Opposition Brief — LSLJ Partnership v. Frito-Lay, Inc.

FILED

(2) JAN 6 1989

No. 88-956 aes vel

CLERK

In THE %

Supreme Court of the United States

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

RESPONDENT’S BRIEF IN OPPOSITION

Ear. E. Po.uock *

KENNETH H. Hocu

JEFFREY L. DoRMAN

Louis C. KEILER

SONNENSCHEIN CARLIN NATH

& ROSENTHAL

8000 Sears Tower

Chicago, Illinois 60606

(312) 876-8000

Attorneys for Respondent

* Counsel of Record

Midwest Law Printing Co., Chicago 60611, (312) 321-0220

+ R

i

QUESTION PRESENTED

The only question presented is whether the courts below—

on the particular facts of this case and after thorough con-

sideration of both the cost data and non-cost evidence ad-

duced by petitioner—correctly held that petitioner “

failed to make out even the outlines of a case of predatory

pricing’’ under the Sherman and Robinson-Patman Acts.

il

RULE 28.1 LISTING

The parent company of respondent Frito-Lay, Ince. is

PepsiCo, Inc. Frito-Lay has the following subsidiaries and

affiliates (other than wholly-owned subsidiaries):

Fujita Frito-Lay, Ltd.

Presco Corporation

Siam Snack Company, Ltd.

Arnotts Snack Foods

Orion Frito-Lay Corporation

Corina Snack Foods

Pepsi-Cola Allied Bottlers, Inc.

Alpac

Southwest Beverage Corp.

Channel Island Beverage Co., Inc.

& Lindsey Holding Company, Inc.

Pepsi-Cola Bottling of Northern California

Midsouth Acquisition Corporation

Pepsi-Cola General Bottlers

Pepsi-Cola Bottling of Roseburg

Pepsi-Cola Bottling of Bend

Willamette Beverage Co.

ABC Corp.—(Omnitron)

Britvic Corona Ltd.

Serm Suk Co., Ltd.

Taiwan Pepsi-Cola Bottling Company, Inc.

Chicago & Rush

Pizza Hut del Distrito, S.A. de C.V.

Pizza Hut Japan, Ltd.

Pizza Hut (UK), Ltd.

Wendy’s Germany

Pizza Hut Restauration GMBH

Pizza Hut S.N.C.

Kentucky Fried Chicken Espana, S.A.

Kentucky Fried Chicken de Venezuela S.A.

International Process Foods

Kentucky Fried Chicken Beijing Limited

Kentucky Fried Chicken (Great Britain) Limited

ill

TABLE OF CONTENTS

QUESTION PRESENTED ...................

ens 2k LASTING .............cccccccccce

I.

THE DECISION BELOW IS NOT IN CON.

FLICT WITH ANY DECISION OF OTHER

sss Ut ae a oo 4 A: en

A.

The Decision Below Does Not Conflict

With Decisions Allowing The Use Of Non-

Cost Evidence In Predatory Pricing

ee ey ha ou

Jays Failed To Adduce Sufficient Cost

Evidence To Meet Any Applicable Cost

eA ate OY pt

IT.

THE DECISION BELOW IS NOT IN CON-

FLICT WITH APPLICABLE DECISIONS OF

ee oan ask ac kde bkcc.

A.

B.

The Decision Below Is Completely In Ac-

cord With This Court’s Cargill Decision .

There Is No Conflict Between The Deci-

sion Below And This Court’s Decision In

mee Gee Pee Case .................

6

~]

10

10

13

iv

C. The Court Below Properly Applied This

Court’s Decisions Concerning The Proper

Standard For Granting Summary Judg-

a rrr errr rr et eye ore

II.

THE DECISION BELOW PRESENTS NO ISSUE

WARRANTING REVIEW BY THIS COURT ...

CONCLUBIGN sinc cccck sd escsanccctiarvsenes

14

16

Vv

TABLE OF AUTHORITIES

Cases

Adjusters Replace-A-Car, Inc. v. Agency Rent-A-

Car, Inc., 735 F.2d 884 (5th Cir. 1984), cert.

denied, 469 U.S. 1160 (1986) ..............

Anderson v. Liberty Lobby, Inc.. 477 U.S. 242

Ce er ee Fe aip ees nett hrs

Arthur S. Langenderfer, Inc. v. S.E. Johnson Co.,

729 F.2d 1050 (6th Cir.), cert. denied, 469 U.S.

ks Pre Peer Tere wee re

Barry Wright Corp. v. ITT Grinnell Corp., 724

ee wet COE CO. Te 5 inno i nnd cx ceesiss

Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S.

Oe CINE bao dkdetncidenteadiceesseeenise

Celotexr Corp. v. Catrett, 477 U.S. 317 (1986) ..

Chillicothe Sand & Gravel Co. v. Martin Marietta

Corp., 615 F.2d 427 (7th Cir. 1980) ........

Edwards v. Aguillard, 482 U.S. , 107 S. Ct.

oe Bs ine Sree ree

International Air Industries, Inc. v. American Ex-

celsior Co., 517 F.2d 714 (5th Cir. 1975), cert.

denied, 424 U.S. 943 (1976) ...............

Lomar Wholesale Grocery, Inc. v. Dieter’s Gourmet

Foods, Inc., 824 F.2d 582 (8th Cir. 1987), cert.

denied, 108 S. Ct. 707 (1988) ..............

MCI Communications Corp. v. American Tele-

phone & Teiegraph Co., 708 F.2d 1081 (7th

Cir.), cert. denied, 464 U.S. 891 (1983) .....

Matsushita Electric Industrial Co. v. Zenith Radio

Corp., 473 US. Si4 (1968) 2. occ ccccceenss

PAGE

14

vl

Northeastern Telephone Co. v. American Telephone

& Telegraph Co., 651 F.2d 76 (2d Cir. 1981),

cert. denied, 455 U.S. 943 (1982) .......... 8

Pacific Engineering & Production Co. v. Kerr-

McGee Corp., 551 F.2d 790 (10th Cir.), cert.

demed, 434 U.S. 879 (1977) ..........000. 9, 4

Southern Pacific Communications Co. v. American

Telephone & Telegraph Co., 740 F.2d 980 (D.C.

Cir. 1984), cert. denied, 470 U.S. 1005 (1985) . 9

Sunshine Books, Ltd. v. Temple University, 697

i — 8 Bi a... Serer res 8

Transamerica Computer Co. v. International Busi-

ness Machines Corp., 698 F.2d 1377 (9th Cir.),

cert. denied, 464 U.S. 955 (1983) .......... 7, 8,9

Utah Pie Co. v. Continental Baking Co., 386 U.S.

IL LO. i 45544 canaces banca eaes 13, 14

William Inglis & Sons Baking Co. v. ITT Conti-

nental Beking Co., 668 F.2d 1014 (9th Cir.),

cert. denied, 459 U.S. 825 (1982) .......... 14

Statutes

Clayton Act § 2(a), as amended by the Robinson-

Patman Act (15 U.S.C. § 13(a)) ..........0.. 2, le

Sherman Act $2 (15 U.S.C. §2) .............. 2,14

Other Authorities

Areeda & Turner, Predatory Pricing and Related

Practices under Section 2 of the Sherman Act,

88 Harv. L. Rev. 697 (1975) .............. 14

IN THE

Supreme Court of the United States

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

RESPONDENT’S BRIEF IN OPPOSITION

STATEMENT OF THE CASE

Background of the Litigation

Petitioner is the assignee of claims asserted by Jay’s

Foods, Inc. (“Jays’’) in an action filed by Jays against re-

spondent Frito-Lay, Inc. (“Frito-Lay”) in November 1978.!

! In 1986 Jays was sold to Borden, Inc., for $30 million. How-

ever, the claims asserted in this action were assigned to peti-

tioner. For ease of reference, since it is Jays’ claims which

are in issue, petitioner is sometimes referred to herein as

“Jays”.

=

In its complaint, Jays charged that Frito-Lay violated

§ 2 of the Sherman Act and § 2(a) of the Robinson-Patman

Act in the pricing and promotion of potato chips in the

Chicago area. “(T]he relevant geographic market is the

Chicago area and the relevant product is potato chips’.

(Pet. App. 6a.)

Throughout the period involved in this case (1974-80),

Jays was the largest seller of potato chips in the Chicago

area. (Pet. App. 24a.) According to Jays (Pet. 6), ‘““The com-

pany with the greatest share of potato chip sales controls

the entire salty snack food section of the supermarket”.

In the pertinent period (1974-80), Jays more than doubled

its sales and increased its sales each year.? In addition,

Jays made substantia! profits in each year in the period.*

During the same period, although Jays paid dividends

to its stockholders each year, Jays’ retained earnings near-

ly doubled.4 Jays’ equity (including treasury stock pur-

chased in 1981) also nearly doubled.®

2 1974 — $22,970,172; 1975 — $27,430,101; 1976 — $31,996,614;

1977 — $35,691,531; 1978 — $37,650,107; 1979 — $41,586,256;

1980 — $44,352,969; 1981 — $47,431,378.

References to years in footnotes 2, 3, 4, and 5 are to Jays’

fiscal years, each ending January 31 of the designated year.

3 1974 — $139,749; 1975 — $825,590; 1976 — $1,957,727:

1977 — $2,319,620; 1978 — $1,280,911; 1979 — $1,795,907;

1980 — $948,557; 1981 — $663,462.

4 1974 — $4,108,780; 1975 — $4,290,637; 1976 — $4,996,603;

1977 — $5,825,361; 1978 — $6,277,904; 1979 — $6,835,952;

1980 — $7,141,104; 1981 — $7,366,118.

5 1974 — $4,408,780; 1975 — $4,590,637; 1976 — $5,296,603;

1977 — $6,125,361; 1978 — $6,577,904; 1979 — $7,135,952;

1980 — $7,441,144 1981 — $7,666,118.

= oe

Proceedings Below

In the District Court, Jays expressly admitted:

(1) that Frito-Lay’s “prices were totally unrelated to

the prices charged by other snack food manufac-

turers”’;

(2) that “Without regard for any changes in the com-

petitive environment, Frito-Lay blindly determined

the amount of price increases needed to meet its

company-wide financial targets, and applied that

percentage increase to then current prices in each

different marketing area”;

(3) that “No effort was made to relate Frito-Lay’s prices,

whether list or net of promotional allowance, to the

prices of competitors’; and

(4) that Jays, even while undercutting Frito-Lay’s prices,

was able both to consistently earn a profit on the

sale of its potato chips and to maintain the largest

share of potato chip sales in the Chicago area.

In a series of four opinions (Pet. App. 5a-62a), issued

over a period of two years, the District Court granted

Frito-Lay’s motions for summary judgment on each of

Jays’ claims and dismissed the complaint.

Frito-Lay’s summary judgment motions were filed after

‘full and complete discovery” (Pet. App. 5a) and sought

summary judgment on the basis of the discovery record,

including in particular Jays’ own study of Frito-Lay’s

potato chip sales in the Chicago Division. (Pet. App. 15a-

l6a, 20a-21a.)

On the basis of its detailed review of the evidence, the

District Court held that ‘Jays simply has failed to make

out even the outlines of a case of predatory pricing” (Pet.

App. 28a); that “Even though it has made a Herculean

effort, Jays has advanced a case that rests largely upon

speculation and conjecture” (Pet. App. 29a); and that “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 summary judgment” (Pet. App.

29a).

Jays did not claim that Frito-Lay priced below its aver-

age variable cost (except for a single 4-week period), and

the District Court found that ‘In this case it is near cer-

tain that Frito-Lay priced its potato chips above average

variable cost”. (Pet. App. 25a.) The Court further held

that ‘‘In sum, the data is so fragmentary that no mean-

ingful judgment can be made as to whether Frito-Lay

priced its supermarket potato chips beneath its long-run

incremental cost’’. (Pet. App. 21a-22a.) Similarly, the Court

stated: “Here the long-run incremental cost data is too

rudimentary for a supportable conclusion that there has

been predation’. (Pet. App. 26a.)

Contrary to petitioner’s assertions (e.g., Pet. 9), the Dis-

trict Court did not limit its analysis to cost evidence. In-

stead, the Court recognized that ‘‘. . . the decisions do

require consideration of non-cost factors in conjunction

with the application of cost-based measures of predation.”

(Pet. App. 22a.) The Court then addressed each of the

non-cost arguments advanced by Jays. Thus, the Court

considered and rejected Jays’ arguments based on profit

eross-subsidization (Pet. App. 22a-23a), profit maximiza-

tion (Pet. App. 23a), entry barriers (Pet. App. 23a-26a),

and expressions of predatory intent (Pet. App. 26a-27a).

With respect to entry barriers, the Court held:

‘‘In the absence of substantial evidence to the con-

trary, this court has doubts as to whether the pur-

ported entry barriers caused by shelf space limits are

unusually high for potato chips. Presumably all prod-

ucts for which supermarket sales are important can

be said to have equally high entry barriers. Assum-

ing the existence of entry barriers, it is also unclear

~

—Oo—

whether Jays, the largest potato chip supplier in the

Chicago area, faced unusual difficulties in maintain-

ing or expanding its share of supermarket shelf space

or in penetrating into new supermarkets.” (Pet. App.

24a.)

Jays’ “intent evidence”, the Court held, consisted of “‘pri-

marily naive expressions of competitive zeal’? and was

‘wholly insufficient to establish Frito-Lay’s predatory in-

tent’. (Pet. App. 27a.)

On Jays’ motion for reconsideration, the Court sum-

marized its position:

“The heart of the court’s opinion is an examination

of plaintiff's contentions. The court found that the

data about defendant’s pricing policy was somewhat

fragmentary and did not point towards predatory pric-

ing. The non-price evidence was similarly devoid of

substantial evidence supporting plaintiffs claim ... .”

(Pet. App. 34a.)

* * *

“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 view-

ing 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 Matsu-

shita Electric Industrial Co., Ltd. v. Zenith Radio

Corp., 54 L.W. 4319 (S.Ct. 3/26/86).”” (Pet. App. 36a.)

The judgment of the District Court was affirmed by the

Seventh Circuit in an unpublished order. (Pet. App. 1la-4a.)

After reviewing the record, the Court of Appeals adopted

the District Court’s opinions and specifically stated its

agreement with the District Court that “Jays simply has

failed to make out even the outlines of a case of predatory

pricing’’. (Pet. App. 2a.)

-

REASONS FOR DENYING THE WRIT

As examination of the decision below readily confirms,

the decision is based on the specific facts of this case and,

in particular, on petitioner’s admissions and deficiencies

of proof.

None of the relevant considerations governing review

on certiorari, as set forth in this Court’s Rule 17, sup-

ports the grant of the requested writ. The decision of the

Court of Appeals is wholly consistent—and is not in con-

flict—with the decisions of this Court and the other Courts

of Appeals. Nor does the decision below merit review by

this Court for any other reason.

I.

THE DECISION BELOW IS NOT IN CONFLICT WITH

ANY DECISION OF OTHER COURTS OF APPEALS.

Petitioner seeks to manufacture a conflict by misstating

the decisions and record below. In essence, petitioner at-

tacks a straw-man of its own making. \

Contrary to-spetitioner’s assertions (e.g., Pet. 9), the

lower courts did not ‘ignore’ petitioner’s non-cost evi-

dence. Instead, the District Court, whose opinions were

adopted by the Court of Appeals, considered that evidence

but found it “unilluminating”’ and “wholly insufficient”’.

(Pet. App. 27a, 29a.)

Nor is there any basis in the decisions or record for

believing that Frito-Lay priced its potato chips “‘for the

express purpose of injuring competition’’, as petitioner as-

serts in its statement of ‘‘Questions Presented” (Pet. i).

Indeed, petitioner admitted below that Frito-Lay priced

a. a

solely to meet its financial goals without regard to its com-

petitors’ prices. (See supra, p. 3.)

The decisions below do not conflict with the predatory

pricing standards established either by this Court or by

any Court of Appeals. Simply put, the courts below held

that, regardless of whether predatory intent may be in-

ferred from prices below variable cost or total cost, Jays

had not met either standard (Pet. App. 15a-22a, 25a). In

addition, regardless of whether non-cost evidence could

be used to demonstrate predatory intent, the courts below

found Jays’ non-cost evidence to be ‘‘wholly insufficient’’

(Pet. App. 27a, 29a, 2a). Jays’ predatory pricing claim was

rejected simply because there was a total failure of proof

regardless of what standard was adopted.

A. The Decision Below Does Not Conflict With Decisions

Allowing The Use Of Non-Cost Evidence In Predatory

Pricing Cases.

Petitioner initially suggests that the Seventh Circuit’s

decision conflicts with Ninth Circuit decisions—notably

Transamerica Computer Co. v. International Business

Machines Corp., 698 F.2d 1377 (9th Cir.), cert. denied,

464 U.S. 955 (1983)—concerning the role of non-cost evi-

dence in proving predatory pricing (Pet. 10-11). In Trans-

america, ironically, the Ninth Circuit cited two Seventh

Circuit opinions as examples of the proper use of non-

cost data. See 698 F.2d at 1387 n.15 (‘““The Seventh Cir-

cuit also recognizes the importance of considering non-

price factors in evaluating whether a pricing policy is

predatory’’).®

6 See Chillicothe Sand & Gravel Co. v. Martin Marietta Corp.,

615 F.2d 427, 432 (7th Cir. 1980) (“while we accept the use

(Footnote continued on following page)

linn

As the Ninth Circuit pointed out in Transamerica, the

Seventh Circuit has repeatedly stated that non-cost evi-

dence may be used to supplement a showing of preda-

tory pricing. And, as pointed out in the Statement (supra,

pp. 4-5), the courts below gave ample consideration to

Jays’ non-cost evidence, but simply found it wanting. The

alleged conflict with the Ninth Circuit does not exist.

B. Jays Failed To Adduce Sufficient Cost Evidence To Meet

Any Applicable Cost Standard.

Aware that a predatory pricing test based wholly on

subjective evidence of ‘intent’? would stifle genuine price

competition, every Circuit which has addressed the issue

(including the Ninth) has adopted some price-cost test in

determining whether predatory pricing has occurred.?

8 continued

of marginal or average variable cost as both a relevant and

an extremely useful factor in determining the presence of preda-

tory conduct, we are willing to consider the presence of other

factors in our evaluation of whether or not [the plaintiff] has

made out a prima facie case of monopolizing or attempt to mo-

nopolize”’); MCI Communications Corp. v. American Tele-

phone & Telegraph Co., 708 F.2d 1081, 1123 n. 59 (7th Cir.),

cert. denied, 464 U.S. 891 (1983) (“we agree, at least in prin-

ciple, with Judge Wood’s advocacy of the use of non-economic

(or less rigorous economic) evidence in some cases’’).

7 See, e.g., Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d

227, 235-36 (Ist Cir. 1983); Northeastern Telephone Co. v.

American Telephone & Telegraph Co., 651 F.2d 76, 88 (2d Cir.

1981), cert. denied, 455 U.S. 943 (1982); Sunshine Books, Ltd.

v. Temple University, 697 F.2d 90, 92 (3d Cir. 1982); Adjusters

Replace-A-Car, Inc. v. Agency Rent-A-Car, Inc., 735 F.2d 884,

888-91 (Sth Cir. 1984), cert. denied, 469 U.S. 1160 (1985); Arthur

S. Langenderfer, Inc. v. S.E. Johnson Co., 729 F.2d 1050, 1056-

57 (6th Cir.), cert. denied, 469 U.S. 1036 (1984); Lomar Whole-

sale Grocery, Inc. v. Dieter’s Gourmet Foods, Inc., 824 F.2d

582, 598 (8th Cir. 1987), cert. denied, 108 S. Ct. 707 (1988); Trans-

(Footnote continued on following page)

i om

Petitioner argues that ‘‘the decision below falls square-

ly in the existing conflict among the Circuits on the ques-

tion of whether prices above incremental cost may be

predatory” (Pet. 11). However, irrespective of what differ-

ences may exist among the Circuits, petitioner fundamen-

tally misstates the standards applied by the courts below.

A simple review of the District Court’s opinion clearly

shows that the Court considered all cost evidence pre-

sented by Jays. Jays did not prepare a variable cost

analysis. Instead, it prepared a total cost study of Frito-

Lay’s potato chip revenues and costs in Frito-Lay’s Chi-

cago Division for the years 1974-80 (Pet. App. 15a). The

“study” showed that Frito-Lay’s revenues exceeded total

cost throughout the period from 1976 to 1980 (Pet. App.

15a-16a), that revenues fell short of total cost by only 3%

in 1975 (Pet. App. 16a), and that revenues exceeded total

costs during the final eight-week period in 1974 (the only

portion of that year within the limitations period). From

this evidence, the District Court concluded that there

was no evidence that Frito-Lay had priced below variable

cost (Pet. App. 16a-17a, 25a), and the District Court’s opin-

ions were expressly adopted by the Court of Appeals (Pet.

App. 2a).

Jays also claimed to have prepared a study of Frito-

Lay’s long run incremental potato chip costs for the sales

zone (covering all or part of seven states) which contained

Chicago (Pet. App. 20a-22a). However, as the District

7 continued

america Computer Co. v. International Business Machines

Corp., 698 F.2d 1377, 1383-88 (9th Cir.), cert. denied, 464 U.S.

955 (1983); Pacific Engineering & Production Co. v. Kerr-

McGee Corp., 551 F.2d 790, 795-97 (10th Cir.), cert. denied,

434 U.S. 879 (1977); Southern Pacific Communications Co. v.

American Telephone & Telegraph Co., 740 F.2d 980, 1002-07

(D.C. Cir. 1984), cert. denied, 470 U.S. 1005 (1985).

_-10—

Court noted, Jays merely took a fully distributed cost

(“FDC”) computation made by Frito-Lay and tacked on

an additional cost of 7.5% to 8.5% of sales which supposed-

ly represented the cost of capital. For this reason, the

District Court rejected Jays’ so-called LRIC study as “‘in-

herently of questionable accuracy”’ (Pet. App. 35a) and as

‘“‘mov[ing] from the realm of reasonably permissible infer-

ences to the realm of speculation” (Pet. App. 35a-36a).

Thus, the courts below found that Jays had failed to pro-

duce any reliable evidence showing that Frito-Lay had

priced below either variable or total cost.

In sum, this case does not present an issue as to whether

variable or total cost is the appropriate standard in pred-

atory pricing cases. The courts below considered both

standards and found Jays’ evidence inadequate to create

a triable issue of fact under either standard.

[I.

THE DECISION BELOW IS NOT IN CONFLICT WITH

APPLICABLE DECISIONS OF THIS COURT.

A. The Decision Below Is Completely In Accord With This

Court’s Cargill Decision.

In Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S.

104, 117 (1986), this Court pointed out that ‘“‘Predatory

pricing may be defined as pricing below an appropriate

measure of cost for the purpose of eliminating competitors

in the short run and reducing competition in the long

run.’’§ In the present case, as in Cargill, there is no need

to define the “appropriate measure of cost’’ since (1) peti-

8 The District Court adopted substantially the same definition

of predatory pricing, which was advanced by petitioner—i.e.,

the‘‘deliberate sacrifice of current revenues through lower

prices for the purpose of driving rivals out of the market.”

(Pet. App. 10a.)

~~

tioner conceded below that Frito-Lay did not set its prices

for the purpose of eliminating Jays or any other competi-

tor, and (2) at no time was Jays threatened with elimina-

tion from the market by Frito-Lay’s prices.

In the District Court, Jays admitted that Frito-Lay’s

“prices were totally unrelated to the prices charged by

other snack food manufacturers” and that “No effort was

made to relate Frito-Lay’s prices, whether list or net of

promotional allowances, to the prices of competitors.”’ The

District Court’s finding was to the same effect. (Pet. App.

8a.) In other words, Frito-Lay’s pricing was not targeted

at eliminating Jays or any other competitor from the

market. This squarely precludes any finding that Frito-

Lay’s pricing was predatory.

Furthermore, according to petitioner’s own records and

admissions, Jays was never threatened with elimination

from the market by Frito-Lay’s prices. Jays admits (Pet.

6) that it remained the largest potato chip seller in the

Chicago area during the period in question (1974-80). Its

total sales grew from $22.9 million in 1974 to $44.3 million

in 1980. (Pet. App. 7a; see note 2 supra.) Jays also ad-

mitted that it did not suffer a loss on its potato chip sales

during the years in question. Indeed, Jays’ pretax profits

rose from $139,749 in 1974 to $2,319,620 in 1977 and were

$948,557 in 1980. (Pet. App. 7a; see note 3 supra.) In

short, Jays was never forced to sustain losses by com-

peting with Frito-Lay’s prices. Nor did Jays identify any

other firm driven from the market (or threatened with

extinction) by Frito-Lay’s prices.

Jays nevertheless sought damages for its alleged inabil-

ity to increase prices to reach a 6% pretax rate of return

on sales. (Pet. App. 9a.) In this regard, petitioner’s theory

of “‘predatory”’ pricing is strikingly similar to the theory

==

which this Court rejected in Cargill, supra. In Cargill,

the plaintiff (Monfort) contended that a proposed acquisi-

tion by the defendant (Cargill), while not threatening

plaintiff with extinction, would result in, inter alia, a

price-cost squeeze that would reduce the plaintiffs profit

margin. 479 U.S. at 114-15. This Court squarely rejected

Monfort’s argument, stating

“The kind of competition that Monfort alleges here,

competition for increased market share, is not activity

forbidden by the antitrust laws. It is simply, as peti-

tioners claim, vigorous competition. To hold that the

antitrust laws protect competitors from the loss of

profits due to such price competition would, in effect,

render illegal any decision by a firm to cut prices in

order to increase market share. The antitrust laws

require no such perverse result, for ‘{iJt is in the in-

terest of competition to permit dominant firms to en-

gage in vigorous competition, including price competi-

tion.’”’ (id. at 116, citation omitted.)

Similarly, in this case, Jays does not (and cannot) claim

that it was threatened with elimination from the market.

Rather, its sole contention is that it could have charged

higher prices, earned even higher profits, and maintained

an even greater market share. Since Frito-Lay’s prices

did not threaten to drive Jays from the market, its prices

were not predatory no matter what measure of cost is

applied.

For all of these reasons, the decision below is not depen-

dent on the particular measure of cost applied or even

on resolution of the issue of whether above-cost pricing

designed to eliminate a competitor can ever be considered

predatory. See Cargill, supra, 479 U.S. at 117-18 n.12.

—13—

B. There Is No Conflict Between The Decision Below And

This Court’s Decision In The Utah Pie Case.

Petitioner argues (Pet. 12) that the decision below can-

not be reconciled with this Court’s decision in Utah Pie

Co. v. Continental Baking Co., 386 U.S. 685 (1967), which,

like the present case, involved alleged geographic price

discrimination in violation of Section 2(a) of the Robinson-

Patman Act (15 U.S.C. § 13(a)).

In Utah Pie, however, the record was replete with evi-

dence of “persistent sales below cost and radical price cuts

themselves discriminatory” (886 U.S. at 702 n.14)—evi-

dence which is totally lacking in this case (Pet. App. 48a).

Furthermore, in Utah Pie, this Court emphasized that

the evidence showed that the defendants’ below-cost sales

had an adverse impact on market conditions, i.e., “a

drastically declining price structure which the jury could

rationally attribute to continued or sporadic price discrim-

ination.” Jd. at 703. Indeed, in Utah Pie this Court spe-

cifically distinguished the cases on which the defendants

relied as not invoiving a “general decline in price struc-

ture attributable to the defendant’s price discriminations”’

and as presenting ‘‘no evidence of a long-term market

price decline.” /d., n.15. In the present case, on the other

hand, petitioner has never even asserted that Frito-Lay’s

pricing has caused or contributed to any such declining

price structure. Absent such evidence, or any other evi-

dence of an actual adverse effect on the market, petitioner

was obliged to come forward with evidence of predatory

pricing, which, as shown above, it has failed to do. (Pet.

App. 44a.)°

9 The Circuits which have addressed the issue have held that

the predation standards for § 2(a) of the Robinson-Patman Act

(Footnote continued on following page)

=

Finally, Jays never even proferred the type of cost data

utilized in Utah Pie. As Jays states in its petition (Pet.

12), evidence was presented in Utah Pie that the chal-

lenged prices were less than direct cost plus an alloca-

tion for overhead (386 U.S. at 698). In stark contrast, Jays

did not submit any evidence of direct cost.!°

C. The Court Below Properly Applied This Court’s Deci-

sions Concerning The Proper Standard For Granting

Summary Judgment.

In rejecting the contention that the District Court im-

properly weighed the evidence in granting summary judg-

ment, the Seventh Circuit expressly applied the standard

prescribed by this Court:

“As Celotex Corp. v. Catrett, 477 U.S. 317 (1986),

makes plain, where the nonmoving party bears the

ultimate 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

9 continued

are the same as for § 2 of the Sherman Act. See, e.g., William

Inglis & Sons Baking Co. v. ITT Continental Baking Co., 668

F.2d 1014, 1041 (9th Cir.), cert. denied, 459 U.S. 825 (1982);

Pacific Engineering & Production Co. v. Kerr-McGee Corp.,

551 F.2d 790, 798 (10th Cir.), cert. denied, 434 U.S. 879 (1977);

International Air Industries, Inc. v. American Excelsior Co.,

517 F.2d 714, 720 n.10 (5th Cir. 1975), cert. denied, 424 U.S.

943 (1976). Accord, Areeda & Turner, Predatory Pricing and

Related Practices under Section 2 of the Sherman Act, 88

Harv. L. Rev. 697, 727 (1975).

10 Moreover, the only calculation presented by Jays which al-

legedly indicated below-cost prices required Jays to tack on

an arbitrary percentage of sales which supposedly represented

Frito-Lay’s cost of capital to a profit calculation which already

included indirect costs. (Pet. App. 21a.) There is no indication

that the direct cost standard utilized in Utah Pie permitted

inclusion of such a cost of capital component.

eee

withstand a motion for summary judgment.” (Pet.

App. 2a.)

The District Court also expressly applied the same stan-

dard. (Pet. App. 28a, 36a.)

In determining whether a triable issue is presented, the

trial court must of necessity decide what inferences may

reasonably be drawn from a plaintiff's evidence. This need

to “assess the proof’’ and reject “implausible” inferences

does not invade the province of the jury. Matsushita Elec-

tric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574,

587 (1986); see also Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 249-52 (1986). Citing Matsushita, the District

Court found that Jays’ evidence—both its cost and non-

cost evidence—would, at best, permit the jury to engage

in impermissible speculation. (Pet. App. 36a.)"!

In sum, summary judgment was properly granted under

the standards most recently set forth by this Court in

Matsushita, Celotex, and Anderson, supra.

11 Although Jays elected not to designate any expert witnesses

in the “massive” final pretrial order (Pet. App. 28a), petitioner

complains (Pet. 15) that its proposed expert’s two affidavits—

one filed after the submission of the final pretrial order and

after initial briefing on the motion for summary judgment; the

other filed with Jays’ motion for reconsideration—were not re-

butted by “‘contrary testimony”’ offered by Frito-Lay. However,

as the District Court pointed out (Pet. App. 36a), “‘A brief af-

fidavit filed after the decision in this case saying that isn’t

necessarily so is not enough to revive plaintiffs claim even

were it to be considered.” Furthermore, as this Court recently

pointed out, “The existence of ‘uncontroverted affidavits’ does

not bar summary judgment.”’ Edwards v. Aguillard, 482 U.S.

___, 107 S. Ct. 2573, 2583 (1987), citing Celoter. See also

Matsushita, supra, 475 U.S. at 594 n. 19.

—16—

If.

THE DECISION BELOW PRESENTS NO ISSUE

WARRANTING REVIEW BY THIS COURT.

As we have shown, the decision below does not con-

flict with any decision of this Court or of any other Court

of Appeals. Indeed, the decision turns entirely on the in-

sufficiency of the evidence adduced by petitioner. That

issue is clearly one which does not warrant this Court’s

review.

CONCLUSION

For the foregoing reasons, the petition for certiorari

should be denied.

Respectfully submitted,

EarL E. Pouiock *

KENNETH H. Hocu

JEFFREY L. DorMAN

Louis C. KEILER

SONNENSCHEIN CARLIN NATH

& ROSENTHAL

8000 Sears Tower

Chicago, Illinois 60606

(312) 876-8000

Attorneys for Respondent

Dated: January 6, 1989 * Counsel of Record