266 F. Supp. 3d 705
S.D.N.Y.2017Background
- MarkitSERV operates the dominant straight-through-processing (STP) "drop-copy" network used for post-trade processing of most interest-rate swaps (IRS); trueEX is an SEF (trading platform) and depended on MarkitSERV’s drop-copy service for trades with counterparties to which trueEX lacked direct connectivity.
- trueEX and its sister company truePTS (a nascent trade-processing competitor funded and supported by trueEX) sought access to MarkitSERV’s network; trueEX had a multi-year Broker Terms Agreement (BTA) with MarkitSERV providing drop-copy services.
- MarkitSERV terminated the BTA, citing concern that trueEX/truePTS would free-ride on MarkitSERV’s network to compete, and offered an alternative "standard workflow" that limited trueEX’s ability to use drop-copy for parties without direct connections.
- Plaintiffs sued for monopolization and attempted monopolization under §2 of the Sherman Act; trueEX also asserted promissory estoppel under New York law. Plaintiffs moved for a preliminary injunction to preserve the BTA pending trial.
- The court found (for the injunction stage) that trueEX raised serious questions on the merits of its §2 refusal-to-deal claim, would suffer irreparable harm if disconnected (loss of dealers, liquidity, and goodwill), the balance of hardships favored trueEX, and the public interest supported preserving competition.
- The court granted a preliminary injunction preventing MarkitSERV from terminating the BTA or discontinuing drop-copy service to trueEX; the injunction was denied for truePTS because it lacked likelihood of success.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MarkitSERV’s termination of cooperation violated §2 as an unlawful refusal to deal | MarkitSERV had a long, voluntary course of dealing with trueEX and terminated it to foreclose competition (Aspen-type refusal) | MarkitSERV had legitimate business reasons (protecting against free-riding; profitability concerns) and may have been maximizing short-term profits | Court: trueEX raised serious questions on the merits; injunction appropriate for trueEX pending trial |
| Whether MarkitSERV’s network is an "essential facility" and denial violated §2 | The STP/drop-copy network is uniquely essential and cannot be practically duplicated; denial forecloses competition | trueEX already processes many trades without MarkitSERV; MarkitSERV offered reasonable access via standard workflow; duplication is feasible over time | Held: essential-facilities claim failed at PI stage because reasonable access existed and duplication was plausible |
| Whether trueEX showed irreparable harm warranting preliminary relief | Loss of dealer liquidity and buy-side participants would likely destroy trueEX and truePTS; harm not remedied by money | Harm to MarkitSERV from keeping status quo is limited (just continued performance); freedom to refuse to deal weighs against injunctive relief | Held: irreparable harm shown for trueEX; balance of hardships and public interest favor injunction for trueEX |
| Whether trueEX’s promissory estoppel claim likely to succeed | MarkitSERV promised not to cut off drop-copy after termination, inducing reliance and injury | No substantial change in position or identifiable injury caused by short reliance period; standstill preserved status quo | Held: promissory estoppel unlikely to succeed; claim fails at PI stage |
Key Cases Cited
- Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) (refusal to deal that sacrifices short-term benefits to exclude a rival can violate §2)
- Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) (Supreme Court constrains refusal-to-deal liability and describes Aspen as near the outer boundary of §2 liability)
- United States v. Grinnell Corp., 384 U.S. 563 (1966) (definition of monopolization under §2 requiring willful acquisition or maintenance of monopoly power)
- In re Adderall XR Antitrust Litig., 754 F.3d 128 (2d Cir. 2014) (discussion of standards for pleading and evaluating monopolization claims)