Petition for Writ of Certiorari — Axis, S. p. A. v. Micafil, Inc.

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Supreme Court, US

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No. JOSEPH F. SPANIOL, JR, -

CEERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

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AXIS, S.p.A.,

Petitioner,

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MICAFIL, INC.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

GORDON B. SPIVACK

DAVID H. MARKS*

COUDERT BROTHERS

200 Park Avenue

New York, New York 10166

(212) 880-4400

Attorneys for Petitioner

Axis, S.p.A.

*Counsel of Record

QUESTION PRESENTED

1. Does the most likely potential entrant suffer antitrust

injury when it is excluded from the market as the direct result of

a merger which is illegal under the antitrust laws because it

excludes that potential entrant from a highly concentrated

market?

PARTIES TO THE PROCEEDING

Petitioner is Axis, S.p.A., an Italian closely-held corpora-

tion.

Respondent is Micafil, Inc.

TABLE OF CONTENTS

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Semewrwat PROVISIONS INVOLVED ...........

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REASONS FOR GRANTING THE WRIT ...........

Il. The Court of Appeals Decided an Important

III.

Question of Law in Conflict With This Court’s

EERE R Ea at a

A. The Court of Appeals Misconceives Bruns-

wick and Ignores McCready and Cargill. ..

B. The Court of Appeals Ignored the Loss of

EMCTORSER COMPCtitION, ....... 0c ccceeees

The Court of Appeals’ Decision Conflicts With

the Decisions of Other Circuits...............

The Court of Appeals’ Decision Bars the Most

Appropriate Plaintiff From Enforcing the Anti-

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1V. The Court of Appeals’ Holding Could Have a

Widespread and Adverse Impact Eliminating

Many Private Antitrust Actions..............

LARS 8065 8S Saabs ES ERRORS RASS AEROS

Appendix A:

Appendix B:

Appendix C:

Appendix D:

Appendix E:

Appendix F:

Opinion of the United States Court of

Appeals for the Sixth Circuit (March 24,

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Opinion of the United States District

Court for the Northern District of Ohio

(Tecember 31, 1967) x. cous csccucccecss

Opinion of the United States District

Court for the Northern District of Ohio

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Judgment of the United States Court of

Appeals for the Sixth Circuit (March 24,

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Judgment of the United States District

Court for the Northern District of Ohio

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Statutory Provisions Involved..........

PAGE

15a

2ia

3la

TABLE OF AUTHORITIES

Cases PAGE

Associated General Contractors of California v. Califor-

nia State Council of Carpenters, 459 U.S. 519 (1983) 8

Bayou Bottling, Inc. v. Dr Pepper Co., 725 F.2d 314 (Sth

Cir.), cert. denied, 469 U.S. 833 (1984)............. 14

Blue Shield of Virginia v. McCready, 457 U.S. 465

4 rg ate Gs Rit rae ar iam is Srey 9, 10, 14

Brunswick Corp. v. Pueblo Bowl-O-Mat Inc., 429 U.S.

MET AEST REEL OH COR ee eaces ha Oe te

Bubar v. Ampco Foods, Inc., 752 F.2d 445 (9th Cir.),

cart. Gemied. 472.035. TS CAFR os) sons os save sedans 13

Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104

(SSOP sdf arate shares caPaak ere lade eae 8, 9, 10, 11

Fashion Originators’ Guild v. Federal Trade Commis-

ON. Sid Uicix Sas CE) 6 a hk ea eee re 17

Fishman v. Estate of Wirtz, 807 F.2d 520 (7th Cir. 1986) 14

Helix Milling Co. v. Terminal Flour Mills Co., 523 F.2d

1317 (9th Cir. 1975), cert. denied, 423 U.S. 1053 (1976) 13

Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207

CES as 65a ve peda kee Sane a eae eee eae 17

Reiter v. Sonotone Corp., 442 U.S. 330 (1979) ........ 15

United States v. Aluminum Co. of America, 377 U.S.

Bik EOD vx n 4a 44040040 R Da Rae 12

United States v. Colgate & Co., 250 U.S. 317 (1919)... 17

United States v. Columbia Steel Co., 334 U.S. 495 (1948) 12

United States v. Falstaff Brewing Corp., 410 U.S 526

BL) Pe ee oe ee ee ate Bue oy aa

PAGE

United States v. First National Bank & Trust Co. of Lex-

meat, a7e Um: SBS (I9GRE vi ska kek scivciiaicans 6

United States v. Marine Bancorporation, Inc., 418 U.S.

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Statutes, Rules

Sherman Act, Section 1, 15 U.S.C. §1.......... ay Oy Be At

Clayton Act, Section 4, 15 U.S.C. € 15. . cock kadcices 2

Clayton Act, Section 7, 15 U.S.C. § 18....... 2: 3y-42, 36, 17

Clayton Act, Section 16, 15 U.S.C. § 26.............. 3

Rule 12(b)(6), Federal Rules of Civil Procedure ....... 6

IN THE

Sipreme Court of the United States

OCTOBER TERM, 1988

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AXIS, S.p.A.,

Petitioner,

MICAFIL, INC.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Petitioner Axis, S.p.A. (‘‘Axis’’) respectfully prays that a

writ of certiorari issue to review the judgment and opinion of

the United States Court of Appeals for the Sixth Circuit,

entered on March 24, 1989, which affirmed an order of the

United States District Court for the Northern District of Ohio

dismissing Axis’ complaint against respondent Micafil, Inc.

(‘‘Micafil’’). —_

OPINIONS BELOW

The opinion of the United States Court of Appeals for the

Sixth Circuit, reproduced as Appendix A at la-14a, is reported

at 870 F.2d 1105. The opinion of the United States District

Court for the Northern District of Ohio entered on December

31, 1987, and reproduced as Appendix B at 15a-26a, is reported

at 681 F. Supp. 1271. The opinion of the District Court denying

Axis’ motion to reconsider was entered on February 24, 1988,

and is reproduced as Appendix C at 27a-30a; it is not reported.

The judgments of the Court of Appeals and the District Court

are reproduced as Appendix D and Appendix E, respectively, at

3la-32a, and 33a.

JURISDICTION

The judgment of the Court of Appeals was entered on March

24, 1989. This petition for a writ of certiorari was filed within

ninety (90) days of that date. This Court has jurisdiction to

review tiie judgment of the Court of Appeals by writ of certio-

rari pursuant to 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

Section 1 of the Sherman Act, 15 U.S.C. § 1, and Sections 4,

7 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 18 and 26, are

reproduced as Appendix F, at 34a-35a.

STATEMENT OF THE CASE

This case involves an acquisition which had the unquestioned

effect of substantially lessening competition in the United

States market for armature winding machines. One of only four

competitors in the market was acquired by one of the two larg-

est competitors, respondent Micafil. Moreover, as a direct

result of the acquisition, competition was substantially lessened

because petitioner Axis, the leading European competitor and

most likely potential entrant into the United States market, was

prevented from making that acquisition and thereby itself

entering the market.

Petitioner brought an action alleging that the acquisition vio-

lated both Section 7 of the Clayton Act, 15 U.S.C. § 18, and

Section 1 of the Sherman Act, 15 U.S.C. § 1. Axis sought both

damages pursuant to Section 4 of the Clayton Act, 15 U.S.C.

§ 15, and an injunction pursuant to Section 16 of the Clayton

Act, 15 U.S.C. § 26, ordering Micafil to divest the illegally

acquired patent licenses or to provide Axis with licenses directly

under the Possis patents which Micafil owned. The jurisdiction

of the district court was invoked under 28 U.S.C. §§ 1337 and

1331.

The district court concluded that Axis did not suffer antitrust

injury, even though it was the direct and immediate target of

the violation. The court of appeals affirmed.

The facts surrounding Axis’ action are not contested. The

court of appeals treated ‘‘the following facts as true”’:

‘‘Armatures are necessary components of fractional power

commutator motors used in most small household appliances.

To manufacture armatures efficiently the manufacturer must

use an armature winding machine. The [petitioner], Axis, is an

Italian corporation that manufactures armature winding

machines and sells them to electrical appliance manufacturers

throughout Europe. The [respondent], Micafil, is a United

States corporation that has manufactured and sold armature

winding machines in the United States since 1985. Micafil is a

wholly-owned subsidiary of Micafil, A.G., a Swiss corporation

that manufactures and sells armature winding machines

throughout Europe.

‘‘An armature winding machine winds copper wire around an

armature arm to form a coil. The machine attaches the wire to a

commutator and then cuts the wire. In the 1970s Globe Tool &

Engineering (Globe) and Possis Corporation (Possis) obtained

United States patents on the only two wire cutting methods used

in armature winding machines. In 1975 Globe and Possis

granted each other a non-exclusive license ‘to make, have made,

use, lease and sell’ devices and methods falling within the scope

of their patents. Sometime later Possis granted similar licenses

to Ott-A-Matic, Inc. (Ott) and Mechaneer, Inc. (Mechaneer).

In 1985, prior to Micafil’s entry into the market, four compa-

nies manufactured and sold armature winding machines in the

United States: Possis, Globe, Ott and Mechaneer. Three com-

panies engaged in the same activities outside the United States:

Axis, Micafil and Odawara, a Japanese corporation.

‘‘Prior to 1985 Possis refused to grant a license to any of the

foreign armature winding machine manufacturers though all

three sought such licenses. In July 1985, however, Possis sold

its assets, including the patents and licenses covering armature

winding machines, to Micafil. Micafil then entered the U.S.

market. Shortly thereafter Axis learned that Micafil was

attempting to purchase Mechaneer. When the president of Axis

approached Mechaneer to determine whether Mechaneer was

for sale, that company’s principals refused to discuss the possi-

bility of selling to Axis because Mechaneer’s negotiations with

Micafil were almost complete. Micafil bought Mechaneer in

September 1985. Axis was ready, willing and able to purchase

Mechaneer for the same price that Micafil paid. The two pur-

chases enable Micafil to control approximately 50% of the U.S.

armature winding machine market (Possis had about 40% and

Mechaneer about 10%).

‘‘At some unspecified time Odawara purchased Ott. As a

result of the various acquisitions, the number of armature

winding machine manufacturers in the United States shrunk

from four to three. These three competitors, Globe, Micafil and

Odawara, now own all the patents and licenses governing the

manufacture of armature winding machines in the United

States.’ (Pet. App. 2a-3a)

In sum, in August 1985, there were four U.S. manufacturers

of armature winding machines (Globe, Micafil, Mechaneer and

Ott). Two of the U.S. manufacturers (Mechaneer and Ott) were

ultimately available for purchase. There were two likely poten-

tial entrants—the two non-U.S. manufacturers (Axis and Oda-

wara). As the district court assumed, Axis ‘‘would have

acquired Mechaneer thereby gaining entry into the U.S. market

had the defendant [Micafil] not acquired Mechaneer’’ (Pet.

App. 24a). Thus, absent Micafil’s purchase of Mechaneer,

there would today be four significant competitors in the U.S.

market, one of which would be Axis; instead there are three.

———oe™”---rsSs st

Micafil, by its earlier purchase of Possis, had obtained all of

the patent rights it needed to compete in the U.S. market. It

then purchased Mechaneer for $1 million; its own counsel

stated in its brief (at p.14) in the court of appeals that Micafil

had paid the $1 million for the patent licenses. Yet, Micafil did

not obtain additional patent rights. To the contrary, Mecha-

neer’s principal assets—its patent licenses—were totally super-

fluous to Micafil since they were the same patent licenses

Micafil acquired from Possis. The only effects of Micafil’s pur-

chase of Mechaneer for $1 million were to eliminate the existing

limited competition with Mechaneer and, more importantly,

the substantial additional competition that would have fol-

lowed Axis’ entry into the U.S. market by Axis acquiring

Mechaneer. ’

Axis thereafter brought this action against Micafil alleging

that the acquisition of Mechaneer violated Section 1 of the

Sherman Act and Section 7 of the Clayton Act. Axis alleged

that barriers to entry had been raised substantially and that it

had been excluded from the U.S. market by the elimination of

Mechaneer as a means by which it would have entered the U.S.

market. The elimination of the substantial increase in competi-

tion that Axis would have brought to the U.S. market violated

Section 7 of the Clayton Act (prohibiting acquisitions which

‘‘may substantially lessen competition’’ in a ‘“‘line of com-

merce’’).”

The acquisition also violated Section 1 of the Sherman Act as

an unreasonable restraint of trade.’ There were no Significant

l Micafil ensured that Axis could not enter by refusing to grant a

license to Axis under the Possis patents which it had previously

acquired.

Moreover, with the elimination of Mechaneer as a potential means

for Axis to enter the U.S. market, the existing U.S. marketers could

safely ignore Axis as a potential competitor, thereby eliminating the

effect on the market from what this Court previously referred to as an

‘‘on-the-fringe potential competitor.’ United States v. Falstaff Brew-

ing Corp., 410 U.S. 526, 537 (1973).

3 Since Section 7 of the Clayton Act requires a plaintiff to show only a

reasonable probability of a substantial lessening of competition, as

procompetitive effects from the acquisition; Micafil already

owned the patents and licenses which were Mechaneer’s princi-

pal assets. On the other hand, there was the obvious and very

substantial anticompetitive effect of preventing Axis’ substan-

tial competition in the U.S. market.

Micafil moved to dismiss, pursuant to Rule 12(b)(6), Federal

Rules of Civil Procedure, contending that the injury alleged in

Axis’ complaint was not antitrust injury. The district court

granted the motion. The court ‘‘assum[ed] that the plaintiff

would have acquired Mechaneer thereby gaining entry into the

U.S. market had the defendant not acquired Mechaneer’”’ (Pet.

App. 24a); nonetheless, the district court concluded that Axis’

injury did not ‘‘flow[ ] directly from the alleged anticompetitive

acts of the defendant.’’ Rather, it concluded that Axis’ ‘‘alleged

injury would have occurred notwithstanding the defendant’s

alleged anticompetitive violations.’’ (Pet. App. 24a)

Specifically, the district court concluded that Axis’ ‘‘alleged

injury could flow from at least two other sources.’’ First, the

court stated that the patents themselves were the real barrier to

Axis’ entry and that Axis ‘‘merely attempted to transform the

patent barrier into an acquisition barrier.’’ Second, the fact

that Odawara bought Ott after Micafil had acquired Mechaneer

‘*raises the inference that plaintiff’s alleged injury may also be

attributable to Odawara.’’ (Pet. App. 25a)

On appeal, Axis argued that the ‘‘two other sources’’ of

Axis’ alleged injury were contrary to the facts alleged and were

otherwise irrelevant. First, while Axis did not dispute that the

market was highly concentrated and entry was limited to those

with the necessary patent license, if Micafil had not acquired

Mechaneer, Axis could and would have surmounted the patent

barrier by purchasing Mechaneer for $1 million. After this

‘*entry vehicle’’ was eliminated, the cost of entering the market

opposed to the actual anticompetitive effect required by Section 1 of

the Sherman Act, acquisitions are normally challenged only under Sec-

tion 7. Nonetheless, this Court has held that Section I continues to

apply to acquisition contracts. See, e.g., United States v. First

National Bank & Trust Co. of Lexington, 376 U.S. 665 (1964).

rose to the cost of ‘‘inventing around’’ the patents: thus, the

barrier to entry (the cost of entering) was raised dramatically by

Micafil’s acquisition of Mechaneer.

Second, the reference to Odawara’s acquisition of Ott proved

far too much, for whichever of the two remaining potential

competitors entered by acquiring Ott, the other would be

excluded because Mechaneer had been bought by Micafil.

Much as in the game musical chairs, removing one chair while

there are still two players means inevitably that one will fail; it is

the ‘‘illegal’’ removal of the chair rather than the greater dex-

terity of one of the two players that assures that one will be

eliminated.

The court of appeals, after a lengthy summary of the parties’

respective arguments, considered the relationship between the

patent and antitrust laws. It concluded that Axis had not

charged either patent misuse or attempt to monopolize in Mica-

fil’s acquisition of first Possis and then Mechaneer. (Pet. App.

13a) However, it did not conclude that all acquisitions of pat-

ents or patent licenses are exempt from Section 7 of the Clayton

Act or Section | of the Sherman Act. Indeed, respondent never

even suggested that such an exemption existed.

Instead, the court of appeals went on to affirm the dismissal

in a brief conclusion, relying on dictum from this Court’s deci-

sion in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S.

477 (1977). Axis did not suffer antitrust injury, said the court of

appeals, because it ‘‘would have suffered the same injury if

Mechaneer had remained in business or if some entity other

than Micafil had purchased Mechaneer. Perhaps a consumer or

a competitor could state a claim for damages and injunctive

relief on the basis of the Mechaneer acquisition, but Axis did

not.’’ (Pet. App. 14a)

REASONS FOR GRANTING THE WRIT

As this Court stated in Associated General Contractors of

California v. California State Council of Carpenters, 459 U.S.

519, 536-37 (1983), it is ‘‘virtually impossible to announce a

black-letter rule that will dictate the result in every case’’ as to

‘‘whether a party injured by an antitrust violation may recover

treble damages.’’ It is the ‘‘previously decided cases’’ that

‘‘identify factors’’ and ‘‘guide the exercise of judgment.”’

In no case has this Court considered whether a party excluded

from the market by an illegal acquisition suffered antitrust

injury that would allow it to bring an antitrust action attacking

the illegal acquisition. This Court has considered the issue of

antitrust injury in two merger cases, Brunswick Corp. v. Pueblo

Bowl-O-Mat, supra, and Cargill, Inc. v. Monfort of Colorado,

Inc., 479 U.S. 104 (1986). But both cases involved a plaintiff

which was an actual competitor in the market alleging ‘‘injury’”’

from increased competition that would result from the illegal

merger.

This Court has held that a competitor cannot attack a mer-

ger, no matter how illegal the merger may be, when the only

alleged injury the plaintiff suffers results from an increase in

legitimate competition. What remains to be determined is the

proper rule where there is a substantial decrease in competition

and the plaintiff is one whose injury is the exclusion from the

market as a direct result of the acquisition. This question can

arise in many acquisitions. The court of appeals’ decision pre-

vents suits by plaintiffs uniquely situated to pursue the procom-

petitive interests of the antitrust laws.

Moreover, the court of appeals’ holding is not limited to mer-

gers. It has created a rule of antitrust injury so narrow that it

could have an adverse impact on most antitrust actions. The

court below held that Axis failed to allege antitrust injury

because it would have suffered the same injury under other pos-

sible facts, even though those facts are contrary to what the

court assumed to be true. A rule which eliminates plaintiff’s

antitrust remedy where injury might have occurred in other cir-

cumstances, unrelated to an antitrust violation, would effec-

tively eliminate many private antitrust actions, even for per se

violations such as horizontal boycotts and horizontal price-

fixing conspiracies.

I. The Court of Appeals Decided an Important Question of

Law in Conflict With This Court’s Decisions.

A. The Court of Appeals Misconceives Brunswick and

Ignores McCready and Cargill.

In defining those persons who suffer antitrust injury, the

court of appeals chose the most restrictive language from this

Court’s Brunswick decision and ignored this Court’s own

description of Brunswick in Blue Shield of Virginia v.

McCready, 457 U.S. 465 (1982), and Cargill. This is strong evi-

dence that this Court’s ‘‘previously decided cases,’’ two of

which involved injury from increased competition, offer insuf-

ficient guidance to the lower courts in determining whether

antitrust injury is suffered by those who are injured by being

prevented—as a result of an illegal acquisition—from entering

the market and increasing competition.

In Brunswick, the plaintiff Pueblo alleged that, absent

Brunswick’s acquisition of certain failing bowling centers,

those bowling centers would have gone out of business and

Pueblo’s profits would have increased. Yet, the acquisition by

Brunswick allegedly violated Section 7 of the Clayton Act not

because the bowling centers stayed in business, but rather

because the entry of Brunswick’s ‘‘deep pocket”’ in local mar-

kets previously populated by relatively small competitors might

ultimately lessen competition. 429 U.S. at 482.

This Court had no difficulty in holding that Pueblo could not

recover treble the profits it would have made if the bowling cen-

ters had been allowed to go out of business. Pueblo’s injury was

the result of Brunswick’s ‘‘preserv[ing] competition, thereby

depriving respondents of the benefit of increased concentra-

tion.’’ 429 U.S. at 488. This was not ‘‘antitrust injury’’:

‘injury of the type the antitrust laws were intended to prevent

and that flows from that which makes the defendants’ acts

unlawful.’’ 429 U.S. at 489 (emphasis in original).

In discussing the relationship between Section 4, the private

right of action, and Section 7 of the Clayton Act, which does

not require any proof of a present anticompetitive effect, but

rather ‘‘only that injury may result,’’ this Court noted that

Pueblo would have suffered the same injury if the bowling cen-

ters had obtained refinancing or had been acquired by some

‘‘shallow pocket’’ parent. 429 U.S. at 487. The court of

appeals, in affirming the dismissal of Axis’ action, concluded

that this language controlled the claims of all potential entrants

like Axis. (Pet. App. 14a)

In so holding, the court of appeals ignored this Court’s expla-

nation in McCready of the very passage from Brunswick upon

which it relied. In McCready, the defendants also contended,

relying on Brunswick, that the plaintiff had not suffered anti-

trust injury because she ‘‘would have suffered the identical

‘loss’—but no compensable ‘injury’—as long as her employer,

which acted independently in an unrestrained market, contin-

ued to purchase a group insurance contract that did not cover

the services of clinical psychologists.’’ 457 U.S. at 480 n. 16.

This Court rejected the defendants’ argument. Rather, it con-

cluded that the holding in Brunswick was based on ‘‘the general

principle that treble-damage recoveries should be linked to the

procompetition policy of the antitrust laws.’’ 457 U.S. at 482.

McCready’s injury was recognized as antitrust injury because it

‘‘was inextricably intertwined with the injury the conspirators

sought to inflict on psychologists and the psychotherapy mar-

ket.’’ 457 U.S. at 484.

McCready is not the only decision of this Court that has

interpreted Brunswick in this manner. In Cargill, Inc. v. Mon-

fort of Colorado, Inc., the plaintiff claimed that the allegedly

illegal acquisition would injure it because the merged company

would increase competition, thereby lowering the plaintiff’s

profits. This Court stated that in Brunswick, ‘‘[w]e held that

this injury, although causally related to a merger alleged to vio-

late § 7, was not an antitrust injury, since ‘[i]t is inimical to [the

antitrust] laws to award damages’ for losses stemming from

continued competition. Jd. at 488.’’ 479 U.S. at 109-10. Simi-

larly, this Court found that Monfort’s injury was not antitrust

injury because ‘‘the threat of loss of profits due to possible

price competition following a merger does not constitute a

threat of antitrust injury.’’ 479 U.S. at 117.

However, this Court ‘‘decline[d] the invitation’’ of the

United States to deny standing to competitors who actually

alleged (and would prove) that the acquisition would result in

predatory pricing. 479 U.S. at 121. While predatory pricing

might be infrequent, a person threatened with being excluded

from the market as a result of an acquisition that would lead to

predatory pricing should not, this Court concluded, have its

injuries ignored. This Court never suggested that the plaintiff

would have to plead and prove that it could not have suffered

the same injury without an antitrust violation.

The court of appeals’ decision relies exclusively on the dictum

from this Court’s decision in Brunswick, simply ignoring this

Court’s subsequent discussion of the issue in McCready and

Cargill. This Court should grant review to determine what fac-

tors the lower courts should consider when determining whether

a plaintiff’s injury is ‘‘antitrust injury’? when the plaintiff

alleges that an illegal acquisition has prevented it from entering

the market and increasing competition.

B. The Court of Appeals Ignored the Loss of Increased

Competition.

In concluding that Axis did not suffer antitrust injury, the

court of appeals described the injury to competition from Mica-

fil’s acquisition of Mechaneer by ignoring both the allegations

of the complaint and the prior decisions of this Court. The

court of appeals concluded that ‘‘[w]hat made the acquisition

illegal was that by acquiring Mechaneer, Micafil further

reduced competition in an industry that was already served by

very few manufacturers.’’ (Pet. App. 13a)

The elimination of Mechaneer, however, had two distinct

anticompetitive effects in violation of Section 7 of the Clayton

Act. The acquisition did eliminate the present competition pro-

vided by Mechaneer. But Mechaneer was a small competitor

that did not have substantial market strength. The present com-

petition provided by Mechaneer was not the most important

anticompetitive effect of Micafil’s action. Indeed, if only

Mechaneer’s own strengths were at issue, Micafil might have

argued that Mechaneer was sufficiently small and under-

financed that acquiring it would not probably ‘‘substantially

lessen competition’’ in violation of Section 7.

The more important effect on competition was that Micafil

eliminated Mechaneer as a means by which a major competitor

could enter the U.S. market for armature winding machines. If

Axis, rather than Micafil, had acquired Mechaneer, competi-

tion would have increased substantially rather than decreased.

The court of appeals simply ignored this Court’s decisions

which have recognized the importance of increased competition

from expanding a small competitor. See United States v. Alu-

minum Co. of America, 377 U.S. 271, 279 (1964); United States

v. Falstaff Brewing Corp., 410 U.S. 526, 537 (1973); United

States v. Marine Bancorporation, Inc., 418 U.S. 602 (1974).*

The court of appeals’ compounded its error by ignoring Axis’

claim that Micafil’s agreement to acquire Mechaneer also vio-

lated Section 1 of the Sherman Act. Under the standard set by

this Court in United States v. Columbia Steel Co., 334 U.S.

495, 527-30 (1948), the question is whether the acquisition

agreement was an unreasonable restraint of trade. The elimina-

tion of the substantial increase in competition that would have

occurred absent respondent’s acquisition is an obvious anti-

competitive effect to be weighed in any Rule of Reason analy-

4 Eliminating Mechaneer as a means by which Axis could enter the

U.S. market for armature winding machines also eliminated the pro-

competitive effect that Axis may well have been exerting on the U.S.

market by being on the ‘‘fringe’’ of the market, perceived by the mar-

ket as likely to enter (by acquiring Mechaneer for instance) if the U.S.

market failed to remain competitive. This Court recognized the sub-

stanual lessening of competition that may occur when the perceived

potential entrant is eliminated in United States v. Falstaff Brewing

Co., 410 U.S. at 531-34.

sis. Indeed, the violation of Section 1 of the Sherman Act is

based as much or more on the elimination of Axis’ increase in

competition as on the elimination of the present competition

provided by Mechaneer.

II. The Court of Appeals’ Decision Conflicts With the Deci-

sions of Other Circuits.

The court of appeals concluded that a potential competitor

which is excluded from the market by an illegal acquisition can-

not bring an antitrust action because it did not suffer antitrust

injury. Other Circuits have allowed exactly such plaintiffs to

pursue their claims.

In Helix Milling Co. v. Terminal Flour Mills Co., 523 F.2d

1317 (9th Cir. 1975), cert. denied, 423 U.S. 1053 (1976), the

plaintiff Helix had been a competitor, but its mill was destroyed

by fire. It sought to re-enter the market by purchasing a mill

that General Foods was offering for sale. Terminal, Helix’ prin-

cipal competitor, also sought to buy General Foods’ mill. Helix

sued alleging that the only means by which it could re-enter the

flour market was by purchasing this mill. It also alleged that

‘*but for the contract between Terminal and General [Foods], it

would have purchased the. . . mill.’’ 523 F.2d at 1319. The

Ninth Circuit concluded that Helix had properly stated a cause

of action under the antitrust laws.° While the issue of standing

was only raised by implication, the Ninth Circuit recently con-

firmed that standing was found in Helix. Bubar v. Ampco

Foods, Inc., 752 F.2d 445, 453 (9th Cir.), cert. denied, 472 U.S.

1018 (1985).

5 The Ninth Circuit found that Helix’ claim under Section | of the

Sherman Act was proper. The claim under Section 7 of the Clayton

Act was dismissed only because the agreement between Terminal and

General Foods was never consummated, a point which the Ninth Cir-

cuit believed was a necessary element for a damage action under Sec-

tion 7. 523 F.2d at 1323.

Similarly, the Sixth Circuit’s holding is in conflict with that

of the Seventh Circuit in Fishman v. Estate of Wirtz, 807 F.2d

520, 532-35 (7th Cir. 1986). There, the Seventh Circuit held that

a plaintiff suffered antitrust injury when its exclusion from the

market was the result of an agreement in violation of Section |

of the Sherman Act to acquire the assets the plaintiff sought as

a means by which to enter the market.°

Ill. The Court of Appeals’ Decision Bars the Most Appropri-

ate Plaintiff From Enforcing the Antitrust Laws.

The private right of action is a fundamental part of antitrust

jurisprudence. It exists to allow private parties to help in

enforcing the antitrust laws. Blue Shield of Virginia v.

McCready, 457 U.S. at 472-73. The availability of private

enforcement is particularly important at a time when the budg-

ets for the antitrust enforcement agencies—the Antitrust Divi-

sion of the Department of Justice and the Federal Trade

Commission—have been reduced substantially.’ And the

present case also reflects the difficulty of uncovering all illegal

acquisitions: the Mechaneer acquisition was so small it fell

below the Hart-Scott-Rodino Act reporting thresholds. Yet,

small or local markets are frequently the ones in which barriers

to entry (whether expressly or implicitly resulting from govern-

mental rules, e.g., patents) are most pervasive.

6 The court of appeals in this action believed that its holding was sup-

ported by the Fifth Circuit's decision in Bayou Bottling, Inc. v. Dr

Pepper Co., 725 F.2d 300 (Sth Cir.), cert, denied, 469 U.S, 833 (1984)

(Pet. App. lla), Bayou Bottling is factually distinguishable from the

present action; it involved a dispute between two actual competitors,

rather than an actual competitor and a potential competitor, over

which should be allowed to buy a third. Thus, even if plaintiff Bayou

prevailed, there would still only be two remaining bottlers in that mar-

ket, as Opposed to the present case in which Axis wishes to return the

number of competitors to four. Nonetheless, the Fifth Circuit does rely

on the same Brunswick dictum as the Sixth Circuit and, therefore, does

conflict to some degree with the decisions of the Ninth and Seventh

Circuits.

7 There was a ‘60% reduction in the antitrust division staff under Mr.

Reagan.’’ Wall Street Journal, June 16, 1989, at B12, col. 1.

The court of appeals has barred persons excluded from the

market as a result of an illegal acquisition from bringing a pri-

vate action to enforce the antitrust laws. The only plaintiffs that

the court of appeals recognized ‘‘perhaps’’ could sue were ‘‘a

consumer or competitor.’’ (Pet. App. 14a) Neither group is

likely to be preferable to the excluded potential entrant as an

appropriate plaintiff to enforce the antitrust laws and enhance

competition.

This Court has noted that consumers (é.g., a customer) are

often appropriate plaintiffs. Reiter v. Sonotone Corp., 442

U.S. 330 (1979). Consumers, however, are much less likely to

bring an antitrust action chalienging even a clearly illegal acqui-

sition than they would be to attack price-fixing. First, it may be

virtually impossible for the consumer to prove any damages

arising from an illegal acquisition. Prices may not increase for a

substantial period of time. Indeed, it may be impossible ever to

show a price increase resulting from the reduction in competi-

tion. Rather, the anticompetitive effect may be seen in a loss of

competition in subjective factors, such as service, quality and

the introduction of new products. It may even be difficult for a

consumer to make a sufficient showing to support an injunc-

tion. Finally, in many commercial settings, a customer may

have a substantial disincentive to sue a principal supplier alleg-

ing that its acquisition of another supplier violates the antitrust

laws; a failure to prevail in the lawsuit might be followed by a

refusal to continue to supply.

The other potential plaintiff cited by the court of appeals is

the ‘‘competitor’’. This is extraordinary in light of the fact

that in both cases in which this Court considered whether

competitor-plaintiffs suffered antitrust injury from acquisitions

(Brunswick and Cargill), this Court concluded that they did

not. Indeed, the competitor will most likely not suffer injury

when competition is reduced as a result of an acquisition. Exist-

ing competitors, like Pueblo Bowl-O-Mat and Monfort, will

normally be willing to spend money to bring an antitrust action

only when their injury results from increased competition.

Thus, existing competitors are not likely potential plaintiffs

who can or will properly allege antitrust injury from an illegal

acquisition.

In contrast, the potential competitor which is prevented from

entering a market with high barriers to entry as a result of an

illegal acquisition has both the financial incentive and the neces-

sary procompetitive intent to bring a proper private antitrust

action. The financial incentive is clear; it will seek to recover

damages based on its inability to enter and compete in the

market—that is, its lost profits. The procompetitive intent

reflects the fact that it seeks to increase competition if it prevails

by adding an additional, and in the case of Axis, substantial

competitive input to the market.

The court of appeals holds out an ephemeral hope that some

other appropriate private plaintiff will appear to enforce the

antitrust laws. Certainly none has come forward in the four

years since Mechaneer was acquired. Given the substantial bar-

riers to entry and the level of concentration, Axis appears to be

the only plaintiff likely to redress a clear violation of Section 7

of the Clayton Act and Section 1 of the Sherman Act.

IV. The Court of Appeals’ Holding Could Have a Widespread

and Adverse Impact Eliminating Many Private Antitrust

Actions.

The court of appeals denied Axis the right to obtain relief

from its injury ‘‘because Axis would have suffered the same

injury if Mechaneer had remained in business or if some entity

other than Micafil had purchased Mechaneer.’’ (Pet. App.

14a). However, as the district court assumed for purposes of the

motion to dismiss, absent Micafil’s acquisition of Mechaneer,

Axis would have purchased Mechaneer and entered the U.S.

market. (Pet. App. 24a)

According to the court of appeals, therefore, Axis did not

suffer antitrust injury because, under hypothetical facts con-

trary to the facts alleged, Axis might have suffered the same

injury without a violation of the antitrust laws having taken

place. One of the facts this Court noted in Brunswick as reason

to be concerned whether Pueblo was an appropriate plaintiff

(that it would have suffered the same injury under circum-

stances in which there was not an illegal acquisition—if the

bowling centers had been acquired by ‘‘shallow pockets’’ or

had obtained refinancing), is now a requirement for all private

antitrust plaintiffs.

Antitrust injury is required for plaintiffs not only in actions

brought under Section 7 of the Clayton Act, but also for claims

alleging violations of Section 1 of the Sherman Act such as that

in McCready. Indeed, the court of appeals affirmed the dis-

missal of Axis’ claim under Section 1 of the Sherman Act

because Axis purportedly did not suffer antitrust injury.

According to the court of appeals, therefore, the antitrust

plaintiff alleging injury from a violation of Section 1 must show

that the same ‘‘injury’’ could not have resulted from any set of

possible facts not involving an antitrust violation.

This definition of antitrust injury would surely eliminate

many of the most common private antitrust actions. For exam-

ple, a company that was the target of a boycott in Fashion Orig-

inators’ Guild v. Federal Trade Commission, 312 U.S. 457

(1941), or in Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359

U.S. 207 (1959), would not have suffered antitrust injury when

it was eliminated from the market. Pursuant to United States v.

Colgate & Co., 250 U.S. 300 (1919), each of the companies

could have, without violating the antitrust laws, unilaterally

determined to refuse to deal with the purchaser because they did

not want to sell to those who aid design pirates or to an inde-

pendent like Klor’s. Under the test for antitrust injury stated by

the court of appeals, the fact that they did act by agreement and

not unilaterally is no more relevant than the fact that, absent

Micafil’s acquisition of Mechaneer, Axis would have purchased

Mechaneer and entered the market.

Similarly, the victim of a price-fixing conspiracy will have to

show that the participants in the conspiracy could not have indi-

vidually arrived at the higher price charged. Each defendant

confronted with the same inflationary cost pressures could have

unilaterally decided to increase prices. Following the court of

appeals’ decision in this case, it would be insufficient for the

plaintiff to prove that there was no evidence to support such

unilateral activity by the violators and that the evidence was to

the contrary. Since the plaintiff ‘‘would have suffered the same

injury’’ had the price-fixers acted unilaterally, plaintiff suffered

no ‘‘antitrust injury.”’

A definition of antitrust injury which supports such a dra-

matic reduction in private rights of action mer:ts this Court’s

immediate review.

CONCLUSION

For the foregoing reasons, petitioner respectfully prays that

this Court issue a writ of certiorari to review the judgment of

the United States Court of Appeals for the Sixth Circuit.

Respectfully submitted,

GORDON B. SPIVACK

DAVID H. MARKS*

COUDERT BROTHERS

200 Park Avenue

New York, New York 10166

(212) 880-4400

Attorneys for Petitioner

Axis, S.p.A.

*Counsel of Record

June 22, 1989

APPENDICES

a ae see

Sey yore ys

APPENDIX A

RECOMMENDED FOR FULL TEXT PUBLICATION

See, Sixth Circuit Rule 24

Nos. 88-3113, 88-3245

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Axis, S.p.A..

Plaintiff-Appellant, On APPEAL from the

United States District

r Court for the North-

MICAFIL, INC., ern District of Ohio

Defendant-Appellee.

Decided and Filed March 24, 1989

Before: WELLFORD, Circuit Judge: PECK and LIVELY.*

Senior Circuit Judges.

LIVELY, Senior Circuit Judge. This is an appeal from dis-

missal of an antitrust action pursuant to Fed. R. Civ. P.

12(b)(6), for failure to state a claim upon which relief can

be granted. The question for decision is whether the injury

claimed by the plaintiff in its complaint constitutes an

“antitrust injury,” a requirement for recovery of treble dam-

ages under § 4 of the Clayton Act, 15 U.S.C. § 15, and for

injunctive relief under § 16 of the Clayton Act, 15 U.S.C.

*The Honorable Pierce Lively became a senior judge on January 1.

1989.

§ 26. We conclude that the district court properly determined

that the complaint failed to allege an antitrust injury. and

affirm the judgment.

Since the district court rendered judgment at the pleading

stage, we must accept as true the facts alleged in the com-

plaint. Hishon v. King & Spalding. 467 U.S. 69. 73 (1984).

Applying this standard, we treat the following facts as true.

Armatures are necessary components of fractional power

commutator motors used in most small household appli-

ances. To manufacture armatures efficiently the manufac-

turer must use an armature winding machine. The plaintiff.

Axis, is an Italian corporation that manufactures armature

winding machines and sells them to electrical appliance man-

ufacturers throughout Europe. The defendant. Micafil. is a

United States corporation that has manufactured and sold

armature winding machines in the United States since 1985.

Micafil is a wholly-owned subsidiary of Micafil, A. G.. a Swiss

corporation that manufactures and sells armature winding

machines throughout Europe.

An armature winding machine winds copper wire around

an armature arm to form a coil. The machine attaches the

wire to a commutator and then cuts the wire. In the 1970s

Globe Tool & Engineering Co. (Globe) and Possis Corpora-

tion (Possis) obtained United States patents on the only two

wire cutting methods used in armature winding machines.

In 1975 Globe and Possis granted each other a non-exclusive

license “to make, have made, use, lease and sell” devices and

methods falling within the scope of their patents. Sometime

later Possis granted similar licenses to Ott-A-Matic. Inc. (Ott)

and Mechaneer, Inc. (Mechaneer). In 1985, prior to Micafil’s

entry into the market, four companies manufactured and sold

armature winding machines in the United States: Possis.

Globe. Ott and Mechaneer. Three companies engaged in the

same activities Outside the United States: Axis. Micafil and

Odawara. a Japanese corporation.

Prior to 1985 Possis refused to grant a license to any of

the foreign armature winding machine manufacturers though

all three sought such licenses. In July 1985. however. Possis

sold its assets. including the patents and licenses covering

armature winding machines, to Micafil. Micafil then entered

the U.S. market. Shortly thereafter Axis learned that Micafil

was attempting to purchase Mechaneer. When the president

of Axis approached Mechaneer to determine whether

Mechaneer was for sale. that company’s principals refused

to discuss the possibility of selling to Axis because

Mechaneer’s negotiations with Micafil were almost complete.

Micafil bought Mechaneer in September 1985. Axis was

ready. willing and able to purchase Mechaneer for the same

price that Micafil paid. The two purchases enabled Micafil

to-control approximately 50% of the U.S. armature winding

machine market (Possis had about 40% and Mechaneer about

10%).

At some unspecified time Odawara purchased Ott. As a

result of the various acquisitions, the number of armature

winding machine manufacturers in the United States shrunk

trom four to three. These three competitors. Globe, Micafil

and Odawara, now own all the patents and licenses governing

the manufacture of armature winding machines in the United

States.

While alleging in its complaint that “the acquisition of

Mechaneer by Micafil raised substantially the barriers to

entry into the U.S. market for manufacture and sale of arma-

ture winding machines for all potential manufacturers, par-

ticularly Axis, and indeed, has prevented Axis’ entry into the

market.” Axis also stated that “the Possis patents now owned

by Micafil” are “(t]he only thing[s] preventing” Axis’ entry

into the market. The complaint charged Micafil with violat-

ing the antitrust laws by acquiring Mechaneer because the

acquisition brought about a substantial reduction of competi-

tion in the market. Axis also alleged that by reason of the

acquisitions it had suffered lost sales and lost profits from

winding machines that it would have sold in the United

States had Micafil not purchased Mechaneer. In addition to

treble damages under § 4, Axis sought an injunction under

§ 16 of the Clayton Act requiring Micafil either to divest itself

of Mechaneer or to grant Axis express licenses to the Possis

patents.

In granting Micafil’s motion to dismiss, the district court

assumed that the Mechaneer acquisition violated both § | of

the Sherman Act and § 7 of the Clayton Act, as Axis claimed.

Nevertheless, the court found that the complaint failed to

state a claim because it did not allege an “antitrust injury.”

The court concluded that Axis wouid have suffered the same

injury—exclusion from the U.S. market—if Micafil had not

purchased Mechaneer. The Possis and Globe patents. not the

purchase of Mechaneer, foreclosed Axis’ entry into the mar-

ket. Thus, the anticompetitive act of purchasing Mechaneer

did not cause the plaintiff's alleged injury. The patents were

an impenetrable barrier to the plaintiff's entry before Micafil

purchased Mechaneer, and they remained as great a barrier

afterwards. The district court also recognized that Odawara

had been able to enter the U.S. market by purchasing Ott.

an effort Axis apparently never made. This acquisition could

have caused Axis’ aileged injury. Thus, the court concluded.

any injury that Axis may have suffered did not flow directly

from Micafil’s presumably unlawful act.

II.

The Clayton Act uses very broad language to describe who

may bring private actions for antitrust violations. Section 4

states that “any person who shall be injured in his business

or property by reason of anything forbidden in the antitrust

laws may sue... and shall recover threefold the damages

by him sustained.” Section 16 provides that “[a]ny person,

firm, corporation, or association shall be entitled to sue for

and have injunctive relief... against threatened loss or dam-

age by a violation of the antitrust laws.”

Despite the statute’s all-encompassing language, the

Supreme Court has determined that claims of injury by rea-

son of antitrust violations are compensable only when the

injury flows directly from the unlawful act. The Court noted

in Hawaii v. Standard Oil Co., 405 U.S. 251 (1972), that

“(t]he lower [federal] courts have been virtually unanimous

in concluding that Congress did not intend the antitrust laws

to provide a remedy in damages for all injuries that might

conceivably be traced to an antitrust violation.” /d. at 263,

n.14. In Associated General Contractors, Inc. v. California

State Council of Carpenters, 459 U.S. 519 (1983), after quot-

ing Hawaii v. Standard Oil Co., the Court stated that the ques-

tion of whether a given plaintiff may recover for injury

claimed to have been caused by an antitrust violation

requires consideration of common law requirements for

recovery of damages, such as causation, as well as the specific

language of the antitrust laws. 459 U.S. at 535.

The Supreme Court subjected a § 4 claim for treble dam-

ages to this analysis in Brunswick Corp. v. Pueblo

Bowl-O-Matic, Inc., 429 U.S. 477 (1977). That case involved

the acquisition of failing bowling alleys by Brunswick, the

giant in the bowling industry. Competitors of the acquired

operations sued for treble damages, claiming that if Bruns-

wick had not purchased the failing bowling alleys the alleys

would have gone bankrupt. The plaintiffs claimed that as a

result their business and profits would have increased. The

Court assumed that acquisition of the alleys by the dominant

actor in the industry violated § 7 of the Clayton Act by reduc-

ing competition, but determined that the acquisitions did not

cause the plaintiffs’ alleged losses. !f any other solvent pur-

chaser had acquired the alleys, or if the alleys had been able

to obtain financing sufficient to stay in business. the result

would have been the same—the plaintiffs would have been

denied the profits they anticipated from the alleys’ failure.

As the Court stated: “while respondents’ loss occurred ‘by

reason of the unlawful acquisitions. it did not occur ‘by rea-

son of that which made the acquisitions unlawful.” /d. at

488.

The Court defined this limitation on the right to recover

treble damages for § 7 violations [acquisitions whose effect

“may be substantially to lessen competition. or to tend to

create a monopoly”] as follows:

We therefore hold that for plaintiffs to recover tre-

ble damages on account of § 7 violations, they must

prove more than injury causally linked ‘to an illegal

presence in the market. Plaintiffs must prove

antitrust injury, which is to say injury of the type

the antitrust laws were intended to prevent and that

flows from that which makes defendants’ acts unlaw-

ful. The injury should reflect the anticompetitive

effect either of the violation or of anticompetitive

acts made possible by the violation. It should, in

short, be “the type of loss that the claimed violations

... would be likely to cause.” Zenith Radio Corp.

v. Hazeltine Research, 395 U.S. at 125.

Id. at 489 (emphasis in original) (footnote omitted).

In Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104

(1986), the Supreme Court held that a plaintiff seeking

injunctive relief under § 16 of the Clayton Act also must

allege a threat of antitrust injury, that is. an injury “of the

type the antitrust laws were designed to prevent and that

flows from that which makes defendants’ acts unlawful.” /d.

at 113, quoting Brunswick, 429 U.S. at 489. Thus, to survive

a motion to dismiss, it was necessary that Axis’ claims for

damages and for injunctive relief both allege antitrust injury.

III.

The parties repeat in this court the arguments they made

in the district court. We will discuss the plaintiff-appellant s

position in detail.

Axis insists that the district court misconstrued its com-

plaint and misread decisions of the Supreme Court, this

court, and other federal courts. Axis contends that the stan-

dard applied by the district court in this case would preclude

almost all private antitrust actions. It interprets the district

court opinion to hold that an antitrust plaintiff must show

“not only that its injury flowed from the violation, but also

that its injury could not have occurred under any alternative

set of facts that did not include an antitrust violation.”

Axis argues for a very narrow application of Brunswick.

The acquisitions of the failing bowling allevs by Brunswick

increased or at least maintained the level of competition in

the relevant market. From this fact, Axis argues that

Brunswick never precludes recovery for failure to allege anti-

trust injury when the plaintiff claims that the challenged

acquisition reduces competition. While the fact that Bruns-

wick’s acquisitions would not reduce competition was cer-

tainly an important element of the Brunswick decision, that

was not the only decisive factor. For purposes of the present

case, another element of the decision is equally important.

Aside from the acquisitions’ effect on competition, the Court

found no antitrust injury because the plaintiffs’ injury, while

causally connected to the acquisitions, was not caused by

“that which made the acquisitions unlawful.” 429 U.S. at

488. The acquisitions were unlawful because Brunswick was

the giant of the industry, and any acquisitions by it presum-

ably would tend to reduce competition. However, it was not

this potential reduction of competition that caused the plain-

tiffs’ loss of anticipated profits. They would have suffered the

same injury if the failing alleys had been kept in operation

by other means. Brunswick stands for a much broader princi-

ple than that to which Axis would restrict it.

Axis seeks to support its position by citing two of the

Supreme Court’s post-Brunswick decisions, one of which

dealt with § 4 antitrust standing and the other with § 16 anti-

trust injury. Antitrust injury is a concept distinct from anti-

trust standing, but is an element in the determination of

standing. Thus, even where there is antitrust injury, a plain-

tiff may be found to lack standing because other elements

of the standing equation are missing. See Cargill, Inc. v. Mon-

fort of Colorado, Inc., 479 U.S. 104, 110 n. 5 (1986) (“A show-

ing of antitrust injury is necessary, but not always sufficient,

to establish standing under § 4, because a party may have

suffered antitrust injury but may not be a proper plaintiff

under § 4 for other reasons.”). The district court decided this

case on the basis of a failure to show antitrust injury and

did not consider any of the other elements required for stand-

ing. We will do the same, and we will examine the cited deci-

sions to determine their applicability where only antitrust

injury is in issue.

Axis first relies on Blue Shield of Virginia v. McCready,

457 U.S. 465 (1982), which was a § 4 standing case (“The

question presented is whether a subscriber who employed the

services of a psychologist has standing to maintain an action

under § 4 of the Clayton Act based upon the health insurance

plan’s failure to provide reimbursement for the costs of that

treatment.”). Jd. at 467. Although the Court found that the

plaintiff had suffered an antitrust injury, this finding was part

of its larger standing determination. In discussing Brunswick,

the McCready Court refused to limit its Brunswick holding

to a requirement that to constitute antitrust injury the plain-

tiffs injury must “ ‘reflect the anticompetitive effect’ of the

alleged violation.” /d. at 482. Instead, McCready left the

Brunswick requirement of “antitrust injury” unchanged.

“Nevertheless, we agree with petitioners that the relationship

between the claimed injury and that which is unlawful in the

defendant's conduct, as analyzed in Brunswick is one factor

to be considered in determining the redressability of a partic-

ular form of injury under § 4.” /d. at 483 n. 19.

Although not explicitly stated in the opinion, Associated

General Contractors, Inc. v. California State Council of Car-

penters, 459 U.S. 519 (1983), was also a standing case. The

Court did not base its rejection of the union’s claim solely

on the union’s failure to allege antitrust injury. The Court

considered several factors that are relevant to the determina-

tion of standing—“the nature of the [plaintiff's] injury, the

tenuous and speculative character of the relationship between

the alleged antitrust violation and the [plaintiffs] alleged

injury, the potential for duplicative recovery or complex

apportionment of damages, and the existence of more direct

victims of the alleged conspiracy.” /d. at 545. In the course

of the Associated General Contractors opinion Justice Stevens

noted that the Court had cited Brunswick in McCready to

support its conclusion that “McCready’s injury was of a type

that Congress sought to redress in providing a private remedy

for violations of the antitrust laws.” /d. at 538, quoting

McCready, 457 U.S. at 483. Nothing in Associated General

Contractors detracts from the Brunswick holding with regard

to the requirement of antitrust injury.

Axis also relies on Cargill, Inc. v. Monfort of Colorado, Inc.,

479 U.S. 104 (1986). As we have noted, the Supreme Court

in Cargill held that one seeking an injunction under § 16 of

the Clayton Act to prevent a proposed merger must show a

threat of antitrust injury. There the plaintiff alleged that the

proposed merger would result in a concentration of economic

power in the relevant markets, substantially lessening compe-

tition or tending to create a monopoly. The plaintiff further

charged that this concentration would impair its ability to

compete in those markets. Relying principally upon

10a

Brunswick, the Court concluded that the threat of lost profits

following the projected merger was not sufficient to show a

threat of antitrust injury. /d. at 116-17.

Axis also contends that the district court erred in relying

on Alberta Gas Chemicals, Lid. v. EJ. Du Pont de Nemours

& Ci, 826 F.2d 1235 (3d Cir. 1987), cert. denied, 108 S. Ct.

2830 (1988). Suit was filed in 4/berta Gas to prevent the pro-

posed acquisition of Conoco by Du Pont. Du Pont was the

largest producer of methanol in the United States. Prior to

the merger Conoco had planned to build a new plant for the

production of methanol. The complaint stated that to stimu-

late demand for methanol while its plant was under construc-

tion, Conoco would buy methanol from the plaintiff and

other producers and sell it on the merchant market. After

the acquisition, Du Pont cancelled the plans for a new mc.ha-

nol plant. The plaintiff claimed direct injury from the loss

of anticipated sales of methanol to Conoco. It claimed indi-

rect injury from the loss of anticipated sales of methanol that

would have resulted from the increased market activity

induced by Conoco. The court held that the losses alleged

by the plaintiff did not constitute antitrust injury.

The court assumed that the acquisition was illegal because

it gave Du Pont the power to prevent Conoco from entering

the methanol-producing industry as an independent competi-

tor. In other words, it reduced competition in that industry

The court, however, found that the loss of anticipated sales

from the cancelled “demand creation” activities of Conoco

did “not flow ‘from that which makes the defendants’ acts

unlawful.’ ” Jd. at 1241, quoting Brunswick, 429 U.S. at 489

If another entity without Du Pont’s market power had

acquired Conoco and curtailed its methanol plans, Alberta

Gas would have suffered the same injury. 826 F.2d at

1241-42. Although there are obvious differences between the

present case and A/berta Gas, that decision does support the

district court’s conclusion here.

lla

We have not found a helpful Sixth Circuit case. In

Langenderfer, Inc. v. S.E. Johnson Co., 729 F.2d 1050 (6th

Cir.), cert. denied, 469 U.S. 1036 (1984), one of the plaintiff's

claims for treble damages was based on the defendant's acqui-

sition of competitors. The plaintiff claimed that the acquisi-

tions eliminated the competitive pressures of the acquired

companies, thus permitting the defendant to engage in other

monopolistic acts such as unfair pricing, profit squeezing and

predatory bidding. /d. at 1058. We held that this allegation

was Sufficient to satisfy the Brunswick requirement of anti-

trust injury. The injury resulted “from ‘anticompetitive acts

made possible’ by the acquisitions.” /d. at 1058, quoting

Brunswick, 429 US. at 489. Langenderfer does not support

Axis because Axis’ exclusion from the United States armature

winding machine market did not result from Micafil’s acqui-

sition of Mechaneer-—the anticompetitive act. Before Micafil

ever acquired Mechaneer, Axis was shut out of the desired

market by the patents controlled by Possis and Globe and

by the refusal of those companies to license to Axis.

In Bavou Bottling, Inc. v. Dr. Pepper Co., 725 F.2d 300 (Sth

Cir.), cert. denied, 469 U.S. 833 (1984), the plaintiff claimed

treble damages for lost profits resulting from the defendants’

interference with the plaintiff's attempt to purchase a com-

petitor. The court found that the plaintiff's losses from its

failure to acquire the target company did not constitute anti-

trust injury. Applying Brunswick, the court stated:

Bayou would have suffered the identical loss of sales.

and economies of scale if [the competitor] had

retained his operation or if he had sold to a third

party. The injury does not satisfy either prong of the

Brunswick test; it is not the type of injury the anti-

trust laws were designed to prevent and it does not

flow from that which ostensibly made the defen-

dants’ activ'ties illegal.

Id. at 304. The district court applied the same analysis to

Axis claim in the present case.

12a

Many of Micafil’s arguments appear to confuse antitrust

injury with antitrust standing. This confusion occurs because

the two concepts “share a common ingredient.” 7riple MJ

Roofing Corp. vy. Tremco, Inc., 753 F.2d 242, 247 (2d Cir.

1985). The common ingredient is that both requirements

limit “recovery to those who have been injured by restraint

on competitive forces in the economy.” /d., quoting GAF

Corp. v. Circle Floor Co., 463 F.2d 752, 758 (2d Cir. 1972),

cert. dismissed, 413 U.S. 901 (1973) (emphasis added). Any

inquiry to determine whether antitrust injury has been shown

is more limited than one to determine whether the plaintiff

has standing. The single determinant of antitrust injury is

whether the plaintiff has suffered an “injury of the type the

antitrust laws were intended to prevent and that flows from

that which makes [a defendant’s] act [ ] unlawful.” Brunswick,

429 U.S. at 489. On the other hand, even if an antitrust injury

is shown sufficiently, standing may be denied on the basis

of other factors. The purpose of the additional inquiries is

to confine recovery to cases that promote the congressional

intent to ensure that consumers receive the benefits of com-

petitive markets.

IV.

We agree with the district court. Viewing the complaint

in the light most favorable to Axis, the complaint does not

allege an antitrust injury. As Axis admitted in the complaint

itself, the Possis and Globe patents precluded its entry into

the U.S. market. The cases cited by Axis for the general prop-

osition that a patent holder may violate antitrust laws by mis-

using his patents in an attempt to create an unlawful monop-

oly cast no light on the issue in this case. See SCM Corp.

v. Xerox Corp., 645 F.2d 1195 (2d Cir. 1981), cert. denied,

455 U.S. 1016 (1982); Kobe, Inc. v. Dempsey Pump Co., 198

F.2d 416 (10th Cir.), cert. denied, 344 U.S. 837 (1952).

l3a

Our patent and antitrust laws seek to further different and

opposing policies. Patent laws grant a monopoly for a limited

time in order “[t]o promote the Progress of Science and useful

Arts... .” U.S. Const Art. I. § 8. cl. 8. Antitrust laws. on the

other hand, are designed to promote and protect competition

in the marketplace. Thus, a lawfully acquired patent creates

a monopoly that does not violate the antitrust laws. While

patent abuse may constitute an antitrust violation. United

States v. Westinghouse Electric Corp., 648 F.2d 642. 647 (Sth

Cir. 1981), Axis did not allege that Micafil violated ihe ant-

trust laws by misusing its patents or licenses. It charged only

that the acquisition of Possis and Mechaneer raised the barri-

ers to its entry into the U.S. market.

This is not a case where a patent holder has attempted “to

monopolize an industry by acquiring all present and future

patents relevant to that industry.” /d. Globe still owns patents

and Odawara operates in the U.S. market under licenses

granted by Possis to Ott pricr to Odawara’s acquisition of

Ott. The charge that Micafil “raised the barriers” to Axis’

entry into the U.S. market. by acquiring Possis and

Mechaneer fails to allege antitrust injury, however. since

Micafil never dominated the U.S. market for armature wind-

ing machines as Xerox did the market for plain paper copying

machines in SCM Corp. v. Xerox Corp. The SCM court care-

fully delineated the conditions under which the acquisition

of patents may violate the antitrust laws and create antitrust

injury for which damages may be awarded. 645 F.2d at 1205.

Giving the complaint a most indulgent reading, Axis did not

make such a claim in this case.

CONCLUSION

Axis alleged no more than a causal link between Micafil’s

acquisition of Possis and Mechaneer and its claimed injury.

What made the acquisition illegal was that by acquiring

Mechaneer, Micafil further reduced competition in an indus-

try that was already served by very few manufacturers. As

l4a

did the plaintiffs in Brunswick, Alberta Gas, and Bavou Bot-

tling, however. Axis would have suffered the same injury 1f

Mechaneer had remained in business or if some entity other

than Micafil had purchased Mechaneer. Perhaps a consumer

or a competitor could state a claim tor damages ana injunc-

tive relief on the basis of the Mechaneer acquisition. but Axis

did not. The injurv for which it sought relief was not inflicted

by reason of Micafil’s newly-acquired position in .he market

and the elimination of one competitor. The patents and

licenses owned and possessed by three companies—Globe.

Odawara and Micafil—not by Micafil alone. precluded Axis"

entry into the U.S. market for armature winding machines.

Thus. Axis’ alleged injury is not “of the type the antitrust

laws were intended to prevent” and it did not “flow from”

the element of the acquisition that made it unlawful.

Brunswick, 429 U.S. at 489.

The judgment of the district court is affirmed.

15a

APPENDIX B

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF OHIO

EASTERN DIVISION

Case No. C87-1956

a ae

Axis, S.p.A.,

Plaintiff,

VS.

Micafil, Inc.,

Defendant.

MEMORANDUM OPINION

Il. INTRODUCTION.

DowD, J.

This is an antitrust action filed by the plaintiff against the

defendant for alleged violations under § 1 of the Sherman Act

and § 7 of the Clayton Act seeking damages and equitable relief

under §§ 4 and 16 of the Clayton Act. The plaintiff claims that

it has suffered antitrust injuries as a result of the defendant’s

acquisition of two out of four U.S. armature manufacturing

companies thus limiting the ability of the plaintiff to enter the

U.S. market.

The defendant has moved the Court for a motion to dismiss

asserting that the plaintiff has failed to allege the necessary ele-

ment of an antitrust action that being an antitrust injury. The

plaintiff has replied to the motion, and for the reasons that

appear below, the motion is granted.

l6a

I]. BACKGROUND.

Axis, S.p.A. (‘‘Axis’’) is an Italian corporation organized

under the laws of Italy with its principal place of business in

Florence, Italy. The defendant Micafil, Inc. (‘‘Micafil’’) is a

corporation organized under the laws of the State of Delaware

and is a wholly-owned subsidiary of Micafil A.G. (‘‘Micafil

A.G.’’), a corporation organized under the laws of Switzerland

with its principal place of business in Zurich, Switzerland. Both

companies are engaged in the manufacturing of electrical equip-

ment, and specifically the manufacturing of armature winding

machines.

Both the plaintiff and the defendant manufacture machines

that are used in the manufacture of fractional power commuta-

tor motors. Household appliances such as vacuum cleaners,

food processors, and electrical drills all include a fractional

power commutator motor as its source of power. A necessary

component of a fractional power commutator motor is an

armature.

An armature winding machine operates by spinning wires

around a core, attaching them to a commutator tang and

then cutting the wire to permit removal from the machine.

Purchasors cf such machines require that they incorporate

a device to grip the wire and either break it or cut it,

depending on the thickness of the wire and the ability of

the breaking or cutting device to operate on it with preci-

sion. For many uses, a wire cutting device must be

employed and no economically practical alternatives are

available.

Complaint, q 7.

The ability to manufacture and sell armature winding

machines with such cutting devices is essential to the sale

of lines cf equipment for the manufacture of electric

motors. Manufacturers of such motors prefer to purchase

manufacturing equipment which offer complete lines,

including armature winding machines equipped with such

wire cutting devices.

Id. at 7 8.

17a

Prior to 1985, there were four manufacturers of armature

winding machines in the United States: (1) Globe Tool & Engi-

neering Co. (‘‘Globe’’); (2) Possis Corporation (‘‘Possis’’); (3)

Ott-a-Matic, Inc. (‘‘Ott’’); and (4) Mechaneer, Inc. (‘‘Mecha-

neer’’). Since 1975, Ott and Mechaneer have manufactured and

sold armature winding machines pursuant to licenses granted by

Possis. Complaint 4 10. Globe and Possis manufacture and sell

armature winding machines pursuant to a cross licensing agree-

ment. Complaint { 9. Before 1985, Axis and Micafil, A.G., the

two principal manufacturer of armature winding machines in

Europe, were foreclosed from manufacturing and distributing

armature winding machines in the United States because of the

patents and license agreements held by the United States com-

panies. Complaint § 14. Odawra, a Japanese company, is also a

manufacturer of armature winding machines outside of the

United States. Jd.

In July of 1985, Micafil, A.G., through its wholly-owned

subsidiary the defendant Micafil acquired all the assets of the

motor equipment division of Possis. Complaint 4 15. The assets

purchased by Micafil included the various patents and patent

licenses covering armature winding machines. /d. At the time of

the asset acquisition, Possis held a forty percent share of the

U.S. market for armature winding machines.

In September of 1985, Micafil, A.G., through its wholly-

owned subsidiary Micafil acquired all the assets of Mechaneer.

The purchase included the patent licenses for the manufacture

of armature winding machines from Globe and Possis. At the

time of the acquisition, Mechaneer held a ten percent U.S. mar-

ket share for armature winding machines. Complaint 4 17.

Prior to Micafil’s acquisition of Mechaneer, Axis became aware

that Micafil intended to purchase Mechaneer. Axis contacted

Mechaneer ‘‘to determine whether it was for sale.’’ Complaint

4 16. The president of Axis ‘‘was advised that negotiations with

Micafil had, in fact, reached the point where an acquisition by

Micafil was likely and that Mechaneer, therefore, would not

discuss a possible acquisition by Axis.’’ Jd.

At some point, the Japanese company, Odawra, acquired Ott

and entered the U.S. market. Complaint 4 19.

18a

The plaintiff instituted this action claiming that ‘‘the acquisi-

tion of Mechaneer by Micafil raised substantially the barriers to

entry into the U.S. market for manufacture and sale of arma-

ture winding machines for all potential manufacturers, particu-

larly Axis, and ... has prevented Axis’ entry into the

market.’’ Complaint { 19. The plaintiff claims that it was ready

and willing to acquire Mechaneer had it been allowed to do so.

Specifically, the plaintiff alleges that ‘‘Axis was ready, willing

and able to pay an equal price for the assets of Mechaneer pur-

chased by Micafil as was paid by Micafil.’’ Complaint 4 18.

The plaintiff claims that had it been allowed to purchase

Mechaneer, it would have been able to immediately enter the

U.S. market for armature winding machines. Complaint 4 20.

The plaintiff claims that ‘‘[t]he only thing preventing such an

entry is the lack of licenses for the Possis patents now owned by

Micafil.’’ Complaint 4 20.

The plaintiff alleges that as a result of Micafil’s acquisition of

both Possis and Mechaneer: (1) the U.S. market for armature

winding machines has become even more highly concentrated;

(2) there are only three U.S. competitors rather than four com-

petitors; (3) the barriers to entry in the U.S. market have been

substantially raised by elimination of possible licenses and

acquisition vehicles; (4) the ‘‘competition in the U.S. market

for armature winding machines may be, and in fact has been

substantially lessened in violation of Section 1 of the Sherman

Act (15 U.S.C. § 1) and Section 7 of the Clayton Act (15 U.S.C.

§ 18);’’ and (5) that Axis has suffered loss of profits and sales

that it would have sold to U.S. manufacturers of fractional

power motors. Complaint ¢ 22.

IlI. DISCUSSION.

In its motion to dismiss, the defendant claims that the plain-

tiff’s complaint fails to state a claim because the plaintiff has

failed to allege an antitrust injury. The defendant argues that

the plaintiff’s alleged injury is not ‘‘one that flows from the

supposed anticompetitive effect of the chalienged acquisi-

tions.’’ Defendant’s Memorz 1dum in Support of Motion, p.2.

19a

The defendant claims that the plaintiff's alleged injury would

have occurred regardless of the identity of the acquirer or

whether an acquisition had occurred at all. Specifically, the

defendant claims that, notwithstanding the acquisitions, the

plaintiff would have been foreclosed from the U.S. market

because Axis did not hold any patents or licenses for the manu-

facture of armature winding machines.

The plaintiff, on the other hand, claims that it has alleged an

antitrust injury. The plaintiff argues that the complaint alleges

that Micafil’s acquisitions of Possis and Mechaneer resulted in

substantially raised barriers and thereby decreased competition

in the U.S. armature winding machine market. Moreover, as a

result of that decreased competition and ability to enter the

market, the plaintiff has suffered an injury. Further, the plain-

tiff argues that the injury is more than causally related to the

acquisitions by Micafil and flows directly from the anticompeti-

tive effect to the defendant’s antitrust violations.

Section 4 of the Clayton Act provides for the recovery of tre-

ble damages for ‘‘any person who shall be injured in his busi-

ness or property by reason of anything forbidden in the

antitrust laws. . . .’? 15 U.S.C.A. § 15. Section 16 of the Clay-

ton Act provides for injunctive relief ‘‘against threatened loss

or damage by a violation of the antitrust laws, . . . when and

under the same conditions and principles as injunctive relief

against threatened conduct that will cause loss or damages is

granted by course of equity... .’’ 15 U.S.C.A. § 26. The

plaintiff claims that the antitrust laws violated by the defendant

include § 1 of the Sherman Act and § 7 of the Clayton Act. Sec-

tion 7 of the Clayton Act provides that

[nJo corporation engaged in commerce shall acquire,

directly or indirectly, the whole or any part of the stock or

other share capital and no corporation subject to the juris-

diction of the Federal Trade Commission shall acquire the

whole or any part of the assets of another corporation

engaged also in commerce, where in any line of commerce

in any section of the country, the effect of such acquisition

may be substantially to lessen competition, or tend to cre-

ate monopoly.

20a

15 U.S.C.A. § 18 (emphasis added). Section 1 of the Sherman

Act provides that ‘‘[e]very contract, in the combination of the

form of trust or otherwise, or conspiracy, the restraint of trade

or commerce among the several States, or with foreign nations,

is declared to be illegal. . . .”’ 15 U.S.C.A. § 1.

A prerequisite to a private right of action under § 4 and § 16

of the Clayton Act is an antitrust injury. The resolution of what

is an antitrust injury for purposes of § 4 and § 16 of the Clay-

ton Act is a nebulous concept. In Brunswick Corp. v. Pueblo

Bowl-O-Mat, Inc., 429 U.S. 477 (1976), the Supreme Court

held that

for plaintiffs to recover treble damages on account of § 7

violation, they must prove more than injury causally

linked to an illegal presence in the market. Plaintiffs must

prove antitrust injury, which is to say injury of the type the

antitrust laws were intended to prevent and that flows

from that which makes the defendant’s acts unlawful. The

injury should reflect the anticompetitive effect either of

the violation or of anticompetitive acts made possible by

the violation.

Brunswick, 429 U.S. at 489 (emphasis in original). In Cargill,

Inc. v. Monfort of Colorado, Inc., U.S. , 167 S. Ch.

484 (1986), the Court extended the same antitrust injury analy-

sis to actions under section 16 of the Clayton Act. Moreover,

the fundamental theme of an antitrust injury analysis is that

‘‘[t]he antitrust laws . . . were enacted for ‘the protection of

competition, not competitors.’ ’’ Brunswick, 429 U.S. at 488,

quoting Brown Shoe Cop. v. United States, 470 U.S. 294 (1962)

(emphasis in original).

In addition to establishing antitrust injury under a § 4 analy-

sis, the plaintiff must also establish standing. ‘‘A showing of

antitrust injury is necessary, but not always sufficient, to estab-

lish standing under § 4, because a party may have suffered anti-

trust injury but may not be a proper plaintiff under § 4 for

other reasons.’’ Cargill, Inc., U.S. at , 17 S. Ct. at

489, n.S. In Associated General Coniractors of California, Inc.

v. California State Council of Carpenters, 459 U.S. 519 (1983),

the Court considered the antitrust injury requirement under the

2la

Brunswick analysis and also considered whether the plaintiff,

notwithstanding antitrust injury, had sufficient standing to

assert the claim. See also Southaven Land Co., Inc. v. Malone

& Hyde, Inc., 715 F.2d 1079 (6th Cir. 1983).

On a motion to dismiss pursuant to Rule 12(b)(6), Fed. R.

Civ. P. the district court must review the facts in the light most

favorable to the plaintiff and accept those facts as true. Hishon

v. King & Spalding, 467 U.S. 69, 73 (1984) (citing Conley v.

Gibson, 355 U.S. 41, 45-46 (1957)); Westlake v. Lucas, 537

F.2d 857, 858 (6th Cir. 1976); Davis H. Elliot Co. v. Carribean

Utilities Co., 513 F.2d 1176, 1182 (6th Cir. 1975). The defen-

dant has moved the Court for a motion to dismiss pursuant to

Rule 12(b)(6) on the basis that the plaintiff has failed to state an

antitrust injury. Consequently, the only issue before this Court

is whether the plaintiff has stated an antitrust injury and thus,

for the purposes of this motion, the Court assumes that the

defendant’s acquisition of Mechaneer violates § 7 of the Clay-

ton Act and § 1 of the Sherman Act as alleged in the complaint.

In support of its motion to dismiss, the defendant relies heav-

ily on the proposition that any alleged injury attributed to an

alleged violation of § 7 of the Clayton Act and § 1 of the Sher-

man Act is one that would have occurred notwithstanding the

alleged violations. In other words, the plaintiff would be suffer-

ing the same injury had the defendant not acquired Mechaneer

and Possis, or if the Mechaneer and Possis continued to operate

in their previous capacities. Moreover, the defendant argues

that the barriers to Axis’ entry into the U.S. market are the pat-

ents and licences held by the Possis and Globe, and that not-

withstanding the acquisition of Mechaneer Axis would still be

barred from entry into the U.S. market because of its lack of

patents or licenses. The defendant argues that the plaintiff read-

ily admits that patents and licenses are a barrier to entry. Com-

plaint 4 20. Thus, the defendant claims that the injury sustained

by the plaintiff does not flow directly from the alleged viola-

tion, or the anticompetitive effect. |

The defendants rely heavily on the Third Circuit Court of

Appeals decision in A/berta Gas Chemicals v. E.I. DuPont Co.

De Nemours, 927 F.2d 1235 (3rd Cir. 1987). Alberta Gas is a

Canadian manufacturer of methanol. Conoco was an American

22a

company with large resources of coal which planned to invest

large sums of money to build a manufacturing plant in the U.S.

that would transform its large coal reserves into methanol. As

part of that plan, Conoco envisioned developing a large net-

work of retail outlets to reach the ultimate consumer. Alberta

Gas, 826 F.2d at 1235. Aware of Conoco’s plan, Alberta Gas

figured that Conoco would need to buy methanol from other

suppliers such as Alberta Gas to supply its network of consumer

outlets pending the completion of Conoco’s proposed plant.

Moreover, Alberta Gas was of the opinion that Conoco’s

efforts would eventually increase the overall demand for metha-

nol and thus Alberta would benefit in the long run. Jd. Prior to

Conoco’s imposition of the plan, DuPont acquired Conoco.

DuPont was a manufacturer of methanol with a twenty-five to

thirty percent share of the market in the U.S. at the time of the

acquisition. After acquiring Conoco, DuPont cancelled the

plan to invest in the coal/methanol producing plant. There-

after, Alberta brought an action against DuPont claiming that

Conoco’s plan was terminated to protect DuPont’s own

monopoly in the U.S. market. The district court granted sum-

mary judgment in favor of the defendant and held that there

was no antitrust injury resulting from DuPont’s acquisition of

Conoco. The district court and the circuit court for purposes of

the motion assumed that the acquisition had violated the anti-

trust laws, and in that case § 7 of the Clayton Act.

The Third Circuit’s opinion in Alberta Gas is an excellent

review of the antitrust injury analysis and the standing analysis

applied in antitrust actions. The Alberta Gas decision relies

heavily on the proposition that alleged injury must relate specif-

ically to the anticompetitive effect of the alleged antitrust viola-

tion. The Third Circuit stated that the ‘‘Clayton Act deterrence

through compensatory provisions is aimed toward the directly

harmful effects of an antitrust transgression. The statutory

sanctions do not constitute a broad restitutionary scheme for

injuries not closely related to the violation, but caused by other

effects, desirable or not, of the illegal conduct.’’ Alberta Gas,

826 F.2d at 1240 (citations omitted). The Third Circuit went on

to hold that Alberta Gas’ losses were not the result of the mer-

ger. ‘‘Alberta’s alleged losses were neither connected with, nor

Niesscsenseeneeeeenennniiieenanemiimninaaiiebaneeeale

resulted from, DuPont’s market power in the methanol-

producing industry. That is clear because the same harm would

have occurred had any acquirer decided to curtail Conoco’s

production and marketing plans.’’ Alberta Gas, 826 F.2d at

1241 (emphasis supplied). The Third Circuit also relied on

Brunswick for the finding of no antitrust injury and states that

‘*because Alberta’s injuries would have ocurred absent a viola-

tion of § 7, they do not flow from the anticompetitive effects of

the merger.’’ Alberta Gas, 826 F.2d at 1242.

The defendants argue that A/berta Gas clearly establishes

that there is no antitrust injury alleged because the plaintiff’s

injury would have accurred absent any alleged violation of § 7

of the Clayton Act or § 1 of the Sherman Act. The defendants

argue that notwithstanding the acquisition of Mechaneer, the

plaintiffs would still be barred from the U.S. market because

Axis has no patents or licenses to produce armature winding

machines in the United States. In sum, they argue that the

alleged injury of the plaintiffs does not flow directly from the

acquisition of Mechaneer, but rather its inability to develop

new technology or obtain patents and licenses.

The defendant also relies on the Brunswick decision and the

facts giving rise to that case. In Brunswick, a large manufac-

turer of bowling equipment acquired a number of failing bowl-

ing alleys in the plaintiff’s market area. Brunswick, 429 U.S. at

479-80. The plaintiff brought an action under § 4 of the Clay-

ton Act claiming that they were injured as a result of the defen-

dant’s acquisition of the failing bowling alleys. The plaintiff’s

claim that had the defendant not acquired the bowling alleys,

the bowling alleys would have closed and the plaintiff would

have realized increased sales and profits. The Court did not find

antitrust injury because the defendant’s actions resulted in

increased competition. The Brunswick court relied on the

Brown Shoe court and protected competition and not the com-

petitors. Brunswick, 429 U.S. at 488. The defendant attempts

to analogize the facts of this case to those of Brunswick and

argues that the plaintiff cannot state an antitrust injury as a

result of increased competition in the U.S. market.

The plaintiff's primary argument in opposition to defen-

dant’s motion to dismiss is that antitrust injury is a result of the

24a

defendant’s anticompetitive conduct. The plaintiff argues that

the defendant’s acquisition of both Mechaneer and Possis

decreased the number of U.S. competitors from four to three.

Moreover, the acquisitions gave Micafil at least a fifty percent

share of the U.S. market for armature winding machines. The

consolidation of two of the four competitors, according to the

plaintiff, substantially reduced the ability of companies such as

Axis to obtain a license to produce the armature winding

machines. The plaintiff further argues that it would not be in

the same position but for the acquisition of Mechaneer and

Possis by Micafil. The plaintiff argues and alleges that had

Micafil not purchased Mechaneer, the plaintiff would have

been able to purchase Mechaneer and thus enter the U.S. mar-

ket for armature winding machines. Accordingly, the plaintiff

argues that their injury flows directly from the alleged anticom-

petitive conduct of the defendant.

The plaintiff also opposes the defendant’s analogy of this

case to the facts in Brunswick. The plaintiff argues that in

Brunswick the focus was on increased competition whereas in

this case the focus is on decreased competition. The plaintiff

argues that as a result of the defendant’s actions the U.S. mar-

ket for armature winding machines has experienced a decrease

in competition.

Construing the facts alleged in the complaint in a light most

favorable to the plaintiff, the Court finds that the plaintiff has

failed to allege an antitrust injury under § 4 and § 16 of the

Clayton Act. Assuming an alleged violation of § 7 of the Clay-

ton Act and § 1 of the Sherman Act, and even assuming that the

plaintiff would have acquired Mechaneer thereby gaining entry

into the U.S. market had the defendant not acquired Mecha-

neer, the Court finds that the plaintiff has failed to establish an

antitrust injury. The plaintiff has failed to allege facts that

establish that the alleged injury flows directly from the alleged

anticompetitive acts of the defendant. The Court finds that the

plaintiff’s alleged injury would have occurred notwithstanding

the defendant’s alleged antitrust violations. Further, the Court

finds that the plaintiff’s alleged injury does not flow directly

from the alleged anticompetitive act of the defendant.

25a

The complaint itself establishes that the plaintiff’s alleged

injury could flow from at least two other sources. First, the

plaintiff admits that the patents and licenses prevent its entry

into the U.S. market. Complaint 4 20. The plaintiff summarily

addresses the patent and license barriers in its reply memoran-

dum in opposition to the defendant’s motion to dismiss stating

that

[t]wo years ago there were four U.S. companies manufac-

turing and selling armature winding machines. To enter

most U.S. markets, potential entrant need only set up sales

and manufacturing force in the U.S. The market for arma-

ture winding machines, however, had additional barriers

to entry which were quite high: the patents and the cross-

license agreement. Absent a license from Globe and Pos-

sis, the only way to enter would be to develop an entirely

new, non-infringing technology.

In 1985-86, the patent barrier was, in effect, lowered

when three of the U.S. companies decided that they would

consider selling their respective businesses; rather than

needing a new technology, the entry barrier was the pur-

chase price of one of these companies.

Plaintiff’s Reply Memorandum in Opposition to Defendant’s

Motion to Dismiss, p.1 (emphasis added). The plaintiff has

merely attempted to transform the patent barrier into an acqui-

sition barrier. Second, the entry of Odawra, the Japanese firm,

raises the inference that plaintiff’s alleged injury may also be

attributable to Odawra.

26a

IV. CONCLUSION.

The Court finds that the plaintiff’s alleged injury. would have

occurred absent the alleged anticompetitive act of the defen-

dant. Accordingly, the Court finds that the defendant’s motion

to dismiss for the failure of the complaint to allege an antitrust

injury is well taken. This case is hereby dismissed.

IT IS SO ORDERED.

DAVID D. DOWD, JR.

David D. Dowd, Jr.

U.S. District Judge

[STAMP]

FILED

1987 DEC 31 PM 5:35

CLERK U.S. DISTRICT COURT

NORTHERN DISTRICT OF OHIO

AKRON

27a

APPENDIX C

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF OHIO

EASTERN DIVISION

Case No. C87-1956

Axis, S.p.A.,

Plaintiff,

VS.

Micafil, Inc.,

Defendant.

aaa

ORDER

DowpD, J.

The Court has before it the plaintiff’s motion to amend or

vacate the Court’s judgment entry of December 31, 1987 dis-

missing the plaintiff’s complaint. In the alternative, the plain-

tiff seeks leave of Court to file an amended complaint. The

defendant has opposed the motion. ind for the reasons that

appear below, the motion is denied.

On December 31, 1987, the Court found that the defendant’s

motion to dismiss for the failure of the complaint to allege an

antitrust injury was well taken. The Court dismissed the plain-

tiff’s cause of action under the same judgment entry. The plain-

tiff is now before the Court claiming that the Court should

reconsider its judgment entry of December 31, 1987 and either

vacate that judgment or permit the plaintiff leave to file an

amended complaint.

28a

The plaintiff offers two basic arguments in support of its

motion for reconsideration. First, the plaintiff argues that the

Court failed to view the evidence in a light most favorable to the

plaintiff as required under a Rule 12(b)(6) motion notwith-

standing the fact that the Court recognized the applicable stan-

dard. Second, the plaintiff argues that the Court failed to

follow the law of antitrust as interpreted in the Sixth Circuit.

In regards to the plaintiff’s first assertion, the defendant

argues that the Court properly applied the standard of a Rule

12(b)(6) motion and viewed the facts alleged in the plaintiff’s

complaint in the light most favorable to the plaintiff. The

defendant further argues that the Court went to great lengths in

assuming facts pled by the plaintiff. However, the defendant

notes that the Court declined to accept the plaintiff’s argument

that the facts pled permitted the Court to infer the existence of

an antitrust injury. The defendant argues that the plaintiff is

merely asserting arguments previously made in opposition to

the motion to dismiss and that the standard of a Rule 12(b)(6)

motion was properly applied.

The Court finds that the plaintiff’s argument that the Court

failed to apply the proper Rule 12(b)(6) standard is not well

taken. The Court clearly identified and stated the standard to

be applied on a Rule 12(b)(6) motion in its memorandum opin-

ion and applied that standard throughout the opinion. The

Court made permissible inferences where appropriate based

upon the facts pled and the Court finds that such an application

cannot be said to warrant a vacation of its earlier decision.

In regards to the plaintiff’s argument that the Court failed to

recognize the law as stated in the Sixth Circuit, the defendant

argues that the primary case reted upon by the plaintiff, Chris-

tian Schmidt Brewing Co. v. G.H. Heileman Brewing Co., 753

F.2d 1354 (6th Cir.) cert. denied, 469 U.S. 1200 (1985), was a

factually different case than that from which was brought by

the plaintiff. The defendant further argues that although plain-

tiff disagrees with the Court’s analysis of the standing issue,

disagreement alone does not provide for a proper basis for a

motion for reconsideration.

The Court finds that the plaintiff's argument regarding its

failure to apply the law of the Sixth Circuit is not well taken.

29a

The Court applied the law of antitrust injury under the guide-

lines established by the United States Supreme Court in Cargill,

Inc. v. Monfort of Colorado, Inc., US. ists. <x.

484 (1986) and Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,

429 U.S. 477 (1976). Further, although the plaintiff would

rather have had the Court rely on Christian Schmidt Brothers,

the Court found that the analysis presented in Alberta Gas

Chemicals v. E.I. DuPont Co. de Nemours, 927 F.2d 1235 (3rd

Cir. 1987) to be more applicable to the case at hand. Accord-

ingly, the Court finds that the plaintiff’s argument that the

Court failed to follow relevant Sixth Circuit precedent not to be

well taken. .

The Court finds that the plaintiff’s motion for reconsidera-

tion and vacation of the judgment entry of December 31, 1987

to not be well taken. The plaintiff has asserted substantially

similar arguments in the motion for reconsideration that were

presented in opposition to the motion to dismiss and the Court

finds that they raise no new issues of law or fact which would

require the Court to vacate its earlier holding.

As an alternative to the vacation of the December 31, 1987

judgment entry, the plaintiff seeks leave of Court to file an

amended complaint. The plaintiff asserts that an amended com-

plaint would remedy any defect in pleading. The defendant on

the other hand argues that the complaint was dismissed, not on

the basis that facts were not pleaded, but on the basis that the

facts alleged did not amount to an antitrust injury. The Court

agrees and finds that the plaintiff’s motion for leave to file an

amended complaint is not well taken. The Court has already

addressed and resolved the issue of antitrust injury based upon

the facts alleged and finds that any further pleading will not

state a claim upon which relief can be granted. Furthermore,

the plaintiff has failed to provide the Court with a proposed

amended complaint asserting new or omitted facts.

30a

For the reasons that appear above, the Court finds that the

plaintiff’s motion for reconsideration and/or vacation, modifi-

cation of relief from the judgment entry of December 31, 1987

is not well taken. Accordingly, the motion is denied.

IT IS SO ORDERED.

DAVID D. DOWD, JR.

David D. Dowd, Jr.

U.S. District Judge

(STAMP]

FILED

1988 FEB 24 AM 10:46

CLERK U.S. DISTRICT COURT

NORTHERN DISTRICT OF OHIO

AKRON

3la

APPENDIX D

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

No. 88-3113/3245

<—

AXIS, S.p.A.,

Plaintiff-Appellant,

Vv.

MICAFIL, INC.,

Defendant-Appellee.

Before:

WELLFORD, Circuit Judge; and

PECK and LIVELY*, Senior Judges.

JUDGMENT

ON APPEAL from the United States District Court for the

Northern District of Ohio.

THIS CAUSE came on to be heard on the record from the said

District Court and was argued by counsel.

ON CONSIDERATION WHEREOF, It is now here ordered and

adjudged by this court that the judgment of the said District

Court in this case be and the same is hereby affirmed.

IT IS FURTHER ORDERED that Defendant-Appellee recover

from Plaintiff-Appellant the costs on appeal, as itemized

° The Honorable Pierce Lively became Senior Circuit Judge January

1, 1989.

32a

below, and that execution therefor issue out of said district

court, if necessary.

ENTERED BY ORDER OF THE COURT

By: /s/ LEONARD GREEN

Leonard Green

Clerk

Issued as Mandate: April 20, 1989 A True Copy.

COosTs: None _ Attest:

rx ag dia ay ; By: /s/ [ILLEGIBLE]

Total..........8 [legible]

Deputy Clerk

[STAMP]

FILED

MARCH 24, 1989

LEONARD GREEN,

Clerk

33a

APPENDIX E

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF OHIO

EASTERN DIVISION |

Case No. C87-1956

Axis, S.p.A.,

Plaintiff,

VS.

Micafil, Inc.,

Defendant.

JUDGMENT ENTRY

DowD, J.

For the reasons set forth in the Memorandum Opinion filed

contemporaneously with this Judgment Entry, IT IS HEREBY

ORDERED, ADJUDGED and DECREED that the defendant’s

motion to dismiss for the failure of the complaint to allege an

antitrust injury is well taken. This case is hereby dismissed.

By: /s/ DAVID D. Down, Jr.

David D. Dowd, Jr.

U.S. District Judge

[STAMP]

FILED

1987 DEC 31 PM 5:35

CLERK U.S. DISTRICT COURT

NORTHERN DISTRICT OF OHIO

AKRON

34a

APPENDIX F

Section 1 of the Sherman Act, 15 U.S.C. § 1, provides in per-

tinent part: ‘‘Every contract, combination in the form of trust

or otherwise, or conspiracy, in restraint of trade or commerce

among the several States, or with foreign nations, is declared to

be illegal.’’

Section 4 of the Clayton Act, 15 U.S.C. § 15, provides in per-

tinent part: ‘‘Except as provided in subsection (b) of this sec-

tion, any person who shall be injured in his business or property

by reason of anything forbidden in the antitrust laws may sue

therefor in any district court of the United States in the district

in which the defendant resides or is found or has an agent, with-

out respect to the amount in controversy, and shall recover

threefold the damages by him sustained, and the cost of suit,

including a reasonable attorney’s fee.’’

Section 7 of the Clayton Act, 15 U.S.C. § 18, provides in per-

tinent part: ‘‘No person engaged in commerce or in any activity

affecting commerce shall acquire, directly or indirectly, the

whole or any part of the stock or other share capital and no per-

son subject to the jurisdiction of the Federal Trade Commission

shall acquire the whole or any part of the assets of another per-

son engaged also in commerce or in any activity affecting com-

merce, where in any line of commerce or in any activity

affecting commerce in any section of the country, the effect of

such acquisition may be substantially to lessen competition, or

to tend to create a monopoly.”’

Section 16 of the Clayton Act, 15 U.S.C. § 26, provides in

pertinent part: ‘‘Any person, firm, corporation, or association

shall be entitled to sue for and have injunctive relief, in any

court of the United States having jurisdiction over the parties,

against threatened loss or damage by a violation of the antitrust

laws, including sections 13, 14, 18, and 19 of this title, when

and under the same conditions and principles as injunctive

relief against threatened conduct that will cause loss or damage

is granted by courts of equity, under the rules governing such

proceedings, and upon the execution of proper bond against

EGC

35a

damages for an injunction improvidently granted and a show-

ing that the danger of irreparable loss or damage is immediate,

a preliminary injunction may issue:... .”’

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.