Shearman & Sterling LLP | Antitrust Blog | U.S. District Court For The District Of New Jersey Dismisses Class Action For Failure To Identify Concerted Action And Relevant Market
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  • U.S. District Court For The District Of New Jersey Dismisses Class Action For Failure To Identify Concerted Action And Relevant Market
    01/23/2018
    On January 9, 2018, Judge William J. Martini of the United States District Court for the District of New Jersey dismissed with prejudice a putative class action brought by a purchaser of Jaguar vehicles against Jaguar Land Rover North America LLC, Jaguar Land Rover Limited (collectively, the “manufacturer defendants”), their dealers, and a third-party consulting company.  Baar v. Jaguar Land Rover North Am., LLC, et al., No. 2:17-04142 (D.N.J. Jan. 9, 2018).  Plaintiff alleged that defendants unreasonably restrained trade by implementing and enforcing a no-export agreement that prohibited purchasers from reselling Jaguar’s vehicles abroad for at least one year.  The Court held that the plaintiff’s complaint failed to state a violation of federal or state antitrust laws because it did not adequately allege (1) concerted action among the defendants, or (2) that Jaguar’s no-export policy produced anticompetitive effects within a cognizable antitrust product and geographic market.

    Due to high demand in certain foreign countries, Jaguar vehicles may resell at a price as high as three to four times greater in those countries than in the U.S. To protect its foreign profit margins, the manufacturer defendants allegedly developed a policy requiring all U.S. purchasers to sign a no-export agreement at the time of sale in which they agreed not to export the vehicle within the following year.   The manufacturer defendants allegedly hired a third-party consulting firm to draft the policy.  Under the policy, Jaguar dealers conducted certain due diligence tasks on customers in an attempt to identify resellers and prevent them from making purchases.  Plaintiff alleged that defendants unreasonably restrained trade of Jaguar vehicles by conspiring together to create, implement, and enforce Jaguar’s no-export policy, and that this was a per se violation of Section 1 of the Sherman Act.  Plaintiff defined the relevant market in which competition was affected as the “U.S. market for exporting [Jaguar and Land Rover Vehicles] for resale.”

    The Court found the no-export policy “unquestionably vertical in nature,” and therefore not a per se violation of Section 1 of the Sherman Act.  The Court also held that plaintiff failed to allege concerted action among the defendants to restrain trade because plaintiff’s complaint “makes it clear” that the Jaguar defendants “unilaterally implemented” the no-export policy. The Court held that a manufacturer has the right to deal or not deal with whomever it chooses, so long as it does so independently, and allegations that dealers complied with their supplier’s policy are not sufficient to sustain the conclusion that the dealers conspired with the manufacturer. Further, the Court found that the participation of the third-party consultant in drafting the policy did not transform the manufacturers’ independent unilateral decision to implement the policy into a conspiracy nor turn the consultant into a conspirator.  

    Moreover, the Court found that plaintiff failed to carry his burden of pleading a cognizable relevant market because this definition did not consider reasonably interchangeable substitutes or the cross-elasticity of demand. Specifically, it did not account for other high-demand luxury SUV brands, such as Lexus, BMW, and Mercedes, in the primary and export U.S. markets.  The Court noted that while consumers may prefer Jaguar products for a variety of reasons, “consumer preference does not transform an otherwise dynamic market with dozens of interchangeable and cross-elastic products into a singular market.”  After dismissing plaintiff’s Section 1 claim with prejudice, the Court dismissed all other state law claims for the “same reasons” that it dismissed the federal antitrust claims.

    This opinion is a straightforward application of the antitrust principles governing relationships between manufacturers and their dealers, and in particular, the principle that a dealer’s adherence to a manufacturer’s unilateral policy does not equate to conspiracy.  It also reflects modern courts’ strong disdain for alleged “single brand” markets, that is, markets defined by consumer preference for a particular brand.  Under these circumstances, the Court’s rigorous approach in dismissing the complaint with prejudice, finding it apparent from the face of the complaint that any attempt to replead would be futile, is to be commended.       

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