Recent D.N.J. Opinion Offers Roadmap to Practitioners Defending Antitrust Claims

A recent opinion from the District of New Jersey illustrates the breadth of defenses available to an entity accused of violating the antitrust laws. World Phone Internet Services, Pvt. Ltd., a provider of VoIP services in India, and its majority shareholder, TI Investment Services, LLC, sued Microsoft (owner of Skype), alleging that Microsoft’s intentional failure to abide by the requirements of India’s licensing regime for VoIP service providers allowed it to undercut World Phone’s pricing, which advantage Microsoft supposedly used to quash its competitors. In granting Microsoft’s motion to dismiss the complaint in TI Investment Services, LLC v. Microsoft Corp., the Court relied on four independent grounds to decide that plaintiffs’ claims of monopolization and collusion did not pass muster under the Sherman Act.

First, the Court held that World Phone did not adequately allege antitrust injury and thus lacked standing to pursue the matter. The anticompetitive conduct boiled down to a claim for predatory pricing. But the Complaint did not plausibly allege that Microsoft’s pricing was below its costs. And neither did the Court find a dangerous probability that Microsoft could recoup its losses from the predatory pricing by raising rates; even if Microsoft succeeded in driving World Phone out of the market, it would still have to compete with its other “non-compliant” peers in the market, making a rate hike unlikely.

Second, the Foreign Trade Antitrust Improvements Act (“FTAIA”) removes from the reach of the Sherman Act conduct that injures a foreign competitor in a foreign market. Microsoft’s sale of VoIP services to customers in India, which purportedly injured World Phone in India, thus was foreclosed by the FTAIA.

Third, the relevant market alleged was deficient. The Complaint did not define the relevant market with reference to all interchangeable and/or substitute products for VoIP services. As to the geographic dimension of the relevant market definition, claims concerning the foreign market were exempted by the FTAIA, while claims concerning the domestic market were not alleged to have harmed World Phone.

Fourth, the Section 1 conspiracy claim failed because the so-called parallel conduct of Microsoft and other World Phone competitors could just as readily have been the product of independent action as of an illicit agreement. The Court reasoned that the cost of complying with the Indian licensing regime gave Microsoft and the others an independent business motive to disregard it.

As to TI, the Court held it lacked standing to sue Microsoft because shareholders do not have standing under the Sherman Act to bring suit arising from injuries suffered purely by the corporations they own. Having dismissed plaintiffs’ federal antitrust violations, the Court then declined to exercise supplemental jurisdiction over the remaining state law claims, including for unfair competition and tortious interference.

Although it does not blaze any new trails along the antitrust landscape, this opinion is a useful roadmap for practitioners faced with defending an antitrust lawsuit.

Kevin R. Reich is an Associate in the Gibbons Business & Commercial Litigation Department.
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