Terminating a lease in response to exorbitant rent demands is not an antitrust violation and having a restrictive sign code is not an antitrust violation.  That’s the lesson of Karraa and VMG versus OUTFRONT Media and the City of Los Angeles.  Here are the facts.

• Rabadi Service Station Inc. operates a Mobil gas station on Santa Monica Boulevard in Hollywood.  Anton Karraa is Rabadi’s president.
• In 1997 Rabadi Service Station Inc signed a lease to permit construction of a billboard on its property. The lease was renewed and amended several times before it was acquired by OUTFRONT. The lease expired August 31, 2019.
• In 2002 Los Angeles adopted a new sign code prohibiting construction of new billboards.
• Karraa believed the billboard rent was not market and asked OUTFRONT for an increase. After failing to reach an agreement,  Karraa signed and agreement with VMG under which VMG would take over the billboard after expiration of the OUTFRONT lease.
• OUTFRONT told Karaa hat if he leased to VMG, OUTFRONT would remove the billboard.  VMG offered to purchase the billboard from OUTFRONT for $180,000.  OUTFRONT declined and removed the billboard.  VMG applied for a permit to construct a billboard and the city declined to issue a new permit.
• Karraa and VMG filed a complaint against the City of Los Angeles and OUTFRONT for anticompetitive behavior, antitrust violations and a taking.    The lawsuit alleged that the city’s sign ordinance was designed to unfairly stifle competition by preventing construction of new billboards and that the Los Angeles sign code an unconstitutional infringement of first amendment rights.
• A US District Court dismissed the case noting that Karraa failed to provide facts demonstrating anticompetitive conduct and that any First Amendment claims “are foreclosed by prior billboard precedent.”

Insider’s take:  We’ll be following this case to see if there is an appeal.  The case alleges anticompetitive behavior as opposed to a violation of terms of the lease.  Insider suspects that OUTFRONT had a lease which permitted it to remove the billboard on termination and so the landlord was forced to make speculative claims of anticompetitive behavior.

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