The plaintiffs, R.J. Reynolds Tobacco Company, Lorillard Tobacco Company, and Brown & Williamson Tobacco Corporation, sued Philip Morris Incorporated in U.S. District Court for the Middle District of North Carolina for alleged violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2; North Carolina General Statutes §§ 75-1, 75-1.1, 75-2, and 75-2.1; and North Carolina common law prohibiting unfair competition. The plaintiffs, who are cigarette manufacturers competing with Philip Morris, base their case on a retail marketing program called "Retail Leaders" that Philip Morris started in 1998. Under Retail Leaders, Philip Morris provides discounts to retailers on its popular Marlboro brand in exchange for the most advantageous display and signage space in retail establishments. This arrangement, the plaintiffs say, restricts the flow of information to consumers, limits the plaintiffs’ abilities to promote their products, insulates Philip Morris from effective competition, and results in higher cigarette prices.You'd think with all the lawsuits the tobacco company faces as an industry, they'd be less inclined to sue each other over petty antitrust claims. Then again, with the government cutting off the tobacco company's revenue at every turn, perhaps this sort of legal canibalism was inevitable.
The district court, after considering an exhaustive record that includes extensive data and information about sales, trends, and conditions in the cigarette market for over two decades, granted (in a thorough opinion) Philip Morris’s motion for summary judgment as to all of the plaintiffs’ claims. See R.J. Reynolds Tobacco Co. v. Philip Morris Inc., 199 F. Supp. 2d 362 (M.D.N.C. 2002). The district court concluded that in the period "since [Philip Morris] implemented its challenged Retail Leaders program [in 1998], the cigarette market in the United States remains highly competitive, as evidenced by the general stability of market shares in the light of long-term trends, the profitability of the Plaintiffs, and the ongoing entry and increasing market share of new manufacturers." Id. at 397. We affirm the grant of summary judgment to Philip Morris, and we do so on the reasoning of the district court with one exception. With respect to the plaintiffs’ claim under section 1 of the Sherman Act, we decline to conclude, as did the district court, that Philip Morris lacks market power. We agree, however, with the rest of the district court’s analysis of the section 1 claim. Assuming for the sake of argument that Philip Morris has market power, the plaintiffs did not show that Retail Leaders substantially forecloses competition in the relevant market. See id. at 386-93. Accordingly, as the district court ultimately determined, the plaintiffs’ section 1 claim fails. On the remaining issues, we affirm on the reasoning of the district court without any modification.
The judgment of the district court is affirmed.
Tuesday, June 24, 2003
Antitrust News: Unpublished Mayhem
How many lawyers does it take to get a three-page unpublished opinion? In the antitrust appeal of RJ Reynolds Tobacco Co. v. Philip Morris USA, it took 24 lawyers on the oral arguments and briefs to assist the U.S. Court of Appeals for the Fourth Circuit in producing a brief, unpublished per curiam opinion affirming a lower court's summary dismissal of the underlying claims. Here now is the court's entire opinion:
Posted by Skip at 10:28 PM