The European Commission is investigating whether luxury watch manufacturers have suppressed competition by refusing to provide spare parts to independent repairers.

While the Commission has not identified any specific companies, the Swatch Group, parent company of such brands as Omega and Breguet, has identified itself as one of the subjects.  Swatch has said it is confident regarding the outcome of the inquiry.

The probe comes as the result of a complaint filed by the Confederation of Watch and Clock Repairers’ Associations (“CEAHR”) in 2002.  The EU Regulatory Commission initially rejected the complaint because of insufficient community interest, but a 2010 ruling from the General Court in Luxembourg overturned this decision.

CEAHR claims that watch manufacturers’ refusal to provide spare parts to independent watchmakers is harming competition by driving these artisans out of business.  According to CEAHR, consumers are being harmed because manufacturers often refuse to accommodate unique customer requests and carry out repairs without the input of the customer.  CEAHR says that such a restraint on competition enables manufacturers to charge artificially high prices.

A class action complaint in the U.S. District Court for the Northern District of California alleges that Apple and five major publishers engaged in a price-fixing conspiracy to block competition from Amazon’s e-reader, the Kindle.

The complaint in Petru et al. v. Apple, Inc. et al. alleges that prior to the launch of Apple’s iPad, Apple, HarperCollins, Penguin, Simon & Schuster, Macmillan, and Hachette Book Group violated federal and California state antitrust laws by conspiring to fix the prices of electronic books (e-books).

The plaintiffs contend that Apple was threatened by the popularity of Amazon’s Kindle and the potential that it would edge out Apple products in the market for mobile digital media devices.

According to the complaint, Apple wanted to protect its e-books from the price competition of Amazon, Sony and other e-book distributers that were selling e-books for $9.99.  The complaint claims that Apple sought to engineer an increase in Amazon’s prices in order to allow Apple’s iPad to better compete in the market for e-readers.

Plaintiffs allege that Apple orchestrated an agreement among publishers to sell e-books through an agency model.  This type of arrangement allowed publishers, not distributers, to set prices.  The agency model allegedly eliminated price competition among distributers.  According to the complaint, this model caused prices for e-books to rise by 30 to 50%, while the prices of hardcopy books remained constant in a competitive market.

If the class is certified, it will include purchasers of e-books from the five publisher defendants after the adoption of the agency model.

Plaintiffs claiming that Cablevision abuses market power in requiring subscribers to rent cable boxes are going to have to think outside the box after being told by the U.S. District Court of New Jersey for the third time that their claims of illegal tying and monopolization are inadequate.

Judge Jose Linares has dismissed the second amended complaint in Marchese v. Cablevision Systems Corp., but given plaintiffs leave to replead their allegations that Cablevision’s requirement that subscribers to advanced interactive services use set-top boxes provided by that cable operator constitutes both an illegal tie under Section 1 of the Sherman Act, and monopolization under Section 2.

According to Judge Linares, plaintiffs’ latest complaint failed to adequately allege that Cablevision had market power over “Two Way Services.”  The judge also faulted the complaint for attempting to treat set-top boxes programmed for use on Cablevision’s system alone as a relevant market.  Plaintiffs’ pleading difficulties in this case illustrate the difficulty of defining relevant antitrust markets in media entertainment industries.

Premium digital cable services often include features that require two-way communication, such as interactive program guides, video-on-demand, and remote recording functions.  To access these features, consumers need to lease a set-top box from the cable operator.  Although most set-top boxes in the U.S. are built by two manufacturers (Motorola and Cisco), only boxes leased from the cable operator are programmed to work with that operator’s systems.

Consumers can access some one-way, non-interactive digital cable channels without a set-top box, using a small device called a CableCARD, which can be plugged into home equipment, to descramble the channels.  CableCARD-reliant devices offered by sellers not affiliated with the cable operator are not licensed to support two-way services.  In Marchese, the plaintiffs claimed that by requiring two-way customers to rent set-top boxes, Cablevision compelled its customers to pay for a product they don’t want – a Section 1 tying claim.

Market power is essential to tying claims.  A plaintiff has to show that the defendant has power in the market for a “tying” product – here, two-way cable services – and used that power to compel customers to pay for a “tied” product – the set-top box.  Plaintiffs’ pleading difficulties began when they originally defined the tying product as digital cable service generally.  The court dismissed that complaint because Cablevision’s subscribers could access some aspects of digital cable – basic one-way service – without a set-top box, and were not compelled to lease a box.  In response, plaintiffs amended their complaint to define the tying product market as two-way service.

This, too, created a pleading problem: to show that Cablevision had market power in two-way services, plaintiffs relied on statistics about Cablevision’s market share and prices for digital cable generally – the broader market definition that they were forced to abandon.  But, said the court, Cablevison’s clout in digital cable service generally didn’t establish that it had power in the narrower market for two-way cable service.  Because of this, the judge dismissed the Section 1 claim, giving plaintiffs one more opportunity to re-plead.

The court also dismissed a claim that Cablevision was monopolizing the market for set-top boxes that can be used on its systems by preventing other set-top boxes from working.  Here, Judge Linares found that set-top boxes programmed for use on Cablevision’s systems could not be a relevant market because the same set-top box hardware was also used for some other cable systems.

Generally speaking, a single company’s product cannot be a relevant market for antitrust purposes.  The court analogized this to “aftermarket” cases such as Kodak v. Image Technical Services, in which the Supreme Court ruled that parts and service for a particular brand of copier cannot be a relevant market unless some special circumstances are present.  Because Cablevision’s set-top boxes were also used on some other cable systems, albeit with different firmware, the court ruled that set-top boxes that run on Cablevision’s systems was not a legally relevant market that could be monopolized.

QSGI Inc., the former second largest reseller of IBM mainframe computers, has filed a multi-million dollar antitrust suit against IBM in the U.S. District Court for the Southern District of Florida.

The complaint in QSGI Inc. v. IBM Global Financing alleges that IBM violated the Florida Antitrust Act and the Florida Unfair and Deceptive Trade Practices Act by adopting a rule that devastated QSGI’s ability to compete as a seller in the used IBM mainframe computer market. 

IBM allegedly instituted a “Six-Month Rule” in 2007, which prohibited outside resellers like QSGI from obtaining the parts and code necessary to modify used IBM mainframes until the computers had been installed for at least six months.  QSGI directly competed with IBM’s own subsidiary, IBM Global Financing (“IGF”), the largest reseller of IBM mainframe computers.  The rule did not apply to IGF, which could still modify used mainframes prior to shipping. 

Prior to the Six-Month Rule, QSGI alleges it was able to buy the parts from IBM necessary to turn off unwanted mainframe capacity which led to lower licensing costs for its customers.  QSGI claims that the Six-Month Rule forced it out of the mainframe market and ultimately into bankruptcy because it could no longer compete with IGF on price.  The suit also claims that the rule forced purchasers to buy used mainframes at uncompetitive prices from IGF.

Plaintiffs alleging a conspiracy among manufacturers of drives that play CDs and other optical discs are going to have to refocus their allegations in order to screen their claims of price-fixing in federal court.

Judge Richard Seeborg of the United States District Court for the Northern District of California has granted the defendants’ motions to dismiss each of the plaintiffs’ consolidated complaints, with leave to amend, in the case of In re Optical Disk Drive Antitrust Litigation.

The complaints in this Multi-District Litigation allege a conspiracy among defendants to fix the prices of Optical Disc Drives (“ODDs”) and Optical Disc Drive Products (“ODD Products”) in violation of the Sherman Act and state antitrust law.  ODDs are disc drives that use laser light to read and write data in optical discs, such as CDs, DVDs and Blu-Ray discs. 

In granting defendants’ motion to dismiss, the court focused on definitional inconsistencies in the complaints of the plaintiffs, who include a putative class of direct purchasers and indirect purchasers of ODDs and ODD Products.  To provide clarity, the court defined ODDs as “optical disc drive mechanisms built to be incorporated into either (1) stand-alone CD, DVD, or Blue-Ray players and records, whether for audiovisual or computer use, (2) computers, (3) game consoles, or (4) camcorders.”  The court defined ODD devices as “all such products (including the stand-alone players and recorders) that include ODDs.” 

The court granted defendants’ motion to dismiss the “direct purchaser” plaintiffs’ complaint under the federal Illinois Brick doctrine, under which only direct purchasers have standing to seek damages for price-fixing violations.  The court stated that “the likelihood is that most, if not all, the plaintiffs only purchased ODD devices,” rather than actual ODDs.  Accordingly, the court found that the direct purchaser plaintiffs were not, in fact, direct purchasers under Illinois Brick, due partially to the complaint’s definitional confusion and partially to the complaint’s lack of factual support.  Moreover, the court found the alleged conspiracy implausible as the number of entities needed to participate in the alleged conspiracy would be vast and the type of entities would be highly differentiated.  Finally, the court found the direct purchaser plaintiffs’ complaint was insufficient under the Twombly pleading standards. 

The court dismissed the indirect purchaser plaintiffs’ complaint on similar grounds, concluding that the complaint did not satisfy the plausibility standard.  The court took particular aim at the implausibility of the allegations of bid-rigging in auctions conducted by HP and Dell, which claimed the two companies were both co-conspirators and victims. 

In dismissing the complaints with leave to amend, the court gave plaintiffs 30 days to remedy the insufficiencies of their allegations.