5-Hour Energy v. 8-Hour Energy: Monopolization Claim Flops

In an unfair competition suit under 15 U.S.C. § 1125, the king of the two-ounce energy shot, 5-Hour Energy, is suing the makers of 8-Hour Energy in the Eastern District of Michigan, claiming that 8-Hour Energy falsely associates itself with 5-Hour Energy.  8-Hour Energy has tried to strike back with a monopolization claim, arguing that 5-Hour Energy has engaged in a number of anticompetitive tactics to drive away competitors like 8-Hour Energy, and 6-Hour Energy, which 5-Hour Energy sued in 2008. 

 Anyone who has recently set foot in a convenience store or watched late night cable television knows how valuable the energy drink business has become. To get an idea of how this market has grown, take a look at the wall of energy drinks displayed at the screamingenergy.com product review web site.  Perhaps the most valuable spot in that market is in the two-ounce “energy shot” space, on the counter next to the cash register, where customers are willing to pay $3.50 for two ounces of an elixir that will “help you feel sharp and alert.”  (By comparison, a consumer will seldom pay more than 99 cents for a 12 ounce can of caffeinated cola.)   And the consensus is that 5-Hour Energy dominates this category

The 8-Hour Energy defense team may have a good argument that 5-Hour Energy is the king of the convenience store counter, but the Eastern District of Michigan issued an Order last week slapping down 8-Hour Energy’s monopolization claim. 8-Hour Energy argued that 5-Hour Energy engages in anticompetitive tactics to control the market, but failed to convince the court that those tactics actually harm 8-Hour Energy.  For example, the court noted that anything 5-Hour Energy did to exclude 6-Hour Energy from the market couldn’t have harmed 8-Hour Energy.  Ultimately, 8-Hour Energy should be able to argue that any anticompetitive conduct is relevant to prove that 5-Hour Energy has harmed competition – this may be an issue that 8-Hour Energy can exploit on appeal. 

The court’s order provides a good example of the risks associated with raising antitrust counterclaims.  Here, the Eastern District of Michigan dismissed 8-Hour Energy’s monopolization counterclaim for failure to convincingly plead the claim.  If 8-Hour Energy somehow revives the claim, the next hurdle will be definition of the relevant market.  Is there an exclusive market of 2-ounce energy drinks?  If Red Bull, Coca Cola, or coffee are reasonable substitute “energy drinks,” 8-Hour Energy’s monopolization case doesn’t have a chance.