Opinion ID: 486483
Heading Depth: 3
Heading Rank: 1

Heading: Whether the Lease of the Omni and Use of SEATS Were

Text: 22 Tied 23 The first and perhaps most significant issue in this appeal is the question of whether the district court correctly concluded that the lease of the Omni and the use of SEATS were tied as a matter of antitrust law. 14 To establish that two products are in fact tied, a plaintiff must show something more than just that two products were sold together in the same package. Jefferson Parish, supra, 466 U.S. at 11, 104 S.Ct. at 1558; SmithKline Corp. v. Eli Lilly & Co., 575 F.2d 1056, 1061 n. 3 (3rd Cir.), cert. denied, 439 U.S. 838, 99 S.Ct. 123, 58 L.Ed.2d 134 (1978); Response of Carolina, Inc. v. Leasco Response, Inc., 537 F.2d 1307, 1327 (5th Cir.1976). Rather, the plaintiff must establish that the seller forced or coerced the buyer into purchasing the tied product. 15 See Jefferson Parish Hospital, supra, 466 U.S. at 12, 13-15, 26, 104 S.Ct. at 1558-60, 1565; Midwestern Waffles, supra, 734 F.2d at 712; Tire Sales Corp. v. Cities Service Oil Co., 637 F.2d 467, 472-74 (7th Cir.1980), cert. denied, 451 U.S. 920, 101 S.Ct. 1999, 68 L.Ed.2d 312 (1981); Response of Carolina, Inc., supra, 537 F.2d at 1327; American Manufacturers Mutual Insurance Co. v. American Broadcasting-Paramount Theatres, Inc., 446 F.2d 1131, 1137 (2d Cir.1971), cert. denied, 404 U.S. 1063, 92 S.Ct. 737, 30 L.Ed.2d 752 (1972). A showing of coercion requires evidence of actual exertion of economic muscle against the buyer which actually influences his choice of products in the tied market. See American Manufacturers Mutual Insurance Co., supra, 446 F.2d at 1137. Part and parcel of the concept of coercion is the premise that the buyer was forced to buy a product that he did not want or would have preferred to buy elsewhere on other terms. Jefferson Parish, supra, 466 U.S. at 12, 104 S.Ct. at 1558; Will v. Comprehensive Accounting Corp., 776 F.2d 665, 669 (7th Cir.1985), cert. denied, --- U.S. ----, 106 S.Ct. 1659, 90 L.Ed.2d 201 (1986); Response of Carolina, Inc., supra, 537 F.2d at 1327; cf. Sports Form, Inc. v. United Press International, Inc., 686 F.2d 750, 754 (9th Cir.1982) (no tying problem where buyer asks for package of items and is sold what it wishes to buy). 24 Appellants argue that the district court's conclusion that an illegal tie existed here is fatally flawed because the district court's findings do not establish that the lease of the Omni and the use of SEATS were in fact tied as a matter of antitrust law. They contend that the district court's findings of fact fall short of establishing that the appellants coerced promoters to use SEATS and that the lease of the Omni was actually conditioned on the use of SEATS. We disagree. 25 The district court concluded that the two products at issue here were  'tied' in an anti-trust sense in that the lease of Omni facilities is, as a practical matter, conditioned upon use of SEATS ticket selling services. The district court based its ruling principally on two factors: 1) the Producer's Agreement, which the court described as falling only slightly short of expressly requiring promoters to use the Omni, and 2) the negotiating process between TOPCOL and prospective promoters for use of the Omni. The court found that the combination of these two factors appear[ed] to indicate the necessity of using SEATS. The court also found that promoters understood through years of dealing with TOPCOL that they had to use SEATS for Omni events and that, in fact, no agency besides SEATS had ever been used to provide ticketing services for a musical event as long as SEATS had been in existence. Finally, the court found that, but for the tying arrangement, at least one promoter, Jim Veal, would have used TXP to provide ticketing services at the Omni. We hold that these findings adequately support the conclusion that the lease of the Omni and the use of SEATS were tied as a matter of antitrust law. 26 Appellants argue that these findings do not establish a tie because various other findings by the court undercut the conclusion that promoters were compelled to use SEATS in order to lease the Omni. Specifically, they point to findings that 1) the Producer's Agreement did not actually require promoters to use SEATS, together with findings that none of the promoters ever asked to use another ticketing agency and none of the promoters were ever told by the appellants that they had to use SEATS, and 2) several promoters testified that they would have used SEATS regardless of the Producer's Agreement because of the intrinsic superiority of computerized ticketing. 27 As to the first set of findings, we note that the fact that the Producer's Agreement contains a clause for approval of other ticketing agencies does not necessarily dispose of the question of whether promoters were forced to use SEATS. See Northern Pacific Railway, supra, 356 U.S. at 11-12, 78 S.Ct. at 521; Midwestern Waffles, supra, 734 F.2d at 712. Where a contract or franchising agreement provides that buyers shall use only the seller or a source approved by the seller to purchase the tied product, the courts have looked to see if the approval clause was reasonable and permitted the buyer meaningful freedom of choice, or whether it is manipulated by the seller to force the buyer to purchase the tied product from the seller. See Midwestern Waffles, supra, 734 F.2d at 712-13; Kentucky Fried Chicken, supra, 549 F.2d at 377-79; Advance Business Systems & Supply Co. v. SCM Corp., 415 F.2d 55, 66 (4th Cir.1969), cert. denied, 397 U.S. 920, 90 S.Ct. 928, 25 L.Ed.2d 101 (1970). 28 Although the district court determined that the language of the approval clause in this case gave promoters the right to request approval of another ticket agency, it also found that no promoter had ever requested permission to use another ticket agency, notwithstanding the approval clause, because they understood through years of dealing with TOPCOL and using the Agreement that they were required to use SEATS. 16 Furthermore, it also found that the appellants had never approved another ticket agency and that they had never established written standards and procedures for approving other agencies. Cf. Kentucky Fried Chicken, supra, 549 F.2d at 378 (approval clause reasonable where seller had already approved 10 suppliers and had never refused a request for approval). Given these findings, it is reasonable to conclude that the approval clause was somewhat bogus under the circumstances present in this case and that promoters did not have meaningful freedom of choice in the tied market. 29 We also reject the contention that there is no tie here because the court found that several of the promoters would have used SEATS regardless of the tying arrangement due to their view that a computerized ticketing service is better to use for large-scale reserved seating events staged at the Omni. While it is true that two products are not tied as a matter of antitrust law if the buyer voluntarily purchases the tied product, see Will v. Comprehensive Accounting Corp., supra, 776 F.2d at 669; Response of Carolina, Inc., supra, 537 F.2d at 1327-28, the court's findings of fact establish that at least one promoter, Jim Veal, did not use SEATS voluntarily. 17 The court expressly found that, but for the tying arrangement, Veal would have used TXP for several events in the Omni. Furthermore, even if some of the promoters would have selected SEATS regardless of the tying arrangement, the arrangement prevented them from making that choice freely. We reiterate that the principal evil of tie-ins is that they foreclose competition on the merits in the tied market. See Kentucky Fried Chicken, supra, 549 F.2d at 375 (tying arrangements anticompetitive because they may deprive the tie's victims of the advantages of shopping around.). 30 In addition, we note that the characteristics of the tied market in this case make the tying arrangement challenged here particularly destructive to competition. Although the evidence at trial indicated that computerized ticketing may have certain advantages over hard-ticketing for an arena as large as the Omni, it is unlikely that any prospective competitor in the ticketing services market would be willing or able to invest the amount of money required to develop a computerized system in light of the virtual impossibility of ever getting any of the Omni business so long as there is a tying arrangement. Cf. Northern Pacific Railway, supra, 356 U.S. at 12, 78 S.Ct. at 521 (even with approval clause, competitor in tied market at an unfair competitive disadvantage because it does not have access to tied market on same terms as seller). This disincentive is particularly real when one considers that the evidence at trial indicated that computerized ticketing appears to have no special advantage over hard-ticketing in smaller arenas, and is in many cases more expensive to use. Given the fact that the Omni is the only arena in Atlanta of a size and configuration to warrant a computerized ticketing system, a prospective competitor has no incentive to develop a computerized system at all unless he knows that he will provide at least some ticketing services for events at the Omni. Cf. Jefferson Parish Hospital, supra, 466 U.S. at 13 n. 19, 104 S.Ct. at 1558 n. 19 (tying increases difficulty of entering tied market because new firms must not only match seller's price and quality, but also offset attraction of tying product itself). 31 Appellants also argue that the court's findings do not establish a tie because they fail in various ways to establish the element of coercion. 18 First, we reject the appellants' contention that the district court's finding of coercion is deficient because the court did not cite a single incident of coercive or forceful salesmanship on their part. While it is true that the district court did not find any direct evidence attesting to the fact that the appellants put a gun to the head of promoters, the courts have never required direct evidence of coercive behavior to prove a tying violation. It is well established that coercion may be established by showing that the facts and circumstances surrounding the transaction as a practical matter forced the buyer into purchasing the tied product. Kentucky Fried Chicken, supra, 549 F.2d at 377; see Tire Sales Corp., supra, 637 F.2d at 474; Photovest Corp. v. Fotomat Corp., 606 F.2d 704, 722 (7th Cir.1979), cert. denied, 445 U.S. 917, 100 S.Ct. 1278, 63 L.Ed.2d 601 (1980); Heatransfer Corp. v. Volkswagenwerk, A.G., 553 F.2d 964, 977 (5th Cir.1977), cert. denied, 434 U.S. 1087, 98 S.Ct. 1282, 55 L.Ed.2d 792 (1978). The district court correctly found that the facts and circumstances surrounding the negotiations for lease of the Omni, including the Producer's Agreement, established that the lease of Omni facilities is, as a practical matter, conditioned upon use of SEATS ticket selling services. 32 We also reject the appellants' contention that the district court improperly based its finding of coercion solely on the subjective perception of the promoters. While the subjective perception of buyers standing alone would not be enough to support a finding of liability, Association for Intercollegiate Athletics for Women v. National Collegiate Athletic Association, 558 F.Supp. 487, 1983-1 Trade Cases para. 65,293, at 69,738 (D.D.C.1983), aff'd, 735 F.2d 577, 1984-1 Trade Cases para. 66,007 (D.C.Cir.1984), the district court also considered several other factors in reaching its decision, most notably the language of the Producer's Agreement. Furthermore, the subjective understanding of the promoters that they were required to use SEATS is relevant to the determination of whether the circumstantial evidence indicates coercion and was properly weighed in that context. 33 Finally, we reject the appellants' contention that proof of coercion in this case requires proof that at least some of the promoters requested permission to have TXP do their ticketing in the Omni. While, as noted earlier, coercion can be negated by a showing that the buyers bought the tied product from the seller of the tying product voluntarily, Will v. Comprehensive Accounting Corp., supra, 776 F.2d at 669; Response of Carolina, Inc., supra, 537 F.2d at 1327-28, it does not necessarily follow that a buyer has purchased the tied product voluntarily simply because he did not attempt to buy the tied product elsewhere. See Photovest Corp., supra, 606 F.2d at 725. In this case, the court found other facts tending to show that the use of SEATS was not voluntary, at least as to Jim Veal. More specifically, it found that promoters did not attempt to use other ticketing agencies because they understood from years of dealing with the appellants and using the Producer's Agreement that they were required to use SEATS and, further, that Jim Veal would have used TXP but for the tying arrangement.