Brunswick Revisited: Antitrust Injury In A Competitor's Merger Challenge

Previously published Spring/Summer 2012

Keywords: Brunswick, competitor suits, antitrust injury, antitrust claims

In fall 2011, antitrust plaintiffs were put on notice that the requirement of antitrust injury was alive and well and might be applied rigorously in competitor suits. In Sterling Merchandising, Inc. v. Nestlé, S.A., the US Court of Appeals for the First Circuit affirmed summary judgment for defendants, dismissing a competitor's antitrust claims against Nestlé S.A. concerning a merger that allegedly increased concentration among ice cream distributors in Puerto Rico.

Following the merger, plaintiff Sterling Merchandising's sales and market share actually increased, but Sterling alleged that, but for the merger and resulting anticompetitive activities, it would have performed even better. The First Circuit rejected plaintiff's argument that it had established antitrust injury, reasoning that Sterling had failed to prove any increase in prices or reduction in output. Significantly, the First Circuit noted that plaintiffs' post-merger success was a "further indication" (i.e., evidence) that no antitrust injury existed. While the future impact of this aspect of the ruling is yet unknown, it may serve to raise the bar for future antitrust plaintiffs who have achieved success in the aftermath of an alleged antitrust violation.

Antitrust Injury and the Competitor-Plaintiff

Though the antitrust injury question is now a standard feature in private antitrust cases, it was a question no one asked until the Supreme Court's 1977 decision in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.1 In Brunswick, a plaintiff group of bowling alley operators charged that Brunswick, the leading maker of bowling equipment, had made a series of bowling center acquisitions that were illegal under Section 7 of the Clayton Act because the "failing company" doctrine had not been properly applied. In that context, the plaintiffs alleged that their centers would have been more profitable if some of the Brunswick-acquired centers had instead gone out of business.2

The court rejected this theory, noting that the survival of the centers, in whatever hands, was pro-competitive.3 Indeed, plaintiffs' theory was "designed to provide them with the profits they would have realized had competition been reduced," a resolution that would have been "inimical to the purposes of the [antitrust] laws."4 Private antitrust plaintiffs were, from then on, required to demonstrate the existence of "antitrust injury," or "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful."5 In other words, an antitrust plaintiff must show not only that it has been injured as a result of the defendant's actions and that those actions constitute an antitrust violation, but also that its injury stems from conduct that reduces output or that raises prices to consumers.

The antitrust injury requirement is particularly important in suits brought by competitors, as was the case in Sterling. Competitors are far more prone to complain about too much competition, rather than an absence of it. For instance, even if a competitor is stymied because a merger of its rivals makes them more efficient or able to compete more aggressively, that new market reality is not an antitrust violation, and the competitor thus lacks standing. Further, unlike consumers, competitors have incentives to bring antitrust suits for...