Central District Of California Dismisses Sherman Act Claims Involving Alleged Los Angeles Outdoor Advertising Market
11/17/2020On November 9, 2020, the United States District Court for the Central District of California granted defendant Outfront Media Inc.’s (“Outfront”) motion to dismiss claims that Outfront engaged in an illegal conspiracy to stifle competition and maintain “monopolistic control” over the alleged market for outdoor advertising (billboards) in Los Angeles. Karraa v. City of Los Angeles, No. 2:20-cv-07036-SVW-AGR (C.D. Cal. Nov. 9, 2020). The Court found that plaintiffs, including rival outdoor advertising company Virtual Media Group, Inc. (“VMG”) and the ground lessors of billboard sites, did not plead facts to establish a violation of either Section 1 or Section 2 of the Sherman Act.
Plaintiffs alleged that Outfront conspired with other unnamed large billboard companies to influence the City of Los Angeles (the “City”) to adopt and apply billboard ordinances to prevent the construction of new billboards, even to replace existing billboards, in a way that allows Outfront and its co-conspirators to maintain a monopoly over the Los Angeles outdoor advertising market. Plaintiffs also alleged that the conspirators engaged in an “Anticompetitive Plan” that included destroying existing billboards when the ground lessors refused to accept suppressed rents. The conspiracy, plaintiffs alleged, stifled competition from new entrants in the market—competitors like VMG whose entry was increasing prices for ground leases.
In dismissing the Sherman Act § 1 claims, the Court found that plaintiffs did not allege sufficient facts to support a finding of an agreement among the alleged conspirators. The complaint’s conclusory statement that “the few giant outdoor advertising companies which have monopolistic control over the Los Angeles outdoor advertising market . . . entered into a conspiracy to accomplish the anticompetitive goal described in this complaint” was conclusory and inadequate. And the only specific, allegedly anticompetitive conduct alleged in the complaint was limited to the unilateral conduct of Outdoor. Because the complaint did not either identify the alleged co-conspirators or describe what they did to conspire, the Court readily dismissed the Section 1 claim for failure to allege facts establishing the essential element of an agreement.
With respect to the claims under Section 2 of the Sherman Act, the Court found that plaintiffs did not plead facts required to establish either anticompetitive conduct in the form of a conspiracy to monopolize or monopoly power in a properly defined market. First, the conspiracy to monopolize theory was not supported by facts establishing a conspiracy, for the reasons explained above. With regard to monopoly power, the Court expressly declined to address whether plaintiffs had properly pled a relevant antitrust market but relied on the failure to plead facts showing monopoly power within that market. Plaintiffs had pled no specific facts regarding market share in the alleged Los Angeles market, instead relying on data on defendant’s nationwide presence. And the only specific factual allegation that competition was excluded was limited to the allegation that Outdoor anticompetitively eliminated a single competitive location in Los Angeles. Without more, the Court found these allegations “neither establish nor allow a reasonable inference” that Outfront or its alleged co-conspirators possessed the alleged “dominant” share of the relevant market necessary to establish monopoly power. For these reasons, the complaint failed to state a claim for a violation of Section 2 of the Sherman Act.
The Court went on to dismiss First and Fifth Amendment claims against the City and Outfront for failure to state a claim, as well as plaintiffs’ state law claims for lack of jurisdiction.
This case is a straight-forward application of Twombly principles—specific facts showing an agreement is needed to establish a Section 1 claim, and conclusory allegations of market “dominance,” even when coupled with specific allegations of exclusionary conduct toward a competitor, are not enough to establish the monopoly power element of a Section 2 claim.