Antitrust Law Daily Wrap Up, ANTITRUST—D. Md.: Standing found for injunction claim against competitor’s sole source agreements with infant formula manufacturers, (Mar 14, 2014)

By Edward L. Puzzo, J.D.

A producer of additives used in infant formula was found to have antitrust standing to seek an injunction against its competitor’s sole source agreements with infant formula manufacturers, the federal district court in Baltimore has ruled (BNLfood Investments v. DSM Nutritional Products, March 13, 2014, Quarles, W.).

Background. Defendant DSM Nutritional Products, now part of Martek Biosciences, produces the chemicals DHA and ARA, which are used as infant-formula additives. Four companies—Mead Johnson, Abbott Labs, Nestle and PBM Products—produce nearly all of the infant formula in the United States. Three of the companies signed sole source agreements (SSAs), requiring them to use Martek as their sole supplier for DHA and ARA. Consequently, since 2005, Martek has had nearly 100% market share for DHA and ARA in the United States.

Plaintiff BNLfoods, based in Luxembourg, attempted to break into the American market for DHA and ARA starting in 2004, without success. In February 2011, BNLfoods brought suit against Martek, alleging violations of Section 2 of the Sherman Act, Section 3 of the Clayton Act, and the Maryland Antitrust Act. It also sought a permanent injunction under Section 16 of the Clayton Act, which would prohibit Martek from continuing its exclusive dealing arrangements with customers.

In March 2013, the federal district court in Baltimore dismissed BNLfoods’ action. The court found that triable issues of fact existed on the definition of the relevant product market, whether Martek had monopoly power, whether the SSAs were procompetitive under the rule of reason, and whether the SSAs harmed competition. The motion for summary judgment was granted, however, because BNLfood was unable to show injury from Martel’s SSAs, and thus could not establish antitrust standing.

BNLfoods then filed a Federal Rule of Civil Procedure Rule 59(e) motion to alter or amend the court’s March 2013 summary judgment order, arguing that evidence did show harm from Martek’s SSAs, and arguing that the order failed to address its claim for injunctive relief.

Rule 59(e). Under Rule 59(e), one of the bases for amending an earlier judgment would be to “correct a clear error of law or prevent manifest injustice,” the court explained. It cannot be used to raise arguments which could have been raised prior to the issuance of the judgment, or mere disagreement with the earlier decision.

Differing standards for antitrust standing. In its Rule 59(e) motion, BNKfoods argued that the requirements for antitrust standing for injunctions are less strict than that for damages. Under Section 4 of the Clayton Act, actual antitrust injury flowing from defendant’s actions must be proven to provide antitrust standing for damages, whereas under Section 16 of the Clayton Act, only a threatened loss or harm must be shown to support antitrust standing for an injunction. Martek’s motion for summary judgment only addressed the former issue, not the latter issue.

The court agreed that by failing to address BNLfood’s Section 16 claim in its motion for summary judgment, Martek did not meet its burden of showing that it was entitled to summary judgment on that claim. The court also conceded that it never ruled on the injunction claim in its March 2013 summary judgment order. Thus the court found that BNLfoods had shown a clear error of law in the order, and vacated its summary judgment order regarding standing for Section 16 injunction purposes.

The court, however, further ruled that BNLfoods had presented no new evidence of actual harm from Martek’s SSAs that had not already been presented prior to the court’s earlier ruling. Therefore, the court declined to reconsider its prior holding that BNLfoods had failed to present sufficient evidence of harm from Martek’s SSAs to maintain antitrust standing for its Section 4 claim of actual damages.

The case is Civil Action No. WDQ-ll-0446.

Attorneys: Charles C. Moore (White and Case LLP) for BNLfood Investments Limited SARL. Andrea William Trento (Hogan Lovells US LLP) for DSM Nutritional Products, LLC.

Companies: BNLfood Investments Limited SARL; DSM Nutritional Products, LLC.

Cases: Antitrust MarylandNews