Saturday, May 7, 2011

Pet Food Express thwarts Royal Canin's Antitrust Defenses in breach of contract action

Judge Marilyn Hall Patel granted Pet Food Express partial summary judgment in its lawsuit to obtain a market development allowance from Royal Canin.  This will prevent Royal Canin from raising antitrust defenses and counterclaims at trial.

In 2004, Royal Canin approved Pet Food Express as a "market developer" which entitled it to a market development allowance (MDA).  Royal Canin would pay Pet Food Express 5% of the annual dollar volume of products shipped by Royal Canin into the territory Pet Food Express operated.  Royal Canin never paid and Pet Food Express sued.  Royal Canin counterclaimed that the MDA was unenforceable because it violated California state and federal antitrust laws.  This blog has written before about the challenges that arise in raising antitrust claims - most notably is showing an antitrust injury.  Judge Marilyn Hall Patel wasn't buying it.
Moreover, defendant only raised these issues as an affirmative defense and counterclaim after its own alleged breach of the contract. Suddenly, defendant’s good-Samaritan instincts have prompted these claims that, in reality, describe a competitive injury to plaintiff’s competitors and which elucidate no similar injury to defendant or to competition. Thus, the nature of defendant’s claims of injury are not rooted in an antitrust law-based injury-in-fact, but instead, if anything, present a harm grounded solely in contract law.
She also noted that even if Royal Canin had standing the claims would fail as a matter of fact.  She granted summary judgment on the antitrust defenses and counterclaims to Pet Food Express.

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