The opinion of the court was delivered by: Ian H. Levin, United States Magistrate Judge
MEMORANDUM OPINION AND ORDER
Before the court is ChoiceParts' ("Plaintiff") Motion for a Preliminary
Injunction. The subject motion concerns Plaintiffs assertion that
Defendants General Motors Corporation ("GM"), DaimlerChrysler ("DCX"),
Ford Motor Company ("Ford") and OEConnection, LLC ("OEC") willfully
conspired to withhold automotive parts data Plaintiff needs to operate
it's automotive parts locator business. Consequently, Plaintiff in this
motion alleges that Defendants' refusal to provide parts data constitutes
a conspiracy that unreasonably restrains trade in contravention of the
A. Original Equipment Manufacturers
Defendants GM, DCX and Ford are Original Equipment Manufacturers
("OEM") who sell automobiles and original equipment ("OE") parts through
their dealers. Defs.' Mem. at 2. Specifically, each OEM sells parts only
through its authorized dealers, who then compete with each other and with
"aftermarket" (non-GE, knock-off) and "salvage" (recycled) parts
sellers. Id. Dealers, in turn, sell GE parts to other dealers, collision
shops, and retail customers. Id. Dealers buy parts from other dealers
when, for example, a needed part is unavailable from an OEM. Id.
Dealers have many ways of locating automotive parts. Defs.' Mem. at 3.
For instance, they can call other dealers or they can use electronic
parts locator services; such as OneTouch, National Parts Locator ("NPL"),
or Parts Voice. Id. Moreover, each OEM has developed data about each of
its parts, including detailed pricing information and cross-references to
substitutable parts (i.e., "supersession data") (collectively, "Parts
Data"). Each Defendant OEM owns its own Parts Data and this data is
considered to be highly proprietary. Id.
OEC is a joint venture which was formed by Defendants GM, Ford and
DCX, and Bell & Howell in December, 2000. Pl.'s Mem. at 11. OEC was
established for the purpose of operating a parts locator service using
Defendants' Data Parts and selling OE parts only. Id. at 12.
ChoiceParts was created as a joint venture in May, 2000 by three
companies in the automotive software industry: ADP (over $6 billion in
annual revenue), Reynolds ($1 billion in annual revenue) and CCC
Information Services ("CCC") (over $200 million in annual revenue).*fn2
Pl.'s Mem. at 3. ChoiceParts was organized to "engage in the business of
creating and operating an Internet and network-based marketplace for the
purchase and distribution of OEM Parts, Non-OEM Parts and Salvaged Parts."
ChoiceParts was based upon its founding companies' industry knowledge and
expertise to create an end-to-end solution comprised of two components:
(1) dealer-to-dealer software designed to enable dealers to locate parts
from other dealers and consummate transactions electronically, and (2)
dealer-to-collision shop software designed to allow dealers to accept
orders electronically from collision shops, interface with the
dealer-to-dealer locator software as necessary, and consummate sales
transactions with collision shops electronically. Id.
Plaintiff initially developed an automotive parts locator designed to
provide participating dealers with access to real-time inventory
information from potential sellers. Pl.'s Mem. at 4. The software allows
dealers to search not only for specific part numbers, but also (using
"supersession" data) to locate parts that are interchangeable with the
original part identified by the dealer. Id. Plaintiff plans to integrate
its dealer-to-dealer software with DMS's enabling selling dealers to
automatically generate invoices and adjust inventory information. Id.
In the latter part of 2000, Plaintiff conducted a "proof-of-concept"
test pilot of the dealer-to-dealer software in Dayton, Ohio. Pl.'s Mem.
at 4. As a result of the test pilot, Plaintiff initiated and signed
contracts with over 250 dealers (including GM, Ford and DCX dealers).
Id. In April, 2001, Plaintiff acquired rights to software used by
collision shops. Id. Plaintiff has, subsequently, developed
dealer-to-collision software allowing collision shops to order parts from
dealers electronically rather than by manual ordering processes. Id.
II. Plaintiff's Motion for Entry of a Preliminary Injunction
In its opening memorandum, Plaintiffs threshold assertion is that it
has satisfied the requirements for entry of a preliminary injunction.
Pl.'s Mem. at 14.
A party seeking a preliminary injunction must establish: (1) some
likelihood of succeeding on the merits; (2) that it has "no adequate
remedy at law," and (3) that it will suffer "irreparable harm," if
preliminary relief is denied. Abbott Lab. v. Mead Johnson & Co., 971 F.2d 6,
11 (7th Cir. 1992) (citing Lawson Prods., Inc. v. Avnet, Inc.,
782 F.2d 1429, 1433 (7th Cir. 1986); Roland Mach. Co. v. Dresser Indus.,
Inc., 749 F.2d 380, 386-87)). If the moving party is unable to establish
this threshold showing, the court's inquiry is over and the injunction
will be denied. Id. If the moving party can satisfy this showing, the
court must then consider the irreparable harm the non-moving party will
suffer if preliminary relief is granted, balancing that harm against the
irreparable harm to the moving party if relief is denied. Id. Lastly, the
court must also consider the public interest, that is, the consequences
to non-parties of granting or denying the injunction. Id.
(1) Plaintiff presents the following arguments in support of its
assertion that it will succeed on the merits of its antitrust claim.
(a) Plaintiff first argues that Defendants' concerted refusal to
provide it with Parts Data violates Section 1 of the Sherman Act. Pl.'s
Mem. at 14. To prevail under Section 1, Plaintiff asserts that it must
establish a "contract, combination, . . . or conspiracy" that
unreasonably restrains trade. 15 U.S.C. § 1.
(i) Direct Evidence of Conspiracy
Plaintiff alleges that there is direct evidence of a conspiracy, in
that, Defendants have unlawfully agreed not to provide Parts Data to
Plaintiff. Pl.'s Mem. at 15. Plaintiff presents the following evidence in
support of its conspiracy theory.
Plaintiff asserts that the conspiracy began in early 2000. Pl.'s Mem.
at 8. For example, in GM's March 10, 2000, "Opportunities and Threats"
presentation to its parts division management, Plaintiff was described as
a potential threat to GM's revenue; thereby, jeopardizing the division's
ability to meet commitments made to GM's Board of Directors. Knott Ex.
1; Mackie Dep. 89. Shortly thereafter, in early May 2000, GM, Ford and
DCX representatives attended a private conference conducted by Carlisle &
Company ("Carlisle"), an industry consultant that had worked extensively
with GM, DCX and other OEMs. Id. At the conference, Carlisle presented a
report on Internet threats, which specifically identified Plaintiffs firm
as one that "may particularly threaten the genuine collision parts
business" by putting pressure on profit margins. Smith Ex. 1; Knott Dep.
34-35. In a draft document provided to GM prior to the conference,
Carlisle further opined that "[t]he name of the game is in controlling
the portals" and "[t]he only way to beat this challenge is to retake
control of dealer parts management practices." Carlisle Ex. 3.
On May 4, 2000, GM met with Plaintiff, and responded to Plaintiffs
prior requests for Parts Data by presenting Plaintiff with a list of "Veto
Rights/Boundary Conditions" which Plaintiff would need to accept before
GM would consider providing the requested Parts Data. Mackie Ex. 7;
Loeffler Ex. 1. GM's "boundary conditions" were designed to impose
control over Plaintiffs business model by dictating an "OE-centric"
business model that would ensure that the benefits of any Internet-based
solutions developed by Plaintiff would be denied to companies
manufacturing non-OE parts. Id.
On May 5, 2000, senior officials of GM and Ford met and discussed the
"threat" Plaintiffs parts locator business posed to their profitability.
Pl.'s Mem. at 9. At the meeting, GM shared its "Opportunities and
Threats" presentation posed by "Internet start-ups" with Ford. Tudor
Dep. 53-55; Tudor Ex. 5. The main threat GM discussed with Ford was that
such "Internet start-ups" reduce OEM profits by increasing competition
from non-OE parts. Plaintiffs company was identified as one posing such a
threat during the meeting. Tudor Dep. 58.
On May 18, 2000, GM and DCX met to discuss Carlisle's proposal for a
"Genuine Parts Exchange." Pl.'s Mem. at 9. During the meeting, Carlisle
warned GM and DCX that Plaintiff would make it easier in the future to
buy non-OE parts; thereby, threatening OEM profit margins. Carlisle
further expressed the belief that "it is unlikely that an unorganized
consortium of OEs will be able to gain control of [Plaintiff] and
guarantee maintenance of its current closed exchange environment." Smith
Dep. at 53-55. Carlisle concluded that "the smart response is to counter
with the collaborative development of a closed exchange that will trade
only in genuine parts, from all partner OEs." Id.
Plaintiff argues that Defendants GM, DCX, and Ford recognized that
changes in the automotive parts business posed substantial threats to
their ability to maintain historic levels of profitability on the sale of
replacement parts. Pl.'s Mem. at 9-10. Defendants responded to these
threats by jointly creating an OEM-only parts portal (i.e.,
Marmaduke/OEC) to control the purchase and sale of parts in a way that
would suppress the emergence of new forms of competition. Id. at 7-8.
Plaintiff argues that Defendants GM, Ford, and DCX, and Bell & Howell
created Marmaduke/OEC so that it "[would] be the sole source for accurate
OEM data." Pl.'s Mem. at 12. (DCX 001884.) In mid-August 2000, GM
prepared the Terms of Agreement for the formation of Marmaduke/OEC. The
Agreement provided, inter alia, that:
Technology partners not agreeing to terms for
participation in the OE portal will be left to compete
against the OE portal in the marketplace, without
benefit of OE endorsement or OE catalog or technical
service information. (Loeffler Ex. 17.)
A September 14, 2000 draft proposal among Defendants GM, DCX, and Ford,
and Bell & Howell provided, inter alia, that:
The 3 OEM's also agree not to participate or support
any other automotive parts eCommerce initiative with a
similar vision of the Portal. The 3 OEMs further agree
not to provide access to the parts catalog data and
other related Intellectual Properties to other parties
potentially competing with the Portal. Baumgartner
Ex. 31 (Pl.'s Mem. at 12.)
Moreover, in a memorandum of understanding that led to the formation of
OEC,*fn3 Defendants indicated that Plaintiff has "no OEM data" and "of
course this gives OEMs leverage." Tudor Ex. 17.
Defendants GM, DCX, and Ford agreed that they would not grant
Plaintiffs data requests unless Plaintiff agreed to their anticompetitive
conditions for a business arrangement. Pl.'s Mem. at 12. For example,
Defendants noted that, as a result of the "unified" front of GM, Ford and
DCX, Plaintiff "will do anything we want." Miller Ex. 15. Moreover,
because Defendants were unable to coerce Plaintiffs management into
acceding to their demands, Defendants engaged in a
"divide and conquer"
strategy by approaching the senior executives of Plaintiffs parent
companies. Id. For instance, Mr. John Smith (GM) called Mr. Lloyd
Waterhouse (Reynolds) and stated, that if, Plaintiffs founders continued
to support Plaintiff as a competitor of Marmaduke/OEC, then "we will not
provide the parts data." Waterhouse Dep. 68-77. Furthermore, at a December
14, 2000 meeting with Plaintiff, Mr. Smith further stated (in the
presence of Ford and DCX representatives) that GM would maintain its
position in withholding Parts Data from Plaintiff. Galbato Dep. 546.
Plaintiff alleges that it requested Parts Data from each Defendant.
Pl.'s Mem. at 11. Following each request, however, Plaintiff was informed
that Defendants GM, Ford and DCX would continue to withhold Parts Data
(refusal to provide Parts Data was confirmed on September 11, 2000 and
October 5, 2000). Galbato Dep. 264-66.
(ii) Circumstantial Evidence of Conspiracy
Plaintiff alleges that, in addition to the above-reference direct
evidence, circumstantial evidence of a conspiracy exists that
demonstrates that Defendants conspired to withhold Parts Data. Pl.'s
Mem. at 15. Plaintiff argues that proof of a conspiracy may be
established by "circumstantial evidence that reasonably tends to prove
that [the parties] had a conscious commitment to a common scheme designed
to achieve an unlawful objective." Monsanto Co. v. Spray-Rite Serv.
Corp., 465 U.S. 752, 768 (1984). Moreover, to prove a conspiracy based on
circumstantial evidence, a plaintiff must prove evidence of parallel
conduct by the defendants, together with one or more "plus factors."
Petruzzi's IGA Supermarkets v. Darling-Delaware Co., Inc., 998 F.2d 1224,
1232 (3rd Cir. 1993). "Plus factors," for example, can include pretextual
explanations of a defendant's conduct. Id.
Plaintiff asserts that Defendants GM, Ford, and DCX have engaged in
parallel conduct by refusing to grant it Parts Data licenses.*fn4 Pl.'s
Mem. at 16. Moreover, GM, Ford, and DCX gave the identical Parts Data
(that Plaintiff requested) to both OEC and other independent businesses
whose activities do not involve parts locator services. Id. Furthermore,
most other major automobile manufacturers have provided Parts Data to
Plaintiff. Id. Plaintiff, thus, asserts that Defendants have engaged in a
common scheme, in that, they have agreed to withhold Parts Data. Id.
Plaintiff further argues that Defendants' reasons for their refusal to
provide Plaintiff with Parts Data are merely pretextual ("plus factor").
Pl.'s Mem. at 17. Plaintiff alleges pretextual behavior on the part of
each Defendant. Id. at 17-18. Plaintiff, therefore, asserts that
Defendants' parallel conduct in refusing to grant it Parts Data licenses
as well as their pretextual reasons given for refusing ...