By Don T. Hibner, Jr.
Rival condom manufacturer’s antitrust claims dismissed. Church & Dwight Co., Inc. v. Mayer Laboratories, Inc., United States District Court, Northern District of California, Case No. C-10-4429 EMC (April 12, 2012).
Church & Dwight Co., Inc. (“C&D”), the manufacturer of Trojan brand condoms filed a declaratory relief action in the district of New Jersey seeking a declaration that its marketing of condoms through the use of “planograms” and retailer inspired “category captain” programs was lawful. Defendant Mayer Laboratories, Inc. (“Mayer”) counterclaimed, alleging the C&D’s marketing programs violated Sections 1 and 2 of the Sherman Act, the California Cartwright Act, the Lanham Act, and California unfair competition laws, and alleging as well tort claims for interference with contracts and interference with economic relations. The action was transferred to the Northern District of California.
After three years of litigation, and voluminous discovery, C&D moved for summary judgment. Based upon an analysis of primarily Ninth Circuit law relating to exclusive dealing, the court granted the motion as to the antitrust claims, finding that Mayer had failed to present a genuine issue that C&D had abused its position as category captain for certain retailers, or had engaged in exclusionary conduct that was other than pro-competitive. While the “rubber has hit the road” as to the antitrust claims, the motion for summary judgment was denied as to the interference tort claims.
C&D manufactures and distributes “Trojan” and other brand-name condoms. Its branded sales count for 75% of all retail condom sales in the United States, although its global share is only 11%. C&D’s domestic market share has steadily increased from a 67.2% figure in 2001, and has been at least 50% since 1985. The number two seller has maintained a steady share of 14-15%, while the third has a share of just under 10%. Together, the sales of the three largest competitors account for an excess of 99% of national sales. These sales have been made in three channels. The first is “food, drug and merchandise” (“FDMx”), which accounts for almost 50%. The second channel is Wal-Mart sales alone, which accounts for 33%. The remaining channel is “convenience stores” (“c-stores”), which count for almost 15%. Mayer’s sales of its “Kimono” brand represent a market share of less than one-half of 1%.
The channels differ somewhat in pricing and sales structure. Drug stores, for example, carry the largest variety of condom brands, with retail prices twice as high as the mass merchandise channel. Convenience stores tend to carry only one or two brands, in three-unit packs due to limited shelf-space. Convenience stores typically seek exclusive contract bids from the manufacturers. Convenience store pricing is still higher, and may represent impulse purchases. In all channels, there is a heavy reliance on point of sale advertising. The manufacturers compete for retail space on the basis of...
