Source: http://openjurist.org/577/f2d/239
Timestamp: 2015-03-28 14:24:13
Document Index: 205498261

Matched Legal Cases: ['§ 1', '§ 2', '§ 9', '§ 1', '§ 2', '§ 1', '§ 2']

577 F2d 239 Equipment Company Inc v. International Harvester Company | OpenJurist
577 F. 2d 239 - Equipment Company Inc v. International Harvester Company	Home577 f2d 239 equipment company inc v. international harvester company
577 F2d 239 Equipment Company Inc v. International Harvester Company 577 F.2d 239
1978-2 Trade Cases 62,136
H & B EQUIPMENT COMPANY, INC., Plaintiff-Appellant,v.INTERNATIONAL HARVESTER COMPANY, Defendant-Appellee.
No. 77-1376.
July 10, 1978.Rehearing Denied Aug. 24, 1978.
Jack N. Price, Austin, Tex., Paul Thorp, Dallas, Tex., T. D. Smith, Local Counsel, Houston, Tex., for plaintiff-appellant.
B. Jeff Crane, Jr., John L. Murchison, Jr., Ann Lents, Houston, Tex., William W. Crawford, James R. Fruchterman, Chicago, Ill., for defendant-appellee.
H & B Equipment Co., Inc., a distributor for International Harvester Co., severed relations with International Harvester and brought this antitrust suit against it under the Sherman Act, 15 U.S.C.A. §§ 1, 2. At trial, H&B sought to prove monopolization, a conspiracy to drive H&B out of business, customer restrictions, and unfair competition. The district court granted a directed verdict for the defendant at the close of H&B's case on the federal antitrust claims, without specifically addressing the state law claims of unfair competition. We affirm. H&B failed to introduce adequate proof of monopolization, conspiracy, or injury from customer restrictions, and in that context we decline to consider the allegations of unfair competition.
This case involves the market in Houston, Texas, for bulldozer-loaders, backhoes, and hydraulic excavators, known collectively in the International Harvester organization as the "J-12" line. In 1970, International Harvester had little or no penetration of that already crowded market. Its machines faced competition from John Deere, Case, Massey-Ferguson, Allis Chalmers, Caterpillar, Hein Warner, Drott, Link Belt, and Poclain. Desiring to expand, International Harvester allowed four of its agricultural dealers there to sell bulldozer-loaders and backhoes, and engaged H&B to sell and service all types of J-12 machinery.
H&B experienced moderate success. After a loss in 1971, it earned an equivalent profit in 1972. International Harvester had, by acquiring the Fench company Yumbo, added a new hydraulic excavator, the 3960. H&B sold the first 3960 bought in the United States. International Harvester, however, was still not satisfied. Feeling a "full line" dealer would do better, it attempted to arrange financing for an H&B expansion. When that effort failed, in late 1972 it established a company store, International Harvester Sales and Service, Inc., in direct competition with H&B.
H&B's fortunes immediately turned sour. Viewing the facts in a light most favorable to H&B, as we are instructed to do in reviewing a directed verdict against it, Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir. 1969) (en banc ), International Harvester harassed H&B by delaying parts orders and warranty claims, undercut H&B in the marketplace by selling machines just above or even below dealer cost, continued to enforce customer restrictions by not allowing H&B to bid on government sales or sales to rental yards, and drove H&B into a loss position, forcing H&B to terminate in late 1973. After H&B left the market, International Harvester sold the company store to Plains Machinery, which by 1976 was doing in excess of 20 times more J-12 business than H&B had done in its best year as a dealer.
H&B claims International Harvester's effort to drive H&B out of business was part of an attempt to monopolize the Houston market for hydraulic excavators, and so violated Sherman Act § 2. H&B and the company store were the only International Harvester dealers in Houston selling hydraulic excavators, in particular the 3960.
The hydraulic excavator market, however, cannot be confined to International Harvester products alone. H&B principal L. S. Hackney testified that, in addition to International Harvester, rivals Drott, Hein Warner, John Deere, and Case sold hydraulic excavators in 1971, and the rival brands were "very popular." He did not know their sales, but was "sure" they were more than those of the 3960. The plaintiff introduced into evidence an advertisement for the 3960 published in Texas Contractor which read: "International Harvester has simplified your toughest job: getting the best buy in 7/8-yd. and 5/8-yd. Hydraulic Excavators. You know the almost Las Vegas odds of picking a winner from more than 20 makes."
To succeed in claiming monopolization, a plaintiff must show the defendant has achieved a monopoly, or, for attempt, demonstrate a "dangerous probability of success." Yoder Bros., Inc. v. California-Florida Plant Corp.,537 F.2d 1347, 1366-1369 (5th Cir. 1976), cert. denied, 429 U.S. 1094, 97 S.Ct. 1108, 51 L.Ed.2d 540 (1977). See Annot., 27 A.L.R.F. 762 at § 9. No hard and fast rule exists for determining the market share necessary to establish a monopoly. Compare Heatransfer Corp. v. Volkswagenwerk, A.G., 553 F.2d 964, 981 (5th Cir. 1977) (71-76 percent), cert. denied, 434 U.S. 1087, 98 S.Ct. 1282, 55 L.Ed.2d 792 (1978), with United States v. Grinnell Corp., 384 U.S. 563, 571, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966) (87 percent). Whatever the test, H&B has failed to meet it. It introduced no statistics on the number and size of firms in the market, and every hint the record gives indicates International Harvester's market position fell far short of being dominant.
The evidence at trial shows that H&B attempted to establish a submarket of hydraulic excavators consisting of the 3960 alone. See Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). On appeal, H&B's attorney cites that testimony but characterizes it as referring to hydraulic excavators generally. That market is competitive. The trade in the 3960 belongs to International Harvester alone, but the evidence that it is a submarket by itself is short of the substantial evidence needed to create an issue for the jury. The evidence showed that the only characteristic which distinguished the 3960 from other hydraulic excavators was that it had a special undercarriage which did not need service and could operate in three feet of mud. That feature, however, was quickly copied by other dealers. Even without it, other excavators could accomplish the same work. No evidence establishes that the industry recognized the 3960 as being special, or that it exclusively served the needs of a readily identifiable class of customers. In fact, it hardly served anyone at all. H&B sold only three, including one at distress prices and another to an enterprise in which Hackney was a partner. That one customer told H&B's expert witness that it would take a rise in price of as much as 30 percent before he would consider another machine hardly constitutes substantial evidence that the 3960 was in a class by itself. Even the most ordinary greyhound has its devoted fans at the racetrack.
H&B proffers two distinct theories of liability under § 1 of the Sherman Act. First, it alleges International Harvester, as part of its dealership arrangement, blocked H&B from selling to certain "house account" customers, including governments and rental yards. See White Motor Co. v. United States, 372 U.S. 253, 83 S.Ct. 696, 9 L.Ed.2d 738 (1963). Second, it asserts that International Harvester engaged in harassment, discriminatory treatment, and predatory pricing, all with the intent of eliminating it from the market. See Coleman Motor Co. v. Chrysler Corp., 525 F.2d 1338 (3d Cir. 1975).
Section 1 is both broader and narrower than § 2. Under § 1, H&B need not show monopoly power. An unreasonably anticompetitive effect, or conduct presumed under the per se rubric to have that effect, is all that is required. Section 1, however, unlike § 2, requires the existence of a "contract, combination, or conspiracy." The assumption behind the statutory scheme is that anticompetitive conduct by firms lacking monopoly power threatens the sound operation of a free economy only when done in concert with others.
H&B thus faces the threshold requirement of identifying a co-conspirator who agreed with International Harvester to inflict injury on H&B. H&B may claim that H&B conspired