*1 SONS INGLIS & BAKING WILLIAM
CO., al., Plaintiffs-Appellees, et
ITT BAKING CONTINENTAL INC.,
COMPANY, al., et
Defendants-Appellants.
WILLIAM INGLIS & SONS BAKING
CO., al., Plaintiffs-Appellants, et BAKING
ITT CONTINENTAL COMPA-
NY, INC., Defendant-Appellee. 79-4207,
Nos. 78-3604. Appeals,
United States Court
Ninth Circuit.
Argued and Nov. Submitted 1980. Aug.
Decided 1981. Rehearing Amended on Denial of
As
Rehearing En Banc Feb. 8,1982.
Amended Order March
1016
1019 *9 Schafer,
John Covington H. Burling, & C., Washington, D. defendants-appel- for lants. Khourie, Broad,
Michael N. Khourie & Schulz, Cal., Francisco, plaintiffs- San appellees. * BROWNING,
Before PECK and SNEED, Judges. Circuit SNEED, Judge: Circuit Inglis William Baking (Inglis) & Sons Co. brought private antitrust suit to recov- damages er treble against ITT Continental Baking (Continental), Co. American Baker- (American), ies Campbell-Taggart, Co. Inc., alleging violations sections 1 and 2 Act, Sherman U.S.C. §§ 2(a) Act, section Clayton as amended Act, the Robinson-Patman 15 U.S.C. 13(a), Unfair Practices California Act, & Cal.Bus. Prof.Code 17000-17101. §§ charged also that Continental had conspired parent corporation, with its Inter- (ITT), Telephone Telegraph national & others in violation of sections and 2 * Peck, designation. John Honorable W. Senior United States Judge Circuit, sitting by Sixth Circuit *10 pound the one and one and one-half pound Amer- and Act. Both Continental Sherman During the pan white bread. also loaves of against Inglis counterclaims filed ican Inglis’ both by complaint, violations, period covered although Con- antitrust alleging un- Inglis their bread and sold at trial. Continental dropped counterclaim tinental its an “advertised” “private” with der a label and settled Campbell-Taggart trial Before bread is manufactured granted court sum- label. Private label the Inglis, and district particular a with re- on behalf of judgment for Continental wholesaler mary conspiracy a label “vertical” and marketed under alleged to the retail customer spect Continental, ITT, and others. La- Adver- held that customer. exclusively between its horizontal ter, voluntarily dropped generally is a national Inglis tised bread label 1 against section purchas- claims under to conspiracy brand available all retail name a Following one named defendants. bears ers. advertised bread Continental’s jury a in returned label, trial Inglis month marketed the “Wonder” while all on remain- against aside, Continental verdict Labeling “Sunbeam” bread. $5,048,- damages of and ing claims awarded principal private label difference between jury found that neither American The price. and advertised bread was one they Inglis were on claims liable nor private la- typically Wholesale bakeries sold against each other. filed price than advertised bel bread at a lower and, were es- products brands because judgment for then moved Continental same, profit. at a Both sentially the lower or, (JNOV) in notwithstanding verdict manufac- types generally bread were alternative, on a new trial all claims. production tured at the same facilities the motions for granted district court The on of most both could be found the shelves alternative, and, a trial in the new JNOV large retailers. grant but refused to on the federal claims for on the state claims. JNOV Continental in 1971 Inglis’ complaint, which was filed Instead, a new ordered. William trial was on in was founded supplemented Baking v. ITT Continen- Inglis & Sons Co. elimi- charges sought to that Continental (N.D.Cal. Baking F.Supp. tal competition nate northern California 1978). Inglis appeals now district by charging market wholesale bread entry of and alternative or- court’s JNOV discriminatory and below-cost claims, new for a trial on federal der private Inglis claims that label bread. appeals the court’s refusal and Continental victim principal was the of this JNOV on state to enter in its favor scheme, suffering losses 1967 and since claims, 1292(b). pursuant We to U.S.C. April eventually going out business in part, part, affirm in reverse in and remand it filed its nearly years five after for a this case new trial. In- complaint. theory initial The on which growth case glis structured its was that the
I. bread, private began in label 1968, began in 1967 or northern California THE STATEMENT OF CASE Wonder to weaken market for Continental’s Theory A. The of Plaintiff’s Actions response challenge to Conti- bread. began label Inglis selling private was a nental also family-owned wholesale bak- bread, price gap private production but between ery with facilities located Inglis Stockton, persisted. bread It label and Wonder California. manufactured argues then decided rolls in Cali- that Continental distributed bread and northern strategy predatory pricing in its pursue one of the fornia. Continental nation’s bread, intent bakeries, sales label with the largest private wholesale and was a com- like Inglis eliminating independent wholesalers petitor of in the northern California market, production Inglis financially capable less who were facilities San Francisco, Oakland, ultimate withstanding war. The and Sacramento. asserts, large goal, acquire primary products Inglis involved in this case were designed prove private market and then share of the label Continental’s intent power to use the enhanced market raise drive from the market. This evi- private prices, which would diminish label principally dence consisted of report pre- *11 competitive disadvantage the of Wonder pared independent by identify- consultants contends, Moreover, the Inglis bread. ac- ing strategies might adopt Continental to private quisition of label accounts would private competition. combat label One al- “leverage” enable Continental to more shelf ternative involved maintaining prices “to space from for Wonder bread those retailers hasten Inglis wholesaler exit.” also intro- purchased private who also Continental’s by reports duced Continental salesmen tar- label bread. geting private Inglis label accounts en- competitive hanced efforts.
B. The Evidence Summarized explanation Continental’s of events dur- support theory, Inglis To its introduced ing period, the complaint course, differed First, following the Inglis evidence.1 exam First, sharply Inglis. from that of Conti- prices ined the movement in Continental’s nental emphasized intensely competitive the during complaint period, focusing the on pound Septem the one loaves of bread. In nature of the wholesale bread market in price ber 1970 Continental reduced the of northern California and its lack own private label from bread 19 to cents power. Campbell-Taggart market held the per price loaf and maintained near largest and, share of the although market ly July years. two In 1972 Continental ambiguous, appar- some of the evidence is price further reduced its to 17.2 cents and ently price initiated reductions that other through that price maintained the summer competitors, Continental, including were gradually of 1973. Thereafter Continental Second, forced to follow. during the com- began price, allegedly to raise because it period plaint market was affected Inglis then knew that was in its death growth “captive” so-called bakeries. competitor.2 Second, Inglis throes as a es Retail such Safeway stores established tablished that Continental suffered sub bakeries, their own thereby reducing the stantial losses from its northern california demand products. for wholesale bread One through 1974, period bakeries from result all was that of the wholesale bakeries during private which Continental’s label experienced excess capacity during the rele- prices Inglis were at their lowest. also vant period. striking this, As evidence of expert testimony, introduced on based proved during Continental eleven- an study prices during periods brief in 1972 week in January strike December 1972 and 1973, tending to show that Continen operated by which closed the bakeries private prices tal’s label were below its av Campbell-Taggart, Continental and Ameri- erage production. Third, variable cost of can and Inglis supply were able to the en- Inglis showed that actively Continental tire with existing market their capacity. made competing private offers to label creating addition to excess capacity, by Inglis. accounts held Although Inglis captive pressure bakeries also exerted on actually only lost one account to Continen provide price-competitive other retailers to tal, respond it nevertheless was forced to private products, pressure label prices to which lower of its own and suffer the resulting respond- Continental and loss of revenue from other wholesalers sales. Final ly, Inglis documentary introduced evidence ed. description only highlights ery early manager’s 1. The that follows which stated the presented expectation Inglis evidence trial. We do not would not remain in pretend provide account year. full of a trial that Inglis business for more than one intro- generated nearly thirty volumes of transcribed prediction duced no direct evidence that this testimony. actually pricing affected Continental’s deci- sions. introduced a memorandum written manager of Continental’s Sacramento bak- cost, average variable which that all below emphasized
Finally, Continental
price
any
court
event found not to
subject to federal
were
the bakeries
respect
until
With
controlling,
of 1971
was insufficient.
the summer
controls from
claim,
Act
period
Inglis’
the federal
Robinson-Patman
Within
April 1974.
temporary price
pric-
imposed
Inglis’
failure
show
also
court held that
government
prevented
of 1973.
it
marginal
the summer months
cost also
during
ing below
freeze
Continental,
controls
establishing
injury
competition
According to
from
inability
to its
substantially
The court
required by
contributed
Robinson-Patman.
during
increasing costs
prices despite
raise
trial on the state claim be-
ordered
new
period
private
label
weight
the evi-
cause
found
levels.
were at
their lowest
Continental
Continental’s defense
supported
dence
*12
which oc
price increases
argues that
the
Finally,
court
meeting competition.
the
1973 and 1974 resulted
curred in late
that
new trial was warranted be-
held
a
Inglis’
anticipation of
from Continental’s
damage
the
award was exces-
jury’s
cause
demise,
govern
expiration of
but from the
weight
the
of the
unsupported by
sive and
price constraints.3
ment
evidence.
trial, this
presented
evidence
From the
D.
of Review
Standards
among
price competition
is
The
plain:
much
California, all sell-
in northern
the district court’s
passing
wholesalers
In
on
decision,
was in-
ing substantially
products,
similar
the
we are mindful of
deference
result,
many
in part,
tense.
at least
jury.
As
of a
To
due the verdict
determine
profit
Inglis
failed to earn a
and
bakeries
of
is
we
entry
proper,
whether an
JNOV
operations. The
was forced to discontinue
by
apply
applied
the same standard
must
jury
the
thus was
question
central
v. Cowles Com
the district court. Alioto
casualty
vigorous,
Inglis
whether
was a
of
Inc.,
777,
munications,
(9th
F.2d
780
519
honest,
competition, or the victim
but
denied,
930,
280,
Cir.),
423
96
cert.
U.S.
S.Ct.
adopted by
tactics
unfair and
is,
(1975). That
must
3. It increases offered different reasons that some during price price years and increase the were allowed control for Continental’s failure to advantage private opportunities allow- label bread when Continental took ances increase bread. were available. Wonder contrast, later, may appear a new trial be will sons that the third ele- if, opin by the district court in its ordered ment will discussed second rather than ion, jury’s clearly contrary was verdict last. may weight of the evidence. We Specific 1. Intent only such an order if we find
reverse district court its discretion as to abused specific The element of intent appears to ground which its upon each decision genesis have had its in the distinctions —and Meshriy, Traver v. 627 F.2d based. monopolization similarities —between 1980); Cir. Peacock v. Board of 940-41 attempted monopolization, both of which Regents, 1979); proscribed are in separate terms section 1302; Fount-Wip, supra, 568 F.2d at Han Cooper, Attempts and Monopoliza- See 1352, 1359 (9th v. Shell Oil son Mildly Expansionary tion: A Answer to the U.S. Prophylactic Two, Riddle of Section (1977). 50 L.Ed.2d Thus, Mich.L.Rev. 375 section 2 em- only braces not an uncertain collection of II. “monopolization,” evils termed but also con- falling duct short of result. By analo- THE SECTION 2 ATTEMPT MO- TO gy to law of attempt, criminal the re- NOPOLIZE CLAIM—PREDATORY quirement specific intent is used to con- *13 PRICING reach attempt fine the of an claim to con- standards, Bearing in mind these shall we duct threatening monopolization. See consider, first, entry the district of court’s Times-Picayune Publishing Co. v. United respect JNOY for Continental with to the States, 594, 626, 889, 872, 345 U.S. 73 S.Ct. jury’s finding attempted that Continental (1953); 97 1277 L.Ed. United States v. Grif- monopolize to the wholesale bread market fith, 100, 105, 941, 944, 334 U.S. 68 S.Ct. 92 by pric- northern predatorily in California (1948); L.Ed. 1236 & Swift Co. v. United and, products next, ing its its alternative States, 375, 396, 276, 196 279, U.S. 25 S.Ct. requiring ground order a new trial on the (1905). 49 518 L.Ed. prove predatory failed to con- duct. origins, Whatever its the existence specific may of intent be established not The
A.
Elements of an
Claim
Attempt
only
direct
by
evidence of unlawful design,
Although
law
evidence,
of this circuit on
but
circumstantial
principally
attempted monopolization has
been
illegal
g., CalComp,
of
conduct. E.
supra,
static,
736;
recognizes
current state
ele
three
613
at
v.
Ley
F.2d
Sherman
British
attempt
Motors, Ltd.,
ments of an
claim
2
429,
under section
land
601 F.2d
453 n.47
(1)
specific
(9th
1979);
of
Sherman Act:
intent to
Gough
Cir.
v. Rossmoor Corp.,
destroy
381,
control
competition
(9th
1978),
585
390
F.2d
Cir.
cert. de
commerce;
part
(2)
936,
predatory
nied,
1280,
some
of
440 U.S.
99 S.Ct.
59 L.Ed.2d
anticompetitive
(1979);
Bros.,
conduct directed to accom 494
Janich
Inc. v. American
plishing
purpose;
(3)
848,
Distilling
(9th
unlawful
570 F.2d
853-54
Cir.
dangerous probability
g.,
1977),
denied,
829,
of success. E.
cert.
439 U.S.
99 S.Ct.
Computer Products,
103,
(1978).
California
Inc. v. IBM
1028 denied, cert. U.S.
Thus,
consistently have held
we
(1974);
Industry
Hallmark
from conduct
may be drawn
L.Ed.2d
the inference
8, 12
(9th
Reynolds
a substantial
F.2d
Cir.
Metals
that serves as
basis
cases,
Several
94 S.Ct.
trade.4
claim restraint
equated such
explicitly
necessity
have
example,
L.Ed.2d 235
The
restraint of
an unreasonable
conduct with
the fact
conduct rests on
corroborative
1 of the
of section
Sher
trade
violation
intent alone can be
that direct evidence of
736;
F.2d
CalComp, supra, 613
at
man Act.
misleading.6
The law
ambiguous
n.47;
at 453
Sherman,
supra, 601 F.2d
monopolization must
a nar
attempted
tread
Gough,
at 390. Actions
supra, 585 F.2d
that would in
pathway
row
between rules
power may
market
taken
a firm without
competition and those that
hibit honest
if
ac
intent
those
support the inference of
pernicious
subtle conduct
would allow
but
clearly threatening to
a kind
tions are “of
evi
scrutiny.
antitrust
Direct
escape
exclusionary.”
clearly
Ja
competition or
vanquish
in an
dence of intent
rival
Bros.,
n.4.5
supra, 570 F.2d
nich
help to
competitive struggle cannot
honest
opinions
language
have taken
Some
an antitrust violation.7 It also
establish
g.,
1. E.
se violations of section
per
refer
sought
shown that
the defendant
must be
n.10;
CalComp, supra,
1029
as
Dangerous Probability
specific
2.
of Success
evidence of
intent
vice
versa.
See Lessig
Co.,
v. Tidewater Oil
327 F.2d
element, dangerous
third
prob
459,
(9th Cir.),
denied,
474
cert.
first,
success,
ability
like the
also is
of
root
(1964).9
S.Ct.
L.Ed.2d 1046
relationship
separate
ed in the
between
However, our more recent decisions make
monopolization
attempt
offenses of
to
plain that
the permissibility
inferring
of
See,
monopolize.
g.,
supra,
e.
&
Swift
dangerous probability
proof
specific
from
of
Although
unlikely to interrelationship extends to This the defendant market, likely that is less proof required to type strength mark monopolize the attempted to actually In the absence of each element. establish Conversely, a firm with substantial et.12 specific probative evidence of direct and it more rational to may find power market example, plain monopolize, for intent of conduct monopolistic course in a engage of conduct tiff must introduce evidence firm in a less concen a smaller than would claim of re amounting to a substantial trated market.13 clearly or conduct threaten straint of trade sum, dangerous probability of suc- exclusionary.14 competition clearly ing to analyzing always relevant in cess element intent, on the other Direct evidence of its rele- The nature of attempt claim. an hand, permit reliance on a broader may however, the state of vance, is a function of conduct, pur simply because range of support of the other offered the evidence ambiguous may be more pose of conduct proof of the necessary to elements two But, general, con clearly understood.15 claim. support attempted a claim of that will duct monopolization must be such that its antici
3. Conduct
dependent upon its
pated benefits were
competi
tendency
discipline
or eliminate
attempt
claim
element of
The conduct
long-
firm’s
thereby
enhance the
two ele-
tion
closely related to
other
also is
element,
monopo
Thus,
specific
ability
reap
term
the benefits
the first
ments.
compe
power.
conduct is not true
competi-
ly
Such
prices or exclude
intent to control
tition;
only
it elimi-
it makes sense
because
tion,
types
from certain
may be inferred
927;
Hunt-Wesson,
supra,
at 737. The remainder of this section
F.2d at
613 F.2d
See
12.
669-70;
Foods, supra,
concept.
Mutual
610 F.2d at
on that
Blair
elaborates
Investors,
Management
Inc. v. Putnam
Fund
1977).
553 F.2d
As our earlier discussion of the first
two
attempt
recognizes,
of the
claim
sev
elements
recently
proposed
13. Two commentators
suggested
type
have also
that the
eral cases
selecting
against preda-
rules directed
means of
attempted mo
conduct
sufficient
to establish
tory
on a basis similar
to this one.
conduct
may vary
power
nopolization
market
with the
Klevorick,
Analyz-
Framework for
Jaskow &
A
Hunt-Wesson,
supra,
g.,
of the defendant. E.
Pricing Policy,
ing Predatory
Yale L.J. 213
925; CalComp, supra,
arguments of the case at bar.
dispute
Much of the
appeal
on
concerns
proper
relationship between
Predatory Pricing
B.
direct evi
dence of intent and evidence concerning the
Inglis alleged
support
of its section 2
relationship between
the cost and
claim that Continental set predatory prices
products.
Continental’s
As already indi
private
for its
purpose
label bread with the
cated, a distinction must be maintained be
eliminating
weaker bread wholesalers.
“predatory”
tween a
price and a “competi
support
Inglis presented
In
to the jury tes-
tive” one. Constraints
developed
must be
timony
documentary
relating
evidence
former,
that will deter
but not
to Continental’s
intent as
expert
well as
Klevorick,
latter.
See Joskow &
A Frame
testimony
demonstrating
the relationship
work
Analyzing
Predatory Pricing Poli
prices
between Continental’s
and various
cy, 89 Yale
(1979).18
L.J.
220-22
categories of
granting
costs.
In
Continen-
JNOV,
tal’s motion for
the district court
Price reductions
that constitute
Inglis
present
determined that
had
legitimate,
failed to
competitive response to market
competent
evidence of predatory
conduct
conditions are entirely proper.
“Pricing is
according
legal
Inglis
standards which
only where the firm foregoes
challenges
now
appeal.
on
In granting
profits
short-term
develop
order
Continental’s alternative motion for a new
position
market
such that the firm can later
”
trial,
the court
found that
Inglis’ expert
prices
raise
and recoup
profits
lost
....
frequently
activity
16. We have
proof
prices
referred to such
eluded that without
below mar-
legitimate
pur
cost,
conduct “without
ginal
business
prove
could not
that Continen-
Bros.,
pose.”
supra,
853;
Janich
570 F.2d at
predatory.
tal’s
were
See id. at 418-19
Greyhound Computer Corp.
Corp.,
v. IBM
& n.7.
(1978);
U.S.
L.Ed.2d 790
objective
establishing
18. Narrow
standards for
Knutson, supra,
814;
548 F.2d at
Chisholm
predatory pricing pose special
consisting
risks
Brothers,
1145;
supra,
Hallmark,
498 F.2d at
possibility
competitive
that either some
supra,
Janich
1352, 1358 (9th
because the
properly
to be
allocated
sources
Oil
son
Shell
1074,
denied,
97
accurately “signals”
429 U.S.
consumer
1976), cert.
price
(1977).19 Al
813,
product.
1033
(1977).
Finally,
upheld
we
we again
S.Ct.
ginal average variable cost. court, agree how We district prove plaintiff was the able to neither case ever, Inglis’ in order. *21 a new trial is greater that the defendant had sacrificed concerning the relation greater principal losses than nec evidence profits or incurred plaintiff.33 essary, ship prices in order to eliminate the cost and between Continental’s plaintiff the introduced neither CalComp average computa In cost variable consisted of nor evi predatory of intent direct evidence by expert. computations its These tions cost average variable prices dence of below entirely Inglis’ by were on directions based average total cost.34 were to con counsel as to costs be fixed, sidered variable and which directions grant In this case the district court categories which were derived from of cost because ed Continental’s motion JNOY Bros., Inc. v. mentioned in Janich American concern Inglis’ it concluded that evidence Distilling supra, F.2d at n.11. 858 & ing cost-price relationship was Continental’s Inglis maintains that Janich allocated cate legally predatory insufficient to establish gories of as a matter of law and refers cost Although expert Inglis’ testified pricing. to the of Professors Ar us recommendation the in his during period that examined categories and be eeda Turner that such study were below aver prices Continental’s cost, dispute.36 case-by-case fixed to avoid We age variable the district court conclud- policy get CalComp opinion emphasized pricing Han- 34. The that the 33. Before the new could any jury attempt plaintiff possible “to mo- had failed introduce evidence son to the as a to proof nopolize, to IBM’s that its the controvert substantial Hanson had to establish that highly price profitable.” represented “predatory pricing” policy cuts were 613 F.2d new 743. designed competitors the mar- to drive out of monopoly ket establish benefits for Shell. and attempt price just has no do. The a to This he made to fact that is sufficient appears pric- producing marginal all new of the unit . .. that Shell’s recover the cost [F]or policies nothing output says nothing ing at- were more than an of about whether that gain tempt larger price, charged a market if across to share of the the board all custom- ers, stronger competitive position. generate will because of revenues sufficient to recover Hanson, Similarly, supra, out-of-pocket at 1358. even total costs or costs over alia, found, plaintiff range output. Only comparison Janich court inter that actual any average average price to cost had to introduce evidence of actual variable or total failed yield capacity An defend- can that answer. excess sales below cost or evidence that may justify average-variable-cost legitimate responses situation ant’s were not say, pricing, it is even in that competition. but unrealistic See F.2d at 857. situation, marginal price note, previously no cost can that above men We also for reasons predatory. tioned, Packing be that neither Pierce Co. v. John 1980), Morrell & 633 F.2d arbitrary Crowley, Tugboat Turner Murphy 36. Areeda and advocate Co. nor assignment we cost the result of all costs to the variable forecloses costs, capital category exception supra. today. with See note reach output, property and other taxes unaffected Inglis’ interpretation of disagree transportation, with Ja- are typically considered reject proposal we of Profes- variable.37 nich and Turner.
sors Areeda and
predatory pricing
cases the rele
purport
catego-
changes
did
to describe
output
Janich
vant
in
will be those attrib
were
price
alleged
ries of fixed and variable costs that
utable to the
reduction
to be
pricing
all
apply
predatory
predatory.
price
in
cases. Rath-
reduction of
in
such
er,
case
examples
cost
were listed as
no doubt will have
items
resulted in an ex
pansion
output
market,”
typically
costs that
are variable and fixed.
to “clear the
i.
e.,
satisfy
generat
the increased
They should be read as illustrative and not
demand
price
ed
is
do
reduction.
It
those costs
prescriptive. To
otherwise would be to
change
as
the expanded
a result of
forget
costprice comparisons
that the use of
output that appropriately
an
in
are considered to
is not
end
itself but a means of
Thus,
be
justification
step
variable.
first
interpreting
likely
par-
deter
mining average
in a
pricing
variable cost
ticular
decisions.
generally
case will
to compare
true,
course,
pro-
It is
the fixed
production
costs
before and after the
costs
a firm
duction
are those costs that
price reduction. The variable costs would
vary
output
with
do not
that would
then be
expenses
those
increased
pro-
remain even if the firm discontinued
output expansion
result of the
attributable
Likewise,
costs, as
duction.
variable
price
to the
price
reduction.
If the new
suggests,
vary
term
those costs
do
are
average
below the
per
of these costs
unit of
output
likely
with
that the firm is
to be
output
reason,
good
there is
as we have
contemplating
most concerned
when
said,
price
to infer that the
reduction was
change
consequent changes
*22
predatory.38
However,
output.
to determine whether
variable,
particular costs are
one must eval-
Price
may
maintenance
also
be
relationship
uate the
the prospective
alternatives,
of
if
other
such as
change
output
higher
in
to
output
that
level of
prices
output
and reduced
or termi
presently
which
exists. For example,
nating production
some
would have
altogether,
production
great magnitude
decisions of
been
minimizing
better means of
losses. If
may entail
the substantial
retirement or
these alternatives would have
con
been
be,
expansion, as
case may
productive
the
of
the
commercially
sidered
firm as
reason
capacity,
able,
typically
in which case costs
con-
it would
appropriate
then be
con
to
sidered fixed become variable. At
oth-
the
sider them in identifying variable costs.
extreme,
er
expansions
small
of output may Under such circumstances the
cost
variable
costs,
entail no change in
such as labor or
items
be
would
those that would have been
depreciation
plant.
ingredients,
fuel,
wrappers,
of
3 P. Areeda & D.
ble were
and sales-
Turner,
715c,
supra
j|
note
at 173-74. The
men’s
If
commissions.
costs
these
were the
authors
that
only
admit
this allocation
actually
includes
that
ones
as a
increased
result of
varying degrees
“several elements that
to
are
price reduction,
prices
the
and if the
were suffi-
”
really ‘fixed,’
id. at
but defend it on the
them,
cient to recover
then there is less reason
of
basis
administrative
convenience
and the
predation
to infer
than
Of
maintains.
permissiveness
otherwise relative
of their mar-
course,
may
as we discuss later it
be
Con-
that
ginal
rule,
cost
id. at 172-74.
commercially
tinental avoided other
reasonable
minimizing
means of
losses that would have
dispute
principal
37. The
in the trial court was
effective,
been more
and this
fact would
expenses
whether
such as truck rental and
strengthen
predation.
the inference of
How-
wages for workers and drivers committed to
ever,
accuracy
we intimate no view on the
of
production
private
and distribution of
label
They
proper subjects
these assertions.
are
bread should be considered variable.
Such
investigation on remand.
among
typically
costs were
those
considered
argued,
in
variable
ever,
Janich. Continental
how-
allowed, however,
production
private
The defendant
be
increased
must
to
label
merely
by proving nonpredatory
bread
filled
rebut
this inference
excess oven time and truck
space already
only
price alleged
predatory.
available and that
reasons for the
be
cost
properly
items
could be considered varia-
average
apart
proof
prices
from
below
another com
adopted
had the firm
reduced
cost,
jury’s
more effective
verdict.
output
price
support
variable
bination
should be
These costs
minimizing losses.
prices
be-
introduce evidence of
Inglis did
costs
they are
variable because
considered
already
average total cost. We have
low
at the
its control
had within
the firm
that,
plaintiff
can
out
unless
pointed
alleged to
price
established the
time it
average
prove that
were below
abjured
Thus,
but
available
an
predatory.
cost,
of demon-
variable
it bears the burden
reduced
have
that would
course of conduct
strating
anticipated
benefits
unre
specifically identifiable
amount of
dependent upon
were
defendant’s
items as
cost
earmarks such
costs
covered
com-
tendency
discipline
or eliminate
these costs
average
It is
variable.
defend-
petition
thereby
enhance the
a result of
output as
per unit of
incurred
monopo-
ability
reap
ant’s
the benefits
by the
pursued
actually
action
the course of
in the aftermath.
ly power
with the
compared
that must be
producer
unit.39
price of each
examining
,We note further that in
the determina
It follows that
discharged,
this burden has been
whether
and which
which costs are variable
tion of
evidence as
courts must consider the
each
vary with the facts of
case.
fixed will
whole,
giving plaintiffs “the full benefit
Moreover,
solely for the
categories
cost
are
tightly compartmental
without
proof
their
answering the
providing
purpose of
aid
components and
izing the various factual
question:
justification
ultimate
Did
scrutiny of
wiping the slate clean after
price
upon its antic
depend
defendant’s
v.
Car
each.” Continental Ore Co. Union
competition
on
ipated destructive effect
Corp.,
bide & Carbon
justified
reasonably cal
as a
1404, 1410,
tal’s
charged dis
“price
tition with the seller who has
private
prices,
label
discrimi
than its
statute,
primary-line
A
nation,”
meaning
criminatory prices.46
typical
of
within
national manufacturer and
Nothing
than a difference in
case involves a
more
exists.
price
its
products
of
who lowers
grade
like
distributor
price between commodities
purpose
of disci
necessary to
local market
establish such
quality
and
Anheuser-Busch,
plining
eliminating
competitors,
or
local
FTC v.
discrimination.44
other,
maintaining higher
549-60,
1267,
while
Inc.,
536,
80 S.Ct.
363 U.S.
less
markets.47 As the Su
However,
competitive
1274,
(1960).
1041 recognized those we in attempt monopo- Co. v. C. T. 446 F.2d to Quality Tools S. denied, lize cases. 825, (9th Cir. cert. 404 715, 1049, L.Ed.2d 740 92 S.Ct.
U.S.
follows, therefore,
It
that we
Cream, supra, 231
(1972);
Ice
F.2d
Balian
disagree with the district
holding
court’s
And,
alleging
suits
as is true in
at 369.
that
primary-line
Robinson-Patman
monopolization
the
attempted
under
Sher
required
prove
Act claim
Inglis
to
that
Act,
may be
intent
inferred
predatory
man
prices
margin
Continental’s
were below its
Pie,
proof
predatory
conduct. Utah
from
al
production.
plaintiff
cost of
A
may es
1332,
n.12,
at
at
supra,
87 S.Ct.
386 U.S.
required
competition
tablish the
effects on
n.12;
Industries,
supra,
International Air
primary-line
though
in a
case even
the de
722-23;
Tools,
Quality
517 F.2d at
Cornwell
prices
fendant’s
were shown
above
supra,
at 831.48
However,
marginal
plain
the
cost.
unless
proves
prices
tiff
were below the
Predatory
2.
Intent
in Pri-
Proof
average
cost,
plain
defendant’s
variable
mary-Line Cases
tiff
establishing
bears
burden of
this case we
the anticipated
prices
In
confront
issue
benefits of the
de
pended
principles
anticipated
whether
set forth above in
on their
destructive ef
fect
proof
competition.
plaintiff
on
If the
predatory
connection with
intent in
does
prove
cost,
average
below
variable
attempt monopolize
pursuant
an
claim
the burden
to the
shifts
defendant to estab
are equally
section 2 of
Sherman Act
lish a legitimate
justification
business
proof
applicable
predatory
intent in a
Accordingly,
its conduct.
we must reverse
Act
primary-line Robinson-Patman
suit.
entry
the district court’s
of JNOV.
they
previously
We
are. We have
hold that
recognized
price
where “a
differential
However, no abuse of its discretion
primary
injury,
line
.. .
threatens a
section
occurred when the trial court
a new
ordered
2(a)
Act .
of the Sherman
. . and section
trial on the Robinson-Patman Act claim.
Act ..
Clayton
. are directed at the Although Inglis did establish that Continen
evil
same economic
and have
same sub
prices
tal’s
in many
were
below
instances
Bros., supra,
stantive
Janich
content.”
cost,
average
total
failed to establish
Accord,
at
Engineering
F.2d
855.
Pacific
& sufficient
either
evidence
that Continental’s
Corp.,
Production Co. v.
Kerr-McGee
prices
average
were
cost
below
variable
Cir.),
prices
that the
benefits
Continental’s
de
L.Ed.2d
U.S.
98 S.Ct.
160 pended
anticipated tendency
on their
(1977);
Industries, supra,
Air
International
competition. Finally,
eliminate
as we ex
3. Sherman fairly place in the market power tive pared rights competitors, of its respecting the competition pro injury to An effects no forecast of future adverse then 2(a) the Robinson-Pat- by section scribed those facts is competition based on on established with may be perhaps Act man hand, If, the on the other valid. predatory intent or proof predatory out predatoriness is based on projection Therefore, we do not however.49 pricing, reasonably buccaneering, it can be fore- complete substan exists a there hold competi- on that an adverse effect cast the synchronization of Sherman tive may tion occur. However, no Acts. basis Robinson-Patman FTC, Anheuser-Busch, Inc. v. competitive establishing requisite 1961) original). (emphasis' proof predatory than injury, other Thus, recognize language while we that the pricing, is evident intent and may Act afford of the Robinson-Patman us, Inglis argued nor has before the record more latitude than that of somewhat Inglis Certainly, mere fact one. Act, the in this case difference Sherman eventually opera ceased losses and suffered sustaining jury’s provides no basis for establish a section sufficient to tions is not verdict. violation. Act 2(a) Robinson-Patman lies in the The second difference cases, Act Robinson-Patman primary-line injury scope competitive envisioned one, between is this the distinction such as While section 2 of the by the two statutes. honest, price competition and vigorous, but requires attempted monopoli Act Sherman competitive proc on the predatory assaults commerce, “part” of and thus is zation of a just important as it is to Sherman ess competitive gen conditions concerned with brought under its section 2. Un cases Act affected, line commerce erally in the analytical stan der-these circumstances 2(a) requires of Robinson-Patman section be no different. dards should impermissible competition effect on only an employing with the seller discrim others between other differences Two again, this differ inatory prices.51 Once requirements of Sher the substantive not alter our result here. Under ence does Acts should be and Robinson-Patman man Inglis present has failed to either statute mentioned,' although neither alters the re jury’s ver evidence to sustain sufficient First, the offense of at sult of the case. dict. requires proof of a tempted monopolization of success while sec dangerous probability B. Causation 2(a) Act re
tion Robinson-Patman entry The court based its showing price dis district quires only judgment against Inglis on its Robinson substantially lessen com “may” crimination indepen case, however, a second and the distinc Patman Act claim on petition. In this It was re ground. Without ad held significance. tion is of little dent quired to show that Continental subsidized dressing dispute about whether section private of its label “possibility” or a the lower bread 2(a) requires merely a higher prices of its advertised “probability” competi more substantial proof necessary to estab agree with the bread. Such injury,50 tive we Seventh relationship lish a causal between Circuit that Kalinowski, Industries, See, supra supra, g., note 50. e. 4 J. von 49. See International Air n.14; Baking, supra, 28.05. § F.2d at 722 Continental Section, 103-04; 1 ABA Antitrust 476 F.2d at Monograph 6.3, See, Rowe, g., supra Act: No. Robinson-Patman § F. note e. Rowe, (1980); supra Policy note and Law 77 F. 122-23. 7.3, 7.4; Sullivan, 8, 221; supra note L. §§ Kalinowski, 4 J. von Antitrust Laws and Trade Regulation § 29.03
1043 (and merely Co., the Materials v. not lower of Co. Southern Stone discrimination 612 198, (5th Cir.), denied, cert. F.2d 200 449 prices) any injury Inglis might two 101, 832, 66 Finding U.S. 101 S.Ct. proof no direct L.Ed.2d 37 have suffered. (1980). subsidization, the district court held that Inglis could the inference of subsi- not draw Only require the third of these dy proof prices withotit that Continental set disputed ments is begin in this case. We marginal below cost. noting jurisdictional reach of the Sherman Act is different from that showing
We do not
of the
decide whether
Robinson-Patman Act.
In enacting the
necessary
primary-line
in a
subsidization is
Congress
go
Sherman Act
case,
“wanted to
to the
for we
that even if such a re-
hold
power
utmost extent of its Constitutional
in
existed,
quirement
the district court erred
restraining
trust
monopoly agree
refusing
permit
in
the inference of subsi-
ments.” United
States
South-Eastern
except
plaintiff
dization
when
can
Ass’n,
533, 558,
Underwriters
322 U.S.
64
prove
the lower
be-
1162, 1176,
(1944).
S.Ct.
L.Ed.
88
1440
Ac
marginal
low
cost. Our earlier discussion
cordingly, the
Act consistently
Sherman
has
marginal
demonstrates
cost test
been construed
anticompetitive
to reach
ac
capture
range
does not
full
economi-
tivities
affect
commerce. E. g.,
cally questionable pricing activity, and that
Mandeville Island
Crys
Farms American
in
weakness condemns it
this context as
Co.,
Sugar
219, 234,
tal
334 U.S.
68 S.Ct.
court, therefore,
well. The district
erred in
996, 1005,
(1948).
contrast,
Denying none of these
argues
asserting
that the interstate sales
that we should affirm the district
Continental
(1974);
FTC,
jurisdiction. Although
L.Ed.2d 102
Borden
339
tion from the issue of
Co.
953,
(7th
1964);
applied
princi
955
Belliston v. Texa
some courts have
a de minimis
co, Inc.,
175,
Cir.),
ple
jurisdictional
aspect
2(a),
455 F.2d
178
to the
see
§
2494,
Basket,
Albertson’s,
Inc.,
92
33 L.Ed.2d
S.Ct.
Food
Inc. v.
341
1967);
788
Zoslow v. Columbia
Inc.,
Broadcasting System,
Trade
1977-2
Cas.
agreed
54. The district court
with Continental
73,126 (N.D.Cal.1976);
¶ 61,756, at
Baldwin
minimis,
its Nevada sales were de
when
Building
Paper
Hills
Material Co. v. Fibreboard
compared to
sales from its
Continental’s total
(C.D.
Corp.,
F.Supp.
Products
204-05
F.Supp.
northern California bakeries.
at
Cal.1968),
they have done so when the inter
however,
holding,
420. The court’s
was in the
merely
state sales were
inadvertent or inciden
analysis
segmented
context of an
the mar-
basically
tal to defendant’s
intrastate business.
ket and then found the Nevada sales to be too
However, when the defendant
is an interstate
insignificant
to substantiate
the claimed ad-
marketing
corporation engaged in a multistate
2(a).
competition required
verse effect on
§
operation,
made in the course
interstate sales
alone,
Examining
agree
those sales
we
with the
operation
involving
prod
the same
However,
determining
district court.
wheth-
price
ucts and
differentials
as are found
price
er
had
Continental’s
discrimination
transactions,
are suffi
defendant’s
intrastate
required
competition,
effect on
of the dis-
all
jurisdiction,
cient to establish
even
those
when
sales,
criminatory
in Nevada and
both
Califor-
insignificant
are
in relation to the total
sales
nia,
competi-
must be examined. The effect on
sales under examination.
price
tion of the
of either Neva-
discrimination
ques-
da or
sales
is a different
California
alone
entry
JNOV on the
certainty,
price
court’s
Robinson-Pat-
than absolute
con-
good
man Act claim is that its
was
being
is
cession
offered meet an equal-
price competition.
faith effort to meet
Sec
price
ly
competitor
low
offered
2(b)
Act,
13(b),
tion
15 U.S.C. §
2(b)
satisfy
sufficient
defense.”
provides
affirmative
It
for this
defense.
States v.
Gypsum
United
United States
permits the defendant
that its
establish
U.S.
S.Ct.
[98
any
price
purchaser
purchasers
lower
“to
faith,
good
L.Ed.
Since
rather than
854].
good
equally
made in
faith to meet an
certainty,
absolute
is the touchstone of
competitor.”
low
showing
of a
Such
defense,
meeting-competition
a seller
provides
charge
an absolute defense to a
can assert the defense
if it
even
has un-
2(a).
violating section
Standard
Co. v.
Oil
knowingly made a bid that
in fact not
FTC,
S.Ct.
L.Ed.
U.S.
Id.,
but
only
competition.
met
beat his
Inc.,
(1951); Cadigan
Texaco,
at 2882],
454 [98
*29
383,
(9th
1974).
F.2d
386
Cir.
Continental
Continental maintains that its reductions in
argues that it established this defense. The
price
private
the
label bread were made
question
district
did not
court
discuss the
response
equally
in
to
prices
low
offered
grounds.
it granted
because
JNOV on other
principally by
Campbell-Tag-
American and
discussed,
equivalent
Its near
was
however.
gart.
challenges
good
faith of
pro
California Unfair Practices Act
Continental’s behavior by emphasizing two
a
“meeting competition”
vides
similar
de
price
related features of the
reductions.
court,
ordering
fense. The district
in
a new
First,
price
when Continental reduced its
to
Act,
trial on the claim based on this
found
response
competitive
one
in
a
customer
to
weight
that
of the evidence established
offer,
price
it made that
through-
available
private
Continental maintained its
la
market, Second,
out the
in contrast
to its
prices
good
response
compe
bel
in a
faith
to
practice
respect
price
to
discounts for
employ
meeting competition
tition. To
bread,
its advertised
Continental made no
ground
defense as an additional
for JNOV
attempt
verify
to
the buyers
each of
to
claim,
on the Robinson-Patman Act
Conti
whom
price
Continental
lower
offered its
nental
sup
must establish that the evidence
actually
had
equally
received an
low offer
ported only one reasonable conclusion —that
competitor.
from a
prices
good
response
its lower
were a
faith
competition.
g.,
E.
Fount-Wip,
Inc. v.
Although the Robinson-Patman
Inc.,
Reddi-Wip,
1296,
(9th
568 F.2d
1300
“places emphasis
Act
competi
on individual
1978). Although
Cir.
agree
we
with the
situations,
upon
tive
general
rather than
district court that
weight evi
system competition,”
v.
Staley
FTC A.E.
defense,
dence
supports
we conclude
Co.,
746, 753,
Manufacturing
324 U.S.
65
Continental has not satisfied
de
the more
974,
971,
(1945),
S.Ct.
market. But when
for such a be
private
The market for
label bread
exist,
2(b) may permit
lief do
section
mar
during
complaint
in northern California
Also,
ket-wide reductions.
the defense is
period
intensely competitive.
Conti
simply
not forfeited
because
defendant
operated
assumption
nental'
on the
sought
gain
has
new customers with a
once a new
became available to one
price,
lower
as well as retain old ones
buyer, it
quickly,
immediately,
would
if not
tempted by competitive offers.
Interna
buyers
become
to all
available
in the mar
Industries,
tional Air
Inc. v. American Ex
assumption
ket. This
was shared
other
celsior
competitors,
supported by experi
and was
U.S.
ence. Private
Texaco, Inc.,
large
label bread was sold to
(1976); Cadigan
L.Ed.2d 349
Thus,
387;
grocery
chain
although
stores.
supra, 492
Hanson v. Pitts
*30
Industries, Inc.,
volume of
burgh
large
any
loaves sold was
for
Plate Glass
given private
account,
label
the number
226-27
these
comparatively
tions than occurred the case of appar- advertised label discounts. Continental grocery apparent- 57. Other stores and bakeries ently provid- believed that these conversations ly copies learned of the 18-cent offer from verifying ed a more reliable basis for that com- Campbell-Taggart’s letter to Albertson’s con- petitive occurred, offers had and thus that for- firming the offer. The does record not indicate unnecessary. mal documentation was Never- public how the letter became or how it was theless, once Continental had verified that circulated. competitive some of its accounts had received accounts, competitive Inglis appeals documentation of- from the district court’s order fers for those accounts would have been for a new trial and Continental seeks to for advertised label easier than verification overturn the court’s denial of its motion for admittedly Our small doubt respect alleged reductions. JNOV with violations acceptance our precludes February nonetheless between October 1970 and argument Continental’s that JNOV was We turn arguments first to Continental’s support warranted it established the meet- because of JNOV.
ing competition defense. Appeal: A. Continental’s Preemp- The
IV.
tion Issue
principal argument
Continental’s
is that
THE CALIFORNIA UNFAIR
preempted by
California’s statute is
ACT CLAIM
PRACTICES
disagree.
federal antitrust
laws. We
Sec
jury’s finding
The
of a violation
tion 17043 of the statute makes it unlawful
Act,
California Unfair Practices
Cal.Bus. &
any
product
“to sell
article or
at less than
17000-17101,
Prof.Code
was based on
§§
the cost thereof to the vendor ...
for the
selling
Continental’s
bread below cost with
purpose
injuring competitors
destroy
or
purpose
injuring competitors
or de
ing competition.”
The statute
defines
stroying competition during
periods
Oc
“cost”
virtually
to include
all variable and
1,1970,
1,1972,
through
tober
February
fixed costs of the business. Cal.Bus. &
7, 1976,
February
through April
1976.58
17026,17029.59 Thus,
Prof.Code
the Cal
§§
granted
district court
Continental’s mo
ifornia
essentially proscribes
statute
pricing
respect
tion for
with
alleged
JNOV
viola
below what we have
average
described as
period
ground
tions within the later
on the
cost for
purpose
injuring
total
com
Inglis
failed to show that Continental’s
petitors
destroying
competition.
prices during
period
were below cost as
term is defined in the
argues
California stat
Continental
this standard
Inglis
ute.
challenge
does not
this ruling
conflicts with this
interpretation
circuit’s
appeal.
court, however,
on
The district
laws,
did the federal antitrust
permits
produced
find that
had
sufficient evi
appropriate
under
circumstances at
dence of below-cost sales for the earlier
marginal
average
or above
variable cost.
period. Nonetheless, consistent with the
It does not
compliance
contend that
result
respect
reached with
to other analo
requires
California law
conduct that would
claims,
gous
Continental’s motion for a new violate
Rather,
federal antitrust
laws.
trial
granted
because
argues
it had established
proscribes
California law
by weight of the
evidence that
and,
conduct which
permits
federal law
good
were
response
faith
competition.
doing,
so
frustrates
the.
poli-
fundamental
*32
applied
one-year
58. Because the district court
doing
a
all costs of
business
incurred in the
limitations,
parties
statute of
an action the
do
conduct of the business
and shall
include
dispute,
applied
only
following
the state law claim
without
limitation the
items of ex-
periods,
dating
Inglis’
pense:
filing
(including
two
one
from
of its
labor
salaries of executives
original
rent,
officers),
complaint,
capi-
and first
amended
and the
interest on borrowed
tal,
cost,
filing
depreciation,
selling
supplemental
other from the
of its
maintenance of
com-
plaint.
infra,
equipment, delivery costs,
losses,
gap
As we discuss
credit
between
all
licenses,
taxes,
type
periods
of
two
was the
insurance and adver-
result of the district
tising.
supplemental
court’s refusal
to allow the
com-
addition,
provides,
plaint
17073
§
in relevant
to “relate back” to the date of the first
part:
complaint.
amended
average
doing
Proof of
overall cost of
busi-
any particular
inventory
period
ness
provides,
part:
59. Section 17026
in relevant
“
production
when added to the cost of
of each
applied
production
‘Cost’ as
includes the
product,
producer,
article or
as to a
is
...
materials,
cost of raw
labor and all overhead
presumptive evidence of cost of each article
expenses
producer.”
of the
Section 17029
product
any
brought
or
involved in
action
expense”
defines “overhead
chapter.
under this
.
purpose
Act.60 We are not
unlawful
by introducing
cies
Sherman
evidence
plus
sales
proof
injury
convinced.
of
below cost
of
competitors
competition.
or
Cal.Bus. &
First,
possibility
proscrip
of
However,
Prof.Code
17071.61
pre
§
this
tion
California of conduct that federal
sumption may
be rebutted
establishing
might permit
law
is not sufficient
to war
defenses,
of
one
the statute’s affirmative
preemption.
Corp.
rant
Exxon
v. Governor
meeting competition,
such as
see Cal.Bus. &
117, 131,
Maryland,
of
437 U.S.
98 S.Ct.
17050,
Prof.Code
by showing
or
that the
§
2207, 2216,
(1978);
of
under
V.
laws does not war
the two
ence between
preemption.62
of
rant
the inference
DAMAGES
$5,048,-
judgment
of
jury
The
returned
Meeting Compe-
Appeal: The
Inglis’
B.
Continental,
on both the
against
based
Issue
tition
and state law claims. The district
federal
The district court found
Conti
light
court
found this excessive in
of
requirements
met
of the
nental had
an
evidence and awarded a new trial. As
meeting competition
by the
defense of
order,
ground
alternative
for its
the court
evidence,
accordingly
or
weight of the
jury’s
Inglis’
of
found that
attribution
Practices
dered a new trial on the Unfair
against
was also
losses to Continental
the same
Act
For
reasons set forth
claim.63
weight of the evidence. The court deter-
in our discussion of
Robinson-Patman
significant-
mined that other causal factors
Act,
respect
we also believe that with
ly
Inglis’ injury.
contributed to
this defense the district court did not abuse
Therefore,
reject
Inglis’
agree
its discretion.
we
Because we
that a new trial on
appeal
question
liability
required,
well
we
as
as Continental’s claim that
of
is
need
preemption
especially
62. The inference of
is
court was careful
to note that
its decision
inappropriate
purposes
validity
ruling
because the basic
of the
should not be taken as a
on the
statute,
only
state and federal statutes
similar. See Exx
are
Maryland, supra,
of the California
which is the
Corp.
on
Governor
question we have considered.
132-33,
U.S. at
at 2217. The
Califor
designed
“safeguard
pub
provides,
part:
nia statute was
63. Section
in relevant
against
perpetuation
lic
nopolies
the creation or
of mo
prohibitions
chapter against
The
of this
encourage competi
and to foster and
locality discriminations,
cost,
sales below
(West
tion.” Cal.Bus. & Prof.Code
§
any
apply
loss leaders do not
sale made:
1964) (statement
legislative purpose);
Harris
Capitol
Distributing Corp.,
Records
64 Cal.2d
(d)
good
In an
in
endeavor made
faith to
454, 461,
139, 144,
Cal.Rptr.
413 P.2d
legal prices
competitor selling
meet the
of a
(1966).
purposes
of the Sherman Act
product,
the same article or
locality
in the same
hardly
succinctly.
could be stated more
Even
ordinary
or trade area and in the
if,
contends,
as Continental
California’s means
channels of trade.
pursuing
dampening
of
price competition,
this end has a
effect on
(e)
good
by
In an endeavor made in
faith
pre
this does not warrant
manufacturer, selling
product
an article or
emption.
competi
“For if an adverse effect on
manufacture,
his own
in a transaction and
were,
itself, enough
tion
in and of
to render a
sale to a wholesaler or retailer for resale to
invalid,
power
state statute
the States’
to en
legal prices
competitor selling
meet the
of a
gage
regulation
in economic
would be effective
comparable
the same or a similar or
article
ly destroyed.”
Corp.
Exxon
v. Governor of
product,
locality
the same
or trade area
Maryland,
supra,
1051
Inglis’
consider whether the district court erred in whether
evidence of causation was
finding
damages
meager
entry
the amount of
excessive.
so
as to warrant
judgment
However,
argues
was,
Inglis’
Continental
lack
for Continental.
demise
in our
record,
causation is a sufficient al- view of the
of evidence on
the result of a conflu-
ground
judgment
ternative
in its favor
ence of factors.
In such circumstances it is
identify precisely
on both the federal and state claims. This
difficult to
the extent to
requires
We
allegedly
contention
our attention.
disa- which
failure was the result of
However,
gree
position.
illegal
with Continental’s
conduct.
the law does not
precision
require
in this area. Continental’s
A. Causation
pricing
only
need
have been a material
decline,
Inglis’
cause of
may
and causation
To establish a cause of action for
Inglis’ injury
be inferred if
type
was “the
damages
Act,
Clayton
under section 4 of the
loss that
claimed violations of the anti-
15,
15
an essential element
U.S.C.
§
likely
trust
laws would be
to cause.” Ze-
recovery
proof
cognizable injury
is
at
125,
Corp., supra,
nith Radio
Continental introduced estimate damage based on relevant which data,” the district court ordering Bigelow Pictures, credited in v. RKO Radio trial, showing Inc., a new 251, 264, the existence of 574, 579, fac 66 S.Ct. tors other than its own activity (1946), L.Ed.2d 652 is not entitled to Inglis’ contributed to failure speculation as a “render a verdict based on only business. The guesswork,” issue before us now is qualify id. To as an “esti- *35 spirators parent company, mate” and avoid a characterization as Continental’s ITT, management it “speculation,” necessary consulting is to show that and the firm Thereafter, McKinsey market of & Co. the district conditions of both the “base” granted summary judgment court “liability” periods and “were similar but for Con conspiracy involving tinental on the claim impact of the violation.” Pacific Coast Continental, ITT, Ass’n, McKinsey.66 We af Agricultural Export supra, 526 F.2d entry judgment firm the district court’s at 1207. Further comment at this time we alleged conspiracy on the between Conti unnecessary believe to be both and unwise. McKinsey, nental and but reverse with re spect conspiracy to the between Continental VI. and ITT.67 OTHER ISSUES Inglis’ Allegations 1. The Timeliness of Although we have decided to affirm the of a district court’s order new trial as to summary judg- Continental’s motions for actually presented jury, those claims to the conspiracy ment on the claims were filed in yet two issues remain. The first concerns response Inglis argued that, 1978. In with- entry summary judg- the district court’s regard out to the “horizontal” conspiracy against Inglis ment on its “vertical” con- between the named baking defendant com- spiracy claim. The second concerns the panies, disputed issues of fact had been application court’s statute of limita- concerning raised conspiracy “vertical” Inglis’ supplemental complaint. Continental, ITT, tions to between McKinsey. necessary Our resolution of these issues is Continental contended that allegation scope because it will affect of a new had been raised too late in proceedings trial. to be considered in connection with its mo-
tions
summary judgment.
Continental
argument
A.
raises the same
Conspiracy
appeal,
The Sherman Act
Claims
on
al-
though
appears
the district court
noted,
previously
Inglis’ original
As
com
grounds.
based its decision on other
plaint, as well as its first amended com
plaint,
allegations
included
that Continental
presented
The issue
is an unusual
conspired with named defendants American
undisputed
one. It is
Inglis’ complaint
Campbell-Taggert,
par
and with
alleged
third
a conspiracy in violation of the
ties,
identity
unknown,
whose
however,
was then
appears,
Sherman Act.
It
restrain trade in violation of section
throughout
1 of
much
the lengthy pretrial
Act,
1,65
case,
the Sherman
proceedings
U.S.C.
and to
parties
in this
as
monopolize in violation of section 2 of the
only conspiracy
sumed that the
at issue was
trial,
Shortly
Sherman Act.
before
Inglis
the horizontal one between the named de
previously
Nevertheless,
identified the
Inglis’
unnamed cocon-
fendants.
complaint
provides,
65.
light
Section I of the Sherman Act
and the inferences drawn therefrom in the
part:
.
party opposing
most favorable to the
the mo-
tion,
contract,
Every
moving party clearly
combination in
is entitled to
the form of
otherwise,
prevail
conspiracy,
Vaughn
trust or
as a matter of law.”
in restraint
v. Tele-
Inc.,
dyne,
among
of trade or commerce
the several
We
States,
foreign nations,
or with
grant
is
declared
note
does not contend that the
illegal.
summary
judgment
resulted
the exclusion
any
reasonably
evidence that
would have
grant summary judg-
66. The court declined to
been introduced had the court allowed it to
alleged
conspiracy
ment
on
horizontal
be-
present
conspiracy
jury.
its
claims
Nor
baking companies.
tween the named defendant
any
presentation
is there
contention that
However, Inglis
during
withdrew this claim
conspiracy claims would have added to the
trial.
claim;
damage
Inglis’
all of
claims relied on the
Finally,
same conduct
Continental.
neither
reaching
this conclusion we have adhered
McKinsey
parties
ITT nor
were named as
de-
“[sjummary judgment
prop-
to the rule that
erly
fendant.
genuine
awarded when there is no
issue of
where, viewing
material
fact or
the evidence
case, “provided always
be
that a late
conspiracy
possibility
did raise
of the case will
shift
in the thrust
the named defendants
or more of
tween one
*36
maintaining his
prejudice
party
the other
in
Inglis, how
parties.
unnamed third
and
Wright
upon the merits.” 5 C.
&
defense
all of the
ever,
required to sue
was not
Miller,
1219,
supra,
at 145.
Arm-
A.
See
§
as antitrust
conspirators inasmuch
alleged
(8th
F.2d 206
strong
Lyons,
Cork Co. v.
366
severally
jointly and
coeonspirators are
lia
1966). The issue therefore is whether
Cir.
conspir
damages
by
caused
for all
ble
rely
entitled to
on a “vertical”
Inglis was
P. Abraham Construction
acy. Wilson
claim,
which was
conspiracy
the nature of
Inc.,
897,
Industries,
604 F.2d
Corp. v. Texas
originally
pleadings
evident from the
as
not
1979),
(5th
granted
cert.
sub
904 n.15
Cir.
filed,
summary judg-
to defeat motion
Industries,
Ma
Inc. v. Radcliff
nom. Texas
years
ment made six
after the first amend-
351,
949,
Inc.,
101 S.Ct.
terials,
449 U.S.
complaint
ed
was filed.
Distributing
(1980); Walker
but Vegas such as Las within our circuit cases naming consulting firm of The Sun, convinces us Harvey, and Knutson nonparty coeonspirator McKinsey & Co. as although part of the corporations, that two McKinsey’s was based on with Continental “family,” capable are corporate same report, previous- of a discussed preparation single they function as conspiring unless possibility which mentioned the of Conti- ly, unit. economic “holding as a means of com- prices” nental’s batting private label bread. Continental provides no reliable existing record ITT, McKinsey, like argued has ITT did to whether Continental answer *38 legally incapable conspiring, given its Nothing in the not so function. or did lack of economic interest northern conclusively that ITT directed record shows though Even bread market. California pricing activity in the north- Continental’s defective, argument we Continental’s fact, the evi- market. In ern California agree with the district court that no triable given was that Continental dence indicates respect with to McKin- issue of fact existed any In operating autonomy. considerable conspiracy. in a sey’s participation event, did not apparently court the district details of the ITT-Continental explore the conspiracy only A occurs when that relationship because of its conclusion unity pur parties have reached “a incapable conspiring so the two were design under pose or a common the whole- compete ITT did not long as standing, meeting or a of minds in an un market and did not act as a sale bread arrangement.” American Tobacco lawful supplier to Continental. manufacturer or States, 781, 809-10, Co. v. United exploration necessary before an Such 1125, 1138, L.Ed. 1575 66 S.Ct. judgment could be summary motion court The evidence available to district possibility The of less properly considered. McKinsey prepared had indicated that large holding of a than total involvement analyzing means of report for Continental competitive affairs of one company in by private and responding competition way operating subsidiaries in a that of its producers. Near the captive label bread anticompetitive as- might strengthen an report appeared this voluminous end of subsidiary, perpetrated by that is of sault including subjects study, list further for policy concern to antitrust to re- sufficient possibility “maintainpng] prices alleged quire investigation further of an pace.” we hasten wholesaler exit As have conspiracy. noted, already there was no evidence that adopted considered or this the Continental ever express
We
no views about
McKinsey
was ever direct
proposal,
in this case.
conspiracy
existence of such a
further, or
note, however,
pursue
suggestion
ed to
although
conspir
We
McKinsey
plans
knew of Continental’s
acy may be inferred from circumstantial
northern
evidence,
activity
actual
in the
California
Inglis must
show an under
addition,
language
alleged coconspirators market.
standing between the
clearly that
itself does not indicate
report
to restrain
specific
with the
intent of each
proposed
even
for
conduct was
ap
With
unlawful
monopolize
trade or
the market.
Although
recognize
we
study.
further
regard
requirement,
propriate
for
conduct
may be inferred from
parent
conspiracy
typically
relationship
close
between
mental
proved
complaint.
ruling
not be
evidence of an
The effect of this
and need
express agreement,
g.,
e.
United
damage periods,
States
was to create two
one
Pictures, Inc.,
131, 142,
Paramount
U.S.
original
measured from the date of the
915, 921,
(1948);
Affirmed reversed in presumption rebuttable of illegality remanded. plaintiff shown be below PECK, Judge, W. concur- JOHN Circuit average defendant’s variable costs. The ring part dissenting part. application district court’s “erroneous” of a majority’s judgment I concur in the on all marginal-cost standard did not result in except the new necessity issues of'a trial of any exclusion of evidence that is material Inglis’s attempt-to-monopolize Robin- under the rule majority announced son-Patman causes of action. On these I today. the district court av- Since treated grant would affirm the district court’s erage cost as the sur- “evidentiary variable n. o. judgment rogate” marginal cost, (and Inglis tried notes, the majority Inglis’s As direct evi- failed) to show Continental sold below specific dence Continental’s intent to mo- average pri- variable producing costs of legally nopolize inconclusive and insuf- vate white bread. label There is no reason Inglis’s “predatory” ficient. evidence of why Inglis given oppor- should a second insufficient, was likewise even conduct cou- tunity to make this showing. judg- The pled purported with the direct evidence of ment n. o. v. on the attempt-to-monopolize intent, permit inferences intent should, feel, cause I be affirmed. monopolize.and dangerous probability My disagreement basic more success. majority’s opinion implicit concerns its hold- majority holds new trial that “a ing proof that mere below aver- upon warranted because the evidence age cost supports variable inferences depended prove predatory conduct specific monopolize both intent to and dan- *41 not upon was based of calculation gerous probability of majority success. The costs were fixed and which variable that probable may states that success in- be rooted in particular facts of this alone, evidence ferred from of conduct if plaintiff’s A failing present case.” com- is the specific conduct sort from which petent evidence does not warrant a new be may proof intent also inferred. Since plaintiff’s of the adopted trial cause. pricing average below variable cost states costs, rigid definition of variable with the case prima predatory facie pricing, result its evidence of sup- Continental’s posed permits the double proved nothing. majority below-cost sales In- inference from glis’s adopted counsel definition evidence of conduct alone.
1059
cost is
average
categories
solely
pur-
variable
are
for the
Pricing below
[C]ost
the inference of
sufficiently ambiguous that
providing
answering
pose of
aid in
success should not
dangerous probability of
question:
justification
ultimate
Did the
re
majority’s opinion
automatic. The
price depend upon
for the defendant’s
dangerous
“element”1 of
duces the former
anticipated
competi-
destructive effect on
affirmative de
probability to a matter of
price justified
or was the
as a reason-
tion
result,
fear,
encourag
fense,
I
with the
ably
maximizing
calculated means of
litigation.
futile antitrust
ing wasteful and
losses,
profits, minimizing
achieving
Steuer, Attempts Monop
&
See Handler
legitimate
Accordingly,
some other
end?
Monopolization, 129
olize and No-Fault
we hold that
the determination of fixed
125,
(1980).
U.Pa.L.Rev.
jury
and variable costs is a matter for the
proof
de
This reallocation of burdens
appropriate
under
instructions.
from this
former rule
parts sharply
Circuit’s
specific
monopolize,
intent
major-
“accordingly”
revealing.
The
The
success,
in
cannot be
probability
hence
inferences,
ity allows automatic
but cannot
unless the con
ferred from conduct alone
they
right
will be drawn in the
ensure
exclusionary or otherwise restrains
duct is
juries
way
open
direction. The
lies
for
Foods, Inc. v.
trade.
Hunt-Wesson
See
pricing
average
infer
below
variable cost
(9th
Ragu Foods, Inc.,
919,
925-26
jurors’ preliminary
view
from
921, 101
1980),
Cir.
450 U.S.
nature
con-
defendant’s
1369,
(1981);
The full has been dangerous court advised probability of may, success rehearing. en banc suggestions cases, One appropriate be inferred predato- from judge requested the ry of the court matter be anticompetitive or conduct. considered en banc. A vote of all active If majority this were all the sought to judges a majority was taken and voted Inglis, articulate in there would be no de- against en banc consideration. parture prior However, from our decisions. rehearing are denied and petitions Inglis attempts a dramatic expansion of the rehearing for a en banc are suggestions types anticompetitive predatory or con- rejected. duct which will support an inference of the other two elements of a section 2 attempted WALLACE, Judge, Circuit dissenting monopolization First, claim. Judge Peck from denial to rehear en banc: recognized dissent, in his majority’s opinion “departs sharply from this Circuit’s I dissent from the court’s refusal to former specific rule that monopo- intent to rehear this case en bane. To prevent intra- lize, and hence probability success, can- conflict, circuit panels of this court must not be inferred from conduct alone unless precedent urge follow the court’s active exclusionary conduct or otherwise judges precedent to overrule the en banc. Second, restrains trade.” Ante at 1059. See, e.g., Smith, United States v. 645 F.2d majority’s opinion seeks relegate 1981) (Reinhardt, J., con- marginal rule, cost represents curring specially), banc, reheard en No. 80- workable, predictable and efficient means (argued 18, 1981). Dec. byYet failing of determining what sorts of consti- banc, take this case en we have sanc- tute predatory conduct under the Sherman tioned decision which departs from the Act, to the slag heap of discarded antitrust settled law of this Through Circuit. formulae, and to place substitute in its unpersuasive strained and reading prior subjective amorphous test cases, involving a majority seeks to harmonize the shifting proof burden of which leaves to the invents, “novel” and “innovative” rule it jury, in nearly every case, decisional author- ante at (Peck, J., 1058-1059 dissenting), with ity attempted on monopolization it, the rule claims. effect, rejects. addition, majority’s holding unjustified is an depar- I do disagree with the majority’s ba ture economically-sound from the marginal sic, abstract definition of predatory pricing: By permitting result, cost rule. “Pricing is predatory only where the firm only court not approves the use of an amor- foregoes profits short-term in order to de phous, unpredictable test for velop a position market such that the firm pricing, but also leaves district courts in the can later raise prices recoup prof lost guidance Circuit with no as to which rule— its.” Bros., quoting Ante at Janich “marginal cost rule” or the refor- Inc. Distilling American mulation —should apply pretrial dismissal motions in Therefore, antitrust cases. I U.S. 99 S.Ct. (1978) L.Ed.2d 122 respectfully dissent. (Janich). believe, I however, do that in the majority’s attempt dogmatic to “eschew ad
I
particular,
herence
rigid
to a
test and to
Section 2
Act,
of the Sherman
15 U.S.C.
fashion broad and
objective
flexible
stan
2, proscribes monopolization
and attempts
dards concerned
accurately
evaluating
to monopolize. The three elements of
purposes
an
behavior,”
of business
ante at
attempted monopolization
specific
n.18,
it has advocated an unworkable
claim —
intent
control
destroy
competi-
test for distinguishing price reductions that
tion; predatory or anticompetitive conduct
legitimate,
constitute
competitive responses
directed to accomplishing the
pur-
unlawful
to market
conditions from
reductions
pose;
dangerous
and a
probability of suc-
that are predatory attempts
monopolize
Thus,
cess—interact.
specific intent and a
the relevant market. The result may well
*43
marginal
injure only
can
Prices set at
cost
the benefits
public of
the American
deprive
Thus, “pric-
manufacturers.
less efficient
on the merits.
competition
flowing from
competitive
is the
ing marginal
at
cost
test:
majority’s
Under
result,”
711, quoted
socially optimal
id.
plain-
a
pricing
predatory
establish
[T]o
Janich, supra,
570 F.2d at
approval
anticipated bene-
that the
prove
must
tiff
making
excep-
a new
n.9. Instead of
857 &
depend on its
price
of defendant’s
fits
rule,
marginal
majori-
cost
tion to the
compe-
eliminate
discipline or
tendency to
attempts to eliminate the rule
ty’s opinion
the firm’s
thereby enhance
tition and
it was not com-
because it concludes
ability
reap the benefits
long-term
to
it,
though
previous
our
to follow even
pelled
the defendant’s
power.
If
monopoly
confirmed it.
have announced and
cases
average total cost but
were below
prices
prior
only a brief review of these
It takes
cost,
plaintiff
average variable
above
has
to demonstrate that
Circuit
cases
showing
defendant’s
the burden
bears
marginal
test as the stan
adopted the
cost
however,
If,
predatory.
was
pricing
measuring
preda
what constitutes
dard for
the defendant’s
plaintiff
proves
In Hanson v.
Oil
tory pricing.
Shell
cost,
average variable
below
prices were
The by creating an those reasons they will be cannot ensure that pre- but it more marginal cost test. But is way The right in the direction. Inglis drawn stan- jury, dictable to ask pricing below open juries to infer does, “anticipated lies ben- to measure dard jurors’ average costs from the variable pricing policies, than efits” of a defendant’s predatory nature preliminary view of judge, on a motion for to ask the district conduct, instead of verdict, the defendant’s summary judgment or a directed vice-versa. marginal cost rule (1) whether the decide (2) the defendant’s whether applies, and Ante at 1059. marginal cost? To me its price was below marginal prevents cost rule this sort clearly no. the answer is judicial responsibility in abdication of addition, should not overlook In one In California Com- predatory pricing cases. place will on the dis- Inglis burden directed added example, we affirmed a puter, for all, only predatory Computer, is not the sort fact does not alter the After ante at support anticompetitive conduct which will panel in that case followed Hanson that the attempt- monopolization 2 claim of holding a section to show that the defend- failure Nor, finally, Murphy monopolization. marginal or aver- ed were less that its ant’s Inglis distinguishable Tugboat on its facts. from age failure as a matter variable cost was a cases, plaintiffs show that predatory failed to In both prima facie case of law to raise Furthermore, marginal costs ever exceeded pricing. it is the defendants’ 743. 613 F.2d at however, plaintiff Inglis, prices. eminently lan- their context of the clear from the jury, get aspects” case to the some- majority quotes its guage will be able that “other Murphy Tugboat thing plaintiff un- may monopolist’s be considered of a conduct marginal cost rule. pricing practices because of the able to do are not. even if of unmeritorious Disposing trict courts. marginal the established and strike cases America, UNITED STATES of will, Inglis cost reformulation is rule if the Plaintiff-Appellee,
followed, perspec- From this be at an end. change in the law Inglis only tive is not WILLIAMS, Michael Dean Circuit, one untoward conse- but Defendant-Appellant. quences for the district courts. No. 80-1857. IV Appeals, United Court of States may where One well wonder this case Ninth Circuit. not, judge. leaves the did district Argued Aug. 6, Hanson, and Submitted 1981. not, because it could overrule Ja- nich, Computer Murphy Tug- California Decided Nov. 1981. distinguished Thus, merely boat. It them. As Corrected Feb. assume, judge I will be free to district so, a may, follow them. If district court *46 Inglis,
consistent enter a ver- directed plaintiff
dict for the where the defendant
fails to establish the defendant ever average
set marginal below varia- clearly
ble cost. This would consistent marginal Moreover,
with the rule. cost
would, words, majority’s in the own “not inconsistent with the reached
[be] result[] [Inglis]” plaintiff because the would not prove
be “able to defendant had greater profits great-
sacrificed or incurred necessary,
er losses than in order to elimi- (footnote
nate plaintiff.” Ante
omitted). stands,
As the law of Circuit now apply marginal
four of our decisions
cost rule not. I and one does would think it
would be this court difficult for to reverse a judge
district he because or she chose to precedent
follow adopted applied by us past years, four cases over the five rather
than a newer standard advocated in an
opinion professes consistency with
those four older decisions. say,
Needless to do not I believe
district judge presented with should be such
an obvious would conflict. It be far more
appropriate for us to eliminate this dilemma
by clarifying Inglis with an en banc rehear-
ing. Therefore, respectfully I dissent from
the court’s failure so. to do