Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Pa.: $35.5M settlement over pricing of baby products approved, (Jan 22, 2015)

By Linda O’Brien, J.D., LL.M.

National retailer chain Toys “R” Us and manufacturers of baby products have reached a $35.5 million final settlement with consumers of various baby products over allegations that the defendants conspired to restrict competition by requiring all retailers to sell their products at or above a minimum resale price. In granting final approval of the settlement agreement, the federal district court in Philadelphia found that the settlement was fair, reasonable, and adequate (McDonough v. Toys “R” Us, Inc., January 21, 2015, Brody, A.).

In 2006, a group of consumers brought a putative class action against national retailer chain in the baby products market — Toys “R” Us, doing business as Babies “R” Us (BRU) — and several manufacturers of baby products, alleging violations of Sections 1 and 2 of the Sherman Act. The consumers asserted that BRU conspired with manufacturers of the following products — BabyBjörn baby carriers, Britax car seats, Kids Line products, Maclaren strollers, Medela breast pumps, and Peg Perego strollers, car seats, and high chairs — to implement pricing policies that would prevent the discounting of those baby products. As a result, the consumers paid inflated prices for the products.

Terms. The settlement agreement would create a $35.5 million common fund. After deductions for administrative expenses and attorneys’ fees, the net fund available to the class would be $21.5 million. There would be no cy pres distribution. Instead any unclaimed funds revert to the defendants that subsequently will issue coupons to class members who have cashed their settlement checks.

Proposed settlement agreement. The court found that the litigation was complex, expensive, and lengthy; an overwhelming majority of class members did not opt out or object; the parties engaged in extensive discovery and trial preparation; there were significant risks to the plaintiffs in establishing liability and damages; and the settlement fund was reasonable in light of the best possible recovery to the plaintiffs.

Additionally, the proposed settlement would provide a meaningful direct benefit to the class and would pay over $1.1 million claims. Individual awards would be distributed on a pro rata basis so each claimant would recover the same percentage of damages. Also, the claims process presented no hurdle for most class members, since the plaintiffs used BRU records to identify most of the class members. Thus, the distribution of funds could be estimated with reasonable accuracy.

Attorney fees. The court reduced the attorney fees requested by class counsel and awarded fees in the amount of $11.1 million or 31.2 percent of the gross settlement fund. In reducing the requested fee, the court noted that, although the class counsel had substantial evidence and devoted substantial time to the case, objections to an initial settlement proposal forced class counsel to negotiate a revised settlement that more directly benefited class members. Finally, awards of attorney fees and expenses were granted to the objector Kevin Young who pursued changes to the initial settlement which led to an acceptable settlement for the class.

The case is No. 2:06-cv-00242-AB.

Attorneys: William G. Caldes (Spector Roseman Kodroff & Willis, PC) for Carol M. McDonough and Ariel Elliott. Harry H. Rimm (Reed Smith LLP) and Marisa J. Steel (Anderson, Kill, Olick, PC) for Toys "R" Us, Babies "R" Us, Inc., and Toys "R" Us-Delaware, Inc. Hannah Resnick (Dorsey & Whitney) for Baby Bjorn, AB. Alexander Maltas (Latham & Watkins LLP) and Dennis R. Suplee (Schnader Harrison Segal and Lewis, LLP) for Britax Child Safety, Inc.

Companies: Toys "R" Us; Babies "R" Us, Inc.; Toys "R" Us-Delaware, Inc.; Britax Child Safety, Inc.

Cases: Antitrust PennsylvaniaNews