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From Antitrust Law Daily, January 9, 2014

Challenge to wedding product maker’s minimum retail pricing policies fails

By Jeffrey May, J.D.

House of Brides, Inc.—an online and brick-and-mortar retailer of bridal gowns—has failed to state antitrust claims against Alfred Angelo, Inc.—a designer/manufacturer of wedding dresses—based on the manufacturer’s minimum retail pricing policies, the federal district court in Chicago has ruled. Although the court considered it doubtful that the deficiencies in the complaint could be remedied, dismissal was without prejudice (House of Brides, Inc. v. Alfred Angelo, Inc., January 8, 2014, Tharp, J.).

For more than 40 years, House of Brides was an authorized dealer of Alfred Angelo wedding products. In 2010, Alfred Angelo implemented policies that included both a Manufacturer’s Suggested Retail Price (MSRP) and a Minimum Pricing Policy (MPP). The MSRP represented the expected retail price for online sales, and the MPP represented the minimum price for products sold at brick-and-mortar stores. The MSRP was purportedly set substantially higher than the MPP in order to prevent the plaintiff from competing with retail stores.

House of Brides refused to agree to the minimum pricing policies. The manufacturer ceased supplying dresses to House of Brides.

House of Brides alleged that Alfred Angelo’s conduct reduced competition in the market for Alfred Angelo wedding products by forcing consumers to pay artificially high prices. Additionally, the retailer contended that it was unable to fill existing customer orders or convert prospective customer inquiries into orders.

At the outset, the court ruled that the per se rule was inapplicable to the alleged agreements. Alfred Angelo contended that House of Brides failed to plead horizontal agreements that would trigger the per se rule. The conduct arose in the context of a “dual distribution” system. Alfred Angelo was both a manufacturer and retail distributor of its products. It operated a dealership on the same market level as one or more of its customers, the court explained.

Next, the court rejected the plaintiff’s relevant product market, which was limited to the Alfred Angelo brand, for purposes of judging the reasonableness of the alleged agreements. A single brand may constitute a relevant product market, the court noted. However, House of Brides did not support its proposed product market by alleging that many customers “do not consider other accessories suitable substitutes,” and that customers would not substitute other accessories for Alfred Angelo products even in the face of a “significant, non-transitory increase in the price” of Alfred Angelo brand products.

“The choices available to consumers planning weddings clearly encompass products interchangeable for those carrying the Alfred Angelo label,” the court explained. The failure to identify a relevant product market was fatal to the conspiracy claims.

Robinson-Patman Act claim. To supports its Robinson-Patman Act price discrimination claim, House of Brides contended that it was terminated by Alfred Angelo for noncompliance with the manufacturer’s pricing policies, even though other distributors offered Alfred Angelo products for sale online below both the MSRP and MPP and Alfred Angelo discounted its own products below the prices set in these policies both online and in brick-and-mortar stores. However, the court concluded that Alfred Angelo’s efforts to enforce minimum prices across its dealer network, even if unsuccessful, undermined, rather than supported, a price discrimination claim.

Further, the complaint failed to state that retail competitors paid a different price to purchase Alfred Angelo products in any transaction, contemporaneous or otherwise. This alone warranted dismissal of the price discrimination claim, the court noted. Alfred Angelo’s refusal to sell its products to House of Brides was simply an enforcement mechanism to achieve uniform retail pricing; it was not a viable alternative basis for a Robinson-Patman Act claim.

Tortious interference with business expectancy claim. The court also rejected a claim under Illinois law for “tortious interference with business expectancy.” House of Brides failed to state a claim that Alfred Angelo intentionally interfered with its existing and prospective customer relationships by attempting to fix a minimum price or by failing to deliver Alfred Angelo clothing for sale in House of Brides stores.

This is Case: 1:11-cv-07834.

Attorneys: James Kenneth Borcia (Tressler LLP) for House of Brides, Inc. Peter E. Cooper (Lawrence, Kamin, Saunders & Uhlenhop) for Alfred Angelo, Inc.

Companies: House of Brides, Inc.; Alfred Angelo, Inc.

MainStory: TopStory Antitrust FranchisingDistribution IllinoisNews

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