Opinion ID: 798173
Heading Depth: 3
Heading Rank: 2

Heading: Detrimental Effects

Text: 36 Even though we hold that no reasonable jury could find that Craftsmen properly defined the market as the specialty limousine market, Craftsmen contends that it presented sufficient evidence of an antitrust violation to avoid summary judgment regardless of whether the relevant product market is defined as the market for specialty limousines or the market for limousines generally. Therefore, we proceed to examine whether Craftsmen presented evidence sufficient for a jury to find detrimental effects on competition in the correct product market — the market for limousines generally. 37 We first look to whether Craftsmen submitted evidence of actual, sustained adverse effects on competition in the general market for limousines. Ind. Fed'n of Dentists, 476 U.S. at 461, 106 S.Ct. 2009. Craftsmen points to no evidence that such effects occurred in the limousine industry as a result of the restrictions. Craftsmen did not show an increase in limousine prices above the competitive level during that time period, nor a decrease in the total number of competitors, nor a reduction in overall limousine output, nor some other economic indicator that the coachbuilding industry as a whole suffered anti-competitive consequences due to the advertising restrictions. The mere fact that the restrictions may have reduced demand for specialty limousines relative to their shorter counterparts does not, without more, show an actual, sustained adverse effect on competition in the market as a whole. Any action that a profit-seeking business takes could increase its market share relative to some other segment of that market; indeed, most rational businesses actively take such steps at every available opportunity. Such steps impact competitors, but that alone does not prove an adverse impact upon the competitive process. 38 There may have been other conceivable avenues of proving detrimental effects upon the competitive process in this case. For example, Craftsmen may have been able to show that the restrictions stifled industry research and development by effectively forcing innovative coachbuilders to perform costly independent safety testing of vehicles that did not comply with QVM or CMC guidelines. If Craftsmen offered more than a scintilla of evidence that the restrictions were so detrimental to the survival of non-QVM/CMC participants and independent testing so cost-prohibitive that the defendants created an artificial and illegitimately high barrier to competition by means of innovation, then Craftsmen's case might survive summary judgment. Cf. Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 495-98, 108 S.Ct. 1931, 100 L.Ed.2d 497 (1988) (describing a jury verdict for the plaintiff on facts similar to those hypothesized above); Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656, 659-60, 81 S.Ct. 365, 5 L.Ed.2d 358 (1961) (per curiam) (reversing the dismissal of the plaintiff's antitrust claim based upon allegations that the defendants refused to offer their seal of approval for the plaintiff's product and effectively forced it from the market for anticompetitive reasons). Craftsmen does not direct our attention to any such evidence, and facts that do appear in the record would not permit a reasonable jury to find that the advertising restraints had actual, sustained adverse effects on competition of the type hypothesized above. Ind. Fed'n of Dentists, 476 U.S. at 461, 106 S.Ct. 2009. 39 Because Craftsmen cannot directly prove actual adverse effects on competition during the years at issue, we turn to the question of whether it has presented evidence to prove those effects indirectly through an inquiry into market power and market structure. Copperweld Corp., 467 U.S. at 768, 104 S.Ct. 2731. We find that Craftsmen did not submit evidence sufficient to satisfy its burden of proof under this alternative means of proving the detrimental, anticompetitive effects of the advertising restrictions, and therefore it cannot avoid summary judgment. 40 First, it is clear that Ford and American Coach, acting independently, do not wield power in the limousine market; that is, neither one has the ability to raise price above the competitive level without losing so many sales so rapidly that the price increase is unprofitable and must be rescinded. Midwestern Mach. Co., 392 F.3d at 274 (quotation omitted). Ford sells motor vehicles, a tiny percentage of which are converted into limousines (as are a tiny percentage of vehicles sold by other car manufacturers). It does not sell limousines, and therefore it can individually affect the competitiveness of the limousine market only by unilaterally raising the prices of its pre-conversion vehicles or by entering into an agreement to sell a certain line of vehicles solely to a certain coachbuilder, thus making that coachbuilder the exclusive dealer of limousines converted from that particular base vehicle. The common-sense realities of the market show that Ford lacks the ability to profitably take either step. If Ford were to raise the prices of its motor vehicles generally above competitive levels, it would lose sales to competitors in the much larger market for off-the-lot vehicles, as well as the market for base vehicles to be converted into limousines. Ford also lacks the ability to profitably sell an existing line of vehicles exclusively to a particular coachbuilder, even if it made those sales at a price far above the competitive level. According to Scoggins, there were only 2,250 limousine conversions of any vehicle make in the United States in 1994. If Ford were, for example, to make its Lincoln Town Cars unavailable to the public and sell them exclusively to one coachbuilder, the loss in profits from sales to individuals and other businesses would obviously outweigh the marginal profits of making and selling far fewer Town Cars at a higher price. Craftsmen presents no evidence to contradict these apparent realities of the market. 41 American Coach does compete in the limousine industry, but the record reveals that it by no means dominates that market. It is merely one of many competitors engaged in the business of coachbuilding, and therefore any attempt to unilaterally increase its prices above competitive levels would be thwarted by consumer flight to American Coach's competitors. 42 Because neither Ford nor American Coach has the ability to wield market power on their own, we must assume that Craftsmen's theory of the case depends upon the concerted actions of Ford, GM, and the members of their QVM and CMC programs, including American Coach. Acting together, these businesses could conceivably exercise market power in the industry. If a broad cartel of QVM and CMC members agreed to collectively raise prices above competitive levels, the action could be profitable due in large part to advertising restrictions that would have made it more difficult for consumers to learn about competitively-priced alternatives to doing business with cartel members. In other words, through price-fixing and cutting off the means for non-members to compete effectively, the cartel could collectively act as a monopoly within the coachbuilding industry. 43 This theory, if proven, could support a finding of market power and an antitrust violation in this case. On the record before us, however, no reasonable jury could find such market power, particularly given the structure of the limousine market. Craftsmen's only evidence of market power is the fact that Ford, GM, and several QVM and CMC coachbuilders acted collectively through LIMO to pressure trade publications into restricting marketing opportunities for coachbuilders who did not belong to the QVM or CMC programs and did not perform independent crash testing. This proven ability to act collectively to exercise influence over trade publication advertising policies does not demonstrate an ability to act collectively to raise price above the competitive level without losing so many sales so rapidly that the price increase is unprofitable and must be rescinded. Midwestern Mach. Co., 392 F.3d at 274 (quotation omitted). We noted in Craftsmen I that Craftsmen had presented sufficient evidence to prove an agreement among the defendants to set advertising standards; it had not proven that such an agreement was unreasonably anticompetitive. We did not find that the agreement at issue, without more, was sufficient evidence of market power, and we do not make that finding now. We note that demanding certain standards for advertising that exclude some competitors may make the exercise of market power more feasible, but such acts do not alone prove the possession of market power. 44 Craftsmen did not fill this evidentiary void on remand. The record offers no other evidence to show that these coachbuilders formed a cartel with the ability to collectively exercise market power. For example, there is no evidence that these coachbuilders exchanged price or output information or took some other step that would facilitate price-fixing among them. There is also no evidence that the structure of the coachbuilding market would allow for a well-disciplined cartel. Indeed, the record suggests that the market consists of a large number of small coachbuilding firms who engage in individually negotiated sales for customized products, facts that make the detection and punishment of firms that cheat on any price-fixing agreement difficult if not impossible. There appear to be low costs to entry into and exit from the market, and the minimum efficient scale within the industry appears to be fairly small; both facts weigh against the sustainability of any anticompetitive cartel because its membership would necessarily consist of a large number of firms who would face new and frequent price competition from upstart firms. For example, a small-scale cartel member selling vehicles to livery operators in St. Louis and Kansas City above the competitive price (per an agreement with the cartel) would be hard-pressed to remain faithful to that agreement if a new, non-cartel firm took advantage of the ease of entry into the limousine market and began marketing directly to those same livery operators through personal visits, phone calls, mailings, or advertisements in sources other than trade shows or the two major trade publications. Multiply this likely scenario many times over for the numerous small-scale firms in the industry, and it becomes clear that the structure of the limousine market during the years at issue in this case made the attainment and exercise of market power nearly impossible. 45 Finally, even if Craftsmen could show the feasibility of such a cartel that would have market power, Craftsmen has identified no motive for Ford to engage in such a conspiracy. Ford makes motor vehicles; it does not convert them into limousines. Any anticompetitive agreement among coachbuilders would likely reduce output in the limousine industry and therefore hurt Ford's sales of base vehicles without any apparent benefits to Ford. In sum, Craftsmen simply has not submitted sufficient evidence of the existence of some entity — whether an individual defendant or the defendants acting as a cartel — with the means to exercise market power in the limousine industry.