Tuesday, May 8, 2018
Antitrust Action Against Energy Drink Maker Fails
Competitor’s Allegations That Monster Energy Co. Blocks Competition at Military Bases Found Inadequate
By a MetNews Staff Writer
The maker of Pit Bull Energy drinks yesterday lost its bid for reinstatement by the Ninth U.S. Circuit Court of Appeals of its action against Monster Energy Company for alleged antitrust conduct in blocking its product from being sold on military bases and other places under the control of the U.S. Defense Commissary Agency.
A maker of energy drinks that has been unable to sell is products on military bases because the only brokers who arrange such sales are allegedly bullied by Monster Energy Co. not to deal with its rivals failed in the Ninth U.S. Circuit Court of Appeals yesterday to gain a reinstatement of its lawsuit alleging antitrust violations.
A three-judge panel affirmed a dismissal without leave to amend of an action by Hip Hop Beverage Corp. (HHBC) alleging violations of the federal Sherman Act and Clayton Act, as well as California’s Cartwright Act and Unfair Competition Law and for interference with prospective economic advantage. District Judge Stephen V. Wilson held last year that HHBC failed to plead adequately that Monster monopolizes the military market.
HHBC manufactures Pit Bull Energy drinks, in competition with Monster drinks. It alleges that that to sell its products in the “Military Resale Market”—operated by the U.S. Defense Commissary Agency—it is necessary to deal with a broker. It alleges that Monster has sufficient clout as to be able to deter brokers from representing any of its competitors and actually pressured two of them from severing ties with HHBC.
The Military Retail Market, according to the complaint, consists of 503 exchanges, 247 commissaries, hundreds of other places patronized by military personnel.
‘Injury to Competition’
In affirming the dismissal of HHBC’s action, a three-judge panel said yesterday in a memorandum opinion:
“HHBC’s amended complaint failed to adequately plead injury to competition, as is required to state a claim for a violation of the Sherman Act or the Clayton Act. While HHBC’s amended complaint pleaded some injury to itself, it fell short of pleading injury to competition generally….Mere injury to HHBC’s position as a market competitor is not sufficient.”
In alleging an exclusive-dealing arrangements between some brokers and Monster, the opinion says, HHBC did not adequately plead that it was barred from competing, pointing out:
“Here, HHBC alleged that (at most) four brokers refused to do business with HHBC due to Monster’s conduct. But HHBC did not allege how many total brokers were in the market in order to establish that Monster foreclosed competition. Moreover, HHBC conceded that HHBC remained in the market without the assistance of brokers.”
The opinion goes on to say:
“While HHBC’s amended complaint properly defined the relevant market, it did not sufficiently allege that Monster had a dominant share of that market or that existing competitors lacked the capacity to increase their output to offset Monster’s conduct. The amended complaint merely stated that Monster controlled a ‘major percent’ of the energy-drink market and did not allege that other ‘entrenched’ competitors such as Red Bull and Rockstar were unable to increase their output to offset Monster’s alleged conduct.”
The opinion does not specifically mention the Cartwright Act or the Unfair Competition Law. It says the state law claims were properly dismissed because they, “including interference with contractual relations” are “derivative of the Sherman Act and Clayton Act claims.”
In a 2016 opinion in the case (in which leave to amend was granted), Wilson explained that California antitrust analysis mirror federal analysis and that “when a plaintiff’s Sherman Act claims are dismissed for failure to state a claim, plaintiff’s Cartwright Act claims should also dismissed.” He pointed out that the UCL claim was infirm because it was based on a supposed antitrust violation.
Wilson also set forth:
“Plaintiff cannot state an actionable interference claim because it has not stated a claim for a predicate unlawful act. There is no indication in the pleadings that the contract between Plaintiff and any of its brokers prohibited at-will termination.”
The case is Hip Hop Beverage Corp. v. Monster Energy Co., No. 16-56757
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