Abraham & Veneklasen Joint Venture v. Am. Quarter Horse Ass'n, No. 13-11043 (5th Cir. Jan. 14, 2015).
The plaintiffs here are two quarter horse aficionados. They formed a joint venture to invest in quarter horses that have been cloned from past prize winners. There’s a big problem with that plan, though: the AQHA—the American Quarter Horse Association—won’t register cloned horses. And without an AGHA registry, quarter horses aren’t eligible to compete in the big-money racing and cutting competitions.
The plaintiffs assert that the AQHA adopted its anti-clone policy to constrict the supply of elite quarter horses. According to the plaintiffs, AQHA leaders instituted the policy because they themselves own elite quarter horses and want to keep the prices for their horses high.
The plaintiffs assert two claims. They claim that the AQHA conspired with one of its internal committees to violate section one of the Sherman Act. They also claim that the AQHA monopolized the market for elite quarter horses, thus violating section two of the Sherman Act.
A federal jury found in favor of the plaintiffs but didn’t award any damages. Then, to effectuate the jury verdict, the district court ordered the AQHA to allow cloned horses to be registered. The AQHA now appeals to the Fifth Circuit, arguing that there’s not enough evidence to support the jury’s verdict.
The AQHA’s anti-clone policy was first endorsed by an internal committee, and then officially approved by the AQHA board of directors. Some of the members of the internal committee had a financial interest in elite quarter horse breeding, but no evidence at trial suggested that the majority of the committee had any such interest. Instead, testimony suggested that committee members were motivated by ethical and practical concerns about cloning. The Fifth Circuit acknowledges that there was a stray anticompetitive comment by one committee member, but to prevail the plaintiffs were required to show that that comment swayed the other committee members. This they failed to do, says the Fifth Circuit. The jury’s verdict on the conspiracy claim must be reversed.
The jury’s verdict on the monopolization claim must also be reversed, the Fifth Circuit holds. The AQHA itself—as opposed to its members—does not breed, race, sell, or show elite quarter horses. Because it is not a market player, it cannot be a market monopolist.