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INFORMATION RESOURCES, INC. v. DUN & BRADSTREET CORP.

April 28, 2003

INFORMATION RESOURCES, INC., PLAINTIFF, AGAINST THE DUN & BRADSTREET CORPORATION, A.C. NIELSEN CO. AND IMS INTERNATIONAL, INC., DEFENDANTS.


The opinion of the court was delivered by: Louis L. Stanton, United States District Judge.

OPINION and ORDER

The Court of Appeals, in its opinion reported at 294 F.3d 447, 448-9, concisely describes this lawsuit:

IRI and Nielsen are both providers of retail tracking services. These services, as described by the district court,
involve the continuous collection of data on the sale of consumer packaged goods. From this data, retail tracking services suppliers produce estimates of trends in sales of product categories and brands, by relevant geographic region for each product category being tracked.
In short, a retail tracking service is the provision of information to manufacturers and retailers of consumer goods concerning turnover, market share, pricing and other aspects of the sale of fast moving consumer goods and analysis of that information to reveal market trends, business conditions, and the like.
Both Nielsen and IRI provide these services in the United States. While Nielsen also offers these services in several foreign countries, IRI generally operates abroad through an assortment of subsidiaries and joint ventures. These foreign affiliates find the foreign clients, obtain the data from these clients, and deliver the completed reports to them. The data are processed and the resulting reports are generated by IRI in the United States.
In this action, IRI alleges that Nielsen engaged in a variety of anticompetitive conduct, both in the United States and abroad, with the purpose of destroying IRI as competition in the retail tracking services industry. The alleged antitrust violations include tying and bundling contracts in violation of Section 1 of the Sherman Act, monopolization and attempted monopolization of the export (that is, foreign) markets in violation of Section 2 of the Sherman Act, and attempted monopolization of the United States market in violation of Section 2 of the Sherman Act. Among the principal allegations is that Nielsen would offer "favorable pricing conditions if Nielsen's services were purchased in a considerable number of countries, including, at least, one country where IRI was present." (citations omitted)
Background

In an Opinion dated July 12, 2000, clarified by Memorandum dated February 6, 2001, both reported at Information Resources, Inc. v. Dun & Bradstreet Corp., et al., 127 F. Supp.2d 411 (S.D.N.Y. 2000), appeal dismissed, 294 F.3d 447 (2d Cir. 2002), this court decided, among other things, that (127 F. Supp.2d at 415):

From the submissions, there seems little doubt that inflicting competitive injury on IRI was a goal and purpose of defendants' alleged activities, and that the economic connection between the alleged violations and the effect on IRI is linear and short; nevertheless the fact that the primary injury fell on the foreign companies (who have rights to sue for whatever remedies the law applicable to them provides), together with the factors discussed above, leaves IRI without standing to sue for its derivative injuries.
Defendants' motion for partial summary judgment is granted. IRI's claims of injury suffered from defendants' activities in foreign markets where IRI operates through subsidiaries or companies owned by joint ventures, or "relationships" with local companies, are dismissed.
That ruling rested on acceptance of defendants' submission that, assuming antitrust violation, IRI lacks standing to sue (id. at 416)
. . . because it was not the person directly affected by the alleged conduct. Rather, the conduct allegedly harmed IRI's affiliates in Europe — separate corporate entities that are not parties to this suit. IRI was affected only in its capacity as a shareholder of, and supplier to, the European entities. It is hornbook law that the shareholder and supplier relationships are insufficient to confer standing.
The opinion clarifying the July 12, Order also stated (ibid.)
Not only where IRI shared in the subsidiary's losses as a partner, joint venture or shareholder, but also where its volume of sales to the subsidiary was diminished because of the subsidiary's loss of business, IRI has no standing to sue, because (together with the other factors stated in the Order) IRI's injury is derivative of the antitrust injury inflicted on the subsidiary. Nor can IRI recover damages for weakening of its competitive position in the United States because of reduced revenue from its foreign subsidiaries. The deprivation of revenue, and the consequent inability to use the lost money to competitive advantage, amount to the same thing. The only value of money lies in the uses to which it can be put.
The Present Applications

By a second motion for partial summary judgment, defendants seek dismissal of all claims regarding 22 foreign markets (the "remaining markets")*fn1 where IRI operated through affiliates, or which it was unable to enter because (IRI says) its antitrust injuries in other markets deprived it of the necessary resources. Defendants' motion rests on five grounds, that: (1) The court's prior orders bar derivative claims arising in markets where IRI operated through affiliates, (2) IRI would have entered many of the remaining markets through affiliates, (3) IRI was not prepared to enter those new markets, (4) IRI cannot show that defendants' conduct caused its failure to enter the Canadian or Mexican markets, and (5) the court lacks jurisdiction over claims that IRI was prevented from entering a foreign market if the failure to enter was caused by losses sustained by a European affiliate or the entity entering the market would have been an IRI subsidiary or affiliate (citing the Foreign Trade Antitrust Improvements Act, ("FTAIA") 15 U.S.C. § 6a)

In its cross-motion for reconsideration of the July 12, 2000 and February 6, 2001 Orders, IRI reformulates its claims of injury. Essentially, its present claims focus on disbursements it had to make in the United States to repair injuries inflicted on its foreign subsidiaries; it then seeks recovery not of the sums it was required to expend, but of the injuries IRI sustained in the domestic United States market because of the lack of those funds.

Thus, IRI stresses that it "is not seeking to recover the money [it] claims to have diverted to cover the affiliates' losses" (its counsel's Nov. 15, 2002 letter to court, p. 6; emphasis in original) and IRI:

. . . is not seeking to recover any of the following: 1) the profits on lost sales of retail tracking services in markets where IRI operated through subsidiaries; 2) the damages for the lost use of the profits it otherwise expected to obtain from its subsidiaries; and 3) the monies that IRI had to use to cover the operating losses in Europe caused by Defendants' conduct. (id., p. 2, emphasis in original)
In its counsel's December 19, 2002 letter to the court, IRI at p. 1
. . . reiterates that by this claim it is only seeking to recover damages for the lost use of money that IRI expended from the U.S. and, but for Defendants' extra-territorial practices, would have used to compete against Defendants in the domestic market.
The following extracts give a summary of IRI's present claim, with its foreign components (id. pp. 2, 4-7, 8) (the paragraph numbers are omitted)
The evidence establishes that by 1993, Defendants launched a series of coordinated, anticompetitive practices, both in the U.S. and abroad, to regain monopoly power in the domestic market for retail tracking services (the "U.S. Market"). These practices included: i) bundling retail tracking services in the U.S. with geographic markets where Nielsen had monopoly power; ii) predatorily pricing services in the U.S. Market; iii) informing IRI's U.S. clients, potential clients, financial analysts and third parties that IRI was financially unstable; and iv) draining IRI of U.S. resources and denying it access to the capital necessary to compete in the U.S. Market.
Draining IRI of U.S. resources was critical to the success of Defendants' attempted monopolization of the U.S. Market. Though IRI, through its new and innovative service, had been able to enter the domestic market which Nielsen long dominated, IRI did not possess Defendants' vast financial resources or geographic coverage. By draining IRI of U.S. resources and depressing its earnings, Defendants determined that they could financially cripple and outlast their smaller rival, as IRI attempted to expand into new geographic markets.
Defendants intentionally and systematically depleted IRI's U.S. resources by bundling and predatorily pricing services to customers in the U.S. Market, while simultaneously raising the cost of IRI's expansion into new geographic markets. Defendants fully appreciated that IRI could not afford to fend off an anticompetitive attack on its domestic business, while covering large, unanticipated losses in other geographic markets.
The calculated result of Defendants' extra-territorial practices was that IRI was forced to expend millions of dollars from the U.S. to cover excessive losses in markets into which IRI was attempting to expand. Because this money came from the U.S., it was then unavailable to compete against Defendants in the U.S. Market, just as Defendants had planned . . .
The lost use of these resources caused IRI to lose millions of dollars in sales of domestic retail tracking services.
To increase the cost of IRI's geographic expansion, Defendants entered into a number of contracts with retailers that either inflated the cost to IRI of acquiring scanner data or denied IRI access to it altogether. For example, with a critical retailer in the U.K., Defendants dramatically increased data payments to that retailer, provided that it agreed not to sell its data to any other supplier for a lesser amount. The European Commission determined that through this clause Nielsen was able to raise IRI's entry costs.
In addition, Defendants offered contracts that discounted services in markets where Nielsen dominated if the customer purchased services in European markets that IRI was entering . . .
These bundled contracts prevented IRI from selling its services to a critical market segment — multi-nation customers. As the European Commission and Canadian Tribunal determined, once in a position to provide a retail tracking service, a supplier must have access to customer revenue to support entry and operating costs. By denying IRI access to multi-national customers, Defendants dramatically increased the losses that IRI had to cover from the U.S.
While IRI certainly planned to expend money from the U.S. to cover anticipated losses in new geographic markets, it expected that those markets would be profitable and would require no further cash infusions from the U.S. by 1997 at the latest. IRI did not expect that it would have to cover the inordinate losses that Defendants' anticompetitive conduct caused. Nor did IRI expect that its joint venture partners would be unable to cover their share of these losses.
IRI's expenditures from the U.S. to cover these losses have come in the form of capital contributions, loans made to the subsidiaries and the payment by IRI of its subsidiaries' production costs. [footnote omitted]
To be clear, with respect to the capital contributions and loans, IRI typically wire transferred funds from its Harris Bank account in Chicago to the bank accounts of its subsidiaries in the countries identified above. With respect to the production costs, IRI did the work in the U.S. and shipped the data reports overseas. Regardless of the form of the expenditure, however, in each case IRI expended money from the U.S. to cover the losses in Europe caused by Defendants' anticompetitive conduct, which money would otherwise have been used to compete against Defendants in the U.S. Market.
To fund the losses overseas, IRI was forced to sell its EXPRESS technology and line of software products to Oracle in July 1995. This netted IRI approximately $90 million which, along with U.S. profits, IRI expended from the U.S. to cover the excess losses that Defendants caused through their extra-territorial practices. Defendants described this as IRI selling the "crown jewels." Defendants announced that "by selling what many believe is the best and most profitable asset, and one long portrayed as their growth engine, IRI retains what may be the less attractive side of their business" — retail tracking services.
In addition, IRI had been able to stay ahead of its deep-pocketed rival in the U.S. Market by more quickly developing and bringing to market innovative products and services. The outflow . . . from the U.S., because of Defendants' anticompetitive conduct, undermined IRI's ability to make capital improvements and invest in research and development that had been so critical to its early success. As a result, IRI has lacked funds to reengineer its operating and production systems and invest in new services.
In short, the lost use of money has inhibited IRI's ability to continue improving its systems and services to stay ahead of Defendants. Indeed, in 1994, as IRI's European losses were mounting, Defendants launched a communication strategy to inform customers that IRI would not be able to invest in research and development as it had before and that customers would be taking a risk by choosing a company that could no longer afford to support their technical needs.
The upshot, IRI asserts, undermined its ability to make improvements and invest in research and development, depressed its earnings and stock price, impaired its relationships with customers, creditors and key employees, and damaged its ability to compete with defendants in the domestic market and to engage in the remaining markets abroad.

Defendants regard IRI's revision of its claim as "a matter of semantics, not substance." They argue (Oct. 22, 2002 br. pp. 3, 42)

No matter how IRI seeks to describe them, its claims amount to the same thing: that the losses of the European affiliates allegedly deprived IRI of resources to compete in the U.S. and enter foreign markets. As we show, these are derivative injuries that this Court correctly ruled IRI lacks standing to assert.
In any event, IRI's newly redrawn theory of injury in the United States from Defendants' conduct in the markets where IRI had affiliates is a distinction without a difference, it makes no difference whether IRI claims a lack of resources due to the loss of anticipated revenue from the European affiliates or because it chose to divert U.S. resources to cover the losses of the European affiliates resulting from Defendants' conduct in the European markets.
Defendants conclude in their Feb. 14, 2003 brief (p. 42)
IRI's claim for the lost use of money that it allegedly paid to cover the affiliates' injuries is a derivative consequence of the harm to the affiliates. By IRI's own admission, its injury results from its relationship as a shareholder, creditor, and supplier of the European affiliates that were allegedly the direct victims of Defendants' conduct in the European markets in which the affiliates ...

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