Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Private label cigar maker obtains $44.4M jury verdict against Swisher International, (Apr 4, 2016)

By Linda O’Brien, J.D., LL.M.

Following a two-week trial, on March 30, a jury in Santa Ana, California found that the world’s largest cigar manufacturer, Swisher International, used its monopoly power to restrict the supply of competing private label cigar distributor Trendsettah USA, Inc., and awarded the distributor $14.8 in damages, which will be trebled to $44.4 million (Trendsettah USA, Inc. v. Swisher International, Inc., Case No. 8:14-cv-01664-JVS-DFM).

Trendsettah USA, Inc. (“TSI”) markets and distributes tobacco and other products. Swisher International is a global manufacturer of cigars and cigarillos.

In January 2011, TSI entered into a private label agreement with Swisher for the manufacture of cigarillos—a sector of the cigar market—under the brand name “Splitarillo.” As the agreement continued, TSI’s Splitarillo brand began to capture a larger share of the cigarillo market, and Swisher’s view of TSI soured. Subsequently, Swisher began restricting the supply of Splitarillos by refusing to fulfill the orders for Splitarillos that TSI had placed under the private label agreement.

In October 2014, TSI filed suit against Swisher, alleging that the company used its monopoly power to injure competition by refusing to fulfill TSI’s purchase orders for the manufacture of the private label brand cigarillo, in breach of contract, and by disparaging the quality of TSI’s competing private label brand. The complaint alleged violations of Section 2 of the Sherman Act and California’s Unfair Competition Law.

In a unanimous special verdict, the jury found that TSI proved by a preponderance of the evidence that Swisher created or maintained a monopoly through anticompetitive practices, in violation of Section 2 of the Sherman Act. TSI contended that Swisher became concerned that TSI’s sales of Splitarillos were cutting into the market share of Swisher’s own brand and that the breach of the private label agreement was anticompetitive. Since Swisher’s manufacturing right of the Splitarillo was exclusive and TSI could not use another manufacturer to fulfill orders for Splitarillo cigar products, Swisher’s conduct caused TSI to lose sales and reduce the rate of market share growth that it has previously experienced, TSI argued.

Siding with TSI, the jury awarded damages in the amount of $14.8 million, which will be trebled to $44.4 million. After finding that Swisher committed an antitrust violation and that the violation caused injury to TSI, the jury was allowed to calculate lost future net profits, using reasonable estimates of the amount of profits TSI would have earned and the length of time it would have earned those profits.

Attorneys: Mark W. Poe (Gaw Poe LLP) for Trendsettah USA, Inc. Cindy A. Laquidara (Akerman LLP) for Swisher International, Inc.

Companies: Trendsettah USA, Inc.; Swisher International, Inc.

News: Antitrust CaliforniaNews