Northern District Of Georgia Allows Sherman Act Tying Scheme Claims To Proceed
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  • Northern District Of Georgia Allows Sherman Act Tying Scheme Claims To Proceed
     
    04/28/2020
    On April 14, 2020, Judge Timothy C. Batten Sr. of the United States District Court for the Northern District of Georgia denied a motion to dismiss Shearman Act claims against defendant CargoSprint, LLC and its founder.  PayCargo, LLC v. CargoSprint, LLC, No. 3:19-CV-85-TCB, 2020 WL 1861928 (N.D. Ga. Apr. 14, 2020).  Plaintiff, a competing provider of electronic payment management services to freight and cargo carriers and shippers, alleged that defendants violated antitrust laws by tying the use of one of their products to the purchase of another.  Judge Batten denied defendants’ motion to dismiss, rejecting defendants’ argument that plaintiff’s amended complaint contained only conclusory allegations regarding the tying arrangement.
     
    Plaintiff PayCargo, LLC and defendant CargoSprint, LLC are competitors that offer payment and collection services in the freight and cargo industry.  In addition to its SprintPay payment platform, CargoSprint offers a product called SprintPass, which helps coordinate cargo transfers during dock deliveries.  Plaintiff brought its complaint alleging that defendants violated antitrust laws by unlawfully tying a customer’s use of SprintPay to its purchase of SprintPass. 
     
    In denying defendants’ motion to dismiss, the District Court found that, unlike PayCargo’s first complaint (which the court dismissed), PayCargo’s amended complaint plausibly alleged (1) the contours of the tying product market, (2) CargoSprint’s significant share of the market power, and (3) the involvement of a not insubstantial amount of interstate commerce in the tied product market.
     
    The District Court found that PayCargo plausibly alleged the contours of the tying market because the amended complaint sufficiently pled that:  (1) SprintPass does not have a reasonable substitute; (2) SprintPass’ potential substitutes did not satisfy a salability inquiry; and (3) SprintPass is, at the least, a subset of a larger product market.  In reaching these conclusions, the District Court noted that PayCargo sufficiently pled that one of SprintPass’s alleged substitutes is a European service that has not attempted to enter the U.S. market and the other is a U.S. service that has yet to make any sales.  The District Court also observed that even if SprintPass is part of a larger market of dock delivery services, the amended complaint sufficiently pled facts showing that SprintPass is a unique service because of the sophisticated manner in which it schedules deliveries.
     
    The District Court also held that plaintiff sufficiently pled defendants’ significant market power, based on allegations that defendants were able to charge double the price for SprintPay compared to competing products, that CargoSprint was the sole provider of automated delivery services, and that there were barriers to entry that inhibited the ability of defendants’ competitors to compete with SprintPass.  The District Court also noted that even if PayCargo had not successfully made barriers to entry allegations, the amended complaint would still state a claim in light of allegations that defendants gained an unfair cost advantage by unlawfully obtaining and reverse engineering SprintPass from a different, competing developer, TurretLabs.
     
    Finally, the District Court held that plaintiff plausibly alleged that defendants’ purported misconduct sufficiently impacted interstate commerce by pleading that defendants imposed the alleged tying arrangement on five major U.S. airports and that defendants process 50,000 delivery transactions each month.

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