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Island Mortgages of New Jersey v. 3M (Minnesota Mining And Manufacturing Company)

PAS-L-2997-03 (N.J. Super. Law Div. 2004) (Unpublished)

CONSUMER FRAUD ACT; ANTITRUST—Where there is a conflict between New Jersey’s Consumer Fraud Act and the standing requirements under New Jersey’s Antitrust Act, a party may not bring suit under the Consumer Fraud Act if it could not bring suit under the Antitrust Act.

A class action suit was brought against a manufacturer by several companies that purchased its brand of adhesive tape. Their complaint alleged that the manufacturer’s conduct constituted unconscionable commercial practices and violated the Consumer Fraud Act (CFA). The consumers claimed that the manufacturer restricted their access to lower-priced tape offered by competitors. They also alleged that the manufacturer prevented competitors from gaining or maintaining large volume sales by stifling growth of private label tape and by focusing on large distributors to keep retail tape prices high. One particular allegation was that the manufacturer would bind retailers to exclusive dealing arrangements by offering them large lump-sum cash payments and cash incentives. The allegations also charged that the manufacture lured retailers with a “bundled” rebate structure, rewarding retailers for refusing to carry other labels of tape. Based on these and other claims, the customers asserted that they experienced significant harm because of the higher prices they paid for transparent tape above competitive levels and by their having been denied a free choice in a competitive market. According to the complaint, the manufacturer’s coercive activities constituted unconscionable commercial practices.

The Court found no allegation in the complaint that the manufacturer had used deception, fraud or misrepresentation or had concealed material facts regarding the sale of its tape to consumers. Also, there was no allegation that the manufacturer had any direct contact with any consumer in the suing class. The customers’ sole legal theory was that the manufacturer’s monopolistic conduct was, by itself, an unconscionable commercial practice as contemplated by the Consumer Fraud Act. Unfortunately for them, an unconscionable commercial practice requires a capacity to mislead. Here, the Court held that even if the customers’ factual allegations were true, they failed to show that the manufacturer did anything that had a capacity to mislead.

The Court also held that even if the customers had alleged a viable claim under the CFA, they lacked standing to pursue that claim. To apply the CFA in this case would materially conflict with New Jersey’s Antitrust Act. The allegations of unconscionable commercial practices clearly fell within the ambit of the Antitrust Act because that Act’s purpose is to prevent trade-restraining practices, which ordinarily deprive the public of the benefits of a competitive market.

The conflict between the two Acts did not necessarily mean that one couldn’t apply in the presence of the other. But, in this case, the manufacturer argued that applying the CFA would impermissibly conflict with the Antitrust Act’s standing requirements. The Court agreed. The customers had not purchased the tape directly from the manufacturer. Instead, they purchased tape from independent retailers. For that reason, the Court found that the companies’ class was made up of indirect or pass-through purchasers. As such, the customers would have been barred from bringing suit under the New Jersey Antitrust Act. For that reason, the Court held that their attempt to bring suit under the CFA should also be barred as being in direct conflict with New Jersey antitrust law.

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