United States: Brunswick Revisited: Antitrust Injury In A Competitor’s Merger Challenge

Previously published Spring/Summer 2012

Keywords: Brunswick, competitor suits, antitrust injury, antitrust claims

In fall 2011, antitrust plaintiffs were put on notice that the requirement of antitrust injury was alive and well and might be applied rigorously in competitor suits. In Sterling Merchandising, Inc. v. Nestlé, S.A., the US Court of Appeals for the First Circuit affirmed summary judgment for defendants, dismissing a competitor's antitrust claims against Nestlé S.A. concerning a merger that allegedly increased concentration among ice cream distributors in Puerto Rico.

Following the merger, plaintiff Sterling Merchandising's sales and market share actually increased, but Sterling alleged that, but for the merger and resulting anticompetitive activities, it would have performed even better. The First Circuit rejected plaintiff's argument that it had established antitrust injury, reasoning that Sterling had failed to prove any increase in prices or reduction in output. Significantly, the First Circuit noted that plaintiffs' post-merger success was a "further indication" (i.e., evidence) that no antitrust injury existed. While the future impact of this aspect of the ruling is yet unknown, it may serve to raise the bar for future antitrust plaintiffs who have achieved success in the aftermath of an alleged antitrust violation.

Antitrust Injury and the Competitor-Plaintiff

Though the antitrust injury question is now a standard feature in private antitrust cases, it was a question no one asked until the Supreme Court's 1977 decision in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.1 In Brunswick, a plaintiff group of bowling alley operators charged that Brunswick, the leading maker of bowling equipment, had made a series of bowling center acquisitions that were illegal under Section 7 of the Clayton Act because the "failing company" doctrine had not been properly applied. In that context, the plaintiffs alleged that their centers would have been more profitable if some of the Brunswick-acquired centers had instead gone out of business.2

The court rejected this theory, noting that the survival of the centers, in whatever hands, was pro-competitive.3 Indeed, plaintiffs' theory was "designed to provide them with the profits they would have realized had competition been reduced," a resolution that would have been "inimical to the purposes of the [antitrust] laws."4 Private antitrust plaintiffs were, from then on, required to demonstrate the existence of "antitrust injury," or "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful."5 In other words, an antitrust plaintiff must show not only that it has been injured as a result of the defendant's actions and that those actions constitute an antitrust violation, but also that its injury stems from conduct that reduces output or that raises prices to consumers.

The antitrust injury requirement is particularly important in suits brought by competitors, as was the case in Sterling. Competitors are far more prone to complain about too much competition, rather than an absence of it. For instance, even if a competitor is stymied because a merger of its rivals makes them more efficient or able to compete more aggressively, that new market reality is not an antitrust violation, and the competitor thus lacks standing. Further, unlike consumers, competitors have incentives to bring antitrust suits for purposes that are anticompetitive, such as inducing the defendant competitor to moderate its competition. As a result, there is good reason for courts to be "properly skeptical of many rivals' suits, particularly when the practices are not obviously 'exclusionary.'"6

Notwithstanding this skepticism, a competitor's allegations of anticompetitive exclusion, if properly framed, will satisfy at least initial scrutiny. The question then becomes one of proof: what evidence exists that the anticompetitive conduct injured the plaintiff and injured competition? A competitor-plaintiff will typically proffer evidence of some form of decreased sales or profits and of increased market prices or other effects that negate competition. To bolster its story, a plaintiff will attempt to "connect the dots" between injury to itself and antitrust injury. For instance, a plaintiff may argue that its lost sales and market share reflect a reduced level of competition that has enabled the defendant to raise prices to consumers.

This story is less compelling, if not doubtful, when a competitor-plaintiff's performance has actually improved following the alleged anticompetitive conduct. To be sure, "an antitrust plaintiff's post-violation successes do not necessarily preclude compensation for damages proximately caused by an antitrust violation."7 A plaintiff may be able to establish that, but for the alleged violation, its sales or profits would have increased even more than they did, which can be a viable demonstration of injury in fact (though perhaps a more difficult one than if the plaintiff had fared worse following the alleged violation). However, even if a plaintiff can establish injury in fact under these circumstances, antitrust injury will require evidence that explains how a plaintiff's relative success squares up with a supposed lessening of competition. What consideration (if any) should be given to a plaintiff's success in considering the existence of antitrust injury?

Sterling: the Factual Background

Plaintiff Sterling alleged violations of the Sherman Act, the Clayton Act and the Puerto Rico Anti-Monopoly Act arising from the 2003 merger between Nestlé P.R. and Payco, two of Puerto Rico's largest ice cream distributors. Also at issue was Nestlé S.A.'s 2003 acquisition of Dreyer's, the parent company and manufacturer of Edy's brand ice cream, Sterling's best-selling product line. Prior to Nestlé S.A.'s acquisition of Dreyer's, Sterling had been the exclusive distributor of Edy's in Puerto Rico. The Nestlé P.R. acquisition of Payco was approved by the Puerto Rico Office of Monopolistic Affairs (PROMA) on the condition that distribution rights to Edy's could not be removed from Sterling without prior PROMA approval.8

The parties agreed that prior to the 2003 Nestlé P.R.-Payco merger, the market in Puerto Rico was competitive, with no distributor possessing market power.9 Immediately after the merger, the new Nestlé P.R. (including Payco) had an 85 percent share of the ice cream distribution market in Puerto Rico.10 However, by 2007, that market share had fallen to 70 percent.11 Conversely, during the period following the merger, Sterling's market share and sales actually increased (nearly doubling in size from 2003 to 2008), and Sterling acquired distribution rights for additional ice cream brands.12 Overall, Sterling's sales grew more than 11 percent per year following the merger.13 Sterling's market share also increased year over year. Following the merger, Nestlé P.R. also lost several exclusive distribution arrangements with key retailers.14

While Sterling retained its exclusive distribution rights to Edy's in Puerto Rico, Dreyer's decreased its per unit promotional support on Edy's products, citing increased costs of raw materials.15 Dreyer's also terminated Sterling's distribution of the Skinny Cow ice cream line, which it now distributes through Nestlé P.R.16

In an effort to show injury to itself in the face of its growing success following the 2003 transactions, Sterling alleged that, absent the 2003 Nestlé P.R.-Payco merger, it would have thrived even more than it did. Sterling alleged that, following its merger with Payco, Nestlé was able to enter exclusive arrangements with numerous grocery stores that foreclosed Sterling from certain segments of the market.17 Also, according to Sterling, "absent this market foreclosure, it would have earned higher profits" on its sales due to increased efficiencies of scale realized as a result of its growing operation.18 Sterling also alleged it was damaged by the increase in price on Edy's and by the loss of Dreyer's Skinny Cow brand.19

District Court Ruling

After extensive discovery, the district court granted defendants' motion for summary judgment, con­cluding that Sterling had presented no evidence of restricted output or of increased prices (citing some prices that had actually fallen). Further, the court noted that Sterling's claims of any injury to itself were severely undermined by its increased profits, sales and market share in the post-merger period.20 The district court also rejected Sterling's damages model, stating that "it is unrealistic to posit that the company's sales and market presence would have grown four-fold had the Nestlé-Payco merger never occurred."21 Even if Sterling had somehow shown an injury to itself, the district court reasoned, it had not shown that it was injured by anticompetitive activity.

As to the allegations on exclusive contracts, the district court found that such contracts had been in use in Puerto Rico since the 1990s, that Nestlé P.R. had actually decreased its reliance on such contracts, and that the contracts were, in any event, reasonable.22 Sterling's claims of a price squeeze (from the increase in price on Edy's) were also rejected as a basis for antitrust injury, because there was no evidence that the competitive structure of the market had been harmed.23 Finally, as to the termination of Sterling's rights to distribute the Skinny Cow brand, the district court noted that Dreyer's had no legal duty to deal with Sterling and that, in any event, Sterling's increased sales and market share belied any antitrust injury.24

The First Circuit Affirms

In its appeal, Sterling argued that the "District Court's opinion was permeated by its erroneous view that evidence of Sterling's increased sales, profits, and market share was dispositive of the issue of antitrust injury," and cited a series of opinions from other circuits in support.25 Sterling further argued that the "District Court failed to recognize the altered competitive landscape that prevailed after 2003, in which [Nestlé-Payco] wielded unremunerative exclusive dealing agreements to preserve its overwhelming market share, while keeping Sterling in its place and other competitors out of the market altogether."26 According to Sterling, had the Nestlé-Payco merger not taken place, and had Sterling's Edy's discounts remained at pre-merger levels, "purchasers would have been offered more choice in more locations at more competitive prices, and Sterling would have gained even more market share."27

The First Circuit Court of Appeals was unmoved. Consistent with the lower court's analysis, the First Circuit held that Sterling had failed to show any injury to competition or to consumers. The court found that Sterling's expert did not analyze the effect of the merger on pricing to consumers, and it noted that other evidence indicated that ice cream prices to consumers actually decreased from 2003 to 2007.28 The court also found that Sterling failed to show that output was reduced or that customers "were forced to choose between less preferred brands."29 With regard to the exclusive dealing agreements, the court noted that Sterling had failed to show that the agreements had violated the antitrust law, which foreclosed less than 30 percent of market during the relevant time period and were nearly all for a one- to-two-year duration.30 Consequently, even if the exclusive arrangements were a source of injury to Sterling, they could not form the basis of antitrust injury.

The court went on to expressly highlight Sterling's post-merger success, noting "that Sterling's sales, profits, and market share have increased during the relevant period [and that this increase] provides further indication that no antitrust injury exists here."31 Indeed, Nestlé P.R. actually lost several large accounts to Sterling and other competitors during the relevant time period, which indicated an increase, rather than a decrease, in competition. Moreover, the court noted that Sterling's claim of injury was premised on a market without any exclusive agreements—an assumption the court described as "erroneous," given that such vertical agreements are often pro-competitive and had been in use in Puerto Rico since before the merger.32


The First Circuit's holding in Sterling does much to reinforce and further refine the requirement of antitrust injury, with a particular emphasis on its application to competitor suits. In a modern-day ruling reminiscent of Brunswick, the First Circuit made clear that a change in market structure (in this case, the merger of two competitors) was not sufficient on its own to establish antitrust injury. Moreover, the First Circuit was obviously skeptical of Sterling's antitrust injury claim in light of its well-documented post-merger success. The First Circuit was careful not establish a bright-line rule or presumption regarding a competitor whose performance did not decline following an alleged violation. But a fair reading of the ruling suggests, at minimum, that a competitor's post-violations success may be an albatross vis-à-vis establishing antitrust injury.

The First Circuit's skepticism also extended to Sterling's "but-for world," upon which injury of any sort (to Sterling or to competition in general) was dependent. Given Sterling's recent success, the First Circuit seemed particularly unwilling to allow injury to be established via a but-for world that could only be described as fanciful relative to the history and economic realities of the market.

The Sterling ruling is likely to have continuing impact in markets and industries where consolidation will inevitably lead to competitor suits similar to the one brought by Sterling. The question will continue to be posed: Does consolidation lead to increased efficiencies or anticompetitive outcomes? In answering the inquiry, plaintiffs in future cases will undoubtedly attempt to limit the Sterling holding to its facts. However, the skepticism reflected in Sterling is entirely consistent with the precedent established by the US Supreme Court in Brunswick and should help to frame the antitrust injury analysis in competitor cases moving forward.


1 429 U.S. 477, 489 (1977).
2 Id. at 477-81.
3 Id. at 488.
4 Id.
5 Id. at 489.
6 2 Areeda & Hovenkamp, Antitrust Law, ¶ 348a, at 387 (2d. ed. 2000).
7 Sterling Merch., Inc. v. Nestlé, S.A., 656 F.3d 112, 122 (1st Cir. 2011) (quoting Pierce v. Ramsey Winch Co., 753 F.2d 416, 436 (5th Cir. 1985)).
8 Id. at 116.
9 Id. at 115.
10 Id. at 116.
11 Id.
12 Id. at 116-17.
13 Id.
14 Id. at 116.
15 Id. at 117.
16 Id.
17 Id.
18 Id.
19 Id.
20 See Sterling Merch., Inc. v. Nestlé, S.A., 724 F. Supp. 2d 245 (D.P.R. 2010).
21 Id. at 262.
22 Id. at 260-61, 264-66.
23 Id. at 261.
24 Id. at 270-72.
25 Brief for Appellant at 38, Sterling Merch., Inc. v. Nestlé, S.A., No. 10-1925 (1st Cir. December 22, 2010).
26 Id. at 40.
27 Sterling, 656 F.3d at 120-21.
28 Id. at 122
29 Id.
30 Id. at 124.
31 Id. at 122-123.
32 Id. at 123 n5.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2012. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions