Specifically, the non-moving party must produce evidence such that a reasonable juror could find for that party. Anderson, 477 U.S. at 248. When considering how a reasonable juror would rule, the court should apply the substantive evidentiary standard -- in this instance, a preponderance of the evidence -- that the fact-finder would be required to use at trial. Id. at 252. A mere scintilla of evidence will not require the court to send the question to the fact-finder. Id. at 251 (citing Improvement Co. v. Munson, 81 U.S. 442, 14 Wall. 442, 448, 20 L. Ed. 867 (1872)).
Defendants argue that they are entitled to summary judgment on plaintiff's Sherman Act § 1 claim since MHB has failed to produce evidence sufficient to show that defendants' conduct caused injury to competition in the relevant market. For the following reasons, summary judgment will be granted in favor of defendants with respect to count I.
Generally, § 1 Sherman Act claims are reviewed as either per se violations of the Sherman Act or under a rule-of-reason standard. Per se violations of the Sherman Act include those "practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or business excuse for their use." Northern Pacific Railway Company v. United States, 356 U.S. 1, 5, 2 L. Ed. 2d 545, 78 S. Ct. 514 (1958). Over the years, per se illegal practices have included group boycotts, price fixing, resale price maintenance, tying arrangements and some reciprocal dealing. Malley-Duff & Assoc. v. Crown Life Insur. Co., 734 F.2d 133, 140 (3d Cir.), cert. denied, 469 U.S. 1072 (1984).
MHB argues that the agreement between Parker and RG constitutes a per se violation of § 1 of the Sherman Act in that the conduct resembles bid rigging. Whereas typical bid rigging involves collusion among bidders to control the bid level, MHB appears to suggest that this case entails collusion between Parker and RG to influence the bidding on the purchase of MHB.
As opposed to most bid rigging arrangements, the agreement between Parker and RG is vertical, not horizontal.
Yet, courts have only deemed bid rigging a per se violation where the agreements have been horizontal. See, e.g., United States v. Fischbach & Moore, Inc., 750 F.2d 1183, 1192 (3d Cir. 1984) (finding bid rigging among horizontal companies per se illegal conduct), cert. denied, 470 U.S. 1029, 84 L. Ed. 2d 785, 105 S. Ct. 1397 (1985). Courts are generally less likely to find per se violations in the case of vertical agreements. The Supreme Court has stated: "a vertical restraint is not illegal per se unless it includes some agreement on price or price levels." Business Electronics v. Sharp Electronics, 485 U.S. 717, 735-36, 99 L. Ed. 2d 808, 108 S. Ct. 1515 (1988). As MHB has not alleged any agreement between RG and Parker on price levels, the so- called "bid rigging" agreement between defendants does not constitute a per se violation of the Sherman Act.
The appropriate standard for reviewing vertical nonprice restraints is rule of reason. This standard requires plaintiffs raising § 1 Sherman Act claims to prove four elements:
1) that the defendants contracted, combined, or conspired among each other; 2) that the combination or conspiracy produced adverse, anticompetitive effects within relevant product and geographic markets; 3) that the objects of the conduct pursuant to that contract and conspiracy were illegal; and 4) that the plaintiff was injured as a proximate result of that conspiracy.
Tunis Bros. Co., Inc. v. Ford Motor Co., 952 F.2d 715, 722 (3d Cir. 1991) (citations omitted), cert. denied, 120 L. Ed. 2d 903, 112 S. Ct. 3034 (1992). Focusing on the second element, defendants argue that plaintiff has failed to demonstrate that Parker's and RG's conduct caused injury to competition within the relevant markets.
Broken down, defendants' contention has two components. Defendants allege that plaintiff has not only failed to tender sufficient evidence specifying the relevant markets, but has also failed to prove anticompetitive effects in the very markets it has selected.
Defendants argue that the relevant product market is the sale of fluid power products and the relevant geographic market is Pennsylvania and the United States.
Plaintiff, however, asserts that the relevant product market is the sale of fluid power distributorships, and the relevant geographic market is Southeastern Pennsylvania.
While plaintiff has produced meager evidence to support its construction of the relevant markets, I will, for purposes of argument, accept plaintiff's version.
It appears, though, upon review of MHB's evidence, that even within its own definition of the relevant markets, plaintiff has not established that defendants' conduct injured competition.
"[A] vertical restraint is not unreasonable unless it impacts on interbrand competition." Inter-City Tire and Auto Center v. Uniroyal, Inc., 701 F.Supp. 1120, 1123 (D.N.J. 1988)(citing Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 53 L. Ed. 2d 568, 97 S. Ct. 2549 (1977)), aff'd without opinion, 888 F.2d 1380 (3d Cir. 1989). As the Supreme Court recently stated in Business Electronics, "interbrand competition is the primary concern of the antitrust laws." 485 U.S. at 726.
According to Judge Posner, in order adversely to affect interbrand competition, a company must have "market power," where "market power" is defined as the ability of a business entity unilaterally to raise its price above the price charged by competitors.
Only a company with market power can adopt anticompetitive restraints and survive. A company without market power lacks the capacity to injure interbrand competition.
Not surprisingly, Judge Posner's insights have proved influential. Several courts have required that plaintiffs alleging anticompetitive effects show as a threshold matter that defendants have substantial market power in the relevant markets. See Assam Drug Co., Inc. v. Miller Brewing Co., Inc., 798 F.2d 311, 316 (8th Cir. 1986)(citing a number of cases which have imposed this threshold condition); Inter-City Tire and Auto Center, 701 F.Supp. at 1123 (using Assam market power analysis), aff'd without opinion, 888 F.2d 1380 (3d Cir. 1989); O.S.C. Corp. v. Apple Computer, Inc., 601 F.Supp. 1274, 1291 n.8 (C.D. Cal. 1985), aff'd, 792 F.2d 1464, 1469 (9th Cir. 1986).
Accordingly, to avoid summary judgment, MHB must, as a threshold matter, produce some evidence tending to show that Parker has market power within Southeastern Pennsylvania with respect to the sale of fluid power distributorships.
Market power is measured by two factors: market share and product differentiation. Package Shop, Inc. v. Anheuser-Busch, Inc., 675 F.Supp. 894, 940 (D.N.J. 1987)(quoting ABA Antitrust Section, Monograph 2, Vertical Restrictions Limiting Intrabrand Competition, 62-63 (1977)). Defendants have produced an affidavit showing that there are forty fluid power distributorships in the Southeastern Pennsylvania area, two of which are indicated as selling Parker FluidPower products (Die-a-Matic and Progressive Hydraulics). Defendants' Brief in Sup. at 13-14. Although it is not clear from the affidavit, it appears that two other distributorships (MHB and Rexroth) may also sell Parker FluidPower products. Thus, Parker fluid power distributorships represent from 5% to 10% of the fluid power distributorships in the Philadelphia area.
Even assuming Parker's market share were 10%, the percentage is insufficient to bestow market power upon Parker. Companies with a far greater share of the market have been found to lack market power. See Assam Drug Co., Inc., 798 F.2d at 318-19 (19.1% market share insufficient); Donald B. Rice Tire Co., 483 F. Supp. 750 (D.Md. 1980)(20%-25% insufficient), aff'd, 638 F.2d 15 (4th Cir. 1981), cert. denied, 454 U.S. 864, 70 L. Ed. 2d 164, 102 S. Ct. 324 (1981); OSC Corp. v. Apple Computer, Inc., 601 F. Supp. 1274 (C.D.Cal. 1985) (20% insufficient), aff'd, 792 F.2d 1464, 1469 (9th Cir. 1986).
Market share is not the only indicator, though. Companies with small market share may have significant market power where their product is insulated from competition because of product differentiation. However, MHB has not presented evidence of product differentiation among fluid power distributors. The record offers no reason why potential purchasers would consider the purchase of Parker fluid power distributorships and would disregard other competing fluid power distributorships.
MHB argues that the eagerness of ten companies to purchase MHB demonstrates Parker's market power. This fact, it seems, cannot support the inference of market power. The interest of several buyers reflects instead an expectation of profit. Profit can be had from companies without market power. MHB also insists that the willingness of MHB and RG to sell Parker products exclusively shows Parker's market power. Again, plaintiff's evidence does not support an inference of market power. MHB's and RG's willingness to forgo other distributorship contracts does not indicate Parker's market power among competitors so much as Parker's power as a manufacturer over a distributor. Cf. Arnold Pontiac-GMC, Inc. v. General Motors Corp., 700 F.Supp. 838 (W.D. Pa. 1988) (agreement between manufacturer and distributor of an exclusive franchise is not per se illegal).
Plaintiff has presented inadequate evidence to show Parker's market power. However, even if MHB had demonstrated that Parker had the requisite market power, MHB has nonetheless failed to meet its evidentiary burden of proving anticompetitive effects within the relevant markets. In its opposing brief, plaintiff states: "Parker's conduct in impairing MHB's ability to sell that franchise clearly constitutes a restraint within a relevant market." Plaintiff's Brief in Opp. at 9. Plaintiff's allegation, even if accepted as true, does not amount to anticompetitive effects within the purview of the Sherman Act. The Sherman Act protects competition, not the competitor. See, e.g. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 50 L. Ed. 2d 701, 97 S. Ct. 690 (1977). Injury to a competitor, even "the total elimination of one competitor," is not sufficient to make a Sherman Act claim. Northeast Women's Center, Inc. v. McMonagle, 670 F.Supp. 1300, 1305 (E.D. Pa. 1987). Cf. Harold Friedman, Inc. v. Kroger Co., 581 F.2d 1068, 1071 (3d Cir. 1978) (Sherman Act not designed to provide relief for all business torts committed by or against persons engaged in interstate commerce)(citing Hunt v. Crumboch, 325 U.S. 821, 826, 89 L. Ed. 1954, 65 S. Ct. 1545 (1945)).
In Northeast Women's Center, the court explained how a plaintiff may show anticompetitive effects:
An injury to competition within an industry may be proven by an appreciable reduction in the number of competitors or by some other outward sign of adverse effects on competitive conditions.
670 F.Supp. at 1304. Plaintiff has not shown an appreciable reduction in the number of competitors. Nor has plaintiff suggested that there has been an increase in the price of fluid power distributorships, a typical outward sign of adverse effects.
As its evidence of Parker's and RG's adverse effect on competition, MHB notes that, besides losing its own business, ten willing buyers suffered an injury because they could not "pursue the purchase of the business." Plaintiff's Brief in Opp. at 10. Although an unreasonable restriction of competitive opportunity is a recognized anticompetitive effect, Sitkin Smelting & Refining Co. v. FMS Corp., 575 F.2d 440, 447 (3d Cir.), cert. denied, 439 U.S. 866, 58 L. Ed. 2d 176, 99 S. Ct. 191 (1978), plaintiff's statement is insufficient to show an unreasonable restriction. While the ten companies willing to buy MHB could not purchase MHB, they still had the opportunity to buy any of a number of other fluid power distributorships. The lost opportunity to buy one fluid power distributorship in a market of forty does not amount to an unreasonable restriction or an anticompetitive injury to the relevant market.
Summary judgment is not granted lightly in any case. And that caveat has special force in antitrust litigation. Poller v. Columbia Broadcasting System, 368 U.S. 464, 473, 7 L. Ed. 2d 458, 82 S. Ct. 486 (1962). But in a proper case -- such as this one, in which plaintiff has not been able to establish that a genuine issue of fact remains to be tried -- summary judgment is appropriate. As the Court put it in First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 20 L. Ed. 2d 569, 88 S. Ct. 1575 (1968):
While we recognize the importance of preserving litigants' rights to a trial on their claims, we are not prepared to extend those rights to the point of requiring that anyone who files an antitrust complaint setting forth a valid cause of action be entitled to a full-dress trial notwithstanding the absence of any significant probative evidence tending to support the complaint.
Accordingly, an order will be filed granting defendants' Motion for Summary Judgment with respect to count I. Furthermore, because plaintiff has failed to establish a genuine issue of fact essential to this court's subject matter jurisdiction, the remainder of plaintiff's claims, all pendent state law claims, will also be dismissed. United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S. Ct. 1130, 1139, 16 L. Ed. 2d 218 (1966).
September 4, 1992
For the reasons given in the accompanying opinion, it is hereby ORDERED that:
1) Defendants' motion for summary judgment is GRANTED with respect to count I; and
2) Plaintiff's remaining claims, which are state law claims, are DISMISSED. United Mine Workers v. Gibbs, 383 U.S. 715, 726-27, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966).
September 9, 1992