Antitrust Through a Telescopic Lense: Optronics Technologies, Inc. v. Ningbo Sunny Electronic Co., Ltd.

Antrust Through a Telescopic Lense: Optronics Technologies, Inc. v. Ningbo Sunny Electronic Co., Ltd., Case No. 5:16-cv-06370-(EJD), 2019 WL 4751940 (09/30/2019)

By Bob Connolly
Law Office Of Robert Connolly

The case is about telescopes and the antitrust law.  The Court’s earlier opinion denying defendants’ Motion to Dismiss was covered in a previous e-brief (here).  In the above-captioned Order the Court ruled on a myriad of summary judgment motions filed by the plaintiff, Optronic Technologies (“Orion”), and the defendants, Ningbo Sunny Electronic Co. Ltd. and Sunny Optics, Inc. (“Sunny”). 

Background

Plaintiff Orion sells but does not manufacture telescopes.  In early 2013, Meade, a telescope manufacturer,  became available for acquisition.  Sunny acquired Meade in 2013 beating out Orion and another bidder.   Until 2016, Orion marketed and sold telescopes manufactured by Sunny and by Synta Suzhou, a settling party. Orion purchased telescopes made by Sunny through the Synta Entities. After the Synta Entities settled, Orion sent a demand letter to defendants. In response, Sunny ceased selling Orion its telescopes and Orion filed this litigation.

Orion brought claims under  Sections 1 & 2 of Sherman Act, Section 7 Clayton Act, California’s Unfair Competition Law (“UCL”), and California’s Cartwright Act.  The Court granted and denied various summary judgment motions brought by both plaintiff and defendants, as discussed below.  The Court applied the summary judgment standard:  Summary judgment is appropriate if, after drawing all inferences in favor of the non-moving party, and not weighing the evidence nor making credibility determinations, “there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” 2019 WL 4751940 at * 2 (citations omitted).

Cases of Actions

A. Injury From Sunny’s Acquisition of Meade from Synta

Orion proffered two antitrust injuries stemming from an alleged conspiracy between Sunny and Synta for Sunny to acquire Meade.  The Court, after discussing Article III standing and the antitrust standing required to bring a claim, found that Orion lacked standing to maintain claims and recover damages arising from its failure to acquire Meade for itself because Orion lacked the financial ability to match an offer from a third party that also lost out to Sunny. Orion, therefore, would not have been able to purchase Synta even absent the alleged conspiracy between Sunny and Synta. Id. at *3.

Orion advanced a second claim regarding the Sunny purchase of Meade from Synta:  the acquisition was anticompetitive and resulted in higher telescope prices for purchasers.  The Herfindahl–Hirschman Index (“HHI”) for the alleged relevant market, “the market for telescope manufacturing services,” increased from 3,284 to 4,375, an increase of 1,094.  This increase in an already concentrated market was more than five times the amount (200) presumed to enhance market power.  Defendants argued that plaintiff’s expert did not properly define a relevant market, but the Court held that that was a question for the jury. “Accordingly, whether Orion has suffered an antitrust injury on this theory of liability is not a question to be resolved on summary judgment.” Id. at *4.

B.  Defendants and Synta Conspire On The Acquisition Of Meade.

The Court found facts cutting both for and against conspiracy between Sunny and Synta to rig the sale of Meade to Sunny.  Therefore, the Court concluded “[t]he evidence here is subject to multiple interpretations, so summary judgment is not appropriate as to the conspiracy claims.” Id. at *5.

C. Market Allocation and Price Fixing

Orion alleged that Sunny and the Synta entities conspired to allocate the telescope market and fix prices. Id. at *6.  Orion sought summary judgment based on the fact that Sunny shared sensitive competitive information with Synta—evidence of a conspiracy.  Sunny countered that Synta was part of a normal distribution chain for Sunny in selling to Orion so there was nothing conspiratorial about this.  The Court found the “evidence shows that there are triable issues as to which Synta Entity distributed Sunny’s telescopes to Orion and whether that entity was part of the alleged conspiracy. Both parties’ motions are denied as to this theory of liability.”  Id. at *7.

D. Other Claims

The claims in this case are nearly as numerous as the stars themselves.  On a claim that the Sunny conspired to prevent Orion from purchasing some assets, domain names, by cutting off Orion’s line of credit, the defendants noted that other reasons prevented Orion from making this acquisition.  The Court noted that a “plaintiff need not prove that the antitrust violation was the only cause of its injury…: proof that the violation was a material cause is sufficient.” (citations omitted)  Id. at *7.  Again, faced with competing interpretations of the evidence, the Court denied both parties’ motions for summary judgment on this claim.

Orion threw in the “rarely tried, and even more rarely successful” below-cost pricing claim.  Id. at *8. The Court granted summary judgment on this claim for lack of evidence.  The Court also threw out an Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) refusal to deal claim finding the defendants had ample reason to refuse to continue to deal with Orion. 2019 WL 4751940 at *8.

Plaintiff further sought restitution under California’s Unfair Competition Law (“UCL”).  The Court noted that “[i]n a UCL claim, ‘disgorgement of profits is allowed…only to the extent it constitutes restitution, i.e. profits unfairly obtained to the extent they represent money in which the plaintiff has an ownership interest.’” Id. (citing In re Ditropan XL Antitrust Litig., 529 F. Supp. 2d 1098, 1102 (N.D. Cal. 2007).  Accordingly, the Court held that “Orion is entitled to recover the difference between the overcharge that Orion actually paid and what Orion would have paid absent Defendants’ allegedly unlawful conduct. Orion is not entitled to other monetary awards on its UCL claim.” Id. at *9.

Conclusion

Plaintiff Orion raised enough antitrust claims to make an excellent fact pattern for an antitrust law school exam.  The Court analyzed each claim, discussing the evidence and applying relevant black letter law.  While some claims were denied, most will proceed to trial, raising the possibility that there may be yet another e-brief in the stars for this case.