Duty Free Americas, Inc. v. Estée Lauder Companies

946 F. Supp. 2d 1321, 2013 WL 2303764
CourtDistrict Court, S.D. Florida
DecidedMay 9, 2013
DocketCase No. 12-60741-Civ
StatusPublished
Cited by3 cases

This text of 946 F. Supp. 2d 1321 (Duty Free Americas, Inc. v. Estée Lauder Companies) is published on Counsel Stack Legal Research, covering District Court, S.D. Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Duty Free Americas, Inc. v. Estée Lauder Companies, 946 F. Supp. 2d 1321, 2013 WL 2303764 (S.D. Fla. 2013).

Opinion

ORDER GRANTING MOTION TO DISMISS

ROBERT N. SCOLA, JR., District Judge.

This is primarily an antitrust case. Plaintiff Duty Free Americas, Inc. (DFA) operates duty-free stores in airports and one of the main products it carries is beauty products. Defendant The Estee Lauder Companies, Inc. (ELC) supplies many duty-free stores with its beauty products, but it no longer deals with DFA. DFA alleges that ELC attempted to monopolize the market for beauty products in duty-free stores in violation of § 2 of the Sherman Act,- 15 U.S.C. § 2; that ELC conspired with DFA’s competitors to (a) exclude DFA from that market, (b) exclude DFA from the market consisting of the bid process by which duty-free operators obtain concessions from airports to operate duty-free stores, and (c) monopolize the beauty-product market in duty-free stores — all in violation of § 1 of the Sherman Act, 15 U.S.C. § 1; and finally, DFA alleges that ELC tortiously interfered with its business relationships with three airports under Florida law. ELC moved to dismiss all these claims for failure to state a valid claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. (DE 20.) For the reasons set forth below, the Court GRANTS ELC’s Motion (DE 20) and DISMISSES the claims without prejudice.

BACKGROUND

Most international travelers are familiar with duty-free stores. They are retail outlets located in airports’ (and seaports’) international terminals, typically offering a distinct assortment of luxury goods — like alcohol, jewelry, and beauty products — to outbound international travelers. “Duty-free” stores get their name from the fact that their customers do not pay certain sales taxes or import duties on purchases in their stores. This gives them a reputation for offering luxury goods at lower prices and on favorable terms. And it is this perception that drives consumer demand.

ELC is the largest manufacturer of beauty products1 sold in duty-free stores [1325]*1325in U.S. airports; ELC’s market share is “approximately 50% or greater.” (DE 1 at 2, 29.) Its brands include Aramis, Aveda, Clinique, Donna Karen, Estée Lauder, La Mer, Smashbox, and Tommy Hilfiger. These brands routinely rank first in sales of beauty products in U.S. duty-free stores.

DFA is one of fewer than ten major duty-free store operators in the U.S. It currently operates duty-free stores in JFK, LaGuardia, Detroit, Dulles, Miami, Boston, Baltimore (BWI), Charlotte, Salt Lake City, San Antonio, Phoenix, and Reagan National international airports. DFA is a self-described “maverick” in the duty-free industry, particularly when it comes to its prices, product-displays, and beauty products brands. While most duty-free operators generally offer the same lineup of brands — which includes brands that compete with ELC — DFA also sells new and innovative brands (like Perry Ellis and Jennifer Aniston) that compete with the incumbent brands (like ELC’s).

Duty-free operators, such as DFA, generally secure space to operate duty-free stores in a particular airport via a competitive bidding process initiated by a request for'proposal (RFP). For example, an airport will generally issue an RFP to operate duty-free stores in its international terminals, typically for a term of five to ten years. Duty-free operators then submit proposals to the airport detailing certain information, such as the products they carry, and the amount of “rent” (typically a percentage of sales) they will pay to the airport in exchange for the duty-free concessions. With some exception, an airport generally awards all of its duty-free .concessions to only one duty-free operator.

A. DFA’s factual allegations2

Before June 2008, DFA and ELC had a healthy business relationship. ELC would sell its beauty products to DFA at standard “travel retail” wholesale prices— which were lower than traditional retail wholesale prices — and DFA would then add a markup and retail the products in its stores across the U.S. During that time, ELC instructed DFA and its competitors (i.e., other duty-free operators) on what margins to take on the “travel retail” products sold in their stores. It also instructed them on the quality and quantity of display space to be allocated to its beauty products in their duty-free stores. DFA went along with these instructions from ELC.

In January 2007, ELC announced that “effective April’ 1, 2008[its] Travel Retail Suggested Price ... [would] change to U.S. Domestic Suggested Retail Price.”3 (DE 1-1 at 2.) DFA objected to this price increase, indicating that it would not accept the new wholesale pricing. DFA advised that the increase could diminish the duty-free industry’s advantage and reputation for lower pricing on premium beauty products. But ELC encouraged DFA and its competitors to simply maintain their margins by raising prices to consumers. [1326]*1326DFA refused and stopped buying ELC’s beauty products.

When DFA later learned that ELC had not raised its products price, DFA tried to resume purchasing ELC’s beauty products. But this time ELC refused DFA’s requests. So DFA began devoting the display space it had previously used for ELC’s brands to introduce new beauty product brands in its duty-free stores, many of which had not been sold before in U.S. duty-free stores. For example, DFA introduced and developed a significant demand for a new beauty product brand— Smashbox. In 2010, however, ELC acquired Smashbox after obtaining antitrust regulatory approval for the deal. It then ceased supplying Smashbox to DFA. DFA has tried to negotiate future sales of Smashbox, but to no avail.

1. The Newark RFP

In December 2008, an RFP was issued to lease and develop duty-free concessions at Newark Liberty International Airport (Newark airport) for a new seven-year term. DFA and rival duty-free operators submitted bids. About three weeks later — before the identities of the bidders were made public — ELC’s President of Travel Retailing Worldwide, Olivier Bottrie, sent an unsolicited letter to Ms. Judy Tuttle, the leasing agent who managed the RFP process for Newark and other airports. The letter highlighted and promoted ELC’s authorized duty-free retail partners:

Dear Ms. Tuttle:
In the context of a tough economy and fears of a prolonged recession, suppliers depend on, and need to rely on, the quality of their authorized retailer partners. '
The Estée Lauder Companies are proud to have established strong and mutually beneficial commercial relationships with, and only with, the following landed retail partners in the United States of Americas:
— Alpha Keys
— Ammex
— DFASS
— DFASS-Nuance
— DFS Group
— DUFRY
— EJE
— HMS-Host
— International Shoppes
— Nuance

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Bluebook (online)
946 F. Supp. 2d 1321, 2013 WL 2303764, Counsel Stack Legal Research, https://law.counselstack.com/opinion/duty-free-americas-inc-v-estee-lauder-companies-flsd-2013.