First Circuit Upholds Summary Disposition Of Section 2 Claim in Outdoor Billboard Market

(Reproduced with permission from Antitrust & Trade Regulation Report, Vol. 81, No. 2021, p. 149 (Aug. 17, 2001). Copyright 2001 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com)

First Circuit Upholds Summary Disposition Of Section 2 Claim in Outdoor Billboard Market

A recent entrant into the outdoor billboard market in Massachusetts cannot invoke Sherman Act Section 2 to challenge exclusionary conduct by the dominant firm in the industry, according to a decision by the U.S. Court of Appeals for the First Circuit (RSA Media, Inc. v. AK Media Group, Inc., 1st Cir., No. 00-2508, 8/6/01).

Judge Juan R. Torruella rules that the plaintiff lacks antitrust standing because the market exclusion of the plaintiff stems from a state regulatory scheme, rather than from wrongful conduct by the defendant monopolist.

Challenged Conduct:

For purposes of this litigation, the defendant, AK Media Group, Inc., does not dispute that it controls nearly 92 percent of the 2,400 billboards in the Greater Boston billboard advertising market. AK is being sued by RSA Media, Inc., a new entrant, for seeking to squelch competition.

The market is highly regulated, with most existing billboards owing their continued existence to grandfathering, meaning that they are in locations in which a new billboard would be barred by federal or state law. According to the court, it is "impossible, or at least nearly impossible, to obtain a permit to build a new billboard." The overall market thus is static or diminishing.

Federal law regulates billboards on or near interstate highways. Elsewhere, the Massachusetts Outdoor Advertising Board (OAB) controls a state licensing and permitting process. A billboard owner must obtain a license from the OAB. A permit is needed to operate a billboard, and the billboard operator also must negotiate a lease with the owner of the property on which the billboard is located.

AK owns nearly all the billboard structures operated by it. AK contracts with landlords to lease the property on which each billboard is located, and it holds the necessary permits and annual licenses issued by OAB.

RSA alleged that AK has a policy intended to preserve its market dominance. AK allegedly refuses to transfer billboard or permits, even when it no longer has a tenancy right to the underlying property. "In fact," the court recounts, AK allegedly "promises that it will destroy its billboard rather than sell them, and hold and renew its permits indefinitely, rather than abandon them."

The complaint alleged that RSA's attempts to obtain tenancy rights on properties containing grandfathered billboards have been undermined by AK's "drill" to landlords. AK allegedly has told landlords that: (1) if they negotiate a lease with RSA, AK will destroy the billboard; (2) AK will not abandon its permits even if it no longer has tenancy rights to the property on which the billboard is located; (3) if AK destroys a billboard, RSA would not be able to obtain a permit to build a new billboard on the spot; and (4) RSA's inability to obtain a period would result in the loss of rent if the landlord did not negotiate a new lease with AK.

The district court ruled that RSA lacked antitrust standing because its inability to enter the market "was a by-product of the regulatory scheme rather than a result of AK's conversations with landlords."

Analysis:

Judge Torruella, affirming, cannot be persuaded that RSA's evidence of causation--a showing of a causal link between the alleged antitrust violation and the plaintiff's injury-- is sufficient to create a genuine issue of material fact precluding summary judgment.

While RSA argued that it would be possible to obtain permits for new billboards if AK's exclusionary conduct ceases, the evidence "strongly contradicts" this claim, the First Circuit opines. The fact that AK obtained a variance in 1994 to make improvements on one billboard does not show that RSA would be able to secure permits. AK replaced an old billboard to improve parking in the area, while RSA would be seeking to build new billboards on lots where none had existed.

Second, while RSA argued that, absent AK's exclusionary conduct, landlords would have pursued leases with RSA, instead of AK, the evidence indicates otherwise--the landlords stayed with AK because of the difficulty in obtaining new permits and because they wanted to receive rent.

"In sum," the court of appeals opines, "the district court's causation analysis was correct. RSA was not excluded from the market for outdoor billboards because of AK's threats; it was excluded because of the Massachusetts regulatory scheme that prevents new billboards from being built. In short, AK's representations to landlords did not prevent those landlords from leasing their land to RSA."

The court of appeals also upholds a summary judgment to AK on a claim of unfair trade practices under Mass. Gen. Laws ch. 93A, Section 11. Causation is an element of this offense, and RSA "has not made any unique arguments related to its 93A claim."

Counsel for plaintiff: James Coyne King, Hanify & King; counsel for defendant: Mark I. Levy, Howrey Simon Arnold & White, L.L.P.

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Marguerite Willis, Esq., a former Partner with Howrey Simon, was the trial lawyer who won summary judgement.