Antitrust Law Daily Wrap Up, ANTITRUST—D. Mass.: Jukebox manufacturers and trade group may be liable for conspiracy to harm jukebox seller, (Apr 4, 2014)

By Jody Coultas, J.D.

A jukebox seller stated Sherman Act and Massachusetts Consumer Protection Act (CPA) claims against jukebox manufacturers and an industry trade group that allegedly conspired to harm the seller’s business, the federal district court in Worcester, Massachusetts has held (Lease America.org, Inc. v. Rowe International Corporation, March 31, 2014, Hillman, T.).

Lease America.org, Inc. sells electronic jukeboxes, while Rowe International Corporation and AMI Entertainment Network, Inc. manufacture jukeboxes. The parties allegedly entered into a secret agreement by which Lease America would purchase Rowe’s jukeboxes and sell them directly to end users, which was in contravention of long standing industry practice. Generally, manufacturers sell their jukeboxes to distributors who act as middlemen between the manufacturers and the operators. Amusement and Music Operators Association, Inc. (AMOA), a trade group that represents the interests of jukebox operators, strongly resisted this practice of selling directly to end users. AMOA allegedly threatened that its members would no longer use Rowe’s juke boxes if Rowe continued to allow Lease America to sell direct. Rowe terminated Lease America’s agreement and turned off all of the jukeboxes that had already been placed in venues so that the users could not access the contents.

In response, Lease America filed Sherman Act, CPA, tortious interference with contract, and tortious interference with contractual relations claims against Rowe and AMOA. Both Rowe and AMOA sought dismissal of all the claims.

Lease America’s allegations and evidence were sufficient to plead circumstantial evidence of a conspiracy, according to the court. To state a Sherman Act claim, a plaintiff must allege facts showing some form of an illegal agreement. There was evidence that AMOA convened a meeting to discuss suppression of the growth of Lease America and a boycott of Rowe if it continued to allow Lease America to sell direct. Rowe was threatened with a boycott and agreed with AMOA to boycott Lease America. The facts set forth by Lease America were more than conclusory and made out a plausible claim of an illegal agreement. Lease America also alleged that the jukebox industry was highly concentrated, that its business model disrupted the industry status quo, and that trade association conduct cannot be discounted. Lease America alleged direct evidence, in addition to circumstantial evidence, of a conspiracy.

The court held that Lease America failed to properly allege an anticompetitive injury. Anticompetitive injuries are measured by a reduction in output and an increase in prices in the relevant market. An action harms the competitive process when it obstructs the achievement of competition’s basic goals. The allegations were conclusory and recited fundamental antitrust damage principles without factual support. Lease America was granted leave to amend to provide sufficient factual support for their allegations.

Lease America sufficiently stated CPA claims against AMOA, according to the court. The CPA only applies to unfair or deceptive acts within a business context. AMOA argued that they are a non-profit trade association that primarily protected the interests of jukebox operators and were not involved in trade or commerce. “Trade” or “commerce” is “the advertising, the offering for sale, rent or lease, the sale, rent, lease or distribution of any services and any property,” The issues of whether AMOA was involved in trade or commerce and whether the unfair act took place in Massachusetts were issues of fact best left for a jury. Therefore, the motion to dismiss was denied.

Rowe and AMI were also denied dismissal of the Sherman Act claim by the court. The companies argued that Lease America failed to exclude the possibility that the defendants acted independently and failed to allege an antitrust injury. The court’s previous explanation applied to this motion. Lease America was therefore granted leave to amend its complaint to provide sufficient factual support for their antitrust damage allegations.

The court declined to dismiss the CPA claims against Rowe and AMI. Rowe and AMI argued that Lease America failed to allege that their conduct took place “primarily and substantially” within Massachusetts as required by the CPA. This was a factual issue that could not be decided on a motion to dismiss. Whether the conduct at issue was “willful and malicious” was also a question of fact based on the allegations made by Lease America.

The case is No. 13-40015-TSH.

Attorneys: Courtney A. Palko (Blecher & Collins, PC) for Lease America.org, Inc. David Viens (Bowditch & Dewey LLP) for Rowe International Corp. and AMI Entertainment Network, Inc. Harvey Weiner (Peabody & Arnold LLP) for Amusement and Music Operators Association, Inc.

Companies: Lease America.org, Inc.; Rowe International Corporation; AMI Entertainment Network, Inc.; Amusement and Music Operators Association, Inc.

Cases: Antitrust StateUnfairTradePractices MassachusettsNews