Shearman & Sterling LLP | Antitrust Blog | 9th Circuit Upholds Grant Of Summary Judgment In Favor Of UPS And FedEx In Antitrust Suit Brought By Third-Party Shipping Rate Consultant<br >  
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  • 9th Circuit Upholds Grant Of Summary Judgment In Favor Of UPS And FedEx In Antitrust Suit Brought By Third-Party Shipping Rate Consultant
     
    08/21/2017
    On August 21, 2017, in an unpublished, split panel decision, the Ninth Circuit affirmed U.S. District Judge Jesus G. Bernal’s decision granting summary judgment in favor of UPS and FedEx on AFMS LLC’s antitrust suit under § 1 of the Sherman Act.  AFMS, a firm that offered rate negotiation and consulting services for package shippers, alleged that UPS and FedEx conspired to boycott third-party consultants such as AFMS who negotiated rates for their customers, including by threatening to discontinue the rate discounts for any shippers who continued to use intermediaries.  After providing AFMS with three opportunities to amend its complaint, the U.S. District Court finally dismissed the claims with prejudice in April 2015 because AFMS had not properly defined a market impacted by the alleged agreement.

    Although the Ninth Circuit ultimately affirmed the dismissal of claims, the judges on the divided panel explained their reasoning in three separate, albeit brief, opinions.  Writing for the majority, Judge Tashima explained that, to proceed with its claims, AFMS was required to show that it participated in the same market as UPS and FedEx.  AFMS had offered two market definitions: a market for “shipping consultation services” and a market for “rate negotiation.”  But in doing so, AFMS had constructed markets that included only itself, other third-party consultants, UPS, and FedEx, and could not explain the exclusion of other shipping firms such as in-house shipping consultants, the U.S. Postal Service, regional carriers, and other types of shipping consultants, from these markets.  The Court further stated that it was “highly questionable” whether UPS and FedEx even participated in the market for “rate negotiation.”  Accordingly, the Court found that AFMS had failed to define a cognizable market, and therefore lacked standing to sue.

    Although agreeing with the result, Judge Nguyen proffered different reasoning for affirming the grant of summary judgment.  Unlike Judge Tashima, Judge Nguyen believed that AFMS’s market definitions were cognizable for antitrust purposes, but that AFMS had failed to support its legal theories with sufficient evidence to survive summary judgment.  Further, although AFMS was not required to provide expert testimony regarding the relevant market, Judge Nguyen explained that the District Court was within its discretion to exclude the plaintiffs’ proffered expert’s testimony, and to grant summary judgment on the basis of insufficient evidence. 

    Judge Reinhardt dissented, finding that there could be a genuine issue of fact “as to the existence of a market regarding shipping consultation services, rate negotiations, and/or a combination of the two.”

    This case illustrates the difficulties a plaintiff faces in defining a market in which it offers a service that is performed on an integrated basis, not separately, by other firms in the marketplace.  While there are exceptions to the rule that the plaintiff must participate in the same market as the defendants, notably, when its alleged injuries are “inextricably intertwined” with the defendants’ collusive activities, this obstacle is still a difficult one to overcome.