Antitrust Law Daily Tying, refusal to deal claims against cemetery operator dismissed
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Wednesday, January 15, 2014

Tying, refusal to deal claims against cemetery operator dismissed

By Jeffrey May, J.D.

An independent dealer of cemetery monuments and markers has failed to state tying and refusal to deal claims against a cemetery operator for banning independent dealers from installing memorials at one of its cemeteries, the federal district court in Birmingham, Alabama, has decided (Clark Memorials of Alabama, Inc. v. SCI Alabama Funeral Services, LLC, January 14, 2014, Coogler, L.).

The complaining dealer alleged that SCI Alabama Funeral Services, LLC—a wholly-owned subsidiary of national cemetery operator Service Corporation International (SCI)—implemented a policy at Birmingham’s Elmwood Cemetery, requiring consumers who purchased a monument or marker from independent dealers to pay a fee for installation of that memorial by SCI. The complaining dealer was no longer permitted to install the memorials itself at Elmwood. The dealer contended that the conduct of the operator, which also sold various types of memorials, was part of a plan to develop an exclusive installation policy at Elmwood that would take business away from independent memorial dealers.

Tying arrangements. According to the court, the dealer attempted to allege two separate tying arrangements: (1) the SCI defendants exploited their control over burial lots (the tying product) to force the buyer into the purchase of the installation of memorials (the tied service); and (2) the SCI defendants exploited their dominant position in the market for the installation of memorials (the tying product) to monopolize the sale of memorials (the tied product). The complaining dealer plausibly alleged that a purchaser of a burial lot at Elmwood also had to buy installation services from the SCI defendants and that memorials and installation were tied. However, the dealer failed to properly plead the relevant markets to support these claims.

The dealer’s first tying claim was premised on the SCI defendants’ alleged dominance in the burial lot market (the tying product market). However, the dealer failed to plead sufficient facts to suggest that the geographic market in burial lots was limited to the Birmingham metropolitan area. Cemetery owners in the Birmingham area might compete in a broader geographic area.

Even if the dealer plausibly defined the relevant market as burial lot sales in the Birmingham metropolitan area, it did not plead any facts to show that the defendants held market power in such a market. It did not allege an actual percentage or relative percentage of the market held by the SCI defendants, which operated four cemeteries in the Birmingham metropolitan area. The court also noted that the dealer did not allege sufficient facts to suggest that Elmwood was so unique as to convey market power. Thus, without market power in the tying product market, there was no anticompetitive conduct because the tying arrangement was not illegal, the court concluded.

The dealer’s second tying claim, premised on its allegation that consumers were forced to purchase an SCI memorial due to the defendants’ power over installation services, failed for the same reasons, the court concluded. The dealer failed to plead any facts to show that the SCI defendants possessed market power in the installation market for greater Birmingham.

The court also ruled that the dealer could not proceed with a “lock-in” claim based on the defendants’ purported change in installation policy after consumers had made their initial purchase. A true lock-in was foreclosed by the dealer’s allegation that the defendants informed consumers that if they choose to purchase a monument or memorial from an independent memorial dealer, they would be charged installation fees, the court noted. The dealer also did not allege any facts to suggest “significant information and switching costs” imposed on consumers to support a lock-in theory of tying.

Refusal to deal. The court quickly disposed of the dealer’s refusal to deal or essential facilities claim. In order to state an essential facilities claim, the plaintiff had to allege an “essential facility” for which there were no alternatives and a denial of access to that facility.

The dealer contended that Elmwood was an “essential facility,” and that the defendants had to allow it access to Elmwood to install its memorials. The dealer did not plead facts to suggest that Elmwood Cemetery was actually essential to competing in the markets for the installation or sale of memorials in the Birmingham area. The dealer could continue to compete with the defendants by offering to make and install its memorials at other cemeteries in the Birmingham area, the court explained.

The court declined to exercise supplemental jurisdiction over pending state law claims, including a claim under the Alabama Antitrust Act.

The case is No. 2:13-cv-01356-LSC.

Attorneys: Leah O. Taylor (Taylor & Taylor) for Clark Memorials of Alabama Inc. John M. Johnson (Lightfoot Franklin & White LLC) for SCI Alabama Funeral Services LLC.

Companies: Clark Memorials of Alabama, Inc.; SCI Alabama Funeral Services, LLC; Service Corporation International.

MainStory: TopStory Antitrust AlabamaNews

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