Antitrust Law Daily Wrap Up, ANTITRUST—NDInd: Tying Claims Adequately Stated Against Shopping Center Operator, (Jun 19, 2013)

By Jeffrey May, J.D.

The federal district court in South Bend, Indiana, has denied a motion for reconsideration of a March 13, 2013, decision, allowing tying claims to proceed against Simon Property Group, Inc.—an operator of shopping centers and outlet malls around the country (Gumwood HP Shopping Partners, L.P. v. Simon Property Group, Inc., June 17, 2013, Deguilio, J.).

Gumwood HP Shopping Partners brought an antitrust action against Simon after Gumwood had difficulty securing retail tenants for its new Heritage Square lifestyle shopping center in Mishawaka, Indiana. Gumwood alleged that Simon restrained trade and attempted to maintain its monopoly in the market for “leasable space in enclosed regional malls, lifestyle centers, or select specialty centers in the South Bend/Mishawaka region.”

Simon already operated the University Park Mall, self-described as “the only super-regional mall serving South Bend/Mishawaka and Southern Michigan,” and was preparing to open Village at University Park—a lifestyle component to the mall. Gumwood alleged that Simon pressured retailers to open stores at Simon's Village at University Park rather than at Heritage Square by threatening not to renew the retailers' leases at top shopping centers in other parts of the country unless they leased at Village at University Park.

In moving to dismiss Gumwood’s complaint, Simon disputed that Gumwood adequately alleged exclusionary conduct to support its conspiracy and monopoly claims. Simon characterized Gumwood’s allegations of anticompetitive conduct as “exclusive dealing” between Simon and certain tenants.

The conduct did not amount to exclusive dealing, according to the court. There were no allegations that the retailers that leased space with Simon agreed to refrain from dealing with other shopping centers. These retailers simply had no desire to open more than one location in the relevant market. The de facto exclusive nature of a retail lease in a small market was not an independently unlawful restraint of trade. While Gumwood's allegations did not support a claim based on exclusive dealing arrangements, its allegations were nonetheless sufficient to state a tying claim and therefore withstood Simon’s motion to dismiss.

Gumwood plausibly alleged that Simon engaged in a per se unlawful tying arrangement, the court ruled. Simon allegedly tied the purchase of leasable space in premium shopping centers in other parts of the country, including Atlanta, Miami, and New York, (the tying product) to the purchase of leasable space in its University Park shopping center (the tied product), when those retailers would have preferred to lease elsewhere or on different terms. The court rejected Simon's contentions that Gumwood failed to allege (1) that Simon had sufficient economic power in the tying product markets to restrain free competition in the tied product market or (2) that the tie affected a substantial amount of interstate commerce.

To force the purchase of a tied product in the South Bend/Mishawaka market, it could be plausibly inferred that Simon had the requisite market power in one or more of the other markets (or perhaps in the aggregate). Ultimately, however, the evidence might prove otherwise, the court noted. If the relevant markets in Atlanta, Miami, or New York were fully competitive, then national retailers could have simply chosen other locations in those markets and could not have been forced to lease at University Park Mall.

With respect to the volume of commerce, Simon allegedly “used anticompetitive tactics” to force multiple retailers to lease at University Park Mall. Even if only a single retailer, Ann Taylor, was forced to lease at University Park Mall instead of Gumwood's property, Gumwood might still prove that the volume of commerce affected by that single transaction was not insubstantial. This was especially true in light of the additional degree of foreclosure allegedly affected by various co-tenancy requirements dependant on the presence of an Ann Taylor outlet at Heritage Square, in the court's view.

Motion for reconsideration. In its motion for reconsideration, Simon contended that, in denying the motion to dismiss, the court “did not have the benefit of fully-developed briefing on the law of tying, particularly the extensive body of cases on the requirements for pleading and proving the key element of tying market power.” According to Simon, if the court had “properly understood the market power requirement, it would have dismissed the complaint.”

The court noted that reconsideration was not justified on this ground. Although the court could have benefitted from more comprehensive briefing on the issue of tying, the defendant had every opportunity to present its case in the two rounds of briefing on its motion to dismiss, the court explained. The issue of whether Simon had market power in any tying market would be better addressed based on evidence rather than allegations.

The case is CAUSE NO. 3:11-CV-268 JD.

Attorneys: Brad A Catlin (Price Waicukauski & Riley LLC) for Gumwood HP Shopping Partners, L.P. Patrick David Murphy (Boveri Murphy Rice LLP) for Simon Property Group, Inc.

Companies: Gumwood HP Shopping Partners, L.P.; Simon Property Group, Inc.

Cases: Antitrust IndianaNews