Court Opinion

ID: 24237
Source: CourtListenerOpinion
Date Created: 2010-04-25 08:19:33+00
Date Added: 2024-06-11T16:47:03.910072
License: Public Domain

253 F.3d 215 (5th Cir. 2001)
SPECTATORS' COMMUNICATION NETWORK           INC.; FRANK L. MITCHELL, PLAINTIFFS - APPELLANTS,v.COLONIAL COUNTRY CLUB; ET AL., DEFENDANTS,ANHEUSER-BUSCH, INC., DEFENDANT - APPELLEE.
No. 98-11453
UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
May 31, 2001

Appeal from the United States District Court for the Northern District of TexasBefore Politz, GIBSON,*  and Higginbotham, Circuit Judges.
John R. Gibson, Circuit Judge.

1
Spectators' Communication Network and its owner, Frank Mitchell,1 appeal from the summary           judgment entered in favor of Anheuser-Busch, Inc., the only remaining defendant in their antitrust suit           alleging that Spectators' was excluded from broadcasting professional golf tournaments. Spectators'           contends that the PGA and the other defendants organized a group boycott of Spectators' in order to put it           out of business. We conclude that Spectators' made an adequate showing of an antitrust conspiracy that           makes economic sense. Although Spectators' has not shown a horizontal boycott that would constitute a           per se violation of the Sherman Act, it should be allowed the chance to prove its case under the rule of           reason. We therefore reverse the entry of summary judgment for Anheuser-Busch on Spectators's antitrust           claim. However, we affirm the district court's entry of judgment for Anheuser-Busch on Spectators's state           law claims.

2
Spectators' pioneered the use of on-site radio broadcasting at professional golf tournaments. Because golf           fans at a tournament can only see a small part of the action going on at any time, Spectators' began to           report events taking place at other locations at the tournament. Broadcasts were available only on the golf           course and were transmitted through special low-frequency radios. Spectators' made money by selling           advertising rights for on-air commercials and for logos which were placed on the special radios.

3
The world of professional golf, in which Spectators' operates, consists of several tiers of interests that           figure in this case. At the top is the Professional Golf Association, or PGA, which controls the golfers           through contracts that restrict the golfers from playing in non-PGA events if they wish to remain on the           PGA Tour.

4
The second tier of interests is composed of the sponsors, which in turn consist of two classes: "tournament           sponsors," who organize and conduct the tournament as co-sponsors with the PGA, typically to raise           money for local charities; and "corporate sponsors," who support the Tour tournaments financially in           exchange for publicity. The sponsors were associated in an organization called American Golf Sponsors,           which included NEC, K-Mart and Anheuser-Busch, all of whom were corporate sponsors of tournaments.           Through a standard Sponsor Agreement, the PGA required the tournament sponsors to transfer all media           rights, including television and radio broadcast rights, to the PGA and to give the PGA veto power over           any radio broadcasting equipment that would be placed on the golf course.

5
The third tier of interests consists of Spectators' and its competitors in the on-site broadcasting business.           Eventually, the PGA took over the on-site broadcasting niche itself, arranging to have the Tour events           broadcast by Vanguard International, LLC, broadcasting as the "PGA Tour Radio Network."

6
Spectators' contends that the relevant market is the market for on-site advertising at golf tournaments.           According to Spectators', this market is not interchangeable with other kinds of sports advertising because           of the unusually desirable demographic characteristics of the people who attend golf tournaments, in that           the spectators are affluent, highly educated, and busy.

7
From 1986 to 1990, Spectators' dealt directly with the PGA, which reserved the right to "exercise           extensive controls" and to charge Spectators' a fee for the privilege of broadcasting. Their relationship           ended in 1990, and Spectators' sued the PGA. In the summer of 1991, the PGA gave Spectators'           permission to enter broadcasting deals with the sponsors of individual tournaments. That fall Spectators'           and Anheuser-Busch entered a contract for Spectators' to broadcast sporting events as the "Budweiser           Spectators Network," which involved advertising Anheuser-Busch products on-air and putting           Anheuser-Busch logos on the Spectators' radios at one golf tournament, a car race, and a tennis match. In           November 1992, Anheuser-Busch confirmed by letter that it had agreed with Spectators' to sponsor the           broadcast of seven unspecified events in 1993, with a formal contract to be drafted later. In April 1993,           Anheuser-Busch and Spectators' entered a contract for advertising in connection with broadcasts at three           golf tournaments: the K-Mart Greater Greensboro Open, the Anheuser-Busch Classic, and the NEC           World Championship. Spectators' completed the first two broadcasts, but was unable to do the third           because the sponsor, NEC, refused to permit Spectators' to broadcast from the golf course. Frank           Mitchell, the owner of Spectators', testified in an affidavit that he learned from Barbara Burdick, an           employee of NEC, that NEC had "succumbed" to the PGA's requests not to allow Spectators' to           broadcast the NEC tournament. Similarly, Mitchell testified that in the fall of 1993, a representative of the           K-Mart Greater Greensboro Open told him that the PGA would not allow the Greensboro tournament or           other tournaments to let Spectators' broadcast at their tournaments.

8
Beginning in July 1993, Mitchell tape recorded several conversations with Anheuser-Busch's David           Brunette in which Brunette said that Anheuser-Busch was under pressure from the PGA not to use           Spectators':

9
You know, so I don't know, I mean they [the PGA Tour] don't want to give you, they don't mind if we do           them [on-site broadcasts,] but they don't want us using you.

10
The gist of these conversations was that the PGA, and in particular, Gary Stevenson of the PGA, was           hostile to Spectators' because of Spectators's lawsuit against the PGA and that the PGA would try to           prevent Anheuser-Busch from working with Spectators'. For instance, Brunette reported:

11
[I]t's just that obviously, the PGA's just concerned about the fact that you know we're trying to deal with           you and at the same time you're suing them. It's something that they have to grant us. We want to have the           rights to do this and if they're not willing to grant us those rights, uh, you know, you've got somewhat of a           battle if you start trying to do these things. . . . I mean, they're just pretty adamant about the fact that they           don't, they're not very happy with what's going on and they don't cherish the fact that we'd be working with           you, but that still doesn't have anything to do with the fact that the funding is tight.

12
Spectators' contends that the PGA also made concessions in other aspects of its regulation of tournaments           to persuade Anheuser-Busch not to deal with Spectators'. Spectators contends that the PGA previously           had in place a "no alcohol" policy; though the extent of such a policy is unclear, at the least the PGA           Commissioner limited the advertising of alcoholic products in connection with the Tour. On September 22,           1993, Anheuser-Busch representatives met with the PGA's Gary Stevenson and Leo McCullagh. They           reached an agreement on an extensive program called the "Michelob 19th Hole" program, which involved           Anheuser-Busch becoming a sponsor of the Tour Championship, advertising during golf events on           television, using the PGA's logo in product promotions, and maintaining a "19th Hole" pavilion, a mobile           exhibit that included substantial advertising at the tournament site. Shortly after this meeting,           Anheuser-Busch wrote Spectators', canceling the April 1993 contract.

13
Eventually, Anheuser-Busch's Michelob beer became the "official beer" of the PGA Tour.

14
Spectators' brought this suit against Colonial Country Club, NEC, K-Mart, American Golf Sponsors,           Anheuser-Busch and the PGA Tour and its employee, Stevenson. The complaint alleged state commercial           law and federal antitrust claims, in particular, that the defendants had engaged in a conspiracy to restrain           trade in the market for professional golf tournament on-site advertising services.

15
Eventually, all the defendants except Anheuser-Busch were dismissed, either by the court or pursuant to           agreements with the plaintiffs. Anheuser-Busch moved for summary judgment, which the district court           granted. The court held that Spectators' failed to perform its obligation under the 1993 contract to           broadcast the NEC tournament and therefore could not bring an action to enforce the contract. The court           held that the plaintiffs' claim for civil conspiracy under Texas law failed for lack of evidence of conspiracy           or any unlawful overt acts pursuant to the alleged conspiracy. As for the antitrust conspiracy, the court           rejected Spectators's group boycott theory. The court held that the evidence did not show           Anheuser-Busch had entered a combination with the intent to restrain competition in the market for           advertising, and, in fact, such a claim would be nonsensical, since Anheuser-Busch would not rationally act           to cause injury to purchasers of advertising, a class which includes Anheuser-Busch itself. The court           concluded that no anticompetitive combination was shown by evidence that PGA conditioned the 19th           Hole package on Anheuser-Busch's discontinuation of business with Spectators': "At best, Plaintiffs raise a           fact issue regarding whether [Anheuser-Busch] decided not to engage in further business relations with           [Spectators'] because it desired to engage in more lucrative business relations with others, and was           concerned that its chances of securing the latter might be hampered by the former."(emphasis added). The           court held that Spectators' evidence showed nothing more than competitive behavior by the defendants,           and therefore Spectators' was injured by too much competition, not too little.

I.

16
We review the grant of summary judgment de novo. See Stewart Glass & Mirror, Inc. v. U.S. Auto Glass           Discount Centers, Inc., 200 F.3d 307, 312 (5th Cir. 2000). Summary judgment is appropriate when there           are no genuine issues of material fact and the movant is entitled to entry of judgment as a matter of law. See           id. The party opposing the summary judgment motion must do more than show there is some metaphysical           doubt as to the material facts. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586           (1986).

17
Under section 1 of the Sherman Act, 15 U.S.C. § 1 (1994), the substantive law limits the range of           permissible inferences from ambiguous evidence. See Matsushita, 475 U.S. at 588. In particular, courts           will not draw inferences to support a claim that makes no economic sense; such a claim will require           unusually persuasive evidence to withstand summary judgment. See id. at 587, 596-98. Rational economic           actors do not ordinarily conspire to injure themselves.

18
Spectators' claims that the PGA combined with Anheuser-Busch and other tournament sponsors to freeze           Spectators' out of the advertising market so that the PGA could appropriate Spectators's business for           itself. According to Spectators', the PGA accomplished this both by coercion and by enticement. The PGA           could coerce the sponsors by invoking rights in its sponsorship contracts giving the PGA the power to           control broadcasts of PGA Tour tournaments. The enticement took the form of changing the existing PGA           policies about alcohol-related advertising so that Anheuser-Busch could purchase advertising opportunities,           such as the 19th Hole program, directly from the PGA. According to Spectators', this concession was           conditioned upon Anheuser-Busch not using Spectators' for on-site broadcasts.

19
A claim under section 1 of the Sherman Act requires proof of three elements: that the defendant           (1)engaged in a conspiracy (2) that restrained trade (3) in a particular market. See Stewart Glass, 200 F.3d at 312. To prove conspiracy or "concerted action," the plaintiff must prove that the conspirators had           a "conscious commitment to a common scheme designed to achieve an unlawful objective." Monsanto Co.           v. Spray-Rite Serv. Corp, 465 U.S. 752, 768 (1984).

20
The district court held, and Anheuser-Busch argues, that there was not sufficient evidence of a combination           or conspiracy, because it would have been irrational for Anheuser-Busch to conspire to restrain           competition in a market in which it was a purchaser:

21
As a consumer of on-site advertising at professional golf tournaments, [Anheuser-Busch] has no economic           incentive to reduce competition in the market because doing so would bring about its own economic harm.           "[A] theory of liability attributing irrationality to consumers does not get very far." Indeed, where an           antitrust claim simply makes no economic sense, more persuasive evidence is required than would           otherwise be necessary. Plaintiffs fail to provide such evidence.

22
Slip op. at 27-28 (internal citations           omitted).

23
By reasoning that a consumer would never wish to bring about a restraint of trade in the market where it           buys, the district court has ignored salient facts of this case: Spectators' contends that Anheuser-Busch was           both coerced and enticed to comply with the PGA's wishes. Though in the abstract Anheuser-Busch would           have nothing to gain from freezing a competitor out of the on-site broadcasting market, in the actual case at           hand, Spectators' alleges that the PGA made it worth Anheuser-Busch's while to cooperate, by opening up           the new opportunity to advertise through the 19th Hole exhibit and the designation of Michelob as the           official beer of the PGA tournament on the condition that Anheuser-Busch not do business with           Spectators'. Additionally, Spectators' alleges that the PGA coerced Anheuser-Busch to boycott           Spectators' by exercising its contractual power to control radio broadcasts of Tour events.

24
Antitrust law has never required identical motives among conspirators, and even reluctant participants have           been held liable for conspiracy. In United States v. Paramount Pictures, Inc., 334 U.S. 131, 161 (1948),           the Supreme Court refused to distinguish between conspirators who fomented the conspiracy and those           who only participated because they were coerced:

25
There is some suggestion . . . that large exhibitors with whom defendants dealt fathered the illegal practices           and forced them onto the defendants. But as the District Court observed, that circumstance if true does not           help the defendants. For acquiescence in an illegal scheme is as much a violation of the Sherman Act as the           creation and promotion of one.

26
The Supreme Court describes group boycotts as "joint efforts by a firm or firms to disadvantage           competitors by 'either directly denying or persuading or coercing suppliers or customers to deny           relationships the competitors need in the competitive struggle." Northwest Wholesale Stationers, Inc. v.           Pacific Stationery and Printing Co., 472 U.S. 284, 294 (1985) (internal quotation omitted) (emphasis           added). This description implicitly recognizes that an integral part of a boycott is often bringing pressure to           bear ("persuading or coercing") on other participants who have no direct motive to restrain trade.           Conspirators who are not competitors of the victim may have no interest in curtailing competition in a           market in which they do not compete; nevertheless, when they have been enticed or coerced to share in an           anticompetitive scheme, there is still a combination within the meaning of the Sherman Act.

27
The Third Circuit rejected the idea that parties to a conspiracy must share an identical anti-competitive           motive in Fineman v. Armstrong World Industries, Inc., 980 F.2d 171, 212 (3d Cir. 1992). The court held           that where an otherwise disinterested party had some interest in the ringleader's economic success, the           conspiracy could make economic sense. In Fineman, a flooring manufacturer, which wished to develop its           own video program, convinced a wholesaler not to deal with a company that developed a "video           magazine" to be used as a sales aid in the flooring business. The video magazine company sued the           manufacturer on a vertical boycott theory. The manufacturer argued that there was no illegal combination           because the wholesaler did not compete with the video magazine company and therefore had no interest in           eliminating it as a competitor of the manufacturer. The district court granted the manufacturer a directed           verdict on this theory. The Third Circuit reversed, saying:

28
We conclude that the district court's novel approach is misplaced as it renders section 1 claims unavailable           to private litigants suffering antitrust injury as a result of concerted action in a vertical matrix. Such a           restrictive rule fails to recognize the difference between motive and objective and would dramatically alter           the antitrust landscape in a manner unjustified by either precedent or policy considerations. . . . A rational           factfinder could infer agreement with the objective from knowledge of the objective and action calculated           to achieve the objective despite differing motives.

29
Id. at 212.   Although the wholesaler did not act from the same motive as the manufacturer, that did not mean that it had           no motive to conspire. Rather, its motive derived from its relationship with the manufacturer: "Because [the           wholesaler] relied upon sales of [the manufacturer's] products for 90 percent of its gross revenues,           however, it would naturally perceive that that which is in [the manufacturer's] interest also inures to [the           wholesaler's own] benefit." Id. at 212-13. Accord Full Draw Productions v. Easton Sports, Inc., 182 F.3d 745, 751 (10th Cir. 1999) (boycott by customers against supplier could make economic sense because           customers controlled competing supplier).

30
Another way a ringleader can persuade a vertically aligned actor to boycott the ringleader's competitor is           by coercion. In MCM Partners, Inc. v. Andrews-Bartlett & Associates, Inc., 62 F.3d 967 (7th Cir.           1995), two exhibition contractors refused to rent equipment from MCM because of "threats of labor           disruption by a union official in cahoots with the would-be monopolist," id. at 972, a competitor of MCM.           The effect of the exhibitors' acquiescence to the coercion was to raise the price they had to pay for the           equipment, obviously not a result they would have chosen in the absence of the threat. See id. at 971.           MCM sued the exhibitors for participating in a vertical boycott. The exhibitors argued in their defense that           they had only participated because of coercion. The Seventh Circuit rejected the coercion defense,           concluding that "the 'combination or conspiracy' element of a section 1 violation is not negated by the fact           that one or more of the co-conspirators acted unwillingly, reluctantly, or only in response to coercion." Id.           at 973. "So long as defendants knew that they were acquiescing in conduct that was in all likelihood           unlawful, we have no difficulty concluding that they thereby joined a combination or conspiracy for which           they can be held accountable under section 1." Id. at 975.

31
The Tenth Circuit applied similar reasoning to a tying case in Systemcare, Inc. v. Wang Laboratories           Corp., 117 F.3d 1137 (10th Cir. 1997) (en banc). There, the court held that a combination arose when a           buyer made a coerced purchase forced on it by a seller engaged in tying. Judge Tacha reasoned that when           a buyer accedes to the anticompetitive demands of a seller foisting an unwanted product on him, it deprives           the market of "independent centers of decisionmaking," which is just what the concerted action requirement           of section 1 exists to prevent. Id. at 1143. Accord Datagate, Inc. v. Hewlett-Packard Co., 60 F.3d 1421,           1426-27 (9th Cir. 1995); Will v. Comprehensive Accounting Corp., 776 F.2d 665, 670 (7th Cir. 1985).

32
Applying these precedents, we conclude that there can be sufficient evidence of a combination or           conspiracy when one conspirator lacks a direct interest in precluding competition, but is enticed or coerced           into knowingly curtailing competition by another conspirator who has an anticompetitive motive. So even           though it was not directly in Anheuser-Busch's interest to eliminate competition in the market for on-site           advertising at tournaments, other facts in this record made it economically plausible for Anheuser-Busch to           participate in a combination fomented by the PGA.

33
Accordingly, the district court erred when it held that Spectators' had not shown concerted action because           its allegations were not economically plausible.

II.

34
Even though Spectators' has established a case for concerted action, the question remains whether the           combination alleged was a restraint of trade, or more precisely, an unreasonable restraint of trade. See           Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co., 472 U.S. 284, 289 (1985). If           Spectators' cannot prove an unreasonable restraint of trade, it would be futile for us to remand the antitrust           claim.

35
We assess whether a combination restrains trade unreasonably by use of the "rule of reason," weighing all           the circumstances of the case, see Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717,           723, 108 S. Ct. 1515, 99 L. Ed. 2d 808  (1988), unless the combination falls within one of the categories of per se unreasonableness--conduct           so pernicious and devoid of redeeming virtue that it is condemned without inquiry into the effect on the           market in the particular case at hand. See Northwest Stationers, 472 U.S. at 289.

36
Spectators' characterizes the combination as a "group boycott" that was per se illegal. Some group           boycotts fall into the category of per se section 1 violations, but not all. "Exactly what types of activity fall           within the forbidden category is . . . far from certain. '[T]here is more confusion about the scope and           operation of the per se rule against group boycotts than in reference to any other aspect of the per se           doctrine.'" Id. at 294 (quoting L. Sullivan, Law of Antitrust 229-30 (1977)).

37
Although the distinction between boycotts that are per se illegal and those judged by the rule of reason is           often a vexing one, one rule is clear: only horizontal2 boycotts can be per se violations of the Sherman           Act. "[A]ntitrust law does not permit the application of the per se rule in the boycott context in the absence           of a horizontal agreement, though in other contexts, say vertical price fixing, conduct may fall within the           scope of a per se rule not at issue here." NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 138 (1998);           accord Sharp, 485 U.S. at 735-36 (vertical restraint not per se illegal unless it includes agreement on price           or price levels). Thus, in order to bring its boycott claim within the per se rule, Spectators' must point to a           horizontal conspiracy, in other words, a conspiracy between competitors, rather than a vertical conspiracy           between firms at different levels of distribution. See Sharp Electronics, 485 U.S. at 730 and n.4 (explaining           distinction between horizontal agreement and vertical agreement with horizontal effects); Nova Designs,           Inc. v. Scuba Retailers Ass'n, 202 F.3d 1088, 1092 (9th Cir. 2000) (where only parties to agreement are           not competitors of each other, no horizontal boycott).

38
To make a per se case, the horizontal agreement need not be between competitors of the victim. In Klor's,           Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959), a boycott arranged by a single competitor of           the victim retailer, but carried out by a "wide combination" consisting of manufacturers and distributors, as           well as the competing retailer, led to per se liability. Id. at 212-13. NYNEX harmonized Klor's with its rule           limiting per se analysis to horizontal boycotts: "Although Klor's involved a threat made by a single powerful           firm, it also involved a horizontal agreement among those threatened, namely, the appliance suppliers, to           hurt a competitor of the retailer who made the threat." 525 U.S. at 135. Cf. Northwest Stationers, 472 U.S. at 294 (per se liability applied to "efforts by a firm or firms to disadvantage competitors by either           directly denying or persuading or coercing suppliers or customers to deny relationships the competitors           need in the competitive struggle.")(internal quotations omitted and emphasis added).

39
Spectators' relies on a theory of per se liability, but its arguments are inconsistent with NYNEX.           Spectators' contends: "[A] group boycott formed for the simple purpose of eliminating a trader from the           market, or putting a company out of business, is always illegal, regardless of who is involved in the           conspiracy." This pronouncement is simply contrary to NYNEX, where the Supreme Court rejected the           argument that the defendants' motive of putting the plaintiff out of business brought the case within the per           se rule. 525 U.S. at 137-38. The Supreme Court warned that decisions to put a victim out of business are           not always the stuff of antitrust liability: "To apply the per se rule here--where the buyer's decision, though           not made for competitive reasons, composes part of a regulatory fraud--would transform cases involving           business behavior that is improper for various reasons, say, cases involving nepotism or personal pique,           into treble-damages antitrust cases." Id. at 136-37 (emphasis supplied). When Spectators' alleges that "the           PGA Tour, driven to a fury by Mitchell's daring to sue it in a former case, set out to destroy [Spectators'],"           it is relying on the kind of vendetta that Justice Breyer stated would not give rise to antitrust liability.

40
Spectators' also hints that it has carried the burden of showing a horizontal agreement by alleging that the           PGA is a "horizontal competitor" of Spectators'. Involvement by one competitor of the victim does not           alone make a horizontal restraint; there must be an agreement between more than one competitor at the           same level to make a horizontal restraint. See supra at 16. The Supreme Court emphasized in Sharp           Electronics that "a restraint is horizontal not because it has horizontal effects, but because it is the product           of a horizontal agreement." 485 U.S. at 730 n.4.

41
However, despite its argument that a horizontal agreement is not necessary to establish a per se case,           Spectators' at least pleaded a horizontal conspiracy. Its complaint alleged that the conspiracy or           combination involved members of the American Golf Sponsors association, which included           Anheuser-Busch, K-Mart, and NEC. The sponsors operate at the same level. However, the only evidence           supporting NEC's participation in the conspiracy is Mitchell's testimony that he learned from NEC's           Barbara Burdick that NEC had "succumbed" to PGA directives not to let Spectators' broadcast the NEC           tournament.3   Mitchell also testified that a representative of the K-Mart Greater Greensboro Open told           him that the PGA would not allow Spectators' to broadcast PGA events. There is thus evidence of           sponsors separately agreeing with the PGA, but no evidence of the competitors agreeing among           themselves. This hub and spoke sort of proof does not establish a horizontal combination. See Royal Drug           Co. v. Group Life and Health Ins. Co., 737 F.2d 1433, 1436-37 (5th Cir. 1984) (contracts entered           separately between powerful buyer and competing sellers not horizontal combination without evidence of           agreement among sellers); Brookins v. International Motor Contest Ass'n, 219 F.3d 849, 852 n.3 (8th Cir.           2000); Lomar Wholesale Groc., Inc. v. Dieter's Gourmet Foods, Inc., 824 F.2d 582, 590-95 (8th Cir.           1987) (distributor's separate conspiracies with several suppliers to deny a competing distributor access to           the suppliers' products is not horizontal boycott); U.S. Healthcare, Inc. v. Healthsource, Inc., 986 F.2d 589, 594 (1st Cir. 1993) (exclusive dealing arrangements of HMO with many doctors are vertical, not           horizontal, without showing that HMO was actually tool for doctors themselves).

42
Spectators' has therefore failed to establish a horizontal conspiracy subject to the per se rule.  We now turn to its allegations of a vertical conspiracy.4  The district court  held that Spectators' had not established a rule of reason case           against Anheuser-Busch because it had not shown that Anheuser-Busch, alone, had market power and           therefore could affect competition in any relevant market. Slip op. at 23 n.16. Of course, Spectators'           alleges that PGA, not Anheuser-Busch, had market power. Apparently because the district court held           there was no combination, it did not examine the market power of the alleged co-conspirator, the PGA.           But after all, the reason for looking at market power is to determine whether the combination or           conspiracy, not each individual conspirator, has the power to hurt competition in the relevant market. See           FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 460-61 (1986) ("Since the purpose of the inquiries into           market definition and market power is to determine whether an arrangement has the potential for genuine           adverse effects on competition, proof of actual detrimental effects, such as a reduction of output, can           obviate the need for an inquiry into market power, which is but a surrogate for detrimental           effects.")(internal quotations omitted and emphasis added). As the rule of reason theory was not addressed           squarely below, we remand for consideration in the first instance by the district court of whether           Spectators' has presented evidence of a vertical boycott constituting an unreasonable restraint of trade           under the rule of reason.

III.

43
Spectators' contends that the district court erred in entering judgment for Anheuser-Busch on Spectators's           breach of contract claim. The district court held that Spectators' had no claim for breach of the April 1993           contract because it failed to perform its obligation under that contract to broadcast the NEC tournament.           Spectators' contends that its performance was excused by Anheuser-Busch. In support, Spectators' points           to the assertion in Mitchell's affidavit that "in late April or May 1993" Brunette of Anheuser-Busch           "instructed [Spectators'] not to schedule any further golf events." Spectators' interprets this ambiguous           instruction from Brunette (schedule any further events after May? after the end of the contract?) as proof           that Anheuser-Busch repudiated the contract. However, the parties clearly did not act on the premise that           the contract was called off in April or May 1993, because Spectators' broadcast the July 1993           Anheuser-Busch Classic. Because the parties did not give any effect to the alleged repudiation by Brunette,           it does not excuse Spectators's failure to perform months down the road.

44
Spectators' falls back on the November 1992 letter of intent, arguing that it is an enforceable contract in its           own right. The letter, from Dave Brunette, stated that Anheuser-Busch had reviewed Spectators's proposal           and agreed to the broadcast of seven unspecified "Spectators Communications events in 1993." There was           no mention of price or of what advertising Anheuser-Busch was to receive. Brunette asked Spectators' to           contact him to discuss which events they would broadcast. Brunette stated that he would work with           Anheuser-Busch's legal department in the coming weeks to draft a contract with "the appropriate business           points as well as representations, warranties, indemnities and other provisions customarily included in           Anheuser-Busch agreements." Eventually, Anheuser-Busch produced such a contract, which is the April           1993 contract just discussed. The 1993 agreement and the November 1992 letter both covered the 1993           year, but the terms of the two documents varied materially. The contract was much longer and more           detailed than the letter. Moreover, the contract specified the broadcast of only three events, rather than the           seven mentioned in the letter. The 1993 contract contained a merger clause stating: "This Agreement           constitutes the entire understanding between the parties with respect to the subject matter hereof and           supersedes all prior or contemporaneous agreements, promises, understandings or representations, written           or oral, in regard thereto."

45
Anheuser-Busch argues that the 1992 letter was only an agreement to agree and that the April 1993           agreement represented the fruits of further negotiation that resulted in a complete contract with a reduced           broadcast schedule. Therefore, Anheuser-Busch argues, the merger clause in the 1993 agreement           establishes that the formal contract superseded the 1992 letter. Spectators' responds that the 1993           contract did not supersede the 1992 letter because the two documents had different subject matters: the           1992 letter referred to seven broadcasts, and the 1993 contract referred to only three. Spectators's           complaint and the record are devoid of any support for this theory; it did not perform seven broadcasts in           1993. It pleaded performance of a total of two, the first two in the 1993 contract. Because the subject           matter of the 1992 letter was obviously subsumed in the 1993 formal contract, the district court properly           granted summary judgment on this claim, and we need not deal with Spectators's many other arguments on           this point.

IV.

46
The district court entered judgment against Spectators' on its claim under Texas law for civil conspiracy on           the ground that Spectators' had not proved a meeting of the minds to put Spectators' out of business or any           "unlawful overt acts" in furtherance of any conspiracy. Spectators' argues that it showed Anheuser-Busch           intended to put it out of business, but as the district court held, the evidence shows only that           Anheuser-Busch had an intent to quit doing business with Spectators', rather than any design or thought of           driving Spectators' out of business. Spectators' has therefore failed to prove civil conspiracy under Texas           law, which requires that the conspirators share "a preconceived plan and unity of design and purpose."           Schlumberger Well Surveying Corp. v. Nortex Oil and Gas Corp., 435 S.W.2d 854, 857 (Tex. 1969);           accord Ward v. Sinclair, 804 S.W.2d 929, 931 (Tex. Ct. App. 1990).

47
***

48
We affirm the judgment of the           district court as to the contract and civil conspiracy claims, but reverse as to the claim for conspiracy to           violate section 1 of the Sherman Act.

Notes:

*
   Circuit Judge of the Eighth Circuit, sitting by designation.

1
  We will refer to Spectators' and Mitchell collectively as Spectators'.

2
  "Restraints imposed by agreement between competitors have traditionally been denominated as           horizontal restraints, and those imposed by agreement between firms at different levels of distribution as           vertical restraints." Business Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 730 (1988).

3
  Mitchell's testimony about these conversations with sponsors appears to be vulnerable to hearsay objection.  However, Anheuser-Busch does not object to it and Spectators' argues that it is admissible as co-conspirator hearsay.  Because the district court did not rule on the admissibility of the evidence, we will not do so in the first instance, but will consider it part of the record for the sake of argument.

4
  Although Spectators' devotes most of its brief to arguing that it showed a horizontal conspiracy that is per se illegal, it also makes vertical boycott, rule of reason arguments that preserve the rule of reason issue for our review.  Spectators' argues at length that its case is comparable to Fineman v. Armstrong World Industries, Inc., 980 F.2d 171 (3rd Cir. 1992) and MCM Partners, Inc. v. Andrews-Bartlett & Associates, Inc., 62 F.3d 967 (7th Cir. 1995), vertical boycott cases involving coerced customers.  Vertical boycotts are subject to the rule of reason.  See NYNEX, 525 U.S. at 138, 119 S. Ct. 493.  Moreover, Spectators' argues that the district court should have considered the anticompetitive acts of the entire conspiracy, rather than those of Anheuser-Busch alone; at the same time, Spectators' also argues that proof of anticompetitive effects is irrelevant to a per se case.  Thus, by arguing the merits of an issue that is irrelevant to per se analysis, Spectators' is evidently challenging the district court's rule of reason holding.