In re Pool Prods. Distribution Mkt. Antitrust Litig.
| Decision Date | 11 April 2013 |
| Docket Number | MDL No. 2328. |
| Citation | 940 F.Supp.2d 367 |
| Parties | In re: POOL PRODUCTS DISTRIBUTION MARKET ANTITRUST LITIGATION. |
| Court | U.S. District Court — Eastern District of Louisiana |
OPINION TEXT STARTS HERE
Camilo Kossy Salas, III, Salas & Co., LC, Russ M. Herman, Herman, Herman, Katz & Cotlar, LLP, New Orleans, LA, Thomas J. H. Brill, Law Office of Thomas H. Brill, Leawood, KS, Arnold Levin, Levin, Fishbein, Sedran & Berman, Philadelphia, PA, Daniel W. Krasner, Wolf, Haldenstein, Adler, Freeman & Herz, LLP, New York, NY, Douglas G. Thompson, Finkelstein Thompson LLP, Washington, DC, Jay L. Himes, Labaton Sucharow, LLP, Linda P. Nussbaum, Grant & Eisenhofer, PA, New York, NY, Matthew B. Moreland, Becnel Law Firm, LLC, Reserve, LA, Richard J. Arsenault, Neblett, Beard & Arsenault, Alexandria, LA, Robert N. Kaplan, Kaplan Fox & Kilsheimer LLP, Ronald J. Aranoff, Bernstein Liebhard LLP, New York, NY, Scott R. Bickford, Martzell & Bickford, New Orleans, LA, Vincent J. Esades, Heins, Mills & Olson, PLC, Minneapolis, MN, for Plaintiff.
William Bernard Gaudet, Adams & Reese, LLP, New Orleans, LA, David H. Bamberger, Deana L. Cairo, DLA Piper, LLP, Washington, DC, Wayne J. Lee, Stone, Pigman, Walther, Wittmann, LLC, New Orleans, LA, for Defendant.
THIS DOCUMENT RELATES TO ALL DIRECT–PURCHASER PLAINTIFF CASES ORDER AND REASONS
Before the Court are defendants' 1 motions to dismiss direct purchasers' antitrust claims.2 For the following reasons, defendants' motions are granted in part and denied in part. Specifically, the Court grants defendants' motion to dismiss plaintiffs' monopolization claim under Section 2 of the Sherman Act and plaintiffs' claim that defendants engaged in a per se illegal boycott under Section 1 of the Sherman Act. The Court denies defendants' motion to dismiss plaintiffs' attempted monopolization claim under Section 2 of the Sherman Act and plaintiffs' Sherman Act Section 1 claims under the rule of reason. Finally, the Court grants defendants' motion to dismiss plaintiffs' claim that defendants fraudulently concealed their antitrust offenses.
This is an antitrust case that direct-purchaser plaintiffs (DPPs) and indirect-purchaser plaintiffs (IPPs) filed against PoolCorp and the Manufacturer Defendants. PoolCorp is the country's largest distributor of Pool Products. The Manufacturer Defendants are Hayward Industries, Inc., Pentair Water Pool and Spa, Inc., and Zodiac Pool Systems, Inc., which plaintiffs allege are the three largest manufacturers of Pool Products in the U.S. As defined in DPPs' complaint, Pool Products are the equipment, products, parts and materials used for the construction, renovation, maintenance, repair, and service of residential and commercial swimming pools. Pool Products include pumps, filters, covers, drains, fittings, rails, diving boards, and chemicals, among other goods. Pool buys Pool Products from manufacturers, including the three Manufacturer Defendants. DPPs are pool builders, pool retail stores, and pool service and repair companies (collectively “Pool Dealers”) that buy Pool Products from distributors and sell them to owners of residential and commercial pools. On November 21, 2011, the Federal Trade Commission (FTC) announced that it had conducted an investigation into unfair methods of competition by Pool and had entered a consent decree with Pool resolving the matter. Shortly after the FTC's announcement, the plaintiffs in this case filed the suits against Pool that have been consolidated for pretrial purposes in this court. Plaintiffs later added claims against the Manufacturer Defendants.
Plaintiffs allege that Pool monopolized and attempted to monopolize the Pool Products distribution market in the U.S. in violation of Section 2 of the Sherman Act by acquiring rival distributors and by entering into agreements with manufacturers to exclude Pool's rivals. Plaintiffs also allege that PoolCorp and the Manufacturer Defendants violated Section 1 of the Sherman Act by engaging in an unlawful conspiracy to exclude Pool's competitors. Plaintiffs allege that PoolCorp entered agreements with Manufacturer Defendants that prevented them from selling to new and existing PoolCorp rivals, with the purpose of raising their rivals' costs, preventing them from competing with Pool, and increasing prices for Pool Products. Plaintiffs claim to have suffered damages from defendants' conduct in the form of overcharges they paid as a result of defendants' conduct. They assert claims on behalf of a class of direct purchasers, defined as “[a]ll persons or entities that purchased Pool Products in the United States directly from PoolCorp ... at anytime between August 1, 2002 and the present.” 3 Defendants contend that none of plaintiffs' antitrust claims can withstand a motion to dismiss.
Plaintiffs allege that Pool pursued a deliberate strategy to restrain trade and monopolize through the acquisition of competitors and through the foreclosure of actual and potential competition by conditioning access to its distribution network on promises by manufacturers not to supply Pool's rivals. They allege that PoolCorp is the world's largest Pool Products distributor with roughly $1.8 billion in net sales revenue in 2011 and the only Pool Products distributor that operates nationwide.4 Pool is alleged to operate more than 200 distribution centers throughout the country, with the next largest U.S. distributor operating less than 40.5 The complaint alleges that PoolCorp “prices its products on a national basis and controls its pricing from its headquarters.” 6
Plaintiffs generally allege that the Manufacturer Defendants, the only full-line Pool Products vendors, agreed with Pool Defendants to eliminate existing distribution competitors and prevent new entrants from obtaining the products necessary to compete. Plaintiffs allege that the Manufacturer Defendants collectively represent more than 50 percent of sales of Pool Products at the wholesale distribution level and that as the only Manufacturers carrying a full line of pool products, they are “must have” inputs for wholesale distributors. 7 They allege that each of the three Manufacturer Defendants markets itself as either the leading manufacturer of Pool Products in the world or one of the world's leaders.8
Plaintiffs allege that Pool eliminated competition by acquiring rivals. Specifically, the complaint describes 13 instances from 1995 to 2009 when Pool purchased all or some of the assets of existing Pool Products distributors or suppliers in the U.S.9
Plaintiffs also allege that Pool entered into exclusionary agreements with manufacturers. Pool allegedly “often represent[s] 30 to 50 percent of a manufacturer's total sales.” 10 Plaintiffs allege that Pool used the leverage of its high volume purchasing to induce manufacturers, including Manufacturer Defendants, to agree to exclude Pool's rivals upon Pool's command. Plaintiffs allege that Pool “conditioned access to its distribution network on promises by manufacturers not to supply PoolCorp's rivals.” 11 The complaint alleges that Pool carried this out primarily through a Preferred Vendor Program (PVP). The complaint describes the PVP as a program by which Pool promoted member manufacturers' goods to customers, and provided advertising and marketing programs and product support.12 Plaintiffs allege that Pool informed PVP members, including the three Manufacturer Defendants and “virtually all of the other major Pool Products manufacturers,” that they were to discontinue favorable pricing or sales of Pool Products altogether to rival distributors if Pool Corp so directed.13 They allege that manufacturers, including the Manufacturer Defendants, complied with this condition because they feared losing Pool's business since no other distributor could replace Pool's volume and geographic coverage. Plaintiffs allege that when a new entrant sought to distribute Pool Products in a particular geographic area, Pool threatened to refuse to sell the manufacturers' products throughout the U.S., not just in the geographic area of the new entrant. The complaint includes allegations of eight rival distributors that were denied supply from manufacturers because Pool demanded that they be foreclosed.14 Plaintiffs allege that one of those companies went out of business, while the others allegedly experienced increased costs because of Pool's actions.15 Plaintiffs cite these instances as “examples” of a broader pattern of conduct.
Plaintiffs allege that Pool tended to target new entrants into the Pool Products distribution industry because new entrants “represented a unique threat to PoolCorp because they were more likely to compete aggressively on price to earn new business.” 16
Plaintiff's also specifically allege that, in the mid–2000s, Mareva, a manufacturer of specialty chemicals in Florida, entered into an agreement to sell exclusively to PoolCorp and not to any other Pool Products distributor. 17 They allege that Mareva would have preferred to sell to more distributors but could not afford to risk losing PoolCorp's substantial business.18 Plaintiffs allege that PoolCorp entered into agreements with rival distributors to refrain from competing with each other, such as a 2002 agreement with Cardinal Systems in Pennsylvania to avoid competition “for each other's customers on products they both sold.” 19
The complaint alleges that Pool's agreements with preferred vendors generally included a most favored nation (MFN) clause, by which the supplier agreed to give PoolCorp prices and terms that were at least as favorable as any provided to other purchasers with the same or similar volume levels as those of PoolCorp.20 Plaintiffs allege that the MFNs operated to suppress the ability of competitors to compete on price with Pool because they established a price floor for products bought from manufacturers.21
Finally, plaintiffs allege that the conduct of Pool...
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