Eastern District Of New York Holds That Group Boycott Of Online Dental Marketplace Must Go To Trial
On April 13, 2018, Judge Brian M. Cogan of the United States District Court for the Eastern District of New York denied defendants’—two leading dental supply distributors—motions for summary judgement. Plaintiff SourceOne, a nascent competitor in the dental supply distribution market, partnered with the Texas Dental Association (TDA) to launch an online marketplace in competition with the larger distributors, including defendants. Plaintiff alleged that the two defendants and a third leading dental supply distributor (who settled early in the case), which collectively controlled 80 percent of the dental supply distribution in the United States, conspired to boycott the TDA and Arizona Dental Association trade shows in an effort to harm plaintiff.
Plaintiff also alleged that defendants pressured dental supply manufacturers and at least one dentist not to deal with SourceOne. It contended that these concerted actions constituted a per se illegal group boycott under the antitrust laws and the information sharing necessary to facilitate the group boycott violated the antitrust laws under the rule of reason. Defendants moved for summary judgment on the grounds that plaintiff had not adduced sufficient evidence to support its claims that defendants had reached an agreement to boycott the trade shows—a foundational element of any claim of concerted action under the antitrust laws. Judge Cogan disagreed. He recounted a variety of communications between defendants that showed that they discussed not attending the trade shows unless TDA ended its partnership with plaintiff.
More importantly, Judge Cogan found that neither defendant would have skipped the trade shows without an assurance that its main competitors would also skip the trade shows. If one defendant chose not to attend, but its main competitor attended, the absent defendant would suffer a competitive disadvantage as its competitor made additional sales. Judge Cogan also found the evidence of high-level communications between defendants to be irregular and the timing of those communications to be suspicious. He rejected defendants’ arguments that their conduct was not sufficiently parallel because one defendant announced that it would not attend the trade shows several months before its other two competitors made that same decision. For these same reasons, Judge Cogan found that plaintiff had set forth sufficient evidence to support its claims that defendants tried to organize a group boycott of both dental supply manufacturers and customers (i.e., dentists). Based on these findings, Judge Cogan denied defendants’ motion for summary judgment on plaintiff’s group boycott claim.
With respect to plaintiff’s information sharing claim, defendants argued that information sharing between competitors can only be illegal where the information exchanged is pricing or other competitively sensitive information. Defendants argued that plans to attend a trade show do not fall into these categories. Judge Cogan disagreed here too. He said that defendants’ own documents acknowledged the importance of trade show attendance, and because skipping a trade show would be harmful to each defendant in the absence of a conspiracy, he held that a jury could find that plans to attend the trade shows were competitively sensitive information. As such, he rejected defendants’ attempt to dismiss that claim on summary judgment.