Judge Stearns: No Market Power, No Illegal Tying

by Lee Gesmer on March 8, 2009

U.S. District Court Judge Richard Stearns has issued a summary judgment decision dismissing AVX Corp.’s claims of an an antitrust violation by Cabot Corporation, based on allegations of illegal tying by Cabot.

A tying arrangement is where a seller says, “I’ll sell you product A, but only if you also buy product B.”  Product B is said to be “tied” to product A, the “tying product.”  A little thought and common sense would cause even an economist to conclude that if the seller doesn’t have market power in product A, rather than be forced to buy product B a rationale buyer will look around for another seller, who can sell it product A without the “tie.”  In fact, this is just the conclusion the Supreme Court reached in the Illinois Tool case in 2006.

In the AVX v. Cabot case Judge Stearns noted that “AVX offers no evidence that Cabot had a sufficiently dominant market position to ‘force’ it into a multi-year purchase agreement for a product that it did not want.”  The fact that AVX was unable to satisfy this element of an illegal tying arrangement doomed its antitrust claim.

If this wasn’t enough, Judge Stearns also found that AVX was unable to produce reliable evidence of damages, another essential element of its claim.

Based on Judge Stearns’ opinion, it appears that AVX missed the mark in this case by a large margin.  While the case doesn’t break new ground, it is a good reminder of the burden a plaintiff faces when it claims illegal tying, especially following the Supreme Court’s 2006 decision in Illinois Tool.

Here is a link to the case, AVX Corporation v. Cabot Corporation.

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