity of demand, there was no clear understanding of the services or participants in the alleged market, in the court’s view.

Per se violations. The court rejected the plaintiff’s argument that the defendants committed per se violations of the Sherman Act, making a market analysis unnecessary. It noted that the per se rule was only appropriate when the court had considerable experience with the restraint at issue and could predict with confidence that the restraint would be invalidated in almost all instances under the rule of reason. The plaintiff did not point to any case applying the per se treatment that resembled the factual scenario in the case and characterized similar facts as a group boycott.

Under the rule of reason analysis, the plaintiff had the initial burden of show that the restraint produced significant anticompetitive effects within a relevant market. Since the plaintiff produced no evidence from which a reasonable jury could find that “shipping consultation services” was the relevant market, summary judgment was appropriate, the court concluded.

The case is No. CV 10-5830.

Attorneys: Charles Thomas Collett (Charles T. Collett PC) for AFMS LLC. Douglas J. Beteta (Morrison and Foerster LLP) for United Parcel Service Co. Colleen Hitch Wilson for FedEx Corporation.

Companies: AFMS, LLC; United Parcel Service Co.; FedEx Corporation

Cases: Antitrust CaliforniaNews