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

Heading: Competing Pumps

Text: 33 Flygt and ITT claim that H.J. failed to prove, despite the presence of other types of manure pumps in the marketplace, that submersible liquid manure pumps constitute a distinct relevant market. In its brief, H.J. responds with the conclusory assertion that [t]here were no operational pumps competitive with the ITT/Flygt pumps. After careful consideration, we agree with Flygt and ITT that H.J. failed to meet its burden of proof on this issue. 34 Flygt was the only manufacturer selling submersible liquid manure pumps within the geographic region until the beginning of 1982. 2 Defining a relevant market solely in terms of a manufacturer's own product guarantees that the manufacturer will have a monopoly in that market; however, it does not mean the manufacturer has true monopoly power. du Pont & Co., 351 U.S. at 392-93, 76 S.Ct. at 1005-6; Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480, 488 (5th Cir.1984). Products always face at least the possibility of competition from the products they are meant to supercede. It makes no sense to say that an entrant with a new technology has monopoly power by defining the market as those customers whom the entrant has so far managed to persuade. All new entrants, indeed most competitors, would then be monopolists. Neumann v. Reinforced Earth Co., 786 F.2d 424, 429 (D.C.Cir.) cert. denied, 479 U.S. 851, 107 S.Ct. 181, 93 L.Ed.2d 116 (1986). 35 Both the solid piston and long shaft manure pumps sold in the region perform the same basic function as submersible pumps--moving manure from the barn to a storage area. Both types are sold to the same customers, dairy farmers, and are handled by similar, or even the same, dealers and distributors. Nonetheless, H.J. insists there was sufficient evidence to pose a jury question on the scope of the relevant product market. 36 H.J. did not produce any expert testimony describing the relevant product market. There were no market data concerning sales of solid piston, long-shaft, and submersible pumps, nor was there any testimony describing the degree of cross-elasticity of demand between Flygt manure pumps and the other types of manure pumps. The only bases offered by H.J. for an inference of low cross-elasticity of demand are (1) testimony of the submersible pump's advantages over other types, (2) the suggestion of a trend toward purchase of submersibles, and (3) general (and not consistent) statements of Flygt personnel as to the lack of competition from the other types. 37 The Flygt submersible does enjoy several advantages over the long-shaft and solid manure pumps. In some applications, the shaft of a long-shaft pump may be too long or too short to fit a manure containment pit. The Flygt pump is easier to service, and its operational life is longer than the long-shaft pump. The Flygt submersible pump is more efficient than both long-shaft and solid-piston pumps. 38 There was evidence suggesting a trend away from solid manure handling systems to liquified systems, and, within liquified systems, from long-shaft pumps to Flygt submersibles. This trend alone, however, fails to show that submersibles were not in the same market as solid and long-shaft pumps. Simply because Flygt pumps outperformed the others does not prove there were no economic restraints on Flygt's ability to control prices. Without a comparison of relative costs, bare conclusions of one product's superior quality are meaningless. Acme Precision Products, Inc., v. American Alloys Corp., 484 F.2d 1237, 1242 (8th Cir.1973) (District Court finding that sales of superior aluminum alloy constituted relevant market overturned because less expensive but slightly inferior alloys were substitutable in 95% of uses). H.J. wholly failed to establish the relative costs of the different pumps. 3 Depending on the relative prices, a farmer may choose to retain or replace a less efficient long-shaft or solid piston pump rather than purchase a submersible. As there was evidence of some degree of substitutability between the types of pumps, it was incumbent upon H.J. to prove that the Flygt pump virtually made the other pumps obsolete--that decisions to buy a submersible pump were not significantly influenced by the availability of (imperfect) substitutes. 39 There was evidence of statements by Flygt personnel bearing on the competitiveness of other types of pumps with the Flygt submersibles. Some indicated they were not competitive, others that they were. 40 A November 24, 1980 agricultural marketing plan recognized that [a]t the present time there are no submersible pump competitors in this marketplace. The existing competition is two fold--long shaft centrifugal pumps and positive displacement piston pumps. It went on to compare the relative advantages and disadvantages of the competitors. 41 On May 19, 1981, in a memo to Ed Pirro concerning prices of agricultural equipment supplied by Flygt, Ross Chambers addressed the question of how close Flygt was to a competitive price. Mr. Chambers stated that [t]he only units that, at this time, even come close to being a competitive unit are long shaft electric motor driven reception pit pumps.... Within reason competitive pricing is unimportant. Yet in the same paragraph Mr. Chambers noted the pressure from the other pumps on Flygt's pricing decision: [W]e must keep the less efficient units pricing in mind. There is, I believe, a point at which the farmer can put up with inefficiency rather than make an exorbitant capital expenditure. He concluded that a moderate [price] increase in October would create only the normal grumbling that accompanies any pricing change. 42 The minutes of the June 25, 1981 meeting of agricultural distributors under the heading Marketing stated Competition. At present the equipment available is of non-submersible type. This presents little competition on a product to product basis. Success to this point has been so overwhelming that relatively little product knowledge has been required. 43 Finally, there were some statements concerning potential future expansion. Mr. Larsen predicted that Flygt pumps would in time completely replace the long-shaft pump, and Flygt predicted that by the end of 1981, it would have captured approximately 50% of the available agricultural waste pump market. Predictions as to future sales tell little about either the definition of the relevant product market or present monopoly power. 44 The question is whether these conclusory statements constitute sufficient evidence to present a jury question of the existence of a market for submersible liquid manure pumps distinct from that for other manure pumps. We think they cannot. At best, they are rather casual statements, not made as part of a serious market analysis, alternately discounting and recognizing the competition posed by the other pumps. 4 This court has been insistent upon market data or similar hard evidence in identifying the relevant market. In the absence of such proof courts are incapable of determining the extent of cross-elasticity of demand in the market. Morton Bldgs., 531 F.2d at 919. Statements such as those above are not sufficient for the jury to infer the technical conclusion that submersible pumps were substantially immune from price competition from other types of manure pumps--that the sales of other pumps were not responsive to price changes in the submersible pumps, or in other words, that farmers would rather pay higher prices than switch.