Wednesday, March 26, 2003

$68M jury award upheld against 3M in antitrust case

Tape maker used rebate program to squeeze rival

By Bill Bergstrom
The Associated Press

PHILADELPHIA - The maker of Scotch tape used monopoly powers over big retailers to "squeeze out" a smaller competitor, a federal appeals court ruled, upholding a $68.4 million jury award against 3M.

St. Paul, Minn.-based 3M will ask the U.S. Supreme Court to review the decision and expects to record an $85 million charge in the first quarter to reflect the ruling, the company said Wednesday.

The 3rd U.S. Circuit Court of Appeals Tuesday reversed an earlier ruling that said LePage's, a Pittsburgh-based company whose largest business was making store-brand tapes for big retailers, had failed to prove that 3M had an illegal monopoly.

In the ruling, Judge Dolores K. Sloviter said 3M lured away LePage's customers by offering bundled rebates that retailers could collect only by meeting sales goals in six categories of 3M product lines.

The rebates were anti-competitive, Sloviter wrote, because "they may foreclose portions of the market to a potential competitor who does not manufacture an equally diverse group of products and who therefore cannot make a comparable offer."

She wrote, "the jury could reasonably find that 3M used its monopoly in transparent tape, backed by its considerable catalog of products, to squeeze out LePage's."

LePage's said the 3M rebate program, involving payments as high as $1 million to retailers who agreed not to buy from competitors, cost it some of its largest customers. Staples canceled a contract with LePage's to manufacture a store-brand tape to take advantage of the 3M rebate program, LePage's said.

In a statement, 3M said it didn't expect the U.S. Supreme Court to decide until fall whether to hear its appeal. The company also said it had discontinued such programs more than three years ago.

A federal jury had found in 1999 that 3M had unfairly used its market power to hurt sales of LePage's tape. Jurors awarded damages of $22.8 million, and the amount was tripled because the panel determined that 3M had violated federal antitrust laws.

A three-judge panel of the 3rd U.S. Circuit Court of Appeals had overturned the verdict in January 2002, but the case was reheard by the full 3rd Circuit.

BW5447  MAY 16,2003       12:20 PACIFIC      15:20 EASTERN

( BW)(MI-LEPAGES) LePage's Applauds Consumer Filing of Class Action Against 3M

    Business Editors

    TAYLOR, Mich.--(BUSINESS WIRE)--May 16, 2003--LePage's, a leading tape manufacturer based in Taylor, Michigan, released a statement today expressing encouragement to consumers who this week filed a class action suit against 3M. In the statement, Navin Chandaria, President of LePage's remarked that "We applaud the informed consumers and retailers standing up to 3M and its anti-competitive agenda. This lawsuit will be watched closely, and will send a clear message: American consumers and retailers want freedom of choice and fair competition. After LePage's successes in Federal Court and the marketplace, it is interesting to note that all the ethical retailers have also endorsed the fight against monopolistic giants. The days are now over where monopolistic manufacturers could hold retailers at ransom with these pressure tactics and schemes. One can simply look at the new range of products on the shelves to see where retailers have embraced consumer choice."
    The recent anti-trust filing against 3M in a California court is likely to include hundreds of thousands of claimants and follows closely on the heels of a $65 million award, plus interest, to LePage's on similar grounds. It is alleged that 3M abused its monopolistic position and used a bundled rebate scheme with cash payments to retailers to limit competitor access to retail shelves. The recent claims for damages are likely to focus on the higher prices and outdated technologies resulting from the lack of fair competition.
    In the statement, Mr. Chandaria noted that "Even after court sanctions, companies are finding legal ways of doing the same thing to violate the spirit of the law. These practices may not be limited to the tape category, and the global scope may not be limited to California or the United States. In other products, such as the sticky note category, a simple investigation will uncover many potential competitors that have been put out of the business with costly, spurious lawsuits, as well as bundled rebates and other schemes."
    Mr. Chandaria continued, that, in the light of the recent wave of corporate scandals in the U.S., "regulators and consumer advocates should take a close look at the unethical practices exposed by court challenges against 3M, and to investigate the wide range of abuses that may continue to be perpetrated. Complete disclosure by 3M of its ethics program, or lack thereof, and how it is implemented in its marketing strategies, would be a welcome start to rebuilding the trust that consumers and shareholders once had for the company."
    Drawing attention to the successes of LePage's outside the courtroom, Mr. Chandaria noted that "Many retailers have congratulated and thanked us for being a viable alternative, and have found that LePage's outperforms 3M on the basis of consumer choice wherever a level-playing field has been created. This clearly demonstrates that consumers and retailers want better alternatives and fair play. The few remaining retailers and warehouse clubs mired in their old ways should open their doors to consumer choice and follow both the letter and the spirit of the law."


    CONTACT: LePage's
             Joe Nunes, 416/752-4125 or 1-800/387-5275

    SOURCE: LePage's