Antitrust Law Daily Wrap Up, ANTITRUST—N.C. Super. Ct.: Lack of market power dooms monopolization, tying counterclaims, (Jun 15, 2016)

By Greg Hammond, J.D.

A company that develops and markets facility-management software for the self-storage industry failed to allege antitrust counterclaims against a competitor. In granting the competitor’s motion to dismiss, a North Carolina Superior Court determined that the company failed to sufficiently allege market power to support allegations of illegal tying, monopolization, and attempted monopolization (SiteLink Software, LLC v. Red Nova Labs, Inc., June 14, 2016, Gale, J.).

SiteLink Software, LLC and Red Nova Labs, Inc. develop and market facility-management software for the self-storage industry. SiteLink filed suit against Red Nova, alleging that Red Nova improperly accessed SiteLink’s application-programming interface (API) by competing with SiteLink while an API license agreement was still in place and by later accessing the API without SiteLink’s consent. Red Nova’s antitrust counterclaims center on SiteLink’s termination of Red Nova’s access to SiteLink’s API and underlying database, as well as on SiteLink’s campaign that purportedly involved a number of false statements sent to Red Nova’s customers.

SiteLink moved to dismiss Red Nova’s antitrust counterclaims, which involved allegations of false statements; combinations and acts in restraint of trade or commerce; collusion to coerce customers not to deal with SiteLink’s competitors; use of market power to monopolize or attempt to monopolize; illegal tying; unfair competition; improper pricing; and conduct that impedes Red Nova’s ability to enter or compete in the marketplace.

Vertical restraint. The court first determined that the API license was not an illegal vertical restraint of trade. In particular, the court determined that Red Nova pleaded no underlying factual allegations to support the generalized conclusion that agreements between SiteLink and its customers have resulted in artificially high pricing—an illegal vertical restraint theory. Because Red Nova failed to meet the state’s liberal pleading standard, the court did not consider any claim that was based on improper pricing.

Group boycott. Next, because Red Nova did not allege any horizontal agreement among SiteLink and its competitors, the court determined that Red nova’s allegations did not allege a per se group boycott.

Market power. Lastly, because Red Nova failed to adequately allege market power in support of its counterclaims of illegal tying, monopolization, and attempted monopolization, the court granted the motion to dismiss. The narrowest market suggested by the counterclaims, according to the court, was a market for facility-specific management software for facility owners and operators in the self-storage industry. Even in this market, according to the court, SiteLink’s market share did not exceed 35 to 40 percent. The court also found that the counterclaims contained no facts concerning any participant in such a narrow market other than SiteLink or Red Nova. This was insufficient, according to the court, which determined that a claim that one competitor suffered injury by the acts of another competitor, without more, did not rise to the level of an actionable antitrust claim.

The case is No. 14 CVS 9922.

Attorneys: Luther D. Starling, Jr. (Daughtry, Woodard, Lawrence, & Starling) for SiteLink Software, LLC. W. Swain Wood (Morningstar Law Group) for Red Nova Labs, Inc.

Companies: SiteLink Software, LLC; Red Nova Labs, Inc.

Cases: Antitrust NorthCarolinaNews