*1 in the case Cooey intervened also Dennis, held that we court.
district its discre not abuse court did “the district to dem Dennis failed holding that tion on of success a likelihood onstrate “Dennis held that further We merits.” will suffer that he failed demonstrate change a injury absent irreparable adopt Without protocol.” execution Ohio in Dennis the conclusion rejecting ing or to demonstrate a failure is there merits, we of success likelihood court the district find nevertheless not abuse discretion case did aof granting for the criteria weighing denying restraining order and stay or because primarily requested, the relief v. Nelson untimely. See motion was 637, 124 S.Ct. 541 U.S. Campbell, (2004) (holding that 2126, 158 L.Ed.2d na minute the last may consider “a court stay execution application ture of re equitable grant deciding whether Dis lief.”) States v. United (citing Gomez District the Northern trict Court for 1652, 118 653, 112 Cal., S.Ct. 503 U.S. (1992)). L.Ed.2d stay of execution request DENIED. INC., AIRLINES,
SPIRIT Plaintiff-Appellant,
v. INC., AIRLINES, NORTHWEST Defendant-Appellee.
No. 03-1521. Appeals, Court States United Circuit. Sixth Sept. Argued: 15, 2005. Dec. Filed: Decided and
ARGUED: Arnold, Richard Alan Ken- Nachwalter, ny, Seymour, Arnold, Criteh- low Spector, Miami, & Florida, for Appel- lant. Denvir, James Boies, P. Schiller & Flexner, Washington, D.C., for Appellee. ON BRIEF: Richard Arnold, Alan Wil- Blechman, liam J. Kevin Murray, J. Kenny Nachwalter, Seymour, Arnold, & Critchlow Miami, Spector, Florida, for Appellant. Denvir, James P. Levitt, Alfred P. Boies, Flexner, Schiller & Washington, D.C., Lawrence G. Campbell, Zinn, L. Pahl Dickinson Wright, Detroit, Michigan, for Appellee.
Before: CLAY, MOORE and Circuit Judges; HAYNES, Judge.* District HAYNES, J.,D. opinion delivered the court, CLAY, J., which joined. MOORE, (pp. 953-59), J. delivered a separate opinion concurring in the judgment.
* Jr., Haynes, Honorable William J. Tennessee, United sitting by designation. Judge States District for the Middle District of tri- context, reasonable conclude we OPINION
AMENDED separate and find that er of fact could HAYNES, Judge. District mar- leisure-passenger distinct low-fare Airlines, appeals Inc. Spirit Plaintiff presented The evidence ket existed. order grant- final court’s the district a market includes support of such to the Defendant judgment summary ing data, the testi- marketing own Airlines, Plaintiffs Inc. on officials, the find- marketing mony of its attempted monopolization claims regulators ings government 2 of the Section under monopolization Moreover, based on the evidence experts. § 2.1 Act, 15 U.S.C. Antitrust Sherman of fact could a reasonable trier presented, engaged that Northwest alleged predation, at the time find that tac- predatory other pricing predatory geographic two relevant mar- airline in the leisure tics concentrated, Northwest highly routes was and Detroit- Detroit-Boston for the kets share, overwhelming market possessed sum, district routes. Philadelphia high. Ac- entry were and the barriers not Spirit’s proof had found court of fact could trier cordingly, a reasоnable North- established *5 pred- in engaged that Northwest conclude the Specifically, markets. in these west mar- passenger leisure atory definition rejected Spirit’s court district in geographic routes on these two kets fare to as limited low market the relevant out of the business. Spirit force order to adopted North- passengers leisure presented on the Finally, evidence based of all market definition west’s a reasonable trier experts, Spirit’s conclusion, the this routes. these With on exited the that once fact find could total that Northwest’s found court district to re- market, raised its Northwest for these total costs its exceeded revenues during pre- it incurred coup the losses Moreover, opined court the district routes. we reverse Accordingly, period. dation passen- fare or leisure if the low even summary judgment favor grant appropriate market were ger to the case and remand the demonstrated expert proof Northwest’s con- further proceedings court for ex- district revenues still Northwest’s total opinion. this The district sistent with relevant costs. ceeded proof Spirit’s expert deemed court and revenue costs
analysis of Northwest’s BACKGROUND2 A. FACTUAL conclu- these Given implausible. to be 1. Parties it unneces- sions, deemed the district court other sary Spirit’s to decide for a its certificate obtained claims. practices Michigan service scheduled 1992, One In Charter One. 1990 as record, Charter when our review From fare a low Spirit, name to changed its fa- light in a most is considered evidence in De- of operations its base carrier in this with required Spirit, as vorable infra, district court because the 2. As discussed appeal, North- pendency of this During the summary stay for granted motion bankruptcy. The automatic west filed for law, 362(a)(1) applies this we are applicable § judgment, 11 U.S.C. under under 953, Lines, light 310 F.3d Air in a appeal. In re Delta record the factual required to view Cir.2002). stipula- (6th Upon parties' non-moving par- Spirit, most favorable tion, bankruptcy entered order court ty- on stay lifting decision the automatic appeal. Spirit's 1992, troit. In Spirit had four airplanes negotiations with Airways U.S. to use two servicing 140,931 four cities passen- with gates that Northwest subsequently ac- gers, approximately employees and an- quired. The district Spir- court found that nual revenues of approximately mil- $60 it did secure short term leases from Unit- Spirit’s primary lion. point routes were ed Airlines and Airlines, Continental but point flights between Detroit-Atlantic City that Spirit $100,000 expended to add its and, time, for a By Detroit-Boston. the Detroit-Philadelphia flight. Spirit also end of Spirit had added service to paid a 25% higher landing fee than airlinеs cities Florida and in Spirit expand- that had leases with the Detroit airport ed to other cities. Spirit targeted local authority. price-sensitive leisure or passengers whose Spirit explored expansion of its is generally travel such discretionary, service between Detroit cities, and other passengers visiting relatives, friends and including Boston and Philadelphia. Mark and tourists or vacationers might who not Kahan, Spirit’s general counsel, explained otherwise fly. Spirit’s pricing strategy that these major two have cities business provided incentive to such leisure and leisure travelers. model, With unrestricted, travelers with but non-re- Spirit expected to primarily attract fundable fares. services lacked price conscious or leisure Spir- traveler. service, first class frequent flyer benefits, management it’s considered the Detroit- and connecting service. Leisure or low Philadelphia route a particularly attractive price-sensitive passengers purchase tickets given its other flights from the with use, restrictions e.g., their an ad- Philadelphia airport and the poten- route’s purchase vance or stay-over requirement, *6 tial price-sensitive base of and leisure trav-
in exchange for low prices for a particular elers. route. On 15, 1995, December Spirit 1992, com- In Spirit approached the Detroit a single menced daily non-stop trip round Metropolitan airport’s management about flight between Detroit-Philadelphia on access an to additional ticket counters and 87-seat airplane DC-9 at a gates. fare with $49 a Because “Northwest a had stran- load factor of percent. 74.3 glehold Spirit soon on gates the at Metro,” Detroit experienced higher factor load Spirit’s on the (J.A. 1336). efforts “were futile.” DetroiN-Philadelphia in June, 1996, route Northwest controlled the majority of the rising to percent 88.5 gates percent 64.1 at the Detroit airport either lease January, 28, 1996, On June Spirit secondary rights from other airlines. added a second non-stop round trip flight cited an internal Northwest memo- for the Detroit-Philadelphia route. On randum advocating that when Detroit built 15, April 1996, Spirit started its its Detroit- airport, new the existing Detroit conc- Boston route with one daily non-stop ourses should be destroyed, so that other round trip, initially $69, at fares of and $89 carriers not would “benefit from the vacu- $109. um which is created once va- [Northwest] cates its existing gates” at the old Detroit 1995, By Spirit operated 10 aircraft and (J.A.
airport. 41). serviced 13 travel 583,969 routes carrying
Spirit was allowed to gates use formerly passengers and employing approximately used Trump Charter, Shuttle and but 450 people. 1996, By Spirit increased its could not permanent secure a gate ar- capacity aircraft, to 11 with 15 routes. In rangement. Spirit was unsuccessful in its June 71,364,828 had seat miles
923 Philadelphia was U.S. tor for the service million and of $62.9 revenues annual with 780). (J.A. Airways US Airways. and employees. approximately provider service highest the cost was 1926 as air founded in was Northwest (J.A3 479), expert Spirit’s and the Chicago Minneapolis the for carrier mail “compli- Airways as a U.S. characterized at Minne- operations The firm’s route. (J.A. 3796). of Northwest. competitor ant” developed Northwest and grew apolis daily non-stop round had six Northwest merged By Northwest hub there. Detroih-Philadelphia trip on flights Airlines, had hubs which Republic with four. Airways had U.S. route and In Northwest Memphis. Detroit carri- passenger largest air fourth was Response 2. Northwest reve- annual with States er United Entry from domestic billion nues $9.1 Competi- “New adopted its Northwest At the Detroit operations. international response Analysis” for its Equilibrium tive “controlled” Northwest airport, Metro (J.A. on its routes. competitor any new per- had 78 gates and airport’s 3514). North- analysis, step In one of De- from the travel passenger of all cent new en- impact considers west airport. troit-Metro revenue. service on trant’s hub-and-spoke operates Northwest two, wheth- studies step Northwest Id. Detroit, Minne- hubs at with network Id. route. capacity to add er In the hub Memphis. Paul apolis-St. Dailey admits Paul executive connecting as the serves the hub system, “art” than “sci- is more analysis that this cities that other flights between point (J.A.1649). ence.” (J.A. In a “spokes.” serve North- Spirit’s entry, At time not do word, system passengers in this fare for Detroit- lowest unrestricted west’s single on a journey their begin or end lowest and its Philadelphia flight was $355 spoke from a flight is The initial flight. way. US each was fare $125 restricted deplaning, and after the hub airport to to North- comparable Airways’ fares were flight to a second boards Initially, neither Northwest fares. west’s destination, another ultimate passenger’s *7 fares nor its Airways reduced nor U.S. restricted offers Northwest spoke airport. entry into Spirit’s after capacity added clubs, tickets, airport fre- and unrestricted route, Spirit until Detroit-Philadelphia benefits, seat selec- advanced flyer quent factors, high as e.g., as high load service, achieved tion, classes first and other entry Spirit’s Before April 88% utilizes the Northwest meals. on-board route, Northwest into Detroit-Boston which, in es- policy, management yield service non-stop air provided maximize the revenue sence, seeks “to daily 8.5 route with Detroit-Boston ... and domestic network for our earn we fare unrestricted its trips; lowest round highest at its every seat try to sell fare $411, restricted and its lowest was (J.A fare.” possible Spirit’s en- Prior to way. each was $189 Northwest of- entry, Spirit’s Prior ca- its to reduce intended try, Northwest Detroit-Bos- on the non-stop service fered route the Detroit-Boston pacity For routes. Detroit-Philadelphia ton 3,238 seats by 13.7% of 1996 summer route, Northwest Detroit-Philadelphia 3,753 seats. the De- For share. a 72% market had dra- 15, 1996, Northwest April Effective route, had 89% Northwest troit-Boston Detroit- fare on the its matically reduced only competi- Northwest’s share. $69, Boston route to offering this lowest lowest fare for 92.5% of days during fare on flights. all of its Northwest also predation period. daily non-stop increased its round trip Spirit’s monthly load factors on the De- flights on the Detroit-Boston route to 10.5. troit-Philadelphia route were 43% (July added a 289-seat Northwest DC-10 air- 1996), 36% (Aug.), 31% (Sept.). As a re- plane that had three Spirit’s times entire sult, Spirit abandoned its Detroit-Philadel- daily capacity on the Detroit-Boston route. phia September 29, route on 1996. On
Prior Spirit’s entry into the 28, 1996, October Northwest increased its fare had been in Northwest’s excess of lowest unrestricted fare on the Detroit- route, On the $300. Detroit-Boston 74.5% Philadelphia route to 20, April $279 and passengers Northwest’s flew on fares at 1998, increased that fare to $416. route, or below For this $69. Northwest passengers fares were Spirit’s than less lowest fare on days 93.9% of the during B. PROCEDURAL HISTORY Spirit which flew this route. In July Spirit its filed Section 2 against claims 74% of passengers Northwest’s on the De- Northwest for anti-competitive and exclu- troit-Boston route flew on fares at or be- sionary practices, including, but not limited $69, low that percentage but in Sep- fell to, predatory pricing. Spirit’s complaint
tember, 1996 to 67%. monthly alleged, in pertinent part: average load factors on the Detroit-Boston during route price response part As scheme, this unlawful and as 1996), were (April 18% 21% (May), 24% explained below, more fully Northwest (June), (July), 31% (August), 29% 17% targeted certain the routes on which (September). Spirit never flew more than it and competed and substantial- 1,700 month, passengers per while North- ly capacity increased began 30,000 west averaged well over below Northwest’s average variable cost per month during the period. same or its average total Further, cost. 19, 1996, On June Northwest reduced its part of scheme, its unlawful Northwest unrestricted) lowest (including fares to $49 hampered Spirit’s ability compete at on all Northwest flights on the Detroit- Detroit by denying Spirit access to un- Philadelphia By route. August gates used controlled Spirit discontinued its flight second on charging and/or unreasonable Detroit-Philadelphia Septem- route. On and discriminatory prices to use those 30, 1996, ber Spirit abandoned its Detroit gates, and upon belief, information and Philadelphia route. Northwеst resumed threatening to eliminate or eliminating status as the provider of non-stop discounts, promotions or other benefits *8 service on the route. Spirit’s After exit on companies to greater the Detroit met- route, this Northwest increased its fare ropolitan if area companies those desig- initially to and $271 later to as $461 its nated a carrier other than Northwest for lowest unrestricted fare. From July to service to or from Detroit ... September 1996, 40.5% of Northwest’s The combination of very low and passengers flew on fares or at below $49. very high capacity on the Detroit-Bos- By September 70% of Northwest’s ton route caused Northwest’s revenues passengers flew on fares above on $49 the on that city pair go into free fall ... Detroit-Philadelphia route and equal to or sum, below In Northwest transport- time, $69. At that dramatically ed fares than Spirit’s less fares, lowered its matching Spirit’s $^9 By routes. these Spirit on these on capacity fare, and increased one-ivay standards, opined that Spirit’s experts city pair the routes were prices on these Northwest’s against punch one-two Northwest’s average Spirit’s De- costs. and its variable Detroit-Boston below Spirit produced months after was that within troit-Philadelphia expert proof markets when, by markets, result Norbhioest intended North- the exit from these Spirit’s quarter start that successfully completely recouped and west of fourth service to abandon Spirit was substantially higher fares losses with its forced city pairs. both on routes. capacity and reduced these (emphasis at 19 and Appendix Joint addition, Spirit In Northwest’s cited added). at the high enplanements market share discovery, North- completion of Upon expansion of airport, Detroit Northwest’s summary judgment, con- moved west response on these routes in capacity its sum, showed: that evidence tending, significant and barriers entry, Spirit’s (1) product or the relevant service market, enabling North- entry in this connecting pas- included local and market engage in a west successful airport on the sengers through Detroit from this market campaign to drive Detroit-Philadelphia and Detroit-Boston its lost from its recoup and to revenues times, (2) routes; relevant that at all on these routes. As the predatory pricing its revenues exceeded Northwest’s - injury pre- from Northwest’s competitive (3) routes; costs on these variable dation, reduc- significant cited the price- market of Spirit’s proposed if even on number of leisure travelers tion market were or leisure travelers sensitive competitive op- who lost the these routes revenues on total Northwest’s appropriate, from the Detroit price of low travel tion its relevant still exceeded routes these paid and who sub- airport to these cities (4) price costs; that Northwest’s low travel these stantially higher prices to response to strategy pro-competitive was a this market. Spirit’s exit from after routes mar- entry geographic into these kets. adopted court ruling, In the district its upon relied response, Spirit In its of the relevant definition Northwest’s opined on the definitions who experts, found that market and product or services mar- and service geographic relevant its costs revenues exceeded kets, characteristics anticompetitive reject- court these routes. district on market, ap- the determination service of the relevant Spirit’s definition ed costs of Northwest’s propriate measure in that market, that even concluded but recoupment based likelihood of exceeded its Northwest’s revenues essence, Spir- record. the factual upon district As the these routes. costs or product that the relevant proof was it’s summarized: court price- market is low service facts established brute [T]he for the travelers or leisure fare sensitive not fall below did that Northwest’s fares Detroit-Philadelphia Detroit-Boston *9 costs, and airline’s variable the routes, mar- geographic undisputed produced sufficient has not Spirit [] ap- opinions, Spirit’s experts’ kets. author- legal pertinent identified facts or of is Northwest’s measure costs propriate opinion experts’ ity to validate the addi- providing costs incremental al- some pricing occurred below-cost these capacity divert tional ternative, legally relevant “lowest ing fare” to submit statements of the remain- “price-sensitive” market. ing issues case in this the event that
[*] [*] [*] [*] [*] [*] Northwest’s summary judgment motion granted. submission, were In its Spirit governing The law predatory claims of portions maintains that of its claims for explicated in as Brooke injunctive damages and relief would re- Group and endorsed scholars includ- main viable even in the face of such an ing Spirit’s experts, own deliberately es- Nonetheless, ruling. adverse Spirit any qualitative judgments chews about then states that “remaining these por- competitive desirability of one busi- tions, unaccompanied by Northwest’s act practice ness verses another. The sole of predatory pricing, do not warrant the objective benchmark is whether the time, money and resources necessarily alleged predator’s prices exceed its prosecution involved with the of the re- costs, by reference to products it maining portions of the fedеral antitrust actually sells and the markets in which it (Plaintiffs action.” Post-Hearing State- actually competes with alleged vic- 3). ment of What Remains at Conse- tim of predation. standard, Under this quently, the Court’s award of summary the record compels the conclusion that judgment to Northwest leaves nothing were not predatory, further to in this resolve case. operated because the profitably airline on both the Detroit-Boston and Detroit- (J.A. 80, 29). 81 at n. Philadelphia during pe- routes the entire alleged riod of predation. Consequent- C. THE SUMMARY JUDGMENT ly, Spirit having failed as a matter of law RECORD to establish the prong first of the Brooke 1. Market Characteristics standard, Group Northwest is entitled Passenger Industry Airline to summary judgment in its favor on Spirit’s claims pricing. proof before district court in- (J.A. 80). Department cluded a of Transportation study finding that “low-fare air carriers As Spirit’s remaining Section 2 provide important competitive service and claims, consider-, court district deemed benefits: fare levels are much lower and ation of unnecessary them given its conclu- traffic higher, levels on routes served sion about predatory pricing, con- .by (J.A. 1388). low-fare airlines.” Spirit’s ceded. expert’s analysis revealed that low fare conclusion, Given this the Court need carriers significantly reduce the fares of not address Northwest’s two remaining major carriers: markets that “[i]n do in- arguments in support of its motion ... hubs, volve dominated low-cost service re- This only leaves the question whether in average sults way one savings fare anything remains of claims in per (J.A. passenger, $70 or 40 percent.” outset, this case. As noted at the 876, n. 4 quoting Department the U.S. alleges that engaged in other Transportation, The Low Cost Airline Ser- anticompetitive forms of conduct apart Revolution, vice April, 1996 at p. from predatory pricing, but parties’ current round of submissions addresses The record also study, includes a “Pred- theory the latter recovery. atory Pricing To Industry” U.S. Airline resolve uncertainty, the Court invit- Clinton V. Oster of Indiana University ed parties at the December hear- Strong and John S. of the College of Wil- *10 January travel in 2001. For Oster-Strong study Miami for The Mary. liam and travel, of United offered 6 different markets “the number in 1590 notes that ranging increased dramatical- coach fares the lowest fare traveling $1,045. large highest number of seats to the fare of to the of ly response $483 2591). (J.A. The fares.” at low offered multiple give fares an airline These that there study also reflects Oster-Strong flexibility in price considerable how to in this Competitive Tools” “Multiple are could, flights. on its The airline seats price non-price industry provide example, average service at low for offer among airlinеs. competition for bases by simply making large a number fares Tools. While Multiple Competitive in the lower cate- seats available fare of impor- is an passenger pays fare a did in the gories, as Northwest third airlines competition, of tant element 1996 in the Detroit to Phila- quarter of solely on the basis compete don’t Conversely, of if there is delphia market. Instead, they com- the ticket. price meaningful and no' sufficient demand of includ- multiple dimensions pete over can competition, the airline offer most-of price; ticket number ing: high average of its service at fares mak- timing those day and the flights a ing of few or no seats available the lower flight the characteristics flights; categories. fare flight is itinerary such as whether s{i í¡í if: ^ single-plane ser- continuing nonstop, However, service; presence of a low-fare vice, rebates to connecting reduces an carrier such as Southwest frequent the traveler in the form of flier discoimts; ability high to extract fares airline’s in- corporate programs or from travelers. including service flight amenities food ways together; club commission gers most also dimension one courage given flight, conditions of travel cost are competitor. Airlines [*] lounges; and so another, on their how compete importantly, in which airlines can narrowly travel [*] ground amenities closely may miss the can offer different fares overrides flights particularly attaching restrictions or To focus by paying agents # defined. the seats offering only limited rather than those of to some fares forth. [*] (TACOs), to en- to book full compete with travel if range Airlines can on a [*] including passen- spaced single of the agent on a and, [*] (J.A. 2589, 2590, ward the lower is much smaller matically shifts the distribution these $173 pay them. away from the still remain all of the fare entry, as was the case before cally. that the proportion to about categories entry of a low-fare carrier dra- There are still tickets sold after low-fare categories after low-fare $115. fare classes. The result proportion higher fare classes to- has tickets fare fell (emphasis changed *}* Some sold entry, of travelers from about high fares in each of entry, but dramati- of fares added). but ^ gates industry, access catego- In the airline in some fare number of seats critical, is not determined but access example ries [A]n coach/econo- entrant, and, a new types open competition my fares with associated class to en- barrier gate Air- access is a substantial by United restrictions offered [is] Elzinga, one try. Professor Kenneth from Denver to flights for its lines *11 Spirit’s experts quoted analyst one who at University nomics Washington of aspect summarized this of the market. who teaches and researches in the areas industrial organization, While route and pricing schedules for antitrust economics industry the airline have been the economics of largely contracts. Professor deregulated years, many analyzed over oth- Leffler Northwest’s experts’ re- er aspects industry ports are still in highly against Northwest’s action Ameri- regulated. Perhaps the important most can Airlines for predatory pricing. Pro- regulation govern- comes from local fessor Leffler in found that those reports, ments, manage which own and air- experts Northwest’s opined that: ports region in their and therefore con- a. air travel between city-pairs are rel- key trol airport bottlenecks to service: evant in economic markets the air- boarding gates runways. access to industry; line Most local airport allocate commissions b. predatory pricing can be a rational gates without a formal market mecha- economic strategy in the airline in- nism ... dustry; (J.A. 797). (quoting Gautam Gowrisankar- c. recoupment an, “Competition Regulation likely for an airline dominant Industry,” Airline Federal Reserve Board relevant economic market air- Letter, San Francisco Economic Num- industry; line 1). 2002-01, ber p. Professor Elzinga’s d. there are substantial barriers to en- report majority shows airport try into industry; the airline gates long-term controlled exclu- e. business travelers constitute a dis- sive-use leases the local airport with au- tinct segment in the airline thority. the GAO found that 76 of industry; gates the 86 at the Detroit airport were by long covered term leases until 2008 and f. the measure of variable Northwest had 64 of such leases. cost in the airline industry should include the cost of changing capacity. Levine,
Michael one of Northwest’s ex- perts against action Ameri- (J.A. 893-94).
can Airlines for predatory pricing opined 2. Market that: Power Entry “The Barriers to in Those Hub, Hub-Network, Relevant Regional At the time of Spirit’s entry into these and National Very Markets Are High. The geographic routes in had Entry Barriers to City Hub-to-Hub 78% of all passengers traveling from the Pairs Are Very High. Also Barriers to Detroit Metro airport gates and 64 of 78 Entry in City Certain Pairs Are Also the airport. Detroit During North- (J.A. 926). High.” action, In that Levine west’s share of the air passenger traveler also stated that facing “[n]ew entrants are market at its Minneapolis hub was 75 to higher cost of entry than even existing enplanements 80% of all and about to65 (J.A. competitors have incurred.” 70% at its Memphis hub. Northwest’s “Existing [airlines] obtained initial their of local passengers share on the Detroit- awareness and facilities pursuant base to Philadеlphia route was between 60-75% of government regulations that protected flown seats. Prior to entry into (J.A. 928). them from competition.” Detroit-Philadelphia North- Leffler,
Professor Keith B. Spir- another west carried about 70% the non-stop it expert, is an Associate route, Professor of Eco- traffic on this daily and offered six *12 Airways Airport a distant second to be Northwest’s unique was “most flights; US strategic Prior asset” that must protected market share of about 27%. be “at awith (J.A. all prime the almost cost.” 2396 and entry, Northwest was Spirit’s to Northwest studied low fare carriers the Detroit-Boston route and carrier on competing estimated that with such air- market share for that route. had an 89% exit, lines could cost mil- Northwest resumed its Spirit’s After $250-$375 lion in annual passen- of local revenue at its hubs. This supplier status as the study expressly route. identified as one service on the Detroit-Boston ger such low cost carrier. Id. markets, his review of these Pro- After addition, Levine, In Michael Elzinga concluded that Northwest Northwest’s fessor president, published executive vice power market on the an arti- possessed sufficient describing cle in 1987 a Detroit-Philadelphia strategy two-fold Detroit-Boston and respond to low fare carriers. This predatory pricing plausi- routes “to make (J.A. 3796). strategy, entitled Elzinga’s competitive In Professor the “new ble.” equilibrium analysis,” view, addresses the im- Spirit’s Northwest’s match of fares pact of a new entrant’s in large passengers for a number of its who service market. “The essence of strategy reflected Northwest’s the price are sensitive Match, simple. yet, or better discrimination beat the new ability engage price entrant’s lowest restricted fare to confine charging higher fares who its attractiveness to unlikely Spirit, e.g., busi- the leisure oriented to travel on travelers, price-sensitive substantially sector of the market nesses even at low- enough Make sure seats are available on prices. er your flights in the market to accommodate The Relevant Market 3. in traffic increases caused the fare war. short, In leave no traveler with either a infra, detail the As discussed more price fly or a schedule incentive to the new record that Northwest’s in- factual reflects (J.A. 2549). entrant.” Significantly, Le- marketing repre- and its ternal documents vine states: “The not oper- incumbent will recognize price the “low or sentatives profitably ate such espe- under conditions or traveler” as sensitive traveler” “leisure if, case, cially, usually as is it is a air a distinct and relevant market higher-cost competitor.” airline than its passenger travel market. After a review Id. market, Spirit’s experts found that of this price-sensi- a leisure travel comprehensive study In of the indus- tive market exists and cited this market as try, Department of United States competition focus of the actual be- “North- Transportation concluded and Northwest. Two federal tween response Spirit’s west’s forced exit regulators studied this and also designed this market and was to do so.” (J.A. 1406). found a distinct market for low fare or
price sensitive or leisure travelers.
5.Recoupment Strategy
4. Northwest’s recoupment, Professor On the issue Mills, issues, describes the Spirit expert, Aside from the market David proof predator’s reflects that Northwest’s Chief Ex- view below cost strategy” the Detroit Metro “an investment that is the core ecutive Officer deemed Markets, (1987). Levine, Reg. Competition Deregulated 476-78 Airline 4 Yale J. of predation against for successful recoupment pred- test Northwest’s Elzinga-Mills prop- Spirit. Kaplan, Spirit expert, test Dr. Daniel “[t]he Under this atory pricing. challenged strategy calculating to use also er benchmark example, Detroit-Boston route. For reasonably expected gains and the predator’s DC10, justify if North- the firm would earn addition profit losses is (J.A. analysts arbitrarily in the market.” west’s assumed 362% remained target *13 predation, first increase traffic Detroit- “[t]he To determine wholly average upon Spirit’s entry Boston that is compare Northwest’s task is to oper- contrary price-out to model the months when during fares for flights. on the forecast these flights [DetroiU-Boston] ated its average fares would have route to the D. STANDARD OF REVIEW route, but for Northwest’s
prevailed on (J.A. 3169). This fac- alleged predation.” We review the district court’s order monthly financial sac- tor “measure[s] summary Northwest’s motion for granting by charging airline shouldered rifice the judgment de novo. American Council of prevailing the otherwise lev- prices below Physicians Podiatric and Sur Certified ... compares “The second task el.” Id. geons v. American Board Podiatric expect fares Northwest would (6th Cir.1999). 606, Surgery, 185 F.3d 619 immediately charge, during the months We “must also consider all facts after exited the aver- light most favorable the non-movant and pre- that otherwise would have age fares give must the non-movant the benefit in the market.” Id. This second vailed every reasonable inference.” Id. The mov monthly financial “measure[s] factor ing party’s “clearly burden is to show by driving return Northwest could achieve convincingly” any genuine the absence of predatory the market with its Spirit from of material fact. Memphis issues Sims v. pricing.” “eompare[s] Id. The third factor Processors, Inc., (6th 524, 926 F.2d 526 monthly anticipated during sacrifice Cir.1991) (quoting Kochins v. Linden-Ali monthly predation anticipated with the re- mak, Inc., (6th 1128, 799 F.2d 1138 Cir. recoupment during turn to understand 1986)). pricing plausibly
whether
would
The District Court construed the
option
profitаble
have been
North-
Matsushita,
Supreme
trilogy
Court’s
(J.A. 3170).
west to exercise.”
Anderson, and Celotex to have “in the
Considering the evidence on market
aggregate, lowered the movant’s burden in
industry,
apply-
characteristics
(J.A. 44).
seeking summary judgment.”
ing a number of mathematical formulae to
respectfully disagree.
Supreme
We
The
facts,
concluded, in
these
Professor Mills
summary judgment
observed that
Court
sum,
successfully
that Northwest had
re-
appropriate where the antitrust
claim
couped its lost revenue within
af-
months
sense,”
“simply makes no economic
East
Spirit’s departure
ter
from these routes.
Servs.,
man
Image
Kodak Co. v.
Tech.
Inc.,
451, 467,
2072,
504
112
U.S.
S.Ct.
119
6. Northwest’s Non-Price
“[wjhere
(1992),
L.Ed.2d 265
the record
Predatory Practices
taken as a whole could not lead a rational
Elzinga
nonmoving
also deemed North-
trier of fact to find for the
Professor
”
matching
party
west’s combination of its
....
Matsushita Elect. Indus. Co.
574, 587,
and its
v.
expansion
flight
Corp.,
lower
of its
Zenith Radio
475 U.S.
(1986) (cita-
1348,
capacity
keys
on these routes as the
106 S.Ct.
L.Ed.2d 168
Group,
is that where
principle
Brooke
E. LEGAL ANALYSIS
concentrated, the bar
highly
the market is
Act,
perti-
2 of the Sherman
Section
entry
high,
riers to
the defendant has
part,
“monopo-
nent
makes it unlawful to
capacity, and
power
market
and excess
lize,
...
attempt monopolize,
any part
or
to
recoupment
present,
is
evidence of actual
among
of the trade or commerce
the sev-
summary judgment
inappropriate.
is
§
....”
2. “[Section]
eral States
15 U.S.C.
action,
2
2
single
In a
we ob
addresses the actions
firms
Section
...
“only
thorough analysis
monopolize
attempt
monopolize
a
or
to
served that
protect
of the Act is not to
purpose
each fact situation will reveal whether the
unreasonably
working
anti-
from the
of the mar-
monopolist’s conduct is
businesses
ket;
competitive
Byars
protect
public
and thus unlawful.”
v.
it is to
from the
(6th
Co.,
843,
Spectrum Sports
of the market.”
City News
609 F.2d
860
failure
Bluff
Cir.1979) (citations omitted).
447, 454, 458,
McQuillan,
v.
506 U.S.
prece
Our
Inc.
(1993).
884,
if
U.S.
(1948)).
Inc.,
tion.”
Michigan Hosp.
Smith v. N.
(6th Cir.1983) (cita-
703 F.2d
pre-
whether
has
must decide
We
quotation
tions
internal
marks omit-
evidence that Northwest
sented sufficient
ted)
Moreover,
in order for a com-
pricing to
engaged
withstand
pleted
succeed,
monopolization claim to
summary judgment
in this case. Within
plaintiff
prove general
must
intent
general question
are several issues
exclude;
part
monopolist
find,
trier of fact could
what a reasonable
by contrast,
prevail
while
on a “mere”
leisure travelers consti-
such as whether
claim,
attempt
plaintiff
prove
must
industry;
market
in this
tute a distinct
specific
“destroy
intent to
competition
possessed sufficient
whether Northwest
Markets,
monopoly.”
build a
Tops
Inc.
power
engage
predatory pric-
market
Markets, Inc.,
Quality
v.
142 F.3d
ing;
in re-
whether
(2d Cir.1998). However,
monop-
“no
sponse
Spirit’s entry
were below an
monopolizes
olist
unconscious of what he
costs;
appropriate measure of its
whethеr
doing.” Aspen,
472 U.S. at
recouped
profits
its lost
Thus, “[ijmproper
S.Ct. 2847.
exclusion
prices;
its reduced
and whether the char-
(exclusion
superior
not the result of
effi-
acteristics of this
would facilitate
*15
ciency)
always deliberately
intended.”
economically plausible Spirit’s
and render
(citation
603,
Id. at
ples require us to view the evidence in a
Id. at 782.
light
Spirit.
most favorable to
1. Relevant Markets
to the merits of Spirit’s
As
Sec
Geographic
a.
Market
Co.,
claims,
2
tion
L.P. v.
Conwood
U.S.
(6th
Co.,
Cir.2002)
Tobacco
A
2
claim under
Act
respect
Sherman
and with
monopolization
to the
(1)
claim,
requires proof of two elements:
defendant,
fact,
to show that the
possession monopoly power
(citation
in a
possesses
rele-
monopoly power.” Id.
(2)
market;
omitted).
vant
and
acquisi-
the willful
“A geographic market is defined
tion, maintenance, or
power
use of that
as an area
competition”
of effective
or “the
by anti-competitive or
exclusionary
locale in
product
which consumers of a
or
“growth
means as
opposed
or
can
devel-
service
turn for alternative sources of
opment
from a
resulting
superior prod-
supply.”
Intern.,
(quoting
Id.
Max
Re/
uct,
acumen,
One, Inc.,
or
995, 1016
business
historic acci-
Inc. v. Realty
173 F.3d
(6th Cir.1999)).
Aspen Skiing
Aspen
dent.”
v.
Co.
governs
Sherman Act
585,
Highlands Skiing
area(s)”
Corp., 472 U.S.
geographic
“localized
and “the rel
595-96,
2847,
105 S.Ct.
933 (6th Cir.1981) Inc., 192, products’ peculiar uses, 195 660 F.2d characteristics and facilities, Boxing unique production Club (quoting International distinct cus- States, York, tomers, v. 358 U.S. prices, New Inc. United distinct sensitivity price (1959) 251, 245, 242, L.Ed.2d 270 changes, specialized 79 S.Ct. 3 and vendors.” Id. added). citing Tampa (emphasis Electric Co. v. Nashville Co., 320, 327, 623, 5 Coal U.S. S.Ct. White, &White Inc. v. Ameri (1961)). L.Ed.2d 495, Hosp. Corp., can Supply 723 F.2d opinion,
The district court’s
(6th Cir.1983), we identified the “reason
parties’ agreement
proof
and the
reflect
interchangeability”standard
able
markets are
geographic
that the relevant
method for defining
produсt
the relevant
the Detroih-Boston and Detroit Philadel
or service market. We observed that:
phia
Spirit’s expert
routes.
cited an indus
“The du Pont
noted that
Court
reasonable
try study
passen
to the effect that in the
(1)
interchangeability may
be gauged
industry,
airline
most basic
ger
“[a]t its
uses, i.e.,
product
whether the substi
level,
output
the unit of
of a
products
tute
perform
services can
transportation
passengers
airline is
be
(2)
function,
same
consumer re
and/or
(J.A. 775).
tween cities.”
airline
“[T]he
is,
sponse (cross-elasticity);
consum
industry
multiple-product
industry
is a
sensitivity
er
they
levels at which
producing
selling
thousands of differ
elect substitutes
prod
for
defendant’s
product-travel
city pairs
ent
between
(emphasis
uct or service.” Id.
added and
all,
level,
It
is at the route
after
citing United States v. E.I. du Pont de
actually compete
airlines
with one anoth
Co.,
994,
Nemours &
351 U.S.
76 S.Ct.
According
Transportation
er.” Id.
to the
(1956)
b. Relevant Service Market
here,
proof
a reasonable trier of fact could
market,
product
As to
or service
recog
find that
and Northwest both
States,
in Brown
v.
Shoe Co. United
“discretionary”
“price-
nize “leisure” or
or
294, 325,
1502, L.Ed.2d 510
U.S.
82 S.Ct.
passengers as a distinct market
sensitive”
(1962),
Supreme
emphasized
Court
passenger
in the air
travel market.
product
may
that a
market
have submark
example, during
period,
of a
or
For
the relevant
ets and the definition
market
sub-
separate
market
on economic realities and Northwest had
fares for business
focuses
North-
industry practice. “The boundaries of
travelers and leisure travelers.
may
a
submarket
be determined west’s internal documents on
and
(product)
fares reflect Northwest’s dis-
by examining
practical
such
indicia as
trav-
industry
public recognition
or
the sub-
tinction between business and leisure
entity,
a
el. A Northwest internal document states
separate
market as
economic
“FARE RESTRICTIONS AT-
In Northwest’s comment on the pro-
that
its
posed
policy
and that
enforcement
TEMPT SEGMENTATION”
United
Transportation Department,
States
Dr.
designed
pas-
to make
“Restrictions
(J.A.
Tyson presented
paper
Laura D’Andrea
a
own demand.”
sengers reveal their
4182).
entitled,
Gerend,
“Competition
Michael
Northwest’s man-
Industry:
Response
the Airline
A
to the
ager
pricing, responded
for domestic
to the
Department
Transportation’s Proposed
“Q:
following question:
Pricing
Did the
(J.A. 4188-4205).
Policy”.
Enforcement
Department make distinctions between
In pertinent part,
Tyson
Dr.
stated: “Air-
products?
business and leisure
A. Yes.”
products
lines have
on the same
“Q.
you
Do
view the business market and
different
airplane that
customers
separate
market as
markets?
the leisure
offer
different
characteristics
and thus cover a wide
4171).
(J.A.
Pomerantz,
A.
Kenneth
Yes.”
range
All
prices....
airline seats on a
sales, development
Northwest’s director of
particular flight provide transportation be-
analysis,
question:
answered
similar
airports
tween the two
served
“Q:
they
Are
considered two different
flight,
say,
but it is not accurate to
even
markets, business travel and leisure trav-
class,
specific
within a
these seats
they
el? A: I believe
are considered dif-
provide the same service
have the
same
(J.A. 4173-74).
products.”
ferent
4202)
(J.A.
added).
(emphasis
cost.”
against
Northwest filed
action
Ameri-
study
To
Spirit retained
can
predatory pricing
Airlines for
and in
Professor Kenneth
Elzinga,
highly
G.
experts recognized
that action Northwest’s
regarded
Elzinga
economist.4 Professor
that “business travelers
constitute
dis-
a Professor of
University
Economics at the
segment
tinct market
in the airline indus-
Virginia. Among
prior experiences
his
(J.A.
try.”
expert report
his
are as an economist in the United States
action,
Levine,
for that
Michael
a North-
Department of Justice and as consultant to
executive,
“that
opined
west
there were at
the Federal Trade Commission. Professor
product
least
relevant
seg-
two
Elzinga’s publications on antitrust econom-
compete:
ments which airlines
business
ics,
writings
predatory
include
pricing,
discretionary
and leisure travel.”
below,
writings
as noted
his
have been
(J.A. 1701).
Griffin,
John T.
another wit-
cited
Supreme
United States
Court
against
ness in Northwest’s action
Ameri-
pricing opinions. Profes-
Airlines,
*17
can
nothing
stated: “There’s
Elzinga
sor
special
also served as a
consul-
necessarily links business fares and leisure
tant to
Kaplan
the Honorable Lewis D.
in
really
fares. We
have treated those as
complex
a
antitrust action.
objective
distinct. And within the
of at-
tempting
my
maximize
business
study,
revenue
After his
Elzinga
Professor
(J.A.
separately.”
opined
the leisure revenue
product
that a distinct
or service
market existed.
“The relevant market
2061,
Spirit's experts,
Elzinga
(1981);
4.
Professors Kenneth
101 S.Ct.
935
all local passen-
petition
for air travel consists of
when it
is desired to do so.”
in
originate
par-
itineraries
gers
Byars,
whose
city pairs
narily is inferred from
posses
the seller’s
(J.A. 773-74).
Philadelphia.”
troit and
predominant
sion of a
share of the mar
Although
Elzinga’s
Professor
market defi-
Kodak,
ket.” Eastman
504 U.S. at
expressly
price-
nition is not
limited to
112
Judge
S.Ct. 2072.
Learned Hand
clearly
El-
passengers,
sensitive
Professor
enunciated what has become the
classic
zinga’s cost-comparison is so limited.
explanation of when
analysis of the cost-
market share becomes
Elzinga’s
Professor
large
comparison,
passen-
enough
monopoly:
revenue
the relevant
to constitute a
passen-
are low fare
gers
ninety
percentage
enough
this market
“over
is
(J.A. 793-96).
gers.
Based on the evi-
monopoly;
constitute a
it
is doubtful
by Spirit,
presented
including
dence
sixty
sixty-four
whether
percent would
documents,
own
the testimo-
enough;
certainly thirty-three
be
per
officials,
opinions
and the
ny of its
of
cent is not.”
v.
United States Aluminum
Spirit’s experts,
(2nd
we conclude that a rea-
America,
Co.
148 F.2d
424
Cir.1945).
sonable trier of fact could find that
lei-
Kodak,
In Eastman
the Court
price-sensitive passengers repre-
sure or
precedent
cited its earlier
that possession
separate
sent a
and distinct market
in of
“over two-thirds
the market
2
industry
purposes.
this
for Section
monopoly.”
sessed
here,
applied
As
when
en
Supreme
monopoly
Court’s formulations
tered the Detroit-Boston and Detroit-
ability
power
single
are “the
seller to
markets,
Philadelphia
Northwest was the
output,”
raise
and restrict
Eastman
At
dominant carrier
each market.
Kodak,
464, 112
S.Ct. 2072
U.S.
entry,
had an
Spirit’s
time of
Northwest
Inc.
(quoting
Enterprises,
Fortner
v. Unit
share and
89% market
became
sole
495, 503,
Corp.,
ed States Steel
394 U.S.
route.
provider on the DetroiL-Boston
(1969)),
1252, 22
S.Ct.
L.Ed.2d 495
or the
more than a
Northwest hаd
70%
compe
to “control
or exclude
power
Detroit-Philadelphia route.
share on the
E.I.
tition.” United States v.
du Pont
entry,
compet
Prior to
Co.,
377, 391, 76
Nemours &
351 U.S.
S.Ct.
carrier,
*18
Air
ed with
one other
U.S.
(1956).
994,
its if reasonably price, price could even the low exceeds the two measures be These cost, monopoly price-cutter’s average long so as the as a clear exercise interpreted ri- Elzinga price sufficiently deemed the is low relative to its power. Professor Hence, possible that Northwest had vals’ cost. it-is that com- here to establish facts petition prices to render its can be harmed low even power market requisite prices price- if those are not below the plausible successful. predatory pricing Baker, that a reasonable trier of fact cutter’s cost.” Jonathan “Predato- conclude We Elzinga’s opinion ry Pricing Group; Professor after Brooke An Eco- could find that Perspective” nomic a economic conclusion based Antitrust L.J. is reasonable (1994). proof. upon article, “Predation, Competition economic reasonable- In his & evaluating In conclusion, Elzinga’s we Law: In The Airline ness of Professor Antitrust Turbulence views, Supreme Industry” commentators’ as the 67 J. Air. L. & Com. note does, (2002), commonly and as the Paul a Stephen Dempsey, Court district Professor requisite power court As to former airline executive and Professor of did below. engage predatory pricing, Space in successful Law and Director of the Air and Baker, University a former Econo- Jonathan Senior Law McGill noted that: entry at the of Economic Advisers “new cannot sustained where the mist Council be willing sig- and an economist the United States incumbent airline is to endure Justice, opined that “If im- nificant short-term in a Department losses below-cost capital market for perfections pricing strategy designed cause financial prey to have less access to force the new entrant out of the market (or predator, preda- than the then the capital bankruptcy) into so that after the new leaves, may reasonably expect ‘deep tor to use its entrant can incumbent resume way traditional to drive the pockets’ monopoly price gouging well above addition, high if prey competitive According to exit. levels.”5 to Profes- following prey unlikely Dempsey, the exit of the sor a less-well-capital- “[w]hen (because ized, competition low-cost, younger, to be eroded new new entrant airline barriers), enter, entry predatory pricing attempts with competitive re- single recoupment may longer sponse no predatory, is with the intent of strategy.... driving be an irrational A firm can the new entrant out of the mar- Dempsey’s deep, pinpointed, discriminatory 5. Professor research touched on it means action, quoting price by big companies driving the issues in this cut aimed at predation price Michael Levine that "I believe is out of cutters in order then possible possible previous and that it occurs.... [I]t to be able to raise back to their impose prospective for an incumbent to levels. I have little doubt is what North- by pricing trying entrants nonrecoverable costs west was and is to do.” Id. See also way they Klingaman, "Predatory Pricing that seeks to ensure that do not A. Russell significant Exclusionary attract share of re- Other Conduct in the Airline gardless Industry: of the incumbent's own cost.” Id. at Is Antitrust Law the Solution?” 4 (1992) Dempsey (quoting 708. Professor cites Dr. Alfred L.J. DePaul Bus. having Kahn who described Northwest as a Michael Levine: "an incumbent who used policy yield ‘scorched-earth’ in which [below-cost such tactics carrier, People management] quickly develops drove another low fare Ex- a few times press, by substantially reputation response entry. out of the market un- for fierce [Le- dercutting People Express’s price reputational while vine] si- calls this information ‘the *19 ”) (foot- multaneously increasing flights predatory the number of investment in deterrence.’ omitted). predation anything, in the market: "If *20 938 (9th Cir.1981)
Co., Although F.2d 1014 for the this circuit 668 has not had an measure of a rival’s cost for a appropriate occasion to specific enunciate a cost- claim: predatory pricing based test for predation, we feel that the accepted the courts have the Ninth Circuit’s modified Although version of the average variable cost stan- marginal or appropriate. test is Areeda/Turner intent, many indicator of dard as an Id. at (quoting Inglis, 1436-37 668 F.2d at of other allow for consideration factors omitted). 1035-36 with other citations La- leading A exam- predation. indicative of ter, “[i]f, however, we statеd that the hybrid that ple approach of this taken plaintiff proves that the prices defendant’s Inglis. the Ninth Circuit There cost, average were below variable the was taken that position although plaintiff prima has established a case facie generally variable cost is a reli- average predatory pricing and the burden shifts indicator, able there are market situa- to the defendant prove prices to that the firm tions where rational would find it justified regard were without to any antici- prudent average to sell below its varia- pated they may destructive effect have on ble cost. See id. at 1035 n. 32. Con- competitors.” Langenderfer Arthur S. versely, acknowledges it that in certain Inc., Co., 1050, v. S.E. Johnson 729 F.2d . situations, selling average a firm above (6th Cir.1984) (quoting Inglis, 1056 668 guilty preda- variable cost could be 1035-36). F.2d at Consequently, tion. id. at it See 1035. ‘on what a rational firm focuses would This Court has continued to apply this expected prices accomplish.’ have its standard. Directory Mgmnt. Sales Corp. permits it Accordingly, Id. Co., 606, v. Bell Ohio Tel. 833 F.2d 613 n. 3 evidence, any introduction addition (6th Cir.1987); Shavrnoch v. Clark Oil & price figures, to illuminate cost (6th Refining Corp., 726 F.2d 294 pricing rationale behind the defendant’s Cir.1984); Morristoum Block & Concrete policy. Co. v. General Shale Prods. Corp., 660 predatory hold that [W]e to establish F.Supp. (E.D.Tenn.), 430-31 aff'd pricing plaintiff prove must (6th Cir.1987) F.2d (citing D.E Rogers). anticipated benefits of defendant’s Co., Inc., See also Schwartz v. Sun depended tendency on to discipline (6th Cir.2002) F.3d 903-04 (price dis competition thereby eliminate en- crimination claim under the Robinson-Pat- long-term ability hance the firm’s Act, man but the pricing stan reap monopoly power. the benefits of If action). dard is the same as in a Section prices the defendant’s were below aver- providing addition to opinions his age average total cost but above variable the relevant markets and their cost, characteris- plaintiff bears burden of tics, Professor Elzinga was also retained to showing preda- defendant’s was provide If, however, methodology to determine tory. plaintiff proves prices relevant prices that the defendant’s were and costs. below Dr. cost, Kaplan, Daniel plaintiff variable economist who spe- has prima cializes airline preda- established facie case of economics and is the tory pricing and the former director of the burden shifts to the Office of Economic to prove Analysis Board, defendant that the for the were Civil Aeronautics justified without regard any anticipat- performed analysis. Professor David Mills, they ed destructive effect might have on an economist and co-author with competitors. Id. at 1035-36. Elzinga Professor in the earlier cited arti- *21 “Northwest recoupment predation, match[ed] cles, analyzed Northwest’s its earlier profits passengers from for those who Spirit’s its lost fares market. from this after exit instead of Northwest.” might choose predation the employed Professor Mills (J.A. 795). Elzinga noted that Professor developed with Pro- test recoupment mea- appropriate these standards for the and cited the United Elzinga fessor average variable costs are consis- sure of Group in its Supreme Court Brooke States treatise of tent with the classic antitrust decision. Hovenkamp in Professors Areeda and markets, defining the relevant After posit the scholars such “[i]n which following Elzinga established Professor capacity and lower involving case excess determining Northwest’s methodology for customers, the theocrat- prices marginal costs. mar- ically benchmark is short-run correct pre- of a apply price-cost part To respect price to the low ginal costs with involved analysis for this case dation 796).6 (J.A. customers.” marginal or incremental examining Northwest’s re- Utilizing Elzinga’s associated with Professor methodolo- costs the addi- Spirit compared with sponse gy, Kaplan Dr. determined company received tional revenues price- costs for the average actual variable is, by incur- That response. from that on these routes. Dr. passengers sensitive campaign Spir- ring the costs of the Flight Profita- Kaplan utilized Northwest’s revenues did predatory, it claims is what (“FPS”) that bility System collects receive as a result? Is Northwest monthly and costs of each North- revenues posi- these between numbers difference aggregates those flight west and then analysis, in other negative? tive or profitability to determine the numbers words, from the ad- focuses on revenue (J.A. spoke.. and the relevant each hub (i.e., capacity) the extra flights ditional 3256-57). To calculate costs for the routes (at discounted that Northwest added issue, North- Kaplan Dr. determined fares) alleged predation was because “equal average variable costs to be west’s through those additional executed that Northwest the total variable costs Therefore, the assessment of flights. city pair during given serving that incurs (the the revenues predation compares pas- period divided the number time tac- received from this price) city pair during traveling in that sengers (or average tic the incremental versus 3248). (J.A. Kap- Dr. period.” that time variable) cost Northwest incurred months fares for various lan studied the carrying passengers. those Utilizing during 1996. city-pairs for both omitted). (J.A. 788) (footnote of the mar- Elzinga’s definition Professor sum, Elzingа’s methodolo- In Professor ket, fare of Kaplan deemed a $225 Dr. appropriate gy would determine as line dividing between reasonable costs, average of Northwest’s measure other travelers -travelers and sensitive transport the non-con- variable costs 3275). (J.A. 3274, Dr. city-pairs. both on the Detroit-Boston necting passengers analysis, all those Kaplan’s Detroit-Philadelphia routes. As Pro- Philadelphia- traveling both alleged below Elzinga explained, $225 fessor (2d edition Citing Phillip Hoven- E. Areeda and Herbert ¶ Law, Ill, p. kamp, 740 at Antitrust Vol. Detroit and Boston-Detroit were deemed during April though September $85.24 price-sensitive passengers. Id. monthly average 1996. The variable cost ranged between in Phila- $53.47 $60.17 Kaplan
Dr. included within vari- *22 delphia-Detroit during July through Sep- costs, costs, flight passenger able costs:7 (J.A. 3267). tember 1996. 3266 and costs, gate and and ticket counter the lat- price range is a function of the variations depreciation ter in and reflected amortiza- (J.A. (J.A. 3258-60). in the load factor flight. expenses. Kap- tion Dr. 3267).” opined lan that in to its response relation flight to Spirit, Northwest’s costs included In comparing Northwest’s average vari- fuel and labor as well as the cost of the able costs and .Northwest’s average net rep- additional aircraft each market that revenue from all “the service capacity resented the incremental routes, market” on these Dr. Kaplan response Spirit’s presence. Northwest’s found, in sum: (J.A. 3258). The economic cost of using Boston-Detroit: From April through airplane was based on the market lease September percent 74.5 of (J.A. 3259). airplane. rate for the Pas- Northwest’s Boston-Detroit passengers senger variable costs for each route were traveled on fares of $69 less.[ ] processing the costs of a passenger’s ticket (Northwest established the fare in $69 boarding, in-flight the cost of food and response Spirit’s April entry
beverages, expense liability of insur- Boston-Detroit). into Northwest’s $69 ance, and the incremental cost of the fuel fare on Boston-Detroit on average (J.A. carry passenger. needed each generated per passenger net revenue 3259-60). Other relevant variables costs after deducting $61.98 commissions flight attendants, are for pilots, gate and and adding certain ancillary other rev- (J.A. 3258). space. counter enues. This per passenger net reve- Dr. Kaplan then calculated Northwest’s nue was below Northwest’s av- $10.75 average variable costs for Boston-Detroit erage Thus, variable cost. between and Pliiladelphia-Detroit “by dividing the April and September 1996 the fare $69 various cost factors for each route in each being by рassengers used traveling on month that Flight Sys- Profit Northwest’s Boston-Detroit service (“FPS”) variable, tem identifies as as well was below Northwest’s average $10.75 value, by as aircraft the total num- variable cost. ber of traveling seg- on that during ment the relevant period. Philadelphiar-Detroit: time July From The monthly average through September 1996, variable cost in Bos- percent 40.5 ranged ton-Detroit between Northwest’s Philadelphia-Detroit $65.87 pas- costs, report above, In his on variable Professor plus variable costs described takeoff or fees, Elzinga landing also found that "In the airline indus- flying empty the fuel costs of aircraft, try, layers marginal there are several and some additional maintenance (i.e.variable) and crew pas- operation costs.... Think of these as costs incurred from the senger variable the aircraft.'' costs... and include ... ticket, processing pro- cost of the cost of "The third are the costs ... include [that] cessing passenger through gate, opportunity cost associated with the use in-flight beverages, cost of food and insurance Finally... of that aircraft---- route variable liability expenses, and other related and the costs... include all of the costs listed above cost of the extra fuel burned plus because of the setting costs incurred in the new 'station' passenger's weight... counters, [F]light additional facilities, vari- with ticket maintenance able costs ... single-passenger (J.A. include the expenses.” 789-90). and other service during that time average variable cost fares of or less. traveled on sengers $49 (Northwest period. fare established the $49 of a second addition
response (J.A. and Detroit Philadelphia flight between earlier, parties’ experts noted As both 1996). Northwest’s at the end of June average variable calculated Northwest’s on av- Philadelphia-Detroit fare $49 upon based data from Northwest’s costs net reve- per passenger erage generated system, expert FPS data but Northwest’s after during period nue of $44.29 different results his calculation reached adding cer- deducting commissions and revenues. of Northwest’s costs *23 per This ancillary revenues. tain other below net revenue was $11.86 expert, Northwest’s Professor Janusz A. average variable cost on Northwest’s Ordover, is a Professor of Economics at period from Philadelphia-Detroit University Deputy York and former New September In July September to 1996. Attorney for the Anti- Assistant General Phila- percent 70 of Northwest’s Depart- trust Division the United States flew on delphia-Detroit iden- ment of Justice. Professor Ordover below equal but to or fares above $49 step tified his four test determine September fare in The $69 $69. engaged predatory whether Northwest average net revenue generated monopolization: and $58.31, which was Northwest of $1.86 analysis 1. A structural of the relevant cost of serv- average variable below market; in that month. ing Philadelphia-Detroit likelihood of 2. An assessment of the of Northwest’s Consequently, percent (exclusionary) effects re- anticompetitive flew on Philadelphia-Detroit passengers conduct; alleged sulting from the than Northwest’s fares that were less (or analysis pertinent prices An 3. July through average variable cost revenues) and costs to assess whether September 1996. made business competitive response omitted). (J.A. 3249) (footnote impact adverse only because of its sense passen- airline “price-sensitive For the not have made competition and would on and viable; on the Boston-Detroit gers” market if remained and the rival sense routes, Kaplan Dr. Philadelphia-Detroit the firm is An evaluation of whether methodology using the same performed profits foregone dur- recoup able to and found as follows: Northwest’s data behavior. ing period average [Northwest’s] Boston-Detroit: (J.A.387). Yet, analysis, Pro- for his initial pas- price-sensitive from the net revenue analysis an deemed fessor Ordover was be- sengers city-pair on this $64.82 necessary. report, In a rebuttal Step 3 1996. This April September tween the other addressed Professor Ordover Northwest’s av- figure was below $8.07 word, In a Professor Ord- three factors. during pe- that time erage variable cost by comparing North- over concluded riod. on each route average variable costs west’s passen- from all Northwest’s revenue av- Philadelphia-Detroit: [Northwest’s] route, including con- traveling on that price-sensi- gers net revenue from the erage it clear necting passengers, became city-pair was passengers on this tive profit incremental had an 1996. Northwest July September $50.35 each route. below Northwest’s figure This was $6.53 analysis, Professor his Ordover con- the route and the VABSO measure was passen-
sidered the total revenue from all approximately million. These June $5.0 gers, travelers as well as leisure connect- equivalent amounts are to about ing passengers, earned from these routes per one-way segment pas- $68 $58 compared those revenues to North- senger, respectively. positive costs for flights. west’s variable those VABS and VABSO April results for of all passen- Revenues from fares airline through September indicate that the av- gers business were totaled and divided to erage plus beyond fare contribution yield average fare. Professor Ordover from passengers traveling between De- compared average prices then Northwest’s troit and average Boston exceeded vari- average with its variable costs on the De- able cost.
troib-Philadelphia and Detroit-Boston Further, even the measures that do during Spirit op- routes the months when not take beyond account of the contribu- (J.A. 395). erated on these routes. For tion, measures, the VAC and VACO his determination of “route level costs and positive (i.e., were in every month resources,” entitled “competitive re- Detroit-Boston *24 sponse package,” Professor in- Ordover segment fare average exceeded its varia- cluded “total onboard plus revenue cost). Indeed, ble only negative segmented allocated revenue from the con- profitability measure May is the necting passengers flight, on a plus be- fully (FAC), allocated contribution which yond from contribution the flow connecting beyond excludes the contribution and is 401-02). (J.A. passengers.” equal to total fully revenue minus allo- expenses. cated beyond When the con- costs,
As to variable Professor Ordover included, tribution is fully allocat- included several of the same cost elements beyond ed with (FABS), contribution Kaplan, as Dr. but for the costs of the this cost positive May measure was for aircraft, Professor Ordover declined to use above, 1996. As discussed variable rath- the commercial lease rates for the aircraft fully er than allocated costs per- are the and instead chose “the opportunity costs standard; yet tinent the fact that of the aircraft North- and its least attractive al- profitable west was even based deployment ternative within on the the airline’s n (J.A. 402). higher fully much system.” allocated Utilizing the cost stan- compo- dard FPS, during period provides nents Northwest’s Professor Ord- further found, sum, support over as for the follows: conclusion that its con- duct predatory. was not there,
... As seen both VABS and positive during [According VABSO8 were the time FPS data to] for the period when Detroit-Philadelphia Northwest was matching, route for 1995 and 1996[,][b]oth or partially matching, Spirit’s fares VABS and VABSO were 1996). (April through September positive For during the period entire time example, June 1996 the VABS mea- when Northwest matching Spirit’s was approximately sure was million for fares on this (July through $5.8 route Sep- explained 8. Professor Ordover that "VABS is west in profitability order to assess the equal (for to total onboard revenue the route part individual routes as of the overall net- segment) plus beyond net revenue contribu- work. relatively VABS is often used for tion, expenses. minus variable VABSO is marketing short-term tactical decisions and equal to VABS minus the cost of frequently aircraft VABSO is used to determinе ownership. These measures which include whether a route is successful over time." beyond (J.A. 44). contribution are used North- n. tember). Hence, ap- any Professor Ordover views con- July 1996 amounts connecting pas- and tribution of revenues from million for VABS proximately $2.8 VABSO, example, necessary to assess whether sengers million for $2.5 one- per response predatory. and was to about Northwest’s equivalent $60 $67 passenger, respectively. way segment report, Elzinga In Professor his rebuttal addition, the variable cost-based In both Kaplan’s comparison Dr. supported account of the that do not take measures costs leisure VACO) (VAC and beyond contribution appropriate traveler market as the more allocat- fully based on and the measures (J.A. measure of variable costs. FABS) (FAC positive were ed costs 871). view, Elzinga’s In Professor Profes- every month. improperly pas- calculated all sor Ordover summary, positive profita- FPS In routes, each of sengers revenue on those on variable costs measures based bility (J.A. including connecting passengers. did clearly predation demonstrate Elzinga explains Professor that the on the Detroit-Boston not occur passengers is the local relevant routes. addi- Detroit-Philadelphia whom because those are tion, exceeding perti- with revenues Spirit. sought divert cost, each route measure of total nent statement As to Professor Ordover’s Put an- clearly makes economic sense. (and of a flight) part that: “each route an airline would not deliber- way, other network; flight if the route or were re- routes offer- ately money lose on the be a reduction in reve- moved there would flights that it did. the schedule of ing flight from that route or but nues not *25 competitive that re- means This network,” citing routes in the also on other competi- even if the sponse makes sense document called “Boston-De- Northwest to viable. tor continues be ANALYSIS”, Dr. troit STIMULATION 403-04). (J.A. that this document actu- Kaplan responded comparison, Professor Ord- Based on his that had ally “demonstrates average that concluded Northwest’s over adjust flexibility capacity to accommo- average routes exceeded its fares on the connecting pas- in local and changes date findings, From these Pro- variable costs. of one an- senger independently demands inferred that Northwest’s fessor Ordover (J.A. 886). view, Kaplan’s In Dr. other.” Spirit’s entry on these pricing response demonstrates that ad- this document “also if profitable have been even routes would connecting passengers in Boston- ditional these cities. Spirit had continued serve little to North- provided Detroit vаlue cited North- Kaplan Id. Dr. also Kap- criticizes Dr. west.” Professor Ordover capaci- to reduce its scheduled average plan of Northwest’s west’s segmentation lan’s Spirit’s ty in the summer of 1996 before passengers for local on those variable costs “sug- entry opined that this decision passengers, including all and routes because by the add- generated that revenue gest[s] contribute to the connecting passengers, oppor- would not cover part passengers of the hub ed flight revenue of the 888). (J.A. at Moreover, tunity serving them.” Ord- cost network. Id. Professor noted that Northwest executive capacity affects also over notes that added E. Levine acknowl- revenue, vice-president Michael including enhancement more than connecting passengers “All connecting edged that: schedule to to the overall value. The least valuable equal increas- are not of crowding reduction flights, through a go who connecting passengers fares. availability of attractive ing the customers, price ginal driven and not—not a purely theoeratically hub are correct revenue; interesting benchmark is very marginal source it’s short-run costs just you respect them to fill seats.” with to the low use Id. customers.” (J.A. 796) (quoting Phillip E. Areeda and sure, Leffler, Professor To be Law, Hovenkamp, Herbert Antitrust Vol. expert, opinion cited Northwest’s ¶ Ill, (2d 2002)). p. 740 at edition Pindyck, expert, appro- Robert on the S. earlier, As we stated we conclude that a priate measure of variable costs in reasonable trier of fact could find that the against action Air- Northwest’s American underlying cost data from Northwest’s predatory pricing. lines for Pin- Professor systems, data Elzinga which Professor dyck Bank is the Mitsubishi Professor of Kaplan Dr. analyses, used their is rea- Applied Economics the Sloan School of sonably sup- accurate and that this data Management at the Massachusetts Insti- ports their price- cost calculations for the Technology. Pindyck’s tute of Professor sensitive market. expert Northwest’s teaching research and are in the areas of used the same cost data in his cost-reve- organization industrial and antitrust eco- analysis. nue If a reasonable trier of fact nomics, writings and his include articles on accept could Professor Ordover’s cost de- monopoly power that have accurate, reasonably terminations as it published leading jour- been economics stands to reason that Spirit’s experts’ de- Pindyck nals. Professor author or terminations, which are based on the same books, co-author of six including two lead- data, cost reasonably must be deemed аc- textbooks, ing Microeconomic and Econo- curate as well. metric Models and Economic Forecasts. against Northwest’s action American sure, To be the district court found that
Airlines for pricing, Professor Spirit failed “to explain why it is not neces- Pindyck opined: “Although costs have sary to isolate the serving price- costs of been measured for all domestic national sensitive from those incurred service, may airline it be in serving remaining passen- useful separately (J.A. determine costs “busi- gers.” analysis cost (J.A. ness” service and “leisure” service. included cost spe- measures were not *26 954) added).” (emphasis Moreover, at in cifically price-sensitive linked to passen- against Airlines, the action American an- gers, but common to passengers. all Spir- expert other Northwest stated: “All air- experts explained it’s their rationale for line seats on a particular flight provide using this metric rather than a figure more transportation between the two airports narrowly defined to price-sensitive served that flight, but it is not accurate market. We hold that a reasonable trier class, say, even within a specific of fact could find rationale convinc- provide these seats the same service or ing and therefore conclude that the costs (J.A. 4202) have the same cost.” (empha- to all attributable customers ais reason- added). sis ably proxy accurate for the costs associat- price-sensitive ed with passengers only.
Professor Elzinga noted that his stan- appropriate dards for the measure of aver- The evidence reflects that in its data age variable costs are system, consistent with the any did not consider classic antitrust treatise of Ar- Professors meaningful differences to exist the aver- Hovenkamp, eeda and in which the age schol- variable costs for different passengers. ars assert that such case involving “[i]n system Northwest’s FPS data that both excess capacity and lower prices to mar- Dr. Kaplan and Professor Ordover utilized (J.A. calculate costs for these an disagreement.” be “intellectual 1734). routes, distinguish among passen- does not (J.A.
gers
its allocations of costs.
4410-
summary judgment
For
purposes,
Model,”
Northwest’s “Price-Out
for we think this evidence supports the rea
flight profitability analysis
likewise
sonable inference that average variable
distinguish
passengers
does not
between
vary
costs did not
among passengers and
computing costs.
If a
of
reasonable trier
thus, Spirit’s experts’ cost determinations
fact could find
sys-
Northwest’s FPS data
could
be found
the trier of fact to be
tem and “Price-Oub-Model” are accurate
view,
reаsonable.
In our
a trier of fact
allocations,
and reliable for cost
then Dr.
reasonably
could
accept Spirit’s experts’
Kaplan’s use of that same data must be
definition and calculation of Northwest’s
reasonably accurate well.
as
incremental costs to attract
the leisure
travel
on these routes as the
Moreover,
Kaplan explained,
as Dr.
non-
appropriate measure of Northwest’s aver
crew,
variable costs such as
fuel
age
deciding
variable costs for
Spirit’s Sec
possibly
vary
aircraft
pas-
do not
with
tion 2 claim against Northwest. We con
sengers
pro-
because the same service is
clude that this
disagreement”
“intellectual
passengers.
vided to both sets of
As Dr.
among
parties’
experts creates materi
Kaplan stated:
al
disputes
factual
on the relevant market
I assumed ...
the cost
providing
appropriate
measure of costs for
...
service
on a route such as [De-
the service at issue so
to preclude
troib-Boston/Philadelphia]
roughly
had
award
summary judgment.
Although
constant returns to scale and that con-
the district court found that Spirit’s ex
sequently
looking
...
the average
pert-opinion testimony made no economic
variable cost
repre-
was
reasonable
sense, we conclude that a reasonable trier
sentation
what their cost would be
if of
testimony
fact could find that
they expanded capacity, expanded out-
Spirit’s experts
upon
is reasonable based
put on the route.
facts in the record and relevant economic
My
...
view is that
there are reason-
principles.
And,
ably constant
returns
scale.
In support
summary judgment
of its
that I
...
reason
believe that is
airlines motion,
upon
Northwest relies
the Tenth
variety
have a
of mix of aircraft of ...
Circuit’s decision in United States v. AMR
ages
different
and different sizes and
(10th Cir.2003),
Corp.,
when it rough- will emerging low-cost out of the mar- carriers ly ... they be the cost at which had At in viability ket. issue the case was the provided capacity the that [had] existed price-cost of the four tests which the Gov- prior to that. ernment claimed demonstrated that Amer- (J.A. 4294) added). (emphasis Pro- ican pricing Airlines was below its costs. Ordover, fessor expert, granting summary judgment Northwest’s con- In in favor of Airlines, dispute Spirit’s sidered his with economic American the Tenth Circuit held experts on the determination of the that appro- none of the four tests the Government priate average measure of variable costs to had utilized was a true measure of the pricing.” Id. purposes predatory of pas- additional adding of cost
incremental factually inapposite and Directory There- Sales is challenged routes. on the sengers adopt principle fore, distinguishable. that the Government’s We the court held conduct eco- alleged predatory Growp that where reasonable Brooke evidence market, this Relying justifies a relevant proof no economic sense. nomic made Spirit’s that argues for a holding, Northwest measure of costs appropriate analysis similarly is flawed. particu- claim is for the price-cost predatory pricing We disagree. in not all good lar or service defendant. or services sold products AMR, in First, of the tests unlike three Spirit’s not contend Northwest does ap Circuits have determined Other it includes flawed because price-cost test is predatory of cost for propriate measure measures re- fixed costs or portion variable claims to be the Instead, Northwest profitability. duced in the rele product or service cost rejection of a the Tenth Circuit’s relies on Studies, Legal Multistate vant market. arbitrarily al- included price-cost test that Legal Inc. v. Harcourt Brace Jovanovich vary do not costs which located common Inc., Publ’ns, 63 F.3d & 'l Prof changes in American proportionately with Cir.1995) (where (10th products at n. held capacity. The Tenth Circuit Airlines’ bar review issue involved full-service incre- inappropriate it evaluate that was workshops the supplemental courses and against these revenue mental stated, product Tenth Circuit “the relevant administrative and overhead general more cost-price predatory pricing’s market for contrast, case, By in this costs. workshop analysis supplemental is the analysis is based on Northwest’s price-cost sup rather than the full service and [the distin- system specifically which FPS An plemental package”); bar U.S. review] costs, and variable guishes between fixed Industries, Inc., 7 Mfg., chor Inc. v. Rule costs which do defining the latter term as Cir.1993) (where (11th F.3d activity. ex- vary flight with anchors as well as products were brand system that the FPS calcu- pert conceded economy anchors that were generic and approximation of the lates a reasonable parties, the Eleventh Circuit sold both costs for a route and is average variable hold, however, that the rele stated: “We evaluating in рroper measure to use light vant market this case constituted (J.A.402). pricing. allegations predatory economy fluke anchors. weight generic and conclude that a reasonable Accordingly, we weigh factors Four of the Brown Shoe Spirit’s price- find that trier of fact could excluding Danforths strongly favor of reliable, analysis accurate and cost from relevant mar product] brand [the distinguishable analysis from the therefore ket.”).
put forth in AMR. Entry Significant Barriers sure, argues,
To be as Northwest Sales, Circuit, another factor the market was Directory where services, determining pricing is “whether found that the advertisement we entry high” because showing of sales below costs barriers plaintiffs *28 high entry of barriers is determined as to the Defendant’s existence “[t]he must be Yet, of significant determining at charges.” “overall 833 F.2d 614. existence intent, only inasmuch as where persuad predatory “[w]e we did so because such exist will there be incentive listing ed that the first barriers [free] [advertise Richter Concrete price predatorily.” a market for separate product is not ment]
947 Corp., 691 F.2d dominant Corp. Hilltop presence may v. Concrete at its hub allow (6th Cir.1982). 818, it power 824 to exert veto over any plans to expand airport’s capacity, which Here, the record reveals that Northwest limits the possibility competi- further of sixty-four seventy-eight controlled of the entry tive and its attendant check on airport gates long- the Detroit under market power. According to some Levine, term leases. a Northwest execu- scholars, having large a network also tive, that a testified these leases created legacy enables airlines to preda- “very high” entry barrier to into the De- torily entrants, on routes served any competitor. pro- troit market for To thereby causing the expend entrant Detroit, Spirit pay vide service from had to cash reserves and exit the market while $100,000 gate to access a as well as 25% “experiences incumbent an economy than higher landing long- fees airlines with of scope the value of reputation for leases, Relying term like Northwest. fierceness as a deterrent to other en- record, a this evidence reasonable trants in other markets or in fu- certainly trier of fact could conclude that ture.” significant entry barriers to existed in the
Detroit market which made Note, “Compatibility And Interconnection possible. Pricing In Industry: The Airline A Pro- Reform,” posal 405, 423, For 114 Yale L.J. Moreover, a collecting law review note 424, (2004) and 425 (emphasis added and reported economic studies of this market omitted). footnotes Another law review follows: as note describes the power that this point-to-point linear [T]he structure that barrier creates in this industry: “When an predominated regulation under was re- airline percentage controls substantial of placed by nearly pervasive hub-and- enplanements airport, at an it sig- wields spoke system. praised While some have power competitors’ nificant over its access hub-and-spoke system for its effi- Note, airport space.” “The Antitrust ciency, many others have also déseribed Implications Airport Of Lease Restric- utility an entry-deterrence its Strate- tions,” (1990). 548, 104 Harv. L.Rev. gy- sum, the facts and the economics of Legacy airlines remain dominant in the industry reasonably this could be found to industry, and their hub-and-spoke route significant entry. establish barriers industry’s structure is single still the Further, a reasonable fact-finder could important most structural characteris- conclude that these barriers enabled tic.... predatory pricing plau- to be studying Economists networks have sible and successful. ... adopting demonstrated that a hub- and-spoke structure is an effective Recoupment entry means deterrence. Part power § deterrence stems the market prerequisite The second under Act, hubbing flights orig- proof creates on that Sherman competitor inate or terminate at the hub. recovered or Since had reasonable hubbing typically prospect dangerous probability airline controls a or a of re large proportion flights couping investment in below-cost Matsushita, 589, airport, out its hub it can prices. raise U.S. at fares 1348; Colorado, flights competi- Cargill on those without v. S.Ct. fear of Monfort of Furthermore, Inc., entry. tive an airline’s 479 U.S. 119 n. 107 S.Ct. *29 948 whether, (1986). given aggregate losses is “For invest 427
93 L.Ed.2d
pricing,
the below-cost
rational,
must
caused
[predator]
to
ment
be
target
likely succumb.
intended
would
expectation of recover
a
have
reasonable
profits,
monopoly
later
in the form of
If
indicate that below-cost
ing,
circumstances
likely
suffered.” Matsushi
its intended
pricing
produce
the losses
could
more than
588-89,
It
ta,
target,
949
demand,
of its scale of
taking advantage
range
from
west’s residual
in the
instance,
of its size.
Id. at
0.3 — 1.0....
...
economies because
if the
[F]or
price elasticity
105 S.Ct.
of Northwest’s residual
U.S:
0.65,
advantages “are a
demand were
average
L.Ed.2d 467. Such
Northwest’s
monthly sacrifice during predation,
of size and not the exercise
us-
consequence
ing cost
power.” Id.
based estimates for the other-
monopoly
wise prevailing price, would have been
Conwood,
(emphasis
conduct and re- Monthly V.B. Northwest’s Returns duced consumer choice harmful After Predation in the Detroit- Id. at 789. competition.” Philadelphia Market Mills, Spirit’s experts, Professor one of before, As the second task is to calcu- recoupment from calculated Northwest’s average monthly late the return North- predatory pricing within months after expected west to receive immediately Spirit’s exit from these routes. Professor Spirit exited the after Detroib-Philadel- Mills concluded: phia Applying market. the same meth- Monthly V.A. Northwest Sacrifice odology used the Detroib-Boston During in the Predation I average calculate and
DTW-PTL monthly anticipated return Northwest on looking both a forward basis and a Northwest did not cut its fares looking I backward basis. do this for entry response the De- the three months of November 1996— Spirit until troit-Philadelphia route add- January 1997 for looking forward flight ed a in late second June scenario and for the same three months underway, Once Northwest sustained its looking 1995—1996 for the backward low fares until halted both of its scenario. flights on the route and withdrew from anticipated for Northwest’s Values av- Detroib-Philadelphia market in late (the erage monthly return are shown in ...
September same month ranging alternative estimates of E withdrew from the Detroib-Boston mar- instance, ket). if 0.3 to 1.0. For elasticity of Northwest’s residual de- I apply methodology the same used in 0.65, average mand were Northwest’s the Detroib-Boston market to calculate monthly during recoupment return average monthly sacrifice Northwest $756,845, would have evaluated on been expect would to incur charging pred- basis, $570,769 looking forward atory prices Detroit-Philadelphia in the looking evaluated on a backward basis. get quantity, market. To I calcu- monthly late and sacrifice Long Recoupment How Does V.C. July, August, for each of the months Detroit-Philadelphia Take September quantity 1996. This mea- sures the sacrifice Northwest would ex- judge To whether Northwest would pect during every charged month it anticipated predatory pricing have predatory prices. Detroit-Philadelphia anticipated profitable, compare
Values for Northwest’s av- would be one must erage monthly anticipated monthly sacrifice are shown in ... sacri- E elasticity during predation estimates of of North- fice with the airline’s *31 prevailing prices as if otherwise monthly during quickly return re- anticipated lower. expected If were Northwest coupment. preda- months of take two-four
it would Recoupment Is Plausible V.D. (in out of the market tion to drive Detroit-Philadelphia Market? months), fact, many how it took three recoupment compa- of would the months conditions, entry especially Given recoup to its ny have needed North- gate-constrained conditions ques- answer to that investment? The competitors faced De- potential west’s approach the same as using tion is found troit, Elzinga emphasized, Professor in the Detroit-Boston market. before certainly expect- Northwest would have high prices long to last ed its renewed ...,R values of M and Based on the in- enough recoup for the airline to its and the an annual hurdle rate of 15% predatory pricing. in Barriers vestment elasticity used residual measures sufficiently entry high were before, substituting values and six expected not Northwest would have p, preda- the number of months re-enter, Spirit to or another entrant anticipated, long I find how North- tion arrive, period substantially longer for a recoup it to take to expect west would necessary recoupment period. than the predatory pricing in its investment supported by This conclusion is the fact instance, For if Northwest’s other- that, retrospect, the first and prevailing prices predi- were those wise significant entry evexxtin Detroit-Phila- approach, the cost-based and if cated Spirit withdrew from the delphia since predation, it two months of anticipated May occurred in 1998 when Pro market recoup Northwest would its investment Air introduced service Detroit between during recoupment. the first month of (DET) City Airport hap- and PHL. This anticipated If the airline four months of pened Spirit’s nineteen months after recoup its predation, Northwest would withdrawal; ample there was time for during the second month of investment recoup its Northwest investment im- recoupment. Recoupment is not as predatory pricing Pro Air chal- before using comparable mediate market- lenged Northwest’s dominance in the But prevailing prices. based otherwise market. if prevailing even Northwest’s otherwise (J.A. 3185-88). prices com- predicted were those parable reasonably and if it an- The trier of fact could approach, ticipated predation, recouped any two months of find that Northwest losses recoup predatory pricing quickly Northwest would its investment from its after Here, Spirit’s between the second and fourth month of left these routes. recoupment, elasticity expert px'oof on the shows that Northwest recov depending Spirit’s of its And if it antici- ered its losses within months of residual demand. addition, upon the markеt. pated predation, four months of North- exit from exit, Spirit’s west Northwest increased its recoup would its investment be- prices multiple tween third and seventh month of on these routes to pres recoupment, depending elasticity prices during Spirit’s on its seven from its lead a rea of residual demand. Just as in the De- ence. These facts could also market, juror competi to conclude that a troit>-Boston Northwest could sonable expect injury not “in the tive occurred be back black” namely, payment higher air travelers’ Detroit-Philadelphia mai’ket as by consumers for air travel cost issue to be determinative. We re- spectfully disagree. these routes. exit, Contrary also to the
After
district court’s conclu-
in-
dropped flights notwithstanding
proof
sion that
of Northwest’s revenues
“price-sensi-
exceeding
creased customer demand
variable costs effec-
sig-
tively
routes.
inquiry,
tive travelers” for those
ends the
Brooke Group em-
*32
competitive impact
phasized
that even
theory suggests
nificant adverse
where
rare,
that
reasonably
predatory pricing
conduct could
be
“[h]owever
Northwest’s
unlikely
possibility may
that
a gener-
found to be those Detroit consumers who
be as
matter,
al
when the
to Boston
Phila-
realities of the market
were leisure travelers
and the record
preda-
facts indicate that [a
and who lost a choice of airlines.
delphia
tory pricing
has
scheme]
occurred and was
only
These consumers suffered not
a re-
succeeded,
likely
theory
to have
will not
in
supply
flights
duction
to these
way
stand in the
of liability.” 509
at
cities,
routes,
U.S.
to travel these
but
had
229, 113
(citing
S.Ct. 2578
Eastman Ko-
pay
price
an almost seven-fold
increase.
dak,
2072).
466, 467,
504
at
112
“
U.S.
S.Ct.
“very high”
entry,
barriers to
With
Conwood,
In
explained
we
‘[a]nticompeti-
likely
for
consumers
this route
would not
tive conduct’ can
in
many
come
too
differ-
any
have
viable alternatives to Northwest
forms,
ent
and is too dependent upon con-
for
future.
be
airlines
the foreseeable
To
text,
any
court or commentator ever to
sure, the antitrust
laws are for “the pro-
have
all
enumerated
the varieties.” 290
competitors.”
not
competition,
tection
F.3d at
(quoting
784
Caribbean Broad.
224,
at
Group,
Brooke
509 U.S.
113 S.Ct.
PLC,
Sys. Ltd. v. Cable & Wireless
148
(emphasis
original quoting
2578
(D.C.Cir.1998)).
F.3d
1087
More-
Shoe,
Brown
370
82
U.S.
S.Ct.
over,
Rogers,
adopted
in D.E.
we
the In-
1502). Yet, in a concentrated market with
glis
“acknowledges
rule that
certain
very
entry,
high
competition
barriers to
situations,
firm selling
a
above
competitors.
will not exist without
See
guilty
predation.”
variable cost could be
Gavil, “Exclusionary
Andrew I.
Distribu-
(citing Inglis
Predation Claims in LePage’s its en banc decision Inc. v. (Minnesota Mining SM and Manufactur- earlier, Spirit As stated also maintained (3rd Co.), Cir.2003), ing 324 F.3d key that a of its component monopolization Third Circuit stated: predatory strategy claim and Northwest’s Group expansion capacity Assuming arguendo was Northwest’s of its that Brooke a Elzinga proposition on these routes. Professor identi- should be read for the legal if its response company’s pricing fied this as critical to North- action is costs, nothing predation. prices west’s successful Michael Le- are not below its vine, executive, discussion suggests a Northwest had authored the decision that its espousing strategy applicable monopolist an article for re- of the issue is pow- sponding to new low fare carriers. The with its unconstrained court on the er.... finding district deemed its discuss, much markets at issues here is not does not Group]
[Brooke
lowered its
monop-
that a
whether
adopt,
proposition
less
capacity
Northwest added
§ 2 unless it sells
but whether
not violate
olist does
Thus,
part
predatory strategy
of a
in order
that the
nothing
Su-
below cost.
factor so low that
Spirit’s
to drive
load
has written since Brooke
preme Court
longer
could no
remain
the Court’s consistent
Group dilutes
found
market.
monopolist
that a
will be
holdings
if
§ 2 of the
Act
it
to violate
Sherman
lowering
exclusionary
engages
seldom if ever be
capacity
extant
would
justifi-
conduct without
valid business
judged predatory
price-cost
under the
cation.
suggested
test
Areeda
Turner.
151,152.
an artifact of the cost structure
This is
Id. at
industry compared
in the airline
to con-
experts provided
reasonable
*33
manufacturing plants envi-
ventional
explanation
anticompeti-
economic
by
sioned
Areeda and Turner.
In the
two-prong
effects of Northwest’s
re-
tive
industry,
marginal
airline
cost of
routes,
entry
sponse
to
on these
passengers
flights
additional
on extant
rapid expansion
of North-
that included
low,
capacity
very
with excess
is
and
capacity
west’s
on these routes. As Pro-
any imaginable fare. But
below almost
Elzinga explained:
fessor
very
prices
flights
even
low
on extant
goal
predation
this case is
unlikély
low-price
are
to drive a
entrant
firm, Northwest,
to
for the incumbent
prices
the market
low
because such
entrant, Spirit,
drive the
from the mar-
not
flights
on extant
would
divert suffi-
way
ket. The most effective
for North-
cient
to
the entrant to
passengers
cause
passengers
west to do this is to divert
exit.
Spir-
that
on
would have otherwise flown
contrast,
major
carrier like
when
Northwest,, thereby
it
lowering Spir-
to
drops prices radically and
it’s revenues below its costs. This is
Northwest.
capacity
it
all
output,
adds
and
incurs
happened. Spirit’s
fact what
load factor
the variable
associated with addi-
costs
plummeted after Northwest
lowered
Thus,
capacity
tional
described earlier.
if
prices match Spirit’s
and added ca-
capacity
the incremental costs of
addi-
pacity. Spirit’s per passenger
for
costs
(aimed at serving
tions
the new lower-
serving
remaining
its
customer base
hopes
fare
Northwest
rose.
Spirit)
divert from
are more that
If
simply
lowered its
revenues,
incremental
then the addition
flights
its extant
and did not add
capacity
is
because it en-
capacity,
unlikely
sufficiently
it is
that a
tails losses that can be explained
large
Spirits’s passengers
number of
Spirit
to drive
from the
investment
would be
a consequence
diverted and as
market. These incremental costs can be
drive
from the market. The rea-
adding capacity.
avoided
not
Conse-
son
presumably
is because Northwest
quently, the revenues
of addi-
and costs
optimized
had
capacity
utilization be-
(or
be)
capacity
tional
at least should
fore
entered and so Northwest
analysis
predation
the focus of the
large
could not add a
number of addi-
industry.
airline
tional passengers
even at lower
Thus,
unless it
firm
capacity.
power,
also increased
For a
with market
such as
predation
question,
critical element of
in the
Northwest on the routes in
it
not
I. ANTITRUST LAW
teaches that
is
analysis
economic
costs ex-
capacity whose
optimal to add
reviewing
brought
a claim
Any court
entry un-
response
revenues
ceed
Act,
§ 2
under
of the Sherman
U.S.C.
hope
can
to drive
the incumbent
less
especially
§
mindful of the fine
must be
reason is
the market. The
entrant from
healthy
illegal predation
line between
power sets its
firm with market
that a
competition.
Supreme
As the
Court has
(or
capacity)
so
output
selects its
stated,
if
would be ironic indeed
“[i]t
marginal
equals
marginal
revenue
predatory pricing liability
standards
the mar-
a new firm enters
cost. When
suits themselves
were so low that antitrust
(residual)
ket,
curve for the
demand
prices high.”
keeping
became a tool for
(shifts to the
firm decreases
incumbent
Group
Brooke
Ltd. v. Brown & William
left),
decreasing the incumbent
thereby
209, 226-27,
Corp., 509 U.S.
son Tobacco
it
making
marginal
firm’s
revenue
(1993).
2578,
II. THE AIRLINE INDUSTRY costs for each additional added Applying principles the theoretical out- plane. on the passenger-variable These reality lined to the above airline costs include the pro- costs associated with industry presents challenging In- task. ticket, cessing the beverage and food ser- Airlines, quiring into whether Northwest (if any), vice required incremental fuel (“Northwest”) charged prices Inc. below carry the passenger, baggage service. appropriate implicates measure of costs Thus, the passenger-variable costs are peculiarities industry. several of the airline quite minimal compared to the common- Turner, Areeda and Professors the first costs, non-passenger variable variable propose specific commentators to cost- costs the route. This disproportional predatory pricing, based standard for ar- passenger-variable nature between the gued below short-term mar- costs and the common-variable costs has ginal cost should be deemed unlawful. significant implications with regard to Turner, Phillip Areeda & Donald F. Pred- evaluating a predatory-pricing claim. For atory Pricing & Related Practices under example, suppose given on a route the Act, Section 2 the Sherman 88 Harv. $1,000 common-variable costs were *35 (1975). 697, L.Rev. 712 Given the real- passenger-variable the per costs were $10 difficulty ascertaining world a firm’s passenger, only passengers two were however, cost, marginal Professors Areeda flown, the total variable costs would be and Turner a suggested using firm’s aver- $1,020, approximately average and the var- cost, age variable defined as total variable iable cost would charged be A fare $510. produced, costs divided total units as a below that amount would be considered proxy marginal 700, cost. Id. at predatory pricing under the Areeda-Tur- Thus, in a industry, traditional if a manu- analysis. ner each passen- With additional prices product, facturer widget, a below ger however, added to plane, the average the the aver- producing variable cost of age widgets, the Areeda-Turner variable cost model would declines because the find price predatory. to be common-variable costs are the bulk of the airline’s expense and the incremental cost manufacturer, a Unlike traditional how- of each passenger additional is so minimal. ever, industry presents the airline a more Thus, if twenty passengers flew on the complicated scenario because the bulk of plane, the total variable costs would be its variable costs are common cоsts shared $1,200, approximately and the var- among all passengers flight. on a Once an Thus, iable cost would be in this $60. airline flying plane commits to a along a scenario, route, model, under the specific Areeda-Turner airline must incur the pilots, flight attendants, costs of the a fare must be fuel to below to be considered $60 fly empty plane, ownership predatory. rejected a Eighth Circuit has such market takes The the airline analysis of
The
holding that
complexity
fare-specific approach,
when narrow
level
on an additional
just
taken into account.
“necessary
to consider not
[an
discrimination
it is
notice
flown on short
who has ever
Anyone
prices,
lowest
but all of its
airline’s]
that similar seats on
to the fact
involved,
can attest
routes
for that is the
for the
identically.
priced
are not
plane
same
relationship
between
upon
basis
which
Indeed,
airline has committed
once an
charges and costs could be
[the airline’s]
route and the
on a certain
flying
plane
Arrangers v.
determined.”
Int’l Travel
already
have
been
costs
common-variable
(8th
Inc.,
991 F.2d
Cir.
NWA
to fill
incurred,
in the airline’s interest
it is
denied,
1993), cert.
114 S.Ct.
U.S.
given the fact
plane
on the
capacity
(1993).
court,
In this
was directed towards during predation period. Specifically, travelers, leisure because it offered argues Professor Mills that because of its flights day, one to two sold its tickets on dominance at scarcity and the DTW basis, a non-refundable and did not offer entrants, gates available for new North- service, frequent-flyer pro- first-class west reasonably expected could have not to Thus, gram, or onboard meals. Professor face another following Spirit’s entrant exit Elzinga argues that because did not from the Accordingly, market. Professor compete with price- local Mills concludes that Northwest could have travelers, insensitive business those reve- reasonably been confident that it could any nues should be excluded preda- return pre-predation recoup Instead, analysis tion as well. Professor profits during predation. sacrificed Hav- Elzinga contends the relevant market ing Spirit’s summarized argument, I now at issue should be limited to Northwest’s turn to response. Northwest’s local, price-sensitive passen- actions ger market. IV. NORTHWEST’S RESPONSE
Relying
Elzinga’s analysis
on Professor
Kaplan
the relevant
Dr.
evalu-
response
Spirit’s
experts
ated the actual
fares offered Northwest
is contained in
report
of its own ex-
in both the local market and the more
pert, Dr. Januz Ordover. Dr. Ordover
local,
specific,
price-sensitive market. Dr.
challenges each of
premises
Kaplan then measured
against
those fares
arguments
First,
experts.
three
average
pas-
variable cost based on all
Dr.
argues
Ordover
that Professor Elzinga
sengers (including connecting passengers
improperly concluded that
the relevant
and price-insensitive passengers). Dr.
market at
something
issue is
other than
Kaplan’s rationale for using
the total-passenger market on the two rel-
variable cost as determined
passen-
all
evant geographic
Second,
routes.
Dr.
gers
passenger-variable
flown is that
costs
challenges
Ordover
Dr. Kaplan’s price-cost
such as
processing
beverage
ticket or
analysis by arguing that
it was error to
service
vary materially
do not
between
compare a
subset of
revenue
connecting
and local
price-
with the average variable cost calculated
price-insensitive
sensitive and
passengers.
for all passengers. Finally, Dr. Ordover
*37
Moreover, by including all passengers
claims that Dr.
recoupment analysis
Mills’s
flown,
average
the
variable cost is lower
is flawed because it relies on several incor-
than if
just
the value was calculated
based
rect assumptions.
I
briefly
will
touch on
price-sensitive
on local
passengers. Com-
each of Dr.
points.
Ordover’s
paring Northwest’s fares to the average
cost,
Kaplan
variable
Dr.
regard
concludes that With
to Professor Elzinga’s defi-
both in the local market
a
as whole as well nition of the relevant
Dr. Ordover
as the
price-sensitive
sub-market of
pas-
argues that it
simply
contrived to view
equally among
pas-
them
all the
allocate
which
passengers
sub-segments
the
sepa-
Instead,
argue
routes as
that the
sengers.
the two relevant
he would
travel on
that
Dr.
states
Ordover
rate markets.
should
allocated a
higher-priced fares
be
level,
that the
this means
the route
“[a]t
the common-variable
higher percentage of
opera-
of its
the costs
must cover
airline
fares,
costs,
lower-priced
such as
while the
route,
at least on
and that
on the
tions
local,
fares, should be
price-sensitive
the
system
it must
routes
the
some
example, Dr.
allocated less. For
Ordover
in excess of the
contribution
enough
earn
no
claim that there is
inherent rea-
would
remaining
the
costs to cover
route-specific
a local
why a
fare of
son
business
$120
Ap-
Joint
the airline.”
operating
costs of
the
fare of
should be allocated
leisure
$60
(Ordover
(“J.A.”)
Rebuttal
at 604
pendix
costs,
of common-variable
such
same share
9). Thus,
con-
Dr. Ordover
at
Report
salary. The effect of the
pilot’s
as the
attempts to cover
“[e]very airline
cludes
of common-variable
uniform allocation
net contri-
by striving to earn
costs
these
very
to make one fare
only
costs
serves
on the
types
passengers
all
from
bution
Instead,
is not.
profitable while the other
route,
segmented
by
out
just
not
the ones
argue
appro-
that the
Dr. Ordover would
Therefore,
Id.
he
experts.”
Plaintiff’s
way
purposes
measure costs for
priate
mixture
that it is the
argues
offares
calcu-
evaluating predatory pricing is to
travelers,
travelers,
leisure
business
average variable cost
late the incremental
the airline
connecting passengers, which
by
passengers generated
for the additional
profitability
to ensure
attempts
optimize
campaign. Specifi-
Northwest’s low-fare
Dr.
example,
For
Ordover
on each route.2
pas-
explains
by taking
cally, he
leisure fare
that a below-cost
argue
would
costs for the incremental
senger-variable
higher
significantly
a
may
offset
be
gained as a result
passengers
fare,
long
but so
business
above-cost
the common-
campaign plus
low-fare
of its
profitability,
ensures
mix of revenue
only with the ad-
costs associated
behaving rationally.
variable
airline is
added to the
capacity Northwest
ditional
price-cost
regard
Kaplan’s
to Dr.
With
campaign,
divided
during
two routes
Kaplan’s
Dr.
Dr.
faults
analysis,
Ordover
incremental
by the
total
local,
fares to
price-sensitive
comparison of
of the varia-
gives a true measure
gained,
passen-
cost for all
variable
pricing strategy.
of Northwest’s
ble costs
argues that because
Dr. Ordover
gers.
by noting that the
Dr.
concludes
Ordover
costs are
majority of variable
the vast
in re-
Northwest offered
costs,
low fares which
simply arbitrary to
it is
common
pric-
to show
plaintiff would need
argues
that this issue
in its brief
2. Northwest
Circuit
Id. at 614.
already
ing
decided
Sixth
as whole.
has
been
in the market
Specifically, Northwest claims
precedent.
holding
in that case was
Critical to our
Directory
Manage-
holding
Sales
that our
ment,
coexten-
companies’ businessеs were
the two
alleged
requires
at an
a court to look
contrast,
case, Spirit's service
By
in this
sive.
predator’s "operations taken as whole.”
service.
with Northwest’s
is not coextensive
do
find this case to be
F.2d at 614. I
not
engaged
pred-
alleges
Spirit
that Northwest
Sales,
compa-
Directory
the two
point.
in which
atory pricing
competed
exact same market but
nies
local,
serves, i.e.,
pas-
price-sensitive
portion
plaintiff attempted to isolate one
finds
trier of fact
sengers.
If a reasonable
that the
that market to demonstrate
within
exists,
then
a distinct market
that such
pricing.
predatorily
Id.
was
incumbent
§ 2
There-
alleged
cognizable
claim.
has
portion
that the
which
613. We held
Directory
fore,
holding in
that our
I conclude
separate
was neither a
plaintiff identified
*38
apply.
does not
Sales
separate
a
market and that
product nor
stated, however,
sponse
were still above the incre- have
determination of the
average
cost for
product
mental
variable
the addi-
relevant
market is an
for
issue
tional
jury
both routes.
to decide. See Lewis v. Philip Mor
(6th
Inc.,
Cir.2004)
515,
ris
355 F.3d
Finally,
critiques
Dr. Ordover
Professor
(holding that the definition of the relevant
analysis.
recoupment
Specifically,
Mills’s
product
a
inquiry
market “is
factual
disputes
Dr.
several of
Ordover
Professor
jury;
may
weigh
the court
not
evi
assumptions upon
analy-
Mills’s
which his
(inter
judge
credibility”)
dence
witness
A recoupment analysis
sis relies.
deter-
omitted),
denied,
quotation
nal
cert.
plausible
mines whether it is
that the al-
U.S.
125 S.Ct.
Y. LEGAL ANALYSIS expert reasonable, opinions were sup- Having expert reports ported sub record, evidence in studied case, mitted I believe both sides persuasive by could each be found a rea- presented have opinions, fact, credible which trier of I sonable conclude the district supported by presented evidence in court erred in granting Northwest sum- Specifically, the record. mary judgment reasonable trier in this case. Specifically, of fact could find that Spirit’s experts have the district court in adopting erred North- put forth a compelling argument expert analysis west’s over pre- the one engage Northwest did in predatory pricing by Spirit. sented Like majority opin- ion, limited market which Spirit com I parties’ believe that the “competing peted that eventually forced Spirit out of expert opinions present the ‘classic battle addition, the market. tri experts’ reasonable and it up jury to a [is] er of fact could conclude instead that the evaluate what weight credibility each relevant market must be viewed expert opinion as the Phillips deserves.” v. Co- predation hen, (6th Cir.2005) (in- route itself and that cannot be 400 F.3d by just omitted) (alteration measured type one of fare. quotation As we ternal *39 summary judgment stage At the original). case, should not district court credibility judge the evidence
weigh Liberty v. Anderson See of witnesses. 242, 255, Inc., 106 S.Ct. 477 U.S. Lobby, (1986) (holding L.Ed.2d 202 determinations, weighing “[cjredibility evidence, legiti- drawing and the jury from the facts inferences mate functions, he judge, of a [when] not those judg- summary ruling on a motion
ment”). my I concur with Accordingly, of the district that the decision
colleagues and the case reversed court should be proceed- for further be remanded should ings. LAKIN, Petitione-
David Patrick Appellant,
v. STINE, Warden, Wayne W. Respondent-Appellee.
No. 05-1388.
Appeals,
Court
United States
Sixth Circuit.
Dec.
2005.
Argued:
Dec.
Decided and Filed:
means
notes
937
agree
average
the relevant measure is
var-
Chronologically,
pre-
the
Id. at 735.
ket.”
1,
cost.” Id. at 223 n.
113 S:Ct. 2578.
follows:
iable
process is as
dation
establishes dominance
Major
1.
airline
Group,
Supreme
In Brooke
Court
levels.
serving competitive
airport
at
rejected
that “we have
else
explained
major airline to
allows
2. Dominance
prices
where the notion that above-cost
levels.
competitive
above
price well
general
that are
market
levels or
below
attempts to
a new entrant
3. When
competitors
of a firm’s
inflict
costs
hub,
major airline’s
domi-
enter a
injury
competition
to
under the
cognizable
responds with below-
nant airline
con
prices
antitrust
laws.
‘Low
benefit
dumping,
pricing,
capacity
cost
regardless
prices
sumers
of how those
are
other
a number of
set,
and/or
long
they
predato
and so
are above
until the new entrant
is
practices
levels,
ry
they
competi
do not threaten
out.
driven
principle
tion ....
have adhered to this
We
out
4.
the new entrant
is driven
Once
regardless
type
of the
of antitrust claim
”
market,
airlines
of the
dominant
223, 113
at
involved.’ 509 U.S.
S.Ct. 2578
to levels sometimes
prices
raises
(quoting
citing
Atlantic
Co.
Richfield
higher
prevailing
than those
before
Co.,
v.
Petroleum
495 U.S.
USA
entry.
attempted
(1990)).
the new entrant
1884,