Roy B. Taylor Sales, Inc. v. Hollymatic Corp.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 93-1211

ROY B. TAYLOR SALES, INC.,

Plaintiff-Appellee,

versus

HOLLYMATIC CORPORATION,

Defendant-Appellant.

Appeal from the United States District Court

for the Northern District of Texas

(August 3, 1994)

Before GOLDBERG, HIGGINBOTHAM, and EMILIO M. GARZA, Circuit Judges.

HIGGINBOTHAM, Circuit Judge:

Roy B. Taylor Sales, Inc., a dealer of hamburger patty

machines and patty paper, sues its supplier, Hollymatic

Corporation, a manufacturer of patty products. Taylor alleges that

Hollymatic violated the antitrust laws by requiring Taylor to

purchase patty paper as a condition to purchasing patty machines.

A Texas jury found that Hollymatic illegally tied the products in

violation of § 1 of the Sherman Act1 and § 3 of the Clayton Act,2

that Hollymatic conspired with its paper supplier, Bomarko

Corporation, to restrain trade in violation of § 2 of the Sherman

1

15 U.S.C. § 1.

2

15 U.S.C. § 14.

Act,3 and that Hollymatic established or attempted to establish a

monopoly in violation of § 1 of the Sherman Act.4 The district

court trebled the jury's award and entered judgment for Taylor. We

find insufficient evidence of either a threat or injury to

competition and reverse.

I.

Roy B. Taylor Sales, Inc., sells and services food handling

equipment and supplies. Hollymatic Corporation manufactures food

processing equipment and related products, including machines for

making hamburger patties and paper for handling hamburger patties.

Bomarko Corporation supplies Hollymatic with paper goods to make

patty paper.

Taylor began selling Hollymatic products in 1970 subject to an

agreement requiring Taylor not to stock or sell the merchandise of

Hollymatic's competitors. The parties forged a different agreement

in 1979 requiring Taylor to make its "best efforts" to promote,

sell, and service the full line of Hollymatic products. Taylor

alleges that while the 1979 agreement did not formally prohibit

Taylor from selling products other than Hollymatic's, Hollymatic

informally maintained the requirement. Taylor claims that

Hollymatic required Taylor, and other dealers and distributors, to

purchase exclusively Hollymatic patty paper as a condition for the

purchase of patty machines.

3

15 U.S.C. § 2.

4

15 U.S.C. § 1.

2

According to Taylor, Hollymatic and Bomarko conspired to

resist a decline in patty paper prices. Taylor suggests that

Hollymatic could sustain prices above the market rate for patty

paper because dealers and consumers were dependent on Hollymatic

for supplying and servicing its patty machines. Taylor further

alleges that Hollymatic offered rebates on patty paper only to some

customers. Taylor sought such rebates, but claims that it received

only a slight reduction in price in one instance and that it was

refused any reduction in others.5 After selling no patty paper

other than Hollymatic's for years, Taylor began in 1988 to purchase

a substitute.

Hollymatic officials confronted Taylor's president, Ronnie

Taylor, in 1990 about Taylor's decreased demand for Hollymatic's

product. When Mr. Taylor acknowledged purchasing patty paper from

another company, Hollymatic expressed an intention to end the

relationship with Taylor. Taylor offered to sell only Hollymatic

patty paper in the future and Hollymatic responded with a new

agreement that would result in probation rather than termination.

After the parties failed to come to terms over the amount of patty

paper that Taylor would purchase each month, Hollymatic severed

relations.

Taylor adduced statements made by Hollymatic executives

indicating a policy of requiring dealers to purchase exclusively

Hollymatic patty paper as a condition for purchasing other

5

Taylor does not claim that Hollymatic used the tie to

effect price discrimination in violation of the Robinson-Patman

Act. See 15 U.S.C. § 13, et seq.

3

Hollymatic products, and evincing an intent to make an example of

Taylor for failing to abide by that requirement. Hollymatic in

turn acknowledges that its dissatisfaction with Taylor stemmed in

part from Taylor's decision not to purchase patty paper from

Hollymatic beginning in 1988. Indeed, Hollymatic also accuses

Taylor of purchasing "counterfeit" Hollymatic spare parts.

Nevertheless, Hollymatic claims that its termination in 1990 of its

relationship with Taylor was not a response to Taylor selling the

products of other companies.

Taylor seeks damages for the loss of profits it suffered in

the five years subsequent to Hollymatic's cessation of business

relations. Taylor asserted at trial that it could have made

profits of approximately $80,000 each year for a present value

total of roughly $370,000. Taylor acknowledged that, after a lapse

of five years, it could recover from the loss of Hollymatic's

product line. The jury found for Taylor and awarded $296,662.60 in

damages, trebled as a matter of law to $889,987.80.6

6

Hollymatic appeals the district court's denial of its

motion to dismiss Taylor's complaint, its motion for summary

judgment, its motion for judgment as a matter of law, its renewed

motion for judgment as a matter of law, and its motion for a new

trial. See Fed. R. Civ. P. 12(b)(6), 56, 50(a), 50(b), and 59(a).

As a jury ruled on the evidence at trial, we need not consider

whether at any given stage Hollymatic might have prevailed. We

assess instead the propriety of the jury verdict. See, e.g.,

Bealmer v. Texaco, Inc., 427 F.2d 885, 886 (9th Cir.), cert.

denied, 400 U.S. 926 (1970) (refusing to entertain appeal of denial

of summary judgment after final resolution of case). Compare

Savarin Corporation v. National Bank of Pakistan, 447 F.2d 727, 732

(2d Cir. 1971) (entertaining challenge of denial of summary

judgment after final resolution of case) with Glaros v. H.H.

Robertson Co., 797 F.2d 1564, 1573 (Fed.Cir. 1986) (criticizing

Savarin and refusing to entertain appeal of denial of summary

judgment).

4

II.

Hollymatic argues that insufficient evidence supported the

jury's finding of a tie. Hollymatic also contends that the

evidence did not support the conclusion that Hollymatic threatened,

or caused the kind of harm, to competition necessary for an

antitrust violation. We do not pause over the question of whether

there was a tie because we conclude that, assuming there was one,

Taylor failed to prove that it was illegal.7 We also conclude that

the insufficiency of the evidence is fatal to Taylor's alternative

theories.

A.

Taylor does not claim that Hollymatic limited the choices

available to consumers. Hollymatic required Taylor, a dealer, to

provide only Hollymatic patty paper. Customers purchasing patty

machines from Taylor remained free to buy paper elsewhere. Only

Hollymatic provides support only for the contention that it

may appeal the district court's denial of its Rule 12(b)(6) and

summary judgment motions. Hollymatic cites two cases in which we

entertained interlocutory appeals of, respectively, denial of a

motion for summary judgment and of a motion under Rule 12(b)(6),

both requested on the basis of qualified immunity. See Spann v.

Rainey, 987 F.2d 1110, 1112 (5th Cir. 1993); Jackson v. Beaumont

Police Dept., 958 F.2d 616, 618 (5th Cir. 1992). Qualified

immunity provides a rare exception to the general rule that we will

not address on appeal a denial of summary judgment. Hollymatic

offers no grounds for entertaining appeals of motions denied prior

to the jury's verdict in cases that do not involve qualified

immunity.

7

We review the evidence to determine whether a reasonable

jury could have found for Taylor. R.D. Imports Ryno Indus. v.

Mazda Distrib., 807 F.2d 1222, 1224 (5th Cir.), cert. denied, 484

U.S. 818 (1987). Hollymatic also contends that the district court

committed reversible error in instructing the jury. We do not

address this issue because we rule for Hollymatic on other grounds.

5

Taylor was bound. As we examine Taylor's complaints about this

restriction, we must keep in mind that the antitrust laws protect

competition, not competitors.8 Ultimately, the consumer is the

beneficiary.

An illegal tie may be shown by proof that the tying firm

"exert[s] sufficient control over the tying market . . . to have a

likely anticompetitive effect on the tied market."9 This is

sometimes described as "per se" illegality. This label makes sense

when describing price fixing or horizontal market division, but is

confusing here because it insists on an inquiry into market power

as a predicate to "per se" illegality.

This odd use of the term "per se" is descriptive of a rule

located between a per se and a rule of reason inquiry. The best

that can be said for it is that it reflects the intermediate danger

tying arrangements pose to the market: unlike other "per se"

illegal arrangements, "not every refusal to sell two products

separately can be said to restrain competition."10 Rather, there

must be proof "as a threshold matter . . . [of] a substantial

8

See Brown Shoe Co. v. United States, 370 U.S. 294, 320

(1962) (antitrust laws provide "protection of competition, not

competitors."); Continental T. V., Inc. v. GTE Sylvania, Inc., 433

U.S. 36, 53 n.21 (1977) (antitrust jurisprudence deals primarily

with "market considerations," not with "restrictions on the

autonomy of independent businessmen").

9

Breaux Bros. Farms v. Teche Sugar Co., 21 F.3d 83, 86 (5th

Cir. 1994) (citing Jefferson Parish Hops. Dist. No. 2 v. Hyde, 466

U.S. 2, 15-18, 26-29 (1984)).

10

See Jefferson Parish, 466 U.S. at 11. See also id. at 32-

44 (O'Connor, J., concurring) (arguing that per se analysis should

not apply to tying arrangements).

6

potential for impact on competition in order to justify per se

condemnation" of a tie.11

The alleged tying arrangement between Hollymatic and Taylor

was a form of vertical nonprice restraint, that is, "an agreement

between entities at different levels of distribution that does not

purport to affect prices charged for . . . goods."12 Vertical

nonprice restraints are generally not subject to per se analysis.13

Ties, however, are often instrumental to suspect vertical nonprice

restraints. They may enable an entity to circumvent laws

proscribing anticompetitive or other behavior. Thus, for example,

a firm may avoid price regulation,14 may engage in price

discrimination,15 or may undertake predatory pricing through the use

11

Id. at 16.

12

Smith Machinery Co., Inc. v. Hesston Corp., 878 F.2d 1290,

1295 (10th Cir. 1989), cert. denied, 493 U.S. 1073 (1990) (footnote

and citations omitted). See Business Electronics Corp. v. Sharp

Electronics Corp., 485 U.S. 717, 730 (1988) ("Restraints imposed by

agreement between competitors have traditionally been denominated

as horizontal restraints, and those imposed by agreement between

firms at different levels of distribution as vertical restraints.")

(footnote omitted).

13

See Business Electronics, 485 U.S. at 735-36 ("[E]conomic

analysis supports the view, and no precedent opposes it, that a

vertical restraint is not illegal per se unless it includes some

agreement on price or price levels.").

14

See Jefferson Parish, 466 U.S. at 36 n.4 (O'Connor, J.,

concurring) ("In a regulated industry a firm with market power may

be unable to extract a supercompetitive profit because it lacks

control over the prices it charges for regulated products or

services. Tying may then be used to extract that profit from sale

of the unregulated, tied products or services.") (citations

omitted).

15

See id. ("Tying may . . . help the seller engage in price

discrimination by 'metering' the buyer's use of the tying

product.") (citations omitted).

7

of a tie.16 Taylor does not allege that Hollymatic pursued any of

these specific ends. More generally, a firm may leverage power in

one market into additional power in another. This leveraging can

force existing competitors from the tied market or create barriers

to entry.17 As the tied market weakens, the tying firm's market

power may increase.18

Tying arrangements that threaten competition come in myriad

industries. A seller of machines, for example, may condition the

availability of parts on the purchase of repair services,19 or a

hospital may provide care only if patients use particular

anesthesiologists.20 Their common ground is ultimate consumers have

to buy one product or service to receive another, removing them

from the market for the tied good.

Where, however, only dealers are subject to a tie,21

competitors do not lose a segment of the tied market if there are

16

See generally E. Thomas Sullivan and Jeffrey L. Harrison,

Understanding Antitrust and Its Economic Implications 183-85 (2d

ed. 1994) (summarizing rationales for proscribing tying

arrangements).

17

See Jefferson Parish, 466 U.S. at 14-15; id. at 36-40

(O'Connor, J., concurring).

18

See generally Louis Kaplow, Extension of Monopoly Power

Through Leverage, 85 Colum. L. Rev. 515, 520-25 (1985).

19

See Eastman Kodak Co. v. Image Technical Servs., 112 S.Ct.

2072 (1992).

20

See Jefferson Parish, 466 U.S. at 4-5.

21

Cf. Fortner Enterprises, Inc. v. U.S. Steel Corp., 394 U.S.

495 (1969) (consumers and intermediaries in line of distribution

required to purchase home to receive loans on favorable terms) and

429 U.S. 610 (1977) (same case).

8

genuine alternative paths to consumers. Here, assuming a tie was

in place, customers could purchase Hollymatic patty machines from

Taylor and purchase patty paper elsewhere. Alternative

distributors did not have to be robust to compete; they merely had

to exist. Companies entering the patty paper market could attract

Taylor's customers provided they charged a lower price, produced a

superior product, or both. Ties that constrain only dealers, like

the one Taylor complains of, create relatively little danger to

competition,22 provided consumers may purchase the two goods

separately.23

As we have suggested, mechanical inquiry into the fit of per

se categories has little utility in exposing any injurious impact

upon competition of ties. Inquiry into Hollymatic's power in the

tying market tells us nothing of other patty paper distributors.

Ronnie Taylor testified, "Patty paper was I guess always available

through paper companies if customers called and asked paper

companies about it." When asked if paper "was always available to

end users in [his] territory," he replied, "Yes." The evidence

22

See Phillip E. Areeda, Antitrust Law, ¶ 1725b, at 316-18

(1991).

23

Where the only competition for an item occurs at the level

of the distributor, a tie at that level may foreclose part of the

market to competitors in the tied good. If a company sells canning

machinery on condition that a canner also buys cans, the consumers

will purchase the two as a single product. Competitors will not be

able to sell cans directly to consumers of canned goods. See id.

¶ 1725b, at 317 (providing this example). A similar situation

arose in United States v. Loew's, Inc., 371 U.S. 38 (1962).

Distributors conditioned purchases by television stations of

desirable films on purchases of undesirable films. Consumers

received transmission of both.

9

suggests that competition in patty paper sales was fierce, and that

Hollymatic was dependent on Taylor's aggressive efforts to move its

product. Under these circumstances, any obligation on Taylor to

carry only Hollymatic's patty paper would have enhanced competition

by ensuring Hollymatic access to the market. Yet assessing

Hollymatic's power in the tying market, and whether there was a not

insubstantial amount of commerce in the tied market, would not

uncover this fact.

The present situation is analogous to others in which a

manufacturer requires a dealer to carry one product in its line to

receive another. The Tenth Circuit addressed these circumstances

in Smith Machinery Co. v. Hesston Corp.,24 in which a manufacturer

conditioned sale of farm equipment to a dealer on purchase of its

tractors.25 The court acknowledged that the arrangement constituted

a tie but focused on the risk posed to competition rather than on

labels.26 Although free to sell tractors from other manufacturers,

the dealer complained that in light of its limited resources

purchase of one tractor would foreclose purchase of another. The

court responded that this claim "[e]ven if true" would not affect

its analysis.27 The court reasoned:

24

878 F.2d 1290 (10th Cir. 1989), cert. denied, 493 U.S. 1073

(1990).

25

Id. at 1291-92.

26

See id. at 1295 (citing Jefferson Parish, 466 U.S. at 21

n.34).

27

Id. at 1296.

10

[W]here a dealer is serving as an intermediate link in a

distribution chain, if one manufacturer is foreclosed

from selling to a dealer because of [an] arrangement, it

is likely going to find another way to take its product

to market, providing a profit potential continues to

exist. In such a case, there is no ultimate foreclosure

to the consumer of a choice of goods. In other more

traditional tying arrangements there is an ultimate

foreclosure of choice to the ultimate consumer. Thus, a

foreclosure of choice to an ultimate consumer appears to

be the principal key to a tie that is illegal per se. No

such foreclosure occurs or is threatened in a typical

line forcing situation such as that at bar.28

We find the same to be true of the alleged tie in the present

case. The claimed arrangement between Hollymatic and Taylor

constituted a vertical nonprice restraint between a manufacturer

and a dealer on goods that the dealer offered to customers

independently. It was in effect an exclusive-dealing agreement in

which Hollymatic required Taylor to sell Hollymatic, and only

Hollymatic, patty paper.29 Such an arrangement is not the sort

"that would always or almost always tend to restrict competition

and decrease output."30 It does not threaten competition to the

28

Id. at 1297 (citing Jefferson Parish, 466 U.S. at 5; Loew's

Inc., 371 U.S. at 40; Northern Pac. Ry. Co. v. United States, 356

U.S. 1, 3 (1958); International Salt Co. v. United States, 332 U.S.

392, 393 (1947)).

29

See Roland Machinery Co. v. Dresser Indus., Inc., 749 F.2d

380, 393-94 (7th Cir. 1984) (Posner, J.) (arguing that exclusive-

dealing agreements which require dealer to sell only manufacturers

product line are assessed under "Rule of Reason") (cited with

approval in Stitt Spark Plug Co. v. Champion Spark Plug Co., 840

F.2d 1253, 1258 n.18 (5th Cir.), cert. denied, 488 U.S. 890

(1988)).

30

Business Electronics, 485 U.S. at 723 (quoting Northwest

Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co.,

472 U.S. 284, 289-290 (1985) (quoting Broadcast Music, Inc. v.

Columbia Broadcasting System, Inc., 441 U.S. 1, 19-20 (1979)))

(internal quotation marks omitted).

11

same extent as tying arrangements that bind ultimate customers.

Regardless of whether the restraint also constitutes a tying

arrangement, subjecting it to per se analysis would ignore our

directive from the Court.31 The measure of legality of

relationships between manufacturers and independent distributors

must not be allowed to turn on labels. Here the language of per se

violations has little utility in the absence of price fixing or

horizontal division of markets.

B.

The alleged tie was nevertheless illegal if it "had an actual

adverse effect on competition."32 Taylor's dissatisfaction resulted

from competition in the patty paper market. Taylor claims to have

lost business because Hollymatic's prices made it difficult for

Taylor to compete. Ronnie Taylor, a member of the family that

owned and ran Taylor Sales, Inc., complained that because of

Hollymatic's high patty paper prices, Taylor "began to lose

customers to competition." These signs of a healthy market in

31

See id. at 726 ("departure from [the rule-of-reason]

standard must be justified by demonstrable economic effect, such as

the facilitation of cartelizing, rather than formalistic

distinctions") (interpreting Monsanto Co. v. Spray-Rite Service

Corp., 465 U.S. 752 (1984) and Continental T.V., Inc. v. GTE

Sylvania, Inc., 433 U.S. 36 (1977)); Jefferson Parish, 466 U.S. at

21 n.34 ("The legality of . . . conduct depends on its competitive

consequences, not on whether it can be labeled 'tying.' If the

competitive consequences of [an] arrangement are not those to which

the per se rule is addressed, then it should not be condemned

irrespective of its label.").

32

Breaux Brothers, 21 F.3d at 86 (quoting Jefferson Parish,

466 U.S. at 31) (internal quotation marks omitted).

12

patty paper belie Taylor's claim that the tying arrangement harmed

patty paper purchasers.

Taylor's claim was, ironically, that it lost customers to

competitors; that the consumer's response to the asserted high

price of paper was to purchase paper elsewhere. Now, this may have

cost Taylor money--injured it--but it belies its claim of injury to

competition. Purchasers of machines from Taylor simply found a

different seller. Taylor's incentive to accept Hollymatic's

requirement that Taylor buy its paper rested on the profitability

of its machine sales.

Taylor characterizes as a threat to competition the

possibility that patty paper purchasers bought Hollymatic's paper

at supracompetitive prices. The claim is:

A customer receiving Hollymatic machines, parts, and

service from a Hollymatic dealer may well buy the

Hollymatic Patty Paper because of that "common tie" to

the dealer. After all, that is more convenient to the

customer than seeking an independent source who could

sell patty paper at a competitive price.

The Supreme Court rejected such reasoning in Jefferson Parish. The

fact that consumers might buy goods because of convenience created

by a tie does not suffice as evidence of an unreasonable restraint

on competition.33 Speculation about anticompetitive effects is not

enough. Taylor had to show that the tie "as it actually operate[d]

in the market"34 harmed competition. The record does not indicate

33

Id. at 29-30.

34

Id. at 29.

13

that consumers continued to purchase Hollymatic patty paper at

prices above the market.

III.

This lack of evidence also defeats Taylor's claim of

conspiracy under § 1 of the Sherman Act.35 Taylor claims that

Hollymatic conspired with Bomarko to restrain trade. The elements

of a § 1 claim are: "1) joint or concerted action between more

than one party that 2) unreasonably restrains trade in 3)

interstate or foreign commerce."36

Taylor's claim of conspiracy is derivative of its tying claim.

Taylor contended in its closing argument:

Hollymatic was being pressured to buy more paper than it

could sell. Hollymatic in turn was putting pressure on

its dealers. Why? Because Bomarko and Hollymatic

together could not compete in a free market--not and both

of them take double digit profits they were taking.

Taylor implicated Bomarko in the alleged tying arrangement.

This accusation is consistent with the request for damages

resulting from termination, which followed from enforcement of the

claimed tie. The conspiracy claim fails because the underlying tie

was not illegal--the concert of action did not unreasonably

restrain trade.

To establish an unreasonable restraint of trade, Taylor's

proof must have included evidence from which the jury could have

35

15 U.S.C. § 1.

36

R.D. Imports Ryno Indus. v. Mazda Distrib., 807 F.2d 1222,

1224 (5th Cir.), cert. denied, 484 U.S. 818 (1987). Hollymatic

argues that it and Bomarko were not distinct entities and that the

two therefore could not have conspired. We need not address this

issue because Taylor's § 2 claim fails in any case.

14

found that Hollymatic's actions had a "substantially adverse"

impact on competition.37 Assessing such an impact requires an

inquiry into the conditions of the relevant market.38 As we

explained, Taylor provided no basis for concluding that

Hollymatic's actions affected competition adversely.

Taylor also contends that Hollymatic amassed monopoly power in

the patty machine market in violation of § 2 of the Sherman Act.

Market power is the ability to control prices or exclude

competition.39 An assessment of market power requires a definition

of the relevant market.40 This definition requires two limiting

terms: "characterization of the product itself and

characterization of the relevant geographic market in which that

product is sold."41 Hollymatic complains that Taylor has never

defined the market in which Hollymatic wields power. We agree.

Taylor argues that its sales area drew the geographical lines

for the market in which Hollymatic possessed power. We find that

Taylor failed to offer evidence to support a jury finding that

Hollymatic possessed the requisite power in the market for any

37

Id.

38

Id. ("Market considerations provide the objective benchmark

for the measurement of competitive impact.") (citing Continental

T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 54 (1977); Daniels

v. All Steel Equipment, Inc., 590 F.2d 111, 113 (5th Cir. 1979)).

39

See Spectrofuge Corp. v. Beckman Instruments, Inc., 575

F.2d 256, 276 (5th Cir. 1978), cert. denied, 440 U.S. 939 (1979).

40

See Seidenstein v. National Medical Enterprises, Inc., 769

F.2d 1100, 1106 (5th Cir. 1985) ("Before a defendant's market power

can be determined, the relevant market must be defined.").

41

R.D. Imports, 807 F.2d at 1224-25.

15

particular product in Taylor's sales area. We assume without

deciding that the sales area was the appropriate geographical area

for measuring competition.42

Taylor's claim of monopoly tracks its allegation of a tying

arrangement. Taylor describes the "Hollymatic Patty Machine" as

the tying product, suggesting that Hollymatic amassed power in the

market for this machine and its competitors. However, Hollymatic

contends, and the record confirms, that the "Hollymatic Patty

Machine" does not exist. Taylor's arguments on appeal and the

record indicate that Taylor may have intended to refer to either of

two possible product markets: the market for the Super Patty

Machine, a particularly successful Hollymatic product; or the

market for all Hollymatic patty machines.43 Taylor failed to prove

that Hollymatic possessed monopoly power in either market, or that

the Super Patty Machine and comparable machines were sufficiently

insulated from competition to constitute a distinct market.

42

See id. at 1225 ("the geographic dimensions of [a] market

encompass[] the areas of effective competition in which the

particular product or its reasonably interchangeable substitutes

are traded") (quoting Hornsby Oil Co. v. Champion Spark Plug Co.,

714 F.2d 1384, 1393 (5th Cir. 1983)) (internal quotation marks

omitted).

43

Taylor relies on the pretrial order and the jury

instructions as identifying the "Hollymatic Patty Machine." The

pretrial order, however, describes "Hollymatic hamburger patty

machines as a tying product and Hollymatic patty paper as a tied

product." The district court's instruction to the jury similarly

explains, "Taylor has alleged that Hollymatic established a tying

arrangement whereby Hollymatic sold Taylor hamburger patty machines

(the tying product) conditioned on Taylor purchasing Hollymatic

patty paper (the tied product)." These sources indicate that the

jury addressed Hollymatic's power in the market for patty machines

in general, not in the market for the Super Patty Machine.

16

We could assume that Taylor meant the tying market to include

Hollymatic's Super Patty Machine and comparable machines sold by

other manufacturers. Taylor at times adopts this approach, noting

that all parties to the litigation acknowledge the prominent place

in the market of the Super Patty Machine. This testimony sometimes

suggested that the Super Patty Machine was a "lead product,"

"flagship product," "market leader," "dominant," and "premiere

product." Beyond these general descriptions of market success,

however, Taylor provides little basis for a conclusion that

Hollymatic possessed monopoly power in the market consisting of the

Super Patty Machine and its competitors. Taylor does not specify

the percentage of sales attributable to the Super Patty Machine in

any market44 or provide any basis for even a rough estimate of such

a figure, nor does Taylor recount information useful in assessing

the strength and scope of competition in the market for the Super

Patty Machine.45

Significantly, there was inadequate evidence about other

products available to Hollymatic's customers. Hollymatic faced

competition, for example, from manufacturers of machines that

produced patties on a larger scale than the Super Patty Machine.

In the mid-1980s, Wendy's, at the time a faithful customer of

Hollymatic, abandoned the Super Patty Machine for larger machines

sold by a rival of Hollymatic, which Wendy's stationed in central

44

See, e.g., Jefferson Parish, 466 U.S. at 26-28 (identifying

percentage of particular market garnered by tying product); Breaux

Bros., 21 F.3d at 86-88 (same).

45

See Jefferson Parish, 466 U.S. at 26-28.

17

locations. This event indicates that larger machines provided a

viable alternative to the Super Patty Machine, at least in a

substantial segment of the market. It also increased the supply of

used Super Patty Machines, which decreased sales in new machines.

Ronnie Taylor acknowledged selling used Super Patty Machines

at a profit equal to or greater than the profits available from

selling new machines, both before and after Hollymatic terminated

his dealership. These competitive threats to the Super Patty

Machine are at odds with a claim of market power--a concept that is

not interchangeable with market success. Despite these disquieting

features of the market, Taylor provided no evidence of the size and

strength of the market in used machines or the incidence of

customers changing to larger machines. This illustrates the

absence of focus upon market power. Without such basic information

about the market, the jury had no means to assess the market power

the Super Patty Machine conferred on Hollymatic.

Taylor may have meant the term "Hollymatic Patty Machine" to

refer, instead, to all of Hollymatic's patty machines. Thus, Roy

B. Taylor, a member of the family that owns Taylor, was asked, "And

you are saying that the continuation of being able to sell the

Super Machine is what forced you to sell paper at a higher price at

that amount of profit?" He responded, "No, sir. I am saying the

failure to sell all their patty machines." The jury did not,

however, have a sufficient basis for concluding that Hollymatic

possessed monopoly power in the market for all patty machines.

18

Taylor relies on only two statements that Roy B. Taylor made

about Hollymatic's presence in the patty machine market. First,

Mr. Taylor provided "just an estimate" that in 1979 of the 200 to

300 patty machines in his territory, no more than five were

manufactured by Hollymatic's competitors. This statement casts

little light on Hollymatic's power in the patty machine market at

relevant times. Second, Mr. Taylor responded to the question,

"What percentage or share of the patty machine market to the

customers that you were serving, customer base that you were

serving, did you have as a Hollymatic distributor?" Mr. Taylor

answered, "Conservatively I think I could honestly say 95 percent

of the business." While Mr. Taylor acknowledged that there were

machines competitive with Hollymatic's products, he claimed that

they did not "perform efficiently" and that "some" of them were no

longer on the market. Mr. Taylor did not define his "patty machine

market" such as the range of patty machines that the market

included. Testimony indicated that Hollymatic was "the industry

leader" in certain lines of patty machines but, as we explained,

did not suggest the share of the market Hollymatic controlled or

the nature of the competition Hollymatic faced. The evidence

indicates that customers could purchase used machines or replace

several small patty machines with a single large one sold by a

competitor of Hollymatic.

Importantly, there was no evidence of significant barriers to

entry. In the absence of barriers to entry such as a capital

intensive industry or patents, a competitor waiting on the

19

sidelines can deny those in the market the power to control prices-

-because current players cannot exclude competition.

In short, Taylor offered no direct evidence that Hollymatic

could control prices in the market for patty machines or for any

particular machine, and offered no evidence of Hollymatic's share

in either market. As a result, "[t]here was simply no evidence

from which the jury could begin to measure [Hollymatic's] power to

control prices or to exclude competition in [any] relevant

market."46 Taylor offers no reason to believe that Hollymatic

acquired or maintained,47 or threatened to acquire or maintain,48 a

monopoly. Taylor cannot succeed under § 2 of the Sherman Act.

Finally, Taylor claims that Hollymatic's actions violated the

Texas Free Enterprise and Antitrust Act.49 The parties agree that

46

Spectrofuge Corp., 575 F.2d at 286.

47

Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d

480, 487 (5th Cir. 1984) ("[T]he offense of monopoly under § 2 [of

the Sherman Act] has two elements: (1) the possession of monopoly

power in the relevant market and (2) the willful acquisition or

maintenance of that power as distinguished from growth or

development as a consequence of a superior product, business

acumen, or historic accident.") (quoting United States v. Grinnell

Corp., 384 U.S. 563, 570-71 (1966)) (internal quotation marks

omitted).

48

See id. at 490 ("The offense of attempted monopolization

has two elements: (1) specific intent to accomplish the illegal

result; and (2) a dangerous probability that the attempt to

monopolize the relevant market will be successful.") (quoting

Dimmitt Agri Indus., Inc. v. CPC Int'l, Inc., 679 F.2d 516, 525

(5th Cir. 1982), cert. denied, 103 S.Ct. 1770 (1983); Spectrofuge

Corp. v. Beckman Instruments, Inc., 575 F.2d 256, 276) (5th Cir.

1978), cert. denied, 440 U.S. 939 (1979)) (internal quotation marks

omitted). See Spectrum Sports, Inc. v. McQuillan, 113 S.Ct. 884,

892 (1993) (requiring proof of dangerous probability of monopoly

for attempt claim under § 2 of Sherman Act).

49

Tex. Bus. & Comm. Code Ann. § 15.05(a)-(c).

20

Texas antitrust law mirrors federal law as applied to the present

case.50 State law does not offer an alternative grounds for

affirmance.

REVERSED.

50

See Caller-Times Pub. Co. v. Triad Communications, Inc.,

826 S.W.2d 576, 580 (Tex. 1992).

21