Opinion ID: 529388
Heading Depth: 1
Heading Rank: 3

Heading: CIG's Antitrust Claim

Text: 35 CIG claims that in addition to being a violation of the Service Agreement and a means of stealing CIG's customers, Natural's decision to stop purchasing gas was also the cornerstone of an attempt by Natural to monopolize the market for the long distance transportation of natural gas. 13 Since an attempt to monopolize typically involves an attempt by a firm which does not possess monopolistic control over a market to become a monopolist in that market, CIG's claim is unusual because it does not allege that Natural was attempting to gain control of the transportation market for itself. Rather, CIG alleges Natural stopped purchasing gas in order to give CIG's chief competitor, the Trailblazer System 14 , a monopoly in the long distance gas transportation market. 36 Natural asserts that a party may not be held liable for attempting to give monopoly power to another party which it does not control. This is especially true, it asserts, when the intended beneficiary of the monopolist is not a single entity but three separately operated entities owned in significant part by the alleged victim of the monopolistic scheme. 37 Nevertheless, Section 2 of the Sherman Act does not explicitly state that a party can only monopolize for itself. We need not decide this thorny issue because even if we assume that it is possible to create a monopoly for the benefit of a third party, CIG did not establish each of the elements of an attempted monopolization claim. 15 38 CIG alleges that Natural attempted to monopolize the market by preventing CIG from offering gas transportation services to customers who might choose between CIG and the Trailblazer System. Because CIG was required to maintain capacity in its pipeline for the volume of gas Natural chose to reserve under the Service Agreement, CIG was not able to replace lost income from Natural's reduced purchases by offering firm 16 transportation services to new customers. In the summer of 1984, after Natural had stopped taking gas from CIG, CIG offered Natural the opportunity to reduce the capacity it reserved on the CIG system. Instead of reducing its reservation, Natural chose to increase it. Thus, Natural continued to tie up CIG's capacity, while refusing to purchase gas. 39 Further, CIG attempted to offer interruptible service to new customers to utilize the capacity left vacant by Natural's decreased purchases. Soon after CIG began to service the new customers, Natural resumed purchases of gas, forcing CIG to interrupt its service to the new customers. Because the Trailblazer System could offer inexpensive, uninterrupted service, CIG's new customers switched to the Trailblazer System. 40 While Natural's alleged manipulation of its gas purchases in an effort to disrupt CIG's ability to service new customers may be reprehensible conduct, the antitrust laws cannot be invoked to punish all forms of unseemly business activity. If a party does not have monopolistic control over a market, its unfair business conduct implicates the attempt provision of the antitrust laws only if that conduct threatens to create a monopoly. Indiana Grocery, Inc. v. Super Valu Stores, Inc., 864 F.2d 1409, 1413 (7th Cir.1989); cf. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 54, 97 S.Ct. 2549, 2559, 53 L.Ed.2d 568 (1977) (an antitrust policy divorced from market considerations would lack any objective benchmarks). The defendant need face the added sanction of antitrust triple damages only if the plaintiff can establish each element of an antitrust offense. 41 In this circuit, four elements must be proven to establish an attempt to monopolize under Section 2 of the Sherman Act: (1) relevant market (including geographic market and relevant product market) in which the alleged attempt occurred; (2) dangerous probability of success in monopolizing the relevant market; (3) specific intent to monopolize; and (4) conduct in furtherance of such an attempt. Shoppin' Bag of Pueblo, Inc. v. Dillon Companies, 783 F.2d 159, 161 (10th Cir.1986). In addition, any private plaintiff seeking treble damages under Section 4 of the Clayton Act must show antitrust injury. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97 S.Ct. 690, 697, 50 L.Ed.2d 701, cert. denied, 429 U.S. 1090, 97 S.Ct. 1099, 51 L.Ed.2d 535 (1977). While Natural argues that CIG has failed to establish each element of the attempted monopolization claim, CIG's failure to show a dangerous probability of successful monopolization reveals the fundamental difficulty in CIG's claim. 17 42 In order to satisfy the dangerous probability of success element of an attempt claim, the plaintiff must show that there was a dangerous probability the defendant would achieve monopoly status as the result of the predatory conduct alleged by the plaintiff. Shoppin' Bag, 783 F.2d at 162; Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255, 271 (7th Cir.1981), cert. denied, 455 U.S. 921, 102 S.Ct. 1277, 71 L.Ed.2d 461 (1982). The likelihood of successful monopolization is typically evaluated by examining the defendant's share of the relevant market. Shoppin' Bag, 783 F.2d at 161. Reformulated in terms of market share, the plaintiff must show that there was a dangerous probability that the defendant's conduct would propel it from a non-monopolistic share of the market to a share that would be large enough to constitute a monopoly for purposes of the monopolization offense. 18 The higher the firm's initial market share, the greater the likelihood that it will eventually gain monopolistic control over the market. Id. at 162. 43 CIG asserts the fact that the Trailblazer System's market share rose from 41% to 53% is sufficient evidence to support the jury's finding that there was a dangerous probability that the Trailblazer System would attain a monopoly. If this were a typical attempted monopolization case in which the defendant was attempting to acquire a monopoly for itself through the use of economic coercion, we would have little difficulty in affirming the jury's finding of dangerous probability. First, a market share at the commencement of the defendant's predatory conduct of 41% would show that the defendant would not have to acquire much additional market share in order to attain monopoly control over the market. 44 More importantly, however, a 41% market share typically indicates that a firm has substantial economic power in the market, and, therefore, has the tools at its disposal to elevate its market share to monopolistic levels. In other words, a high market share indicates that the defendant has the economic capacity to monopolize the market. Id. However, proximity to monopolistic status is not enough; the defendant must also have the ability to propel itself to monopolistic control over the market. Indiana Grocery, Inc., v. Super Valu Stores, Inc., 864 F.2d 1409 (7th Cir.1989) (50% market share insufficient to show dangerous probability of successful monopolization); Richter Concrete Corp. v. Hilltop Concrete Corp., 691 F.2d 818, 827 (6th Cir.1982) (the real test is whether [the defendant] possessed sufficient market power to achieve its aims); United States v. Empire Gas Corp., 537 F.2d 296, 305 (8th Cir.1976), cert. denied, 429 U.S. 1122, 97 S.Ct. 1158, 51 L.Ed.2d 572 (1977) (50% market share insufficient to show dangerous probability of successful monopolization). While the Trailblazer System's substantial market share demonstrates its proximity to monopoly status, it does not indicate Natural's capacity to raise the Trailblazer System's market share to a monopolistic level. 45 CIG did not attempt to offer evidence of Natural's share of the transportation market. One might initially imagine that evidence of a firm's market share would be required in order to assess that firm's ability to obtain or confer market power, but this is not necessarily true. In this case, Natural's capacity to create a monopoly for the Trailblazer System cannot be measured by Natural's market share because Natural did not use economic coercion in its attempt to monopolize. Rather, Natural took advantage of its contractual right to stop purchasing gas from CIG to magnify the Trailblazer System's position in the market. 19 In evaluating the probability of successful monopolization we must consider the firm's capacity to commit the offense, the scope of its objective, and the character of its conduct. Kearney & Trecker Corp. v. Giddings & Lewis, Inc., 452 F.2d 579, 598 (7th Cir.1971), cert. denied, 405 U.S. 1066, 92 S.Ct. 1500, 31 L.Ed.2d 796 (1972). In this case each of these factors is strictly determined and ultimately limited by the Service Agreement between Natural and CIG. 46 Natural's predatory conduct consisted of exercising its contract rights with CIG to prevent CIG from offering transportation services to long distance customers. Because Natural reserved a certain amount of space in CIG's pipeline, CIG could not offer that space to others. By continuing to reserve large amounts of gas and taking gas when CIG threatened to sell Natural's reserved capacity, Natural insured that CIG could not offer Natural's reserved capacity to the market. Yet, Natural's ability to exclude CIG was strictly limited by Natural's ability to insure its reserved capacity went empty. By exercising all its rights under the Service Agreement to tie up the entire capacity it had reserved, Natural was still only able to raise the Trailblazer System's market share to 54%. 47 Thus, from the beginning, Natural's decision to quit purchasing gas presented no danger that Natural could do anything more than shift 13% of the market to the Trailblazer System. The necessarily limited scope of Natural's objective leaves no room for speculation about the probability that the Trailblazer System would gain a monopoly. There was simply no reasonable chance, let alone a dangerous probability, that Natural, through the exercise of its contractual rights, could imbue the Trailblazer System with sufficient market share to be a monopolist. 20 48 Further, market share statistics sometimes overestimate a firm's market power. See, e.g., Ball Memorial Hosp., Inc. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325, 1335 (7th Cir.1986); Landes & Posner, Market Power in Antitrust Cases, 94 Harv.L.Rev. 937, 950 (1981). In this case, if we look beyond market share statistics, we are further convinced that Natural's conduct did not threaten to give the Trailblazer System the degree of market power that would constitute a monopoly for purposes of the monopolization offense. One measure of the degree of market power is the persistence of a firm's ability to profitably charge monopoly prices. 21 If the evidence demonstrates that a firm's ability to charge monopoly prices will necessarily be temporary, the firm will not possess the degree of market power required for the monopolization offense. 22 3 P. Areeda & D. Turner, Antitrust Law, at p 807; Williamsburg Wax Museum, Inc. v. Historic Figures, Inc., 810 F.2d 243, 252 (D.C.Cir.1987); Dimmitt Agri Indus., Inc. v. CPC Int'l, Inc., 679 F.2d 516, 530 (5th Cir.1982), cert. denied, 460 U.S. 1082, 103 S.Ct. 1770, 76 L.Ed.2d 344 (1983); Metro Mobile CTS, Inc. v. Newvector Communications, Inc., 661 F.Supp. 1504, 1523-24 (1987); cf. Copperweld v. Independence Tube Corp., 467 U.S. 752, 767-68, 104 S.Ct. 2731, 2739-40, 81 L.Ed.2d 628 (1984) (antitrust laws are only meant to condemn conduct with long-run anticompetitive effects). 23 49 In this case, the Trailblazer System's ability to charge supracompetitive prices could last only as long as Natural had the contractual right to tie up CIG's pipeline capacity. This right was strictly limited by the duration of the Service Agreement. 24 Once Natural's control over CIG's capacity ended, the market would return to the status quo 25 since the Trailblazer System would be helpless to compete against the unused and inexpensive capacity of CIG's system. 50 This analysis, which requires a plaintiff to show that an attempted monopolist's conduct 26 threatened to create substantial and persistent changes in the marketplace, may allow some unfair and potentially harmful methods of competition to go unpunished by the antitrust laws. But the Supreme Court, in a now oft quoted phrase, has stated 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, 697, 50 L.Ed.2d 701 (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 1521, 8 L.Ed.2d 510 (1962)), cert. denied, 429 U.S. 1090, 97 S.Ct. 1099, 51 L.Ed.2d 535 (1977). The Court has long recognized that the Sherman Act does not purport to afford remedies for all torts committed by or against persons engaged in interstate commerce. Hunt v. Crumboch, 325 U.S. 821, 826, 65 S.Ct. 1545, 1548, 89 L.Ed. 1954 (1945). We believe the triple damage sanction of the Clayton Act is too harsh a remedy for unfair methods of competition that only threaten to have a transitory impact on the marketplace. Since there was no dangerous probability that Natural would bestow upon the Trailblazer System the degree of market power, either in terms of market share or persistence, necessary for the monopolization offense, the jury's antitrust verdict must be reversed.