2 September 2011
By Susan Beck
In honor of the last official weekend of summer, here's an ice cream litigation story.
Since 2006 the two main distributors of ice cream in Puerto Rico have been battling each other in an antitrust suit. The smaller of the two companies, Sterling Merchandising, accused Nestle Puerto Rico of engaging in anti-competitive behavior after it acquired another Puerto Rico ice cream distributor called Payco. Sterling alleged a number of post-merger anticompetitive actions by Nestle, including its entering into exclusivity agreements with many grocery stores. Still, Sterling's market share, sales, and profits improved after Nestle bought Payco. Sterling maintained it would have thrived even more if Nestle hadn't bought Payco.
Last year, federal district court Salvador Casellas in Hato Rey, P.R., granted summary judgment to Nestle, concluding that Sterling lacked standing because it failed to show that that it had suffered a cognizable antitrust injury. He also granted summary judgment on the merits of the claim.
On Thursday the First Circuit U.S. Court of Appeals affirmed on the grounds that Sterling lacked standing. In a 30-page decision written by Chief Judge Sandra Lynch, the court agreed that no antitrust violation occurred largely because Sterling performed better after the acquisition.
"This case indicates that changing the structure of a market won't get you an antitrust violation," said Mayer Brown's Carmine Zarlenga, who defended Nestle. "You have to have anticompetitive injury and behavior." He added that there's some debate over whether an antitrust plaintiff that performs well can prevail. "I don't think there's a bright line test," he explained. "It's a case-by-case evaluation." Here, he said, Sterling's good performance was held against them. (Zarlenga previously worked on this case at Howrey.)
Sterling was represented on the appeal by Bingham McCutchen. The district court case was handled by Godfrey & Kahn. We reached out to Bingham partner Daniel Goldberg but did not hear back.