Defending Market Share

The Saint ReportCompetitors

How far can your competitors go?

By Saint Consulting Staff

The courts have sanctioned the right to organize community opposition that urges government officials and agencies to deny land use permits to applicants, even when the underlying motive of the opposition is protecting market share and eliminating competition. What’s more, the courts are protecting third-party funding sources, in many cases anonymous funding sources, which support the opposition efforts in order to block potential competition.

The courts have found that the First Amendment provides immunity for certain governmental petitioning activities as provided for by the Noerr-Pennington doctrine. The courts have specifically found the doctrine protects petitioning of various village boards and administrative agencies in regard to land use development. There are two main exceptions to such immunity, sham lawsuits and fraudulent misrepresentations, where such misrepresentations are material to the government’s (i.e., the judge’s) action in the litigation, and the litigation is objectively meritless.

The courts have also ruled that the accompanying public relations campaigns related to those activities are similarly protected. The doctrine provides absolute immunity for petitioning legislative and executive bodies, as well as the accompanying public relations campaigns. Further, even where the opposition to development is supported by anonymous third parties with anti-competitive motives, the petitioning activity is protected.

State legislatures are providing additional support for constitutionally-protected petitioning activity by adopting anti- SLAPP statutes. These statutory laws provide expedited mechanisms for dismissing lawsuits aimed at First Amendment petitioning activity, and coercive penalties for violating these statutes through mandatory awards of legal fees to the defendants who must defend against SLAPP lawsuits.

The Noerr-Pennington doctrine and its progeny of cases, together with anti-SLAPP legislation across the nation, provide clear guidelines for protecting market share within the boundaries of competitive engagement.

Key Points

  • The U.S. Constitution guarantees all citizens the right to petition – the right to ask government to take action, or not to take action – regarding any matter.
  • The federal Sherman Anti-Trust Act prohibits anti- competitive business activities that would cause a “restraint” in interstate trade and commerce, adversely affecting the consumer by causing shortages and higher prices. The Supreme Court has long held that the Sherman Act is intended to protect competition, not competitors.
  • In the Noerr case, the Supreme Court ruled that promoting the adoption and enforcement of laws harmful to a competitor is protected as petitioning under the First Amendment to the Constitution. The right to petition does not rest upon the intentions of the petitioner, nor upon the methods he uses, even if they are devious, deceptive, unethical, or even reprehensible.
  • In the case of United Mine Workers v. Pennington, the Supreme Court ruled that joint efforts to influence public officials do not violate antitrust laws even if the actions are intended to eliminate competition. The right to petition protected their efforts. If the petitioning activity is valid, the petitioner is immune from anti-trust liability.
  • Meritless lawsuits that are intended solely to delay projects are not protected and are characterized by the Supreme Court as “sham” litigation.
  • The Supreme Court ruled that litigation is not a sham unless (1) it is objectively baseless—such that no reasonable litigant could expect to win and (2) the baseless lawsuit seeks to interfere directly with the competitor’s business relationships by the use of government process.
  • In the case of Rubloff Development Group v. SuperValu, Inc. and Saint Consulting Group, a developer sued a grocery chain and its land use consultant for opposing the developer’s plans to build a shopping center that would include a competing store. The federal court ruled that the defendants’ activities were protected petitioning under the Noerr-Pennington Doctrine, even where the opposition to the development project was supported by anonymous third parties with anti-competitive motives.
  • Individuals and community groups are sometimes sued for exercising their constitutional rights through “Strategic Lawsuits Against Public Participation” (SLAPP), which seek to intimidate citizens into silence by “slapping” them with expensive litigation. To protect against SLAPP lawsuits, the legislatures in many states have adopted anti-SLAPP statutory laws that provide expedited mechanisms for dismissing such lawsuits and recovering the legal fees associated with the effort to dismiss.

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