It's My Party, Inc. v. Live Nation, Inc.

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-1278
IT’S MY PARTY, INC.; IT’S MY AMPHITHEATRE, INC., d/b/a
Merriweather Post Pavilion,
Plaintiffs - Appellants,
v.
LIVE NATION, INC.,
Defendant - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. J. Frederick Motz, Senior District
Judge. (1:09-cv-00547-JFM)
Argued: December 8, 2015 Decided: February 4, 2016
Before WILKINSON, NIEMEYER, and DIAZ, Circuit Judges.
Affirmed by published opinion. Judge Wilkinson wrote the
opinion, in which Judge Niemeyer and Judge Diaz joined.
ARGUED: Robert William Hayes, COZEN O’CONNOR, Philadelphia,
Pennsylvania, for Appellants. Jonathan M. Jacobson, WILSON
SONSINI GOODRICH & ROSATI, New York, New York, for Appellee. ON
BRIEF: Abby L. Sacunas, Philadelphia, Pennsylvania, L. Barrett
Boss, COZEN O’CONNOR, Washington, D.C., for Appellants. Chul
Pak, Lucy Yen, Kimberley Piro, WILSON SONSINI GOODRICH & ROSATI,
New York, New York, for Appellee.
WILKINSON, Circuit Judge:
Plaintiff It’s My Party, Inc. (IMP) contends that defendant
Live Nation, Inc. (LN) has violated the Sherman Antitrust Act by
engaging in monopolization, tying arrangements, and exclusive
dealing in the music concert industry. The district court
granted summary judgment to defendant LN. Because plaintiff has
failed to define the relevant markets or to demonstrate any
anticompetitive conduct, we affirm.
I.
A.
IMP and LN are competitors in the live music industry. Both
promote concert tours and operate concert venues, but they
differ in geographic reach. Plaintiff IMP is a regional player
that promotes concerts and works with venues in the Washington,
DC and Baltimore, MD area. Defendant LN is a national promoter
that provides services to artists throughout the country. It
owns, leases, or holds exclusive booking rights at venues across
the United States. LN has expanded over time by acquiring other
concert promoters as well as Ticketmaster, a major ticket sales
and distribution company.
In addition to promoting concerts, IMP and LN both operate
outdoor amphitheaters. IMP manages and operates Merriweather
Post Pavilion in Columbia, Maryland, and LN owns Nissan Pavilion
(now called Jiffy Lube Live) in Bristow, Virginia. Merriweather
2
has a seating capacity of roughly 19,000 with 5,000 fixed seats,
while Nissan has a capacity for 25,000 with 10,000 fixed seats.
Concert venues range in size from small clubs with a capacity of
about 1,000 to sports stadiums seating over 60,000.
Artists select venues based on their capacity, revenue
potential, and the option of playing outdoors. The Washington-
Baltimore area has a number of concert venues other than
Merriweather and Nissan. Among the other venues are the Filene
Center at Wolf Trap (7,000 person amphitheater), the First
Mariner Arena (14,000 person arena), the Patriot Center (10,000
person arena), the Pier Six Pavilion (4,200 person
amphitheater), and the Verizon Center (19,000 person arena).
J.A. 1516. Notwithstanding the abundance of options,
Merriweather has more than held its own. Between 2006 and 2012,
it hosted an impressive line-up of prominent artists, including
Bob Dylan, John Legend, Maroon 5, Nickelback, Nine Inch Nails,
Sheryl Crow, Taylor Swift, The Black Eyed Peas, and The Fray.
J.A. 827-40.
The basics of the music concert industry are easily
described. IMP and LN compete for the business of artists, vying
to promote their concerts and showcase them in their venues.
Promoters, in negotiation with artists, work on financing
concerts, arranging dates and locations, securing venues, and
advertising. In terms of compensation, the artist typically
3
receives either a minimum guaranteed payment or an agreed-upon
percentage of the gross ticket sales.
Artists have two main options for organizing the individual
concerts that make up their tours. One approach is to use a
different local promoter for each location and secure venues
through the promoters. Alternatively, an artist can work with a
national promoter such as LN for most or all of the tour. The
two options frequently offer different modes of compensation.
“Artists who contract with one or a few national promoters to
organize their tours often receive a guaranteed payment from the
promoter based on the number of shows organized by that
promoter. Artists who contract ‘locally’ and book with several
promoters in various parts of the country will often receive
instead a percentage of the gross ticket sales from each
concert.” It’s My Party, Inc. v. Live Nat., Inc., 88 F. Supp. 3d
475, 481 (D. Md. 2015).
B.
IMP was dissatisfied with the workings of the industry as
described above. Plaintiff brought suit on March 5, 2009,
alleging that LN had violated § 1 and § 2 of the Sherman Act and
parallel Maryland antitrust law through monopolization, tying
arrangements, and exclusive dealing. The result of LN’s conduct,
claims IMP, was the foreclosure of competition in the concert
promotion and venue markets. The district court denied LN’s
4
motion to dismiss in July 2009 and an initial motion for summary
judgment without prejudice in August 2012. Following briefing
and argument, the court granted summary judgment in LN’s favor
in February 2015.
In a careful opinion, the district court declined to adopt
IMP’s definition of the promotion market and excluded the
portion of its expert analysis defining the venue market. It’s
My Party, 88 F. Supp. 3d at 485-88, 490-92. The trial court also
found insufficient evidence that LN had engaged in
monopolization, tying, or any other anticompetitive behavior.
Plaintiff’s state law claims were deemed to fall in tandem with
its federal ones. IMP now appeals.
Our standard of review is well settled. Summary judgment is
justified if “there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). “In reviewing a motion for summary
judgment, the court must ‘draw any permissible inference from
the underlying facts in the light most favorable to the party
opposing the motion.’” Sylvia Dev. Corp. v. Calvert County, Md.,
48 F.3d 810, 817 (4th Cir. 1995) (quoting Tuck v. Henkel Corp.,
973 F.2d 371, 374 (4th Cir. 1992) (citation omitted)).
II.
Plaintiff faces here the initial challenge of identifying
exactly what market defendant is accused of monopolizing.
5
Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 455-56 (1993)
(discussing the definition of a relevant market as a threshold
issue for monopolization claims under § 2); Eastman Kodak Co. v.
Image Tech. Servs., Inc., 504 U.S. 451, 464 (1992) (treating
“appreciable economic power in the tying market” as a “necessary
feature of an illegal tying arrangement”). In the absence of a
plausible market definition, courts are hard pressed to discern
the nature or extent of any anticompetitive injury that
plaintiff and other similarly situated parties may be suffering.
This case involves two separate but related markets: the
market for concert promotion and the market for concert venues.
In both, the relevant consumers are performing artists, who
contract with promoters and venues to put on concerts. In its
market definition analysis, IMP characterized the promotion
market as national rather than local and restricted the venue
market to major amphitheaters to the exclusion of other venues.
As the district court recognized, these definitions were plainly
designed to bolster IMP’s monopolization and tying claims by
artificially exaggerating LN’s market power and shrinking the
scope of artists’ choices.
A.
To support its claims that LN was monopolizing the concert
promotion market and tying promotion services to its venues, IMP
had to first define the promotion market and demonstrate LN’s
6
market power therein. According to IMP, promoters compete
nationally for contracts to promote performances anywhere in the
country. By defining the market as national, IMP could more
easily construe LN’s nationwide network of promoters and venues
as evidence of market power. In contrast, IMP could portray
itself as a modest regional outfit whose resources pale in
comparison. If instead the market were defined locally and
narrowed to just the Washington-Baltimore area, then IMP would
appear more evenly matched against LN’s regional capacity.
Unfortunately for plaintiff, its market definitions are blind to
the basic economics of concert promotion.
The relevant geographic market in antitrust cases is
defined by the “area within which the defendant’s customers . .
. can practicably turn to alternative supplies if the defendant
were to raise its prices.” E.I. du Pont de Nemours & Co. v.
Kolon Indus., Inc., 637 F.3d 435, 441 (4th Cir. 2011). Applied
to this case, that inquiry focuses on the area within which
artists can find alternative promoters if any one promoter were
to increase its prices. The goal of concert promotion is of
course to boost ticket sales. Therefore, artists’ demand for
promotion services is derivative of the public’s demand for
concert performances. Concertgoers will typically not travel out
of their region to attend a concert in response to higher ticket
prices in their area. Heerwagen v. Clear Channel Commc’ns, 435
7
F.3d 219, 228 (2d Cir. 2006). Because the demand for concerts is
local, promoters need to target their advertising to the area
surrounding a particular venue. As the district court found in
reviewing the record, “promoting shows is highly localized, and
. . . most promoters promote in specific locations.” It’s My
Party, 88 F. Supp. 3d at 492. “For example, Live Nation books
the majority of its television advertising locally, with only
about five percent spent on national advertising.” Id. at 491.
These market dynamics favor promoters familiar with local
media outlets and the local audience. An artist is unlikely to
switch to a promoter based in Miami simply because a Baltimore
promoter demands a bigger cut of the ticket sale proceeds. IMP
sidesteps this point by focusing on the feasibility of promoting
concerts from anywhere using modern technology. That
technological capacity is useless, however, without the relevant
local knowledge and local contacts. Indeed, IMP itself must be
aware of that reality since it does not attempt to promote
beyond its Washington-Baltimore base. Even a national promoter
like LN is almost exclusively focused on local advertising and
operates its promotion services through regional offices rather
than a central hub. J.A. 2427. The ability of national promoters
to coordinate cross-country tours does not change the fact that
they provide services and compete for business on a local basis.
Heerwagen, 435 F.3d at 230. In short then, the market for
8
concert promotion is local, and the relevant competition in this
case is between IMP and LN for the Washington-Baltimore area.
The battle, in other words, is on IMP’s own turf.
B.
IMP’s definition of the venue market is similarly
defective. It first confined the market to “major
amphitheaters,” large outdoor spaces suitable only for popular
artists, while excluding clubs, arenas, stadiums, and other
venues. Not content with that narrow definition of the venue
market, IMP further specified that the amphitheaters must have a
capacity of 8,000 or more, actually sell 8,000 or more tickets,
and be in use only from May to September. Only two venues in the
entire Washington-Baltimore area meet IMP’s specifications –-
the very two venues featured in this case, Merriweather and
Nissan. IMP’s approach is akin to defining a market to include
tennis players who have won more than three Olympic gold medals
and finding that only Venus and Serena Williams fit the bill.
This exercise in precise line-drawing “suits the needs of
plaintiffs,” as the district court observed. It’s My Party, 88
F. Supp. 3d at 488. LN’s market power appears magnified when the
relevant market contains only two competitors, and any business
taken away from Merriweather seems to flow directly to Nissan.
But in its haste to stage this one-on-one showdown, IMP again
casts sound economics aside.
9
Whether a product, in this case amphitheaters, commands a
distinct market depends on whether it is “reasonably
interchangeable,” United States v. E.I. du Pont de Nemours &
Co., 351 U.S. 377, 395 (1956), with other products or the
“extent to which consumers will change their consumption of one
product in response to a price change in another, i.e., the
‘cross-elasticity of demand.’” Eastman Kodak Co., 504 U.S. at
469 (citations omitted) (quoting E.I. du Pont de Nemours & Co.,
351 U.S. at 400). Here, IMP has not pointed to any record
evidence demonstrating that artists are so likely to stick to
amphitheaters in the event of a price increase that
amphitheaters comprise their own market. Artists who prefer
amphitheaters may nonetheless turn to a lower-priced substitute,
which, after all, allows the show to go on. There is therefore
an insufficient basis for excluding “reasonably interchangeable”
venues such as similarly sized arenas or stadiums from the
market definition.
Plaintiff has simply not carried its burden of showing that
amphitheaters are the only place certain artists are willing to
perform, irrespective of the monetary or logistical advantages
of other concert locations. As the district court noted,
“artists regularly perform at both amphitheaters and non-
amphitheaters,” and any “artist dissatisfied with Live Nation’s
conditioning of amphitheaters could simply perform at another
10
venue.” It’s My Party, 88 F. Supp. 3d at 497. IMP’s key evidence
supporting its venue market definition –- a statistical analysis
that purportedly shows that some artists prefer either
amphitheaters or arenas -- fails to adequately consider cross-
elasticity of demand between the two types of venues. IMP’s
reliance on this evidence is akin to claiming that Pepsi and
Coke are in different markets because consumers generally prefer
one or the other. Mere consumer preference does not indicate
what Pepsi enthusiasts would do in response to an increase in
its price. Similarly, a particular artist’s preference for
amphitheaters or arenas does not reveal what the artist would do
if the cost of performing in an amphitheater began to rise.
In defending its market definition, IMP chides the district
court for rigorously challenging its expert’s analysis. But that
court was not required to accept uncritically two market
definitions -- a sweeping national promotion market and a
cramped amphitheater-only venue market –- that coincidentally
fit plaintiff’s precise circumstances. No party can expect to
gerrymander its way to an antitrust victory without due regard
for market realities. See E.I. du Pont de Nemours & Co., 637
F.3d at 442.
III.
Lacking sound market definitions, IMP’s monopolization and
tying claims are left in a weakened state. Even assuming the
11
plausibility of those definitions, however, plaintiff’s
allegations of anticompetitive conduct fail of their own accord.
The bulk of IMP’s case hinges on two closely related tying
claims. First, plaintiff argues that artists who hire LN for its
promotion services are compelled to perform at its Nissan venue.
Second, LN allegedly will give artists access to its
amphitheaters in other locations only if they choose Nissan for
their Washington-Baltimore date. In these two claims, the tying
products used to lure artists are promotion services and
amphitheaters in other areas, whereas the tied product forced
upon artists in both instances is Nissan. We will address the
venue-to-promotion and venue-to-venue tying claims in that
order.
A.
A tying arrangement is “defined as an agreement by a party
to sell one product but only on the condition that the buyer
also purchases a different (or tied) product.” N. Pac. Ry. Co.
v. United States, 356 U.S. 1, 5 (1958). Tying suppresses
competition in two ways: “First, the buyer is prevented from
seeking alternative sources of supply for the tied product;
second, competing suppliers of the tied product are foreclosed
from that part of the market which is subject to the tying
arrangement.” Advance Bus. Sys. & Supply Co. v. SCM Corp., 415
F.2d 55, 60 (4th Cir. 1969).
12
What causes these anticompetitive harms and distinguishes
tying from ordinary market behavior is not the mere bundling of
two products together but rather the coercion of the consumer.
As the Supreme Court put it, the crux of tying lies in “the
seller’s exploitation of its control over the tying product to
force the buyer into the purchase of a tied product that the
buyer either did not want at all, or might have preferred to
purchase elsewhere on different terms.” Jefferson Parish Hosp.
Dist. No. 2 v. Hyde, 466 U.S. 2, 12 (1984), abrogated on other
grounds by Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28(2006) (emphasis added); accord Phillip E. Areeda & Herbert
Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles
and Their Applications ¶ 1700i (3d ed. 1995) (deducing from
longstanding case law that “no tie exists unless the customer
was ‘coerced’ into taking both products”). If instead the buyer
is free to decline the tied product or to purchase the two
products separately, then by definition there is no unlawful
tying. See Times-Picayune Pub. Co. v. United States, 345 U.S.
594, 614 (1953) (stressing the importance of a “forced
purchase”); Stephen Jay Photography, Ltd. v. Olan Mills, Inc.,
903 F.2d 988, 991 (4th Cir. 1990) (same). That is precisely the
case here.
While paying lip service to the tying case law, IMP
proceeds to strip the doctrine of its core element of coercion.
13
By its proffered definition, IMP argues that tying occurs any
time a seller who has market power over product A offers it for
sale together with product B. But merely offering two products
in a single package, allowing each to enhance the appeal of the
other, is not itself coercive. Otherwise, the seller would be
guilty of anticompetitive conduct even if buyers in fact
preferred and freely chose to buy product A and product B
together and competitors were not foreclosed from selling
alternatives to product B. Without the element of coercion,
IMP’s version of tying targets none of the anticompetitive harms
animating the doctrine. Advanced Bus. Sys. & Supply Co., 415
F.2d at 60 (outlining the harms to competitors and consumers).
Without coercion -- i.e., without requiring the customer to buy
product B when buying product A -- selling products A and B as a
unit is simply one strategy for gaining an edge in a free
marketplace. To allow tying doctrine to swell to the point of
prohibiting such legitimate means of competition would make
antitrust law its own worst enemy.
B.
A review of the facts in this case reveals IMP’s reason for
excising coercion from tying doctrine: plaintiff has no prospect
of satisfying that element here. The record contains little
basis for concluding that artists were coerced into taking the
tied product, performances at Nissan, with the tying product,
14
LN’s promotion services. IMP cherry-picks excerpts of LN’s
communications, mostly internal emails, that discuss its
negotiations with artists over concert tours and the Nissan
venue. In no instance, however, did LN convey that an artist
could not receive its promotion services unless it appeared at
Nissan. In fact, several agents specifically denied being forced
to put their artists in LN venues as part of their agreements
with LN. J.A. 6556-57, 6580-82. In response, IMP conjectures
that the “agents shaded their testimony for an entity who
dictates whether their clients ‘work.’” Appellant’s Br. at 44-
45. But if pure speculation by a competitor were enough to prove
the opposite of what consumers describe is happening in the
market, then antitrust defendants should surrender every time a
rival files a complaint.
There is, moreover, ample evidence suggesting the exact
opposite of what IMP seeks to prove, namely the absence of
coercion and tying. Plaintiff’s own analysis reveals that the
tying product was sometimes sold without the tied product.
Artists on LN-promoted national tours, the very artists who were
supposedly strong-armed into performing at Nissan, in fact chose
IMP-owned Merriweather fourteen percent of the time. J.A. 4630-
31. Ten percent has been cited as the minimum benchmark for
separate sales sufficient to rebut any inference of tying. 10
Areeda & Hovenkamp, supra, at 328, ¶ 1756b2. Without adopting
15
that particular figure as the definitive baseline, we note that
non-tied sales in this case exceed it sufficiently to cast doubt
on any allegation of tying.
Even without direct evidence, a plaintiff could still prove
coercion circumstantially. See Serv. & Training, Inc. v. Data
Gen. Corp., 963 F.2d 680, 688 (4th Cir. 1992). Here, IMP relies
on a regression analysis purporting to show that artists on
national tours promoted by LN disproportionately perform at
Nissan rather than Merriweather. From that analysis, IMP infers
that LN must be tying Nissan to its promotion services. For
plaintiff, there could be no other reason for the artists’
choice to pair an LN venue with LN promotion.
But that supposition likewise falls short. To prove an
antitrust violation, a plaintiff must present evidence that
“tends to exclude the possibility” of independent conduct
consistent with competition. Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 588 (1986) (quoting Monsanto
Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984)). A
successful tying claim in particular needs to rule out
alternative market-based explanations for why the consumer might
prefer to purchase the tied product along with the tying
product. See Serv. & Training, Inc., 963 F.2d at 687-88. In this
case, IMP ignores a host of independent reasons that could have
led artists on LN tours to freely choose Nissan.
16
One obvious explanation is that LN simply outcompeted IMP
and gave artists better compensation to appear in LN venues. In
one case, two artists declined Merriweather only after LN
offered 100% of the gross ticket sales (minus expenses) to
perform at Nissan and another LN amphitheater. J.A. 2716. In
another instance, LN enticed a band to play at Nissan by adding
$150,000 to the guaranteed payment for a slate of performances
around the country. J.A. 6447-48. These differences in artist
compensation offered by IMP and LN, clearly signs of competitive
negotiations, were curiously missing from IMP’s regression
analysis.
Plaintiff also ignores the simple fact that it could have
been more efficient for artists already on LN tours to work with
the same concert promoter and venue operator for their
Washington-Baltimore date. The artist may have dealt with LN on
other occasions and come to appreciate the working relationship.
More broadly, the national promoter holds distinct advantages
over its regional competitor: it can offer tour packages
combining a series of venues with promotion services in multiple
locations. By contrast, IMP is limited to the Washington-
Baltimore area, most likely a single stop on any given tour.
Accepting a comprehensive and cost-effective package that
happens to include Nissan is not tying –- it is simply a good
deal for the consumer.
17
The final and perhaps most salient factor is that Nissan
may be a superior venue to Merriweather. IMP scoffs at this
idea, boasting that “Merriweather is an iconic amphitheater in a
bucolic setting,” whereas “Nissan is a concrete shell with
horrific parking problems.” Appellant’s Br. at 42. Setting aside
IMP’s potential bias for its own venue, Nissan possesses at
least some advantages. It carries the prestige and name
recognition of being affiliated with a top-flight concert
promoter. Nissan also holds over 5000 more seats than
Merriweather, nearly all of which are fixed seats that command a
higher ticket price than open lawn space, giving Nissan
significantly greater earning potential. As the Supreme Court
reminds us, “intrinsic superiority of the ‘tied’ product would
convince freely choosing buyers to select it over others”
without any coercion from the seller. Times-Picayune, 345 U.S.
at 605; accord Serv. & Training, Inc., 963 F.2d at 687-88. Yet
IMP fails to account for Nissan’s or LN’s inherent advantages,
or indeed any explanation of artists’ preference for that venue
other than an illicit tying arrangement.
Not only did artists have various reasons to choose Nissan
of their own accord, but they were also equally free to turn
down that venue or LN’s entire package deal of venues and tour
promotion. Artists have always had two options for structuring
their tours. Instead of contracting with a single national
18
promoter for all concert dates, performers can work with local
promoters on a concert-by-concert basis and pick any venue they
want for a specific date. If at any point LN tried to tie Nissan
to its promotion services, the artist could book its tour
“locally,” use another promoter for the Washington-Baltimore
area, and opt for Merriweather instead. When promotion and
venues “may be purchased separately in a competitive market, one
seller’s decision to sell the two in a single package imposes no
unreasonable restraint on either market.” Jefferson Parish, 466
U.S. at 11. In other words, LN’s combined but non-coercive offer
of promotion and venues would not foreclose artists from
choosing Merriweather over Nissan or other venue operators like
IMP from competing for that business. If, however, LN happened
to out-bargain IMP with better package deals, better
compensation, and a better venue, then an antitrust lawsuit
would not be the answer to plaintiff’s troubles.
C.
IMP’s venue-to-venue tying claim is largely a repetition of
its claim of venue-to-promotion tying. The key difference is the
tying product. Plaintiff argues that LN leveraged its market
power in areas where it controlled the only amphitheater to
force artists to perform at Nissan. Again, IMP presents no
direct evidence that LN withheld access to amphitheaters in LN-
controlled areas unless artists chose Nissan over Merriweather.
19
Nor does its circumstantial evidence manage to rebut the myriad
reasons discussed above for why artists would independently make
that choice of venue. The mere fact that artists sometimes took
a package deal of multiple LN venues for a given tour does not
prove tying. At the same time, the record shows a proportion of
non-tied sales that far exceeds the ten-percent benchmark:
twenty-six percent of artists who performed at an LN
amphitheater in a locality where it owned the only such venue
ended up choosing Merriweather, not Nissan, for its Washington-
Baltimore show. J.A. 5529-30. With one in four consumers buying
the tying product without the tied product, it becomes hard to
accept a story of LN strapping Nissan to its other venues and
forcing artists to perform there.
The change in the tying product thus makes no difference to
plaintiff’s case. IMP still fails to prove anything more than,
as the district court found, “vigorous competition by
Merriweather and Nissan in negotiating with artists to perform
at their respective venues.” It’s My Party, Inc., 88 F. Supp. 3d
at 495. In a world of robust market competition where artists
were free to take a package deal of promotion and venues, free
to purchase those products separately, free to turn down both,
and where they in fact exercised all those options to their
20
advantage, the strands of IMP’s reasoning begin to resemble the
invisible ropes allegedly tying LN’s products together. *
IV.
Quite beyond the specifics of market definitions and
product tying, IMP levies a more general attack. Its brief
stresses LN’s market position as “the largest promoter in the
world, larger than all other promoters combined.” Appellant’s
Br. at 63. Size and scope, in IMP’s eyes, are cause for
suspicion. LN’s nationwide reach, “1,000 artist relationships,”
id., and exclusive access to venues are apparently so dominant
that the network itself deters entry into the industry and
unfairly disadvantages localized competitors like IMP. Id. at
63-65. According to plaintiff, “attempting to replicate LN’s
network and promotion relationships would cost ‘billions.’” Id.
at 63.
The sweeping attack upon LN’s size in this action cannot
without more suffice to prove an antitrust infraction. Upon
further inspection, what plaintiff characterizes as illegal
conduct turns out to be lawful pro-competitive behavior. To hold
otherwise would have the most serious implications. Carried to
*
IMP’s other claims of anticompetitive conduct by LN fall
in tandem with its tying allegations since all are based on the
same misconceptions. Likewise, plaintiff’s state antitrust law
claims echo its allegations under the Sherman Act and thus also
fail. Finally, plaintiff’s remaining state-law claims fail for
the reasons outlined by the district court.
21
their logical end, plaintiff’s arguments would cast a pall over
all manner of packaged deals, free contractual negotiations, and
any endeavor to become the dominant player in an industry. To do
so would undermine the very competition that antitrust law was
designed to encourage. See Verizon Commc’ns Inc. v. Law Offices
of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004) (“The mere
possession of monopoly power, and the concomitant charging of
monopoly prices, is not only not unlawful; it is an important
element of the free-market system.”).
The word “tying” at the core of plaintiff’s claims carries
a sinister connotation, evoking the image of an unwelcome
parasite tightly bound to the desired product with the helpless
consumer unable to take one without the other. In outlawing
tying arrangements, Congress and the Court were originally
concerned with egregious forms of leverage, such as tacking
superfluous goods onto a patented product. Areeda & Hovenkamp,
supra, at ¶ 1700d. That leverage was understandably seen as an
unfair way for monopolists in one market to invade related
markets. Erik Hovenkamp & Herbert Hovenkamp, Tying Arrangements
and Antitrust Harm, 52 Ariz. L Rev. 925, 931 (2010).
Yet even as the Court recognized that evil, it hastened to
stress the value of offering “package sales” of multiple goods,
“conduct that is entirely consistent with the Sherman Act.”
Jefferson Parish, 466 U.S. at 12; see also Serv. & Training,
22
Inc., 963 F.2d at 688. What buyers often want is “the purchase
of several related products in a single competitively attractive
package,” especially where each component alone would hold
comparatively little value. Phillips v. Crown Cent. Petroleum
Corp., 602 F.2d 616, 628 (4th Cir. 1979) (giving the example of
a restaurant franchise as a packaged product desired by
restaurateurs). Offering an “attractive package,” however,
becomes indistinguishable from anticompetitive conduct under
IMP’s conception of coercion-less tying. If that view carries
the day, no seller could combine related goods or leverage its
competitive advantage in related markets without risking
antitrust charges.
The real loss would be the productive synergies created
when sellers package complementary products. LN’s business model
serves as an example. When LN bundles promotion, including
financing and advertising, and a series of concert venues
together, it becomes a one-stop shop for touring artists. In
such a case, the practice of “[b]undling obviously saves
distribution and consumer transaction costs . . . [and] can also
capitalize on certain economies of scope.” United States v.
Microsoft Corp., 253 F.3d 34, 87 (D.C. Cir. 2001). Artists do
not have to seek out and transact with separate sellers for each
of the services offered by LN.
23
The whole thereby becomes greater than the sum of its parts
as LN is able to offer advantages only made possible by selling
distinct but complementary products together. As one example,
managing concerts in multiple locations allows LN to “cross-
collateralize” its tours. It’s My Party, 88 F. Supp. 3d at 481.
The national promoter can “cover losses from concerts that
underperformed with revenue from concerts that met or exceeded
expectations,” thereby reducing the overall risk for itself and
for the artists. Id. A local promoter responsible for a single
concert in a single location lacks this risk-pooling ability. It
is likely one reason why national promoters are often able to
attract artists with a higher guaranteed payment, while their
local counterparts can only offer a cut of the ticket sales for
a particular show. Id. If, however, the packaging inherent in
coordinating concert tours were deemed unlawful tying, for
instance of one venue to another, then this synergy and its
attendant benefits would be at risk.
Of course, the idea of synergy is not unique to the live
music industry. It, and thus the potential for tying, is present
whenever products or production processes fit naturally
together. A prime example is vertical integration, where a firm
houses multiple stages of the production and distribution
process for a single good or related goods. Andy C. M. Chen &
Keith N. Hylton, Procompetitive Theories of Vertical Control, 50
24
Hastings L.J. 573, 578 (1999). Take a computer manufacturer, for
example, that “makes its own steel, types its own documents,
creates and places its own advertising, transports the finished
product to dealers, or repairs the product in the hands of
consumers. To that extent it ‘forecloses’ independent makers of
steel or suppliers of typing, advertising, transportation or
repair services.” Areeda & Hovenkamp, supra, at ¶ 1700j1. One
could conceivably accuse the vertically integrated manufacturer
of tying those goods and services together in selling the end
product, the computer.
And yet it is no surprise that vertical integration has
generally been permitted despite its apparent similarity to
tying. See id. (noting antitrust law’s tolerance of vertical
integration); Roger D. Blair & David L. Kaserman, Vertical
Integration, Tying, and Antitrust Policy, 68 Am. Econ. Rev. 397
(discussing the functional similarities between tying and
vertical integration). A single firm incorporating separate but
closely related production processes can often be far more
efficient than various independent entities transacting to
produce the same good or bundle of goods. See Jefferson Parish,
466 U.S. at 41 (O’Connor, J., concurring in judgment) (quoting
Fortner Enters. v. U.S. Steel Corp., 394 U.S. 495, 514 n.9
(White, J., dissenting) (1969)). With advances in modern
technology comes even greater potential for efficient
25
integration, increased compatibility among products, and ties
that are technological as much as or more than contractual. See
Areeda & Hovenkamp, supra, at ¶ 1701d. It would be unfortunate if
an overly aggressive tying doctrine were to impede that
innovation.
Because concert venues and promotion are not technically
part of the same production process, this may not be a case
involving vertical integration per se. Nonetheless, one can see
how IMP’s expansive tying definition could chill constructive
forms of integration. Unable to sell goods and products as a
single unit, businesses may have little reason to consolidate
underlying production processes and promotional strategies no
matter how efficiently they fit together. The eventual outcome
would be a strange world in which sellers go out of their way to
isolate their own products and different components of their
production and promotion processes from one other.
The ultimate victim in that scenario would be the consumer
and his ability to freely contract for desired goods and
services. So long as a transaction is free from coercion, the
consumer has every right to walk away from package deals or
demand more from the seller. It is paternalistic for either a
competitor or the court to just assume that taking two products
together is not the result of independent decision-making. See
Microsoft, 253 F.3d at 87-88 (reiterating consumer choice as the
26
touchstone of tying doctrine and the need to assess whether
consumers prefer to buy products together).
From its market definitions to its descriptions of
anticompetitive conduct, IMP’s entire case sets up a David-and-
Goliath battle between an industry behemoth and its regional
challenger. The tying argument in particular is predicated on
the fact that LN can leverage its sprawling national network of
promoters and venues to oblige artists to perform at Nissan. At
certain points, the whole argument seems to turn on LN’s
dominant market position, on what LN is rather than what it did.
It may be understandable as a matter of strategy for antitrust
plaintiffs to target industry giants. Certainly, many such cases
do require a finding of market power, and the evidence may show
what it fails to show here, namely that the dominant player in
an industry used that very domination for anticompetitive ends.
See E.I. du Pont de Nemours & Co., 351 U.S. at 389-90 (focusing
monopolization doctrine on the exercise of market power to
foreclose fair competition).
And yet big is not invariably bad. An outsized market
position may reflect nothing more than business success achieved
through superior effort and sound strategy. See United States v.
Grinnell Corp., 384 U.S. 563, 570-71 (1966). After all, the
purpose of antitrust law is to penalize anticompetitive
practices, not competitive success. Even monopoly power, long
27
considered a red flag in antitrust law, can under certain
circumstances be a legitimate advantage:
Firms may acquire monopoly power by establishing an
infrastructure that renders them uniquely suited to
serve their customers. Compelling such firms to share
the source of their advantage is in some tension with
the underlying purpose of antitrust law, since it may
lessen the incentive for the monopolist, the rival, or
both to invest in those economically beneficial
facilities.
Trinko, 540 U.S. at 407-08. LN invested heavily in developing
just such an infrastructure, expanding beyond its core promotion
business to acquire exclusive booking rights at concert venues
nationwide and merging with a leading ticket vendor,
Ticketmaster. The synergies among promotion, venues, and ticket
sales, all of which serve to bring live music to the public,
should be obvious.
In a world where the “big is bad” mantra reigns
unquestioned, we would be left with separate tour promoters,
separate venue operators, and separate ticket vendors, each with
little incentive to interact or join with the others despite
their natural affinities. See Fed. Trade Comm’n v. Proctor &
Gamble Co., 386 U.S. 568, 597-98 (1967) (Harlan, J., concurring)
(considering the possible efficiencies created by merging
producers of complementary goods in adjacent markets). IMP’s
tying allegations thus threaten in the end to bring us three
forms of strict economic segregation, first of products, then of
28
production processes, and finally of producers in adjoining
markets. It is not wholly fantastical to wonder if even ketchup
and mustard, salt and pepper, forks and knives will have to bid
each other adieu, doomed to solitary existences along the
grocery aisle.
The Davids of the world need not hope for such a
marketplace in order to thrive. Just as big is not necessarily
bad, small is not necessarily weak. Even though national firms
undoubtedly have an edge over smaller competitors and David may
not triumph over Goliath everywhere, he can certainly hone his
home court advantage. While LN was busily spreading its
operations all over the country, IMP could have focused instead
on branding itself as a uniquely attractive local outfit,
striving to know the Washington-Baltimore audience better than
any other promoter and deepening its relationships with local
clubs, businesses, and media. As it is, IMP has in fact enjoyed
much success at its Merriweather venue, hosting scores of major
artists and doubling its revenue from $11.8 million in 2006 to
$22.5 million in 2012. J.A. 827-40, 4908.
IMP’s distortion of tying doctrine serves in fact as a
potential template for any local business wishing to drive a
national competitor out of its regional market. That template
would prove particularly useful when, as in this case, the
competition is on a local basis and the competitors are a mix of
29
national and local players. If offering products or services
across a particular field is tying and if a national network is
itself suspect when compared to the resources of a regional
contender, then businesses have much less motivation to operate
in multiple geographic markets. Why shoulder the costs of
expansion when the specter of antitrust liability awaits?
Cornering the local Washington-Baltimore market may not
have been far from IMP’s mind. Seth Hurwitz, IMP’s principal,
has protested that “the scourge of the [live music] industry is
too many shows.” J.A. 1566. According to Hurwitz, LN was “paying
way too much money just to keep [a] show away from [IMP],” and
the bidding process for concerts –- the key mechanism for price
competition among promoters -- made it “prohibitive to actually
do a show and make money.” J.A. 1560, 1562. To ease what it
considered an excess of competition, Hurwitz sought to eliminate
its archrival. He suggested either that LN “sell the
Nissan/Jiffy Lube property” or that the two promoters “work
together” to stop bidding against each other when bringing
artists to the Washington-Baltimore area. J.A. 1560-62, 1570.
After failing to collude with LN or expel it from the market,
plaintiff turned to the next best option –- antitrust law.
This case thus captures the anticompetitive effects and
consequences that can ironically arise from antitrust lawsuits.
See Matsushita Elec. Indus., 475 U.S. at 594 (warning against
30
allowing antitrust doctrine to “chill the very conduct the
antitrust laws are designed to protect”); William J. Baumol &
Janusz A. Ordover, Use of Antitrust to Subvert Competition, 28
J.L. & Econ. 247 (1985). This can be a special hazard in
antitrust litigation brought by competitors of the defendant.
See Edward A. Snyder & Thomas E. Kauper, Misuse of the Antitrust
Laws: The Competitor Plaintiff, 90 Mich. L. Rev. 551 (1991). If
abused, such suits can ineluctably lead to an environment of
commercial parochialism. By cutting ties among related products
and related producers, IMP’s view of economic activity, if
allowed to take hold, would box firms both into their own
product markets and into their own geographic locales. That
tendency toward isolationism has more in common with the market
squares and horse-drawn buggies of the nineteenth century than
with the interconnected and technology-driven contemporary
world. The loser in all this is of course the consumer, left
with a patchwork of localized monopolies and one-product wonders
flourishing at the expense of larger and more diverse
competitors. To help prevent antitrust law from being hijacked
for such anticompetitive ends, we join the district court in
sending this tussle between two rivals back to the marketplace
from whence it came. The judgment is hereby
AFFIRMED.
31