Tuesday, September 15, 2015

Antitrust lawsuits come to California restaurants

Recently, restaurants have been finding themselves dealing with a type of lawsuit not commonly seen in the restaurant industry.  While attempting to deal with the rising costs of doing business with increasing minimum wages, paid sick leave, and mandated health care, some restaurants have found themselves accused of violating California and Federal Antitrust laws.  To prepare for these new accusations, we want to provide restaurants with some basic information about antitrust law.  This will help you identify potential issues that arise in this area of the law and provide an opportunity to plan to meet these challenges.
Basic Antitrust Offenses
Antitrust law, at its root, is the law of competition. It is argued that antitrust laws seek to promote fair competition and protect consumers and wronged competitor businesses from anti-competitive business practices.  The practices are viewed as being undertaken to undermine the competitive nature of a free market.
Therefore, the antitrust laws target the wrongful acquisition or preservation of monopoly power and concerted restraints of trade (i.e., business practices undertaken by two or more restaurants to improperly stifle or suppress “competition on the merits” in a given market).
Antitrust laws are concerned with wrongs committed against competition in a free market.  Therefore, a plaintiff cannot simply allege he or she has been harmed by two separate businesses exerting monopoly power or restraints on free trade.  Instead, an antitrust plaintiff must show that the defendant or defendants have undermined competition in a distinct market, and that this injury to competition in general has specifically harmed the plaintiff in particular.  This is called a showing of “antitrust harm” and the ensuing “antitrust injury” to the plaintiff.  While this sounds like someone having to eat a 57 ounce steak to win a T-Shirt, the vague language of the laws make this meal more like eating a summer salad.
In the cases we have seen being filed against restaurants, the plaintiffs have alleged that restaurants in certain geographic areas have gotten together to add a common surcharge that restrains the free market.  The plaintiffs claim this is price fixing under California state law.  The legal dispute pointed to a common surcharge added to menu prices at various restaurants; the application of the alleged violation expands to restaurant groups that own a number of restaurants in a small geographic area or even franchise model relationships.
Where Can I Find These Antitrust Laws?
The antitrust laws can be found in various federal statutes, most notably the Sherman Act and the Clayton Act. The federal statutes use vague and general language to prohibit “monopolization” and “restraints of trade,” leaving the interpretation of these terms up to the courts.  California has its own statute that adopts the federal prohibition of restraints of trade, but do not prohibit monopolization.  The California law is commonly referred to as the Cartwright Act. The two principal antitrust offenses are “monopolization” and “conspiracy to restrain trade.”...
How Do I Defend An Antitrust Case?
Modern day antitrust cases, in many cases, come down to emails and texts.  Restaurants should be very careful regarding non-general industry communications sent or received by competitors so they avoid being accused of engaging in restraints on trade.   Antitrust defense litigation requires careful consideration of the theory of the case and the elements the plaintiff must prove.  Ultimately, antitrust trials boil down to who can tell the better story.  Working with legal counsel to ensure the defense story is backed up by the facts is the best recipe for a successful defense.  Just like presenting a meal to a customer, plating the facts in an easily digestible layout will lead to better results.  When considering changes to your restaurant, you now need to add to the menu of risks: the Federal and State Antitrust laws. By Alden J. Parker (http://www.calrest.org/newsroom)

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