# Petition for Writ of Certiorari — Axis, S. p. A. v. Micafil, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_1581%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1989 - **Citation:** 493 U.S. 823 ## Text Supreme Court, US ; FILED R8 = 2 () 9 5 Lim: “PP YQRY No. JOSEPH F. SPANIOL, JR, - CEERK IN THE Supreme Court of the United States OCTOBER TERM, 1988 a at AXIS, S.p.A., Petitioner, nail eins 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? i PARTIES TO THE PROCEEDING Petitioner is Axis, S.p.A., an Italian closely-held corpora- tion. Respondent is Micafil, Inc. TABLE OF CONTENTS oS FO Os § ne ra Eee OP PEERS FRC LING 02sec cee ences EY RPE RESIGE SD oe os scans cv ven aeesiens eS. 8) 4g | re EE ee ee eee eee ee eS A er VIET rer eee Semewrwat PROVISIONS INVOLVED ........... EE” EP EES GCPAOES oc ccc cece ccs sacssess REASONS FOR GRANTING THE WRIT ........... Il. The Court of Appeals Decided an Important ii 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- eee new kdaw 4 eho 0886 8a 8s ean wk PAGI to to Oo 9 9 14 iv 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, SPUOE Ssh bas dade sedevabesd brie ey ce 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 CPOE UREY 26, FIRO) xc sh census vnc cases Judgment of the United States Court of Appeals for the Sixth Circuit (March 24, ROU 696554 oer eee ec ea ek eee eee Judgment of the United States District Court for the Northern District of Ohio CRmOU SE, BUT ccc cccstccuscaaucks Statutory Provisions Involved.......... PAGE 16 18 la 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 Vi 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. WOE TER EEE Ca hcciesrevsacshc seta vase ees i2 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 eee >_> AXIS, S.p.A., Petitioner, V. 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 2 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. tN 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 6 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- 9 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 10 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 1] 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 12 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. 13 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. 14 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. 15 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 16 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 17 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 18 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 la 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. a 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. 2a § 26. We conclude that the district court properly determined that the complaint failed to allege an antitrust injury. and affirm the judgment. I. A. 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. 3a 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. B. 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 4a 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 Sa 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- 6a 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. 7a 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.” A. 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 8a 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. B. 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 9a 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 c. 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. 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:... .”’ --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_1581%3A1. Public record. Not legal advice.