Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ill.: Karaoke bar fails to vocalize conspiracy, price discrimination claims, (Sep 25, 2014)

By Greg Hammond, J.D.

An Illinois karaoke bar failed to state valid antitrust claims against Slep-Tone Entertainment Corp., the creator of a number of karaoke songs. In dismissing the Sherman Act and Clayton Act claims, the federal district court in Chicago determined that the bar failed to allege any agreement to restrain trade or any discriminatory pricing practice that would violate either statute (Slep-Tone Entertainment Corp. v. Teddy O’Brian’s, Inc., September 24, 2014, Guzmán, R.).

Background. Slep-Tone owns the trademark for SOUND CHOICE, which appears on a number of karaoke accompaniment tracks and graphical displays with lyrics that the company creates. After learning that karaoke operators at karaoke bar Teddy O’Brian’s, Inc. duplicated Slep-Tone’s tracks without permission, and failed to pay any fees or royalties, Slep-Tone filed suit, alleging trademark infringement and unfair competition. Teddy O’Brian’s filed counterclaims, alleging—in part—violations of the Sherman and Clayton Acts. Specifically, Teddy O’Brian’s alleged that Slep-Tone conducted anticompetitive behavior, including threatening to sue a number of karaoke venues unless they buy its products, forcing karaoke operators to submit to random audits, and forcing venues to hire approved karaoke operators. Slep-Tone moved to dismiss the antitrust counterclaims.

Conspiracy. Under section 1 of the Sherman Act, Teddy O’Brian’s was required to establish: (1) a contract, combination, or conspiracy; (2) a resultant unreasonable restraint of trade in the relevant market; and (3) an accompanying injury. However, the court found that the bar failed to allege that Slep-Tone agreed to restrain trade with any other person or entity. Consequently, the Sherman Act claim was dismissed.

Price discrimination. Teddy O’Brian’s also failed to state a claim under section 13(a) of the Clayton Act, which requires a plaintiff to allege discriminatory pricing practices that fall into one of three categories: primary line, secondary line, and tertiary line. Because the bar’s price-fixing counterclaim was devoid of any allegations regarding Slep-Tone’s pricing practices, the court was required to dismiss the Clayton Act claim.

The case number is 14 C 3570.

Attorneys: Vivek Jayaram (Jayaram Law Group) for Slep-Tone Entertainment Corp. Matthew M. Saffar for Teddy O'Brians, Inc.

Companies: Slep-Tone Entertainment Corp.; Teddy O'Brians, Inc.

Cases: Antitrust IllinoisNews