Antitrust Competition

Antitrust Alert: Texas Court Dismisses Antitrust Claims on First Amendment Grounds

Last week, the U.S. District Court for the Southern District of Texas dismissed antitrust claims against Easi‑Set Industries. Plaintiff Tricon Precast claimed Easi‑Set violated the Sherman Act and Texas Antitrust Act when it successfully lobbied the Texas Department of Transportation to require concrete traffic barriers use a V‑shape design that Easi‑Set previously trademarked and licenses to other manufacturers, including Tricon. Tricon alleged that Easi‑Set's objective was to become "the sole supplier of precast concrete barriers," and "maintain its monopoly position through improper means rather than through a superior product, business acumen, or historic accident." 

The court held that the Noerr-Pennington doctrine shielded Easi‑Set's lobbying conduct from antitrust liability. Noerr‑Pennington bars antitrust claims based on conduct that is reasonably calculated or genuinely intended to petition government decisionmakers for action, even if the outcome of the government action is anticompetitive. This doctrine recognizes that the First Amendment right of free assembly and the right to petition the government preclude liability under the antitrust laws, even when motivated by anticompetitive intent. The protection does not cover "sham" campaigns designed to "use the process as an anticompetitive weapon, rather than those genuinely seeking to achieve an intended result." Where a citizen reasonably could not expect to secure favorable government action, the Noerr‑Pennington doctrine may not apply. 

Tricon argued that Easi‑Set's lobbying was a sham because its employees failed to disclose to the government that an Easi-Set trademark covered the V‑shape design. The court rejected Tricon's sham argument because even if Easi-Set disclosed the trademark, it still could have reasonably expected to obtain results in its favor. Further, quoting the Supreme Court, the district court held that, because Easi‑Set's actions were "a successful effort to influence governmental action, they cannot be characterized as a sham." 

Businesses have broad latitude to seek government action that may be anticompetitive. (Although not raised by this case, even competitors’ coordinated lobbying generally is exempt.) Nevertheless, where the government action may have an anticompetitive effect, a company petitioning for the action should in advance carefully evaluate whether its activities will be covered to avoid antitrust liability.

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