Alberta Gas Chemicals Limited and Alberta Gas Chemicals, Incorporated v. E.I. Du Pont De Nemours and Company, Du Pont Holdings, Inc., and Conoco Inc

Chemicals, Plaintiffs are Alberta Gas WEIS, Before BECKER and Ltd., gas producer, a Canadian natural HUNTER, Judges. Circuit Jersey subsidiary, its New Alberta Gas Chemicals, “Alberta”). (collectively Inc. THE OPINION OF COURT produces its methanol from natural WEIS, Judge. Circuit holdings larg- gas Canada boasts product country. in that est source of the producer suit a this antitrust methanol highly In the concentrated United States challenges competitor’s acquisition of an- market,” is, the market for “merchant merger led corporation. other to can- compa- producing used methanol not acquired company's plans of the cellation manufacturing, Alberta’s process, pre- ny for internal produce a new for about by large purchases scale to stimulate sales accounted 7% ceded largest pro- quantities Du large Defendant Pont was the chase of methanol from a of methanol in the States in ducer United producers number of in the interim. Cono- 1981, recording sales of about 30% co would then sell this methanol on the year, market. Du Pont merchant merchant stimulate additional production half to in- about devoted demand. operations. Du Pont and second ternal Alberta estimates that Conoco would producer together controlled about largest purchased at least one hundred mil- market, largest and the four 50% gallons per year lion methanol in the than companies accounted for more 70%. production interim before its own facilities acquisition, the time of Conoco At operational. became Alberta would have energy company an international was own- supplied quantity, says, some it and largest coal in the United ing reserves to would directly. that extent benefit methanol, produce It did not but in States. profit indirectly through would in- purchased gal- million roughly nine price for brought creased methanol about plastic and for use in its chemical lons by large by demand created Conoco’s manufacturing plants Jersey and New purchases. These elements up make Al- purchases represented ap- Its Louisiana. berta’s first “demand creation” claim. of total market proximately merchant 1.8% Alberta’s second claim is based on the in the sales United States. premise it would that have sold methanol Although generally methanol is manufac- to Conoco for its chemical plastic and gas, tured natural studies have dem- plants Jersey in New and Louisiana. After potential using for coal as onstrated merger, filled Conoco some of its needs through gasification liquefac- source and through companies, Du Pont and other but process. During early tion 1970s through none Alberta. Alberta claims prices rapidly, when crude 1980s oil rose a loss for of sales to Conoco experimented pro- that coal projects with which, alleged, resulted from the synthetic grew commercially duce fuels at- merger. governmental encourage- tractive. With acquisition, temporari- After the Du Pont ment, many corporations explored ga- coal ly of its and, methanol-producing closed one two mid-1981, sification at least sixteen and, plants although longer it no predomi- projects coal-to-methanol active. were market,” pos- nates in the “merchant still merger, Before the been power. sesses market The substantial studying plans large coal construct a has of methanol declined substantial- gasification facility in States. the United 1980s, ly early since the there is now Among uses, other company considered oversupply in the an world market. Du blending produce gasoline methanol with proceed Pont insists Conoco did not gasohol, a fuel for motor vehicles that Co- gasification plans with coal because of the existing through noco market falling price of oil and observes that other stations, particularly service the west companies abandoned projects also their coast. for the same reason. merger, After the Conoco cancelled the consumption of Conoco’s methanol fell gasification project. company coal 400,000 gallons after the about sold plant also its chemical in Louisiana of which Du supplied. none Pont Jersey. By and dismantled the one in New purchased Conoco had some methanol from 1984, Conoco’s purchases methanol 1970s, late Alberta but was not comparatively minimal. plaintiffs customer of at the time of Du necessary Because of the for lead time acquisition. Pont’s construction, plant Conoco’sfirst methanol September 25, suit on likely operations filed begun was to have States District the late 1980s. In to have a the United Court until order place began, Jersey. complaint New when manufacture District of relief, pur- planned equitable Alberta asserts that Conoco asked for but Alberta did preliminary injunction. not seek a purchase The Conoco had no September 30, effective on became from Alberta.” parties 1981. After the had conducted ex- Finally, the court denied Alberta’s claim discovery, granted tensive the district court injunction. for an The court noted that summary judgment in favor of Du Pont on injury requirement Alberta’s horizontal or “demand creation” applies equitable relief, to claims for Alber- and, date, claim at a later on the “vertical” ta’s failure to demonstrate antitrust count as well. damage in its claims was prayer fatal to its purposes The court assumed for of sum- for divestiture. mary judgment that Du Pont’s appeal, On Alberta contends that Clayton of Conoco 7 of violated Act1 prove its vertical claim at trial and that Alberta had suffered the losses it showing prospects of sales to Conoco and addition, accept- claimed. the court also argues summary judgment inap- theory potential ed Alberta’s competi- propriate to resolve this issue of material tion between Du Pont and Conoco had been asserts, addition, fact. Alberta that the or would be eliminated because of cancella- district court in evaluating erred the verti- gasification tion of the project. coal Re- cal by relying claim post-ac- on Du Pont’s jecting arguments, Alberta’s the district quisition activity. conduct, That Alberta court stated that the projected absence of a says, self-serving and is merely tempo- industry increase in demand was not identi- rary forbearance limited to the duration of lessening cal to a competition. of There litigation. the current being no antitrust in the view of the As court, claim, to the demand creation denied Alberta’s demand creation argues failing that in claim. to find inju- ry, the district court erred it did distinguished The district court Alberta's recognize not flow direct- second or “vertical” claim—that for losses ly from “either ... violation [antitrust] of sales to Conoco’s plants. Rely- chemical or ... possible made [acts] ing on States, Brown Shoe Co. v. United by the violation.” appellants Brief for 294, 328, 1502, 370 U.S. 1525, 82 S.Ct. 8 (quoting 27 Corp. Brunswick v. Pueblo (1962), L.Ed.2d 510 the court reasoned that Bowl-O-Mat, Inc., 477, 489, 429 U.S. 97 foreclosing competitors segment from a of 690, 697, (1977)). 50 L.Ed.2d 701 the market would make defendant liable for losses traceable to that action. Be- I.

cause Conoco had ceased its chemical man- ufacturing operations 1984, by however, . Summary judgment granted can only be the court ruled that Alberta could not es- genuine if no issue of material fact exists. any tablish losses point. after that 56(c); Fed.R.Civ.P. Goodman v. Mead addition, Co., 566, (3d Johnson & 534 F.2d 573 court observed Al- Cir. 1976), denied, 1038, berta had not cert. any submitted 97 S.Ct. breakdown of 732, (1977). the losses 50 suffered between L.Ed.2d 748 An issue is “genuine” 1981 only and Conoco’s if the withdrawal evidence is such from the plastic and a manufacturing jury chemical reasonable fields could find for the non- in 1984. gap moving party. Based on this proof, Liberty Anderson v. Lob Inc., court by, concluded that Alberta had 477 failed to U.S. 106 S.Ct. meet damages. Moreover, its burden on (1986). 91 L.Ed.2d 202 At summary the court stated that judgment stage, its decision com- judge’s “the function is pelled because “even before the weigh not himself to the evidence and de- provides pertinent 1. Section 7 part: any activity affecting line of commerce or in any person country, engaged commerce in section of the any No in commerce or in activity affecting acquisition may substantially acquire, effect of such commerce shall be di- rectly indirectly, any part competition, the whole or to lessen or to tend to create a capital per- monopoly. stock or other share ... another commerce, engaged son any also in where in U.S.C. § the truth termine matter but to Conduct that harms competitors may genuine determine whether there is a issue benefit consumers—a result the antitrust at 2511. trial.” Id. On review of a laws were not intended penalize. summary judgment, grant ap- this court poor “When the champion consumers, plies the same test that district court a court must especially be care adopted. Marpan should have Marek ful grant not to may relief that undercut (3d Two, Inc., Cir.1987). proper 817 F.2d functions of antitrust.” Ball Hosp.,

Memorial Inc. v. Hosp. Mutual Ins., Inc., (7th Cir. II. 1986); see Cargill, Inc. v. Monfort of - important place litigation in Colo., Inc., -, proper setting. The district court as- 493, (1986) (competitor’s sumed, arguendo, had been violat- loss of due to increased com government If prosecuting, ed. petition following merger does not consti against defendant sanctions should follow. tute a threat of injury)3; see also Otherwise, public policy against improper Hovenkamp, Merger Damages, Actions for mergers expressed as in the antitrust laws Hastings (1984)(private L.Rev. realized.2 plaintiffs’ injuries likely are as to be caused by efficiency aspects mergers not, however, This is a suit instituted power effects); their market Baumol & government society for the benefit of Ordover, Use Antitrust To Subvert whole, brought by pri- as a but a claim Of Competition, 28 J.L. & Econ. 247 litigant competitor vate of defendant. —a supplement To enforcement of the anti- private One restriction on enforcement laws, Congress private trust has created imposed the courts have is the doctrine of causes of action to recover treble standing. A concept malleable easily not equitable and obtain relief. See 15 U.S.C. defined, standing antitrust has been con- 15, 26. This additional avenue of en- §§ variety strued in a ways of and settings. forcement, however, open is not to all who struggle precise to articulate a formu- might' punishing be interested in continuing lation is a one because success wrongdoer or might who have suffered proved has elusive. peripheral some loss. In an keep effort to times, At “standing” the label has private enforcement within reasonable caused confusion when used in the anti- bounds, the courts imposed limitations opposed trust context as to the constitu- designed discourage plaintiffs other than Supreme tional sense. The Court has not- apt

those most carry purposes out the of plaintiff ed that to the antitrust “[h]arm the statutes. satisfy sufficient the constitutional carefully standing Courts have requirement fact, scrutinized en- injury but forcement by competitors efforts the court must make a further determina- their interests are not necessarily con- plaintiff proper tion whether the is a party gruent with the compe- bring private consumer’s stake in antitrust action.” Asso- Mergers tition. promote efficiency Cal., ciated Gen. Contractors Inc. v. prices and marketplace, lower in the for Carpenters, State Council California example, may 519, 31, cause economic loss com- 897, 907, 459 U.S. 535 n. 103 S.Ct. petitors. (1983). 74 L.Ed.2d 723 Department 2. The merg- Justice did commentary, examine the For 3. collections of cases and see and, exception joint er Note, with the of a venture in Mergers, Competitors, and Anti- Horizontal methanol, pertaining an approve area not did Standing Clayton trust Under Section 16 30, July of Conoco on 1981. The Injury, Act: Fruitless Searches Antitrust 70 for joint objection venture was resolved a com- Note, (1986); Standing Minn.L.Rev. 931 to Sue plaint stipulated judgment final filed in the Clayton Injunctions: Chrysler Injured Act for — United States District Court for the District of Party Disgruntled Competitor?, Wayne 31 4, 1981, August Columbia on Docket No. 81- 1275, (1985). L.Rev. 1283 said, enough injunction Clayton it is not an under As the Court of the Act, 26, complaint alleges “a causal con 15 U.S.C. must show a threat of an antitrust violation nection between antitrust Pennsylvania See also fact [plaintiff]____ mere harm to the Dental Ass’n v. [T]he Medical Serv. Ass’n of literally encompassed by claim is Pa., 270, (3d Cir.1987); 815 F.2d inquiry.” end the Clayton Act does not Schoenkopf v. Brown To & Williamson 537, Among the 103 S.Ct. at 908. Id. at (3d Corp., bacco 210-11 Cir. weighed in determin must factors that be 1980). directness or ing standing are the showing injury A of antitrust injury, the court’s abili of the indirectness necessary always but not sufficient to es keep of the claim within the ty to trial standing. party A may tablish antitrust limits, manageable and the nature judicially injury yet have suffered antitrust not be (i.e., type injury is it of proper plaintiff considered for other rea prevent). meant to Id. antitrust laws were Cargill, sons. 107 S.Ct. at 489-90 & 103 S.Ct. at 908-12. See Meri suggested nn. It has been that al Co., can, Caterpillar Inc. v. Tractor though standing closely related to anti (3d Cir.), denied, F.2d 964-65 cert. injury, concepts trust two are distinct. 1024, 104 79 L.Ed.2d 682 S.Ct. injury Once antitrust has been demonstrat (1983). See also Illinois Brick Co. v. Illi relationship ed a causal between the 720, 745, 2061, 2074, nois, 431 U.S. challenged aspect harm and the of the al (1977); Hawaii v. Standard leged violation, standing analysis is em Cal., 251, 264, 92 405 U.S. S.Ct. Oil Co. of ployed to search for the most effective 885, 892, 31 L.Ed.2d plaintiff among those who have suf injury” The “nature of the factor deter- Cargill, fered loss. See 107 S.Ct. at 490 n. mines whether the has suffered 6; 210; Schoenkopf, 637 F.2d at see also injury.” “antitrust This term was the fo- Page, Scope Liability Antitrust Corp. cus of discussion in Brunswick Violations, 37 Stan.L.Rev. Bowl-O-Mat, Inc., 477, 97 Pueblo (1985). However, in plain the sense that There, 50 L.Ed.2d 701. tiffs sustain no may who Court stated that to recover treble dam- recover, they may loosely said to violation, ages plaintiffs for a 7 must standing. lack courts and Some commenta prove causally more than harm linked to an tors thus have treated Brunswick as a illegal presence Rather, in the market. case, standing although its concerns actual they injury “inju- must establish antitrust — ly centered on antitrust ry type of the the antitrust laws were prevent intended to and that from flows Cargill emphasized necessity for that which makes defendants' acts unlaw- scrutinizing injury the antitrust factor. 489, ful.” at Id. 97 S.Ct. at 697. The harm There, Court wrote that the anticompetitive “should reflect the effect against protect laws business “the loss of either of the violation or of practices profits by forbidden the an- possible laws____ by acts made violation. [Competition titrust for in- should, short, type ‘the be loss activity is not for- creased share[ ] likely the claimed violations ... would be bidden the antitrust laws.” 107 S.Ct. at ” (quoting to cause.’ Id. Zenith Radio short, Clayton Act deterrence Research, Inc., Corp. v. Hazeltine 395 U.S. through compensatory provisions is aimed 100, 125, 1562, 1577, 89 S.Ct. 23 L.Ed.2d directly harmful effects of an toward the (1969)); 129 see also Blue Shield Va. v. transgression. statutory 465, 482-83, McCready, 457 U.S. 102 S.Ct. sanctions do not constitute a broad restitu- 2540, 2550, (1982); Associ- closely tionary injuries for not re- scheme Contractors, ated Gen. 459 U.S. at by other lated to the violation but caused 103 S.Ct. at 908-09. not, effects, illegal desirable or of the con- notion, Congoleum Supply duct. Co. v.

Expanding Cargill, on that Seaboard 367, (3d Cir.1985); private plaintiff seeking Corp., F.2d 372 Sit- Court held that a 770 competition Refining Co. v. FMC tial between Du Smelting kin & Pont and Co- (3d Cir.), Instead, 447-48 cert. damages noco. Corp., alleged are denied, 439 58 purely U.S. the result of the failure of demand rise____ (1978). Mindful that antitrust damages possibly L.Ed.2d No can be competition, not com protect law aims to theory.” awarded Alberta Gas on this in analyze the antitrust petitors, we must reaching Alberta contends this viewpoint of the jury question from conclusion, misapplied the district court Brown Shoe Co. United consumer. agree. do Brunswick. We 294, 320, States, purposes discussion, For of this will we 1521, L.Ed.2d 510 assume, court, did the district us is whether The issue before illegal enabled Du may properly losses which has asserted entering Pont bar Conoco from injury. Concerns about called antitrust methanol-producing industry indepen- as an “standing” in read in that this case must be competitor.4 dent setting, the con- light. cern of the antitrust laws and consumers is competition the loss of between Du Pont III. and Conoco entry after latter’s into the above, first, Alberta’s or hori- As noted producer. Shoe, market as a See Brown zontal, claim seeks for lost sales (validity U.S. at S.Ct. at 1529 allegedly caused the termination of Co- merger depends horizontal on certain produce and build demand noco’s factors, including whether will absorb or acquisition, for methanol as a fuel. The competitors, thereby lessening insulate resulting gasifi- in cancellation of the coal acquiring ac- between Alberta, project, according cation violat- quired companies). Du Pont eliminated ed 7 because Conoco producing as a com- substantial injuries But horizontal do Alberta’s

petitor. That action also ended Conoco’s “from not flow that which makes the de spur plans to demand for methanol as fuel. fendants’ acts unlawful.” result, As a Alberta asserts that it lost 97 S.Ct. at 697. Alberta’s “competition sales and when for the with, alleged losses were neither connected gallons sale hundreds of millions of from, power nor resulted Du Pont’s market additional methanol to build in- [to methanol-producing industry. in the That Brief terim was eliminated.” demand] is clear because the same harm would have appellants at 28. any acquirer decided to cur occurred had marketing production district court found that from tail Conoco’s pro plans. example, this “demand For a non-methanol creation” claim “bears abso- ducing company, merger would not lutely relationship aspect no to the whose problems, might been merger illegal pose which is said to make it have 7, is, entering the market be competi- under that that it lessens dissuaded from § gasification or industry.” in the cause of the costs of coal tion methanol court gas, alleges depressed prices of oil and natural noted that “Alberta Gas no dam- the energy ages poten- as a result the more traditional sources. That of the elimination of temporary, pe- the from the absence of the interim Our fundamental difference with dissent not, illegality anti-competitive- its focus the of market stimulation. Plaintiffs do riod intent, merger. not, ness of the The comments on complain about the ultimate ef- and could example, pertinent only are to the issue of prevention competi- merger a fect of the of —the legality. But the district court assumed the entry into the market. tor’s 7, merger appeal. violated as do we on this § short, it, question presented In as we see merits, Thus, further discussion about the or merger socially unde- here is not whether them, really lack of of the are not rele- sirable, plaintiffs these should be but whether vant. damages. quite a to collect That is allowed It seems also that the dissent is concerned question than whether different long-range merger; how- with the effects of the permitted. should be ever, injuries most of Alberta’s claimed flow 1242 might 487,

Du have had an 429 Pont additional rea- ents.” 97 at S.Ct. at 697. pro- desire to increase Similarly, son—a not its total injuries because Alberta’s would change duction methanol—does not have occurred 7, absent a violation of § nature of the of Du Pont’s decision effect they not anticompetitive do flow from the Alberta, competitor, as a is in on Alberta. merger. of the effects position compensable injury no to claim Moreover, the Du Pont-Conoco merger potential from Du Pont’s elimination of a necessarily would not lead the loss of output. increase in See Matsushita Elec. profits Alberta claims. Consistent with a Corp., Radio 475 U.S. Ind. Co. v. Zenith finding that acquisition violated § 1348, 1354, 89 538 L.Ed.2d Du go Pont could have chosen to forward (1986)(competitors cannot recover antitrust strategy, providing with a coal-based Al- conspiracy non- impose for a its anticipated profits. berta with sales and price of ei- restraints that have the effect noted Court limiting raising ther or out- “acquired thriving bowling Brunswick cen- put); Page, supra, Stan.L.Rev. at 1471 acquisitions at least as violative of ters— (competitors injury suffer no antitrust acquisitions respon- instant § — merger resulting higher from horizontal any dents not have lost income that prices). they otherwise would have received.” Id. Further, poten status as a Conoco’s n. at 487 97 S.Ct. at 697 n. 12. competitor tial in the merchant Similarly, if in pro the future Du Pont theory market is irrelevant Alberta’s gasification procedures, ceeds coal with alleged injuries Alberta’s flow not occur, development Alberta maintains will poten from the elimination Conoco as a may the same market effects well result. competitor, tial from the but loss of Conoco Alberta’s injuries proxi Because were not aas future consumer methanol.5 While mately by anticompetitive caused ef may in this case there be some connection merger, fects of the Du they Pont-Conoco plan between compet Conoco’s to become a do not flow from the 7 violation. plan itor and its to consume more methanol Contractors, See Associated Gen. future, in the plan really only the former 907; Gregory S.Ct. at Mar sup coincidental to the harm which Alberta Corp. keting Corp., Food posedly Wakefern challenge sustained. to a (3d Cir.) (broker’s injuries F.2d merger, private horizontal plaintiff must proximately from reduced not commissions injured show that it because ac by caused nature of a quiring competi and the firms are agreement pricing because the broker’s tors a field of commerce. is not profits necessarily “would not be reduced enough happen demonstrate competition”), denied, diminished cert. stance, merging competitors firms are - U.S. -, L.Ed.2d 40 potential competitors. In Brunswick, bowling centers in three Finally, Alberta’s horizontal losses distinct are markets contended wealthy injury type the antitrust defendant’s of some of laws prevent. competitors their were intended to violated 7. The Court Brunswick plaintiffs complained acquiring found no plaintiffs each “would failing bowling center, have deprived suffered identical ‘loss’— defendant no compensable injury but plaintiffs the ac- them the —had quired refinancing centers instead obtained from realized increased concentra- purchased been by par- or pocket’ bankrupt. ‘shallow tion when center went Thus, would, minimum, damages closely 5. Alberta’s more it at a to demonstrate injuries flowing resemble from a fore- "vertical portion existing that a of the market has actual- injuries expect closure" one than would to fol- Alberta, ly merger. been foreclosed believe, merger. low from a horizontal We course, showing cannot make such a in connec- however, that in order for Alberta to maintain theory. tion its "demand creation” with theory, an action based on a vertical foreclosure from standpoint, that “it is far clear From consumer’s Court concluded the de velopment profits anticipated that would that Alberta that the loss of windfall and the basis for its had the centers claim—an increase in have accrued ‘injury’ price prove within the distinctly failed even constitutes disad —would vantageous. quite unavailing argue And it is clear that It is meaning of to injured, ‘by bring it was not Du Pont’s failure to in respondents if about an in in anything price injured the anti- crease of methanol Al reason of forbidden ” in 97 S.Ct. at berta a manner that the antitrust trust laws.’ laws compensate. were intended to Cargill, See (antitrust 107 S.Ct. at 492 laws intended to case, damages In this Alberta seeks from protect price competition); Arthur S. Lan strate- Du Pont’s abandonment of Conoco’s Co., genderfer, Inc. v. S.E. Johnson demand for metha- gy to increase (6th Cir.), (“[i]t F.2d 1050 inis the interest contends, As in Alberta nol. permit dominant firms to position not that its worsened as a result engage vigorous competition, including in acquisition, rather that it was de- but denied, price competition”), cert. in from an increase nied sales profits. The essentially windfall demand— antitrust struck, moreover, We are with the fact laws, however, do not award dam- presence competí of Conoco as a ages equitable relief for losses stem- marketplace tor in the would not serve ming competitor from the failure long self-interest in the It is Alberta’s run. bring in demand and about an increase curious that Alberta would assert a loss 1354; Matsushita, price. 106 S.Ct. at see which, Pont if conduct of Du Alberta is to Areeda, Antitrust also Violations With- credited, suppli be reduced the number of Recoveries, Damage 89 Harv.L.Rev. out marketplace. If helps ers that action (1976) (In Brunswick, “the producer, inevitably Du Pont as a aids position established that its never every producer.6 Alberta as well as other argued only had worsened—it that without Turner, generally P. Areeda D. & An it would have been better off ¶ 335.2f, (1986 Supp.) titrust Law at 239 competitors. due to the failure of its creating (joint venture disincentive for a stretching beyond credibility be foreign independent producer to commence ‘injur[y] property’ words in business or manufacturing operations in the United include within their terms this of dis- kind competition, in reduced States would result appointed expectation profit.”). of windfall competitor only which benefit accurately The district court described market). the American Alberta’s claim as one not for a reduction sum, has not because Alberta asserted existing of its sales base but the denial of aspects from the horizontal Significantly, an increase. cancellation of merger, the district court did not err gasification project any did not cause summary judgment for Du granting supply decrease of methanol claims. Pont on those marketplace; consequently, did not diminish con- the amount available to IV. position sumers. can sus- Alberta’s injuries, only impose analyzing Alberta’s vertical tained the antitrust laws an is, for duty producer expand on a loss of methanol sales Conoco affirmative plants, the district prohibitions plastic markets in addition to the and chemical undertaking possibility “there is no against anticompetitive mea- court said that to show no Gas will be able sures to reduce them. Alberta cites merger.” any lost sales due to the authority for such a construction of the Pont by July found that Du laws. The court currently gas, quantities inexpensive says competi- natural 6. Alberta that it "has an inherent producing methanol.” advantage producers raw material over other methanol tive appellants large at 35. Brief for in the United States since has access 1244 anticompetitive shut metha-

had divested or down Conoco’s ture effects of the Du operations. nol-consuming merger, generally The district Pont-Conoco we will had no court also determined that Conoco view the at the time of its oc- merger purchase accept Alber- currence and before the the facts Alberta them. ta’s methanol from 1981 to 1984. There- asserts fore, concluded the court litigation, in Early the the district court damages. a failed to establish basis denied Du Pont’s motion dismiss based respect allegations contends with on that Du self-

Alberta now Pont-Conoco claim, following prove dealing to the it can at trial it the vertical foreclosed 3% and, discovery progressed, sold methanol to Conoco of the market. As therefore, in apparent district mak purchases court erred became that Conoco’s ing plants are equalled factual determinations which sub for its chemical substantial- ject dispute. ly need not than to substantial We less of the merchant market. 3% on point Although recognizing per resolve this because we will affirm that foreclosure Township se 7, See Fairview ground. not constitute of another did a violation § EPA, (3d 517, Cir. 525 n. 15 court never reexamined extent to which 1985) (this may by merg- affirm district court the market been affected er, finding any support grant judgment court on in but instead chose to basis record). prove failure to fact of injury. Alberta’s essence, compensation Alberta seeks Clearly, de minimis foreclosure of a resulting for lost sales from Du Pont-Cono- market not an antitrust dereliction in merger. co after the self-dealing dis- Shoe, Brown itself. 370 U.S. at year trict court noted Indeed, respected at 1526. 82 S.Ct. schol merger, purchased before the 8.9 question the anticompetitive ars effects of gallons of representing million methanol mergers general. As one vertical com approximately total merchant 1.8% phrases mentator it: “Foreclosure does sales. in- methanol market Alberta claims not, however, reflect an actual reduction in jury Pont, Alberta, because Du and not any meaningful sense.” supplied post-merger require- Damages Antitrust and Economic Page, ments for Jersey Conoco’sNew and Louisi- Efficiency: Approach An to Antitrust In plants. ana jury, (1980); see 495 47 U.Chi.L.Rev. Turner, supra also 4 P. Areeda & D. Dynamics United States v. General ¶ 1004, (foreclosure argument at has Corp., 486, 504, 94 S.Ct. grave weaknesses; only where fore (1974), L.Ed.2d the Court com- monopolistic reach probative proportions closures “postac- mented that the value of —or to do quisition threaten so—does a tending evidence vertical diminish Bork, troublesome); The Anti probability impact R. or ef- become anticompetitive (1978)(“Antitrust’s trust Paradox fects” case is “extremely limited.” mergers The need for concern with vertical such a limitation is obvious. mistaken. “If anticompetitive mergers of creating demonstration that no Vertical are means effects had efficiency, injuring competition____ occurred at the time of trial or not of judgment permissible constituted de- theory merely foreclosure is not [The] suit, irrelevant.”); fense su wrong, Hovenkamp, to a 7 divestiture violators pra, (of could such merely Hastings merg stave off actions re- at all L.J. fraining ers, aggressive acquisitions likely or vertical are the most behavior produce likely when such a suit threatened efficiencies the least Id. at pending.” power merg to enhance firms). ing pertinent vertically integrated seeking Court’s remarks are to our A firm present injury inquiry. engage self-dealing To avoid increase will questionable validity postacqui- output cannot supplying some division’s elsewhere, tending sition profitably evidence the fu- sold or is minimize more

1245 in an effort product of Alberta’s methanol to drive it costly or than more inferior methanol-producing from the market. Ser- 4 P. Areeda & D. suppliers. See outside however, theory, exist 222; Bork, ious flaws with this ¶ 1004, Turner, at R supra, proffered Alberta has not evidence 227-28; Hovenkamp, supra, 35 supra at that it will be forced from the merchant post- Because of Hastings at 962. L.J. market as a result of Du Pont’s cancella- allowing purchase it to merger efficiencies purchases tion Conoco’smethanol there. output at a better acquiring company’s 493; Matsushita, Cargill, See 107 S.Ct. at acquired marketplace, the in the price than Thus, 106 S.Ct. at 1355 n. 8. Alberta can- fall—a company’s purchasing costs would rely quasi-“predatory” activities to being capable of benefit procompetitive establish antitrust under Bruns- prices products. for its on via passed lower Bork, generally supra, R. at wick. See scenario, Thus, post-merger self- in this merger (predation through 232 vertical in efficiencies reflected dealing could result extremely unlikely). As the district court the ultimate consumer. prices in lower to observed, purchases Conoco’s in the mer- competitors of this nature Injuries to only chant market in 1980 amounted to anti compensable under the should not be of sales the United States. That 1.8% not flow from they do trust law because percentage itself is de minimis. merger. effects of a of the foreclosure is cut in half amount being by any post-merger from caused Far one considers that in 1980 Du Pont when competitor’s losses power, consump- sold Conoco of its methanol 46% aspects the efficient spring from would reality, tion. In foreclosed less Carriers, merger. Inc. v. See Car than of the market.7 United States 1% Co., F.Supp. 887-88 561 Ford Motor Co., F.Supp. Paper Hammermill 429 (N.D.Ill.1983) stop dealing to (conspiracy (market (W.D.Pa.1977) 1282 share desire plaintiff motivated “Ford’s with represented by acquiring company’s (plaintiffs) replace high-priced suppliers supply firm is not previous one”; flowing low-priced losses with foreclosure). reviewing part of the type of anti- from termination are not the assumed, arguen- these statistics we have competitive injury the antitrust laws do, correctly defined the that Alberta has forestall), 1101 aff'd, intended the merchant appropriate market to be Cir.1984), denied, (7th cert. in the United States. market for methanol (1985); Bay 105 S.Ct. that Du Pont contends that the We observe Co., Pepper Bottling, Inc. v. Dr. ou should include metha- proper denominator (5th Cir.) (franchisor’s influencing F.2d 300 operations, internal produced for nol assign franchise of soft drink franchisee dramatically reduce the factor which cause firm other than did not foreclosure.8 denied, injury), 469 U.S. cert. acquisi- Alberta has not 83 L.Ed.2d part pattern of a of foreclosures tion was market, Du helpful methanol-consuming Nor is it to characterize nor in the po- triggered pattern of designed Pont’s actions as to eliminate which, aggregate, in the tential consumers for Alberta’s methanol. foreclosures Brown “preda- cause harmful effects. See perspective, From this Du Pont’s Shoe, 82 S.Ct. at as an at- tory” conduct could be viewed the methanol indus- contends that outlets for Alberta tempt to decrease the available Therefore, the foreclosure of sales pur- Pont. points Conoco Du 7. Alberta to the fact that in fact was not 100%. only consumption Conoco of 11.7 chased 6.2% its Pont, gallons in from Du a total million Supplement amounting Hovenkamp, market. the merchant & to 2.1% of 8. See Areeda 1, discussing Department Justice marketing plans own made before Alberta’s 520b merger guidelines, "captive production and con- merger anticipated sales announcement vertically product only gallons sumption relevant in 1982. of the to Conoco of one million however, part bought integrated overall market merger, firms are of the Even after the supply and demand.” methanol from outside sources and 81.5% try highly integrated; as a whole is never- Because the district court assumed plaintiff competes existed, theless in the that a violation of posture merchant market, appeal requires where us allegedly its' losses oc- to consider whether foreclosure could be the curred. basis of an infraction here. We conclude that be merger, freely Since Alberta has sold cause its consequences, de minimis to the rest of the merchant market and acquisition Du Pont subsequent and fore indeed has increased annual in sales closure of purchases Conoco from Alberta gallons States from 38 million United does not establish a 7 violation.10 There § gallons million 1980 to 64 in 1984 83 and fore, the loss of flowing sales to Conoco gallons in million 1985.9 The circumstanc- from the foreclosure does satisfy considerably es here differ from Heatrans- injury requirement as announced A.G., Corp. Volkswagenwerk, 553 fer in Brunswick. 964, (5th Cir.1977), F.2d 985 where a verti- situation, To recover in this merger virtually precluded cal plaintiff private plaintiff must establish foreclosure selling any products. of its of a sufficiently large share of the market closely case at hand more resembles to violate Having 7. failed to do that in § FTC, 345, Corp. v. 360 case, present Fruehauf Alberta has not estab- (2d Cir.1979), in which court decided lished resulting antitrust violation or inju- integration foreclosing that a vertical 5.8% ry. The fact that large Du Pont had a of the market did not constitute an anti share in the market before merger, trust violation. appeals The court of moreover, con does not transform a de minimis foreclosure, cluded as a result of this foreclosure into antitrust any more “there merely realignment be a than superior Brunswick’s ability financial existing market sales any acquisitions without likeli turned its into compe- unlawful competition.” hood a diminution in tition for bowling smaller alleys. Id. See 360; Brunswick, 429 see also Crane U.S. at Co. v. Harsco 97 S.Ct. at 697. Corp., The same harm F.Supp. (D.Del.1981) to Alberta would have ensued if (vertical very pro- small methanol foreclosing 8.8% ducer imposed Conoco and substantially market does not lessen com self-dealing. total petition); Internorth, Crouse-Hinds Co. v.

Inc., F.Supp. (N.D.N.Y.1980) merger If the were considered unlawful (plaintiff must show effect sales, reasons other than foreclosure of as significant well as market foreclosure in question then would become whether merger 7); vertical case under United § damages from the foreclosure flowed from Corp. Nuclear Engineer v. Combustion illegal Turning again act. once Inc., ing, 302 F.Supp. (E.D.Pa. we reiterate that must 1969) (foreclosures of are 5.5% 19% establish that its harm was caused determining “inconclusive” in 7 viola § which makes the action unlawful. Assum- tion). generally 2 P. Areeda & D. ing violated the antitrust laws Turner, ¶ 527a supra, (absent very high because it power concentrated economic concentration, a vertical production of methanol—as Alberta as- may simply realign patterns sales between any resulting foreclosure from this serts — competitors merged merging of, concentration is but an incident and not firms). of, a result the unlawful In act. this in- figures contends for 1980 and 7. § Because he believes that the district court 1981 were antidump- aberrational because of an did not assume a 7 violation as § to the vertical ing brought against action Du Pont. The claim, Judge Hunter would not address the ad- pretrial stipulation shows Alberta’s U.S. sales as question ditional of whether Alberta was in- 1978,. gallons 39 million 59 million in jured by the foreclosure. If the district court and 49 million in 1977. resolving did assume a violation of 7 in claim, Judge join vertical Hunter would in the Judge agrees Hunter that the foreclosure is opinion court's without that reservation. de minimis and does not establish a violation of stance, plant losses are not antitrust foreclosure invest billion a that would $1 trans- form coal into methanol. prices Gasoline high and Conoco intended to reasons, these we conclude that Al- For make methanol an popu- automotive fuel as injuries has not berta gasoline. lar order to stimulate the aspects from the vertical of the Du Pont- gallons demand for the millions of of meth- merger. plant produce, anol which its new was to large Conoco intended to create a network Y. of retail methanol distributors. The size of claims, damage to its addition treble this network would induce consumers to injunction an under Alberta also seeks begin buy methanol-burning automobiles Act, Clayton 15 U.S.C. dissolv- of gasoline, instead using of cars so that merger. ing Du Pont-Conoco For the plant when ready produce Conoco’s damage that Alberta’s treble reasons methanol, product a market for the summary fail under claims place. inbe Alberta Gas contends that to judgment appropriate for Du Pont on operate prod- this network before its own injunctive Alberta’s claims for relief as it, through uct could be sold Conoco would well. bought methanol from a of number suppliers, including other Alberta Gas. In VI. run, long argument goes, Conoco’s sum, present- has not advertising blitz and its efforts to injury, ed evidence of antitrust we will people induce to substitute methanol for grant affirm the district court’s of summa- gasoline dramatically expanded would have ry judgment for Du Pont.11 product, the demand for the and its market price would have risen. Alberta Gas would BECKER, Judge, dissenting. Circuit price benefit from the rise in and demand. appeal This case is us on of before Alas, DuPont, along came which manu- judge’s grant summary judgment trial of approximately factured 25-30% for defendants. The facts are methanol used in the United States. Du- quite simple, majority fairly and the has Pont used half of this methanol itself and presented appears majority them. But the (i.e. sold the other half the “merchant” plaintiff's to have misconceived the claims. spot) market. DuPont Conoco. responds arguments to Alberta Gas’s DuPont plans then terminated Conoco’s but, view, variety my with a of correct invest in the methanol market. Alberta legal principles, irrelevant so that I have protect Gas claims that DuPont did so to difficulty ascertaining grounds monopoly position its own in that market. which the district court has been affirmed. I summary therefore set out a brief I. The Horizontal Claim

plaintiff’s help explain why case which will majority believe the has reached the This is not story the most believable wrong result. about the conduct of rational actors company marketplace,

Alberta Gas is a Canadian because it is far from clear which makes methanol. Conoco was an that it make economic sense for Du- company alleg- American with vast coal re- Pont to have behaved as Alberta Gas plans sympa- sources. Conoco had firm es it did.1 I would therefore have grant summary plans develop sufficiently 11. Because we affirm the methanol were defendant, judgment for the we need not discuss immediately merger, firm that before the Cono- plaintiffs’ summary the denial of the motion for begun advertising plans co had those to the judgment. public. citing Appellant’s opening br. at A the text of a television advertisement noted, however, 1. It should be that the record during Indianapolis broadcast auto the 1981 very strong contains evidence that Conoco was race, which stated that “Conoco soon be will develop indeed committed to plant, a coal-to-methanol methanol, testing passenger powered by cars Indeed, alleges. as Alberta Gas Conoco’s thized with the district court it had found trimental —i.e. Al- that—so justified grant standing that the record of sum- berta Gas has under Brunswick challenge mary judgment ground activity. on the That set put enough essentially forth facts is Gas had not evidence to follows. likely arguably improba- make it that this DuPont, participant Assume as a story ble is true. I would be the last one to oligopolistic methanol, market for summary judgment claim that cannot be earning monopoly per rent of unit on $1 granted an antitrust case on that basis. each of the 100 units methanol it sells: Corp. v. See Zenith Radio Matsushita monopoly total equals rent then As- $100. Co., (E.D.PA F.Supp. Elec. Indus. sume further that if Conoco were to suc- reversed, 1981), (3d Cir.1983), 723 F.2d 238 ceed in its to increase the demand for reversed, 89 methanol, the number of units DuPont L.Ed.2d 538 Assume, could sell would be 1000. how- ever, that the market would then be much grant But the district court did not sum- competitive (more more suppliers would en- mary judgment ground, on this and Du- market, ter the and there would be more Pont does not ap- advance the Matsushita competition, so that the difference beteen proach ground as a for affirmance.2 The marignal revenue would fall even plain- district court in this case held that though price might rise). Then DuPont pursue tiffs had no to standing their might only earn penny monopoly rent plaintiffs claims because it that believed unit, per instead of monopoly Total $1. alleged they had not that incurred “anti- ($.01 rent would now be instead of $10 $100 injury” trust as that term is defined in = = instead of $10.00 $1 X x Corp. Brunswick v. Pueblo Bowl-O-Mat $100). alleges Alberta Gas that DuPont Corp., 429 prevent Conoco’s this from (1977). killed theory L.Ed.2d 701 That the—not happening. plaintiffs sup- belief that the have failed to port implausible theory, an and so should Alberta Gas seeks for two jury not reach a also the basis on which injuries.3 First, kinds of Alberta —is Gas sues grant this Court now affirms the of sum- for the loss of the sales it would have made mary judgment. entirely That is an differ- plant Conoco before Conoco’s came ent matter. line, of the methanol Conoco have would up used to set its network of methanol I that majority’s believe result rests plan distributors. Because the was termi- on a misconstruction of Brunswick and the nated, plaintiff allegedly lost this business. more recent Cargill case of Inc. v. Mon - complains Count I Alberta Gas about Colorado, U.S. -, fort loss, inju- which it calls the “vertical In order to ry.” below, But see typescript discussion explain view, my begin by pointing out at 14-15. that there is a set of facts under which it would make economic Second, sense for DuPont to says Alberta Gas that in- alleges behave as Alberta Gas it did. This crease in pro- demand Conoco would have explanation helps clarify the fact that duced would up have driven both the con- alleged DuPont’s actions socially sumption price were de- and the of methanol over planning produce juncture, and we’re primarily this fuel from Alberta Gas is interested coal.” money damages. may indepen- 2. This Court review the record majority 4. The concentrates its discussion of the dently to determine whether there is an alterna- vertical claims on the sales Alberta Gas would ground tive for affirmance. But I believe that company have made to Conoco if the latter suggests the size of this record that that task be manufacturing not closed down its chemical performed in the first instance the district plants Jersey explain in New and Texas. As I court. below, fully typescript more see I do complaint injunctive 3. While the also seeks re- not understand Alberta Gas to focus on this lief, preliminary Alberta Gas did not seek a point. injunction. My understanding is at this peted has access long term. Alberta Gas to a with would gone out of busi- gas, supply ness, of natural so that large and that plaintiffs’ as a result profits and low. are both constant costs Supreme have risen. The Court complains consumption that this rise Gas therefore complaint held that a about a loss in turn have meant an price and profit caused was not profits, in Alberta Gas’s and that increase complaint about injury. project termination of the took DuPont’s plaintiff in allege Brunswick did not that away. parties This claim the profits those merged entity going engage injury.” “horizontal have denominated the any predatory conduct. respect to the horizontal claim— With argues DuPont here that Alberta Gas is have been stimulated that demand would really only complaining about the fact that increased, prices thereby boosting Al- price rise, for methanol did not and that profits berta Gas’s defendants —both harm such cannot constitute inju- majority and the believe that Alberta Gas ry. While it is true that Alberta Gas is alleged right has not that it sustained the complaining profits, about lost They kind of reach this conclusion allegedly lost not because DuPont they focus on Alberta com- Gas’s preserved or increased the—as plaint benefited from that would have defendant Brunswick was price rise rather than a fall. DuPont have done—but because DuPont eliminat- and the Court reason that since lower competition. things ed alleg- prices always are in the interest of the edly investing would have in a new done— plaintiff’s allegation consumer suf- plant stimulating demand to ensure prices fered from the failure of to rise is there would be a market for that nothing really allegation plain- but an plant’s product procompetitive, social- —are procompetitive activity. tiffs suffered from ly prevention beneficial activities. The reasoning simplistic This and incorrect. those activities causes a in decrease social standing order to have to sue under allegedly welfare. Alberta Gas was in- the antitrust laws a com- must be jured by that decrease social welfare. plaining injury of an majority simply Thus the crucial- —and type the antitrust laws were in- states, ly slip op. it when at —incorrect prevent tended to and that flows from “[fjrom the consumer’s stand- that which makes the defendants’ acts point, development that Alberta antici- The unlawful. should reflect the pated and the basis for its claim—an in- anticompetitive effect either of the viola- price prove crease methanol dis- pos- tion or of acts made —would tinctly disadvantageous.” price A rise sible the violation. represents only harmful to consumers Bowl-O-Mat, Corp. Brunswick v. Pueblo along unchanged movement an demand Inc., 477, 489, 690, 697, 429 U.S. point point curve—a A movement plain- L.Ed.2d graph B on the below. But here the rise tiff attacked a under 7 which price would have been caused a shift to conceded, arguendo, defendants il- was right of the demand curve—a move- legal. bowling Plaintiffs centers point point ment from A to C. This shift in competition with some of the il- centers the demand curve indicates that the com- legally acquired by defendant. Plaintiffs modity sold has become more useful claimed that had defendant not made the illegal acquisition, plaintiffs the lanes com- consumers. change Such a socially nonprice is indeed benefi- restraints that have the effect of cial, procompetitive, and therefore not raising either price limiting out- anticompetitive and harmful.5 This shift put.” Supreme point Court’s there

would also benefit Alberta Gas in the was that one seller in a market will not be run, long increasing profit, its even injured by anticompetitive which, activity though DuPont, might harm lowering while the demand curve remains un- profit, for the reasons have set out moved, raises price. the market But here typescript at 1-2. practice which price would have raised anticompetitive, such as “a con- majority thus has no basis to invoke spiracy Matsushita Elec. Indus. Co. v. Zenith Ra- impose nonprice restraints;” rather, Corp., dio it is here that (1986), have risen as a proposi- procompetitive for the result of tion “competitors activity cannot recover anti- which would have stimulated de- trust conspiracy impose for a mand. Matsushita says nothing about a majority’s focusing response error in on the rise in profits to an increase in demand. But price clearly can also be seen from the fact that would still have risen if demand increased. As complaint profits Alberta Gas’s about lost would graph explains, profits the below would have essentially price the same even if the market represented by risen from the amount area A to suppliers for methanol did not rise at all. If all the sum of that area and area B. And Alberta produced methanol with the same cost structure Gas would still have lost as a result of i.e., marginal as Alberta at constant cost— Gas— anticompetitive DuPont’s actions. price the market would not have risen at all in competitor’s standing protest the elimi- Pont allegedly had here have been procompetitive activity. nation of absent. The majority therefore concludes plaintiff alleged has not inju- explains why This discussion also ry. wrong in majority characterizing plain- complaint attempt as an I recoup tiff's believe the majority’s argument wrong profits.” majority opinion “windfall because it misstates the manner in by The authorities cited majori- which the law uses intent to explain the again, significance ty once and a law re- of anticompetitive activity. If —Matsushita article company view about Brunswick —character- another bought Conoco and plans, ize as a “windfall” the benefits that one terminated the it would have done so competitor in a market would plans have received because the were unwise. DuPont competitor engaged it, too, another anticom- claims why that that is terminated petitive plans. conduct which raised But claims that Du- price. allegation Here the is that Pont eliminated protect Du- risen of procompeti- power as a result Pont’s market in the methanol mar- activity. A tive benefit from ket. If why increased that is did, DuPont did what it competition windfall; is not a exactly purchaser it is then another probably would not the kind of benefit which the antitrust laws have terminated the plans. investment Du- preserve. intended to This is no Pont’s less intention indicates the anti- simply true competitive because one of the benefi- effect of its actions. While the competitor. ciaries regulate conduct, laws as distin- guished intentions, Justice Brandéis majority support also seeks from an explained long ago that argument made in but be- the reason for adopting particular majority lieve that has misconstrued remedy purpose sought or end [and] argument and so misuses it here. To to be attained ... are all relevant facts. help identify what it meant “antitrust good This is not because a intention will injury,” Supreme Court in Brunswick objectionable save an otherwise regula- pointed plaintiffs out that the in that case reverse; tion or the but because knowl- would have injured exactly been edge may help or intent the court to way bowling same if the alleys with which interpret predict facts and to conse- they competed acquired by had been some- quences. one other than defendant. The Court thus “[r]espondents Chicago States, observed that would have Bd. Trade v. United 231, 238, 242, 244, suffered the identical ‘loss’—but no com- L.Ed. pensable injury centers —had instead refinancing pur- obtained or been arguing Alberta Gas is that DuPont’s pocket’ chased parents.” ‘shallow actions have had an effect. U.S. at 97 S.Ct. at majority 697. The Brandéis’ Chicago Justice statement attempts point to make the same in this Board Trade demonstrates that both the case, arguing that if Conoco had been ac- (rather fact that DuPont than another com- quired by company, another Conoco, pany) bought and DuPont’s reason market, company and that had Conoco, buying are relevant evidence of terminated plans Conoco’s to make these purchase’s the ultimate effect. The fact investments, then Alberta Gas would have anticompetitive that no results have would suffered in exactly way. the same that bought if ensued Conoco had been Gen- circumstances, set of DuPont irrelevant, concludes eral Foods is pro- and does not plaintiff and the merger concedes that the vide a basis for dismissal for lack of stand- illegal would not have been ing under allegations view of Alberta Gas’s anticompetitive The motivation which Du- about DuPont’s intentions.6 majority’s I also do not the understand Bruns- 7 case must stem from that which makes the argument merger illegal. majority opinion, wick -based typescript that Alberta Gas’s claim See principle plaintiffs injury citing offends the that a in a at U.S. at 487 n. Finally, majority and the II. defendants The Vertical Claim support for their conclusion that draw I also believe the has majority completely Supreme plaintiff standing from the lacked plaintiff’s misconstrued the “vertical” opinion in Inc. v. Cargill, Court’s recent damages. claim for plaintiff primarily The - Colorado, -, complains about the it would sales have Monfort of There the gone made Conoco if to Conoco had standing Court no held that Monfort had through plans with large to build a challenge alleged merger when it that the majori- network methanol dealers. The ty rejected merged prices ground lower has on entity would because that claim the things that in light as turned out—i.e. plaintiff the not the had that de the plans fact that Conoco’s were terminat- engage pric predatory fendants would bought only ed—Conoco amount a small ing pricing below cost. —i.e. market, open methanol on the fill the however, opinion, of that the course plants; methanol demand of its chemical against explicitly Justice Brennan warned majority the therefore concludes that Al- precisely by majori- the error now made the claim berta Gas’s is de minimis. Since no ty. Department, The amicus Justice significant damages alleged, been have curiae, no argued that should ever majority, judgment holds the summary was merger standing challenge have granted properly for defendant. See ma- grounds merged en- entity that the would jority opinion, typescript at 1245. gage pricing in predatory Jus- respect, majority With has missed Department thought tice predatory that point. Plaintiff complaining is not practices economically are irrational and fact gasi- about the that once Conoco’scoal therefore virtually that businesses would plans fication were terminated. Conoco engage never in them. Justice Brennan purchased only a of methanol on bit however, rejected flatly contention, this open got market and that Gas Alberta none holding: point business. is that Plaintiff's that if may engage While firms practice purchased had DuPont Conoco and only infrequently, there ample evi- gasification plans, terminated coal suggesting practice dence does more, bought have Conocowould much occur. It would be novel indeed for a that Alberta Gas would have sold Conoco court deny standing party seeking much that increment. have no idea injunction against an threatened whether not that fact merely injuries rarely because such oc- right if happened, but Alberta it has Gas cur. certainly stated a non de minimis claim for damages. (footnote omitted). 107 S.Ct. at 495

majority here held squarely has Alber- point apparent also Once this clear it is standing ta Gas lacks because the actions majority relying errs in on the challenges only rarely be anticom- mergers that vertical doctrine cannot be petitive. Supreme just opinion, Court has told anticompetitive. majority typ- See wrong. us that is escript citing Page, H. William majority merger 97 S.Ct. at n. 12. The after the with the observes decided to continue go through if DuPont later decides to merger Cono- plans, with itself is not the source of plans develop plant, co’s a coal-to-methanol Alberta Gas’s Gas will receive the same point Alberta Gas’s is that developed would have received Conoco had illegal as a because DuPont used it means to plant majority opinion, types- itself. plant. Conoco’s coal-to-methanol If eliminate cript majority at 17. The concludes from bought continued DuPont Co- injuries proximately that "Alberta’s were not plant, to build noco’s caused the Du- effects of illegal place. have the first would not been merger, they Pont-Conoco [so do not flow that] thing merger illegal which made the is The merger illegal from” that which the made under thing the which caused Alberta Gas’s therefore Clayton point majority’s § 7 of the Act. The appears to be that because have DuPont could Damages and Economic Antitrust purchases nores the Conoco would have Effi- (1980); Phillip ciency, 47 U.Chi.L.Rev. made from part Alberta Gas as a of those Turner, Antitrust P. Areeda and Donald plans. Having ignored purchases, those 1004; Bork, The Anti- H. Law Robert majority § the concludes that there are no Paradox Those trust authori- damages. vertical nothing anticompeti- hold that there is ties If theory the demand creation recog- merger in a which a tive about vertical valid, however, argued nized as as I have given purchaser product of a downstream be, apparent should it is also that the verti- merges producer product, of that with a so quite claim cal involves substantial purchaser’s needs that the downstream are than the de rather minimis which entirely merged entity the satisfied within majority majority’s finds. Thus the being open filled instead of on market. error on the theory simply vertical assumption that situation is that the compounding concerning of its mistake user’s magnitude of the downstream de- vertical claim. mand remains the same before and after merger; only thing changes is that Competition III. Actual Potential supplier. These authori- identity certainly agree, I such a say, ties and that I Because believe that has al- change in of the seller is not the name leged that injury, suffered antitrust I likely anticompetitive. to be question believe also we must reach a potential competition about the law on case, contrast, by In this Alberta Gas is which defendant offers as an alternative simply complaining not that demand which affirmance, ground Appellee’s see br. being filled it could have filled is now n. The issue has been raised complaining DuPont. Gas is many litigation, appellate times but no could filled does demand which it have now squarely court has ever faced it. exist, because DuPont terminated the project given have rise to the which would Brewing United States v. Falstaff theory of vertical foreclosure demand. Corp., nothing way says one or the other about (1973) and United States v. L.Ed.2d 475 argument. certainly does not hold Bancorp., Marine demand that the elimination of such new (1974), Supreme anticompetitive consequences. has no And potential kinds of Court theorized that two already why I ac- explained DuPont’s competition might be within reach of may tions indeed have had Clayton prohibits mergers Act which § effects. company acquisitions by and one of anoth- alleges way, acquisition may

Put another Alberta Gas if er “the effect such substantially that this is not a vertical at all but competition.” to lessen Un- one, companies a horizontal both theory, “perceived potential which der the first sell—or were about to sell—methanol. Un- competition,” Supreme Court held that analysis, arguments eco- der from the might be diminished a com- mergers purely nomics of are en- vertical pany industry participants which tirely irrelevant. thought might actually enter the market on simply acquired company its own instead argued, As DuPont itself has the vertical already that market. really parts claims are horizontal two interpreted Court has 7 as en- 7,7 single suspect of a violation of [T]he compassing commonly known as what majority mischaracterizes Alberta “wings probability effect”—the Gas’s vertical claims because it miscon- premerger acquiring prompted firm theory. rejects ceives and the horizontal procompetitive target Having may not effects within decided that Alberta Gas being perceived by the exist- sue DuPont’s elimination of Conoco’s demand, likely expand majority ig- ing firms in that market as Appellee’s 7. See br. at 24-25. Falstaff,

enter de novo. entered methanol market [410 U.S.] itself or made 531-537 S.Ct. at acquisition. But, “toe-hold” [93 1099-1103]. as in Marine present procompeti- elimination of such Bancorp., the claim merger is that may merger effects render tive unlaw- company eliminated a which would other- ful under actually § wise have entered the methanol market. 625, Bancorp., Marine 418 U.S. at (footnote omitted). po- at 2871 Perceived yet No court has decided whether 7§ competition premer- focuses on tential authorizes a claim merger illegal that a ger prices perception of the effect that because it potential eliminated actual com- rise, company if a new will enter the petition. Supreme Court Marine prices

market and drive down both and Bancorp., and appeals, three courts of profits. established the have elements of such a The Court has also discussed a second claim but have never found them all satis- potential competition, fied, kind of which has so these courts have never actually potential competition.” been called “actual had to hold that satisfaction of the doc- Bancorp, Marine the Court requirements observed trine’s constituted a violation that it Tenneco, F.T.C., 7. See Inc. v. § (2d Cir.1982); F.2d 352-55 previously

has not resolved whether United Corp., States v. Siemens potential competition proscribes doctrine (2d Cir.1980); Republic Corp. Texas merger solely a market extension on the Governors, Board ground that F.2d such a eliminates the (5th 1981) Cir. Unit A prospect (discussing Clayton long-term deconcentration incorporated Act standard oligopolistic of an into 3 of the in theory that Holding Act); Bank might Company acquiring result if Mercantile firm were Corp. Governors, Texas v. Board except forbidden to enter through a de (5th F.2d 1981) Cir. Unit A undertaking through novo acquisi- (same; stating potential that (a tion of a actual existing small entrant so- competition logical “doctrine has called foothold or force and acquisition). toehold is consonant with the language policy and expressly reserved this issue. Falstaff Clayton Act” but that the ab- “[i]n (footnote omitted). Id. potential The actual necessary findings Board, sence of by the competition doctrine concerns the elimina- however, we will not decide whether the company tion of a which would otherwise adequately doctrine describes a violation of have entered the market either itself or Clayton Act incorporated standard” by acquiring a company infusing small Holding Act); into the Bank Company capital into it. potential competition Actual F.T.C. v. Atlantic Richfield, 549 F.2d relates to the effect entry such a new —and (4th Cir.1977); 293-94 see also Donald F. its prices. elimination—would have had on Turner, Conglomerate Mergers and Sec- I believe this case forces us to address Act, Clayton tion 7 78 Harv.L.Rev. question. presented The issue here is (1965) (describing 1362-86 sup- slightly different, but think the differ- doctrine). porting the quite likely, seems ences are requires irrelevant. This case us however, along a case were to come to assess the legality of a which presented which all the elements of the prevented firm entering claim, the courts would decide that a market plaintiff which the claims the claim is a valid one under 7. I think this acquired firm would otherwise have en- is such a case. argues that, tered. Here Alberta Gas usually presented, As it is the elements acquired Conoco, DuPont Conocowould potential of an actual claim are proceeded with to enter the methanol market. This claim is not identi- oligopolistic; the relevant market is cal to the one made Marine Bancorp., because here acquisition, does not claim acquiring 2. absent the acquisition, but for the DuPont would have firm would have entered the market future either de novo or the near Conclusion company; through acquisition a little foregoing For the reasons I would re- grant verse the summary judgment entry by acquiring standing grounds firm car- 3. such and remand this case to ultimately likelihood of the district court. I ried a substantial would instruct that prejudice this remand is producing deconcentration of the market without to a re- summary judgment motion, newed made on significant procompetitive ef- or other ground that the record did not contain fects. sufficient evidence to putting warrant Tenneco, Inc. v. F.T.C. plaintiff’s jury. case before a (2d Cir.1982),citing Bancorp., Marine and a U.S. at number cases.

of other circuit court properly

I think that Alberta Gas has

alleged these elements. Defendant each of oligopo-

agrees that the relevant market

listic; during period the relevant time two 50%, 70%,

firms controlled four firms essentially industry. nine firms 100% TYSON, Tyson Vernon Janice tricky. The second claim is a bit v. typical potential competition case the al- LITWIN CORPORATION acquiring leged potential competitor is the alleged potential competi- firm. Here the CORPORATION, OIL HESS V.I. Third firm, tor is the Conoco. The 7§ Party Defendant. way, cases are not structured this and no appear brought cases like this to have been Appeal of LITWIN PANAMERICAN under 1 and 2. But difference in this §§ CORPORATION, Appellant. certainly any structure should not make Nos. 86-3475. result; in difference the fear is still that an being entrant into the market is eliminated. Appeals, United States Court of Indeed, insofar as the difference matters at Third Circuit. suggests potential all it actual Argued April fitting doctrine is more here typical than case. In most instances Aug. Decided difficulty proving comes but for challenged acquisition, acquiring firm would have entered the market socially

some more way. beneficial Here question

there nois that Conocowas about big

to enter the way methanol market purchase pre-

and that DuPont’s of Conoco

vented entrance.

I also think that Alberta Gas has ade-

quately alleged the third element of a suc-

cessful claim. DuPont has attacked this

aspect by arguing of Alberta Gas’s case has not the loss of effects,”

“procompetitive though DuPont argument standing

has cast I already explained why

context. argument wrong.

believe that

Case Details

Case Name: Alberta Gas Chemicals Limited and Alberta Gas Chemicals, Incorporated v. E.I. Du Pont De Nemours and Company, Du Pont Holdings, Inc., and Conoco Inc

Court Name: Court of Appeals for the Third Circuit

Date Published: Sep 10, 1987

Citation: 826 F.2d 1235

Docket Number: 86-5662

Court Abbreviation: 3rd Cir.