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Few would expect so much drama to be played out over a sewer system contract, but the case of Flovac v. Airvac, is a clear exceptions. The First Circuit heard and affirmed a lower district court's summary judgment in favor of Airvac on the plaintiff's Sherman Antitrust claims.
The procedural background of this case is weird, so we'll try to go slowly.
Flovac and Airvac are competitors in the rarified market of sewer systems, the former placing more emphasis on vacuum sewer systems. The primary customers are towns and municipalities.
Puerto Rico Aqueduct and Sewer Authority (PRASA) awarded a lucrative contract to Flovac. Airvac personally contacted PRASA and objected to Flovac's being selected to complete the project. Part of the objection was based on a standing federal requirement under the American Recovery and Reinvestment Act that products conform to the "buy American" provision. Since some of Flovac's valves were made in the Netherlands, there was standing to object. PRASA stood its ground. When Airvac went to the EPA, the EPA told Flovac to make the offending vales in Puerto Rico. Problem solved.
Except that Airvac's objections to the original bidding caused a massive delay to project completion and caused Flovac to lose significantly. Flovac sued Airvac on sections 1 and 2 of the Sherman Act, claiming restraint of trade under "rule of reason" and monopolization. The District Court granted Airvac's motion for summary judgment and Flovac appealed.
The circuit affirmed the lower court's grant of summary judgment because Flovac failed to properly include the other types of sewer system choices PRASA had before it. The relevant scope of the product market in antitrust suits is a function of the available substitute products available in the market. Here, at least two different type of sewage systems exist: vacuum and non-vacuum.
The problem was that Flovac offered only a single sewage system type as a definition of the available market choices. Airvac quickly pointed out that numerous sewage systems existed to municipal customers.
Nor was Flovac's attempt to characterize the vacuum system as the more appropriate system for a particular purpose convincing to the court. According to the suit, the appropriateness of one system in a particular geographical location was not a factor that all consumers would take into account.
Thus, unless Flovac plans to appeal again, this Sherman suit is flushed.
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