U.S. COURTS ALLOWS HP AND STAPLES MONOPOLY ON TONERS / INKS

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U.S. COURTS ALLOWS HP AND STAPLES MONOPOLY ON TONERS / INKS

 user 2008-12-01 at 12:05:59 pm Views: 32
  • #20749
    http://www.mondaq.com/article.asp?articleid=70802
    United States: Court Rejects Per Se Rule For Vertical “Market Allocation” Agreement
    A
    federal district court has dismissed the claim that an agreement
    between Hewlett-Packard (HP) and its customer Staples office supply
    stores, under which Staples stopped selling its own ink cartridges for
    HP printers, was a per se illegal antitrust violation. This new
    decision provides a helpful precedent for the argument that an
    agreement between a manufacturer and retailer should be judged under
    the rule of reason, even if one aspect of the arrangement reduces
    “horizontal” competition between them. Bedi v. Hewlett-Packard and
    Staples, Inc., No. 07-12318-RWX (D. Mass., Nov. 17, 2008).

    As
    part of a new strategic relationship agreement with HP, Staples agreed
    to carry only HP’s ink and toner and to cease selling Staples’ own
    brand of HP-compatible printer cartridges. A putative class of
    customers challenged the agreement as “a horizontal agreement between
    direct competitors” and relied on the claim that it was per se illegal.

    Ruling
    on the defendants’ motion to dismiss, the court focused on the narrow
    scope of the per se rule, which applies only to those types of
    agreements that confidently can be said to be always or almost always
    anticompetitive. While acknowledging that the HP and Staples ink
    cartridges compete with each other, the court emphasized that the
    HP-Staples relationship is “primarily vertical” and their strategic
    agreement involved more than the one aspect challenged by the
    plaintiff. Noting that vertical agreements typically are analyzed under
    the rule of reason and that the HP-Staples agreement did not fit into
    any established per se illegal category, the court dismissed the claim.

    This
    decision reinforces what clearly should be the rule. While it is
    possible to have a “naked” market allocation agreement that eliminates
    interbrand competition between firms that otherwise are
    vertically-related, that would be unexpected in ordinary business
    arrangements. More likely, other aspects of the vertical agreement will
    suggest a procompetitive alliance, as the Bedi court found in reviewing
    the supply and purchase commitments and other aspects of the HP-Staples
    agreement. If the agreement is on balance possibly anticompetitive,
    this should be shown under the rule of reason.