Earlier this year, I covered the case of Orchard Supply Hardware LLC v. Home Depot USA, Inc. See this post.
On September 19, 2013, the court (the Northern District of California) issued its decision on defendants’ motion to dismiss the plaintiff’s second amended complaint. The court dismissed plaintiff’s antitrust claims against the tool manufacturers (Makita and Milwaukee Electric Tool Corp. (“METCo”)), this time with prejudice.
On its second go-round, the court found that Orchard had alleged harm to competition, because it alleged a distinct product submarket: the market for certain specific professional power tools, as purchased by professional customers. “The market Orchard alleges . . . is defined by a distinct set of products, and within that market Orchard alleges that there is a distinct submarket as indicated by a distinct set of purchasers, sensitive to a distinct price point. Within this submarket, Orchard alleges that the challenged agreements have the effective of totally foreclosing competition. These allegations suffice to outline a defined submarket in which Orchard has pled harm to competition.”
The court rejected defendants’ argument that Orchard had failed to allege harm to competition because it had alleged neither a reduction in the output or quality of goods, and had not demonstrated an increase in price caused by Orchard’s foreclosure from the market. “An antitrust plaintiff need not demonstrate that prices have actually been raised to plead a rule-of-reason claim.”
Nevertheless, the court dismissed the claims against Makita and METCo. Plaintiff alleged that each tool manufacturer had entered into a separate vertical, exclusive agreement with Home Depot. “[I]t is inappropriate to aggregate the two vertical agreements in evaluating whether METCo and Makita’s conduct was anti-competitive. METCo and Makita each separately made an agreement with Home Depot. Orchard does not contend that, taken individually, these contracts have an anticompetitive effect . . . . If an individual supplier could be held liable for the cumulative impact of all suppliers’ conduct, a company would have to investigate what other businesses were doing before it acted in order to make sure its own conduct wasn’t anticompetitive, a burden the antitrust law does not impose.”