Opinion ID: 403391
Heading Depth: 2
Heading Rank: 2

Heading: Arguments on this Appeal

Text: 18 Sportservice attacks the post-remand definition of the relevant market on many specific fronts, but its general argument is that the district court, on remand, failed to adhere to this court's instructions in Finley I. Sportservice reads our instructions as explicitly defining the types of facilities and categories of events that should be included in the relevant market, leaving the district court with the sole obligation of finding the correct numbers. Finley, on the other hand, reads this court's instructions on prior appeal as more general guidelines fully supporting the district court's actions in finding the new relevant market. We agree with Finley. 19 On prior appeal, we reversed and remanded because a market limited only to major league baseball concession franchises was deemed too narrow. We instructed the district court to supplement the record with evidence of concession franchises that were reasonably interchangeable with the type of franchise serving major league baseball teams. This court intended for the district court to resume its inquiry into the possible addition of concession franchise opportunities which would comprise a more reasonable relevant market under the facts of this case. Our prior opinion did not specifically define the types of events and facilities in the relevant market, nor did it determine the number. Our prior decision stated only that a focus on major league baseball was too narrow, that that focus had resulted from Justice Clark's emphasis upon the market for the sale of concession services rather than the concession franchise market as the relevant line of commerce, and from his failure to examine the franchise market for which reasonable interchangeability among concessionaires like Sportservice existed. 20 Sportservice appears to have little difficulty with the district's court's initial narrowing of the concession franchise market performed by the first step of finding those concession franchises for which substitutability of production in the concession products market exists. Such a narrowing is proper. Calnetics Corp. v. Volkswagen of America, Inc., 532 F.2d 674, 691 (9th Cir.), cert. denied, 429 U.S. 940, 97 S.Ct. 355, 50 L.Ed.2d 309 (1976). Sportservice does take issue with the district court's second narrowing-the determination of reasonable interchangeability in use or demand by national concessionaires among the concession opportunities left after the first paring. As discussed, the district court, on remand, performed the second step by narrowing the market to only those concession franchise opportunities for which we could reasonably expect to find competition among national concessionaires-concessionaires competing with Sportservice. The district court performed the second step by essentially adopting the minimum gross receipts requirements offered by Finley's expert witness, Mr. Vincent Pantuso, an executive with a competing national concessionaire, Interstate United Corporation. It is the use of the Pantuso testimony and the resultant market exclusions that form the specific contentions of Sportservice on this appeal. Because we feel that it was reasonable for the district court to have used the Pantuso testimony in establishing the relevant market in this case, we need not discuss Sportservice's arguments concerning the exclusion of satellite or proximate concession franchises, nor the exclusion of college football concession franchises. 6 21 Sportservice contends that the district court placed undue emphasis upon the testimony of Mr. Vincent Pantuso who testified that, in his opinion, a national concessionaire would not seek out a concession franchise that yielded less than $25,000 annually in net profits or produced less than $250,000 annually in gross receipts. Sportservice argues that this testimony was the basis for the district court's narrow delineation of the relevant market; that Mr. Pantuso's opinion as to the threshold dollar factors used by national concessionaires is not shared by all national concessionaires; and, by relying upon this testimony, the district court incorrectly applied the tests for relevant market that were stated by this court on prior appeal. We disagree. 22 We do not think that the law of this case or antitrust law, in general, constrained the district court to the extent asserted by Sportservice on this appeal. We note that Congress prescribed a pragmatic, factual approach to the definition of the relevant market and not a formal, legalistic one. Brown Shoe Co. v. United States, 370 U.S. 294, 336, 82 S.Ct. 1502, 1530, 8 L.Ed.2d 510, 542 (1962). It is correct, as Sportservice argues, that this court did not explicitly dictate that the market in this case be limited to concession opportunities which would attract only national concessionaires. However, we did not preclude such a conclusion after evidence was received on remand that such was a reasonable view of the facts and circumstances related to this litigation. Similarly, we did not dictate that the district court receive evidence of minimum dollar volume figures to determine a competitive threshold for which concession franchise operations are reasonably interchangeable with major league baseball concessions, but we did not preclude such testimony. In view of the record now before us, we think Mr. Pantuso's profitability and gross receipts tests offered a reasonable approximation of the size of concession franchise opportunities for which there is realistic competition in the concession franchise market. 7 The definition of the relevant market is basically a fact question dependent upon the special characteristics of the industry involved and we will not disturb such findings unless clearly erroneous. See, Telex Corp. v. International Business Machines Corp., 510 F.2d 894, 915 (10th Cir. 1975), cert. dismissed, 423 U.S. 802, 96 S.Ct. 8, 46 L.Ed.2d 244 (1976); and Sulmeyer v. Coca-Cola Company, 515 F.2d 835, 849 (5th Cir. 1975), cert. denied, 424 U.S. 934, 96 S.Ct. 1148, 47 L.Ed.2d 341 (1976). For the reasons expressed herein, we hold that the district court's finding of the relevant market is not clearly erroneous. 23 Although the search for the relevant market is basically a factual inquiry, it deserves noting that the district court also properly followed precedent in this area by restricting the relevant market to one in wherein commercial reality exists. In defining a relevant market for Sherman Act purposes, the court must consider distinction in degree as well as kind. International Boxing Club v. United States, 358 U.S. 242, 251, 79 S.Ct. 245, 250, 3 L.Ed.2d 270 (1959); United States v. Grinnell, 384 U.S. 563, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966). Sportservice argues that (t)he record requires a finding that the relevant market includes all of those types of facilities which sell or can sell franchises for concession products prepared with at most a grill and not a kitchen. In support of this definition, Sportservice proceeded to prove the number of facilities and events of the type described, and, by use of a marketing report and a survey performed for this litigation, Sportservice argues that it controlled only 4 percent of the above-described types of concession events and facilities during the relevant period. Such a definition and estimate of market foreclosure simply ignores commercial reality. In order to abide by the dictates of International Boxing Club and Grinnell, and determine where meaningful competition exists, United States v. Continental Can Co., 378 U.S. 441, 449, 84 S.Ct. 1738, 1743, 12 L.Ed.2d 953 (1964), it was appropriate for the district court to have narrowed the relevant market to those concession franchises for which reasonable substitutability in demand among national concessionaires can be found. The artificially large relevant market proferred by Sportservice lacks the above characteristics. Sportservice's attempt to have this court adopt a relevant market of 2,000 to 11,000 concession franchises fails because such a market simply does not represent an estimate of meaningful competition. It makes no effort to group concession franchises by size of operations or profitability-two characteristics found by the district court to be especially relevant given the national concessionaire's typical economies of scale. The record in this case amply supports the district court's finding that effective competition was limited to the 118 concession franchises comprising the relevant market. 24 It is also worth noting that the effort to find a relevant market in this litigation was not performed without purpose. A definition of a relevant market was necessary in order to assess possible Sherman Act violations. As for the determination of a Sherman Act section 1 violation, an unreasonable restraint of trade, this court sanctioned the use of the tests stated in Tampa Electric Company v. Nashville Coal Co., 365 U.S. 320, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961). That case sets out a three-part test: (1) a determination of the line of commerce involved, (2) a determination of the area of effective competition, and (3) a determination of whether competition has been foreclosed in a substantial share of the relevant market. Id., 365 U.S. at 327-29, 81 S.Ct. at 628-29, 5 L.Ed.2d at 587. We noted in Finley I that the first two tests basically outline a determination of the relevant market. See 512 F.2d at 1275. We note here that a finding of the line of commerce is not significantly different from the first narrowing performed by the district court below. Substitutability in production, while a more technical term of art, is another way of describing the analysis required by the first Tampa Electric test, that of broadly defining the type of business engaged in by competitors in the concession franchise industry. The line of commerce for this case was found to be concession products sold to people in a closed area where preparation of the products requires at most a grill and not a kitchen. See Finley I, 512 F.2d at 1274. Although Sportservice would have the analysis begin and end with this definition of the line of commerce, Tampa Electric, as well as other authorities, dictate further inquiry-we must search for the area of effective competition within this line of commerce. 25 This second inquiry does not significantly differ from the district court's second paring of the market in the instant case. The district court found that effective competition existed only for concession franchises that a national concessionaire would find profitable by reason of dollar volumes. The record amply supports the district court's finding that effective competition did not encompass every concession franchise within the relevant line of commerce. In our minds, an analysis of substitutability in demand or use of franchises in the concession franchise market is another way of describing a method used to test for the area of effective competition under Tampa Electric. The district court, therefore, properly applied the first two Tampa Electric tests in its finding of the relevant market. 26 In conclusion, we affirm the district court's finding of the relevant market below. We feel it is reasonable given the post-remand record, that it accurately applies the instructions of this court on prior appeal, and that it is supported by fact and case law. Moreover, substantial evidence supports the district court's finding that Sportservice controlled 24 percent of the relevant market.