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Third Circuit Holds That A Concessions Vendor Does Not Have Antitrust Standing To Challenge An Exclusive Agreement Between An Airport And A Third-Party Beverage Company
05/04/2022On April 27, 2022, the United States Court of Appeals for the Third Circuit held that a concessions vendor did not have antitrust standing to challenge an exclusive beverage agreement between the Philadelphia International Airport and a third-party beverage company under Section 1 of the Sherman Antitrust Act. Host Int’l, Inc. v. Marketplace, PHL, LLC, No. 20-2848 (3d Cir. Apr. 27, 2022). Accordingly, the Court affirmed a district court ruling granting a motion to dismiss the concession vendor’s antitrust claims.
After plaintiff, an airport concessions vendor, won two concessions spots at the Philadelphia International Airport in a competitive bidding process, it began negotiating the terms of its lease. The airport insisted that the lease needed to include a term that allowed the airport to maintain agreements granting a third-party beverage company exclusive rights to provide non-alcoholic beverages at the airport. Plaintiff refused to accept this provision, terminated the negotiations, and filed a lawsuit in federal court alleging violations of Section 1 of the Sherman Act. Plaintiff alleged that the exclusivity agreement amounted to an unlawful tying arrangement and an illegal conspiracy and agreement in restraint of trade that excluded it from operating at the airport. The United States District Court for the Eastern District of Pennsylvania dismissed plaintiff’s claims for failing to adequately plead a relevant geographic market. Plaintiff appealed.
Before addressing either of plaintiff’s theories, the Third Circuit concluded that the vendor had failed to properly plead antitrust standing because it had not alleged an antitrust injury. Plaintiff contended that it had properly pleaded an injury: It was excluded from setting up shop in the airport because of that exclusivity agreement.
The Third Circuit rejected this argument for two reasons. First, plaintiff was not excluded from the airport marketplace; it chose not to continue negotiations once it discovered the unacceptable lease term. The failure to secure a preferred contractual term is not an antitrust injury. It is a dispute best settled based on contract law principles. Second, plaintiff’s alleged injury was an injury only to itself, not to competition. Plaintiff did not allege that the exclusivity agreement affected prices, supply, or any other aspect of the marketplace or competition therein. Rather, plaintiff claimed that it was excluded from the airport’s marketplace. Thus, even on the facts as pleaded, the exclusivity agreement presented no harm to competition itself.
Having concluded that plaintiff had not adequately pleaded antitrust standing, the Court noted that plaintiff’s tying claim was problematic because, based on the facts as alleged by plaintiff, there was no tying arrangement. The typical tying arrangement involves a seller with significant market power who requires a buyer to purchase one product (one that the buyer may not necessarily want or be otherwise interested in buying) as a condition of purchasing the product that the buyer actually wants and over which the seller has market power. In this way, the two products are tied together, and the buyer is forced to purchase both if it is going to get the product it wants.
But under the facts alleged by plaintiff, there were not two products being tied together. Even if plaintiff had entered the lease agreement, plaintiff would not have been required to purchase any non-alcoholic beverages. Instead, plaintiff’s sublessees would simply have been limited in their choice of vendors should they have decided to purchase third-party beverages. Even if plaintiff were required to purchase beverages from a third-party under the terms of its lease, that requirement would come by way of contract, not by way of the airport’s market power over the products in question. The Court rejected plaintiff’s theory of a tying arrangement.
Because plaintiff had failed to plead antitrust standing, the Third Circuit did not reach the grounds for dismissal adopted by the District Court (an inadequately pleaded geographic market). It did, however, affirm the District Court’s dismissal of the case with prejudice.
Antitrust Litigation