Virginia Lawyers Weekly VA Lawyers Weekly
A defendant was not entitled to judgment as a matter of law on antitrust claims brought by the plaintiff where the jury has a sufficient basis from which to conclude that the defendant’s acquisition of a competitor caused a decrease in quality and increase in price of the products offered by defendant.
Background
Steves and Sons Inc. is an independent manufacturer of interior molded doors, and it relies primarily on Jeld-Wen Inc. to supply it with doorskins, which are used to make the doors. In 2012, Jeld-Wen acquired CraftMaster Manufacturing Inc. This acquisition substantially reduced the number of manufacturers competing in the doorskin market.
In 2016, Steves filed an action against Jeld-Wen alleging, among other claims, a federal antitrust claim and several breach of contract claims. Those claims were tried to a jury in January 2018. The jury returned a verdict in favor of Steves and Sons on the antitrust and breach of contract claims. Jeld-Wen now moves for judgment as a matter of law on the antitrust claims.
Analysis
Steves and Sons offered sufficient evidence of the doorskin prices it would have paid and the reimbursements it would have received but for Jeld-Wen’s acquisition of CraftMaster through the testimony of Professor Shapiro. Shapiro explained that, in the pre-merger market, Jeld-Wen, CraftMaster, and another company, Masonite Inc., all aggressively competed for doorskin customers. After the merger, this competitive market ended and Jeld-Wen unilaterally increased, inconsistent with the terms set in pre-existing contracts. Shapiro also specifically ruled out other possible explanations for these price increases, as Jeld-Wen’s manufacturing costs had actually decreased around this time and the demand for doorskins remained consistent.
Shapiro’s conclusion that the merger was the cause of the price increases was sufficient for Steves and Sons to meet its burden of demonstrating that it paid a higher price than it would have paid absent the antitrust violation. The jury was entitled to reject the counter evidence presented by Jeld-Wen.
Steves and Sons also offered substantial evidence that Jeld-Wen reduced the quality of its doorskins and reversed its favorable reimbursement policy as a result of the merger. Witnesses for Steves and Sons testified that while the quality of doorskins provided under the pre-merger supply agreement was pretty good and consistent, it substantially decreased after the merger. They further testified that Jeld-Wen had honored claims and promptly acted to give Steves and Sons credit for defective doorksins before the merger, but suddenly imposed onerous conditions after the merger that made it too costly for Steves and Sons to even pursue such claims. The jury was entitled to accept this evidence and reject Jeld-Wen’s evidence to the contrary.
The mere fact that these anticompetitive effects did not manifest immediately after the merger does not prove a lack of injury to Steves and Sons. The jury was free to conclude that Jeld-Wen took some time before exercising the pricing power given to them after the merger. Although the evidence showed that there were some quality issues before the merger, the jury was not required to discount the significant decrease in quality that occurred after the merger.
The record also established that Masonite stopped competing for Steve and Sons’s business after the merger, and the jury was entitled to conclude that this change of behavior was a result of the elimination of CraftMaster as an alternative supplier of doorskins.
The calculation of damages made by an expert witness for Steves and Sons, Avram Tucker, was in accordance with standard and accepted methods and was based on the proofs in the case. Jeld-Wen’s failure to offer an alternative calculation does not provide a basis for overturning the jury’s verdict.
The jury was also entitled to accept the evidence that, as a result of Jeld-Wen’s anticompetitive acquisition of CraftMaster, Steves and Sons would go out of business in 2021. As such, the jury’s award of future lost profits was proper.
Steves and Sons sufficiently demonstrated a cognizable antitrust injury. Contractual harm can still constitute antitrust injury even if the parties’ actions are bound by a contract. That is especially true where, as here, the anticompetitive activity injures competition that still exists notwithstanding the contractual agreement. Indeed, the evidence shows that other market participants, who did not have pre-merger contracts, were also affected by the anticompetitive effects of the merger.
Steves and Sons properly defined the relevant antitrust market. It is well settled that a single market can encompass a number of different products or services where the combination reflects commercial realties. The record also demonstrated that foreign suppliers were not a realistic alternative source of doorskins.
Finally, the jury was entitled to rely on Steves and Sons’s evidence regarding the decrease in doorskin quality and increase in price and conclude that the potential efficiency of the merger did not outweigh its anticompetitive effects.
Motion denied.
Steves and Sons Inc. v. Jeld-Wen Inc., Case No. 3:16-cv-545, March 13, 2019. EDVA at Richmond (Payne). VLW 019-3-112. 21 pp.
