Antitrust laws “protect competition, not competitors”​

Plaintiff failed to prove that the challenged conduct harmed competitionAmong other things, the Sherman Act prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce.”  Some restraints on trade are unlawful per se.  For example, most price fixing agreements are illegal.  Other restrainged are evaluated under the so-called “rule of reason,” which distinguishes between restraints with anticompetitive effect that are harmful to the consumer and restraints stimulating competition that are in the consumer’s best interest.

In MacDermid Printing Sols. LLC v. Cortron Corp., No. 15-589 (2d Cir. Aug. 10, 2016) (Cabranes, J.), the Second Circuit held “there is really only one way to prove an adverse effect on competition under the rule of reason: by showing actual harm to consumers in the relevant market.”  In a paragraph that will be often cited in antitrust cases, the Second Circuit explained:

How “actual harm” is shown determines whether proof of market power is also required. If a plaintiff proves that consumers have already experienced harm from the challenged behavior because of higher prices, reduced output, or lower quality, then proof of market power is not required. Otherwise, it is.

In fact, “in no precedential opinion in this Circuit has a plaintiff successfully proved an adverse effect on competition without offering evidence of changed prices, output, or quality. “[P]roving an adverse effect on competition without showing increased price, reduced output, or reduced quality in the market has remained possible in theory but elusive in practice.

For this reason, the Second Circuit overturned a jury verdict that found defunct manufacturer Cortron Corp. liable for harming MacDermid Printing Solutions LLC’s ability to compete in the thermal flexographic printing market.  Cortron had issued a press release after settling a patent infringement suit that E. I. du Pont de Nemours and Co. had brought against it.  Under the settlement, Cortron stopped building printing plate machines that Cortron had previously manufactured for MacDermid.

The plaintiff had argued that the news release harmed competition by pushing demand away from it in the market for thermal flexographic printing, which is a narrow segment where MacDermid was the sole rival to the dominant DuPont.  “It is certainly possible that the purported Cortron-DuPont conspiracy, including DuPont’s press release, led some consumers to buy DuPont machines instead of MacDermid ones.”  But “a plaintiff must show that more than its own business suffered; it must ultimately show that the challenged action harmed consumers. MacDermid has not done so here,” the Second Circuit concluded.  Antitrust laws “protect competition, not competitors.”