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From Antitrust Law Daily, August 10, 2015

Duty free store fails to allege monopolization, false advertising by Estée Lauder

By Greg Hammond, J.D.

Duty Free Americas, Inc.—an operator of duty-free stores in many international airports in the United States—failed to sufficiently allege attempted monopolization or Lanham Act false advertising claims against The Estée Lauder Companies, Inc. The U.S. Court of Appeals in Atlanta affirmed a lower court’s order dismissing the suit, finding that Duty Free did not adequately allege predatory or anticompetitive conduct or that Estée Lauder made false statements or was responsible for any such statement made by Duty Free’s competitors (Duty Free Americas, Inc. v. The Estée Lauder Companies, Inc., August 7, 2015, Marcus, S.).

Duty Free brought claims for attempted monopolization, false advertising, and tortious interference against Estée Lauder, alleging that the cosmetics company refused to have further dealings with Duty Free; disparaged Duty Free to airport authorities during bidding processes for retail space; placed unlawful restrictions on duty-free operators; and made false or misleading statements about Duty Free. The lower court dismissed the Sherman Act claim with prejudice, finding that refusing to deal with Duty Free and disparaging the company to airport authorities did not constitute anticompetitive conduct and that the allegedly anticompetitive restrictions on duty-free operators’ display space allocation and inventory stocking was time-barred to the extent Duty Free sought damages. The Lanham Act claim was dismissed without prejudice because Duty Free did not adequately allege that Estée Lauder or any competing duty-free operators made any false or misleading statements. Duty Free appealed.

Attempted monopolization. In support of its attempted monopolization claim, Duty Free argued: (1) Estée Lauder’s refusal to reinstate its sales relationship constitutes anticompetitive conduct; (2) false statements Estée Lauder allegedly made about Duty Free during airport bidding processes constituted predatory conduct; and (3) Estée Lauder’s restrictions on its customers’ display space and its inventory requirements are anticompetitive. The court rejected all three arguments, first finding that Duty Free originally terminated the business relationship between the two companies and that Estée Lauder has the right to deal, or refuse to deal, with whomever it likes, as long as it does so independently.

The court next determined that the three alleged instances of disparagement—when Estée Lauder (1) sent a letter to the Newark Airport Authority including a list of its dealers and its belief that they were quality operators; (2) told Boston and Orlando airport officials that it did not deal with Duty Free; and (3) communicated its market share and the fact that it did not deal with Duty Free to competing duty-free operators—were not false, and Duty Free failed to allege that any of the communications harmed competition. The statement vouching for the quality of Estée Lauder’s duty-free partners did not refer to Duty Free and did not express an opinion about the quality of its work. In addition, Estée Lauder does not have a relationship with Duty Free, and there are no allegations that the market share it communicated to its duty-free operator customers was inflated or otherwise incorrect.

Lastly, the court agreed that the unlawful restrictions claim for damages was time-barred and that Duty Free failed to support a claim for injunctive relief. Specifically, the court noted that while Duty Free may have been injured by the display and inventory requirements in the past, it cannot be sufficient to establish an injury in fact that would support injunctive relief, because there are no allegations that the restrictions have caused any lasting impact or likely future injury. There was also no plausible connection between an injury Duty Free had allegedly sustained and the restrictions that Duty Free claims currently harm its competitors. Duty Free therefore did not have Article III or antitrust standing to bring its claim for injunctive relief.

False advertising. Duty Free also claimed that Estée Lauder could be held liable for allegedly false statements that Duty Free’s competitors made to airport authorities on a theory of contributory liability. While the court agreed that the Lanham Act’s prohibition on false advertising could be brought on a contributory liability basis, the complaint failed to allege any facts that would allow the court to draw the reasonable inference that Estée Lauder induced or knowingly or intentionally participated in any of the allegedly false statements made by the other duty-free operators. The mere sale of products in the course of an ordinary business relationship, without more, could not justify a finding that Estée Lauder induced, encouraged, caused, procured, or bought about false advertising.

The case number is 14-11853.

Attorneys: Paul Joseph Schwiep (Coffey Burlington, PL) and Emily E. Chow (Faegre Baker Daniels, LLP) for Duty Free Americas, Inc. Cristina Alonso (Carlton Fields Jorden Burt, PA) and Thomas G. Hungar (Gibson Dunn & Crutcher, LLP) for The Estée Lauder Companies, Inc.

Companies: Duty Free Americas, Inc.; The Estée Lauder Companies, Inc.

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