Antitrust Law Daily Wrap Up, TOP STORY—S.D.N.Y.: Dial, Heinz proceed with monopolization claims against in-store promotions company, (Jan 19, 2016)

By Greg Hammond, J.D.

A class of consumer packaged goods firms (CPGs) could move forward with claims that an in-store promotions company engaged in unlawful exclusive dealing and acquired and maintained a monopoly over the third-party in-store promotions market. In denying the in-store promotions company’s motion for summary judgment, the federal district court in New York City concluded that: (1) material questions of fact exist as to whether the effect of the alleged exclusive dealing contracts was to “substantially foreclose” rivals from obtaining a toehold in the third-party in-store promotions marketplace; and (2) whether some, all, or none of the in-store promotions company’s conduct was anticompetitive was a question of fact that a jury must decide (Dial Corp. v. News Corp., January 15, 2016, Pauley, W.).

CPGs Dial Corp., 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 Corp. is a mass media company that serves as a middleman in the ISP market between CPGs and mass retailers.

The ISPs brought antitrust claims under Sections 1 and 2 of the Sherman Act, Section 3 of the Clayton Act, as well as claims under the New York Donnelly Act and the Michigan Antitrust Reform Act, claiming 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. News Corp. allegedly controls approximately 90.5 percent of the ISP market. Before the court were News Corp.’s motion for summary judgment and motion to exclude testimony.

Exclusive dealing. The court denied News Corp.’s motion for summary judgment, first finding that—in considering the duration of the contracts, their staggered end dates, and the guarantees as a whole—the CPGs raised material questions of fact as to whether the effect of the alleged exclusive dealing contract was to “substantially foreclose” rivals from obtaining a toehold in the third-party ISP marketplace—questions that should be resolved by a jury. In particular, the plaintiff CPGs alleged that only 18.7 to 25 percent of News Corp.’s total volume became available for bid each year between 2008 and 2012; and that, coupled with the broad market coverage of News Corp.’s retailer contracts—upwards of 73 percent—and the guarantees offered to retailers like KMART, a significant portion of the market may have been foreclosed to competitors.

Monopolization, anticompetitive conduct. The court also concluded that evidence of News Corp.’s exclusive contracts with retailers raised a genuine issue of fact as to whether News Corp.’s conduct excluded competition in an effort to acquire and maintain monopoly power. Further, in conjunction with News Corp.’s exclusive contracts with retailers, the CPGs presented sufficient evidence to withstand summary judgment that News Corp.’s exclusionary acts may be anticompetitive. The CPGs provided evidence that News Corp. hacked into a company’s computer systems, defaced that company’s products and used the photographs of the defaced products in sales pitches to other retailers; obtained another company’s confidential information and used it to compete against that company; and retained a competitor’s former employee as a “black knight” to dislodge that competitor from a retailer. Whether some, all, or none of News Corp.’s conduct was anticompetitive must be decided by a jury, the court concluded.

In addition to denying the motion for summary judgment with respect to the Sherman Act and state antitrust claims, the court denied News Corp.’s motion to exclude expert testimony.

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

Attorneys: Benjamin Philip Taibleson (Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC), Daniel Bruce Goldman (Kramer, Levin, Naftalis & Frankel, LLP) and James T. Southwick (Susman Godfrey LLP) for Dial Corp., H. J. Heinz Co. LP and Foster Poultry Farms. Jane Baek O'Brien (Paul, Weiss, Rifkind, Wharton & Garrison LLP) and Sharon L. Schneier (Davis Wright Tremaine LLP) for News Corp., News America Inc. and News America Marketing FSI LLC.

Companies: Dial Corp.; H. J. Heinz Co. LP; Foster Poultry Farms; News Corp.; News America Inc.; News America Marketing FSI LLC

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