The Franchise Memorandum

A federal court in Nevada recently dismissed antitrust claims brought by a retailer that claimed it was harmed by a furniture manufacturer’s online sales through Wayfair, but allowed contract claims against the manufacturer to proceed to discovery. Furniture Royal, Inc. v. Schnadig Int’l  Corp., 2018 WL 6574779 (D. Nev. Dec. 13, 2018). Furniture Royal, the retailer, had sold furniture manufactured by Schnadig since 2010. In 2017, while maintaining the relationship with Furniture Royal, Schnadig also began selling its furniture directly to consumers through the Wayfair website at prices well below MSRP. Faced with this competition from online sales, Furniture Royal filed suit against both Schnadig and Wayfair. Both defendants moved to dismiss.

The court dismissed Furniture Royal’s antitrust claims asserted under Section 1 of the Sherman Act and the Robinson-Patman Act. According to the court, the Sherman Act claim failed because Furniture Royal failed to allege any details regarding Schnadig’s alleged market power within a relevant market. The Robinson-Patman Act claim failed because the sales in which the alleged price discrimination occurred were to buyers at different levels of the distribution chain; sales to Furniture Royal were made to a retailer, whereas sales through the Wayfair website were made directly from the manufacturer to the consumer. In contrast, the court allowed contractual claims against Schnadig to proceed based on an alleged implied covenant not to compete established through the parties’ prior course of dealing.