Antitrust Law Daily Wrap Up, ANTITRUST NEWS: High Court asked to consider level of scrutiny for geographic non-compete agreements, (Jan 26, 2015)

By Jeffrey May, J.D.

The nation's two largest grocery wholesalers have asked the U.S. Supreme Court to consider the applicability of the per se rule to acquisitions that contain geographic non-compete agreements and to agreements whose competitive nature and effects remain unclear at summary judgment. At issue is a decision of the U.S. Court of Appeals in St. Louis reversing summary judgment in favor of the wholesalers in an action brought by grocers, alleging a conspiracy to divide markets. The wholesalers filed a petition for certiorari with the High Court on January 16 (SuperValu Inc. v. D&G, Inc., Dkt. 14-891).

The underlying controversy arises out of a 2003 asset exchange agreement entered into by wholesalers SuperValu Inc. and C&S Wholesale Grocers, Inc. The agreement included a non-compete provision with respect to former customers. A grocer filed suit, alleging that the agreement violated the antitrust laws. The district court granted summary judgment in favor of the wholesalers. On appeal, the Eighth Circuit ruled that neither side was entitled to summary judgment and that the case should be tried to a jury. The appellate court decided that there was a factual dispute about the real terms of the wholesalers’ agreement.

Now, the wholesalers, seeking a determination that the rule of reason applies in this case, call on the Supreme Court to reverse the Eighth Circuit panel's decision. Specifically, they ask: (1) whether, in an antitrust case, fact issues about the competitive nature and effects of an agreement preclude applying the rule of reason at summary judgment and require deferring the decision of whether the per se rule applies until after a jury trial; (2) whether, in a business acquisition, the seller's agreement not to compete in the geographic area where that business operated is per se unlawful under the Sherman Act; and (3) whether, in a challenge to a business acquisition, the antitrust statute of limitations begins anew each time the defendant uses its increased market power to sell goods at an inflated price.

According to the petitioners, the Eighth Circuit's holdings create a split among the circuits. They question the Eighth Circuit's decision to reject the rule of reason at the summary judgment stage and to delay resolution of the mode of analysis until after the jury verdict. “The case offers the Court a prime opportunity to clarify the circumstances in which departure from the rule of reason is warranted,” the petitioners contend.

By refusing to apply the rule of reason, the petitioners contend, the Eighth Circuit contradicts the positions taken by the Sixth Circuit in In re Southeastern Milk Antitrust Litigation, 739 F.3d 262, 2014-1 Trade Cases ¶78,633, and the Seventh Circuit in In re Sulfuric Acid Antitrust Litig., 703 F.3d 1004, 2012-2 Trade Cases ¶78,197. “The Eighth Circuit recognized a fact issue about the competition nature and effects of the agreement, just as the Sixth Circuit did in Southeastern Milk and the Seventh Circuit did in Sulfuric Acid, but it drew a different conclusion,” the petitioners explained. In addition, by expanding the per se rule to include acquisitions with geographic noncompetition provisions, the Eighth Circuit was in conflict with the Supreme Court, as well as the Second, Third, Sixth, and Seventh Circuits, it was argued.

Statute of limitations. Lastly, the petitioners ask the Court to address “discord on when a cause of action accrues for antitrust claims relating to an acquisition.” They argue that the statute of limitations should run from the date of the acquisition, and should not be restarted with every sale at an allegedly supra-competitive price, as the Sixth Circuit, held “on virtually identical facts,” in Z Technologies Corp. v. Lubrizol Corp., 753 F.3d 594, 2014-1 Trade Cases ¶78,776.

Attorneys: Aaron M. Street (Baker Botts L.L.P.) and Martin R. Lueck (Robins, Kaplan, Miller & Ciresi, LLP) for SuperValu Inc.

Companies: D&G, Inc.; SuperValu Inc.; C&S Wholesale Grocers, Inc.

News: Antitrust