endorsed. During this period, AARP endorsed the services of Colonial Penn or its related companies for travel and homeowners insurance programs designed to meet the needs of AARP members. In 1979, AARP changed its policy and permitted general advertising except for products it still endorsed, which included travel services, as well as homeowners and automobile insurance. Unfortunately, from Colonial Penn's perspective, AARP endorsed the programs of defendant Olson-Travelworld, Inc. and Hartford Insurance Company for those services. Consequently, Colonial Penn argues that defendants' actions and the exclusion of the advertisements for its travel services, homeowners, and automobile insurance programs from the AARP publications violates the antitrust laws. In addition, plaintiff, in an effort to add a horizontal nature to the alleged conspiracy, asserts that AARP competes in the markets for travel and insurance products along with Colonial Penn, Olsen, and Hartford because it receives from Olson and Hartford a percentage of revenues and premiums on the endorsed products.
A. Section 1 claims
Plaintiff alleges that AARP, Olson, and Hartford have conspired to restrain trade by refusing it access to advertising space in the AARP publications, access which is essential to effective competition in the sale of insurance and travel programs in the relevant markets. Plaintiff argues that its section 1 claim should be analyzed under both a per se and a rule of reason approach.
A section 1 action requires proof of four elements: (1) an unlawful, (2) contract, combination, or conspiracy, (3) that produces adverse, anticompetitive effects within the relevant market, and (4) that proximately causes plaintiff's injuries. E.g., Arnold Pontiac v. GMC, 786 F.2d 564 (3d Cir. 1986). Generally, plaintiff must prove the challenged activity has an anticompetitive effect; however, certain categories of conduct that unjustifiably restrict competition are per se unlawful. The most obvious example is price fixing. The Supreme Court has cautioned against a knee-jerk announcement of a per se rule prohibiting an activity in favor of a threshold determination of whether the challenged activity is likely to have anticompetitive effects. Business Electronics v. Sharp Electronics, 485 U.S. 717, 108 S. Ct. 1515, 99 L. Ed. 2d 808 (1988); Northwest Wholesale Stationers v. Pacific Stationery, 472 U.S. 284, 105 S. Ct. 2613, 86 L. Ed. 2d 202 (1985); see also Seaboard Supply Co. v. Congoleum Corp., 770 F.2d 367 (3d Cir. 1985) (per se approach only applicable to "classic boycotts," i.e., concerted action designed to exclude a person or group from a market or to accomplish some anticompetitive effect).
In Northwest Wholesale, the Court examined the actions of a wholesale cooperative to expel members from the cooperative and held that such conduct is not the type that is likely to have an anticompetitive effect unless "the cooperative possesses market power or exclusive access to an element essential to effective competition." Northwest Wholesale, 105 S. Ct. at 2621. Here, plaintiff alleges that advertising in the AARP publications is necessary to compete in the relevant markets for travel services and homeowners insurance. Under the so-called "essential facilities doctrine," plaintiff must prove four elements: (1) existence of a facility whose use is essential to market entry; (2) duplication of the facility is not practicable; (3) access to the facility can be provided without interfering with the use by plaintiff's competitor and (4) existence of an agreement between the facility owner and plaintiff's competitor that prevents equitable sharing. Hecht v. Pro-Football, 187 U.S. App. D.C. 73, 570 F.2d 982, 992-93 (1977), cert. denied, 436 U.S. 956, 57 L. Ed. 2d 1121, 98 S. Ct. 3069 (1978); Century Air Freight v. American Airlines, 597 F. Supp. 564 (S.D.N.Y.),
aff'd, 738 F.2d 418 (2d Cir.), cert. denied, 469 U.S. 1073, 83 L. Ed. 2d 507, 105 S. Ct. 566 (1984).
A facility is only essential where it is vital to competitive viability, i.e., competitors can not effectively compete in the relevant market without it. Associated Press v. United States, 326 U.S. 1, 89 L. Ed. 2013, 65 S. Ct. 1416 (1945) (competition in certain regions seriously restrained where potential competitors of AP members not permitted to buy news from AP); Home Placement Service, Inc. v. Providence Journal, 682 F.2d 274 (1st Cir. 1982) (advertisements in classified section of largest regional newspaper essential to compete in the rental referral services market), cert. denied, 460 U.S. 1028, 75 L. Ed. 2d 500, 103 S. Ct. 1279 (1983). See generally, P. Areeda & H. Hovenkamp, Antitrust Law, para. 736.2b (Supp. 1986) (facility is not essential if plaintiff can effectively compete without it). Thus, critical to this inquiry is the definition of the relevant markets, whether advertising in the AARP publications is necessary to compete effectively in those markets, and whether this facility can be duplicated.
Plaintiff alleges that advertising in the AARP publications is the only effective means to market its products to persons over the age of fifty, or the more discrete market of AARP members, and that advertising is necessary to compete in the relevant markets thus raising the essential facilities doctrine. Amended Complaint § 23(c). AARP contends that there are other means of advertising to and reaching the relevant markets and that its refusal to accept plaintiff's advertising has no anticompetitive effect because defendants do not possess any power in these markets. See generally, Areeda & Hovenkamp, supra, at 736.2d. These arguments, while appealing, raise factual questions appropriate for a jury to consider, or if no material facts are in dispute, for disposition by a motion for summary judgment.
Plaintiff also seems to allege per se liability under a classic group boycott or refusal to deal among competitors theory. As a preliminary matter, it is unlikely that AARP is a competitor of either Olson or Hartford simply by virtue of its agreements to endorse their products and to share a percentage of their revenues or premiums. Moreover, plaintiff has not alleged that AARP was a potential competitor or entrant into either relevant market so that its agreements with Olson and Hartford could have restricted competition by eliminating a competitor from the field. In any event, in the absence of proof of the essential facilities doctrine, defendants' conduct is not the type likely to have an anticompetitive effect, Northwest Wholesale, supra ; and accordingly, should be judged under the rule of reason under which plaintiff must show an adverse effect on competition in the market. Garshman v. Universal Resources Holding Inc., 824 F.2d 223, 231 (3d Cir. 1987).
B. Section 2 claims
Plaintiff's section 2 claims are a further assertion of the essential facilities doctrine shrouded in monopoly terms rather than those of conspiracy. Plaintiff alleges that AARP has monopolized an essential facility, advertising, and that it has monopolized or attempted to monopolize the relevant markets for travel and insurance products by refusing access to this facility.
See Otter Tail Power Co. v. United States, 410 U.S. 366, 377-79, 35 L. Ed. 2d 359, 93 S. Ct. 1022 (1973); MCI Communications Corp. v. American Telephone & Telegraph Co., 708 F.2d 1081, 1133 (7th Cir.), cert. denied, 464 U.S. 891, 78 L. Ed. 2d 226, 104 S. Ct. 234 (1983). An owner of an essential facility normally has an unfettered right to refuse to deal with anyone except when, as alleged here, it has an economic interest in the relevant market or otherwise limits access for anticompetitive reasons and it has little business justification
for its conduct. See, e.g., Home Placement Service, Inc. v. Provident Journal Co., supra; Official Airline Guides v. FTC, 630 F.2d 920 (2d Cir. 1980), cert. denied, 450 U.S. 917, 67 L. Ed. 2d 343, 101 S. Ct. 1362 (1981).
As emphasized by AARP, it is the impact upon competition, not a particular competitor such as plaintiff, that the antitrust laws are designed to protect. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 50 L. Ed. 2d 701, 97 S. Ct. 690 (1977). Plaintiff alleges that defendants' actions have the necessary adverse impact on competition. I must accept this as true despite my skepticism as to plaintiff's portrayal of AARP's overwhelming power, domination, and control over advertising to the relevant markets. I will, however, order the parties to undertake discovery on the elements identified in this memorandum particularly the relevant markets, whether plaintiff can satisfy the elements of the essential facilities doctrine, and whether AARP possesses a monopoly over advertising to the relevant markets. If the evidence does not support plaintiff's allegations on these facts, summary judgment will be appropriate.
AND NOW, this 8th day of August, 1988, upon consideration of the motion of American Association of Retired Persons for sanctions, which I am treating as a motion to dismiss with the parties' consent, the motion is denied for the reasons set forth in the accompanying memorandum. It is further ordered that a phone conference, initiated by counsel for plaintiff, shall be held on Thursday, August 18, 1988, at 9:30 a.m., to discuss discovery deadlines and plaintiff's motion for expedited discovery.