Antitrust Law Daily Wrap Up, ANTITRUST—SDFla: Operator of Duty-Free Shops Fails to Adequately Allege Antitrust Claims Against Cosmetics Firm, (May 30, 2013)

By Jeffrey May, J.D.

The federal district court in Miami has dismissed conspiracy and attempted monopolization claims brought by Duty Free Americas, Inc. (DFA), an operator of duty-free stores in airports, against cosmetics firm Estee Lauder Companies, Inc. (ELC). A claim for tortious interference with a business relationship under Florida law also was dismissed for failure to allege a protected business relationship (Duty Free Americas, Inc. v. Estee Lauder Companies, Inc., May 9, 2013, Scola, R.).

ELC is the largest manufacturer of beauty products sold in duty-free stores in U.S. airports, with a market share of “approximately 50% or greater.” Its brands, which routinely rank first in sales of beauty products in U.S. duty-free stores, include: Aramis, Aveda, Clinique, Donna Karen, Estée Lauder, La Mer, Smashbox, and Tommy Hilfiger.

For years, DFA, a self-described “maverick” in the duty-free industry, had a good relationship with ELC. A series of events led up to the filing of this lawsuit.

In 2008, DFA stopped buying ELC products after ELC proposed raising its suggested resale prices for duty-free operators. When DFA later learned that ELC had not raised the prices, DFA attempted to resume purchasing ELC’s beauty products. However, ELC refused DFA’s requests.

After DFA lost the ELC products, it began selling a new beauty product brand—Smashbox. ELC later acquired the brand and ceased supplying Smashbox to DFA.

DFA also had difficulty leasing duty-free concessions at various airports, purportedly as a result of actions taken by ELC, including an alleged “smear campaign,” to interfere with the deals.

Conspiracy. DFA failed to allege enough facts to plausibly suggest an “agreement” between ELC and DFA’s competitors in the duty-free business to support a conspiracy claim, the court ruled. The court rejected DFA's contention that a conspiracy could be reasonably inferred based on ELC's submission of an unsolicited letter to the decisionmakers involved in a request for proposal (RFP) to lease and develop duty-free concessions at Newark Liberty International Airport. The letter highlighted and promoted ELC’s authorized duty-free retail partners. It did not demonstrate an agreement. The letter merely suggested that ELC had an interest in seeing that one of its authorized duty-free retailers (as opposed to a retailer with whom it does not deal, like DFA) was awarded Newark’s duty-free concessions, the court explained.

Both ELC and DFA’s competitors had sufficient independent economic incentives to communicate with decisionmakers at Newark airport and other airports without the need to conspire with anyone.

The court also noted that DFA had not alleged any collusive communications between ELC and its co-conspirators. Further, DFA's complaint was silent as to the “who,” “what,” “where,” or “when” of the alleged conspiracy.

Attempted Monopolization. Claims that ELC attempted to monopolize the markets for cosmetics sold in duty-free stores in U.S. airports or skin-care products sold in these stores also were dismissed. DFA failed to show that ELC engaged in predatory or anticompetitive conduct by refusing to deal with DFA, by falsely disparaging DFA to airport authorities, by setting retail prices, or by requiring duty-free operators to provide ELC products with a “disproportionate amount of display place."

This is Case 0:12-cv-60741-RNS.

Attorneys: Elliot R. Golding (Crowell & Moring, LLP) for Duty Free Americas, Inc. Aaron Stenzler Weiss (Carlton Fields) for Estee Lauder Companies, Inc.

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

Cases: Antitrust FloridaNews