Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Luggage shipping company charged with creating monopoly by acquiring competitors, (Jan 11, 2016)

By Jody Coultas, J.D.

Luggage shipping company Luggage Handlers, Inc. has filed Sherman Act and Clayton Act claims in the federal district court in Tyler, Texas, alleging that competitor Luggage Forward, Inc. has created a monopoly through the acquisition of third-party competitors (Luggage Handlers, Inc. v. Luggage Forward, Inc., January 8, 2016).

Luggage Handlers and Luggage Forward ship specialty luggage and sports equipment for consumers seeking to avoid the varied problems of transporting their luggage through airlines. Since 2009, Luggage Forward has grown in significant part through the acquisition of other market players, and it is estimated to control 75% of specialty luggage shipping volume and about 70% of market revenues.

According to the complaint, Luggage Forward violated Section 2 of the Sherman Act through its acquisition of competitors. Section 2 makes it illegal to monopolize, or attempt to monopolize, any part of trade or commerce. Luggage Handlers alleged that Luggage Forward’s post-acquisition market position—75% of specialty luggage shipping by volume, and 70% of market revenues—was evidence of monopoly power. Luggage Handlers further alleged that Luggage Forward’s conduct was willful and that Luggage Forward maintained its monopoly through exclusionary practices to artificially control search engine results and pay-per-click advertising.

Luggage Handlers also claimed that Luggage Forward violated Section 7 of the Clayton Act by obtaining monopoly power through acquisition of its competitors. A barrier to entry exists and competition is negatively affected, where a company inhibits competitors through domination of marketing and advertising channels. Luggage Forward’s allegedly monopolistic practices forced competitors to pay a premium of $15,000 per month to achieve market exposure, the complaint charged. Luggage Handlers alleged that the market concentration resulting from the acquisitions-at-issue will lead to interdependent oligopoly pricing effects.

The exclusionary conduct at issue, according to the complaint, was the continued Internet presence of each acquired competitor. The exclusionary, anti-competitive conduct allegedly resulted in an injury to Luggage Handlers. Specifically, Luggage Handlers and other competitors were pushed beyond the second page of search results (and thus rendered irrelevant) and faced crushing increases in pay-per-click advertising cost to maintain parity.

The complaint notes that, since its alleged injury was speculative until market entry, every acquisition by Luggage Forward should be considered in determining unlawful conduct and calculation of damages. Alternatively, Luggage Handlers argues that the latest two acquisitions by Luggage Forward are within the four-year statute of limitations period.

Luggage Handlers seeks a restraining order to keep Luggage Forward from further acquisitions of firms competing in the specialty luggage delivery marketplace and an order directing Luggage Forward to divest itself of its acquisition of Lug Less and Luggage Club. It further requests overcharges resulting from anti-competitive practices; compensation for the increase in pay-per-click advertising to maintain parity with Luggage Forward’s position on the first-page of search results; attorney fees; court costs; and treble damages.

The case is No. 6:16-cv-00003.

Attorneys: Robert Jewett (Jewett Law) for Luggage Handlers, Inc.

Companies: Luggage Handlers, Inc.; Luggage Forward, Inc.

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