Monday, April 28, 2008

Oral Argument in Theme Promotions v. News America Marketing Addresses: Anti-competitiveness of Right of First Refusal Provisions, Lack of Expert Testimony on Market Definition

The Ninth Circuit heard oral argument on April 14, 2008 in Theme Promotions v. News America Marketing, 06-16230– a case I discussed in a recent post. An audio file of the oral argument is available here.

News America Marketing appealed the lower court's finding of antitrust violations, arguing that the right of first refusal ("ROFR") provisions in its contracts with consumer goods companies were pro-competitive. News America suggested that the ROFR's allowed News to offer volume discounts to consumer goods companies, and pointed out that pricing declined during the relevant time period. The court expressed skepticism, and quoted an internal News America memorandum that suggested that News' enforcement of its ROFR agreements to prevent Theme Promotions from placing its ads with Valassis had an anticompetitive intent. The memo stated, in part: "He is trying desperately to get us to state that he is a customer. Once he wins that premise, then our ROFR clients, e.g., Chef, wouldn't be required to run with NAM or V and he could auction these orders off for the lowest rates."

The panel also questioned the wording of News' ROFR provision, which made the discount contingent on compliance with the ROFR provision retroactive to the signing of the ROFR contract.

Theme Promotions was questioned by the court about its failure to elicit expert testimony regarding the market definition, describing it as "a very real issue in this case." Theme conceded that it would have preferred to have an expert on this topic, but did not use one because it would have been expensive, and suggested that sufficient evidence had been introduced of the market through other witnesses. News responded that the market could not be defined without expert testimony regarding the cross-elasticity of demand related to similar advertising products.

Theme contended that sufficient evidence of damages had been introduced, while News pointed out that the testimony on causation of damages was very limited.

On its cross-appeal, Theme argued, inter alia, that the lower court erred in denying its restitution claim, stating that Theme was entitled to recover profits earned by News on programs sold as a result of News' unlawful behavior towards Theme.

Related post: Court Denies Insignia's Request for Documents from Other Litigation Against News America


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