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Consumer Antitrust Class Certified Against Babies 'R' Us
The Legal Intelligencer
July 20, 2009
A federal judge has certified a class action consumer antitrust suit against retail giant Babies "R" Us and a group of manufacturers of popular baby products after concluding that a price-fixing conspiracy could be proven entirely through "common evidence."
Legally, the 50-page opinion by U.S. District Judge Anita B. Brody in McDonough v. Toys "R" Us Inc. is important because it clarifies the scope and effect of two recent decisions from higher courts -- one from the U.S. Supreme Court and one from the 3rd U.S. Circuit Court of Appeals -- that altered the pleading standards for price-fixing cases and made the test for winning class certification a more rigorous one.
In the suit, consumers allege that Babies "R" Us is the dominant retailer in the baby products market and that it used that power to eliminate competition from heavily discounting Internet retailers by coercing manufacturers to institute minimum price controls and bans on discounting.
Although the ruling comes at a preliminary stage of the case, Brody found that the plaintiffs have begun to muster proof of their allegations, saying: "The evidence indicates that BRU pressured the manufacturers to prevent internet discounting, they responded by curtailing specific retailers or implementing distribution policies targeting internet retailers, and this response benefitted BRU but harmed the manufacturers."
Brody also appointed three law firms to serve as lead counsel for the class -- Spector Roseman Kodroff & Willis in Philadelphia; Hagens Berman Sobol Shapiro in Seattle; and Wolf Haldenstein Adler Freeman & Herz in New York.
The consumer suit is a companion case to an antitrust suit brought by two Internet retailers -- BabyAge and BabyClub -- that alleges they were successfully competing with Babies "R" Us by undercutting its prices, but that their efforts to gain a foothold in the market were thwarted when Babies "R" Us persuaded the manufacturers to insist on minimum retail prices.
Echoing those allegations, the consumers claim they have paid inflated prices for high-end baby products -- including strollers, high chairs, breast pumps and car seats -- that were subject to the minimum retail prices.
Named as defendants in both suits are Toys "R" Us Inc., the parent company of Babies "R" Us, and six manufacturers: Britax Child Safety Inc.; Peg Perego USA Inc.; Medela Inc.; Maclaren USA Inc.; Kids Line; and Baby Bjorn AB, as well as BabyBjorn's U.S. distributor, Regal Lager Inc.
Lawyers for Babies "R" Us and the manufacturers, led by attorney Margaret M. Zwisler of Latham & Watkins in Washington, D.C., opposed class certification, arguing that the plaintiffs cannot prove their claims through common evidence.
But Brody disagreed, concluding that the plaintiffs had mustered sufficient evidence that was common to the entire class or to the subclasses to prove the price-fixing conspiracy.
Brody found that the legal landscape in the antitrust area has changed significantly since the case was filed, but that the plaintiffs were able to satisfy the new standards.
