UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
filed: August 5, 1993.
ALVORD-POLK, INC.; AMERICAN BLIND FACTORY, INC.; DELTA PAINT AND WALLPAPER SUPPLY CO., INC.; FAIRMAN WALLPAPER AND PAINT COMPANY; FRANK R. YOCUM, T/A FRANK R. YOCUM & SONS WALLPAPER CO.; HARRY'S WALLPAPER, INC.; LANCASTER CARPET MARKET, INC.; MARVIN KOLSKY, T/A HEADQUARTERS WINDOWS & WALLS; SILVER WALLPAPER & PAINT CO., INC.; YANKEE WALLCOVERINGS, INC., APPELLANTS
F. SCHUMACHER & CO.; THE NATIONAL DECORATING PRODUCTS ASSOCIATION, INC. APPELLEES
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA. (D.C. Civil No. 90-03617).
Before: Stapleton, Roth and Lewis, Circuit Judges.
Opinion OF THE COURT
LEWIS, Circuit Judge.
For over a decade, retailers who market wallpaper by providing sample books and showroom displays have feuded with dealers who sell at a discount through toll-free "1-800" telephone numbers. In this case, ten 800-number dealers have accused the retailers' trade association and one of the leading wallpaper manufacturers of violating antitrust laws in an attempt to force them out of business. The district court granted summary judgment to the defendants on these and certain state-law claims. We will affirm.
Our review of a grant of summary judgment is plenary; we evaluate the evidence using the same standard the district court was to have applied in reaching its decision. Big Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1362 (3d Cir. 1992); J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1530 (3d Cir. 1990); Erie Telecommunications, Inc. v. City of Erie, 853 F.2d 1084, 1093 (3d Cir. 1988). Plaintiffs have alleged three theories of antitrust liability under the Sherman Act, 15 U.S.C. § 1 (the "Act"). A brief review of the Act and its purposes informs our determination of the standard to be applied on summary judgment.
Section 1 of the Sherman Act provides:
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal[.]
15 U.S.C. § 1. The very essence of a section 1 claim, of course, is the existence of an agreement. Indeed, section 1 liability is predicated upon some form of concerted action.*fn1 Fisher v. Berkeley, 475 U.S. 260, 266, 89 L. Ed. 2d 206, 106 S. Ct. 1045 (1986); Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767-69, 81 L. Ed. 2d 628, 104 S. Ct. 2731 (1984); United States v. Colgate & Co., 250 U.S. 300, 63 L. Ed. 992, 39 S. Ct. 465 (1919); Big Apple BMW, 974 F.2d at 1364. See also Weiss v. York Hospital, 745 F.2d 786, 812 (3d Cir. 1984) (section 1 claim requires proof of three elements, the first of which is "a contract, combination or conspiracy"); Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 110 (3d Cir. 1980) ("unilateral action, no matter what its motivation, cannot violate [section] 1"). A "'unity of purpose or a common design and understanding or a meeting of minds in an unlawful arrangement[,]'" must exist to trigger section 1 liability. Copperweld, 467 U.S. at 771, quoting American Tobacco Co. v. United States, 328 U.S. 781, 810, 90 L. Ed. 1575, 66 S. Ct. 1125 (1946). See also Fisher, 475 U.S. at 267; Sweeney, 637 F.2d at 111.
The requirement is an important one, for it emphasizes the distinction between section 1 liability, which is imposed for concerted action in restraint of trade, and liability imposed under section 2 of the Sherman Act for monopolization. See Copperweld, 467 U.S. at 767. Activity which is alleged to have been in violation of section 1 may be subject to a per se standard and engender liability without inquiry into the harm it has actually caused. See Copperweld, 467 U.S. at 768. See generally Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 723, 99 L. Ed. 2d 808, 108 S. Ct. 1515 (1988). Alternatively, section 1 liability might be imposed for concerted action which violates the "rule of reason" standard without proof that it threatened monopolization. Copperweld, 467 U.S. at 768.
Congress treated concerted action more strictly than unilateral behavior because,
Concerted activity inherently is fraught with anticompetitive risk. It deprives the marketplace of the independent centers of decisionmaking that competition assumes and demands. In any conspiracy, two or more entities that previously pursued their own interests separately are combining to act as one for their common benefit. This not only reduces the diverse directions in which economic power is aimed but suddenly increases the economic power moving in one particular direction. Of course, such mergings of resources may well lead to efficiencies that benefit consumers, but their anticompetitive potential is sufficient to warrant scrutiny even in the absence of incipient monopoly.
Id. at 768-69. For this reason, when we examine an alleged violation of section 1 of the Sherman Act, we look for an agreement that "brings together economic power that was previously pursuing divergent goals." Id. at 769. A lack of such divergent goals precludes officers of a single company from conspiring. Neither internally coordinated conduct of a corporation and its unincorporated division, nor activity undertaken jointly by a parent corporation and its wholly owned subsidiary, can form the bases of section 1 violations. Id. at 769-71.
An agreement need not be explicit to result in section 1 liability, Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 59-60, 55 L. Ed. 619, 31 S. Ct. 502 (1911), quoted in Copperweld, 467 U.S. at 785 (Stevens, J., Dissenting), and may instead be inferred from circumstantial evidence. Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 U.S. 537, 540-41, 98 L. Ed. 273, 74 S. Ct. 257 (1954); Sweeney, 673 F.2d at 111; Milgram v. Loew's, Inc., 192 F.2d 579, 583 (3d Cir. 1951). Therefore, direct evidence of concerted action is not required.
In this case, the parties contest the propriety of summary judgment on the issue of concerted action in each of three different alleged fact patterns. Before addressing each fact pattern, we turn to a review of the summary judgment standard applicable to antitrust cases.
A district court may enter summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The substantive law determines which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).
A party moving for summary judgment need not produce evidence to disprove its opponent's claim, Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986), but it does bear the burden of demonstrating the absence of any genuine issues of material fact. Big Apple BMW, 974 F.2d at 1362. As in this case, when the nonmoving party will bear the burden of proof at trial, the moving party may meet its burden by showing that the nonmoving party has failed to produce evidence sufficient to establish the existence of an element essential to its case. Celotex, 477 U.S. at 322.
In reviewing the evidence, facts and inferences must be viewed in the light most favorable to the party opposing summary judgment. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). When the moving party has pointed to material facts tending to show there is no genuine issue for trial, however, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Matsushita, 475 U.S. at 586-87.
This traditional summary judgment standard applies with equal force in antitrust cases, Eastman Kodak Co. v. Image Technical Services, Inc., 119 L. Ed. 2d 265, 285, 112 S. Ct. 2072 (1992); Big Apple BMW, 974 F.2d at 1362-63; however, the meaning we ascribe to circumstantial evidence will vary depending upon the challenged conduct.
For example, evidence of conduct which is "as consistent with permissible competition as with illegal conspiracy," without more, does not support an inference of conspiracy. Matsushita, 475 U.S. at 597 n.21, citing Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 763-64, 79 L. Ed. 2d 775, 104 S. Ct. 1464 (1984); Big Apple BMW, 974 F.2d at 1363. See generally Fineman v. Armstrong World Industries, Inc., 980 F.2d 171, 186-87 (3d Cir. 1992). This is because mistaken inferences in such a context "are especially costly[;] they chill the very conduct the antitrust laws are designed to protect." Matsushita, 475 U.S. at 594; Monsanto, 465 U.S. at 763-64. In such cases, the Supreme Court has required plaintiffs to submit "evidence tending to exclude the possibility" of independent action, i.e., "direct or circumstantial evidence that reasonably tends to prove that [the alleged conspirators] 'had a conscious commitment to a common scheme designed to achieve an unlawful objective.'" Monsanto, 465 U.S. at 764, quoting Sweeney, 637 F.2d at 111.
Conversely, if the alleged conduct is "facially anticompetitive and exactly the harm the antitrust laws aim to prevent," no special care need be taken in assigning inferences to circumstantial evidence. Eastman Kodak, 119 L. Ed. 2d at 291; Arnold Pontiac-GMC, Inc. v. Budd Baer, Inc., 826 F.2d 1335, 1339 (3d Cir. 1987) (Monsanto and Matsushita do not apply when challenged action is overtly anticompetitive); Tunis Brothers Co., Inc. v. Ford Motor Co., Inc., 823 F.2d 49, 50 (3d Cir. 1987) (implying that Matsushita requires evidence tending to exclude the possibility of independent action only when the challenged conduct is as consistent with permissible competition as with illegal conspiracy). See also In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation, 906 F.2d 432, 438-39 (9th Cir. 1990) ("the key to proper interpretation of Matsushita lies in the danger of permitting inferences from certain types of ambiguous evidence").*fn2
With these standards in mind, we will review the evidence, granting reasonable inferences to the plaintiffs.*fn3
Persons interested in decorating or redecorating their homes or offices typically view samples of wallpaper before purchasing. Recognizing this, retailers traditionally have made available to consumers the wallpaper sample books they purchase from manufacturers. They have also provided consumers with information through the use of promotional materials and showroom displays. The purchase of sample books, establishment of a showroom and hiring of knowledgeable sales personnel are costly endeavors and, as one might expect, these costs are reflected in higher prices to consumers. Manufacturers have encouraged retailers to incur these costs, however, because of a prevailing notion that their products sell better when marketed thus.
In recent years, a new breed of retailer has emerged. Some companies now accept orders from consumers all over the United States who call toll-free telephone numbers to order wallpaper after having availed themselves of the sample books, displays and assistance offered by conventional retailers. Today, purchasers may visit a conventional retailer's showroom, peruse the sample books, note the brands and product numbers of the patterns they like, and then go home and order wallpaper at a discount from an 800-number dealer. This informed decision has, of course, been funded in part by retailers who will realize no return on their investment. The 800-number dealer will arrange a "drop shipment" directly from the manufacturer to the purchasers' homes.*fn4
Both conventional retailers and 800-number dealers are members of the National Decorating Products Association (the "NDPA"), a trade association comprised of independent retailers who sell a variety of decorating products. The NDPA has about 3,300 members who operate approximately 8,500 retail locations. Its policy is established and its business conducted by an 18-member board of directors. It sponsors a number of trade shows and educational programs for its members each year. It also publishes a monthly industry news journal titled Decorating Retailer, and it formerly published a similar newsletter called Wallcovering Industry News.
In the late 1970's and early 1980's, conventional retailers in the NDPA threatened to cease purchasing products from manufacturers who continued to do business with the 800-number dealers, whom they referred to as "pirates." The NDPA itself actively campaigned against 800-number dealers by lobbying manufacturers to recognize the advantages of conventional retailing and by encouraging them to "level the playing field" between 800-number dealers and conventional retailers.
For example, Robert Petit, NDPA's executive vice president and chief executive officer, spoke to manufacturers, including Michael Landau, president of F. Schumacher & Co. ("FSC") on this subject. Appendix ("App.") at 190-97, 202. In February, 1983, Petit sent a letter on NDPA letterhead urging retailers to request from manufacturers sample books that did not reveal retail prices. Depriving consumers of this information, Petit argued, would make it more difficult for them to avail themselves of an 800-number dealer's discount. App. at 523. The NDPA also marketed a "sales piracy kit" for conventional retailers to use in disguising or concealing pattern numbers and price information on sample books so that consumers could not so easily acquire the information and then order elsewhere. App. at 271-73, 407.
In 1985, the Federal Trade Commission ("FTC") issued a complaint against NDPA because of these activities. In 1986, the parties entered into a consent decree which provided in part:
NDPA . . . shall cease and desist from:
A. Conduct having the purpose or effect of:
Expressly or impliedly advocating, suggesting, advising, or recommending that any of NDPA's . . . members refuse to deal with any seller of wallcoverings on account of, or that any of NDPA's . . . members engage in any other act to affect, or to attempt to affect, the prices, terms or conditions of sale, or distribution methods or choice of customers of any seller of wallcoverings.
App. at 412. The consent decree also provided:
IT IS FURTHER ORDERED that this Order shall not be construed to prevent NDPA . . . from publishing written materials or sponsoring seminars, or otherwise providing information or its members' views on topics including but not limited to cost accounting principles, and suggested prices and product identification numbers in wallcovering sample books to other sellers of wallcoverings, provided, however, that the information or views are not presented in a manner constituting a violation of any provision contained in Part II of this Order.
In the aftermath of this settlement, as required by the consent decree, NDPA circulated a summary of the consent order in which it informed members that NDPA, as a group of competitors, was "already considered to be an 'agreement.'" App. at 430. The NDPA guidelines for conducting meetings, drafted shortly before entry of the consent decree, also acknowledge that "a trade association is, by definition, a combination of competitors." App. at 740. The guidelines further provide that before a chapter officer delivers a speech or makes a presentation at a meeting, he or she should state that the views expressed are his or her own and not those of the NDPA or any chapter. App. at 743.
Since the entry of the consent decree, NDPA has informed its members that it may no longer assist them in urging manufacturers to act against 800-number dealers. One poll showed that some members have resigned because the NDPA is "not doing anything in regard to the sales piracy issue." App. at 200. Petit, however, has continued to impart to manufacturers, including Landau, his view of the advantages of conventional retailing over other methods of marketing wallcovering, such as 800-number sales. App. at 198.
The sentiment against 800-number dealers continued to escalate even after the consent decree was entered. Decorating Retailer published several letters from NDPA members, including some retailers who were former or current NDPA officers, urging action against the 800-number dealers. Its editor, John Rogers, often solicited comment for the letters column by sending a variety of articles from a forthcoming issue to a number of people in the industry. In each issue of Decorating Retailer, a standard statement appeared in the letters column apprising the reader that: "The editor reserves the right to edit to fit space limitations or publishing policies. Opinions expressed are those of the writer and not necessarily those of the editor." E.g., app. at 496.
Decorating Retailer and Wallcovering Industry News also printed several news articles about 800-number dealers, most of which used the term "pirates" among other characterizations to describe them. In May, 1988, one editorial -- a Perspective column in Decorating Retailer -- stated that "there are increasing signs that the retailer's voice crying in the wallcovering wilderness is being heard," and cited many developments in the industry, such as "a sudden advent of bar coding kits for retailer protection of sample book pattern numbers," as signs that wallpaper suppliers were responding to retailers' needs. App. at 758.
Undoubtedly, FSC, a leading manufacturer which had always promoted the traditional method of marketing wallcoverings, heard the complaints. In July, 1988, it announced a drop shipment surcharge on wallcovering deliveries directly to consumers, to take effect in September, 1988. App. at 298-99. Under this new policy, FSC would impose a 7 percent surcharge on every order requesting drop shipment. Obviously, this would have the effect of increasing the 800-number dealers' costs while decreasing their ability to compete on the basis of price with conventional retailers.
The minutes from FSC's management committee meeting in April, 1988, state that it considered the policy to be a signal to conventional retailers that FSC was trying to help them. App. at 290. A draft press release, later revised, identified the protection of dealers from piracy as one reason for the surcharge. Compare app. at 298-99 with app. at 1364-65. Minutes from September, 1989, reveal that the management committee viewed the drop shipment surcharge as "a good first step" against 800-number dealers. App. at 304.
Beyond merely responding to dealer complaints, FSC also claimed that the surcharge was, in part, intended to recoup increased costs of drop shipments. It did not, however, employ any particular formula or calculations to arrive at its surcharge figure or to determine its basis for recoupment. Nor did it consult any source regarding or otherwise study such costs, although the record contains statements by another manufacturer indicating that his costs for drop shipments were no higher than for shipments to stores. App. at 148-49, 622.
Predictably, retailers responded favorably to the imposition of the surcharge. For example, in September, 1988, a Decorating Retailer editor's note responding to a letter about 800-number dealers' advertisements stated that "there are signs that telling your troubles to suppliers eventually will be heard and some remedy may result." App. at 485.
Yet the retailers were not entirely satisfied. In January, 1989, at a convention in Halifax, Nova Scotia, Petit revisited the issue of 800-number dealers and the problems they posed for the industry. An August, 1989 memo shows that Petit spoke to at least one manufacturer about "the anger felt by the retailers in lack of support from the wallcovering industry." App. at 185-86. During this period, NDPA officer Clyde Morgan also expressed "concern about the 800-number and the effect it was having on me" at a meeting of industry leaders. App. at 183.
The fall 1989 planning session at FSC also reflected continuing concerns about 800-number dealers. In September, 1989, soon after an NDPA meeting, Landau stated at a management committee meeting that the surcharge was a good first step but that other measures were necessary. App. at 304. An October, 1989 memo asked whether "we [should] make another anti-pirate move? If so, what?" App. at 793. In November, 1989, Landau reported to the management committee what he had learned at an NDPA trade show: "retailers squeezed by mass market & 800 #'s." App. at 307. The minutes from that committee's meeting also include the following entry: "800 #s: Meeting with attorneys next week to formulate new strategy." App. at 309.
In January, 1990, FSC announced a local trading policy to be implemented in March, 1990. App. at 694-97. FSC dealers would be prohibited from selling FSC products outside of their "local trading area," thus effectively prohibiting 800-number dealers from selling FSC's products nationwide through their toll-free telephone numbers. Immediately after this policy was announced, Petit circulated a copy of it to the NDPA board of directors, saying, "This is a major step forward in our battle against the 800-number operators." App. at 693. He also sent a letter to Landau on NDPA letterhead stating, "On behalf of the members of our decorating products associations, I want to express our appreciation of your actions." App. at 700.
Five FSC executives testified that the purpose of the local trading area policy was to ensure that FSC dealers would realize a return on their investments in sample books and other FSC overhead. App. at 1215, 1218-19, 1222-23, 1238-40, 1249-50, 1340-43, 1520-22, 1550-52. FSC's vice president of sales testified that if FSC had not taken action against the 800-number dealers, it "would continue to have resistance to purchasing sample books with the piracy issue." App. at 691. Indeed, there were several references in planning meetings to safeguarding against free riders and supporting conventional retailers.
Shortly thereafter, according to Decorating Retailer and Wallcovering Industry News articles, NDPA president John Wells spoke at a trade show in Anaheim, California. The articles describe Wells as urging that "insisting on supplier support rather than coding books is the answer to piracy problems besetting wallcovering retailers." App. at 440. At the same show Petit, according to one of the articles, applauded manufacturers' efforts to fight 800-number dealers. Id. In accordance with NDPA guidelines, Wells specifically stated that his views were his own as an independent retailer, but the articles refer both to him and to Petit in their NDPA capacities.*fn6
In May, 1990, Rogers wrote a Perspective column in which he discussed the retailers' opposition to 800-number dealers, reviewed some of the methods retailers had adopted to guard against 800-number dealers' taking their business, and stated, "ultimately, the answer for the individual dealer is that given by Wells: 'I will support those who support me.'" App. at 167. Rogers testified that while the Perspective column does not represent the policy of the NDPA, to his knowledge there has not been an occasion when a comment published in it has contravened NDPA's policies.
Both before and after it instituted the policies in question, FSC received letters from retailers urging it to take action against the 800-number dealers. Meanwhile, during this period the FTC repeatedly responded to inquiries from plaintiffs with the assurance that, in its view, NDPA was in compliance with the consent decree entered into in 1986.
Anti-800 number dealer sentiment was not confined to retailers' ranks; manufacturers were also discussing 800-number dealers among themselves. Between 1988 and 1990, wallpaper manufacturers discussed 800-number dealers at meetings of the Wallcovering Manufacturers Association ("WMA"), an organization in which Landau served as a member of the board of directors.
In April, 1988, for example, Landau reported to the FSC management committee that there had been "extensive Discussion pirate situation" at the WMA meeting in Hilton Head. App. at 292. Manufacturers also discussed bar-coding, in the context of either "pirate-proofing" sample books or standardizing labels and shipping containers. FSC discussed with other manufacturers steps they were taking to combat 800-number dealers, such as engaging in cooperative advertising, imposing state sales taxes and imposing local trading policies.
800-number dealers were also discussed at conventions sponsored by a chain of wallcovering stores called Wallpaper-To-Go. App. at 313, 315. FSC officials and other wallcovering manufacturers deny that they agreed with other manufacturers to take action against the 800-number dealers, however. See FSC's brief at 42.
Other manufacturers reacted against the 800-number dealers in much the same fashion as FSC did. In April 1988, the owner of one company wrote an open letter to manufacturers about 800-number dealers. In it, he suggested that a task force be formed to establish an "effective, standard and universal method of 'pirate-proofing' sample books." App. at 884. At least one manufacturer took a step in that direction and coded its sample books so that style and price information could not easily be discerned. App. at 139-41. Another imposed a local trading policy, app. at 130-38, 151, and another tried, but discontinued, a cooperative advertising program with conventional retailers. App. at 127-28. By August, 1989, two more manufacturers had imposed a drop shipment surcharge. App. at 160, 789.
In May, 1990, plaintiffs filed suit against NDPA and FSC. Their amended complaint, filed in January, 1991, contained twelve counts, the first four of which provide the central focus for this appeal. In Count I, they alleged that "the individual retail wallcovering dealers, acting through the NDPA" violated section 1 of the Sherman Act by entering into a horizontal conspiracy to eliminate the competition posed by 800-number dealers. In Count II, the plaintiffs alleged that in response to the pressure exerted by the NDPA, FSC joined NDPA in a vertical conspiracy similarly designed to thwart competition. In Counts III and IV, the plaintiffs alleged that FSC entered into a conspiracy with other, unnamed, wallcovering manufacturers aimed at eliminating 800-number dealers. Specifically, plaintiffs challenged FSC's imposition of the drop shipment surcharge and its adoption of a local trading policy as being directed at them.*fn7
Plaintiffs also alleged a claim under section 2(d) of the Clayton Act, 15 U.S.C. § 13(d); state-law antitrust and restraint of trade violations; tortious interference with contracts and prospective contractual relations; fraud and misrepresentation; defamation and commercial disparagement and breach of contract. In turn, FSC asserted various counterclaims against the 800-number dealers.
The district court granted defendants' motions for summary judgment on Counts I through IV and granted both plaintiffs and defendants summary judgment on various other claims and counterclaims. Thereafter, the parties settled those claims which had not been disposed of, and plaintiffs filed this appeal challenging the district court's decision on Counts I through IV, the state-law antitrust claims, the tortious interference claim and the defamation claim against NDPA.
The district court had jurisdiction over this case pursuant to 28 U.S.C. § 1331, and we exercise jurisdiction pursuant to 28 U.S.C. § 1291.*fn8 In our analysis of each of the plaintiffs' Sherman Act claims, which allege three distinct antitrust theories of liability, we proceed from the premise that "plaintiffs should be given the full benefit of their proof without tightly compartmentalizing the various factual components and wiping the slate clean after scrutiny of each." Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699, 8 L. Ed. 2d 777, 82 S. Ct. 1404 (1962).
At Count I, in which plaintiffs named only NDPA as a defendant, they alleged that conventional retailers, acting through the NDPA, conspired to pressure manufacturers to eliminate them from the marketplace. The district court examined the record for evidence of "officially sanctioned NDPA activity," found none, and ruled that plaintiffs could not meet the "concerted action" requirement because "the NDPA can only act pursuant to a resolution from its board and no such resolution has been identified." App. at 37. We will affirm, although on different grounds. Erie Telecommunications, 853 F.2d at 1089 n.10; Johnson v. Orr, 776 F.2d 75, 83 n.7 (3d Cir. 1985) (an appellate court may affirm a result reached by the district court for any reason in the record supporting the judgment).
It is both uncontested and uncontestable that NDPA is an association of competing wallpaper dealers. As such, when NDPA takes action it has engaged in concerted action so as to trigger potential section 1 liability. Weiss, 745 F.2d at 816 (hospital executive committee's actions are concerted action within the meaning on section 1). "Antitrust policy requires the courts to seek the economic substance of an arrangement, not merely its form." Weiss, 745 F.2d at 815. The actions of a group of competitors taken in one name present the same potential evils as do the actions of a group of competitors who have not created a formal organization within which to operate. See id. at 816 ("where such associations exist, their actions are subject to scrutiny under section 1 . . . in order to insure that their members do not abuse otherwise legitimate organizations to secure an unfair advantage over their competitors"). See also Silver v. New York Stock Exchange, 373 U.S. 341, 10 L. Ed. 2d 389, 83 S. Ct. 1246 (1963); Associated Press v. United States, 326 U.S. 1, 89 L. Ed. 2013, 65 S. Ct. 1416 (1945).
We agree with NDPA's contention, however, that NDPA can only be held liable for concerted action if it acted as an entity. See Nanavati v. Burdette Tomlin Memorial Hospital, 857 F.2d 96, 117-18 (3d Cir. 1988) (Weiss holds that when a group of competitors "acts as a body, it constitutes a 'combination'"). In Nanavati , we held that although the actions of a hospital executive committee might constitute concerted action, the committee does not engage in concerted action when it does not "act as an entity in furtherance of the conspiracy." Id. at 119. As we explained there:
Our Conclusion in Weiss was premised on the concept that where individual actors take actions as a group, they are a combination for the purposes of those actions. Where no group action is taken, no such combination can exist. In short, we did not hold in Weiss that because the actions of the medical staff constitute the actions of a combination, even where there is no allegation that the staff acted as a group, the 'contract, combination or conspiracy' requirement has been met. Such a group is a combination as a matter of law only for the actions it takes as a group.
In Nanavati, the plaintiff did not maintain that the executive committee took any action as a group. Id. Instead, he pointed to the actions of medical staff members who were not on the executive committee as the basis for his claim. He argued that the record contained evidence of a boycott against him by members of the medical staff, so the jury had not erred in finding that the executive committee had participated in the boycott. Our search for evidence that members of the executive committee had acted in furtherance of the boycott yielded none; thus, we affirmed the district court's grant of judgment n.o.v. to the executive committee.
Nanavati teaches that concerted action does not exist every time a trade association member speaks or acts. Instead, in assessing whether a trade association (or any other group of competitors) has taken concerted action, a court must examine all the facts and circumstances to determine whether the action taken was the result of some agreement, tacit or otherwise,*fn9 among members of the association. See generally Nanavati, 857 F.2d at 119-20.
Judicial scrutiny of alleged concerted action, undertaken to determine whether it was the result of an agreement, is an intricate endeavor. In the straightforward case, such as when a stock exchange requires disconnection of a nonmember's private telephone wire, or a hospital executive committee votes to deny staff privileges to a member, the action is obviously a result of an agreement which is stamped with the imprimatur of the association by a vote or passage of a resolution. See, e.g., Silver, 373 U.S. at 347; Weiss, 745 F.2d at 816. We can hardly say, however, that this case falls within that genre.
Here, plaintiffs rely on American Society of Mechanical Engineers, Inc. v. Hydrolevel Corp., 456 U.S. 556, 72 L. Ed. 2d 330, 102 S. Ct. 1935 (1982), to argue that NDPA took concerted action when its officers spoke out in protest against the 800-number dealers' business methods and when NDPA publications included letters complaining about 800-number dealers. In Hydrolevel, the Supreme Court, relying on general principles of agency law, determined that the American Society of Mechanical Engineers ("ASME") could be held liable for the actions of its officers and agents taken with apparent authority. Writing for the majority, Justice Blackmun held that imposing liability based upon apparent authority comported with the intent of the antitrust laws because ASME possessed great power and the codes and standards it issued influenced policies and affected entities' abilities to do business. Hydrolevel, 456 U.S. at 570. "When it cloaks its subcommittee officials with the authority of its reputation, ASME permits those agents to affect the destinies of businesses and thus gives them the power to frustrate competition in the marketplace." Id. at 570-71. Imposing antitrust liability on the association for the actions of its agents would encourage ASME to police its ranks and prevent the use of associations by one or more competitors to injure another. See generally id. at 571-73. See also M. Boudin, Antitrust Doctrine and the Sway of Metaphor, 75 Geo. L. J. 395, 417-18 (1986).*fn10
In deciding Hydrolevel, the Court rejected ASME's argument that it should not be held liable unless its agents had acted with an intent to benefit it. This argument was irrelevant, the Court held, in part because "whether they intend to benefit ASME or not, ASME's agents exercise economic power because they act with the force of the Society's reputation behind them." Hydrolevel, 456 U.S. at 574. The Court viewed the imposition of liability regardless of the agents' intent as more consistent with the purposes of antitrust law, since this would encourage ASME to police its agents so as to prevent the anticompetitive effects of their using its name and power even in individual efforts at restraining trade. Id.
The issue presented here, however, is markedly different. In Hydrolevel, the plaintiff had named three defendants in its conspiracy claim. Although it is difficult to discern the exact contours of the alleged conspiracy from the Hydrolevel opinion, it is quite clear that the plaintiff there was not seeking to hold ASME liable for concerted action solely on the basis of actions taken by one official with apparent authority. The conspiracy alleged apparently was between the chairman of an ASME standards committee and the plaintiff's primary competitor; the question before the Court was whether ASME could be held liable for its agent's anticompetitive activity in participating in the conspiracy even though no one else at ASME had authorized the violation. Because a conspiracy was alleged to have taken place between the ASME official and another conspirator, the Court did not address the question of whether two or more members of ASME were utilizing that organization as a vehicle for concerted anticompetitive activity.
We believe that the Hydrolevel rule that an association's economic power may justify its being held liable for the actions of its agents cannot be extended to defeat the "concerted action" requirement of section 1. Imposing liability on an association, as we did in Weiss, does not abolish or diminish the first element of section 1 liability; it merely recognizes that a group of competitors with a unity of purpose are engaged in concerted action, whether or not they act under one name. As we explained in Nanavati, in the absence of a co-conspirator, an association's actions satisfy the concerted action requirement only when taken in a group capacity. For this reason, even actions taken by a person with apparent authority to act on behalf of an association should not result in section 1 liability in the absence of a co-conspirator, unless the actions in question represent an attempt by the association, rather than the actor, to restrain trade. Thus, we cannot agree that Hydrolevel requires imposition of section 1 liability upon NDPA, in the absence of a co-conspirator, without some indication that two or more members of NDPA were utilizing it as a vehicle for concerted anticompetitive action.
Having narrowed our inquiry to whether the actions taken and statements made by NDPA officials were proscribed by Weiss and Nanavati, we agree with the district court's determination that the evidence was insufficient to proceed beyond summary judgment. On the record before us, to adopt the suggestion that NDPA's members either agreed that it should threaten manufacturers with a boycott unless they took steps to injure the 800-number dealers, or believed that NDPA was doing so on their behalf and acquiesced in its effort, would require an exercise in conjecture. Cf. Moore v. Boating Industry Assoc., 754 F.2d 698, 711 (7th Cir. 1985), vacated on other grounds 474 U.S. 895 (1985), on remand 819 F.2d 693 (7th Cir. 1987) (combination of threat of denial of certification to members using a certain product, made by association officer acting with apparent authority, plus "subsequent action on the part of the Association members in refusing to purchase" the product constituted concerted action).
For example, plaintiffs point to evidence of conversations about 800-number dealers which Petit had with a number of wallcovering manufacturers as indicating that NDPA acted to injure them. See app. at 185, 190-98, 201-07, 212-29, 407, 416-19, 693-99, 700. Neither complaints by dealers nor complaints on behalf of many dealers communicated by the president of their trade association constitute antitrust violations, however. Absent indications that Petit, while representing the NDPA, coerced (or attempted to coerce) manufacturers into cooperating in eliminating 800-number dealers, Petit's conversations, even if undertaken while representing the NDPA, show nothing more than the legitimate voicing of complaints to manufacturers. Nothing in either the antitrust laws or the FTC consent decree prohibits the NDPA from voicing complaints.
Plaintiffs also point to the statements regarding 800-number dealers which Wells, Petit and Morgan made at NDPA conventions as evidencing NDPA's campaign against them. See app. at 167, 182-84, 440. It is undisputed, however, that NDPA officials were instructed, and their general practice was, to preface their remarks with the explicit disclaimer that they were speaking in their individual rather than official capacities. Indeed, Wells and Morgan specifically testified that they had done so. See app. at 183-84, 2245-46. In the face of such uncontradicted evidence, it would be unreasonable for a jury to infer that these officials were speaking as representatives of NDPA. Moreover, even if it were reasonable to infer that they were speaking in their official capacities, the statements constituted nothing more than further complaints about 800-number dealers and a suggestion that retailers should support the manufacturers who supported them in their sales efforts. Nothing in the record before us indicates that dealers cooperated in this effort by doing so, or that they refused to support those manufacturers who did not support them.
Finally, plaintiffs refer to letters from NDPA members and editorials and articles about 800-number dealers which were published in Decorating Retailer and Wallcovering Industry News. See app. at 468, 479, 485, 490-92, 495, 756-59, 784, 837-38. Letters revealing members' views, and articles and editorials expressing frustration and anger with the 800-number dealers, however, do not evidence an agreement among the members of NDPA who read these publications to pressure manufacturers into treating 800-number dealers less favorably than traditional retailers.
In sum, while an occasional letter or article may imply a call for action from fellow retailers, and while NDPA officers were hardly reticent in voicing members' complaints about 800-numbers dealers, even considering all of the evidence in context, there is insufficient evidence to support a reasonable inference that NDPA members agreed to act through the NDPA to pressure manufacturers to take steps against 800-number dealers.
For these reasons, we will affirm the district court's grant of summary judgment at Count I.
At Count II, plaintiffs alleged that FSC responded to pressure from the NDPA by conspiring with it to eliminate 800-number wallpaper dealers from the marketplace. Their allegations flow directly from evidence of conventional retailers complaining to FSC and other manufacturers about plaintiffs' "free-riding." This type of evidence is as consistent with procompetitive activity as with allegedly illegal activity. Monsanto, 465 U.S. at 763. In Monsanto, a case which also involved an alleged conspiracy to terminate a dealership relationship because of other dealers' complaints, the Supreme Court noted:
Permitting an agreement to be inferred merely from the existence of complaints, or even from the fact that termination came about 'in response to' complaints, could deter or penalize perfectly legitimate conduct. Complaints about price cutters 'are natural -- and from the manufacturer's perspective, unavoidable -- reactions by distributors to the activities of their rivals.' Such complaints . . . 'arise in the normal course of business and do not indicate illegal concerted action.' . . . Moreover, distributors are an important source of information for manufacturers. In order to assure an efficient distribution system, manufacturers and distributors constantly must coordinate their activities to assure that their product will reach the consumer persuasively and efficiently. To bar a manufacturer from acting solely because the information upon which it acts originated as a price complaint would create an irrational dislocation in the market.
Monsanto, 465 U.S. at 763-64. Thus, we exercise a measure of caution when drawing inferences from such facts; "a fine line demarcates concerted action that violates antitrust law from legitimate business practices." Big Apple BMW, 974 F.2d at 1363, citing Monsanto, 465 U.S. at 762-64.*fn11
In Big Apple BMW, plaintiffs alleged that BMW of North America, Inc. ("BMW") had refused to grant automobile dealerships to them because other dealers had complained about plaintiffs' high-volume, deep-discount business methods. BMW asserted a variety of legitimate business reasons for its actions, including a concern about plaintiffs being "free-rider" dealers. Plaintiffs, however, presented evidence that they would not have posed the "free-rider" problem BMW feared, see Big Apple BMW, 974 F.2d at 1377, and that a person with the same advertising tactics as theirs (high-volume, deep-discount "sellathons") had been granted a BMW franchise. Id. at 1378. They also presented evidence tending to discredit the other reasons BMW proffered to support its refusal to grant them a franchise. Id. at 1377-80.
We reversed the district court's grant of summary judgment because plaintiffs had advanced evidence tending to exclude the possibility of BMW's having acted independently from the complaining dealers. They had "countered each alleged reason with evidence that both discredits BMW NA's witnesses and provides independent support for the [plaintiffs'] claim that BMW NA and its dealers acted in concert to repel" plaintiffs' competition. Id. at 1380.
Similarly, in Arnold Pontiac-GMC, Inc. v. General Motors Corp., 786 F.2d 564 (3d Cir. 1986), we reversed a grant of summary judgment because defendant General Motors Corporation ("GMC") first favorably viewed plaintiff's franchise application, then heard its dealers' disapproval and threatened non-cooperation, and then denied the application. GMC had not expressed concern about the plaintiff's franchise application until it heard its dealers' complaints. We held that "we must infer that [the dealers'] conduct contributed to GMC's decision not to award [the plaintiff] the Buick franchise." Arnold Pontiac, 786 F.2d at 573.
In marked contrast to Big Apple BMW and Arnold Pontiac, here it is conceded that the 800-number dealers are free riders. It is also undisputed that FSC has for years sold sample books and promotional materials and has encouraged its dealers to invest in these and other overhead costs in order to provide better service to their customers. Plaintiffs cannot, and do not, argue that FSC imposed the two policies at issue for any reason other than it simply believed its products were best sold through conventional retailers rather than 800-number dealers. Thus, unlike the scenarios in Big Apple BMW and Arnold Pontiac, there was no abrupt turnaround in this case. FSC had for years recognized the importance of selling service; indeed, part of its business is selling sample books and promotional materials to provide that service. When it became convinced that the conventional retailers who provided such services were being adversely affected by the 800-number dealers, its actions were entirely consistent with its previously held view of its own self-interest.
Big Apple BMW, in fact, bears little resemblance to this case. In that case, plaintiffs applied for a dealership at three locations. They produced evidence that BMW had encouraged them to apply; that as to each location, competing dealers complained to BMW about anticipated price-cutting, and that BMW abruptly reversed its position on the plaintiffs' applications. Plaintiffs' evidence further revealed that a BMW vice president informed the holder of one of the franchises plaintiffs sought that the plaintiffs' application would fail because they were price cutters. An agent of BMW admitted that "it was the dealers who did not want [plaintiffs] to get the [Philadelphia] franchise, it wasn't BMW who rejected them." Big Apple BMW, 974 F.2d at 1372.
Plaintiffs also presented evidence that the reasons given by BMW for denying the franchises, while purporting to be justifications from BMW's point of view, were pretexts, thus permitting an inference that self-interest did not motivate its actions. In 1981, for example, BMW said the plaintiffs were not accepted as franchisees because they had tried to bribe a BMW employee. We took note of and were impressed with the fact that, despite this alleged bribery, in 1982 BMW urged the plaintiffs to reapply. Id. at 1368. The concern expressed about the alleged bribe apparently did not surface until BMW needed a reason to refuse plaintiffs' application. Id. at 1369.
Despite any indication to the contrary which might result from a broad reading of these decisions, Supreme Court authority makes clear that antitrust liability cannot result from the fact that termination came about in response to dealer complaints. Monsanto, 465 U.S. at 763. Monsanto teaches that the ultimate inquiry is not whether retailers' complaints caused FSC to respond with its drop shipment surcharge and local trading area policy, but whether FSC agreed, tacitly or otherwise, with retailers to try to injure 800-number dealers as a result of NDPA's coercion.
Plaintiffs emphasize a number of items in attempting to support their claim at Count II. Each of these, however, tends to demonstrate no more than that FSC adopted and implemented its drop shipment surcharge and local trading policy in response to its retailers' complaints. Such activity does not violate section 1. See Monsanto, 465 U.S. at 763 ("permitting an agreement to be inferred . . . from the fact that termination came about 'in response to' complaints could deter or penalize perfectly legitimate conduct"); Parkway Gallery Furniture, Inc. v. Kittinger/Pennsylvania House Group, Inc., 878 F.2d 801, 805 (4th Cir. 1989).
For example, plaintiffs place great stock in FSC's management committee minutes, which indicate that FSC was attempting through its new policies to tell retailers that it was trying to help them. The minutes also reveal that Landau learned at an NDPA meeting that FSC's drop shipment surcharge was a "good first step," but it had to take further steps to help its traditional retailers. See app. at 290, 304. These statements reflect no more than a recognition by FSC that its retailers were being injured by the 800-number dealers and an attempt to respond to their concerns in that regard, actions which are entirely legitimate in the aftermath of Monsanto.
Plaintiffs also focus on letters which many retailers sent to manufacturers, including FSC, urging that they "do something" about 800-number dealers. See app. at 517, 519, 521-22, 526, 545, 550-75. These letters similarly reveal nothing more than that retailers complained to FSC. They do not tend to show that FSC went beyond responding to the complaints and actually agreed with retailers to attempt to eliminate the competition posed by the 800-number dealers.
To support an inference that FSC crossed the line between proper and improper action, plaintiffs highlight two examples of what they claim to be FSC's assertion of pretextual reasons for its actions. (If FSC had, in fact, advanced reasons for its actions which were pretextual, this would tend to support an inference that it had indeed acted as part of a conspiracy with conventional retailers. See Big Apple BMW, 974 F.2d at 1374-80.)
First, plaintiffs point to evidence in FSC's management committee minutes which contrast the "objective" of its drop shipment surcharge ("To make statement to industry that we are trying to help them") with the "rationale" for this surcharge ("To protect legitimate customers, to increase margins in this area"). App. at 290. They also point to a parallel distinction between FSC's original and published press releases announcing the surcharge. The original press release stated:
In direct response to retailer requests, we at F. Schumacher & Company are proud to announce that we will assertively support our dealers in their local trading areas and protect them from sales piracy by adding a seven percent surcharge onto all drop shipments . . . While bar coding is a breakthrough for the industry in terms of product identification we feel that it alone is not an entirely effective deterrent against sales piracy . . . . Our approach attacks the problem at its root and makes the accounts who drop ship feel the effects, rather than leaving the responsibility of policing to the retailers.
App. at 298-99. The final press release stated that the policy was not designed to combat "piracy" but rather to
help insure that our consumers receive the best possible service and that our wallcovering brands are supported in the most effective and appropriate manner at retail . . . This policy seeks to encourage all dealers to concentrate their selling efforts exclusively within their own trading areas where they can provide service directly to the consumers to whom they sell the product.
App. at 486.
Plaintiffs argue that these inconsistencies in and contrasts between the internal and the public explanations of the drop shipment policy reveal that FSC was attempting to disguise the true reason for its actions. We disagree; even granting plaintiffs reasonable inferences, the two statements and the two press releases instead seem in harmony with FSC's explanation, which it has consistently maintained, that it took the action it did to protect the investments made by traditional retailers. That FSC felt a need to use more genteel language when explaining to the public what it could internally refer to as efforts to combat "piracy" does not imply a sinister motive. FSC is permitted to respond to dealer complaints, and it did just that.
Second, plaintiffs argue that although FSC acknowledges that dealer complaints were part of the reason for its surcharge, at one time it also stated that the surcharge was intended in part to recoup increased costs associated with drop shipments. FSC did not, however, use mathematical calculations to arrive at its surcharge figure; it neither consulted anyone regarding nor studied such costs, and the record contains statements by another manufacturer indicating that his costs for drop shipments were no higher than for shipments to stores. This, plaintiffs argue, underscores the arbitrariness of the surcharge and evinces FSC's true, sinister motive.
A lack of market research, while perhaps adding luster to plaintiffs' contention that the surcharge was arbitrarily determined, does not necessarily invite an inference that FSC's statement was an attempt to conceal a conspiracy. It is true that the seven percent figure did not reflect an analysis of FSC's costs; however, this does not indicate that FSC was not pursuing its self interests in imposing it. The record affirmatively indicates that the seven percent figure was arrived at as one which would provide sufficient incentive for traditional retailers to continue to invest in service -- a reason entirely consistent with FSC's explanation for its actions and rendering unreasonable any inference of sinister motive. See app. at 149-50; H.L. Hayden Co. of New York, Inc. v. Siemens Medical Systems, Inc., 879 F.2d 1005, 1014 (2d Cir. 1989) (mere fact that a business reason advanced to explain actions is undermined does not alone justify inferring that the actions resulted from a conspiracy). Plaintiffs' attempt to portray as disingenuous FSC's assertion of an economic basis in support of its decision to implement the surcharge is unavailing.
Plaintiffs note a further piece of evidence which they claim tends to support their theory of liability at Count II: the memorandum Petit circulated among the NDPA board of directors after FSC imposed its local trading area policy in January, 1990. In it, Petit stated: "Enclosed is a copy of FSC's new marketing and advertising policy. This is a major step forward in our battle against the 800 number operators. Enumerated point 12 in effect means that FSC will no longer be selling [to] the 'sales pirate.'" App. at 693.
Subsequent ratification of a manufacturer's actions may sometimes tend to indicate that an agreement existed between the ratifier and the manufacturer, but nothing in this memorandum does so. Instead, at most, the memorandum reveals that Petit recognized that FSC's new policy would be beneficial to traditional retailers and wanted to share both the policy and that information with the board.
While separate enumeration and Discussion of the evidence upon which plaintiffs rely in support of Count II has been necessary to make clear what we believe its significance to be, we have also considered the evidence as a whole in accordance with Continental Ore. We nonetheless conclude, however, that the plaintiffs have simply failed to present evidence tending to exclude the possibility of independent action, as they must to survive summary judgment under Monsanto. They have not countered FSC's alleged reasons for its actions with evidence that both discredits the reasons and provides independent support for their conspiracy claim. See Big Apple BMW, 974 F.2d at 1380. Accordingly, we will affirm the district court's grant of summary judgment at Count II.
At Counts III and IV, plaintiffs allege that FSC conspired with other wallcovering manufacturers to injure the 800-number dealers. We will affirm the district court's grant of summary judgment as to these counts because plaintiffs' evidence tends to show only an opportunity to conspire, not an agreement to do so.
Certainly, direct evidence (or a direct inference) of an agreement between FSC and other manufacturers regarding 800-number dealers could enable plaintiffs to show concerted action. The evidence of an agreement, however, amounts to nothing more than communications on the 800-number subject. Communications alone, although more suspicious among competitors than between a manufacturer and its distributors, do not necessarily result in liability. Tose v. First Pennsylvania Bank, N.A., 648 F.2d 879, 894 (3d Cir. 1981). As we have observed, it is only when those communications rise to the level of an agreement, tacit or otherwise, that they become an antitrust violation.
Thus, plaintiffs are left to argue that FSC and other manufacturers conspired based upon their parallel conduct. "Proof of consciously parallel business behavior is circumstantial evidence from which an agreement, tacit or express, can be inferred but . . . such evidence, without more, is insufficient unless the circumstances under which it occurred make the inference of rational, independent choice less attractive than that of concerted action." Bogosian v. United States, 561 F.2d 434, 446 (3d Cir. 1977). The circumstances necessary to support such an inference are: (a) a showing that the defendants acted contrary to their own economic interests; and (b) satisfactory demonstration of a motivation to enter an agreement. Id., citing Venzie Corp. v. United States Mineral Products Co., Inc., 521 F.2d 1309, 1314 (3d Cir. 1975). See also Petruzzi's IGA Supermarkets, Inc. v. Darling Delaware Co., Inc., (3d Cir. July 13, 1993); Schoenkopf v. Brown & Williamson Tobacco Corp., 637 F.2d 205, 208 (3d Cir. 1980).
In particular, when evidence shows communications which provided an opportunity for agreement, a plaintiff must still produce evidence permitting an inference that an agreement in fact existed. Venzie, 521 F.2d at 1313. The evidence must give rise to more than speculation. Id.
In Venzie, for example, plaintiffs contended that two defendant corporations had agreed to refuse to sell fireproofing material to them. The record contained evidence that defendants had made numerous telephone calls, at least one of which concerned the plaintiffs, to each other and had met for lunch. We held that it was for the jury to assess the credibility of the defendants' assertions that they had not discussed or agreed upon the alleged refusal to deal, but, even disregarding statements to that effect, all that plaintiff's evidence proved was an opportunity for an agreement, which would not suffice to support a verdict. Plaintiff had failed to highlight evidence supporting an inference that an agreement in fact existed and thus could not support a verdict. Venzie, 521 F.2d at 1312. See also Tose, 648 F.2d at 895.
In contrast, a particularly detailed memorandum of a telephone call can give rise to a reasonable inference of agreement. In Apex Oil Co. v. DiMauro, 822 F.2d 246, 254 (2d Cir 1987), for example, the plaintiff survived a summary judgment motion by advancing evidence in the form of detailed memoranda indicating the existence of an agreement.
In this case, it is conceded that manufacturers discussed 800-number dealers, and actions they were taking concerning them, at conventions. The evidence of communications thus falls somewhere between Venzie, in which there were no notations of the subject matter of the conversations, and Apex Oil, in which the notations implied an agreement. Plaintiffs, however, seek to infer an agreement from those communications despite a lack of independent evidence tending to show an agreement and in the face of uncontradicted testimony that only informational exchanges took place. Without more, they cannot do so. Cf. Tose, 648 F.2d at 894 (mere disbelief of contrary testimony does not prove agreement).
We emphasize that unlike actions such as price-cutting, which provide the classic example of conscious parallelism, FSC's action was in its economic interests. It is simple syllogistic reasoning that if FSC was aware that most of its dealers were conventional retailers, and believed that its products sold better in the conventional setting, it would conclude that it was in its economic interests to keep the conventional retailers satisfied. That FSC may have foregone some short-term opportunity for sales to 800-number dealers does not suffice to show it acted contrary to its self-interests when it indisputably believed it was acting to benefit itself economically in the long term. Tose, 648 F.2d at 895; see P. Areeda, Antitrust Law § 1415e (1986). FSC's listening to retailers' complaints in no way implies that there was an agreement among manufacturers to do the same. See Venzie, 521 F.2d at 1314 ("the absence of action contrary to one's economic interest renders consciously parallel business behavior 'meaningless, and in no way indicates agreement,'" quoting Turner, The Definition of Agreement Under the Sherman Act: Conscious Parallelism and Refusals to Deal, 75 Harv. L. Rev. 655, 681 (1962)); see also Houser v. Fox Theatres Management Corp, 845 F.2d 1225, 1232-33 (3d Cir. 1988) (requiring both actions contrary to economic interests and motive to conspire).
Remaining for Disposition are the plaintiffs' state-law antitrust and tort claims. Although no federal claims remain at this juncture, considerations of judicial economy and fairness militate in favor of our retaining jurisdiction over and deciding the merits of these state-law claims. Graf v. Elgin, Joliet and Eastern Ry. Co., 790 F.2d 1341, 1347-48 (7th Cir. 1986); Ingram Corp. v. J. Ray McDermott & Co., Inc., 698 F.2d 1295, 1317-20 (5th Cir. 1983). See generally Enercomp, Inc. v. McCorhill Publishing, Inc., 873 F.2d 536, 545-46 (2d Cir. 1989). We will affirm the district court's Disposition of these claims.
In Count VI, plaintiffs alleged that the defendants violated Pennsylvania antitrust law by engaging in the activity alleged as the basis of Counts I through IV. This allegation rises or falls with plaintiffs' federal antitrust claims. See Collins v. Main Line Board of Realtors, 452 Pa. 342, 304 A.2d 493 (Pa. 1973); Schwartz v. Laundry and Linen Supply Drivers' Union, 339 Pa. 353, 14 A.2d 438 (Pa. Super. 1940); plaintiffs' brief at 45; FSC's brief at 47-48. Therefore, our decision with respect to Counts I through IV disposes of Count VI as well.
In Count VII, plaintiffs alleged that FSC and NDPA tortiously interfered with their existing and prospective contracts. Like Count VI, Count VII rises or falls with plaintiffs' antitrust claims. See Big Apple BMW, 974 F.2d at 1381-82 ("factual underpinnings of these tort claims are intertwined with the antitrust claims"; antitrust violations or other actions in restraint of trade are examples of improper conduct). Moreover, plaintiffs have failed to demonstrate that they would be able to present evidence tending to prove each element of their tortious interference claims at trial.
To establish a claim of tortious interference with existing contracts, plaintiffs must prove that the defendants intentionally and improperly interfered with their performance of contracts with third persons. Nathanson v. Medical College of Pennsylvania, 926 F.2d 1368, 1388 (3d Cir. 1991); Adler, Barish, Daniels, Levin and Creskoff v. Epstein, 482 Pa. 416, 393 A.2d 1175, 1183 (Pa. 1978). To prove their claims of tortious interference with prospective contractual relations, plaintiffs likewise must prove, inter alia, the existence of prospective contracts. Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 412 A.2d 466, 471 (Pa. 1979). A prospective contract "is something less than a contractual right, something more than a mere hope[ ]" id.; it exists if there is a reasonable probability that a contract will arise from the parties' current dealings. Glenn v. Point Park College, 441 Pa. 474, 272 A.2d 895, 898-99 (Pa. 1971).
Plaintiffs have failed to identify with sufficient precision contracts and prospective contracts which were interfered with by the defendants. They have likewise failed to identify an existing contract which was terminated because of the defendants' actions. Nor have they demonstrated a reasonable probability that they would have entered into prospective contracts with third parties but for defendants' alleged interference. See General Sound Telephone Co., Inc. v. AT&T Communications, Inc., 654 F. Supp. 1562, 1565-66 (E.D. Pa. 1987). In sum, plaintiffs have failed to advance more than speculation to support their claim of tortious interference; therefore, we will affirm the district court as to this count.
Finally, in Count X, plaintiffs alleged that the NDPA defamed them by publishing articles and editorials referring to 800-number dealers as "pirates." Under Pennsylvania law, a statement is defamatory if it "'tends to so harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him.'" U.S. Healthcare, Inc. v. Blue Cross of Greater Philadelphia, 898 F.2d 914, 923 (3d Cir. 1990), quoting Birl v. Philadelphia Electric Co., 402 Pa. 297, 167 A.2d 472, 475 (Pa. 1960). To prove their claim, plaintiffs must show: (1) the defamatory character of the statements; (2) publication by NDPA; (3) the statements' application to the plaintiffs; (4) an understanding by readers of the statements' defamatory meaning; and (5) an understanding by readers of an intent on the part of NDPA to refer to the plaintiffs. 42 Pa. Cons. Stat. Ann. § 8343(a) (1982); U.S. Healthcare, 898 F.2d at 923. The law does not require that a plaintiff be specifically named in an allegedly defamatory statement, for a statement might be defamatory if, by description or circumstances, it tends to identify the plaintiff as its object. Redco Corp. v. CBS, Inc., 758 F.2d 970, 972 (3d Cir. 1985).
Plaintiffs base their defamation claim upon statements referring to 800-number dealers in general as "pirates." Individual group members may sue based upon statements about a group when the statements were directed toward a "comparatively small class or group all of whose constituent members may be readily identified and the recipients of the [statements] are likely to identify some, if not all, of them as intended objects of the defamation." Farrell v. Triangle Publications, Inc., 399 Pa. 102, 159 A.2d 734, 736-37 (Pa. 1960). But no claim arises from a defamatory remark directed toward a group whose membership is so numerous that no individual member can reasonably be deemed its intended object. Id. at 736. Similarly, no claim exists if, for any other reason, a reader could not reasonably conclude that the statements at issue referred to the particular person or persons alleging defamation. Id. at 737.
Relying upon record evidence indicating that in 1990 there were only 20 to 25 800-number dealers in the industry (app. at 1123-24), plaintiffs argue that they may base their claim on statements directed at 800-number dealers in general. Cf. Restatement (Second) of Torts § 564A, comment c. As noted above, however, a group's size is not the sole consideration in determining whether individual members may assert defamation claims based upon statements about the group. A group may be relatively small, but statements which disparage it may not serve as a basis for an individual defamation claim unless a reader could reasonably connect them to the complaining individual.
In Farrell, for example, one of 13 township commissioners asserted a defamation claim against a newspaper which had published a story implicating "a number of township commissioners and others" in corrupt activity. Farrell, 159 A.2d at 736. The Pennsylvania Supreme Court held that the plaintiff had stated a claim for defamation. In so holding, however, the court concentrated not on the size of the group discussed but on whether readers "knew that the plaintiff was one of the thirteen commissioners." Id. at 738. We similarly do not end our inquiry upon being apprised that there were between 20 and 25 800-number dealers in 1990; we examine whether the plaintiffs were "sufficiently identified as [objects of NDPA's statements] to justifiably warrant a Conclusion that [their] individual reputation[s have] been substantially injured." Id. at 736.
Here, there is nothing in the record other than the number of 800-dealers which could support a Conclusion that any of the plaintiffs' individual reputations were injured by NDPA's statements about 800-number dealers in general. Indeed, the individual identities of this group's members are, by the very nature of their business, less meaningful than the telephone numbers they promote to facilitate discount purchases. This group appears amorphous and ill-defined when compared to the well-defined group of township commissioners at issue in Farrell. Plaintiffs have not produced evidence tending to prove that they belong to such an easily identifiable, cohesive group that a reader would ascribe statements referring to 800-number dealers in general as "pirates" to any of them individually. Thus, we will affirm the district court's grant of summary judgment on Count X.
For the foregoing reasons, we will affirm the district court's grant of summary judgment as to Counts I through IV, VI, VII and X of the plaintiffs' amended complaint.
ROTH, Circuit Judge, Concurring in part and Dissenting in part:
Because I believe the majority has misapplied the precedent relevant to the antitrust claims involved in the present case and misanalyzed the evidence present in the record, I respectfully Dissent from the Conclusion that the majority reaches in Parts IV and V with regard to Counts I and II of the complaint. Because I believe that Counts VI and VII are intimately linked with Counts I and II, I also Dissent from the Conclusion the majority reaches in Part VII A and B. I concur with the majority's Conclusions in Parts VI and VII C with regard to the remaining counts.
Initially, I would like to emphasize that this case was disposed of by summary judgment; no trial by a factfinder has been held. A court may grant summary judgment only when the submissions in the record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).
In antitrust cases, to establish a violation of Section 1 of the Sherman Act, the plaintiff must prove the existence of a "contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations." 15 U.S.C. § 1. To survive a defendant's motion for summary judgment in a Section 1 antitrust case, a plaintiff "must establish that there is a genuine issue of material fact as to whether [the defendant] entered into an illegal conspiracy [or combination] that caused [the plaintiff] to suffer a cognizable injury." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-86, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). The plaintiff must introduce evidence that tends to demonstrate "a unity of purpose or a common design and understanding, or a meeting of the minds." Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1364 (3d Cir. 1992) (quoting Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 111 (3d Cir. 1980)). "Concerted action may be inferred from circumstantial evidence. That evidence should be analyzed as a whole, rather than compartmentalized, to determine whether it supports an inference of concerted action." Big Apple BMW, 974 F.2d at 1364 (citing Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 698, 8 L. Ed. 2d 777, 82 S. Ct. 1404 (1962)).
In evaluating a record for purposes of deciding a summary judgment motion, "it is inappropriate for a court to resolve factual disputes and to make credibility determinations. . . . Inferences should be drawn in the light most favorable to the non-moving party, and where the non-moving party's evidence contradicts the movant's, then the non-movant's must be taken as true." Big Apple BMW, 974 F.2d at 1363 (citing Country Floors, Inc. v. A Partnership Composed of Gepner and Ford, 930 F.2d 1056, 1061 (3d Cir. 1991)).
To raise a genuine issue of material fact, . . ., the opponent need not match, item for item, each piece of evidence proffered by the movant. In practical terms, if the opponent has exceeded the 'mere scintilla' threshold and has offered a genuine issue of material fact, then the court cannot credit the movant's version of events against the opponent, even if the quantity of the movant's evidence far outweighs that of its opponent. It thus remains the province of the factfinder to ascertain the believability and weight of the evidence.
Big Apple BMW, 974 F.2d at 1363.
As the majority at least implicitly recognizes, there is evidence present in the record in this case that supports appellants' claims. See majority opinion at [typescript at 10-21]. As I will explain, I believe that this evidence, taken as a whole, exceeds a "mere scintilla" threshold. I fear that the majority has crossed the delicate line between the inference drawing proper for summary judgment analysis and the substantive evaluation of evidence that must be left to a jury.
In reviewing the evidence, we must also keep in mind that the NDPA has been campaigning for years against the 800 number dealers. The NDPA was previously prosecuted by the FTC for exactly the activity complained of here, attempting to drive 800 number dealers out of the wallcovering business. See app. at 412; majority opinion at [typescript at 12-14]. I find that this history is significant to an evaluation of the evidence present in the record. It is uncontested that the NDPA is both highly sophisticated and possesses significant market power. It is unrealistic to think that such a sophisticated trade association, wary of the antitrust laws, would produce the same kinds of damaging evidence as would a less artful group.
Turning first to Count I, the claim of a horizontal conspiracy between the individual retail wallcovering dealers, acting through the NDPA, I believe that the majority has misapplied relevant precedent to its consideration of an intellectually challenging issue of first impression in this Court.*fn12 The threshold legal question that must be answered is: Can the actions and statements of an agent of a trade association, if that agent is cloaked with the apparent authority to act on behalf of the association, serve to hold the trade association liable as a "combination" under section 1 of the Sherman Act. The majority has answered this question in the negative unless a court finds either that a co-conspirator exists or that "the actions in question represent an attempt by the association, rather than the actor, to restrain trade" so that section 1 liability cannot be imposed on the NDPA "absent some indication that two or more members of NDPA were utilizing it as a vehicle for concerted anticompetitive action." Majority opinion at [typescript at 30]. In arriving at this Conclusion, however, the majority misconstrues the concept of apparent authority to arrive at a result which is inconsistent both with relevant Supreme Court precedent and with the dictates of logic.
Let me begin by discussing the basics of "apparent authority." The issue of apparent authority arises when there is a question of the existence or of the scope of the agency. If it is clear that the principal itself is acting or that the principal has expressly authorized the action of the agent, the question of "apparent authority" never surfaces. The issue in the present case is whether the officers of the NDPA were authorized to make certain statements on behalf of the association. If these officers had the express authorization of the association, we would not need to determine whether they were speaking with its "apparent authority." We get to this question only when the situation is more clouded.
As a general rule, apparent authority may be created by any conduct, or acquiescence in conduct, by the principal which causes a third person to believe that the principal consents to the actions or statements of the person who is allegedly acting for the principal. See Restatement (Second) of Agency § 27 (1984) ("apparent authority to do an act may be created by written or spoken words or any conduct of the principal which, reasonably interpreted, causes a third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him.") Cf. NLRB v. L & J Equipment Co., Inc., 745 F.2d 224, 232-235 (3d Cir. 1984) (discussing "apparent agency" in considering whether certain actions and statements of in-house organizing committee members during labor union representation election were done as agents of the union).
This issue of the apparent authority of the NDPA officers to speak on behalf of the association is one which I conclude, on the basis of the facts of record which I will discuss later, should go to the jury.
With apparent authority in mind, I will return to plaintiffs' allegations in Count I, the horizontal conspiracy. "In order to establish a violation of section 1 of the Sherman Act . . ., a plaintiff must establish three elements: (1) a contract, combination, or conspiracy; (2) restraint of trade; and (3) an effect on interstate commerce." Weiss v. York Hosp., 745 F.2d 786, 812 (3d Cir. 1984), cert. denied, 470 U.S. 1060, 84 L. Ed. 2d 836, 105 S. Ct. 1777 (1985). The issue here is whether the actions of a trade association's agent can create liability on the part of the trade association as a section 1 "combination." A proper analysis of the requirements for a section 1 "combination" focuses not upon concepts such as official authorization of action but upon "the economic substance of . . . [an] arrangement." Weiss, 745 F.2d at 815. In Weiss, this Court found that a hospital's medical staff was a section 1 combination because "each staff member . . . has an economic interest separate from and in many cases in competition with the interests of the other medical staff members." Id. Additionally, the Court found the medical staff similar to the Associated Press and the New York Stock Exchange, "a combination of otherwise competing entities," which the Supreme Court has previously found to be section 1 combinations. Id. (citing Silver v. New York Stock Exchange, 373 U.S. 341, 10 L. Ed. 2d 389, 83 S. Ct. 1246 (1963); Associated Press v. United States, 326 U.S. 1, 89 L. Ed. 2013, 65 S. Ct. 1416 (1945)).
The NDPA is similarly a combination of otherwise competing entities. A trade association is a group of competitors who unite for a common purpose and is a unit of joint action sufficient to constitute a section 1 combination See G.D. Webster, The Law of Associations § 9a.01, 9A3-4 (1991) ("There is no question that an association is a 'combination' within the meaning of Section 1 of the Sherman Act. Although a conspiracy requires more than one person, an association, by its very nature a group, satisfies the requirement of joint action. Thus, any association activity which restrains interstate commerce can be violative of Section 1 even if no one acts in concert with the association."); Stephanie W. Kanwit, FTC Enforcement Efforts Involving Trade and Professional Associations, 46 Antitrust L.J. 640, 640 (1977) ("Because trade associations are, by definition, organizations of competitors, they automatically satisfy the combination requirements of § 1 of the Sherman Act."). Indeed, NDPA's summary of the FTC consent order notes that anticompetitive activities will violate the "antitrust laws," and explains that "an agreement between one or more competitors is necessary for the law or the consent order to be violated, but remember that: 1 NDPA is a group of competitors and is therefore already considered to be an 'agreement.'" App. at 429-40. This statement indicates both that NDPA believed that it was a section 1 combination with group status and power and that it conveyed that impression to the wallcovering industry.
I conclude that NDPA's status as a section 1 combination does not change when it acts through its agents cloaked with apparent authority. I believe that this Conclusion is compelled by the Supreme Court's opinion in American Soc'y of Mechanical Eng'rs v. Hydrolevel Corp., 456 U.S. 556, 570-71, 72 L. Ed. 2d 330, 102 S. Ct. 1935 (1982), where the Court held a trade association liable under section 1 of the Sherman Act for the statements of a subcommittee chairman. The Court stated that "when it cloaks its subcommittee officials with the authority of its reputation, ASME permits those agents to affect the destinies of businesses and thus gives them the power to frustrate competition in the marketplace." Id. The response at issue was merely an "'unofficial' response authored by a single ASME subcommittee chairman. Yet the force of ASME's reputation is so great that M & M was able to use that one 'unofficial' response to injure seriously the business of a competitor." Id. at 971.
As the majority emphasizes, in Hydrolevel ASME was found liable as a co-conspirator rather than as a combination. I find this factual distinction with the present case of little relevance. The Supreme Court's analysis in Hydrolevel was neither explicitly nor implicitly limited to situations where a trade association was one of many co-conspirators. Instead, it was grounded upon the economic power that a trade association may possess. See 456 U.S. at 570-71. The Court reasoned:
Only ASME can take systematic steps to make improper conduct on the part of all its agents unlikely, and the possibility of civil liability will inevitably be a powerful incentive for ASME to take those steps. Thus, a rule that imposes liability on the . . . [trade association]--which is best situated to prevent antitrust violations through abuse of its reputation--is most faithful to the congressional intent that the private right of action deter antitrust violations.
Id. at 572-73. Indeed, the Supreme Court has explained that it is the economic power of concerted action that requires section 1 antitrust scrutiny. "Concerted activity inherently is fraught with anticompetitive risk. It deprives the marketplace of the independent centers of decisionmaking that competition assumes and demands." Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768-69, 81 L. Ed. 2d 628, 104 S. Ct. 2731 (1984); see also Terrence C. Sheehy & William J. Hunter, Jr., Antitrust Principles Applicable to Trade Association Activities, 362 PLA/Comm 19 (1985) ("[A] trade association may be found liable for treble damages based upon the activities of its members, when they act with the apparent authority of the association. . . . It is not necessary that co-conspirators be named parties.").*fn13
The majority relies upon Nanavati v. Burdette-Tomlin Memorial Hosp., 857 F.2d 96 (3d Cir. 1988), to support its position that the actions of a trade association's agent cloaked with apparent authority can render the trade association liable only if there has been some group decision by members of the association to pursue anticompetitive activity. Such reliance is misplaced. In Nanavati there was no allegation of group or concerted action by the hospital's Executive Committee in connection with the allegations of a boycott of the referral of patients to Dr. Nanavati. See 857 F.2d at 119. We held that the Executive Committee could not be considered a combination because it did not act as a body with regard to the boycott. "Instead of group action by the Executive Committee, Nanavati points to the actions and motivations of medical staff members who were not on the Committee." See id.
There is no inconsistency between Nanavati and a proper application of Hydrolevel to the present case. Here, group action on the part of NDPA has been alleged. The "individuals" whose actions are under scrutiny are officials of NDPA who are allegedly cloaked with apparent authority. Just as the actions of ASME's subcommittee chairman could hold that association liable under section 1 of the Sherman Act, the statements and actions of NDPA's officers and agents can hold it similarly liable. The appropriate analog to the present case in Nanavati would have been an allegation that an Executive Committee officer cloaked with apparent authority had engaged in a boycott against the plaintiff. In such a situation, as in the present case, sufficient allegations of "group action" would exist to find a section 1 combination.
The majority's Conclusion that an association could be liable for the actions of its agents cloaked with apparent authority only if "the actions in question represent an attempt by the association, rather than the actor, to restrain trade" would eviscerate the doctrine of apparent authority delineated in Hydrolevel. The point of Hydrolevel is that actions of an association's agent, cloaked with apparent authority, are actions of the association. Indeed, the majority's interpretation is contradicted by the Conclusion in Hydrolevel that there need be no ratification of the actions of an association's agents for it to be held liable. "[A] ratification rule would have anticompetitive effects, directly contrary to the proposes of the antitrust laws. ASME could avoid liability by ensuring that it remained ignorant of its agent's conduct, and the antitrust laws would therefore encourage ASME to do as little as possible to oversee its agents." Hydrolevel, 456 U.S. at 573-574. As long as the association has clothed the agent with apparent authority to act on its behalf, it is liable for the anticompetitive actions taken by that agent. Moreover, acquiescence by the association in one of its officers acting as its spokesman can be a confirmation of apparent authority. See Restatement (Second) of Agency § 27 (1984).
An examination of the evidence present in the record demonstrates that there is sufficient evidence to submit this case to a jury for a determination whether NDPA's agents were cloaked with the apparent authority to act on behalf of the association and whether they engaged in anticompetitive activity. Particularly relevant is the speech given by NDPA president John Wells at a trade show. According to reports of this speech in Decorating Retailer and the Wallcovering Industry News, this speech was characterized as "Retailer Spokesman Urges Supplier Support," App. at 440, and included statements to solve the "piracy problem" by "urging retailers to say 'No' to some collections and suppliers." App. at 167, 440. Regardless of Wells' insistence that he had stated that he was speaking in his individual rather than official capacity, see app. at 183-84, the fact that those who heard him and who reported on what he said characterized his remarks in NDPA's publications as those of the "retailer spokesman" may persuade a jury to find that he was speaking in his official capacity with the acquiescence of the NDPA.
Furthermore, there is evidence of conversations between NDPA Chief Executive Officer Robert Petit and other NDPA officers and wallcovering manufacturers allegedly to urge that the manufacturers take steps to eliminate the 800 number dealers. See app. at 185, 190-98, 201-207, 212-229, 407, 416-419, 693-99, 700. One such conversation occurred between Petit and John Fitzgerald, president of Collins and Aikman, parent corporation of manufacturer Kinney Wallcoverings. In a memorandum recording this meeting, Petit stated that he told Fitzgerald of the "anger felt by the retailers in lack of support from the wallcovering industry" and "that the piracy issue seems to have intensified." App. at 185. In response, "Fitzgerald indicated that he recognized the problems the retailer faces and wanted to know what I felt would be the chances of success if they in effect started a new company and actually franchised dealers to handle two or three lines. These lines would be guaranteed not to be available to 800 number operators or to chains." Id. Petit added that "I think it's a very important step forward and told them we would like to cooperate where possible. If [Kinney] does something of this nature, it could break the logjam that now exists in regard to piracy." Id. Petit admitted that he made similar statements to other manufacturers including FSC. See app. at 204. Again, considering the implications of this conversation, in view of Petit's position as CEO of the NDPA, the question of whether Petit was speaking with the authority or the apparent authority of the NDPA should be considered by the jury, and not dismissed by the Judge.
Finally, the evidence of other speeches, numerous letters, and editorials in Decorating Retailer add to the reservoir of evidence of anticompetitive activity from which a jury could draw. I conclude that on the whole there is sufficient evidence to survive summary judgment because, viewed in a light favorable to plaintiffs, this evidence creates a material issue of fact whether NDPA officials, cloaked with apparent authority to act on behalf of the association, engaged in anticompetitive activity.*fn14 I would reverse the district court's Disposition of Count I and remand for trial.
Turning now to Count II, I conclude that there is enough evidence of a conspiracy between NDPA and FSC to go to a jury in light of my determination in Part I that there is sufficient evidence to go to a jury regarding NDPA's alleged anticompetitive activities. Generally, in order to survive summary judgment on a vertical conspiracy claim, the non-movant must produce evidence which "tends to exclude the possibility that the manufacturer and [involved] distributors were acting independently." Monsanto, 465 U.S. at 764. When dealer complaints are introduced as such evidence, "an antitrust plaintiff must be prepared to demonstrate a causal relationship between alleged dealer complaints and a distributor's action in order to show that the concerted action in violation of the Sherman Act is distinguishable from 'perfectly legitimate' independent conduct." Big Apple BMW, 974 F.2d at 1364. This causal relationship appears to require evidence that supplements dealer complaints. "Complaints by competitors, standing alone, are not sufficient to show a conspiracy." Monsanto, 465 U.S. at 764.
The present case, however, does not represent a garden variety vertical conspiracy case. Rather, it involves allegations of a hybrid horizontal/vertical conspiracy where a manufacturer entered the scheme only as a result of substantial dealer coercion to do so. In Business Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 99 L. Ed. 2d 808, 108 S. Ct. 1515 (1988), the Court appeared to say that vertical restraints forced by a horizontal conspiracy which involves manufacturers coerced by retailers is really a horizontal antitrust violation and should be treated as a horizontal conspiracy. The Court interpreted Judge Bork's antitrust treatise as follows: "[Bork says] that a facially vertical restraint imposed by a manufacturer only because it has been coerced by a 'horizontal cartel' agreement among his distributors is in reality a horizontal restraint. That says precisely what we say: that a restraint is horizontal not because it has horizontal effects, but because it is the product of a horizontal agreement." 485 U.S. at 730 n.4 (interpreting Robert Bork, The Antitrust Paradox 288 (1978)). Judge Bork emphasized that such a scheme includes restraints which are "vertical in form only." Bork at 288.
The implication of treating the conspiracy alleged in this case as such a hybrid is that the assumptions underlying Monsanto 's requirements for evidence that excludes the possibility of independent manufacturer action apply with much less force. The case contains allegations that the manufacturer's decision process has been tainted by coercion. Indeed, the principles grounding post-Monsanto antitrust theory and jurisprudence demonstrate that it is evidence of dealer coercion of a manufacturer or of the pretextual naature of a manufacturer's purported justification for imposing a vertical restraint which tends to show that the vertical restraint violates the antitrust laws. See Jean Wegman Burns, Rethinking the "Agreement" Element in Vertical Antitrust Restraints, 51 Ohio St. L.J. 1, 31-32 (1990); Frank H. Easterbrook, Vertical Arrangements and the Rule of Reason, 53 Antitrust L.J. 135 (1984).
Normally, vertical restraints may enhance interbrand competition and provide consumers with the optimal level of dealer services. See Business Electronics, 485 U.S. at 724-25; Easterbrook, 53 Antitrust L.J. at 135. Indeed, elimination of "free riders" may create long-run efficiencies by protecting the viability of dealers who provide the efficient level of services. See Business Electronics, 485 U.S. at 725; Burns, 51 Ohio St. L.J. at 12-14. However, a retailers' scheme to coerce manufacturers into imposing vertical restraints is more likely to eliminate competition from discounters who tend to drive the prices of goods down to an efficient equilibrium. For example, in the personal computer market, computers originally were sold only by showroom retailers. Eventually, 800 number discounters entered the market and drove prices substantially down. At present, the market contains both showroom retailers and 800 number discounters. But the price gap between them is much smaller than when 800 number discounters first entered the market. Previously the gap often exceeded $1000 per computer. Now, that gap is often as small as $100 per computer. The Monsanto theory of efficient service level was validated in the personal computer market; but the price of those services dropped to a long-term efficient equilibrium only because of the presence of "free riders" who drove the price of those services down from an inefficiently high level. See, e.g., Stewart Alsop, Bewitched, Bedraggled: PC Industry Dances to Customers' Beat, InfoWord, July 5, 1993, at 4; Stratford Sherman, How to Prosper in the Value Decade, Fortune, November 30, 1992, at 90; Peter Burrows & Stephanie Anderson Forest, Dell Computer Goes into the Shop, Business Week, July 12, 1993, at 138. The wisdom that has undergirded our traditional antitrust jurisprudence also carries forward to the present.
The protection of price competition from conspirational restraint is an object of special solicitude under the antitrust laws. We cannot respect that solicitude by closing our eyes to the effect upon price competition of the removal from the market, by combination or conspiracy, of a class of traders. Nor do we propose to construe the Sherman Act to prohibit conspiracies to fix prices at which competitors may sell, but to allow conspiracies or combinations, to put competitors out of business entirely.
United States v. General Motors, 384 U.S. 127, 148, 16 L. Ed. 2d 415, 86 S. Ct. 1321 (1966).
In the present case, I believe that there is evidence both of dealer coercion and of pretext sufficient to present Count II to a jury. Plaintiffs allege a hybrid horizontal/vertical conspiracy that involves dealer coercion. Petit's activities regarding Fitzgerald, see app. at 185-86, and Landau of FSC, see app. at 304, 309 indicate that NDPA was pressuring FSC and other manufacturers to adopt measures to restrain 800 number dealers. The Decorating Retailer, through both editorials and letters to the editor, was also used as a mechanism to pressure manufacturers. As members of the wallcovering industry who received this publication, FSC and other manufacturers must have known about the strong anti-800 number dealer sentiments that dominated the industry. Moreover, affirmative requests by the trade association of retailers that included implicit threats to boycott uncooperative manufacturers support plaintiffs' claim.
Furthermore, I find that there is evidence of pretext present in the record. First, the two FSC press releases demonstrate that FSC was concerned about eliminating its references to "sales piracy" and its linkage to its drop shipment surcharge. See app. at 289-99, 486. The majority explains away the possibility that this evidence demonstrates FSC's complicity in an anticompetitive conspiracy: "That FSC felt a need to use more genteel language when explaining to the public what it could internally refer to as efforts to combat 'piracy' does not imply a sinister motive." Majority opinion at [typescript at 41]. I believe that the proper body to make such determinations about the implications of FSC's "genteel language" is a jury. I find it difficult to believe that no reasonable jury could find that the changes from the draft to the final press release constitute evidence of pretext.
Second, I find that FSC's failure to engage in any economic or mathematical analysis regarding its surcharge provides additional evidence of pretext. Again the majority explains this away: "A lack of market research, while perhaps adding luster to plaintiff's contention that the surcharge was arbitrarily determined, does not necessarily invite an inference that FSC's statement was an attempt to conceal a conspiracy." Maybe so; but I believe it could invite such an inference. Since we must draw all possible inferences in the non-movant's favor, I find that this issue also is capable of resolution only by a jury. I would reverse the district court's Disposition of Count II and remand for trial.
In summation, I conclude that counts I and II are inextricably linked. The anticompetitive activity alleged in the present case properly may be characterized as an effort by the NDPA, acting through its officers, to coerce manufacturers such as FSC into adopting restraints upon 800 number wallcovering dealers. In essence, plaintiffs have alleged a "horizontal" conspiracy involving both the NDPA and FSC. Even under the majority's analysis of section 1 combination liability, the evidence of FSC's complicity in NDPA's campaign against 800 number dealers should prove sufficient for Count 1 to survive summary judgment. Similarly, the majority's Conclusion that FSC's actions are as likely to be the result of independent action as of an illicit conspiracy is undercut when one accounts for the evidence that NDPA's officers actively solicited manufacturer restraints upon 800 number dealers. Both Counts I and II should be resolved by a jury.