Opinion ID: 518733
Heading Depth: 3
Heading Rank: 1

Heading: Anticompetitive or Predatory Conduct7

Text: 51
52 The jury found that the defendants had attempted to monopolize through predatory pricing (question 6), doubtless by pricing Flygt's mix hoist system below cost, thereby undercutting H.J. 53 Predatory pricing has been defined as pricing whereby the firm foregoes short-term profits in order to develop a market position such that the firm can later raise prices and recoup lost profits.... Conoco Inc., 774 F.2d at 906 (8th Cir.1985) (quoting William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 668 F.2d 1014, 1031 (9th Cir.1981) (quoting Janich Bros., Inc. v. American Distilling Co., 570 F.2d 848, 856 (9th Cir.1977))). This does not mean H. J. was required to prove that Flygt was foregoing all profits as a firm in order to gain control of the hoist market; if it did, many markets would be vulnerable to monopolization by diversified firms which could rely upon profits in one area to support losses in another. Instead, the issue of predatory pricing usually turns upon whether the defendant priced its product below some measure of cost. See Conoco, 774 F.2d at 906 n. 8, Superturf, 660 F.2d at 1281 n. 12 & 13, and cases cited. The jury was instructed that predatory pricing is the selling of a product below its average variable cost. See McGahee v. Northern Propane Gas Co., 858 F.2d 1487, 1494 (11th Cir.1988) and Janich Bros. Inc., 570 F.2d at 857-58 (average variable cost acceptable proxy for marginal cost, the floor below which prices may be considered predatory). Flygt and ITT do not challenge this instruction, but assert, first, that, even after the February 1982 price reduction, Flygt's hoist was actually priced above cost. 54 Flygt claims one component of the hoist, a nozzle, cost only $17.80 as shown on an April, 1981 invoice from its supplier, while H.J. claims Flygt's final cost for the part was actually $114.42 or $114.75, after finishing, as shown on Flygt's January, 1982 cost data sheets. The parties agree the difference in the two figures controls whether the hoist was priced above or below cost. Mr. Ericson, Flygt's director of marketing and sales, admitted he did not know the true cost of the nozzle and that the nozzle may have required costly machining after it was purchased. This is supported by one of Flygt's cost data sheets, which shows an entry of $95.20 for OUTSIDE PROC. The jury was free to accept H.J.'s explanation. 55 Additionally, there was evidence that Flygt's costs were even higher and its average price even lower. Beginning February, 1982, Flygt sometimes picked up the tab for shipping, contrary to its practice when dealing with H.J. Flygt also on at least one occasion gave away hoists free of charge to a dealer who made a large pump order. 56 Second, Flygt claims that even if its price of $305 was below its own cost, it was above H.J.'s cost of $230 to $240 per hoist. Thus, H.J. cannot claim an injury from Flygt's predatory pricing, as H.J. could have responded with its own price cut to prevent losing sales. We initially note that predatory pricing is defined in relation to the defendant's cost relative to its selling price, not relative to the plaintiff's cost, Conoco, 774 F.2d at 906 n. 8, and thus H.J.'s cost is apparently irrelevant. 57 An even more compelling reason to reject Flygt's argument is the flimsiness of the proof that H.J.'s cost was no more than $240: Mr. Larsen's single comment on cross-examination that in the fall of 1979, when H.J. first considered producing its own hoist, he could have had the hoists built for about $230 to $240, and offered to sell them to Flygt at that price. There is no evidence of what H.J.'s cost for the hoist was in February, 1982, more than two years later, when Flygt dropped its price to $305, nor anything to suggest H.J.'s cost had not increased. 58
59 The jury did find tying as an instance of anti-competitive conduct. Because predatory pricing fulfills that element of attempt to monopolize, and there was evidence to sustain that finding, the finding of tying is no longer essential to liability. We do observe, however, that we have found no evidence that defendants coerced customers to buy the tied product (the hoist) in order to obtain the tying product (the pump). Coercion is an essential element of a tying claim. Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U.S. 2, 12, 104 S.Ct. 1551, 1558, 80 L.Ed.2d 2, 17 (1984).