It's My Party, Inc. v. Live Nation, Inc.
Filing
PUBLISHED AUTHORED OPINION filed. Originating case number: 1:09-cv-00547-JFM. [999748911]. [15-1278]
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-1278
IT’S MY PARTY, INC.; IT’S
Merriweather Post Pavilion,
MY
AMPHITHEATRE,
INC.,
d/b/a
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
opinion, in which Judge Niemeyer and Judge Diaz joined.
the
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.
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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
dealing
in
in
monopolization,
the
music
tying
concert
arrangements,
industry.
The
and
exclusive
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
outdoor
amphitheaters.
IMP
manages
and
operates
operate
Merriweather
Post Pavilion in Columbia, Maryland, and LN owns Nissan Pavilion
(now called Jiffy Lube Live) in Bristow, Virginia. Merriweather
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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 WashingtonBaltimore
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
amphitheater),
and
J.A.
Notwithstanding
1516.
the
Six
Verizon
Pavilion
Center
the
(4,200
(19,000
person
person
arena).
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,
3
the
artist
typically
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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
4
district
court
denied
LN’s
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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
monopolization,
tying,
evidence
or
that
any
other
LN
had
engaged
anticompetitive
in
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
5
is
accused
of
monopolizing.
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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
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market
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power
therein.
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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
itself
as
a
comparison.
of
market
modest
If
power.
regional
instead
the
In
contrast,
outfit
market
whose
were
IMP
could
resources
defined
portray
pale
locally
in
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
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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
8
short
then,
the
market
for
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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
defective.
definition
It
of
first
the
confined
venue
market
the
is
market
similarly
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
the
Washington-Baltimore
very
two
venues
area
featured
in
meet
this
IMP’s
case,
specifications
–-
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.
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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
amphitheaters
in
the
comprise
event
their
of
own
a
price
market.
increase
Artists
who
that
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
“artists
concert
regularly
locations.
perform
As
at
the
both
district
court
amphitheaters
and
noted,
non-
amphitheaters,” and any “artist dissatisfied with Live Nation’s
conditioning of amphitheaters could simply perform at another
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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 crosselasticity
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
definitions
cramped
not
--
required
a
to
sweeping
amphitheater-only
accept
uncritically
national
venue
market
promotion
–-
that
two
market
market
and
a
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
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plausibility
of
those
Pg: 12 of 31
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).
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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.
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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
preferred
together
anticompetitive
and
and
freely
chose
competitors
alternatives
to
conduct
product
to
were
B.
even
buy
product
not
Without
if
buyers
A
and
foreclosed
the
element
in
fact
product
from
of
B
selling
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,
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LN’s
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promotion
services.
communications,
negotiations
mostly
with
IMP
Pg: 15 of 31
cherry-picks
internal
artists
over
excerpts
emails,
concert
that
tours
of
LN’s
discuss
and
the
its
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 4445. 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
opposite
of
is,
moreover,
what
IMP
ample
seeks
to
evidence
prove,
suggesting
namely
the
the
exact
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. 463031. 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
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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
national
tours
analysis
promoted
purporting
by
that
artists
on
disproportionately
LN
to
show
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
antitrust
“tends
to
consistent
supposition
violation,
a
exclude
the
with
likewise
plaintiff
falls
must
possibility”
competition.
short.
present
of
Matsushita
To
prove
evidence
independent
Elec.
Indus.
an
that
conduct
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.
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One obvious explanation is that LN simply outcompeted IMP
and gave artists better compensation to appear in LN venues. In
one
case,
offered
two
100%
artists
of
the
declined
gross
Merriweather
ticket
sales
only
LN
expenses)
(minus
after
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.
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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
least
potential
some
for
advantages.
recognition
promoter.
bias
of
being
Nissan
its
It
own
carries
affiliated
also
venue,
holds
the
with
over
a
Nissan
possesses
prestige
and
top-flight
5000
more
at
name
concert
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
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a
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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,
“locally,”
use
another
area,
opt
for
and
the
promoter
Merriweather
artist
for
could
the
instead.
book
its
tour
Washington-Baltimore
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
compensation,
IMP
and
a
with
better
better
venue,
package
then
an
deals,
better
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
force
areas
artists
where
to
it
perform
controlled
at
Nissan.
the
only
Again,
amphitheater
IMP
presents
to
no
direct evidence that LN withheld access to amphitheaters in LNcontrolled areas unless artists chose Nissan over Merriweather.
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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
twenty-six
sales
that
percent
far
of
exceeds
artists
the
ten-percent
who
performed
benchmark:
at
an
LN
amphitheater in a locality where it owned the only such venue
ended up choosing Merriweather, not Nissan, for its WashingtonBaltimore 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
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advantage, the strands of IMP’s reasoning begin to resemble the
invisible ropes allegedly tying LN’s products together. *
IV.
Quite
product
beyond
tying,
the
IMP
specifics
levies
a
of
more
market
general
definitions
attack.
Its
and
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.
further
inspection,
what
plaintiff
characterizes
as
Upon
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.
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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
tying
unable
to
arrangements,
concerned
with
take
one
Congress
egregious
without
and
forms
of
the
the
other.
Court
leverage,
In
were
such
outlawing
originally
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,
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Inc., 963 F.2d at 688.
Pg: 23 of 31
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
restaurateurs).
becomes
as
Offering
a
an
indistinguishable
packaged
“attractive
from
product
desired
package,”
anticompetitive
by
however,
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
financing
an
and
example.
When
advertising,
LN
and
bundles
a
promotion,
series
of
including
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.
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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 “crosscollateralize” 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
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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
efficient
than
production
various
processes
independent
can
often
entities
be
far
transacting
more
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
(White,
Enters.
J.,
technology
v.
U.S.
dissenting)
comes
even
Steel
Corp.,
394
U.S.
(1969)).
With
greater
potential
25
495,
advances
for
514
in
n.9
modern
efficient
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integration,
Filed: 02/04/2016
increased
Pg: 26 of 31
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
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touchstone
Filed: 02/04/2016
of
tying
doctrine
Pg: 27 of 31
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-andGoliath 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.,
purpose
of
384
U.S.
antitrust
563,
law
570-71
is
to
(1966).
penalize
After
all,
the
anticompetitive
practices, not competitive success. Even monopoly power, long
27
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considered
a
Filed: 02/04/2016
red
flag
in
Pg: 28 of 31
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
producers
complementary
of
possible
efficiencies
goods
in
created
adjacent
by
merging
markets).
IMP’s
tying allegations thus threaten in the end to bring us three
forms of strict economic segregation, first of products, then of
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production
Filed: 02/04/2016
processes,
and
Pg: 29 of 31
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
the
world
need
existences
along
the
grocery aisle.
The
Davids
of
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
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Pg: 30 of 31
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.
Nissan/Jiffy
together”
He
Lube
to
suggested
property”
stop
bidding
either
or
that
against
the
each
that
two
other
LN
“sell
promoters
when
the
“work
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
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allowing
Filed: 02/04/2016
antitrust
doctrine
Pg: 31 of 31
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,
allowed
to
take
product
markets
hold,
and
IMP’s
view
would
box
into
their
of
economic
firms
own
both
activity,
into
geographic
their
locales.
if
own
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
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