Distribution, Competition, and Antitrust / Intellectual Property (IP) Law

Why You Need to Pay Close Attention to Antitrust Standing

In a nutshell, you need to pay attention to antitrust standing doctrine because the doctrine has real teeth and can result in dismissal of claims.

That’s what the plaintiff in Static Control Components, Inc. v. Lexmark International, Inc., Nos. 09-6287/6288/6449 (6th Cir. Aug. 29, 2012), recently discovered. The case concerns Lexmark’s alleged conspiracy with unidentified microchip suppliers and resellers of Lexmark-manufactured printers to restrain trade and otherwise monopolize the market for printer toner cartridges. (Like many printer manufacturers, Lexmark employs technology and microchips to ensure that only its cartridges will work with its printers.) The plaintiff sells microchips to remanufacturers of Lexmark toner cartridges along with other parts to facilitate the repair and resale of Lexmark toner cartridges.

The Sixth Circuit affirmed dismissal of Static Control’s antitrust claims on antitrust standing grounds. Normally, only claimants who are competitors or consumers within the injured market have standing to sue. Static Control – a chip manufacturer – was neither a competitor nor a consumer in the market for toner cartridges.

Noting the exception for injuries in adjacent markets if “inextricably intertwined” with the injury sought to be inflicted upon the relevant market or participants, see Blue Shield of Va. v. McCready, 457 U.S. 465 (1982), the Sixth Circuit held that the exception is a narrow one and not designed to give standing to claimants whose injuries are a “tangential byproduct” of monopolistic conduct in a related market. To succeed, a claimant must show that the defendants “manipulated or utilized [the claimant] as a fulcrum, conduit or market force to injure competitors or participants in the relevant product and geographical markets.”

The court held that Static Control had not made such allegations. Its claim made no mention of being used by Lexmark as a fulcrum, and it did not allege that it was harmed because it was manipulated into harming the remanufacturers. Instead, the allegations made clear that Lexmark was using the end users to obtain the desired anticompetitive effects (through, e.g., “prebate” programs), rather than using Static Control.

In short, Static Control’s allegations “resemble a classic case of a supplier seeking standing to recover for indirect damages following anticompetitive conduct directed at its customers’ market.” It therefore lacked antitrust standing.

It’s too simplistic to say that only a direct competitor or a customer has antitrust standing. That said, it’s a good idea when evaluating a claim to ask whether the plaintiff or potential plaintiff is a direct competitor or a customer. If the answer is “no,” careful though should be given as to whether the plaintiff or potential plaintiff  in fact has antitrust standing.

P.S. I covered an earlier, related Lexmark decision on patent exhaustion here.

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