When Can False Advertising Lead to Sherman Act Liability? The Fifth Circuit Weighs In
In a December 2, 2016 decision, Retractable Technologies, Inc. v. Becton Dickinson & Company, the Fifth Circuit opined on when false advertising can lead to liability under the Sherman Act. The Fifth Circuit’s answer: Very rarely.
In Retractable Technologies, a jury found the defendant, Becton Dickinson & Co. (“BD”), liable for attempting to monopolize the U.S. market for safety syringes. The jury’s verdict partially turned on its finding that two of BD’s advertising claims—that BD’s needles are the “world’s sharpest” and have “low waste space”—were false. On appeal, BD argued that it was entitled to judgment as a matter of law because two persistent, false advertising claims could not constitute anticompetitive conduct for purposes of the Sherman Act. The Fifth Circuit agreed.
The Fifth Circuit set a high hurdle for plaintiffs who seek to bring antitrust claims premised on false advertising, reasoning that such antitrust claims will not lie “absent a demonstration that a competitor’s false advertisements had the potential to eliminate, or did in fact eliminate, competition.” BD’s false advertisements did not fit within this narrow holding because the plaintiff, Retractable Technologies, Inc. (“RTI”), had not been eliminated from competition. To the contrary, during the litigation period, RTI had dominated the retractable syringe market and competition in the overall syringe market had remained robust.
The Retractable Technologies opinion is aligned with decisions from other circuits. As the Fifth Circuit noted, the Seventh Circuit does not recognize antitrust claims based on false advertising. Other circuit courts, including the Second, Sixth, and Ninth Circuits, presume that false advertising has a de minimis effect on competition and require plaintiffs to satisfy a rigorous six-part test to overcome this presumption.
So what’s left for a plaintiff who seeks to bring an antitrust claim based on a competitor’s false advertising? Not much. More than thirty years ago, the Eighth Circuit affirmed a district court’s conclusion that an airline’s false advertisements, which included print advertisements, radio commercials and letters to travel agents, supported a finding of antitrust liability under Section 1 and Section 2. But more recently, a district court sitting in the Eighth Circuit, in a decision captioned, Fair Isaac Corp. v. Experian Info. Solutions, 645 F. Supp. 2d 734 (D. Minn. 2009), questioned whether this Eighth Circuit precedent is still controlling.