Petition for Writ of Certiorari — LSLJ Partnership v. Frito-Lay, Inc.
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IN THE
Supreme Court of the Gn
OCTOBER TERM, 1988
LSLJ PARTNERSHIP,
Petitioner,
vs.
FRITO-LAY, INC.,
Respondent.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
PETITION FOR WRIT OF CERTIORARI
ANTHONY S. DIVINCENZO*
CAMPBELL & DIVINCENZO
Suite 3460
55 West Monroe Street
Chicago, Illinois 60603
312-443-1915
JOHN C. BREZINA
BREZINA & BUCKINGHAM
111 West Jackson Boulevard
Chicago, IL 60604
312-427-2922
DAVID C. BREZINA
MYERS & EHRLICH, LTD.
53 West Jackson Boulevard
Chicago, Illinois 60604
312-294-0350
Attorneys for LSLJ Partnership
* Counsel of Record
Pandick Midwest, Inc., Chicago ¢ (312) 733-6000
QUESTIONS PRESENTED
1. Whether proof of below incremental cost pricing is
required to establish that a defendant with market
power in an industry with significant harriers to
entry engaging in geographic price discrimination
and other non-price conduct for the express purpose
of injuring competition has violated § 2 of the Sher-
man Act or the Robinson-Patman Act?
2. Whether the uncontradicted testimony of an expert
witness that defendant priced below long-run in-
cremental cost creates a genuine issue of material fact
sufficient to withstand a motion for summary judg-
ment under Rule 56 of the Federal Rules of Civil
Procedure?
PARTIES INVOLVED
Petitioner, LSLJ Partnership, is a partnership com-
posed of the former owners of Jay’s Foods, Inc., a manu-
facturer of snack foods. Jay’s Foods, Inc., filed suit
against Frito-Lay, Inc. After filing suit, Jay’s Foods, Inc.,
assigned its claims against Respondent, Frito-Lay, Inc., to
the LSLJ Company which then assigned to the LSLJ
Partnership. LSLJ Partnership has no parents, subsid-
iaries, or affiliates.
li
TABLE OF CONTENTS
PAGE
QUESTIONS PRESENTED ................. cesses i
PARTUES TVs Bee isis cscs cesses ccecscsingeasies OTR i
TABLE OF AUTHOR Ea ee isc sscccesssscncistecessnesssersoseonse iii
OPINIONS BAIT asicccssscrrscccccmacercinencinsmesss: 1
JURISDICTION 0.6 oiccc.ccs ce heneernens: 2
STATUTES TOC V Gs Bee iaicsccsssccciehetend seen tesceorrisi sxe 3
STATEMENT OF THE CASE. ..............4:.000s-cccccssseseesees: 5
REASONS FOR GRANTING THE WRIT OF CER-
TIORARY ..oiicssscocecosercesssiangsunease nee eas 8
INTRODUCE oss icccerc oe 8
I. THE DECISION BELOW CONFLICTS
WITH THE DECISIONS OF OTHER
COURTS OF APPEAL ON THE PROP-
ER DEFINITION OF PREDATORY
PRECIO aia siesccascncetera tas ea ep ante 10
II. THE DECISION BELOW IGNORES
CONTROLLING AUTHORITY HOLD-
ING THAT A STRICT INCREMENTAL
COST STANDARD IS_ INAPPRO-
PRIATE UNDER THE ROBINSON-
PATMAN AM 33 12
III. THE DECISION BELOW RAISES
IMPORTANT AND RECURRING
QUESTIONS CONCERNING THE
APPROPRIATE DEFINITION OF
PREDATORY PRO ciscccecsec cess: 13
IV. THE DECISION BELOW MISAPPLIES
CONTROLLING AUTHORITY CON-
CERNING THE PROPER STANDARD
FOR SUMMARY JUDGMENT ............... 14
CONCLUSION .......0-:<ccnesceccasancastepeiana rene enti nents 16
ill
TABLE OF AUTHORITIES
Cases Cited
Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
SASSI A
Arthur S. Langenderfer, Inc. v. S.E. Johnson
Company, 729 F.2d 1050 (6th Cir.), cert.
denied, 469 U.S. 1086 (1984) 000.00.
Barry Wright Corp. v. ITT Grinnell Corp.,
tae © ae aot (ist Cir. 1968)...........................
Cargill, Inc. v. Monfort of Colorado, Inc., 479
ee cic eaccavadivexe
Celotex Corp. v. Catrett, 477 U.S. 317 (1986) ..
D&S Redi-Mizx v. Sierra Redi-Mizx & Con-
tracting Co., 692 F.2d 1245 (9th Cir. 1982).
Henry v. Chloride, Inc., 809 F.2d 1334 (8th
sl ER aS Ga
Instructional Systems Development Corpo-
ration v. Aetna Casualty and Surety Com-
pany, 817 F.2d 639 (10th Cir. 1987) ............
International Air Industries, Inc. v. Ameri-
can Excelsior Company, 517 F.2d 714 (5th
Cir. 1975), cert. denied, 424 U.S. 948
en, acgzees
Marsann Company v. Brammall, Inc., 788
F.2d 611 (9th Cir. 1986) .......... Siac head ces
Matsushita Electric Industrial Co., Ltd. v.
Zenith Radio Corp., 475 U.S. 574 (1986)......
Northeastern Telephone Co. v. American
Telephone & Telegraph Company, 651 F.2d
occ yacuandiiecenasdgedscecincs:
PAGE
15
11
11
10, 13, 14
14
10
11,15
11,15
11
10
13, 14
iv
O. Hommel v. Ferro, 659 F.2d 340 (3rd Cir.
1981), cert. denied, 455 U.S. 1017 (1982),
reh. denied, 456 U.S. 965 (1982) ....................
Transamerica Computer Company, Inc. v.
International Business Machines Corpo-
ration, 698 F.2d 1377 (9th Cir. 1983), cert.
denied, 464 U.S. 955 (1983) .........0.0000.c.
Utah Pre Co. v. Continental Baking Co., 386
ee ED sa ne
Statutes Cited
15 U.S.C. § 2 (The Sherman Act) .....................
15 U.S.C. §13(a) (The Robinson-Patman
Ill. Rev. Stat. Chap. 121% 4261 (Illinois
Consumer Fraud and Deceptive Business
Practices Act)
PAGE
11
10, 11
12
in passim
in passim
in passim
IN THE
Supreme Court of the Gnited States
OCTOBER TERM, 1988
LSLJ PARTNERSHIP,
Petitioner,
vs.
FRITO-LAY, INC.,
Respondent.
ON PETITION OF LSLJ PARTNERSHIP FOR A
WRIT OF CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE SEVENTH CIRCUIT
PETITION FOR WRIT OF CERTIORARI
Petitioner respectfully prays that a writ of certiorari
issue to review the judgment and opinion of the United
States Court of Appeals for the Seventh Circuit entered in
this proceeding on September 8, 1988.
OPINIONS BELOW
The Court of Appeals for the Seventh Circuit issued
its Order on September 8, 1988. The Order is reproduced
in the attached appendix at Appendix pp. la-3a. The
Judgment of the Seventh Circuit affirming the judgment
of the District Court for the Northern District of Illinois is
reproduced in the attached appendix at Appendix p. 4a.
Several Opinions of the District Court for the Northern
District of Illinois gave rise to this appeal. The first
Opinion granting summary judgment in favor of Frito-
2
Lay is reported at 614 F.Supp. 103 and is reproduced in the
attached appendix at Appendix pp. 5a-32a. The second
Opinion denying Petitioner’s Motion for Reconsideration
is reported at 635 F.Supp. 103 and is reproduced in the
attached appendix at Appendix pp. 33a-37a. The third
Opinion is reported at 656 F.Supp. 843 and is reproduced
in the attached appendix at Appendix pp. 38a-45a. The
fourth Opinion is reported at 664 F.Supp. 364 and is
reproduced in the attached appendix at Appendix
pp. 46a-62a. The final judgment of the District Court is
reproduced in the attached appendix at Appendix p. 63a.
JURISDICTION
The Judgment of the Court of Appeals for the Sev-
enth Circuit was entered on September 8, 1988. The
jurisdiction of this Court is invoked pursuant to 28 U.S.C.
§ 1254(1) (1982).
3
STATUTES INVOLVED
15 U.S.C. § 2 (The Sherman Act)
Every person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other
person or persons, to monopolize any part of the trade
or commerce among the several States, or with for-
eign nations, shall be deemed guilty of a felony, and,
on conviction thereof, shall be punished by fine not
exceeding one million dollars if a corporation, or, if
any other person, one hundred thousand dollars, or by
imprisonment not exceeding three years, or by both
said punishments in the discretion of the court.
15 U.S.C. § 13(a) (The Robinson-Patman Act)
(a) That it shall be unlawful for any person
engaged in commerce, in the course of such commerce,
either directly or indirectly, to discriminate in price
between different purchasers of commodities of like
grade and quality, where either or any of the pur-
chases involved in such discrimination are in com-
merce, where such commodities are sold for use, con-
sumption, or resale within the United States or any
Territory thereof or the District of Columbia or any
insular possession or other place under the jurisdiction
of the United States, and where the effect of dis-
crimination may be substantially to lessen com-
petition or tend to create a monopoly in any line of
commerce, or to injure, destroy, or prevent com-
petition with any person who either grants or know-
ingly receives the benefit of such discrimination, or
with customers of either of them: Provided, That
nothing herein contained shall prevent differentials
which make only due allowance for differences in the
cost of manufacture, sale, or delivery resulting from
the differing methods or quantities in which such
commodities are to such purchasers sold or delivered:
Provided, however, That the Federal Trade Commis-
sion may, after due investigation and hearing to all
interested parties, fix and establish quantity limits,
4
and revise the same as it finds necessary, as to
particular commodities or classes of commodities,
where it finds that available purchasers in greater
quantities are so few as to render differentials on
account thereof unjustly discriminatory or promotive
of monopoly in any line of commerce; and the fore-
going shall then not be construed to permit differ-
entials based on differences in quantities greater than
those so fixed and established: And provided further,
That nothing herein contained shall prevent persons
engaged in selling goods, wares, or merchandise in
commerce from selecting their own customers in bona
fide transactions and not in restraint of trade: And
provided further, That nothing herein contained shall
prevent price changes from time to time where in
response to changing conditions affecting the market
for or the marketability of the goods concerned, such
as but not limited to actual or imminent deterioration
of perishable goods, obsolesence of seasonal goods,
distress sales under court process, or sales in good
faith in discontinuance of business in the goods con-
cerned.
5
STATEMENT OF CASE
Plaintiff, LSLJ Partnership, is a partnership com-
prised of the former owners of Jay’s Foods, Inc. Plaintiff
manufactures and sells potato chips in Illinois, Wisconsin,
Michigan, and Indiana. Appendix p. 6a. Chicago is
plaintiff’s principal market. Appendix p. 6a.
Defendant, Frito-Lay, Inc., is a national producer of
salty snack foods, including potato chips, corn chips, tor-
tilla chips, cheese puffs, and pretzels. Appendix p. 5a. By
mid-1978, Frito-Lay had a 55% share of the snack food
market in Chicago, while Jay’s share of that market was
only 24%. Appendix p. 7a fn. 2.
This litigation was brought by Jay’s Foods, Inc., a
manufacturer of potato chips against Frito-Lay, Inc., for
violation of § 2 of the Sherman Act (15 U.S.C. § 2), § 2(a)
of the Robinson-Patman Act (15 U.S.C. § 13(a)), and the
Illinois Consumer Fraud and Deceptive Business Practices
Act (Ill. Rev. Stat. Chap. 121% §§ 261, et seg.). The District
Court had jurisdiction over this action under 28 U.S.C.
§ 1337 and the doctrine of pendent jurisdiction because
the federal claims involved § 2 of the Sherman Act and
§ 2(a) of the Robinson-Patman Act and the state law
claims arose from the same conduct.
Seeking both damages and injunctive relief, plaintiff
alleged that defendant engaged in anti-competitive and
unfair conduct, including predatory pricing, geographic
price discrimination, and commercial sabotage, with the
effect of lessening or tending to lessen competition in the
sale of salty snack foods. Defendant contended that its
conduct was not unlawful.
Through a series of summary judgments, the District
Court entered judgment in favor of defendant on all
counts. On August 1, 1985, the District Court entered
6
summary judgment on plaintiff’s claims under § 2 of the
Sherman Act. On March 31, 1986, the District Court
denied plaintiff’s motion to reconsider. On February 26,
1987, summary judgment against plaintiff’s claims under
the Robinson-Patman Act was entered. Finally, on Feb-
ruary 26, 1987, summary judgment against plaintiff’s
state law claims was entered. The lower court’s rulings
and orders are set forth in the Appendix. The Seventh
Circuit affirmed and adopted these opinions as its own.
Appendix p. 2a.
Sales of snack foods to supermarkets account for over
60% of the total sales of snack foods. Therefore, suppliers,
such as Jay’s and Frito-Lay, compete for shelf space in
supermarkets. Appendix p. 6a. Supermarket sales of
potato chips depend upon the amount of shelf space
allocated to a supplier. Appendix p. 24a. A snack food
supplier needs adequate shelf space to compete. Appendix
p. 24a. Too little shelf space creates difficult supply
problems requiring frequent restocking. Appendix p. 24a.
Inadequate shelf space hinders the ability of snack food
suppliers to expand into new product lines. Appendix
p. 24a.
The company with the greatest share of potato chip
sales controls the entire salty snack food section of the
supermarket. Appendix p. 6a. Moreover, potato chip sales
are the core of Frito-Lay’s regional competitors’ strength.
Appendix p. 6a-7a. For these reasons, Frito-Lay sought
to increase its market share of potato chips. Appendix p.
Ta.
During the 1974-1980 period, Jay’s sold more potato
chips in Chicago than Frito-Lay. Appendix p. 7a. During
the same period Jay’s sought to expand into the manufac-
ture and sale of other snack food products and to become a
supplier of a full range of snack foods. Appendix p. 7a.
7
Chicago was one of Frito-Lay’s problem markets.
Frito-Lay faced strong local competition from Jay’s in
potato chips, and its performance lagged relative to other
markets. Appendix p. 8a. For this reason, Frito-Lay
offered substantial price discounts in the Chicago market.
Appendix p. 8a. Frito-Lay’s prices for some potato chip
products in the Chicago market were lower for significant
periods than prices for the same products in other mar-
kets. Appendix p. 9a. Plaintiff’s analysis of Frito-Lay’s
costs, which was uncontroverted, showed that Frito- Lay’s
total cost of producing potato chips for the Chicago mar-
ket exceeded its revenues. Appendix p. 21a.
Frito-Lay’s scheme of price discrimination was moti-
vated by a desire to hinder aggressive competitive ex-
pansion. Appendix p. 27a. Indeed, some Frito-Lay
employees attempted to buy extra shelf space and to
sabotage supermarket tests of snack food sales in order to
obtain more shelf space. Appendix p. 26a. The district
court recognized that this evidence corroborated the exis-
tence of Frito-Lay’s predatory intent. Appendix p. 27a.
On July 11, 1986, Jay’s Foods, Inc., assigned its cause
of action against Frito-Lay to the LSLJ Company, which
was owned by the shareholders of Jay’s Foods, Inc. In
December, 1986, LSLJ Company assigned this cause of
action to LSLJ Partnership which is composed of the
former shareholders of Jay’s Foods, Inc.
8
REASONS FOR GRANTING
THE WRIT OF CERTIORARI
INTRODUCTION
Defendant, Frito-Lay, is the dominant supplier of
salty snack foods in the United States. By contrast,
plaintiff manufactured and sold potato chips in a limited
market consisting of parts of Illinois, Wisconsin, Indiana,
and Michigan. Plaintiff’s key market was Chicago. By
mid-1978, Frito-Lay had 55% of all snack food sales in
Chicago, plaintiff’s primary market, compared to piain-
tiff’s 24% share. Appendix p. 7a fn. 2. However, Jay’s sold
more potato chips in that market. Appendix p. 7a. Frito-
Lay sought to maintain its dominant market share by
preventing plaintiff from using its strong base of potato
chip sales in Chicago for expansion into new product or
geographic markets. To achieve this end, Frito-Lay
intentionally maintained lower prices on potato chips, the
product upon which plaintiff’s business depended, in
plaintiff’s market area.
Frito-Lay coupled this discriminatory pricing scheme
with commercial bribery and sabotage in an effort to
cripple plaintiff’s competitive efforts. Given the barriers
to entry existing in the snack food industry, the purpose
and effect of Frito-Lay’s conduct was to lessen com-
petition and to maintain Frito-Lay’s dominant market
position.
Plaintiff challenged Frito-Lay’s conduct under § 2 of
the Sherman Act and § 2(a) of the Robinson-Patman Act.
Although recognizing that Frito-Lay possessed signifi-
cant market power, and was motivated by the express
purpose of hindering plaintiff’s expansion in an industry
with significant barriers to entry, the courts below re-
=
9
jected plaintiff’s claims. Ignoring this non-cost evidence,
the lower courts adopted a strict cost test for predatory
pricing. The lower courts held that plaintiff was required
to prove that Frito-Lay’s prices were below incremental
cost in order to establish a prima facie case of predatory
pricing sufficient to withstand a motion for summary
judgment.’
Focusing solely on the pricing aspects of this case, and
improperly ignoring Frito-Lay’s non-price related con-
duct, the Seventh Circuit decided that plaintiff had failed
to make out the “outline” of an antitrust violation despite
the existence of evidence that (1) Frito-Lay’s prices were
below its average total costs adjusted for Frito-Lay’s cost
of capital (Appendix p. 2la); (2) there were barriers to
entry created by the need for shelf space (Appendix
p. 25a-26a); and (3) Frito-Lay, a firm with market power,
acted with predatory intent (Appendix p. 27a). The
imposition of a strict cost-based test for predation in
these circumstances conflicts with the decisions of this
Court and other Courts of Appeal and raises serious
questions which need to be resolved.
' Although the Seventh Circuit stated that plaintiff had to
prove that Frito-Lay priced below average variable cost or
long-run incremental cost, it ignored the uncontroverted testi-
mony of plaintiff’s expert that Frito-Lay sold below long-run
incremental cost. The district court, however, in light of that
testimony, rejected the long-run incremental cost standard
because a price above average variable cost cannot be predatory.
The Seventh Circuit implicitly approved this analysis by adopt-
ing the district court’s opinion. Appendix at 2a.
10
I.
THE DECISION BELOW CONFLICTS WITH THE DECTI-
SIONS OF OTHER COURTS OF APPEAL ON THE
PROPER DEFINITION OF PREDATORY PRICING.
The Seventh Circuit’s determination that proof of
below incremental cost pricing is an essential element of
any claim for predatory pricing directly raises the conflict
concerning the definition of predatory pricing recognized
by this Court in Cargill, Inc. v. Monfort of Colorado, Inc.,
479 U.S. 104 (1986). The decision below most obviously
conflicts with the Ninth Circuit which has directly held
that evidence of below-cost pricing is not an essential
element of a predatory pricing claim. In Transamerica
Computer Company, Inc. v. International Business Ma-
chines Corporation, 698 F.2d 1377 (9th Cir. 1983), cert.
denied, 464 U.S. 955 (1983), the Ninth Circuit found that
prices above average total cost may be predatory upon
direct proof of predatory intent. See also, Marsann
Company v. Brammall, Inc., 788 F.2d 611 (9th Cir. 1986)
(plaintiff’s inability to determine defendant’s cost does
not justify summary judgment) and D&S Redi-Miz v.
Sierra Redi- Miz & Contracting Co., 692 F.2d 1245 (9th Cir.
1982) (cost-based test inappropriate when challenged
conduct does not affect revenues or costs). If this case had
been brought in the Ninth Circuit, there would be little
doubt that the combination of evidence of Frito-Lay’s
market power, Frito-Lay’s predatory intent, Frito-Lay’s
non-price related anti-competitive conduct, and barriers
to entry would be sufficient to withstand a motion for
summary judgment even in the absence of proof of below-
cost pricing. Thus, the facts of this case make it an
appropriate vehicle to resolve the conflict of whether proof
of below-cost pricing is required.
11
Additionally, the decision below falls squarely in the
existing conflict among the Circuits on the question of
whether prices above incremental cost may be predatory.
The Seventh Circuit’s ruling required proof of below
incremental pricing. The First, Second, and Sixth Circuits
also appear to have adopted incremental cost as the
appropriate cost standard. Barry Wright Corp. v. ITT
Grinnell Corp., 724 F.2d 227, 232-235 (1st Cir. 1983);
Northeastern Telephone Co. v. American Telephone & Tele-
graph Company, 651 F.2d 76 (2d Cir. 1981); and Arthur S.
Langenderfer, Inc. v. S.E. Johnson Co., 729 F.2d 1050 (6th
Cir.), cert. denied, 469 U.S. 1036 (1984). However, at leasi
the Third, Fifth, Eighth, Ninth, and Tenth Circuits have
considered direct evidence of intent when prices are
shown to be below average total cost. O. Hommel v. Ferro,
659 F.2d 340 (8rd Cir. 1981), cert. denied, 455 U.S. 1017
(1982), reh. denied, 456 U.S. 965 (1982); International Air
Industries, Inc. v. American Excelsior Company, 517 F.2d
714, 728-725 (5th Cir. 1975), cert. denied, 424 U.S. 943
(1976); Henry v. Chloride, Inc., 809 F.2d 1334, 1346 (8th
Cir. 1987); Transamerica, supra; and Instructional Sys-
tems Development Corporation v. Aetna Casualty and Sure-
ty Company, 817 F.2d 639 (10th Cir. 1987). These Courts of
Appeal hold that prices over incremental cost, but below
full cost, may be predatory depending on the existence of
other evidence.
These conflicts justify the granting of this Petition
for Certiorari.
12 _
Il.
THE DECISION BELOW IGNORES CONTROLLING
AUTHORITY HOLDING THAT A STRICT INCRE-
MENTAL COST STANDARD IS INAPPROPRIATE
UNDER THE ROBINSON-PATMAN ACT.
The Seventh Circuit’s definition of predatory pricing
as pricing below incremental cost in a Robinson-Patman
case conflicts with this Court’s decision in Utah Pie Co. v.
Continental Baking Co., 386 U.S. 685 (1967). In Utah Pie a
jury verdict in plaintiff’s favor was affirmed upon the total
mix of evidence of predation, including cost and non-cost
evidence. Significantly, this Court did not adopt an
incremental cost standard. Instead, evidence that de-
fendant priced below direct cost plus an allocation for
overhead was held sufficient to sustain the jury verdict
given the existence of direct evidence of intent.
The decision below cannot be reconciled with Utah Pie.
In Utah Pie the evidence supporting the jury verdict
included proof that (1) the price discrimination was
aimed at plaintiff; (2) price was a critical market factor;
(3) plaintiff would lose business if it did not meet its
competitor’s price; (4) defendants lost more money in the
relevant market than elsewhere; (5) defendants priced
below direct cost plus an allocation for overhead; and (6)
the below-cost pricing continued for 16 months.
In this case, plaintiff produced virtually identical
proof of predatory intent. The district court found that
(1) barriers to entry existed (Appendix p. 25a-26a); (2)
Frito-Lay had engaged in the buying of shelf space
(Appendix p. 26a); (3) Frito-Lay had sabotaged custom-
ers’ tests of snack food sales to obtain shelf space at
plaintiff’s expense (Appendix p. 26a); (4) Frito-Lay dis-
criminated in price in Chicago (Appendix p. 8a-9a); (5)
the price discrimination was aimed at plaintiff (Appendix
13
p. 8a-9a); (6) Frito-Lay’s total cost of producing potato
chips for the Chicago market exceeded its revenues
(Appendix p. 21a); and (7) the plaintiff offered corrobora-
tive circumstantial evidence of Frito-Lay’s predatory in-
tent (Appendix p. 27a). Such evidence clearly meets the
standards for a Robinson-Patman Act violation estab-
lished in Utah Pie. Despite this evidence, according to the
courts below, plaintiff could not prove a primary line
violation of the Robinson-Patman Act, absent proof of
below incremental cost pricing. Only by ignoring Utah
Pie could this decision be reached.
Ill.
THE DECISION BELOW RAISES IMPORTANT AND
RECURRING QUESTIONS CONCERNING THE
APPROPRIATE DEFINITION OF PREDATORY
PRICING.
The decision below, conflicting as it does with other
decisions, raises the important and recurring question of
the appropriate definition of predatory pricing. In Car-
gill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, fn. 12 at
117 (1987), this Court acknowledged that “[n]o consensus
has yet been reached on the proper definition of predatory
pricing in the antitrust context”. See also Matsushita
Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S.
574 (1986). Both Cargill and Matsushita left unresolved
the very questions concerning the appropriate definition
of predatory pricing raised by the decision below.
Because of its factual context, this is the appropriate
case for the Court to answer these important questions.
As the district court recognized, plaintiff presented evi-
dence that the need for supermarket shelf space created
significant barriers to entry into the snack food market.
Coupled with Frito-Lay’s market power, these barriers to
entry made a strategy of sacrificing present revenue for
14
the purpose of limiting competition plausible because
Frito-Lay could recoup lost revenues before rivals could
enter the market. Thus, this case clearly turns upon the
definition of predatory pricing.
Both in Matsushita, supra, and Cargill, supra, the
factual context of the cases made it unnecessary for this
Court to resolve these questions. However, this case
squarely presents the Court with the question of the
appropriate definition of predatory pricing. Unlike
Matsushita, supra, a Sherman Act § 1 case, plaintiff here
maxes claims under both § 2 of the Sherman Act and the
Robinson-Patman Act. Moreover, unlike Cargill, supra,
plaintiff has not only claimed that defendant acted with
predatory intent but presented evidence which the dis-
trict court found to be “corroborative circumstantial evi-
dence of Frito- Lay’s predatory intent” (Appendix p. 27a).
The current debate over the definition of predatory
pricing is more than an academic debate. As this Court
acknowledged, predatory pricing does occur. Cargill,
supra, at 121. This Court should now resolve the debate
and determine which approach to predatory pricing
should be followed.
IV.
THE DECISION BELOW MISAPPLIES CONTROLLING
AUTHORITY CONCERNING THE PROPER STAN-
DARD FOR SUMMARY JUDGMENT.
The Seventh Circuit, in apparent reliance on Celotex
Corp. v. Catrett, 477 U.S. 317 (1986), held that plaintiff was
required to come forward with sufficient evidence of below
incremental cost pricing in order to avoid entry of sum-
mary judgment. However, in determining whether plain-
tiff’s evidence was sufficient, the Courts below, contrary to
the admonitions of this Court, decided between competing
reasonable inferences. This was error.
15
In Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986),
this Court succinctly stated that, despite the temptation
to do otherwise, a trial judge “is not himself to weigh the
evidence and determine the truth of the matter but to
determine whether there is a genuine issue for trial.” id.
at 249. According to the Court
[t]he inquiry performed is the threshold inquiry of
determining whether there is the need for a
trial—whether, in other words, there are any genuine
factual issues that properly can be resolved only by a
finder of fact because they may reasonably be resolved
in favor of either party.
id. at 250. The decision below ignores this authority.
Here, plaintiff presented evidence from which a jury
could reasonably infer that Frito-Lay’s incremental ex-
penses exceeded its revenues. Plaintiff’s expert submitted
two affidavits supporting this conclusion.? Indeed, the
Court noted that plaintiff’s cost analysis showed that
Frito-Lay’s costs exceeded its revenues. Frito-Lay of-
fered no contrary testimony or evidence. This uncon-
troverted expert testimony, based on an accepted
methodology, should have been sufficient to defeat the
motions for summary judgment, especially since the
determination of cost is a factual issue for the jury. See,
Instructional Systems, supra; and Henry Chloride, supra.
The courts below tried the factual issues rather than
merely determining whether a triable issue existed. This
unwarranted expansive view of summary judgment mis-
applies controlling precedent.
? Plaintiff submitted the first Affidavit of Roger Kormendi
in Opposition to Frito-Lay’s first Motion for Summary Judg-
ment. After entry of the district court’s order granting
summary judgment, plaintiff submitted the second Affidavit of
Roger Kormendi in Support of its Motion for Reconsideration.
16
CONCLUSION
For these reasons, a writ of certiorari should issue to
review the judgment and opinion of the Seventh Circuit.
Respectfully submitted,
ANTHONY S. DIVINCENZO*
CAMPBELL & DIVINCENZO
Suite 3460
55 West Monroe Street
Chicago, IL 60603
312-443-1915
JOHN C. BREZINA
BREZINA & BUCKINGHAM
111 West Jackson Boulevard
Chicago, Illinois 60604
DAVID C. BREZINA
MYERS & EHRLICH, LTD.
53 West Jackson Boulevard
Chicago, Illinois 60604
Attorneys for LSLJ
Partnership
* Counsel of Record
Dated: December 6, 1988
APPENDIX
la
United States Court of Appeals
FOR THE SEVENTH CIRCUIT
CHICAGO, ILLINOIS 60604
(Argued February 9, 1988)
September 8, 1988
UNPUBLISHED ORDER
NOT TO BE CITED
PER CIRCUIT RULE 53
Before
HON. WILLIAM J. BAUER, Chief Judge
HON. HARLINGTON WOOD, JR., Circuit Judge
HON. JESSE E. ESCHBACH, Senior Judge
No. 87-2158 ~ -
JAY’S Foops, INC.,
Plaintrff, Appeal from the United
States District Court for the
and Nor-hern District of Illinois,
LSLJ PARTNERSHIP, > mig a,
Plaintiff- Appellant, Sia er
vs. Judge
FRITO- LAY, INC., a corporation,
Defendant- Appellee. ,
ORDER
LSLJ Partnership, the assignee of Jay’s Food, Inc.’s
(“Jays”) antitrust claims against Frito-Lay, Inc. (“Frito-
Lay”), appeals from the district court’s summary judg-
ment in favor of Frito-Lay. Jays alleges that Frito-Lay
attempted to monopolize the Chicago potato chip market
Za
from 1974 to 1980 by engaging in predatory pricing,
geographic price discrimination, and various other
anticompetitive practices in violation of section 2 of the
Sherman Act, 15 U.S.C. § 2, section 2(a) of the Robinson-
Patman Act, 15 U.S.C. § 13(a), and the Illinois Consumer
Fraud and Deceptive Business Practices Act, Ill. Rev. Stat.
Ch. 121 1/2 §§ 261 et. seg. In a series of exhaustive opinions
rendered over a two year period, Judge Moran disposed of
Jay’s claims. Jays Foods, Inc. v. Frito-Lay, Inc., 614 F.
Supp. 1073 (N.D. Ill. 1985); Jays Foods, Inc. v. Frito-Lay,
Inc., 635 F.Supp. 103 (N.D. Ill. 1986); Jays Foods, Inc. v.
Frito-Lay, Inc., 664 F.Supp. 364 (N.D. Ill. 1987); Jays
Foods, Inc. v. Frito-Lay, Inc., 656 F. Supp. 843 (N.D. IIL.
1987). We hereby affirm and adopt the opinions of the
district court.
Jay’s contention that Judge Moran improperly
weighed the evidence in ruling on Frito-Lay’s summary
judgment motions is unavailing. Jay’s bore the burden of
demonstrating that Frito-Lay engaged in below-cost
pricing in order to prevail on its predatory pricing claims
here. As Celotex Corp. v. Catrett, 477 U.S. 317 (1986),
makes plain, where the nonmoving party bears the ulti-
mate burden of proof at trial, it must “make a showing -
sufficient to establish the existence of [the] element(s]
essential to the party’s case” in order to withstand a
motion for summary judgment. See also The Chicago
Florsheim Shoe Store Co. v. Cluett, Peabody & Co. Inc., 826
F.2d 725 (1987).
After reviewing the record before us, we agree with
Judge Moran that
Jays simply has failed to make out even the outlines of
a case of predatory pricing. MCI makes it clear that
an essential element of a predatory pricing case is
proof that defendant’s prices were below average
variable or long-run incremental costs. After com-
—_———
3a
pleting its discovery and after having many months
to send legions of experts through the thickets of cost
data, plaintiff has failed to come close to satisfying
either cost standard.
614 F.Supp. 1073, 1084.
The judgment of the district court is affirmed and
adopted as the opinion of this court.
4a
JUDGMENT—ORAL ARGUMENT
United States Court of Appeals
FOR THE SEVENTH CIRCUIT
CHICAGO, ILLINOIS 60604
September 8, 1988
Before
HON. WILLIAM J. BAUER, Chief Judge
HON. HARLINGTON WOOD, JR., Circuit Judge
HON. JESSE E. ESCHBACH, Senior Circuit Judge
No. 87-2158 a
JAY’S Foops, INC.,
Plaintiff Appeal from the United
States District Court for the
and Northern District of Illinois,
Eastern Division.
LSLJ PARTNERSHIP, > 1 dn alee
Plaintiff- Appellant James B. Moran,
“. Judge.
FRITO-LAY, INC., a corporation,
Defendant- Appellee. a
This cause was heard on the record from the United
States District Court for the Northern District of Illinois,
Eastern Division, and was argued by counsel.
On consideration whereof, IT IS ORDERED AND
-~ ADJUDGED by this Court that the judgment of the said
District Court in this cause appealed from be, and the
same is hereby, AFFIRMED, with costs, in accordance
with the order of this Court entered this date.
————————
5a
United States Bistrict Court
For THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Jays Foops, INC., @ corporation, ,
Plaintiff,
vs. No. 78 C 4352
Frito-Lay, INC., a corporation,
Defendant. J
MEMORANDUM AND ORDER
This action, in which plaintiff Jays Foods (Jays)
alleges that it was 4 victim of predatory pricing, comes
before this court ten years after the seminal article by
Professors Areeda and Turner which outlined a cost- based
definition of predatory pricing. Areeda and Turner,
Predatory Pricing and Related Practices Under Section 2 of
the Sherman Act, 88 Harv.L.Rev. 697 (1975). Defendant
Frito-Lay’s (Frito-Lay) motion for summary judgment
on Count I requires this court to determine what fealty to
give cost-based tests of predatory pricing in light of a
decade of judicial responses te the article and its progeny.
It also comes in the wake of full and complete discovery.
The question, therefore, is whether there is sufficient
evidence to create triable issues.
I.
Frito-Lay is a national producer of a full range of
salty snack foods such as potato chips and pretzels (Ex.9,
6a
p.206653). Its competitors include regional suppliers of a
more limited range of snack foods ( Ex.30, p.164719). Jays
is one of these regional competitors. Its primary product
is potato chips and its market consists of parts of Illinois,
Wisconsin, Michigan and Indiana.
In an antitrust case plaintiff has the burden of estab-
lishing the relevant product and geographic markets. See
L.A. Draper & Son vy. Wheelabrator- Frye Co., 735 F.2d 414
(11th Cir. 1984). While Jays’ complaint covers several
products and geographic markets, for Purposes of the
motion for summary judgment the relevant geographic
market is the Chicago area and the relevant product is
potato chips. The summary judgment motion is further
focused on the sale of potato chips in supermarkets.
Supermarket sales account for over 60 per cent of the total
sales of snack foods (Exs. 1 and 39). The Chicago market
is presumably the center of Frito-Lay’s allegedly illegal
competitive practices, and is the largest market served by
Jays.
Potato chip sale levels are related to the amount of
supermarket shelf space available to a supplier (Ex.2,
pp.238-240; Ex.12, p.146; Ex.26). Sales levels are also
related to promotional] incentives given stores and their
customers (Ex.6). Sufficient shelf space is also required to
introduce new products (Ex.20, p.201317). Stores allocate
Shelf space to suppliers on the basis of the sales of each
supplier’s products (Ex.2, pp.219-20).
There seems to be a little doubt that in the day-to-
day commercial warfare between snack food suppliers the
key battle is over shelf space (Ex.13). Frito- Lay believed
that the company with the greatest share of potato chip
business would control the entire salty snack sections of
the supermarkets (Ex. 10, p.197034). Because potato chip
sales were the core of the regional competitors’ strength,
Frito-Lay especially sought to increase its market share of
Ta
potato chips (Ex.32, p.186375). In its complaint Jays
alleges that Frito-Lay provided misleading and in-
accurate market studies to major retailer chains in order
to increase its share of shelf space at the expense of other
competitors. Frito-Lay also allegedly engaged in
advertising and promotional practices which helped it to
secure additional shelf space (Ex.6). Finally, Frito-Lay
allegedly used its dominance in the corn chip market as
leverage to induce stores to provide additional shelf space
for its other products (Ex.9, p.206653).
During the 1974-1980 period which is the subject of
this lawsuit,' Jays was the larger of the two potato chip
suppliers in the Chicago area. During the same period
Jays was apparently attempting to expand into other
salty food product lines and become a supplier of a full
range of snack products (Ex.11). Both companies’ sales
grew during this period. In 1974 Frito-Lay’s Chicago
division had total sales of $7,559,630 and showed a loss of
$35,329. By 1980 its sales had nearly doubled to
$13,545,170 and its profits had reached $1,057,830. The
record does not contain figures for Jays’ performance in
the Chicago market. Jays’ total net sales grew from
$22,970,172 in 1974 to $44,352,969 in 1980. Jays’ pretax
profits rose from $139,749 in 1974 to $2,319,620 in 1977,
before tapering off to $948,557 in 1980 (Stip. #9). The
record does not indicate what shifts occurred in each
company’s share of the Chicago potato chip market.’
' Jays filed its complaint on Nov. 3, 1978. Frito-Lay argues
and Jays concedes that the four-year statute of limitations, 15
U.S.C. § 15b, bars Jays from recovering damages suffered prior
to Nov. 3, 1974.
? Frito-Lay apparently had more than a 25% share of the
potato chip market by mid-1978 (Ex.23, p.176905). By the late
1970s Jays potato chips outsold Frito-Lay potato chips within
Chicago (Ex.38, p.168621), but Frito-Lay had a 55% share of the
total salty snack food business in Chicago while Jays’ share of
that market was 24% (Ex.34, p.182435).
8a
The record makes clear that Chicago was one of the
“problem” markets for Frito-Lay. Frito-Lay faced strong
local competition in potato chip sales and its performance
lagged relative to other markets (Ex.30, Dp. 164726-727,
164736; Ex.31, pp.174064-65). Consequently, Frito-Lay
devoted extra promotional and advertising resources to
the Chicago market. These promotions included substan-
tial price discounts, some of which were unauthorized
(Ex.17), and a strong emphasis on potato chips in the
supermarket display shelves (“overfacing”’) (Exs.10 and
11).
The record suggests that Frito-Lay sets its prices
with an eye towards competitive conditions. A summary
of Frito-Lay’s pricing objectives identified three ap-
proaches to pricing based on market conditions (Ex.27).
In high-growth product categories, where Frito-Lay had
market leadership, prices were to be set “most aggres-
sively.” In low-growth categories, where Frito-Lay had
shared market leadership, prices were to be less aggres-
sive. Finally, in “low-growth categories where we do not
dominate we will price competitively (e.g. potato chips).”
(Id.)
What is also evident from the record is that Frito-
Lay’s guide in setting prices was its corporate financial
goals (Ex.27). Its pricing decisions were “designed to
maintain total corporate gross margin at target level of
50%.” Id.
According to Jays, Frito-Lay also sold potato chips in
Chicago for a lower profit in order to increase its market
share. Frito-Lay purportedly was willing to lower its
profit in Chicago and other problem markets because it
could subsidize these lower profits with the higher profits
earned in markets where it faced little or no competition.
Frito-Lay’s prices for identical products varied from mar-
9a
ket to market (Ex.5), at least in part because Frito-Lay
took over regional companies with established price pat-
terns (Ex.4). Regional price variations also resulted from
the different competitive conditions faced by Frito-Lay in
various markets (Ex.18). Frito-Lay prices for some po-
tato chip products in the Chicago market were lower for
significant periods than prices for the same products in
other markets (Ex.5; Ex.20. p.201324; and Ex.21,
p.207878).
Jays’ first amended complaint contains three counts.
Count I alleges that Frito-Lay has engaged in predatory
pricing in violation of Section 2 of the Sherman Act.
Count II is brought under Section 2 of the Clayton Act and
alleges that Frito-Lay has engaged in illegal price dis-
crimination. Count III contains pendent claims brought
under the deceptive trade practices laws of the states
served by Jays and alleges that Frito-Lay engaged in
anti-competitive conduct. Jays claims that it sustained a
loss totalling $4,311,806:73 for fiscal years 1975-1981, be-
cause of its inability to increase prices to reach a 6% pre-
tax rate of return as a result of Frito-Lay’s anti-
competitive conduct.
II.
In Count I Jays claims that Frito-Lay attempted to
monopolize the Chicago market for potato chips in viola-
tion of Section 2 of the Sherman Act. 15 U.S.C. § 2. The
elements of an attempt to monopolize are (1) intent to
control prices or destroy competition with respect to a
part of commerce; (2) predatory or anti-competitive con-
duct directed at accomplishing the unlawful purpose; and
(3) a dangerous probability of success. Chillicothe Sand &
Gravel Co. v. Martin Marietta Corp., 615 F.2d 427, 430 (7th
Cir. 1980).
10a
The parties agree on the definition of predatory
pricing as the dominant firm’s deliberate sacrifice of
current revenues through lower prices for the purpose of
driving rivals out of the market. Once it has vanquished
its rivals, the dominant firm can more than recoup its
short-term losses through higher profits earned in the
absence of competition. MCI Communications Corp. v.
American Telephone & Telegraph Co., 708 F.2d 1081, 1112
(7th Cir.), cert. denied, 104 S.Ct. 234 (1983). The parties
disagree on the proper test for predation, namely, the
sufficiency of cost-based measures of predation and the
relevance of non-cost indicia of predatory intent.
The modern era of predatory pricing analysis was
ushered in by Professors Areeda and Turner. Areeda &
Turner, Predatory Pricing and Related Practices Under
Section 2 of the Sherman Act, 88 Harv.L.Rev. 697 (1975).
They argued that prices at or above marginal cost, even if
not profit- maximizing, generally should be presumed to be
non-predatory. Jd. at 711. Marginal cost is the “in-
crement to total cost that results from producing an
additional increment of output.” Because marginal costs
are difficult to determine, Areeda and Turner advanced
average variable cost as an acceptable surrogate for
marginal cost. Jd. at 716-718. Variable costs are costs
which vary in a short run with changes in output. Such
costs include items such as materials, labor, fuel, use
depreciation, and a return on investment needed to at-
tract enough working capital to pay for variable costs.
Average variable cost is total variable cost divided by
output. Fixed costs, in contrast, are costs which in the
short run do not vary with changes in output. Fixed costs
include such items as management expenses, interest on
bonded debts and other items of irreducible overhead.
Total cost is the sum of fixed and variable costs and
average total cost is the total cost divided by output. See
lla
generally Northeastern Telephone Co. v. American Tele-
phone & Telegraph Co., 651 F.2d 76 (2d Cir. 1981).
The Areeda & Turner formula has won wide if
cautious acceptance by the courts. Some courts have
hewed closely to average variable cost as the conclusive
test of predatory pricing. See e.g. Barry Wright Corp. v.
ITT Grinnell Corp., 724 F.2d 227 (ist Cir. 1983); North-
eastern Telephone, supra. Most courts have recognized the
central importance of a cost-based test of predatory
pricing, but have noted that in unusual circumstances
special market characteristics, such as high entry barriers,
might permit a finding of predatory pricing even if prices
were above average variable cost but below average total
cost. See e.g. Chillicothe Sand & Gravel, 615 F.2d at 431-32;
Pacific Engineering & Product Co. v. Kerr McGee Corp., 551
F.2d 790, 797 (10th Cir.), cert. denied, 484 U.S. 879 (1977);
International Air Industries, Inc. v. American Excelsior
Co., 517 F.2d 714, 723-25 (5th Cir. 1975), cert. denied, 424
U.S. 943 (1976). The Ninth Circuit has strayed most from
sole reliance on a cost-based test of predation. See
Transamerica Computer Co., Inc. v. IBM Corp., 698 F.2d
1377 (9th Cir. 1983). See also D. E. Rogers Associates, Inc.
v. Gardner- Denver Co., 718 F.2d 1431 (6th Cir. 1983), cert.
denied 104 S.Ct. 3513 (1984). In Transamerica the court
held that by reference to non-cost factors a plaintiff could
show that a defendant engaged in predatory pricing even
if its prices were above average total cost. Jd. at 1386-88.
*Courts generally have held that plaintiff makes out a
prima facie case of predatory pricing by showing that defen-
dant’s prices fell below average variable cost and are thus
presumptively predatory. When prices are above average vari-
able but below average total cost plaintiffs must rebut the
presumption that the prices are not predatory. See generally
William Inglis & Sons Baking Company v. ITT Continental
Baking Company, Inc., 668 F.2d 1014, 1035-36 (9th Cir. 1981),
cert. denied, 459 U.S. 828 (1982). The Transamerica court set
plaintiff's burden even higher when defendant’s prices are
above average total cost. 698 F.2d at 1388.
12a
In Chillicothe Sand & Gravel the Seventh Circuit
recognized the centrality of the average variable cost test
in the analysis of a predatory pricing claim. It cautioned,
however, that non-cost factors were not to be neglected
when determining whether a defendant’s pricing policy
was predatory:
[| W |hile we accept the use of marginal or average
variable cost as both a relevant and an extremely
useful factor in determining the presence of pre-
datory conduct we are willing to consider the presence
of other factors in our evaluation of whether or not
plaintiff has made out a prima facie case of monopo-
lizing or attempt to monopolize.
615 F.2d at 432. Indeed, after concluding that defendant’s
prices were above average variable cost, the Chillicothe
court went on to consider and ultimately to reject a
variety of non-cost factors which plaintiff had argued
revealed defendant’s predatory intent. Jd. at 432-34.
In MCI Communications Corp. v. American Telephone
& Telegraph Co., 708 F.2d 1081 (7th cir.), cert. denied, 104
S.Ct. 234 (1988), the Seventh Circuit confronted allega-
tions that AT&T had engaged in predatory pricing of two.
of its services for long distance business communications.
MCI, 708 F.2d at 1111. The issue at MCI was not the
validity of the Areeda and Turner average variable cost
test; neither party ever argued for application of a short
run cost standard. 708 F.2d at 1115. While MCI noted
some of the shortcomings of the average variable cost test,
id. at 1115-16, the decision cannot be read as a repudiation
of that test. In fact, the court expressly stated that
“pricing below average variable cost is normally one of the
most relevant indications of predatory pricing.” Jd. at
1120, n.55.
Perhaps the strongest and most repeated criticism of
the average variable cost test of predatory pricing is its
13a
focus on short term rather than long term costs. See e.g.
Scherer, Predatory Pricing and the Sherman Act: A Com-
ment, 89 Harv.L.Rev. 869, 890 (1976). Then Professor
Posner, for example, recognized the usefulness of the
Areeda and Turner average variable cost formula, but
concluded that predatory pricing also exists when a com-
pany sells its product below its long-run marginal cost
with the intent to exclude a competitor. R. Posner,
Antitrust Law, at 189. Long-run marginal costs are costs
that must be recovered in order for a business to survive
into the indefinite future. Jd. Because all costs are
variable in the long run, long-run marginal costs include
both the fixed and variable components of short-term
costs.
In MCI the court adopted a long-run incremental cost
of providing the two long distance services as the stan-
dard by which to determine if AT&T’s prices were pred-
atory. The long-run incremental cost of producing a
product is total company cost minus what the total cost of
the company would be in the absence of manufacturing
the product, divided by the quality of product being
manufactured. See Baumol, Quasi-Permanence of Price
Reductions: A Policy for Prevention of Predatory Pricing,
89 Yale L.J. 1, 9, n.26 (1979). Long-run incremental cost
includes fixed as well as variable cost of both capital and
operating items. Unlike measures of fully distributed
cost, long-run incremental cost is calculated with refer-
ence to current and anticipated cost, rather than histori-
cal or imbedded cost. MCI, 708 F.2d at 1116-18. The long-
run incremental cost test, in short, measures the costs
caused by the production of a product. Jd. at 1116. Other
courts have been slow to adopt the long-run incremental
cost approach.
l4a
MCI is also important for its discussion of the rule of
non-cost factors in the analysis of predatory pricing. The
court’s most complete statement on the issue was:
We do not intend to imply that in all cases and in
all circumstances we would only examine the price-
cost relationship of a product or service. Our test
merely suggests that a judge and jury may not inter
predatory intent unless price is below long-run in-
cremental cost.... [However,] a strong presumption
of lawfulness must attach when price is shown in a
case like this one to be an appropriately derived
measure of incremental cost.
708 F.2d at 1123, n.59 (emphasis in original).‘
The legacy of Chillicothe and MCI is clear but in-
complete. There are two cost-based tests for predatory
pricing. The average variable cost test focuses on short-
term cost. The long-run incremental cost test measures
the long-term cost caused by the production of product.
While non-cost factors are important adjuncts to the cost-
based tests, the cost tests play a central role in the analysis
of predatory pricing. The Seventh Circuit has not in-
dicated if it will follow the Ninth Circuit in holding that
prices above short-run total cost may in some circum-
stances be predatory. It reasonably can be implied from
MCI and Chillicothe, however, that prices above average
variable cost but below average total cost might be pre-
datory in light of striking non-cost indicia of predation or
unusual market conditions.
‘ There is no indication that the MCI decision requires any
different treatment of non-cost factors when the long-run
incremental cost test rather than the average variable cost test
is employed.
15a
ITI.
For a predatory pricing action of this magnitude, the
data on prices and costs are disconcertingly meager
(Ex.41). Plaintiff concludes that “since Frito-Lay does
not regularly isolate total cost for any division, including
Chicago, these [cost] records do not permit the determi-
nation of costs for potato chips sold in Chicago.” In its
brief plaintiff devotes six pages demonstrating that the
cost data are incomplete and capable of various inter-
pretations. Plaintiff’s position is that as a matter of law it
need not show that Frito-Lay priced potato chips below
applicable cost levels or, alternatively, that the inadequacy
of the cost data precludes summary judgment. Defendant
argues that it is entitled to summary judgment because
the plaintiff has not marshalled cost data in acceptable
form and because the existing data indicates that its
prices were not predatory.
The key piece of cost data is a “total cost study”
covering the years 1974-1980, which plaintiff prepared for
use in cross-examining the defendant’s expert (Ex.42).
The study shows that Frito- Lay’s total costs were general-
ly under its revenues. Plaintiff explains that the cost
study is inaccurate because it relies upon overly con-
servative methodological assumptions. Plaintiff stated
that it intended to provide better and presumably more
favorable cost data at a later date, though it has provided
relatively little in the many months during which Frito-
Lay’s motion has languished.
The cost study purports to show the total cost of
manufacturing, promoting and selling potato chips in
Frito-Lay’s Chicago division. The total cost figures in-
cludes the amounts expended upon (1) manufacturing,
(2) selling and freight, (3) advertising and merchandis-
ing, and (4) general and administrative expenses. The
16a
study, which is broken down into four-week periods,
reveals that Frito-Lay lost $459,275 in 1974 and $292,521
in 1975, and showed profits of $75,819, $7,022, $303,787,
$186,524 and $1,057,830 in the years 1976 to 1980, respec-
tively.
A. Average Variable Cost
The cost study is flawed as an indicator of average
variable cost. For example, it does not differentiate
between the fixed and variable components of total cost.
On its face, however, the study suggests that Frito-Lay’s
average variable cost did not regularly exceed its per unit
prices. First, because average variable cost is but a part of
total cost, Frito-Lay could not have been selling above
variable cost in the years (1976-1980) in which its sales
revenue exceeded its total cost. Second, the 3% difference
between sales revenue and total cost in 1975 would almost
certainly be substantially less than the percentage of total
costs which were fixed.*
Plaintiff has undertaken its own analysis of average
variable cost for a single four-week period in 1976
(Ex.68). It determined that average variable cost ex-
ceeded sales revenue by $3,559 during the period. When
viewed in context, this finding actually supports defen-
dant’s position. First, plaintiff considered 99% of total
manufacturing cost and 98% of total non- manufacturing
cost during the period to be variable, surely an over-
estimation given the short time span. Second, according
to the total cost study, Frito-Lay’s loss during this four-
week period was its third worst of the 91 periods covered
by the study. Frito-Lay’s loss during this period fell
under the 1974 profit/loss average by $42,571. Corre-
sponding figures for the years 1975 through 1980 were
* The cost study shows that Frito-Lay’s revenues exceeded
its total cost for the last eight weeks of 1974.
17a
$58,856, $153,719, $84,922, $100,9771, $169,227 and
$236,196, respectively. That Frito-Lay’s revenues fell
below average variable cost by only $3,559 in such an
abysmal performance period, and that this figure is based
upon questionable methodological assumptions, can only
mean that Frito- Lay’s prices were above average variable
cost in almost all other periods.‘
Plaintiff appears to suggest that it is entitled at a
minimum to recover treble damages for each four-week
period in which Frito-Lay’s potato chip revenues fell
below its total cost for the same period. Average variable
cost and not total cost is, however, the short-run cost
measure. Even assuming that Frito-Lay’s average vari-
able cost was above its revenue during some four-week
periods—a questionable assumption given plaintiff’s des-
ignation of all but a miniscule percentage of cost as
variable—it is doubtful whether plaintiff is entitled to
base its recovery on such short-term perturbations. It is
unclear from the cost study what degree of correspond-
ence there is between the revenue derived from sales
during the period and the costs allocated to that period.
More importantly, given the relatively long periods be-
tween Frito-Lay’s price changes (Ex.5), and the short-
run fluctuations in costs shown in the cost study, it is not
evident that Frito-Lay priced below its reasonably antici-
pated average variable cost. See Areeda & Turner, Anti-
trust Law, 9 715(d) at p. 174.
‘In 1981 Price, Waterhouse & Company prepared an anal-
ysis of a contribution made by the sale of potato chips in the sale
zone which included Chicago (Ex.47). The study found that the
potato chips made a positive contribution on a variable cost basis
each year during the 1974-1980 period. That is, for the zone asa
whole, Frito-Lay was selling its potato chips above its average
variable cost. Plaintiff’s theory, of course, is that Frito-Lay was
selling its supermarket potato chips below its average variable
cost in Chicago, even though its potato chips prices may have
exceeded average variable cost throughout the zone as a whole.
18a
While marginal cost generally is below average total
cost, at high levels of production where production facil-
ities are operating beyond optimum capacity marginal
costs may be above average total cost. Areeda & Turner,
Antitrust Law (1982 Supp.) 7 715.4(c) at p. 155. In rare
cases a defendant who operates a plant well beyond its
optimum capacity may be engaged in predatory pricing
even while earning significant profits. Jd. at 156.
Plaintiff suggests that Frito-Lay’s production facil-
ities were being utilized at the level well over optimum
capacity during the relevant period. The evidence is far
from conclusive in this regard. Plaintiff has produced
evidence which indicates that Frito-Lay officials were
concerned about expanding snack food production facil-
ities nationwide to keep pace with growing demand
(Ex.21, p.207877; Ex.46, p.201549; Ex.53, p.202880; Ex.54;
Ex.56, p.203109; Ex.57, p.203221; Ex.60, p.27904; and Ex.61,
p.203444). The record also shows that there were spot
shortages of Frito-Lay products in some areas due to
strikes, poor materials, bad weather, and, on occasion,
capacity constraints due to spurts in demand caused by
promotions (Ex.9, p.206703; Ex. 29, p.203629; Ex.51; Ex.54;
Ex.58; Ex.59; Ex.62; and Ex.63). The existence of spot
shortages does not necessarily indicate that production
facilities were over-utilized. In fact, Frito-Lay could well
have decided to have spot shortages rather than to utilize
production facilities uneconomically at well over optimum
capacity.
The only hard evidence of the utilization of Frito-
Lay’s potato chip production facilities nationwide does not
indicate sustained production at over-capacity levels.
Records from 1979 show that Frito-Lay operated its
potato chip production facilities at over 100% of capacity
for only two weeks and production levels during these
weeks never exceeded 105% of capacity (Ex.9 at p.206695).
19a
The running average for capacity utilization for the year
never exceeded 90%. Jd. Capacity utilization records for
the first half of 1980 show only one big jump during a
single week to 100% capacity utilization (Ex.64, p.18200).
Capacity utilization over the six four-week periods aver-
aged only 77.4%. Id. p.180198.
This data is of limited use because of its nationwide
scope. The only information about production levels at the
Allen Park plant, the largest supplier of potato chips for
the Chicago market (Ex.40, p.219446), suggests that in
1979 and 1980 capacity well exceeded demand (Ex.D to
Deft’s Reply Memo). In 1979 capacity was 5,900 units,
while demand was projected to be 2,731 units. In 1980
capacity was unchanged and demand was expected to rise
to 3,085 units. Projected demand was well under capacity
of the Allen Park plant through 1983.’
While establishing that Frito-Lay was concerned
about maintaining adequate capacity in the face of rising
demand and that a variety of circumstances led on occa-
sion to spot shortages, plaintiff has done no more than
establish that in three out of seventy-six weeks Frito-
Lay’s plants nationwide were operating at over 100% but
under 110% of capacity. During a good portion of the
same period demand was apparently less than 50% of
capacity at the plant which supplied most of the potato
chips to the Chicago market. Even assuming that margi-
nal costs did exceed average total costs during several
weeks—a questionable assumption given the slight extent
“of the production over capacity—and assuming that the
Allen Park plant was over-utilized—a fact for which there
’ The Allen Park plant was somewhat more inefficient that
most other Frito-Lay plants (Ex.43, p.205123). Plaintiff points
out that cost study, which may not have fully accounted for the
inefficiencies of the Allen Park plan, may thus understate actual
cost.
| crac ici
20a
is no support—this court would be reluctant to base
liability on such short-term periods of production over
capacity levels. Such an approach would be inconsistent
with the purpose of the antitrust laws. Companies would
be reluctant to engage in vigorous price competition if
they faced treble damages for each period, no matter how
short, that their prices happened to fall below their
marginal cost because of unusually high production levels.
Cf. Barry Wright Corp., 724 F.2d at 234 (arguing against
too rigid an adherence to economic principles in antitrust
analysis).
The shortcomings of plaintiff’s position might be
overcome by three factors. First, there is no evidence in
the record as to the utilization of Frito-Lay’s potato chip
plants during much of the period covered by the lawsuit.
Perhaps capacity constraints were greater from 1974
through 1978. Second, not all the potato chips for the
Chicago market were produced at the Allen Park plant.
Conceivably, production levels at the other plants
supplying Chicago were substantially above capacity.
Third, the optimum capacity of the Frito-Lay plants could
have been below the full capacity level established by
Frito-Lay. The existing plant utilization data thus might
understate the extent to which production exceeded opti-
mum capacity. Yet, after extensive discovery, plaintiff
has not been able to advance evidence in support of any of
these suppositions.
B. Long-Run Incremental Cost
The data is even more unsatisfactory with respect to
long-run incremental cost. Both parties agree that plain-
tiff’s cost study is a measure of fully distributed costs. The
Seventh Circuit has rejected fully distributed cost as a
standard with which to examine a company’s long-term
pricing policy. MCI, 708 F.2d at 1119-1123. In some
circumstances fully distributed costs may be an acceptable
2la
proxy for long-run incremental costs. See MCI, 708 F.2d
at 1116, n.47. For example, the average balance sheet cost
of a single product enterprise in a stable economy may
provide an acceptable proxy for long-run incremental
cost. Jd. Frito-Lay, however, produces numerous products.
During the period covered by the lawsuit the economy was
not stable. The potato chip market itself was dynamic and
Frito-Lay was making significant capital expenditures in
new plants in order to meet rising demand.
One can draw suppositions from the data in favor of
both parties. For example, in its supplemental memo-
randum Jays presents a revised cost study which adds the
costs of attracting investment capital to the tally of total
costs. Capital costs are properly included in the calculation
of long-run incremental cost. MCI, 708 F.2d at 1118. As
revised, plaintiff’s cost study shows that Frito-Lay’s total
cost of producing potato chips for the Chicago market
exceeded its revenues. Moreover, plaintiff’s cost study
may understate the actual and anticipated costs from
which the long-run incremental cost figure is derived.
On the other hand, as defendant points out, the total
cost study may significantly overstate the costs attribut-
able to the production of potato chips for the Chicago
market. Long-run incremental costs include only those
costs attributable to the production of a particular prod-
uct. Apparently, not all of the costs which Frito-Lay
would have incurred even if it were not producing potato
chips have been deducted from the total cost study. For
example, the administrative expenses which Frito-Lay
would have incurred in the absence of supermarket potato
chip lines might not have been significantly different than
the amount of administration expenses shown in the total
cost study. If so, the figures for administrative expenses
are substantially inflated for purposes of a measure of
long-run incremental cost. In sum, the data is so
aac ii
22a
fragmentary that no meaningful judgment can be made
as to whether Frito-Lay priced its supermarket potato
chips beneath its long-run incremental cost-
IV.
Jays’ position is that non-cost factors alone can be
determinative of Frito-Lay’s liability. Chillicothe and
MCI cast substantial doubt on this position, at least in the
usual predatory pricing case. Yet, the decisions do require
consideration of non-cost factors in conjunction with the
application of cost-based measures of predation.
A. Profit Cross-Subsidization
Jays has assembled evidence that Frito-Lay set prices
on a regional basis (Ex.18). In regions where Frito-Lay
had relatively little competition, prices were set higher
than in regions like Chicago, where Frito-Lay faced
vigorous competition. Jays argues that Frito-Lay com-
pensated for the lower profits it earned in Chicago by
charging higher prices elsewhere. According to Jays,
Frito-Lay’s lower prices in Chicago were predatory. In
MCI the Seventh Circuit considered and rejected an iden-
tical profit cross-subsidization theory. The court stated
that the so-called subsidization of low prices in com-
petitive markets by higher prices in less competitive
markets was actually a chimera, as long as the price in the
competitive market exceeded long-run incremental cost
in the market:
When a multiproduct firm prices a competitive
service above its long-run incremental cost, no cross-
subsidy can occur because the additional revenues
produced exceed all additional cost associated with the
competitive service and provide a contribution to the
unallocable common cost otherwise borne by the firm’s
existing customers.
23a
MCI, 708 F.2d at 1124. Assuming that Frito-Lay’s potato
chip prices in Chicago were set above long-range in-
cremental cost, no cross-subsidization occurred for which
liability could attach on a monopolization theory.
B. Profit Maximization
In a position related to the theory of price cross-
subsidization, Jays argues that Frito-Lay’s purported
failure to maximize its profits in Chicago was conclusive
evidence of predatory pricing (Ex.18). The MCI court left
no doubt of its rejection of the profit maximization theory:
{ W Je must reject such “profit maximization” the-
ory as incompatible with the basic principles of anti-
trust. The ultimate danger of monopoly power is that
prices will be too high, not too low. A rule of
predation based on the failure to maximize profits
would rob consumers of the benefits of any price
reductions by dominant firms facing new com-
petition. Such a rule would tend to freeze the prices of
dominant firms at the monopoly levels and would
prevent many pro-competitive price cuts beneficial to
consumers in other purchases .... It is in the inter-
ests of competition to permit dominant firms to en-
gage in vigorous competition, including price com-
petition. We therefore reject MCIs “profit max-
imization” theory and reaffirm this circuit’s holding
that liability for predatory pricing must be based
upon proof of pricing below cost.
MCI, 708 F.2d at 1114 (footnote and citations omitted).
In this case Frito-Lay was not even the largest supplier of
potato chips for the Chicago market. Its adoption of non-
profit maximizing prices in response to Jays’ competitive
challenge was thus more reasonable and more necessary
than if it has been the dominant supplier.
C. Entry Barriers
Jays describes the barriers to entering the snack food
market as “almost insurmountable.” As common sense
24a
suggests, supermarket sales of potato chips depend to a
large extent upon the shelf space allocated to a supplier. A
supplier needs adequate shelf space to compete success-
fully in the cacophony of kinds, colors, shapes and sizes of
the various snack food products and their packages. Too
little shelf space creates difficult supply problems requir-
ing frequent restocking. Inadequate shelf space will also
hinder expansion into new product lines. Supermarkets
allocate shelf space on the basis of sales. Because they
allocate shelf space relatively infrequently, and because of
the tie between shelf space and sales, shelf space once lost
is difficult to regain. Getting shelf space in the first place
can be a daunting task (Ex.12, p.137-38).
Jays’ position is that the link between sales and shelf
space, the difficulties in recapturing lost space, and the
obstacles to gaining access to supermarket shelves, create
a substantial barrier to entry into the Chicago potato chip
market. This barrier was important for two reasons.
First, because barriers to entry protect the inflated profits
of a monopolist, the attractiveness of predatory pricing is
directly proportional to the height of the barriers. Second,
Jays argues that the efforts taken by Frito-Lay to in-
crease its allocation of shelf space reflects Frito-Lay’s
predatory intent.
In the absence of substantial evidence to the contrary,
this court has doubts as to whether the purported entry
barriers caused by shelf space limits are unusually high for
potato chips. Presumably all products for which super-
market sales are important can be said to have equally
high entry barriers. Assuming the existence of entry
barriers, it is also unclear whether Jays, the largest potato
chip supplier in the Chicago area, faced unusual diffi-
culties in maintaining or expanding its share of super-
market shelf space or in penetrating into new super-
markets.
aT
25a
MCI appears to minimize the importance of high
entry barriers in the analysis of predatory pricing. Some
courts have held that high entry barriers may make prices
above average variable cost but below short run profit
maximizing levels predatory. See e.g. International Air
Industries, Inc. v. American Excelsior Co., 517 F.2d 714, 724
(5th Cir. 1975), cert. denied, 424 U.S. 943 (1976). The MCI
court did suggest that in some circumstances a short-run
average variable cost test might be inappropriate where
entry barriers are high, 708 F.2d at 1121, n.57. Yet, the
court indicated that high entry barriers did not affect the
viability of a measure of average total cost, such as the
long-run incremental cost test. Indeed, entry barriers
may not even have to be considered when the long-run
incremental cost test is employed:
An important, but presently theoretical, issue not
directly before this court is the propriety of using
short-run marginal cost (as opposed to some measure
of average total cost) in predatory pricing cases
involving industries with high entry barriers ...
there is some evidence that barriers to entry may be
high in the long distance telecommunications field.
There is also evidence, however, that the development
of microwave technology has significantly lowered
these barriers. Because the parties here have argued
from measures of average total cost we do not reach this
question.
Id. (emphasis added) (citation omitted). The MCI court
never considered the effects of entry barriers as part of its
application of the long-run incremental cost test.
In this case it is near certain that Frito-Lay priced its
potato chips above average variable cost. When all infer-
ences are drawn in plaintiff’s favor it appears, however,
that entry barriers in the Chicago market might be high
enough to cast some doubt on the propriety of strict
26a
adherence to the average variable cost test in the face of
convincing non-cost evidence of predatory behavior. MCI
seems to indicate that the long-run incremental cost test
is unaffected by the presence of high entry barriers. Here
the long-run incremental cost data is too rudimentary for
a supportable conclusion that there has been predation.
Jays also points to evidence of anti-competitive ef-
forts by Frito-Lay to increase its share of supermarket
shelf space. When all inferences are drawn in Jays’ favor,
it appears that some Frito-Lay employees may have
attempted to buy extra shelf space and to sabotage super-
market tests of snack food sales in order to obtain more
space (Exs.13-15). While such evidence, if true, is not
conclusive of liability, this being after all a predatory
pricing case, it has some weight as circumstantial evidence
of a predatory scheme.
D. Expressions of Predatory Intent
Jays has culled from the Frito-Lay files various ex-
pressions of competitive combativeness by Frito-Lay em-
ployees (see e.g. Ex.16, p.161286; Ex.18, p.162483; Ex.20,
pp.201316, 201323; Ex.23, p.176901; Ex.34, p.182434035;
Ex.35-37; and. Ex.46, p.174074). Courts are to approach
purported expressions of predatory intent by company
officials warily:
Even if it were possible to identify those persons
within a firm whose intentions are relevant, the
meaning of the evidence will usually be obscure.
After all, competition consists of winning business
from rivals. The intent to preserve or expand one’s
market share is presumptively lawful. To encourage
judges and juries to rely overly on non-probative data
allegedly bearing on a firms “state of mind” invites
the twin mischiefs of (1) burdening the litigation
with thousands of documents about the firm’s motives
and calculations, and (2) encouraging inconsistent
and quixotic results.
27a
MCI, 708 F.2d at 1113.
The closest the evidence comes to a “smoking pistol” is
a statement in a memorandum:
Mazimum Impact on Competition—By placing in-
cremental effort behind these low share markets, we
would maximize the effectiveness of our spending,
since these markets account for 77% of the volume of
our top five competitors and 77% of all branded
competition. This is significant since the bulk of our
major competition’s volume/profit comes from their
potato chip business. Focusing our efforts on potato
chip growth is most likely to hinder aggressive com-
petitive expansion.
(Ex.23, p.176901 (emphasis added); see also Ex.16,
p.161286.) This statement, however, is part of a discussion
of where Frito-Lay should focus its promotional resources
and is not directly connected to Frito- Lay’s pricing policy.
It is alone far from conclusive on the issue of whether
Frito-Lay engaged in predatory pricing. The remaining
intent evidence appears to be primarily naive expressions
of competitive zeal. In short, the existing exidence of
predatory intent has only some limited weight as
corroborative circumstantial evidence of Frito-Lay’s
predatory intent. Standing by itself, the intent evidence
is wholly insufficient to establish Frito-Lay’s predatory
intent.
E. Price and Promotional Discrimination
Jays provide some evidence that Frito-Lay ran pro-
motions featuring price discounts longer in Chicago than
in other markets and generally devoted more merchandis-
ing resources to the zone of which Chicago was a part
(Ex.49, p.169529; Ex.65). Even if true, these things do not
necessarily indicate predatory pricing. The same prin-
ciples that apply to Jays’ product maximization and profit
price cross-subsidization arguments apply in this in-
28a
stance. So long as Frito-Lay priced potato chips above its
average variable cost and its long-run incremental cost,
then there is no compelling reason to deny Chicago con-
sumers the benefits of longer and greater promotional
discounts. While the social benefits of increased advertis-
ing might be debated, there is nothing inherently pre-
datory about heavy advertising in highly competitive
markets.
V.
Courts generally approach summary disposition of
complex antitrust cases with caution. See Lupia v. Stella
D'Oro Company, Inc., 586 F.2d 1163 (7th Cir.), cert. denied,
440 U.S. 982 (1979). This is especially true in antitrust
cases where motive and intent play leading roles. Feld-
man v. Health Care Service Corp., 562 F.Supp. 941 (N.D. II.
1982). If, however, after completion of discovery it is clear
that the plaintiff will not be able to establish an essential
element of its claim, summary judgment in defendant’s
favor is warranted. Products Liability Insurance Agency,
Inc. v. Crum & Forester Insurance Companies, 682 F.2d 660
(7th Cir. 1982).
The parties have completed discovery and filed a
massive pretrial order. If the court denies Frito- Lay’s
motion for summary judgment the parties will go to trial
using exactly the same body of evidence that they have
drawn upon for their briefs. This trial is optimistically
estimated to last six weeks. It will expose Frito-Lay to
treble damages.
Jays simply has failed to make out even the outlines of
a case of predatory pricing, MCI makes clear that an
essential element of a predatory pricing case is proof that
29a
defendant’s prices were below average variable or long-
range incremental costs. After completing its discovery
and after having many months to send legions of experts
through the thickets of cost data, plaintiff has failed to
come close to satisfying either cost standard. In fact, to
the extent it is usable, the available cost data indicates
that Frito-Lay’s pricing policy was not predatory.
Jays rests its case upon the legal proposition that non-
cost evidence can support a predatory pricing claim. A
weak pricing case can perhaps be rescued by convincing
non-cost evidence. But here plaintiff’s pricing data is
anemic at best and its non-cost evidence is unilluminat-
ing.
Because it is based largely upon empirical factors,
predatory pricing analysis does not depend upon consid-
erations of motive and intent. That barrier to summary
judgment is thus not at issue. Now that the pretrial order
is entered there is no possibility that Jays can divine cost
figures or uncover non-cost evidence that reveals pred-
atory pricing. Even though it has made a Herculean
effort, Jays has advanced a case that rests largely upon
speculation and conjecture. In order to avoid presenting a
jury with such a case, the court has no option under the
circumstances but to grant Frito-Lay’s motion for sum-
mary judgment.
VI.
Count II is brought under the Robinson-Patman Act,
15 U.S.C. § 13(a), which provides that
it shall be unlawful for any person engaged in com-
merce, in the course of such commerce, either directly
or indirectly, to discriminate in price between differ-
ent purchasers of commodities of like grade and
quality, where either or any of the purchases involved
in such discrimination are in commerce, where such
30a
commodities are sold for use, consumption, or resale
...and where the effect of such discrimination may be
substantially to lessen competition or tend to create a
monopoly in any line of commerce.
Plaintiff moves for summary judgment on that count.
There are three contested issues with respect to Jays’
Robinson-Patman Act claim: whether Frito-Lay (1) dis-
criminated in price; (2) in the sale of goods of like grade
and quality; (3) such that competition was substantially
lessened. Plaintiff’s motion is directed only at the first
two issues. For purposes of the motion Jays focuses only
on the sale in the Chicago market of supermarket-sized
products within the categories of (1) Lays/Frito- Lays;
(2) Ruffles; and (3) flavored potato chips.
The extent to which a product is of like grade and
quality as another product depends on “the characteristics
of the product itself.” FTC v. Borden Co., 383 U.S. 637, 641
(1966). In Borden the court held that evaporated milk
produced and sold under the Borden name was of like
grade and quality as that which Borden produced for sale
at lower prices under other brand names. The physical
and chemical identity of the two products, rather than
brand names and consumer preferences, are conclusive of
the like grade and quality question. Jd. at 639-640.
Defendant emphasizes the physical differences be-
tween the various lines of Frito-Lay products marketed in
Chicago and throughout the country. The likeness of
grade and quality of, for example, a plain potato chip and
a flavored ridged potato chip presents a genuine issue of
fact which cannot be resolved upon a motion for summary
judgment. See Checker Motors Corp. v. Chrysler Corp., 283
F.Supp. 876, 888-89 (S.D.N.Y. 1968), aff'd 405 F.2d 319 (2d
Cir.), cert. denied, 394 U.S. 994 (1969). Jays’ motion, as
this court understands it, is directed instead towards
3la
establishing only that the various lines of supermarket-
sized Frito-Lay products sold in Chicago were substan-
tially identical to the same items Frito-Lay sold in the
same supermarket-sized packages outside of Chicago. So,
for example, barbecued potato chips sold in supermarket-
sized packages in Chicago are substantially identical to
barbecued potato chips sold in supermarket-sized pack-
ages elsewhere, but not substantially identical to ridged
potato chips sold in supermarket-sized packages. The
evidence supports this rather unremarkable proposition.
Price discrimination under the Robinson-Patman Act
“is merely a price difference.” FTC v. Anheuser-Busch,
Inc., 363 U.S. 536, 549 (1960). Jays has advanced evidence
that Frito-Lay prices for its supermarket-sized products
were sometimes lower in the Chicago market than else-
where. Frito-Lay provides evidence that its prices were
sometimes higher in Chicago than elsewhere. Frito-Lay
also argues that the price differentials were simply inher-
ited from the local companies which it absorbed. See Dean
Milk Company v. FTC, 395 F.2d 696, 700-03 (7th Cir. 1968).
Summary disposition of this issue is unwarranted in view
of the uncertainty of the data. It would seem, however,
that the parties ought to be able to agree on historical
pricing data, thus eliminating the need for evidence on
that issue, and perhaps on post-1978 promotional cam-
paign discounts.
32a
Conclusion
Defendant’s motion for summary judgment on Count
I is granted. Plaintiff’s motion for summary judgment on
Count II is granted in part within the parameters as set
out in the opinion. Defendant’s motion for summary
judgment on the Count II price discrimination issue is
denied.
JAMES B. MORAN
JAMES B. MORAN
Judge, United States District Court
August 1, 1985.
33a
United States Bistrict Court
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JAYS Foops, INC., a corporation,
Plaintuff,
vs. No. 78 C 4352
FRITO- LAY, INC., a corporation,
Defendant.
MEMORANDUM AND ORDER
Plaintiff has moved pursuant to Rule 54(b) of the
Federal Rules of Civil Procedure for reconsideration and
vacation of this court’s August 1, 1985 order granting
defendant’s motion for summary judgment as to count I.
The August 1, 1985 memorandum and order came
after the parties had completed discovery and filed a final
pretrial order. The parties briefed the summary judgment
issue very thoroughly and well. It was apparent to the
court that both sides had a good grasp of both the
applicable law and an extremely large and tangled record.
In reaching its decision the court was confident that each
position was well supported by strong lawyering.
In its opinion the court dealt with plaintiff’s con-
tentions one-by-one. Such an approach was necessitated
by the scope of plaintiff’s claim and the expansiveness of
the record. The court did not, however, forget the nature
of plaintiff’s case. It understood that plaintiff was not
complaining of a series of discrete instances of
Se
34a
anticompetitive predatory conduct but rather of a system
of unlawful anti-competitive behavior that stretched over
many years.
In fact, it was precisely the adoption of plaintiff’s
approach that prompted the court to conclude that plain-
tiff, after full discovery, simply did not have enough
evidence to create a triable issue on its count I claim. The
heart of the court’s opinion is an examination of plaintiff’s
contentions. The court found that the data about defen-
dant’s pricing policy was somewhat fragmentary and did
not point towards predatory pricing. The non-price
evidence was similarly devoid of substantial evidence
supporting plaintiff’s claim that defendant intentionally
designed and implemented an anti-competitive system
that included pricing and numerous marketing and sales
components, covered a large metropolitan market and
lasted for years.
In its motion to reconsider, plaintiff defends a radi-
cally scaled-down version of its case. As to the treatment
of non-price contentions, plaintiff makes only one direct
challenge, alleging that the court did not give weight to
evidence that defendant sold below its short-run margihal
cost during its potato chip promotions. In its opinion the
court noted, however. that the evidence presented by
plaintiff strongly indicated that defendant did not price
below its short-run marginal cost. This data was broken
down into four week periods and did not reveal a pattern
of pricing below short-run marginal cost that correspond-
ed to promotional periods.
Apparently accepting the court’s conclusions about
short-run marginal cost, plaintiff also argues that the
court improperly rejected a study purporting to establish
that defendant priced below its long-run incremental
cost. This study is simply a record of defendant’s fully-
35a
distributed costs of producing potato chips in the zone
that included Chicago, with cost of capital figures tacked
on. As the court noted in its opinion, this revised study is
inherently of questionable accuracy.
The Seventh Circuit has reiterated that pricing below
average variable cost is normally one of the most relevant
indications of predatory pricing. MCI Communications
Corp. v. American Telephone & Telegraph Co., 708 F.2d
1081, 1115 (7th Cir.), cert. denied 104 S.Ct. 234 (1983). The
evidence which the parties have developed after years of
litigating does not support a claim on that basis. In MCI,
the court adopted a long-run incremental cost approach as
a means of defining average total cost because that was
the approach adopted by both parties. It made clear,
however, that fully distributed costs were not the same as
long-run incremental costs and were not normally a
proper measure of average total costs to determine pred-
atory pricing, and, further, that long range incremental
costs were most appropriately a measure of costs of new
products or services, especially when the goods or services
were in capital-intensive industries where growth of
plant and equipment is marked. Jd. at 1115-16. One
would there expect a rational economic pricing decision to
relate more to expectable capital costs and less to im-
bedded historical costs.
By no stretch of the imagination can the production
of potato chips be described as high-tech industry. Potato
chips are a conventional consumer food product in a multi-
product industry with some continuing capital in-
vestment. It is pressing a bit to contend that the pricing
of potato chips should be viewed from a standard that
essentially equates all costs, including capital costs, as
variable. When even that model rests upon the uncertain
foundation of a fully distributed costs analysis, with
capital costs merely tacked on, we have moved from the
36a
realm of reasonably permissible inferences to the realm of
speculation. A brief affidavit filed after the decision in
this case saying that isn’t necessarily so is not enough to
revive plaintiff’s claim even were it considered. Pricing
decisions which do not reflect substantial capital costs in a
new and rapidly expanding market may well be suspect.
If pricing decisions in an established market are likewise
suspect if they do not recover all costs, including prior
capital investment, then pricing above average variable
costs would permit a conclusion of predatory pricing. But
that is not what the cases hold, nor is such a conclusion
consistent with economic reality.
The issue thus becomes whether the earlier reworking
by plaintiff of defendant’s fully distributed cost analysis
should be enough to defeat summary judgment when
plaintiff, after full discovery, has otherwise failed to
establish even the outlines of an alleged system of anti-
competitive conduct. The court believes that granting
summary judgment under the circumstances was and is
appropriate.
As this court’s decision indicated, much of plaintiff’s
argument rests upon inferences which are at best no more
reasonable than contrary inferences and others which are,
in many instances, highly attenuated. The statistical data
to be presented at trial in many instances provides an
uncertain basis for drawing any meaningful conclusion.
Discovery has long been closed. The plaintiff has the
burden of proof. The mosaic which plaintiff presents, in
the context of all the evidence, would leave the jury to
speculate that there may have been predatory pricing but
without sufficient proof, even after viewing the evidence
most favorably to plaintiff, that such a conclusion could
reasonably be reached as more likely than not. And that is
not sufficient. See Matsushita Electric Industrial Co., Ltd.
v. Zenith Radio Corp., 54 L.W. 4319 (S.Ct. 3/26/86).
37a
As can be seen, the court’s grant of summary judg-
ment is not inconsistent with plaintiff’s theory of the case,
but rather follows from it. Plaintiff’s motion to reconsider
and vacate the August 1, 1985 order is accordingly denied.
JAMES B. MORAN
JAMES B. MORAN
Judge, United States District Court
March 31, 1986.
38a
United States District Court
For THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JAYS Foops, INC., a corporation,
Plaintiff,
vs. > No. 78 C 4352
FRITO-LaY, INC., a corporation,
Defendant. :
MEMORANDUM AND ORDER
On August 1, 1985 this court granted defendant’s
motion for summary judgment on count I, holding that
there was insufficient evidence, after full discovery, to
raise a triable attempted monopolization issue. The court
there did not wholly reject reliance on evidence of sub-
jective predatory intent, if there were such, although it
emphasized predatory pricing as the key issue and its
analysis was primarily focused on the relevant cost mea-
surement. Plaintiff tried again, with a motion for
reconsideration. That was rejected on March 31, 1986,
with this court again emphasizing cost measurement
standards.
Defendant followed with a motion for summary judg-
ment on the remaining two counts. The thrust there was
that the Robinson-Patman claim mus¢ also be rejected
because it too requires predatory pricing analyzed on the
same basis as a Section 2 Sherman Act claim. Rather than
require full briefing this court suggested that the parties
39a
file position papers setting forth what they expected to be
able to demonstrate to the court if the issues were fully
explored, and they have done so. This court thereafter
delayed ruling until it had an opportunity to explore
generally the law applicable to Robinson-Patman Act
claims, an area with which it had little familiarity. Hav-
ing done so, this court now grants defendant’s motion for
summary judgment on count IJ and denies it on count III.
Plaintiff claims that this court was wrong the first
time and, if it wasn’t, at least the predation standard for a
Robinson-Patman claim is different from that applicable
to a Section 2 claim. It rests upon Utah Pie Co. v.
Continental Baking Company, 386 U.S. 685 (1967), and
reargues many of its prior contentions.
Utah Pie is a slender reed upon which to rely. The
development of the law has not been kindly to the plain-
tiff since this case was filed and, if anything, it has been
even less kindly since the 1985 opinoin here. The “modern
era of predatory pricing analysis... ushered in by Profes-
sors Areeda and Turner” (Jays Foods, Inc. v. Frito-Lay
Inc., 614 F.Supp. 1078, 1076 (N.D. Ill. 1985)) was eight
years after Utah Pie. If Utah Pie ever meant that a
Robinson-Patman violation can rest upon pricing above
an appropriate cost measurement, it has been soundly
criticized. See Bork, The Antitrust Paradoz, pp.286-387
(1978); Areeda & Turner, Antitrust Law, J 720c, pp.189-
190 (1978); ABA Antitrust Section, Monograph 4, The
Robinson-Patman Act: Policy and Law, Volume I, p.77
(1980). But if it once meant that, it means it no longer.
It is illuminating that, with respect to a Sherman Act
claim, the Supreme Court in Matsushita Electric Industri-
al Co. v. Zenith Radio Corp., 475 U.S. ___, 106 S.Ct. 1348
(1986), defined predatory pricing as chiefly a problem of a
single firm, having a dominant share of the relevant
market, cutting its prices in order to force competition out
49a
of the market, with predatory pricing meaning pricing
below some appropriate measure of cost. It declined, in
that case, to resolve the debate over what cost measure-
ment is relevant (fn.8, p.1355). The Court relied, however,
on cases which had emphasized objective pricing and
incremental cost data, referred to Utah Pie as generally
supporting that proposition, and indicated (in fn.9) that
any theory based upon pricing above an appropriate cost
measurement was vulnerable. A similar shift in emphasis
is echoed in Ball Memorial Hospital, Inc. v. Mutual Hospi-
tal Insurance, Inc., 784 F.2d. 1325 (7th Cir. 1986) (‘So
‘intent to harm rivals’ is not a useful standard in anti-
trust” (p.1338). ‘“[{A] dominant firm may slash prices to
marginal cost in an effort to capture patronage” (p.1339).
“The focus must be on the objective basis, not the mental
state” (id.); see also Olympia Equipmeni Leasing Company
v. Western Union Telegraph Company, 797 F.2d 370 (7th
Cir. 1986) and The Great Escape, Inc. v. Union City Body
Company, Inc., 791 F.2d 532 (7th Cir. 1986). Finally,
Matsushita was a forerunner of Anderson v. Liberty Lobby,
Inc., 476 U.S. ___, 106 S.Ct. 2505 (1986) and Celotex Corp.
v. Catrett, 476 U.S. ___, 106 S.Ct. 2548 (1986), where the
Supreme Court made it clear that summary judgment is a
useful tool when the party having the burden of proof
cannot sustain its burden after full discovery.
Indeed, the rapid development of the law is well
illustrated by one treatise. Von Kalinowski, Antitrust
Laws and Trade Regulation, ch. 29, vol. 4, dealing with
competitive injury under the Robinson-Patman Act, ap-
pears to have been largely written in 1969 and somewhat
revised in 1979. Ch. 10, vol. 3, dealing with predatory
practices, appears to have been substantially rewritten in
1985 and discusses fully the differing approaches of the
various circuits in the post- Areeda & Turner era. There is
an almost total lack of congruency between the chapters.
4la
In ch. 10 (10-25, § 10.03(5)), fn. 48, Von Kalinowski notes
that Utah Pie probably has little present relevance since it
predated the “recent flood of predatory pricing writing
precipitated by Areeda & Turner’s proposal and before a
large amount of litigation on the issue. There is a
different context of common law and economic theory that
the Supreme Court must now consider.”
Courts have been unwilling to drop intent as a stan-
dard entirely, perhaps because of an understandable
reluctance to never say never when the universe is
unpredictable, perhaps in deference to the past, or per-
haps in recognition that commercial megalomania, even
without market power, is, still, without redeeming virtue.
But see Barry Wright Corporation v. ITT Grinnell Corpo-
ration, 724 F.2d 227 (1st Cir. 1983). Some courts have
been unwilling, also, to follow the logic of an objective
predation standard. They have, rather, noted that pre-
datory pricing can lead to an inference of predatory
intent which can lead to an inference of the requisite
possible effect on competition, William Inglis & Sons
Baking Co. v. ITT Continental Baking Co., 668 F.2d 1014
(9th Cir. 1981), cert. denied, 459 U.S. 825 (1982) or to an
inference of a dangerous probability of success in attain-
ing monopolization, Janich Bros. Inc. v. American Dis-
tilling Co., 570 F.2d 848 (9th Cir. 1977), cert. denied, 439
U.S. 829 (1978). The relevant cost measurements remain,
as the Supreme Court noted, the subject of intense debate,
with factors such as entry barriers relevant to that de-
bate.
Where does that leave a Robinson-Patman price dis-
crimination claim? The answer is, in one sense, unclear.
The statute imposes liability not for price discrimination
but illegal price discrimination, and that requires a pos-
sible impact on competition (not just on a competitor,
Henry v. Chloride, Inc., __. F.2d ___, Nos. 85-2394,
42a
85-2446, slip op. (8th Cir. Jan. 20, 1987)). That is, by its
terms, different from the monopolization standard of
dangerous probability of success. But if predatory pricing
leads inexorably to a presumed danger of monopolization
(and, obviously, a presumed threat), the focus necessarily
is on the predation standard, at least in primary-line
injury cases. And the courts and commentators are now in
virtual agreement that the predation standards for Sec-
tion 2 and Robinson-Patman claims are the same, even
though they may disagree over what the standards may
be. O. Hommel Co. v. Ferro Corp., 659 F.2d 340 (3rd Cir.
1981), cert. denied, 455 U.S. 1017 (1982); William Inglis &
Sons Baking Co. v. ITT Continental Baking Co., supra; see
International Air Industries, Inc. v. American Excelsior
Co., 517 F.2d (5th Cir. 1975), cert. denied, 424 U.S. 943
(1976).
Defendant here concedes that market analysis may
establish a Robinson-Patman violation even in the ab-
sence of predation, and certainly the Seventh Circuit has
so stated in Lloyd A. Fry Roofing Co. v. FTC, 371 F.2d 277,
282 (7th Cir. 1966), a refrain repeated in some more
recent cases such as Double H. Plastics, Inc. v. Sonoco
Products Company, 732 F.2d 351 (3rd Cir.), cert. denied,
469 U.S. 900 (1984), and Henry v. Chloride, Inc., supra, slip
op. at 12. This court confesses to being highly uncertain
what that means, if anything. A more efficient enterprise
using, for example, some new technology, might be able to
make a profit at prices below all its competition in one
market and drive them from it, while charging a higher
price in another market. It can be argued that that is
competition, not predation, and that the antitrust laws do
not condemn that price benefit to consumers, at least so
long as insurmountable entry barriers do not create a
continuing monopoly. If that enterprise raises prices
”
43a
later, its competitors can return (as they also can if they
become more efficient).
This court has already concluded that the evidence
does not support a claim of predatory pricing here and
that should end the matter. Plaintiff again contends that
in some weeks it can show pricing below a relevant cost
measurement, but no matter how the standard is verba-
lized such transitory fluctuations are not violations. They
do not support a presumed intent, as they do not suggest
an intent to drive competition from the marketplace and
then raise prices to more than recapture past losses. They
do not prove a possible substantial impact on competition,
much less a dangerous probability of monopolization.
Brief under-cost pricing hardly establishes the monopoly
staying power with which Section 2 concepts, at least, are
concerned.
But even if a market analysis is relevant in the
absence of predation plaintiff does not indicate in a
meaningful way why it would be relevant here. Plaintiff
does not contend that the parties are in a capital-
intensive, high technology industry. It argues that shelf
space once lost is difficult to regain. Despite its continuing
references to high entry barriers plaintiff does not, how-
ever, appear to suggest that defendant could, if dominant,
charge monopoly prices and continue to exclude com-
petitors for any extended period. At most, it contends
that inertia in allocating shelf space will delay somewhat
the entry of a competitor with products of equal quality
and lower prices. It is difficult to see how that supports an
argument that defendant’s pricing could be predatory
because it was rational only if losses could be recouped by
subsequent extended monopoly pricing. “If the price-
cutter cannot dominate—if other rivals can with reason-
able ease take the place of any competitors knocked
out—competition is not seriously or permanently dam-
———
44a
aged.” Henry v. Chloride, Inc., supra, slip op. at 21. Plain-
tiff contends that defendant has a dominant position in
the Chicago market for snack foods other than potato
chips, which it protects by potato chip price dis-
crimination, and that in recent years plaintiff has lost and
defendant has gained market share. But that is a far cry
from a drastically declining price structure or some other
change in-the market from which a threat to competition
could be argued even if we assume that a threat without
predation is a violation. Plaintiff’s case rests, ultimately,
upon an expansive view of Utah Pie, and that view is
unwarranted.
That leaves, then, count III. Plaintiff there asserts
claims under the state antitrust laws of Illinois, Indiana, °
Michigan and Wisconsin, and under the Illinois Uniform
Deceptive Practices Act, the Illinois Consumer Fraud and
Deceptive Business Practices Act and the Wisconsin
Fraudulent Advertising Statute. Defendant initially con-
tended that these state law claims fall if it prevailed on
the federal claims because they are pendent. Plaintiff
points out, however, that there is complete diversity, and
defendant has apparently abandoned that contention.
Conversely, plaintiff does not contend that state antitrust
statutes give it a claim even though federal law does not,
and it does not now urge that it is entitled to relief under
the Wisconsin Fraudulent Advertising Statute. It argues,
however, that there are triable issues under both Illinois
statutes. Unfortunately, both parties have treated the
state law claims in their memoranda as very much an
afterthought. Indeed, plaintiff’s one case citation was toa
1946 New York case. This court notes that in plaintiff’s
statement of contested issues in the final pretrial order it
makes no reference to any state law claims. On the other
hand, it has expressly abandoned only some of the state
law claims advanced in paragraph 20 of the First
45a
Amended Complaint, those being subparagraphs (c), (d),
(e), (g), (i), (j) and (1). Further, some of the subpara-
graphs are essentially price discrimination claims, and
those are now foreclosed. Those are subparagraphs (a)
and (b). 7
That leaves, then, claims that defendant engaged in
advertising and promotional practices directly tied to the
allocation of increased shelf space, had a program of
acquisitions and mergers to forestall entry and lessen
competition and illegally induced store buyers and the like
to allocate additional shelf space and product “and/or
excluding other competitors’ products.” We assume that
plaintiff does not contend that acquisitions and mergers
have anything to do with the Illinois statutes. Although it
is far from clear, plaintiff is apparently claiming that
defendant on occasion bought additional shelf space, used
false sales figures to get a larger allocation, and made
various misrepresentations. Without, however, a more
specific understanding of what claims remain, it is diffi-
cult for the parties to argue, and for this court to deter-
mine, their legal sufficiency under state law. The motion
for summary judgment on count III is, therefore, denied,
not because it is without merit but because this court
cannot presently determine what merit it may have.
JAMES B. MORAN
JAMES B. MORAN
Judge, United States District Court
February 26, 1987.
46a
Hnited States District Court
FoR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JAYS Foops, INC., a corporation,
Plaintiff,
vs. > No. 78 C 4352
FRITO- Lay, INC., a corporation,
Defendant. a
MEMORANDUM AND ORDER
Plaintiff Jays Foods, Inc. filed this action in 1978. It
was primarily an antitrust case consisting of predatory
pricing claims under section 2 of the Sherman Act, 15
U.S.C. § 2, and price discrimination claims under the
Robinson-Patman Act, 15 U.S.C. § 138(a). Two successful
summary judgment motions by the defendant, Frito-Lay,
Inc., disposed of these federal antitrust claims. Jays
Foods, Inc. v. Frito-Lay, Inc., 614 F.Supp. 1073 (N.D. IL.
1985) (no triable issue concerning Sherman Act claim).
635 F.Supp. 103 (N.D. Ill. 1986) (motion for reconsidera-
tion denied), 656 F.Supp. 843 (N.D. Ill. 1987) (no triable
issue concerning Robinson-Patman Act claim). All that
remains are Jays’ claims under the Illinois Consumer
Fraud and Deceptive Business Practices Act (the “Con-
sumer Fraud Act’), Ill.Rev.Stat. ch. 121-1/2, | 262 et seq.,
and the Illinois Deceptive Trade Practices Act, Ill.Rev.-
Stat. ch. 121-1/2, 9 311 et seqg., which have received scant
attention until Frito-Lay filed this summary judgment
motion shortly before trial. The trial date was vacated
47a
and Frito-Lay’s summary judgment motion is now grant-
ed. ~
REMAINING CLAIMS
Jays’ remaining claims relate te subparagraphs 20(f)
and (k) of its amended complaint. In subparagraph 20(f)
plaintiff alleges that Frito-Lay is
[e]ngaging and continues to engage in advertising
and promotional practices which are directly tied to
retailer’s allocation of additional shelf space to Frito-
Lay products to forestall market entry and lessen
competition.
Subparagraph 20(k) charges Frito-Lay with
[i]llegally and improperly inducing store buyers and
similarly situated personnel to give defendant addi-
tional shelf space, additional authorization for its
products and/or excluding other competitors’ prod-
ucts.
These allegations closely resemble the shelf space allega-
tions in Jays’ antitrust claims.
Jays intended to show at trial that Frito-Lay at-
tempted to influence the allocation of retail shelf space by
engaging in several unfair and deceptive practices. First,
Jays would show that Frito-Lay urged retailers to allocate
shelf space based on total snack food sales but it failed to
use the shelf space it gained that way in a profit max-
imizing manner. For example, Frito-Lay devoted all
newly gained space to its comparatively slow-selling
regular potato chips. Second, Jays would show that Frito-
Lay gained additional shelf space by presenting retailers
with misleading and incomplete shelf space studies. For
example, one such study, Frito-Lays’ “mini-analysis,”
examined only total sales of snack foods, ignoring other
48a
variables such as profits, inventory turnover, location and
service. Jays also would show that Frito-Lay stacked its
products at the front of retail shelves, leaving unused
space behind (“dummying up’), and left more of its
products in certain stores than sales justified, moving
them to stores with higher inventory turnover only just in
time to prevent them from going stale (“rolling stock’’).
Jays contends that these practices enabled Frito-Lay to
occupy excessive shelf space at the expense of Frito-Lay’s
competitors, such as Jays.
Third, Jays would show that Frito-Lay engaged in
promotional programs directly tied to the allocation of
additional shelf space, a practice that Jays characterizes as
“buying space.” Finally, Jays would show that Frito-Lay
took steps to skew sales when retailers were conducting
shelf space tests to protect its shelf space allocations.
DISCUSSION
The course of events has somewhat skewed the
present dispute. The final pretrial order was filed in 1982,
after discovery had been closed. That order, which was to
govern the issues to be tried and listed the witnesses and
exhibits, largely ignored the state law claims. After the
summary judgments on the antitrust claims this court
determined that the two state law claims remained, a very
small tail on what had been a large and now dead dog. We
assumed, on the basis of what had been previously repre-
sented, that plaintiff might be claiming, for example, that
it had been excluded from some supermarket or con-
venience store chain for a time or had its shelf space
reduced by such an enterprise, all because of defendants
conduct and that plaintiff would point to reduced sales to
those enterprises as a result. The issues would be, in those
circumstances, factual and legal—whether there was con-
duct which led to provable loss of sales and whether that
49a
conduct was illegal. A trial of those remaining narrow
issues was contemplated to be short, resulting in a final
judgment which would permit appeal of the antitrust
decisions.
Plaintiff now claims that the passage of time nullifies
the restrictions of the final pretrial order. It seeks to
introduce evidence of everything which has happened
since discovery closed for the purpose of ascribing to
defendant’s shelf space conduct the claimed difference
between plaintiff’s value at the beginning of 1984 (based
on the sales price of the company in 1986) and what the
value could have been. The amounts claimed exceed those
of the antitrust claims. Defendant quite reasonably
argues that plaintiff is seeking to litigate a new and
different lawsuit about which there has been no discovery.
We do not, however, reach that question because we
conclude that the conduct of which plaintiff now complains
does not create triable issues under Illinois law. Frito-Lay
argues that the record shows there are no triable issues as
to (1) the alleged violations of either of the two Illinois
statutes Jays relies on; (2) the causation of Jays’ claimed
injury; and (3) Jays’ theory of damages. Because Frito-
Lay’s first argument is persuasive, there is no need to
examine the others.
Jays devotes a surprising amount of attention to the
Illinois Deceptive Trade Practices Act. Section 2 of the
Act, Ill.Rev.Stat. ch. 121-1/2, 9312, lists the kinds of
conduct covered in twelve subparagraphs. The first eleven
subparagraphs apply to specific kinds of deceptive. con-
duct, such as passing-off, trademark infringement and
false advertising. None of those subparagraphs is at issue
here. Jays relies on subparagraph 2(12), Ill.Rev.Stat. ch.
121-1/2, ¥ 312(12), which prohibits “conduct which sim-
ilarly creates a likelihood of confusion or misunder-
50a
standing.” The only conduct by Frito-Lay that might fit
within that subparagraph is its alleged use of misleading
shelf space studies, or perhaps its efforts to skew retailers’
own shelf space studies. Because the Deceptive Trade
Practices Act only applies to false or misleading conduct
concerning goods or services, it does not apply to Frito-
Lay’s other non-deceptive conduct. See Steinberg v. Chi-
cago Medical School, 69 Ill.2d 320, 328, 13 Ill.Dec. 699, 703,
371 N.E.2d 634, 638 (1977); Ill.Rev.Stat. ch. 121-1/2, J 311
Prefatory Illinois Notes (the Act deals with “false, con-
cealing, or deceptive trade identification, and false, con-
fusing, or deceptive representations as to the source or
origin of goods.’’).
But the Deceptive Trade Practices Act only provides
for injunctive relief, plus costs and attorneys’ fees in
appropriate circumstances. [ll.Rev.Stat. ch. 121-1/2,
71313. Although Jays’ original complaint in this action
mentioned injunctive relief, this case has proceeded as a
damage action since then. Neither the final pretrial order
nor plaintiff’s statement of issues to be tried indicate that
anything other than damages is sought now. Because
there is no damage remedy under the Deceptive Trade
Practices Act, Frito-Lay is entitled to summary judgment
on that part of Jays’ claim.
If Jays is to recover damages it must proceed under
‘ the Consumer Fraud Act, which provides:
Unfair methods of competition and unfair or decep-
tive acts or practices, including but not limited to the
use or employment of any deception, fraud, false
pretense, false promise, misrepresentation or the con-
cealment, suppression or omission of any material
fact, with the intent that others rely upon the con-
cealment, suppression or omission of such material
fact, or the use or employment of any practice de-
scribed in Section 2 of the “Uniform Deceptive Trade
Practices Act” ... are hereby declared unlawful
5la
whether any person has in fact been misled, deceived
or damaged thereby. In construing this section con-
sideration shall be given to the interpretations of the
Federal Trade Commission and the federal courts
relating to Section 5(a) of the Federal Trade Com-
mission Act.
Ill.Rev.Stat. ch. 121-1/2, 9262; see Ill.Rev.Stat. ch.
121-1/2, J 270a (providing for a private damage action).
The Consumer Fraud Act incorporates Section 2 of the
Deceptive Trade Practices Act by reference, but it is
considerably broader. Like the Federal Trade Commission
Act, 15 U.S.C. § 41 et seg., the Consumer Fraud Act applies
to “unfair methods of competition.” Unfair methods of
competition include violations of the federal antitrust.
laws. See, e.g., E. I. DuPont de Nemours & Co. v. FTC, 729
F.2d 128, 1386-37 (2d Cir. 1984). However, Jays cannot
proceed on an antitrust theory because of Frito-Lay’s
earlier successful summary judgment motions. Except for
the possible violations of the Deceptive Trade Practices
Act, Jays must show that Frito-Lay’s shelf space practices
were unfair even though they did not violate the antitrust
laws. is ;
The Consumer Fraud Act is, by its terms, wide-
ranging. In interpreting it, consideration shall be given
to interpretations of the Federal Trade Commission Act,
but the decision as to what is “unfair” is left to juries and
the courts rather than to an administrative agency hav-
ing experience and expertise.' Perhaps for this reason the
‘Consumer Fraud Act claims are frequently tried before a
jury. See, e.g., Warren v. LeMay, 142 Ill.App.3d 550, 572-73, 96
Ill.Dec. 418, 4382, 491 N.E.2d 464, 478 (5th Dist. 1986); Tague v.
Molitor Motor Co., 139 Ill. App.3d 313, 93 Ill.Dec. 769, 487 N.E.2d
436 (5th Dist. 1985). However, the only court to face the issue
held that the Consumer Fraud Act does not provide for jury
trials. Richard/Allen/Winter Ltd. v. Waldorf, No. 2-86-0119
(2d Dist. June 10, 1987).
52a
Illinois courts have moved cautiously in fleshing out the
contours of the Act. See Evanston Motor Co. v. Mid-
Southern Toyota Dist., Inc., 486 F.Supp. 1370, 1374 n.4
(N.D. Ill. 1977); Frahm v. Urkovich, 113 Ill. App.3d 580, 586,
69 Ill.Dec. 572, 576, 447 N.E.2d 1007, 1011 (1st Dist. 1983)
(“we do not interpret the liberal construction require-
ments to mean that liability under the Act is completely
open-ended’’). No Illinois case appears to have extended
liability under the Consumer Fraud Act to the kind of
conduct at issue here. Although the Illinois courts have
often stated that unfair practices under the Consumer
Fraud Act must be defined on a case-by-case basis, ¢.g.,
Scott v. Ass'n for Childbirth at Home, Int'l, 88 Ill.2d 279,
290, 58 Ill.Dec. 761, 767, 480 N.E.2d 1012, 1018 (1982), this
court, as a federal court sitting in diversity jurisdiction,
must be particularly hesitant to push the frontiers of state
law. See, e.g., Anderson v. Marathon Petroleum Co., 801
F.2d 936, 942 (7th Cir. 1986); Zick v. Verson Allsteel Press
Co., 623 F.Supp. 927, 930 (N.D. Ill. 1985).
In this action Jays has failed to develop any evidence
showing that consumers are injured by Frito-Lay’s con-
duct. The Illinois courts have limited liability under the
Consumer Fraud Act to conduct that implicates consumer
protection concerns. See, e.g., Feldstein v. Guinan, 148
Ill.App.3d 610, 615, 101 Ill.Dec. 947, 951, 499 N.E.2d 535,
539 (1st Dist. 1986) (“the Act does not redress purely
private wrongs but is for practices which affect the public
generally”); Frahm, 113 Ill.App.3d at 586, 69 Ill.Dec. at
576, 447 N.E.2d at 1011 (“the Act is intended to reach
practices of the type which affect consumers generally and
is not available as an additional remedy to redress a purely
private wrong”); see also M & W Gear Co. v. AW
Dynamometer, Inc., 97 Ill.App.3d 904, 915, 53 Ill.Dec. 721,
731, 424 N.E.2d 356, 366 (4th Dist. 1981) (Webber, J.,
dissenting) (“the emphasis is on the consumer and the
53a
apparent purpose is an effort to equalize economic power
as between consumers and predators in the business
world’’).
Several federal courts in this district, including this
court, have followed that limitation. See, e.g., Horsell
Graphic Industries, Ltd. v. Valuation Counselors, Inc., 639
F.Supp. 1117, 1122 (N.D. Ill. 1986); Heritage Ins. Co. v.
First Natl Bank, 629 F.Supp. 1412, 1419 (N.D. Ill. 1986);
Newman-Green, Inc. v. Alfonzo-Larrain R., 590 F.Supp.
1083, 1086-88 (N.D. Ill. 1984). The Illinois Supreme Court
has not squarely faced the issue, but its decisions also
support limiting liability under the Consumer Fraud Act
to conduct that deceives or exploits consumers. See Scott v.
Ass’n for Childbirth at Home, Int1, 88 Ill.2d at 285, 58
Ill.Dec. at 764, 480 N.E.2d at 1015 (Consumer Fraud Act
applies to advertising and sale of educational and training
services because “purchasers of educational services may
be in as much need of protection against unfair or decep-
tive practices in their advertising and sale as are pur-
chasers of any other service’’); Steinberg v. Chicago Medical
School, 69 Ill.2d at 328, 13 Ill.Dec. at 703, 371 N.E.2d at 638
(rejected medical school applicants could not sue under the
Consumer Fraud Act because they were not consumers).
The limitation does not prevent businesses from suing
under the Consumer Fraud Act, but injury to consumers is
an essential element of such a claim. See, e.g., Newman-
Green, Inc., 590 F.Supp. at 1087-88.
The Illinois courts have not uniformly formulated this
consumer injury limitation and some courts have stated
that it does not apply. See, e.g., M& W Gear, 97 Ill. App.3d
at 913-14, 53 Ill.Dec. at 730, 424 N.E.2d at 365.2 However,
? Other Illinois cases have headed in the opposite direction,
stating that only consumers have standing to sue under the
Consumer Fraud Act. See, e.g., McCarter v. State Farm Mutual
Automobile Ins. Co., 130 Ill.App.3d 97, 101, 85 Ill.Dec. 416, 419,
473 N.E.2d 1a015, 1018 (3d Dist. 1985); Carter v. Mueller, 120
Ill. App.3d 314, 322, 75 Ill.Dec. 776, 783, 457 N.E.2d 1335, 1342
(1st Dist. 1983).
54a
those cases have either involved consumer plaintiffs or
conduct from which injury to consumers could be readily
inferred. In M & W Gear the plaintiff successfully sued a
competitor for false advertising. On appeal, the defend-
ant argued that the plaintiff had failed to plead or prove
any adverse effect on the public. The court rejected any
public injury requirement and affirmed judgment for the
plaintiff. However, as the court in Newman-Green ob-
served, the M & W Gear court could easily have held that
false advertising gives rise to a conclusive presumption of
public injury to consumers. 590 F.Supp. at 1087 (citing
Evanston Motor Co., 4386 F.Supp. at 1374 n.6). In Tague v.
Molitor Motor Co., 139 [ll.App.3d 313, 316, 93 Ill.Dec. 769,
770-71, 487 N.E.2d 436, 487-38 (5th Dist. 1985), the court
rejected a public injury requirement, but there the plain-
tiff was a consumer complaining of odometer tampering
and other misconduct in connection with the sale of a used
car. In Duncavage v. Allen, 147 Ill.App.3d 88, 102, 100
Ill. Dec. 455, 463, 497 N.E.2d 433, 441 (1st Dist. 1986), the
court concluded that a tenant was a consumer under the
Consumer Fraud Act, and relied on Taguwe in allowing a
suit on behalf of a deceased tenant against a landlord.
Similarly, the court in Haroco, Inc. v. American Nat
Bank & Trust Co., 647 F.Supp. 1026, 1034-35 (N.D. II.
1986), rejected any public injury requirement, but that
was a class action by commercial borrowers against a
bank. The plaintiffs were in the same position as con-
sumers with respect to their loans, and the alleged mis-
conduct involved deceptive practices addressed to a broad
segment of the bank’s market. See Exchange Nat! Bank v.
Farm Bureau Life Ins. Co., 108 Ill.App.3d 212, 216, 63
Ill.Dee. 884, 887, 488 N.E.2d 1247, 1250 (3d Dist. 1982)
(holding that plaintiff borrowers had no Consumer Fraud
Act claim “[i]n the absence of an allegation indicating
such [deviant business] practices to be part of a pattern of
55a
defendant’s lending activities...”). Thus Haroco, like
M & W Gear on which it relied, may rest on an unnecessar- -
ily broad ground.
This court concludes, as it did in Horsell, that some
consumer injury is an essential element of any claim
under the Consumer Fraud Act. Perhaps where the
plaintiff is a consumer, no further public injury need be
shown. But where a suit is between competitors, as it is
here, a plaintiff must show that the defendant’s mis-
conduct injured consumers generally. See Hangstefer v.
Insco, No. 86 C 1022 (N.D. Ill. May 14, 1987); Maduff v. Life
Ins. Co., 657 F.Supp. 437, 440 (N.D. Ill. 1987) (both noting
the apparent split in Illinois authority and concluding
that allegations of public injury or effect on consumers
generally are necessary to state a claim under the Con-
sumer Fraud Act).
Although the consumer injury requirement is an
independent element of any Consumer Fraud Act claim,
including claims based on the incorporated Deceptive
Trade Practices Act violations, it is similar in some re-
spects to the issue of unfairness. The consumer injury
requirement developed in part from concepts applied in
determining whether a trade practice is unfair under
section 5 of the Federal Trade Commission Act, 15 U.S.C.
§ 45. See, e.g., Evanston Motor, 436 F.Supp. at 1874. A
practice that is neither a violation of the antitrust laws
nor deceptive may still be unfair under section 5 if it
offends some established public policy, if it is immoral,
unethical, oppressive or unscrupulous, or if it is substan-
tially injurious to consumers. Spiegel, Inc. v. FTC, 540 F.2d
287, 293 (7th Cir. 1978) (citing FTC v. Sperry Hutchinson
& Co., 405 U.S. 233, 244-45 & n.5 (1972) ); see Scott v. Ass'n
for Childbirth at Home, Int1, 88 Ill.2d at 290, 58 Ill.Dec. at
767, 480 N.E.2d at 1018 (citing Spiegel and Sperry
Hutchinson with approval in defining unfair practices
56a
under the Consumer Fraud Act). The Federal Trade
Commission has further refined the concept of unfairness
under the FTC Act, clarifying that its primary focus is
consumer injury; the public policy theory is used mainly to
cross-check and confirm a finding of consumer injury, and
the theory of immoral or unscrupulous conduct was aban-
doned altogether as an independent basis of liability. See,
e.g., International Harvester Co., 104 F.T.C. 949, 1060-61,
1070-76 (1984).
As the Evanston Motor court recognized, consumer
injury under the Consumer Fraud Act can take two forms.
Violations may affect consumers directly or indirectly by
affecting competition. The plaintiff here has not at-
tempted to set forth any evidence of a direct injury to
consumers. Frito-Lay’s alleged misconduct was directed
to retailers, not to consumers. Further, although plaintiff
contends that consumer’s purchasing decisions were af-
fected by changes in shelf space allocation, this court does
not believe that such an effect can be characterized as an
injury. See Newman-Green, 590 F.Supp. at 1088 n.7.
Rather, Jays’ case depends on showing that consumers
are injured because Frito-Lay’s conduct was anti-
competitive. The Federal Trade Commission has recog-
nized, at least implicitly, that efforts to influence retail
shelf space allocations are not in themselves anti-
competitive. In Kellogg Co., 99 F.T.C. 8 (1982), the
Commission filed a complaint against manufacturers of
ready-to-eat cereals. The complaint counsel! alleged in
part that the manufacturers had a tacit agreement
among themselves to avoid competition for shelf space in
retail stores, an unfair practice under section 5 of the
Federal Trade Commission Act, 15 U.S.C. § 45. 99 F.T.C.
at 141-50. The ALJ concluded that
the record does not support complaint counsel’s asser-
tion that respondents had a tacit agreement to avoid
57a
competition for shelf space in retail stores. Kellogg
independently formulated a shelf space allocation
plan that incorporated principles which were in ac-
cord with retailers’ preferred methods of doing busi-
ness. The other respondents, faced with the same
requirements of retailers, responded with plans that
| incorporated the same basic principles. While each
respondent competed for the most favorable shelf
space location and the most space it could get, it was
constrained not to push for more than a reasonable
share in order to maintain rapport and credibility
with retailers. Nevertheless, both General Mills and
| General Foods did present shelving alternatives in
variations in an effort to gain competitive advan-
tages.
99 F.T.C. 254.
Ultimately the complaint was dismissed. 99 F.T.C. at
269. In a separate statement Commissioner Clanton
briefly discussed the shelf space allocation issues:
It could be argued that an order restricting or
preventing respondents from making shelf space rec-
ommendations would held to inject more competitive
pressures into an important area of non-price com-
petition, without intruding unnecessarily into re-
spondent’s day-to-day business judgments. On the
other hand, this type of activity is undoubtedly nor-
mal commercial behavior that is engaged in by many
other food manufacturers, although it is not clear
whether the nature and pattern of recommendations
in the cereal industry are followed in other markets.
However, regardless of whether a workable re-
medy could be crafted on this subject, it is question-
able whether the issue is at all important from a
remedial standpoint.
99 F.T.C. at 277-78 (citing Schmalensee, Entry Deterrence
in the Ready-to-Eat Breakfast Cereal Industry, 9 Bell J.
Econ. 305, 307 n.4 (1978)).
58a
Competition for shelf space does not appear to be an
unusual phenomenon, and some of Frito-Lay’s exhibits
show that Jays used tactics similar to Frito-Lay’s in
trying to increase its own shelf space allocations. As
Kellogg Co. suggests, there is no reason to assume that
these efforts were anti-competitive. Jays contends that
Frito-Lay’s shelf space practices were anti-competitive
because Jays and other potato chip companies were ex-
cluded from 7-Eleven stores. All that supports this
contention, however, are certain internal memoranda
from Frito-Lay. One document describes Frito-Lay’s
response to 7-Eleven’s planned test-marketing of Frito-
Lay’s competitors’ products (exh. 13). Another document
is an enthusiastic letter to Frito-Lay salesmen, urging
them to “[k]ick out our competition” (exh. 34). However,
the letter does not mention 7-Eleven stores. A third
document describes Frito-Lay’s efforts to persuade 7-
Eleven to eliminate plaintiff’s products completely, leav-
ing Frito-Lay as 7-Eleven’s exclusive supplier (exh. 37).
The documents Jays relies on show that Frito-Lay isa
hard-nosed, arguably over-zealous competitor. They do
not, however, support the inference that Frito- Lay’s shelf
space practices were exclusionary. There is nothing in the
record, for example, indicating that 7-Eleven was con-
tractually bound to deal only with Frito-Lay, that Frito-
Lay was able to coerce 7- Eleven into some sort of exclusive
arrangement, or that Frito-Lay was otherwise able to
prevent 7-Eleven from dealing with Frito-Lay’s com-
petitors. Moreover, Leonard Japp, Jr., a vice-president of
Jays, testified on November 25, 1980 that the plaintiff was
then supplying 7-Eleven and that some fifteen of its
products were authorized in 7-Eleven stores. At the
deposition, Mr. Japp explained that Jays had just been
authorized to service 7-Eleven stores (Japp dep. at 410-
12). The documents plaintiff relies on are dated at least
several months before the deposition.
59a
Without evidence that Frito-Lay’s shelf space alloca-
tion practices were exclusionary, Jays’ reliance on FTC v.
Brown Shoe Co., 384 U.S. 316 (1966) is misplaced. There
the Supreme Court stated that the Federal Trade Com-
mission had the power to declare an exclusive franchise
program unfair without proof that its effect “may be to
substantially lessen competition or tend to create a mono-
poly.” 384 U.S. at 321. The Court held that the Commission
had the power under section 5 of the FTC Act to arrest
trade restraints in their incipiency, without proof that
they amount to an outright violation of the antitrust laws.
384 U.S. at 322. In a brief opinion it reversed the Eighth
Circuit Court of Appeals, which apparently reasoned that
Brown Shoe could not have violated the FTC Act if it did
not violate the antitrust laws.
Moreover, as the Fourth Circuit recognized in Chuck's
Feed & Seed Co. v. Ralston Purina Co., 810 F.2d 1289, 1292-
96 & n.3 (4th Cir. 1987), Brown Shoe does not hold that
exclusive dealing arrangements are inherently anti-
competitive. The plaintiff in Ralston Purina was a retail
feed store operator. Ralston Purina terminated the store
operator’s dealership after the operator began selling a
competitor’s product. The store operator sued under the
South Carolina Unfair Trade Practices Act, S.C. Code
Ann. § 39-5-20, which is similar in material respects to the
Illinois statute at issue here. The store operator contended
that Ralston Purina’s exclusive dealing policy was an
unfair trade practice. The Court of Appeals reversed a
jury vercict in favor of the store operator, holding that
the district court should have granted Ralston Purina’s
motion for judgment notwithstanding the verdict. After
reviewing the standards concerning exclusive dealing
arrangements and other vertical restraints under the
federal antitrust laws, the Court determined that
60a
(the store operator] simply failed to offer the relevant
evidence concerning the extent to which Ralston
Purina may have used exclusive dealing arrange-
ments to “foreclose the market,” or, in other words, to
keep competing brands of feed out of a substantial
percentage of the feed dealerships in the area. In-
stead, almost all of [the store operators] evidence
related to his own individual experience with Ralston
Purina. That alone is not enough to show a negative
impact on competition in the market as a whole.
810 F.2d at 1295; see Tampa Electric Co. v. Nashville Coal
Co, 365 U.S. 320 (1961); Beltone Electronics Corp., 100
F.T.C. 68, 192-221 (1982); see also, Continental T.V., Inc. v.
GTE Sylvania, Inc., 483 U.S. 36 (1977) (rule of reason
applies to vertical competitive restraints).
Thus, as Ralston Purina illustrates, even if Frito-
Lay’s practices were exclusionary to some degree, they
were not necessarily anti-competitive. As the Court’s
earlier opinion suggests, plaintiff’s evidence on that issue
is too scanty to support the conclusion that they were.
Rather than developing evidence bearing on the fore-
closure of a significant amount of competition in some
relevant market, plaintiff has focused on its own declining
fortunes and asks this court to draw unwarranted infer-
ences.
Jays argues that direct evidence of anti-competitive
effects is unnecessary in light of their evidence of Frito-
Lay’s anti-competitive intentions and Frito-Lay’s failure
to act in a profit-maximizing /fashion. This court has
already observed that “[s]tanding by itself, Jays’ intent
evidence is wholly insufficient to establish Frito-Lay’s
predatory intent.” 614 F.Supp. at 1073. No anti-
competitive effects can be inferred from this evidence.
Similarly, Frito-Lay’s alleged failure to maximize profits
in arranging its shelf space displays cannot itself establish
a violation of the Consumer Fraud Act. See Perrin v.
6la
Pioneer Natl Title Ins. Co., 83 Ill.App.3d 664, 672-63, 39
Ill.Dee. 124, 131, 404 N.E.2d 508, 515 (1st Dist. 1980)
(giving bigger volume discounts than cost savings would
justify is not actionable under the Consumer Fraud Act);
cf. 614 F.Supp. at 1082, (citing MCI Comm. Corp. v.
American Tel. & Tel. Co., 708 F.2d 1081, 1114 (7th Cir.),
cert. denied, 464 U.S. 891 (1983) (rejecting a profit max-
imization test for predatory pricing).
Moreover, Jays’ contention that proof of anti-
competitive effects is unnecessary where there is evidence
of some anti-competitive purpose or lack of an in-
dependant business justification is based on a misreading
of the Du Pont case. In Du Pont, a parallel pricing case,
the Second Circuit rejected the FTC’s position that non-
collusive, non-predatory and independent conduct of a
non-artificial nature could be unfair under Section 5 of
the FTC act where it resulted in a substantial lessening of
competition. 729 F.2d at 137. In vacating the FTC’s order
the Second Circuit stated that evidence of an anti-
competitive purpose or lack of an independent business
justification might substitute for proof of a tacit agree-
ment, not that such evidence could substitute for proof of
anti-competitive effects. 729 F.2d at 139-40. Finally, as
courts have repeatedly observed, injury to a competitor is
not the same thing as injury to competition. See, e.g.,
Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962);
Ball Memorial Hosmtal v. Mutual Hospital Ins., Inc., 784
F.2d 1325, 1838 (7th Cir. 1986); Newman-Green, 590
F.Supp. at 1087 & n.6.
Without evidence that Frito-Lay’s shelf space activi-
ties were anti-competitive, Jays cannot establish the con-
sumer injury element of its claim under the Consumer
Fraud Act. For the same reason Jays cannot establish
that Frito-Lay’s non-deceptive shelf space practices were
62a
unfair. If Jays were seeking injunctive relief, perhaps
plaintiff nevertheless could proceed to trial under the
Illinois Deceptive Trade Practices Act, Ill. Rev. Stat. ch.
121-1/2, § 311 et seq., on its claim that Frito-Lay deceived
retailers by using incomplete data in its shelf allocation
“mini-analysis” or by sabotaging retailers’ own shelf-
space studies. However, it cannot recover damages under
the Deceptive Trade Practices Act. Under the cireum-
stances, Frito-Lay is entitled to summary judgment.
CONCLUSION
Frito-Lay’s motion for summary judgment is grant-
ed.
JAMES B. MORAN
JAMES B. MORAN
Judge, United States District Court
June 29, 1987.
63a
United States District Court
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JUDGMENT IN A CIVIL CASE
JAYS Foops, INC.
v. CASE NUMBER: 78 C 4352
FRITO- Lay, INC.
(JJury Verdict. This action came before the Court for a
trial by jury. The issues have been tried and the jury
has rendered its verdict.
& Decision by Court. This action came to trial or hearing
before the Court. The issues have been tried or heard
and a decision has been rendered.
IT IS ORDERED AND ADJUDGED That defendant’s
motion for summary judgment is granted. (See Memo-
randum and Order dated 6-29-87)
H. STUART CUMMINGHAM
Clerk
WILLIE A. HAYNES
Deputy Clerk
Date June 29, 1987
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.