A court in Louisiana recently dismissed parts of the antitrust lawsuit brought against PoolCorp and the “Big Three” manufacturers (Hayward, Pentair and Zodiac) yet allowed other parts to advance.
The plaintiffs in the case consist of both dealers and consumers, known in the case as “direct purchasers” and “indirect purchasers” respectively.
As previously reported, the plaintiffs original suit claimed that PoolCorp intimidated manufacturers in order to stop them from selling products through competing distribution channels.
Subsequent filings added Big Three manufacturers to the list defendants, in essence accusing them of collaborating with PoolCorp by going along with the scheme. As the Big Three dominate equipment manufacturing in the pool business, the effect of the alleged collusion was to shut out competition in pool distribution.
The lawsuit hinges on the definition of the Sherman Act, historically known as the “antitrust act.”
In their suit, the plaintiffs focused on Sections 1 and 2 of the Sherman Act. Dealers claim PoolCorp engaged in a boycott, a violation of Section 1 of the Sherman Act, which prohibits businesses from conspiring in activity that works to restrain other trade or commerce. The consumer plaintiffs claim PoolCorp illegally monopolized the market — a violation of Section 2.
Judge Sarah S. Vance dismissed this monopolization claim, saying that “courts almost never find monopoly power when market share is less than about 50 percent,” adding that the plaintiffs “have not plausibly alleged that PoolCorp possesses monopoly power in the relevant market.”
Another claim, that PoolCorp fraudulently concealed their antitrust offenses, was also dismissed.
While the claim that a monopoly occurred was dismissed, the claim that a monopoly was attempted was allowed to stand. An attempted monopoly is defined as the act of engaging in anticompetitive conduct with both the intent and a “dangerous probability” of achieving monopoly power.
This remaining allegation, that PoolCorp’s market share is increasing, and the organization’s exclusionary agreements with other manufacturers have created a barrier to entry, is still to be decided in court.
In the next step of the lawsuit, the plaintiffs will have to prove that “dangerous probability” of achieving a monopoly exists. Vance describes this as a “threshold matter” that, because of the PoolCorp’s smaller market share, will rely on factors such as market concentration, high barriers to entry, consumer demand, strength of competition or consolidation trends.
