*4 Before MORRIS SHEPPARD ARNOLD, GIBSON, R. JOHN RILEY, Judges. Circuit ARNOLD, MORRIS SHEPPARD Judge. Circuit (referred plaintiffs collectively The Midwestern) appeal summary from a judg- against ment entered them in their action against § Northwest Airlines under Act, see Clayton § 18. U.S.C. For below, the reasons stated affirm we judgment of the district court.1 Frank, 1. The Honorable Donovan W. United sota. Judge States District for the District of Minne- merger, after the neverthe- years, eleven
I. motion for sum- less survives Northwest’s Repub- merged with Airlines grounds. mary judgment on limitations merger, Before Airlines lic argues that its action is also Midwestern largest airline eighth Northwest was by laches. not barred States, Republic was the the United pres- significant had a largest. Both ninth II. Airport Paul Minneapolis-St. at the
ence (MSP). was sanctioned first Midwestern asserts Transportation but was Department “continuing violations” Northwest’s immunity. granted antitrust Clayton Act allow it to avoid the bar of will years after the eleven Specifically, of limitations. claiming that filed suit premium” Northwest’s “hub points § 7 of the Act. merger violated and North flights through MSP hub complaint, The district court dismissed entry prevent actions to successful west’s holding merger could not be into сarriers as overt acts MSP low-cost acquired subject 7 claim because the that restart the statute. *5 to exist. We entity’s stock had ceased continuing-vio Under the so-called Ma- in Midwestern that dismissal
reversed “ theory, act that is part overt lation ‘each Airlines, Inc., chinery, Inc. v. Northwest injures plain violation and that Cir.1999). (8th remand, On F.3d 439 167 statutory period running tiff ... starts the court allowed Midwestern the district plaintiffs knowl again, regardless of the certify plaintiffs, a class of but notification much earli edge alleged illegality while the dis- postponed the class was ” Corp., A.O. er times.’ Klehr v. Smith motion trict court considered Northwest’s 1984, 189, 179, 138 521 117 S.Ct. U.S. ground that summary judgment on (1997) 2 P. & (quoting Areeda L.Ed.2d 373 limitations had run. When statute of ¶ (rev. Antitrust Law 338b Hovenkamp, H. motion, Mid- granted the district court ed.1995)). Midwestern, however, no' cites appealed. western this appellate applying principle decisions pro Act 7 of Section Rather, attempts § it anal 7 claims. “substantially that acquisitions hibits serve antitrust areas of ogize this case other competition, or to tend to create to lessen has in fact theory such a beеn law where 18, § 15 and contains monopoly,” U.S.C. recognized. pri of limitations for four-year vi continuing The antitrust actions, typical 7 15 15b. Section vate U.S.C. conspiracy, price-fixing in a arrest, incipien- their olation occurs primarily to exists Act, § 1 the Sherman actionable under could anti-com cy, mergers produce that 1, con conspirators § when Corp. Boat v. see 15 U.S.C. results. Concord petitive to, (8th cartel 1039, to fine-tune their tinue meet Corp., 207 F.3d 1050 Brunswick denied, 979, Pennsylvania Dental Cir.2000), agreement. 121 See cert. 531 U.S. Pa., (2000). Ass’n 815 428, Ass’n v. Medical Serb. 148 436 Gener L.Ed.2d S.Ct. Cir.1987), denied, (3d 270, cert. F.2d 278 challenging 7 action ally, “Section 153, 851, 108 98 109 L.Ed.2d company’s 484 S.Ct. acquisition of another U.S. initial (1987). acts that are overt meetings These at the time of the or assets accrues stocks because new limitations begin a statute of acquisition.” Id. objectives of the however, further the maintains, there three serve to are Corp. Radio v. Ha- suit, Zenith why though conspiracy. it filed reasons was Cf. 270 Research, 321, 338, 401 U.S. 91 harm
zeltine
on Hanover. Although Hanover
(1971).
795,
77
28 L.Ed.2d
S.Ct.
could have
in 1912
injury
sued
for the
inflicted,
being
then
equally
was
enti-
“[continuing
But
violations have
tlеd to sue
1955.
not
found outside the RICO or
been
Sher
...
Act conspiracy
man
context
because
15,
at 502
U.S.
n.
S.Ct.
implement
reflect or
‘simply
acts
a Court thus endorsed the Third Circuit’s
prior refusal to deal or acts that are mere
reasoning
United’s conduct “went be
(of
ly
consequences
unabated inertial
a yond a mere continuation of the refusal to
act)
single
do
restart
statute of
sell; it collected rentals on
leases
en
”
Boat, 207
limitations.’
Concord
F.3d at
tered
machinery
into new leases when old
DXS,
(quoting
Inc. v. Siemens Med.
longer
in working
no
condition and
(6th
Inc.,
462,
Sys.,
100 F.3d
467-68
Cir.
required
Shoe,
replacement.” Hanover
(citations
1996)
quotations
and internal
Inc. v.
Shoe Machinery Corp.,
United
omitted)).
words,
to apply
other
(3d
776,
Cir.1967),
F.2d
part
aff'd
continuing
theory
non-conspi
violation
in part,
481,
rev’d
392 U.S.
88 S.Ct.
conduct,
ratorial
new overt acts must be
(1968).
Looking applied at how courts have only policy to maintain its monopoly, continuing theory to violation claims cf. Ctr., National Souvenir Inc. v. Historic 2§ under brought the Sherman Act Inc., Figures, F.2d why theory light sheds does not *6 (D.C.Cir.1984), denied, 825, cert. 469 U.S. In apply Clayton to Act claims. Hanover 103, (1984), 105 S.Ct. 83 L.Ed.2d Shoe, 48 the Corp., Inc. v. Shoe Mach. United 392 begins statute of 481, limitations to run from 483-84, 2224, U.S. 88 S.Ct. 20 L.Ed.2d the initial violation (1968), United, where a defendants are 1231 manufacturer and accused of to attempting monopolize by machinery, distributor of shoe was sued customers, Hanover, passively implementing anti-competitive one of its for mono- policies, deal, polizing such as a refusal to machinery industry the shoe see Gar Goerlich’s, Inc., elick 854, § 2 v. violation of of the Sherman Act. 323 Unit- F.2d 856 (6th Cir.1963) curiam), (per ed leased but refused to sell machinery maintaining its Hanover, an causing pay covenant, to action to Hanover to enforce a more restrictive Co., for use of the machines over see time. Unit- Pace Indus. v. Three Phoenix (9th lease-only 234, Cir.1987). policy adversely ed’s first F.2d affect- Existing ed Hanover in but competitors suit was not filed must act a when rival initiates until 1955. The Court held that anti-competitive policies United’s that do not re continued policy part adherence the was quire anti-competitive additional action to of monopoly. its maintenance implement. 2See P. Areeda & H. Hoven ¶ Court stated: (2d ed.2000). kamp, Antitrust Law 820e4 circumstances, such dealing implementation We are not with a violation is which, all, if it occurs at a reaffirmation policy’s must occur adop tion, within specific begins some and limited and the statute as time run soon Rather, span.... as dealing competitor DXS, we are the injury. suffers conduct 467-68; which constituted at continuing a F.3d see also Concord Boat, violation Klehr, of the Sherman Act and which 207 F.3d at (citing inflicted continuing 190-91, 117 1984). accumulating and U.S. S.Ct. tion). merger completed, is there actively Once monopolist the Only where possible violation under continuing and is no anti-competitive policy the reinitiates justify extending the stat- can the that action enjoys benefits from beyond four years. of limitations This ute theory continuing apply. violation independent and between “new distinction in- alleges that Northwest and accumulat- ... inflict new act[s] MSP and premium the hub сreased (which plaintiff’ restart ing injury on the into entry low-cost carriers prevented limitations), Pace, 813 F.2d statute prices and schedules by changing MSP consequences unabated inertial offering passengers rewards to not) (which do allows acts previous continuing theo- A violation agents. travel have effect and of limitations to acts, how- ry alleged on these overt based from discourages private parties sleeping ever, extending justify could not the stat- rights. on their theory if we ute even believed such because, §to is apply could ever 7. That mergers this rationale to Applying 7,§ merger if the initial violated even no If the initial violation makes sense. furthering are not acts allegations these itself, none of the “con- merger objectives merger. They may alleges can tinuing violations” Midwestern laws, acts that violate other antitrust be of limitations justify restarting the statute continuing they are not violations but were not undertaken because these acts Clayton Act sufficient to restart or to illegal policy merger further limitations. statute of Otherwise, every merger. maintain the could as a con- qualify decision business unlawful, Even if the itself was statute of tinuing violation to restart en- merged continued existence of the firm long as the continued limitations It is tity continuing is not violation: merger is merged. Once the desire simply the natural inertial conse- unabated merge completed, plan is completed, merger. Conducting busi- quence of can no overt acts be undertaken itself. presupposed ness plan. further responding Selling and services and goods *7 by lowering potential competition prices to conspiracy a or the main Unlike (aside practices pricing predatory from merger is a taining monopoly, of a a dis Act) 2§ the may that violate of Sherman act, A ongoing not an scheme. con crete very increasing quality are the product or on theory violation based overt tinuing firms, things competitive merged that objectives of an anti acts that further the not, con- encouraged provide to do to are § 1 of the conspiracy in violation of trust the quality products at high sumers to designed pro Act or that are Sherman prices. lowest § 2 of monopoly a in violation of mote theory expose § 7 of would apply mergers cannot to under Midwestern’s act liability pri- potential firms in merger merged Act. if the initial to Clayton Even the remained long as the firm 7, to hold vate suits as § it makes little sense violated because, assuming that the initial merged pursued were to effectuate policies Act, every Clayton might a illegal merger as we case violated merged firm (e.g., subsequent § 1 action involving violating a conspiracy to designed violation meetings continuing to a would be a occurred effectuate cartel viability. . firm’s violating merged a maintain price-fixing agreement) or case higher face sus- Merged companies do a (e.g., predatory pric of ongoing policy 2 than non- private suits monopoliza- ceptibility undertaken to effectuate ing 272 firms,
merged years but for the four III. following merger, absent some other holding-and-use Midwestern’s justification tolling statute of limi- firmly is theory precedent. more rooted tations. “Clayton Act claims аre not limited to prohibit all
Congress
mergers
did not
of
challenging
acquisition
the initial
stocks
Clayton Act
so
because
do
would
‘holding
...
or assets
since
as well as
merg-
the consumer
preclude
benefits
obtaining
potentially
of
assets’ is
violative
generate. Admittedly,
pro-com-
ers can
Boat,
7.”
207
at
section
Concord
F.3d
1050
petitive merger
anti-eompetitive
and an
(quoting United States v. ITT
Bak
Cont’l
other,
one are hard to
from
discern
each
Co.,
223, 240,
926,
43
U.S.
S.Ct.
liability
a firm to
exposing
perpetual
but
(1975))(internal quotation
L.Ed.2d 148
simply
under the
Act
because its
omitted).
holding
using
But since
as
history
a merger
business
includes
acquired in a
sets
the same
chill pro-competitive business combina-
manner as
were used at the
of
time
Finding
tions.
that a continuing violation
merger merely
is
an unabated inertial
theory
§ 7
apply
give
does not
does not
Boat,
consequence
of
Concord
“green light” monopolists, as Midwest-
1052, only
207 F.3d at
different
uses
claims,
firms,
merged
ern
all
because
like
justify restarting
assets can
the statute
firms,
subject
are still
to the Sherman
limitations. Midwestern relies on United
monopolization
prоhibitions
Act’s
or at-
Co.,
v. du Pont
States
de Nemours &
tempts monopolize.
586,
872,
U.S.
77 S.Ct.
flawed. asset, an could be considered it not was exchanged rather, in the merger; First, power market cannot be an power. created the market Clayton Act if purposes of the asset holding-and-use theory allows statute of any statute of limitations is have effect. only limitations to tolled when asset be an Otherwise, holding-and-use theory differently is used after a from the pow bar. Market would swallow time way it being merg that was used before a ability as of ... er is defined “the a firm er. If the asset did not exist before the price above competitive raise level requires logic theory this losing many so rapidly without sales so apply. cannot If power market could be is price unprofitable increase an acquired Clayton pur asset for Act must be rescinded.” A. Landes & William poses, so would of economies scale and Posner, Richard A. Market Power Anti other gained size efficiencies from the Cases, trust Harv. L.Rev. combination of two firms in a merger. To (1981). mergers All horizontal lead to in holding-and-use hold that oper theory and, that, creased market share in “assets,” however, ated for these sales, power: Post-merger market creased subject even the most pro-competitive through made even those market domina mergers liability. to perpetual can This tion, independent They are not acts. are not be. merely original merg reaffirmations of the definition, mergers, by er. Horizontal in Even if we power consider market crease the size enhance the market to be an asset that was exchanged in the power resulting firm. “Section of merger, it, rather being created Clayton requires Act ... proof mar there is no evidence this case that it is fact, power; ket the main purpose of being differently. used as mergers section 7 is to limit that increase serts that strategy Northwest’s business omitted). (footnote power.” market Id. If changed significantly in the last half of power market could be considered asset 1993. The presented evidence and the Clayton the retention which violated the however, experts’ reports, do support required extending Act and the statute of experts assertion. Some of the until the market power limitations asset only looked activity Northwest’s after (ignoring disgorged impossibility the suit was filed and others did firm divesting pow its market any not show difference between North er), the statute of limitations would have west’s use of market power before the definition, By any merger no effect. that merger beginning in 1993. In order power created market would violate the to toll the statute of limitations based long Act forever as the firm holding using market power, Midwest position. maintained market Addition ern point must demonstrate at what it was ally, power, market unlike other assets injured first differing Northwest’s use Clayton Act, traded, under the cannot power. of market It is at that point sold, trade, sale, or bought absent the begins limitations to run. It purchase power that; of other assets. Market merely has not done asserts a asset, not itself an but is the result change.
275 the ... extended on basis period cannot be cannot that a nonmovant law It clear is holding acquisitions.” and use the motion mere- summary judgment a survive Boat, F.3d at 1051. In con- pleadings as Midwest- 207 on its Concord by resting ly trast, theory in this is Discovery continuing a violation based to do here. attempts ern pro- that the anti- an initial action violates Midwestern on case was sufficient injuries exists, caused evidence, that Northwest’s laws followed if it trust vide designed implement Three time actions changed. illegal power of market use pre- Holding initial violation. relevance here: the the are of periods effectuate (the year the the statute of using assets restarts merger period; 1986 (four the the before suit use of assets years limitations when merger) to present. continuing To while filed); 1993 to the differs after the was summary statute of limitations Northwest’s restart the against violations prevail scheme, ongoing hold- is such basis the there an judgment motion the when attempt theory, conspiracy must show a price-fixing Midwestern ing-and-use power market dur- monopolize. use of that Northwest’s same periods two was the ing the first IV. the only during period the third
while Mid- in a new fashion. power market used ... starts period “The limitations western, however, infor- no provided has the first point at act causes to run ‘the ” use of market mation Northwest’s about Boat, at 207 F.3d injury.’ Concord this Without merger. the power before 190-91, Klehr, U.S. (quoting whether, information, know its we cannot 1984). can be tolled “The statute S.Ct. power of market differed post-1993 use circumstances, as ... certain such under pre-merger from its use. significantly only specu damages are plaintiffs a where during period.” the limitations Con lative that market suggests also Midwestern Boat, F.3d at 1051. cord innovations pricing program as the such after 1993 exem- employed that Northwest argues stat power. of market its different use plify tolled here of limitations should be ute however, theory, preclude would Such damages plaintiffs’ future because changes merged responding from firms during initial limita speculative were opportunities. in market conditions In ending in 1990. Zenith period tions This makes scant sense. Radio, 338-42, 91 S.Ct. U.S. the statute of Supreme tolled that Court briefs note Midwestern’s case because in a Act is to limitations Sherman theory related holding-and-use limitations during filed if had been theory, while suit continuing their violation claimant’s fu the existence of the period the two argue Northwest’s briefs theories, speculative have damages if ture would been both are the same. While ories have based on actions, been § 7 would allow because accepted for the mar market and on free hypothetically more than four litigant sue private claimant would have sug ket share acquisition, the initial we years after among a conspiracy it not for enjoyed were parties are incorrect. Un gest both The Court stated theory, competitors. claim holding-and-use der as too profits future “refusal award injury from an must arise different from holding that no equivalent acquisition. speculative initial injury caused yet .... has accrued injury at the cause action was sustained Where instances, action for the cause of acquisition, “the limitations these time of the *11 occur, damages, they future if ever will had it filed during years suit the four date accrue the are suffered.” following the would have been plaintiffs Id. at S.Ct. damages able to recover had already the it not Zenith Radio could have avoided in- if suffered the court that found North- curring damages the future even if they Republic west’s violated the during period. had filed suit the limitations scope Act. The and extent of Mid- does not claim that if it damages
Midwestern
had western’s future
may have been
four-year
within
filed suit
the
speculative,
but the fact
it
that
had suf-
period
limitations
it could not have calcu-
quantifiable injury
fered a
was not. See
any
damages
lated
of the
it
that
had suf- Pace,
because could not forecast future dam- tions in this case ensures that the statute ages at that time. Midwestern meaning. continues have We cannot injury could have established its but could (which imagine Clayton means, Act claim precisely have calculated the scope and definition, by plaintiffs allege that extent damages future it would suf- an acquisition competition fer has lessened Northwest-Republic due merg- them) injured er. If it had suit filed 1990 and won could not be filed merits, however, equitable relief on the years it more than four acquisition after the damages. would have incurred no future were towe hold that the unascertainable Radio, plaintiffs in Unlike the Zenith Mid- scope and extent damages of future was precluded western could future have dam- sufficient to tolling warrant the statute. ages occurring by obtaining from within In merger cases where monopolization by four years injunctive merged intimated, firm is as it was relief that it possibly now seeks or divesti- here, future damages to be borne con- ture. will always speculative sumers long as merged firm exists.
Injuries caused a merger, of course, might not until materialize after mean, This holding however, does not four-year period expired. limitation has that Midwestern was without recourse for case, In that plaintiff has not been damages that If, it suffered after 1990. injured yet, and the statute of limitations an action filed within the statute of limita- begin plaintiff does not to run until the period, tions proved had anti- Boat, injury. suffers See Concord 207 F.3d injury stemming trust from the alleged at 1051. But plaintiffs injury where violation, Clayton Act the court could have (as immediate Midwestern’s was according provided Midwestern with equitable relief representatives), the class the statute of precluded would have post-1990 limitations begins to run at that time. The damages, including the damages that period limitations begins “present whеn now seeks. And if Northwest’s actions damages future enough became definite constituted violations of other antitrust support a recovery.” P. Areeda & H. laws, Act, ¶320d such as 2 of (2d the Sherman Hovenkamp, Antitrust Law ed.2000). Midwestern would have had a The total extent new and alleged separate damages, cause of action including damages, four-year future with a time, unknown damages but statute of limitations from the time that could Midwestern, be claimed existed. allegedly illegal activity occurred. *12 addition, no produced In Midwestern
V.
justification
eleven-year
for the
reasonable
seeking damages,
In addition to
nothing
did
delay
filing suit. Northwest
relief. See
sought injunctive
or
merger
conceal the
from Midwestern
to
court
to
It asked the
26.
U.S.C.
timely
filing
it from
suit in a
to dissuade
policies
changes
Northwest’s
order
stated
representatives
manner.
Class
number of
MSP,
including limiting the
that,
years following the
during the four
Northwest,
requiring
gates
leased
file
merger, they
nauch-publicized
did.not
equipment
ser
provide
Northwest
busy, too con-
suit because
were too
carriers, requiring North
to low-cost
vices
litigation,
costs
cerned
of
about
аllow interline or
to establish or
west
If
about their cause of action.
ignorant
relationships
low-cost
sharing”
“code
justify
sufficient to
de-
these reasons were
(allowing
carriers to sell
carriers
low-cost
compara-
a
nying
laches defense when
regional feeder air
on Northwest’s
seats
period
statute of limitations time
has
ble
lines),
North
limiting the extent which
over,
the notion of
run more
twice
profit-
in short-term
engage
west could
rendered, meaningless.
laches would be
activities,
sacrificing
requiring
frequent flyer program,
its
adjust
of
Beyond
long-since expired
statute
adjust
its travel
requiring Northwest
limitations in
case and the lack of a
this
program.
agent compensation
justification,
explain
from- Midwestern
delay,
Northwest would
substantial-
Northwest,
part
its
of
sum
ly prejudiced
equitable
were
relief to be
motion, asserted that the
judgment
mary
1989,
at this late date.
In
North-
granted
sought
by the
equitable relief
was barred
corporate parent ceased to be a
west’s
laches,
requires a show
doctrine of
which
privately-
a
and became
public corрoration
of
“guilty
was
unrea
plaintiff
(after
the four-
company.
held
In
delay that has
and inexcusable
sonable
year
statute of limitations on the
prejudice
resulted
the defendant.”
run),
again
corporation
had
became
Douglas, Corp.,
v.
Goodman McDonnell
traded. The current shareholders
publicly
(8th
800,
Cir.1979);
IT &
606 F.2d
cf.
in 1994 Or after
of Northwest who invested
Corp.,
T v.
Tel. & Elec.
F.2d
General
no
that a
had
reason to believe
(9th
913,
Cir.1975), overruled on
years earlier
more than seven
occurring
American
grounds,
other
v.
California
be the basis for suit. Northwest’s
could
Co.,
Stores
495 U.S.
110 S.Ct.
unduly prejudiced
would be
shareholders
(1990).
doctrine of
rayed entry of that with barriers conclusions: combined following arrive at the fact to by competitors.6 market (1) Republic, Before (4) impor- airport gates Control over not have dominance Northwest did *14 to new entrants at some еntry tant barrier competed airport, but Minneapolis at the Minne- particular, and in airports, Republic.2 apolis airport.7 (2) merger, the new North- After (5) hub” domi- Possession of a “fortress gates at around 75% of controlled west ("Where Beyer Report, App. 22 a concen- Beyer 6. report C. concern- expert of John 2. The coupled with barriers to en- market is limitations issues stated: trated statute of possession try can of market ... one infer merger, Repub- Northwest and Before their firm.”); by Re- were, power the dominant Ohanian eighth respectively, the and ninth lic ("Market power requires a port, App. States. Both 152 largest airlines in the United entry operations at the Min- to into high share and barriers firms had substantial market ("MSP”) market.”). airport and neapolis/ St. Paul were, far, serving largest by airlines competed with one another The firms MSP. 22; Accounting Beyer Report, App. General 7. they in which passengers on the routes Office, Entry, Deregulation: to Airline Barriers And, overlapped. each firm constrained (senior many management at supra, at 9-11 charge supracom- ability to of the other gate long-term, exclusive start-up airlines said they in which petitive prices on the routes entry Minneapolis; leases are barrier to readily overlap could because each did not Minneapolis gates at showing out of 65 49 operations adjust flight schedules and their Northwest; airports "The had been leased to opportunity advantage profit on to take Detroit, Newark, Minneapolis were and in serving at the city-pair were not routes by that start- frequently cited the airlines most time. having competition deregulation as ed after App. 20. gaining to in access constraints limited subleasing gates requirement gates”; the financial 3. At the time of merger in reported Minneapolis "key would result in press gain entry factor” gates at controlling Northwest 75-80% to serve Minne- decision not Southwest's Report, App. Minneapolis. ("A Lee A. Ohanian key Report, App. apolis); Ohanian Office, Accounting Air- See also General access entry airline market is in the barrier Entry Deregulation: Barriers to Continue line Accounting Office re- gаtes.”). A General Key Competition Several Domestic in to Limit gates at Minne- that all port from 1999 stated 18, 1996) (Oct. (showing 49 out of Markets 10 and subject leases apolis were to exclusive-use Minneapolis been leased gates at had gates; leased 54 of the that Northwest Northwest). "no that there were airport stated officials General gates to new entrants. available” Planning, Flight Airline Plan: 4. Minnesota Office, Dergulation: Accounting Airline (1999). Competition in Minnesota 3 Airfares, Quality, and Bar- Changes Service 4, 1999). (March Entry See also riers to (quoting Report, App. 156-57 5. Ohanian ("The Planning, supra, at 3 U.S. Minnesota Report: 19 of Dep't [the "In of Justice Accounting in 1996 that Office found General Minneapolis where Northwest out of markets seriously gate long-term, leases exclusive-use Republic provided service] most of the Minneapolis-St. Paul. competition at inhibit two consolidate up service, gates are tied airports where most thereby At nonstop providing airlines leases, are often forced new entrants competition.”). such eliminating present all entry gy by sphere cаrrier8 can create an Northwest to reduce the by one nated the dominant carrier a by giving barrier which it competed and concentrate its advantage puts frequency-of-flights fortress hubs.13 competitive at a disadvan- new entrants (8)Also beginning locking in customers and tage9 responded problem-the upsurge to a new frequent flyer and agents through travel airlines-by of low-fare new entrant various “frequent programs.10 booker” strategies exploitation involved of its (6) economic conditions General fortress at Minneapolis.14 hub pre- financial situation Northwest’s own propositions, supported These which are effectively exploiting its vented it from by expert opinions up by backed data and until 1993.11 power market studies, governmental academic and suffice (7) in the second half of Beginning beginning to show that the four- within in Northwest’s ex- great leap there was a year period, limitations Northwest made a ploitation power of its market Minne- gained new use of assets in the greatly in- apolis, as demonstrated competition reap monopoly prof- stifle profit supra-competitive margins creased *15 Machinery’s its. Midwestern claim should in premiums.”12 or “hub This increase premiums corresponded summary judgment new strate- survive under usually gate gates, monopoly power.... which results in sublease Northwest’s higher [Minneapolis] premium times and sig- access at less desirable hub increased so cost.”) nificantly appears because Northwest to have changed way in which seats on its air- is used in the air- 8. The term "fortress hub” planes amongst were allocated the various industry to describe hubs in which one line classes.”); Report, App. fare Ohanian 166 flights a dominant share of or carrier has (contrasting premium charged by fare North- Strong Report, App. 202 services. John S. 1993(21%) Minneapolis flights west on in n.8. (40.3%)).; charged Dep’t with that in 1994-97 Transportation, of Low Cost Airline Revolu- 9. have that a carrier with a "[S]tudies shown tion, supra, (comparing premi- at 29 hub fare advantage gains frequency in a market a dis 1988(23%) Minneapolis ums at for and for traffic, parate of local which com share (40.8%)); Report, App. Ohanian pounds competitive рroblem for other car (showing profit margin that Northwest’s for compete at riers that the network hub. When twenty major Minneapolis markets went from cost carriers with similar characteristics do quarter in the first of 1993 to 0.9% 15.5% flows, they not have access to the same traffic 1994-97); 1998, "[B]y quarter the third compete.” Department are unable to using Minneapolis] airport travelers [the were Transportation, Office of Aviation and Inter paying highest the third fares in the nation.” Economics, Low national Cost Airline Ser Stephen Dempsey, Predatory Paul Practices 1996). (April vice Revolution 27 Monopolization Industry: in the Airline A Paul, Study Minneapolis/ Case St. Borenstein, 10. Severin Hub Dominance and 129, (2000). Transp. LJ. But cf. (1999). Pricing 4-5 (“Boren- Planning, supra, Minnesota at 7 analysis premiums stein's shows that fare 170-71; Report, App. 11. Ohanian Ohanian paid by Minneapolis- Northwest customers in Report, App. Rebuttal 194-95. dramatically St. Paul increased between high 1989 and and have remained since ("The App. Beyer Report, 12. 26-27 increase then.”). [Minneapolis] premium hub Northwest’s percent percent to 46 from 21 in 1993 in 1994 13. See discussion at 8-9. The substantial increase in substantial.... infra [Minneapolis] premium Northwest's hub be- 201-38, Strong Report, App. and 1994 indicates that tween 1993 North- discussed in detail, changed way infra, west in which it was exercis- n.25. opine experts in an did that Northwest articulated west’s Act standards case, gained power market as a result of the this Midwestern Ma stage of earlier Inc., Airlines, they merger, but made clear chinery, Inc. v. Northwest (8th Cir.1999), acquired came power market from assets 167 F.8d Corp., Republic’s gate v. in the such as Corp. Boat Brunswick Concord (8th Cir.2000). 1039, 1050-51 Minneapolis airport.16 at the When leases 207 F.Sd the term plaintiffs’ economists use today or repudiate does not The Court case, they in this use it as power” “market legal standards set out Mid gainsay the proxy for the constellation of assets such Boat, Machinery and Concord western up leases that make a “fortress gate holding action and use that a cause of Therefore, worry we not about hub.” need threat assets accrues when the asset, power market is itself whether evi monopoly first becomes restraint property since it results from control of injury suffers there plaintiff dent and the rights indubitably that are assets. Machinery, 167 F.3d at by. Midwestern point goes only to the words The Court’s Boat, 443; at 1051. The F.3d Concord used, to the of what substance states, “[O]nly of as Court different uses plaintiffs’ evidence showed. justify restarting can the statute sets Second, says plain- I Supra Accordingly, Court limitations.” 8.15 argue legal stan tiffs did not show made distinc- no need about have Instead, my during use of the assets the limitations dards. concern is with tive that differed from their use of the period of the facts. The Court Court’s treatment But during period. did evidence time-barred says plaintiffs not adduce assets *16 plaintiffs the did show this. The alleged. particular, plaintiffs of the facts the evidence that Northwest’s use says plaintiffs did not show introduced Court in gained merger Minneapolis in varied three they used assets the of the hub was de- competition they periods. did time Because this case threaten and they differently summary judgment, used the I will recount not show assets cided (1993 light in the favorable to limitations and the evidence most during period the after) preceding, plaintiffs. did the the during can period. time-barred The Court merger, the did not Before Northwest a by ignoring reach these conclusions majority of at Minne- gates control a the contrary. great deal of evidence to the departing and apolis flights arriving or the First, says power market from there. Before the North- the Court asset, charge premium not able to a possession is not an but the result of west was competitive for Minne- Supra price of at 11. North- other assets. above Areeda, merger preda- Phillip Compare II Herbert Hoven- could show facilitated Blair, tion, camp, Roger 320c5 & Antitrust Law then the statute limitation would 2000) ("[A] (2d continuing oc- ed. violation challenge merger a to the itself bar merger in a curs when the defendant uses the a distinctive to as Whether the use referred acquisition way that is not inherent in the holding continuing violation or different example, merger suppose that a itself. For use, the idea is the same. engage gave power to in a firm the structural predatory pricing. damages A action chal- 152-55; Strong Report, Re- App. 16. Ohanian merger long lеnging a fail as such would ("The App. dominance and port, hub merely possible likely. predation were or even firmly corresponding power was es- market result, a the statute of would not As limitation ....”). tablished However, damage once on such run claim. began predation plaintiff and the unlawful apolis flights, compete because it had to Department lowed Transporta- Republic.17 with tion, over Department protest, of Justice because the DOT believed in theory Upon acquiring Republic, Northwest “contestability” new carriers could gained a dominant position at the Minne- —that easily enter new markets and therefore apolis airport.18 In period between the specter competition discipline Northwest charge did (above premium unfolded, dominant weighted history carriers.21 As national av- erage price) Minneapolis flights, theory for it disproved.22 but was E. Michael relatively premium.19 Levine, was a small plain- A Management, Yale School of expert explained tiffs that factors such as wrote an influential article in 1987 conclud- the 1991-1992 recession and Northwest’s ing that important hubs were sources of own financial prevented difficulties North- competitive advantage for airlines and de- making west from effective use of its con- scribing means which airlines with Minneapolis trol of the hub to extract a strong exploited hubs that advantage. See large monopoly premium there.20 Levine, Michael E. Competition “Airline Beginning Deregulated Theory, June Markets: Firm Northwest re- sponded to new developments, part by Strategy, Policy,” Public 4 Yale Jour- using the Minneapolis gained (1987). hub Regulation nal merger. Several conditions combined to hired Levine in 1992 as Executive Vice allow this new use of the Minneapolis hub. President Marketing. for Levine deter- mined that Northwest should abandon its
First, it took some time after airline previous strategy of competing with the deregulation experience to accrue dem- biggest three airlines on their own turf onstrating competitive advantages for reaping an airline of concentrate on dominating advantages airport. hub NorthwesNRepublic Northwest’s part existing strоng hubs. aof wave of airline mergers Dyer in the Davis 1980’s. and Len Schlesinger, “North- The Northwest-Republic merger was al- west Airlines: Coping Change,” Har- *17 1, supra. 17. See footnote proved (and then-prevailing under the since discredited) neo-classical economics view Airlines, acqui- Northwest as a result of its 18. 'contestability' that of markets would arrest 1986, Republic sition of Airlines in was able any anticompetitive conduct. The North- to establish and sustain a service network .that west-Republic mergers and TWA-Ozarlt airports includes dominant hub at Minne- vigorously opposed by were Depart- the U.S. (MSP), apolis-St. Paul Wayne Detroit Metro grounds ment of Justice [DOJ] on (DTW), County (MEM).” Memphis monopolies would create hub Minneapolis Strong Report, App. 200. Louis, respectively.”). and St. Report, App. (citing Ohanian 166-67 two 19. 22. reports: comparing premium one 21% in Proponents deregulation 1994-97; believed that premium 1993 to in 40.3% and the "contestable,” is, airline markets were comparing premium other in 1988 to 23% easily new carriers could figures 1997, enter markets be- in 41% 44% 1995 and key cause airlines’ respectively). resources-airplanes-are out, highly however, mobile. As it turns equipment Report, App. 20. Ohanian other 170. and facilities needed to route-especially gate space-can serve a Dempsey, ("The supra, costly at 139-40 DOT’s difficult and to obtain. Facilities 21. highly permissive policies may respect ticketing, baggage to also be limited for mergers explosion led to an handling, operations of such activi- and maintenance. ty.... Many mergers ap- of these Planning, were supra, Minnesota at 13. significantly lower fares School, offering service at 9-897-027 at 10 No. Business vard major network airlines.”24 (1997). to establish such airlines were able Where Second, industry developed new hub, collected premiums at a hub routes that allowed systems management yield dominant carrier declined.25 and instant- monitor ticket sales airlines market particular exploit ly respond threat, In to this new North- response put in Northwest opportunities. Minneapolis its control of the west used management yield newly developed place by price entrants to chase out low-fare hub North- which allowed computer systems on the entrant’s routes cuts focused threatened on manipulate pricing west challenged routes with swamping the already- offering more seats routes size ad- and seats.26 Northwest’s flights fares, responding low thus established entrants, obviously which vantage over the general sparking new entrants without merger, gave from the part resulted price war.23 staying power to Northwest the financial engage targeted price cuts so
Third, airline entered the type a new pricing could not sustain a new entrants of the economic “In wake picture. price parity.27 Using recession, advantage or even War recovery from the Gulf yield management sys- sophisticated experi- industry airline U.S. available, could focus tems now applications significant upsurge enced airlines, routes price responses particular on the entrant entry by low-fare new industry- an challenged sparking without costs and with lower typically operating 208-10, of Northwest or the financial resources Report, App. 218. Le- Strong 23. Cf. vine, ("The periods prоlonged of such anti- complex fare struc- withstand supra, at 477 computerized capacity competitive controls behavior. tures with (footnote omitted). industry Strong Report, App. which have come dominate competitive techniques play important Strong’s role in these list of Northwest's tactics.”). entrants out of the market included drive new directly dependent were some actions that 201; Strong Report, App. Dep't (“Restric- of Trans- Minneapolis controlling facilities at portation, counters, Office of Aviation and International (e.g., op- gates tions on or facilities Affairs, Service Revolu- The Low Cost Airline offices) prevent a new entrant erations 1996) ("[S]ince early (April tion 3 competing ser- being able to launch from major evolutionary development pace of this vice”) capitalize on North- and others has dra- carriers”] “advent of low-cost [the ("Schedul- flights ability to offer more west's matically quickened.”). proximity to the new departures in close ”). 'bracketing.' flights, entrant’s known *18 Strong Report, App. 216-17. 25. by technique an article was described in This frequency possi- “Add where Michael Levine: 26. ble, depar- new entrant’s to 'sandwich' departures.” Le- own tures between one's anticompetitive specific pattern behav- A vine, supra, at 476. apparent and began to be in 1993-94 ior practices These in- continued thereafter. ("As major Strong Report, App. 218-20 27. "dumping” seats capacity of low fare clude airline, ability to sustain such Northwest’s "bracketing” flight frequencies, greater likely much losses to be revenue gates flights, over at its restrictive controls carrier.”). entering Le- a smaller flyer targeted frequent airports, fortress hub Cf. vine, ("The object is to reduce supra, at 477 programs. agent incentive and travel subject entrant and to the new trial sustained practices serve to make These period operation at low load prolonged for low- competition much more difficult carriers, strategy saps the entrant's This who factors. especially new entrants fare ”). working operations capital .... the size or network do not have case, In at least onе price wide war.28 NANCE, Appellant, Eric Randall challenged on the cut fares
Northwest cost until the routes below variable new v. route.29 gave up the Facilities and entrant Larry NORRIS, Director, Arkansas during gained merger30 equipment Department Correction, gave capacity swamp Northwest Appellee. seats,31 so that the flights market with any not offer new entrants could schedul- No. 03-2018. travelers. ing advantage to Once the new Appeals, United States Court of town, chased out of entrant had been Eighth Circuit. flights cut Northwest back raised level where had its fares above the May Submitted: 2004. challenge.32 new entrant’s been before the Filed: Dec. 2004. came forward with evi- plaintiffs peri- within the limitations dence gain knowledge,
od did Northwest
technology, and the market conditions that exploit power it to the market
allowed merger placed in its I
Republic grasp. affirming summary judg-
cannot concur in
ment on such a record. market, Strong Report, App. Minneapolis 28. 218. Northwest increased flights number of on the route 48% Strong App. E.g., Report, (during 29. 223-24 53%); (when number of seats Sun Vanguard competed time Airlines on Minne- market, Country Minneapolis Airlines entered route, apolis-Des charged Moines Northwest capacity Northwest added to seat 33% cost). prices below variable challenged years, routes in two whereas rate 1%; growth previous years for five Although pointed has Midwest to much increase was almost five times the number of specific particular Republic evidence of what used, route); Country assets were the record does Contain seats offered Sun cf. Levine, ("If (in- would allow a finder of supra, evidence that fact at All circumstances that, instance, imple- conclude cluding the financial condition of the new strategies using Republic’s mented its new warrant, entrant) the incumbent can flood the gates gained merger. Bey- DC-9's and seats, low-priced withdrawing market with (Northwest Report, App. ap- er controlled invisibly peak them almost times or as gates proximately Minneapolis *19 after 75% allow.”). competitive conditions Affidavit, merger); Ihrig App. Richard 7-9 (summarizing evidence that DC-9 aircraft 32.Strong Report, (Vanguard App. 223-24 gained merger flights were used to add airlines); (after Kiwi International was routes). challenged market, Minneapolis-Detroit forced from $467). changed $69 fare from Strong Report, App. (generally), (when Vanguard City- entered Kansas