Antitrust & Trade Regulation Update

UNITED STATES

HP and Staples Sued Over Anticompetitive Ink Cartridge Agreement

Computer manufacturer Hewlett-Packard Co. and office supply retailer Staples Inc. face a consumer class action lawsuit for allegedly agreeing to restrict competition in the market for laser printer ink cartridges. In December, a California resident and owner of an HP inkjet printer, Ranjit Bedi, filed a lawsuit against the companies in the US District Court for the District of Massachusetts. Bedi claims that HP and Staples conspired to reduce competition and raise prices in the HP-compatible ink cartridge market. HP is the US market leader for both printers and replacement ink cartridges, but earns higher profits on sales of ink cartridges.

The complaint states that HP and Staples violated the antitrust laws when they entered an agreement in 2006 according to which Staples ceased sales of its own brand of HP-compatible printer cartridges in exchange for monetary benefits from HP. Such benefits allegedly included more than US$100 million in "market development funds." According to the complaint, the HPStaples agreement is a horizontal agreement between direct competitors: "It reduces the output of HP-compatible cartridges, increases the price of HP-compatible cartridges, eliminates interbrand competition between Staples and HP and limits nonprice competition in the market for HPcompatible cartridges."

Bedi claims that the HP-Staples agreement is illegal under the Sherman Act because it restrains trade and fixes prices. He has asked the court to certify a class of similarly situated purchasers of HP-compatible ink cartridges. He has also asked for injunctive relief, treble damages, attorneys' fees and court costs.

ALJ Dismisses FTC Action Against Michigan Realtors Association

Chief Administrative Law Judge Stephen J. McGuire has dismissed the complaint brought by the Federal Trade Commission (FTC) against Realcomp, a corporation servicing more than 2,100 Michigan real estate brokerage offices. Realcomp, which is owned by a group of realtor boards and associations, operates the multiple listing service (MLS) for Southeastern Michigan. The FTC alleged that by restricting certain brokers' access to the MLS and related public websites, Realcomp unreasonably restrained competition.

According to the FTC's complaint, Realcomp restrained trade by blocking information about Exclusive Agency (EA) listings and listings by other nontraditional brokerage services and by preventing the dissemination of this information to public websites that are fed by the MLS. EA listings are produced by agreements whereby the broker receives a commission only if the broker locates the buyer; if the seller locates the buyer, the agent receives no commission. The complaint further alleged that brokers who adopted Realcomp's MLS rules effectively agreed to restrict the manner in which they compete. Moreover, such brokers collectively withheld a valuable resource from their nontraditional broker competitors.

In dismissing the FTC's complaint, Chief Judge McGuire ruled that the agency failed to establish an "anticompetitive effect or actionable consumer harm." Specifically, McGuire found that the evidence presented failed to demonstrate that the Realcomp website Policy: "(1) has eliminated or limited consumer choice of a desired product; (2) has excluded discount EA listings from substantial exposure on the Realcomp MLS or other public websites; (3) has unreasonably impeded the ability to discount brokers to compete in Southeastern Michigan; or (4) has forced discount brokers to exit the market or deterred entry." "Despite the website Policy," McGuire held, "discount brokers offering EA listings have been able to market their products and compete successfully in the Realcomp Service Area...