Business Electronics Corporation v. Sharp Electronics Corporation, 780 F.2d 1212

Business Electronics Corporation v. Sharp Electronics Corporation

780 F.2d 1212

5th Cir.

1986

Check Treatment

*1 cluding marijuana.6 “arrested” the seizure of his records is Given these admis- sions, properly without merit. district court explain, Dr. Norris does and we refused to dismiss Dr. Norris’ see, indictment fail to how testimony Dr. Moise’s ground. on this marijuana possession Dr. Norris had in his prejudice caused him required the severe

E. certainly a mistrial. The district court Due to local the district publicity, plain did not commit error. Because we requiring parties court an order all error, issued find no the conviction is making to refrain from pub witnesses AFFIRMED. concerning lic statements the trial. Dr. alleges

Norris that this order denied him a public

fair trial “because formed an

opinion without benefit of all true,

facts.” Even Dr. Norris’

guilt public was not determined preju Norris has failed to articulate actual BUSINESS ELECTRONICS CORPORA- dice from this order. See United v. States TION, Plaintiff-Appellee, (5th Cir.1980). Thompson, 615 F.2d 329 F. SHARP ELECTRONICS CORPORA- TION, Defendant-Appellant. argues Dr. Norris the trial judge sponte should have sua ordered a No. 84-2618. prejudicial testimony mistrial because of Appeals, United States Court of jury to hear. allowed The testimo Fifth Circuit. ny complains Norris of was elicited from Dr. Harold Moise who testified about an Jan. 1986. instance people when several obtained mar Rehearing Rehearing En Banc ijuana out of Dr. Norris’ car and another Denied Feb. instance when he and Dr. Norris were ar possessing marijuana. rested for trial,

During the objected Dr. Norris

this testimony and moved to strike it from granted

the record. The court the motion disregard

and instructed the

testimony. Dr. Norris informed the court limiting

that the instruction was satisfac-

tory. argues He testimony now that this easily

was not juror’s erased from the

minds and that the district court erred in

failing sponte. to order a mistrial sua expressed

Because Dr. Norris satisfac- instruction, limiting

tion with the court’s

our review is limited to a determination of plain

whether the district court committed 52(b).

error. See Fed.R.Civ.P. The record

discloses that Dr. Norris testified several he, occasion,

times that on more than one altering substances,

took different mind in- ludes, LSD, Demoral, Percodan, Dilaudid, specifically having 6. Dr. Norris admitted to Dexa- alcohol, drine, Preludin, Tuinal, Sodium, following tried the substances:. mari- Seconal Tussio- heroin, nex, juana, peyote, psilocybin, speed, Quaa- and Valium. *2 nett, Gotthoffer, Dankin, Lance A. Peter City, defendant-appellant. New York McGowan, Gary Godfrey, V. H. Lee Ken- Houston, Marks, Tex., plaintiff- neth S. appellee. *3 CLARK, Judge,

Before Chief JONES, THORNBERRY and Circuit Judges.

CLARK, Judge: Chief Defendant-appellant Sharp Electronics Corporation (Sharp) appeals from jury plaintiff-appellee verdict favor of Busi- (BEC), Corporation ness Electronics a for- calculators, Sharp dealer in mer in BEC’s Sharp per claim committed a se viola- tion of section of the one Sherman Act agreeing competing with a dealer to termi- nate BEC cutting. Sharp (1) contends that the district court instructing per erred that it must find liability regard any agreement without (2) price, on evidence was insufficient finding jury per liability, (3) there no rule should be se liabili- cases, (4) ty price fixing in vertical prejudicial district court committed error in making (5) evidentiary rulings certain accepted the district court an erroneous damages. jury measure Because the point (1), improperly instructed on we reverse and remand for a trial. new I Sharp supplier is a of various consumer including products, and business electronic calculators, throughout the United States. Sharp through distributed its calculators bought network of retail dealers that calculators from and resold them to Sharp provided users. end retail lists prices to which resale its deal- ers. appointed Kelton Ehrens-

berger as electronic deal- its sole calculator Harvin, Houston, Atlas, Ehrensberger David Scott J. er in the Houston area. la- Tex., Gartland, incorporated J. Lawrence M. Har- as BEC and continued his Peter ter testimony, he was under no obli- BEC’s sales Hartwell’s dealership that name. under keeping prices gation any particular price. low The strategy retail to sell involved prices lower than dropped often sold at and BEC calculators have Sharp’s price lists. those on since 1973. that, years after apparent

It is several calculator Ehrensberger became II dealer, Sharp became dissatisfied with The district court submitted this case to disagree, parties performance. theory on the that an however, the reason for dissatis- Sharp and terminate between Hartwell to presented evidence faction. cutting of the latter’s BEC because quotas and that BEC failed to meet sales constitutes se violation of section one poor it for this Sharp remonstrated with the Sherman Act. The district court BEC, on the other performance. sales charged jury: *4 hand, Sharp that was presented evidence The Sherman Act is violated when a discounting and about BEC’s concerned agreement seller enters into an or under- up pricing “clean BEC to wanted [its] standing its with one of dealers to termi- structure.” nate dealer of the other another because mid-1972,Sharp’s problems with BEC In price cutting. dealer’s Plaintiff contends Hartwell appointment of Gilbert led to the Sharp that terminated Business Electron- in the Houston Sharp calculator dealer as a ics in furtherance of Hartwell’s desire to Sharp may record indicates that area. The price- eliminate Business Electronics as a that his initially promised Hartwell have cutting rival. exclusive, dealership but would special a inter- until The court also submitted subsequently decided to retain BEC rogatory jury, it about the market. to the which described as more was learned follows: very upset Hartwell was about BEC’s Question you 1 asks whether number policies to Ehrens- pricing preponderance of the you find a evi- a berger that the dealers avoid “discount” agreement that there was an dence complained bitterly to situation. He also understanding Sharp and Hart- between undercutting him Sharp that BEC was terminate Business Electronics as that well to market. There was evidence the concern, although of Business Elec- Hartwell’s a dealer shared Sharp consistently price-cutting. testified that tronics’ Hartwell that it could not tell BEC what told him theory, require an This which does not charge. to Hartwell also testified Sharp and Hartwell to agreement between he not concerned about BEC’s that was prices, is an incorrect one. maintain resale cutting general only about but court’s decision in Aladdin Oil Co. v. This riding” Hartwell’s invest- “free Inc., (5th Cir.1979), Texaco, 603 F.2d promotion product ment in sales- both the error committed demonstrates that the cus- services. He stated related proper the standard of liabili- this case and through these developed he tomers which Oil, sought ty. plaintiff In to Aladdin buy then from BEC at lower means would of a Texaco distributor- acquire the assets prices. going ship which was out business. June, 1973, presented an ulti- Hartwell Texaco, However, supplier defendant Sharp terminated matum to —unless gasoline products, consulted with oil and days, would termi- within 30 Hartwell BEC Powertram, the other Texaco defendant dealership. Sharp re- his own nate area, that in the and decided distributor terminating BEC. sponded by in the did not need two distributors Texaco Texaco, had Therefore which same area. that Hartwell The evidence showed failing purchase distribu- option an always, adhered to usually, but not assign option its to Pow- torship, prices. According to decided suggested retail (3d Corp., plaintiff from ac- prevent Cir.1979) ertram and 595 F.2d quiring distributorship competition followed number other circuits. House, that with Powertram. This court held this g.,E. Victorian Inc. v. Fisher Ca not violate antitrust ¶ conduct alone did Corp., 66,706 muto Trade Cases alleged plaintiff that laws. The fact 63,382 (8th July 1985); Zidell Cir. prevented Texaco and had it Powertram Int’l, Exploration, Ltd., Inc. v. Conval acquiring distributorship from in order to (9th Cir.1983); F. Bostick Oil 2d competition lessen intrabrand made no dif- Corp., Co. v. Michelin Tire 702 F.2d lessening ference because “abstract of in- denied, (4th Cir.), cert. Id. competition enough.” trabrand is not 78 L.Ed.2d 232 indicated, however, at 1116. The court Cemuto rule “if is that a manufacturer pursuant had Texaco’s action been taken deliberately product withdraws from agreement maintenance with Pow- price-cutting request distributor at the of a ertram, it would have violated antitrust competing part conspir distributor of a Id. at 1117. laws. acy protect requesting distributor price competition, the manufacturer Similarly, present in the case was has committed a violation of enough jury for the that BEC find Zidell, supra, antitrust laws.” 719 F.2d at price competition; reduce terminated to following 1469. The courts rea rule have required should been find son that the manufacturer and dealer pursuant termination was to a protect wish the dealer from com maintenance between *5 petition then they prices must intend that Petersburg and Hartwell. St. Yacht higher price-cutting be once the dealer is Charters, Inc., Yacht, Morgan Inc. v. 457 terminated. 1028, (Fla.Dist.Ct.App.1984); So.2d 1050 see also v. Borger Corp., Yamaha Int’l adopted This circuit has not this reason 390, (2d Cir.1980) 625 (improper F.2d 397 Charters, Petersburg See St. Yacht ing. for a dealer instructions state that supra, Muen (citing 457 So.2d at 1048-49 termination “solely was unlawful the Butane, Inc., supra, ster 651 F.2d at 294- basis of purpose a to restrict intraband 95). agreement An price to terminate a competition”). Additional prices any specific does not fix at or cutter proposition may be found in Bu Muenster general merely level but frees the com tane, Co., 292, Inc. v. Stewart F.2d 651 plaining prices dealer to set as he chooses. (5th Cir.1981), court where the Charters, Petersburg supra, St. Yacht 457 dealer, appar treated the termination of a at true So.2d 1043-45. It is that the effect ently protect another “in dealer from terminating price the cutter may be to tense competitive pricing,” vertical as a prices equally raise but this is true of non-price restraint to be tested under granting dealership, of an exclusive which Regueira, rule of reason. See also Joe illegal. held not Carl we have to be Inc., Co., Distilling Inc. v. American 642 Tools, Tool, son Machine Inc. v. American 826, (5th Cir.1981) (plaintiff F.2d 833 Inc., 1253, 1259 Cir.1982) (the 678 F.2d required to show that its termination “was grant dealership of an exclusive is not a the result of a combination had ... which violation of the Sherman be Act fixing purpose as its or effect the whole grant “such a im cause does not seek to added). prices”) (emphasis sale and retail price pose resale maintenance on dis example type An instruction that tributor”). Any non-price vertical restric proper may would have been this case prices, may yet affect Su tion resale Co., Pierce v. Ramsey Winch found 753 preme Court such has held that restrictions 416, (5th Cir.1985). F.2d 428 n. 14 are nonetheless to be evaluated under T.V., v. Continental Inc. recognize

We of liabili reason. standard rule of Inc., 36, Sylvania, ty 57, 97 GTE we set forth conflicts with rule enun 433 U.S. Cemuto, 2549, 2561, 568, Inc. v. Cabinet ciated in United S.Ct. 53 L.Ed.2d 584 ambiguity per of the Supreme legal recent deci rule. It is The Court’s fectly legitimate, and Spray-Rite expected, Ser for distrib in Monsanto Co. v. sion 1464, complain price cutting S.Ct. 79 utors to about the Corp., 465 U.S. vice — -, denied, reh’g legitimate rivals. It is for a U.S. their also L.Ed.2d (1984), price fur- manufacturer cutter L.Ed.2d terminate 104 S.Ct. divergence independently pursuant or to a non- that this circuit’s either ther confirms agreement. rationale is correct. mere fact from the Cernuto fol Monsanto, Court held that an antitrust manufacturer terminates a cutter response lowing complaints verdict or in to dealer cannot survive a directed plaintiff manufac merely showing a manufacturer does not determine whether the motion acting price-cutting independently, pursuant distributor in re- is turer terminated complaints by non-price pursuant other or to a sponse following to or at Id. To allow of termi agreement. S.Ct. at 1468. evidence distributors. following important response noted two distinctions nation to com The Court plaints The first to serve as the for the cases. sole basis in distributor-termination damages concerted award of treble to the terminated is the distinction between pro- discourage legitimate is tend to independent only the former dealer would action— at-, complaints legitimate the Sherman Act. Id. manufac scribed dealer Thus, complaints. at 1469. under United in the face 104 S.Ct. turer action of such Co., Colgate & By disrupting communications between States 465, 468, (1919), it is L.Ed. 992 manufacturer dealer it would create manufacturer, acting in- permissible “an irrational dislocation in the market.” any distributor dependently, to terminate 764, 104 Id. at S.Ct. comply with the manufac- for its failure possible interpret It is Monsanto as prices.

turer’s merely saying that a manufacturer can ter- cutter, is between minate a whether or not a The second distinction “agrees,” long dealer complaining and concerted as the concerted action set acting is reason non-price former manufacturer for some action on restriction —the “just knuckling than under to the illegal per se while the latter is evaluated *6 [complaining at for less com- the rule of Id. 465 U.S. desire under reason. dealer’s] at 1469. The Court con Valley Liquors, 761, petition.” S.Ct. Inc. v. 104 Renfield Ltd., 742, 678 744 Importers, difficult to F.2d ceded that these distinctions are Cir.1982). interpretation conduct Such an could apply practice in because both the parties and effect make Monsanto consistent with Cernuto. of the the economic Sons, Id.; may Sweeney in Edward J. & be or identical see also that conduct similar 1470. 762, Texaco, Inc., 105, (3d at 111 Id. 637 F.2d Inc. many cases. denied, 911, Cir.1980), 101 However, chose not cert. 451 U.S. in Monsanto the Court 1981, (1981). 68 L.Ed.2d 300 How- theoretical dif S.Ct. underlying the to deal with Instead, ever, interpretation the the would lead to per the rule.1 ficulties of se that Monsan- legitimate very con “irrational dislocations” sought to ensure that Court jury, sought to avoid. The under part of manufacturers Cer- on the the duct nuto, required is to determine whether the penalized due would not be distributors urges us to re- validity vertical evaluate all vertical between The distinction argu- has price non-price restraints rule This restraints under the of reason. straints See, subject scholarly long application discussion. history been a ment faces of the Bork, Over- e.g., ruled, Vertical Schwinn Restraints: against price per rule restraints. vertical 171, (1977); Pos- Sup.Ct.Rev. 1977 180-81 Medical Co. v. Park & Sons Dr. John D. Miles ner, the Economic The Rule of Reason and Co., L.Ed. 502 S.Ct. Decision, Sylvania Approach: Reflections on (1911). it Our resolution this case makes Posner, (1977). The Next 45 U.Chi.L.Rev. Sharp's unnecessary for us to reach or rule on Restricted Step the Antitrust in Treatment contention. Legality, Per Se 48 U.Chi.L.Rev. Distribution: price fixing agreement. Rather, of a motivation was one of ter- manufacturer’s reducing minating language only “free riders” or one of of Monsanto can indicate either case the price competition, yet price fixing agree- in the Court’s belief that a one of hos- manufacturer’s attitude will be requirement liability ment is a in Judge tility price As Pos- toward cutters. cases. distributor-termination For exam- it, unreality” a “certain put ner has there is ple, plaintiff the Court indicated that a apart. trying tell these motivations must that the show “distributors are not supra, 678 F.2d at 744. Valley Liquors, making independent pricing decisions.” Therefore, manufacturer which desires Monsanto, -, supra, 465 U.S. at price cutter to terminate a because of its S.Ct. at 1470. The also stated that Court riding legit- free will be deterred from this importance “it of considerable that inde- indistinguishable, it is imate action because manufacturer, pendent action reader, except perhaps to a mind from restrictions, nonprice concerted action on i.e., prohibits, what termination of Cernuto distinguished price-fixing agree- be price cutting. of its ments, cutter because present since under law the latter subject are se treatment and treble prob- The instant case well illustrates the damages.” Finally, Id. the Court defined If, confronted com- lem. with Hartwell’s concept of “common scheme” as includ- determined that plaints, ing parties communication between the cutting undermining Hartwell’s incen- agreement price. to an Id. at n. (or promote Sharp tive to calculators sim- at 1471 n. 9. S.Ct. ply preferable that it was to terminate BEC record), poor of its sales had that, For these reasons hold we perfect right Sharp’s to terminate BEC. order for a manufacturer’s termination of a counsel, however, legal would be unable to se, illegal per distributor to be it must be safely advise of a means of accom- pursuant to maintenance if, Cernuto, plishing as under termination with another distributor. That distributor Sharp’s liability solely antitrust turned on a expressly impliedly agree must to set its jury’s guess as to motivation. level, though specific at some Thus, Sharp prevented would from exer- one. The distributor cannot retain com cising legal rights merely because its plete freedom to set whatever originated information dealer com- instructions in this case chooses. plaint, very “irrational dislocation” failed to reflect this standard and therefore prevent.2 sought Monsanto critically were defective.3 expressly disapprove did not Monsanto Indeed, cited, rule. Cernuto Court III holding, of its cases such as Sweeney, supra, which follow contends that the evidence is Cernuto. *7 However, jury in to raise a issue as to the issue Monsanto was the insufficient Sharp quantity necessary to infer a and Hartwell entered into a evidence whether fixing agreement, agreement. Sharp it maintenance not whether was agreement argues that necessary to such an at therefore we should reverse show Nothing suggests in the district court’s denial of its motions for all. Monsanto that judgment and for liability any can found evidence directed verdict notwith- without Posner, 1, Step, supra complaining likely at whenever The Next note 13. 2. is [DJealer riders, discounting by free because there is If, retrial, again the district court chooses by are such conduct. most dealers harmed special interrogatories, may wish to to use prevent The manufacturers cannot the com- interrogatory either the form of the first follow plaining. Yet if it the manufacturer occurs Monsanto, U.S.-, n. in 465 may nonprice even restric- have to abandon form of the first and distribution, n. 2 or the bifurcated any tions in action it Ramsey interrogatories v. in Pierce second may against takes a discounter be deemed to Winch, n. 6. 753 F.2d at 423 by price-fixing. be tainted

1219 Sharp order For these reasons was not standing the BEC’s com- entitled verdict judgment plaint dismissed. to as a matter of law. party judgment When moves for a as a a law,

matter of the court should consider IV light “in the and with all rea the evidence jury error in the critical instructions most favorable to the sonable inferences requires alone reversal. Two further is- party the motion.” opposed Boeing to Co. they sues should be addressed because are F.2d Shipman, v. Cir. likely to The first arise on retrial. issue 1969). a may only take case from A court trial, evidentiary ruling. involves an At is such jury if the evidence that reason sought Sharp to introduce certain doc- only able arrive at one verdict. men could policy terminating uments to confirm its sought by Sharp, relief grant Id. To quotas. sales dealers who failed to meet proof in we test the terms of should also Sharp Defendant’s is a Exhibit 52 doc- operating proper under the le fact finder Sharp ument sent Vice-President to H. Ka- gal in Part II concepts articulated above. wai, responsible one of the men BEC’s bar, to the this standard case Applying termination, May, 1972. The document the evidence was sufficient we hold that only indicates that BEC made of its 45% support instructed verdict properly quota. sales Defendant’s Exhibit 53 is a true While it is that there BEC’s favor. representa- document sent to sales little, any, direct evidence that was Kawai, managers, tives and as well as an as to and Hartwell reached 1972; May, it states that dealers who fall jury reasonably could price, think the we replaced. quota below should be 50% agreement from the infer such an evidence that Sharp contends district as a whole. these erroneously court excluded doc that, evidence even before There was " agree. as hearsay. uments We 'Hear dealer, Sharp sought Hartwell became statement, say’ than one made BEC’s adherence to testifying while at trial or declarant tending produced evidence list. BEC prove hearing, offered evidence “free-riding” that it was not show truth of the matter asserted.” Fed.R.Evid. performance equal that sales was its 801(c). offering these not doc logical Hartwell’s. The inferences proving purpose uments evidence, jury, if drawn could such contained truth of statements therein. finding that BEC’s termination Defendant’s Exhibit 52 was offered to Sharp suggests. to the reasons was not due only had made of its show BEC 45% Dill, Beverage Sons v. Fragale See & Co. quota BEC had but show believed Cir.1985). (3d F.2d only quota. made See Moore 45% addition, there was evidence that Sears, Co., F.2d Roebuck & Sharp’s suggest- usually followed Hartwell (11th Cir.1982) (corporate memoranda con prices. ed There was also evidence that cerning employee’s performance were ad encourage to fol- sought Hartwell BEC missible, employee not to show that actual Finally, the shows prices. low record these show ly performed poorly, but to that cor complained vigorously Hartwell perform poration employee’s believed ulti- pricing and that about poor). Defendant’s Exhibit 53 ance was by terminating mately Sharp responded *8 Kawai, was offered to show that who re evidence, taken as whole and BEC. This document, that Sharp’s believed ceived BEC, light most to viewed in the favorable dealers policy was to terminate who fell could an inference that quota, whether or not this below of 50% agreed that Hartwell had Hartwell would Sharp’s policy. in fact was Sharp’s follow also be pursuant Exhibit 53 would admis was to that termination showing of purpose sible for the what this agreement. policy actually Sharp’s quotas, was because it did were sufficiently not relevant to directly that declare “termination is be admissible. Sharp’s policy” merely indicated but that saying policy indirectly by that dealers fall- V ing quota replaced. below of should 50% Sharp's second issue involves conten- McCormick,

See Evidence 249. Even if § tion that the accepted district court an erro- hearsay, the document would fall within neous computing damages. method of exception. the “state of mind” Fed.R.Evid. First, Sharp claims that Hartwell’s sales 803(3). should yardstick not have been used as a to The district court’s memorandum and or- Second, damages. measure BEC’s der indicated that even the excluded doc- argues plaintiff’s damage that the expert admissible, uments were they related to improperly gross profit used BEC’s mar- policies and states mind “too far re- gin, instead of gross prof- Hartwell’s lower moved in time from the termination to be margin, damages. calculate Although relevant.” the district court has broad discretion in the admission of evi- plaintiff An antitrust is not re dence, Shelton, 203, Carlton v. 722 F.2d quired “prove particularity with exact — (5th Cir.), denied, U.S.-, cert. what might its success have been (1984), 81 L.Ed.2d 347 that illegal market the absence of conduct of improperly was discretion exercised here. Multiflex, another.” Inc. v. Samuel upon Much of the evidence BEC relies re- Co., Moore & 709 F.2d Cir. Sharp’s long lates to actions before the 1983), denied, cert. S.Ct. Indeed, termination. the district court 80 L.Ed.2d 126 The use of properly admitted Plaintiff’s Exhibit yardstick Hartwell as a was reasonable February 1971, document product because he sold the same in the Sharp’s which reflected policy time same area. He sold similar customers. enforcing pricing minimum retail on an- business, While both were in their sales product other line. 52 and Exhibits roughly equivalent. volume was Further provide explanations Sharp’s actions more, there was evidence BEC’s ex pure pric- than a concern for BEC’s penses lower were than those of Hartwell. ing. Furthermore, the fact that be- Although Sharp pointed possible defects lieved in 1972 only that BEC had met 45% BEC, in the method used consideration quota is relevant to its decision to properly such defects was left to the BEC, terminate when faced with an ultima- jury since the method chosen was not a dealer, tum from more successful one pure speculation. matter of Pierce v. year later. It was error to exclude Defend- Winch, Ramsey supra, 753 F.2d at 440. ant’s Exhibits 52 and 53. We conclude the district court did not accepting err in BEC’s method of calcula Defendant’s Exhibits 54 and 55 are damages. tion Sharp documents that were received Burkholder, Thomas repre Texas sentative, in May September, VI

They set quota Burkholder’s sales and indi correctly The district court ruled that importance quota. cate the of meeting that judgment was not entitled to a as a improperly Exhibits and 55 were also matter law. judgment We reverse the as hearsay. They excluded were offered to appealed from case sub- Burkholder, i.e., show their effect on mitted an theory erroneous pressure show that he was under to meet liability. pro- We remand further quotas. sales correctly The district court ceedings opinion. not inconsistent with this ruled that Defendant’s 54 and Exhibits which did not performance relate dealer AND REMANDED. REVERSED *9 JONES, Judge, Sharp obviously required to Circuit have been EDITH HOLLAN quickly imaginatively changes react concurring: marketplace. in the record in this case The requiring re- judgment in the I concur reveals that both market share and court is retrial because this mand for prices retail of were the its calculators in by the decision Monsanto Co. v. bound Nevertheless, declining period.2 in this as Corp., 465 U.S. Spray-Rite Service the result of the current state of antitrust (1984). L.Ed.2d 775 104 S.Ct. law, Sharp potentially held accountable However, perfectly case illus- I believe this damages terminating in a distrib- treble arguments why price vertical the trates who, Sharp’s perception, failed to utor anti- should be tested under restraints hold, than, product adequately. market its To as rather Rule of Reason1 trust’s must, respond require, per se il- this court cannot continues to Monsanto changing market conditions with all of no social benefit to sub- legality. There is quiver pricing competitive relation- the arrows includ- jecting manufacturers’ potential ing, necessary, program respond ships their distributors with BEC,3 they operate put in mar- per illegality where “free riders” like is to at a se competitiveness potential competitive disadvantage. kets whose interbrand To of any detrimental effects Sharp’s marketing options overwhelms limit for its cal- And, although relationships. Mon- may range those prod- culators also limit the of alleviating the threat moves toward santo to the ucts available consumer of calcula- actions, treble-damage of unwarranted Easterbrook, Arrange- tors. See Vertical suggests that the Su- abiding uncertainty Reason, Anti- ments and the Rule wisely jettison preme would more Court (1984). trust To isolate one factor L.J. per led to the rule of se precedent relationship in the and its distribu- illegality for vertical restraints. tors, Sharp required i.e. whether them to lists, published adhere to its rec- The flaws in Monsanto’s continued hectically competitive ig- market is to highlighted ognition illegality are nore the fact that here have been no anti- First, by it is difficult to con- this ease. the conduct in issue: competitive effects of how, world, subjection real ceive quality and the number and prices declined illegali- of vertical restraints to products The competing increased. functioning economy ty improves the of the larger that can be drawn from conclusion Only consumer welfare. ata- or enhances assuming scenario of this case is or slide rule vistic devotees of abacus variety, vitality and innova- continued history fail to recall the remarkable could enterprise sys- tion of the American free during of the electronic calculator market tem, it is unrealistic to conclude that mea- range years. The of avail- the last fifteen enhance sures taken a manufacturer to models, variety of functions that can able marketability, product’s his whether relat- myriad optional en- performed, and not, anticompetitive un- ed to are multiplied rapidly while hancements have they part program are of a to enforce less prices plummeted. The average have manufacturer- or dealer-level cartel. See competing manufacturers has number of Posner, Step posi- The Next in the Antitrust To maintain their market increased. manufacturers like Treatment Restricted Distribution: profitability, tion services, Inc., V, market-development Sylvania of customer Continental T. Inc. v. GTE 1. See performed by 53 L.Ed.2d 568 the distributor who has which are (1977). discounting. kept margins higher by not Fre- quently, the "free rider's” sales benefit from competitors. of its faced 100 2. full-price performed See dealer. services Posner, $500-1,000 ranged in 1972 to calculators and the Economic The Rule Reason years ten later. $150-300 Decision, Sylvania Approach: on the Reflections 45 U.Chi.L.Rev. market neglect "Free riders” are distributors who by cutting prices, products to the their *10 1222 48 Legality,

Per U.Chi.L.Rev. 25 the Se antitrust law vertical restraints re- (1981). turmoil, mains much in to the detriment of potential public, defendants and the which majority opinion demon- elegantly As the suffer due to the limitation of distributional strates, has raised level of Monsanto variety, but to legal the benefit of the proof required price to submit a vertical class. jury. However, restraint case to the that, despite doing, costly flaw is Semantic nuances are second so to business- inmen the real uncertainty incongrui- Supreme a cloud of world. The leaves and Court that, “per noted standard, has se ty. illegality rules of “something Monsanto appropriate only are when agree- they more” relate to price formulation of vertical conduct ment,4 provides manifestly anticompeti- guidance little lower agreements tive---- are certain and Already, Eighth ‘[TJhere courts counsel. practices and perni- which because of their has finding per Circuit affirmed a competition cious effect on any and lack of liability upon “price-related” based con- redeeming are conclusively pre- virtue spiracy, totally which is at to- odds with sumed to be unreasonable and therefore interpretation day's of Monsanto this illegal without inquiry elaborate as to the Circuit. See Victorian House Inc. Fish- precise harm they have caused or the busi- (8th Corp., er F.2d Camuto 769 469 ” ness excuse for their use.’ Cir.1985); Northern compare Bender v. Southland States, Ry. Co. v. United 356 U.S. Cir.1984). 749 Corp., F.2d 1205 Most Pacific 1, 5, 514, 518, (1958) 78 2 S.Ct. 545 L.Ed.2d attorneys, plaintiff’s clever like counsel (quoted T.V., in Continental case, Inc. v. GTE generate this will be able sufficient Inc., Sylvania supra, 433 U.S. evidence, pursuant even to the Monsanto 2557).5 S.Ct. at Present economic under- standard, to summary judgment withstand standing compel per does not se treatment review, and thus to exert substantial influ- price of vertical restrictions. theOn con- ence toward settlement of cases where no trary, Judge analysis Easterbrook’s anticompetitive harm, or harm to the con- appear Monsanto would to be correct: suming public, Moreover, really occurred. dealing If price arrange- restricted and the distinction price between vertical and ordinarily ments are procompetitive, if non-price restraints can be difficult there is no real difference between the draw, and because Monsanto retains a restraints, price non-price effects of and powerful incentive to describe a dealer’s objection if the re- [vertical complaints being antitrust price-related, as is the same as straints] litigational order to secure the benefit restraints, vertical then it follows that per standard, such distinctions can per se condemnation of [vertical (and expected finely be to be even more is anomalous. restraints] uselessly) generally Hay, articulated. See Monsanto, Easterbrook, Vertical Restraints supra Supreme at 171. The after (1985). Cornell L.Rev. Reten- Court should take the opportunity earliest illegality tion of se test of approach review its Russian roulette vertical maintenance will thus contin- vertical restraints. functioning

ue inhibit non-price Supreme

restraints which the Court sees as

generally T.V., beneficial. Continental Inc., Sylvania

Inc. v. GTE U.S. sum,

S.Ct. L.Ed.2d ("evidence quirky questiona- 104 S.Ct. at 1471 n. 9 must 5. For a discussion of legal presented history both ble that the distributor se rule vertical communicat- cases, price restraint see acquiescence agreement, Brief of United ed its Supreme States Amicus Curiae to the Court sought manufacturer"). case; Easterbrook, Monsanto see also supra.