Court Opinion

ID: 9474400
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:56:16.465601+00
Date Added: 2024-06-11T17:44:03.673491
License: Public Domain

*1221EDITH HOLLAN JONES, Circuit Judge,
concurring:
I concur in the judgment requiring remand for retrial because this court is bound by the decision in Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984). However, I believe this case perfectly illustrates the arguments why vertical price restraints should be tested under antitrust’s Rule of Reason1 rather than, as Monsanto continues to require, per se illegality. There is no social benefit to subjecting manufacturers’ pricing relationships with their distributors to potential per se illegality where they operate in markets whose interbrand competitiveness overwhelms any detrimental effects of those relationships. And, although Monsanto moves toward alleviating the threat of unwarranted treble-damage actions, the abiding uncertainty suggests that the Supreme Court would more wisely jettison the precedent that led to the rule of per se illegality for vertical price restraints.
The flaws in Monsanto’s continued recognition of per se illegality are highlighted by this ease. First, it is difficult to conceive how, in the real world, the subjection of vertical price restraints to per se illegality improves the functioning of the economy or enhances consumer welfare. Only atavistic devotees of the abacus or slide rule could fail to recall the remarkable history of the electronic calculator market during the last fifteen years. The range of available models, variety of functions that can be performed, and myriad optional enhancements have multiplied rapidly while the average prices have plummeted. The number of competing manufacturers has increased. To maintain their market position and profitability, manufacturers like Sharp have obviously been required to react quickly and imaginatively to changes in the marketplace. The record in this case reveals that both Sharp’s market share and the retail prices of its calculators were declining in this period.2 Nevertheless, as the result of the current state of antitrust law, Sharp is potentially held accountable in treble damages for terminating a distributor who, in Sharp’s perception, failed to market its product adequately. To hold, as this court must, that Sharp cannot respond to changing market conditions with all of the competitive arrows in its quiver including, if necessary, a program to respond to “free riders” like BEC,3 is to put Sharp at a potential competitive disadvantage. To limit Sharp’s marketing options for its calculators may also limit the range of products available to the consumer of calculators. See Easterbrook, Vertical Arrangements and the Rule of Reason, 53 Antitrust L.J. 135 (1984). To isolate one factor in the relationship of Sharp and its distributors, i.e. whether Sharp required them to adhere to its published retail price lists, in this hectically competitive market is to ignore the fact that here have been no anti-competitive effects of the conduct in issue: prices declined and the number and quality of competing products increased. The larger conclusion that can be drawn from the scenario of this case is that assuming the continued variety, vitality and innovation of the American free enterprise system, it is unrealistic to conclude that measures taken by a manufacturer to enhance his product’s marketability, whether related to price or not, are anticompetitive unless they are part of a program to enforce a manufacturer- or dealer-level cartel. See Posner, The Next Step in the Antitrust Treatment of Restricted Distribution: *1222Per Se Legality, 48 U.Chi.L.Rev. 6, 25 (1981).
As the majority opinion elegantly demonstrates, Monsanto has raised the level of proof required to submit a vertical price restraint case to the jury. However, its second flaw is that, despite so doing, it leaves a cloud of uncertainty and incongruity. The Monsanto standard, a “something more” formulation of a vertical price agreement,4 provides little guidance for lower courts and counsel. Already, the Eighth Circuit has affirmed a finding of per se liability based upon a “price-related” conspiracy, which is totally at odds with today's interpretation of Monsanto by this Circuit. See Victorian House Inc. v. Fisher Camuto Corp., 769 F.2d 466, 469 (8th Cir.1985); compare Bender v. Southland Corp., 749 F.2d 1205 (6th Cir.1984). Most clever attorneys, like plaintiff’s counsel in this case, will be able to generate sufficient evidence, even pursuant to the Monsanto standard, to withstand summary judgment review, and thus to exert substantial influence toward settlement of cases where no anticompetitive harm, or harm to the consuming public, really occurred. Moreover, the distinction between vertical price and non-price restraints can be difficult to draw, and because Monsanto retains a powerful incentive to describe a dealer’s antitrust complaints as being price-related, in order to secure the litigational benefit of the per se standard, such distinctions can be expected to be even more finely (and uselessly) articulated. See generally Hay, Vertical Restraints after Monsanto, 70 Cornell L.Rev. 418, 431-35 (1985). Retention of the per se test of illegality for vertical price maintenance will thus continue to inhibit the functioning of non-price restraints which the Supreme Court sees as generally beneficial. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977). In sum, the antitrust law of vertical restraints remains much in turmoil, to the detriment of potential defendants and the public, which suffer due to the limitation of distributional variety, but to the benefit of the legal class.
Semantic nuances are costly to businessmen in the real world. The Supreme Court has noted that, “per se rules of illegality are appropriate only when they relate to conduct that is manifestly anticompeti-tive---- ‘[TJhere are certain agreements and 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.’ ” Northern Pacific Ry. Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958) (quoted in Continental T.V., Inc. v. GTE Sylvania Inc., supra, 433 U.S. at 50, 97 S.Ct. at 2557).5 Present economic understanding does not compel per se treatment of vertical price restrictions. On the contrary, Judge Easterbrook’s analysis of Monsanto would appear to be correct:
If restricted dealing and price arrangements are ordinarily procompetitive, if there is no real difference between the effects of price and non-price restraints, and if the objection to [vertical price restraints] is the same as that to other vertical restraints, then it follows that per se condemnation of [vertical price restraints] is anomalous.
Easterbrook, supra at 171. The Supreme Court should take the earliest opportunity to review its Russian roulette approach to vertical price restraints.

. See Continental T. V, Inc. v. GTE Sylvania Inc., 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977).

. Sharp faced 100 competitors. The prices of its calculators ranged from $500-1,000 in 1972 to $150-300 ten years later.

. "Free riders” are distributors who market products by cutting their prices, to the neglect of customer and market-development services, which are performed by the distributor who has kept margins higher by not discounting. Frequently, the "free rider's” sales benefit from the services performed by the full-price dealer. See Posner, The Rule of Reason and the Economic Approach: Reflections on the Sylvania Decision, 45 U.Chi.L.Rev. 1, 6-10 (1977).

. 104 S.Ct. at 1471 n. 9 ("evidence must be presented both that the distributor communicated its acquiescence or agreement, and that this was sought by the manufacturer").

. For a discussion of the quirky and questionable legal history of the per se rule in vertical price restraint cases, see Brief of the United States as Amicus Curiae to the Supreme Court in the Monsanto case; see also Easterbrook, supra.