Opinion ID: 441760
Heading Depth: 2
Heading Rank: 1

Heading: Market Definition and Determination of Market Share

Text: 12 In determining the relevant product and geographic market, Judge Griesa considered only firms that presently collect waste in competition with WMI's subs TIDI and ACS. He thus did not consider the effect of potential competition by new entrants upon the market power of the merged firm but rather treated this as part of the rebuttal to the prima facie case. Although potential competition resulting from easy entry can as logically be appraised as part of market definition, see R. Posner, Antitrust Law 132-33 (1976), we will utilize the traditional analysis of defining the market in terms of existing competitors. 13 We thus begin by determining which firms presently collect waste in actual competition with WMI (a term we use henceforth to include TIDI and ACS). WMI provides waste disposal services to business and industrial customers as do a number of other private haulers. Neither WMI nor these other haulers provides substantial services to residential customers since residential waste is generally collected by private or municipal haulers who provide only limited services to business/industrial customers. Residential and business/industrial customers are thus served largely by different firms. 14 One reason for the distinction between residential and business/industrial collection is found in customer preferences for collection by particular equipment at existing prices. Thus, residential customers largely prefer non-containerized service while business/industrial customers usually opt for containerized hauling. There is of course overlap, and the district court therefore did not define the market solely in terms of equipment distinctions. Some large apartment complexes prefer containerized service (and were included by Judge Griesa as customers in the relevant market), and some businesses make do with hand collection (also included as customers in the relevant market). 15 Another reason for the distinction (as modified by the overlaps) between residential and business/industrial collection is that most private haulers provide only containerized service and most municipalities provide only non-containerized service. The largest municipality, the City of Dallas, provides no containerized service. Moreover, the few municipalities that do provide containerized service to business/industrial customers were included as sellers in the relevant product market. 16 At bottom, however, the distinction between residential and business/industrial service rests on two facts, one economic and the other political. First, customers with large amounts of trash have a greater need for containerized service than do customers with smaller quantities; the former tend to be business/industrial and the latter residential. Second, the latter customers are, for political reasons, served by hand collection provided at low prices by municipalities. At the fringe, of course, some business/industrial customers have sufficiently little trash to be able to choose hand collection at existing prices while some residential customers, such as large apartment complexes, prefer containerized service. Some business/industrial customers haul their trash themselves, although the record indicates that is not a feasible alternative for many at existing prices. 17 Customer preferences for service, therefore, turn largely on the quantity of trash produced, and different kinds of equipment are most useful for different quantities of trash. It might be that in a market without municipal haulers the larger private haulers would offer a full line of services, and the relevant product market would be all trash collection. However, the decision of the City of Dallas and other municipalities to provide non-containerized service has narrowed the market available to private haulers. The fact that only a small fringe of customers have a meaningful choice at existing prices between hand collection, containerized service, or self-hauling demonstrates that the bulk of business/industrial customers will view the alternatives as economically feasible only when confronted with substantial increases in the cost of containerized service. We regard this as legally sufficient to support Judge Griesa's view of which existing firms presently compete with WMI. 3 18 Nor is there support for WMI's claim that the power of Dallas or other municipalities to provide containerized service is a constraint on the prices charged by private firms serving the market so defined. Such an expansion of services would be essentially political since the City of Dallas is not a profit-seeking entrepreneur, and there is no evidence that such a decision is likely absent very substantial price increases by private haulers. 19 Indeed, for all of the smoke blown by WMI over Judge Griesa's market definition, internal TIDI documents fully support his findings. In October, 1980, TIDI completed a Budget Questionnaire that had been sent by Waste Resources. This required TIDI to list its major competitors by name, percentage of market, and kinds of equipment. TIDI listed only private haulers as competitors, and these provided almost exclusively containerized service. The major competitors included therein were five private firms with 83 trucks suitable for containerized service and two trucks suitable for hand collection. This questionnaire amply documents Judge Griesa's conclusions as to the product market as defined in terms of existing competitors. 20 The district court found the relevant geographic market to be Dallas County, plus a small fringe, but not Tarrant County, of which the city of Fort Worth is part. WMI argued below, and continues to argue here, that the relevant geographic market consists of the entire Dallas-Fort Worth metropolitan area. We disagree. Dallas and Fort Worth constitute a Single Standard Metropolitan Statistical Area based on the Office of Management and Budget's judgments regarding economic and social integration. Nevertheless, the bulk of existing Dallas and Fort Worth haulers presently operate exclusively in their respective cities. Only a few, situated near the border between Dallas and Tarrant Counties, do business in both. The area between the two cities is not heavily urbanized and some of the towns between them have granted long term exclusive franchises to waste collectors. Since the travel times between the more heavily populated cities is 45 to 50 minutes, daily service between both areas by the same trucks would be costly. Existing firms that presently compete with WMI are thus found for the most part only in Dallas County, a finding consistent with the TIDI Budget Questionnaire. 21 The district court found that TIDI's and ACS's combined share of the market so defined was 48.8%. This finding was based on a comparison of revenues of the various haulers within this market, and it is to that evidence that we now turn. 22 In the pre-acquisition Budget Questionnaire filled out by TIDI, it listed its major competitors and gave their approximate market shares. TIDI's responses and Judge Griesa's findings are compared as follows: 23 TIDI's Estimate Judge Griesa's of Approximate Finding of % of Name % of Market Market ACS ............... 26 22.5 Moore Ind.......... 15 11.1 BFI ............... 10 7.2 AIDS .............. 5 3.4 S.C.A.............. 4 2.5 24 TIDI calculated its own market share as 40-45%, as compared with the 26.3% found by Judge Griesa. The difference between the TIDI estimates and Judge Griesa's findings are accounted for by Judge Griesa's inclusion of municipal revenues from business/industrial waste disposal. 25 WMI's principal challenge to these findings focuses upon the admission into evidence of two revenue surveys of various firms prepared respectively by an expert retained by the government and by paralegal employees of the Justice Department. However, so far as the surveys relate to the revenues of the largest private haulers, they are fully corroborated by other testimony or exhibits, and we find no contrary evidence in the record. To the extent the surveys relate to the revenues of smaller private haulers or of municipalities serving business/industrial customers, their exclusion would not significantly affect Judge Griesa's findings as to market share. Accordingly, if error was committed, it was harmless. We have reviewed other evidentiary issues raised by WMI but have concluded that they too are, at best, harmless error.