Antitrust Law Daily Wrap Up, TOP STORY—S.D. N.Y.: Class certification granted for claims of monopoly over in-store advertising services, (Jun 19, 2015)

By Linda O’Brien, J.D., LL.M.

In a class action suit by consumer product firms against News Corporation for allegedly maintaining a monopoly in the market for third-party, in-store promotions, the firms established the requirements of commonality, typicality, predominance, and superiority for class certification, the federal district court in New York City has ruled. Thus, their motion for class certification was granted (Dial Corporation v. News Corporation, June 18, 2015, Pauley, W.).

Consumer product firms (CPGs) Dial Corporation, H.J. Heinz Co., Foster Poultry Farms, and Smithfield Foods, Inc. purchase a wide variety of in-store promotions (ISPs), including print and electronic signage, end of aisle displays, shelf-mounted displays, freezer displays, and floor signage. News Corporation is a mass media company that serves as a middleman in the ISP market between CPGs and mass retailers.

The firms brought antitrust claims under Sections 1 and 2 of the Sherman Act and Section 3 of the Clayton Act. Specifically, the plaintiffs alleged that News Corp. maintains a monopoly in the market for ISPs by entering into long-term contracts with retailers for exclusive access to their stores. Currently, News Corp. controls approximately 80 percent of the ISP market. Before the court was the plaintiffs’ motion to certify a class of CPGs that directly purchased ISPs from News Corp after April 5, 2008.

Commonality. The court found that there were several questions common to the class and capable of resolution through common proof, including News Corp.’s liability under the Sherman and Clayton Acts, definitions of the relevant geographic and product markets, and News Corp.’s market power in the relevant market. The majority of News Corp.’s alleged predatory conduct involved dealings with competitors and retailers, not putative class members, and was capable through common proof.

Typicality. Typicality requires that the claims of the class representatives be typical of those of the class. News Corp. contended that the plaintiffs were not representative of the class, since two plaintiffs did not purchase ISPs in recent years and other plaintiffs differed in whether they purchased ISPs across the entire News Corp. network. In the court’s view, the plaintiffs demonstrated that all class representatives made some ISP purchases during the damages period. The differences in the purchase amounts or characteristics of the class representatives did not defeat typicality.

Predominance. Under the predominance requirement, the plaintiffs must demonstrate that class-wide injury is capable of proof through evidence that is common to the class rather than individual to its members. News Corp. argued that, since each CPG negotiated with News Corp. and purchased different ISP products, there was a variation in News Corp.’s ISP prices across customers that precluded class-wide proof. The plaintiffs acknowledged that the prices may differ but countered that those prices depended predominately on common and observable factors and that all CPGs would pay lower prices but for News Corp.’s conduct.

According to the court, the plaintiffs presented expert analysis that employed a regression model correlating News Corp.’s transaction prices to product attributes, contract attributes, and product costs to determine class-wide impact. Combined with other evidence, the plaintiffs’ model suggests that prices were systematic and antitrust injury could be measured with common proof.

Additionally, the plaintiffs showed that damages resulting from the antitrust injury were measurable on a class-wide basis through the use of a common methodology. The plaintiffs’ expert employed a “benchmarking” or “yardstick” technique to calculate overcharges by calculating News Corp.’s profit margin for its ISPs and identifying a benchmark competitive margin for firms similar to News Corp. The expert then estimated how News Corp.’s monopoly pricing would have shifted downward if it had earned a competitive margin, with resulting savings for the CPGs.

News Corp.’s argument that discounts on ISPs to buyers with bundled offerings was rejected. The court noted that the fact that some customers received discounts did not defeat a showing of predominance. Damages calculations may require individual calculations. The important issues in the case were common: (1) whether News Corp. violated the antitrust laws; (2) the plaintiffs’ payment of supra-competitive prices was caused by News Corp.’s exclusionary conduct; and (3) whether the injury to the plaintiffs was an antitrust injury.

Superiority. Finally, the plaintiffs showed that a class action was superior to other available methods for fairly and efficiently adjudicating the controversy. In this case, there would be little interest in class members bringing their own actions, since most class members’ potential recovery would be outweighed by the costs of litigation. Class relief is superior where class wide litigation of common issues would reduce litigation costs and promote judicial efficiency, the court concluded.

The case is No. 1:13-cv-06802-WHP.

Attorneys: Daniel Bruce Goldman (Kramer, Levin, Naftalis & Frankel, LLP) for Dial Corp., H. J. Heinz Co., H.J. Heinz Company LP, Foster Poultry Farms, and BEF Foods Inc. Jane Baek O'Brien (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for News Corp., News America Inc., News America Marketing In Store Services LLC, and News America Marketing FSI LLC.

Companies: Dial Corp.; H. J. Heinz Co.; H.J. Heinz Company LP; Foster Poultry Farms; BEF Foods Inc.; News Corp.; News America Inc.; News America Marketing In Store Services LLC; News America Marketing FSI LLC

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