Antitrust Law Daily Wrap Up, TOP STORY—S.D. Tex.: Shipbuilder repair contract not attempted monopolization, (Nov 20, 2015)

By Edward L. Puzzo, J.D.

A repair and maintenance contract between a shipbuilder and a company that did not have the ability to do the repairs itself was not an attempt at monopolization prohibited by the Sherman Act, because no factual basis for the attempted monopolization was presented, and three-quarters of the relevant market was unaffected by the contract in question, the federal district court in Houston has ruled (App-America Trade & Ship Repair, Inc. v. Hellenic Marine, LLC, November 19, 2015, Atlas, N.).

Shipbuilder Hyundai Heavy Industries (HHI) entered into a contract with APP-America Ship Repair (APP) for repair and maintenance of their fleet of vessels in the Gulf of Mexico, including the Rowan Resolute. APP in turn contracted with Hellenic Marine (Hellenic) to perform repair services on the Rowan Resolute.

Hellenic, alleging that it had not been paid for its repair work on the Rowan Resolut, filed a lawsuit asserting, among other claims, an antitrust claim—attempted monopolization in violation of Section 2 of the Sherman Act. HHI moved to dismiss.

Attempt to monopolize. In order to properly allege an attempted monopolization claim under Section 2, the court explained, Hellenic must allege that HHI (1) has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power. Hellenic charged that HHI engaged in predatory or anticompetitive conduct when it contracted with APP to perform repair work, knowing that APP was not capable of performing the repairs itself. But the court responded that Hellenic had cited no legal authority for its argument that entering into a contract that may be perceived as without a legitimate business purpose was predatory or anticompetitive, nor did Hellenic allege a factual basis for the suggestion that HHI intended through its contract with APP to monopolize.

Identification of market. In addition, the court continued, there can be no determination as to whether there was a dangerous probability of achieving monopoly power without first identifying the market threatened by monopolization. If, as Hellenic urged, the relevant market was defined as after-delivery warranty repair work on newly constructed drilling vessels operating in the Gulf of Mexico, then by Hellenic’s own admission, 74 percent of that market was controlled by shipbuilders other than HHI. Thus there was no dangerous probability of APP achieving monopoly power through its contract with HHI, the court concluded.

Since Hellenic failed to allege factually that HHI engaged in predatory or anticompetitive conduct, that HHI had an intent to monopolize the after-delivery warranty repair work on newly constructed drilling vessels operating in the Gulf of Mexico, or that there was a dangerous probability that HHI would achieve monopoly power in that market, Hellenic failed to state a claim under Section 2 of the Sherman Act. Thus, the claim must be dismissed, the court ruled.

The case is Civil Action No. 4:15-cv-01603.

Attorneys: Alexander Carl Chae (Gardere Wynne Sewell LLP) for APP-America Trade & Ship Repair Inc. George A. Gaitas (Chalos and Co., PC) for Hellenic Marine LLC.

Companies: APP-America Trade & Ship Repair Inc.; Hellenic Marine LLC

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