Antitrust Law Daily Wrap Up, ANTITRUST—W.D. Tex.: Lack of monopoly power allegations dooms search engine marketing suit, (Mar 29, 2016)

By Greg Hammond, J.D.

An online advertising agency failed to adequately allege that a competitor had a dangerous probability of acquiring monopoly power in the pay-for-performance search engine advertising market by running “predatory ads.” In granting the competitor’s motion to dismiss the attempted monopolization counterclaim, the federal district court in Austin concluded that the online advertising agency failed to sufficiently allege the size of the relevant market, the competitor’s share of that market, or information about other competitors in the market (WickFire, LLC v. TriMax Media, Inc., March 25, 2016, Sparks, S.).

Pay-for-performance search engine marketing is an advertising model in which a merchant targets an ad to a consumer’s interests by placing an ad alongside the results of an Internet search performed by the consumer. WickFire filed suit against TriMax, alleging solicitation of “kickback and exclusivity agreements,” creation of predatory ads, and defamation. TriMax responded, in part, with an attempted monopolization counterclaim, alleging that WickFire began running “predatory ads” that depleted competitor advertisers’ budgets, allowing WickFire ads to “win” for any targeted search term-merchant pair even if the WickFire ad is of poor quality. This strategy, according to TriMax, will lead to worse outcomes for merchants because it elevates low-quality ads which ultimately result in fewer purchases from merchants’ websites. In addition, if WickFire is successful, competition will be eliminated and prices will rise to a supracompetitive level, TriMax claims. WickFire moved to dismiss the attempted monopolization counterclaim.

Attempted monopolization. The court dismissed TriMax’s attempted monopolization claim, finding that TriMax failed to plausibly allege that WickFire has a dangerous probability of acquiring monopoly power. In particular, the court found that (1) the mere assertion that the relevant geographic market was “small,” without any facts concerning WickFire’s share of that market or the number of WickFire’s competitors therein, was not enough; and (2) the sole, conclusory allegation that WickFire’s competitors were “too weak to constrain WickFire’s prices” was insufficient to establish that WickFire holds market power. Because this was TriMax’s ninth attempt at pleading its counterclaims, the motion to dismiss the Sherman Act counterclaim was granted with prejudice.

The case is No. A-14-CA-34-SS.

Attorneys: Benjamin L. Bernell (Pillsbury Winthrop Shaw Pittman LLP) and Bradley Dalton Coburn (Dykema Cox Smith) for WickFire, LLC. Barry M. Golden (Goldfarb LLP) for TriMax Media, LLC.

Companies: WickFire, LLC; TriMax Media, Inc.

Cases: Antitrust TexasNews