NicSand and 3M made sandpaper for do-it-yourself body repair folk. They sold the abrasive paper through big retailers, including Wal-Mart, KMart, and and Pep Boys, under exclusive single or multiple year contracts.
But then 3M started forking over millions of dollars in up-front cash to lock up the retailers’ business. NicSand tanked. Retailers raised their prices for the product 70 percent. And NicSand’s bankruptcy estate sued 3M for monopolizing the market.
The district court tossed the case on the ground that NicSand lacked "antitrust standing". The Sixth Circuit, by a 10-4 en banc vote, affirmed. It noted that NicSand’s status as competitor made standing less likely than if it sued as a consumer. The majority also pointed out that real power in the market lay not in the manufacturers’ hands but with the large retailers, which together sold 80 percent of the sandpaper. And 3M’s up-front payments, multi-year contracts, and exclusivity provisions didn’t offend Their Honors, not least because NicSand did pretty much the same thing. The court also emphasized that NicSand did not allege "predatory pricing" or any of the other typical categories of predatory conduct. NicSand Inc. v. 3M Co., No. 05-3431 (6th Cir. Oct. 17, 2007).
The dissent begged to differ.
Blawgletter can see both sides. The troubling thing to us concerns the sharp jump in retail prices after NicSand exited. The majority urges that a retail price leap says nothing about whether wholesale prices likewise rose. We respectfully disagree. It says something about wholesale prices — specifically that high retail prices give the wholesaler more room to raise its prices, lower quality, and lessen choice. Doesn’t every wholesaler want those things? And doesn’t obtaining them through conduct that produces a monopoly violate section 2 of the Sherman Act?