Starbucks Antitrust Update - International Center for Law & Economics
Focus Areas:    Antitrust

Starbucks Antitrust Update

WSJ Law Blog offers a follow up (and the complaint!) to Keith’s post (also check out the discussion in the comments) on the antitrust suit filed by an independent coffee shop owner against Starbucks concerning the use of exclusive leases with landowners. After reviewing the complaint, I agree with Lauren Albert, the antitrust lawyer quoted in Lattman’s story who concludes that: “The facts here don’t really seem to allege a violation of antitrust law.” Indeed, they do not.

Pages 11-13 are particularly telling, i.e. the description of the handing out of free samples in response to plaintiff’s entry as “predatory and retaliatory,” and noting that “the intent and effect is to drive out independently owned coffee shops.” The alleged anticompetitive effect? While the complaint does cite an “espresso blogger” for the proposition that Starbucks intentionally over-roasts its coffee, there is very little here in terms of alleging an antitrust violation (though para. 16 alleges that market output has been increasing, and that Starbucks has been primarily responsible for the growth). As I pointed out in the comments to Keith’s excellent post:

The relevant inquiry, assuming market definition and even market power, is whether Starbucks’ leases can foreclose rivals substantially foreclose rivals from achieving minimum efficient scale. Clearly, they do not . . .. The Starbucks leases do not, and cannot possibly, “tie up� more than a trivial fraction of this real estate. Such foreclosure is a necessary condition of this type of claim and is clearly absent. Competition for favorable locations for coffee shops, even when it includes exclusivity terms in the leases for good reason, is competition on the merits.

I predict a successful motion to dismiss.