# Amicus Curiae Brief — Northern Propane Gas Co. v. McGahee

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1989
- **Citation:** 490 U.S. 1084

## Text

MOTION FILED

No. 88-1603

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

NORTHERN PROPANE GAS COMPANY,
Petitioner,
V.

H. FLoyD MCGAHEE,
Respondent.

On Appeal from the United States Court
of Appeals for the Eleventh Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE
IN SUPPORT OF PETITION FORA
WRIT OF CERTIORARI AND BRIEF OF THE
BUSINESS ROUNDTABLE AS AMICUS CURIAE

THOMAS B. LEARY *
JANET L. MCDAVID

Of Counsel
JON V. HEIDER
3925 Embassy Parkway HOGAN & HARTSON
Akron, Ohio 44318 555 Thirteenth Street, N.W.
Washington, D.C. 20004
(202) 637-5662

Counsel for Amicus Curiae
The Business Roundtable

* Counsel of Record
- 789-0096 - WASHINGTON, D.C. 20001

WILSON - EPES PRINTING Co., INC

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

No. 88-1603

NORTHERN PROPANE GAS COMPANY, -
Petitioner,
V.

H. FLoyD MCGAHEE,
Respondent.

On Appeal from the United States Court
of Appeals for the Eleventh Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE

The Business Roundtable respectfully moves for leave
to file the attached brief as amicus curiae in this case.
The consent of the attorney for petitioners has been ob-
tained, but the attorney for respondent has refused to
consent.

The Business Roundtable is an association of about 200
member companies represented by their chief executive
officers. These substantial companies are widely dispersed
by type of business and geographic location. The com-
panies represented in The Business Roundtable are sub-
stantial producers and consumers of goods and services
who believe it is critical that the marketplace operate

competitively. They are, therefore, vitally interested in
interpretations of the antitrust laws that adversely af-
fect competition.

This case involves the appropriate measure of cost and
standard of proof in predatory pricing cases. Because
predatory pricing claims are usually directed against
firms with substantial market shares, the issues pre-
sented in this case are obviously of particular importance
to large business organizations like those represented in
The Business Roundtable. But those issues are also crit-
ical for a broad segment of the business community be-
cause even a relatively small company can have a signifi-
cant share of sales in small markets like the one at issue
here.

The brief The Business Roundtable requests permission
to file describes the practical implications of the decision
of the United States Court of Appeals for the Eleventh
Circuit. As discussed in the attached brief, the standard
established by the Eleventh Circuit decision will be vir-
tually impossible for businesses to apply. The decision
will have anticompetitive effects because it will deter
businesses from engaging in vigorous price competition.

For the foregoing reasons, The Business Roundtable
requests that the attached brief in support of the petition
for a writ of certiorari be accepted for filing.

Respectfully submitted,

Of Counsel THOMAS B. LEARY *
JON V. HEIDER JANET L. MCDAVID
3925 Embassy Parkway HOGAN & HARTSON
Akron, Ohio 44318 555 Thirteenth Street, N.W.

Washington, D.C. 20004

(202) 637-5662

Counsel for Amicus Curiae
* Counsel of Record The Business Roundtable

TABLE OF CONTENTS
Page

INTEREST OF AMICUS CURIAE AND SUMMARY
OF ARGUMENT ............. ae eiaiaudcknachbetsnensnaseaaanedeentieans 1

I. THE ELEVENTH CIRCUIT’S RULING WILL
HAVE A CHILLING EFFECT ON VIGOROUS

yg 2% Tet) bo yyy y(t) 2

A. Businesses Require a Clear and Objective
Standard Governing Predatory Intent .......... 3

B. Other Circuits Have Adopted a Clear and
I Ns ce spemacmsntoceionce 6

Il. THE ELEVENTH CIRCUIT SHOULD NOT
HAVE RELIED ON AMBIGUOUS EVIDENCE
ogee 6 EW 6) o GOL. yy |, i 9

Ill. THE ELEVENTH CIRCUIT MISAPPLIED
THE REQUIREMENT OF A “DANGEROUS
PROBABILITY OF SUCCESS” ................... aa 11

CONCLUSION ...... ees tiabceeisiannieeedanninieesss pcniaainolunebidinass 13

il
TABLE OF AUTHORITIES
Cases Page

Adjusters Replace-A- Car, Inc. v. Agency Rent-A-
Car, Inc., 735 F.2d 884 (5th Cir. 1984), cert.

denied, 469 U.S. 110 (1985) metesk 8, 12
ore Wright Corp. v. ITT Grinnell Corp., 724 F.2d
27 (1st Cir. 1983) ............ . 6-7, 10
decom Inc. v. Montfort of Colorado, Inc., 479 USS.
104 (1986) 2, 3, 11-12
Henry v. Chloride, Inc., 809 F.2d 1334 (8th Cir.
INGE BF cckccndnasscosnae PEON Aa Pe Fie 7,10
International Air Indue.. Ine. American Bead.
sior Co., 517 F.2d 714 (5th Cir. 1975), cert.
denied, 424 U.S. 943 (1976). oat 8, 12
Matsushita Electrical Industrial Co. v. Zenith
Radio Corp., 475 U.S. 574 (1986) 2, 3, 11

MCI Communications Corp. v. American Tel, €
Tel. Co., 708 F.2d 1081 (7th Cir.), cert. denied,
464 U.S. 891 (1983) 4, 7-8, 10
Northeastern Tel. Co. v. American Tel. & Tel. Co.,
651 F.2d 76 (2d Cir. 1981), cert. denied, 455 U.S.
943 (1982) 7,12
Telex Corp. v. International Business Machines
oe 510 F.2d 894 (10th Cir.), cert. dismissed,
. U.S. 808 (1976) ..................... 4
W oth Inglis & Sons Baking Co. v. ITT Coutines n-
tal Baking Co., 668 F.2d 1014 (9th Cir. 1981),

cert. denied, 459 U.S. 829 (1982) 10
U.S. Philips Corp. v. Windmere Corp., 861 F.2d 695
(Fed. Cir. 1988) &

Other Authorities

Areeda & Turner, Predatory Pricing and Related

Practices Under Section 2 of the Sherman Act,

88 Harv. L. Rev. 697 (1975) 5
P. AREEDA & D. TURNER, ANTITRUST LAW (1978) 4,5, 12
P. AREEDA & H. HOVENKAMP, ANTITRUST LAW

(1988 Supp.) 5, 1!
Baumol, Quasi-Permanence of Price Reductions:

A Policy for Prevention of Predatory Pricing,

89 Yale L.J. 1 (1979)

bo

on

iii

TABLE OF AUTHORITIES—Continued

Page
R. GIVENS, ANTITRUST: AN ECONOMIC APPROACH
CIID ciiscouconsesnccee tabecaconetinsal a Sleammnecieua eke ear 4
Hay, The Economics of Predatory Pricing, 51 Anti-
WOES Fad. Bek GROEED cncsicccauatnce 5, 12
Joskow & Klevorick, A Framework for Analyzing
Predatory Pricing Policy, 89 Yale L.J. 213
RID EID sticcuntsicsdsidiksiakinins atenossdncielstnn eee 4,5, 12
R. POSNER, ANTITRUST LAW: AN ECONOMIC PER-
SEE, CIEE sonstinstndeitanbecaatactceeeeeeeee 4, 9-10
Scherer, Predatory Pricing and the Sherman Act,
89 Harv. L. Rev. 869 (1976) ......0.0...0cc eee eee 5

Williamson, Predatory Pricing: A Strategic and
Welfare Analysis, 87 Yale L.J. 284 (1977)....... 5

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988
No. 88-1603

NORTHERN PROPANE GAS COMPANY,
Petitioner,
vw.

H. FLoyp MCGAHEE,
Respondent.

On Appeal from the United States Court
of Appeals for the Eleventh Circuit

BRIEF FOR THE BUSINESS ROUNDTABLE AS
AMICUS CURIAE SUPPORTING PETITIONERS

INTEREST OF AMICUS CURIAE AND
SUMMARY OF ARGUMENT

The Business Roundtable is an association of about 200
member companies represented by their chief executive
officers. These substantial companies are widely dispersed
by type of business and geographic location. The com-
panies represented in The Business Roundtable are sub-
stantial producers and consumers of goods and services
who believe it is critical that the marketplace operate
competitively. They are, therefore, vitally interested in
interpretations of the antitrust laws that adversely affect
competition.

2

This case squarely presents issues that this Court has
discussed, but never decided—the appropriate measure
of cost and standard of proof in predatory pricing cases.’
The opinion of the United States Court of Appeals for
the Eleventh Circuit deviates from the standard adopted
by most of the other Circuits that have considered these
questions. The opinion establishes a standard that will
make it impossible for businesses to engage safely in
vigorous price competition. It will also encourage base-
less antitrust litigation by competitors who are incon-
venienced by hard competition and prevent courts from
resolving predatory pricing cases without trial.

Because predatory pricing claims are usually directed
against firms with substantial market shares, the issues
presented in this case are obviously of particular impor-
tance to large business organizations like those repre-
sented in The Business Roundtable. But these issues are
also critical for a broad segment of the business com-
munity because even a relatively small company can have
a significant share of sales in small markets like the one
at issue here.

I. THE ELEVENTH CIRCUIT'S RULING WILL HAVE
A CHILLING EFFECT ON VIGOROUS PRICE
COMPETITION.

Predatory pricing is generally understood to mean a
firm’s efforts to eliminate existing rivals or exclude po-
tential rivals through low prices. But because one of the
goals of the antitrust laws is to insure that consumers
pay low prices, it is imperative to distinguish between

1In Cargill. Inc. v. Montfort of Colorado, Inc., this Court wrote,
“in this case. as in Matsushita Electrical Industrial Co Zenith
Radio Corp., we find it unnecessary to ‘ onsider whether recovery
should ever b available . when the pricing im que stion is above
some measure of incremental cost,’ or whether above-cost pricing
coupled with predatory intent is ever sufficient to state a claim of
predation.” 479 U.S. 104, 117-18 n.12 (1986 emphasis in original,

citation omitted

3

anticompetitive pricing behavior and desirable price com-
petition. This Court has recognized the importance of
vigorous price competition, and noted that unfounded
claims of price predation present a serious threat to com-
petition. In Matsushita Electric Industrial Co. v. Zenith
Radio Corp., for example, the Court stated:

[C]utting prices in order to increase business often
is the very essence of competition. Thus, mistaken
inferences in cases such as this one are especially
costly, because they chill the very conduct the anti-
trust laws are designed to protect. [475 U.S. 574,
594 (1986) }.

Similarly, in Cargill, Inc. v. Montfort of Colorado, Inc.,
this Court wrote:

[C]lompetition for increased market share [by low-
ering prices to slightly above costs] is not activity
forbidden by the antitrust laws. It is simply .. .
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 in-
crease market share. The antitrust laws require no
such perverse result, for “{i]t is in the interest of
competition to permit dominant firms to engage in
vigorous competition, including price competition.”
(479 U.S. at 116 (citation omitted) }.

This brief will first explain the practical implications of

the Eleventh Circuit decision and why it will seriously
inhibit pro-competitive behavior.

A. Businesses Require a Clear and Objective Stand-
ard Governing Predatory Intent.

The competitive marketplace forces fast pricing deci-
sions. A business that faces an imminent assault on its
market position by an existing competitor, or a competi-
tor about to enter the market, must react quickly. Ob-
viously, a price cut is one strategy that needs to be con-
sidered, and even companies with very high market shares

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tion, at least in all but the most extraordinary cases. If
there are no guidelines that can be readily understood and
quickly applied, a business may have to undertake compli-
cated market studies and extensive file searches before it
can begin to evaluate its legal position. Even if it takes
such steps, it may have little confidence in the outcome.
Price competition will ultimately be chilled and consum-
ers will suffer.

As petitioners point out,’ a majority of circuits have
endorsed some form of the so-called ‘Areeda-Turner”’
test, which presumes that prices above short run margi-
nal cost cannot be predatory.* Because corporate account-
ing data do not readily permit a determination of margi-
nal cost, the Areeda-Turner test permits the use of short
run average variable cost as a surrogate for marginal
cost. The Areeda-Turner test has been widely accepted
and has provided the rough guide that business people
need for over a decade.

A large number of learned articles have explored the
precise contours of the test and suggested variations that
might yield more precise results in hypothetical cases.°

> Petition for a Writ of Certiorari at 12-13.

‘The test was first articulated in Areeda & Turner, Predatory
Pricing and Related Practices Under Section 2 of the Sherman Act,
88 Harv. L. Rev. 697 (1975). It was further explained and slightly
modified in III P. AREEDA & D. TURNER, ANTITRUST LAW {{ 711-22
(1978) and P. AREEDA & H. HOVENKAMP, ANTITRUST LAW {{| 710-21
(1988 Supp.).

5 See, e.g., R. POSNER, ANTITRUST LAW: AN ECONOMIC PERSPEC-
TIVE 184-96 (1976); Baumol, Quasi-Permanence of Price Reduc-
tions: A Policy for Prevention of Predatory Pricing, 89 Yale L.J. 1

1979); Hay, The Economics of Predatory Pricing, 51 Antitrust
L.J. 361 (1982); Joskow & Klevorick, A Framework for Analyzing
Predatory Pricing Policy, 89 Yale L.J. 213 (1979); Scherer, Preda-
tory Pricing and the Sherman Act, 89 Harv. L. Rev. 869 (1976) ;
Williamson, Predatory Pricing: A Strategic and Welfare Analysis,
87 Yale L.J. 284 (1977).

6

However, judges and business people seem to appreciate
that ease of application is more important than absolute
precision.

The Areeda-Turner test can be applied in a practical
way by businesses and their legal advisors. The basic
question is whether sales at the price in question will
make an immediate positive contribution to bottomline
results or whether they will reduce profits. Precise cal-
culations usually are not necessary because business peo-
ple are apt to have a fairly good intuitive feeling about
the answer to this basic question, and they can allow a
margin of error for the sake of safety in litigation. If
the sales in issue will make a contribution to profits, there
is no need to look further; if they will not be profitable,
then a further inquiry into motivation and likely con-
sequences of a price cut may be required.

B. Other Circuits Have Adopted a Clear and Objec-
tive Standard.

Most recent court decisions concerning predatory pric-
ing recognize the practical realities of business decision-
making and have developed a practical standard that is
relatively easy for businesses and courts to apply. For
example, in its recent decision in Barry Wright Corp. v.
ITT Grinnell Corp., the First Circuit concluded that it
would rely on the Areeda-Turner test as a basis for dis-
tinguishing predatory price cutting from legitimate com-
petition. 724 F.2d 227, 231-36 (1st Cir. 1983). Judge
Breyer wrote for the majority:

[O]ne must ask why the Sherman Act ever forbids
price cutting. After all, lower prices help consumers.
The competitive marketplace that the antitrust laws
encourage and protect is characterized by firms will-
ing and able to cut prices in order to take customers
from their rivals. * * * Thus, a legal precedent or
rule of law that prevents a firm from unilaterally
cutting its prices risks interference with one of the
Sherman Act’s most basic ohjectives: the low price

7

levels that one would find in well-functioning com-
petitive markets. * * * [T]he antitrust courts’ major
task is to set rules and precedents that can segregate
the economically harmful price-cutting goats from
the more ordinary price-cutting sheep, in a manner
precise enough to avoid discouraging desirable price-
cutting activity. [Jd. at 231-32 (emphasis in origi-
nal; citations omitted) ].

Similarly, the Second Circuit has concluded that prices
below reasonably anticipated marginal costs will be pre-
sumed predatory, while prices above reasonably antici-
pated marginal costs will be presumed non-predatory.
Northeastern Tel. Co. v. American Tel & Tel. Co., 651
F.2d 76, 88 (2d Cir. 1981), cert. denied, 455 U.S. 943
(1982). The Second Circuit articulated the rationale for
its adoption of the Areeda-Turner test as follows:

[W]e must be mindful both of the limits of the ju-
dicial process and the realities of the marketplace.
Court occasionally err in applying even the clearest
legal rules. The more complicated that standard, the
greater the chance for misapplication. * * * Preda-
tory pricing is difficult to distinguish from vigorous
price competition. Inadvertently condemning such
competition as an instance of predation will undoubt-
edly chill the very behavior the antitrust laws seek
to promote. [Jd. at 88].

Accord, Henry v. Chloride, Inc., 809 F.2d 1334, 1346 (8th
Cir. 1987).

Other courts have adopted some variant of the Areeda-
Turner test that provides reasonably concrete guidance
to both lower courts and businesses. For example, the
Seventh Circuit has held that predatory pricing must be
based on proof of pricing below cost:

There is... . no reliable way to determine whether
predatory pricing has occurred without some com-
parison between the prices charged and a properly
defined measure of the cost of production. * * * In

8

the absence of an objective standard, firms making
pricing decisions in the presence of competition
would be unable to ascertain what price reductions
may be lawfully undertaken. [MCI Communications
Corp. v. American Tel. & Tel. Co., 708 F.2d at 1112-
13}.

The Fifth Circuit has also adopted an objective ap-
proach and held that prices above short run average var-
iable cost are presumptively lawful, unless there are sub-
stantial entry barriers. Adjusters Replace-A-Car, Inc. v.
Agency Rent-A-Car, Inc., 735 F.2d 884, 889-91 (5th Cir.
1984), cert. denied, 469 U.S. 1160 (1985); International
Air Indus., Inc. v. American Excelsior Co., 517 F.2d 714,
724 (5th Cir. 1975), cert. denied, 424 U.S. 943 (1976).

The test in the Eleventh Circuit opinion, by contrast,
provides no help at all.° The opinion below states that a
jury question on predatory intent is presented whenever
prices dip below “the average of the total economic cost,
which includes the necessary minimum profit,” and fur-
ther notes that “|t!he amount of profit that is a part of
total economic cost is an issue of fact requiring expert
testimony particular to the market involved.” * Any price
response to competition would raise a potential jury is-
sue under this test since experts may differ about the
appropriate level of profit in an industry.

It is hard to imagine a test that would be more dif-
ficult for businesses to apply or that would more greatly
inhibit price competition. A company with a large mar-
ket share would have to maintain its traditional profit
margins in the face of an intense price assault or risk

* A recent decision by the Federal Circuit raises similar problems.
In U.S. Philips Corp. v. Windmere Corp., 861 F.2d 695 (Fed. Cir.
1988), the Federal Circuit reversed the entry of summary judgment
for defendant, largely because of subjective evidence of predatory
intent.

7 Appendix A to Petition for a Writ of Certiorari at 18a & n.35.

treble antitrust damages. In fact, as Petitioners point
out, this test would force a company to raise its prices
as competitive pressures cause its volume to decline.‘
This is simply absurd.

Il. THE ELEVENTH CIRCUIT SHOULD NOT HAVE
RELIED ON AMBIGUOUS EVIDENCE OF PREDA-
TORY INTENT.

Another critical flaw in the Eleventh Circuit’s opinion
is its reliance on subjective evidence of the defendant’s
intent to harm competitors by cutting prices. The Elev-
enth Circuit held that if prices were below average total
cost (plus profit), but above short run marginal cost, the
plaintiff could demonstrate predatory intent by introduc-
ing other evidence, such as documents from the defend-
ant’s files showing a desire to harm a rival.? Every vig-
orous competitor intends to harm its rivals, however, and
competition stagnates when firms try to avoid doing so.

Most commentators and other courts that have con-
sidered predatory pricing claims have recognized that
subjective evidence of intent is virtually useless and
should not form a basis for any judicial decision. In his
treatise on antitrust law, Judge Posner aptly described
the problems with such evidence:

[T]he availability of evidence of improper intent is
often a function of luck and of the defendant’s legal
sophistication, not of the underlying reality. A firm
with executives sensitized to antitrust problems will
not leave any documentary trail of improper intent:
one whose executives lack this sensitivity will often
create rich evidence of such intent simply by the
clumsy choice of words to describe innocent behavior.
Especially misleading here is the inveterate tendency
of sales executives to brag to their superiors about
their competitive prowess, often using metaphors of

5 Petition for a Writ of Certiorari at 21-22.

’ Appendix A to Petition for a Writ of Certiorari at 18a.

10

coercion that are compelling evidence of predatory
intent to the naive. Any doctrine that relies upon
proof of intent is going to be applied erratically at
best. [R. PoSNER, ANTITRUST LAW: AN ECONOMIC
PERSPECTIVE 189-90 (1976) ].

The objective tests for predatory pricing utilized by most
courts recognize this problem. Those tests also recognize
that unless the defendant’s price is below some appro-
priate measure of cost, subjective evidence of intent
should be irrelevant because low prices cannot have any
anticompetitive effect. See, e.g., Henry v. Chloride, Inc.,
809 F.2d at 1344; Barry Wright Corp. v. ITT Grinnell
Corp., 724 F.2d at 232; MCI Communications Corp. v.
American Tel & Tel. Co., 708 F.2d at 1112; William
Inglis & Sons Baking Co. v. ITT Continental Baking Co.,
668 F.2d 1014, 1028 (9th Cir. 1981), cert. denied, 459
U.S. 829 (1982).

The evidence relied on by the Eleventh Circuit vividly
illustrates this problem. The court based its finding of
predatory intent on evidence that the defendant had in-
vestigated the plaintiff’s financial condition, provided free
propane tanks to customers, and prepared documents that
discussed “contribut[ing] to [the plaintiff’s] financial
problems.” '° This kind of evidence is totally ambiguous;
it could just as easily indicate vigorous competition. But
in any event, unless the defendant’s pricing practices
were anticompetitive by some objective standard, evidence
of saber rattling rhetoric is meaningless.

The Eleventh Cireuit’s reliance on ambiguous evidence
of subjective intent, if sustained, would further compli-
cate the inquiry corporate counsel must make to advise on
the legality of a proposed price cut. Competitive action
in the marketplace usually cannot await a lengthy file
search to make sure that no rhetorical excesses have been
memoralized somewhere in the company’s records.

10 Appendix A to Petition for a Writ of Certiorari at 20a.

a

1]

lil. THE ELEVENTH CIRCUIT MISAPPLIED THE
REQUIREMENT OF A “DANGEROUS PROBABIL-
ITY OF SUCCESS”.

In addition to the assurance provided by an objective
cost/price test, companies that want to compete on price
also gain needed assurance from the requirement that a
plaintiff must prove a dangerous probability of monopoly
power arising from the price cuts in issue. This means
more than the prospect of inconvenience or financial in-
jury to the plaintiff; it means a realistic chance that the
defendant will emerge from a price war with a market
position secure enough to recoup its losses through supra-
competitive prices.

This Court and many lower courts have recognized that
entry barriers should be critical to a predatory pricing
case. Predatory pricing is rational business behavior only
if the predator can recoup the losses sustained by charg-
ing monopoly prices tage its rivals are eliminated. How-
ever, it can do so only if its monopoly prices do not at-
tract new entry. Thus, jet incurred through preda-
tory pricing can be recouped only if there are substantial
barriers to entry. Unless such barriers exist. firms are
unlikely to engage in predatory pricing because there wil!
be no reasonable prospect of recovering the losses sus-
tained when prices were low.

In Matsushita, this Court wrote, “without barriers to
entry it would presumably be impossible to maintain
supracompetitive prices for an extended time.” 475 U.S.
at 591. In Cargill, the Court explained this idea at
greater length:

In evaluating entry barriers in the context of a
predatory-pricing claim, however, a court should fo-
cus on whether significant entry barriers would ex-
ist after the merged firm had eliminated some of its
rivals, because at that point the remaining firms
would begin to charge supracomptitive prices, and

12

the barriers that existed during competitve condi-
tions might well prove insignificant. [479 U.S. at
120 n.15].

Accord, e.g., Adjusters Replace-A-Car, Ine. v. Agency
Rent-A-Car, Inc., 735 F.2d at 889-91; Northeastern Tel.
Co. v. American Tel. & Tel. Co., 651 F.2d at 89; Inter-
national Air Indus., Inc. v. American Excelsior Co., 517
F.2d at 724."!

The District Court opinion below recognized the impor-
tance of entry barriers in this case.'* The District Court
undertook a detailed analysis of barriers to entry in the
market and concluded that entry was relatively easy.
Indeed, the plaintiff's own success provided a powerful
example of ease of entry. The plaintiff was able to enter
from scratch with $800,000 of borrowed capital and cap-
ture a substantial share of the market, despite the de-
fendant’s efforts to compete on price. As a result of the
plaintiff’s new entry and price competition, the defend*
ant’s market share fell from 65 percent in 1981 to 35
percent in 1983.'*" There is no realistic risk that this
defendant could ever exercise monopoly power and main-
tain its market position with supracompetitive prices
when it could not even maintain its market position in
the midst of a price war.

The Eleventh Circuit ignored these facts and held that
there was sufficient evidence of a dangerous probability
of monopolization simply because at the time the plaintiff

11 Most commentators agree that entry barriers are critical. See,
e.g., III P. AREEDA & D. TURNER, ANTITRUST LAW { 711b at 151-52;
P. AREEDA & H. HOVENKAMP, ANTITRUST LAW { 711.2d at 498-99
(1988 Supp.); Hay, The Economics of Predatory Pricing, 51 Anti-
trust L.J. 361, 364 (1982); Joskow & Klevorick, A Framework for
Analyzing Predatory Pricing Policy, 89 Yale L.J. 213, 227-34, 245-49
(1979).

12 Appendix B to Petition for a Writ of Certiorari at 32a-33a.
13 Appendix A to Petition for a Writ of Certiorari at 22a n.45.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_1132%3A3. Public record. Not legal advice.