PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

______

Nos. 11-3301 and 11-3426

______

ZF MERITOR, LLC;

MERITOR TRANSMISSION CORPORATION,

Appellants, No. 11-3426

v.

EATON CORPORATION,

Appellant, No. 11-3301

______

On Appeal from the United States District Court

for the District of Delaware

(D.C. No. 1-06-cv-00623)

District Judge: Honorable Sue L. Robinson

______

Argued June 26, 2012

Before: FISHER and GREENBERG, Circuit Judges,

and OLIVER,* District Judge.

 

*

The Honorable Solomon Oliver, Jr., Chief Judge of

the United States District Court for the Northern District of 

Ohio, sitting by designation.
2

(Filed: September 28, 2012 )

Caeli A. Higney

Thomas G. Hungar

Theodore B. Olson (Argued)

Cynthia E. Richman

Geoffrey C. Weien

Gibson, Dunn & Crutcher

1050 Connecticut Avenue, N.W., 9th Floor

Washington, DC 20036

Erik T. Koons

William K. Lavery

Joseph A. Ostoyich

Baker Botts

1299 Pennsylvania Avenue, N.W.

The Warner

Washington, DC 20004

Donald E. Reid

Morris, Nichols, Arsht & Tunnell

1201 North Market Street

P.O. Box 1347

Wilmington, DE 19899

Counsel for Eaton Corporation

Jay N. Fastow (Argued)

Dickstein Shapiro

1633 Broadway

New York, NY 10019
3

Robert B. Holcomb

Adams Holcomb

1875 Eye Street. N.W., Suite 810

Washington, DC 20006

Christopher H. Wood

1489 Steele Street, Suite 111

Denver, CO 80206

Counsel for ZF Meritor, LLC and

Meritor Transmission Corp.

Michael S. Tarringer

Cafferty Faucher

1717 Arch Street, Suite 3610

Philadelphia, PA 19103

Counsel for American Antitrust

Institute

______

OPINION OF THE COURT

______

FISHER, Circuit Judge.

This case arises from an antitrust action brought by ZF 

Meritor, LLC (―ZF Meritor‖) and Meritor Transmission 

Corporation (―Meritor‖) (collectively, ―Plaintiffs‖) against 

Eaton Corporation (―Eaton‖) for allegedly anticompetitive 

practices in the heavy-duty truck transmissions market. The 

practices at issue are embodied in long-term agreements 
4

between Eaton, the leading supplier of heavy-duty truck 

transmissions in North America, and every direct purchaser of 

such transmissions. Following a four-week trial, a jury found 

that Eaton‘s conduct violated Section 1 and Section 2 of the 

Sherman Act, and Section 3 of the Clayton Act. Eaton filed a 

renewed motion for judgment as a matter of law, arguing that 

its conduct was per se lawful because it priced its products 

above-cost. The District Court disagreed, reasoning that 

notwithstanding Eaton‘s above-cost prices, there was 

sufficient evidence in the record to establish that Eaton 

engaged in anticompetitive conduct—specifically that Eaton 

entered into long-term de facto exclusive dealing 

arrangements—which foreclosed a substantial share of the 

market and, as a result, harmed competition. We agree with 

the District Court and will affirm the District Court‘s denial 

of Eaton‘s renewed motion for judgment as a matter of law.

We are also called upon to address several other 

issues. Although the jury returned a verdict in favor of 

Plaintiffs on the issue of liability, prior to trial, the District 

Court granted Eaton‘s motion to exclude the damages 

testimony of Plaintiffs‘ expert. The District Court also denied 

Plaintiffs‘ request for permission to amend the expert report 

to include alternate damages calculations. Consequently, the 

issue of damages was never tried and no damages were 

awarded. Plaintiffs cross-appeal from the District Court‘s 

order granting Eaton‘s motion to exclude and the District 

Court‘s subsequent denial of Plaintiffs‘ motion for 

clarification. For the reasons set forth below, we will affirm 

the District Court‘s orders to the extent that they excluded 

Plaintiffs‘ expert‘s testimony based on the damages 
5

calculations in his initial expert report, but reverse to the 

extent that the District Court denied Plaintiffs‘ request to 

amend the report to submit alternate damages calculations. 

Finally, although the District Court awarded no damages, it 

did enter injunctive relief against Eaton. On appeal, Eaton 

argues that Plaintiffs lack standing to seek injunctive relief 

because they are no longer in the heavy-duty truck 

transmissions market, and have expressed no concrete desire 

to re-enter the market. We agree and will vacate the District 

Court‘s order issuing injunctive relief.

I. BACKGROUND

A. Factual Background

1. Market Background

The parties agree that the relevant market in this case 

is heavy-duty ―Class 8‖ truck transmissions (―HD 

transmissions‖) in North America. Heavy-duty trucks include 

18-wheeler ―linehaul‖ trucks, which are used to travel long 

distances on highways, and ―performance‖ vehicles, such as 

cement mixers, garbage trucks, and dump trucks. There are 

three types of HD transmissions: three-pedal manual, which 

uses a clutch to change gears; two-pedal automatic; and twoor-three-pedal automated mechanical, which engages the 

gears mechanically through electronic controls. Linehaul and 

performance transmissions, which comprise over 90% of the 
6

market, typically use manual or automated mechanical 

transmissions.1

There are only four direct purchasers of HD 

transmissions in North America: Freightliner, LLC 

(―Freightliner‖), International Truck and Engine Corporation 

(―International‖), PACCAR, Inc. (―PACCAR‖), and Volvo 

Group (―Volvo‖). These companies are referred to as the 

Original Equipment Manufacturers (―OEMs‖). The ultimate 

consumers of HD transmissions, truck buyers, purchase 

trucks from the OEMs. Truck buyers have the ability to 

select many of the components used in their trucks, including 

the transmissions, from OEM catalogues called ―data books.‖ 

Data books list the alternative component choices, and 

include a price for each option relative to the ―standard‖ or 

―preferred‖ offerings. The ―standard‖ offering is the 

component that is provided to the customer unless the 

customer expressly designates another supplier‘s product, 

while the ―preferred‖ or ―preferentially-priced‖ offering is the 

lowest priced component in data book among comparable 

products. Data book positioning is a form of advertising, and 

standard or preferred positioning generally means that 

customers are more likely to purchase that supplier‘s 

components. Although customers may, and sometimes do, 

request components that are not published in a data book, 

doing so is often cumbersome and increases the cost of the 

 

1 A third category of heavy-duty trucks, ―specialty‖ 

vehicles, such as fire trucks, typically use automatic 

transmissions.
7

component. Thus, data book positioning is essential in the 

industry.

Eaton has long been a monopolist in the market for 

HD transmissions in North America.2 It began making HD

transmissions in the 1950s, and was the only significant 

manufacturer until Meritor entered the market in 1989 and 

began offering manual transmissions primarily for linehaul 

trucks. By 1999, Meritor had obtained approximately 17% of 

the market for sales of HD transmissions, including 30% for 

linehaul transmissions. In mid-1999, Meritor and ZF 

Friedrichshafen (―ZF AG‖), a leading supplier of HD 

transmissions in Europe, formed the joint venture ZF Meritor, 

and Meritor transferred its transmissions business into the 

joint venture.3 Aside from Meritor, and then ZF Meritor, no 

significant external supplier of HD transmissions has entered 

the market in the past 20 years.4

One purpose of the ZF Meritor joint venture was to 

adapt ZF AG‘s two-pedal automated mechanical 

 

2 At trial, Eaton disputed that it was a monopolist, but 

on appeal, does not challenge the jury‘s finding that it 

possessed monopoly power in the HD transmissions market 

in North America.

3

ZF AG is not a party to this lawsuit.

4

―External‖ transmission sales do not include 

transmissions manufactured by Volvo Group for use in its 

own trucks.
8

transmission, ASTronic, which was used exclusively in 

Europe, for the North American market. The redesign and 

testing took 18 months, and ZF Meritor introduced the 

adapted ASTronic model into the North American market in 

2001 under the new name FreedomLine. FreedomLine was 

the first two-pedal automated mechanical transmission to be 

sold in North America.

5 When FreedomLine was released, 

Eaton projected that automated mechanical transmissions 

would account for 30-50% of the market for all HD 

transmission sales by 2004 or 2005.

2. Eaton’s Long-Term Agreements

In late 1999 through early 2000, the trucking industry 

experienced a 40-50% decline in demand for new heavy-duty 

trucks. Shortly thereafter, Eaton entered into new long-term 

agreements (―LTAs‖) with each OEM. Although long-term 

supply contracts were not uncommon in the industry, and 

were also utilized by Meritor in the 1990s, Eaton‘s new LTAs 

were unprecedented in terms of their length and coverage of 

the market. Eaton signed LTAs with every OEM, and each 

LTA was for a term of at least five years.

Although the LTAs‘ terms varied somewhat, the key 

provisions were similar. Each LTA included a conditional 

rebate provision, under which an OEM would only receive 

rebates if it purchased a specified percentage of its 

 

5

Eaton did not produce a two-pedal automated 

mechanical transmission at the time, and would not fully 

release one until 2004.
9

requirements from Eaton.6 Eaton‘s LTA with Freightliner, 

the largest OEM, provided for rebates if Freightliner 

purchased 92% or more of its requirements from Eaton.7 

Under Eaton‘s LTA with International, Eaton agreed to make 

an up-front payment of $2.5 million, and any additional 

rebates were conditioned on International purchasing 87% to 

97.5% of its requirements from Eaton. The PACCAR LTA 

provided for an up-front payment of $1 million, and 

conditioned rebates on PACCAR meeting a 90% to 95% 

market-share penetration target. Finally, Eaton‘s LTA with 

Volvo provided for discounts if Volvo reached a market-share 

penetration level of 70% to 78%.8 The LTAs were not true 

 

6 We will refer to these as ―market-share‖ discounts or 

―market-penetration‖ discounts. It is important to distinguish 

such discounts from quantity or volume discounts. Quantity 

discounts provide the buyer with a lower price for purchasing 

a specified minimum quantity or volume from the seller. In 

contrast, market-share discounts grant the buyer a lower price 

for taking a specified minimum percentage of its purchases 

from the seller. Phillip E. Areeda & Herbert Hovenkamp, 

Antitrust Law ¶ 768, at 169 (3d ed. 2008).

7

In 2003, Freightliner and Eaton modified the 

agreement from a fixed 92% goal to a sliding scale, which 

entitled Freightliner to different rebates at different marketpenetration levels.

8

The share penetration targets in the Volvo LTA were 

lower because Volvo also manufactured transmissions for use 

in its own trucks. The commitment to Eaton, plus Volvo‘s 
10

requirements contracts because they did not expressly require 

the OEMs to purchase a specified percentage of their needs 

from Eaton. However, the Freightliner and Volvo LTAs gave 

Eaton the right to terminate the agreements if the share 

penetration goals were not met. Additionally, if an OEM did 

not meet its market-share penetration target for one year, 

Eaton could require repayment of all contractual savings.

Each LTA also required the OEM to publish Eaton as 

the standard offering in its data book, and under two of the 

four LTAs, the OEM was required to remove competitors‘ 

products from its data book entirely. Freightliner agreed to 

exclusively publish Eaton transmissions in its data books 

through 2002, but reserved the right to publish ZF Meritor‘s 

FreedomLine through the life of the agreement. In 2002, 

Freightliner and Eaton revised the LTA to allow Freightliner 

to publish other competitors‘ transmissions, but the revised 

LTA provided that Eaton had the right to ―renegotiate the 

rebate schedule‖ if Freightliner chose to publish a 

competitor‘s transmission. Subsequently, Freightliner agreed 

to a request by Eaton to remove FreedomLine from all of its 

data books. Eaton‘s LTA with International also required that 

International list exclusively Eaton transmissions in its 

electronic data book. International did, however, publish ZF 

Meritor‘s manual transmissions in its printed data book. The 

Volvo and PACCAR LTAs did not require that Eaton 

products be the exclusive offering, but did require that Eaton 

products be listed as the preferred offering. Both Volvo and 

 

own manufactured products, accounted for more than 85% of 

Volvo‘s needs.
11

PACCAR continued to list ZF Meritor‘s products in their data 

books. In the 1990s, Meritor‘s products were listed in all 

OEM component data books, and in some cases, had 

preferred positioning.

The LTAs also required the OEMs to ―preferential 

price‖ Eaton transmissions against competitors‘ equivalent

transmissions. Eaton claims that it sought preferential pricing 

to ensure that its low prices were passed on to truck buyers. 

However, there were no express requirements in the LTAs 

that savings be passed on to truck buyers (i.e., that Eaton‘s 

prices be reduced) and there is evidence that the ―preferential 

pricing‖ was achieved by both lowering the prices of Eaton‘s

products and raising the prices of competitors‘ products. 

Eaton notes that it was ―common‖ for price savings to be 

passed down to truck buyers, and a Volvo executive testified 

that some of the savings from Eaton products were passed 

down while others were kept to improve profit margins. 

Plaintiffs, however, emphasize that according to an email sent 

by Eaton to Freightliner, the Freightliner LTA required that 

ZF Meritor‘s products be priced at a $200 premium over 

equivalent Eaton products. Likewise, International agreed to 

an ―artificial[] penal[ty]‖ of $150 on all of ZF Meritor‘s

transmissions as of early 2003, and PACCAR imposed a 

penalty on customers who chose ZF Meritor‘s products.

Finally, each LTA contained a ―competitiveness‖ 

clause, which permitted the OEM to purchase transmissions 

from another supplier if that supplier offered the OEM a 

lower price or a better product, the OEM notified Eaton of the 

competitor‘s offer, and Eaton could not match the price or 

quality of the product after good faith efforts. The parties 
12

dispute the significance of the ―competitiveness‖ clauses. 

Eaton maintains that Plaintiffs were free to win the OEMs‘ 

business simply by offering a better product or a lower price, 

while Plaintiffs argue and presented testimony from OEM 

officials that, due to Eaton‘s status as a dominant supplier, the 

competitiveness clauses were effectively meaningless.

3. Competition under the LTAs and 

Plaintiffs’ Exit from the Market

After Eaton entered into its LTAs with the OEMs, ZF 

Meritor shifted its marketing focus from the OEM level to a 

strategy targeted at truck buyers. Also during this time 

period, both ZF Meritor and Eaton experienced quality and 

performance issues with their transmissions. For example, 

Eaton‘s Lightning transmission, which was an initial attempt 

by Eaton to compete with FreedomLine, was ―not perceived 

as a good [product]‖ and was ultimately taken off the market. 

ZF Meritor‘s FreedomLine and ―G Platform‖ transmissions 

required frequent repairs, and in 2002 and 2003, ZF Meritor 

faced millions of dollars in warranty claims.

During the life of the LTAs, the OEMs worked with 

Eaton to develop a strategy to combat ZF Meritor‘s growth.

On Eaton‘s urging, the OEMs imposed additional price 

penalties on customers that selected ZF Meritor products, 

―force fed‖ Eaton products to customers, and sought to 

persuade truck fleets using ZF Meritor transmissions to shift 

to Eaton transmissions. At all times relevant to this case, 

Eaton‘s average prices were lower than Plaintiffs‘ average 

prices, and on several occasions, Plaintiffs declined to grant 

price concessions requested by OEMs. Although Eaton‘s 
13

prices were generally lower than Plaintiffs‘ prices, Eaton 

never priced at a level below its costs.

By 2003, ZF Meritor determined that it was limited by 

the LTAs to no more than 8% of the market, far less than the 

30% that it had projected at the beginning of the joint venture. 

ZF Meritor officials concluded that the company could not 

remain viable with a market share below 10% and therefore 

decided to dissolve the joint venture. After ZF Meritor‘s 

departure, Meritor remained a supplier of HD transmissions 

and became a sales agent for ZF AG to ensure continued 

customer access to the FreedomLine. However, Meritor‘s 

market share dropped to 4% by the end of fiscal year 2005, 

and Meritor exited the business in January 2007.

B. Procedural History

On October 5, 2006, Plaintiffs filed suit against Eaton 

in the U.S. District Court for the District of Delaware, 

alleging that Eaton used unlawful agreements in restraint of 

trade, in violation of Section 1 of the Sherman Act, 15 U.S.C. 

§ 1; acted unlawfully to maintain a monopoly, in violation of 

Section 2 of the Sherman Act, 15 U.S.C. § 2; and entered into 

illegal restrictive dealing agreements, in violation of Section 3 

of the Clayton Act, 15 U.S.C. § 14. Specifically, Plaintiffs 

alleged that Eaton ―used its dominant position to induce all 

heavy duty truck manufacturers to enter into de facto

exclusive dealing contracts with Eaton,‖ and that such 

agreements foreclosed Plaintiffs from over 90% of the market 

for HD transmission sales. Plaintiffs sought treble damages, 

pursuant to Section 4 of the Clayton Act, 15 U.S.C. § 15, and 
14

injunctive relief, pursuant to Section 16 of the Clayton Act, 

15 U.S.C. § 26.

On February 17, 2009, Plaintiffs‘ expert, Dr. David 

DeRamus (―DeRamus‖), submitted a report on both liability 

and damages. On May 11, 2009, Eaton filed a motion, 

pursuant to Daubert v. Merrell Dow Pharmaceuticals, Inc., 

509 U.S. 579 (1993), to exclude DeRamus‘s testimony. The 

District Court ruled that DeRamus would be allowed to testify 

regarding liability, but excluded DeRamus‘s testimony on the 

issue of damages on the basis that his damages opinion failed 

the reliability requirements of Daubert and the Federal Rules 

of Evidence. ZF Meritor LLC v. Eaton Corp., 646 F. Supp. 

2d 663 (D. Del. 2009). Plaintiffs filed a motion for 

clarification, requesting that DeRamus be allowed to testify to 

alternate damages calculations based on other data in his 

expert report, or in the alternative, seeking permission for 

DeRamus to amend his expert report to present his alternate 

damages calculations. The District Court decided to defer 

resolution of the damages issue and bifurcate the case.

The parties proceeded to trial on liability. On October 

8, 2009, after a four-week trial, the jury returned a complete 

verdict for Plaintiffs, finding that Eaton had violated Sections 

1 and 2 of the Sherman Act, and Section 3 of the Clayton Act. 

Following the verdict, Plaintiffs asked the District Court to 

set a damages trial, but no damages trial was set at that time. 

On October 30, 2009, Plaintiffs supplemented their earlier 

motion for clarification, incorporating additional arguments 

based on developments at trial.
15

On November 3, 2009, Eaton filed a renewed motion 

for judgment as a matter of law, or in the alternative, for a 

new trial. Eaton‘s principal argument was that Plaintiffs 

failed to establish that Eaton engaged in anticompetitive 

conduct because Plaintiffs did not show, nor did they attempt 

to show, that Eaton priced its transmissions below its costs. 

Sixteen months later, on March 10, 2011, the District Court 

denied Eaton‘s motion, reasoning that Eaton‘s prices were not 

dispositive, and that there was sufficient evidence for a jury to 

conclude that Eaton‘s conduct unlawfully foreclosed 

competition in a substantial portion of the HD transmissions 

market. ZF Meritor LLC v. Eaton Corp., 769 F. Supp. 2d 684 

(D. Del. 2011).

On August 4, 2011, the District Court denied 

Plaintiffs‘ motion for clarification, and denied Plaintiffs‘ 

request to allow DeRamus to amend his expert report to 

include alternate damages calculations. The same day, the 

District Court entered an order awarding Plaintiffs $0 in 

damages. On August 19, 2011, the District Court entered an 

injunction prohibiting Eaton from ―linking discounts and 

other benefits to market penetration targets,‖ but stayed the 

injunction pending appeal. Eaton filed a timely notice of 

appeal and Plaintiffs filed a timely cross-appeal.

II. JURISDICTION AND STANDARD OF REVIEW

The District Court had jurisdiction over this case 

pursuant to 28 U.S.C. §§ 1331 and 1337. We have appellate 

jurisdiction under 28 U.S.C. § 1291.
16

We exercise plenary review over an order denying a 

motion for judgment as a matter of law. LePage’s Inc. v. 3M, 

324 F.3d 141, 145 (3d Cir. 2003) (en banc). A motion for 

judgment as a matter of law should be granted ―only if, 

viewing the evidence in the light most favorable to the 

nonmovant and giving it the advantage of every fair and 

reasonable inference, there is insufficient evidence from 

which a jury reasonably could find liability.‖ Id. at 145-46 

(quoting Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 

1166 (3d Cir. 1993)). We review questions of law underlying 

a jury verdict under a plenary standard of review. Id. at 146

(citing Bloom v. Consol. Rail Corp., 41 F.3d 911, 913 (3d Cir. 

1994)). Underlying legal questions aside, ―[a] jury verdict 

will not be overturned unless the record is critically deficient 

of that quantum of evidence from which a jury could have 

rationally reached its verdict.‖ Swineford v. Snyder Cnty., 15 

F.3d 1258, 1265 (3d Cir. 1994).

We review a district court‘s decision to exclude expert 

testimony for abuse of discretion. Montgomery Cnty. v. 

Microvote Corp., 320 F.3d 440, 445 (3d Cir. 2003). To the 

extent the district court‘s decision involved an interpretation 

of the Federal Rules of Evidence, our review is plenary. 

Elcock v. Kmart Corp., 233 F.3d 734, 745 (3d Cir. 2000). We 

also review a district court‘s decisions regarding discovery 

and case management for abuse of discretion. United States 

v. Schiff, 602 F.3d 152, 176 (3d Cir. 2010); In re Fine Paper 

Antitrust Litig., 685 F.2d 810, 817-18 (3d Cir. 1982).

We review legal conclusions regarding standing de 

novo, and the underlying factual determinations for clear 
17

error. Interfaith Cmty. Org. v. Honeywell Int’l, Inc., 399 F.3d 

248, 253 (3d Cir. 2005).

III. DISCUSSION

A. Effect of the Price-Cost Test

The most significant issue in this case is whether 

Plaintiffs‘ allegations under Sections 1 and 2 of the Sherman 

Act and Section 3 of the Clayton Act are subject to the pricecost test or the ―rule of reason‖ applicable to exclusive 

dealing claims. Under the rule of reason, an exclusive 

dealing arrangement will be unlawful only if its ―probable 

effect‖ is to substantially lessen competition in the relevant 

market. Tampa Elec. Coal Co. v. Nashville Coal Co., 365 

U.S. 320, 327-29 (1961); United States v. Dentsply Int’l, 399 

F.3d 181, 191 (3d Cir. 2005); Barr Labs., Inc. v. Abbott 

Labs., 978 F.2d 98, 110 (3d Cir. 1992). In contrast, under the 

price-cost test, to succeed on a challenge to the defendant‘s 

pricing practices, a plaintiff must prove ―that the 

[defendant‘s] prices are below an appropriate measure of [the 

defendant‘s] costs.‖ Brooke Grp. Ltd. v. Brown & 

Williamson Tobacco Corp., 509 U.S. 209, 222 (1993).9

 

9 Although Plaintiffs brought claims under three 

statutes (Sections 1 and 2 of the Sherman Act and Section 3 

of the Clayton Act), our analysis regarding the applicability 

of the price-cost test is the same for all of Plaintiffs‘ claims. 

In order to establish an actionable antitrust violation, a 

plaintiff must show both that the defendant engaged in 

anticompetitive conduct and that the plaintiff suffered 
18

 

antitrust injury as a result. Atl. Richfield Co. v. USA 

Petroleum Co., 495 U.S. 328, 339-40 (1990). Because a lack 

of anticompetitive conduct precludes a finding of antitrust 

injury, the key question for us is whether Eaton engaged in 

anticompetitive conduct. See id. at 339 (―Antitrust injury 

does not arise . . . until a private party is adversely affected by 

an anticompetitive aspect of the defendant‘s conduct.‖).

Sections 1 and 2 of the Sherman Act and Section 3 of 

the Clayton Act each include an anticompetitive conduct 

element, although each statute articulates that element in a 

slightly different way. Under Section 1 of the Sherman Act, a 

plaintiff must establish that the defendant was a party to a 

contract, combination or conspiracy that ―imposed an 

unreasonable restraint on trade.‖ 15 U.S.C. § 1; In re Ins.

Brokerage Antitrust Litig., 618 F.3d 300, 314-15 (3d Cir. 

2010). Under Section 2, a plaintiff must demonstrate that the 

defendant willfully acquired or maintained its monopoly 

power in the relevant market. 15 U.S.C. § 2; United States v. 

Grinnell Corp., 384 U.S. 564, 570-71 (1966). ―A monopolist 

willfully acquires or maintains monopoly power when it 

competes on some basis other than the merits.‖ LePage’s Inc. 

v. 3M, 324 F.3d 141, 147 (3d Cir. 2003) (en banc) (citing 

Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 

585, 605 n.32 (1985)). Finally, Section 3 of the Clayton Act 

makes it unlawful for a person to enter into an exclusive 

dealing contract where the effect of such an agreement is to 

substantially lessen competition or create a monopoly. 15 

U.S.C. § 14.
19

Eaton urges us to apply the price-cost test, arguing that 

Plaintiffs failed to establish that Eaton engaged in 

anticompetitive conduct or that Plaintiffs suffered an antitrust 

injury because Plaintiffs did not prove—or even attempt to 

prove—that Eaton priced its transmissions below an 

appropriate measure of its costs. We decline to adopt Eaton‘s 

unduly narrow characterization of this case as a ―pricing 

practices‖ case, i.e., a case in which price is the clearly 

predominant mechanism of exclusion. Plaintiffs consistently 

argued that the LTAs, in their entirety, constituted de facto

exclusive dealing contracts, which improperly foreclosed a 

substantial share of the market, and thereby harmed 

competition. Accordingly, as we will discuss below, we must 

evaluate the legality of Eaton‘s conduct under the rule of 

reason to determine whether the ―probable effect‖ of such 

conduct was to substantially lessen competition in the HD 

transmissions market in North America. Tampa Elec., 365 

U.S. at 327-29. The price-cost test is not dispositive.

1. Law of Exclusive Dealing

 

Exclusive dealing claims may be brought under 

Sections 1 and 2 of the Sherman Act and Section 3 of the 

Clayton Act. LePage’s, 324 F.3d at 157. Additionally, the 

Supreme Court has held that the price-cost test is not confined 

to any one antitrust statute, and applies to pricing practices 

claims under the Sherman Act, the Clayton Act, and the 

Robinson-Patman Act. Brooke Grp. Ltd. v. Brown & 

Williamson Tobacco Corp., 509 U.S. 209, 222-23 (1993); Atl.

Richfield, 495 U.S. at 339-40. Thus, regardless of which test 

applies, that test is applicable to each of Plaintiffs‘ claims.
20

An exclusive dealing arrangement is an agreement in 

which a buyer agrees to purchase certain goods or services 

only from a particular seller for a certain period of time. 

Herbert Hovenkamp, Antitrust Law ¶ 1800a, at 3 (3d ed. 

2011). The primary antitrust concern with exclusive dealing 

arrangements is that they may be used by a monopolist to 

strengthen its position, which may ultimately harm 

competition. Dentsply, 399 F.3d at 191. Generally, a 

prerequisite to any exclusive dealing claim is an agreement to 

deal exclusively. Tampa Elec., 365 U.S. at 326-27; see 

Dentsply, 399 F.3d at 193-94; Barr Labs., 978 F.2d at 110 & 

n.24.10 An express exclusivity requirement, however, is not 

necessary, LePage’s, 324 F.3d at 157, because we look past 

the terms of the contract to ascertain the relationship between 

the parties and the effect of the agreement ―in the real world.‖ 

Dentsply, 399 F.3d at 191, 194. Thus, de facto exclusive 

dealing claims are cognizable under the antitrust laws. 

LePage’s, 324 F.3d at 157.

Exclusive dealing agreements are often entered into for 

entirely procompetitive reasons, and generally pose little 

threat to competition. Race Tires Am., Inc. v. Hoosier Racing 

 

10 Evidence of an agreement is expressly required 

under Section 1 of the Sherman Act and Section 3 of the 

Clayton Act. See 15 U.S.C. §§ 1 and 14. However, an 

agreement is not necessarily required under Section 2 of the 

Sherman Act, which can provide a vehicle for challenging a 

dominant firm‘s unilateral imposition of exclusive dealing on 

customers. See 15 U.S.C. § 2; Herbert Hovenkamp, Antitrust 

Law ¶ 1821a, at 183 (3d ed. 2011).
21

Tire Corp., 614 F.3d 57, 76 (3d Cir. 2010) (―[I]t is widely 

recognized that in many circumstances, [exclusive dealing 

arrangements] may be highly efficient—to assure supply, 

price stability, outlets, investment, best efforts or the like—

and pose no competitive threat at all.‖) (quoting E. Food 

Servs. v. Pontifical Catholic Univ. Servs. Ass’n, 357 F.3d 1, 8 

(1st Cir. 2004)). For example, ―[i]n the case of the buyer, 

they may assure supply, afford protection against rises in 

price, enable long-term planning on the basis of known costs, 

and obviate the expense and risk of storage in the quantity 

necessary for a commodity having a fluctuating demand.‖ 

Standard Oil Co. v. United States, 337 U.S. 293, 306 (1949). 

From the seller‘s perspective, an exclusive dealing 

arrangement with customers may reduce expenses, provide 

protection against price fluctuations, and offer the possibility 

of a predictable market. Id. at 306-07; see also Ryko Mfg. Co. 

v. Eden Servs., 823 F.2d 1215, 1234 n.17 (8th Cir. 1987) 

(explaining that exclusive dealing contracts can help prevent 

dealer free-riding on manufacturer-supplied investments to 

promote rival‘s products). As such, competition to be an 

exclusive supplier may constitute ―a vital form of rivalry,‖ 

which the antitrust laws should encourage. Race Tires, 614 

F.3d at 83 (quoting Menasha Corp. v. News Am. Mktg. InStore, Inc., 354 F.3d 661, 663 (7th Cir. 2004)).

However, ―[e]xclusive dealing can have adverse 

economic consequences by allowing one supplier of goods or 

services unreasonably to deprive other suppliers of a market 

for their goods[.]‖ Jefferson Parish Hosp. Dist. No. 2 v. 

Hyde, 466 U.S. 2, 45 (1984) (O‘Connor, J., concurring), 

abrogated on other grounds by Ill. Tool Works Inc. v. Indep. 
22

Ink, Inc., 547 U.S. 28 (2006); Barry Wright, 724 F.2d at 236 

(explaining that ―under certain circumstances[,] foreclosure 

might discourage sellers from entering, or seeking to sell in, a 

market at all, thereby reducing the amount of competition that 

would otherwise be available‖). Exclusive dealing 

arrangements are of special concern when imposed by a 

monopolist. See Dentsply, 399 F.3d at 187 (―Behavior that 

otherwise might comply with antitrust law may be 

impermissibly exclusionary when practiced by a 

monopolist.‖). For example:

[S]uppose an established manufacturer has long 

held a dominant position but is starting to lose 

market share to an aggressive young rival. A 

set of strategically planned exclusive-dealing 

contracts may slow the rival‘s expansion by 

requiring it to develop alternative outlets for its 

product, or rely at least temporarily on inferior 

or more expensive outlets. Consumer injury 

results from the delay that the dominant firm 

imposes on the smaller rival‘s growth.

Phillip Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1802c, 

at 64 (2d ed. 2002). In some cases, a dominant firm may be 

able to foreclose rival suppliers from a large enough portion 

of the market to deprive such rivals of the opportunity to 

achieve the minimum economies of scale necessary to 

compete. Id.; see LePage’s, 324 F.3d at 159.

Due to the potentially procompetitive benefits of 

exclusive dealing agreements, their legality is judged under 

the rule of reason. Tampa Elec., 365 U.S. at 327. The 
23

legality of an exclusive dealing arrangement depends on 

whether it will foreclose competition in such a substantial 

share of the relevant market so as to adversely affect 

competition. Id. at 328; Barr Labs., 978 F.2d at 110. In 

conducting this analysis, courts consider not only the 

percentage of the market foreclosed, but also take into 

account ―the restrictiveness and the economic usefulness of 

the challenged practice in relation to the business factors 

extant in the market.‖ Barr Labs., 978 F.2d at 110-11 

(quoting Am. Motor Inns, Inc. v. Holiday Inns, Inc., 521 F.2d 

1230, 1251-52 n.75 (3d Cir. 1975)). As the Supreme Court 

has explained:

[I]t is necessary to weigh the probable effect of 

the contract on the relevant area of effective 

competition, taking into account the relative 

strength of the parties, the proportionate volume 

of commerce involved in relation to the total 

volume of commerce in the relevant market 

area, and the probable immediate and future 

effects which pre-emption of that share of the 

market might have on effective competition 

therein.

Tampa Elec., 365 U.S. at 329. In other words, an exclusive 

dealing arrangement is unlawful only if the ―probable effect‖ 

of the arrangement is to substantially lessen competition, 

rather than merely disadvantage rivals. Id.; Dentsply, 399 

F.3d at 191 (―The test [for determining anticompetitive effect] 

is not total foreclosure, but whether the challenged practices 

bar a substantial number of rivals or severely restrict the 

market‘s ambit.‖).
24

There is no set formula for evaluating the legality of an 

exclusive dealing agreement, but modern antitrust law 

generally requires a showing of significant market power by 

the defendant, Tampa Elec., 365 U.S. at 329; Race Tires, 614 

F.3d at 74-75; LePage’s, 324 F.3d at 158, substantial 

foreclosure, Tampa Elec., 365 U.S. at 327-28; United States 

v. Microsoft Corp., 253 F.3d 34, 69 (D.C. Cir. 2001), 

contracts of sufficient duration to prevent meaningful 

competition by rivals, CDC Techs., Inc. v. IDEXX Labs., Inc., 

186 F.3d 74, 81 (2d Cir. 1999); Omega Envtl., Inc. v. 

Gilbarco, Inc., 127 F.3d 1157, 1163 (9th Cir. 1997), and an 

analysis of likely or actual anticompetitive effects considered 

in light of any procompetitive effects, Race Tires, 614 F.3d at 

75; Dentsply, 399 F.3d at 194; Barr Labs., 978 F.2d at 111. 

Courts will also consider whether there is evidence that the 

dominant firm engaged in coercive behavior, Race Tires, 614 

F.3d at 77; SmithKline Corp. v. Eli Lilly & Co., 575 F.2d 

1056, 1062 (3d Cir. 1978), and the ability of customers to 

terminate the agreements, Dentsply, 399 F.3d at 193-94. The 

use of exclusive dealing by competitors of the defendant is 

also sometimes considered. Standard Oil, 337 U.S. at 309, 

314; NicSand, Inc. v. 3M Co., 507 F.3d 442, 454 (6th Cir. 

2007).

2. Brooke Group and the Price-Cost test

We turn now to some fundamental principles regarding 

predatory pricing claims and the price-cost test. ―Predatory 

pricing may be defined as pricing below an appropriate 

measure of cost for the purpose of eliminating competitors in 

the short run and reducing competition in the long run.‖ 

Cargill, Inc. v. Monfort of Colo., 479 U.S. 104, 117 (1986); 
25

see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 

U.S. 574, 584 n.8 (1986); Advo, Inc. v. Phila. Newspapers, 

Inc., 51 F.3d 1191, 1198 (3d Cir. 1995). The Supreme Court 

has expressed deep skepticism of predatory pricing claims. 

See Cargill, 479 U.S. at 121 n.17 (―Although the 

commentators disagree as to whether it is ever rational for a 

firm to engage in such conduct, it is plain that the obstacles to 

the successful execution of a strategy of predation are 

manifold, and that the disincentives to engage in such a 

strategy are accordingly numerous.‖) (citations omitted); 

Matsushita, 475 U.S. at 589 (―[P]redatory pricing schemes 

are rarely tried, and even more rarely successful.‖) (citations 

omitted). In the typical predatory pricing scheme, a firm 

reduces the sale price of its product to below-cost, intending 

to drive competitors out of the business. Weyerhaeuser Co. v. 

Ross-Simmons Hardwood Lumber Co., 549 U.S. 312, 318 

(2007). Then, once competitors have been eliminated, the 

firm raises its prices to supracompetitive levels. Id. For such 

a scheme to make economic sense, the firm must recoup the 

losses suffered during the below-cost phase in the 

supracompetitive phase. Id.; see Matsushita, 475 U.S. at 589 

(explaining that success under such a scheme is ―inherently 

uncertain‖ because the firm must sustain definite short-term 

losses, but the long-run gain depends on successfully 

eliminating competition).

In Brooke Group Ltd. v. Brown & Williamson Tobacco 

Corp., 509 U.S. at 222-24, the Supreme Court fashioned a 

two-part test that reflected this ―economic reality.‖ 

Weyerhaeuser, 549 U.S. at 318. The Court held that, to 

succeed on a predatory pricing claim, the plaintiff must 
26

prove: (1) ―that the prices complained of are below an 

appropriate measure of [the defendant‘s] costs‖; and (2) that 

the defendant had ―a dangerous probability . . . of recouping 

its investment in below-cost prices.‖ Brooke Grp., 509 U.S. 

at 222-24 (citations omitted). We are concerned only with the 

first requirement, which has become known as the price-cost 

test. In adopting the price-cost test, the Court rejected the 

notion that above-cost prices that are below general market 

levels or below the costs of a firm‘s competitors are 

actionable under the antitrust laws. Id. at 223. ―Low prices 

benefit consumers regardless of how those prices are set, and 

so long as they are above predatory levels [i.e., above-cost], 

they do not threaten competition.‖ Id. (quoting Atl. Richfield 

Co. v. USA Petroleum Co., 495 U.S. 328, 340 (1990)). Low, 

but above-cost, prices are generally procompetitive because 

―the exclusionary effect of prices above a relevant measure of 

cost [generally] reflects the lower cost structure of the alleged 

predator, and so represents competition on the merits[.]‖ Id.; 

see Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 

477, 488 (1977) (―The antitrust laws . . . were enacted for  ̳the 

protection of competition, not competitors.‘‖) (quoting Brown 

Shoe Co. v. United States, 370 U.S. 294, 320 (1962)). The 

Court acknowledged that there may be situations in which 

above-cost prices are anticompetitive, but stated that it ―is 

beyond the practical ability of a judicial tribunal‖ to ascertain 

whether above-cost pricing is anticompetitive ―without 

courting intolerable risks of chilling legitimate price-cutting.‖ 

Brooke Grp., 509 U.S. at 223 (citing Phillip Areeda & 

Herbert Hovenkamp, Antitrust Law ¶¶ 714.2, 714.3 (Supp. 

2002)). ―To hold that the antitrust laws protect competitors 

from the loss of profits due to [above-cost] price competition 
27

would, in effect, render illegal any decision by a firm to cut 

prices in order to increase market share. The antitrust laws 

require no such perverse result.‖ Id. (quoting Cargill, 479 

U.S. at 116). Significantly, because ―[c]utting prices in order 

to increase business often is the very essence of competition . 

. . , [i]n cases seeking to impose antitrust liability for prices 

that are too low, mistaken inferences are  ̳especially costly, 

because they chill the very conduct that antitrust laws are 

designed to protect.‘‖ Pac. Bell Tel. Co. v. linkLine 

Commc’ns, Inc., 555 U.S. 438, 451 (2009) (quoting 

Matsushita, 475 U.S. at 594) (additional citations omitted).

3. Effect of the Price-Cost Test on 

Plaintiffs’ Exclusive Dealing Claims

Eaton argues that principles from the predatory pricing 

case law apply in this case because Plaintiffs‘ claims are, at 

their core, no more than objections to Eaton offering prices, 

through its rebate program, which Plaintiffs were unable to 

match. Eaton contends that Plaintiffs have identified nothing, 

other than Eaton‘s pricing practices, that incentivized the 

OEMs to enter into the LTAs, and because price was the 

incentive, we must apply the price-cost test. We 

acknowledge that even if a plaintiff frames its claim as one of 

exclusive dealing, the price-cost test may be dispositive. 

Implicit in the Supreme Court‘s creation of the price-cost test 

was a balancing of the procompetitive justifications of abovecost pricing against its anticompetitive effects (as well as the 

anticompetitive effects of allowing judicial inquiry into 

above-cost pricing), and a conclusion that the balance always 

tips in favor of allowing above-cost pricing practices to stand. 

See linkLine, 555 U.S. at 451; Brooke Grp., 509 U.S. at 223. 
28

Thus, in the context of exclusive dealing, the price-cost test 

may be utilized as a specific application of the ―rule of 

reason‖ when the plaintiff alleges that price is the vehicle of 

exclusion. See, e.g., Concord Boat Corp. v. Brunswick Corp., 

207 F.3d 1039, 1060-63 (8th Cir. 2000).

Here, Eaton argues that the price-cost test is 

dispositive, and therefore that Plaintiffs‘ claims must fail 

because Plaintiffs failed to show that the market-share rebates 

offered by Eaton pursuant to the LTAs resulted in below-cost 

prices. We do not disagree that predatory pricing principles, 

including the price-cost test, would control if this case 

presented solely a challenge to Eaton‘s pricing practices.

11

 

 

11 Despite the arguments of amicus curiae, the 

American Antitrust Institute, our decision in LePage’s v. 3M

does not indicate otherwise. In LePage’s, we declined to 

apply the price-cost test to a challenge to a bundled rebate 

scheme, reasoning that such a scheme was better analogized 

to unlawful tying than to predatory pricing. See 324 F.3d at 

155. In that case, the plaintiff (LePage‘s) was the market 

leader in sales of ―private label‖ (store brand) transparent 

tape. Id. at 144. As LePage‘s market share fell, it brought 

suit against 3M, alleging that 3M, which manufactured 

Scotch tape, some private label tape, and a number of other 

products, leveraged its monopoly power over Scotch brand 

tape and other products to monopolize the private label tape 

market. Id. at 145. Specifically, LePage‘s challenged 3M‘s 

multi-tiered bundled rebate program, which offered 

progressively higher rebates when customers increased 

purchases across 3M‘s different product lines. Id. The rebate 
29

 

programs also set customer-specific target growth rates. Id. at 

154. The sizes of the rebates were linked to the number of 

product lines in which the targets were met; if a customer 

failed to meet the target for any one product, it would lose the 

rebates across all product lines. Id. LePage‘s could not offer 

these discounts because it did not sell the same diverse array 

of products as 3M. Id. at 155.

Relying on Brooke Group Ltd. v. Brown & Williamson 

Tobacco Corp., 509 U.S. 209 (1993), 3M argued that its 

bundled rebate program was lawful because the rebates never 

resulted in below-cost pricing. We disagreed, reasoning that 

the principal anticompetitive effect of 3M‘s bundled rebates 

was analogous to an unlawful tying arrangement: when 

offered by a monopolist, the rebates ―may foreclose portions 

of the market to a potential competitor who does not 

manufacture an equally diverse group of products and who 

therefore cannot make a comparable offer.‖ LePage’s, 324 at 

155.

For several reasons, we interpret LePage’s narrowly. 

Most important, in light of the analogy drawn in LePage’s

between bundled rebates and unlawful tying, which ―cannot 

exist unless two separate product markets have been linked,‖ 

Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 21 

(1984), abrogated on other grounds by Ill. Tool Works Inc. v. 

Indep. Ink, Inc., 547 U.S. 28 (2006), LePage’s is inapplicable 

where, as here, only one product is at issue and the plaintiffs 

have not made any allegations of bundling or tying. The 

reasoning of LePage’s is limited to cases in which a singleproduct producer is excluded through a bundled rebate 
30

 

program offered by a producer of multiple products, which 

conditions the rebates on purchases across multiple different 

product lines. Accordingly, we join our sister circuits in 

holding that the price-cost test applies to market-share or 

volume rebates offered by suppliers within a single-product 

market. See NicSand, Inc. v. 3M Co., 507 F.3d 442, 452 (6th 

Cir. 2007); Concord Boat Corp. v. Brunswick Corp., 207 F.3d 

1039, 1061 (8th Cir. 2000); Barry Wright Corp. v. ITT 

Grinnell Corp., 724 F.2d 227, 236 (1st Cir. 1983).

Additionally, several of the bases on which we 

distinguished Brooke Group have been undermined by 

intervening Supreme Court precedent, which counsels caution 

in extending LePage’s. For example, we indicated in 

LePage’s, 324 F.3d at 151, that Brooke Group might be 

confined to the Robinson-Patman Act, but the Supreme Court 

has made clear that the standard adopted in Brooke Group

also applies to predatory pricing claims under the Sherman 

Act. Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber 

Co., 549 U.S. 312, 318 n.1 (2007). Additionally, LePage’s, 

324 F.3d at 151-52, suggested that Brooke Group is not 

applicable in cases involving monopolists, but the Supreme 

Court has since applied Brooke Group‘s price-cost test to 

claims against a monopolist, Pac. Bell Tel. Co. v. linkLine

Commc’ns, Inc., 555 U.S. 438, 447-48 (2009), and a 

monopsonist, Weyerhaeuser, 549 U.S. at 320-25. Finally, we 

observed in LePage’s that, in the years following Brooke 

Group, the Supreme Court had only cited the case four times 

(and for unrelated propositions), but since LePage’s, the 

Court has reaffirmed and extended Brooke Group. See 
31

The lesson of the predatory pricing case law is that, generally, 

above-cost prices are not anticompetitive, and although there 

may be rare cases where above-cost prices are 

anticompetitive in the long run, it is ―beyond the practical 

ability‖ of courts to identify those rare cases without creating 

an impermissibly high risk of deterring legitimate 

procompetitive behavior (i.e., price-cutting). linkLine, 555 

U.S. at 452; Weyerhaeuser, 549 U.S. at 318-19; Brooke Grp., 

509 U.S. at 223. These principles extend to above-cost 

discounting or rebate programs, which condition the 

discounts or rebates on the customer‘s purchasing of a 

specified volume or a specified percentage of its requirements 

from the seller. See NicSand, 507 F.3d at 451-52 (applying 

price-cost test to a challenge to up-front payments offered by 

a supplier to several large retailers on the basis that such 

payments were ―nothing more than  ̳price reductions offered 

to the buyers for the exclusive right to supply a set of stores 

under multi-year contracts‘‖); Concord Boat, 207 F.3d at 

1060-63 (applying price-cost test to volume discounts and 

market-share discounts offered by a manufacturer); Barry 

Wright, 724 F.2d at 232 (applying the price-cost test to 

uphold discounts linked to a requirements contract); see also 

 

linkLine, 555 U.S. at 447-48; Weyerhaeuser, 549 U.S. at 325. 

In doing so, the Court emphasized the importance of Brooke 

Group in light of ―developments in economic theory and 

antitrust jurisprudence,‖ and downplayed the significance of 

seemingly inconsistent circuit court antitrust precedent from 

the 1950s and 1960s, some of which we referenced in 

LePage’s. See linkLine, 555 U.S. at 452 n.3.
32

Race Tires, 614 F.3d at 79 (―[I]t is no more an act of 

coercion, collusion, or [other anticompetitive conduct] for [a 

supplier] . . . to offer more money to [a customer] than it is 

for such [a] supplier[] to offer the lowest . . . prices.‖).

Moreover, a plaintiff‘s characterization of its claim as 

an exclusive dealing claim does not take the price-cost test off 

the table. Indeed, contracts in which discounts are linked to 

purchase (volume or market share) targets are frequently 

challenged as de facto exclusive dealing arrangements on the 

grounds that the discounts induce customers to deal 

exclusively with the firm offering the rebates. Hovenkamp ¶ 

1807a, at 132. However, when price is the clearly 

predominant mechanism of exclusion, the price-cost test tells 

us that, so long as the price is above-cost, the procompetitive 

justifications for, and the benefits of, lowering prices far 

outweigh any potential anticompetitive effects. See Brooke 

Grp., 509 U.S. at 223; Concord Boat, 207 F.3d at 1062 

(noting that there is always a legitimate business justification 

for lowering prices: attempting to attract additional business).

In each of the cases relied upon by Eaton, the Supreme 

Court applied the price-cost test, regardless of the way in 

which the plaintiff cast its grievance, because pricing itself 

operated as the exclusionary tool. For example, in Cargill, 

Inc. v. Monfort of Colorado, Inc., the plaintiff argued that a 

proposed merger between vertically integrated firms violated 

Section 7 of the Clayton Act because the result of the merger 

would have been to substantially lessen competition or create 

a monopoly. 479 U.S. at 114. The plaintiff offered, as a 

theory of antitrust injury, that it faced a threat of lost profits 

stemming from the possibility that the defendant, after the 
33

merger, would lower its prices to a level at or above-cost. Id.

at 114-15. The plaintiff claimed that it would have to respond 

by lowering its prices, which would cause it to suffer a loss in 

profitability. Id. at 115. The Supreme Court held that such a 

theory did not present a cognizable antitrust injury, reasoning 

that ―the antitrust laws do not require the courts to protect 

small businesses from the loss of profits due to continued 

[above-cost] competition.‖ Id. at 116.

Atlantic Richfield Co. v. USA Petroleum Co. involved 

an allegation that a vertical price-fixing agreement was 

unlawful under Section 1 of the Sherman Act. 495 U.S. at 

331. In that case, the plaintiff was an independent retail 

marketer of gasoline, which bought gasoline from major 

petroleum companies for resale under its own name. Id. The 

defendant was an integrated oil company, which sold directly 

to consumers through its own stations, and sold indirectly 

through brand dealers. Id. Facing competition from 

independent marketers like the plaintiff, the defendant 

adopted a new marketing strategy, under which it encouraged 

its dealers to match the retail prices offered by independents 

by offering discounts and reducing the dealers‘ costs. Id. at 

331-32. The plaintiff brought suit under the Sherman Act, 

alleging that the defendant conspired with its dealers to sell 

gasoline at below-market levels. Id. at 332. The district court 

granted summary judgment for the defendant on the basis that 

the plaintiff had not shown that the defendant engaged in 

predatory pricing, and thus had not shown any antitrust 

injury. Id. at 333. The U.S. Court of Appeals for the Ninth 

Circuit reversed, USA Petroleum Co. v. Atl. Richfield Co., 

859 F.2d 687, 693 (9th Cir. 1988), reasoning that a showing 
34

of predatory pricing was not necessary to establish antitrust 

injury; rather, the antitrust laws were designed to ensure that 

market forces alone determine what goods and services are 

offered, and at what price they are sold, and thus, an antitrust 

injury could result from a disruption in the market. The 

Supreme Court disagreed, explaining that where a firm (or a 

group of firms) lowers prices pursuant to a vertical 

agreement, but maintains those prices above predatory levels, 

any business lost by rivals cannot be viewed as an 

anticompetitive consequence of the agreement. Atl. Richfield, 

495 U.S. at 337. ―A firm complaining about the harm it 

suffers from nonpredatory price competition is really 

claiming that it is unable to raise prices.‖ Id. at 337-38.

In Brooke Group, the plaintiff and the defendant were 

competitors in the cigarette market in the early 1980s. 509 

U.S. at 212. At that time, demand for cigarettes in the United 

States was declining and the plaintiff, once a major force in 

the industry, had seen its market share drop to 2%. Id. at 214. 

In response, the plaintiff developed a line of generic 

cigarettes, which were significantly cheaper than branded 

cigarettes. Id. The plaintiff promoted the generic cigarettes 

at the wholesale level by offering rebates that increased with 

the volume of cigarettes ordered. Id. Losing volume and 

profits on its branded products, the defendant entered the 

generic cigarette market. Id. at 215. At the retail level, the 

suggested price of the defendant‘s generic cigarettes was the 

same as that of the plaintiff‘s cigarettes, but the defendant‘s 

volume discounts to wholesalers were larger. Id. The 

plaintiff responded by increasing its wholesale rebates, and a 

price war ensued. Id. at 216. Subsequently, the plaintiff filed 
35

a complaint against the defendant under the Robinson-Patman 

Act, 15 U.S.C. § 13(a), alleging that the defendant‘s volume 

rebates amounted to unlawful price discrimination. Id. The 

plaintiff explained that it would have been unable to reduce 

its wholesale rebates without losing substantial market share. 

Id. Accordingly, because the ―essence‖ of the plaintiff‘s 

claim was that its ―rival ha[d] priced its products in an unfair 

manner with an object to eliminate or retard competition and 

thereby gain and exercise control over prices in the relevant 

market,‖ the plaintiff had an obligation to show that the 

defendant‘s prices were below its costs. Id. at 222.

Here, in contrast to Cargill, Atlantic Richfield, and 

Brooke Group, Plaintiffs did not rely solely on the 

exclusionary effect of Eaton‘s prices, and instead highlighted 

a number of anticompetitive provisions in the LTAs. 

Plaintiffs alleged that Eaton used its position as a supplier of 

necessary products to persuade OEMs to enter into 

agreements imposing de facto purchase requirements of 

roughly 90% for at least five years, and that Eaton worked in 

concert with the OEMs to block customer access to Plaintiffs‘ 

products, thereby ensuring that Plaintiffs would be unable to 

build enough market share to pose any threat to Eaton‘s 

monopoly. Therefore, because price itself was not the clearly 

predominant mechanism of exclusion, the price-cost test 

cases are inapposite, and the rule of reason is the proper 

framework within which to evaluate Plaintiffs‘ claims.

We recognize that Eaton‘s rebates were part of 

Plaintiffs‘ case. DeRamus testified about the exclusionary 

effect of the rebates, OEM officials testified that Eaton 

offered lower prices, and Plaintiffs‘ counsel stated in oral 
36

argument that part of the reason ZF Meritor could not 

increase sales above a certain level was that ―the OEMs were 

trying to hit those [share-penetration] targets to get their 

money from Eaton.‖ Eaton‘s post-rebate prices were 

attractive to the OEMs, and Eaton‘s low prices may, in fact, 

have been an inducement for the OEMs to enter into the 

LTAs. That fact is not irrelevant, as it may help explain why 

the OEMs agreed to otherwise unfavorable terms and it may 

help to rebut an argument that the agreements were 

inefficient. Hovenkamp ¶ 1807b, at 134. However, contrary 

to Eaton‘s assertions, that fact is not dispositive.

Plaintiffs presented considerable evidence that Eaton 

was a monopolist in the industry and that it wielded its 

monopoly power to effectively force every direct purchaser of 

HD transmissions to enter into restrictive long-term 

agreements, despite the inclusion in such agreements of terms 

unfavorable to the OEMs and their customers. Significantly, 

there was considerable testimony that the OEMs did not want 

to remove ZF Meritor‘s transmissions from their data books, 

but that they were essentially forced to do so or risk financial 

penalties or supply shortages. Several OEM officials testified 

that exclusive data book listing was not a common practice in 

the industry and, in fact, it was probably detrimental to 

customers. An email between Freightliner employees stated:

―From a customer perspective, publishing [ZF Meritor‘s] 

product is probably the right thing to do and [it] should never 

have been taken out of the book. It is a good product with 

considerable demand in the marketplace.‖ The email went on 

to conclude, however, that including ZF Meritor‘s products 

would not be ―prudent‖ because it would jeopardize 
37

Freightliner‘s relationship with Eaton. Eaton itself even 

acknowledged that the OEMs were dissatisfied. Internal 

Eaton correspondence reveals that PACCAR complained that 

the LTAs were preventing it from promoting a competitive 

product (FreedomLine), which was being demanded by truck 

buyers. In fact, PACCAR felt that Eaton was holding it 

―hostage.‖

Plaintiffs also introduced evidence that not only were 

the rebates conditioned on the OEMs meeting the market 

penetration targets, but so too was Eaton‘s continued 

compliance with the agreements. As one OEM executive 

testified, if the market penetration targets were not met, the 

OEMs ―would have a big risk of cancellation of the contract, 

price increases, and shortages if the market [was] difficult.‖ 

Eaton was a monopolist in the HD transmissions market, and 

even if an OEM decided to forgo the rebates and purchase a 

significant portion of its requirements from another supplier, 

there would still have been a significant demand from truck 

buyers for Eaton products. Therefore, losing Eaton as a 

supplier was not an option.

Accordingly, this is not a case in which the 

defendant‘s low price was the clear driving force behind the 

customer‘s compliance with purchase targets, and the 

customers were free to walk away if a competitor offered a 

better price. Compare Concord Boat, 207 F.3d at 1063 (in 

deciding to apply price-cost test, noting that customers were 

free to walk away at any time and did so when the 

defendant‘s competitors offered better discounts), with 

Dentsply, 399 F.3d at 189-96 (applying exclusive dealing 

analysis where the defendant threatened to refuse to continue 
38

dealing with customers if customers purchased rival‘s 

products, and no customer could stay in business without the 

defendant‘s products). Rather, Plaintiffs introduced evidence 

that compliance with the market penetration targets was 

mandatory because failing to meet such targets would 

jeopardize the OEMs‘ relationships with the dominant 

manufacturer of transmissions in the market. See Dentsply, 

399 F.3d at 194 (noting that ―[t]he paltry penetration in the 

market by competitors over the years has been a refutation 

of‖ the theory that a competitor could steal the defendant‘s 

customers by offering a better deal or a lower price ―by 

tangible and measurable results in the real world‖); id. at 195 

(explaining that an exclusivity policy imposed by a dominant 

firm is especially troubling where it presents customers with 

an ―all-or-nothing‖ choice).

Although the Supreme Court has created a safe harbor 

for above-cost discounting, it has not established a per se rule 

of non-liability under the antitrust laws for all contractual 

practices that involve above-cost pricing. See Cascade 

Health Solutions v. PeaceHealth, 515 F.3d 883, 901 (9th Cir.

2007) (stating that the Supreme Court‘s predatory pricing 

decisions have not ―go[ne] so far as to hold that in every case 

in which a plaintiff challenges low prices as exclusionary 

conduct[,] the plaintiff must prove that those prices were 

below cost‖). Nothing in the case law suggests, nor would it 

be sound policy to hold, that above-cost prices render an 

otherwise unlawful exclusive dealing agreement lawful. We 

decline to impose such an unduly simplistic and mechanical 

rule because to do so would place a significant portion of 
39

anticompetitive conduct outside the reach of the antitrust laws 

without adequate justification. 

―[T]he means of illicit exclusion, like the means of 

legitimate competition, are myriad.‖ Microsoft, 253 F.3d at 

58; LePage’s, 324 F.3d at 152 (― ̳Anticompetitive conduct‘ 

can come in too many different forms, and is too dependent 

on context, for any court or commentator ever to have 

enumerated all the varieties.‖) (quoting Caribbean Broad 

Sys., Ltd. v. Cable & Wireless PLC, 148 F.3d 1080, 1087 

(D.C. Cir. 1998)). The law has long recognized forms of 

exclusionary conduct that do not involve below-cost pricing, 

including unlawful tying, Jefferson Parish, 446 U.S. at 21; 

Standard Oil, 337 U.S. at 305-06, enforcement of a legal 

monopoly provided by a patent procured through fraud, 

LePage’s, 324 F.3d at 152 (citing Walker Process Equip., Inc. 

v. Food Mach. & Chem. Corp., 382 U.S. 172, 174 (1965)), 

refusal to deal, Aspen Skiing Co. v. Aspen Highlands Skiing 

Corp., 472 U.S. 585, 601-02 (1985); Otter Tail Power Co. v. 

United States, 410 U.S. 366 (1973), exclusive dealing, Tampa 

Electric, 365 U.S. at 327; Dentsply, 399 F.3d at 184, and 

other unfair tortious conduct targeting competitors, Conwood 

Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768 (6th Cir. 2002); 

Int’l Travel Arrangers, Inc. v. Western Airlines, Inc., 623 

F.2d 1255 (8th Cir. 1980).

Despite Eaton‘s arguments to the contrary, we find 

nothing in the Supreme Court‘s recent predatory pricing 

decisions to indicate that the Court intended to overturn 

decades of other precedent holding that conduct that does not 

result in below-cost pricing may nevertheless be 

anticompetitive. Rather, as we explained above, Brooke 
40

Group and the cases preceding it each involved an allegation 

that the defendant‘s pricing itself operated as the exclusionary 

tool. See Brooke Grp., 509 U.S. at 212-22; Atl. Richfield, 495 

U.S. at 331-38; Cargill, 409 U.S. at 114-16. Eaton places 

particular emphasis on two recent cases, arguing that such 

cases demonstrate the Supreme Court‘s willingness to extend 

the price-cost test beyond the traditional predatory pricing 

context. However, neither of these cases suggests that the 

price-cost test applies to the exclusive dealing claims at issue 

in our case.

In Weyerhaeuser Co. v. Ross-Simmons Hardwood 

Lumber Co., 549 U.S. at 315, 320, the Supreme Court applied 

the price-cost test to a case involving an allegation of 

predatory bidding by a monopsonist.12 In a predatory bidding 

scheme, a purchaser of inputs bids up the market price of a 

critical input to such high levels that rival buyers cannot 

survive, and as a result acquires or maintains monopsony 

power. Id. Then, ―if all goes as planned,‖ once rivals have 

been driven out, the predatory bidder will reap monopsonistic 

profits to offset the losses that it suffered during the highbidding stage. Id. at 321. Therefore, the Court explained, 

predatory pricing and predatory bidding claims are 

―analytically similar.‖ Id. ―Both claims involve the 

 

12 Monopsony power is market power on the buy (or 

input) side of the market. Weyerhaeuser, 549 U.S. at 320. 

―As such, a monopsony is to the buy side of the market what 

a monopoly is to the sell side[.]‖ Id. (citing Roger Blair & 

Jeffrey Harrison, Antitrust Policy and Monopsony, 76 Cornell 

L. Rev. 297, 301, 320 (1991)).
41

deliberate use of unilateral pricing measures for 

anticompetitive purposes.‖ Id. at 322. Moreover, the Court 

noted, bidding up input prices, like lowering costs, is often 

―the very essence of competition.‖ Id. at 323 (citing Brooke 

Grp., 509 U.S. at 226). ―Just as sellers use output prices to 

compete for purchasers, buyers use bid prices to compete for 

scarce inputs. There are myriad legitimate reasons—ranging 

from benign to affirmatively procompetitive—why a buyer 

might bid up input prices.‖ Id. Furthermore, high bidding 

will often benefit consumers because it will likely lead to the 

firm‘s acquisition of more inputs, which will generally lead to 

the manufacture of more outputs, and an increase in outputs 

generally results in lower prices for consumers. Id. at 324. 

Accordingly, the Supreme Court adopted a variation of the 

price-cost test for allegations of predatory bidding: ―[a] 

plaintiff must prove that the alleged predatory bidding led to 

below-cost pricing of the predator‘s outputs.‖ Id. at 325. In 

other words, the firm‘s predatory bidding must have caused 

the cost of the relevant output to increase above the revenues 

generated by the sale of such output. Id.

In Pacific Bell Telephone Co. v. linkLine 

Communications, Inc., the Supreme Court relied, in part, on 

the price-cost test to hold that the plaintiffs‘ price-squeezing 

claim was not cognizable under the Sherman Act. 555 U.S. at 

457. In that case, the plaintiffs alleged that the defendant, an 

integrated firm that sold inputs at wholesale and sold finished 

goods at retail, drove its competitors out of the market by 

raising the wholesale price while simultaneously lowering the 

retail price. Id. at 442. The Court held that, pursuant to 

Verizon Communications Inc. v. Trinko, LLP, 540 U.S. at 
42

409-10, the wholesale claim was not cognizable because the 

defendant had no antitrust duty to deal with its competitors at 

the wholesale level, and pursuant to Brooke Group, the retail 

claim was not cognizable because the defendant‘s retail prices 

were above cost. linkLine, 555 U.S. at 457. As to the retail 

claim, the Court explained that ―recognizing a price-squeeze 

claim where the defendant‘s retail price remains above cost 

would invite the precise harm‖ the price-cost test was 

designed to avoid: a firm might refrain from aggressive price 

competition to avoid potential antitrust liability. Id. at 451-

52. Recognizing that the plaintiffs were trying to combine 

two non-cognizable claims into a new form of antitrust 

liability, the Court explained that ―[t]wo wrong claims do not 

make one that is right.‖ Id. at 457.

Contrary to Eaton‘s argument, neither Weyerhaeuser

nor linkLine stands for the proposition that the price-cost test 

applies here. Weyerhaeuser established the straightforward 

principle that the exercise of market power on prices for the

purpose of driving out competitors should be judged by the 

same standard, whether such power is exercised on the input 

or output side of the market. See 549 U.S. at 321, 325. And 

linkLine did no more than hold that two antitrust theories 

cannot be combined to form a new theory of antitrust liability. 

See 555 U.S. at 457. The plaintiffs‘ retail-level claim in 

linkLine was a traditional pricing practices claim, and 

therefore indistinguishable from the pricing practices claims 
43

in Brooke Group, Atlantic Richfield, and Cargill. 555 U.S. at 

451-52, 457.13

 

13 Eaton also relies heavily on the Supreme Court‘s 

statement in Atlantic Richfield v. USA Petroleum Co. that 

price-cost principles apply ―regardless of the type of antitrust 

claim involved.‖ 495 U.S. at 340. When read in context, 

however, it is clear that this statement means that the pricecost test applies regardless of the statute under which a 

pricing practices claim is brought, not that the price-cost 

applies regardless of the type of anticompetitive conduct.

In Atlantic Richfield, the plaintiffs argued that no 

showing of below-cost pricing was required to establish 

antitrust injury for a claim of illegal price-fixing under 

Section 1 of the Sherman Act because the price agreement 

itself was illegal, and any losses that stem from such an 

agreement, by definition, flow from that which makes the 

defendant‘s conduct unlawful. Id. at 338. The Supreme 

Court rejected that argument, reasoning that although pricefixing is unlawful under Section 1, a plaintiff does not suffer 

antitrust injury unless it is adversely affected by an 

anticompetitive aspect of the defendant‘s conduct, and ―in the 

context of pricing practices, only predatory pricing has the 

requisite anticompetitive effect.‖ Id. at 339 (citing Brunswick

Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 487 (1977)) 

(additional citations omitted). It was in this in context, in 

rejecting an argument that Section 1 was somehow exempt 

from the price-cost test, that the Supreme Court made the 

broad statement that it has ―adhered to . . . [price-cost] 
44

In contrast to the price-cost test line of cases, here, 

Plaintiffs do not allege that price itself functioned as the 

exclusionary tool. As such, we conclude that the price-cost 

test is not adequate to judge the legality of Eaton‘s conduct. 

Although prices are unlikely to exclude equally efficient 

rivals unless they are below-cost, exclusive dealing 

arrangements can exclude equally efficient (or potentially 

equally efficient) rivals, and thereby harm competition, 

irrespective of below-cost pricing. See Dentsply, 399 F.3d at 

191. Where, as here, a dominant supplier enters into de facto

exclusive dealing arrangements with every customer in the 

 

principle[s] regardless of the type of antitrust claim 

involved.‖ See id. at 340.

The Court‘s discussion following this statement 

supports our interpretation. The Court went on to explain 

that, for purposes of determining whether a plaintiff has 

suffered antitrust injury in a pricing practices case, Section 1 

is no different than, for example, the plaintiff‘s allegation in 

Cargill, Inc. v. Monfort of Colorado, Inc. that the defendants‘

unlawful merger under Section 7 of the Clayton Act caused 

antitrust injury. Id. at 340 (citing Cargill, 479 U.S. at 116) 

(―To be sure, the source of the price competition in the instant 

case was an agreement allegedly unlawful under § 1 of the 

Sherman Act rather than a merger in violation of § 7 of the 

Clayton Act. But that difference is not salient.‖). Moreover, 

Atlantic Richfield was decided before LePage’s and we did 

not interpret the ―regardless of the type of antitrust claim 

involved‖ language as mandating the application of the pricecost test to 3M‘s bundled rebates.
45

market, other firms may be driven out not because they 

cannot compete on a price basis, but because they are never 

given an opportunity to compete, despite their ability to offer 

products with significant customer demand. See id. at 191, 

194. Therefore, Eaton‘s attempt to characterize this case as a 

pricing practices case, subject to the price-cost test, is 

unavailing. We hold that, instead, the rule of reason from 

Tampa Electric and its progeny must be applied to evaluate 

Plaintiffs‘ claims.

B. Proof of Anticompetitive 

Conduct and Antitrust Injury

We turn now to Eaton‘s contention that even leaving 

aside the price-cost test, Plaintiffs failed to prove that Eaton‘s 

LTAs were anticompetitive or that they caused antitrust 

injury to Plaintiffs. The rule of reason governs Plaintiffs‘ 

claims under Section 1 and Section 2 of the Sherman Act, and 

Section 3 of the Clayton Act. See LePage’s, 324 F.3d at 157 

& n.10 (explaining that exclusive dealing claims are 

cognizable under Sections 1 and 2 of the Sherman Act and 

Section 3 of the Clayton Act, and evaluated under the same 

rule of reason); see also Section III.A, supra, at n.9. Under 

the rule of reason, an exclusive dealing arrangement is 

anticompetitive only if its ―probable effect‖ is to substantially 

lessen competition in the relevant market, rather than merely 

disadvantage rivals. Tampa Elec., 365 U.S. at 328-29.

In addition to establishing a statutory violation, a 

plaintiff must demonstrate that it suffered antitrust injury. 

Race Tires, 614 F.3d at 75. To establish antitrust injury, the 

plaintiff must demonstrate: ―(1) harm of the type the antitrust 
46

laws were intended to prevent; and (2) an injury to the 

plaintiff which flows from that which makes defendant‘s acts 

unlawful.‖ Id. at 76 (quoting Gulfstream III Assocs. Inc. v. 

Gulfstream Aerospace Corp., 995 F.2d 425, 429 (3d Cir. 

1993)) (additional citation omitted).

Our inquiry on appeal has several components. First, 

we examine whether the LTAs could reasonably be viewed as 

exclusive dealing arrangements, despite the fact that the 

LTAs covered less than 100% of the OEMs‘ purchase 

requirements and contained no express exclusivity provisions. 

Second, because the unique characteristics of the HD 

transmissions market bear heavily on our inquiry, we review 

Eaton‘s monopoly power, the concentrated nature of the 

market, and the ability of a monopolist in Eaton‘s position to 

engage in coercive conduct. Third, we discuss the 

anticompetitive effects of the various provisions in the LTAs, 

and consider Eaton‘s procompetitive justifications for the 

agreements. Finally, we consider whether Plaintiffs 

established that they suffered antitrust injury as a result of 

Eaton‘s conduct.

1. De Facto Partial Exclusive Dealing

A threshold requirement for any exclusive dealing 

claim is necessarily the presence of exclusive dealing. Eaton 

argues that Plaintiffs‘ claims must fail because the LTAs were 

not ―true‖ exclusive dealing arrangements in that they did not 

contain express exclusivity requirements, nor did they cover 

100% of the OEMs‘ purchases. Neither contention is 

persuasive because de facto partial exclusive dealing 
47

arrangements may, under certain circumstances, be actionable 

under the antitrust laws.14

First, the law is clear that an express exclusivity 

requirement is not necessary because de facto exclusive 

dealing may be unlawful. Tampa Elec., 365 U.S. at 326;

Dentsply, 399 F.3d at 193; LePage’s, 324 F.3d at 157. For 

example, in United States v. Dentsply International, Inc., we 

held that transactions which were ―technically only a series of 

independent sales‖ could form the basis for an exclusive 

dealing claim because the large share of the market held by 

the defendant and its conduct in excluding competitors, 

―realistically made the arrangements . . . as effective as those 

in written contracts.‖ 399 F.3d at 193 (citing Monsanto Co. v. 

Spray-Rite Serv. Corp., 465 U.S. 752, 764 n.9 (1984)). 

Likewise, in LePage’s, we held that bundled rebates and 

discounts offered to major suppliers were designed to and did 

 

14 Our dissenting colleague objects to the phrase ―de 

facto partial exclusive dealing‖ as constituting a creative 

neologism that ―distorts the English language‖ and 

infrequently appears in a search of an online legal database. 

Dissenting Op., Part II. ―De facto partial exclusive dealing‖ 

is certainly a neologism, but it also accurately represents that 

an exclusive dealing claim does not require a contract that 

imposes an express exclusivity obligation, Tampa Elec., 365 

U.S. at 326; Dentsply, 399 F.3d at 193; LePage’s, 324 F.3d at 

157, nor a contract that covers 100% of the buyer‘s needs, 

Tampa Elec., 365 U.S. at 328 (―[T]he competition foreclosed 

by the contract must be found to constitute a substantial share

of the relevant market.‖) (emphasis added).
48

operate as exclusive dealing arrangements, despite the lack of 

any express exclusivity requirements. 324 F.3d at 157-58.

Here, there was sufficient evidence from which a jury 

could infer that, although the LTAs did not expressly require 

the OEMs to meet the market penetration targets, the targets 

were as effective as mandatory purchase requirements. See 

Tampa Elec., 365 U.S. at 326 (noting that ―even though a 

contract does  ̳not contain specific agreements not to use the 

(goods) of a competitor,‘ if  ̳the practical effect is to prevent 

such use,‘ it comes within the condition of [Section 3] as to 

exclusivity‖) (citing United Shoe Mach. Corp. v. United 

States, 258 U.S. 451, 457 (1922)); Dentsply, 399 F.3d at 193-

94. Evidence presented at trial indicated that not only were 

lower prices (rebates) conditioned on the OEMs meeting the 

market-share targets, but so too was Eaton‘s continued 

compliance with the LTAs. For example, Eaton‘s LTAs with 

Freightliner, the largest OEM, and Volvo explicitly gave 

Eaton the right to terminate the agreements if the marketshare targets were not met. And despite the fact that Eaton 

did not actually terminate the agreements on the rare occasion 

when an OEM failed to meet its target, the OEMs believed 

that it might.15 Critically, due to Eaton‘s position as the 

dominant supplier, no OEM could satisfy customer demand 

without at least some Eaton products, and therefore no OEM 

could afford to lose Eaton as a supplier. Accordingly, we 

agree with the District Court that a jury could have concluded 

 

15 In 2003, for example, PACCAR failed to meet its 

market penetration target, and although Eaton withdrew all 

contractual savings, it did not terminate the agreement.
49

that, under the circumstances, the market penetration targets 

were as effective as express purchase requirements ―because 

no risk averse business would jeopardize its relationship with 

the largest manufacturer of transmissions in the market.‖ ZF 

Meritor, 769 F. Supp. 2d at 692.

Second, an agreement does not need to be 100% 

exclusive in order to meet the legal requirements of exclusive 

dealing. We acknowledge that ―partial‖ exclusive dealing is 

rarely a valid antitrust theory. See Barr Labs., 978 F.2d at 

110 n.24 (―An agreement affecting less than all purchases 

does not amount to true exclusive dealing.‖) (citation 

omitted); Concord Boat, 207 F.3d at 1044, 1062-63 (noting 

that the defendant‘s discount program, which conditioned 

incremental discounts on customers purchasing 60-80% of 

their needs from the defendant, did not constitute exclusive 

dealing because customers were not required to purchase all 

of their requirements from the defendant, and in fact, could 

purchase up to 40% of their requirements from other sellers 

without foregoing the discounts); Magnus Petroleum Co. v. 

Skelly Oil Co., 599 F.2d 196, 200-01 (7th Cir. 1979) (holding 

that contract requiring buyer to purchase a fixed quantity of 

goods that amounted to roughly 60-80% of its needs was not 

unlawful ―[b]ecause the agreements contained no exclusive 

dealing clause and did not require [the buyer] to purchase any 

amounts of [the defendant‘s product] that even approached 

[its] requirements‖) (citations omitted). Partial exclusive 

dealing agreements such as partial requirements contracts and 

contracts stipulating a fixed dollar or quantity amount are 

generally lawful because market foreclosure is only partial, 

and competing sellers are not prevented from selling to the 
50

buyer. See Concord Boat, 207 F.3d at 1062-63; Magnus 

Petroleum, 599 F.2d at 200-01.

However, we decline to adopt Eaton‘s view that a 

requirements contract covering less than 100% of the buyer‘s 

needs can never be an unlawful exclusive dealing 

arrangement. See Eastman Kodak, 504 U.S. at 466-67 

(―Legal presumptions that rest on formalistic distinctions 

rather than actual market realities are generally disfavored in 

antitrust law.‖). ―Antitrust analysis must always be attuned to 

the particular structure and circumstances of the industry at 

issue.‖ Verizon Commc’ns, 540 U.S. at 411. Therefore, just

as ―total foreclosure‖ is not required for an exclusive dealing 

arrangement to be unlawful, nor is complete exclusivity 

required with each customer. See Dentsply, 399 F.3d at 191. 

The legality of such an arrangement ultimately depends on 

whether the agreement foreclosed a substantial share of the 

relevant market such that competition was harmed. Tampa 

Elec., 365 U.S. at 326-28.

In our case, although the market-share targets covered 

less than 100% of the OEMs‘ needs, a jury could nevertheless 

find that the LTAs unlawfully foreclosed competition in a 

substantial share of the HD transmissions market. See id. 

There are only four direct purchasers of HD transmissions in 

North America, and Eaton, long the dominant supplier in the 

industry, entered into long-term agreements with each of 

them. Compare Concord Boat, 207 F.3d at 1044 (noting the 

defendant was the market leader, but there were at least ten 

other competing manufacturers). Each LTA imposed a 

market-penetration target of roughly 90% (with the exception 

of Volvo, which manufactured some of its own transmissions 
51

for use in its own trucks), which we explained above, could 

be viewed as a requirement that the OEM purchase that 

percentage of its requirements from Eaton. Although no 

agreement was completely exclusive, the foreclosure that 

resulted was no different than it would be in a market with 

many customers where a dominant supplier enters into 

complete exclusive dealing arrangements with 90% of the 

customer base. Under such circumstances, the lack of 

complete exclusivity in each contract does not preclude 

Plaintiffs‘ de facto exclusive dealing claim.16

2. Market Conditions in HD Transmissions Market

Exclusive dealing will generally only be unlawful 

where the market is highly concentrated, the defendant 

possesses significant market power, and there is some 

element of coercion present. See Tampa Elec., 365 U.S. at 

329; Race Tires, 614 F.3d at 77-78; LePage’s, 324 F.3d at 

159. For example, if the defendant occupies a dominant 

position in the market, its exclusive dealing arrangements 

invariably have the power to exclude rivals. Tampa Elec., 

365 U.S. at 329; Dentsply, 399 F.3d at 187. Here, the jury 

 

16 Additionally, the District Court instructed the jury 

that Plaintiffs did not allege ―actual‖ exclusive dealing, but 

instead alleged that ―the long-term supply contracts with 

defendant, in effect, committed the OEMs to purchase at least 

a substantial share of their transmissions from defendant.‖ 

The District Court defined such an arrangement as a ― ̳de 

facto‘ exclusive dealing contract.‖ Eaton does not challenge 

this instruction on appeal.
52

found that Eaton possessed monopoly power in the HD 

transmissions market, and Eaton does not contest that finding 

on appeal.

A hard look at the nature of the market in which the 

parties compete is equally important. Tampa Elec., 365 U.S. 

at 329. An exclusive dealing arrangement is most likely to 

present a threat to competition in a situation in which the 

market is highly concentrated, such that long-term contracts 

operate to ―foreclose so large a percentage of the available 

supply or outlets that entry‖ or continued operation in ―the 

concentrated market is unreasonably constricted.‖ Race 

Tires, 614 F.3d at 76 (quoting E. Food Servs., 357 F.3d at 8); 

see Dentsply, 399 F.3d at 184 (noting that the relevant market 

was ―marked by a low or no-growth potential‖ and the 

defendant had long dominated the industry with a 75-80% 

market share). Here, the HD transmissions market had long 

been dominated by Eaton. Except for Meritor‘s production of 

manual transmissions in the 1990s and the ZF Meritor joint 

venture, no significant external supplier has entered the 

market for the last twenty years. A jury could certainly infer 

that Eaton‘s dominance over the OEMs created a barrier to 

entry that any potential rival manufacturer would have to 

confront. See Concord Boat, 207 F.3d at 1059 (―If entry 

barriers to new firms are not significant, it may be difficult 

for even a monopoly company to control prices through some 

type of exclusive dealing arrangement because a new firm or 

firms easily can enter the market to challenge it [but] [i]f 

there are significant entry barriers . . . , a potential competitor 

would have difficulty entering.‖) (citations omitted). The 

record shows that the barriers to entry in the North American 
53

HD transmission market are especially high: HD 

transmissions are expensive to produce; transmissions 

developed for other geographic markets must be substantially 

modified for the North American market; and all HD 

transmission sales must pass through the highly concentrated 

intermediate market in which the OEMs operate. Eaton‘s 

theory that ZF Meritor or any new HD transmissions 

manufacturer would be able to ―steal‖ an Eaton customer by 

offering a superior product at a lower price ―simply has not 

proved to be realistic.‖ Dentsply, 399 F.3d at 194 (citation 

omitted); compare NicSand, 507 F.3d at 454 (in finding 

exclusive dealing arrangements lawful, noting that the 

plaintiff was the market leader, and lost business due to a new 

entrant‘s competition). ―The paltry penetration in the market 

by competitors over the years has been a refutation of 

[Eaton‘s] theory by tangible and measurable results in the real 

world.‖ Dentsply, 399 F.3d at 194; see Microsoft, 253 F.3d at 

55 (noting importance of significant barriers to entry in 

maintaining monopoly power, in spite of the plaintiffs‘ selfimposed problems).

Although we generally ―assume that a customer will 

make [its] decision only on the merits,‖ Santana Prods., Inc. 

v. Bobrick Washroom Equip., Inc., 401 F.3d 123, 133 (3d Cir. 

2005) (quoting Stearns Airport Equip. Co. v. FMC Corp., 170 

F.3d 518, 524-25 (5th Cir. 1999)), a monopolist may use its 

power to break the competitive mechanism and deprive 

customers of the ability to make a meaningful choice. See 

Race Tires, 614 F.3d at 77 (noting that coercion ―has played a 

key, if sometimes unexplored, role‖ in antitrust law); 

Dentsply, 399 F.3d at 184 (observing that the defendant 
54

―imposed‖ an exclusivity policy on its customers); LePage’s, 

324 F.3d at 159 (explaining that because 3M occupied a 

dominant position in several different product markets, it was 

able to effectively force customers in the ―private label‖ tape 

market to deal with 3M exclusively, despite the plaintiff‘s 

competitiveness in that market). A highly concentrated 

market, in which there is one (or a few) dominant supplier(s), 

creates the possibility for such coercion. And here, there was 

evidence that Eaton leveraged its position as a supplier of 

necessary products to coerce the OEMs into entering into the 

LTAs. Plaintiffs presented testimony from OEM officials 

that many of the terms of the LTAs were unfavorable to the 

OEMs and their customers, but that the OEMs agreed to such 

terms because without Eaton‘s transmissions, the OEMs 

would be unable to satisfy customer demand.17

 

17 Eaton emphasizes that the OEMs are multi-billion 

dollar companies (or at least owned by multi-billion dollar 

parent companies), and therefore claims that the OEMs 

dictated terms to Eaton – not the other way around. 

Significantly, in United States v. Dentsply International, Inc., 

we found coercion even though the relationship between the 

customers and the defendant was not totally one-sided. 399 

F.3d 181, 185 (3d Cir. 2005) (noting that the defendant 

considered bypassing dealers and selling directly to customers 

but abandoned that strategy out of fear that dealers might 

retaliate by refusing to buy other products manufactured by 

the defendant). Moreover, even assuming that the evidence 

could support a conclusion that the OEMs had more power in 

the relationship, the fact that two reasonable conclusions 
55

Accordingly, this case involves precisely the 

combination of factors that we explained would be present in 

the rare case in which exclusive dealing would pose a threat 

to competition. See Race Tires, 614 F.3d at 76.

3. Sufficiency of the Evidence: Anticompetitive Conduct

We turn now to a discussion of whether there was 

sufficient evidence for a jury to conclude that Eaton engaged 

in anticompetitive conduct. Our inquiry in a sufficiency of 

the evidence challenge is limited to determining whether, 

―viewing the evidence in the light most favorable to the 

[winner at trial] and giving it the advantage of every fair and 

reasonable inference, there is insufficient evidence from 

which a jury reasonably could find liability.‖ Lightning Lube, 

Inc. v. Witco Corp., 4 F.3d 1153, 1166 (3d Cir. 1993) 

(citation omitted). Eaton argues that even under the 

extraordinarily deferential standard, there was insufficient 

evidence for a reasonable jury to conclude that Eaton engaged 

in conduct that harmed competition. Guided by the principles 

set forth in Section III.A.1, supra, we disagree.

i. Extent of Foreclosure

First, the extent of the market foreclosure in this case 

was significant. ―The share of the market foreclosed is 

important because, for the contract to have an adverse effect 

upon competition,  ̳the opportunities for other[s] . . . to enter 

 

could be drawn from the evidence does not make the jury‘s 

adoption of Plaintiffs‘ view unreasonable.
56

into or remain in that market must be significantly limited.‘‖ 

Microsoft, 253 F.3d at 69 (citing Tampa Elec., 365 U.S. at 

328). Substantial foreclosure allows the dominant firm to 

prevent potential rivals from ever reaching ―the critical level 

necessary‖ to pose a real threat to the defendant‘s business. 

Dentsply, 339 F.3d at 191. Here, Eaton entered into longterm agreements with every direct purchaser in the market, 

and under each agreement, imposed what could be viewed as 

mandatory purchase requirements of at least 80%, and up to 

97.5%. The OEMs generally met these targets, which, as 

Plaintiffs‘ expert testified, resulted in approximately 15% of 

the market remaining open to Eaton‘s competitors by 2003.

18

 

See LePage’s, 324 F.3d at 159 (noting that foreclosure of 

40% to 50% is usually required to establish an exclusive 

 

18 ZF Meritor‘s expert, Dr. David DeRamus, testified 

at trial that Eaton‘s market share was consistently above 80% 

from 2000 through 2007. Later in his testimony, DeRamus 

concluded that Eaton‘s increased market share from 2000 to 

2007 was the result of the LTAs. Furthermore, DeRamus 

showed that ZF Meritor‘s market share percentages in the 

linehaul transmissions market (i.e., the only portion of the 

overall HD transmissions market in which ZF Meritor 

competed), dropped from 32% to 24% between 2000 and 

2002, and dropped even further from 24% to 12% between 

2002 and 2003, before ultimately falling to 0% in 2007. 

DeRamus concluded that the loss of ZF Meritor‘s linehaul 

transmissions market share and its eventual exit from the 

market were due to Eaton‘s conduct and, specifically, the 

LTAs.
57

dealing violation under Section 1 of the Sherman Act (citing 

Microsoft, 253 F.3d at 70)). From 2000 through 2003, 

Plaintiffs‘ overall market share ranged from 8-14%, and by 

2005, Plaintiffs‘ market share had dropped to 4%.

ii. Duration of LTAs

Second, the LTAs were not short-term agreements, 

which would present little threat to competition. See, e.g., 

Christofferson Dairy, Inc. v. MMM Sales, Inc., 849 F.2d 

1168, 1173 (9th Cir. 1988) (upholding exclusive dealing 

arrangement of ―short duration‖); Roland Mach. Co. v. 

Dresser Indus., Inc., 749 F.2d 380, 395 (7th Cir. 1984) 

(noting that exclusive dealing contracts of less than one year 

are presumptively lawful); Barry Wright, 724 F.2d at 237 

(citing two-year term in upholding requirements contract). 

Rather, each LTA was for a term of at least five years, and the 

PACCAR LTA was for a seven-year term.19 See FTC v. 

Motion Picture Adver. Serv. Co., 344 U.S. 392, 393-96 

(1953) (upholding contracts of one year or less, but 

condemning contract terms ranging from two to five years). 

Although long exclusive dealing contracts are not per se

unlawful, ―[t]he significance of any particular contract 

duration is a function of both the number of such contracts 

and market share covered by the exclusive-dealing contracts.‖ 

Hovenkamp ¶ 1802g, at 98. Here, Eaton entered into longterm contracts with every direct purchaser in the market, 

which locked up over 85% of the market for at least five 

 

19 Eaton and Freightliner revised their original LTA to 

increase the duration to ten years.
58

years. Although long-term agreements had previously been 

used in the HD transmissions industry, it was unprecedented 

for a supplier to enter into contracts of such duration with the 

entire customer base.

Eaton acknowledges, as it must, the unprecedented 

length of the LTAs, but maintains that the LTAs were not 

anticompetitive because they were easily terminable. See,

e.g., PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d 101, 111 (2d 

Cir. 2002) (finding challenged contracts lawful, in part, 

because they were terminable at will); Omega Envtl., 127 

F.3d at 1164 (noting easy terminability of agreements). Each 

LTA included a ―competitiveness‖ clause, which permitted 

the OEM to purchase from another supplier or terminate the 

agreement if another supplier offered a better product or a 

lower price. However, Plaintiffs presented evidence that any 

language giving OEMs the right to terminate the agreements 

was essentially meaningless because Eaton had assured that 

there would be no other supplier that could fulfill the OEMs‘ 

needs or offer a lower price. Thus, a jury could very well 

conclude that ―in spite of the legal ease with which the 

relationship c[ould] be terminated,‖ the OEMs had a strong 

economic incentive to adhere to the terms of the LTAs, and 

therefore were not free to walk away from the agreements and 

purchase products from the supplier of their choice. 

Dentsply, 399 F.3d at 194.

iii. Additional Anticompetitive Provisions in LTAs

Third, the LTAs were replete with provisions that a 

reasonable jury could find anticompetitive. To begin, a jury 

could have found that the data book provisions were 
59

anticompetitive in that they limited the ability of ZF Meritor 

to effectively market its products, and limited the ability of 

truck buyers to choose from a full menu of available 

transmissions. See id. (discussing anticompetitive effect of 

limitations on customer choice). Eaton downplays the 

significance of the data book provisions, arguing that truck 

buyers always remained free to request unlisted 

transmissions, and ZF Meritor remained free to market 

directly to truck buyers. However, the mere existence of 

potential alternative avenues of distribution, without ―an 

assessment of their overall significance to the market,‖ is 

insufficient to demonstrate that Plaintiffs‘ opportunities to 

compete were not foreclosed. Id. at 196. An OEM‘s data 

book was the ―most important tool‖ that any buyer selecting 

component parts for a truck would use. If a product was not 

listed in a data book, it was ―a disaster for the supplier.‖ 

Although truck buyers could request unpublished 

components, doing so involved additional transaction costs, 

and in practice, meant that truck buyers were far more likely 

to select a product listed in the data book. See id. at 193 

(explaining that the key question was not whether alternative 

distribution methods allowed a competitor to ―survive‖ but 

whether the alternative methods would ―pose[] a real threat‖ 

to the defendant‘s monopoly) (citing Microsoft, 253 F.3d at 

71). Additionally, prior to the LTAs, it was not common 

practice for one supplier to be given exclusive data book

listing. Historically, data books had included all product 

offerings, including Meritor transmissions, and the OEMs 

acknowledged that removing ZF Meritor products, especially 

FreedomLine, from the data books was ―from a customer 

perspective,‖ the wrong thing to do so because they were 
60

―good product[s] with considerable demand in the 

marketplace.‖

A jury could also have found that the ―preferential 

pricing‖ provisions in the LTAs were anticompetitive. 

Although it was ―common‖ for price savings to be passed 

down to truck buyers in the form of lower prices, and there 

are indications that at least some of the savings from Eaton 

transmissions were indeed passed down, there is also 

evidence that the preferential prices were achieved by 

artificially increasing the prices of Plaintiffs‘ products.

Additionally, the jury could have determined that the 

―competitiveness‖ clauses were of little practical import 

because Eaton‘s conduct ensured that no rival would be able 

to offer a comparable deal. There was also evidence that the 

competitiveness clauses were met with stiff resistance by 

Eaton.

iv. Anticompetitive Effects vs. Procompetitive Effects

Finally, the only procompetitive justification offered 

by Eaton on appeal is that the LTAs were crafted to meet 

customer demand to reduce prices, as well as engineering and 

support costs. See Barr Labs., 978 F.2d at 111 (explaining 

that courts must ―evaluate the restrictiveness and the 

economic usefulness of the challenged practice in relation to 

the business factors extant in the market‖) (citations omitted). 

In response to the economic downturn in the heavy-duty 

trucking industry in the late 1990s and early 2000s, each 

OEM sought to negotiate lower prices, and some sought to 

reduce the number of suppliers. During this time, oversupply 
61

was a problem, as were low truck prices, and an 

unavailability of drivers. It appears that Eaton responded 

well to the downturn; despite persistent quality control 

problems and a relatively late introduction of two-pedal 

automated mechanical transmissions, the company cut costs 

and increased market share.

However, no OEM ever asked Eaton to be a sole 

supplier, and there was considerable testimony from OEM 

officials that it was in an OEM‘s interest to have multiple 

suppliers. Although long-term agreements offering marketshare or volume discounts had been used in the industry in the 

past (for transmissions and for other truck components), OEM 

executives consistently testified that Eaton‘s new LTAs 

represented a substantial departure from past practice. For 

example, the longest supply agreements Freightliner and 

Volvo had ever signed previously were for two-year terms. 

Likewise, OEM officials testified that the provisions in the 

LTAs requiring exclusive data book listing and ―preferential 

pricing‖ were not common. Critically, there was considerable 

evidence from which a jury could infer that the primary 

purpose of the LTAs was not to meet customer demand, but 

to take preemptive steps to block potential competition from 

the new ZF Meritor joint venture. Eaton devised the 

unprecedented LTAs only after Meritor formed the joint 

venture with ZF AG, which Eaton viewed as a ―serious 

competitor.‖ Eaton feared that the ZF Meritor joint venture 

would put Eaton‘s ―[North American] position at risk‖ by 

introducing a new product (FreedomLine) for which there 

was significant customer demand, but for which Eaton did not 

produce a comparable alternative.
62

In sum, the LTAs included numerous provisions 

raising anticompetitive concerns and there was evidence that 

Eaton sought to aggressively enforce the agreements, even 

when OEMs voiced objections.20 Accordingly, we hold that 

there was more than sufficient evidence for a jury to conclude 

that the cumulative effect of Eaton‘s conduct was to adversely 

affect competition.21

 

20 Judge Greenberg, in dissent, objects that our rule of 

reason analysis fails to consider that Eaton‘s prices were 

above cost. Dissenting Op., Part II. However, contrary to 

this objection, and even though ZF Meritor does not contend 

that Eaton‘s prices operated as an exclusionary tool, we do 

not view Eaton‘s prices as irrelevant to the rule of reason 

analysis. Rather than analyzing the alleged exclusionary 

provisions in a vacuum, we analyze these provisions in the 

larger context of the LTAs as a whole, and we recognize that 

Eaton maintained above-cost prices. We conclude that ZF 

Meritor presented sufficient evidence for the jury to find that, 

even though not every provision was exclusionary, the LTAs 

as a whole functioned as exclusive dealing agreements that 

adversely affected competition.

21 It is worth noting that despite Eaton‘s contention

that Plaintiffs‘ higher prices and quality problems led to their 

decline in market share, the OEMs felt differently. In 2002, a 

Freightliner executive wrote: ―[t]his is a dangerous situation. 

We have already killed Meritor‘s transmission business. It is 

just a matter of time before they close their doors.‖ Likewise, 

a 2006 Volvo presentation states: ―With all its OEM 

customers, Eaton has established long term supply contracts 
63

4. Sufficiency of the Evidence: Antitrust Injury

Having concluded that there was sufficient evidence 

from which a jury could determine that the LTAs functioned 

as unlawful exclusive dealing agreements, we have no 

difficulty concluding that there was likewise sufficient 

evidence that Plaintiffs suffered antitrust injury. See Atl. 

Richfield, 495 U.S. at 344 (explaining that a plaintiff suffers 

antitrust injury if its injury ―stems from a competitionreducing aspect or effect of the defendant‘s behavior‖). 

Eaton‘s conduct unlawfully foreclosed a substantial share of 

the HD transmissions market, which would otherwise have 

been available for rivals, including Plaintiffs. ZF Meritor 

exited the market in 2003, followed by Meritor in 2006, 

because they could not maintain high enough market shares to 

remain viable. A jury could certainly conclude that Plaintiffs‘

inability to grow was a direct result of Eaton‘s exclusionary 

conduct. 

C. Expert Testimony

1. Expert Testimony on Liability

Eaton raises two challenges to the District Court‘s 

decision to admit DeRamus‘s testimony on liability. First, 

Eaton argues that DeRamus failed to employ any recognized 

or reliable economic test for determining whether Eaton‘s 

 

. . . [which] ha[ve] led to . . . Eaton‘s only North American 

competitor, Meritor, [being] gradually marginalized to its 

current market position with a 10% market share.‖
64

conduct harmed competition and caused antitrust injury. 

Second, Eaton contends that DeRamus‘s opinion was 

contradicted by the facts. We disagree with both 

contentions.22

Federal Rule of Evidence 702 provides:

A witness who is qualified as an expert by 

knowledge, skill, experience, training, or 

education may testify in the form of an opinion 

or otherwise if: (a) the expert‘s scientific, 

technical, or other specialized knowledge will 

help the trier of fact to understand the evidence 

or to determine a fact in issue; (b) the testimony 

is based on sufficient facts or data; (c) the 

testimony is the product of reliable principles 

and methods; and (d) the expert has reliably 

applied the principles and methods to the facts 

of the case.

Under Rule 702, the district court acts as a ―gatekeeper‖ to 

ensure that ―the expert‘s opinion [is] based on the methods 

and procedures of science rather than on subjective belief or 

unsupported speculation.‖ Calhoun v. Yamaha Motor Corp., 

U.S.A., 350 F.3d 316, 321 (3d Cir. 2003) (quoting In re Paoli 

R.R. Yard PCB Litig. (Paoli II), 35 F.3d 717, 741 (3d Cir. 

 

22 Eaton also argues that DeRamus‘s testimony was 

contrary to law because he did not employ a price-cost test. 

However, as we explained above, no price-cost test was 

required in this case.
65

1994)). Here, as the District Court noted, DeRamus relied on 

the exclusionary nature of the LTAs to form his opinion. He 

defined the relevant market, determined whether Eaton has 

monopoly power, and engaged in an analysis of Eaton‘s 

conduct, taking into account market conditions and the extent 

of the exclusive dealing. He examined the effect of the LTAs 

on prices and consumer choice, and considered whether 

foreclosure of the market could be attributed to factors other 

than the LTAs, such as market conditions or quality issues 

with Plaintiffs‘ products. We find no error in the District 

Court‘s acceptance of DeRamus‘s methodologies as reliable 

under Rule 702. See LePage’s, 324 F.3d at 154-64 (analyzing 

exclusive dealing by looking to many of the same factors 

considered by DeRamus).

Eaton also argues that DeRamus‘s opinion was 

contradicted by the facts. ―When an expert opinion is not 

supported by sufficient facts to validate it in the eyes of the 

law, or when indisputable record facts contradict or otherwise 

render the opinion unreasonable, it cannot support a jury‘s 

verdict.‖ Brooke Grp., 509 U.S. at 242; Phila. Newspapers, 

51 F.3d at 1198. In an antitrust case, an expert opinion 

generally must ―incorporate all aspects of the economic 

reality‖ of the relevant market. Concord Boat, 207 F.3d at 

1057. Here, the District Court properly rejected Eaton‘s 

argument that DeRamus‘s testimony should have been 

excluded on the basis that it was contradicted by other facts. 

Eaton‘s argument on this point really amounts to nothing 

more than a complaint that DeRamus did not adopt Eaton‘s 

view of the case. The District Court correctly noted that, 

although some of DeRamus‘s testimony may have been 
66

contradicted by other evidence, including the testimony of 

Eaton‘s expert, the existence of conflicting evidence was not 

a basis on which to exclude DeRamus‘s testimony. The 

respective credibility of Plaintiffs‘ and Eaton‘s experts was a 

question for the jury to decide. LePage’s, 324 F.3d at 165. 

DeRamus was extensively cross-examined and Eaton 

presented testimony from its own expert, who opined that the 

LTAs had no anticompetitive effect. In the end, the jury 

apparently found DeRamus to be more credible. ―[Eaton]‘s 

disappointment as to the jury‘s finding of credibility does not 

constitute an abuse of discretion by the District Court in 

allowing [DeRamus‘s] testimony.‖ Id. at 166.

2. Expert Testimony on Damages

In their cross-appeal, Plaintiffs argue that the District 

Court erred in excluding DeRamus‘s testimony on the issue 

of damages. The core of DeRamus‘s damages analysis was 

one page (titled ―Five Year Product Line Profit and Loss‖) of 

ZF Meritor‘s Revised Strategic Business Plan (―SBP‖) for 

fiscal years 2002 through 2005, which was presented to ZF 

Meritor‘s Board of Directors in November 2000.23 The 

District Court determined that, although DeRamus used 

methodologies regularly employed by economists, his opinion 

nevertheless failed the reliability requirements of Daubert and 

the Federal Rules of Evidence because the underlying data 

 

23 The SBP contained a five-year forecast of profit and 

loss estimates based on estimated unit sales, unit prices, 

manufacturing costs, operating expenses, and other 

considerations.
67

was not sufficiently reliable. The District Court 

acknowledged that experts often rely on business plans in 

forming damages estimates, but concluded that DeRamus‘s 

reliance on the SBP in this case was improper because he did 

not know either the qualifications of the individuals who 

prepared the SBP estimates or the assumptions upon which 

the estimates were based. Plaintiffs filed a motion for 

clarification, which asked the District Court to allow 

DeRamus to testify based on his existing expert report to 

damages estimates independent of the SBP, or, in the 

alternative, to allow him to amend his report to include the 

alternate damages estimates. The District Court did not 

resolve the damages issue at that time, and bifurcated the 

case. After the trial on liability, Plaintiffs supplemented their 

pre-trial motion for clarification, adding several new 

arguments based on developments at trial, and renewing their 

request that DeRamus be allowed to testify based on alternate 

calculations. The District Court denied Plaintiffs‘ motion and 

awarded $0 in damages.

Our inquiry on appeal is two-fold. Initially, we must 

determine whether the District Court erred in excluding the 

expert opinion of DeRamus on the basis that it was not 

sufficiently reliable. Then, we must consider whether the 

District Court abused its discretion in denying Plaintiffs‘ 

request to allow DeRamus to testify to alternative damages 

calculations. We will address these issues in turn.

i. DeRamus‘s original damages calculations 

First, we will consider Plaintiffs‘ contention that the 

District Court erred in determining that DeRamus‘s damages 
68

opinion was not sufficiently reliable. Federal Rule of 

Evidence 702, as amended in 2000 to incorporate the 

standards set forth in Daubert, imposes an obligation upon a 

district court to ensure that expert testimony is not only 

relevant, but reliable. Fed. R. Evid. 702; Paoli II, 35 F.3d at 

744. As we have made clear, ―the reliability analysis 

[required by Daubert] applies to all aspects of an expert‘s 

testimony: the methodology, the facts underlying the expert‘s 

opinion, [and] the link between the facts and the conclusion.‖ 

Heller v. Shaw Indus., Inc., 167 F.3d 146, 155 (3d Cir. 1999); 

see also id. (―Not only must each stage of the expert‘s 

testimony be reliable, but each stage must be evaluated 

practically and flexibly without bright-line exclusionary (or 

inclusionary) rules.‖). As we explain below, the District 

Court did not abuse its discretion by finding that DeRamus‘s 

damages estimate, which was based heavily on the SPB 

projections, bore insufficient indicia of reliability to be 

submitted to a jury.

To determine the damages suffered by Plaintiffs as a 

result of Eaton‘s anticompetitive conduct, DeRamus 

conducted a two-part analysis. He computed Plaintiffs‘ lost 

profits for the period between 2000 and 2009, as well as the 

lost enterprise value of Plaintiffs‘ HD transmissions business. 

To calculate Plaintiffs‘ lost profits, DeRamus first estimated 

the incremental revenues that Plaintiffs would have earned 

―but for‖ Eaton‘s anticompetitive conduct, and then 

subtracted from that figure the incremental cost that Plaintiffs 

would have had to incur to achieve such incremental sales.

Ordinarily, such an approach would be appropriate 

because ―an expert may construct a reasonable offense-free 
69

world as a yardstick for measuring what, hypothetically, 

would have happened  ̳but for‘ the defendant‘s unlawful 

activities.‖ LePage’s, 324 F.3d at 165 (citations omitted). 

However, the District Court‘s primary criticism of 

DeRamus‘s report was that he did not construct an offensefree world based on actual financial data, but instead relied on 

a one-page set of profit and volume projections without 

knowing the circumstances under which such projections 

were created or the assumptions on which they were based. 

In some circumstances, an expert might be able to rely on the 

estimates of others in constructing a hypothetical reality, but 

to do so, the expert must explain why he relied on such 

estimates and must demonstrate why he believed the 

estimates were reliable. See Fed. R. Evid. 702; Daubert, 509 

U.S. at 592-95; Paoli II, 35 F.3d at 748 n.18 (―Arguably, 

[third-party estimates] that an expert relies on are not his 

underlying data, but rather the data that went into the [thirdparty estimates] in the first place are his underlying data.‖).

Plaintiffs contend that DeRamus‘s reliance on the SBP 

estimates was appropriate because a company‘s internal 

financial projections, like those in the SBP, are regularly and 

reasonably relied upon by economists in formulating opinions 

regarding a company‘s performance in an offense-free world. 

Plaintiffs are certainly correct that ―internal projections for 

future growth‖ often serve as legitimate bases for expert 

opinions. See LePage’s, 324 F.3d at 165; Autowest, Inc. v. 

Peugeot, Inc., 434 F.2d 556, 566 (2d Cir. 1970) (holding that 

damages testimony was admissible because the financial 

projections on which the testimony was based ―were the 

product of deliberation by experienced businessmen charting 
70

their future course‖). Businesses are generally well-informed 

about the industries in which they operate, and have 

incentives to develop accurate projections. As such, experts 

frequently use a plaintiff‘s business plan to estimate the 

plaintiff‘s expected profits in the absence of the defendant‘s 

misconduct. See Litigation Services Handbook: The Role of 

the Financial Expert 24:13 (4th ed. 2007). However, there is 

no per se rule of inclusion where an expert relies on a 

business plan; district courts must perform a case-by-case 

inquiry to determine whether the expert‘s reliance on the 

business plan in a given case is reasonable. See Heller, 167 

F.3d at 155.

Here, the District Court concluded that the SBP could 

not serve as a reliable basis for DeRamus‘s opinion because 

he was unaware of the qualifications of the individuals who 

prepared the document, or the assumptions on which the 

estimates were based. Plaintiffs argue that these factual 

findings are contradicted by the record. Admittedly, the 

record indicates that DeRamus did not, as the District Court 

suggested, blindly accept the SBP estimates without question. 

DeRamus was aware that the SBP had been presented to ZF 

Meritor‘s Board of Directors, and that it was revised several 

times to ―address and resolve queries management had about 

the reasonableness of the assumptions, projections, [and] 

forecasts.‖ He also knew that the Board had relied on the 

SBP in making business decisions. Moreover, ZF Meritor‘s 

former president testified that he ―did not submit SBPs to 

management for review unless [he] believed the projections, 

forecasts, and assumptions therein to be reliable.‖
71

However, contrary to Plaintiffs‘ assertions, these 

excerpts from the record do not contradict the District Court‘s 

ultimate findings. The record amply supports the District 

Court‘s concern that, although DeRamus was generally aware 

of the circumstances under which the SBP was created and 

the purposes for which it was used, he lacked critical 

information that would be necessary for Eaton to effectively 

cross-examine him. An expert‘s ―lack of familiarity with the 

methods and the reasons underlying [someone else‘s] 

projections virtually preclude[s] any assessment of the 

validity of the projections through cross-examination.‖ TK-7 

Corp. v. Estate of Barbouti, 993 F.2d 722, 732 (10th Cir. 

1993); compare Autowest, 434 F.2d at 566 (holding that 

projections of company officials were admissible where such 

officials ―set out at length the bases from which they derived 

their figures, and consequently, [the opposing party] was able 

to cross-examine them vigorously‖). Here, DeRamus knew 

that the SBP was presented to the Board by experienced 

management professionals, but he did not know who initially 

calculated the SBP figures. He did not know whether the 

SBP projections were calculated by ZF Meritor management, 

lower level employees at ZF Meritor, or came from some 

outside source. Nor did DeRamus know the methodology 

used to create the SBP or the assumptions on which the SBP‘s 

price and volume estimates were based.24

 

24 As the District Court noted, it is especially important 

for an expert to identify and justify the assumptions 

underlying financial projections when dealing with a new 

company. Here, although Meritor had been in the HD 
72

Under the deferential abuse of discretion standard, we 

will not disturb a district court‘s decision to exclude 

testimony unless we are left with ―a definite and firm 

conviction that the court below committed a clear error of 

judgment.‖ In re TMI Litig., 193 F.3d 613, 666 (3d Cir. 

1999) (citation omitted). Plaintiffs cannot clear that high 

hurdle. Accordingly, we conclude that the District Court 

acted within its discretion in determining that one page of 

financial projections for a nascent company, the assumptions 

underlying which were relatively unknown, did not provide 

―good grounds,‖ Paoli II, 35 F.3d at 742 (quoting Daubert, 

509 U.S. at 590), for DeRamus to generate his damages 

estimate. Compare LePage’s, 324 F.3d at 165 (noting that 

plaintiff‘s expert considered the defendant‘s internal 

projections for growth, but also closely examined the market 

conditions, including the past performance of competitors).

Plaintiffs raise two additional challenges to the District 

Court‘s exclusion of DeRamus‘s testimony. First, Plaintiffs 

contend that because the SBP was admitted into evidence at 

trial, Rule 703 does not provide a basis for exclusion. 

However, this argument is based on the flawed assumption 

that the District Court excluded DeRamus‘s testimony under 

Rule 703, rather than Rule 702. Plaintiffs assume that 

because the District Court stated that ―DeRamus manipulated 

the SBP using methodologies employed by economists,‖ ZF 

Meritor, 646 F. Supp. 2d at 667, the District Court necessarily 

 

transmissions industry for over a decade, ZF Meritor was 

offering a brand new line of transmissions that had never 

before been sold in the North American market.
73

concluded that Rule 702, which focuses on methodologies, 

was satisfied. However, the District Court explicitly stated 

that ―the fundamental query‖ was ―whether the [SBP] 

estimates pass[ed] the reliability requirements of Rules 104, 

702, and 703.‖ Id. Although it is not entirely clear from the 

District Court‘s opinion which rule the District Court relied 

upon in finding DeRamus‘s testimony inadmissible, we may 

affirm evidentiary rulings on any ground supported by the 

record, Hughes v. Long, 242 F.3d 121, 122 n.1 (3d Cir. 2001), 

and we conclude that DeRamus‘s opinion was properly 

excluded because it failed the reliability requirements of Rule 

702.

25

Plaintiffs‘ suggestion that the reasonableness of an 

expert‘s reliance on facts or data to form his opinion is 

somehow an inappropriate inquiry under Rule 702 results 

 

25 We base our affirmance of the District Court‘s 

decision entirely on the fact that DeRamus‘s opinion failed 

Rule 702, and do not decide whether Rule 703 provides an 

additional basis for exclusion. We note, however, that 

Plaintiffs‘ argument that Rule 703 somehow constrains a 

district court‘s ability to conduct an assessment of reliability 

under Rule 702 is misplaced. After all, a piece of evidence 

may be relevant for one purpose, and thus admissible at trial, 

but not be the type of information that can form the basis of a 

reliable expert opinion. As the District Court stated, ―the fact 

that [a piece of evidence] [i]s part of [the] plaintiffs‘  ̳story‘ 

does not mean, ipso facto,‖ that an expert opinion relying on 

such evidence is admissible. ZF Meritor LLC v. Eaton Corp., 

800 F. Supp. 2d 633, 637 (D. Del. 2011).
74

from an unduly myopic interpretation of Rule 702 and ignores 

the mandate of Daubert that the district court must act as a 

gatekeeper. See Daubert, 509 U.S. at 589; Heller, 167 F.3d at 

153 (―While  ̳the focus, of course, must be solely on 

principles and methodology, not on the conclusions that they 

generate,‘ a district court must examine the expert‘s 

conclusions in order to determine whether they could reliably 

flow from the facts known to the expert and the methodology 

used.‖) (emphasis added) (quoting Daubert, 509 U.S. at 595). 

Where proffered expert testimony‘s ―factual basis, data, 

principles, methods, or their application are called sufficiently 

into question, . . . the trial judge must determine whether the 

testimony has  ̳a reliable basis in the knowledge and 

experience of the relevant discipline.‘‖ Kumho Tire Co. v. 

Carmichael, 526 U.S. 137, 149 (1999) (quoting Daubert, 509 

U.S. at 592). A district court‘s inquiry under Rule 702 is ―a 

flexible one‖ and must be guided by the facts of the case. 

Daubert, 509 U.S. at 591, 594. Here, the District Court‘s 

analysis fell squarely within its flexible gatekeeping function 

under Daubert and Rule 702. See Kumho Tire Co. 526 U.S. 

at 149; Paoli II, 35 F.3d at 748 n.18; see also Elcock, 233 

F.3d at 754 (explaining that an expert‘s testimony regarding 

damages must be based on a sufficient factual foundation); 

Tyger Constr. Co. v. Pensacola Constr. Co., 29 F.3d 137, 142 

(4th Cir. 1994) (―An expert‘s opinion should be excluded 

when it is based on assumptions which are speculative and 

not supported by the record.‖).

Second, Plaintiffs argue that the District Court did not 

provide fair notice that it intended to exclude DeRamus‘s 

testimony under Federal Rule of Evidence 703. Again, this 
75

argument rests on the flawed assumption that the District 

Court relied solely on Rule 703. However, even assuming the 

District Court mistakenly believed that its Rule 702 reliability 

analysis actually fell under Rule 703, Plaintiffs‘ notice 

argument would still be meritless. A district court must give

the parties ―an adequate opportunity to be heard on 

evidentiary issues.‖ In re Paoli R.R. Yard PCB Litig. (Paoli 

I), 916 F.2d 829, 854 (3d Cir. 1990). Here, there was 

extensive briefing regarding DeRamus‘s damages opinion, 

much of which focused on Eaton‘s argument that DeRamus‘s 

reliance on the SBP was improper. The District Court held 

not one, but two in limine hearings, in which DeRamus 

testified for several hours. Compare id. at 854-55 (holding 

that the district court did not give the plaintiffs an adequate 

opportunity to be heard where it failed to conduct an in limine

hearing and denied oral argument on the evidentiary issues). 

As such, Plaintiffs were well aware of, and had ample 

opportunity to be heard on, the question of whether 

DeRamus‘s reliance on the SBP rendered his testimony 

inadmissible.

ii. Alternate damages calculations

The District Court‘s opinion excluding DeRamus‘s 

damages testimony focused exclusively on DeRamus‘s 

damages estimates based on the SBP projections regarding 

ZF Meritor‘s market share and profit margin. However, his 

expert report also set forth market-share estimates based on 

an econometric model. The econometric model did not 

consider the SBP, but instead used economic variables, such 

as the number of heavy-duty trucks built and sold in the North 

American market, an index of consumer confidence in the 
76

United States, the average wholesale price of oil in the United 

States, and interest rates. The model also considered ZF 

Meritor‘s market share from the previous month ―in order to 

capture market dynamics.‖

To reach his ultimate damages estimate, DeRamus 

averaged several damages calculations, each of which used a 

different combination of inputs for market share and profit 

margin. Following the District Court‘s order excluding 

DeRamus‘s testimony due to his reliance on the SBP, 

Plaintiffs filed a motion for clarification, asking the District 

Court to allow DeRamus to calculate damages using the same 

methodologies from his expert report, but using data 

independent of the SBP. Specifically, Plaintiffs proposed 

several revisions to DeRamus‘s damages estimate. First, 

Plaintiffs indicated that DeRamus could revise his ―Eaton 

Operating Profit Method,‖ which used as principal inputs the 

SBP estimates for market share and Eaton‘s actual operating 

profits for profit margin. Plaintiffs stated that DeRamus had 

recalculated lost profits using the same methodology, but 

replacing the market-share data from the SBP with marketshare data from his econometric model. Second, Plaintiffs 

explained that DeRamus could similarly revise his 

―Econometric Method‖ of calculating lost profits, which used 

the econometric model for market share, and data from the 

SBP for profit margin. He could use the same methodology 

and replace the profit margin data from the SBP with profit 
77

margin data from Plaintiffs‘ actual sales data from 1996 

through 2000.26

Noting that all of the data necessary for DeRamus‘s 

recalculations were already in the expert report, Plaintiffs 

requested that DeRamus be able to testify to the alternate 

calculations using the existing expert report. Allowing 

DeRamus to testify to alternate damages numbers without 

amending his expert report would have left Eaton without 

advance notice of the new calculations, and thus would have 

been improper. As such, the District Court did not err in 

ruling that DeRamus could not testify to new calculations 

based on the existing expert report. However, the District 

Court‘s refusal to allow DeRamus to amend his expert report 

presents a much more difficult question, one that we will 

explore in depth.

Before beginning our analysis, it is necessary to 

provide some context regarding the procedural history 

because the way in which the damages issue was handled by 

the District Court is significant to our determination that the 

District Court abused its discretion. After the District Court 

granted Eaton‘s motion to exclude DeRamus‘s damages 

testimony, it granted leave for Plaintiffs to file a motion for 

clarification to identify damages calculations in DeRamus‘s 

expert report that were not based on the SBP. On September 

 

26 Although the District Court did not address 

DeRamus‘s lost enterprise value calculations, Plaintiffs 

indicated in their motion for clarification that DeRamus could 

make similar revisions to those calculations.
78

9, 2009, ten days before trial was set to begin, Plaintiffs filed 

the motion, acknowledging that new calculations would be 

required, but submitting that all of the necessary data was 

already in the report. The next day, the District Court held a 

pretrial conference, in which it considered Plaintiffs‘ motion, 

and determined that it had two options: to ―basically punt‖ on 

the damages issue and bifurcate the case, or to allow 

Plaintiffs‘ new damages theory to go forward and allow Eaton 

to depose DeRamus to examine his new theories. The 

District Court concluded that the ―cleanest‖ option was to 

defer the damages issue, bifurcate, and proceed to trial on 

liability. That way, the District Court stated, the damages 

issue would only need to be resolved if ―the jury c[ame] back 

with a plaintiffs‘ verdict, which [was] [up]held on appeal.‖ In 

opting to defer a decision on damages, the District Court 

noted that it ―did not . . . at the moment, have the time to 

parse [DeRamus‘s report] as carefully‖ as would be necessary 

to satisfactorily address the parties‘ arguments regarding 

damages.

The jury delivered its verdict on liability on October 8, 

2009, and the District Court entered judgment in favor of 

Plaintiffs on October 14. Two days later, Plaintiffs requested 

that the District Court set a trial on damages. Eaton opposed 

Plaintiffs‘ request, asserting that the judgment on liability was 

a final appealable decision. Although the District Court 

apparently agreed with Eaton initially, stating that it ―d[id] 

not intend to address damages until liability has been finally 

resolved by the Third Circuit,‖ the District Court 

subsequently issued an amended judgment, which stated that 

because damages had not been resolved, there was no final 
79

appealable order under Federal Rule of Civil Procedure 54(b). 

On November 3, 2009, Eaton filed its renewed motion for 

judgment as a matter of law or a new trial. The District Court 

did not rule on the motion until March 2011.27

Following the District Court‘s denial of Eaton‘s 

motion, Plaintiffs renewed their request for a damages trial. 

On July 25, 2011, the District Court held a status conference, 

in which it heard arguments on whether the liability issue was 

appealable as a judgment on fewer than all claims under Rule 

54(b). Although the District Court initially indicated that it 

would proceed under Rule 54(b), and once again defer 

resolution of the damages issue, after both parties agreed that 

the judgment on liability was not appealable under Rule 54(b) 

(and that it was unlikely that this Court would grant an 

interlocutory appeal), the District Court acknowledged that it 

would ―need to go back to the papers and see how I extract 

myself from the procedural morass that I put myself in.‖ The 

District Court then signaled the way in which it would extract 

itself, stating ―so let‘s assume that I am going to resurrect a 

motion that is two years old [Plaintiffs‘ September 3, 2009 

motion for clarification], and let‘s assume that I deny it, and 

we‘re left with the situation we have now. At that point, 

would it make sense to have a cross-appeal on liability, on the 

Daubert decision, and get it up to the Third Circuit?‖

 

27 It is unclear from the record why sixteen months 

passed between Eaton‘s motion and the District Court‘s 

decision on the motion.
80

Several days later, on August 4, 2011, the District 

Court issued a memorandum opinion and order denying 

Plaintiffs‘ motion for clarification, and awarding $0 in 

damages. The District Court‘s entire analysis of Plaintiffs‘ 

request to modify DeRamus‘s report consisted of one 

paragraph. The District Court concluded that allowing 

Plaintiffs to amend DeRamus‘s expert report ―would be 

tantamount to reopening expert discovery‖ because DeRamus 

would need to be deposed again and Eaton would have to 

prepare another rebuttal expert report. The District Court also 

noted that, when it granted leave for Plaintiffs to move for 

clarification, leave was granted only for Plaintiffs to show 

that DeRamus‘s report already contained an alternate 

damages calculation, and that Plaintiffs‘ motion requested 

permission to submit additional damages calculations. 

Therefore, the District Court concluded, ―[a]t this stage of the 

litigation,‖ it would not give Plaintiffs an opportunity to 

modify their damages estimate.

We provide this extensive review of the procedural 

history to make a basic point: while we appreciate the District 

Court‘s attempt to conserve judicial resources and refrain 

from addressing the damages issue unless absolutely 

necessary, it is apparent from the record that Plaintiffs‘ 

request for permission to submit alternative damages 

calculations was given little more than nominal consideration. 

We are mindful that the District Court has considerable 

discretion in matters regarding expert discovery and case 

management, and a party challenging the district court‘s 

conduct of discovery procedures bears a ―heavy burden.‖ In 

re Fine Paper, 685 F.2d at 817-18 (―We will not interfere 
81

with a trial court‘s control of its docket  ̳except upon the 

clearest showing that the procedures have resulted in actual 

and substantial prejudice to the complaining litigant.‘‖) 

(citation omitted); see Schiff, 602 F.3d at 176. Under Federal 

Rule of Civil Procedure 26(a)(2), a party is required to 

disclose an expert report containing ―a complete statement of 

all opinions the witness will express and the basis and reasons 

for them.‖ Fed. R. Civ. P. 26(a)(2)(B)(i) (emphasis added). 

Any additions or changes to the information in the expert

report must be disclosed by the time the party‘s pretrial 

disclosures are due. Fed. R. Civ. P. 26(e)(2). Here, Plaintiffs 

were required to make all mandatory disclosures six months 

before trial, including all damages calculations. The damages 

estimates in DeRamus‘s report were found to be unreliable, 

and Plaintiffs sought, after the date by which discovery 

disclosures were due, to modify the estimates to reflect 

reliance on different data. Ordinarily, we will not disrupt a 

district court‘s decision to deny a party‘s motion to add 

information to an expert report under such circumstances. 

Schiff, 602 F.3d at 176; In re Fine Paper, 685 F.3d at 817. A 

plaintiff omits evidence necessary to sustain a damages award 

at its own risk. See Natural Res. Def. Council, Inc. v. Texaco 

Ref. & Mktg., Inc., 2 F.3d 493, 504 (3d Cir. 1993).

However, exclusion of critical evidence is an 

―extreme‖ sanction, and thus, a district court‘s discretion is 

not unlimited. Konstantopoulos v. Westvaco Corp., 112 F.3d 

710, 719 (3d Cir. 1997); see also E.E.O.C. v. Gen. Dynamics 

Corp., 999 F.2d 113, 116 (5th Cir. 1993) (explaining that a 

continuance, as opposed to exclusion, is the ―preferred 

means‖ of dealing with a party‘s attempt to offer new 
82

evidence after the time for discovery has closed). There are 

indeed times, even when control of discovery is at issue, that 

a district court will ―exceed[] the permissible bounds of its 

broad discretion.‖ Drippe v. Tobelinski, 604 F.3d 778, 783 

(3d Cir. 2010). In Meyers v. Pennypack Woods Home 

Ownership Ass’n, 559 F.2d 894, 905 (3d Cir. 1977), 

overruled on other grounds by Goodman v. Lukens Steel Co., 

777 F.2d 113 (3d Cir. 1985), we set forth five factors that 

should be considered in deciding whether a district court‘s 

exclusion of evidence as a discovery sanction constitutes an 

abuse of discretion. Here, although the District Court‘s 

decision was not a discovery sanction nor an exclusion of 

proffered evidence, but rather an exercise of discretion to 

control the discovery process and a refusal to allow 

submission of additional evidence, we find the Pennypack

factors instructive, and thus they will guide our inquiry. See 

Trilogy Commc’ns, Inc. v. Times Fiber Commc’ns, Inc., 109 

F.3d 739, 744-45 (Fed. Cir. 1997) (applying factors similar to 

those set forth in Pennypack to evaluate whether a district 

court erred in denying the plaintiff‘s motion to supplement its 

expert report with additional data); see also Hunt v. Cnty. of 

Orange, 672 F.3d 606, 616 (9th Cir. 2012) (applying similar 

factors to determine whether the district court abused its 

discretion in denying a motion to amend a pretrial order).

In considering whether the District Court abused its 

discretion in denying Plaintiffs‘ request to submit alternate 

damages calculations, we will consider: (1) ―the prejudice or 

surprise in fact of the party against whom the excluded 

witnesses would have testified‖ or the excluded evidence 

would have been offered; (2) ―the ability of that party to cure 
83

the prejudice‖; (3) the extent to which allowing such 

witnesses or evidence would ―disrupt the orderly and efficient 

trial of the case or of other cases in the court‖; (4) any ―bad 

faith or willfulness in failing to comply with the court‘s 

order‖; and (5) the importance of the excluded evidence. 

Pennypack, 559 F.2d at 904-05. The importance of the 

evidence is often the most significant factor. See Sowell v. 

Butcher & Singer, Inc., 926 F.2d 289, 302 (3d Cir. 1991); 

Pennypack, 559 F.2d at 904 (observing ―how important [the 

excluded] testimony might have been and how critical [wa]s 

its absence‖).

Applying the Pennypack factors to this case, we 

conclude that the District Court abused its discretion in 

denying Plaintiffs‘ request to allow DeRamus to submit his 

alternate damages estimates. As to the first and second 

factors, Eaton would not have suffered substantial prejudice if 

DeRamus were allowed to amend his expert report. 

DeRamus‘s new calculations will be based on data from the 

initial report, which Eaton has been aware of for nearly three 

years, and DeRamus will employ methodologies that the 

District Court has already recognized as being regularly and 

reliably applied by economists. As Plaintiffs noted in their 

motion for clarification, it would be ―a straightforward matter 

of arithmetic‖ to substitute data from the econometric model 

and actual sales data for the SBP projections. For this reason, 

the District Court‘s concern that granting Plaintiffs‘ request 

would be ―tantamount to reopening discovery‖ seems 

unfounded. Although Eaton will have to respond to new 

calculations, it will not have to analyze any new data, or 

challenge any new methodologies. Moreover, Plaintiffs 
84

specifically set forth in their motion for clarification the 

changes that DeRamus would make, and because the changes 

only involved the substitution of inputs, Eaton would not be 

unfairly surprised by the new damages estimates.

As to the third Pennypack factor, allowing DeRamus 

to submit additional damages calculations will not disrupt the 

orderly and efficient flow of the case. In fact, our ruling on 

the liability issues and remand to the District Court to resolve 

damages is precisely what the District Court and the parties 

envisioned all along. Eaton, well aware of the District 

Court‘s desire to have this Court determine the liability issues 

before setting a damages trial, suggested that the best way to 

accomplish the District Court‘s objective was to amend the 

JMOL order to include ―zero damages and no injunctive 

relief.‖ As the District Court stated at the July 25, 2011 status 

conference, ―[t]he way I handle complex litigation generally, 

when I bifurcate, is that I enter a final judgment pursuant to 

Rule 54(b) . . . and once the Circuit Court determines liability, 

if there is a reason to have a damages trial, we have a 

damages trial.‖ Thus, it cannot seriously be a surprise to any 

of the parties that they will once again be required to address 

damages in this case. Additionally, Eaton repeatedly states in 

its brief that Plaintiffs seek to reopen discovery ―on the eve of 

trial.‖ Although that may have been true when Plaintiffs‘ 

original motion for clarification was filed, it is no longer true. 

Trial ended in October 2009 and thus, when the District Court 

finally ruled on Plaintiffs‘ motion, there was no longer any 

time-crunch problem. Any concern that granting Plaintiffs‘ 

motion would prevent Eaton from being able to effectively 

prepare to address DeRamus‘s new damages estimates at trial 
85

is no longer relevant, nor is there any risk that granting 

Plaintiffs‘ motion would excessively delay a trial on liability.

As to the fourth factor, there is no evidence of any bad 

faith on the part of Plaintiffs. However, under this fourth 

factor, we may also consider the Plaintiffs‘ justifications for 

failing to include alternative damages calculations in the 

event calculations based on the SBP were found to be 

insufficient. See Pennypack, 559 F.2d at 905; Gen. Dynamics 

Corp., 999 F.2d at 115-16. Given that DeRamus‘s report 

already included the data necessary to develop alternate 

damages estimates, he could very easily have provided such 

estimates. Plaintiffs have provided no persuasive explanation 

for his failure to do so, other than that he believed his existing 

estimates were sufficiently reliable. It is not the district 

court‘s responsibility to help a party correct an error or a poor 

exercise of judgment, and thus, Plaintiffs‘ conscious choice to 

rely so heavily on data that was ultimately found to be 

unreliable weighs against a finding of abuse of discretion. 

This is especially true in a case such as this, where the party 

submitting the flawed expert report is a large corporation with 

significant resources represented by highly competent 

counsel.

However, perhaps the most important factor in this 

case is the critical nature of the evidence, and the 

consequences if permission to amend is denied. Expert 

testimony is necessary to establish damages in an antitrust 

case. As such, without additional damages calculations, it is 

clear that Plaintiffs will be unable to pursue damages, despite 

the fact that they won at the liability stage. Compare Gen. 

Dynamics Corp., 999 F.2d at 116-17 (finding an abuse of 
86

discretion in the district court‘s exclusion of expert testimony, 

in part, because the total exclusion of such testimony ―was 

tantamount to a dismissal of the [plaintiff‘s] . . . claim‖), with

Sowell, 926 F.2d at 302 (finding no abuse of discretion in 

district court‘s exclusion of proffered expert testimony, in 

large part, because ―the record [was] totally devoid of any 

indication of . . . how th[e] testimony might have bolstered 

[the plaintiff‘s] case,‖ and thus, there was ―no basis whatever 

for believing that the admission of expert testimony would 

have influenced the outcome of th[e] case‖). The District 

Court‘s decision therefore would clearly influence the 

outcome of the case. See Sowell, 926 F.2d at 302.

Significantly, in the antitrust context, a damages award 

not only benefits the plaintiff, it also fosters competition and 

furthers the interests of the public by imposing a severe 

penalty (treble damages) for violation of the antitrust laws. 

See Hawaii v. Standard Oil Co. of Cal., 405 U.S. 251, 262 

(1972) (―Every violation of the antitrust laws is a blow to the 

free-enterprise system envisaged by Congress. . . . In 

enacting these laws, Congress had many means at its disposal 

to penalize violators. It could have, for example, required 

violators to compensate federal, state, and local governments 

for the estimated damage to their respective economies 

caused by the violations. But, this remedy was not selected. 

Instead, Congress chose to permit all persons to sue to 

recover three times their actual damages . . . . By [so doing], 

Congress encouraged these persons to serve as  ̳private 

attorneys general.‘‖) (citations omitted); Mitsubishi Motors 

Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 655 

(1985) (―A claim under the antitrust laws is not merely a 
87

private matter. The Sherman Act is designed to promote the 

national interest in a competitive economy . . . .‖) (quotation 

omitted). Thus, if Plaintiffs are not able to pursue damages, 

not only will they be unable to recover for the antitrust injury 

Eaton caused, the policy of deterring antitrust violations 

through the treble damages remedy will also be frustrated. 

See Paoli II, 35 F.3d at 750 (―[T]he likelihood of finding an 

abuse of discretion is affected by the importance of the 

district court‘s decision to the outcome of the case and the 

effect it will have on important rights.‖).

In sum, after weighing the Pennypack factors and 

taking into account the circumstances under which Plaintiffs‘ 

motion for clarification was ultimately denied, we conclude 

that the District Court abused its discretion in not permitting 

Plaintiffs to submit alternate damages calculations.28

 

28 We express no opinion as to the reliability or 

admissibility of DeRamus‘s alternate damages calculations. 

That is a matter left to the District Court on remand. 

However, we note that Plaintiffs‘ motion for clarification only 

sought to include damages calculations based on data already 

in the expert report, and that fact is crucial to our holding that 

prejudice to Eaton can be easily cured. Nothing in our 

opinion should be read as requiring the District Court to allow 

Plaintiffs to bring in entirely new data for the revised 

damages estimates.
88

D. Article III Standing to Seek Injunctive Relief

Finally, we turn to Eaton‘s contention that Plaintiffs 

lack standing to seek injunctive relief. Eaton argues that 

Plaintiffs‘ complete withdrawal from the HD transmissions 

market in 2006 and their failure to present evidence showing 

anything more than a mere possibility that they will reenter 

the market precludes a finding of Article III standing as to 

injunctive relief. Although the District Court did not directly 

address standing, it noted in a footnote that, ―[w]hile 

[P]laintiffs are no longer in business and are unable to 

directly benefit from an injunction, here, an injunction is 

appropriate because of the public‘s interest in robust 

competition and the possibility that [P]laintiffs may one day 

reenter the market.‖ ZF Meritor LLC v. Eaton Corp., 800 F. 

Supp. 2d 633, 639 (D. Del. 2011). We agree with Eaton that 

this determination was improper, and we will therefore vacate 

the injunction issued by the District Court.29

 

29 Even though Meritor was still technically in the HD 

transmissions business at the time the complaint in this case 

was filed, it is still appropriate to frame this issue as one of 

standing, rather than one of mootness. Plaintiffs‘ complaint, 

which was filed on October 5, 2006, stated that Meritor 

intended to exit the HD transmissions business in January 

2007, and did not indicate any intent to reenter. Thus, even at 

the time the complaint was filed, Plaintiffs could not 

demonstrate the requisite likelihood of future injury sufficient 

to confer standing. See Davis v. F.E.C., 554 U.S. 724, 734 

(2008) (―[T]he standing inquiry [is] focused on whether the 

party invoking jurisdiction had the requisite stake in the 
89

A plaintiff bears the burden of establishing that he has 

Article III standing for each type of relief sought. Summers v. 

Earth Island Inst., 555 U.S. 488, 493 (2009). In order to have 

standing to seek injunctive relief, a plaintiff must show: 

(1) that he is under a threat of suffering ― ̳injury in fact‘ that is 

concrete and particularized; the threat must be actual and 

imminent, not conjectural or hypothetical‖; (2) a causal 

connection between the injury and the conduct complained 

of; and (3) a likelihood that a favorable judicial decision will 

prevent or redress the injury. Id. (citing Friends of Earth, Inc. 

v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180-81 (2000)). 

Even if the plaintiff has suffered a previous injury due to the 

defendant‘s conduct, the equitable remedy of an injunction is 

―unavailable absent a showing of irreparable injury, a 

requirement that cannot be met where there is no showing of 

any real or immediate threat that the plaintiff will be wronged 

again[.]‖ City of Los Angeles v. Lyons, 461 U.S. 95, 111 

(1983); see O’Shea v. Littleton, 414 U.S. 488, 495-96 (1974) 

(―Past exposure to illegal conduct does not in itself show a 

present case or controversy regarding injunctive relief . . . if 

unaccompanied by any continuing, present adverse effects.‖). 

Accordingly, a plaintiff may have standing to pursue 

 

outcome when the suit was filed.‖) (citations omitted); U.S. 

Parole Comm’n v. Geraghty, 445 U.S. 388, 397 (1980) (―The 

requisite personal interest that must exist at the 

commencement of the litigation (standing) must continue 

throughout its existence (mootness).‖) (citation omitted). 

Moreover, even if we treated this as a mootness question, our 

conclusion would remain the same.
90

damages, but lack standing to seek injunctive relief. Lyons, 

461 U.S. at 105.

For example, in City of Los Angeles v. Lyons, the 

plaintiff sued the city, seeking damages, injunctive relief, and 

declaratory relief, for an incident in which he was allegedly 

choked by police officers. Id. at 97. The Supreme Court held 

that, although the plaintiff clearly had standing to seek 

damages, he lacked standing to seek injunctive relief because 

he failed to establish a ―real and immediate threat‖ that he 

would again be stopped by the police and choked. Id. at 105. 

―Absent a sufficient likelihood that he [would] again be 

wronged in a similar way, [the plaintiff] [was] no more 

entitled to an injunction than any other citizen of Los 

Angeles.‖ Id. at 111. Likewise, in Summers v. Earth Island 

Institute, the Court held that an organization lacked standing 

to enjoin the application of Forest Service regulations in 

national parks where its members expressed only a ―vague 

desire‖ to return to the affected parks. 555 U.S. at 496. 

―Such some-day intentions—without any description of 

concrete plans, or indeed any specification of when the some 

day will be—do not support a finding of . . . actual or 

imminent injury.‖ Id. (quoting Lujan v. Defenders of 

Wildlife, 504 U.S. 555, 564 (1992)) (internal marks omitted); 

see also Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 

2559-60 (2011) (noting that employees who no longer 

worked for Wal-Mart lacked standing to seek injunctive or 

declaratory relief against Wal-Mart‘s employment practices).

Applying those principles to our case, we hold that 

Plaintiffs lack standing to seek an injunction. They clearly 

have standing to seek damages based on Eaton‘s violation of 
91

the antitrust laws while ZF Meritor and Meritor were 

competitors. However, the ZF Meritor joint venture 

operationally dissolved in 2003, Meritor stopped 

manufacturing HD transmissions in 2006, and Meritor has 

expressed no concrete desire to revive the joint venture or 

otherwise reenter the market. The sole evidence in the record 

of Meritor‘s future intentions is found in one page of trial 

testimony, in which a Meritor official stated that there had 

been internal discussions at the company about the possibility 

of reentry, but that no decision had been made. The official 

testified that Meritor ―continue[d] to monitor the performance 

of the products that are in the marketplace[,] . . . ha[d] a very 

thorough understanding of how the products [we]re 

working[,] . . . and [was] actively considering what [its] 

alternatives might be.‖ He explained, however, that upon any 

attempt to reenter, Meritor would be confronted with the 

―same obstacle that caused the dissolution of the joint 

venture.‖30

As the District Court acknowledged, this evidence 

establishes no more than a ―possibility‖ that Meritor might 

one day reenter the market. Where the District Court went 

 

30 In a post-trial status conference, the District Court 

asked Plaintiffs‘ counsel why an injunction would be 

appropriate given that Plaintiffs were no longer in the 

business. Plaintiffs‘ counsel could give no more concrete 

information about Plaintiffs‘ plans than the witness, stating 

simply that, if Eaton‘s conduct was enjoined, ―a different set 

of calculations‖ would apply to Plaintiffs‘ discussions 

regarding reentry into the market.
92

wrong, however, was in concluding that such a possibility is 

sufficient to confer Article III standing for injunctive relief. 

See McCray v. Fidelity Nat’l Ins. Co., 682 F.3d 229, 242-43 

(3d Cir. 2012) (―Allegations of possible future injury are not 

sufficient to satisfy Article III.‖) (internal marks and citation 

omitted). Plaintiffs were required to set forth sufficient facts 

to show that they were entitled to prospective relief, including 

that they were ―likely to suffer future injury.‖ McNair v. 

Synapse Grp. Inc., 672 F.3d 213, 223 (3d Cir. 2012) (citation 

omitted) (emphasis added); see McCray, 682 F.3d at 243 

(explaining that ―a threatened injury must be certainly 

impending and proceed with a high degree of certainty‖) 

(internal marks and citation omitted). Absent a showing that 

they are likely to reenter the market and again be confronted 

with Eaton‘s exclusionary practices, Plaintiffs were ―no more 

entitled to an injunction‖ than any other entity that has 

considered the possibility of entering the HD transmissions 

market. Lyons, 461 U.S. at 111. ―Vague‖ assertions of 

desire, ―without any descriptions of concrete plans,‖ are 

insufficient to support a finding of actual or imminent injury. 

See Summers, 555 U.S. at 496. Although Plaintiffs claim that 

they might again enter the market, such a decision ―w[ould] 

be their choice, and what that choice may be is a matter of 

pure speculation at this point.‖ McNair, 672 F.3d at 225.

Plaintiffs seem to suggest that there is a lower 

threshold for standing in antitrust cases.31 However, 

 

31 Specifically, Plaintiffs argue that the appropriate 

standard is found in Section 16 of the Clayton Act, which 

provides that any person ―shall be entitled to sue for and have 
93

Plaintiffs confuse the doctrines of constitutional standing and 

antitrust standing. Although the doctrines often overlap in 

practice, they are, in fact, distinct. Sullivan v. D.B. Invs., Inc., 

667 F.3d 273, 307 (3d Cir. 2011). Regardless of any 

additional requirements applicable to a particular type of 

action, a plaintiff must always demonstrate that a justiciable 

case or controversy exists sufficient to invoke the jurisdiction 

of the federal courts. Id. Plaintiffs‘ failure to do so here 

renders any inquiry into antitrust (statutory) standing 

unnecessary. See Conte Bros. Auto., Inc. v. Quaker StateSlick 50, Inc., 165 F.3d 221, 225 (3d Cir. 1998).

We agree with the District Court that there are strong 

public policy reasons for issuing an injunction in this case. 

However, the fact that there may be strong public policy 

reasons for enjoining Eaton‘s behavior does not mean that 

Plaintiffs are the appropriate party to seek such an injunction. 

Standing is a constitutional mandate, Doe v. Nat’l Bd. of Med. 

Exam’rs, 199 F.3d 146, 152 (3d Cir. 1999), and the 

consequences that flow from a finding of lack of standing 

here, although concerning, cannot affect our analysis.32

 

injunctive relief . . . against threatened loss or damage by a 

violation of the antitrust laws . . . when and under the same 

conditions and principles as injunctive relief . . . is granted by 

courts of equity.‖ 15 U.S.C. § 26.

32 Because we conclude that Plaintiffs lack standing to

pursue injunctive relief, we need not address Plaintiffs‘ 

argument that the District Court erred by refusing to allow 

them to address the scope of injunctive relief.
94

IV. CONCLUSION

First, we hold that Plaintiffs‘ claims are not subject to 

the price-cost test, and instead must be analyzed as de facto

exclusive dealing claims under the rule of reason. Second, 

we conclude that Plaintiffs presented sufficient evidence to 

support the jury‘s finding that Eaton engaged in 

anticompetitive conduct and that Plaintiffs suffered antitrust 

injury as a result. Third, we find no error in the District 

Court‘s decision to admit DeRamus‘s testimony on the issue 

of liability. Fourth, we hold that the District Court properly 

exercised its discretion in excluding DeRamus‘s damages 

testimony based on his expert report, but we conclude that the 

District Court abused its discretion by preventing DeRamus 

from submitting alternate damages calculations based on data 

already included in his initial report. Finally, we hold that 

Plaintiffs lack standing to pursue injunctive relief, and 

therefore, we will vacate the injunction issued by the District 

Court. We will remand to the District Court for further 

proceedings consistent with this opinion.
1

Greenberg, Circuit Judge, dissenting

Notwithstanding the majority‟s thoughtful and wellcrafted opinion, I respectfully dissent as I would reverse the 

District Court‟s order that it entered following its opinion 

reported at ZF Meritor LLC v. Eaton Corp., 769 F. Supp. 2d 684 

(D. Del 2011), denying Eaton‟s motion for judgment as a matter 

of law. Although the majority opinion recites in detail the 

factual background of this case, I nevertheless also set forth its 

factual predicate as I believe the inclusion of certain additional 

facts demonstrates even more clearly than the facts the majority 

sets forth why Eaton was entitled to judgment as a matter of 

law.1 

I. FACTS

A. The HD Transmission Market

The parties stipulated before the District Court and do not 

now dispute that the relevant product market in this case is 

heavy-duty (“HD”) truck transmissions and that the relevant 

geographic market is the United States, Canada, and Mexico, the 

so-called “NAFTA market.” On appeal, Eaton does not dispute 

 

1 Throughout this dissent I use the same standard of review that 

the majority sets forth. Thus while I am exercising plenary 

review of the order denying the motion for a judgment as a 

matter of law within that review I am being deferential to the 

jury verdict.
2

that it possessed monopoly power in that market during the 

events relevant to this case.

HD trucks include linehaul trucks, the familiar 18-

wheelers used to travel long distances on highways, and 

performance trucks used on unfinished terrain or to carry heavy 

loads, such as cement mixers, garbage trucks, and dump trucks. 

There are three types of HD truck transmissions: manual, 

automatic, and automated mechanical. 

As the majority indicates, the NAFTA HD truck 

transmission market functions in the following way. Original 

Equipment Manufacturers (“OEMs”) construct HD trucks. 

There were four OEMs during the period relevant to this 

dispute: Freightliner Trucks (“Freightliner”); International Truck

and Engine Corporation (“International”); PACCAR; and Volvo 

Group (“Volvo”). OEMs provide the purchasers of HD trucks 

with “data books” that list HD truck component part options, 

including transmissions, and thereby allow the customer to 

select from various options for certain parts of the HD trucks. 

The data books list one option as the “standard” offering 

with which OEMs will fit the truck unless the customer selects 

otherwise. Additionally, the component part listed in the data 

book as the lowest-priced option is referred to as the so-called 

“preferred” or “preferentially-priced” option.2 For obvious 

 

2

“Standard” and “preferred” positioning are not the same thing. 

See J.A. at 2546 (PACCAR and Eaton‟s LTA) (stating that 

PACCAR will list Eaton‟s product “as Standard Equipment and 

the Preferred Option,” whereas “„Standard Equipment‟ means 
3

reasons, positioning as the standard or preferred component part 

option in a data book can be beneficial and a form of promotion 

of the parts that the component part manufacturers supply. 

Evidence adduced at trial, which I explore further below, shows 

that OEMs decide which component parts to list as standard or 

preferred based, at least in part, on their determination of which 

component part is the most advantageous option for them to 

supply in terms of such factors as cost of supply pricing as to the 

OEMs and the availability and performance of the product. 

Consequently, the OEMs and component part manufacturers 

negotiate with respect to data book positioning. 

Data books, however, are not the exclusive means of 

advertising HD truck transmissions or other parts nor do they 

restrict the truck purchasers‟ choices. Component suppliers, 

such as appellees3and Eaton, market directly to purchasers, and 

purchasers of HD trucks can and do request unpublished options 

that are not listed in the data books. 

B. The Parties and Market Conditions

During the 1950s, Eaton began manufacturing 

transmissions for HD trucks, and eventually it developed a full 

 

the equipment that is provided to a customer unless the customer 

expressly designates another supplier‟s product” and “„Preferred 

Option‟ means the lowest priced option in the Data Book for 

comparable products”). 

3

I refer to the plaintiffs as appellees even though they are also 

appellants in these consolidated appeals.
4

product line of transmissions in a range of speeds and styles. 

Prior to 1989, Eaton was the only domestic manufacturer of HD 

truck transmissions. In 1989, however, Meritor entered the 

market with 9- and 10-speed HD manual transmissions for 

linehaul trucks. But, unlike Eaton, Meritor did not offer nor did 

it develop at any point a full product line of HD truck 

transmissions. Nevertheless, by 1999 Meritor had obtained 

approximately 18% of the market for sales of HD truck 

transmissions in North America. 

In 1999, Meritor entered into a joint venture with ZF 

Freidrichshafen (“ZF AG”), a large German company that 

previously had not sold HD truck transmissions in North 

America. The joint venture, called ZF Meritor (“ZFM”), sought 

to adapt for the NAFTA market ZF AG‟s “ASTronic” 

transmission, a linehaul 12-speed, 2-pedal, automated 

mechanical transmission. Meritor transferred its transmission 

business to ZFM, and ZFM introduced the ASTronic (renamed 

the “FreedomLine” for the NAFTA market) to these new 

markets around February 2001. At that time, Eaton did not have 

a two-pedal automated mechanical transmission and did not 

intend to release one until 2004. Appellees believe that the 

FreedomLine was technically superior to other HD truck 

transmissions available. 

In late 1999, during the same time period that appellees 

formed ZFM, there was a severe economic downturn in the 

NAFTA market area that caused a sharp decline of HD truck 

orders. By 2001, around the time ZFM introduced the 

FreedomLine, HD truck orders had fallen by approximately 

50%, with demand plummeting from more than 300,000 new 
5

HD truck orders per year to roughly 150,000 orders. 

C. The Long-Term Agreements

In the 1980s and 1990s, Eaton entered into supply 

agreements with each of the four OEMs. These agreements set 

the prices for Eaton‟s transmissions and offered volume 

discounts to the OEMs, i.e., discounted prices based on the 

OEMs‟ purchase of a certain quantity of transmissions. 

Appellees do not allege that these agreements violated the 

antitrust laws. Beginning in late 2000, however, Eaton entered 

into new supply agreements with all four of the OEMs. Those 

agreements, to which the parties refer as long-term agreements 

(“LTAs”), are at the core of the present dispute.

Eaton‟s LTAs offered the OEMs rebates based on 

market-share targets. The discounts thus provided the OEMs 

with lower prices on Eaton‟s transmissions conditioned on their 

purchase of a certain percentage of their transmission needs 

from Eaton. Although the LTAs‟ terms varied, all of the LTAs 

at issue were consistent in two respects.

First, the LTAs were not explicitly exclusive-dealing 

contracts: each OEM remained free to buy parts from any other 

HD transmission manufacturer, including ZFM, and none of the 

LTAs conditioned Eaton‟s payment of rebates on an OEM‟s 

purchase of 100% of its transmission needs from it. Second, 

each LTA contained a so-called “competitiveness clause” that 

permitted the OEM to exclude an Eaton product from the share 

target and to terminate its LTA altogether if another 

manufacturer offered transmissions of better quality or lower 
6

price. Because the LTAs are at the crux of ZFM‟s claims, I 

review those four contracts and the circumstances of their 

formation in some detail. 

1. Freightliner

As of 1998, both Eaton and Meritor had respective threeyear supply agreements with Freightliner, the largest of the 

OEMs. Meritor‟s agreement provided that it would reduce the 

price of its component parts if Freightliner listed Meritor‟s parts 

as standard in its data book, while, as I have mentioned, Eaton‟s 

agreement provided volume-discount rebates to Freightliner.

In October 2000, Freightliner notified Meritor, which by 

then had evolved into ZFM with respect to its transmission 

business, that Eaton had offered it 10-speed transmissions at a 

price significantly lower than Meritor‟s price, Eaton was 

offering certain transmissions that Meritor did not have 

available, and Eaton‟s transmissions were superior to Meritor‟s 

in price and technology. Pursuant to a provision in Meritor‟s 

supply agreement that required Meritor to remain competitive 

with respect to its products in terms of quality and technology, 

Freightliner notified Meritor that it had 90 days within which to 

match Eaton‟s inventory or Freightliner would delete Meritor‟s 

noncompetitive products from the agreement. Though Meritor 

disputed Freightliner‟s contention it did not make a counteroffer 

or offer to match Eaton‟s inventory. 

Soon thereafter, in November 2000, Eaton entered into a 

five-year LTA with Freightliner, one of the four contracts that 

appellees challenge. The LTA provided rebates ranging from 
7

$200 to $700, contingent on a 92% share target for Eaton‟s 

transmissions and clutches, an additional truck component that 

Eaton manufactured. In 2003, Eaton and Freightliner amended 

the LTA by adopting a sliding scale that entitled Freightliner to 

varying lower rebates if it met lower market-share targets 

beginning at 86.5% and going up to 90.5%. 

In exchange for the discounted prices, the LTA required 

Freightliner to list Eaton‟s transmissions as the “preferred” 

option in its data book. Significantly, however, Freightliner 

“reserve[d] the right to publish” the FreedomLine transmission 

“through the life of the agreement at normal retail price levels.” 

J.A. at 1948. The LTA also provided that in 2002 Freightliner 

would publish Eaton‟s transmissions and clutches in its data 

book exclusively, but the parties amended that provision in 2001 

to allow Freightliner to continue to publish Eaton‟s competitors‟ 

products. From 2002 onwards, Freightliner did not list ZFM‟s 

manual transmissions but it continued to list ZFM‟s other 

transmissions from 2000 to 2004. In 2004, however, 

Freightliner removed the FreedomLine from its data books 

because Meritor4had refused to pay a $1,250 rebate it had 

promised to Freightliner on that product and because 

Freightliner had experienced reliability issues with ZFM‟s 

products. See id. at 3725 (letter from Freightliner representative 

to Meritor representative (Feb. 10, 2004)) (“Freightliner is 

outraged at ArvinMeritor in the handling of the FreedomLine 

transmissions price changes. It is totally unacceptable that 

 

4As explained below, ZFM dissolved in December of 2003, and 

thus Meritor was handling sales of the FreedomLine 

transmission in the NAFTA market as of 2004.
8

ArvinMeritor would commit to price protection, and then seek 

to renege on that commitment.”). 

Under the LTA, Eaton had the right to terminate the 

agreement if Freightliner did not meet its share targets. In 2002, 

however, even though Freightliner did not meet the 92% share 

target, Eaton did not terminate the agreement. In 2003, the 

parties amended the LTA so that it would last for a total of ten 

years, extending the agreement to 2010. 

2. International

Eaton entered into a five-year LTA with International in 

July 2000. A representative from International stated that 

International entered into the LTA because it made “good 

business sense,” id. at 1532, inasmuch as the LTA provided the 

lowest purchase price for International and there was “greater 

customer preference and brand recognition for the Eaton 

product,” id. at 1528. 

In return, Eaton provided a $2.5 million payment to 

International, $1 million of which was payable in cash or in 

cost-savings initiatives. The LTA provided sliding scale rebates 

of 0.35% to 2% beginning at a market share of 80% and up to 

97.5% and above. It also provided for sliding rebates based on a 

market share of Eaton‟s clutches. For current truck models, 

International agreed to list Eaton‟s transmission as the preferred 

option, and for future models, it agreed to publish Eaton‟s 

transmissions exclusively.5 Notwithstanding the latter 

 

5

International already had listed Eaton as the standard option as 
9

provision, International continued to list ZFM‟s manual 

transmissions in its printed data book.

3. PACCAR

In July 2000, Eaton entered into a seven-year LTA with 

PACCAR. A PACCAR representative stated that PACCAR 

agreed to the market-share rebates because it “ma[d]e long term 

economic sense and it ha[d] a total value as to PACCAR.” Id. at 

1555. The PACCAR representative indicated that the “total 

value” concept incorporated such considerations as the “lower 

cost” provided by the LTAs, “providing a full product line of . . .

transmissions,” “providing product during periods of peak 

demand and ensuring the product is available,” “warranty 

provisions,” and “aftermarket supply.” Id. at 1555-56. 

The representative indicated that PACCAR was in 

discussions with ZFM regarding a supply agreement but 

ultimately it declined to enter into an agreement with ZFM 

because, apart from Eaton‟s more appealing offer, ZFM suffered 

from negative considerations such as ZFM‟s restricted output of 

its products, “massive transmission failure in the marketplace 

that caused market unacceptance of their transmissions earlier,” 

and ZFM‟s lack of a full product line. Id. at 1557, 1562. 

Additionally, PACCAR “always [paid] . . . a higher cost [for a 

ZFM product] than a comparable Eaton product, independent of 

the rebate,” particularly for the FreedomLine, which, according 

 

of 1996 because, according to an International representative, 

Eaton provided the greatest value to International. See J.A. at 

1533. 
10

to the PACCAR representative, was “by design, a more 

expensive product” because of its European origins. Id. at 1558-

59. In this regard, the representative stated that Eaton‟s rebates

were not “the only thing that made them competitive.” Id. at 

1562. 

Under the LTA, Eaton provided price reductions, a $1 

million payment, firm pricing for seven years, and engineering 

and marketing support. PACCAR also could obtain rebates 

ranging from 2% to 3% in exchange for meeting 90% to 95% 

market share targets in both transmissions and clutches. In 

exchange, PACCAR was required to list Eaton as the standard 

and preferred option in its data book. At all times PACCAR 

continued to list ZFM‟s transmissions in its data book.

4. Volvo

Eaton entered into a five-year LTA with Volvo in 

October 2002. A Volvo representative stated that Volvo entered 

into the LTA because it represented “the best overall value for 

Volvo” in terms of “price, delivery, quality manufacturing, and 

logistics.” Id. at 1430. Indeed, another Volvo representative 

stated that “[p]ricing was significantly better with Eaton [even] 

excluding rebates.” Id. at 1295; see id. at 1293, 1296 (the same 

representative estimating the savings to Volvo from the LTA 

with Eaton to be about 12% to 15% excluding the rebates and 

stating that Volvo‟s motivation in entering the LTA was “purely 

dollars, dollars and cents”). Volvo was in discussions with ZFM 

to sign a supply agreement, but ultimately it did not do so in 

large part because of ZFM‟s “inability to have a complete 

product offering of all transmissions.” Id. at 1431. 
11

The LTA provided sliding scale rebates of 0.5% to 1.5% 

originally set at 65% market share, and, as of 2004, a 70% to 

78% market share. Eaton had the option of terminating the LTA 

if its market share at Volvo fell below 68%. In turn, Volvo 

agreed to position Eaton‟s transmissions and clutches as the 

standard and preferred offering. Volvo continued to list in its 

data books both ZFM‟s and Volvo‟s own transmissions that it 

manufactured only for installation in its own trucks.6

D. ZFM‟s Business and Exit from the Market 

As of July 2000, before Eaton signed any of the 

challenged LTAs, ZFM had lost nearly 20% of its market share

in transmissions, its share declining from 16.1% to 13%. 

Minutes from a ZFM Board of Directors meeting held in July 

2000 reveal that ZFM‟s President, Richard Martello, identified a 

number of factors that caused ZFM‟s falling market position, 

including: 

(i) poor product quality image, (ii) a decrease in 

Ryder business, (iii) turnover in the [c]ompany‟s 

sales organization, (iv) an increase in sales of 

Eaton Autoshift, (v) the push towards 13-speed 

transmissions, especially by Freightliner, (vi) the 

multi-year fleet business lost due to competitive 

 

6

Eaton also entered into an LTA with the OEM Mack Trucks 

that same month. Volvo had acquired Mack Trucks in 2001, 

and it appears that the LTAs are substantively the same. 

Accordingly, I refer only to the Volvo LTA.
12

equalization cutbacks in early 1999 and (vii) 

controlled distribution.

J.A. at 3235.

Some explanation will illuminate Mr. Martello‟s 

observations. “Competitive equalization” payments are 

incentives a component manufacturer provides directly to truck 

purchasers for them to select its products from a data book. 

ZFM‟s internal documents, included in the trial record, 

demonstrate that “[d]uring the peak periods of production 

between March 1999 and September 1999, Meritor reduced 

[competitive equalization] payment[s] on deals trying to reduce 

the incentive [to] „war‟ with Eaton” but Eaton “continued . . . to 

buy business when Meritor declined deals.” Id. at 3028. 

“Controlled distribution” refers to the practice of purposefully 

limiting the quantity of a product available to the market — a 

practice that ZFM identified as the cause of it losing “various 

deals” due to ZFM‟s “lack of product” availability. Id. at 3030. 

The reference to ZFM‟s decrease in “Ryder business” appears 

to refer to the fact that ZFM lost the business of the OEM 

previously known as Mack-Ryder due to ZFM‟s controlled 

distribution practices. See id. 

In that same meeting, Mr. Martello also observed that 

there were “significant forces in favor of direct drive, fully 

automated transmissions,” including:

(i) major engine changes in October 2002 due to 

emissions standards changes, (ii) continued driver 

shortages, (iii) continued upward pressure on fuel 
13

prices, (iv) market pressure on „guaranteed cost of 

operation‟ sales incentives and (v) continued 

technician shortages. 

Id. at 3236. Significantly, as I already have noted, the 

FreedomLine was an automated mechanical transmission, not a 

fully automated transmission. 

Mr. Martello also noted that the industry was turning 

away from the component part manufacturers‟ traditional focus 

on advertising directly to truck purchasers as an incentive for 

them to select their component part, so-called “pull” advertising, 

to focus instead on “the creation of closer relationships with the 

OEMs.” Id. Along this line, Mr. Martello observed that the 

OEMs desired to have “single source, full product line 

suppliers” in an effort to reduce costs. See id. Additionally, Mr. 

Martello noted that OEMs were resistant to the prospect of 

engineering new products, such as the FreedomLine, into their 

trucks, and that, as sales of HD trucks declined, component part 

manufacturers provided rapidly increasing sales incentives to the 

OEMs. See id. To overcome these obstacles and increase 

ZFM‟s market share, Mr. Martello “recommended that a full 

line of automated products be released at every OEM and that 

[ZFM] develop a full [HD] product line.” Id. at 3237. 

Notwithstanding ZFM‟s awareness of the declining HD 

truck market, after the 2000 meeting ZFM refused to lower its 

prices despite certain OEMs‟ repeated requests that it do so. 

See, e.g., id. at 3596 (letter from Chris Benner, ZFM, to Paul D. 

Barkus, International (Sept. 19, 2002)) (stating ZFM‟s refusal to 

lower prices despite International‟s June 2002 request that it do 
14

so); id. at 1537-38 (deposition testimony of Paul D. Barkus, 

International) (indicating that ZFM refused International‟s 

request that ZFM lower its prices in December 2001); id. at 

3953 (ZFM Board minutes) (“Board did not agree with 

providing any price decreases to Volvo/Mack.”). To the 

contrary, at the end of 2003, ZFM raised the price of the 

FreedomLine by roughly 25%, an increase that caused 

significant consternation among the OEMs. Moreover, ZFM did 

not develop a full HD truck transmission product line as Mr. 

Martello had recommended. Furthermore, as the majority notes, 

at least two of ZFM‟s transmissions, including its flagship 

transmission, the FreedomLine, experienced significant 

performance problems resulting in frequent repairs, and, in 2002 

and 2003, ZFM faced significant warranty claims on its products 

amounting to millions of dollars in potential liability. 

Notwithstanding the trouble it experienced in 2000, ZFM 

experienced growth in some areas. From 2001 to 2003, the 

FreedomLine transmission went from comprising 0% of the 

linehaul market to 6% of the linehaul market, and between 2000 

and 2003, ZFM‟s market share of linehaul HD truck 

transmissions increased at three of the four OEMs. From July 

2000 to October 2003, ZFM‟s share of the total HD transmission

market ranged between 8% and 14%. 

In spite of its gains, ZFM believed that Eaton‟s LTAs 

limited ZFM‟s potential market share to approximately 8% of 

the transmission market, not the 30% that it had expected to gain 

as a result of the joint venture and which it needed to achieve for 

the venture to be a viable business. In December 2003, on the 

basis of that calculation, ZFM was dissolved. Following ZFM‟s 
15

dissolution, Meritor returned to the transmission business it had 

conducted before entering into the joint venture. In 2006, 

however, Meritor exited the HD truck transmission business 

entirely. 

E. Eaton‟s Pricing

At trial, appellees did not allege or introduce any 

evidence that Eaton priced its transmissions below any measure 

of cost during the relevant time period, and, on appeal, appellees 

do not contend that Eaton‟s prices were below cost. 

Furthermore, at all times relevant to the present dispute, Eaton‟s 

average transmission prices to the OEMs were lower than 

ZFM‟s average prices to the OEMs. In other words, the OEMs 

paid more to purchase and supply ZFM‟s transmissions to the 

truck purchasers than they paid for Eaton‟s transmissions. In 

particular, ZFM priced its FreedomLine significantly above the 

price of Eaton‟s transmissions.

II. ANALYSIS

Although it frames the question differently, as the 

majority recognizes the central question that emerges in this 

appeal is what effect, if any, does appellees‟ failure to allege, 

much less prove, that Eaton engaged in below-cost pricing have 

on its claims? Eaton, of course, contends that the effect is 

dispositive, arguing that Supreme Court precedent requires that 

courts apply the price-cost test of Brooke Group Ltd. v. Brown 

& Williamson Tobacco Corp., 509 U.S. 209, 113 S.Ct. 2578 
16

(1993), in any case in which a plaintiff challenges a defendant‟s 

pricing practices.7 Appellees challenged Eaton‟s pricing 

practices, namely, its market-share discounts, but because 

appellees did not introduce evidence that Eaton engaged in 

below-cost pricing, Eaton contends that appellees did not 

establish that they suffered antirust injury nor did they show that 

by adopting the LTAs Eaton violated the antitrust laws.8

 

7Under the Brooke Group price-cost test, a firm must first 

establish that the defendant‟s prices “are below an appropriate 

measure of its . . . costs,” and second, it must show that the 

defendant “had a reasonable prospect [under § 1 of the Sherman 

Act], or, under § 2 of the Sherman Act, a dangerous probability, 

of recouping its investment in below-cost prices.” 509 U.S. at 

223-24, 113 S.Ct. at 2587-88. 

8Apart from meeting the requirements of Article III standing, an 

antitrust plaintiff seeking monetary or injunctive relief must 

show that it has suffered antitrust injury, i.e., an “injury of the 

type that the antitrust laws were intended to prevent and that 

flows from that which makes [the] defendant[‟s] acts unlawful.” 

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 

489, 97 S.Ct. 690, 697 (1977). Although courts often conflate 

the antitrust injury requirement with the determination of 

whether the defendant‟s conduct violated the antitrust laws, this 

approach is erroneous as the antitrust injury requirement 

assumes the defendant‟s conduct was unlawful (and thus 

anticompetitive) and asks whether the anticompetitive aspect of 

the unlawful conduct is the cause of plaintiff‟s injury. See 

Angelico v. Lehigh Valley Hosp., Inc., 184 F.3d 268, 275 n.2 
17

Appellees, of course, contend that their failure to show 

that Eaton engaged in below-cost pricing is entirely irrelevant to 

the success or failure of their claims. Appellees claim that the 

obligation to show below-cost pricing applies only where a 

 

(3d Cir. 1999) (“The District Court erred by incorporating the 

issue of anticompetitive market effect into its standing analysis, 

confusing antitrust injury with an element of a claim under 

section 1 of the Sherman Act . . . .”); see also Daniel v. Am. Bd. 

of Emergency Med., 428 F.3d 408, 447-48 (2d Cir. 2005) 

(explaining that anticompetitive effects of defendant‟s behavior 

“are classic „rule of reason‟ questions, distinct from the antitrust 

standing question”) (citations omitted). Because I conclude that 

Eaton was entitled to judgment as a matter of law as there was 

insufficient evidence for the jury‟s conclusion that Eaton 

violated Sections 1 and 2 of the Sherman Act and Section 3 of 

the Clayton Act, I do not address whether appellees satisfied the 

antitrust injury requirement. Accord L.A.P.D., Inc. v. Gen. Elec. 

Corp., 132 F.3d 402, 404 (7th Cir. 1997) (“Because LAPD 

adequately alleges injury in fact and thus has standing under 

Article III, however, we may bypass the antitrust-injury issue to 

go straight to the merits.”); Hairston v. Pac. 10 Conference, 101 

F.3d 1315, 1318 (9th Cir. 1996) (“[W]e need not decide whether 

appellants have met the requirements for antitrust standing, 

because they have failed to establish any violation of the 

antitrust laws.”); Levine v. Cent. Fl. Med. Affiliates, Inc., 72 

F.3d 1538, 1545 (11th Cir. 1996) (“We need not decide whether 

Dr. Levine has met the requirements for standing as to any of his 

antitrust claims, because as to each one he has failed to establish 

any violation of the antitrust laws.”).
18

plaintiff brings a so-called “predatory pricing” claim.9In this 

regard, appellees contend that they were not required to show 

that Eaton engaged in below-cost pricing because they did not 

bring a “predatory pricing” claim. In fact, appellees explicitly 

disavow any allegation that Eaton engaged in below-cost pricing 

and instead contend that the LTAs, including the market-share 

rebates they contained, amounted to unlawful de facto exclusive 

dealing agreements.10

The majority appears to split the difference between the 

parties‟ two positions. The majority concludes that the Brooke 

 

9A firm engages in “predatory pricing” when it cuts its prices 

below an appropriate measure of cost to force competitors out of 

the market or to deter potential entrants from entering the 

market. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 

475 U.S. 574, 584 n.8, 106 S.Ct. 1348, 1355 n.8 (1986). “The 

success of any predatory scheme depends on maintaining

monopoly power for long enough both to recoup the predator‟s 

losses and to harvest some additional gain.” Id. at 589, 106 

S.Ct. at 1357 (emphasis in original). Due to the inherently 

speculative nature of such an undertaking, “predatory pricing 

schemes are rarely tried, and even more rarely successful.” Id.

10As the leading antitrust treatise points out, “to be challenged as 

unlawful exclusive dealing, . . . [a] quantity discount program 

would necessarily involve prices above cost, else the program 

would not be sustainable.” Phillip E. Areeda & Herbert 

Hovenkamp, Fundamentals of Antitrust Law § 18.03b, at 18-70 

(4th ed. 2011).
19

Group price-cost test may be dispositive in a case where a 

plaintiff brings a claim challenging a defendant‟s pricing 

practices11 and alleges that price itself functioned as the 

exclusionary tool. I agree completely with the majority‟s 

conclusion in this regard. Thereafter, however, our paths 

diverge because the majority appears to conclude that where a 

plaintiff brings a claim of unlawful exclusive dealing against a 

defendant‟s pricing practices but does not contend that the 

defendant‟s prices operated as the exclusionary tool, the pricecost test is irrelevant and has neither dispositive nor persuasive 

effect.12

As I explain further below, while I do not believe that the 

Supreme Court has held that the inferior courts must impose and 

give dispositive effect to the Brooke Group price-cost test in 

every claim challenging a defendant‟s pricing practices, the 

 

11Throughout this opinion I use the term “pricing practices” to 

encompass the variety of ways in which a firm may set its 

prices, including but not limited to, straightforward price cuts 

and conditional rebates or discounts. 

12I recognize that the majority states that Eaton‟s low prices are 

not irrelevant to the extent they may help explain why the OEMs 

entered the LTAs even though the LTAs allegedly included 

terms that were unfavorable to the OEMs and to rebut an 

argument that the agreements were inefficient but the majority 

does not factor the circumstance that Eaton‟s prices were above

cost into its analysis of whether the LTAs were exclusionary and 

anticompetitive, and I believe its failure to do so is error. 
20

Court‟s unwavering adherence to the general principle that 

above-cost pricing practices are not anticompetitive and its 

justifications for that position lead me to conclude that this 

principle is a cornerstone of antitrust jurisprudence that applies 

regardless of whether the plaintiff focuses its claim on the price 

or non-price aspects of the defendant‟s pricing program. Thus, 

although the price-cost test may not bar a claim of exclusive 

dealing challenging a defendant‟s above-cost pricing practices, 

regardless of how a plaintiff casts its claim or the non-price 

elements of the pricing practices that the plaintiff identifies as 

the exclusionary conduct, where a plaintiff attacks a defendant‟s 

pricing practices — and to be clear that is what the market-share 

rebate programs at issue here are — the fact that defendant‟s 

prices were above-cost must be a high barrier to the plaintiff‟s 

success. Accordingly, I believe that we must apply the Brooke 

Group price-cost test to the present case and give that test 

persuasive effect in the context of our broader analysis under the 

antitrust laws at issue.

Allowing appellees that opportunity, the majority 

concludes that the plaintiffs adduced sufficient evidence at trial 

from which a jury reasonably could infer that the LTAs 

represented unlawful “de facto partial exclusive dealing.”13 In 

 

13I cannot utilize this phrase without making the point that where 

a court permits a non-exclusive, non-mandatory supply 

agreement to morph into a mandatory exclusive-dealing contract 

to legitimize a plaintiff‟s claim of unlawful “de facto partial 

exclusive dealing” the court follows antitrust plaintiffs down the 

rabbit hole a bit too far. While “de facto partial exclusive 

dealing” is a creative neologism, the phrase not only distorts the 
21

doing so, the majority concludes that despite the fact that the 

LTAs by their terms were not exclusive nor mandatory and 

despite the fact that the prices offered under them were at all 

times above-cost such that an equally-efficient competitor could 

have matched them, they were de facto partial exclusive dealing 

contracts because Eaton was a dominant supplier, the OEMs 

could not have afforded to lose Eaton as a supplier, and thus, the 

majority reasons, the OEMs were compelled to enter the LTAs 

and meet their market-share targets. The majority reaches its 

 

English language (in what other realm would one refer to a 

contract as “partially exclusive”?), it takes us so far from the 

text of Section 3 of the Clayton Act and the actual concept of 

exclusive dealing that I shudder to think what will be labeled as 

exclusive dealing next. 

The majority concedes that “partial exclusive dealing is 

rarely a valid antitrust theory.” Typescript at 43 (internal 

quotation marks omitted). Indeed, the only thing rarer may be 

what appellees actually allege here: “de facto partial exclusive 

dealing.” I am not aware of any Supreme Court or court of 

appeals precedent recognizing such a claim, and a Westlaw 

search of the phrase reveals only one other case recognizing the 

concept as a viable antitrust claim. In a sign that we truly have 

come full circle, that case is a class action pending in the United 

States District Court for the District of Delaware brought by 

truck purchasers against Eaton, the four OEMs, and a handful of 

other entities, alleging that the same LTAs at issue here violated 

Sections 1 and 2 of the Sherman Act and Section 3 of the 

Clayton Act. See Wallach v. Eaton Corp., 814 F. Supp. 2d 428, 

442-43 (D. Del. 2011). 
22

conclusion despite the absence of evidence in the record 

suggesting that Eaton would have refused to supply 

transmissions to the OEMs had the OEMs failed to meet the 

LTAs‟ market-share targets or that Eaton at any point coerced 

the OEMs into entering the LTAs or meeting the targets. For 

reasons I set forth more fully below, I cannot join my colleagues 

in this judicial reworking of the LTAs and the unbridled 

speculation the majority‟s reasoning requires to convert the 

LTAs into exclusive dealing contracts. Even analyzing 

appellees‟ claims under the rule of reason and the principles 

used to ascertain whether an exclusive-dealing arrangement is 

lawful and employing the deferential standard of review to 

which we subject jury verdicts, it is plain that the agreements 

could not have been and in fact were not anticompetitive.

A. The Supreme Court‟s Treatment of Antitrust Challenges to 

Pricing Practices 

Beginning with Cargill, Inc. v. Monfort of Colorado, Inc., 

479 U.S. 104, 107 S.Ct. 484 (1986), the Supreme Court in a 

series of cases considering antitrust challenges to pricing 

practices has made clear that as a general matter above-cost 

pricing practices do not threaten competition. In Cargill, the 

Court considered whether Monfort, a beef-packing business, had 

shown antitrust injury to the end that it had standing to challenge 

the merger of two of its competitors that allegedly violated 

Section 7 of the Clayton Act. See id. at 106-09, 107 S.Ct. at 

487-88. Monfort presented two theories of antitrust injury: “(1) 

a threat of a loss of profits stemming from the possibility that . . 

. [defendant], after the merger, would lower its prices to a level 

at or only slightly above its costs” and “(2) a threat of being 
23

driven out of business by the possibility that . . . [defendant], 

after the merger, would lower its prices to a level below its 

costs.” Id. at 114, 107 S.Ct. at 491. 

The Court rejected Monfort‟s first theory of injury, 

stating “the antitrust laws do not require the courts to protect 

small businesses from the loss of profits due to continued 

competition, but only against the loss of profits from practices 

forbidden by the antitrust laws.” Id. at 116, 107 S.Ct. at 492. 

Because the defendant‟s above-cost “competition for increased 

market share” was not “activity forbidden by the antitrust laws” 

but rather constituted “vigorous competition,” Monfort could 

not demonstrate antitrust injury under its first theory. Id. In this 

regard, the Court noted that “[t]o hold that the antitrust laws 

protect competitors from the loss of profits due to such price 

competition would, in effect, render illegal any decision by a 

firm to cut prices in order to increase market share.” Id. The 

antitrust laws, the Court noted, “require no such perverse result” 

because “[i]t is in the interest of competition to permit dominant 

firms to engage in vigorous competition, including price 

competition.” Id. (internal quotation marks and citation 

omitted). The Court rejected Monfort‟s second claim that the 

defendant would engage in below-cost, i.e. predatory pricing, 

following the merger because Monfort had failed to raise and 

failed to adduce adequate proof of that claim before the district 

court. See id. at 118-19, 107 S.Ct. at 494. 

Four years later, in Atlantic Richfield Co. v. USA 

Petroleum Co., 495 U.S. 328, 110 S.Ct. 1884 (1990), the Court 

reiterated that above-cost pricing practices generally are not 

anticompetitive, this time in the context of Section 1 of the 
24

Sherman Act. In Atlantic Richfield, USA Petroleum Company 

(“USA”), an independent retail marketer of gasoline, alleged 

that its competitor, Atlantic Richfield Company (“ARCO”), 

which sold gasoline through its own stations and indirectly 

through dealers, violated Sections 1 and 2 of the Sherman Act 

through a price-fixing scheme that set gasoline prices at belowmarket but above-cost levels through its offer of short-term 

discounts, such as volume discounts, and the elimination of 

credit-card sales to its dealers. See id. at 331-32, 110 S.Ct. at 

1887-88. Only USA‟s Section 1 claim was before the Court, see 

id. at 333 n.3, 110 S.Ct. at 1888 n.3, and the question presented 

was whether USA had suffered an antitrust injury by virtue of 

ARCO‟s Section 1 violation, see id. at 335, 110 S.Ct. at 1889. 

At the time, ARCO‟s conduct was regarded as a per se violation 

of Section 1. See id. (citing Albrecht v. Herald Co., 390 U.S. 

145, 88 S.Ct. 869 (1968), overruled by State Oil Co. v. Khan, 

522 U.S. 3, 118 S.Ct. 275 (1997)).

First, the Court rejected USA‟s claim that it automatically 

satisfied the antitrust injury requirement because ARCO‟s 

conduct constituted a per se violation of Section 1. 495 U.S. at 

336-37, 110 S.Ct. at 1890-91. The Court then turned to USA‟s 

alternative claim that even if it was not entitled to a presumption 

of injury, it had suffered injury “because of the low prices 

produced by the vertical restraint.” Id. at 337, 110 S.Ct. at 1891. 

Rejecting this contention, the Court reasoned that “[w]hen a 

firm, or even a group of firms adhering to a vertical agreement, 

lowers prices but maintains them above predatory levels, the 

business lost by rivals cannot be viewed as an „anticompetitive‟ 

consequence of the claimed violation.” Id. Such injury, the 

Court concluded, “is not antitrust injury; indeed, „cutting prices 
25

in order to increase business often is the very essence of 

competition.‟” Id. at 338, 110 S.Ct. at 1891 (emphasis in 

original) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith 

Radio Corp., 475 U.S. 574, 594, 106 S.Ct. 1348, 1359 (1986)). 

USA argued alternatively that it was “inappropriate to 

require a showing of predatory pricing before antitrust injury 

can be established when the asserted antitrust violation is an 

agreement in restraint of trade illegal under § 1 of the Sherman 

Act, rather than an attempt to monopolize prohibited by § 2.” 

Id. at 338, 110 S.Ct. at 1891. As the Court noted, “[p]rice fixing 

violates § 1, for example, even if a single firm‟s decision to 

price at the same level would not create § 2 liability” because 

“the price agreement itself is illegal.” Id. at 338, 110 S.Ct. at 

1891. USA contended that therefore it had “suffered antitrust 

injury even if [ARCO‟s] pricing was not predatory under § 2 of 

the Sherman Act.” Id. at 339, 110 S.Ct. at 1891.

In a passage that is significant in the context of the 

present case, the Court also rejected that contention. It 

explained: 

Although a vertical, maximum-price-fixing 

agreement is unlawful under § 1 of the Sherman 

Act, it does not cause a competitor antitrust injury 

unless it results in predatory pricing. Antitrust 

injury does not arise for purposes of § 4 of the 

Clayton Act, until a private party is adversely 

affected by an anticompetitive aspect of the 

defendant‟s conduct; in the context of pricing 

practices only predatory pricing has the requisite 
26

anticompetitive effect. Low prices benefit 

consumers regardless of how those prices are set, 

and so long as they are above predatory levels, 

they do not threaten competition. Hence, they 

cannot give rise to antitrust injury. 

Id. at 339-40, 110 S.Ct. at 1891-92 (citations omitted and some 

emphasis added). 

The Court observed that it had “adhered to this principle 

regardless of the type of antitrust claim involved.” Id. at 340, 

110 S.Ct. at 1892 (citing Cargill, 479 U.S. at 116, 107 S.Ct. at 

492; Brunswick Corp., 429 U.S. at 487, 97 S.Ct. at 696).14 The 

 

14As did Cargill, Brunswick Corp. involved a competitor‟s 

antitrust challenge to an allegedly illegal acquisition under 

Section 7 of the Clayton Act because it would have brought a 

“„deep pocket‟ parent into a market of „pygmies.‟” 429 U.S. at 

487, 97 S.Ct. at 697. The Court concluded that the plaintiff 

could not show antitrust injury based on the losses it would 

suffer from that acquisition because the aspect of the merger that 

made it unlawful did not cause the plaintiff‟s losses. See id.

The majority interprets the Supreme Court‟s statement it 

had adhered to the principle that “in the context of pricing 

practices only predatory pricing has the requisite anticompetitive 

effect” “regardless of the type of antitrust claim involved” to 

mean “that the price-cost test applies regardless of the statute 

under which a pricing practice claim is brought, not that the 

price-cost [test] applies regardless of the type of anticompetitive 

conduct.” Typescript at 38 n.13. While the Supreme Court‟s
27

Court noted that although “the source of the price competition in 

[Atlantic Richfield] was an agreement allegedly unlawful under 

§ 1 of the Sherman Act rather than a merger in violation of § 7 

of the Clayton Act . . . that difference [wa]s not salient . . . 

[because] [w]hen prices are not predatory, any losses flowing 

from them cannot be said to stem from an anticompetitive aspect 

of the defendant‟s conduct.” 495 U.S. at 340-41, 110 S.Ct. at 

1892 (emphasis in original).

 

statement undoubtedly makes clear that the principle that abovecost pricing is not anticompetitive applies regardless of which 

provision of the antitrust laws is at issue, I believe that the 

Court‟s rather clear statement that it had adhered to this 

principle “regardless of the type of antitrust claim involved” 

means exactly what it says — that whether the plaintiff 

challenges a defendant‟s pricing practices in the context of a 

challenge to an allegedly unlawful merger or whether it does so 

in the context of a claim that a defendant has entered a pricefixing agreement a plaintiff cannot contend that the prices 

resulting from those arrangements are anticompetitive unless 

they are below cost. While I do not believe that the Court‟s 

statement in this regard requires that the price-cost test apply 

with dispositive force in every challenge to a defendant‟s pricing 

practices because there may be other elements of a defendant‟s 

conduct that are anticompetitive notwithstanding its above-cost 

prices, the Court‟s reasoning undoubtedly lends support to my 

conclusion that the price-cost test must factor into a court‟s 

decision when it is asked to judge the lawfulness of such a 

defendant‟s rebate program.
28

It is, of course, important to understand the significance 

of Cargill and Atlantic Richfield in the context of this case. 

Cargill and Atlantic Richfield involved the question of whether 

the plaintiffs had suffered antitrust injury, not whether abovecost pricing practices ever can violate Sections 1 and 2 of the 

Sherman Act or Section 3 of the Clayton Act. Indeed, at the 

time the Court decided Atlantic Richfield, vertical, maximumprice-fixing schemes were regarded as per se illegal under 

Section 1 of the Sherman Act, and the Court assumed in its 

analysis that even the above-cost scheme at issue in Atlantic 

Richfield was illegal under Section 1. 

Nevertheless, though it was writing in the context of the 

antitrust injury requirement for the actions, the Court in Cargill

and Atlantic Richfield forcefully rejected the notion that the 

above-cost pricing practices at issue threatened competition at 

all. See Atl. Richfield, 495 U.S. at 340, 110 S.Ct. at 1892 (“[S]o 

long as [prices] are above predatory levels, they do not threaten 

competition.”); Cargill, 479 U.S. at 116, 107 S.Ct. at 492 

(stating that Cargill‟s above-cost pricing practices aimed at 

increasing its market share was not “activity forbidden by the 

antitrust laws”) (emphasis added). Because the antitrust laws at 

issue in this case require to fix liability on it that Eaton‟s 

behavior present a probable threat to or actually negatively 

impact competition in the relevant marketplace, these 

pronouncements are important here and should bear on our 

consideration of the question of whether the particular pricing 

practices involved in this case are anticompetitive and thus 

violate the antitrust laws. 

Along this same line, other courts of appeals have looked 
29

to Atlantic Richfield‟s discussion of above-cost pricing practices 

not only in the context of considering whether the plaintiff has 

demonstrated antitrust injury but also in considering whether a 

defendant‟s conduct violates the antitrust laws. See Cascade 

Health Solutions v. PeaceHealth, 515 F.3d 883, 902-03 (9th Cir. 

2008) (relying on Atlantic Richfield, among other cases, to hold 

that bundled discounts are not exclusionary conduct under 

Section 2 of the Sherman Act unless the discounts result in 

below-cost pricing); Virgin Atl. Airways Ltd. v. British Airways 

PLC, 257 F.3d 256, 269 (2d Cir. 2001) (stating in the context of 

a challenge to a volume-discount program that “[a]s long as low 

prices remain above predatory levels, they neither threaten 

competition nor give rise to antitrust injury”) (citing Atl. 

Richfield, 495 U.S. at 340, 110 S.Ct. at 1892) (emphasis added); 

Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1060-

61 (8th Cir. 2000) (relying on Atlantic Richfield in concluding 

that defendant had not violated Section 2 through its above-cost 

market-share discounts). Similarly, the Supreme Court has 

invoked Atlantic Richfield‟s discussion of below-cost pricing 

practices in considering whether pricing practices violate the 

antitrust laws.

Indeed, three years after it decided Atlantic Richfield, the 

Court reemphasized this principle in concluding that below-cost 

pricing was necessary to establish liability under Section 2 of the 

Clayton Act in an attack on a defendant‟s pricing practices. In 

Brooke Group, Liggett, a generic cigarette manufacturer, alleged 

that Brown & Williamson Tobacco Corporation (“B&W”) 

violated Section 2 of the Clayton Act when it offered below-cost 

price-cuts and volume rebates on “orders of very substantial 

size” to its wholesalers on B&W‟s generic cigarettes in an effort 
30

to reverse decreasing sales of its branded cigarettes. 509 U.S. at 

216-17, 113 S.Ct. at 2584. The Court stated that “whether the 

claim alleges predatory pricing under § 2 of the Sherman Act or 

primary-line price discrimination under the Robinson-Patman 

Act, . . . , a plaintiff seeking to establish competitive injury 

resulting from a rival‟s low prices must prove that the prices 

complained of are below an appropriate measure of its rival‟s 

costs” and “that the competitor had a reasonable prospect, or 

under § 2 of the Sherman Act, a dangerous probability, of 

recouping its investment in below-cost prices.” Id. at 222-24, 

113 S.Ct. at 2587-88 (emphasis added). Because Liggett had 

failed to provide sufficient evidence that B&W had a reasonable 

prospect of recouping its allegedly predatory losses, the Court 

concluded that B&W was entitled to judgment as a matter of 

law. See id. at 243, 113 S.Ct. at 2598.

Importantly, in explaining the dual requirements set forth 

above, the Court noted that it had “rejected elsewhere the notion 

that above-cost prices that are below general market levels or 

the costs of a firm‟s competitors inflict injury to competition 

cognizable under the antitrust laws.” Id. at 223, 113 S.Ct. at 

2588 (citing Atl. Richfield, 495 U.S. at 340, 110 S.Ct. at 1892). 

In this connection, the Court reiterated Atlantic Richfield‟s 

principle that “„[l]ow prices benefit consumers regardless of 

how those prices are set, and so long as they are above predatory 

levels, they do not threaten competition . . . regardless of the 

type of antitrust claim involved.‟” Id. (quoting Atl. Richfield, 

495 U.S. at 340, 110 S.Ct. at 1892). The Court observed:

As a general rule, the exclusionary effect 

of prices above a relevant measure of cost either 
31

reflects the lower cost structure of the alleged 

predator, and so represents competition on the 

merits, or is beyond the practical ability of a 

judicial tribunal to control without courting 

intolerable risks of chilling legitimate pricecutting.

509 U.S. at 223, 113 S.Ct. at 2588. 

The Court again rejected an attack on above-cost pricing 

practices with its decision in Weyerhaeuser Co. v. RossSimmons Hardwood Lumber Co., 549 U.S. 312, 320-21, 127 

S.Ct. 1069, 1075 (2007). Weyerhaeuser involved the unusual 

situation in which there was an allegation of “predatory 

bidding,” meaning that a firm with monopoly buying power on 

the supply side drives up the price of that input to levels at 

which a competitor cannot compete. Id. at 320, 127 S.Ct. at 

1075. Once the monopolist has caused competing buyers to exit 

the market for the input, “it will seek to restrict its input 

purchases below the competitive level, thus reduc[ing] the unit 

price for the remaining input[s] it purchases[,]” thereby allowing 

the monopolist to reap profits that will offset any losses it 

suffered in bidding up the input prices. Id. at 320-21, 127 S.Ct. 

at 1075-76. The issue was whether a plaintiff alleging that a 

defendant engaged in such conduct was required to demonstrate 

that the defendant engaged in below-cost pricing through the 

alleged predatory bidding on the supply side. Due to the 

theoretical and practical similarities between a claim of 

predatory pricing and a claim of predatory bidding, the Court 

concluded that its Brooke Group test applies to predatory 

bidding claims under Section 2 just as the test applies to Section 
32

2 predatory pricing claims. See id. at 325, 127 S.Ct. at 1078. 

In doing so, the Court noted that in Brooke Group it had 

been “particularly wary of allowing recovery for above-cost 

price cutting because allowing such claims could, perversely, 

„chil[l] legitimate price cutting,‟ which directly benefits 

consumers.” Id. at 319, 127 S.Ct. at 1074 (quoting Brooke Grp., 

509 U.S. at 223-24, 113 S.Ct. at 2588). Accordingly, the Court 

had “specifically declined to allow plaintiffs to recover for 

above-cost price cutting, concluding that „discouraging a price 

cut and . . . depriving consumers of the benefits of lower prices . 

. . does not constitute sound antitrust policy.‟” Id., 127 S.Ct. at 

1074-75 (quoting Brooke Grp., 509 U.S. at 224, 113 S.Ct. at 

2588). 

Most recently in Pacific Bell Telephone Co. v. Linkline 

Communications, Inc., 555 U.S. 438, 129 S.Ct. 1109 (2009), the 

Court extended this principle to “price squeeze” claims. Price 

squeeze claims allege that a “vertically integrated firm [that] 

sells inputs at wholesale and also sells finished goods or services 

at retail” has “simultaneously raise[d] the wholesale price of 

inputs and cut the retail price of the finished good” thereby 

“squeezing the profit margins of any competitors in the retail 

market,” and forcing the competitors to “pay more for the inputs 

they need . . . [and] cut their retail prices to match the other 

firm‟s prices.” Id. at 442, 129 S.Ct. at 1114. The Court noted 

that “[t]o avoid chilling aggressive price competition, [it] ha[d] 

carefully limited the circumstances under which plaintiffs can 

state a Sherman Act claim by alleging that prices are too low.” 

Id. at 451, 129 S.Ct. at 1120. It reiterated the dual requirements 

of Brooke Group for predatory pricing claims, and noted, once 
33

more, Atlantic Richfield‟s principle that “so long as [prices] . . . 

are above predatory levels, they do not threaten competition.” 

Id. (quoting Atl. Richfield, 495 U.S. at 340, 110 S.Ct. at 1892).15

The Supreme Court‟s decisions in the above cases require 

that inferior courts recognize that in general above-cost pricing 

practices are not anticompetitive and thus do not violate the 

antitrust laws. Time and time again, the Court has made clear 

that above-cost pricing practices generally do not threaten 

competition in the marketplace. Accord Cascade Health 

Solutions, 515 F.3d at 901 (observing in the context of challenge 

to bundled discount program that Brooke Group and 

Weyerhaeuser “strongly suggest that, in the normal case, abovecost pricing will not be considered exclusionary conduct for 

antitrust purposes”); Concord Boat, 207 F.3d at 1061 (stating in 

the context of a challenge to a market-share discount program 

that decisions of the Supreme Court “illustrate the general rule 

that above cost discounting is not anticompetitive”); see also 

Khan, 522 U.S. at 15, 118 S.Ct. at 282 (“Our interpretation of 

the Sherman Act also incorporates the notion that condemnation 

of practices resulting in lower prices to consumers is „especially 

costly‟ because „cutting prices in order to increase business 

often is the very essence of competition.”) (internal quotation 

 

15An equally important facet of the Court‟s decision in Linkline, 

in a context quite apart from that here, was its holding that a 

plaintiff may not bring a Section 2 Sherman Act price-squeeze 

claim “when the defendant is under no antitrust obligation to sell 

the inputs to the plaintiff in the first place.” 555 U.S. at 442, 

129 S.Ct. at 1115. 
34

marks and citation omitted). 

 As the majority notes, it is also clear that the conditional 

nature of the price cuts or the fact that the prices and the 

conditions were memorialized in the LTAs does not render the 

precedent that I summarize above inapplicable.16 As noted, both 

Atlantic Richfield and Brooke Group involved conditional 

discounts of another type, namely volume rebates, and surely 

inasmuch as ARCO and B&W both were sophisticated 

companies that dealt in large-scale transactions, they certainly 

explained these discounts and the conditions they placed on 

them to the purchasers of their products whether or not they did 

so in writing. In any event, the purchasers necessarily knew that 

they were receiving the discounts when they were afforded 

 

16As noted, in the case of PACCAR‟s and International‟s 

respective LTAs, Eaton provided up-front cash payments in 

addition to market rebates. Although these payments were not 

in the form of rebates, they cannot be distinguished from the 

market-share rebates because both practices were an avenue for 

Eaton ultimately to provide discounted prices to the OEMs. 

Accord Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 614 

F.3d 57, 79 (3d Cir. 2010) (noting that tire manufacturer‟s offer 

of up-front payments to race sanctioning bodies to select 

manufacturer‟s tires presented no more a coercive threat than an 

offer of lower prices); NicSand, Inc. v. 3M Co., 507 F.3d 442, 

452 (6th Cir. 2007) (en banc) (noting that defendant‟s cash 

payments to induce retailers to carry its product solely were 

“nothing more than price reductions offered to the buyers”) 

(internal quotation marks and citation omitted). 
35

them. These cases thus make apparent that the Court‟s 

reluctance to condemn above-cost pricing practices extends not 

only to direct price cuts but also to conditional pricing practices 

whether or not they are stated in written agreements. The 

principle that above-cost pricing practices generally do not 

threaten competition in the marketplace remains true whether 

the plaintiff casts its claim in the verbiage of “predatory pricing” 

and alleges explicitly that defendant‟s prices are too low or 

whether it realizes it cannot do so because the prices were above 

cost so it instead couches its challenge in the language of 

exclusive dealing and attacks the agreements that offer the low 

prices.

In practice, however, a defendant‟s pricing practices may 

include both price and non-price elements. Further, I concur in 

the majority‟s conclusion that notwithstanding the Court‟s 

strong pronouncements favoring above-cost price cuts, the 

Supreme Court has not held that in every case in which a 

plaintiff challenges a defendant‟s pricing practices the Brooke 

Group test is dispositive and the plaintiff therefore must 

demonstrate that there has been below-cost pricing to succeed. 

See Cascade Health Solutions, 515 F.3d at 901 (noting that “in 

neither Brooke Group nor Weyerhaeuser did the Court go so far 

as to hold that in every case in which a plaintiff challenges low 

prices as exclusionary conduct the plaintiff must prove that 

those prices were below cost”).17 But where a plaintiff contends 

 

17Likewise, I concur fully with the majority‟s point that a firm 

may engage in anticompetitive conduct without engaging in 

below-cost pricing. The antitrust laws proscribe an array of 

conduct that, of course, does not require as an essential element 
36

that a defendant‟s prices alone were anticompetitive, the Brooke 

Group price-cost test provides the entire legal framework 

necessary to evaluate that claim because the Brooke Group

price-cost test is designed to measure whether prices are 

anticompetitive or not. Thus, where a plaintiff challenges a 

defendant‟s pricing practices as exclusive dealing or under any 

other theory of antitrust liability but in fact alleges only that the 

defendant‟s prices themselves operate as the exclusionary or 

anticompetitive tool, the Brooke Group test must apply and have 

dispositive effect.18 My conclusions in this regard largely mirror 

 

below-cost pricing. For example, tying arrangements, unlawful 

mergers, and price-fixing agreements, to name a few, are all 

practices that may violate the antitrust laws regardless of the 

prices resulting from such conduct. The Supreme Court has 

made clear, however, that where an antitrust plaintiff attacks a 

defendant‟s pricing practices, i.e. price cuts, rebates or the like, 

if those practices result in above-cost prices they generally do 

not threaten competition, regardless of the source or type of 

antitrust claim at issue.

18Appellees rely heavily on LePage‟s Inc. v. 3M, 324 F.3d 141 

(3d Cir. 2003) (en banc), and contend that our decision in that 

case precludes the possibility that the price-cost test has any 

applicability outside of the predatory-pricing-claim framework. 

For essentially the same reasons the majority sets forth, I, too,

believe that LePage‟s must be confined to its facts and in any 

event does not bear on the present factually-distinguishable case. 

LePage‟s dealt with bundled rebates, a practice which we 

analogized to tying arrangements in its exclusive potential and 
37

 

which we concluded may exclude an equally efficient but less 

diversified rival even if the bundled rebates resulted in abovecost prices. See 324 F.3d at 155 (“The principal anticompetitive 

effect of bundled rebates as offered by 3M is that when offered 

by a monopolist they may foreclose portions of the market to a 

potential competitor who does not manufacture an equally 

diverse group of products and who therefore cannot make a 

comparable offer.”). Above-cost single-product market-share 

discounts, however, do not present the same putative danger of 

excluding an equally efficient but less diversified rival by virtue 

of that rival‟s limited production alone. For this exact reason, as 

I explain in further detail below, the same leading antitrust 

treatise upon which LePage‟s relied to analogize bundled 

rebates to tying concludes that single-product market-share 

discounts are more appropriately likened to straightforward 

price cuts and the Brooke Group price-cost test should control 

challenges to such programs. Thus, I concur with the majority 

that our reasoning in that case necessarily is limited to a singleproduct producer‟s claim that it has been excluded through a 

more-diversified competitor‟s bundled rebate program that 

conditioned discounts on the purchase of products that the 

single-product producer did not offer.

Additionally, while I believe that LePage‟s‟ bases for 

distinguishing Brooke Group stood on questionable grounds 

when we set them forth nine years ago, as the majority notes the 

Supreme Court‟s subsequent decisions have eviscerated those 

bases and counsel that we do not extend LePage‟s beyond its 

original parameters. Furthermore, in concluding that LePage‟s

must be confined to its facts, I think it appropriate to point out 
38

those of the majority.

Where I part from my colleagues, however, is with their 

conclusion that if a plaintiff challenges a defendant‟s pricing 

 

that there has been considerable academic criticism of our 

opinion in that case. See, e.g., J. Shahar Billbary, Predatory 

Bundling and the Exclusionary Standard, 67 Wash. & Lee L. 

Rev. 1231, 1246 (Fall 2010) (“[T]he main problem with the 

LePage‟s test is that it does not investigate whether a bundled 

discount is pro-competitive. . . . [It] may in fact protect a less 

efficient competitor (as LePage‟s admitted to be.”); Richard A. 

Epstein, Monopoly Dominance or Level Playing Field? The 

New Antitrust Paradox, 72 U. Chi. L. Rev. 49, 49, 61-72 

(Winter 2005) (criticizing LePage‟s‟ reasoning and noting that 

the case “shows the deleterious consequences that flow from the 

aggressive condemnation of unilateral practices”). Moreover, 

another court of appeals specifically has declined to follow 

LePage‟s, see Cascade Health Solutions, 515 F.3d at 903. But 

perhaps most significantly, the Antitrust Modernization 

Commission, a statutorily-created bipartisan group tasked with 

evaluating the state of antitrust law and setting forth 

recommendations to Congress and the President for its 

modernization, criticized LePage‟s as potentially “harm[ing] 

consumer welfare,” and proposed instead that courts adopt a 

three-part test modeled after Brooke Group‟s below-cost pricing 

test to evaluate the lawfulness of bundled discounts. See

Antitrust Modernization Comm‟n, Report and 

Recommendations 94-99 (2007) available at 

http://govinfo.library.unt.edu/amc/report_recommendation/amc_

final_report.pdf.
39

practices but contends that the non-price aspects of defendant‟s 

conduct, rather than the prices themselves, constituted the 

anticompetitive conduct, the price-cost test is no longer relevant.

While the Supreme Court has not held that the price-cost test is 

dispositive of all claims that attack a defendant‟s pricing 

practices, it is undeniable that its reasoning in the above cases 

establishes that courts ought to exercise a great deal of caution 

before condemning above-cost pricing practices. As the 

majority notes, in the precedent recited above the plaintiffs 

grounded their claims in the allegation that defendant‟s prices 

would cause or had caused them harm. Yet the purpose of my 

summary and my quotation of that precedent in such detail is to 

bear out the fact that the Court‟s holdings rejecting the 

respective plaintiffs‟ challenges in those cases were grounded in 

the fundamental and broader principle that above-cost pricing 

practices, even those embodied in discount and rebate programs 

memorialized in written agreements, generally are not 

anticompetitive and it is that point that is so critical here. 

I believe that it is evident that the Supreme Court‟s 

reasoning with respect to above-costs pricing applies to a 

plaintiff‟s challenge to a defendant‟s pricing practices even if 

the plaintiff claims that the non-price aspects of the defendant‟s 

practices were the actual exclusionary tactics. Regardless of 

what components of Eaton‟s rebate program that appellees 

identify as the anticompetitive conduct, whether it is the prices 

or the conditions that Eaton attached to those prices, the 

question the jury considered at the trial and that we face on 

appeal is whether Eaton‟s rebate program and conduct as a 

whole was procompetitive or anticompetitive. See LePage‟s 

Inc. v. 3M, 324 F.3d 141, 162 (3d Cir. 2003) (en banc) (“[T]he 
40

courts must look to the monopolist‟s conduct taken as a whole 

rather than considering each aspect in isolation.”) (citing Cont‟l 

Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699, 

82 S.Ct. 1404 (1962)). Our inquiry in that regard should be an 

objective one that focuses on the facts of the program and our 

answer to that question should not turn on the circumstance that 

appellees had enough foresight specifically not to protest 

Eaton‟s prices.19 

Eaton‟s prices were, of course, the crux of the rebate 

program and are an inextricable element of the LTAs. Although 

appellees conveniently chose to ignore Eaton‟s prices in 

formulating their claims, in light of that economic reality and the 

Supreme Court‟s mandate that the inferior courts tread lightly 

when asked to condemn above-cost pricing practices, the nature 

of those prices must bear on the question of whether Eaton‟s 

rebate program as a whole was anticompetitive or not. 

Accordingly, I believe that if, as here, a plaintiff attacks both the 

price-based and non-priced-based elements of a defendant‟s 

pricing practices, a court should apply and give persuasive effect 

to the Brooke Group price-cost test such that a firm‟s above-cost 

pricing practices enjoy a presumption of lawfulness regardless 

of how a plaintiff crafts its claim challenging the practices. This 

approach honors the Supreme Court‟s repeated admonition that 

 

19In this regard I note that Eaton‟s rebate program existed in the 

same form, above-cost prices and all, on the day before 

appellees filed their claim as on the day after they filed their 

claim. The program did not undergo an ontological 

transformation because appellees had enough prudence not to 

challenge the price aspects of the program. 
41

above-cost pricing practices are generally procompetitive and 

that inferior courts must exercise caution before condemning 

such practices. Furthermore, it has the added virtue of injecting 

a modicum of predictability into this muddled area of antitrust 

jurisprudence. This principle is critical in this case. 

I recognize, however, that as is always true with respect 

to any nonconclusive presumption, there may be an exception to 

the presumption of lawfulness of above-cost pricing if a plaintiff 

challenging a defendant‟s above-cost pricing practices 

establishes that the defendant‟s conduct as a whole was 

anticompetitive notwithstanding the pricing aspect of its 

conduct. In this vein, I acknowledge that, as most contracts 

offering large-scale quantity discounts necessarily do, the LTAs 

had other provisions besides the reduced prices themselves, 

namely, the conditions Eaton attached to those reduced prices, 

i.e., the market-share targets and the data book placement 

provisions which appellees attack as anticompetitive. Applying 

and giving persuasive effect to the Brooke Group price-cost test 

would not preclude appellees from arguing that the non-price 

aspects of Eaton‟s conduct were anticompetitive even in the 

absence of below-cost pricing. In practice then, in a case such 

as this one, the Brooke Group price-cost test would operate only 

as one element, though a significant one, of a court‟s and jury‟s 

inquiry under the rule of reason. 

In at least implicitly recognizing the dubious footing of 

an antitrust mode of analysis that hinges entirely on how a 

plaintiff crafts its claim, the majority states that a plaintiff may 

not escape the Brooke Group price-cost test simply by 

characterizing its claim as one of exclusive dealing but it does 
42

allow the plaintiff to avoid application of the test as long as the 

plaintiff brings an exclusive dealing claim and contends that the 

non-price aspects of the agreement offering the reduced prices 

operated as the exclusionary tool. The result of the majority‟s 

approach is that the strong procompetitive justifications driving 

the Supreme Court‟s repeated charge that inferior courts 

exercise caution before condemning above-cost pricing practices 

suddenly disappear so long as the plaintiff is clever enough to 

claim that the non-price aspects of the defendant‟s pricing 

practices, not the prices themselves, were anticompetitive. I do 

not believe that this is the result the precedent requires or 

prudence counsels. 

I reject the notion that a plaintiff may engage in such 

legalistic maneuvering in an effort to circumvent the Supreme 

Court‟s charge that a court look with a skeptical eye at attacks 

on above-cost pricing practices. The non-price aspects of the 

LTAs which appellees challenge, namely the market-share 

targets and the data book placement provisions, and indeed the 

LTAs themselves would not exist without the reduced prices 

that Eaton offered as an incentive for the OEMs to enter the 

agreements. Conceptually severing the conditions Eaton 

attached to those prices ignores the economic realities of this 

case and allows a plaintiff essentially to commandeer a court‟s 

analysis through artificial distinctions.20 In concluding that the 

 

20Of course, the majority in effect if not intent encourages an 

antitrust plaintiff challenging a defendant‟s above-cost pricing 

practices simply to avoid any mention of defendant‟s prices. In 

light of the majority‟s approach, it would be the rare case indeed 

in which a sophisticated plaintiff would bring an exclusive 
43

Brooke Group price-cost test at least must have persuasive 

effect in a plaintiff‟s challenge to a defendant‟s pricing practices 

regardless of how a plaintiff casts its claim, I believe it 

appropriate to note that although I stand alone in this case, I 

nonetheless find myself in good company. The leading antitrust 

treatise, on which the majority also relies,21 concludes that 

single-product market-share discounts that do not require 

exclusivity as a condition of the discount are pro-competitive 

and thus lawful so long as they remain above-cost. Because that 

treatise cogently explains why above-cost market-share 

 

dealing claim against a defendant‟s above-cost pricing practices 

and allege that price itself functioned as the exclusionary tool 

for such a claim necessarily would be ill-fated under the 

majority‟s approach.

21The majority quotes from Areeda and Hovenkamp to explain 

the treatise‟s perspective that a dominant firm may employ 

exclusive-dealing contracts to preclude a young rival‟s 

expansion. I do not doubt the truth of this statement but as I 

note above the treatise takes the position that market-share 

discount programs that do not condition the discount on 

exclusivity, which precisely describes Eaton‟s program, are, in 

fact, not exclusive dealing contracts and should not be treated as 

such. Areeda and Hovenkamp suggest that where a marketshare discount program conditions the discount on exclusivity 

the standards applicable to exclusive dealing should apply. See 

Fundamentals of Antitrust Law, § 18.03b, at 18-65 (“A discount 

conditioned on exclusivity should generally be treated as no 

different than an orthodox exclusive-dealing arrangement.”).
44

discounts are generally not anticompetitive and do not constitute 

unlawful exclusive dealing, I quote it at length: 

[U]nilaterally imposed quantity discounts 

can foreclose the opportunities of rivals when a 

dealer can obtain its best discount only by dealing 

exclusively with the dominant firm. For example, 

discounts might be cumulated over lengthy 

periods of time, such as a calendar year, when no 

obvious economies result. The effect of 

continuously increasing discounts varies, but they 

can resemble exclusive dealing in extreme 

circumstances. 

Nevertheless, quantity and market share 

discounts differ from exclusive dealing in 

important respects. First, the buyer need not 

make any ex ante commitment of long duration to 

deal with only one firm; as soon as other 

advantages outweigh the discount, the buyer can 

switch simply by paying the nondiscounted price. 

The buyers can also switch if one or more other 

sellers can match the discount. As long as the 

discounted price is above cost and not predatory, 

it can be matched by any equally efficient rival. 

Second, the similarity to exclusive dealing 

is greatest when the product in question is 

fungible, with buyers indifferent to all 
45

characteristics except price.[22] If the product is 

differentiated, the buyer may wish to purchase a 

mixture from alternative sellers, notwithstanding 

one seller‟s progressive discount. For example, 

an appliance seller who has customer demand for 

four brands of refrigerators is likely to stock all 

four, even though the seller of one offers 

progressive discounts for larger purchases.

The effective period over which a firm is 

„locked up‟ by a cumulating discount may bear on 

competitive effects, just as contract duration in

excluding dealing cases. . . . Discounts that are 

aggregated over a longer period — say, over all 

purchases made in one year — may be more 

problematic. First, however, they cannot have an 

anticompetitive effect greater than exclusive 

dealing with one year contracts. Where there are 

multiple buyers, numerous selling opportunities 

will come up anew each year. Second, in the 

great majority of cases they exclude much less 

than the one-year exclusive dealing contract 

because an aggressive rival can steal sales by 

matching the cumulated discount, which will be 

 

22Of course, HD truck transmissions are not fungible products. 

Indeed, this fact is an unstated premise of appellees‟ claims 

because they contend essentially that the FreedomLine was far 

superior to Eaton‟s transmissions and that its failure in the 

marketplace can be attributed only to Eaton‟s anticompetitive 

conduct.
46

the same as the dominant firm‟s cumulative 

discount obligation. Even in such a case, singleitem discounts can be matched by an equally 

efficient rival. 

For single-item discounts, no matter how 

measured or aggregated, injury to an equally 

efficient rival seems implausible. It is perhaps 

most plausible where there are a very small 

number of buyers, entry barriers into the buying 

market are very high, and buying requires the 

making of long-term commitments. In that case, 

aggressive discounting by the monopolist could 

deprive a rival of most of its patronage. Even 

here, however, we would hesitate to condemn a 

firm for making an above-cost sale that could 

readily be matched by an equally efficient rival. 

Competitive injury is not plausible when there are 

a large number of buyers, particularly when entry 

barriers into the buying market are low. As the 

First Circuit did in Barry Wright [Barry Wright 

Corp. v. ITT Grinnell Corp., 724 F.2d 227, 232 

(1st Cir. 1983) (Breyer, J.)], we would test 

illegality by the ordinary rules applying to 

predatory pricing and allow all above-cost single 

item discounts. 

Given that above-cost discounts can be 

matched by equally efficient rivals, 

anticompetitive effects are likely only when the 

large firm can offer a larger variety of products or 
47

services than the smaller firm does. The most 

common scenario resembles tying.

IA Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 

768b, at 148-50 (2d ed. 2000) (emphasis added).

This discussion is set forth in the treatise‟s treatment of 

market-share discounts in the context of Section 2 of the 

Sherman Act. However, for the same reasons recited above, 

Areeda and Hovenkamp take the identical position in the context 

of Section 1 Sherman Act challenges to market-share discounts: 

One approach to [market-share discounts] . 

. . is to treat them as exclusive dealing contracts, 

with the contract period equal to the period over 

which purchases can be aggregated for purposes 

of measuring the size of the discount. 

. . . 

If exclusive dealing under equivalent 

structural conditions and subject to equivalent 

defenses were lawful, the discount arrangement 

should be lawful as well. But the competitive 

impact must in fact be less because any equally 

efficient rival can take the customer by bidding a 

better price and even compensating the customer 

for the loss of the discount from the defendant —

assuming, as we have, that the defendant‟s 

program results in above-cost prices at all 

discount levels. . . . For these reasons we suggest 
48

that discounts attached merely to the quantity of 

good purchased, and not to exclusivity itself, be 

treated as lawful, and not be subjected to the laws 

of exclusive dealing. 

The decisions to the contrary involve

situations where the defendant aggregates the 

discount across two or more related products, 

while the plaintiff produces only one or a subset 

of these products. 

XI Areeda & Hovenkamp, Antitrust Law ¶ 1807b2, at 132-33 

(citing LePage‟s, 324 F.3d 141) (emphasis added).23

The treatise‟s reasoning as set forth above is clear and 

needs little further elaboration from me. While, as noted, the 

law allows a plaintiff to contend that non-price aspects of a 

defendant‟s pricing practices were anticompetitive under the 

rule of reason notwithstanding the defendant‟s above-cost 

prices, I believe that the treatise‟s extraordinarily detailed 

economic rationale for concluding that the price-cost test is 

appropriate in challenges to single-product market-share 

discounts show that my approach is on firm footing. See also 

Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 232 

(1st Cir. 1988) (Breyer, J.) (Above-cost prices do not “have a 

tendency to exclude or eliminate equally efficient competitors. 

Moreover, a price cut that leaves prices above incremental costs 

 

23As I explain below, Areeda and Hovenkamp take the position 

that Section 3 does not encompass non-exclusive market-share 

discount programs.
49

was probably moving prices in the „right‟ direction — towards 

the competitive norm.”); Herbert Hovenkamp, Discounts and 

Exclusion, 2006 Utah L. Rev. 841, 844 (2006) (“One of the 

factors driving the predatory pricing rule is that, as long as 

prices are above the relevant measure of cost, the discounts 

cannot exclude an equally efficient rival. The same is true of 

single-product discounts.”).

In sum, I reiterate that Supreme Court precedent requires 

that courts exercise considerable caution before condemning 

above-cost pricing practices and that in a challenge to a 

defendant‟s pricing practices the Brooke Group price-cost test 

should apply and be given persuasive effect regardless of 

whether a plaintiff identifies non-price elements of a 

defendant‟s conduct that it alleges were anticompetitive. 

Having discussed this critical point, I now turn to the question of 

whether under the rule of reason analysis and the standards 

applicable to claims of unlawful exclusive dealing appellees 

demonstrated that a jury could hold that Eaton violated the 

antitrust laws notwithstanding its above-cost prices. 

B. Clayton Act Section 3 and Sherman Act Section 1 Claims24

 

24The majority collapses appellees‟ three claims into one 

analysis, and while that approach is not necessarily incorrect and 

the three provisions at issue overlap substantially, I believe it 

most prudent to address the claims separately as the provisions 

at issue have some distinct elements that require separate 

discussion. 
50

Appellees contend that the LTAs were anticompetitive 

exclusive dealing arrangements in violation of Section 1 of the 

Sherman Act and Section 3 of the Clayton Act. They claim that 

through the LTAs “Eaton engaged in de facto exclusive dealing 

agreements and other conduct that denied any other supplier the 

ability to compete for even 10% of the market.” Appellees‟ br. 

at 43. 

In considering this argument, I start with the principle 

that even explicit exclusive-dealing arrangements, which 

preclude a buyer from purchasing the goods of another seller, 

are not per se unlawful. See Race Tires Am., Inc. v. Hoosier 

Racing Tire Corp., 614 F.3d 57, 76 (3d Cir. 2010); United States 

v. Dentsply Int‟l, Inc., 399 F.3d 181, 187 (3d Cir. 2005). 

Indeed, “it is widely recognized that in many circumstances 

exclusive dealing arrangements may be highly efficient — to 

assure supply, price stability, outlets, investment, best efforts or 

the like — and pose no competitive threat at all.” Races Tires, 

614 F.3d at 76 (quoting E. Food Servs., Inc. v. Pontifical 

Catholic Univ. Servs. Ass‟n, Inc., 357 F.3d 1, 8 (1st Cir. 2004)) 

 

In this case, I make many more citations to the record 

than judges of this Court ordinarily would make in an opinion. I 

do so because while deference to the jury‟s verdict requires that 

we not reweigh the evidence and that we view the evidence in 

the light most favorable to appellees, where, as here, the 

evidence supporting that verdict falls so short of the standard 

required to sustain that verdict I believe it appropriate to point 

not only to the absence of evidence supporting the jury verdict 

but also to the considerable undisputed evidence contradicting 

that verdict.
51

(internal brackets omitted); see also Standard Oil Co. of Calif. v. 

United States, 337 U.S. 293, 306-07, 69 S.Ct. 1051, 1058-59 

(1949) (listing advantages of requirements contracts to both 

buyers and sellers); Omega Envtl., Inc. v. Gilbarco, Inc., 127 

F.3d 1157, 1162 (9th Cir. 1997) (“There are . . . well-recognized 

economic benefits to exclusive dealing arrangements, including 

the enhancement of interbrand competition.”) (citation omitted). 

As we stated in Race Tires, “[i]t is well established that 

competition among businesses to serve as an exclusive supplier 

should actually be encouraged.” 614 F.3d at 83 (citation 

omitted). “[C]ompetition to be an exclusive supplier may 

constitute „a vital form of rivalry, and often the most powerful 

one, which the antitrust laws encourage rather than suppress.‟” 

Id. at 76 (quoting Menasha Corp. v. News Am. Marketing InStore, Inc., 354 F.3d 661, 663 (7th Cir. 2004)). Of course, 

“exclusive agreements are not exempt from antitrust scrutiny.” 

Race Tires, 614 F.3d at 76. “All exclusive dealing agreements 

must comply with section 1 of the Sherman Act.” Barr Labs., 

Inc. v. Abbott Labs., 978 F.2d 98, 110 (3d Cir. 1992) (citing 

Am. Motor Inns, Inc. v. Holiday Inns, Inc., 521 F.2d 1230, 1239 

(3d Cir. 1975)). “Contracts for the sale of goods . . . must also 

comply with the more rigorous standards of section 3 of the 

Clayton Act.” Id. 

While Section 3 requires that a plaintiff demonstrate that 

it is “probable that performance of the contract will foreclose 

competition in a substantial share of the line of commerce 

affected,” Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 

320, 327, 81 S.Ct. 623, 628 (1961) (emphasis added), under a 

Section 1 rule-of-reason case such as this case “the plaintiff 

bears the initial burden of showing that the [alleged] agreement 
52

produced an adverse, anticompetitive effect within the relevant 

geographic market,” Burtch v. Milberg Factors, Inc., 662 F.3d 

212, 222 (3d Cir. 2011) (quotations marks and citation omitted) 

(emphasis added). Accordingly, if an arrangement “do[es] not 

infringe upon the stiffer standards of anti-competitiveness under 

the Clayton Act, . . . [it] will also be lawful under the less 

restrictive provisions of the Sherman Act.” Barr Labs., 978 F.2d 

at 110 (citing Am. Motor Inns, 521 F.2d at 1250); see also CDC 

Techs., Inc. v. IDEXX Labs., Inc., 186 F.3d 74, 79 (2d Cir. 

1999) (“The conclusion that a contract does not violate § 3 of 

the Clayton Act ordinarily implies the conclusion that the 

contract does not violate the Sherman Act . . . .”) (citation 

omitted); Twin City Sportservice, Inc. v. Charles O. Finley & 

Co., 676 F.2d 1291, 1304 n.9 (9th Cir. 1982) (“[A] greater 

showing of anticompetitive effect is required to establish a 

Sherman Act violation than a section 3 Clayton Act violation in 

exclusive-dealing cases.”) (citation omitted).25

 

25In Tampa Electric, the Court indicated that if an arrangement 

is lawful under Section 3 of the Clayton Act it will be lawful 

under both Sections 1 and 2 of the Sherman Act. See 365 U.S. 

at 335, 81 S.Ct. at 632 (“We need not discuss the respondents‟ 

further contention that the contract also violates § 1 and § 2 of 

the Sherman Act, for if it does not fall within the broader 

proscription of § 3 of the Clayton Act it follows that it is not 

forbidden by those of the former.”) (citing Times-Picayune 

Publ‟g Co. v. United States, 345 U.S. 594, 608-09, 73 S.Ct. 872, 

880 (1953)). In Barr Laboratories, however, we disposed of the 

plaintiff‟s Section 1 Sherman Act claim with its Section 3 

Clayton Act claim but we addressed the plaintiff‟s Section 2 
53

To determine whether it is “probable that performance of 

the contract will foreclose competition in a substantial share of 

the line of commerce affected” in violation of Section 3, Tampa 

Electric Co., 365 U.S. at 327, 81 S.Ct. at 628, logically a 

plaintiff first must establish the share of the market, expressed in 

a percentage, in which the exclusive dealing arrangement 

forecloses competition. As the Court of Appeals for the District 

of Columbia Circuit stated in one of the more notable antitrust 

cases of the recent past, “[t]hough what is „significant‟ may vary 

depending upon the antitrust provision under which an exclusive 

deal is challenged, it is clear that in all cases the plaintiff must 

both define the relevant market and prove the degree of 

foreclosure.” United States v. Microsoft Corp., 253 F.3d 34, 69 

(D.C. Cir. 2001); see also Stop & Shop Supermarket Co. v. Blue 

Cross & Blue Shield of R.I., 373 F.3d 57, 66 (1st Cir. 2004) 

(“For the exclusive dealing contract, the first step would be [for 

plaintiff] to show the extent of foreclosure resulting from the . . . 

contract . . . .”); R.J. Reynolds Tobacco Co. v. Philip Morris 

Inc., 199 F. Supp. 2d 362, 388 (M.D.N.C. 2002), aff‟d, 67 F. 

App‟x 810 (4th Cir. 2003) (“A plaintiff makes out a prima facie

case of substantial foreclosure by demonstrating first that a 

 

Sherman Act claim separately. See 978 F.2d at 110-12; see also 

Dentsply, 399 F.3d at 197 (concluding that the district court 

erred in stating that defendant had not violated Section 2 of the 

Sherman Act solely because it had concluded that defendant had 

not violated Section 3 of the Clayton Act) (citing LePage‟s, 324 

F.3d at 157 n.10). For this reason, I subsume appellees‟ Section 

1 Sherman Act claim within its Section 3 claim but I address 

separately appellees‟ Section 2 Sherman Act claim.
54

significant percentage of the relevant market is foreclosed by the 

provision challenged.”). 

“The share of the market foreclosed is important because, 

for the contract to have an adverse effect upon competition, „the 

opportunities for other traders to enter into or remain in that 

market must be significantly limited.‟” Microsoft Corp., 253 

F.3d at 69 (quoting Tampa Elec. Co., 365 U.S. at 328, 81 S.Ct. 

at 628-29); see also Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 

466 U.S. 2, 45, 104 S.Ct. 1551, 1576 (1984) (O‟Connor, J., 

concurring) (“Exclusive dealing is an unreasonable restraint on 

trade [under Section 1 of the Sherman Act] only when a 

significant fraction of buyers or sellers are frozen out of a 

market by the exclusive deal.”) (citation omitted); Chuck‟s Feed 

& Seed Co. v. Ralston Purina Co., 810 F.2d 1289, 1294 (4th Cir. 

1987) (“[T]he courts‟ focus in evaluating exclusive dealing 

arrangements should be on their effect in shutting out competing 

manufacturers‟ brands from the relevant market.”); Perington 

Wholesale, Inc. v. Burger King Corp., 631 F.2d 1369, 1374 

(10th Cir. 1979) (“[A] complaining trader [challenging an 

exclusive-dealing arrangement] must allege and prove that a 

particular arrangement unreasonably restricts the opportunities 

of the seller‟s competitors to market their product.”) (citation 

omitted). Thus, “[f]ollowing Tampa Electric, courts considering 

antitrust challenges to exclusive contracts have taken care to 

identify the share of the market foreclosed.” Microsoft Corp., 

253 F.3d at 69 (citation omitted); see also E.I. du Pont de 

Nemours and Co. v. Kolon Indus., Inc., 637 F.3d 435, 451 (4th 

Cir. 2011) (noting that “the requirement of a significant degree 

of foreclosure serves a useful screening function”) (internal 

quotation marks and citation omitted). 
55

Nevertheless, the antitrust laws tolerate some degree of 

market foreclosure; Section 3 only condemns an agreement 

where the foreclosure represents a substantial share of the 

market. See Standard Fashion Co. v. Magrane Houston Co., 258 

U.S. 346, 357, 42 S.Ct. 360, 362 (1922) (“That . . . [Section 3] 

was not intended to reach every remote lessening of competition 

is shown in the requirement that such lessening must be 

substantial.”). Thus, once the plaintiff demonstrates the portion 

of the market the exclusive-dealing arrangement forecloses, the 

court must ask whether that level of preemption constitutes a 

“substantial” share of the market. See Tampa Elec. Co., 365 

U.S. at 328, 81 S.Ct. at 628 (In a Section 3 case, the Court must 

consider the degree of market foreclosure and “the competition 

foreclosed by the contract must be found to constitute a 

substantial share of the relevant market.”). There is no fixed 

percentage at which foreclosure becomes “substantial” and 

courts have varied widely in the degree of foreclosure they 

consider unlawful. See R.J. Reynolds Tobacco Co., 199 F. 

Supp. 2d at 388 (collecting cases and noting that “[c]ourts have 

condemned provisions involving foreclosure as low as 24% 

while provisions involving foreclosure as high as 50% have 

been upheld”) (citations omitted). 

Under Tampa Electric, however, “the degree of market 

foreclosure is only one of the factors involved in determining 

the legality of an exclusive dealing arrangement.” Barr Labs., 

978 F.2d at 111 (citation omitted). Indeed, while a negligible 

degree of foreclosure “makes dismissal easy,” a high degree of 

market foreclosure does not “automatically condemn” an 

exclusive-dealing arrangement. Stop & Shop Supermarket, 373 

F.3d at 68. Rather, once a plaintiff identifies the degree of 
56

market foreclosure, to determine whether that preemption is 

“substantial,” a court considers not only the quantitative aspect 

of the foreclosure but also the qualitative conditions of the 

particular market, such as “the relative strength of the parties, 

the proportionate volume of commerce involved in relation to 

the total volume of commerce in the relevant market area,” and 

the effect “preemption of that share of the market might have on 

effective competition therein.” Tampa Elec. Co., 365 U.S. at 

329, 81 S.Ct. at 629; see also Barr Labs., 978 F.2d at 111. 

Courts employing Tampa Electric‟s market analysis also 

consider the duration of the agreement, the ease of its 

terminability, the height of any entry barriers, alternative outlets 

competitors may employ to sell their product, and the buyer‟s 

and seller‟s business justifications for the arrangement. See 

Concord Boat, 207 F.3d at 1059; Omega Envtl., 127 F.3d at 

1163-65; Barr Labs., 978 F.2d at 111; Barry Wright Corp, 724 

F.2d at 236-37; R.J. Reynolds Tobacco Co., 199 F. Supp. 2d at 

389; see also XI Areeda & Hovenkamp, Antitrust Law ¶ 1821d, 

at 183-88.26 

 

26In substance, the Tampa Electric standard for Clayton Act 

Section 3 claims differs very marginally, if at all, from the factintensive rule-of-reason analysis that applies to this case under 

Section 1 of the Sherman Act. Cf. Deutscher Tennis Bund v. 

ATP Tour, Inc., 610 F.3d 820, 830 (3d Cir. 2010) (“The rule of 

reason requires the fact-finder to weigh [] all of the 

circumstances of a case in deciding whether a restrictive practice

should be prohibited as imposing an unreasonable restraint on 

competition. The inquiry is whether the restraint at issue is one 

that promotes competition or one that suppresses competition.”) 
57

In considering whether Eaton‟s conduct violated Section 

3, I note first that it is undisputed that the LTAs were not by 

their terms exclusive-dealing contracts. The LTAs did not 

require the OEMs to purchase any amount, much less all, of 

their transmission needs from Eaton, and they did not preclude 

the OEMs from purchasing transmissions from appellees or any 

other manufacturer. Additionally, the LTAs did not condition 

the rebates on the OEMs‟ purchase of 100% of their 

transmission needs from Eaton. 

In the past, we have expressed doubt as to whether an 

agreement involving less than all of a customer‟s purchases even 

falls within the ambit of Section 3. See Barr Labs., 978 F.2d at 

110 n.24 (“An agreement affecting less than all purchases does 

not amount to true exclusive dealing.”) (citation omitted); see 

also W. Parcel Express v. United Parcel Serv. of Am., Inc., 190 

 

(quotation marks and citations omitted). Indeed, it appears more 

often than not that in a Section 1 case courts explicitly employ 

the Tampa Electric standard as the guiding framework for the 

rule-of-reason analysis. See, e.g. Allied Orthopedic Appliances 

Inc. v. Tyco Health Care Grp., 592 F.3d 991, 996 (9th Cir. 2010) 

(“Under the antitrust rule of reason, an exclusive dealing 

arrangement violates Section 1 only if its effect is to „foreclose 

competition in a substantial share of the line of commerce 

affected.‟”) (quoting Omega Envtl., 127 F.3d at 1162); see also 

Jefferson Parish, 466 U.S. at 45, 104 S.Ct. at 1575 (O‟Connor, 

J., concurring) (“Exclusive dealing arrangements are 

independently subject to scrutiny under § 1 of the Sherman Act, 

and are also analyzed under the Rule of Reason.”) (citing Tampa 

Elec. Co., 365 U.S. at 333-35, 81 S.Ct. at 631-32). 
58

F.3d 974, 976 (9th Cir. 1999) (concluding that because volume 

discount contracts did “not preclude consumersfrom using other 

delivery services, they [we]re not exclusive dealing contracts 

that preclude[d] competition”); Magnus Petroleum Co., v. Skelly 

Oil Co., 599 F.2d 196, 200 (7th Cir. 1979) (“Because the 

agreements contained no exclusive dealing clause and did not 

require plaintiffs to purchase any amounts of gasoline that even 

approached their requirements, they did not violate Section 3 of 

the Clayton Act.”) (citations omitted). 

Indeed, Section 3 explicitly applies only to those 

agreements entered into “on the condition, agreement, or 

understanding that the lessee or purchaser . . . shall not use or 

deal in the goods . . . of a competitor.” 15 U.S.C. § 14; see also 

Standard Fashion Co., 258 U.S. at 356, 42 S.Ct. at 362 (Section 

3 “deals with consequences to follow the making of the 

restrictive covenant limiting the right of the purchaser to deal in 

the goods of the seller only.”).27 I doubt whether a market-share 

 

27Section 1 of the Sherman Act, which proscribes “[e]very 

contract, combination in the form of trust or otherwise, or 

conspiracy, in restraint of trade or commerce,” 15 U.S.C. § 1 

and Section 2 of the Sherman Act, which proscribes the 

monopolization or attempted monopolization of trade or 

commerce, 15 U.S.C. § 2, do not contain Section 3‟s “on the 

condition” language. Accordingly, the LTAs fall within the 

theoretical reach of those provisions. Nevertheless, appellees‟ 

Section 1 and 2 claims fail because appellees did not introduce 

sufficient evidence from which a jury could infer that the LTAs 

were exclusive dealing contracts that foreclosed competition in 

the marketplace. 
59

discount program of the type here, which does not preclude the 

buyer from dealing in the goods of others and does not even 

condition the rebate on exclusivity, falls within the statutory 

reach of that provision. See IIIA Areeda & Hovenkamp, 

Antitrust Law ¶ 768, at 148 n.26 (noting that “only the Sherman 

Act applies” to a claim that a market-share discount amounts to 

exclusive dealing because “[w]hile § 3 of the Clayton Act, 15 

U.S.C. § 14, expressly covers the seller who offers a „discount 

from, or rebate upon‟ a sale in exchange for a promise not to 

deal with others, that is not the same thing as a quantity or 

market share discount, in which the buyer makes no promise not 

to deal with others”).28 

The majority bypasses this obstacle to appellees‟ success 

by stating that a plaintiff‟s allegation that a contract lacking an 

express exclusivity requirement nonetheless establishes an 

unlawful de facto exclusive dealing program sets forth a 

 

28In fact, even if the LTAs had required the OEMs to purchase a 

certain share but not all of their transmissions needs from Eaton, 

as the majority interprets them to do, it is still unclear whether 

Section 3 would have reached that agreement. See Areeda & 

Hovenkamp, Fundamentals of Antitrust Law § 18.01c, at 18-17 

(“Literally, a „partial‟ exclusive dealing requirement appears not 

to be covered by § 3 of the Clayton Act at all. For example, if A 

requires B to purchase „at least 60 percent‟ of its gasoline needs 

from A, B is still free to purchase the remaining 40 percent 

elsewhere. As a result, there is no condition that B not deal in 

the goods of a competitor, as the statute requires. Most of the 

courts take this position.”) (citations omitted). 
60

cognizable antitrust claim. In doing so, the majority also 

concludes that Section 3 encompasses contracts that require 

partial exclusivity. 

The notion of de facto exclusive dealing has its roots in 

United Shoe Machinery Corp. v. United States, 258 U.S. 451, 

457, 42 S.Ct. 363, 365 (1922), in which the Court held that a 

contract lacking an express agreement not to use the goods of a 

competitor falls within the ambit of Section 3 if “the practical 

effect is to prevent such use.” As noted, the majority appears to 

interpret this statement as meaning that a contract that has the 

effect of causing the purchaser to buy most of its needs from one 

seller falls within Section 3 because it induces near-exclusivity. 

I disagree with this interpretation and believe instead that United 

Shoe and its “practical effect” standard stands for the 

proposition that a contract that is not facially exclusive may 

nonetheless fall within the ambit of Section 3 if, in the 

implementation of its terms, it induces actual exclusivity. 

In United Shoe, the Court condemned as unlawful 

exclusive dealing a lease that included, among other things, a 

forfeiture provision to the effect that if the lessee failed to use 

exclusively machinery of certain kinds made by the lessor, the 

lessor had the right to cancel the lessee‟s right to use all such 

machinery, a provision that the lessee would not use the 

machinery on products that had not received particular 

operations upon certain of other lessor‟s machines, and a clause 

that required the lessee to purchase its supplies exclusively from 

the lessor. See id. at 456-57, 42 S.Ct. at 365. Lessees who used 

the lessor‟s competitors‟ machines in violation of the terms of 

the leases “had their attention called to the forfeiture provisions 
61

in the leases, which was understood, by many of the lessees, as 

warnings, in the nature of threats, that unless discontinued these 

covenants of the leases would be enforced.” United States v. 

United Shoe Mach. Co., 264 F. 138, 145 (D.C. Mo. 1920). 

These provisions, which the Court noted amounted in reality to 

“tying agreements,” fell within the scope of Section 3 because 

they “effectually prevent[ed] the lessee from acquiring the 

machinery of a competitor of the lessor, except at the risk of 

forfeiting the right to use the machines furnished by the 

[lessor].” 258 U.S. at 457-58, 42 S.Ct. at 365. Thus, in practice, 

the lease induced actual, total exclusivity. Subsequent cases 

relying on United Shoe‟s "practical effect” formulation bear the 

point out. 

In International Business Machines Corp. v. United 

States, 298 U.S. 131, 135, 56 S.Ct. 701, 703 (1936), the Court, 

relying on United Shoe, concluded that a lease for tabulating 

machines that required the lessee to use only the tabulating cards 

of the lessor on its machines fell within Section 3 because in 

practice it required the exclusive use of the lessor‟s cards. The 

Court explained that while “the condition is not in so many 

words against the use of the cards of a competitor, but is 

affirmative in form, that the lessee shall use only appellant‟s 

cards in the leased machines,” because “the lessee can make no 

use of the cards except with the leased machines, and the 

specified use of appellant‟s cards precludes the use of the cards 

of any competitor, the condition operates [to prohibit the use of 

the cards of a competitor] in the manner forbidden by” Section 3 

of the Clayton Act. Id. (citing United Shoe, 258 U.S. at 458, 42 

S.Ct. at 365); but see FTC v. Sinclair Refining Co., 261 U.S. 

463, 474, 43 S.Ct. 450, 453 (1923) (distinguishing United Shoe
62

and concluding that contract that required lessee of gasoline 

pumps not to use competitor‟s gasoline in lessor‟s pumps did not

fall within Section 3 because the contract did not contain a 

provision “which obligate[d] the lessee not to sell the goods of 

another,” and “[t]he lessee [wa]s free to buy [pumps] wherever 

he cho[se]”). Similarly, in Standard Oil, the Court assumed that 

Section 3 encompassed “[e]xclusive supply contracts” that the 

defendant had entered with its dealers, in which the dealer 

promised “to purchase from Standard all his requirements of one 

or more products.”29 337 U.S. at 295-96, 69 S.Ct. at 1054. 

Accordingly, while Section 3 encompasses agreements 

that do not contain express exclusivity provisions but in reality 

induce actual exclusivity, it does not, as the majority seems to 

believe, encompass agreements that do not contain express 

exclusivity provisions and do not induce actual exclusivity.30 

 

29In Tampa Electric, the case most often cited for the “practical 

effect” standard, the Court considered a challenge to a 

requirements contract and “assume[d], but d[id] not decide, that 

the contract [wa]s an exclusive-dealing arrangement within the 

compass of § 3.” 365 U.S. at 330, 81 S.Ct. at 629. 

30LePage‟s and Dentsply, cases on which the majority relies, are 

not to the contrary. Those cases dealt not with Section 3 of the 

Clayton Act but rather with Section 2 of the Sherman Act, which

does not contain the same restrictive “on the condition” 

language as Section 3. Furthermore, in LePage‟s, we concluded 

that 3M‟s bundled rebate agreements constituted unlawful de 

facto exclusive dealing arrangements because LePage‟s 

“introduced powerful evidence” that its prior customers refused 
63

Here, not only did the LTAs lack any provision imposing a ban 

on the OEMs‟ purchase of Eaton‟s competitors‟ products, they 

did not contain a provision amounting to or having the effect of 

imposing such a ban. Moreover, the evidence adduced at the 

trial demonstrates that the LTAs actually did not induce de facto 

total exclusivity on the part of the OEMs. As noted, from July 

2000 to October 2003, ZFM‟s share of the HD transmission 

market ranged between 8% and 14%. Thus, the majority, in

interpreting the scope of Section 3 to encompass an agreement 

which neither explicitly forbids nor has the effect of precluding 

the OEMs from purchasing Eaton‟s competitors‟ products, has 

expanded the scope of Section 3 greatly beyond its intent. 

Section 3 only encompasses agreements that explicitly forbid or 

have the practical effect of precluding one party from using the 

goods of another. Nevertheless, despite my serious misgivings 

on this threshold exclusive-dealing issue, which could justify 

terminating this discussion now and thus reversing the District 

Court‟s denial of judgment as a matter of law as to appellees‟ 

Section 3 Clayton Act claim, I will assume that the LTAs fall 

 

to meet with LePage‟s‟ sales representatives, refused to discuss 

purchasing LePage‟s products for “the next three years,” and 

3M offered bonus rebates to its customers upon achieving solesupplier status. 324 F.3d at 158. And in Dentsply, we 

concluded that a provision that Dentsply imposed on its dealers 

that actually prohibited the dealers from adding its competitors‟ 

tooth lines as part of their product offering amounted to 

exclusive dealing. 399 F.3d at 193. Here, as explained below, 

appellees fell woefully short of introducing evidence that the 

LTAs induced anything approaching actual exclusivity. 
64

within the theoretical reach of Section 3 and proceed to analyze 

the LTAs under that provision. My analysis, however, does not 

get very far before it becomes readily apparent that this 

fundamental flaw in appellees‟ case — that the LTAs were not, 

in fact, exclusive-dealing contracts — is fatal to their claim. 

As noted above, under Tampa Electric a plaintiff first 

must identify the degree of market foreclosure. Despite a 

lengthy trial in the District Court, which has resulted in the 

creation of a nine-volume joint appendix and extensive briefing 

on this appeal, appellees do not identify clearly for us the precise 

degree of market foreclosure attributable to the LTAs. The 

majority, however, attempts to make up for appellees‟ 

deficiency in this regard by stating that appellees‟ expert, Dr. 

David DeRamus, testified that the LTAs left only 15% of the 

market remaining to Eaton‟s competitors, or stated another way, 

that the LTAs foreclosed competition in 85% of the market. In 

reality, however, Dr. DeRamus did not testify that the LTAs 

foreclosed competition in 85% of the market. The testimony on 

which the majority apparently relies for that figure deals not 

with Dr. DeRamus‟ opinion as to the extent to which the LTAs 

foreclosed competition in the HD truck transmission market but 

rather with Dr. DeRamus‟ calculation of Eaton‟s market share 

during the relevant time period in the context of his 

determination as to whether Eaton had monopoly power. See

J.A. at 722 (Dr. DeRamus‟ testimony) (explaining the steps he 

took to ascertain whether “Eaton has monopoly power in the[] . . 

. [NAFTA HD truck transmission market”); see also J.A. at 

4758, 4760 (Dr. DeRamus‟ expert report) (setting forth the data 

reflecting Eaton‟s market share). I think it obvious that the 

inquiry into Eaton‟s market share is a question separate and 
65

apart from the LTAs‟ alleged foreclosure effect31 and that we 

may not simply borrow Dr. DeRamus‟ testimony as to Eaton‟s 

market share to adduce evidence of the LTAs‟ foreclosure 

effect. 

In point of fact, Dr. DeRamus aimed much higher with 

his estimation of the LTAs‟ alleged foreclosure effect by stating 

explicitly in his expert report that “Eaton‟s exclusionary 

agreements with all four of the heavy-duty truck OEMs — the 

only significant manufacturers of heavy-duty trucks in the 

relevant geographic markets at issue in this case — foreclosed 

nearly 100 percent of the North American market or markets for 

HD [t]ransmissions.” J.A. at 4814 (Dr. DeRamus‟ expert 

report). Dr. DeRamus arrived at this foreclosure percentage on 

the basis of the market-share targets the LTAs required for the 

 

31See, e.g., Barry Wright Corp., 724 F.2d at 229, 237 (observing 

that potential foreclosure effect of volume discount

requirements contract between manufacturer, who had 83% to 

94% market share, and purchaser of mechanical snubbers was 

50% where purchaser‟s snubber purchases represented 50% of 

snubber market). The distinction between these two inquiries, 

the question of Eaton‟s market share and the question of the 

LTAs‟ alleged foreclosure effect, is particularly critical in a case 

such as this one since prior to 1989 Eaton was the only HD 

transmission manufacturer and thus possessed 100% market 

share at a time before appellees contend that it engaged in any 

alleged anticompetitive conduct.
66

OEMs to receive the rebates.32 

In denying Eaton judgment as a matter of law, the 

District Court took a similar view that reliance on the marketshare targets was an appropriate method to ascertain the LTAs‟ 

foreclosure effect, concluding that there was sufficient evidence 

“that the contracts foreclosed a substantial share of the market” 

not because ZFM identified a specific foreclosure percentage 

but because “each OEM was required to order 80% or more of 

its transmissions from” Eaton to receive the rebates. ZF 

Meritor, 769 F. Supp. 2d at 692.33 While the majority‟s reliance 

on Dr. DeRamus‟ testimony regarding Eaton‟s market share to 

ascertain the LTAs‟ foreclosure effect is mistaken, it is clear that 

the majority likewise ultimately concludes that the market-share 

 

32Although Dr. DeRamus did not set forth explicitly in his 

expert report how he arrived at his foreclosure percentage or his 

arithmetic in that regard — a shocking oversight in a case that 

hinges on this very question — his testimony at trial illuminates 

that he relied on the market-share targets to arrive at his 

estimation of the LTAs‟ foreclosure effect, though notably he 

testified as to a different foreclosure percentage than that which 

he set forth in his report. See J.A. at 858 (Dr. DeRamus‟ 

testimony) (explaining that he arrived at his opinion of the 

LTAs‟ foreclosure effect by relying on the market-share targets 

and opining that one could take a “simple average” of the 

market-share targets to yield a 90% foreclosure rate). 

33The District Court‟s statement in this regard was inaccurate as 

Volvo‟s LTA granted it rebates beginning at a 65% marketshare target. 
67

targets may serve as a measure of the LTAs‟ foreclosure effect. 

For several reasons, however, the market-share targets do not 

reflect the LTAs‟ foreclosure effect, and, on this point, I find 

that the Court of Appeals for the Ninth Circuit‟s and the Court 

of Appeals for the Eighth Circuit‟s treatment of Sherman Act 

Section 1 challenges to non-exclusive market-share discount 

programs are instructive. 

In Allied Orthopedic Appliances Inc. v. Tyco Health Care

Group, 592 F.3d 991, 994-96 (9th Cir. 2010), a group of 

hospitals and health care providers alleged, among other things, 

that Tyco, a monopolist in the U.S. pulse oximetry sensor 

market, unlawfully foreclosed competition in the market in 

contravention of Section 1 of the Sherman Act through its offer 

of market-share discounts. As here, the market-share 

agreements provided discounts conditioned on the customers‟ 

purchase of a certain percentage of the product in issue, i.e., 

pulse oximetry sensors, from Tyco, the discount increasing with 

Tyco‟s increasing market share. “The agreements did not 

contractually obligate Tyco‟s customers to buy anything from 

Tyco . . . and [t]he only consequence of purchasing less than the 

agreed upon percentage of Tyco‟s products was loss of the 

negotiated discounts.” Id. at 995. 

The court of appeals concluded that the agreements did 

not foreclose competition in violation of Section 1 because the 

agreements did not require Tyco‟s customers to purchase 

anything from Tyco and because “[a]ny customer subject to one

of Tyco‟s market-share discount agreements could choose at 

anytime to forego the discount offered by Tyco and purchase 
68

from a generic competitor.” Id. at 997.34 Thus, Tyco‟s 

competitors “remained able to compete for Tyco‟s customers by 

offering their products at better prices.” Id. at 998. 

The Court of Appeals for the Eighth Circuit took a 

similar view of market-share discount agreements in Concord 

Boat. In that case, a group of boat builders that sold boats to 

dealers alleged that Brunswick, the market leader in the 

manufacture of stern drive engines, violated Section 1 through 

its offer of market-share discount agreements with the builders 

and dealers. The agreements offered reduced prices conditioned 

on market-share targets of 60% to 80%. See 207 F.3d at 1044.35

As is true here with respect to the product in issue, none of 

Brunswick‟s programs “obligated boat builders and dealers to 

purchase engines from Brunswick, and none of the programs 

restricted the ability of builders and dealers to purchase engines 

from other engine manufacturers.” Id. at 1045. 

The court employed the standards of Tampa Electric to 

conclude that the plaintiffs had “failed to produce sufficient 

evidence to demonstrate that Brunswick had foreclosed a 

 

34The court also found significant the plaintiffs‟ expert failure to 

explain why “price-sensitive hospitals would adhere to Tyco‟s 

market-share agreements when they could purchase less 

expensive generic sensors instead.” 592 F.3d at 997. 

35The plaintiffs also alleged that Brunswick had violated Section 

7 of the Clayton Act and Section 2 of the Sherman Act, but the 

court likewise rejected these claims. See 207 F.3d at 1043, 

1053, 1062.
69

substantial share of the . . . market through anticompetitive 

conduct” and failed to show that “Brunswick‟s discount 

program was in any way exclusive” in violation of Section 1. 

Id. at 1059. The court reached that conclusion because the 

builders were “free to walk away from the discounts at any 

time,” and “Brunswick‟s discounts, because they were 

significantly above cost, left ample room for new competitors . . 

. to enter the engine manufacturing market and to lure customers 

away by offering superior discounts.” Id.; see also Se. Mo. 

Hosp. v. C.R. Bard, Inc., 642 F.3d 608, 612-13 (8th Cir. 2011) 

(rejecting Sherman Sections 1 and 2 and Clayton Section 3 

challenge to market-share discount program on the basis of 

Concord Boat where customers “were not required to purchase 

100 percent of their . . . needs from . . . [defendant] or to refrain 

from purchasing from competitors” or indeed to purchase 

“anything from . . . [defendant]”); Stitt Spark Plug Co. v. 

Champion Spark Plug Co., 840 F.2d 1253, 1258 (5th Cir. 1988) 

(affirming district court‟s directed verdict in favor of defendant 

on Section 1 and Section 3 claims where plaintiff “proved no 

instance in which a distributor honored an exclusive dealing 

arrangement by refusing to purchase . . . [plaintiff‟s] plugs, . . . 

there was no testimony that any distributor agreed to refrain 

from selling competing plugs for any specific period of time, . . . 

[and] [t]here was no evidence that a distributor who failed to 

abide by the agreement would be subject to any sanction”). 

As was true of the contracts at issue in Allied Orthopedic

and Concord Boat with respect to what are suggested to be, 

wrongly in my view, mandatory purchase obligations, the LTAs 

did not obligate the OEMs to purchase anything from Eaton, 

much less 100% of their transmission needs, nor did they 
70

preclude the OEMs from purchasing transmissions from any 

other manufacturer. Rather, the agreements provided for 

increasing rebates and thus lower prices based on the percentage 

of an OEM‟s transmission needs that it purchased from Eaton. 

In such a circumstance, the LTAs did not foreclose competition 

in any share of the market because Eaton‟s competitors were 

able to compete for this business as the OEMs were at liberty to 

walk away from the LTAs at any time. 

Indeed, this point is precisely where the Brooke Group

price-cost test comes into play. In a situation such as this one, 

where the contract in terms is not exclusive and merely provides 

discounted but above-cost prices conditioned upon a marketshare target, any equally efficient competitor, including ZFM, if 

it was an equally efficient competitor, had an ongoing 

opportunity to offer competitive discounts to capture the OEMs‟ 

business. If Eaton‟s discounts had resulted in prices that were 

below-cost, a charge that appellees do not make, then even an 

equally-efficient competitor might not have the opportunity to 

compete for the business the LTAs covered and thus it could be 

said that competition was foreclosed in that share of the market 

notwithstanding the non-obligatory and non-exclusive nature of 

the LTAs. But we do not need to address that unlikely 

circumstance because Eaton‟s discounts resulted in prices that 

were above-cost and thus the LTAs “left ample room” for ZFM 

or new competitors to enter the market and “to lure customers 

away by offering superior discounts.” Concord Boat, 207 F.3d 

at 1059. As in Allied Orthopedic, “[t]he market-share discount 

agreements at issue here did not foreclose . . . [Eaton‟s] 

customers from competition because „a competing manufacturer 

need[ed] only offer a better product or a better deal to acquire 
71

their [business].‟” 592 F.3d at 997 (quoting Omega, 127 F.3d at 

1164); see also Areeda & Hovenkamp, Antitrust Law ¶ 768b, at 

148-50 (concluding that above-cost market-share discounts do 

not exclude equally efficient rivals because “[a]s long as the 

discounted price is above cost and not predatory, it can be 

matched by any equally efficient rival”). Absent evidence that 

notwithstanding the above-cost prices of the LTAs the non-price 

aspects of the LTAs rendered them anticompetitive, we should 

conclude that as a matter of law Eaton‟s LTAs were not 

anticompetitive. 

The majority dismisses as inapplicable the reasoning of 

Allied Orthopedic and Concord Boat by stating that “this is not a 

case in which the defendant‟s low price was the clear driving 

force behind the customer‟s compliance with purchase targets, 

and the customers were free to walk away if a competitor 

offered a better price.” Typescript at 33. But the reality is to the 

contrary as the testimony I have summarized establishes it is 

precisely the case that Eaton‟s low prices led the OEMs to enter 

the LTAs and to strive to meet the market-share targets. 

Likewise, it is clearly the case that the OEMs were free to walk 

away from the market-share rebates the LTAs offered at any 

time. In attempting to overcome this crucial defect in appellees‟ 

claim and concluding that notwithstanding the LTAs‟ terms the 

LTAs were in fact mandatory agreements to which the OEMs 

were beholden against their will the majority sets forth two 

justifications. 

First, the majority downplays the possibility that ZFM 

could “steal” Eaton‟s customers by offering a superior product 

or lower price because that possibility did not “prove[] to be 
72

realistic.” Typescript at 47. In other words, the majority 

appears to assume that because ZFM did not lure away Eaton‟s 

customers through offering superior products or lower prices, it 

could not have done so and the reason for its inability to do so 

was the LTAs. I find the majority‟s treatment of this point to be 

an unpersuasive answer to the logic of Allied Orthopedic and 

Concord Boat.

I hardly need make the logical point that one cannot 

assume that because an event did not happen it could not have 

happened. It appears that ZFM did not lure away Eaton‟s 

customers. That does not mean, however, that ZFM was 

incapable of doing so. It is beyond dispute and indeed a central 

point to this case that ZFM did not offer lower prices than 

Eaton‟s prices and ZFM did not develop a full product line as it 

knew it had to do in order to compete effectively with Eaton.36 

 

36The majority states, without elaboration, that Eaton assured 

that there would be no other supplier that could fulfill the 

OEMs‟ needs or offer a lower price. I note first that it is an 

undisputed fact that when Meritor entered into the joint venture 

with ZF AG at a time prior to any allegation of anticompetitive 

conduct by Eaton, Meritor did not offer a full product line of 

HD truck transmissions. Thereafter, ZFM explicitly identified 

its lack of a full product line as a barrier to its market success 

and yet it did not develop a full product line. There is no 

evidence that Eaton somehow prevented either Meritor or later 

ZFM from developing a full product line. Furthermore, there is 

no evidence in the record indicating that Eaton prevented ZFM 

from offering more attractive discounts to capture Eaton‟s 

business and there is no evidence that other firms tried to enter 
73

In other words, ZFM did not even engage in the type of 

competitive conduct that potentially could have lured away 

Eaton‟s customers. Thus, we cannot say that it is not realistic to 

think that if it had engaged in that competition conduct ZFM 

could have been successful.37 

 

the HD truck transmission market but were thwarted by Eaton. 

37I recognize that appellees contend that “[f]ar from offering 

low prices to seek competitive advantages . . . Eaton broke the 

price mechanism, so that ZFM could not compete even by 

offering discounts or other incentives notwithstanding that ZFM 

had a better product.” Appellees‟ br. at 44. But appellees‟ 

assessment of their product does not establish that the truck 

purchasers — the entities that actually made the ultimate 

decision as to which transmission to select for their trucks —

would make the same assessment. Indeed, some of the evidence 

suggests that both OEMs and truck purchasers held the opinion 

that overall Meritor‟s products were inferior to Eaton‟s, and 

Meritor does not point to evidence foreclosing the possibility 

that its relatively unfavorable reputation in that regard persisted 

despite the emergence of ZF Meritor and thereby tainted truck 

purchasers‟ view of the FreedomLine. Moreover, even if the 

truck purchasers had come to the same conclusion as appellees 

regarding the FreedomLine‟s technical superiority, appellees‟ 

complaint holds no force as the purchasers‟ were at all times 

free to act on that opinion by selecting the FreedomLine for their 

trucks. Nevertheless, it is clear from the record that other 

factors beyond possible technical superiority, including such 

considerations as price, service, and availability of the product, 
74

Second, the majority attempts to overcome this absolutely 

fundamental defect in appellees‟ case by concluding that 

notwithstanding the fact that the LTAs were not by their terms 

mandatory and the fact that Eaton‟s prices after consideration of 

the rebates were at all times above-cost such that appellees, were 

they equally efficient competitors, could have matched them, 

there nevertheless was sufficient evidence that the LTAs 

foreclosed competition in a substantial share of the HD truck 

transmission market because “the targets were as effective as 

mandatory purchase requirements.” Typescript at 42. In this 

regard, the majority reasons that “[c]ritically, due to Eaton‟s 

position as the dominant supplier no OEM could satisfy 

customer demand without at least some Eaton products, and 

therefore no OEM could afford to lose Eaton as a supplier.” Id.

at 43. Therefore, the majority reasons, “a jury could have 

concluded that, under the circumstances, the market penetration 

targets were as effective as express purchase requirements 

because no risk averse business would jeopardize its relationship 

 

could motivate a purchaser in making its decision as to the most 

advantageous transmission for it to purchase. Lest this fact be 

doubted I merely need to point out that consumers regularly 

purchase inexpensive automobiles even though more highlypriced automobiles might be technically better. Overall, the 

point remains that if ZFM was an equally efficient competitor 

the LTAs simply did not preclude it from competing with Eaton 

and did not foreclose competition in any portion of the market, 

and thus a jury verdict based on a contrary conclusion simply 

could not survive Eaton‟s motion for judgment as a matter of 

law.
75

with the largest manufacturer of transmissions in the market.” 

Id. (internal quotation marks and citation omitted). 

Undoubtedly, there is evidence in the record that the 

OEMs required Eaton‟s products, to the end that an OEM could 

not have afforded to lose Eaton as a supplier. However, there is 

not a scintilla of evidence that if an OEM did not meet its LTA‟s 

market-share target Eaton would have refused to supply it with 

transmissions. First, as the majority notes, only the Freightliner 

LTA and the Volvo LTA granted Eaton the right to terminate 

the LTA altogether if the OEM did not meet its market-share 

targets. Yet the fact that Eaton had the right to terminate those 

LTAs if those OEMs did not meet their targets — notably, a 

right that it did not exercise when Freightliner failed to achieve 

the market-share target in 2002 — is no more significant than 

the fact that Eaton would not have to pay the rebate if 

Freightliner did not meet the target. Termination of the LTA 

simply made unavailable the rebates to those OEMs; it did not, 

as the majority implies, mean that Eaton no longer would 

provide transmissions to those OEMs. It simply meant that 

those OEMs would not receive Eaton‟s transmissions at the 

discounted prices the LTAs offered.

I understand that the LTAs are supply agreements that 

ensure that Eaton will meet the OEMs‟ transmission needs and 

do so at a certain price and under certain conditions, and an 

OEM lacking a supply agreement may be in an unfavorable 

position as it would prefer a supply agreement to set the terms of 

its relationship with Eaton. Nevertheless, although an OEM 

with a cancelled LTA would have lacked a supply agreement 

with Eaton, at least temporarily, one cannot infer from that fact 
76

that Eaton would not have supplied the OEM with its 

transmissions. Furthermore, the majority glosses over the fact 

that PACCAR‟s and International‟s LTAs did not include a 

provision granting Eaton the right to terminate the LTAs if those 

OEMs did not meet their respective market-share targets.

Nevertheless, regardless of whether the LTAs granted 

Eaton a right of termination, the majority‟s suggestion that the 

OEMs faced losing Eaton as a supplier if they failed to meet the 

market-share targets is contradicted by the market reality that 

while Eaton was the largest manufacturer of transmissions in the 

market there were only four OEMs that bought Eaton‟s 

transmissions. Accordingly, the idea that Eaton could or would 

have refused to deal with one of the OEMs in addition to being 

unsupported by the record is irrational from an economic 

viewpoint for if Eaton had done so it would have turned its back 

on a significant purchaser of its products measured in sales 

volume. The notion is completely unjustified.

Perhaps if appellees had produced evidence at the trial 

that Eaton had threatened to refuse to supply transmissions to an 

OEM that did not meet its market-share targets the nonmandatory market-share targets would have taken on an air of 

the mandatory threats that the majority insists they actually 

were. Literally the only evidence that I can identify relating to 

this contention is deposition testimony by a Volvo representative 

relaying an email he had received from one of his colleagues in 

which the colleague stated that Volvo needed to meet its market 

share target because if it was not successful it faced “a big risk 

of cancellation of the contract, price increases and shortages if 

the market is difficult,” J.A. at 688, and a sentence from an 
77

internal Volvo presentation in which it speculated that if Eaton 

terminated its LTA it would have “[n]o delivery performance 

commitment (possibly disastrous),” id. at 2101. While I 

understand that we view a jury‟s verdict through a deferential 

lens, even under that standard I cannot conclude that one 

sentence of second-hand speculation from a contracting party 

but not from Eaton as to whether Eaton might provide an OEM 

with an insufficient volume of transmissions in the event of a 

market shortage and an unidentified Volvo representative‟s 

statement that if it did not have a delivery performance 

commitment from Eaton it could be potentially disastrous is 

sufficient to sustain the inference that facially voluntary marketshare targets were in reality the mandatory, almost extortionary, 

provisions the majority makes them out to be.38

I must address also an aspect of the majority‟s reasoning 

on this point that I find to suffer from a serious flaw with 

dangerous implications for antitrust jurisprudence. Perhaps the 

majority does not believe that any evidence was required to 

rebut the reality that even though the market-share targets were 

 

38The majority appears to hang its hat to some extent on the 

notion that even if the OEMs did not actually face the threat of 

losing Eaton as a supplier they believed they might and that 

belief drove their compliance with the LTAs. While, as noted, 

there is scant evidence, indeed, for the proposition that the 

OEMs‟ efforts to meet the market-share targets was driven by 

such a belief, that belief, if unfounded as it was here, does not 

support the majority‟s repeated statements to the effect that 

Eaton actually coerced the OEMs into entering the LTAs and 

meeting the targets. 
78

facially voluntary, the mere circumstances that Eaton was the 

dominant supplier in the market and that no OEM could afford 

to lose it as a supplier sufficed to render the LTAs mandatory. 

The majority‟s reasoning in this regard literally would mean that 

had Eaton not been the dominant supplier of HD truck 

transmissions in the NAFTA market, there would not have been 

sufficient evidence for the jury to conclude that the LTAs were 

de facto exclusive. While I realize that monopolists may face 

more constraints on their conduct under the antitrust laws than 

less dominant firms, see LePage‟s, 324 F.3d at 151-52, it is an 

unfair and unwarranted leap to create the specter of coercion out 

of reference to Eaton‟s market dominance, cf. R.J. Reynolds, 

199 F. Supp. 2d at 392 (“The strong position of Marlboro, 

however, does not, standing alone „coerce‟ retailers into signing 

. . . [market-share] agreements.”). In sum, I cannot ascribe to 

the view that a non-mandatory, non-exclusive contract is 

transformed magically into a mandatory, exclusive contract by 

virtue of reference to the firm‟s market position alone such that 

dominant firms must be wary when they enter voluntary 

contracts that offer rebates or discounts lest a court later permit 

a jury to interpret those contracts as mandatory simply due to 

that firm‟s dominant position. 

Apart from insinuating that Eaton‟s dominant market 

position coerced the OEMs into meeting the market-share 

targets, the majority adds to the picture of coercion it attempts to 

paint by stating that “there was evidence that Eaton leveraged its 

position as a supplier of necessary products to coerce the OEMs 

into entering into the LTAs.” Typescript at 48. Relatedly, the 

majority states that appellees “presented testimony from OEM 

officials that many of the terms of the LTAs were unfavorable to 
79

the OEMs and their customers, but that the OEMs agreed to 

such terms because without Eaton‟s transmissions, the OEMs 

would be unable to satisfy customer demand.” Id.

In point of fact, there is not a trace of evidence beyond 

appellees‟ own baseless accusations and the majority does not 

bring our attention to any such evidence supporting its rather 

serious accusation that Eaton leveraged its position as a 

monopolist to force the OEMs to enter into agreements that the 

OEMs did not want to enter.39 Eaton‟s offer of lower prices to 

 

39Appellees contend that the OEMs did not want to enter the 

LTAs and did so only in response to Eaton‟s coercion by citing 

to testimony that in fact weakens their case. In this regard, 

appellees rely on a Volvo representative‟s testimony that it 

entered into the LTA with Eaton because ZFM did not have a 

full product line and thus Volvo would require Eaton‟s products 

even if it entered into an LTA with ZFM but if Eaton was not its 

standard partner it would not provide favorable pricing to 

Volvo. See J.A. at 522; see also J.A. 2098 (noting that Eaton 

would not provide favorable pricing to Volvo if it selected ZFM 

as its partner). In part for this reason, it elected to enter the LTA 

with Eaton. 

In business as in life we rarely are presented with a 

perfect option. The fact that long-term supply agreements with 

ZFM and Eaton each had their respective advantages and 

disadvantages is hardly surprising and that Eaton would not 

have granted an OEM the generous discounts its LTA provided 

if it selected ZFM as its primary supplier is likewise not exactly 

an astonishing revelation. That the OEMs had to weigh these 
80

the OEMs in the form of rebates and direct payments in an effort 

to gain their business is hardly coercion. Rather, it is nothing 

more than legitimate good business practice. See Race Tires, 

614 F.3d at 79 (“[I]t is no more an act of coercion, collusion, or 

improper interference for [suppliers] . . . to offer more money to 

[customers] . . . than it is for such suppliers to offer the lowest . . 

. prices.”). 

Likewise, there is no evidence that the LTAs represented 

unfavorable arrangements for the OEMs such that the OEMs 

only agreed to enter the contracts out of fear of losing Eaton as a 

supplier.40 Indeed, to the extent one may be tempted to infer 

 

factors in deciding whether to enter into an LTA with Eaton 

hardly amounts to coercion. 

40In their brief, appellees point to the testimony of two OEM 

representatives who testified to the hardly surprising fact that 

they would have preferred upfront price cuts with no strings 

attached as opposed to conditional market-share targets but that 

the OEMs entered the agreements because they nonetheless 

offered the best prices. See J.A. at 415-16 (deposition testimony 

of International representative) (stating that International 

preferred to have upfront discounts “in price” but “if a supplier 

is willing to offer [it] rebates” it would take that option if it 

believed it could meet the conditions for those rebates); see id.

at 525 (deposition testimony of Volvo representative) (stating 

that during LTA negotiations Volvo “wanted no” market-share 

targets but it agreed to the 68% target because it believed it 

could achieve that target and it “wanted the savings and the 

equalization, and the rebates”). That the OEMs would have 
81

that the market-share targets were so high as to be unfavorable 

to the OEMs I note that the targets were actually very close to or 

in fact below Eaton‟s preexisting market share at three out of the 

four OEMs measured at a time before the adoption of the LTAs 

during which appellees do not claim that Eaton was violating 

any law. See J.A. at 4779 (Dr. DeRamus‟ expert report) 

(Eaton‟s LTA with International began providing rebates at 80% 

market share but Eaton‟s market share of International‟s 

transmission needs prior to the LTA already was 79%); id. at 

4785 (Eaton‟s LTA with PACCAR provided rebates beginning 

at 90% but Eaton‟s market share “consistently hover[ed] around 

90% or higher for HD transmissions” with PACCAR prior to the 

LTA); id. at 4793 (Eaton‟s LTA with Volvo provided a rebate 

starting at 65% market share but Eaton‟s market share of 

Volvo‟s transmissions was 85% when they entered the LTA in 

2002.). The reality that the market share levels that Eaton 

reached prior to the adoption of the LTAs makes it, in a word I 

do not like using but fits perfectly here, ridiculous to conclude 

that the LTAs had a coercive effect on the OEMs.

 

preferred that Eaton simply cut its prices is hardly surprising. 

Customers faced with a buy one at full price and get one for

50% off deal likely would prefer to have the option of buying 

one item for 50% off. Yet, in the same way that the customer 

who purchases the two items to receive the discount on one 

cannot be said to have been “coerced” into that transaction, the 

OEMs‟ preference for unconditional price cuts hardly can be 

used as evidence that the terms of the LTAs were “unfavorable” 

to them, much less so “unfavorable” as to warrant the inference 

that the OEMs must have entered them as a product of coercion.
82

After studying the majority‟s treatment of the LTAs I am 

left with the impression that it pictures Eaton representatives as 

using coercion when they handed the OEM representatives the 

LTAs. Yet the reality is that there is absolutely no evidence in 

the record suggesting that Eaton compelled the OEMs by the 

threat of punishment to agree to the LTAs or compelled them to 

meet the share targets.41 Quite to the contrary, the record is 

replete with evidence, as I have summarized above, that shows 

that far from cowering under Eaton‟s “threats,” the OEMs 

entered into the LTAs in furtherance of their own economic selfinterests and because those agreements provided the best 

possible prices and assurance of a full product line supply. They 

worked to meet the market-share targets because by achieving 

those targets they received discounted prices.

Tellingly, the evidence also shows that the OEMs used 

those arrangements to their advantage. An illuminating example 

of this market reality is found in a letter an International 

representative wrote to ZFM in June 2002, in which the 

representative recounted the HD truck market‟s dramatic slump 

and stated to ZFM that:

In the last 12 months, your competition has 

supported our need for cost control with price 

 

41Of course, the lack of coercion associated with the LTAs is 

significant. While coercion is not “an essential element of every 

antitrust claim,” it is an important consideration where the 

relevant market players adopt their own business practices and 

the parties “freely entered into exclusive contracts.” Race Tires, 

614 F.3d at 78.
83

reductions consistent with the trend in new truck 

pricing. In addition, one of your competitors [i.e., 

Eaton] has offered International a compelling 

incentive to increase their sales at your expense. 

As a result, International is seriously considering 

shifting your portion of our buy to alternative 

suppliers. 

International values the relationship our 

companies have created over the years. However, 

the relationship is in jeopardy if your lack of cost 

competitiveness cannot be overcome. We 

therefore require a 5% across the board price 

reduction effective August 1, 2002.

J.A. at 4596 (letter from Paul D. Barkus, International, to Robert 

S. Harrison, ZFM (June 18, 2002)). In fact, the record shows 

that six months prior to this correspondence, International had 

attempted to use its relationship with Eaton as leverage to gain 

further cost reductions from ZFM. See id. at 3727 (electronic 

mail from Paul D. Barkus, International, to Galynn Skelnik, 

International (Jan. 11, 2002)) (“I got a phone message from 

[ZFM] . . . stating that after much internal discussion they have 

decided not to offer any transmission reductions even though 

their list prices could be increased. . . . Our strategy was to give 

Meritor the impression that our Partnership with Eaton provided 

us with HD reductions that would increase Meritor‟s list price if 

they didn‟t offset the widened price gap. That started out as a 

bluff, but when we look at our option prices between the two 

supplier[s] there appears to be some cost/price inconsistency.”). 

In sum, because appellees failed to produce evidence to show 
84

that the LTAs and their voluntary, above-cost market-share 

target rebates could have or did foreclose competition in any, 

much less a substantial, share of the market, notwithstanding the 

jury‟s verdict it is obvious that appellees‟ claims must fail under 

Tampa Electric. 

Before moving on, I think it appropriate to make a final 

point on the importance of the Tampa Electric standard and to 

illuminate fully why I depart from the majority‟s application of 

that case. As I already have noted, exclusive-dealing contracts 

are not per se unlawful and, indeed, may lead to more 

competition in the marketplace as firms compete for such 

potentially lucrative arrangements. Accordingly, one must ask 

why antitrust law ever would forbid such contracts. The reason, 

as the Supreme Court‟s Tampa Electric standard makes clear, is 

that where there is such an agreement, the seller‟s competitors 

cannot compete for the percentage of the market that a purchaser 

needs because the purchaser has signed a contract to deal only in 

the goods of that particular seller (or has signed a contract that 

has that practical effect). Even if the seller‟s competitors can 

offer a better deal to the purchaser, the purchaser is precluded 

from accepting competing offers because they have entered the 

exclusive-dealing arrangement. Cf. Standard Oil, 337 U.S. at 

314, 69 S.Ct. at 1062 (requirements contract violated Section 3 

because “observance by a dealer of his requirements contract 

with Standard does effectively foreclose whatever opportunity 

there might be for competing suppliers to attract his patronage, 

and . . . the affected proportion of retail sales of petroleum 

products is substantial”). Therefore, competition is foreclosed 

in that percentage of the marketplace and under Tampa Electric

the question is simply whether that foreclosure is substantial, 
85

considering the quantity of the foreclosure and the qualitative 

aspects of the marketplace and the agreement itself. 

It is that foreclosure of competition, the elimination of 

the possibility that the seller‟s competitors can capture that 

portion of the market through vigorous competition, with which 

Section 3 (and Section 1 of the Sherman Act in exclusivedealing cases) is concerned. See Tampa Elec. Co., 365 U.S. at 

328, 81 S.Ct. at 629 (emphasis added) (observing that “the 

ultimate question” is “whether the contract forecloses 

competition in a substantial share of the line of commerce 

involved”). The Tampa Electric market-foreclosure analysis 

thus assumes that a circumstance existed which appellees seek 

and fail to prove existed here: that there was an exclusivedealing arrangement between a market seller and purchaser. 

Now consider the case at hand. The parties do not 

dispute that the LTAs did not require the OEMs to purchase 

anything, much less 100% of their needs, from Eaton and 

appellees do not contend that Eaton‟s prices were below cost. 

Accordingly, appellees remained free at all times to compete for 

the OEMs‟ (and the truck purchasers‟) business. Appellees, if 

they were equally efficient competitors, were at liberty to offer 

lower prices, better products, more logistical and technical 

support, or any other myriad considerations to make their 

products more attractive to the OEMs, and the OEMs and the 

truck purchasers were at all times free to accept appellees‟ 

products and services. Accordingly, the LTAs did not foreclose 

competition in any portion of the market. This basic point —

that the LTAs were not in fact exclusive-dealing arrangements 

that foreclosed competition in any portion of the market —
86

explains appellees‟ failure to identify before us any credible, 

precise percentage of market foreclosure. Appellees‟ failure to 

meet their burden under Tampa Electric to prove any 

quantitative degree of market foreclosure should spell the end of 

their Section 3 and Section 1 claims.

Although I believe that appellees‟ failure in this regard 

renders unnecessary discussion of the qualitative analysis under 

Tampa Electric, I note briefly that contrary to the majority‟s 

discussion, the qualitative inquiry elucidates further why the 

LTAs did not violate Section 3. Contrary to the majority‟s 

statement that the long duration of the contracts added to their 

alleged anticompetitiveness, the duration of the LTAs is of little 

to no significance because they did not actually preclude the 

OEMs from purchasing competitors‟ products at any time during 

the life of the LTA. Because the OEMs were free to walk away 

from the discounts at any time it does not matter how long Eaton 

promised to offer those discounts to the OEMs. 

Moreover, a claim of lack of ease of terminability is 

likewise a non-starter given the LTAs were terminable at will; 

the agreements simply would have lost their force once the 

OEMs decided to seek Eaton‟s competitors‟ products and forego 

the market-share rebate.42 The majority denies that the LTAs 

 

42Although I conclude that the LTAs did not foreclose 

competition in any portion of the market, if as the majority 

concludes, the LTAs did foreclose competition in the market, 

that alleged foreclosure effect necessarily was diminished by the 

fact that the LTAs at most blocked only one avenue of reaching 

the end-users, i.e., the truck purchasers. Component part 
87

were easily terminable by reasoning that “the OEMs had a 

strong economic incentive to adhere to the terms of the LTAs, 

and therefore were not free to walk away from the agreements.” 

Typescript at 52. I reject the majority‟s ipse dixit reasoning on 

this point. While Eaton offered through the LTAs financial 

incentives that undoubtedly served as the OEMs‟ motivation to 

meet the market-share targets, the LTAs‟ promise of financial 

reward does not mean that the OEMs were not at liberty to leave 

the LTAs behind to take up a more attractive offer. Economic 

incentives are by their nature fluid and the OEMs‟ incentives 

might have shifted in the face of a more financially appealing 

option. 

Additionally, “[t]he existence of legitimate business 

justifications for the contracts also supports the legality of the . . 

. contracts.” Barr Labs., 978 F.2d at 111. In this regard, 

evidence that the defendant‟s actions were motivated by an 

ordinary business motive is significant. See Aspen Skiing Co. v. 

Aspen Highlands Skiing Corp., 472 U.S. 585, 608, 105 S.Ct. 

2847, 2860 (1985) (noting that “[p]erhaps most significant . . . is 

the evidence related to [defendant] itself, for [defendant] did not 

persuade the jury that its conduct was justified by any normal 

business purpose”). Eaton contends that the LTAs were 

designed to meet the OEMs‟ demands to lower prices by 

consolidating their component part suppliers and that the OEMs 

 

manufacturers, including ZFM, can and do advertise directly to 

truck purchasers and are able to offer discounts directly to those 

consumers as an incentive for them to select their parts from 

their data books, and truck purchasers were at all times free to 

select appellees‟ products. 
88

entered the contracts because they afforded the best possible 

prices. As I noted above, the record supports this assertion as 

representatives from each of the OEMs testified that the OEMs 

entered into the LTAs because those agreements were 

financially attractive, and ZFM itself noted in 2001 that the 

OEMs sought a single-source supplier.43 Additionally, an Eaton 

representative testified that when the OEMs increase their 

purchases of Eaton‟s products, Eaton is able to “translate that 

volume into [a] lower cost base, [and] come up with the funds 

and the revenue to give them [the OEMs] more competitive 

pricing, which is what they were asking for.” J.A. at 1398.

In a similar circumstance, we concluded that a defendant 

drug manufacturer offered valid business justifications to defeat 

its competitor‟s Section 1 and Section 3 claims, which attacked 

the defendant‟s offer of contracts that provided volume-based 

discounts to warehouse chain drug stores. See Barr Labs., 978 

F.3d at 104-05. We found that there were “legitimate business 

justifications for the contracts” because “the evidence 

established that the warehouse chains [that carried defendant‟s 

products] entered the contracts because of the inherent 

advantages they saw in them in price, convenience, and service” 

and “[t]he contracts also proved advantageous from Abbott‟s 

perspective in terms of reaping business goodwill, and as 

providing high volume, low transaction cost outlets for Abbott‟s 

 

43The majority states that the procompetitive justifications of the 

LTAs are diminished by the fact that no OEM asked Eaton to be 

a sole supplier. My response to that assertion is as simple as 

remarking once more that the LTAs did not by their terms or by 

their effect make Eaton a sole supplier for any of the OEMs. 
89

manufacturing capacity.” Id. at 111; see also Virgin Atl. 

Airways, 257 F.3d at 265 (finding that defendant proffered procompetitive justification for market-share incentive agreement 

because such agreements “allow firms to reward their most loyal 

customers” and “[r]ewarding customer loyalty promotes 

competition on the merits”); Barry Wright, 724 F.2d at 237 

(finding legitimate business justification for requirements 

contracts because for the purchaser “the contracts guaranteed a 

stable source of supply, and, perhaps, more importantly, they 

assured [the purchaser] a stable, favorable price” and for the 

seller “they allowed use of considerable excess . . . [product] 

capacity and they allowed production planning that was likely to 

lower costs”). 

Undoubtedly, Eaton was motivated to tender the LTAs 

because of its desire to increase sales of its product. Although 

such a motivation could not excuse otherwise anticompetitive 

conduct, the desire to sell more product is an ordinary business 

purpose, and the antitrust laws do not prohibit such motivation. 

As the Supreme Court stated in Cargill, “competition for 

increased market share[] is not activity forbidden by the antitrust 

laws. It is simply . . . vigorous competition.” 479 U.S. at 116, 

107 S.Ct. at 492 (emphasis added); see also Concord Boat, 207 

F.3d at 1062 (noting that defendant‟s proffered reason that it 

was “trying to sell its product” through market-share discounts 

constituted valid, pro-competitive business justification for 

program); Stearns Airport Equip. Co. v. FMC Corp., 170 F.3d 

518, 524 (5th Cir. 1999) (observing that defendant‟s explanation 

that “it was trying to sell its product” was valid business 

justification).
90

Tampa Electric makes clear that “it is the preservation of 

competition which is at stake” under Section 3. 365 U.S. at 328, 

81 S.Ct. at 628 (emphasis added and internal quotations marks 

and citation omitted). Here, appellees remained free at all times 

to compete for the OEMs‟ business and directly for customers‟ 

business and yet the majority permits a jury to condemn the 

LTAs. I cannot join in that conclusion. Appellees failed to 

supply an evidentiary basis to establish that the LTAs had the 

probable effect of foreclosing competition in a substantial share 

of the market and thus they failed to produce evidence that could 

demonstrate that Eaton violated Section 3 of the Clayton Act. 

Because Section 3 of the Clayton Act sweeps more broadly than 

Section 1 of the Sherman Act, appellees likewise failed to show 

that Eaton violated Section 1.

C. Sherman Act Section 2 Claim 

Appellees presented the same evidence and same de facto 

exclusive dealing theory on which they based their Section 2 

claim as they did to support their Clayton Act Section 3 and 

Sherman Act Section 1 claims. In light of my lengthy analysis 

of appellees‟ other claims, I will abbreviate my discussion of 

their Section 2 claim. 

Section 2 targets defendants who “monopolize or attempt 

to monopolize, or combine or conspire with any other person or 

persons, to monopolize any part of the trade or commerce 

among the several States, or with foreign nations.” 15 U.S.C. § 

2. To establish a Section 2 violation, a plaintiff must show that: 

(1) the defendant possessed monopoly power in the relevant 

market and (2) the defendant willfully acquired or maintained 
91

that power “as distinguished from growth or development as a 

consequence of a superior product, business acumen, or historic 

accident.” Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 

U.S. 451, 481, 112 S.Ct. 2072, 2089 (1992) (quoting United 

States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 

1704 (1966)). Eaton acknowledges that it has monopoly power 

in the NAFTA HD truck transmission market, and thus I focus 

my discussion on whether it has maintained that monopoly 

through unlawful means.

A monopolist willfully acquires or maintains monopoly 

power in contravention of Section 2 if it “attempt[s] to exclude 

rivals on some basis other than efficiency.” Aspen Skiing Co., 

472 U.S. at 605, 105 S.Ct. at 2859. “Anticompetitive conduct 

may take a variety of forms, but it is generally defined as 

conduct to obtain or maintain monopoly power as a result of 

competition on some basis other than the merits.” Broadcom 

Corp. v. Qualcomm Inc., 501 F.3d 297, 308 (3d Cir. 2007) 

(citation omitted). “[E]xclusive dealing arrangements can be an 

improper means of maintaining a monopoly.” Dentsply, 399 

F.3d at 187 (citing Grinnell Corp., 384 U.S. 563, 86 S.Ct. 1698; 

LePage‟s, 324 F.3d at 157). 

The District Court denied Eaton‟s motion seeking a 

judgment as a matter of law on appellees‟ Section 2 claim as it 

concluded that “[t]he jury found that [Eaton] had willfully 

acquired or maintained its monopoly power through LTAs that 

amounted to de facto exclusive dealing contracts having the 

power to foreclose competition from the marketplace.” ZFM, 

769 F. Supp. 2d at 697 (emphasis added). In this regard, the 

Court concluded that “„neither proof of exertion of the power to 
92

exclude nor proof of actual exclusion of existing or potential 

competitors is essential to sustain a charge of monopolization 

under the Sherman Act.‟” Id. (quoting LePage‟s, 324 F.3d at 

148). 

The District Court‟s finding on this point reflected its 

misunderstanding of the requirements of Section 2. As we 

recently stated in Dentsply: 

Unlawful maintenance of a monopoly is 

demonstrated by proof that a defendant has 

engaged in anti-competitive conduct that 

reasonably appears to be a significant contribution 

to maintaining monopoly power. Predatory or 

exclusionary practices in themselves are not 

sufficient. There must be proof that competition, 

not merely competitors, has been harmed.

399 F.3d at 187 (citing LePage‟s, 324 F.3d at 162) (emphasis 

added) (citations omitted); see also Broadcom, 501 F.3d at 308 

(“[T]he acquisition or possession of monopoly power must be 

accompanied by some anticompetitive conduct on the part of the 

possessor.”) (citing Verizon Commc‟ns Inc. v. Law Offices of 

Curtis V. Trinko, LLP, 540 U.S. 398, 407, 124 S.Ct. 872, 878-

79 (2004)).

Indeed, in Dentsply we made clear that a plaintiff‟s 

demonstration that the defendant merely possessed the power to 

exclude is not a sufficient basis on which to build a claim that 

the defendant is culpable under Section 2; a plaintiff must show 

that the defendant used its power to foreclose competition. See
93

399 F.3d at 191 (“Having demonstrated that Dentsply possessed 

market power, the Government must also establish the second 

element of a Section 2 claim, that the power was used „to 

foreclose competition.‟”) (quoting United States v. Griffith, 334 

U.S. 100, 107, 68 S.Ct. 941, 945 (1948)) (emphasis added). As 

the Supreme Court explained in Trinko:

The mere possession of monopoly power, and the 

concomitant charging of monopoly prices, is not 

only not unlawful; it is an important element of 

the free-market system. The opportunity to 

charge monopoly prices — at least for a short 

period — is what attracts „business acumen‟ in 

the first place; it induces risk taking that produces 

innovation and economic growth. To safeguard 

the incentive to innovate, the possession of 

monopoly power will not be found unlawful 

unless it is accompanied by an element of 

anticompetitive conduct.

540 U.S. at 407, 124 S.Ct. at 879 (emphasis in original). 

“Conduct that merely harms competitors . . . while not 

harming the competitive process itself, is not anticompetitive.” 

Broadcom, 501 F.3d at 308; see also Spectrum Sports, Inc. v. 

McQuillan, 506 U.S. 447, 458, 113 S.Ct. 884, 892 (1993) (The 

Sherman Act “directs itself not against conduct which is 

competitive, even severely so, but against conduct which 

unfairly tends to destroy competition itself.”). To determine 

whether a practice is anticompetitive in violation of Section 2, 

we consider “whether the challenged practices bar a substantial 
94

number of rivals or severely restrict the market‟s ambit.” 

Dentsply, 399 F.3d at 191 (citations omitted). Thus, the 

standard for ascertaining whether certain conduct is 

anticompetitive under Section 2 is quite similar to the marketforeclosure analysis under Section 3 of the Clayton Act. 

“Conduct that impairs the opportunities of rivals and either does 

not further competition on the merits or does so in an 

unnecessarily restrictive way may be deemed anticompetitive.” 

W. Penn Allegheny Health Sys., 627 F.3d at 108 (internal 

quotation marks and citation omitted).

Accordingly, for largely the same reasons that appellees‟ 

Section 3 and Section 1 claims fail, so, too, does their Section 2 

claim. Because the LTAs did not obligate the OEMs to 

purchase anything from Eaton and did not condition the rebates 

on Eaton having a 100% market share and because its prices 

were at all times above-cost, the LTAs allowed any equally 

efficient competitor, including appellees, if they were equally 

efficient competitors, to compete. Thus, the LTAs did not bar 

Eaton‟s competitors from the market nor did the LTAs impair 

their opportunities to compete with Eaton for the business the 

LTAs covered. Cf. NicSand, Inc. v. 3M Co., 507 F.3d 442, 452 

(6th Cir. 2007) (en banc) (plaintiff failed to demonstrate 

antitrust injury under Sherman Act Section 2 because 

defendant‟s rebates and up-front payments to retailers pursuant 

to exclusive dealing contract were above-cost).

In this regard, the LTAs stand in stark contrast to the 

contracts at issue in Dentsply, a case on which appellees and the 

majority rely heavily. In Dentsply we considered whether 

Dentsply, a monopolist in the field of the production of artificial 
95

teeth, violated Section 2 of the Sherman Act through a provision 

called “Dealer Criterion 6” in its contracts with dealers, who, in 

turn, sold the products to dental laboratories. See 399 F.3d at 

184-85. The provision, which Dentsply “imposed . . . on its 

dealers” prohibited the dealers from adding non-Dentsply tooth 

lines to their product offering. See id. Dealers who carried 

competing lines prior to the implementation of Dealer Criterion 

6 were permitted to continue carrying non-Dentsply products, 

but Dentsply enforced Dealer Criterion 6 against all other 

dealers. See id. 

We concluded that Dealer Criterion 6 violated Section 2 

because “[b]y ensuring that the key dealers offer Dentsply teeth 

either as the only or dominant choice, Dealer Criterion 6 ha[d] a 

significant effect in preserving Dentsply‟s monopoly.” Id. at 

191. We noted that “Criterion 6 impose[d] an „all-or-nothing‟ 

choice on the dealers” and “[t]he fact that dealers ha[d] chosen 

not to drop Dentsply teeth in favor of a rival‟s brand 

demonstrates that they ha[d] acceded to heavy economic 

pressure.” Id. at 196. Accordingly, we concluded that Dealer 

Criterion 6 harmed competition by “keep[ing] sales of 

competing teeth below the critical level necessary for any rival 

to pose a real threat to Dentsply‟s market share.” Id. at 191. 

Criterion 6 so limited competitors‟ sales because Dentsply‟s 

competitors realistically could not hope to compete solely 

through direct sales to laboratories and because “[a] dealer 

locked into the Dentsply line [wa]s unable to heed a request for 

a different manufacturers‟ product . . . .” Id. at 194. 

Unlike Dealer Criterion 6, the LTAs did not impose an 

“all-or-nothing” choice on the OEMs because they did not 
96

prohibit the OEMs from purchasing or from offering to its HD 

truck purchasers non-Eaton transmissions. Accordingly, the

LTAs did not suppress sales of appellees‟ products because the 

OEMs were able to and, in fact, did heed truck purchasers‟ 

requests for ZFM‟s products. Critically, at all times, truck 

purchasers retained the freedom to make the ultimate decision 

with respect to the transmissions they would select. Thus, the 

situation here differs from that in Dentsply because the LTAs 

did not have the effect of making Eaton the only choice for truck 

purchasers nor did it impair the purchasers‟ choice in the 

marketplace. See J.A. at 1530 (deposition testimony of Paul D. 

Barkus, International) (indicating that International‟s LTA 

included a clause explicitly stating that International was not 

precluded from dealing in Eaton‟s competitors‟ products 

because International “would never jeopardize a condition of 

sale based on a customer specifying a product that [it] would 

refuse to provide”).

Adding to the specter of restricted customer choice, the 

majority states that the OEMs worked with Eaton to force feed 

Eaton‟s products to customers and to shift truck fleets from 

using ZFM transmissions to Eaton transmissions. It appears that 

there is some evidence in the record for the unsurprising 

contention that the OEMs sought to meet the market share 

targets and thus obtain the rebates in part by persuading their 

customers to select Eaton‟s products. Indeed, in all walks of life 

if a salesperson has more to gain by selling a customer product 

X as opposed to product Y it is to be expected that the 

salesperson will push the customer to select product X. 

Ultimately, however, the majority does not and cannot dispute 

the fact that the HD truck purchasers at all times were free to 
97

select any transmission, including ZFM‟s transmissions, for 

their truck orders.

Though appellees also assert that the LTA provisions that 

required the OEMs to list Eaton‟s products as the preferred and 

standard option in their data books constituted anticompetitive 

conduct, those provisions no more support appellees‟ case than 

the rebates that the LTAs provided. Appellees claim that the 

provisions were anticompetitive because they required the 

OEMs to charge artificially higher prices for ZFM‟s products 

than for Eaton‟s. This is not the case, however, because the 

terms of the LTAs only required that the OEMs ensure that 

Eaton was priced as the lowest-cost option, which, with respect 

to the OEMs, was at all times the case. 

As a PACCAR representative explained, a component 

part manufacturer “is going to get a preferred position in the 

data book as long as . . . [it is] competitive in the marketplace, 

and being competitive in the marketplace means that . . . [it has] 

the lowest total cost to PACCAR, total cost, not just price, total 

cost.” Id. at 1553. A competitor manufacturer‟s product will be 

listed “at a premium . . . because that other transmission . . . is at 

a higher cost to PACCAR.” Id. at 1552. Indeed, that 

representative confirmed that data book positioning was in fact 

“a leverage point for [PACCAR] to negotiate . . . [to] manage 

[its] supply base.” Id. at 1553. Accordingly, Eaton‟s demand 

that the OEMs preferentially price its products reflected the fact 

that those transmissions came at the lowest cost to the OEMs 

and the fact that Eaton had made certain price concessions to the 

OEMs in exchange for that favorable listing, a practice that was 

apparently commonplace in the HD truck transmission market. 
98

Furthermore, the demand had the added consequence of 

assuring Eaton that it receive the favorable promotion for which 

it had bargained through its price concessions. If the LTAs did 

not include requirements regarding data book placement, an 

OEM would have been able to purchase Eaton‟s transmissions at 

a low cost while listing Eaton‟s products at a higher cost to the 

truck purchasers than ZFM‟s products in its data book, thereby 

reaping a greater profit on Eaton‟s transmissions. It was entirely 

reasonable for Eaton to avoid this scenario by insisting that the 

OEMs‟ data books reflect that Eaton‟s transmissions were the 

lowest-cost, highest-value product. 

As the majority notes, it is unclear from the record 

whether the OEMs arrived at the preferential price by lowering 

the price of the preferred option or by raising the price of the 

non-preferred options until the preferred component part was the 

lowest-cost option. The LTAs simply required that the OEMs 

list Eaton as the preferred option but they did not require that the 

OEMs take either path in doing so, and thus it appears that the 

OEMs had the discretion to decide in which way they would 

make Eaton the preferred option. Of course, from the OEMs‟ 

perspective, keeping the price of Eaton‟s products stable and 

raising the price of Eaton‟s competitors‟ products was the more 

financially attractive option than keeping the prices of Eaton‟s 

competitors‟ products stable and dropping the price of Eaton‟s 

products and, as the majority points out it appears there is some 

evidence in the record that the OEMs took the first path.44

 

44Thus, as the majority notes, in an email exchange between 

Eaton and Freightliner representatives a Freightliner 
99

Nevertheless, to the extent that the OEMs in some 

instances may have decided to ZFM‟s raise the cost of 

transmissions to arrive at the preferential price for Eaton‟s 

transmissions or to make Eaton‟s transmissions appear more 

favorable to their customers in an effort to achieve the marketshare targets and receive the rebates, such conduct reasonably 

cannot be attributed to Eaton as neither the LTAs nor Eaton 

elsewhere required that the OEMs do so. Additionally, it is 

clearly telling with respect to data book placement provisions 

that prior to 2001 Meritor had a three-year LTA with 

 

representative stated that its LTA with Eaton required it to price 

ZFM‟s products at a $200 premium. Yet, Freightliner‟s LTA 

did not require that Freightliner price ZFM‟s products at a 

premium; it simply required that Eaton‟s products be the lowestpriced option. In light of the silence of Freightliner‟s LTA as to 

this issue, I can interpret this exchange only to mean that 

Freightliner had elected to price Eaton‟s products preferentially 

by imposing the $200 premium on ZFM‟s products. Likewise, it 

appears that International and PACCAR may have imposed 

charges on customers who selected ZFM‟s products but neither 

their respective LTA nor Eaton itself required them to do so. In 

fact, as noted, at least in regard to International, there is 

evidence in the record that suggests that the data book price 

increases for ZFM‟s transmissions were a product of 

International‟s realization in 2002 that its current price for 

ZFM‟s products did not reflect accurately the cost of that 

product to International. See J.A. at 3727 (e-mail from Paul D. 

Barkus, International, to Galynn Skelnik, International (Jan. 11, 

2002)) (proposing that International increase ZFM‟s list prices 

to bring them “in line with where they should be”). 
100

Freightliner, under which Meritor reduced the prices of its 

component parts if Freightliner listed those parts as the standard 

option. Furthermore, there is evidence in the record that as of 

June 2002, ZFM itself was attempting to achieve exclusive 

listing in PACCAR‟s data book. See id. at 3394 (electronic 

correspondence from Tom Floyd, PACCAR, to Christian 

Benner, ZFM (June 4, 2002)) (noting that PACCAR was 

“extremely disappointed” with ZFM‟s business proposal in part 

because PACCAR was “very clear that” ZFM‟s proposal 

“should not include requirements regarding exclusive 

position[ing]” and that “it would require some extraordinary 

benefits for PACCAR in order [for ZFM] to receive 

consideration” in that regard). 

While Meritor‟s prior LTA and ZFM‟s own attempts to 

achieve exclusive data book positioning do not, in themselves, 

defeat appellees‟ claim that those tactics are anticompetitive, 

their actions are of some significance. Cf. Race Tires, 614 F.3d 

at 82 (noting fact that plaintiff created and championed racing 

sanctioning bodies‟ rule that required the use of a single brand 

of tire during races and later alleged such rule violated the 

antitrust law); NicSand, 507 F.3d at 454 (plaintiff‟s prior use of 

exclusive-dealing contract undermined its attack on defendant‟s 

use of such arrangements). At a minimum, ZFM‟s conduct 

belies its contention that the LTAs were far afield from the 

normal practice of the HD truck transmission market. 

In our consideration of this case we should remember that 

“[a]ntitrust analysis must always be attuned to the particular 

structure and circumstances of the industry at issue.” Trinko, 

540 U.S. at 411, 124 S.Ct. at 881. Practices from industry to 
101

industry do not come on a one-size-fits-all basis. Here, it 

appears that bargaining between the OEMs and their suppliers 

regarding data book positioning is quite typical of the 

marketplace with which we are dealing. See Race Tires, 614 

F.3d at 79 (noting as relevant that it was “a common and 

generally accepted practice for a supplier to provide a sports 

sanctioning body . . . financial support in exchange for a supply 

contract”); Concord Boat, 207 F.3d at 1062 (observing that 

“Brunswick‟s competitors also cut prices in order to attract 

additional business, confirming that such a practice was a 

normal competitive tool within the . . . industry”); see also Trace 

X Chem., Inc. v. Canadian Indus., Ltd., 738 F.2d 261, 266 (8th 

Cir. 1984) (“Acts which are ordinary business practices typical 

of those used in a competitive market do not constitute conduct 

violative of Section 2.”). 

But appellees‟ case fails for one more reason than its 

failure to show that Eaton engaged in anticompetitive conduct, 

in that their case also did not include evidence that the LTAs 

harmed competition. See Dentsply, 399 F.3d at 187 (“There 

must be proof that competition, not merely competitors, has 

been harmed.”). Appellees contend that the LTAs harmed 

competition by depriving truck buyers of access to the 

FreedomLine, which appellees believe was a technologically 

innovative product, and by causing truck buyers to pay higher 

prices. 

With regard to the FreedomLine, it is enough to say once 

more that the OEMs and truck purchasers were at all times free 

to purchase that transmission as well as any other of ZFM‟s 

transmissions, whether or not those transmissions were listed in 
102

the data books. Additionally, with the exception of 

International, the LTAs permitted the OEMs to list all of ZFM‟s 

transmissions, including the FreedomLine, in their respective 

data books and the OEMs continued to do just that.45 

Appellees do not point to any evidence in support of their 

contention that truck purchasers paid higher prices as a result of 

 

45I have not overlooked the fact that International‟s LTA 

required it to list Eaton‟s transmissions exclusively. Yet, 

International continued to list ZFM‟s manual transmissions, and 

it is thus not apparent whether its decision not to list ZFM‟s 

automated and automated mechanical transmissions is 

attributable to the LTA. Regardless, International‟s failure to 

list the FreedomLine, standing alone, did not deprive truck 

purchasers of access to the FreedomLine because truck 

purchasers were at all times free to specify the use of the 

FreedomLine transmission. Furthermore, it is important to note 

that HD truck purchasers in many cases were sophisticated 

customers in the HD truck market that were aware that ZFM‟s 

transmissions were available. Though I recognize that some 

purchasers likely were small operators perhaps owning only one 

HD truck who may have had limited knowledge of the 

differences in available transmissions, certainly the large 

purchasers, i.e., big trucking companies, would have been more 

knowledgeable with respect to available transmissions. In any 

event, we are, after all, not dealing with consumers buying 

motor vehicles for their personal use. The transmissions 

involved here were installed in vehicles intended for commercial 

use, and the owners did not acquire the vehicles to go to the 

grocery store. 
103

the LTAs. The only evidence that I can find in the record 

relevant to appellees‟ allegation in this regard is Dr. DeRamus‟ 

statement in his expert report offered by appellees that after the 

LTAs went into effect Eaton reduced its “competitive 

equalization” or incentive payments that historically it had paid 

to truck buyers as an incentive to them to select Eaton‟s 

transmissions. See J.A. at 4830. While Dr. DeRamus put forth 

data demonstrating that Eaton decreased its competitive 

equalization payments on average by about $100 (dropping from 

roughly $500 on average to just below $400 on average) from 

1999 to 2007, see id. at 4831, he did not present a scintilla of 

evidence that truck purchasers ultimately paid a higher price for 

Eaton‟s transmissions during the existence of the LTAs or 

following their expiration. Overall, it is clear that his testimony 

in this regard as an inadequate basis on which to predicate an 

antitrust case. In sum, appellees failed to put forth any — much 

less sufficient — evidence that Eaton engaged in 

anticompetitive conduct or that Eaton‟s conduct actually harmed 

competition, both of which are required elements of a claim 

under Section 2.46

 

46Even if a plaintiff establishes under Section 2 that “monopoly 

power exists” and that “the exclusionary conduct . . . ha[s] an 

anti-competitive effect,” “the monopolist still retains a defense 

of business justification.” Dentsply, 399 F.3d at 187; Concord 

Boat, 207 F.3d at 1062 (“A Section 2 defendant‟s proffered 

business justification is the most important factor in determining 

whether its challenged conduct is not competition on the 

merits.”); Stearns Airport Equip. Co., 170 F.3d at 522 (“The key 

factor courts have analyzed in order to determine whether 
104

III. CONCLUSION

I offer a few final thoughts on this important case, which, 

though seemingly complicated, should have an obvious result. 

It is axiomatic that “[t]he antitrust laws . . . were enacted for „the 

protection of competition not competitors.‟” Brunswick, 429 

U.S. at 488, 97 S.Ct. at 697 (quoting Brown Shoe Co. v. United 

States, 370 U.S. 294, 320, 82 S.Ct. 1502, 1521 (1962)) 

(emphasis in original). Yet as often as this refrain is repeated 

throughout antitrust jurisprudence, it appears increasingly that 

disappointed competitors, on the assumption that their deficient 

performances must be attributable to their competitors‟ 

anticompetitive conduct rather than their own errors in judgment 

or shortcomings or their competitors‟ more desirable products or 

business decisions, or on the assumption that they can convince 

a jury of that view, turn to the antitrust laws when they have 

been outperformed in the marketplace. Of course, competitors 

can be and sometimes are harmed by their peers‟ anticompetitive 

conduct and when they show that is what happened they may 

have viable antitrust claims. Yet often it is the case that a 

defeated competitor falls back on the antitrust laws in an attempt 

to achieve in the courts the goal that it could not reach in the 

 

challenged conduct is or is not competition on the merits is the 

proffered business justification for the act.”). As with appellees‟ 

Section 3 and Section 1 claim, Eaton‟s valid business 

justifications for the LTAs undermines the notion that the LTAs 

constituted competition on some basis other than the merits in 

violation of Section 2. 
105

properly-functioning competitive marketplace. This case is a 

classic demonstration of that process, which so far with respect 

to liability even if not damages has been successful. Indeed, I 

find it remarkable that appellees‟ case that is predicated on 

nothing more than smoke and mirrors has gotten so far.

But the basic facts are clear. Appellees do not bring a 

predatory pricing claim because they cannot do so as Eaton‟s 

prices were above cost. Instead, they seek refuge in the law of 

exclusive dealing to challenge the LTAs, which based on the 

record could not be found to be either facially or de facto 

exclusive or mandatory. After stripping this case of appellees‟ 

baseless insinuations that Eaton engaged in coercive or 

threatening conduct in regards to the LTAs, it becomes apparent 

that the core of appellees‟ claim really is their belief they had a 

superior product in the FreedomLine and the disappointing sales 

of that product relative to their expectations must have been 

attributable to Eaton‟s anticompetitive conduct. See appellees‟ 

br. at 32 (“Eaton‟s conduct harmed competition and ZFM. For 

the first time in this market, a better product, even combined 

with offers of discounts, could not elicit additional sales because 

Eaton‟s LTAs and other conduct had broken the competitive 

mechanism.”). Appellees thus “appear[] to be assuming that if 

[Eaton‟s] product was not objectively superior, then its victories 

were not on the merits.” Stearns Airport Equip., 170 F.3d at 

527. 

As the Court of Appeals for the Fifth Circuit stated in 

Stearns Airport Equipment in confronting a similar type of 

claim, courts are “ill-suited . . . to judge the relative merits of” 

the parties‟ respective products. Id. “That decision is left in the 
106

hands of the consumer, not the courts, and to the extent this 

judgment is „objectively‟ wrong, the inference is not that there 

has been a[n] [antitrust] violation . . . , but rather that the 

winning party displayed superior business acumen in selling its 

product.” Id. The truth is that neither judges nor juries have 

expertise in determining the best transmission to buy. Certainly, 

the purchasers of trucks and transmissions should make 

transmission decisions for themselves and so long as appellees 

manufactured their transmissions they had a chance to be their 

supplier. 

I recognize that the record could support a finding that 

the FreedomLine was a technological innovation for which 

Eaton did not offer a technically comparable product, and I 

further recognize that Eaton engaged in vigorous competition 

through aggressive but above-cost methods to compensate for 

the possible deficiency of their transmission offerings in that 

regard. But in the absence of anticompetitive conduct, the 

antitrust laws do not forbid Eaton‟s response. See Ball Mem‟l 

Hosp., Inc. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325, 1339 (7th 

Cir. 1986) (“Even the largest firms may engage in hard 

competition, knowing that this will enlarge their market 

shares.”) (citations omitted). In reality, however, the record 

compels that the conclusion that Eaton was able to maintain its 

dominant market position in the face of the availability of the 

FreedomLine for myriad reasons, including its capability of 

offering the OEMs a full product line, favorable pricing, its 

long-standing, positive reputation, and various market forces 

that favored an established market player such as Eaton. And it 

is also evident from the record, especially from ZFM‟s internal 

documents, that there were numerous intervening factors, such 
107

as ZFM‟s precipitously falling market share, which tellingly 

predated the adoption of the LTAs, the market‟s drive towards 

full-product line manufacturers, the OEMs‟ hesitancy to 

purchase new products, and the severe market downturn, that 

disfavored ZFM.47 In the difficult market it faced, Meritor 

entered into a joint venture that needed to achieve an almost 

one-third market share within approximately four years of the 

venture‟s formation to maintain a viable business, an obviously 

ambitious goal indeed even when one overlooks the fact that the 

joint venture offered a limited product line and a flagship 

transmission that cost far more than other transmissions in the 

market.

I note finally that courts‟ erroneous judgments in cases 

such as this one do not come without a cost to the economy as a 

 

47I recognize that as the majority points out, certain OEM 

representatives speculated that the LTAs damaged significantly 

ZFM‟s business and may have caused its ultimate demise. As I 

have stated above, it is beyond peradventure to say that “[t]he 

antitrust laws . . . were enacted for „the protection of 

competition not competitors.‟” Brunswick, 429 U.S. at 488, 97 

S.Ct. at 697 (internal quotation marks and citation omitted); see 

also Virgin Atl. Airways, 257 F.3d at 259 (“[W]hat the antitrust 

laws are designed to protect is competitive conduct, not 

individual competitors.”). Even if the LTAs negatively affected 

ZFM‟s business, that circumstance is not the salient inquiry in 

an antitrust case. The pivotal question is whether the LTAs 

negativelyaffected competition — not a particular competitor —

in the marketplace, and for the reasons I have recited above, 

they could not be found to have done that. 
108

whole. Discounts of all varieties, whether tied to the purchase 

of multiple products, exclusivity, volume, or market-share, are 

ubiquitous in our society. “Discounts are the age-old way that 

merchants induce customers to purchase from them and not 

from someone else or to purchase more than they otherwise 

would.” Hovenkamp, Discounts and Exclusion, 2006 Utah L. 

Rev. at 843. Indeed, market-share discounts can be particularly 

pro-competitive because they can result in lower prices for a 

broader range of customers as they extend to smaller purchasers 

discounts typically reserved for the largest of purchasers under 

more common volume-discount programs. See IIIA Areeda & 

Hovenkamp, Antitrust Law ¶786b2, at 148. “[L]ower prices 

help consumers. The competitive marketplace that the antitrust 

laws encourage and protect is characterized by firms willing and 

able to cut prices in order to take customers from their rivals.” 

Barry Wright Corp., 724 F.2d at 231. Accordingly, “mistaken 

inferences in cases such as this one are especially costly, 

because they chill the very conduct the antitrust laws are 

designed to protect.” Matsushita Elec. Indus. Co., 475 U.S. at 

594, 106 S.Ct. at 1360. 

Thus, as the Supreme Court has stressed, courts do not 

issue these decisions in a vacuum: once we file our opinion in 

this case firms that engage in price competition but seek to stay 

within the confines of the antitrust laws must attempt to use the

precedent that we establish as a guide for their conduct, at least 

if they are subject to the law of this Circuit. This is serious 

business indeed.48 For this reason, the Supreme Court has 

 

48Of course, every decision we make is serious business and I do 

not imply otherwise. However, particularly in light of the 
109

“repeatedly emphasized the importance of clear rules in antitrust

law.” Linkline, 555 U.S. at 452, 129 S.Ct. at 1120-21; see also 

Town of Concord v. Bos. Edison Co., 915 F.2d 17, 22 (1st Cir. 

1990) (Breyer, C.J.) (Antitrust rules “must be administratively 

workable and therefore cannot always take account of every 

complex economic circumstance or qualification.”). I confess I 

can glean no such clear rule from the majority‟s opinion. I do 

not know how corporate counsel presented with a firm‟s 

business plan at least if it is a dominant supplier that seeks to 

expand sales through a discount program that might be 

challenged by competitors as providing for a de facto exclusive 

dealing program and asked if the plan is lawful under the 

Sherman and Clayton Acts will be able to advise the 

management. The sad truth is that the counsel only will be able 

to tell management that it will have to take a chance in the 

courtroom casino at some then uncertain future date to find out. 

If Eaton‟s above-cost market-share rebate program 

memorialized in the LTAs, which were neither explicitly nor de 

facto exclusive or mandatory, can be condemned as unlawful de 

facto partial exclusive dealing on the basis of literally a handful 

of disjointed statements that amount at most to unsupported 

speculation as to the possibility that Eaton may have stopped 

supplying its transmissions if the OEMs did not meet the targets, 

firms face a difficult task indeed in structuring lawful discount 

programs. “Perhaps most troubling, firms that seek to avoid . . . 

liability [for market-share rebate programs] will have no safe 

harbor for their pricing practices.” Linkline, 555 U.S. at 452, 

 

current economic climax, the reasoning of a precedential 

opinion with such obvious economic repercussions is crucial.
110

129 S.Ct. at 1121 (citing Town of Concord, 915 F.2d at 22) 

(Antitrust rules “must be clear enough for lawyers to explain 

them to clients.”). What I find most troubling is that firms will 

play it safe by not formulating discount programs and that the 

result of this case will be an increase of prices to purchasers and 

the stifling of competition, surely a perverse outcome. It is 

ironical that the very circumstance that the majority‟s opinion is 

so thoughtful and well crafted that the risk that it poses is so 

great. On the other hand, the approach I believe the Supreme 

Court‟s precedent compels — applying and giving persuasive 

effect to the Brooke Group price-cost test and granting a 

presumption of lawfulness to pricing practices that result in 

above-cost prices — provides clear direction to firms engaging 

in price competition but still allows for an antitrust plaintiff to 

allege that a defendant has engaged in attendant anticompetitive 

conduct that renders its practices unlawful. 

In sum, I conclude that Eaton was entitled to judgment as 

a matter of law on liability in all respects. Accordingly, I would 

reverse the judgment of the District Court and remand this case 

for entry of a judgment in favor of Eaton. My view of this facet 

of the case renders it unnecessary for me to consider the 

numerous other issues raised on this appeal, including the 

District Court‟s decision that appellees suffered antitrust injury, 

and its decisions regarding damages and injunctive relief. Thus, 

I do not opine on the proper disposition of those matters.