Opinion ID: 75953
Heading Depth: 3
Heading Rank: 1

Heading: Imputation of Market Share to Relevant Market

Text: 27 As mentioned above, the district court determined, as a matter of law, that Anheuser-Busch did not have market power in the alleged relevant market for the purchase and sale of equity ownership interests in beer distributorships given its market share of 1%-3% in that market. Maris, however, maintains that Anheuser-Busch's significant market share in the manufacture and sale of beer is sufficient to show market power in the relevant market and submarket. Specifically, Maris contends that [i]n cases involving vertical restraints imposed by a manufacturer on distributors, market power is determined by reference to the manufacturer's share of products in the market, not its share of ownership in distributors. Maris's Opening Brief, at p. 45. In other words, Maris maintains that a manufacturer's market share in the market for its products should be imputed to the separate market for ownership interests in the manufacturer's distributorships when a provision in the distributorship agreement is challenged. We disagree. 28 We begin by noting that Maris's position seems to be foreclosed by our precedent, unless Maris is able to show some connection between the two different markets that would justify our consideration of Anheuser-Busch's market share in the beer market while considering Maris's claim. In Manufacturing Research Corp. v. Greenlee Tool Co., 693 F.2d 1037 (11th Cir.1982), we rejected the relevance to an antitrust claim of market power in a market other than the relevant market for the particular claim. In that case, which involved an attempt to monopolize claim, we considered a district court's denial of discovery concerning the defendant's sales of conduit benders in light of the court's finding that the relevant market for the antitrust claims in that case was the market for cable benders. We affirmed the denial of discovery, reasoning that a showing of market power in the cable bender market did not show market power in the relevant market of conduit benders. Id. at 1043. In particular, we noted that this was true because the plaintiff had provided [n]o proof of any connection between Greenlee's conduct in the conduit bender market and that in the cable bender market. Id. Therefore, we held that a defendant's market share in a market other than the alleged relevant market is irrelevant, and cannot be imputed, at least absent a showing of some connection between two different markets that would provide a basis for such an imputation. 29 We have not been alone in reaching that conclusion. In Intergraph Corp. v. Intel Corp., 195 F.3d 1346 (Fed.Cir.1999), the Federal Circuit considered a monopolization claim brought by Intergraph against its supplier Intel, a business with a high market share in the market for high performance computer microprocessors. Intergraph alleged in that case that the relevant market for its antitrust claim was the graphics subsystems market, a market in which Intergraph and Intel were competitors, but in which neither Intel nor Intergraph had market power. Id. at 1354. In rejecting Intergraph's claim that Intel's role in the microprocessor market supported its claim of monopolization in the graphics subsystem market, the court stated: 30 Intel's market power in the microprocessor market is irrelevant to the issues of this case, all of which relate to the effect of Intel's actions on Intergraph's position in its own markets. 31 Id. Therefore, the Federal Circuit also declined to impute market share from one market to another for purposes of determining whether a defendant had market power in the second market. 32 While urging us to accept its position that Anheuser-Busch's market share in the beer market should be imputed to the alleged relevant market for the purchase and sale of equity ownership interests in beer distributorships, Maris primarily relies on two cases — the Supreme Court's opinion in Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977), and our decision in Graphic Products Distributors v. Itek Corp., 717 F.2d 1560 (11th Cir.1983). Sylvania is the Supreme Court's seminal case concerning vertical, non-price restraints. In that case, the Supreme Court noted as background that: 33 The traditional framework of analysis under § 1 of the Sherman Act is familiar and does not require extended discussion. Section 1 prohibits [e]very contract, combination ..., or conspiracy, in restraint of trade or commerce. Since the early years of this century a judicial gloss on this statutory language has established the rule of reason as the prevailing standard of analysis. Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911). Under this rule, the factfinder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition. 34 Sylvania, 433 U.S. at 49, 97 S.Ct. at 2557. The Supreme Court then went on to explain that [t]he market impact of vertical restrictions is complex because of their potential for a simultaneous reduction of intrabrand competition and stimulation of interbrand competition, and that even though such restrictions may reduce intrabrand competition, [v]ertical restrictions promote interbrand competition by allowing the manufacturer to achieve certain efficiencies in the distribution of his products. Id. at 51-54, 97 S.Ct at 2558-60. Therefore, the Court held that non-price, vertical restraints are subject to analysis under the rule of reason, rather than to per se treatment. Id. at 57-59, 97 S.Ct. at 2561-62. 35 Maris argues that Sylvania supports its position that Anheuser-Busch's market share in the manufacture and sale of beer could show market power over the alleged relevant market for the purchase and sale of equity ownership interests in distributorships because it maintains that Sylvania indicates that it is a manufacturer's market share in manufacturing that is relevant in judging a vertical restraint. Maris notes that the Supreme Court spoke in terms of the defendant's market share in sales of the manufacturer's end-products. See id. at 38, 97 S.Ct. at 2551 (noting that defendant's market share in sales of televisions increased from 1-2% to 5% following imposition of vertical restraint). 36 We believe that the difference between Sylvania and the instant case is patent and significant. The relevant market involved in Sylvania was the market for television sets. Therefore, of course the defendant's market share in the manufacture and sale of those products was directly relevant to the issue of whether it had market power in the relevant market. Nothing in Sylvania offers any support, however, for the notion urged by Maris that in the case of a restraint imposed by a manufacturer on its distributors, market share may be imputed from one market ( i.e., beer) to another market ( i.e., equity ownership interests in distributorships) in order to determine whether the defendant has market power in the second market. 37 We find equally unavailing Maris's reliance on our decision in Graphic Products Distributors v. Itek Corp., 717 F.2d 1560 (11th Cir.1983). In that case, we also dealt with a claim concerning non-price, vertical restraints, in the form of territorial restrictions on distributors, and stated that  Sylvania places the competitive effect of particular vertical restraints at the center of the analysis under the rule of reason. Id. at 1568. We noted that as a threshold matter under the rule of reason, a plaintiff must establish that the defendant had market power in a well-defined relevant market, and that [m]arket power is the ability to raise price significantly above the competitive level without losing all of one's business. Id. at 1568-70. We also recognized that [m]arket share is frequently used in litigation as a surrogate for market power. Id. at 1570. 38 As Maris points out, in Graphic Products, we did talk in terms of the defendant's market share in the manufacture or sale of the end-products. Id. at 1570-71. However, as was the case in Sylvania, that was because the defined relevant market was the market for those end-products. Therefore, here again, this case does not provide any basis for imputing market power from one relevant market to another. 5 39 In an attempt to provide the type of connection that would justify the imputation of Anheuser-Busch's market share in the beer market to the market for distributorships, Maris alludes to economic literature bearing on this question. Maris states that its experts relied on economic literature on vertical restraints which supports the determination of the defendant manufacturer's market power based on its market share in manufacturing. Maris's Opening Br., at p. 46. Other than the conclusory assertion of its experts, Maris provides no economic rationale suggesting that Anheuser-Busch's alleged market power in the beer market should endow it with power in the different market for the purchase and sale of equity ownership interests in beer distributorships. As Anheuser-Busch points out, Maris's expert testified that he could not identify a single non-price vertical restraint case in which a court had imputed market power from an entirely different market. 40 We have carefully reviewed Maris's arguments and its experts' reports. We conclude that Maris has not identified a valid economic reason why Anheuser-Busch's alleged market power in the beer market should create market power in the different market for the purchase and sale of equity ownership interests in beer distributorships. We also pressed Maris at oral argument in this regard, to no avail. 6 41 The relevant market share evidence reveals that Anheuser-Busch possesses only one to three percent of the alleged relevant markets. Under these circumstances, it is clear that Anheuser-Busch's market share in the relevant market is inadequate, standing alone, to permit a finding of market power. See Retina Assocs. v. Southern Baptist Hospital of Fla., Inc., 105 F.3d 1376, 1384 (11th Cir. 1997) (holding that the defendants' 15% market share in the relevant market was insufficient as a matter of law to show market power for purposes of a § 1 claim); L.A.P.D., Inc. v. General Electric Corp., 132 F.3d 402, 405 (11th Cir.1997) (noting in context of § 1 claim that [a] 5% or 10% or 15% share of a normal market ... does not imply power to raise prices by curtailing output). Therefore, unless Maris could show some other basis which would have permitted the jury to find that Anheuser-Busch possessed market power in the relevant market, then the district court properly entered a directed verdict on this issue. We turn to Maris's efforts to make such a showing.