Menu
Blog Banner Image

The Franchise Memorandum

Ninth Circuit Affirms Dismissal of Class Action Conspiracy Case
Posted in Antitrust

The United States Court of Appeals for the Ninth Circuit recently affirmed a ruling in favor of the largest U.S. retail dealer of musical instruments and guitars, dismissing a class action brought by purchasers of guitars on the grounds that the plaintiffs did not plead sufficient facts to prove an antitrust conspiracy. In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d 1186 (9th Cir. Aug. 25, 2015). The class action plaintiffs alleged that the defendant, Guitar Center, Inc., along with manufacturers Fender, Yamaha, Gibson, Hoshino, and Kaman, engaged in a "hub and spoke" conspiracy through which the retailer and manufacturers agreed to implement minimum advertised price policies fixing the minimum price at which any retailer could advertise the guitars, constituting "vertical" agreements to restrain trade. The plaintiffs also alleged that the manufacturers agreed among themselves to adopt these policies, constituting a "horizontal" agreement in violation of federal and state antitrust laws.

Although they lacked direct evidence of horizontal agreements among the guitar manufacturers, the plaintiffs argued that the court should infer the manufacturers engaged in illegal behavior because of their parallel conduct in adopting the minimum advertised price policies, in conjunction with several "plus factors." These factors included the manufacturers' common motive, their action against their own selfinterest, the simultaneous adoption of minimum advertised price policies by multiple manufacturers, the FTC's prior investigation of the agreements, the manufacturers' attendance at the National Association of Music Merchants meetings, and the rise of average retail prices for guitars. The court analyzed each of these "plus factors" in turn and found that the plaintiffs' evidence could just as easily suggest rational (and legal) business behavior by the manufacturers and did not necessarily result from a conspiracy. Because this evidence only showed a possibility of a conspiracy, rather than the "plausibility" necessary to survive a motion to dismiss, the Ninth Circuit affirmed the trial court's dismissal of the case.

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