Opinion ID: 151442
Heading Depth: 3
Heading Rank: 1

Heading: Basic Principles of Antitrust Law

Text: This Court has never directly considered the legality of a practice like the single tire rule or the specific kind of exclusive contracts entered by the sanctioning bodies and Hoosier. Nevertheless, there are certain fundamental and well-established legal principles that must guide our analysis. The District Court itself accurately summarized at least some of these principles in its summary judgment ruling. Section 1 of the Sherman Act provides that [e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce ... is declared to be illegal. 15 U.S.C. § 1. It is well established that this provision prohibits only unreasonable restraints of trade. See, e.g., NCAA v. Bd. of Regents, 468 U.S. 85, 98, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984). STA appears to agree that the rule of reason standard applies in this context. See, e.g., Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1368 (3d Cir. 1996). In order to survive summary judgment in cases where [the rule of reason] applies, the plaintiff must show concerted action, antitrust injury, evidence that the conspiracy produced `adverse, anti-competitive effects within the relevant product and geographic markets,' and evidence `that the objects of and the conduct pursuant to the conspiracy were illegal.' InterVest, Inc. v. Bloomberg, L.P., 340 F.3d 144, 159 (3d Cir.2003) (quoting Rossi v. Standard Roofing, Inc., 156 F.3d 452, 465 (3d Cir.1998)). The plaintiff may satisfy its burden by showing either actual anti-competitive effects or proof of the defendant's market power. See, e.g., Orson, 79 F.3d at 1367. The notion of market power in this context is defined as the ability to raise prices above those that would exist in a competitive market. See, e.g., id. The burden then shifts to the defendant to show a sufficient pro-competitive justification or objective for the challenged conduct. See, e.g., id. at 1367-68. A restraint cannot be justified solely on the basis of social welfare considerations. See, e.g., United States v. Brown Univ., 5 F.3d 658, 678-79 (3d Cir.1993). The plaintiff then must demonstrate that the restraint itself is not reasonably necessary to achieve the stated objective. See, e.g., Orson, 79 F.3d at 1368. In other words, [e]ven if an anticompetitive restraint is intended to achieve a legitimate objective, the restraint only survives a rule of reason analysis if it is reasonably necessary to achieve the legitimate objectives proffered by the defendant. Brown Univ., 5 F.3d at 678-79 (citations omitted). `The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.' Orson, 79 F.3d at 1367 (quoting Bd. of Trade v. United States, 246 U.S. 231, 238, 38 S.Ct. 242, 62 L.Ed. 683 (1918)). Section 2 of the Sherman Act targets persons who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of ... trade or commerce. 15 U.S.C. § 2. This offense of monopolization has two elements: `(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.' Eastman Kodak, 504 U.S. at 481, 112 S.Ct. 2072(quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966)). As to the second element, [a] monopolist willfully acquires or maintains monopoly power when it competes on some basis other than the merits. LePage's Inc. v. 3M, 324 F.3d 141, 147 (3d Cir.2003) (en banc) (citing Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 605 n. 32, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985)). In turn, the offense of attempted monopolization has the following three elements: (1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993) (citation omitted). The final element requires an inquiry into the relevant product and geographic market as well as the defendant's economic power in that market. See, e.g., id. at 459, 113 S.Ct. 884. In turn, market share, while crucial, may not always be determinative. See, e.g., United States v. Microsoft Corp., 253 F.3d 34, 54 (D.C.Cir.2001) (en banc) (per curiam). Once the plaintiff demonstrates harm to competition, the defendant then has to show that it is actually promoting a pro-competitive or legitimate business objective. See, e.g., United States v. Dentsply Int'l, Inc., 399 F.3d 181, 187, 196-97 (3d Cir.2005). Ultimately, Section 2 is directed against conduct that unfairly tends to destroy competition itself, as opposed to even severe competition. Spectrum Sports, 506 U.S. at 458, 113 S.Ct. 884 (citations omitted). STA also claims that it has been the victim of unlawful tying. `Tying is defined as selling one good (the tying product) on the condition that the buyer also purchase another separate good (the tied product).' Harrison Aire, 423 F.3d at 385 (quoting Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp., 959 F.2d 468, 475 (3d Cir.1992) (en banc)). A private antitrust plaintiff must further establish that it suffered an antitrust injury as a result of the misconduct and therefore possesses the standing necessary to seek relief. The antitrust laws were enacted `for the protection of competition not competitors.' Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962)). Therefore, the injury prong requires: (1) harm of the type the antitrust laws were intended to prevent; and (2) an injury to the plaintiff which flows from that which makes defendant's acts unlawful. Gulfstream III Assocs. Inc. v. Gulfstream Aerospace Corp., 995 F.2d 425, 429 (3d Cir.1993) (citing Int'l Raw Materials, Ltd. v. Stauffer Chem. Co., 978 F.2d 1318, 1327-28 (3d Cir.1992)). The District Court correctly recognized that exclusive supply contracts or exclusive dealing agreements have been frequently upheld when challenged on antitrust grounds. See, e.g., E. Food Servs., Inc. v. Pontifical Catholic Univ. Servs. Ass'n, Inc., 357 F.3d 1, 8 (1st Cir.2004) (stating that exclusive dealing contracts are not disfavored by antitrust laws and ordinarily pose threat to competition only in very discrete circumstances); Barr Labs., Inc. v. Abbott Labs., 978 F.2d 98, 111 (3d Cir. 1992) (recognizing that existence of legitimate business justifications for the [exclusive dealing] contracts also supports the legality of the global contracts). Rather, it is widely recognized that in many circumstances [exclusive dealing arrangements] may be highly efficientto assure supply, price stability, outlets, investment, best efforts or the likeand pose no competitive threat at all. E. Food Servs., 357 F.3d at 8 (citation omitted). Expressly rejecting any assertion that exclusive deals are subject to a per se rule of illegality, the Seventh Circuit in Menasha Corp. v. News America Marketing In-Store, Inc., 354 F.3d 661 (7th Cir.2004), appropriately explained that the competition to be an exclusive supplier may constitute a vital form of rivalry, and often the most powerful one, which the antitrust laws encourage rather than suppress. Id. at 663 (citing Paddock Publications, Inc. v. Chicago Tribune Co., 103 F.3d 42 (7th Cir.1996)). On the other hand, we agree with STA that such exclusive agreements are not exempt from antitrust scrutiny. In fact, the Third Circuit addressed exclusive dealing arrangements in its en banc ruling in LePage's Inc. v. 3M, 324 F.3d 141 (3d Cir.2003) (en banc), and, more recently, in United States v. Dentsply International, Inc., 399 F.3d 181 (3d Cir.2005). In the en banc case, the Court upheld a jury verdict under Section 2 against 3M, a clearly dominant supplier in the transparent tape market that paid major retailers through a rebate program designed to achieve sole-source supplier status (and also entered exclusive dealing agreements with at least two retailers), LePage's, 324 F.3d at 157, and thereby cut off its plaintiff competitor from key retail pipelines, id. at 160. In Dentsply, this Court reversed the trial court's judgment in favor of the defendant, ruling that an exclusivity policy imposed by an artificial teeth monopoly on its dealers violated Section 2. Dentsply, 399 F.3d at 184; see also, e.g., E. Food Servs., 357 F.3d at 8 (providing as best example of possible threat to competition situation in which market itself is already heavily concentrated and long-term exclusive contracts then foreclose so large a percentage of the available supply or outlets that entry into the concentrated market is unreasonably constricted).