Court Opinion

ID: 9478371
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:47:40.006814+00
Date Added: 2024-06-11T17:46:24.044695
License: Public Domain

PAULINE NEWMAN, Circuit Judge,
with whom MARKEY, Chief Judge, joins, dissenting.
I respectfully dissent, for I believe that the district court correctly directed a verdict in favor of the Philips companies with respect to the asserted violation of Section 2 of the Sherman Act.
Perhaps a more cautious, or less confident, style of trial management would have been to allow the jury to reach a verdict and then review the decision. However, the law of the Eleventh and Fifth Circuits fully supports the procedure followed. See, e.g., J & H Auto Trim Co. v. Bellefonte Insurance Co., 677 F.2d 1365, 1368 (11th Cir.1982) (“There must be a conflict in substantial evidence to create a jury question.”) (quoting Boeing Co. v. Shipman, 411 F.2d 365, 375 (5th Cir.1969) (en banc)); Malcolm v. Marathon Oil Co., 642 F.2d 845, 848 (5th Cir.) (the non-moving party must present evidence sufficient to create a jury question as to each element of the claim), cert. denied, 454 U.S. 1125, 102 S.Ct. 975, 71 L.Ed.2d 113 (1981).
In a carefully reasoned opinion, applying the standards of the Supreme Court and the Eleventh and Fifth Circuits, the district court held that Windmere’s evidence was “simply insufficient to permit the trier of fact to find facts in connection with this matter”. Review of the record and arguments shows that the district court was correct when it held that, as a matter of law, Windmere had not adduced sufficient evidence to support a jury verdict in its favor on the asserted Section 2 violation. The most stalwart defender of jury trials must also defend the authority of the trial judge to manage the trial and, when appropriate, to direct the verdict. Galloway v. United States, 319 U.S. 372, 392-95, 63 S.Ct. 1077, 1088-90, 87 L.Ed. 1458 (1943).
A
In response to a suit for patent infringement and for unfair competition (based on *706trade dress), Windmere asserted a counterclaim of monopolization and attempt to monopolize against the Philips companies under Section 2 of the Sherman Act. Other antitrust counterclaims, also decided against Windmere on the ground of insufficient evidence, are not before us.
The district court stated that “Windmere had failed to present substantial evidence sufficient to create a jury question on at least one element of its antitrust claim— the willful acquisition or maintenance of monopoly power via predatory pricing”. The district court held, correctly, that unless Windmere were able to create a jury question on this element, Windmere could not prevail on its Sherman Act charge. See Malcolm v. Marathon Oil, supra.
The court thus concentrated on Wind-mere’s evidence on the issue of predatory pricing and concluded that, as a matter of law, Windmere had not presented sufficient evidence to create a jury question on the essential premises thereof. Applying United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1703-04, 16 L.Ed.2d 778 (1966), the district court observed that it is not illegal to lower one’s price in view of competition, (or in this case to bring in additional models at low price, without lowering the price of the existing models) unless in so doing the pricing is “predatory”. The applicable law on determination of predatory pricing has recently been reviewed in Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 117 n. 12, 107 S.Ct. 484, 492 n. 12, 93 L.Ed.2d 427 (1986), as follows:
No consensus has yet been reached on the proper definition of predatory pricing in the antitrust context, however. For purposes of decision in Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 [106 S.Ct. 1348, 89 L.Ed.2d 538] (1986), for example, we defined predatory pricing as either “(i) pricing below the level necessary to sell their products, or (ii) pricing below some appropriate measure of cost.” Id., at 585, n. 8 [106 S.Ct. at 1355, n. 8]. Definitions of predatory pricing also vary among the Circuits. Compare Arthur S. Langenderfer, Inc. v. S.E. Johnson Co., 729 F.2d 1050, 1056-57 (CA6) (pricing below marginal or average variable cost presumptively illegal, pricing above such cost presumptively legal), cert. denied, 469 U.S. 1036 [105 S.Ct. 511, 83 L.Ed.2d 401] (1984), with Transamerica Computer Co. v. International Business Machines Corp., 698 F.2d 1377 (CA9) (pricing above average total costs may be deemed predatory upon showing of predatory intent), cert. denied, 464 U.S. 955 [104 S.Ct. 370, 78 L.Ed.2d 329] (1983).
The district court, following this direction, looked to the precedent of its own circuit for elaboration of the method of determining predatory pricing. In International Air Industries, Inc. v. American Excelsior Co., 517 F.2d 714, 724 (5th Cir.1975), cert. denied, 424 U.S. 943, 96 S.Ct. 1411, 47 L.Ed.2d 349 (1976), the Fifth Circuit held:
In short, in order to prevail as a matter of law, a plaintiff must at least show that either (1) a competitor is charging a price below his average variable cost in the competitive market or (2) the competitor is charging a price below its short-run, profit-maximizing price and barriers to entry are great enough to enable the discriminator to reap the benefits of predation before new entry is possible, [footnotes omitted]
The first of the two International Air tests, pricing below average variable cost, was the lesser standard for Windmere to meet. It is a commonly used test for predatory pricing in the Fifth Circuit, see, e.g., Adjusters Replace-A-Car Inc. v. Agency Rent-A-Car Inc., 735 F.2d 884 (5th Cir.1984), cert. denied, 469 U.S. 1160, 105 S.Ct. 910, 83 L.Ed.2d 924 (1985); and in other circuits, see, e.g., MCI Communications Corp. v. American Telephone & Telegraph Co., 708 F.2d 1081 (7th Cir.) (criticizing the profit maximizing test), cert. denied, 464 U.S. 891, 104 S.Ct. 234, 78 L.Ed.2d 226 (1983); Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 236 (1st Cir.1983); Northeastern Telephone Co. v. American Tel. & Tel. Co., 651 F.2d 76, 87-88 (2d Cir.1981), cert. denied, 455 U.S. 943, 102 S.Ct. 1438, 71 L.Ed.2d 654 (1982); Southern Pacific Comm. Co. v. American *707Tel. & Tel Co., 556 F.Supp. 825, 927, 964 (D.D.C.1982), aff'd, 740 F.2d 1011 (D.C.Cir.1984), cert. denied, 470 U.S. 1005, 105 S.Ct. 1359, 84 L.Ed.2d 380 (1985).
From the record and argument, it is apparent that Windmere’s only way of attempting to show price below average variable cost was by including Philips full advertising costs as variable costs, attributed per unit to the reintroduced obsolete models 1320 and 1615. Although the parties argue the point on this appeal — the majority opinion refers to a “vigorous dispute”— the district court looked to the evidence.
The district court found that Windmere had presented “no record evidence” to support either its method of allocation of advertising costs or its challenge to the total advertising expenditures; and that on No-relco’s established advertising expenditures of $17,558,000, of which $6.6 million was paid by NVP, “even according to the testimony of Windmere’s Vice President of Finance, Burton Honig, Norelco achieved a profit on the sale of the 1320 and 1615 in 1985”. Although Windmere argues the arithmetic on appeal, there was no evidence to the contrary. Argument of counsel is not evidence, as the Fifth Circuit has discussed:
Unsupported, self-serving testimony is not substantial evidence sufficient to create a jury question. Yoder Brothers, Inc. v. California-Florida, Plant Corp., 537 F.2d 1347, 1371 (5th Cir.1976), cert. denied, 429 U.S. 1094, 97 S.Ct. 1108, 51 L.Ed.2d 540 (1977). Similarly, inferences can not stand in the face of uncontradict-ed and substantial evidence to the contrary. Scott Medical Supply Co. v. Bedsole Surgical Supplies, Inc., 488 F.2d 934, 937 (5th Cir.1974).
Comfort Trane Air Conditioning Co. v. Trane Co., 592 F.2d 1373, 1383 (5th Cir.1979). Accord Janich Bros., Inc. v. American Distilling Co., 570 F.2d 848, 858 (9th Cir.1977), cert denied, 439 U.S. 829, 99 S.Ct. 103, 58 L.Ed.2d 122 (1978) (affirming directed verdict for a defendant on a predatory pricing claim because of the inadequacy of plaintiff’s accounting evidence: “a firm’s marginal costs cannot be ascertained from conventional business records. Conventional records do not provide information which a jury can use as evidence of marginal cost.”)
The district court remarked on the absence of evidence of any advertising whatsoever of the 1615 and 1320 models; and the court observed that Windmere had the burden of proof. Referring to Windmere’s reliance on its proposed projections of Philips’ costs rather than actual cost data, the district court held that “[ajlthough some use of projections undoubtedly is necessary, we find that where such use alone makes the difference between a loss or a profit on an item that use is too extensive.” The district court cited the Supreme Court in Matsushita Electric Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 589, 106 S.Ct. 1348, 1357, 89 L.Ed.2d 538 (1986) on the necessity of “direct evidence” of predatory pricing schemes.
Following the guidance of Matsushita, the district court concluded that “Wind-mere’s evidence of below-cost pricing does not meet the substantial evidence standard necessary to withstand a directed verdict.” No error has been shown in the district court’s careful analysis of the evidence presented, or in its conclusion that the minimum evidentiary standards on which a jury could have reached a verdict of predatory pricing had not been met.
B
Windmere argues in the alternative that the district court should have applied to its pricing analysis the second standard of International Air, 517 F.2d at 724, viz. that “the competitor is charging a price below its short-run, profit-maximizing price and barriers to entry are great enough to enable the discriminator to reap the benefits of predation before new entry is possible”. The Fifth Circuit Court explained the profit maximizing test as follows:
This standard should be applied only when the barriers to entry are extremely high. The lower the barriers to entry in a market, the closer to marginal cost a monopolist would have to set its price in order for a plaintiff to prevail as a mat*708ter of law, for we see no social utility in insuring the survival of inefficient firms where a new entry is possible.
International Air, 517 F.2d at 725 n. 31.
The district court did not rely in its decision on the presence or absence of barriers to entry, presumably because Windmere did not argue that it encountered any actual barriers. It was undisputed that the Izumi shavers, labeled with the Ronson trademark, experienced no entry barriers whatsoever. In its first year Windmere sold six million dollars’ worth, double its projections. In its 1984 Annual Report Windmere stated:
The most exciting new product introduced in 1984 was the Ronson shaver line, which included three microfoil and two rotary shavers. We were successful in gaining distribution of our shavers to many of the major retailers in America. This was the most successful product introduction in the Company’s history.
Windmere’s sole argument as to entry barriers is based on its reference to negotiations for the Schick trademark — an event whose significance is belied by Windmere’s apparently ready acquisition of the Ronson mark, and its immediate market success. Accord, D.E. Rogers Associates, Inc. v. Gardner-Denver Co., 718 F.2d 1431, 1434 (6th Cir.1983), cert. denied, 467 U.S. 1242, 104 S.Ct. 3513, 82 L.Ed.2d 822 (1984) (ease of entry shows lack of barriers to entry). In addition, Windmere’s Vice President of Sales testified that the Sunbeam brand name was available and could be used to market electric shavers.
Since Windmere did not meet the threshold burden, under the profit-maximizing test, of presenting evidence whereby a jury could find that it experienced high barriers to entry, I respectfully disagree with my colleagues’ reliance on entry barriers as contributing substantial evidence for the jury: this is the first of the majority’s four-point basis for remand for jury trial. Nor can I agree that it is probative of violation of the Sherman Act to introduce a lower-price model in response to a competitor’s low-price model (the majority’s second point); or to engage in vigorous price competition (the majority’s third point). The fourth point, on which the negotiations concerning the Schick trademark were relied on as evidence of intent to monopolize, even if established, is not probative without below-cost pricing. Industrial competition is not benevolent, and causing loss of profits to a competitor, or making the market less attractive to a competitor, whereby a less efficient or higher cost competitor leaves the market, is not itself a violation of antitrust law. As stated in Ball Memorial Hospital, Inc. v. Mutual Hospital Ins., 784 F.2d 1325, 1338, 1339 (7th Cir.1986):
[ Ijntent to harm rivals is not a useful standard in antitrust_ Vigorous competitors intend to harm rivals, to do all the business if they can. To penalize this intent is to penalize competition.
Windmere’s position, simply put, is that Philips was obliged to preserve its pricing at the levels of the status quo ante, and neither reduce its price nor bring in a lower-price model. Windmere refers approvingly to Remington’s failure to reduce its prices when Windmere introduced its Ron-son brand foil razor. Thus Windmere argues that Philips must be barred by the antitrust laws from pricing its obsolete 1320 and 1615 models at lower prices than those at which they had sold when they were the current models (the 1615 having been offered at $28.00 some years before, and now reoffered at $17.50), since the purpose was to offer these models at a lower price than that at which Windmere was offering the Izumi shaver.
It is not the law that Philips was required to preserve its prices and products as they were before Windmere offered the Izumi product at a lower price. “It is not anticompetitive for a company to reduce prices to meet lower prices already being charged by competitors. Indeed, ‘[t]o force a company to maintain non-competitive prices would be to turn the antitrust laws on their head.’ ” D.E. Rogers, 718 F.2d at 1435 (citations omitted) (quoting Richter Concrete Corp. v. Hilltop Concrete Corp., 691 F.2d 818, 826 (6th Cir.1982)). The district court applied this principle in its state*709ment that “[p]rice cutting between competitors as a general rule is precisely the type of conduct our laws are designed to promote.” Pertinent is the Supreme Court’s recent discussion in Matsushita, 475 U.S. at 594, 106 S.Ct. at 1360:
But cutting prices in order to increase business often is the very essence of competition. Thus, mistaken inferences in cases such as this one are especially costly, because they chill the very conduct the antitrust laws are designed to protect. See Monsanto, supra [465 U.S. 752], at 763-764, 79 L.Ed.2d 775, 104 S.Ct. 1470 [at 1470-1471 (1984)]. “[W]e must be concerned lest a rule or precedent that authorizes a search for a particular type of undesirable pricing behavior end up by discouraging legitimate price competition.” Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 234 (CA1 1983).
The district court considered Windmere’s arguments as to the applicable precedent, including a careful analysis of Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985). The court, for the purpose of this motion, accepted Windmere’s definition of the relevant market as limited to rotary shavers, but did not agree with Windmere that it is always a violation of the Sherman Act to reduce prices if the result is to “deliberately remove competitors”, in Windmere’s words, or that Philips was required to refrain from reacting to Wind-mere’s importation of the Izumi product. The court, following International Air, held that it is insufficient evidence of Sherman Act violation to show that a “large entrenched firm with a dominant market share”, id. at 721, reduced its prices in “a program of stunting the possible growth of [the new entrant]”. Id. at 719. The court held, as International Air requires, that it is also necessary to show that the sales were below average variable cost. Id. at 72j. It is not the law that a dominant company must make room for new entrants.
The Fifth Circuit has discussed the role of intent, stating in Adjusters Replace-A-Car, Inc. v. Agency Rent-A-Car, Inc., 735 F.2d 884, 887 (5th Cir.1984), cert. denied, 469 U.S. 1160, 105 S.Ct. 910, 83 L.Ed.2d 924 (1985) that:
A statement of intent to compete ... even if perceived as a threat is not unlawful. Such a manifestation of intent to triumph in the competitive market, in the absence of unfair, anticompetitive or predatory conduct, is not enough to establish an antitrust violation.
(quoting Hayes v. Solomon, 597 F.2d 958, 977 (5th Cir.1979), cert. denied, 444 U.S. 1078, 100 S.Ct. 1028, 62 L.Ed.2d 761 (1980)). It is not the purpose of the antitrust laws to require that a lawful monopolist “hold[ ] an umbrella over inefficient competitors”. Olympia Equipment Leasing Co. v. Western Union Telegraph Co., 797 F.2d 370, 375 (7th Cir.1986), cert. denied, 480 U.S. 934, 107 S.Ct. 1574, 94 L.Ed.2d 765 (1987).
Today it is clear that a firm with lawful monopoly power has no general duty to help its competitors, whether by holding a price umbrella over their heads or by otherwise pulling its competitive punches.
Id. at 375.
Philips was not required to limit its products to those pre-existing at higher prices, to provide an “umbrella” for the importation by Windmere of the cheaper Izumi model, or to refrain from selling an even cheaper model, even for a limited time. The standard of the Fifth and Eleventh Circuits is that an essential element of a Section 2 violation is proof of sale below a fair measure of cost, as discussed in International Air. We, sitting in review of the district court’s application of Fifth/Eleventh Circuit law, are unauthorized to set a different standard.
C
The district court concluded that there was insufficient evidence to create a jury question on whether Philips was pricing the re-introduced models below cost. It was the trial court’s obligation to assure that the jury was presented with evidence, not appeals to “passion and prejudice”. Connell v. Sears Roebuck & Co., 722 F.2d *7101542, 1546 (Fed.Cir.1983). The Court stated in Zenith Radio Corp. v. Hazeltine Research Inc., 395 U.S. 100, 124, 89 S.Ct. 1562, 1577, 23 L.Ed.2d 129 (1969), that “speculation and guesswork” can not support a verdict of antitrust violation. See also Comfort Trane Air Conditioning Co. v. Trane Co., 592 F.2d 1373, 1383 (5th Cir.1979) (directed verdict granted when plaintiff failed to present substantial evidence that defendant’s illegal antitrust activities were a material cause of plaintiffs injuries). Accord Broadway Delivery Corp. v. United Parcel Service, Inc., 651 F.2d 122, 131 (2d Cir.), cert. denied, 454 U.S. 968, 102 S.Ct. 512, 70 L.Ed.2d 384 (1981) (motion to dismiss after jury trial granted because plaintiffs proof “did not permit a reasonable fact-finder [to make] a careful assessment of the relationship between the defendants’ prices and costs”); MCI Communications Corp. v. American Tel. & Tel. Co., 708 F.2d 1081, 1125, 1126, 1127 (7th Cir.) (affirming a directed verdict for defendant on a predatory pricing claim because of insufficient evidence), cert. denied, 464 U.S. 891, 104 S.Ct. 234, 78 L.Ed. 2d 226 (1983); Janich Brothers, Inc. v. American Distilling Co., 570 F.2d 848, 858 (9th Cir.1977) (jury verdict set aside because of insufficient evidence of predatory pricing), cert. denied, 439 U.S. 829, 99 S.Ct. 103, 58 L.Ed.2d 122 (1979). See generally Areeda & Turner, Predatory Pricing and Related Practices Under Section 2 of the Sherman Act, 88 Harv.L.Rev. 697 (1975).
The district court correctly concluded that Windmere had not adduced sufficient evidence to create a jury question of its Section 2 Sherman Act claim, as a matter of law. The court thus acted within its authority in directing the verdict on this issue, and should be affirmed.