Opinion ID: 336567
Heading Depth: 2
Heading Rank: 3

Heading: Per se Illegality of BGA and GRA

Text: 72 Section 1 of the Sherman Act prohibits (e)very contract, combination . . ., or conspiracy, in restraint of trade . . . . 15 U.S.C. § 1. Although generally this section prohibits only unreasonable restraints on competition, see Standard Oil Co. v. United States, 1911, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619, the Supreme Court has written that: 73 (T)here are certain agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use. This principle of per se unreasonableness not only makes the type of restraints which are proscribed by the Sherman Act more certain to the benefit of everyone concerned, but it also avoids the necessity for an incredibly complicated and prolonged economic investigation into the entire history of the industry involved, as well as related industries, in an effort to determine at large whether a particular restraint has been unreasonable an inquiry so often wholly fruitless when undertaken. Among the practices which the courts have heretofore deemed to be unlawful in and of themselves are price fixing, United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 210, (60 S.Ct. 811, 883, 84 L.Ed. 1129); division of markets, United States v. Addyston Pipe & Steel Co., (6 Cir.), 85 F. 271, aff'd, 175 U.S. 211, (20 S.Ct. 96, 44 L.Ed. 136); group boycotts, Fashion Originators' Guild v. Federal Trade Comm'n, 312 U.S. 457, (61 S.Ct. 703, 85 L.Ed. 949); and tying arrangements, International Salt Co. v. United States, 332 U.S. 392, (68 S.Ct. 12, 92 L.Ed. 20). 74 Northern Pacific Ry. v. United States, 1958, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545. 75 In United States v. General Motors Corp., 1966, 384 U.S. 127, 86 S.Ct. 1321, 16 L.Ed.2d 415, the Court reaffirmed its position that group boycotts are among those classes of restraints that are illegal per se. To label an arrangement a group boycott, however, is merely to state a conclusion. In order to determine whether or not the label fits, it is necessary to ascertain whether 76 the presence of exclusionary or coercive conduct warrants the view that the arrangement in question is a naked restraint of trade. 77 E. A. McQuade Tours, Inc. v. Consolidated Air Tour Manual Comm., 5 Cir. 1972, 467 F.2d 178, 187, cert. denied, 1973, 409 U.S. 1109, 93 S.Ct. 912, 34 L.Ed.2d 690. See Sulmeyer v. Coca Cola Co., 5 Cir. 1975, 515 F.2d 835, cert. denied, 1976, --- U.S. ----, 96 S.Ct. 1148, 47 L.Ed.2d 341. 78 The McQuade Tours court discerned three categories of cases in which collective refusals to deal were condemned as per se violations of section 1. In our opinion, the third category comes closest to describing the fact situation before us. 13 In that group of cases, the combinations were designed to influence coercively the trade practices of boycott victims, rather than those of direct competitors. 79 The leading case of this type is Fashion Originators' Guild of America, Inc. v. FTC, 1941, 312 U.S. 457, 61 S.Ct. 703, 85 L.Ed. 949 (hereinafter referred to as FOGA ). In FOGA, a combination of women's garment designers, textile manufacturers, and textile dyers, in an effort to stamp out style piracy, refused to sell their products to retailers who purchased and sold garments that were surreptitiously copied from the FOGA designers. Retailers were required to sign agreements that assured their cooperation with the FOGA boycott; those who did not sign would not receive original designs from FOGA participants. The FOGA system was enforced by anonymous visits to retail outlets, audits of members' books, and a variety of prohibitions on members' business practices. 80 The Supreme Court held that FOGA's refusal to deal with retailers who patronized style pirates was illegal per se. Because the purpose and object of the combination was to destroy one type of manufacture and sale that competed with FOGA members i.e. imitation the Court found irrelevant FOGA's proffered evidence tending to show that the program was reasonable since it protected all persons in the manufacturing chain from the evils of style piracy. 81 Like the ill-fated FOGA system, BGA required all persons who wanted access to new varieties developed by its breeder members to sign an appropriate BGA agreement. Propagator-distributors were forbidden to sell, loan, or in any way to place BGA cuttings in the hands of nonsignatories. Like FOGA, BGA had the right to audit members' books. Like FOGA, BGA contained other restrictions on members' business practices most importantly, the requirement that all sports found on BGA varieties be returned to BGA. Like FOGA, if a potential customer refused to sign an agreement, the requested BGA variety would not be sent to him. Finally, unlike FOGA but like General Motors, supra, an indispensible part of the BGA program was the assessment and collection of a royalty whose amount was fixed in advance by the breeder members of BGA. See384 U.S. at 147, 86 S.Ct. at 1331, 16 L.Ed.2d at 427. 82 We believe that these factors present the kind of exclusionary or coercive conduct characteristic of a naked restraint of trade, see McQuade Tours, supra. 14 The differences in degree of enforcement between BGA and FOGA, to the extent they existed, do not warrant a contrary conclusion. The central purpose of the BGA program was to ensure that a set royalty was paid on every BGA cutting sold, and that BGA cuttings were not released to those who would not pay. 15 A secondary and equally exclusionary purpose was to retain control over the sports that appeared on BGA plants. In light of all these factors, we hold that the district court correctly ruled that the BGA and GRA programs were per se violations of section 1 of the Sherman Act. 16 D. Monopolization and Attempted Monopolization 83 On this phase of the appeal, Cal-Florida asserts that the district court erred in granting Yoder's motion for a directed verdict on the section 2 claims of monopolization and attempted monopolization. Without specifying what the relevant market was, the court held that Yoder did not have a sufficient share of the market to permit an inference of monopoly power, citing United States v. Grinnell Corp., 1966, 384 U.S. 563, 86 S.Ct. 1698, 16 L.Ed.2d 778, and Cliff Food Stores, Inc. v. Kroger, Inc., 5 Cir. 1969, 417 F.2d 203. Additionally, the court found that the evidence tending to show dangerous probability of success in an attempt to monopolize was insufficient to go to the jury. 84 Cal-Florida presents two arguments in support of its position: first, that the district court erroneously believed that a defendant had to have something more than 50 percent of the market before a monopolization or an attempt offense could be made out, misinterpreting this Court's Cliff Food Stores decision; and second, that the facts were sufficient to allow the jury to find even a 50 percent market share, depending on how the market is defined. It offers four possibilities for the product market: 17 (1) ornamental plants; (2) chrysanthemums grown; (3) chrysanthemum cuttings sold; and (4) new varieties of chrysanthemum cuttings sold. Yoder responds that Cal-Florida failed to prove a relevant market and mounts various attacks on Cal-Florida's computations attempting to show a market limited to chrysanthemum cuttings. 85 1. Monopolization. In United States v. Grinnell Corp., 1966, 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1703-1704, 16 L.Ed.2d 778, 785-786. The Supreme Court summarized the section 2 monopolization offense as follows: 18 86 The offense of monopoly under § 2 of the Sherman Act 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. 87 Monopoly power, defined as the power to control price or exclude competition, is measured with reference to a relevant market. United States v. E. I. du Pont de Nemours & Co., 1956, 351 U.S. 377, 391, 76 S.Ct. 994, 1005, 100 L.Ed. 1264 (sometimes referred to as the Cellophane case). Because the definition of relevant market is essentially a fact question, see Sulmeyer v. Coca Cola Co., supra, 515 F.2d 835, 849, the precise issue we must address is whether the district court correctly ruled that Cal-Florida failed to introduce sufficient evidence to raise a jury question on the market issue. See Boeing Co. v. Shipman, 5 Cir. 1969, 411 F.2d 365, 374-75 (en banc). 88 The classic test for determination of the relevant market was stated in the Cellophane case: 89 In considering what is the relevant market for determining the control of price and competition, no more definite rule can be declared than that commodities reasonably interchangeable by consumers for the same purposes make up that part of the trade or commerce, monopolization of which may be illegal. 90 351 U.S. at 395, 76 S.Ct. at 1007, 100 L.Ed. at 1280. Products need not be actually fungible in order to qualify as reasonable substitutes. Id.; Telex Corp. v. IBM, 10 Cir., 510 F.2d 894, 917-18, cert. dism'd, 1975, 423 U.S. 802, 96 S.Ct. 8, 46 L.Ed.2d 244. On the other hand, if the differences in the two products' price, use, and qualities become too great, then they can no longer be said to be reasonably interchangeable. Compare United States v. E. I. du Pont de Nemours & Co., supra (broad market definition), with United States v. Grinnell Corp., supra (narrower market definition). Factors such as functional interchangeability, responsiveness of the sales of one product to the price changes of the other, and degree of competition from the potential substitute are all relevant to the market inquiry. 91 If the correct relevant market was all ornamental plants, as Yoder asserts, then the district court's directed verdict was correct, for Yoder's share of the ornamental plant market was less than 20% clearly not enough for monopolization. 19 See United States v. E. I. du Pont de Nemours & Co., supra, 351 U.S. at 379, 76 S.Ct. at 998, 100 L.Ed. at 1272; Cliff Food Stores, Inc. v. Kroger, Inc., supra, 417 F.2d 203, 207 n.2. If Cal-Florida did succeed in raising an evidentiary issue on the reasonable interchangeability of chrysanthemums with other ornamentals, the opposite conclusion would be required. 92 According to Cal-Florida's data, Yoder's share of the proposed market of chrysanthemums grown ranged from 53.9% in 1969 to 49.6% in 1972. Looking at chrysanthemum cuttings taken and sold, Yoder's share went from 61.4% in 1969 to 58.1% in 1972. 20 Finally, Cal-Florida refers to data covering the years prior to the period of limitations showing that Yoder had almost 100% of the new varieties of chrysanthemums registered with BGA. Since the relevance of this last data escapes us, we shall concentrate our attention on the former two proposed product markets. 93 The evidence upon which Cal-Florida relies to show that chrysanthemums were not reasonably interchangeable with other ornamental plants may be summarized as follows. Mr. Tsukushi, the general manager of the California Chrysanthemum Growers Association, testified that the price of chrysanthemum cuttings did not change at the same time or in the same amount as the price of carnation cuttings, and that there was no relationship between price changes of carnation cuttings and chrysanthemum cuttings. Secondly, Cal-Florida considers probative the fact that Mr. Ramsey Yoder did not cite the prices of other ornamental plants as one factor he considered in setting cutting prices. Third, it recites the truism that in order to grow chrysanthemums, a grower must obtain chrysanthemum cuttings. It asserts that growers could not switch crops easily, due to factors such as greenhouse space and layout, watering systems, and the use of lights and cloth. Finally, it points to a lack of testimony showing that commercial propagators of chrysanthemums competed with propagators of rose plants, carnation cuttings, or other immature ornamental plants. 94 Yoder first directs our attention to testimony by Cal-Florida's market expert, Mr. Fossum, to the effect that ultimate consumers would accept any kind of flower. Although Fossum recognized that certain adjustments were necessary before a grower could shift crops, he stated that no barrier existed to prevent such shifts, and that those traders who did not shift when consumer demand changed simply behaved so out of personal choice. Neckar of CFPC, who had formerly been a grower, testified that if the price of one kind of plant material rose too high, he would move to another crop; among the crops he grew were carnations, roses, lilies, poinsettas, cyclamen, calendulas, hydrangeas, violets, and gloxinias. Significantly, Neckar testified that market demand at the ultimate consumer level dictated his choice of how much space to devote to each kind of ornamental. 95 Yoder also refers us to testimony that consumer demand was responsive to price, that consumer demand fluctuated rapidly, and that growers and propagators reacted with the same demand characteristics. Multi-crop growers shifted production within the year, in response to shifts in price and demand. A large number of growers testified that they handled a wide assortment of ornamentals and that consumer demand dictated the way they allocated bench space. 96 Viewing the evidence as a whole, we conclude that Cal-Florida failed to introduce enough evidence supporting a chrysanthemums only product market to reach the jury. The testimony was overwhelming that growers, who were Cal-Florida's and Yoder's immediate customers, allocated their crop space according to the demands of ultimate consumers. The demand of ultimate consumers, in turn, was very sensitive to price differences among the ornamentals. See Telex Corp. v. IBM, supra, 510 F.2d at 917-18. Neither the fact that the price of carnations might not have moved down at the same instant that the price of chrysanthemums went up, nor the fact that carnation prices and chrysanthemum prices might not have changed in precisely the same amounts, negates this consumer responsiveness. 97 We are similarly unpersuaded that the fact that a grower was put to some expense and inconvenience to switch crops undermines our conclusion. The Tenth Circuit faced a similar situation in Telex Corp. v. IBM, supra, in which the plaintiff, Telex, was arguing for a relevant market limited to peripheral devices plug compatible with IBM central processing units (CPU's) and the defendant, IBM, was arguing that the market should include all peripheral products (i. e. those plug compatible with other manufacturers' CPU's). Despite the fact that it was necessary to design an interface for the peripheral before it could be used on another manufacturer's CPU, the Tenth Circuit found that the relative ease and minimal cost of designing such an interface required the conclusion that all peripherals were reasonably interchangeable. 98 In our opinion, Cal-Florida failed to show that the cost and inconvenience to growers of switching crops was so high that a commitment to chrysanthemum growing made it impractical or impossible to respond to a shift in consumer demand. On the contrary, all of the evidence showed that such shifts were feasible and common. Thus, this factor cannot help Cal-Florida. 99 Because the correct product market was ornamental plants, and Yoder's share of that market was approximately 20%, we hold that as a matter of law Yoder could not have been guilty of monopolization. We therefore affirm the district court's directed verdict for Yoder on the monopolization claim. 100 2. Attempted Monopolization. In order to prove attempted monopolization, the plaintiff must show an intent on the defendant's part to bring about a monopoly and a dangerous probability of success. Swift & Co. v. United States, 1905, 196 U.S. 375, 396, 25 S.Ct. 276, 49 L.Ed. 518. See Sulmeyer v. Coca Cola Co., supra, 515 F.2d at 850; Cliff Food Stores, Inc. v. Kroger, Inc., supra, 417 F.2d at 207. See generally Turner, The Scope of Attempt to Monopolize, 30 Rec. of Ass'n of Bar of N.Y.C. 487 (1975). Like the monopolization offense, the attempt offense must occur within a defined relevant market. See Sulmeyer v. Coca Cola Co., supra. 101 Our conclusion that the relevant market was ornamental plants applies with equal force to Cal-Florida's attempt claim. Although we have found that BGA and GRA were per se violations of section 1, we agree with the district court that Cal-Florida failed to prove a dangerous probability that Yoder would succeed in monopolizing the ornamental plant industry. Indeed, Cal-Florida's own arguments implicitly concede that no attempt offense could be established if the market is ornamental plants, since those arguments all presume a market limited to chrysanthemums. Barriers to entry were low in the ornamental plant industry; conditions were highly competitive. In light of these factors, and Yoder's 20% market share, we hold that the district court properly ruled for Yoder on the attempted monopolization claim as well. E. Damages 102 After the close of the evidence, Yoder moved for a directed verdict on the grounds, inter alia, that the evidence was insufficient to show fact of damage and that the two damage theories offered were legally improper, factually unsupported, and speculative. The court overruled the motion. Upon receipt of the jury's verdict, Yoder moved for judgment n. o. v. pursuant to Rule 50(b), Fed.R.Civ.P., and in the alternative for a new trial with respect to CFPCF's damages pursuant to Rule 59, Fed.R.Civ.P. This motion was likewise denied. 103 Cal-Florida's damages must be sustained, if at all, on the basis of one or both of the theories under which the case was tried and submitted to the jury. The first of these is the royalty payments theory, which asserts that Cal-Florida is entitled to recover the full amount of royalties paid to BGA International for BGA varieties and to Yoder for GRA varieties. As to this theory, the issues before us are whether Cal-Florida submitted enough evidence on the fact of damage to get to the jury, whether the court correctly ruled that the availability of the so-called passing on defense was a question for the jury, and if not, whether Yoder was entitled to the defense as a matter of law. The second theory, labelled the price differential theory by Yoder, relies on the fact that Yoder's average sales income was higher than the average combined sales income of CFPC and CFPCF. Simply stated, the question as to this theory turns on causation: did Cal-Florida submit sufficient evidence of causation to reach the jury? Our review of the law and the sizeable appendix convinces us that the comparative price data was fatally vague and was not shown to be causally related to the antitrust violation. Since the jury may have relied on this theory, this alone would require us to remand the damages issue to the district court. Because the case will be retried, we also consider the royalty payments theory of damages, concluding that the passing on defense was not available to Yoder as a matter of law.
104 The price differential theory rested on evidence of comparative price studies introduced by Cal-Florida over Yoder's objection. 21 The exhibits provided the following information: 105 Yoder launches a broadside attack on the foregoing evidence, correctly pointing out that it does not measure differences in catalog prices for each variety, does not refer to various pricing discounts used by each party, does not determine variety price differences according to quantity sold, does not compare prices to the same kinds of customers, and does not take into account the fact that some Yoder cuttings were sold through brokers. For the computation that lumped together rooted and unrooted cuttings, the proposed damage figure was $1,884,710.16; even when rooted and unrooted cuttings were considered separately, a figure of $633,330 was produced (DX 2227k). Furthermore, Yoder correctly points out that the figure actually represents the sales income that Yoder would have received if it had sold the same number of cuttings as CFPC and CFPCF combined. 22 Additionally, despite the fact that BGA and GRA both ended in 1971 in accordance with the terms of the consent decree in the Government suit, Cal-Florida took the comparison up to 1973. Even if the monopolization claim alone is considered, it is difficult to see how BGA and GRA could have been tools of monopolization two years after termination. 106 Cal-Florida asserts that its comparative price data, detailed above, was admissible to prove the amount of additional income Cal-Florida would have received if its combined average price per cutting had been the same as Yoder's. We must decide whether this evidence could have supported the jury's general verdict, or whether Yoder's motion for directed verdict on this theory should have been granted. 107 Cal-Florida suggests only two possible ways in which the BGA and GRA programs might have been connected to a difference in average price. Johnson, one of CFPCF's witnesses, testified that they could not sell at the same price as Yoder, because Yoder's BGA advertising program had created an appetite for new varieties. Price, CFPC's Operations Manager, testified that if Yoder had been altogether eliminated from the marketplace, Cal-Florida's prices would have been higher. 23 Aside from these two allegations, no purported evidence connecting BGA and GRA to the price disparity existed except a few vague statements to the effect that Cal-Florida felt excluded from the marketplace by Yoder. 108 Specific testimony that BGA and GRA did not affect Cal-Florida's prices was common. As mentioned above, Neckar, the Cal-Florida officer in charge of pricing, testified that Cal-Florida charged what it thought was appropriate and that it would not have charged a different amount even in the absence of BGA. He admitted that Cal-Florida's competitors also handled the royalties as a separately labelled and clearly identified charge, which, he said, helped Cal-Florida to charge whatever it wanted. One important reason for Cal-Florida's lower price was because Cal-Florida wanted a little competitive edge. Price's testimony was to the same effect. Almost all of the evidence of customer-switching went in the direction from Yoder to Cal-Florida. The greater figures for so-called lost profits under this theory occurred after the termination of BGA and GRA. The very nature of the theory and proof negated the possibility of predatory price cutting in connection with the monopolization claims; in any event, no evidence of predatory price cuts was introduced. Finally, the evidence offered no meaningful information, since no allowance was made for a number of significant differences between Yoder Brothers and Cal-Florida that more than adequately account for the difference in lump average prices, or sales income: e. g., quality of cuttings, service, warranty, experience, method of marketing, use of discounts, and size of customers. 109 The cases cited by Cal-Florida to demonstrate the probative value of the comparative price evidence are actually amount of damage cases, rather than fact of injury or causation. 24 Bigelow v. RKO Pictures, Inc., 1946, 327 U.S. 251, 66 S.Ct. 574, 90 L.Ed. 652; Story Parchment Co. v. Paterson Parchment Paper Co., 1931, 282 U.S. 555, 51 S.Ct. 248, 250, 75 L.Ed. 544; Poster Exchange, Inc. v. National Screen Serv. Corp., 5 Cir. 1970, 431 F.2d 334, cert. denied, 1971, 401 U.S. 912, 91 S.Ct. 880, 27 L.Ed.2d 811. Faced with a similar dearth of specific evidence to prove fact of damage in Shumate & Co. v. National Ass'n of Securities Dealers, Inc., 5 Cir., 509 F.2d 147, cert. denied, 1975, 423 U.S. 868, 96 S.Ct. 131, 46 L.Ed.2d 97, this Court said: 110 (W)ith only his ipse dixit to establish the fact of damage, Shumate would have this Court find his testimonial speculation and contentions supply the basis for a jury issue as to the fact of damage. But more evidence than this is necessary to demonstrate that there has been injury before the jury can be allowed to consider the amount that would properly compensate him for such injury. 111 509 F.2d at 153. See also Southern Concrete Co. v. United States Steel Corp., 5 Cir. 1976, 535 F.2d 313, 317 (summary judgment for defendant appropriate when plaintiff failed to specify what injuries, if any, it suffered as a result of the violations alleged). Cf. Soloman v. Houston Corrugated Box Co., 5 Cir. 1976, 526 F.2d 389 (affirms summary judgment where only bald assertions support the violation element.) 112 In our opinion, the isolated self-serving statements of the Cal-Florida officers were not enough to constitute substantial evidence for the jury on the causation issue under Boeing Co. v. Shipman, 5 Cir. 1969, 411 F.2d 365 (en banc) requires a conflict in substantial evidence to create a jury question). 25 Therefore, Yoder's motion for directed verdict based on failure to prove causation should have been granted. See Kestenbaum v. Falstaff Brewing Corp., 5 Cir. 1975, 514 F.2d 690, cert. denied, 1976, --- U.S. ----, 96 S.Ct. 1412, 47 L.Ed.2d 349; see also Cinema-Tex Enterprises, Inc. v. Santikos Theaters, Inc., 5 Cir. 1976, 535 F.2d 932 (1976), aff'g, 414 F.Supp. 640. 113 In a similar situation, this Court said in Kestenbaum v. Falstaff Brewing Corp., supra, 514 F.2d at 695: 114 If the jury calculated any part of its damage award on the (impermissibly speculative) sum of Falstaff's price increases to Kestenbaum, it was error. Under the enigmatic general verdict we cannot know whether they did or not, so the verdict cannot stand. 115 Since we too have no idea whether or not the jury relied on the price differential theory, we reluctantly reverse and remand this lengthy case for further proceedings on the damages issue.
116 Since the case must be retried on damages, we think it appropriate to reach the complex issues with regard to the royalty payments theory at this time. As indicated above, this theory presumed that Cal-Florida suffered monetary injury in the precise amount of the BGA and GRA royalties charged on its cutting sales. Over Yoder's objection, the court submitted this theory to the jury, together with the question whether a passing on defense should be allowed as it was recognized in Hanover Shoe, Inc. v. United Shoe Mach. Corp., 1968, 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231. 117 The evidence showed that Cal-Florida of Florida had paid a total of $35,574.52 in BGA royalties from May 1969 to December 1971, when BGA ended, and it had paid a total of $6,731.95 in GRA royalties until that program ended, for a grand total of $42,306.47. Cal-Florida of California had paid $194,230.60 in BGA royalties and $21,209.23 in GRA royalties over the same time period, for a grand total of $215,439.83. Total BGA and GRA royalties paid by both companies equalled $257,746.30. The pretrial stipulation, which the court specifically ordered would govern at trial, provided that 118 (t)he parties stipulate that the amounts of BGA royalties paid by defendants (CFPC and CFPCF) to BGA were the same as the amounts collected by defendants from defendants' customers. 119 On the basis of the instructions and the evidence of royalties paid, the jury awarded $129,000 in damages, to be split evenly between CFPC and CFPCF. 120 Yoder's central point regarding the royalty payments made by Cal-Florida, a propagator-distributor, to BGA and Yoder is that the very structure of the BGA and GRA programs ensured that no propagator-distributor would be in fact injured. In this connection it argues that it was error to submit the theory to the jury in the absence of evidence showing that CFPC and CFPCF were actually injured by either program and that it was error to use the general rule precluding a passing on defense articulated in Hanover Shoe to circumvent the evidentiary problem. If the passing on concept was applicable at all, Yoder asserts that it was entitled to invoke the defense under the pre-existing cost plus contract exception of Hanover Shoe. 26 121 In Hanover Shoe, Inc. v. United Shoe Mach. Corp., 1968, 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231, Hanover Shoe, a manufacturer of shoes, charged that defendant United Shoe Machinery Corp. (United), a manufacturer and distributor of shoe machinery, had monopolized the shoe machinery industry through its practice of leasing and refusing to sell its more complicated machinery. As damages, Hanover asked for the difference between what it paid United in shoe machine rentals and what it would have paid if United had sold machines to it instead. Hanover had prevailed in the district court and had been awarded trebled damages; the Third Circuit affirmed. In the Supreme Court, United argued that Hanover had suffered no legally cognizable injury, since the illegal overcharge under the leasing system was reflected in the price at which Hanover sold shoes to its customers, and since Hanover would have charged less if its costs were less and thereby would have made no more profit. Rejecting that argument, the Court held that 122 when a buyer shows that the price paid by him for materials purchased for use in his business is illegally high and also shows the amount of the overcharge, he has made out a prima facie case of injury and damage within the meaning of § 4 (of the Clayton Act). 123 392 U.S. at 489, 88 S.Ct. at 2229, 20 L.Ed.2d at 1239. In the normal case, according to the Court, it was of no legal consequence that the buyer might have left his prices unchanged and absorbed the loss, made adjustments in volume or other costs, or raised his prices. Unwilling to adopt United's proposed analysis the Court explained itself as follows: 124 We are not impressed with the argument that sound laws of economics require recognizing this defense. A wide range of factors influence a company's pricing policies. Normally the impact of a single change in the relevant conditions cannot be measured after the fact; indeed a businessman may be unable to state whether, had one fact been different (a single supply less expensive, general economic conditions more buoyant, or the labor market tighter, for example), he would have chosen a different price. Equally difficult to determine, in the real economic world rather than an economist's hypothetical model, is what effect a change in a company's price will have on its total sales. Finally, costs per unit for a different volume of total sales are hard to estimate. Even if it could be shown that the buyer raised his price in response to, and in the amount of, the overcharge and that his margin of profit and total sales had not thereafter declined, there would remain the nearly insuperable difficulty of demonstrating that the particular plaintiff could not or would not have raised his prices absent the overcharge or maintained the higher price had the overcharge been discontinued. Since establishing the applicability of the passing-on defense would require a convincing showing of each of these virtually unascertainable figures, the task would normally prove insurmountable. On the other hand, it is not unlikely that if the existence of the defense is generally confirmed, antitrust defendants will frequently seek to establish its applicability. Treble-damage actions would often require additional long and complicated proceedings involving massive evidence and complicated theories. 125 In addition, if buyers are subjected to the passing-on defense, those who buy from them would also have to meet the challenge that they passed on the higher price to their customers. These ultimate consumers, in today's case the buyers of single pairs of shoes, would have only a tiny stake in a lawsuit and little interest in attempting a class action. In consequence, those who violate the antitrust laws by price fixing or monopolizing would retain the fruits of their illegality because no one was available who would bring suit against them. Treble-damage actions, the importance of which the Court has many times emphasized, would be substantially reduced in effectiveness. 126 392 U.S. at 492-94, 88 S.Ct. at 2231-32, 20 L.Ed.2d at 1241. (Footnotes omitted.) The Court did not sanction an iron rejection of the defense, however. On the contrary, it indicated that the above-quoted policy factors had impelled it to reject the defense for most cases, but that where those factors were absent, the defense would be allowed: 127 We recognize that there might be situations for instance, when an overcharged buyer has a pre-existing cost-plus contract, thus making it easy to prove that he has not been damaged where the considerations requiring that the passing-on defense not be permitted in this case would not be present. We also recognize that where no differential can be proved between the price unlawfully charged and some price that the seller was required by law to charge, establishing damages might require a showing of loss of profits to the buyer. 128 392 U.S. at 494, 88 S.Ct. at 2232, 20 L.Ed.2d at 1242. See generally Pollock, Automatic Treble Damages and the Passing-On Defense : the Hanover Shoe Decision, 13 Antitrust Bull. 1183 (1968). 129 Post-Hanover Shoe cases dealing with the passing on concept fall into two categories: so-called offensive use of passing on, and defensive use. Typical of the offensive use cases is In re Western Liquid Asphalt Cases, 9 Cir. 1973, 487 F.2d 191, cert. denied sub nom. Standard Oil Co. v. Alaska, 415 U.S. 919, 94 S.Ct. 1419, 39 L.Ed.2d 474. In that group of cases, the passing on issue arose in the context of the question whether the remote purchaser would have standing to sue. 27 Hanover Shoe itself exemplified defensive use of passing on, where the question is whether the defendant can avoid liability for damages because the plaintiff passed on the overcharge. Since Yoder is asserting that the burden of the BGA and GRA royalties passed from the propagator-distributors to the growers or self-propagators, to the extent that the passing on concept applies, it is defensive passing on. 130 Although none of the cases since Hanover Shoe have discussed defensive passing on in great detail, we have distilled some general guidelines from the Hanover Shoe decision itself and other cases that we believe should direct the inquiry. First, we believe that the ultimate question of availability of the defense vel non is a legal one for the court. See Obron v. Union Camp Corp., 6 Cir. 1973, 477 F.2d 542; State of Minnesota v. United States Steel Corp., 8 Cir. 1971, 438 F.2d 1380. But see Standard Industries, Inc. v. Mobil Oil Corp., 10 Cir., 475 F.2d 220, cert. denied, 1973, 414 U.S. 829, 94 S.Ct. 55, 61, 38 L.Ed.2d 63 (passing on issue submitted to jury, but no discussion of judge-jury allocation point). It was therefore error for the court here to submit the issue to the jury. 131 As the U.S. Steel court recognized, a number of evidentiary questions will often have to be answered before the final legal issue is resolved. Those questions, which might usefully be the subject of special interrogatories in an appropriate case, might inquire as to the evidence on the impact on the price and volume after the alleged overcharge is discontinued, the evidence on how easily ascertainable the amount of the overcharge is, the evidence on the extent of the pass-on, and the evidence as to the nature of the scheme if that is not clear from written documents. Nevertheless, once all those inquiries are resolved, the court must direct whether or not the defense will stand. 132 Secondly, we believe that a flexible, policy-oriented approach should be taken to the application of the limited defense still available. See Obron v. Union Camp Corp., supra ; State of West Virginia v. Chas. Pfizer & Co., 2 Cir., 440 F.2d 1079, cert. denied sub nom. Colter Drugs, Inc. v. Chas. Pfizer & Co., 1971, 404 U.S. 871, 92 S.Ct. 81, 30 L.Ed.2d 115; State of Minnesota v. United States Steel Corp., supra. Particularly, the overriding importance of the private treble damage action in the antitrust enforcement scheme should be kept in mind. 133 Because the critical facts for the passing-on defense were either stipulated or are contained within the BGA and GRA contracts, we can proceed immediately to an application of the law to this case. Cal-Florida, it seems clear, succeeded in the first instance in establishing a prima facie case of damage: it showed that the final price at which it sold chrysanthemum cuttings was illegally high, 28 and it showed that the amount of the overcharge was $.006 per cutting. On the basis of this showing, Cal-Florida was entitled to have the fact of damage presumed, unless Yoder could bring itself within the Hanover Shoe pre-existing cost plus contract exception or rebut the prima facie case in some other way. 134 Yoder's entitlement to the cost plus exception depends on its overcoming the almost insurmountable burden of showing that the factors that led the Supreme Court to reject the pass-on defense do not apply to the BGA and GRA programs. We have decided that it failed to meet that burden and thereby to qualify itself for the pre-existing cost plus contract exception. Even if we assume that Yoder had adequately demonstrated that (1) the impact of a single change in the conditions and factors influencing the pricing decision could be measured after the fact, (2) Cal-Florida would not have raised its price and did not maintain the higher price, and (3) persons to vindicate the antitrust laws would be readily available to do so, we think that it did not show the effect of a change in price on total sales and costs per unit for a different volume of total sales. 135 The impact of the higher illegal price on total sales is extremely difficult to measure. Yoder argues that since the only difference between sales pursuant to Cal-Florida's March 1971 price list and the list a year later was the elimination of the illegal royalty, a simple comparison of sales volume for the two years would suffice. However, other economic data, such as the general state of the economy at both times, the entry of a new competitor, or an unexpected external event such as the Arab oil boycott might skew this measurement. Yoder introduced no evidence attempting to adjust for these variables. 136 Yoder also argues that the fact that Cal-Florida suffered no sales decline during the BGA and GRA programs helps to negate this factor. Yet we have no way of knowing whether sales to growers would have increased even more if the cuttings had been available at a lower price. Simple economics suggests that sales would have increased at lower prices. The evidence indicated that growers looked to the total cost of a cutting in deciding what to buy; when that cost became prohibitively high, some growers turned to self-propagation. Each move to self-propagation removed one customer from Cal-Florida's universe of potential customers. The uncertainties surrounding this factor are simply too great, and we conclude that Yoder failed to meet its high burden of dispelling them. 137 The difficulty of estimating the cost per unit for a different volume of sales suffers from the same infirmity. Since the difference in total sales is an uncertain figure, the breakdown of that figure into cost per unit plus profit is equally uncertain. Administration of BGA may have affected cost per unit on those varieties. Because it was Yoder's burden to negate this factor, we attach no significance to Cal-Florida's failure to introduce evidence on administrative costs. Additionally, we know nothing about Cal-Florida's unused capacity. If volume of sales had increased at the lower price, it may have been able to cut down somewhat on marginal cost. 138 The long, complex proceedings feared by the Supreme Court would have been necessary in order adequately to deal with the two factors we have singled out. Until the policy considerations that led the Court to reject the passing on defense are rebutted, a litigant cannot take advantage of the pre-existing cost plus contract exception. Because Yoder did not show the inapplicability of those factors, we hold that the lower court should have ruled that Yoder was not entitled to assert a passing on defense. 139 We note that the BGA and GRA programs do not fit the model of a pre-existing cost plus contract in any case. Two characteristics are essential to such a contract, only one of which was met here: first, the buyer must have his contract with a particular customer for a particular sale before the illegal overcharge is imposed on the buyer, and second, the contractual arrangement must assure that whatever the cost of the product was to the buyer, it is the same to the customer. Unquestionably, the BGA and GRA systems satisfied the latter criterion. They were not pre-existing contracts, however, in the former sense. Volume was indefinite; identity of customer was indefinite. The uncertainty in those terms was exactly the flaw in Yoder's arguments purporting directly to meet the Hanover Shoe policy considerations. 140 Thus, whether the problem is approached by attempting to refute the Court's reasons for disallowing the defense or by trying to come within the exception, Yoder fails. On remand, the fact-finder must be permitted to consider the full amount of the overcharge i. e. the total amount of royalties paid as evidence of damages. 29 141 To summarize the antitrust part of this case, then, we have held that Cal-Florida did have standing to sue Yoder, that Cal-Florida was not entitled to the benefits of the tolling provision of the statute of limitations, that BGA and GRA were per se violations of section 1, that the relevant market was ornamental plants, that Yoder neither monopolized nor attempted to monopolize that market, and finally, that a remand is necessary on the damages issue.