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

[Anonymous]

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.

[Author]

December 1, 2008 at 12:05 PM