Antitrust Law Daily Wrap Up, ANTITRUST—S.D. Fla.: Operator of duty free shops fails to state antitrust and Lanham Act claims against cosmetics firm, (Apr 1, 2014)

By Linda O’Brien, J.D., LL.M.

An operator of duty free shops failed to adequately allege antitrust and Lanham Act false advertising claims against a manufacturer of beauty and cosmetic products, the federal district court in Miami has ruled. The operator’s claim for tortious interference with a business relationship under Florida law also was dismissed for failure to show an unjustified interference with a business relationship (Duty Free Americas, Inc. v. The Estee Lauder Companies, Inc., March 31, 2014, Scola, R.).

Duty Free Americas (DFA) operates duty free stores in U.S. airports. Estee Lauder Companies (ELC) is the largest manufacturer of beauty and cosmetic products sold in duty free stores in the U.S., and its brands routinely rank first in sales of beauty products in duty free stores. DFA maintained a business relationship with ELC until 2008 when DFA ceased buying ELC products after ELC proposed raising its suggested retail prices for duty free operators. DFA later attempted to resume purchasing ELC products, but ELC refused DFA’s requests. DFA began to sell another beauty product brand – Smashbox. ELC later acquired the brand and ceased supplying Smashbox to DFA.

After DFA had difficulty leasing duty free concessions at various airports, DFA filed suit against ELC, alleging a conspiracy to exclude DFA from the relevant market and attempted monopolization of the beauty product market in duty free stores, in violation of Sections 1 and 2 of the Sherman Act. DFA also alleged tortious interference with the business relationships of three airports under state law. ELC’s motion to dismiss was granted on all claims. After discovery, DFA filed an amended complaint, adding allegations the ELC engaged in contributory false advertising under the Lanham Act. ELC moved to dismiss the amended complaint.

Attempted monopolization. The court found that DFA failed to adequately plead a claim that ELC attempted to monopolize the relevant markets. To establish a claim under Section 2 of the Sherman Act, a plaintiff must show: (1) the defendant specifically intended to monopolize; (2) the defendant engaged in anticompetitive conduct to achieve that intent; and (3) there was a high probability the defendant would succeed in achieving monopoly power. In rejecting DFA’s argument that ELC’s refusal to deal with it was anticompetitive conduct, the court noted that a business can choose with whom it deals. ELC’s refusal to deal did not constitute anticompetitve conduct because DFA could and was able to purchase beauty products from other suppliers. Moreover, there was no dispute that DFA terminated its business relationship with ELC. It was not anticompetitive for ELC to refuse to resume a business relationship that DFA had unilaterally terminated.

Additionally, ELC’s representations to airport authorities during DFA’s concession bidding process that it did not have a commercial relationship with DFA were truthful and did not constitute anticompetitive conduct. Representations by other duty free operators during the concession bidding process did not constitute anticompetitive conduct by ELC because DFA did not allege that the operators were agents of ELC. DFA also did not allege that ELC conspired with the other operators to prevent DFA from winning the airport concessions.

Since DFA had an opportunity to amend the antitrust and tortious interference claims and failed to state valid claims after extensive discovery, further amendment of the claims would be futile and the claims were dismissed with prejudice.

False advertising. DFA also failed to allege a plausible claim for contributory false advertising. To show a false advertising claim under the Lanham Act, the plaintiff must show that the commercial advertisement was either literally false or likely to mislead consumers. DFA alleged that statements made by another duty free operator during the airport concession bidding process were false and misleading and ELC was liable for contributory false advertising. The operator’s statements were merely predictions about sales prospects and, as such, were opinions. Finally, DFA did not allege that the operator lacked a good faith basis for believing in the statements, the court concluded. Since the Lanham Act claim was a new claim, its dismissal was without prejudice.

The case is No. 12-60741-Civ-SCOLA.

Attorneys: Craig S. Coleman (Faegre Baker Daniels, LLP) and Gabriel Groisman (Coffey Burlington Wright Crockett) for Duty Free Americas, Inc. Aaron Stenzler Weiss (Carlton Fields Jorden Burt, PA) and Joseph Kattan (Gibson, Dunn & Crutcher, LLP) for The Estee Lauder Companies, Inc.

Companies: Duty Free Americas, Inc.; The Estee Lauder Companies, Inc.

Cases: Advertising Antitrust FloridaNews