PUBLIX SUIT CLAIMS 3M IN MONOPOLY PRACTICES 2004-10-04 (2)

LIZA CASABONA

LAKELAND, Fla. -- Publix Super Markets here filed an antitrust lawsuit against 3M, St. Paul, Minn., the maker of Scotch tape and Post-it Notes, for allegedly using anticompetitive and monopolistic practices to drive up tape prices.

Publix alleged that through the use of bundled rebates and exclusionary contracts, 3M eliminated competitors from the marketplace, according to documents filed with the federal court in Philadelphia. Under the bundled rebate program, the price of tape is tied to sales goals set for retailers by 3M across a number of other product categories.

Publix said the possibility of losing 3M's discounts if sales goals weren't met made it risky to carry other tape brands, which suppressed competition in the marketplace and allowed 3M to set its prices above normal competitive levels.

3M declined to comment on the specifics of the pending suit. "We intend to vigorously defend ourselves against the lawsuit," stated Stephen Sanchez, a spokesman for the company. Publix declined to comment on the suit, filed Sept. 17.

While supplier rebate programs aren't uncommon, what sets 3M apart is its de facto monopoly of the tape market, said attorney Mark W. Ryan of Mayer, Brown, Rowe & Maw, Washington. Ryan represented LePage's, Pittsburgh, a 3M competitor who sued the company in a similar antitrust case. LePage's sued 3M for monopolization and attempted maintenance of monopoly power, winning a judgement of $68 million in 1999.

"Rebate and discount practices are pretty prevalent. But from an antitrust standpoint, it doesn't matter unless there is a monopoly power in one of the products," Ryan said.

3M's monopoly comes from consumer associations with Scotch tape, he said, because retailers could not realistically stop carrying the brand if prices were increased.

That, combined with 3M's program tying its rebates to sales goals, made removing 3M products from the shelf to make room for other products risky because retailers jeopardized hitting their sales target. By limiting rival companies' access to shelf space, 3M all but eliminated its competition, and retailers lost the benefit of competitive pricing, Ryan said.

"The theory of the rebates was that they were structured to accomplish exclusivity," he said.

Publix has asked for triple damages and for 3M to be prevented from operating its rebate program as it stands now, saying it believes the verdict in the LePage's case precludes 3M from arguing that its policies were legal.

3M is also being sued for these practices in a class-action suit filed earlier this year by lead plaintiff Bradburn's Parent/Teacher Stores, an educational products retailer, St. Louis, and others.