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Five major life insurers will have to defend an antitrust suit alleging they formed a cartel to restrict the analysis of their investment performance. Southern District of New York Judge Alvin K. Hellerstein refused to dismiss a case brought by an investment analysis company that once worked for the insurers, but now charges it was the victim of a group boycott. But Hellerstein also dismissed some of the claims against the defendant insurance companies in the suit, Intellective Inc. Massachusetts Mutual Life Insurance Co., 01 Civ. 7830. The five companies, known as the Working Group, began in 1993 to commission a regular study on management practices, asset allocation, credit quality and other aspects of investment performance. The so-called Intercompany Investment Performance Study (IIPS) was assembled annually by a third-party vendor from confidential material provided by the insurance companies. In order to contribute to the IIPS and have access to the report, member insurance companies must agree to give total control over the information to the Working Group. Once a company provides its data to the Working Group’s vendor, it can never release the same data to any other consultant. PricewaterhouseCoopers had the contract to produce the IIPS for the Working Group from 1993 to 1999, and from 1996 forward, it subcontracted much of the work to Intellective. Intellective was terminated in 1999 after it was unable to reach an agreement with PricewaterhouseCoopers and the Working Group. After the contract was awarded to another entity for the year 2000, Intellective charged that it was stymied when it tried to produce a competing study on the life insurance industry’s investment performance. The insurers refused to deal with Intellective, the company charged. The insurers filed suit in New York state court trying to block the competing study. As part of the state suit, the Working Group alleged that Intellective breached its contract by retaining data and software after its contract term had ended. In the federal case, the insurance companies first argued to Judge Hellerstein that the complaint should be dismissed under the Noerr-Pennington doctrine, a construct of case law holding that joint efforts by competitors to petition the government do not violate the Sherman Antitrust Act. Hellerstein, noting that the doctrine has been extended to include lawsuits as well, agreed with the Working Group, ruling that its state breach of contract lawsuit does not violate the antitrust laws and was not “objectively baseless.” But the insurers were not so fortunate in their bid to have the case dismissed based on Intellective’s lack of standing under the antitrust laws. Hellerstein said that in order to have standing, Intellective “must identify the relevant product market,” and how supply and demand were allegedly affected by the anti-competitive behavior. “Intellective alleges that its market definition, though inclusive of only one product, is complete because ‘there is no viable alternative to a study or studies based on actual performance data from other life insurance companies,’” he said. Intellective also alleged that comparing the insurance industry study with studies of other industries would be meaningless, and that it was useless to try to assemble a study from publicly available data. For their part, the insurance companies said that the relevant market alleged by Intellective was too narrow, and that Intellective failed to satisfy the antitrust pleading requirement of alleging an impact on the “supply side” of the market. RELEVANT MARKET “Intellective defined the relevant market in terms limited to the product itself — a study of investment performance of life insurance companies — and not on the companies capable of engaging in such a study, and in like studies, for any number of investment companies,” Hellerstein said. “This case presents an unusual product and an unusual market, not easily susceptible to supply or demand side analysis.” The judge said it would be “hard to pin the epithet of ‘monopolists’ on the members of the Working Group for having undertaken the process of collecting the data, because without collection there would be no value and no product.” And while the judge said he joined the defendants in questioning whether “a particular category of investment analysis can be defined as its own market,” he said Intellective had at least satisfied the pleading requirement “as to relevant product market.” He added: “I cannot dismiss the complaint at this time.” As to the defendants’ second argument on standing, Hellerstein went on to find that Intellective had “adequately alleged an antitrust injury.” Jeffrey Slade of New York-based Slade & Associates represented Intellective Inc. David Nathan of New York-based Modlin Haftel & Nathan was lead counsel for the insurance companies.

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