SW Legal Educational Publishing

Pizza Franchisees’ Claims Fall Like Dominos
Description Appeals court upheld dismissal of suit by Domino’s Pizza franchisees against parent company for monopolization of pizza ingredients sold to franchisees.
Topic Antitrust
Key Words Monopolization, Relevant Market, Tying Arrangement, Exclusive Dealing
C A S E   S U M M A R Y
Facts Almost half of the Domino’s Pizza franchisees sued Domino’s for monopolizing the sale of pizza ingredients to the franchisees. The franchisees made multiple claims, including illegal tie-in sales (purchase of ingredients tied to purchase of pizza dough and purchase of ingredients tied to continuing the franchise agreement), exclusive dealing arrangements that restrained trade, and monopolization of pizza supplies by excluding competition (other pizza ingredient suppliers) from selling to franchisees.
Lower Court Decision District court dismissed the suit with prejudice. Plaintiffs failed to allege a "relevant market" as required by the Sherman Act. They maintained that the market was the terms of the franchise contract, which requires franchisees to buy ingredients from the parent company as a part of the agreement. Plaintiffs failed to define a market in reference to product interchangeability or by cross-elasticity of demand. They cannot assert that the market is the contract.
Court of Appeals Decision Affirmed. "[W]here the defendant’s ‘power’ to ‘force’ plaintiffs to purchase the alleged tying product stems not from the market, but from plaintiffs’ contractual agreement to purchase the tying product, no claim will lie." The franchise agreement spelled out the requirements for buying pizza ingredients, hence was a factor in the price in the franchise arrangements. The fact that cheaper ingredients of similar quality were available from other sources did not create a monopoly on the part of Domino’s. If the plaintiffs were correct, franchise contracts would be nearly irrelevant.
Citation Queen City Pizza v. Domino’s Pizza, ---F.3d--- (1997 WL 526215; 3rd Cir.)
124 F 3d 430 (3rd Cir., 1997)

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