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From Antitrust Law Daily, September 3, 2014

Carpet dealer’s refusal to deal claims proceed against Mohawk

By Jeffrey May, J.D.

A jury should determine whether Mohawk Industries, Inc.’s decision not to supply a complaining Tennessee floor covering dealer in connection with national homebuilder accounts was in furtherance of a conspiracy to drive the dealer out of business, the federal district court in Nashville has decided. Mohawk's motion for summary judgment was denied (Watson Carpet & Floor Covering, Inc. v. Mohawk Industries, Inc., September 2, 2014, Sharp, K.).

Watson Carpet & Floor Covering, Inc., a Nashville-area carpet dealer, raised genuine issue of material fact regarding the alleged conspiracy and its purported anticompetitive effect in the relevant market, the court held. Watson alleged that Mohawk refused to sell it carpet as part of a conspiracy with a rival dealer Carpet Den, which was no longer in the case. Mohawk responded that its decision not to work with Watson on national homebuilder accounts for the Nashville region was acceptable, unilateral conduct.

The court denied summary judgment in Mohawk's favor, despite the defendant's argument that “it had no remotely plausible economic motive to conspire with Carpet Den.” Mohawk also contended that it was justified in its actions, since Watson was “aligned with Mohawk’s largest competitor.” The court also ruled that question of fact existed regarding whether Mohawk’s behavior had a significant anticompetitive effect in the market for the distribution of installed carpet sold to production homebuilders in the Nashville area.

Antitrust injury. In addition, the question of antitrust injury had to be submitted to the jury. The court was not convinced by the defendant's argument that neither Watson nor the builders suffered an antitrust injury. Mohawk suggested that Watson was merely seeking to recover lost profits resulting from its inability to be a dealer in Mohawk’s well-populated network.

Substantial effect on interstate commerce. The court also refused to dismiss the complaint on jurisdictional grounds. Mohawk had argued that the court lacked subject matter jurisdiction because the plaintiff could not show a substantial effect on interstate commerce to create jurisdiction under the federal antitrust laws. Mohawk contended that the lawsuit was “an entirely local dispute in the Nashville area.” Watson identified a relevant aspect of interstate commerce and alleged the interrelationship between the defendant’s activities and interstate commerce, the court ruled. Among other things, the plaintiff alleged that Mohawk was located in Georgia and sold and shipped carpet and other floor coverings throughout the United States; the products that the plaintiff received from Mohawk were shipped across state lines; and Mohawk’s refusals to sell stopped the flow of products across state lines worth millions.

The case is No. 3:09-cv-0487.

Attorneys: R. Scott Jackson, Jr. for Watson Carpet & Floor Covering, Inc. Randall Lee Allen (Alston & Bird LLP) for Mohawk Industries, Inc.

Companies: Watson Carpet & Floor Covering, Inc.; Mohawk Industries, Inc.

MainStory: TopStory Antitrust FranchisingDistribution TennesseeNews

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