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Court Tells Optical Disk Drive Plaintiffs To Refocus Antitrust Claims

Posted  August 10, 2011

Plaintiffs alleging a conspiracy among manufacturers of drives that play CDs and other optical discs are going to have to refocus their allegations in order to screen their claims of price-fixing in federal court.

Judge Richard Seeborg of the United States District Court for the Northern District of California has granted the defendants’ motions to dismiss each of the plaintiffs’ consolidated complaints, with leave to amend, in the case of In re Optical Disk Drive Antitrust Litigation.

The complaints in this Multi-District Litigation allege a conspiracy among defendants to fix the prices of Optical Disc Drives (“ODDs”) and Optical Disc Drive Products (“ODD Products”) in violation of the Sherman Act and state antitrust law.  ODDs are disc drives that use laser light to read and write data in optical discs, such as CDs, DVDs and Blu-Ray discs.

In granting defendants’ motion to dismiss, the court focused on definitional inconsistencies in the complaints of the plaintiffs, who include a putative class of direct purchasers and indirect purchasers of ODDs and ODD Products.  To provide clarity, the court defined ODDs as “optical disc drive mechanisms built to be incorporated into either (1) stand-alone CD, DVD, or Blue-Ray players and records, whether for audiovisual or computer use, (2) computers, (3) game consoles, or (4) camcorders.”  The court defined ODD devices as “all such products (including the stand-alone players and recorders) that include ODDs.”

The court granted defendants’ motion to dismiss the “direct purchaser” plaintiffs’ complaint under the federal Illinois Brick doctrine, under which only direct purchasers have standing to seek damages for price-fixing violations.  The court stated that “the likelihood is that most, if not all, the plaintiffs only purchased ODD devices,” rather than actual ODDs.  Accordingly, the court found that the direct purchaser plaintiffs were not, in fact, direct purchasers under Illinois Brick, due partially to the complaint’s definitional confusion and partially to the complaint’s lack of factual support.  Moreover, the court found the alleged conspiracy implausible as the number of entities needed to participate in the alleged conspiracy would be vast and the type of entities would be highly differentiated.  Finally, the court found the direct purchaser plaintiffs’ complaint was insufficient under the Twombly pleading standards.

The court dismissed the indirect purchaser plaintiffs’ complaint on similar grounds, concluding that the complaint did not satisfy the plausibility standard.  The court took particular aim at the implausibility of the allegations of bid-rigging in auctions conducted by HP and Dell, which claimed the two companies were both co-conspirators and victims.

In dismissing the complaints with leave to amend, the court gave plaintiffs 30 days to remedy the insufficiencies of their allegations.

Tagged in: Antitrust Litigation, Price Fixing,