Source: http://www.chanrobles.com/usa/us_supremecourt/475/574/case.php
Timestamp: 2019-05-25 03:26:27
Document Index: 83168188

Matched Legal Cases: ['§ 1', '§ 2', '§ 73', '§ 1', '§ 2', '§ 1', '§ 1', '§ 2727', '§ 1', '§ 1']

MATSUSHITA V. ZENITH RATIO CORP., 475 U. S. 574 (1986) - US SUPREME COURT DECISIONS ON-LINE
(a) The "direct evidence" on which the Court of Appeals relied -- petitioners' alleged supracompetitive pricing in Japan, the "five-company chanroblesvirtualawlibrary
723 F.2d 238, reversed and remanded. chanroblesvirtualawlibrary
Stating the facts of this case is a daunting task. The opinion of the Court of Appeals for the Third Circuit runs to 69 pages; the primary opinion of the District Court is more than three times as long. In re Japanese Electronic Products chanroblesvirtualawlibrary
Petitioners, defendants below, are 21 corporations that manufacture or sell "consumer electronic products" (CEPs) -- for the most part, television sets. Petitioners include both Japanese manufacturers of CEPs and American firms, controlled by Japanese parents, that sell the Japanese-manufactured products. Respondents, plaintiffs below, are Zenith Radio Corporation (Zenith) and National Union Electric Corporation (NUE). Zenith is an American firm that manufactures and sells television sets. NUE is the corporate successor to Emerson Radio Company, an American firm that manufactured and sold television sets until 1970, when it withdrew from the market after sustaining substantial losses. Zenith and NUE began this lawsuit in 1974, [Footnote 1] claiming that petitioners had illegally conspired to drive chanroblesvirtualawlibrary
723 F.2d 251 (quoting respondents' preliminary pretrial memorandum). These "low prices" were allegedly at levels that produced substantial losses for petitioners. 513 F.Supp. at 1125. The conspiracy allegedly began as early as 1953, and, according to respondents, was in full operation by sometime in the late 1960's. Respondents claimed that various portions of this scheme violated §§ 1 and 2 of the Sherman Act, § 2(a) of the Robinson-Patman Act, § 73 of the Wilson Tariff Act, and the Antidumping Act of 1916.
The District Court then turned to petitioners' motions for summary judgment. In an opinion spanning 217 pages, the court found that the admissible evidence did not raise a genuine issue of material fact as to the existence of the alleged chanroblesvirtualawlibrary
conspiracy. At bottom, the court found, respondents' claims rested on the inferences that could be drawn from petitioners' parallel conduct in the Japanese and American markets, and from the effects of that conduct on petitioners' American competitors. 513 F.Supp. at 1125-1127. After reviewing the evidence both by category and in toto, the court found that any inference of conspiracy was unreasonable, because (i) some portions of the evidence suggested that petitioners conspired in ways that did not injure respondents, and (ii) the evidence that bore directly on the alleged price-cutting conspiracy did not rebut the more plausible inference that petitioners were cutting prices to compete in the American market, and not to monopolize it. Summary judgment therefore was granted on respondents' claims under § 1 of the Sherman Act and the Wilson Tariff Act. Because the Sherman Act § 2 claims, which alleged that petitioners had combined to monopolize the American CEP market, were functionally indistinguishable from the § 1 claims, the court dismissed them also. Finally, the court found that the Robinson-Patman Act claims depended on the same supposed conspiracy as the Sherman Act claims. Since the court had found no genuine issue of fact as to the conspiracy, it entered judgment in petitioners' favor on those claims as well. [Footnote 3] chanroblesvirtualawlibrary
The Court of Appeals for the Third Circuit reversed. [Footnote 4] The court began by examining the District Court's evidentiary rulings, and determined that much of the evidence excluded by the District Court was, in fact, admissible. 723 F.2d 260-303. These evidentiary rulings are not before us. See 471 U.S. 1002 (1985) (limiting grant of certiorari).
On the merits, and based on the newly enlarged record, the court found that the District Court's summary judgment decision was improper. The court acknowledged that "there are legal limitations upon the inferences which may be drawn from circumstantial evidence," 723 F.2d 304, but it found that "the legal problem . . . is different" when "there is direct evidence of concert of action." Ibid. Here, the court concluded,
Based on inferences from the foregoing conclusions, [Footnote 5] the Court of Appeals concluded that a reasonable factfinder could find a conspiracy to depress prices in the American market in order to drive out American competitors, which conspiracy was funded by excess profits obtained in the Japanese market. The court apparently did not consider whether it was as plausible to conclude that petitioners' price-cutting behavior was independent, and not conspiratorial. chanroblesvirtualawlibrary
We begin by emphasizing what respondents' claim is not. Respondents cannot recover antitrust damages based solely on an alleged cartelization of the Japanese market, because American antitrust laws do not regulate the competitive conditions of other nations' economies. United States v. Aluminum Co. of America, 148 F.2d 416, 443 (CA2 1945) (L. Hand, J.); 1 P. Areeda & D. Turner, Antitrust Law ¦ 236d (1978). [Footnote 6] Nor can respondents recover damages for chanroblesvirtualawlibrary
any conspiracy by petitioners to charge higher than competitive prices in the American market. Such conduct would indeed violate the Sherman Act, United States v. Trenton Potteries Co., 273 U. S. 392 (1927); United States v. Socony-Vacuum Oil Co., 310 U. S. 150, 310 U. S. 223 (1940), but it could not injure respondents: as petitioners' competitors, respondents stand to gain from any conspiracy to raise the market price in CEPs. Cf. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U. S. 477, 429 U. S. 488-489 (1977). Finally, for the same reason, respondents cannot recover for a conspiracy to impose nonprice restraints that have the effect of either raising market price or limiting output. Such restrictions, though harmful to competition, actually benefit competitors by making supracompetitive pricing more attractive. Thus, neither petitioners' alleged supracompetitive pricing in Japan, nor the five-company rule that limited distribution in this country, nor the check-prices, insofar as they established minimum prices in this country, can, by themselves, give respondents a cognizable claim against petitioners for antitrust damages. The Court of Appeals therefore erred to the extent that it found evidence of these alleged conspiracies to be "direct evidence" of a conspiracy that injured respondents. See 723 F.2d 304-305. chanroblesvirtualawlibrary
The Court of Appeals found that respondents' allegation of a horizontal conspiracy to engage in predatory pricing, [Footnote 8] chanroblesvirtualawlibrary
if proved, [Footnote 9] would be a per se violation of § 1 of the Sherman Act. 723 F.2d 306. Petitioners did not appeal from that conclusion. The issue in this case thus becomes whether respondents adduced sufficient evidence in support of their theory to survive summary judgment. We therefore examine the principles that govern the summary judgment determination.
To survive petitioners' motion for summary judgment, [Footnote 10] respondents must establish that there is a genuine issue of material chanroblesvirtualawlibrary
Second, the issue of fact must be "genuine." Fed.Rules Civ.Proc. 56(c), (e). When the moving party has carried its burden under Rule 56(c), [Footnote 12] its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. See DeLuca v. Atlantic Refining Co., 176 F.2d 421, 423 (CA2 1949) (L. Hand, J.), cert. denied, 338 U.S. 943 (1950); 10A C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure § 2727 (1983); Clark, Special Problems chanroblesvirtualawlibrary
369 U. S. 655 (1962). But antitrust law limits the range of permissible inferences from ambiguous evidence in a § 1 case. Thus, in Monsanto Co. v. Spray-Rite Service Corp., 465 U. S. 752 (1984), we held that conduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy. Id. at 465 U. S. 764. See also Cities Service, supra, at 391 U. S. 280. To survive a motion for summary judgment or for a directed verdict, a plaintiff seeking damages for a violation of § 1 must present evidence "that tends to exclude the possibility" that the alleged conspirators acted independently. 465 U.S. at 465 U. S. 764. Respondents in this case, in other words, must show that the inference of conspiracy is reasonable in light of the competing inferences of independent action or collusive action that could not have harmed respondents. See Cities Service, supra,@ at 391 U. S. 280.
A predatory pricing conspiracy is, by nature, speculative. Any agreement to price below the competitive level requires the conspirators to forgo profits that free competition would offer them. The forgone profits may be considered an investment in the future. For the investment to be rational, chanroblesvirtualawlibrary
R. Bork, The Antitrust Paradox 145 (1978). See also McGee, Predatory Pricing Revisited, 23 J.Law & Econ. 289, 295-297 (1980). As this explanation shows, the success of such schemes is inherently uncertain: the short-run loss is definite, but the long-run gain depends on successfully neutralizing the competition. Moreover, it is not enough simply to achieve monopoly power, as monopoly pricing may breed quick entry by new competitors eager to share in the excess profits. 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. Absent some assurance that the hoped-for monopoly will materialize, and that it can be sustained for a significant period of time, "[t]he predator must make a substantial investment with no assurance that it will pay off." Easterbrook, Predatory Strategies and Counterstrategies, 48 U.Chi.L.Rev. 263, 268 (1981). For this reason, there is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful. See, e.g., Bork, supra, at 149-155; Areeda & Turner, Predatory Pricing and Related Practices Under Section 2 of the Sherman Act, 88 Harv.L.Rev. 697, 699 (1975); Easterbrook, supra; Koller, The Myth of Predatory Pricing -- An Empirical Study, chanroblesvirtualawlibrary
Finally, if predatory pricing conspiracies are generally unlikely to occur, they are especially so where, as here, the prospects of attaining monopoly power seem slight. In order to recoup their losses, petitioners must obtain enough market power to set higher than competitive prices, and then must sustain those prices long enough to earn in excess profits chanroblesvirtualawlibrary
what they earlier gave up in below-cost prices. See Northeastern Telephone Co. v. American Telephone & Telegraph Co., supra, at 89; Areeda & Turner, 88 Harv.L.Rev. at 698. Two decades after their conspiracy is alleged to have commenced, [Footnote 13] petitioners appear to be far from achieving this goal: the two largest shares of the retail market in television sets are held by RCA and respondent Zenith, not by any of petitioners. 6 App. to Brief for Appellant in No. 81-2331 (CA3), pp. 2575a-2576a. Moreover, those shares, which together approximate 40% of sales, did not decline appreciably during the 1970's. Ibid. Petitioners' collective share rose rapidly during this period, from one-fifth or less of the relevant markets to close to 50%. 723 F.2d 316. [Footnote 14] Neither the District Court nor the Court of Appeals found, however, that petitioners' share presently allows them to charge monopoly prices; to the contrary, respondents contend that the conspiracy is ongoing -- that petitioners are still artificially depressing the market price in order to drive Zenith out of the market. The data in the record strongly suggest that that goal is yet far distant. [Footnote 15] chanroblesvirtualawlibrary
The alleged conspiracy's failure to achieve its ends in the two decades of its asserted operation is strong evidence that the conspiracy does not, in fact, exist. Since the losses in such a conspiracy accrue before the gains, they must be "repaid" with interest. And because the alleged losses have accrued over the course of two decades, the conspirators could well require a correspondingly long time to recoup. Maintaining supracompetitive prices, in turn, depends on the continued cooperation of the conspirators, on the inability of other would-be competitors to enter the market, and (not incidentally) on the conspirators' ability to escape antitrust liability for their minimum price-fixing cartel. [Footnote 16] Each of these factors weighs more heavily as the time needed to recoup losses grows. If the losses have been substantial -- as would likely be necessary chanroblesvirtualawlibrary
In Monsanto, we emphasized that courts should not permit factfinders to infer conspiracies when such inferences are implausible, because the effect of such practices is often to deter procompetitive conduct. Monsanto, 465 U.S. at 465 U. S. 762-764. chanroblesvirtualawlibrary
In most cases, this concern must be balanced against the desire that illegal conspiracies be identified and punished. That balance is, however, unusually one-sided in cases such as this one. As we earlier explained, supra at 475 U. S. 588-593, predatory pricing schemes require conspirators to suffer losses in order eventually to realize their illegal gains; moreover, the chanroblesvirtualawlibrary
As our discussion in 475 U. S. 279. The Court of Appeals did not take account of the absence of a plausible motive to enter into the alleged predatory pricing conspiracy. It focused instead on whether there was "direct evidence of concert of action." 723 F.2d 304. The Court of Appeals erred in two respects: (i) the "direct evidence" on which the court relied had little, if any, relevance to the alleged predatory pricing conspiracy; and (ii) the court failed to consider the absence of a plausible motive to engage in predatory pricing.
The "direct evidence" on which the court relied was evidence of other combinations, not of a predatory pricing conspiracy. Evidence that petitioners conspired to raise prices in Japan provides little, if any, support for respondents' chanroblesvirtualawlibrary
That being the case, the absence of any plausible motive to engage in the conduct charged is highly relevant to whether a "genuine issue for trial" exists within the meaning of Rule 56(e). Lack of motive bears on the range of permissible conclusions that might be drawn from ambiguous evidence: if petitioners had no rational economic motive to conspire, and if their conduct is consistent with other, equally plausible explanations, chanroblesvirtualawlibrary
On remand, the Court of Appeals is free to consider whether there is other evidence that is sufficiently unambiguous to permit a trier of fact to find that petitioners conspired to price predatorily for two decades despite the absence of any apparent motive to do so. The evidence must "ten[d] to exclude the possibility" that petitioners underpriced respondents to compete for business, rather than to implement an economically chanroblesvirtualawlibrary
In addition to these inferences, the court noted that there was expert opinion evidence that petitioners' export sales "generally were at prices which produced losses, often as high as twenty-five percent on sales." 723 F.2d 311. The court did not identify any direct evidence of below-cost pricing; nor did it place particularly heavy reliance on this aspect of the expert evidence. See n19, infra.
Respondents also rely on an expert study suggesting that petitioners have sold their products in the American market at substantial losses. The relevant study is not based on actual cost data; rather, it consists of expert opinion based on a mathematical construction that, in turn, rests on assumptions about petitioners' costs. The District Court analyzed those assumptions in some detail and found them both implausible and inconsistent with record evidence. Zenith Radio Corp. v. Matsushita Electric Industrial Co., 505 F.Supp. at 1356-1363. Although the Court of Appeals reversed the District Court's finding that the expert report was inadmissible, the court did not disturb the District Court's analysis of the factors that substantially undermine the probative value of that evidence. See 723 F.2d 277-282. We find the District Court's analysis persuasive. Accordingly, in our view, the expert opinion evidence of below-cost pricing has little probative value in comparison with the economic factors, discussed in 475 U. S. supra, that suggest that such conduct is irrational.
The Court of Appeals correctly reasoned that the five-company rule might tend to insulate petitioners from competition with each other. 723 F.2d 306. But this effect is irrelevant to a conspiracy to price predatorily. Petitioners have no incentive to underprice each other if they already are pricing below the level at which they could sell their goods. The far more plausible inference from a customer allocation agreement such as the five-company rule is that petitioners were conspiring to raise prices, by limiting their ability to take sales away from each other. Respondents -- petitioners' competitors -- suffer no harm from a conspiracy to raise prices. Supra at 475 U. S. 582-583. Moreover, it seems very unlikely that the five-company rule had any significant effect of any kind, since the "rule" permitted petitioners to sell to their American subsidiaries, and did not limit the number of distributors to which the subsidiaries could resell. 513 F.Supp. at 1190.
It is indeed remarkable that the Court, in the face of the long and careful opinion of the Court of Appeals, reaches the result it does. The Court of Appeals faithfully followed the relevant precedents, including First National Bank of Arizona v. Cities Service Co., 391 U. S. 253 (1968), and Monsanto Co. v. Spray-Rite Service Corp., 465 U. S. 752 (1984), and it kept firmly in mind the principle that proof of a conspiracy should not be fragmented, see Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U. S. 690, 370 U. S. 699 (1962). After surveying the massive record, including very chanroblesvirtualawlibrary
In a similar vein, the Court summarizes Monsanto Co. v. Spray-Rite Service Corp., supra, as holding that "courts should not permit factfinders to infer conspiracies when such inferences are implausible. . . ." Ante at 475 U. S. 593. Such language suggests that a judge hearing a defendant's motion for summary judgment in an antitrust case should go beyond the traditional summary judgment inquiry and decide for himself whether the weight of the evidence favors the plaintiff. Cities Service and Monsanto do not stand for any such proposition. Each of those cases simply held that a particular piece of evidence, standing alone, was insufficiently probative to justify sending a case to the jury. [Footnote 2/1] These holdings in no way undermine chanroblesvirtualawlibrary
The DePodwin Report, on which the Court of Appeals relied along with other material, indicates that respondents were harmed in two ways that are independent of whether petitioners priced their products below "the level necessary to sell their products or . . . some appropriate measure of cost." Ibid. First, the Report explains that the price-raising scheme in Japan resulted in lower consumption of petitioners' goods in that country, and the exporting of more of petitioners' goods to this country, than would have occurred had prices in Japan been at the competitive level. Increasing chanroblesvirtualawlibrary
exports to this country resulted in depressed prices here, which harmed respondents. [Footnote 2/2] Second, the DePodwin Report indicates that petitioners exchanged confidential proprietary information and entered into agreements such as the five-company rule with the goal of avoiding intragroup competition in the United States market. The Report explains that petitioners' restrictions on intragroup competition caused respondents to lose business that they would not have lost had petitioners competed with one another. [Footnote 2/3] chanroblesvirtualawlibrary
The DePodwin Report alone creates a genuine factual issue regarding the harm to respondents caused by Japanese cartelization and by agreements restricting competition among petitioners in this country. No doubt the Court prefers its own economic theorizing to Dr. DePodwin's, but that is not a reason to deny the factfinder an opportunity to consider Dr. DePodwin's views on how petitioners' alleged collusion harmed respondents. [Footnote 2/4] chanroblesvirtualawlibrary
The first claim of error is that the Third Circuit treated evidence regarding price-fixing in Japan and the so-called five-company rule and check-prices as "direct evidence' of a conspiracy that injured respondents." Ante at 475 U. S. 583 (citing In re Japanese Electronics Products Antitrust Litigation, 723 F.2d 238, 304-305 (1983)). The passage from the Third chanroblesvirtualawlibrary
The Court's second charge of error is that the Third Circuit was not sufficiently skeptical of respondents' allegation that petitioners engaged in predatory pricing conspiracy. But chanroblesvirtualawlibrary
723 F.2d 282. In short, the Third Circuit found DePodwin's affidavit sufficient to create a genuine factual issue regarding the correctness of his conclusion that petitioners sold below cost over a long period of time. Having made this determination, the court saw no need -- nor do I -- to address the District Court's analysis point by point. The District Court's criticisms of DePodwin's chanroblesvirtualawlibrary