In Sunbeam Television Corp. v. Nielsen Media Research, Inc.,^[1] the Eleventh Circuit ruled that a customer seeking to obtain treble damages against a monopolist supplier for a violation of Section 2 of the Sherman Act cannot recover solely for the injury caused to the customer. The customer must also allege that the monopolist’s conduct either injured a competing supplier or kept would-be competitors out of the market. In the latter situation, the court held that in order to obtain antitrust standing, a customer must establish that the potential competitor “had the intent and was prepared” to enter the relevant market, but could not do so as a result of the defendant’s exclusionary conduct.

BACKGROUND

In general, a monopolist that obtains monopoly rents from consumers, without more, is not liable for a Sherman Act violation. A monopolization claim requires that the defendant engaged in some anticompetitive conduct to attain or maintain monopoly power, “as distinguished from growth or development as a consequence of a superior product, business acumen or historical accident.”^[2] Thus, courts have recognized that a monopolist’s conduct would have no impact on competition – and thus would not constitute a Sherman Act violation – when there is no competitor present in or seeking to enter a particular market.^[3] Higher prices charged to customers does not alone constitute actionable antitrust injury.

In Sunbeam, the Eleventh Circuit was confronted with precisely such a situation, in which an incumbent monopolist was accused of taking actions to foreclose potential competition when there were no direct competitors. The question presented was: “whether, to establish antitrust standing, Sunbeam, as one of Nielsen’s customers, must establish the existence of a willing and able competitor that would have entered the relevant market and competed with Nielsen, but for Nielsen’s exclusionary conduct.”^[4]

THE FACTS

Defendant Nielsen Media Research, Inc. (Nielsen) is a leading provider of television “ratings,” which measure the number of viewers of a particular program or station. Television ratings are the primary driver of advertising pricing and revenue. According to the complaint, Nielsen exercises monopoly power in the market for such “television audience measurement services” nationwide and in the Miami-Fort Lauderdale market in particular. Plaintiff Sunbeam Television Corp. Sunbeam operates a FOX-affiliated broadcast television channel in the Miami-Fort Lauderdale area and is a long-time customer of Nielsen’s ratings.^[5]

According to Sunbeam, in 2008 a change implemented by Nielsen in the device it used to measure television viewership and create its ratings in Miami-Fort Lauderdale caused a 50% drop in Sunbeam’s ratings, resulting in a significant decline in its advertising revenue. Evidently recognizing that its harm alone would not state a monopolization claim, the crux of Sunbeam’s Complaint was that Nielsen engaged in a panoply of exclusionary conduct to maintain its monopoly position and, as a result of such conduct, prevented potential competitors from entering the ratings services market. Specifically, Sunbeam alleged that Nielsen mandated contractual provisions with its customers that prevented competitors from entering the market; undertook transactions and business strategies intended to neutralize competitors; imposed punitive pricing on customers who resisted its practices; utilized defective ratings data to attract new cable customers and foreclose a potential avenue of competitor entry; imposed onerous contract provisions on customers that left them no recourse; and charged supra-competitive prices. Sunbeam claimed it was damaged because the antitrust violations insulated Nielsen from competition, allowing it to sell inferior products to customers at supra-competitive prices.^[6]

THE COURT’S DECISION

The issue before the Eleventh Circuit was whether Sunbeam could establish antitrust standing for its alleged injuries, as required by Section Four of the Clayton Act, which “involves consideration of the nexus between the antitrust violation and the plaintiff’s harm and whether the harm alleged is of the type for which Congress provides a remedy.”^[7] The Eleventh Circuit employs a two-pronged test for antitrust standing: (1) the plaintiff must establish that it has suffered an antitrust injury, i.e., “injuries of the type the antitrust laws were intended to prevent;” and (2) the plaintiff must be an “efficient enforcer” of the antitrust laws, which requires a “causal relationship between the antitrust violation alleged and the antitrust injury sustained.”^[8] The court concluded that it did not need to consider the first prong of the test because Sunbeam was not an efficient enforcer of the antitrust laws.^[9]

The standard for determining whether a customer, as opposed to a competitor, is an efficient enforcer in the context of a monopolization claim was an issue of first impression in the Eleventh Circuit. Sunbeam argued that to have standing, a customer need not demonstrate the existence of a “willing and able” competitor that was excluded from the market as a result of Nielsen’s conduct. The Eleventh Circuit disagreed. The court relied on and adopted the opinion of the D.C. Circuit in Meijer, Inc. v. Biovail Corp., 533 F.3d 857 (D.C. Cir. 2008), concluding that in order to meet the second prong of the standing requirements, “the plaintiff must prove the existence of a competitor willing and able to enter the relevant market, but for the exclusionary conduct of the incumbent monopolist.”^[10]

In order to establish this so-called “preparedness” requirement, Sunbeam was required to prove that a potential competitor “took affirmative steps to enter the business,” which the court described as “particularly important” for “capital intensive” industries.^[11] The court cited several examples that would tend to show “preparedness” by a potential competitor to the monopolist, such as preparing cash flow estimates and financial statements, having existing capabilities to serve the market, or taking steps to obtain necessary government permits, although this was not an exhaustive list.^[12] Sunbeam argued below that three potential competitors could have entered the television ratings market but for Nielsen’s conduct, but the district court, after examining the record in great detail, disagreed and found that there was no disputed issue of fact as to the existence of a “willing and able” competitor. The Eleventh Circuit agreed with the district court’s determination and affirmed the district court’s grant of summary judgment in favor of Nielsen.^[13] Thus, the court did not even reach the question of whether Nielsen’s conduct was exclusionary and therefore actionable under Section 2, since it had no impact on competition.

CONCLUSION

This ruling underscores the rule that it is not enough for a customer in the Eleventh Circuit attempting to make out a monopolization claim to argue that it suffered an economic injury due to an incumbent monopolist’s exclusionary conduct. Indeed, a defendant such as Nielsen cannot be held liable merely for charging customers supracompetitive prices. That is a benefit of monopoly that is permissible because it supposedly attracts new entry.

Accordingly, a customer injured by such monopoly prices must also demonstrate that a competing supplier was foreclosed from competing with the monopolist or that a potential new entrant was willing and able to enter the market, such that plaintiff would have been able to purchase from this competitor at a lower price were it not for the monopolist’s exclusionary conduct. Absent the presence of a viable actual or potential competitor, there can be no harm to competition and thus no Sherman Act liability. While the Eleventh Circuit did not elucidate precisely what the inquiry to determine whether a competitor is truly “willing and able” entails, it made clear that a potential competitor must have taken some affirmative steps toward entering the market; hypothetical competition is clearly not enough.

This ruling once again demonstrates that customers in industries dominated by a single player may get sympathy for being forced to pay higher prices or accept inferior products or services provided by the monopolist, but must suffer the consequences unless there is an actual or potential competitor to the monopolist that has been harmed—a reason for the regulatory regimes imposed on monopolist utilities and cable companies.

_{[1] 711 F.3d 1264 (11th Cir. 2013).}

_{[2] Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, 540 U.S. 398, 407 (2004).}

_{[3] For example, some lower courts have held that a tying arrangement imposed by a monopolist is not illegal when there are no competitors in the tied product market because there is no foreclosure of competition. See, e.g., Reifert v. South Cent. Wisconsin MLS Corp., 450 F.3d 312, 318 (7th Cir. 2006) (“Without evidence of competitors in the [tied product] market … there can be no foreclosure of competition.”); Coniglio v. Highwood Svcs., Inc., 495 F.2d 1286, 1293 (2d Cir. 1974) (same).}

_{[4] Sunbeam Television Corp. v. Nielsen Media Research, Inc., 711 F.3d at 1270.}

_{[5] Id. at 1267.}

_{[6] Id. at 1268-69.}

_{[7] Id. at 1271.}

_{[8] Id. at 1272.}

_{[9] Id.}

_{[10] Id. at 1273.}

_{[11] Id.}

_{[12] Id.}

_{[13] Id.}