Antitrust Law Daily Wrap Up, ANTITRUST—NDTex: Suit Against Quarter Horse Breed Registry over Refusal to Accept Cloned Horses Proceeds, (May 28, 2013)

By Jeffrey May, J.D.

The American Quarter Horse Association (AQHA) could have violated the antitrust laws by refusing to register clones of registered horses, the federal district court in Amarillo, Texas, has ruled. Because issues of material fact remained, the association's motion for summary judgment in its favor on conspiracy and monopolization claims was denied; however, the court granted summary judgment on an attempted monopolization claim (Abraham & Veneklasen Joint Venture v. American Quarter Horse Assn., May 24, 2013, Robinson, M.).

AQHA, the preeminent Quarter Horse breed registry, is a non-profit association funded mostly by memberships, horse registration services, and AQHA competitions. Its 281,000 members are quarter horse breeders, trainers, and racers.

The plaintiffs sought to participate in the “elite” Quarter Horse market using cloned horses. They claimed that AQHA conspired to restrain competition in and monopolized the market for elite Quarter Horses by implementing and maintaining a rule that bars clones and their descendants from AQHA registration. According to the plaintiffs, without AQHA registration, a physically and genealogically elite Quarter is a virtually worthless breeding animal and is ineligible to participate in numerous high-purse competitions.

AQHA argued that it was a single entity incapable of conspiring. The association could have conspired, however, because it was controlled by competitors with interests to ban clones, the court explained.

While it was unclear whether AQHA would benefit or be harmed by allowing clone registration, members of the committee that approved and maintained the rule, including breeders, likely benefitted from fewer registrants. There was evidence that the interests of committee members did not align with those of AQHA and that many, if not all, committee members had an incentive to exclude clones. The court also noted that there was evidence that excluding clones deprived the marketplace of “independent centers of decisionmaking.”

Monopolization. To defeat the monopoly claim, AQHA argued that the clone ban, even if exclusionary, had no potential for making a significant contribution to achieving or maintaining monopoly power. Although the court questioned the plaintiff's allegations, it noted that AQHA might maintain monopoly power by refusing proposals to redraw market boundaries and include clones.

The plaintiffs’ attempted monopolization claim failed, however, because the plaintiffs did not allege that AQHA was trying to and almost obtained monopoly power by passing the rule against clones or by rejecting proposals to modify it. “The only Section 2 story Plaintiffs tell is that the AQHA has had monopoly power over the economically viable Quarter Horse market for decades … and that the association actually exercised that power when passing and defending” the rule, the court noted.

The case is No. 2: l2-cv-103-J.

Attorneys: Nancy J. Stone for Abraham & Veneklasen Joint Venture. W. Wade Arnold (Underwood Law Firm) for American Quarter Horse Assn..

Companies: American Quarter Horse Assn.

Cases: Antitrust TexasNews