Continental Airlines, Inc. v. United Airlines, Inc.

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

CONTINENTAL AIRLINES, INC.; 

CONTINENTAL EXPRESS, INCORPORATED,

Plaintiffs-Appellees,

v.



UNITED AIRLINES, INCORPORATED;

DULLES AIRPORT AIRLINE No. 01-1435

MANAGEMENT COUNCIL,

Defendants-Appellants.

ASSOCIATION OF FLIGHT ATTENDANTS,

AFL-CIO,

Amicus Curiae.



Appeal from the United States District Court

for the Eastern District of Virginia, at Alexandria.

T. S. Ellis III, District Judge.

(CA-00-684-A)

Argued: September 27, 2001

Decided: January 15, 2002

Before MOTZ, KING, and GREGORY, Circuit Judges.

Vacated and remanded by published opinion. Judge Motz wrote the

opinion, in which Judge King and Judge Gregory joined.

COUNSEL

ARGUED: Richard Joseph Favretto, MAYER, BROWN & PLATT,

Washington, D.C., for Appellants. Alden Lewis Atkins, VINSON &

2 CONTINENTAL AIRLINES v. UNITED AIRLINES

ELKINS, L.L.P., Washington, D.C., for Appellees. ON BRIEF:

Mark W. Ryan, Lily Fu Swenson, Robert L. Bronston, MAYER,

BROWN & PLATT, Washington, D.C.; Stephen M. Shapiro, Jeffrey

W. Sarles, Kermit Roosevelt, MAYER, BROWN & PLATT, Chi-

cago, Illinois, for Appellants. Paul L. Yde, Joseph E. Hunsader, Mary

N. Lehner, VINSON & ELKINS, L.L.P., Washington, D.C., for

Appellees. Edward J. Gilmartin, Associate General Counsel, ASSO-

CIATION OF FLIGHT ATTENDANTS, AFL-CIO, Washington,

D.C., for Amicus Curiae.

OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

Continental Airlines, Inc. and Continental Express, Inc. (collec-

tively "Continental"), brought this antitrust action in April 2000 to

challenge the installation of templates, which limit the size of carry-

on baggage, at Dulles Airport. Continental alleges that in agreeing to

install the templates, United Air Lines, Inc. ("United"), the primary

air carrier at Dulles, and the Dulles Airport Airline Management

Council ("AMC"), an unincorporated association of all airlines serv-

ing Dulles, unreasonably restrained trade in violation of Section 1 of

the Sherman Act, 15 U.S.C. § 1 (1997). Applying an abbreviated

"quick-look" analysis, the district court granted summary judgment to

Continental, awarded Continental $254,426.85 in trebled damages,

and permanently enjoined the use of templates at Dulles. See Conti-

nental Airlines, Inc. v. United Air Lines, Inc., 126 F. Supp. 2d 962

(E.D. Va. 2001) (granting summary judgment) (hereafter Continen-

tal); Continental Airlines, Inc. v. United Air Lines, Inc., 136 F. Supp.

2d 542 (E.D. Va. 2001) (granting treble damages and an injunction)

(hereafter Continental II). Because issues of material fact remain dis-

puted and because both the unique architectural configuration of Dul-

les Airport and the competitive effects of templates require thorough

consideration in a less "quick look," we vacate the judgment of the

district court and remand for further proceedings.

CONTINENTAL AIRLINES v. UNITED AIRLINES 3

I.

Before setting forth the factual background giving rise to this case,

we take note of the tragic events of September 11, 2001. Those events

and their ramifications have not yet mooted any aspect of this case;

although the Federal Aviation Administration ("FAA") has now

restricted the number of carry-on bags permitted to each passenger,

to date it has not limited their size. Yet we recognize that the tragedies

of September 11 now affect any discussion of air travel. Their impli-

cations for security1 cannot be overlooked and, on remand, the district

court and the parties will undoubtedly have to deal with these issues

in considering any prospective relief. Having said that, we turn to the

world before September 11, and the facts underlying this case.

A.

In the mid-1990s, an increased volume of air travel and a growing

desire to avoid checking luggage meant passengers carried more and

more baggage onto commercial flights. "[M]any aircraft did not have

sufficient under-seat or overhead bin storage space to stow securely

the number and size of bags brought onboard by the increasing num-

ber of passengers." Continental, 126 F. Supp. 2d at 965. The Associa-

tion of Flight Attendants, joined by United and some other airlines,

lobbied Congress and the FAA to limit the size of carry-on baggage.

Those efforts have failed; instead the FAA simply requires each air-

line to scan carry-on baggage to "control the size and amount carried

on board in accordance with an approved carry-on baggage program

in [the airline’s] operations specifications." 14 C.F.R. § 121.589(a)

(2001). In compliance with this regulation, each airline has published

an FAA tariff stating numerical and size limitations on carry-on lug-

gage that it may enforce.

The increased volume of carry-on baggage has been linked to sev-

eral problems: delays, inconvenience to late boarding passengers from

full overhead bins, conflict between airline staff and passengers, and

reduced on-board safety if baggage cannot be properly stowed. Carry-

1

Throughout we use "security" to refer to concerns about hijacking and

other crimes, and "safety" to refer to concerns about on-board accidents,

such as baggage falling from storage bins.

4 CONTINENTAL AIRLINES v. UNITED AIRLINES

On Baggage Program, 52 Fed. Reg. 21,472, at 21,475 (June 5, 1987)

(codified at 14 C.F.R. pt. 121).2 Airlines have explored various ways

to respond to the increase in carry-on baggage, including one critical

to this lawsuit — the use of baggage templates.

Baggage templates are pieces of plastic or stainless steel, mounted

on hinges, that cover the mouths of x-ray baggage screening

machines. When the templates are down, they narrow the mouth of

the x-ray machine, preventing oversize baggage from passing

through. Generally, even when they are down, the templates permit

all baggage sized within the published FAA tariff of any airline to

pass through. Templates can be flipped upward to allow authorized

larger baggage to bypass the templates. Absent this authorization,

when baggage does not fit through the template, it must be checked.

In 1997 Continental experimented with templates at its hub in

Houston. Frequent fliers in a focus group tested by Continental found

the templates annoying, and templates could not be used in at least

one of Continental’s hubs because another carrier objected. Thus, in

1998 Continental decided not to install templates, opting instead to

expand its overhead bins and provide for more equipment and

employees to permit passengers to carry on or gate-check as much

luggage as they wished.

In May 1999, a Continental customer advisory board urged the air-

line to "[e]ncourage people to check bags" and complained of early

2

The Association of Flight Attendants has testified before Congress,

and filed an amicus brief in support of United and AMC, stating that

oversized carry-on baggage constitutes a safety risk on board aircraft.

The Association maintains that "oversized [carry-on] baggage creates a

myriad of difficulties to passenger and crew, ranging in seriousness from

inconvenient delays to outright physical injury," that bin expansion has

not been sufficient to alleviate these problems and that templates "are the

single most effective system available to airlines to control oversize

carry-on baggage." The Association states that in 1996 approximately

3700 flight attendants employed by four carriers suffered injuries associ-

ated with carry-on baggage, and that each year, across all carriers, falling

carry-on baggage reportedly injures approximately 4500 passengers.

Because many injuries are not reported, the Association estimates that

the total number of carry-on injuries is closer to 20,000 per year.

CONTINENTAL AIRLINES v. UNITED AIRLINES 5

boarding passengers usurping all carry-on baggage space ("People in

row 25 are putting bags in overhead bins in row 7."). The majority

of the group stated their belief "that a baggage template is a good

idea." Similarly, Continental’s Senior Vice President for Airport Ser-

vices agreed in deposition that templates could reduce or eliminate

monopolization of space by early-boarding passengers, flight delays

caused by the need to find space for carry-on baggage, conflict

between airline crew and passengers over carry-ons, and hazards to

crew taking excess carry-on baggage down the jetway to the aircraft.

Nevertheless, Continental rejected templates and other ways to

reduce carry-on baggage. Instead, it focused on providing more space

for carry-on baggage, and on increasing its gate-checking services, so

that when space on board had been exhausted, additional carry-on

baggage could be checked at the gate (or at the side of smaller planes)

without delaying flights. Continental has received press attention as

well as a number of awards, which it attributes to its excellent cus-

tomer service, including its liberal carry-on baggage policy. It also

maintains that this policy has attracted many high-revenue customers.

United has also expanded its overhead bins to meet the problems

of increased carry-on baggage. (In fact, according to Continental’s

Manager for Product Marketing, United began a program of bin

expansion before "Continental followed as a competitive response.")

In addition, however, United has sought to impose a strict limit on

carry-on baggage, restricting each passenger to two carry-on bags of

limited size. Finding it difficult to enforce the size limitation because

of the subjectivity of the process, United looked for a more objective

way to measure size and decided to try baggage templates. United

expected many benefits from the use of templates, including a

smoother boarding process, better on-time performance, increased

passenger comfort, and greater on-board safety.

United initially experimented with templates in mid-1998 at its Los

Angeles and Chicago hubs, with mixed results. The test reduced

delays by up to 65% in Los Angeles and up to 72% in Chicago. How-

ever, United received complaints from high-revenue customers, who

threatened to move their business, and an internal United study deter-

mined that during the 1998 calendar year, while its "template program

ha[d] helped improve carry-on perceptions compared to American

6 CONTINENTAL AIRLINES v. UNITED AIRLINES

and US Airways . . . Continental’s larger bins ha[d] provided a solu-

tion with more customer value." Nevertheless, United management

decided to proceed with a plan to address the problems associated

with carry-on baggage by consistently enforcing the number and size

restrictions of its carry-on policy, educating consumers as to the bene-

fits of the policy combined with larger overhead bins, and deploying

templates wherever possible. (Airlines other than United and Conti-

nental, including American, Southwest, and Delta, also considered

templates, and a number, like United, adopted them.) At present

United has installed templates at security checkpoints used by its pas-

sengers in at least twenty-five domestic airports.

B.

In late 1998, United sought to install templates at Dulles, a United

hub and one of the fastest growing airports in the country. This pre-

sented a special problem because the configuration of Dulles is, as

Continental’s Chief Executive Officer testified, "unique." Most air-

ports have a number of security checkpoints, so that at most only a

few airlines share any given security checkpoint. By contrast, at Dul-

les every non-connecting passenger for every flight must be screened

at one of two common security checkpoints located in the main termi-

nal, which in turn lead to a common "sterile" area. Once in the sterile

area, passengers take shuttles to the midfield concourse from which

their flights depart. The combination of security checkpoints that must

be shared by all airlines, a single sterile area also common to all, and

the use of mobile shuttles, distinguishes Dulles from every other

major airport in the United States.

The twenty-nine airlines that serve Dulles are members of the

AMC, an unincorporated association mandated by the FAA.3 The

3

The Metropolitan Washington Airport Authority ("MWAA"), created

by a compact between the District of Columbia and the Commonwealth

of Virginia, is the landlord of Dulles. A MWAA representative also

attends AMC meetings but has no vote. United and AMC maintained that

MWAA’s authority to "plan, establish, operate . . . and protect" Dulles

afford them state-action immunity. See Parker v. Brown, 317 U.S. 341,

351-52 (1943). For the reasons stated by the district court, we agree that

"the state-action doctrine does not insulate defendants’ agreement." Con-

tinental, 126 F. Supp. 2d at 986.

CONTINENTAL AIRLINES v. UNITED AIRLINES 7

AMC holds monthly meetings to resolve operating issues that neces-

sarily affect more than one carrier at Dulles. For example, federal law

charges all airlines with the responsibility for airport security. 14

C.F.R. § 108.5-.9 (2001). The AMC is thus responsible for the instal-

lation, maintenance, and management of security checkpoints at Dul-

les. As a member of the AMC, each airline receives one vote,

regardless of size. Thus, United, with 38 of the 120 gates (making it

the largest carrier at Dulles), and Continental, with one gate, each

have one vote on the AMC.4

After some deliberation, the AMC agreed to allow United to install

templates at the east checkpoint, through which most of United’s pas-

sengers pass, for a one-month trial period beginning December 30,

1998. The west checkpoint became congested because passengers cir-

cumvented the templates by avoiding the east checkpoint. Once the

trial period ended, the Chairman of the AMC asked United to remove

the templates. United was in the middle of changing station managers

and increasing service at Dulles and did not remove the templates

quickly. Irritated, the AMC hired a contractor to remove the templates

from the east checkpoint in June 1999; United paid for the removal.

Later in 1999, a new United station manager formally asked the

AMC to consider reinstalling baggage templates, at least at the east

checkpoint. After extensive discussion, the AMC agreed that it would

survey the twenty-six carriers eligible to vote on the issue to deter-

mine whether they favored templates and to identify any specific

areas of concern. Of the carriers responding to the survey, fifteen,

including United, favored the templates and five, including Continen-

tal, opposed the templates. The survey form instructed that failure to

return the ballot would be deemed a vote in favor of templates; in

accord with this policy, six airlines that did not respond were included

with the fifteen voting in favor of templates to make the final vote 21-

5.

4

Less than 2% of the passengers flying out of Dulles fly Continental

or Continental Express. Continental Airlines itself flies only a direct non-

stop from Dulles to Houston. Those planes are used on three trips per day

during the business week and two trips per day on weekends. Continental

Express, which flies direct, non-stop flights to Cleveland and Newark

only, does not use planes with expanded overhead bins, but allows plane-

side checking of luggage.

8 CONTINENTAL AIRLINES v. UNITED AIRLINES

One concern that surfaced both in the survey results and in subse-

quent AMC discussions was the desire not to repeat the mistakes of

the prior tests by installing templates at one checkpoint but not the

other. Deposition testimony revealed that no one participating in the

AMC template discussions, including Continental’s representative

and those of other carriers that did not favor the installation of tem-

plates, perceived that any member of the AMC voting to install tem-

plates at Dulles had an anticompetitive purpose in doing so.

The airlines met to discuss implementation of the template pro-

gram. Several airlines expressed concern that high-revenue passen-

gers not be limited by templates. The AMC focused on an alternative

system of tokens, called "medallions," that airlines could distribute to

their passengers, who would present the medallions to have the tem-

plates lifted for their bags. The AMC adopted the medallion option

as part of the template implementation. All AMC members were

asked to estimate the number of medallions they required and an ini-

tial distribution of medallions was made in proportion to each air-

line’s first-class, business-class, and full coach fare passengers. The

templates were installed at Dulles on April 15, 2000.

C.

Shortly thereafter, Continental filed this action, asserting that the

Dulles template program violated Section 1 of the Sherman Act. See

15 U.S.C.A. § 1. After filing suit, Continental distributed medallions

to its customers until it ran out of its initial supply. Thereafter, it made

no attempt to obtain more medallions. Instead, Continental had its

employees (and later contractual workers hired by Continental at a

cost of approximately $10,000 a month) lift the templates for Conti-

nental’s passengers who wished to carry on larger bags. The employ-

ees also distributed literature notifying customers that Continental

was not responsible for the "problems caused" by the template restric-

tion, attributing the decision to install templates at Dulles solely to

United (not mentioning the majority vote of the AMC), and relating

that Continental was "seeking remedies to the problems caused by

United[ ]." Continental II, 136 F. Supp. 2d at 548 n.7.

Nonetheless, the record reveals few complaints about the Dulles

templates. The Metropolitan Washington Airport Authority received

CONTINENTAL AIRLINES v. UNITED AIRLINES 9

no complaints about the templates and did not believe passengers

found them confusing. Similarly, no complaints about the templates

were lodged with the AMC. United received one written complaint

and Continental fewer than five. Northwest Airlines, which had

opposed installation of the templates, received no complaints and

found the template program worked so well that it ultimately found

distribution of medallions to be unnecessary.

Continental’s station manager testified at deposition that Continen-

tal was "able to get all customers [with oversized bags] through the

security checkpoint [by lifting the templates] with or without" the

contract workers. Continental did not reduce flights or reassign planes

as a result of the templates. Continental does not claim that the Dulles

templates or the costs of Continental’s method of dealing with them

affected any ticket price.

The district court granted summary judgment to Continental. The

court ruled that the template program constituted a horizontal restraint

on output with "manifest" anticompetitive impact, and so required no

further proof of anticompetitive effects. Continental, 126 F. Supp. 2d

at 977. Although antitrust law would ordinarily condemn joint

restraints on output as illegal per se, because airlines must cooperate

at airports, the district court determined to employ a "quick-look"

analysis. Id. at 976, 978. Accordingly, the court examined each

asserted procompetitive justification for the template program —

safety, timely departures, and passenger comfort. Id. The court

rejected all three, finding "no record support" for the proposition that

the template program "promote[d] competition among carriers" in any

way. Id. at 979. Having found anticompetitive impact with no

redeeming procompetitive justifications, and thus having found an

antitrust violation, the district court ruled that Continental had suf-

fered antitrust injury. Id. at 982-84. After another hearing, the court

awarded Continental $254,426.85 in trebled damages for its costs in

hiring employees to lift the templates, and enjoined United and the

AMC from using templates at Dulles. Continental II, 136 F. Supp. 2d

at 552-53.

We review a district court’s award of summary judgment de novo.

M & M Med. Supplies & Serv., Inc. v. Pleasant Valley Hosp., 981

F.2d 160, 163 (4th Cir. 1992). "The evidence of the nonmovant[s] is

10 CONTINENTAL AIRLINES v. UNITED AIRLINES

to be believed, and all justifiable inferences are to be drawn in [their]

favor." Anderson v. Liberty Lobby, 477 U.S. 242, 255 (1986). If after

examining the entire record, in light of the controlling legal princi-

ples, a reviewing court concludes that material facts remain genuinely

disputed, it must hold the grant of summary judgment improper. See,

e.g., Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451,

477-78 (1992). We turn now to those controlling legal principles and

then to their application to the above facts.5

II.

Section 1 of the Sherman Act prohibits "[e]very . . . combination

in restraint of trade." 15 U.S.C.A. § 1. The Supreme Court, however,

long ago established that Section 1 only outlaws restraints that are

"unreasonably restrictive of competitive conditions." Standard Oil

Co. v. United States, 221 U.S. 1, 58 (1911). Thus, to prevail on a

claim that a horizontal restraint, an agreement among competitors,

violates Section 1, a plaintiff must prove that the restraint is unreason-

able. A plaintiff cannot prove the unreasonableness of a restraint

merely by showing that it caused economic injury. Rather, because

"[t]he antitrust laws were enacted for the protection of competition,

not competitors," a plaintiff must show that the net effect of a chal-

lenged restraint is harmful to competition. Atlantic Richfield Co. v.

USA Petroleum Co., 495 U.S. 328, 338 (1990) (citation and emphasis

omitted). A proven antitrust violation is a necessary predicate to

recovery of antitrust damages. Lee-Moore Oil Co. v. Union Oil Co.,

599 F.2d 1299, 1306 (4th Cir. 1979); see also Atlantic Richfield, 495

U.S. at 339-41; Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429

U.S. 477, 489 (1977).

Having proven an antitrust violation, an antitrust plaintiff seeking

damages must show an injury "of the type the antitrust laws were

intended to prevent and that flows from that which makes defendants’

acts unlawful." Id. Lost profits and the costs of finding alternatives to

5

Although we are "mindful" that United and AMC’s "version of any

disputed issue of fact . . . is presumed correct," Eastman Kodak, 504 U.S.

at 456, we have included above some facts that Continental proffers and

United and AMC dispute in order to give the reader a better understand-

ing of the issues in controversy.

CONTINENTAL AIRLINES v. UNITED AIRLINES 11

mitigate the damages caused by an antitrust violation may constitute

antitrust injury. Lee-Moore Oil Co., 599 F.2d at 1304-06.

In determining whether a plaintiff has proved that a horizontal

agreement violates Section 1, the Supreme Court has authorized three

methods of analysis: (1) per se analysis, for obviously anticompetitive

restraints, (2) quick-look analysis, for those with some procompetitive

justification, and (3) the full "rule of reason," for restraints whose net

impact on competition is particularly difficult to determine. The

boundaries between these levels of analysis are fluid; "there is gener-

ally no categorical line to be drawn between restraints that give rise

to an intuitively obvious inference of anticompetitive effect and those

that call for more detailed treatment." California Dental Ass’n v. FTC,

526 U.S. 756, 780-81 (1999). Instead, the three methods are best

viewed as a continuum, on which the "amount and range of informa-

tion needed" to evaluate a restraint varies depending on how "highly

suspicious" and how "unique" the restraint is. See 11 Herbert

Hovenkamp, Antitrust Law ¶ 1911a (1998); see also California Den-

tal, 526 U.S. at 779-81. In all cases, however, "the criterion to be used

in judging the validity of a restraint on trade is its impact on competi-

tion." NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 104

(1984).

The first approach, per se analysis, permits courts to make "cate-

gorical judgments" that certain practices, including price fixing, hori-

zontal output restraints, and market-allocation agreements, are illegal

per se. Northwest Wholesale Stationers, Inc. v. Pac. Stationery &

Printing Co., 472 U.S. 284, 289 (1985); see also NCAA, 468 U.S. at

100. Practices suitable for per se analysis have been found over the

years to "be one[s] that would always or almost always tend to restrict

competition and decrease output," and that are not "designed to

increase economic efficiency and render markets more, rather than

less, competitive." Broad. Music, Inc. v. CBS, 441 U.S. 1, 19-20

(1979) (citations omitted) (hereafter BMI). Such restrictions "have

such predictable and pernicious anticompetitive effect, and such lim-

ited potential for procompetitive benefit, that they are deemed unlaw-

ful per se" without any need to conduct a detailed study of the

markets on which the restraints operate or the actual effect of those

restraints on competition. State Oil Co. v. Khan, 522 U.S. 3, 10

(1997).

12 CONTINENTAL AIRLINES v. UNITED AIRLINES

At the other end of the spectrum, if the reasonableness of a restraint

cannot be determined without a thorough analysis of its net effects on

competition in the relevant market, courts must apply a full rule-of-

reason analysis. See Oksanen v. Page Mem’l Hosp., 945 F.2d 696,

709 (4th Cir. 1991). In such cases a plaintiff "must prove what market

. . . was restrained and that the defendants played a significant role

in the relevant market" because "[a]bsent this market power, any

restraint on trade created by defendant’s action is unlikely to impli-

cate" Section 1. Id. The required analysis varies by case and may

extend to a "plenary market examination," California Dental, 526

U.S. at 779, covering "the facts peculiar to the business, the history

of the restraint, and the reasons why it was imposed," Nat’l Soc’y of

Prof’l Eng’rs v. United States, 435 U.S. 679, 692 (1978), as well as

the availability of reasonable, less restrictive alternatives. NCAA, 468

U.S. at 106, 114; BMI, 441 U.S. at 20-23.

Sometimes, the anticompetitive impact of a restraint is clear from

a quick look, as in a per se case, but procompetitive justifications for

it also exist. Such intermediate cases may "involve[ ] an industry in

which horizontal restraints on competition are essential if the product

is to be available at all," NCAA, 468 U.S. at 101, or in which a hori-

zontal restraint otherwise plausibly "increase[s] economic efficiency

and renders markets more, rather than less, competitive." BMI, 441

U.S. at 20 (citation omitted). For these cases, "abbreviated or ‘quick-

look’ analysis" fills in the continuum between per se analysis and the

full rule of reason. California Dental, 526 U.S. at 770.

The Supreme Court, in California Dental, recently explained and

illustrated at some length the subtlety that the quick-look analysis

may require. The Court emphasized that even when a court eschews

a full rule-of-reason analysis and so forgoes detailed examination of

the relevant market, it must carefully consider a challenged restric-

tion’s possible procompetitive justifications. Id. at 773-75.

In California Dental, the Court reviewed a decision of the Ninth

Circuit, which had applied quick-look analysis to FTC factual find-

ings based on a full evidentiary record. California Dental Ass’n v.

FTC, 128 F.3d 720, 726-30 (9th Cir. 1997). An association of dentists

had restricted its members’ advertising, banning claims of superior

quality and imposing such detailed disclosure requirements for price

CONTINENTAL AIRLINES v. UNITED AIRLINES 13

advertisements that dentists effectively could not advertise "across the

board discounts" or even "low" or "affordable" prices. Id. at 723-24.

The Ninth Circuit accepted that the advertising restrictions had obvi-

ous anticompetitive effects, because they reduced the price informa-

tion available to consumers. Id. at 727-28. The appeals court limited

its analysis to determining whether the proffered justifications for the

restrictions had any procompetitive effect, and rejected those justifi-

cations because of an asserted lack of record support for them. Id. at

728 (finding "no evidence that the rule has in fact led to increased dis-

closure and transparency of dental pricing").

The Supreme Court vacated the Ninth Circuit’s analysis as too cur-

sory. Ordinarily, advertising restrictions could be expected to harm

competition, but the challenged restrictions affected a market for pro-

fessional services, in which patients typically have much less infor-

mation about the quality of service than the professionals who serve

them. 526 U.S. at 771-73. The high court instructed that although

quick-look analysis does "carr[y] the day when the great likelihood of

anticompetitive effects can easily be ascertained," a quick look, or at

least the kind of quick look employed by the Ninth Circuit, does not

suffice if a challenged restraint "might plausibly be thought to have

a net procompetitive effect, or possibly no effect at all on competi-

tion." Id. at 770, 771. Only if "an observer with even a rudimentary

understanding of economics could conclude that the arrangements in

question would have an anticompetitive effect on customers and mar-

kets" would summary review like that conducted by the Ninth Circuit

be proper. Id. at 770. Otherwise, determination of a restraint’s impact

on competition "call[s] for more than cursory treatment." Id. at 773.

"What is required . . . is an enquiry meet for the case, looking to the

circumstances, details, and logic of a restraint." Id. at 781. Because

the Ninth Circuit failed to provide this, the Supreme Court vacated its

judgment and remanded the case for further proceedings. Id.

In quick-look cases involving plausible procompetitive justifica-

tions, which require "more than cursory treatment" of "question[s]

susceptible to empirical but not a priori analysis," id. at 773, 774, a

full record may often be necessary.6 Certainly courts have been wary

6

We recognize, of course, that summary judgment can be appropriate

in antitrust cases. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

14 CONTINENTAL AIRLINES v. UNITED AIRLINES

of summary judgment in the context of quick-look analysis. In fact,

the parties have not cited, and we have not found, a single case in

which the Supreme Court has approved a quick-look analysis in

which the parties received less than a full evidentiary hearing, either

before an administrative agency or in court. See FTC v. Indiana Fed’n

of Dentists, 476 U.S. 447, 451 (1986); NCAA, 468 U.S. at 88; Nat’l

Soc’y of Prof’l Eng’rs, 435 U.S. at 685-86; see also California Den-

tal, 526 U.S. at 762-63.

These principles govern our examination of the case at hand. For

the reasons that follow, we believe that application of them to the

facts of this case requires that we vacate the district court’s judgment.

In a nutshell, although the district court demonstrated mastery of

many intricacies of antitrust law, it performed too quick an analysis

on an insufficiently developed factual record.

III.

In several ways, the district court’s approach resembles that of the

Ninth Circuit in California Dental.

Like the Ninth Circuit, the district court applied quick-look analy-

sis because it accepted that the challenged restraint had obvious anti-

competitive effects. Compare California Dental, 128 F.3d at 727

(finding "a fairly naked restraint" (citation omitted)), with Continen-

tal, 126 F. Supp. 2d at 977 (finding "manifest" anticompetitive

effects). Then, again like the Ninth Circuit, the district court deter-

mined that the proffered procompetitive justifications for the alleged

restraint were implausible because of a perceived lack of record sup-

475 U.S. 574, 582, 588 (1986) (holding that summary judgment was

properly granted after years of detailed discovery where plaintiffs’

predatory-pricing theory was "economically irrational and practically

infeasible"). But "[l]egal presumptions that rest on formalistic distinc-

tions rather than actual market realities are generally disfavored." East-

man Kodak, 504 U.S. at 466-67. The Supreme Court has resisted the

argument that such presumptions should replace factual findings, prefer-

ring to "resolve antitrust claims on a case-by-case basis, focusing on the

‘particular facts disclosed by the record.’" Id. at 467 (citing numerous

cases).

CONTINENTAL AIRLINES v. UNITED AIRLINES 15

port for those justifications. Compare California Dental, 128 F.3d at

728 ("[T]he record provides no evidence that [the restraint] has, in

fact, led to increased [procompetitive effects]."), with Continental,

126 F. Supp. 2d at 979 ("There is no record support for the proposi-

tion that an agreement to standardize carry-on baggage size . . . pro-

motes competition.").

In California Dental, even though the lower court relied on fact-

finding based on a fully developed record, the Supreme Court vacated

the Ninth Circuit’s judgment rejecting procompetitive justifications

because the appeals court failed to "scrutinize the assumption of rela-

tive anticompetitive tendencies." 526 U.S. at 781. Here, given the

similar difficulty in the district court’s analysis, rendered on summary

judgment without any fact-finding, we too must vacate the district

court’s judgment.

Specifically, in holding the proffered procompetitive justifications

for the template program "implausible," the district court underesti-

mated the significance of some undisputed material facts and wrongly

ruled that other genuine disputes were immaterial.7 We discuss each

problem in turn.

A.

Although the district court properly noted that airlines must coop-

erate to share airports, rejecting per se analysis on that basis, Conti-

nental, 126 F. Supp. 2d at 976, it failed to recognize the extent to

which Dulles’s indisputably unique architectural configuration

requires careful consideration of the template program’s competitive

effect.

7

That both sides moved for summary judgment does not establish the

absence of material factual disputes. Cross motions for summary judg-

ment neither "establish the propriety of deciding a case on summary

judgment," Columbia Union College v. Clarke, 159 F.3d 151, 168 (4th

Cir. 1998), nor "establish that there is no issue of fact requiring that sum-

mary judgment be granted to one side or another." Id., citing World-Wide

Rights Ltd. P’ship v. Combe, Inc., 955 F.2d 242, 244 (4th Cir. 1992)

(internal quotation marks and citations omitted).

16 CONTINENTAL AIRLINES v. UNITED AIRLINES

At Dulles, all embarking passengers on all airlines must pass

through one of two common security checkpoints, and (because of the

congestion problem revealed if templates are installed at just one

checkpoint) the two checkpoint locations cannot vary in their treat-

ment of carry-on baggage. Unlike other airports, Dulles cannot use

multiple checkpoints to permit variety in its many airlines’ treatment

of carry-on baggage. In other words, Dulles’s checkpoints constitute

a single "bottleneck facility that [can]not feasibly be duplicated," and

therefore "must be shared among rivals." Paddock Publ’ns, Inc. v.

Chicago Tribune Co., 103 F.3d 42, 45 (7th Cir. 1996). Absent an effi-

cient way to differentiate among various airlines’ passengers at the

checkpoints, but see Part IV, the x-ray machines at the checkpoints

must have mouths of some uniform size, and the airlines must cooper-

ate in determining that size: either small, as United and the AMC pre-

fer, or larger, as Continental prefers.

Of course, although operation of the x-ray machines themselves

require cooperation, security concerns do not require the airlines to

cooperate on the use of templates or justify the airlines’ agreement to

do so. See 14 C.F.R. §§ 108.5-.9 (2001); see generally 11 Herbert

Hovenkamp, Antitrust Law § 1906. Templates are not security

devices, and no one in this litigation even contends that the need for

the airlines to cooperate on security justifies the Dulles template pro-

gram.8 Cf. NCAA, 468 U.S. at 114 ("[I]t cannot be said that ‘the agree-

8

In fact, according to FAA commentary, airlines’ carry-on programs

are "required to include at least one baggage control point located outside

the airplane (but not located at the passenger security screening point)."

Carry-On Baggage Program, 52 Fed. Reg. at 21,473; see also 14 C.F.R.

§ 121.589(a) (noting requirement of "an approved carry-on baggage pro-

gram"); Carry-On Baggage Program, 51 Fed. Reg. 19,134, 19,136 (May

27, 1986) (noting that an approved program "would encompass" a

baggage-control point not at the checkpoint). Neither the FAA nor the

parties attempt any explanation of this requirement; apparently, it man-

dates that each airline institute "at least one baggage control point . . .

outside the airplane" that is not "located at the passenger screening

point," but does not prohibit additional "baggage control point[s]" at the

"passenger screening points." Thus, Continental does not contend that the

FAA bars use of the templates at "security screening points" and we have

found nothing in FAA regulations prohibiting this. Indeed, the FAA has

apparently not opposed the installation of templates at security screening

points in many airports throughout the country.

CONTINENTAL AIRLINES v. UNITED AIRLINES 17

ment on price is necessary to market the product at all.’" (citation

omitted)). But unless an efficient way to differentiate among the pas-

sengers of different airlines emerges, Dulles’s unique architecture

does force all of its airlines to cooperate on a single decision as to the

use of templates. When the economic implications of physical or geo-

graphical limitations require coordination among competitors, the

Supreme Court has long applied Section 1 of the Sherman Act with

flexibility.

More than ninety years ago, the Court considered a railroad termi-

nal in which the "geographical and topographical situation" required

all railroad companies passing through the city to use one terminal,

just as all airline passengers may have to pass through one type of

security checkpoint at Dulles. United States v. Terminal R.R. Ass’n,

224 U.S. 383, 397 (1912). The Court held that because of the unique

configuration of the railroad terminus, competing railway companies

could legally combine (indeed, were legally required to do so) to con-

trol the facility. Here, if the airlines did not have to share the check-

points — if Continental had a security checkpoint at Dulles that

served only its passengers — Section 1 would not permit the AMC

to require it to use templates. However, as in Terminal Railroad Asso-

ciation, the presence of unique architectural constraints requires flexi-

bility in applying Section 1.9

Moreover, beyond the general need for greater cooperation at Dul-

les than at other airports, United and Continental each make a more

specific claim, related to Dulles’s unique configuration, as to why

their respective preferred outcomes benefit competition. Each argues

that only a uniform policy in accordance with its preference will make

possible an entire service that would not otherwise be available at

Dulles: assertedly, Continental must win to offer flights with carry-on

9

We note that in Terminal Railroad Association, physical alternatives

such as construction of another bridge were theoretically possible, but

would apparently not have been economically efficient. See 13 Herbert

Hovenkamp, Antitrust Law § 2221b1 (1999) (noting "[g]reat economies

result[ing] from the fact that a single channel existed for bringing rail-

road traffic . . . into and through St. Louis"). Here, the nature and eco-

nomic efficiency of a number of proposed alternatives to the template

program may require resolution on remand. See Part IV.

18 CONTINENTAL AIRLINES v. UNITED AIRLINES

largesse, and United must win to offer flights with carry-on rigor. The

district court may ultimately have to choose between two procompeti-

tive claims; either outcome would both help and hurt competition, and

which helps competition more than the other may be far from plain.

See Part IV.

In such a situation, the Supreme Court has advised that a fuller

examination is necessary. In California Dental, too, the context of the

restraint plausibly had a similar mixed effect on competition. Ordinar-

ily, the restraint at issue — advertising restrictions — hurts competi-

tion, but the restrictions in California Dental occurred in a

"professional context," 526 U.S. at 774, a market in which patients

had much less information on the quality of service than their dentists

had. At bottom, the restrictions’ net impact on the information avail-

able to patients was unclear. Accordingly, the restraint’s net effect

could not be determined — it might even have been nil. Id. at 778.

The Supreme Court simply could not be sure how such a restraint

would affect competition.

We have a similar difficulty. Here also, the context in which the

restraint operates — an airport with unique features — makes it possi-

ble that the restraint yields both positive and negative effects on com-

petition. Because the airlines must share the checkpoints, a decision

that aids one airline’s service may necessarily hamper another’s.

Therefore, without additional analysis, it is as difficult for us as it was

for the Supreme Court in California Dental to determine the nature

of the challenged restraint’s net effect on competition. The district

court’s failure to give careful consideration to Dulles’ unique archi-

tecture when it examined the templates’ impact on competition thus

requires us to vacate its judgment.

B.

The district court also erred in ruling that factual disputes over the

proffered procompetitive justifications for the templates — improved

on-board safety, more timely departures, and a better on-board experi-

ence for passengers — were immaterial. The court recognized the

existence of genuine factual disputes as to the justifications, but mis-

calculated in ruling that they were not material. The district court con-

cluded that "the flying public wants . . . sufficient onboard carry-on

CONTINENTAL AIRLINES v. UNITED AIRLINES 19

storage capacity and flexible carry-on policies," and that United’s "at-

tendant incidental" problems with safety, timeliness, and passenger

comfort only occurred because United had failed to meet that desire.

Continental, 126 F. Supp. 2d at 980. Even if the templates did

improve safety, timeliness, and comfort, they were not procompetitive

because, according to the district court, customers preferred that such

problems be solved through generous carry-on policies like that of

Continental. Thus in the district court’s view, the proffered justifica-

tions for the templates were, as a matter of law, not "plausible or

material." Id. at 981.

Again, the district court’s rationale resembles the Ninth Circuit’s

in California Dental. The Ninth Circuit found no record evidence that

the challenged restrictions had the asserted positive effects, and fur-

ther suggested that they were unlikely to have such effects. California

Dental, 128 F.3d at 728. Here, the district court recognized a dispute

as to whether the templates had the asserted positive effects, but ruled

that even if so, there was "no record support for the proposition" that

achieving safety, timeliness, and comfort through templates "pro-

mote[d] competition." Continental, 126 F. Supp. 2d at 979. In

essence, each court dismissed the proffered procompetitive justifica-

tions because it found them implausible. Compare California Dental,

128 F.3d at 728, with Continental, 126 F. Supp. 2d at 979-81. The

Supreme Court held that the "plausibility of competing claims" as to

the effect of the challenged restriction — that is, the possibility that

the restriction might have procompetitive effects or no effect at all —

"rule[d] out the indulgently abbreviated review" of the Ninth Circuit.

526 U.S. at 778. So it is here.

Review of the record in this case simply does not support the con-

clusion that the proffered justifications for the template program are,

as a matter of law, implausible. Rather, the record reveals factual dis-

putes as to whether the proffered justifications plausibly enhance

competition. Continental has, to be sure, offered evidence indicating

that these justifications are illusory. But United has submitted evi-

dence that a size restriction on carry-on luggage can improve on-

board safety, on-time takeoffs, and passengers’ flying experience, and

that templates increase its efficiency in offering a new output, a ser-

vice with these improved features. Moreover, evidence in the record,

including studies by both airlines, also supports the view that some

20 CONTINENTAL AIRLINES v. UNITED AIRLINES

customers value and have sought such benefits, achieved by restrict-

ing carry-on baggage, including by the use of templates. See also

Carry-On Baggage Program, 52 Fed. Reg. at 21,472, 21,473.

Given this record, we cannot conclude that these justifications are

indisputably implausible. Like the advertising restrictions at issue in

California Dental, installation of templates at Dulles might "plausibly

be thought to have a net procompetitive effect, or possibly no effect

at all." 526 U.S. at 771.

IV.

In addition to its dismissal of the templates’ possible procompeti-

tive justifications, which mirrors the Ninth Circuit action that the

Supreme Court disapproved in California Dental, the district court

erred in a more fundamental respect. It failed to recognize that the

parties genuinely disputed whether, given the lifting and medallion

alternatives, the template program actually restrained trade, i.e.,

whether the program actually restricted Continental’s carry-on ser-

vice. Continental offered evidence that even with medallions and lift-

ing, some of its passengers were unable to avoid the templates. But

United offered evidence to the contrary including the fact that no

other airline found the medallion solution inadequate and the testi-

mony of Continental’s general manager at Dulles that, after installa-

tion of the templates, Continental was still able "to get all customers"

with oversized bags to its gate. On this record, there is thus a genuine

dispute as to whether the template program affected the ability of any

Continental passenger to proceed directly to the gate with all desired

carry-on baggage. The district court overlooked not just the existence

but the central importance of this dispute: If all of Continental’s pas-

sengers reached the gate with all desired luggage, Continental has not

shown a restraint of trade.

The district court only addressed the lifting and medallion options

in finding that Continental had demonstrated antitrust injury. We

agree with the district court that Continental unquestionably incurred

costs in supplying labor to lift the templates for its passengers.10 We

10

As for the medallions, the district court originally ruled that they pro-

vided no solution for "low yield" Continental passengers, and thus that

CONTINENTAL AIRLINES v. UNITED AIRLINES 21

further agree that if related to a violation of the antitrust laws, those

costs would "flow[ ] from that which makes defendants’ acts unlaw-

ful" under the Sherman Act, Brunswick Corp., 429 U.S. at 489, and

would be recoverable as mitigation damages. Continental, 126 F.

Supp. at 983, citing Lee-Moore, 599 F.2d at 1306. But whether there

was a violation of the antitrust laws is very much in dispute. The par-

ties disagree as to whether the template program prevented Continen-

tal passengers from bringing their desired luggage to the gate. If it is

proved that the program did not do this, then the template program

did not affect trade by restraining output.

If Continental cannot show any effect on price or output, then it has

shown only that it incurred costs in hiring people to lift the templates.

Those costs may establish a presumption that Continental lost profits

when its costs rose with no corresponding increase in revenue. Conti-

nental II, 136 F. Supp. 2d at 545-46. But to be recovered as antitrust

damages, a competitor’s loss of profits must "stem[ ] from a

competition-reducing aspect or effect of the defendant’s behavior,"

Atlantic Richfield, 495 U.S. at 344 (original emphasis deleted), that

is, from "acts that reduce output or raise prices to consumers." Chi-

cago Prof’l Sports Ltd. P’ship v. NBA, 961 F.2d 667, 670 (7th Cir.

1992); see also Bd. of Trade of Chicago v. United States, 246 U.S.

231, 240 (1918) (noting that the challenged restraint had not affected

price or reduced output, and that it might have increased output); cf.

Continental suffered antitrust injury despite the medallions. Continental,

126 F. Supp. 2d at 982-83. The court invited the defendants to "seek

reconsideration of [its] ruling" if they cold produce evidence to the con-

trary. Id. at 982 n.53. United did seek reconsideration and offered evi-

dence that the medallions were fully available to all passengers of any

airline that wished to use them. The court never resolved the resulting

factual dispute, but instead apparently concluded that in any event,

medallions presented no solution, because passengers would have to wait

at Continental’s ticket counter to obtain the medallions. Continental II,

136 F. Supp. 2d at 551. The factual basis for this conclusion is unclear;

the district court cites none and Continental refers only to a single affida-

vit of one of its managers, created after the district court issued its initial

opinion. Given the sparseness of this evidence, we believe the district

court erred in implicitly concluding as a matter of law that even if the

medallions were available to all Continental passengers, Continental

could not continue to provide its service. See id.

22 CONTINENTAL AIRLINES v. UNITED AIRLINES

Brunswick Corp., 429 U.S. at 489 (noting that antitrust injury "should

reflect the anticompetitive effect either of the violation or of anticom-

petitive acts made possible by the violation"). Thus, Continental can-

not recover its costs of hiring template lifters unless it can

demonstrate that the template program had any anticompetitive effect,

something it has not yet done.

Before concluding, we note that we recognize the seeming unfair-

ness in "punishing" Continental for perhaps finding a way in which

its passengers could avoid the templates. Of course, "[a]n antitrust

plaintiff is not obliged to pursue any imaginable alternative, regard-

less of cost or efficiency, before it can complain that a practice has

restrained competition." CBS, Inc. v. ASCAP, 620 F.2d 930, 936 (2d

Cir. 1980) (on remand from BMI, 441 U.S. 1). However, a market

innovation "does not restrain trade if an alternative opportunity . . .

is realistically available." Buffalo Broad. Co. v. ASCAP, 744 F.2d

917, 925 (2d Cir. 1984) (citation omitted). Whether an alternative is

"realistic[ ]" depends on its cost. Id. at 926. Here the antitrust plaintiff

— Continental — may have come up with a fully effective alterna-

tive, the cost of which apparently did not affect ticket prices. The tem-

plates are not "a restraint unless it were proven that there are no

realistically available alternatives." Id. at 933.

The Supreme Court’s consideration of alternatives in BMI guides

the proper analysis of alternatives here. In that case, the challenged

restraint added an entirely new good, a blanket license to perform

multiple pieces of music, to the market, without eliminating the goods

that had previously been available, individual licenses to perform sin-

gle pieces of music. BMI, 441 U.S. at 21-24. The Court accepted the

restraint’s potential legitimacy, because permitting the challenged

restraint offered "real choice." Id. at 24; cf. NCAA, 468 U.S. at 106

(considering whether a "real choice" was available). Here, United

argues, and the facts may show, that only templates permit United to

add an entire service to the market, as in BMI.

Unlike the situation in BMI, however, here the same argument

weighs on the other side as well, complicating the problem. Continen-

tal argues, and the facts may show, that the addition of United’s ser-

vice would simultaneously eliminate Continental’s own entire service.

If neither side is able to offer its service through an efficient alterna-

CONTINENTAL AIRLINES v. UNITED AIRLINES 23

tive, the district court may thus have to balance the relative contribu-

tions to competition of the two services. See Continental, 126 F.

Supp. 2d at 981 n.52 (discussing United’s alternatives); 13 Herbert

Hovenkamp, Antitrust Law § 2132d. "[E]ven efficient ventures may

. . . be organized in alternative ways that will reduce dangers to com-

petition." 13 Herbert Hovenkamp, Antitrust Law § 2100c; see also 11

Herbert Hovenkamp, Antitrust Law, § 1912i.

The district court will have an opportunity to consider the issues

we have discussed on a full record. Of course, the resolution of some

disputes could obviate the need to reach others. Given the multiple

factual disputes at present, we express no view as to which issues the

district court may need to reach, let alone what their outcomes might

be. We merely rule that "we cannot reach these conclusions as a mat-

ter of law on a record this sparse." Eastman Kodak, 504 U.S. at 486.

V.

For all of these reasons, we vacate the judgment of the district

court granting summary judgment, damages, and an injunction in

favor of Continental, and remand the case for further proceedings

consistent with this opinion. We leave to the district court the "ques-

tion whether on remand it can effectively assess" the alleged restraint

by a modified quick-look analysis, or whether it must undertake "a

more extensive rule-of-reason analysis." California Dental, 526 U.S.

at 768 n.8; see also California Dental, 224 F.3d 942, 947 & n.2 (9th

Cir. 2000) (on remand from California Dental, 526 U.S. 756).

VACATED AND REMANDED