In the

United States Court of Appeals

For the Seventh Circuit

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No. 04-3253

CHARLES H. SANDERSON,

Plaintiff-Appellant,

v.

CULLIGAN INTERNATIONAL COMPANY,

Defendant-Appellee.

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Appeal from the United States District Court for the

Southern District of Indiana, Indianapolis Division.

No. IP 00-0459-C H/K—David F. Hamilton, Judge.

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ARGUED APRIL 1, 2005—DECIDED JULY 11, 2005

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Before EASTERBROOK, MANION, and ROVNER, Circuit

Judges.

EASTERBROOK, Circuit Judge. Magnatech Corporation

sells “magnetic water conditioners.” Its sole stockholder

brought this suit in his own name, contending that

Culligan, a manufacturer of chemical and filtration systems

of water purification, violated the federal antitrust and

trademark laws by asserting that magnetic systems don’t

work. The suit might have been dismissed immediately, for

Magnatech rather than Sanderson is the appropriate

plaintiff. See, e.g., In re Industrial Gas Antitrust Litigation,
2 No. 04-3253

681 F.2d 514, 519-20 (7th Cir. 1982); Mid-State Fertilizer

Co. v. Exchange National Bank, 877 F.2d 1333, 1335-36 (7th

Cir. 1989). Sanderson does not claim to be injured as a

consumer; his injury (a reduction in the value of his stock)

is derivative of Magnatech’s. Cf. Illinois Brick Co. v.

Illinois, 431 U.S. 720 (1977). But Culligan did not catch

this, and it is not the sort of jurisdictional problem that a

court must notice on its own. See Associated General

Contractors v. California State Council of Carpenters, 459

U.S. 519, 535 & n.31 (1983); Hammes v. AAMCO

Transmissions, Inc., 33 F.3d 774, 778 (7th Cir. 1994).

Instead Culligan defended on the merits, prevailing in a

series of decisions. First the district court dismissed the

antitrust allegations for failure to state a claim on which

relief may be granted. 2001 U.S. Dist. LEXIS 8309 (S.D. Ind.

May 29, 2001). Then it granted summary judgment on the

Lanham Act claim to the extent that any of the statements

preceded the period of limitations. 2002 U.S. Dist. LEXIS

19212 (S.D. Ind. Sept. 20, 2002). Finally it terminated the

case, again by summary judgment, because none of the

remaining statements fits the Lanham Act’s definition of

advertising. 2004 U.S. Dist. LEXIS 15671 (S.D. Ind. July 23,

2004).

Because the case ended without a trial, we must assume

that magnetic systems can reduce lime scale deposits in

pipes, the only benefit that Magnatech and its Superior

Manufacturing Division claim for their products. (They do

not contend that magnetic treatment removes minerals or

biological agents from water.) On a motion to dismiss under

Fed. R. Civ. P. 12(b)(6), even highly unlikely propositions

must be taken as given. See, e.g., Miles v. Augusta City

Council, 710 F.2d 1542 (11th Cir. 1983) (assuming, as the

complaint alleged, that cats can talk). And the party opposing summary judgment receives the benefit of all reasonable inferences. Some evidence in the record suggests

that magnetic systems can reduce lime buildup, though
No. 04-3253 3

whether this evidence, which has not been published in a

scientific journal, meets the standard of Fed. R. Evid. 702

is doubtful.

Lime deposits in plumbing are calcium carbonate

(CaCO3), which is non-magnetic. Sanderson’s lawyer could

not explain why magnets affect nonferrous materials, and

the unpublished study to which his brief refers at length

does not do so either. This study finds that non-chemical

devices can reduce the hardness of calcium carbonate buildup in industrial air-conditioning systems, but only when the

water moves faster that 2.3 meters per second— and even

so the paper offers Sanderson little support, for it lumps

together a variety of non-chemical approaches and does not

report separately on the sort of magnetic systems that

Magnatech sells. See Young I. Cho, Efficiency of physical

water treatments in controlling calcium scale accumulation

in recirculating open cooling water system, American Society

of Heating, Refrigerating & Air-Conditioning Engineers

Research Project 1155-TRP (May 29, 2002). Positive reports

about magnetic water treatment are not replicable; this

plus the lack of a physical explanation for any effects are

hallmarks of junk science. For a review of the literature see

John S. Baker & Simon J. Judd, Magnetic amelioration of

scale formation, 30 Water Research 247 (1996). Nonetheless, we shall indulge the assumption that adverse statements about Magnatech’s products are calumnies.

Sanderson’s antitrust claim rests on §1 of the Sherman

Act, 15 U.S.C. §1, and fails at the threshold because

Sanderson does not contend (in the complaint or anywhere

else) that Culligan has conspired with other producers to

set price or output, or that it possesses the sort of market

power that would lead to condemnation under the Rule of

Reason. See National Collegiate Athletic Association v.

University of Oklahoma, 468 U.S. 85 (1984). Recast under

§2 it would fare no better, because Sanderson does not

contend that Culligan possesses monopoly power or that
4 No. 04-3253

bad-mouthing Magnatech’s products creates a dangerous

probability of monopolization. See Spectrum Sports, Inc. v.

McQuillan, 506 U.S. 447 (1993).

The problem is not that the pleading is short, as

Fed. R. Civ. P. 8 contemplates. Complaints need not allege

facts or legal theories. See Swierkiewicz v. Sorema N.A., 534

U.S. 506 (2002); Bartholet v. Reishauer A.G. (Zürich), 953

F.2d 1073 (7th Cir. 1992). Sanderson’s problem, rather, is

that his complaint and other papers demonstrate that the

claim rests on a belief that the antitrust laws forbid all

“unfair” business tactics, without regard to the likelihood

that the adversary will achieve and retain a monopoly at

consumers’ expense. Not at all. The antitrust laws protect

consumers, not producers. They favor competition of all

kinds, whether or not some other producer thinks the

competition “fair.” Much competition is unfair, or at least

ungentlemanly; it is designed to take sales away from one’s

rivals. There is no obligation to be kindly or cooperative

toward other producers. See, e.g., Verizon Communications

Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398

(2004). Some laws, including the Lanham Act, condemn

particular tactics deemed “unfair”; the Sherman Act is not

among these laws.

Antitrust law condemns practices that drive up prices by

curtailing output. See, e.g., NCAA, 468 U.S. at 103-07;

Broadcast Music, Inc. v. CBS, Inc., 441 U.S. 1, 1920 (1979).

False statements about a rival’s goods do not curtail output

in either the short or the long run. They just set the stage

for competition in a different venue: the advertising market.

Schachar v. American Academy of Ophthalmology, Inc., 870

F.2d 397 (7th Cir. 1989), another antitrust case based on a

supposed commercial falsehood, makes this point forcefully.

We observed:

Warfare among suppliers and their different products

is competition. Antitrust law does not compel your competitor to praise your product or sponsor your work. To
No. 04-3253 5

require cooperation or friendliness among rivals is to

undercut the intellectual foundations of antitrust law.

Unless one group of suppliers diminishes another’s

ability to peddle its wares (technically, reduces rivals’

elasticity of supply), there is not even the beginning of

an antitrust case, no reason to investigate further to

determine whether the restraint is “reasonable”.

870 F.2d at 399 (citations omitted; emphasis in original).

Magnatech remains free to sell to all who can be persuaded

that magnets reduce lime buildup; Culligan faces competition from dozens of other producers that use different,

though more conventional, technologies to filter, purify, or

reduce mineral content in water.

Sanderson contends that Schachar is incompatible

with American Society of Mechanical Engineers, Inc. v.

Hydrolevel Corp., 456 U.S. 556 (1982), but Schachar pointed

out that Hydrolevel depended on something missing there

(and here): an enforcement mechanism. Some producers

persuaded an engineering society to write standards in such

a way that only their products were acceptable. Because

many governmental bodies made compliance with the

standards mandatory (they were incorporated into building

codes and other legal mandates), this curtailed the available supply (rivals’ products having been knocked out) and

could have enabled the conspirators to raise prices.

Nothing comparable is alleged here. Although magnetic

devices were at one time banned from some trade shows

(supposedly at Culligan’s behest), that ban was lifted in the

mid-1990s and is outside the period of limitations, see 15

U.S.C. §15(b)—and anyway is some distance from the legal

restraint that led to Hydrolevel. Sanderson also maintains

that Culligan persuaded the Water Quality Association, a

trade group, to withhold its “Gold Seal” from magnetic

systems. No unit of government incorporates this “Gold

Seal” into any legal requirement; it is just a marketing
6 No. 04-3253

device. Anheuser-Busch might as well claim that by selling

a beer called “Blue Ribbon” Pabst has violated the antitrust

laws, unless Pabst is willing to bestow the same “Blue

Ribbon” on Budweiser. What producers say about each

others’ goods in an effort to sway consumers is competition

in action. Some other law may require judicial intervention

in order to increase the portion of truth in advertising; the

Sherman Act does not. Commercial speech is not actionable

under the antitrust laws. As we put it in Schachar: “There

can be no restraint of trade without a restraint.” 870 F.2d

at 397. See also Santana Products, Inc. v. Bobrick Washroom Equipment, Inc., 401 F.3d 123, 133 (3d Cir. 2005).

As for Sanderson’s claim under §43(a) of the Lanham Act,

15 U.S.C. §1125(a)(1)(B), the district court held that it

founders on the federal statute’s limited scope. Section 43(a)

covers only “commercial advertising or promotion”. The

district court concluded that Sanderson had just three

examples of supposedly false statements within the period

of limitations, and that all three were person-to-person

communications at trade shows. We held in First Health

Group Corp. v. BCE Emergis Corp., 269 F.3d 800, 804 (7th

Cir. 2001), that §43(a) addresses “promotional material disseminated to anonymous recipients”. This leaves to state

law the evaluation of oral statements and brochures at

trade shows. Sanderson does not contend that the statements of which he complains are “commercial advertising

or promotion” as First Health Group understood that

phrase. Indeed, he does not mention that opinion, though it

was the mainstay of the district court’s decision.

For that matter, Sanderson does not contend that any

of the statements within the period of limitations was

uttered by Culligan. He attributes these oral statements

and handouts to its franchisees or distributors and says

that Culligan must be vicariously liable because it insists

that they live up to high standards of business ethics. That

Culligan tries to prevent its distributors from committing

business torts, and reserves the right to stop selling to
No. 04-3253 7

anyone who does, hardly makes any of the distributors its

agent for the purpose of defaming rivals. Unsuccessful efforts at prevention do not imply agency or an assumption of

liability. If Culligan told its distributors to avoid reckless

driving and to obey all state laws, this would not make it

vicariously liable for their auto accidents or oblige it to pay

if a distributor shot his neighbor’s dog for barking late at

night.

Sanderson pursued some claims under state law, which

for reasons we have given is the only applicable body of

legal norms. The district judge granted summary judgment

to Culligan on all of the state-law claims, and Sanderson

does not contest this decision on appeal. His arguments

have been limited to the frivolous claims under federal law.

He should be thankful that Culligan has not filed a crossappeal from the district court’s order denying its motion for

sanctions. Neither the Sherman Act nor the Lanham Act is

designed to throw into federal courts all disputes about the

efficacy of competing products. Whether magnetic water

conditioners work is a question about science, not law, and

scientific disputes must be resolved by scientific means.

AFFIRMED

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—7-11-05