Menu
Blog Banner Image

The Franchise Memorandum

Court Finds Exclusivity Agreements with Distributors May Give Rise to Anticompetitive Conduct Claim Against Dominant Manufacturer
Posted in Antitrust

The United States District Court for the District of Delaware recently held that a manufacturer’s use of exclusivity agreements with its distributors may support anticompetitive conduct for purposes of the Sherman and Clayton Acts. Roxul USA, Inc. v. Armstrong World Indus., Inc., 2018 WL 810143 (D. Del. Feb. 9, 2018). Armstrong World Industries is a dominant manufacturer in the ceiling tile market, controlling 55 percent of the market share. Roxul USA, one of only three companies that compete against Armstrong, brought suit alleging that Armstrong unlawfully maintained monopoly power in the ceiling tile market through its exclusivity arrangements with building material distributors. Armstrong moved to dismiss, arguing that its use of exclusivity agreements did not rise to the level of anticompetitive conduct.

The court denied the motion, allowing Roxul’s claim to proceed. Although Armstrong’s 55 percent market share was not, on its own, sufficient to allege monopoly power, other factors supported the claim. Specifically, Roxul alleged a high barrier of entry to the market and Armstrong’s history of controlling prices. Despite an overall decrease in sales volume in the market, Roxul alleged that Armstrong was able to raise its prices and charge five percent over market. Roxul also claimed that Armstrong retaliated against distributors who violated the exclusivity provision. The court found that the totality of Armstrong’s actions prevented possible competitors from entering the market and reduced consumer choice in the ceiling tile market. Roxul’s claim was therefore permitted to proceed.

Email LinkedIn Twitter Facebook

The information contained in this post is provided to alert you to legal developments and should not be considered legal advice. It is not intended to and does not create an attorney-client relationship. Specific questions about how this information affects your particular situation should be addressed to one of the individuals listed. No representations or warranties are made with respect to this information, including, without limitation, as to its completeness, timeliness, or accuracy, and Lathrop GPM shall not be liable for any decision made in connection with the information. The choice of a lawyer is an important decision and should not be based solely on advertisements.

About this Publication

The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

To subscribe to monthly emails for The Franchise Memorandum, please click here

Topics

Archives

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

Blog Authors