Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Skincare products maker allegedly used exclusive agreement to block supply of ingredient to competitors, (Mar 23, 2016)

By Linda O’Brien, J.D., LL.M.

A skincare product manufacturer has used its dominant market position to enter into an exclusive distribution agreement that blocks the supply of a unique Norwegian skincare product ingredient to competing manufacturers, according to a complaint filed in the federal district court in New York City (Access Business Group International LLC. v. Aqua Bio Technology ASA, March 22, 2016).

Norwegian company Aqua Bio Technology (ABT) develops and sells ingredients used in skincare products. Restorsea LLC is a manufacturer and seller of skincare products, including those containing Red Caviar Concentrate. Red Caviar Concentrate is a unique material made from the hatching fluid of salmon eggs that is harvested from salmon hatcheries in Norway. Access Business Group operates a direct sales business through a global network of independent distributors (IBOs), which sell Amway-branded skincare products to consumers.

The complaint states that, in February 2012, Access entered into an exclusivity agreement with ABT, which gave Access the exclusive worldwide rights to market and sell skincare products containing Red Caviar Concentrate through their network of IBOs. Having secured a supply of this unique ingredient, Access developed a line of premium skincare products with Red Caviar Concentrate as the key ingredient, branded as “Amway Artistry Youth Xtend Ultra.” Since its release in 2013, the product line has been very well received by consumers and Access projects sales of more than $40 million in 2016. The exclusivity agreement expired on January 1, 2016.

Restorea also sells skincare products made from Red Caviar Concentrate. In March 2012, Restorea entered into an exclusivity agreement with ABT. In February 2014, Restorea brought an action, alleging that ABT breached its agreement by supply Red Caviar Concentrate to others. The complaint was dismissed with prejudice in July 2014, and Access believes that Restorea and ABT reached a settlement to resolve the litigation. A report in the trade press described the settlement between Restorea and ABT as granting Restorea exclusivity rights to additional ingredients developed from fish hatching fluids and terminating sales of those ingredients by ABT to other customers, the complaint alleges.

According to the lawsuit, Access expected to be able to obtain a continued supply of Red Caviar Concentrate from ABT’s U.S. distributor, Presperse Corp., after the expiration of the exclusivity agreement. During negotiations to renew the agreement, ABT informed Access that it would not supply it with the Concentrate until the parties executed an amendment to extend the exclusivity agreement. However, after Access placed an order with Presperse on January 15, 2016 for Red Caviar Concentrate, it was informed that the order would not be filed until the negotiations were concluded. Despite ongoing negotiations, Access has been unable to obtain any additional Red Caviar Concentrate from Presperse or ABT.

The settlement in Restorea’s lawsuit against ABT was calculated to gain control of the supply of the unique Red Caviar Concentrate, the plaintiff charged. Restorea currently purchases as much as 97 percent of the Red Caviar Concentrate sold by ABT. Access allegedly will suffer irreparable harm unless it obtains additional Red Caviar Concentrate in the immediate future. Specifically, Access will run out of Red Caviar Concentrate by the end of March 2016, forcing it to cease production of its Youth Xtend Ultra products.

The plaintiff asserts claims for breach of contract, tortious interference with contract, tortious interference with business relations, and unreasonable restraint of trade, monopsonization, and conspiracy to monopsonize in violation of Sections 1 and 2 of the Sherman Act. The action seeks declaratory and injunctive relief, compensatory and treble damages, interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 1:16-cv-02130.

Attorneys: Lawrence G. Scarborough, Bieta Andemariam, and Jacob A. Kramer (Bryan Cave LLP) for Access Business Group International LLC.

Companies: Access Business Group International LLC; Aqua Bio Technology ASA; Restorsea, LLC

News: Antitrust NewYorkNews