CONSOLIDATED RAIL CORPORATION, PETITIONER V. DELAWARE & HUDSON
RAILWAY COMPANY

   No. 90-380

   In The Supreme Court Of The United States

   October Term, 1990

   On Petition For A Writ Of Certiorari To The United States Court Of
Appeals For The Second Circuit

   Brief For The United States As Amicus Curiae

   This brief is submitted in response to the Court's invitation to
the Solicitor General to express the views of the United States.

            TABLE OF CONTENTS
   Questions Presented
   Statement
   Discussion
   Conclusion

                          QUESTIONS PRESENTED

   1. Whether a lawful monopolist has a duty to deal with a rival on
terms allowing the rival a reasonable profit without regard to the
effect on competition of a refusal to deal on such terms.

   2. Whether the court of appeals held that a monopolist's
anticompetitive intent can transform otherwise lawful conduct into a
violation of Section 2 of the Sherman Act.

   3. Whether the "essential facilities" doctrine provides a basis for
holding that a monopolist must make a facility available to a
competitor at a particular price solely to assure that the competitor
earns a profit satisfactory to it.

                               STATEMENT

   1. Petitioner Consolidated Rail Corporation (Conrail) and
respondent Delaware & Hudson Railway Company (D&H) carry freight in
the northeastern United States.  Congress created Conrail in response
to the financial collapse of regional railroads in the 1970s,
combining several rail systems into one system with about 17,000 miles
of track.  D&H, both older and smaller, has only about a tenth as much
track.  Pet. App. 2a, 15a.

   Because of D&H's smaller size, its tracks do not reach the termini
necessary to serve many northeast recipients of newsprint shipped from
Quebec.  D&H's routes to these recipients, therefore, must employ
Conrail's tracks for part of the journey.  In contrast, Conrail can
serve these same customers over its own tracks without using those of
D&H.  All of these newsprint routes originate on the tracks of
Canadian railroads.  Pet. App. 2a-3a.

   Rail shipments involving the tracks of multiple railroads are
conventionally subject to "joint rates" (single rates charged to
shippers for the entire shipment), with the revenues divided among the
railroads involved according to a particular "division." Pet. App. 3a.
 Historically, rail regulation served to assure that shipping rates
were equal over all routes between two given points.  /1/ The division
of revenues between carriers participating in joint routes, however,
might differ between routes.  Divisions were determined either by
negotiations among the railroads or by Interstate Commerce Commission
prescription.

   In prescribing divisions, the starting point, and sometimes the
ending point, was the mileage of each railroad participating in the
joint rate:  "As a general rule where operating conditions are
substantially similar, the straight mileage pro-rate is accepted as a
fair basis for dividing joint rates." Louisville Board of Trade v.
Indianapolis, C. & S. Traction Co., 34 I.C.C. 640, 642 (1915), quoted
in Teagarden, The Federal Government and Railroad Rate Division:
Policies and Practices, 55 Transp. Prac. J. 15, 18 (1987).  The
Transportation Act of 1920, ch. 91, 41 Stat. 456, provided for ICC
determination of "just, reasonable, and equitable divisions" and
specified factors to be considered in determining divisions, including
the efficiency of the carriers, their revenue requirements, and other
facts "which would ordinarily, without regard to the mileage haul,
entitle one carrier to a greater or less proportion than another
carrier of the joint rate." 49 U.S.C. 15(6) (1976) (repealed).  /2/
That provision of the Transportation Act "was designed for affirmative
use in relieving the financial needs of weak carriers." United States
v. Great Northern Ry., 343 U.S. 562, 569 (1952), citing The New
England Divisions Case, 261 U.S. 184, 189-195 (1923).  Nevertheless,
divisions continued to be based in substantial measure on mileage.
E.g., Chicago & N.W. Ry. v. A., T, & S.F.R.R., 387 U.S. 326 (1967)
(weighted mileage).

   The Staggers Rail Act of 1980, Pub. L. No. 96-448, 94 Stat. 1895,
substantially deregulated railroad rates.  Pet. App. 3a, 16a.
Nonetheless, prior to 1982, the joint rates and divisions applicable
to Quebec newsprint destined for the eastern United States were the
ones set under the pre-Staggers Act regulatory regime.  Conrail and
D&H's rates on alternative routes between any given two points were
equal, and the divisions apparently were roughly in proportion to
mileage.  Pet. App. 32a.  /3/

   In 1982, the Canadian Pacific Railroad and the Canadian National
Railroad, faced with increasing competition from trucks, proposed
lower joint rates for newsprint.  Conrail accepted the Canadian
proposals for lower joint rates on routes for which it was the only
American rail carrier but rejected them for routes also involving D&H.
 Following a "make or buy" policy, /4/ Conrail indicated it would
agree to a lower joint rate on the routes involving D&H only if the
division were adjusted so that Conrail earned as much profit on the
route involving D&H as it would on the route not involving D&H.  Pet.
App. 4a, 21a.  Because the D&H portion of these routes was
significantly longer than Conrail's, Conrail's proposal amounted to a
significant shift in the preexisting divisions, to Conrail's benefit
and D&H's detriment.  D&H, faced with a choice "between giving up
almost all of its profits on a given route and losing entirely the
ability to carry freight on the route," id. at 4a, rejected Conrail's
proposal.

   2. D&H filed an antitrust suit against Conrail, alleging (as
narrowed during litigation) that, in violation of Section 2 of the
Sherman Act (15 U.S.C. 2), Conrail had monopolized and attempted to
monopolize the transportation of newsprint from Eastern Canada to the
mid-Atlantic states, primarily by adopting and implementing the "make
or buy" policy.  Pet. App. 15a-17a, 20a.

   The district court granted summary judgment for Conrail.  The
parties agreed, for purposes of summary judgment, to the relevant
product and geographic markets alleged by D&H, and the court presumed
for purposes of its decision that Conrail had monopoly power in that
market.  Pet. App. 18a.  The court also found, based on a single
memorandum, "relatively clear proof of Conrail's monopolistic intent."
/5/ Id. at 19a.  The court recognized, however, that intent alone did
not suffice to convert monopoly power into unlawful monopolization.
Ibid.

   Relying on the jury instruction this Court approved in Aspen Skiing
Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 597 (1985), the
court concluded that the remaining issue was "whether Conrail's make
or buy policy was a legitimate business practice, and therefore not
violative of Section 2, or whether this program was exclusionary, and
therefore impermissible under the (Sherman) Act." Pet. App. 20a.  The
court found that the policy maximized Conrail's profits as compared to
a policy giving a larger share of the revenues to D&H.  Stating that
"(a) monopolist is not required to engage in practices which are less
profitable than other, legitimate practices," the court concluded that
the make or buy policy was a valid business practice and did not
violate Section 2.  Pet. App. 22a, citing United States Football
League v. National Football League, 842 F.2d 1335, 1361 (2d Cir.
1988).

   Analyzing the same facts in light of the "essential facilities"
doctrine, the court assumed that Conrail's tracks were an essential
facility.  It held, however, that D&H had failed to show that Conrail
had unreasonably denied access to the tracks, because the make or buy
policy, which set the terms under which Conrail would permit "access,"
was reasonable.  Pet. App. 25a-26a.  The court therefore granted
summary judgment for Conrail on the monopolization claim.  /6/ Id. at
29a.

   3.  The court of appeals reversed.  In its view, "whether Conrail's
make or buy policy constituted willful anticompetitive conduct"
presented a genuine issue of material fact.  Pet. App. 6a.  The court
explained that although a profit maximization goal "provides support
for an argument that the policy is a legitimate practice," id. at 7a,
neither Aspen nor United States Football League held that conduct
intended to maximize short-term profits cannot violate Section 2.
Pet. App. 6a-7a.  It then concluded that there was sufficient record
evidence to support a jury finding of monopolization, and that the
district court therefore had erred in granting summary judgment.
Without cataloguing the evidence it deemed sufficient, the court gave,
as examples, a statement by a former Conrail executive to the effect
that "the refusal to concur in lowered joint rates would have been
implemented whether or not it increased Conrail's profits";
statements indicating that several Conrail employees considered a
shift of traffic from D&H to Conrail desirable;  a statement
indicating that a Conrail analyst believed that at least one joint
rate under Conrail's make or buy policy would result in "almost
ludicrously low" profits for D&H;  the presumed harm to D&H from
implementation of the policy;  and the "monopoly in total" statement
(see note 5, supra) on which the district court relied.  Pet. App. 7a.

   Treating the "essential facility" theory separately, the court
concluded that Conrail's tracks were an essential facility, that
duplication was impractical, and that it was feasible for Conrail to
provide the facility to D&H.  Accordingly, the court held that
Conrail's denial of access, if "unreasonable," would constitute a
violation of Section 2.  Pet. App. 9a.  The court then concluded that
there was a genuine issue of material fact as to whether the terms of
the make or buy policy were reasonable.  In reaching this conclusion,
the court relied on a hypothetical example constructed by the district
court, id. at 22a n.7, as evidence that Conrail had, in effect,
increased the price Conrail charged D&H for transporting a particular
short haul by 800%.  /7/ Id. at 10a.  "The magnitude of that
increase," the court said, "may be sufficient in itself to create a
triable issue as to whether the terms were unreasonable." Ibid.  The
court did not decide that issue, however, because it believed that
"the various statements of Conrail executives" it had previously
discussed "support our conclusion that there is a triable issue."
Ibid.  The court added that it need not determine "the circumstances
under which a legitimate business practice will shield a defendant
from liability for conduct that otherwise would constitute denial of
an essential facility," because it had already determined that there
was a genuine issue of material fact whether the make or buy policy
was a "legitimate practice." Id. at 10a-11a.  /8/

                              DISCUSSION

   The central question in this case is whether Conrail's refusal to
cooperate with its competitor in setting a joint rate on the basis of
the traditional division was exclusionary conduct likely to injure
competition.  /9/ The resolution of that issue turns on the competitve
significance of Conrail's "make or buy" policy as applied in this
case.  In our view, D&H failed to "come forward with 'specific facts
showing that there is a genuine issue for trial,'" Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting
Fed. R. Civ. P. 56(e)), as to any adverse effect on competition
flowing from Conrail's conduct.  Consequently, the court of appeals
should have affirmed the district court's entry of summary judgment
for Conrail.

   Instead, for reasons that the court's opinion does not fully
explicate, the court of appeals reversed and remanded the case for
trial.  On this record, the logical implication of the court's holding
appears to be that a lawful monopolist must deal with its business
rival on terms that provide the rival with a reasonable profit,
regardless of the effect of the monopolist's conduct on competition
and consumers.  That holding distorts the purpose of the Sherman Act,
and warrants review by this Court.  Although the decision below is
interlocutory and the court of appeals' reasoning is not entirely
clear, we believe that the court's treatment of a monopolist's
obligation with respect to dealings with competitors represents a
sufficiently serious departure from proper antitrust principles, in an
area of potentially broad application, to justify this Court's
intervention.

   1. a. In Aspen, the Court upheld a jury determination that the
refusal by the operator of three ski areas to cooperate with the
operator of a fourth ski area in allowing the marketing of a four-area
ticket was exclusionary conduct in violation of Section 2 of the
Sherman Act.  /10/ The Court was careful to emphasize, however, that
"even a firm with monopoly power has no general duty to engage in a
joint marketing program with a competitor." 472 U.S. at 600.  Nor, the
Court added, is the exclusionary character of a monopolist's conduct
established solely by evidence that the refusal adversely affected the
competitor.  Id. at 605;  see also Brown Shoe Co. v. United States,
370 U.S. 294, 320 (1962) (antitrust laws enacted to protect
competition, not competitors).  To the contrary, the impact on
consumers must be considered.  472 U.S. at 605;  see also American
Academic Suppliers, Inc. v. Beckley-Cardy, Inc., 1991-1 Trade Cas.
(CCH) Paragraph 69,296, at 65,091 (7th Cir. Jan. 17, 1991).  The trier
of fact must determine whether the challenged conduct has "impaired
competition in an unnecessarily restrictive way," 472 U.S. at 605,
which requires consideration of whether the firm has been "attempting
to exclude rivals on some basis other than efficiency." Ibid., quoting
R. Bork, The Antitrust Paradox 138 (1978).

   Applying those principles, the Court in Aspen focused on the impact
of the challenged conduct on competition.  It concluded that the
defendant's refusal to allow a four-area ticket to be sold denied
consumers the opportunity to purchase a product that they valued
highly.  472 U.S. at 605-607.  Although the Court discussed the effect
of that refusal on the plaintiff's ability to compete, it did not stop
with an observation that the plaintiff's profits were reduced.
Rather, it set forth the plaintiff's vigorous attempts, which the
defendant thwarted, to develop alternatives that would allow the
marketing of the four-area ticket that consumers desired.  Id. at
607-608.  Finally, the Court found confirmation for its conclusions in
the defendant's failure to offer "any efficiency justification
whatever for its pattern of conduct." Id. at 608.  The defendant "did
not persuade the jury that its conduct was justified by any normal
business purpose." Ibid.  Rather, the evidence supported an inference
that the defendant "was not motivated by efficiency concerns and that
it was willing to sacrifice short-run benefits and consumer goodwill
in exchange for a perceived long-run impact on its smaller rival." Id.
at 610-611.

   b. In contrast to the Court's approach in Aspen, the court of
appeals in this case failed to consider the impact on competition and
consumers from Conrail's conduct and the efficiency justification that
Conrail offered in its defense.  Absent from the court's opinion is
any suggestion that this record would support a finding that Conrail's
conduct adversely affected competition.  The court supplied no reason
to believe that Conrail's conduct was inconsistent with short-run
profit maximization, that consumers were denied the benefits of
superior efficiency or deprived of valued servies, or that prices were
increased or output reduced.  Instead, the implication of the decision
is that D&H may prevail upon showing that it did not have the
opportunity to make as much money as it would have if Conrail had been
willing to agree to a lower joint rate on the basis of the traditional
division.  That holding -- which is our best reading of an opinion
that is characterized by less than crystalline clarity -- represents a
distortion of basic antitrust principles.  Moreover, in our view, this
summary judgment record does not support characterization of Conrail's
conduct as exclusionary.

   (1) To begin with, there is no basis for a conclusion that any
shipper paid more, or would pay more, or would receive less, because
of Conrail's conduct.  D&H cites nothing in the record to show that
any shipper was unable to obtain rail transportation for newsprint
from Canada to points in the eastern United States, or that any
shipper was unable to obtain the reduced rate by shipping over
Conrail's route.  /11/ D&H does not contend that Conrail's agreement
to continue the traditional division would have allowed D&H and
Conrail jointly to offer a lower rate than the Conrail rate;  rather,
D&H wanted the rates for the joint route and the all-Conrail route to
be equal.

   D&H asserts that "the elimination of D&H from certain routes harmed
shippers because Conrail was no longer forced to compete on the basis
of anything other than price, such as speed and quality of service."
Br. in Opp. 17.  But, as a threshold matter, neither the court of
appeals nor D&H cites evidence in the summary judgment record
indicating that Conrail's conduct deprived D&H of the ability to
continue providing service on its alternative route, and thus
eliminated it as a competitor.  The court of appeals stated that
"there is no question that D&H was harmed by the implementation of the
policy." Pet. App. 7a.  But the court did not assert that there is
evidence -- and D&H refers to none -- demonstrating that the harm
amounted to more than a diminution of D&H's profits.  /12/ To the
contrary, the court of appeals' opinion suggests that it assumed that
D&H could have made at least some profit at the reduced rate, even on
Conrail's terms.  /13/

   Even if we assume that D&H would have been unable to operate
profitably under Conrail's proposed divison, nothing in the court of
appeals' opinion or in D&H's submissions suggests a reason for making
the further, and critical, assumption that consumers were thereby
disadvantaged.  /14/ D&H points to no evidence that any shipper
preferred D&H over Conrail /15/ or that D&H offered superior service
in any respect.  And D&H has not suggested that it made any attempt to
negotiate a joint rate that afforded Conrail the contribution it
demanded while leaving D&H a share sufficient to allow it to operate
profitably.  If D&H offered services that shippers valued and could
not obtain from Conrail, then shippers presumably would have been
willing to pay a higher rate to obtain joint D&H/Conrail service.

   (2) Nor, in our view, did the court of appeals identify any
evidence that would justify a trier of fact in concluding that
Conrail's conduct is best understood as exclusionary rather than
efficiency-based.  /16/ The court stated that a former Conrail
executive indicated that "the refusal to concur in lowered joint rates
would have been implemented whether or not it increased Conrail's
profits." Pet. App. 7a.  But whether Conrail would have implemented
its policy even if it was unprofitable does not establish that the
profitable policy it did implement is exclusionary.  As the district
court noted, there was no evidence that Conrail in fact ever refused
to concur in a joint rate where it would have been more profitable to
concur.  Id. at 23a.

   The court of appeals also cited other statements of Conrail
officials as examples of Conrail's exclusionary purpose.  Evidence of
intent may be probative of the anticompetitive nature and effect of
conduct.  /17/ But, even if Conrail's employees anticipated or desired
the demise of D&H as a competitor, we do not believe that the record
supports the inference that Conrail's actual conduct was exclusionary
rather than efficiency-based.  Conrail's policy benefitted Conrail
without regard to its impact on D&H.  If D&H had accepted Conrail's
proposal and continued to carry the traffic, Conrail would have made
just as much money as it did by carrying all the traffic over its own
route, and newsprint shippers would have been no better and no worse
off.  Conrail was not "sacrific(ing) shortrun benefits and consumer
goodwill in exchange for a perceived long-run impact on its smaller
rival." Aspen, 472 U.S. at 610-611.

   Nor was Conrail's policy one that inherently tended to exclude an
equally efficient or more efficient competitor.  D&H did not offer
evidence explaining why it could not have operated profitably, if its
costs were equal to or lower than Conrail's.  Conrail's proposed
division of revenues would have compensated D&H (for transporting the
newsprint to the transfer point on the D&H/Conrail route) in an amount
equal to Conrail's cost of transporting newsprint to that same point
over its own route.  Under that policy, if D&H could not prosper, the
inference to be drawn is that its costs were greater than Conrail's.
/18/ On this record, it cannot be said that Conrail was "attempting to
exclude rivals on some basis other than efficiency." Aspen, 472 U.S.
at 605.

   It is true that Conrail's make or buy policy did not lower
Conrail's cost of providing service over its own track.  Rather, the
policy increased Conrail's profits by capturing for Conrail the rents
attributable to the segments of the route on which Conrail faced no
railroad competition.  But that does not mean that the policy was not
efficiency-based or lacked a valid business reason.  Ordinarily, an
efficient firm will seek to charge a profit-maximizing price.  And it
is not an antitrust offense for a lawful monopolist to charge a
monopoly price.  See generally, P. Areeda & H. Hovenkamp, Antitrust
Law Paragraph 736.1g, at 756 (Supp. 1990);  Berkey Photo, Inc. v.
Eastman Kodak Co., 603 F.2d 263, 274 n.12 (2d Cir. 1979), cert.
denied, 444 U.S. 1093 (1980);  Continental Cablevision v. American
Elec. Power Co., 715 F.2d 1115, 1121 (6th Cir. 1983).  /19/ In any
event, requiring the monopolist to share its revenues with a rival
would not prevent consumers from having to pay the monopoly price.
/20/

   c. In remanding this case for a jury trial on the issue whether
Conrail's conduct towards D&H violated Section 2 of the Sherman Act,
the court effectively established a monopolist's duty to deal with a
rival where, under Aspen, no such duty exists.  Although the court did
not delineate the scope of that duty, the implication of its holding
is that a monopolist must deal on terms that provide its rival with a
reasonable profit, even if the monopolist must reduce its own profit
to do so and there is no adverse effect on consumer welfare from a
refusal to deal.  We know of nothing in antitrust law that would
require a monopolist to subsidize its rival's profits in this manner;
indeed, such a requirement would be both unsound in theory and
unworkable in practice.

   Equally unsettling, the court's standard offers the monopolist no
guidance in setting its price to a rival, if it must subsidize its
rival's profit.  Liability would inevitably turn on the trier of
fact's conception of a reasonable price and a reasonable profit.  The
court of appeals seems to have decided this case in the spirit of the
Transportation Act of 1920 ch. 91, 41 Stat. 456, not under the law of
the Sherman Act.  It is the former, not the latter, which "was
designed for affirmative use in relieving the financial needs of weak
carriers." Great Northern, 343 U.S. at 569.

   2. Casting the issue in terms of an essential facilities analysis
provides no additional support for the court of appeals' conclusion.
/21/ Even if we assume, as the district court did, Pet. App. 25a, that
short-haul Conrail tracks that reach locations to which D&H lacks
direct access may be considered an essential facility, D&H never
requested the right to use those tracks to provide service itself, so
far as this record reveals.  Nor is D&H's complaint that Conrail will
not provide service on those tracks to D&H customers on a
nondiscriminatory basis.  /22/ D&H's essential facilities claim
reduces to a restatement of its argument that Conrail was obligated to
share with D&H a portion of its monopoly revenues.  That is, the true
"essential facility" here is not track;  it is money.

   Considering D&H's claim under an essential facilities rubric should
not change the result under Section 2.  That is because D&H's claim
still should fail unless Conrail's refusal to cooperate on the terms
D&H desired adversely affects competition.  /23/ "The essential
facilities doctrine is predicated on the assumption that admission of
the excluded applicant would result in additional competition in an
economic * * * sense." Mid-South Grizzlies v. National Football
League, 720 F.2d 772, 787 (3d Cir. 1983), cert. denied, 467 U.S. 1215
(1984);  cf. Olympia Equip. Leasing Co. v. Western Union Tel. Co., 797
F.2d 370, 379 (7th Cir. 1986) (essential facility must be reasonably
"indispensable to effective competition") (emphasis added), cert.
denied, 480 U.S. 934 (1987).  The issue whether the denial of access
is unlawful cannot be approached solely by considering the impact of
denial on a particular competitor.  Where, as here, the party seeking
access to a facility seeks merely to "share( ) the monopolist's
gains," increased competition is unlikely.  /24/ D&H may have required
more favorable terms in order to achieve a certain level of profits,
but requiring Conrail to grant D&H access on those terms will not
increase competiton:  it will neither dilute any monopoly power
Conrail has by virtue of its control of one segment of a route, nor
affect the price and terms offered shippers.

   The court of appeals did not ask whether the denial of access to
D&Hwould have an anticompetitive effect;  rather, as we read its
somewhat Delphic opinion, the court was of the view that Conrail's
conduct could be found unlawful solely by virtue of the magnitude of
Conrail's increase in price and statements by Conrail executives that
the court interpreted as supporting an exclusionary motive.  But, if
Conrail's conduct was, as the court did not dispute, designed to
maximize its profits (both short and long-term), its conduct could be
found "unreasonable" only if the jury were entitled to find that D&H
had a right to share in Conrail's profits.  /25/ It is not the purpose
of the antitrust laws, however, to impose the duty on a monopolist to
assure that its rivals obtain a sufficient level of profit.

   The Fourth Circuit's decision in Laurel Sand & Gravel, Inc. v. CSX
Trans., Inc., 1991-1 Trade Cas. (CCH) Paragraph 69,312, at 65,185
(Jan. 30, 1991), illustrates our point.  /26/ There, the plaintiff
alleged that defendant CSX had denied it access to an essential
facility (CSX's track) by offering to transport the plaintiff's goods,
while denying trackage rights to the plaintiff over CSX's track.
Viewing CSX's offer of transportation as an alternative means of
access to the facility, the Fourth Circuit considered whether CSX's
offer of transportation was reasonable.  It then held that the
transportation offer was "a reasonable alternative" to trackage rights
because it was "reasonable from CSX's perspective" to offer "$2.12 per
ton, a penny over the variable costs." Id. at 65,190.  The court added
that "the reasonable standard of the access factor can not be read to
mean the assurance of a profit" for the person seeking access.  Ibid.
In contrast to the Fourth Circuit's sound analysis, the court of
appeals here seems to have required just that assurance.

   3. In holding that a trier of fact could find unlawful Conrail's
refusal to cooperate on the terms D&H desired, without regard to the
effect of the refusal on competition, the decision below represents a
serious distortion of antitrust law.  Allowing a jury to evaluate the
reasonableness of Conrail's actions from the standpoint of D&H's
interests would, in practice, nullify this Court's admonition in Aspen
that monopolists are under no general obligation to cooperate with
their rivals.  The result would be to transform Section 2 of the
Sherman Act from a guardian of competition to a regulatory statute
focused on the welfare of competitors.

   Such a transformation, which in this case resurrects an abandoned
regulatory regime, would have substantial anticompetitive
consequences.  Recognizing a duty to share profits with competitors
would reduce incentives to investment and innovation by siphoning off
the rewards normally accruing to desirable behavior.  And distributing
profits to competitors would reduce the incentive to strive for
greater efficiency, or even prevent the exit of inefficient firms from
the market and the redirection of their resources to more productive
uses.  Moreover, the duty the court of appeals appeared to create
could chill aggressive competition as firms, uncertain of what prices
they may charge their competitors and yet avoid liability, were forced
to set prices on some basis other than ordinary profit maximization.
In effect, firms would be forced to guess what prices would be
required by unpredictable regulatory decrees issued by particular
juries.

   We note, in closing, the obvious prudential factors pointing in
favor of letting this case go, namely, it is of course in an
interlocutory posture, and the court of appeals was less than clear
about the nature of the required "reasonable" dealing that it applied
to Conrail's conduct.  That being said, the fact remains that the
court of appeals has held that the trier of fact could find Conrail
liable in the absence of any reason to believe that consumers and
competition were adversely affected.  The only issue for trial is
whether Conrail's terms for cooperation were "reasonable" in some
sense foreign to the antitrust laws.

   The very requirement that such an issue need be submitted to trial,
rather than resolved on summary judgment, is itself a serious error.
The salutary principle reflected in this Court's decision in
Matsushita -- a point that bears reemphasis -- is that antitrust
defendants should not be subjected to the formidable burdens and risks
of trial on the basis of evidence that is insufficient to support a
viable theory of antitrust liability.  Decisions such as this one, by
failing to apply Matsushita with rigor and by misapplying basic
antitrust doctrine, not only affect the particular parties but also,
through their impact on antitrust counseling, more broadly influence
business practices.  Indeed, the vagueness of the court's opinion may
contribute to its impact, because the threat of burdensome litigation
and possible treble damages liability tends to induce firms to stay
well within the bounds of established law.  In light of these
considerations, we believe that review by this Court is warranted.

                              CONCLUSION

   The petition for a writ of certiorari should be granted.

   Respectfully submitted.

   KENNETH W. STARR

      Solicitor General

   JAMES F. RILL

      Assistant Attorney General

   LAWRENCE G. WALLACE

      Deputy Solicitor General

   ALISON L. SMITH

      Deputy Assistant Attorney General

   MICHAEL R. DREBEN

      Assistant to the Solicitor General

   CATHERINE G. O'SULLIVAN

   DAVID SEIDMAN

      Attorneys

   APRIL 1991

   /1/ "The principle * * * is vital in our commercial life that there
shall be one fixed and absolutely rigid rate governing the
transportation at a given time of any given commodity between two
given points." A.J. Poor Grain Co. v. Chicago, Burlington & Quincy
Ry., 12 I.C.C. 418, 423 (1907).  See also Chesapeake & Ohio Ry. v.
United States, 704 F.2d 373, 376 (7th Cir. 1983) ("Although the routes
are different, the origin, destination, and commodity are the same, so
the joint rates almost certainly would have to be the same to avoid
violating the prohibition against rate discrimination in 49 U.S.C.
Section 10741(a).").

   /2/ Substantial portions of 49 U.S.C. 15(6) (1976) have been
carried forward into current law.  See 49 U.S.C. 10705(c).  However,
the "just, reasonable, and equitable" standard of 49 U.S.C. 15(6)
(1976) has been replaced by a different standard:  "Divisions of joint
rates * * * must be made without unreasonable discrimination against a
participating carrier and must be reasonable." 49 U.S.C. 10701(a).

   /3/ Although the record does not indicate the preexisting divisions
between Conrail and D&H, it gives no reason to suppose they were not
roughly in proportion to mileage.  The parties do not controvert the
court of appeals' statement (Pet. App. 3a) that "(e)ach railroad's
share of the rate usually is in proportion to the percentage of miles
traveled on that railroad's tracks."

   /4/ According to Conrail, the make or buy policy "means that
Conrail would not 'buy' a service (in this case, D&H's rail
transportation for part of a shipment) if it could 'make' that service
itself less expensively" and that "Conrail would not 'sell' its
services below its profit-maximizing price." Pet. 3.  As the court of
appeals explained, "Under that policy, Conrail would agree to the
reduced rate only if its profit, called 'contribution', matched its
profit on the route where it was the sole carrier." Pet. App. 4a.

   /5/ The memorandum, from an assistant vice-president to the senior
vice president for operations, included this statement:  "I'm for
monopoly in total!  . . .  So let's Conrail take and rationalize the
entire D&H." Pet. App. 7a, 19a.

   /6/ The court also granted summary judgment for Conrail on the
attempted monopolization claim, which rested primarily on the make or
buy policy.  Pet. App. 26a-28a.

   /7/ The record does not indicate whether 800% reasonably
approximates any actual effective price increase in the market in
question.

   /8/ The court also rejected Conrail's contention that D&H had
failed to raise a genuine issue of monopoly power, Pet. App. 8a, and
reversed the district court's grant of summary judgment on the
attempted monopolization claim.  Id. at 11a.

   /9/ The complaint in this case alleges both monopolization and
attempted monopolization.  Because the district court's grant of
summary judgment rested on the holding that Conrail's conduct was not
exclusionary, the court did not focus on the other elements of those
offenses.  Although Conrail challenged in the court of appeals the
existence of monopoly power, Conrail does not renew that challenge
here.  Accordingly, without expressing a view on the issue, we will
assume that Conrail has monopoly power.  We will also address the
nature of Conrail's conduct without distinguishing between
monopolization and attempted monopolization.

   /10/ The Court noted that conduct sufficient to constitute
monopolization under Section 2 of the Sherman Act has variously been
termed "exclusionary," "anticompetitive," or "predatory." 472 U.S. at
602.

   /11/ D&H contends there is evidence indicating "that Conrail harmed
shippers by ignoring their preferences" for reduced rates (Br. in Opp.
17, citing Opp. App. 3a-4a).  But that evidence, to which the court of
appeals did not refer, shows only that Conrail refused to concur in
reduced rates over alternative routes involving D&H, not that shippers
failed to receive reduced rates.

   /12/ Although D&H sought protection under Chapter 11 of the
Bankruptcy Code (six years after the events in question and two years
after it filed this action), D&H offered no evidence that its
insolvency directly resulted from Conrail's conduct, or even that its
financial condition would not have been improved if it had entered
into a joint rate with Conrail consistent with Conrail's make or buy
policy.

   /13/ See Pet. App. 4a (D&H would have to give up "almost all of its
profits on a given route" (emphasis added).  See also Pet. App. 7a
(citing evidence that under the make or buy policy D&H profits "would
be almost ludicrously low").

   /14/ "(T)he fact that a railroad discontinues a particular service
offering is not necessarily a sign of diminished competition from a
broad consumer-welfare standpoint.  Although a shipper might in theory
prefer one through route to another -- maybe one is faster, and that
was the one that has been 'closed' -- in practice routing is almost
always determined by the originating carrier rather than by the
shipper.  Time-sensitive shipments are rarely made by train;  if the
shipper wants speedy delivery he uses another mode." Chesapeake & Ohio
Ry. v. United States, 704 F.2d 373, 377 (7th Cir. 1983).

   /15/ To be sure, there were shipments over D&H tracks prior to the
rate reduction.  But there is no evidence that the shippers, as
opposed to the originating carriers (the Canadian railroads), selected
the route, let alone cared which of two equally priced routes was
selected.

   /16/ As Aspen makes clear, exclusionary rather than
efficiency-based concerns may be probative of injury to competition.
472 U.S. at 608-609.  This consideration, however, loses force in the
unusual case where, as here, the absence of injury to competition is
plainly shown by other factors.

   /17/ Contrary to Conrail (see Pet. 14, 17-21), we do not understand
the court of appeals to have held that intent alone can transform
otherwise lawful conduct into a violation;  consequently, we do not
believe that the second question presented by the petition (Pet. (i))
is raised by this case.  The court specifically noted the statement of
a Conrail vice president that he was in favor of Conrail's taking over
D&H entirely.  Pet. App. 7a.  Although the district court considered
that statement "relatively clear proof of monopolistic intent," id. at
19a, the court of appeals explained that the statement, "standing
alone would not give rise to a Section 2 violation." Id. at 7a.

   /18/ We understand that "cost" in this context is based on an ICC
methodology and includes both variable cost and some portion of fixed
cost.  Conrail was, in effect, offering to "buy" transportation over
D&H's track at some price greater than its own variable cost, or,
alternatively, selling transportation over the segment of its route
that duplicated D&H's route at a price above its variable cost.  We do
not contend that a make or buy policy such as Conrail's could never
have the effect of excluding an equally efficient competitor in the
long run.  And such an exclusion could affect consumers adversely.
See, e.g., Chesapeake & Ohio Ry., 704 F.2d at 377 (closing of more
efficient through routes by means of joint rate cancellations might be
profitable in regulated market and may result in higher costs for
transportation).  But D&H presented no evidence of such circumstances
in this case.

   /19/ Any monopoly power Conrail possesses by virtue of its
ownership of tracks is, of course, a product of Congress's action in
creating Conrail.  Although Congress intended Conrail to be subject to
antitrust liability for any misuse of its power (see, e.g., H.R. Conf.
Rep. No. 1430, 96th Cong., 2d Sess. 83 (1980) (cancellation of joint
rates)), there is little room to argue -- and we do not understand D&H
to contend -- that Conrail's acquisition of control over segments of
track violated the antitrust laws.

   /20/ Nor should the fact that regulatory policy required the
monopolist to share its profits with weaker competitors in the past
impose a duty on the monopolist to continue sharing them once
regulatory restrictions are removed.  The Court in Aspen found it
significant that the defendant had cooperated with the plaintiff in
the past because the development and persistence of that cooperation
was evidence that the cooperation was efficient.  Aspen, 472 U.S. at
604 & n.31.  But in Aspen, unlike this case, the cooperation had
"originated in a competitive market," and similar arrangements
prevailed in other competitive markets.  Id. at 603.  Here, in
contrast, past practice was dictated by regulation and not by market
forces.  In that setting, there is no basis for inferring that a
change in the defendant's practice is not based on efficiency
concerns.

   /21/ Although this Court has never explicitly relied on the
essential facilities doctrine and declined to consider it in Aspen,
the elements of that doctrine are widely accepted in the lower courts.
 A four factor test is conventionally applied:  "(1) control of the
essential facility by a monopolist;  (2) a competitor's inability
practically or reasonably to duplicate the essential facility;  (3)
the denial of the use of the facility to a competitor;  and (4) the
feasibility of providing the facility." MCI Communications v. American
Tel. & Tel. Co., 708 F.2d 1081, 1132-1133 (7th Cir.), cert. denied,
464 U.S. 891 (1983), quoted at Pet. App. 9a.

   /22/ For that reason, the court of appeals' reliance on United
States v. Terminal R.R. Ass'n, 224 U.S. 383, 411 (1912), is misplaced.
 The passage of the Court's opinion quoted by the court of appeals
(Pet. App. 9a-10a) discussed a requirement of nondiscriminatory access
to an essential facility.  Terminal R.R. did not impose a general duty
to deal on "reasonable" terms.

   /23/ To the extent that the court of appeals considered denial of
access to an essential facility to constitute a distinct antitrust
offense, see Pet. App. 11a (referring to "the antitrust offenses of
monopolization, denial of essential facilities and attempted
monopolization"), we disagree.  Section 2 of the Sherman Act
establishes no offenses other than monopolization, attempted
monopolization, and combination or conspiracy to monopolize.  The
"essential facility" doctrine simply describes one form of conduct
that may, in some circumstances, constitute monopolization or
attempted monopolization.

   /24/ Areeda, Essential Facilities:  An Epithet In Need Of Limiting
Principles, 58 Antitrust L.J. 841, 852 (1990) ("A single firm's
facility * * * is 'essential' only when it is both critical to the
plaintiff's competitive vitality and the plaintiff is essential for
competition in the marketplace";  "(n)o one should be forced to deal
unless doing so is likely substantially to improve competition in the
marketplace by reducing price or by increasing output or
innovation.").

   /25/ Although the court did not explicitly articulate that
proposition, we believe it to be the logical implication of the
court's reasoning.  If Conrail's increase in its share of contribution
exposes it to liability even though that pricing policy maximizes
Conrail's short and long-term profits and does not injure consumers,
the only justification for so holding must be that Conrail's conduct
is not "economically reasonable" to D&H.

   /26/ The court of appeals discussed the district court's decision
in Laurel Sand, Pet. App. 10a;  subsequently, the Fourth Circuit
affirmed the judgment in that case.