Petition — International Business Machines Corp. v. Greyhound Computer Corp.

Supreme Court brief1978

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i Supreme Court, U. .

FILED

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In THE | MICHAEL RODAK, JR., CLERK

Supreme Court of the United rs

OcTOBER TERM 1977

No. 7 -694

INTERNATIONAL BUSINESS MACHINES

CORPORATION,

Petitioner,

—against—

GREYHOUND COMPUTER CORPORATION, INC.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Tuomas D. Barr,

ALAN J. HRUSKA,

Ropert F. MULLEN,

One Chase Manhattan Plaza,

New York, N. Y. 10005

NICHOLAS DEB. KATZENBACH,

Old Orchard Road,

Armonk, New York 10504

Lioyp N. CUTLER,

Joun H. PICKERING,

James S. CAMPBELL,

1666 K Street, N.W.,

Washington, D. C. 20006

Attorneys for Petitioner

International Business Machines

Corporation

CRAVATH, SWAINE & Moore,

One Chase Manhattan Plaza,

New York, N. Y. 10005

Washington, D. C. 20006 November 14, 1977.

PAGE

I oe eek cou weeawe tbe d ou eEeiee l

OPINIONS BELOW AND JURISDICTION ............. l

Compeseets PRMSMTED oo ccc ccccccccccccccccces 2

SRATEMENT OF MR CAGE onc cccccccdcccccvcvescs 4

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Tue Evecrronic Data Processinc INDUSTRY ..... 7

CHRONOLOGY OF RELEVANT EVENTS ...........+.: 8

II TE Sikbied o Wee srédekeurdcoccacteds 10

Re, We ES oo videceedédccdecuSascate 10

BD, Wee Ge GE CRED one ccccccccvcccdivcus 10

OTT TT TTT 10

2. Possession of Monopoly Power ........ 12

3. Wilful Acquisition or Maintenance of

BECRGRGET POWER oc ccccccccccpsecece 12

4. What the Court of Appeals Calls IBM’s

SN OD ccceneeheneheneuus 15

5. Attempt to Monopolize ............... 15

G BMD cccccccccccccescccccccccess 16

REASONS FOR GRANTING THE WRIT ........50006: 16

Tue Basts UPon WHICH THE CouRT CONCLUDED A

Jury Coutp Separate A “LEASE SURMARKET”

FROM A “PURCHASE SUBMARKET”’ Is WITHOUT

am LEGAL PUGTEPICATION 2occcccccscccccceccccess 20

PAGE

Tue Court Betow INcorrectLy HELD THAT A JURY

Coup INFER Monopoty Power From IBM's

SHARE OF THE NARROWLY DerFINep “LEASE” Sub-

a SE Re ATES a eee

Tue Court BELow BroapLy CONDEMNS LEGITIMATE

I Se oe a eee cht sb eb 8 66-0

Tur Nrntu Crecuit’s Rute on ArtemMpt to Mon-

OPOLIZE Is FLATLY INCONSISTENT WITH DECISIONS

or Turis Court AND WITH DECISIONS IN ALL

ee bhees kekenee ee nas

APPENDIX A

THE DECISION OF THE DISTRICT COURT

AppENDIXx B

THE DECISION OF THE COURT OF

APPT ccccccccscccccvceccccerevcccces

AppEenpIx C

STATUTORY PROVISIONS .......eeeeeeees

AppENbDIx D

RECORD AS TO THE ELECTRONIC DATA

PROCESSING INDUSTRY AND _ IBM's

PARTICIPATION IN IT .....-. cee eee eees

TABLE OF AUTHORITIES

CASES: |

Acme Precision Products, Inc. v. American Alloys

Corp., 484 F.2d 1237 (8th Cir. 1973) .........

Agrashell, Inc. v. Hammons Products Co., 479

F.2d 269 (8th Cir.), cert. denied, 414 U.S. 1022

CEBUSD oc dccecccccvecqcccoversesseccescces

Alles Corp. v. Senco Products Co., 329 F.2d 567

(Gta Gir; TEBE) nc ccccvcccccccccccccavesece

American Tobacco Co. v. United States, 328 U.S.

ft SP Prrrrrrrrrrrrrrrreririr st ta

4la

43a

iii

PAGE

Brown Shoe Co. v. United States, 370 U.S. 294

ST dx 6 dt mcuekuwuainian wae ik ind hed ede 23

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

a: Se AUS Wevnckes cecanabdasuasacaes 35

California Computer Products, Inc. v. International

Business Machines Corp., Civil No. C73-2331-RM

yea ee 8 Gg eee 4, 6, 17, 20

Calnetics Corp. v. Volkswagen of America, Inc.,

532 F.2d 674 (9th Cir.), cert. denied, 429 U.S.

Pe COWUED cK sccncnedcvesececseicvscdv 23

Cole v. Hughes Tool Co., 215 F.2d 924 (10th Cir,

ME cn kh'ss 699446 ReksaeheRe cee eae eee 29

Continental T.V., Inc. v. GTE Sylvania, 97 S.Ct.

gp RARE eps re See 3

Diamond International Corp. v. Walterhoefer, 289

F. Se Soe CD, BEG, TSGB) on ccccccccweccccn 38

E. J. Delaney Corp. v. Bonne Belle, Inc., 525 F.2d

296 (10th Cir. 1975), cert. denied, 425 U.S. 907

ft er re ee ere ree 37

Fleetway, Inc. v. Public Service Interstate Trans-

portation Co., 72 F.2d 761 (3d Cir. 1934), cert.

GONE: GO Wes GO CUOUOD cecccvececcesdus 36

FLM Collision Parts, Inc. vy. Ford Motor Co., 543

F.2d 101% (2d Cir. 1976), cert. denied, 429 U.S.

Se EE, oven cane vatad esis ne eddae test. 37

Forro Precision, Inc. v. International Business Ma-

chines Ooh) No. 74-1653-RM (N.D. Cal.

George R. Whitten, Jr., Inc. v. Paddock Pool

Builders, Inc., 508 F.2d 547 i Cir. 1974), cert.

denied, 421 U.S. 1004 (1975) ..........0005. 37

IBM Peripheral EDP Devices Antitrust Litigation,

Dl Sinehsédeasdelanduvaspeisasensct 4

In re IBM Antitrust Litigation, MDL 18 ........ 4-5

International Air Industries, Inc, v. American Ex-

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

Gated, 42% U.S. 9438 CIGTS) 2. cccccccccccces 36

PAGE

McElhenney Co. v. Western Auto Supply Co., 269

P24 332 (4th Cle. S9GD) oc cocccccvessceeses 37

Memorex Corp. v. International Business Machines

Corp., Civil No, C73-2239-SC (N.D. Cal.) .... 17

Mullis vy. Arco Petroleum Corp., 502 F.2d 290 (7th

Cle. S506) cc cvicutccssecuvdveseeaunneee 23-24, 37

Northern Pacific Railway v. United States, 356

U.S. € CIGER) ccccccccccecepeccsueneneeue 19, 40

Pacific Engineering & Production Co. y. Kerr-

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

denied, U.S, —=—= (1977) ..ccccscccccces 36

Packard Motor Car Co. v. Webster Motor Car Co.,

243 F.2d 418 (D.C. Cir.), cert. denied, 355 U.S.

Gee CESSP) vecces ccccceueeeneseenenee 37

Panotex Pipe Line Co. v. Phillips Petroleum Co.,

457 F.2d 1279 (Sth Cir.), cert. denied, 409 U.S.

BAS (1972) ..cccccccccccsceccvccesesesnens 36

Purex Corp. v. Procter & Gamble Co., 419 F. Supp.

931 (C.D. Cal. 1976) ..ccccccccccccccscccess 36

Rea vy. Ford Motor Co., 497 F.2d 577 (3d Cir.),

cert. denied, 419 U.S. 868 (1974) ......0e00es 37

Sulmeyer v. Coca Cola Co., 515 F.2d 835 (5th Cir.

1975), cert. denied, 424 U.S. 934 (1976) ...... 37

Swift & Co, v. United States, 196 U.S. 375 (1905). 37

Symbolic Control v. International Business Machines

Corp., Civil No. 71-2207 (N.D. Cal. Dec. 31,

IGTS) oc ccccccccccccsacasnueee enn 4

Telex Corp. v. International Business Machines

Corp., 367 F. Supp. 258 (N.D. Okla. 1973),

modified, 510 F.2d 894 (10th Cir.), cert. dis-

missed, 423 U.S. 802 (1975) ..... 4-7, 20, 23, 27, 31,

35-36, 44a-45a

Travelers Insurance Co. v. Blue Cross, 481 F.2d

80 (3d Cir.), cert. denied, 414 U.S. 1093 (1973). 29

Twin City Sportservice, Inc. v. Charles O. Finley &

Co., 512 F.2d 1264 (9th Cir. 1975) ........00e 23

Union Leader Corp. v. ——, of New

England, Inc., 180 F. Supp. 125 (D. Mass.),

modified, 284 F.2d 528 (lst Cir. 1960), cert.

denied, 365 U.S, 833 (1961) ......cee ee eeees 38-39

ee! ee ne eect 6 Outl

PAGE

United States v. Aluminum Com an A }

148 F.2d 416 (2d Cir. 1945) . . te od a neve

United States v. Columbia Steel Co.. 334 U.S. 495

eo TM aaa aaa «1423, 29

United States v. E.I. duPont de N

US. 377 (1956) e Nemours & Co., 351

United States v. Empire Gas Corp., 537 F.2d 296

8th Cir. 1976), cert. denied, 430 U.S. 915 (1977) 37

United States v. General D ics Co

486 (1974) ynami-s Corp., 415 U.S.

United States v. Griffith, 334 U.S. 100 (1948) ...33-34

United States v. International Business Machines

Corp., oy as Oe MUO TLD... is. css... 4

"US G8 (ING nent Harvester Co, 24

158 (1908) Aaasheons —— -_ o wen 23

United States v. United Shoe Machinery Corp., 110

Sa Ba (ight 8.6 pe carom

7 429 US Cid (ist) : ou i ee 25

tmmtnmieneen

Weber v. Wynne, 431 F.Supp. 1048 (D.N.J. 1977) 36

Yoder Brothers, Inc. v. C alifornia-Florida Plant

Corp., 537 F.2d 1347 (5th Cir. 1976), cert. =

nied, 429 U.S. 1094 pa 23

STATUTES AND RULEs:

Sherman Act § 2 (15 U.S.C. § Se eee passim

Clayton Act § 4 (15 U.S.C. § Died. vain 3. 4la

Investment Tax Credit (26 U.S.C. 8§ 38, 46-50) ..6, 25

ES a 2

EE 2

ES 4la

“——

IN THE

Supreme Court of the United States

OCTOBER TERM 1977

No.

»™

INTERNATIONAL BUSINESS MACHINES CORPORATION,

Petitioner,

—against—

GREYHOUND COMPUTER CORPORATION, INC.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

STATEMENT

Petitioner International Business Machines Corporation

(IBM) respectfully prays that a Writ of Certiorari be issued

to review the judgment of the United States Court of Ap-

peals for the Ninth Circuit (Browning, Ch. J.) entered

on August 17, 1977, reversing a judgment of the United

States District Court for the District of Arizona (Craig,

Ch. J.), entered on July 10, 1972.

OPINIONS BELOW AND JURISDICTION

Judge Craig’s opinion, granting petitioner-defendant’s

motion for a directed verdict on all elements of respondent-

plaintiff's Sherman Act Section 2 claim and its contract

claim is reported at 1972 Trade Cases § 74,205, and is

attached as Appendix A. The opinion of the court of

appeals reversing the decision of the district court on the

Section 2 claim and affirming on the contract claim is

reported at 559 F.2d 488 and is attached as Appendix B.

The judgment below was entered on August 17, 1977; the

mandate of the court of appeals was stayed by order /—

September 13, 1977, pending review by this Court. This

petition is filed within 90 days of the judgment below, as

required by 28 U.S.C. § 2101(c). This Court's jurisdiction

is invoked under 28 U.S.C. § 1254(1). The pene tag

utes relating to this petition are contained in Appendix C.

QUESTIONS PRESENTED

The basic question is whether, given that the judgment

below intimidates vigorous competition on the merits,

burdens the lower federal courts and immediately oe

numerous actual and potential defendants, oe IB : ‘

the judgment should promptly be reversed. Analytically

the separate issues we raise as questions are:

1. Whether the court of appeals erred in holding that

a jury could find that any firm could monopolize a sub-

market” consisting of the leasing of computer a

separate from a “submarket” consisting of the sale of suc

uipment, where: : .

es (a) the products in both “submarkets” are iden-

tical; .

(b) all manufacturers of such equipment both sell

and lease such equipment on a wide and changing

variety of “sale” and “lease” terms and conditions;

entirely the same and frequently both lease and pur-

chase; and

- (d) new “leasing companies” can enter, and large

numbers have entered, the “lease submarket” in re-

sponse to small changes in lease prices.

ed in holding that

2. Whether the court of appeals err

a jury could find that IBM possessed monopoly npedlgs

the “lease submarket” almost entirely because IBM ha

ee ee

Ohi ens -

h Pitta

pa ee oe ee eee

large share of that narrowly defined “submarket”, and that

a jury could disregard—as did the court below—uncontro-

verted evidence of:

(a) rapid and numerous market and “submarket”

entries;

(b) continuing, unprecedented product and price

improvement;

dence;

(d) a constantly declining IBM share in the “lease

submarket” and in any conceivable “market” or “sub-

market”; and

(e) an IBM share of the total market, from which

the “lease submarket” was extracted, far too low to

permit any inference of monopoly power.

3. Whether the court of appeals erred in holding that

a jury could conclude that honest, competitive, non-preda-

tory conduct constitutes monopolization under the Sherman

Act if it “unnecessarily excludes competition”,* and that

such “otherwise lawful” conduct is proscribed even when it

occurs outside the relevant market in a “market” in which

the defendant possesses no power.

4. Whether the court of appeals erred in holding that

a jury could find that IBM was liable for an attempt to

monopolize where it was assumed that “the record would

not support a jury finding of even a dangerous probability

of monopolization” by IBM of any “appropriate market”.

5. Whether the court of appeals erred in holding that

plaintiff had offered sufficient evidence of damages to go to

a jury, where plaintiff offered no testimony even attempting

*This concept in Chief Judge Browning’s decision of “unneces-

sary” exclusion seems part of the same approach which led Judge

Browning to condemn “unnecessary restrictions” on the marketing of

products—rejected by this Court in Continental T. V., Inc., v. GTE

Sylvania, Inc., 97 S.Ct. 2549, 2553-54 n.10 ( 1977).

to calculate such damages and the jury would necessarily

have been forced to engage in sheer speculation on the

amount of any damage supposedly sustained.

STATEMENT OF THE CASE

This case is one of 19 private suits brought against

IBM under Section 2 of the Sherman Act since the United

States Government commenced its own Section 2 action

almost nine years ago.* Most of the existing cases were

filed after the district court’s decision in Telex Corp. V.

IBM, 367 F. Supp. 258 (N.D. Okla. 1973) and before the

unanimous reversal by the Tenth Circuit Court of Appeals

(510 F.2d 894, cert. dismissed, 423 U.S. 802 (1975)).

Two groups of cases have been consolidated by the Multi-

district Panel.** Before the decision below, four cases

had been tried+ and IBM had won all four—three (includ-

ing the instant case) by directed verdict or judgment at the

close of plaintiff's case and one, Telex v. IBM, by the Tenth

Circuit’s unanimous decision.

In all those decisions the courts involved have held

that IBM has not violated Section 2 of the Sherman Act;

they have rejected, as the district court did in this case,

*The trial in United States v. IBM, 69 Civ. 200 (S.D.N.Y.) com-

menced on May 19, 1975. As of November 11, 1977, the trial had

consumed 407 days and the United States had not finished presenting

its direct case. It will be a period of years before that case is ready

for decision even by the district court.

**7n re IBM Antitrust Litigation, MDL 18; IBM Peripheral EDP

Devices Antitrust Litigation, MDL 163.

+Greyhound v. IBM, 24 trial days; Telex v. IBM, 26 trial days;

Symbolic Control v. IBM, Civil No. 71-2207 (N.D. Cal. Dec. 31,

1975), 27 trial days; California Computer Products v. IBM, Civil No.

C73-2331-RM (C.D. Cal. Feb. 15, 1977), 58 trial days. Appeals are

pending in the Symbolic Control and CalComp cases.

++The trial of another case, Forro Precision, Inc. v. IBM, Civil No.

74-1653 (N.D. Cal. Nov. 3, 1977), commenced on August 15, 1977, in

the Northern District of California, and consumed 22 trial days. With

respect to the antitrust issues there involved, the jury was unable to

reach a verdict and on October 26, 1977, the court granted IBM’s

post-trial motion for a judgment on those issues.

ARCO DE OE AOA ert see 6A RW te ow aa tne

wane

A NC ew

all claims that IBM m

lize in violation of eo the a paaetreteneet a

eo . record here, although made only by witnesses

pr ea a (including deposition testimony by IBM

mong ah employees) and by stipulation, coupled with

e decision in Telex, provides a fully adequate basis f

sound resolution of the legal questions presented. * ‘

THE PARTIES

A. IBM ae

‘ Rage develops, manufactures and markets electronic

ata processing (“EDP”) equipment and services. EDP

€quipment—commonly referred to as computers or com

puter systems—consists of a variety of electronic ond

electromechanical equipment organized in separate boxes

(“hardware”). To make a hardware system operable, it

must also receive, store and execute instructions called

— (“software”) (Tr. 1466-72).

customer may purchase or lease**

parts thereof from IBM, or it may sale cue

ware and software from others, or it may purchase or

lease different pieces of hardware from different manufac

turers, interconnect those parts and create its own >

—_ or obtain Programs from still another source gl

cluding IBM, or it may lease computer time from others

The Court Census, stipulated into evidence,+ shows that

*The record was

Statement necessarily Pte pent pad . an five years ago and our

**IBM and most others offer a i

range of different types

on mene arrangements, e.g., “lease” (Tr. 3043-45) Si leone?

(Tr. 7) yy tal payout lease” (Tr. 2585-88), “long term lease”

i a 49), installment sale” (Tr. 2855), “rental credit” (Tr

{This was fe bes yarn |

a ey or “census” of the EDP i

Prova. Census”) ordered by the Minnesota District Coast oy this

: was consolidated for pre-trial there under the of

n re IBM Antitrust Litigation, 18. The census wn

sworn answers to questions posed by IBM and ponding

' ing the revenues, products and services of approximately 1800 re-

customers may obtain EDP products and services from

almost 1800 companies. IBM is the largest supplier of

EDP products and services, having a share of revenues of

approximately 35% in 1970. Telex v. 1BM, 367 F. Supp.

at 286

B. Greyhound

Greyhound Computer Corporation (Greyhound Com-

puter), respondent-plaintiff below, is a computer leasing

company. Such companies purchase computer equipment

from manufacturers for re-lease to users.

Greyhound Computer is one of two commonly man-

aged (Tr. 124-26, 960-61, 2482-83, 2488, 2610-12)

leasing company subsidiaries of The Greyhound Corpora-

tion, a holding company. The other subsidiary, Greyhound

Leasing & Financial Corporation (Greyhound Leasing), is

the parent and creator by spin-off in mid-1966 of Grey-

hound Computer (Tr. 2776, 2806). Both subsidiaries

provide convenient vehicles for utilization of The Grey-

hound Corporation’s cash flow and, through the Investment

Tax Credit (26 U.S.C. §§ 38, 46-50), tax shelters for

Greyhound’s otherwise taxable income (Tr. 551-53,

1221-25, 2500).

Greyhound Computer asserts that it prefers to engage

in short term or “risk” leasing and that Greyhound Leasing

prefers to engage in longer term or “payout” leasing (Tr.

2505-10). However, terms and conditions offered by both

leasing company subsidiaries have from time to time been

substantially the same (Tr. 2770-72) and neither “risk”

nor “payout” has any precise meaning since all leases re-

ferred to in the testimony involved degrees of both “risk”

spondents, and all of the answers are in evidence here (Tr. 2929).

his same census was stipulated into evidence in its entirety in Telex

v. IBM. See 367 F. Supp. at 271 n.2. Most of the statistical data

contained in the census was also in evidence in CalComp v. IBM in

the data base of one of the plaintiff's witnesses.

and “payout”.* In any event, the principal claim at trial

was that IBM had precluded Greyhound Computer—but

not Greyhound Leasing—from purchasing IBM EDP

equipment announced in 1970 and after and leasing that

equipment to others.

THE ELECTRONIC DATA PROCESSING INDUSTRY

It is not disputed that the EDP industry as a whole is

one of the youngest, most dynamic and most vigorously

competitive industries in the United States. Some of the

highlights of the development of this industry, and IBM's

participation in it—as attested to by Greyhound’s witnesses

—are summarized in Appendix D to this petition. The

entire commercial existence of the EDP industry has not

been appreciably longer than 20 years. Entry has been

literally massive—from 11 firms to 1,757 in less than 20

years; the rate and magnitude of price declines have been

unprecedented; technological innovations and product im-

provements virtually boggle the mind; price/performance

has improved exponentially. These facts were given appro-

priate weight by the Tenth Circuit Court of Appeals in

Telex v. IBM where IBM’s acts were realistically viewed

as “part of the competitive scene in this volatile business

inhabited by aggressive, skillful people seeking to market

a product cheaper and better than that of their competi-

tors” (510 F.2d at 928). And they were acknowledged

and relied on by the district court here which found that

IBM's “[p]lace in the industry has been achieved as a result

of superior skill, foresight and industry.” (App. A, at p. 2a)

For the very characteristics which make competitive mar-

kets socially and economically preferable from a policy

standpoint are all evinced by the industry involved in

this case. As one of Greyhound’s expert witnesses testified:

*Greyhound Computer’s President Bumpers admitted that the

line between risk | and —_ leasing “can get vague”, that

“there is no clearly definable line” (Tr. 2606).

“(T]he computer industry has been the subject

of a faster rate of technological progress in engineer-

ing accomplishment than perhaps any other industry

in the history of human enterprise” (Tr. 1646).

And as Greyhound’s principal expert witness concluded

concerning the rapid rate of progress and accomplishment

in the EDP industry:

“[T)hat’s a bonanza from the user’s point of

view...” (DX B-4, at p. 52) and “[t]hat is what

vigorous competition is supposed to contribute to

the marketplace .. .” (Tr. 3354).

We outline the direct evidence of substantial competi-

tion on the merits in an appendix (App. D) rather than in

the body of this petition, because the Ninth Circuit Court

of Appeals declined to take issue with it (App. B, at p. 17a)

—indeed, the court below noted our position that price

reductions and product improvements were “character-

istics of the industry” but viewed those facts as essentially

irrelevant or even negative (id.).

CHRONOLOGY OF RELEVANT EVENTS

April 7, 1964

IBM Announced System/360. IBM announced a new

family of EDP equipment generally called System/360 or

S/360 (Tr. 248-57; DX J).

October 1965

“Technological Discount” on S/360. IBM announced

a purchase price discount of 12% for S/360 equipment

leased one year or more (Tr. 71-72). Greyhound’s trial

counsel labelled this a “Technological Discount” and the

court of appeals utilized that phrase. This discount plan

was not thereafter changed (Tr. 1102-05), although pur-

chase prices were twice thereafter (on 10/1/66 and

6/23/69 as explained below) reduced by 3%, bringing the

total reduction of purchase prices to about 18% below the

original announcement level.

ee ———————————

June 1966

Plaintiff-respondent Greyhound Computer Created.

Greyhound Leasing spun off a portion of its EDP leasing

business into its newly created subsidiary Greyhound Com-

puter (DX X, at p. 4). Prior to October 1, 1966, Greyhound

Computer (or its predecessor) purchased approximately

$13 million of System/360 equipment (Tr. 2793; PX 613).

October 1, 1966

IBM Price Adjustment. IBM raised lease prices and

lowered purchase prices on all of S/360 by 3% (Tr. 2419-

20), thereby lowering the so-ca'led “multipliers” on $/360.

Those $/360 multipliers were never thereafter raised or

lowered in any significant way.*

June 23, 1969

IBM “Unbundled”. IBM announced that it would

thereafter make a separate charge for certain customer sup-

port services and that henceforth purchase and lease prices

would be reduced 3% (Tr. 1077).

June 30, 1970

IBM Announced System/370. The first models of

System/370, a new family of EDP equipment similar in

breadth to S/360, were announced by IBM (PX 686, at

p. 6). The relationship between lease prices and purchase

prices on S/370 from announcement through trial below

(two years and one month), both with and without con-

*“Multipliers” are the ranges between lease and purchases prices

for EDP equipment, expressed generally as the number of months’

lease price which is equal to the purchase oo panies

also make other such calculations, giv Mee Foy as the

cost of monthly maintenance, availability of the Investment Tax

Credit and interest rates. New products were from time to time an-

nounced within the $/360 line with er and lower multipliers but

such new products were never more than a very small part of the

total offerings at any point in time.

sidering maintenance charges, was substantially the same

as the relationship which existed on S/360 equipment

between announcement on 4/7/64 and the 10/1/66 price

adjustment (two years, six months); that is, the multipliers

on §/360 and S/370 were the same for the same respective

periods.

DECISIONS BELOW

A. The District Court

The district court directed a verdict in favor of IBM

on both plaintiff's contract claim* and its claim under Sec-

tion 2 of the Sherman Act. The court found that plaintiff

had failed to prove a single element of its Section 2 claim

(App. A), and held explicitly that, “[a]ssuming that the

defendant holds a substantial share of a market, whatever

that market may be, it is the opinion of this Court from the

evidence adduced thus far on the record that the defen-

dant’s place in the industry has been achieved as a result of

superior skill, foresight and industry” (id., at p. 2a).

B. The Court of Appeals

Five years later the court of appeals reversed the district

court on the Section 2 claim although it affirmed the dis-

trict court on the contract claim. (App. B)

The opinion laid out a basis for a jury verdict for

plaintiff as follows:

1. Relevant Market. The court concluded “that the

evidence was sufficient, though by no great margin, to per-

mit the jury to find that the differences between leasing

and selling general purpose computers were of sufficient

*On October 20, 1969, Greyhound Computer commenced an

action against IBM in Illinois state court, alleging treach of contract

arising out of IBM's announcement that it would charge separately

for certain customer support services. The state court action was

removed to federal court and later consolidated with this action,

which was commenced on September 4, 1970.

significance to justify treatment of the two forms of distri-

bution as distinct submarkets for competitive purposes”

(App. B, at pp. 12a-13a). The following is to be noted

with respect to that leasing “market”:

(a) Plaintiff never claimed a “leasing” market, but

only a “risk lease” market.*

(b) The EDP equipment manufacturers included

within plaintiff's “risk lease” market employed the

same sales forces to both sell and lease, at the user's

option, the same EDP equipment and the same users

often both purchased and leased the same models of

equipment (DX K-4).

fining a lease market separate from a purchase market

was a Close question (App. B, at pp. 10a-13a). In resolv-

ing that close question in favor of plaintiff, the court

(i) characterized lease and sale—which are no more

than financial alternatives concededly offered by all

manufacturers and utilized by all customers—as

“means” of distribution (App. B, at pp. 10a, 13a) and

with that label invoked “distributor” cases in support

of its analysis (App. B, at p. 10a n.8); (ii) brushed

aside plaintiff's failure to offer any evidence of entry

barriers or lack of supply substitutability with the state-

ment—as if it were defendant's burden of proof—

that “neither IBM nor the record suggests’ that

there were any alternative suppliers that “could have

shifted their operations to such a business readily”

(App. B, at p. 8a n.4); (iii) ignored the evidence of un-

precedented supply substitution through prompt entry

*Indeed, Greyhound argued that “{a] full-payout lease is simply

another means of financing an outright sale .. .” (GYH. App. Reply

Br., at 8). The court ex ly declined to rule on the risk/payout

lease distinction asserted by Greyhound (App. B, at p. 13a n.15).

of some 120 firms which occurred after IBM increased

the lease prices by 3% and reduced the purchase prices

by 3% on S/360 in October 1966; and (iv) finally re-

solved the close question of market definition for plain-

tiff only because of “the weighty presumption in favor

of a jury determination” (App. B, at pp. 10a, lla).

2. Possession of Monopoly Power. Having carved a

narrow “submarket” out of a broad competitive industry,

the court of appeals placed its principal reliance for a show-

ing of monopoly power on IBM's share of that “submarket”

—a share which the court said had declined from 82.5%

in 1964 to 64.6% in 1970 (App. B, at pp. 14a-15a). No

significance was given to that loss of almost 20 percentage

points in six years—a phenomenon wholly inconsistent

with monopolization—nor to overwhelming direct proof

of vigorous, continuing competition on the merits (See

App. D).

3. Wilful Acquisition or Maintenance of Monopoly

Power. The court flatly rejected any defense based on the

fact that the acts at issue were “ ‘honestly industrial’ —that

is of a kind an ordinary enterprise might utilize with im-

punity” (App. B, at p. 18a). To the contrary, the court

said, “[i]f the jury concluded IBM possessed monopoly

power in the leasing of general purpose computers, IBM

would be precluded from employing otherwise lawful prac-

tices that unnecessarily excluded competition from the sub-

market” (id.).

The specific acts which the court believed could be so

condemned by a jury fit nowhere in almost a century of

antitrust litigation. They are not, for example, claimed to

have been below-cost pricing, even arguable violations of

Section 1, or even anticompetitive vis-d-vis the preponder-

ance of other companies with which IBM competes. Rather,

Wier

the claims upheld by the court were all founded on the

fact that IBM either charged plaintiff somewhat more for

equipment than plaintiff wished to spend, or charged users

effectively less in monthly lease rates than plaintiff wanted

to compete with. Specifically, the practices in question

were:

(a) “Technological Discount” Claim on S/360.

A 12% discount on installed equipment announced

by IBM in October 1965 (almost a year before plain-

tiff was created) which plaintiff later utilized repeatedly

on purchases from IBM, but which was not as high as

the discount previously offered by IBM for older equip-

ment. The court concluded that a jury could find that

the 12% discount was not “economically justifiable”

(App. B, at p. 22a), ie., that it might—or should—

have been increased in the late 1960’s to a level ap-

proaching or equal to the purchase discount offered on

pre-360 equipment.

(b) The “Unbundling” Claim. In June 1969,

IBM offered certain services for a separate charge and

concomitantly reduced the lease and purchase prices

3%. Applying contract law, the court below affirmed

dismissal by the district court because Greyhound had

received exactly what it bargained for and had no right

to complain about the separation of services or the 3%

reduction. However, under the Sherman Act unbundling

was found by the court to be “anticompetitive” because

it “left the leasing companies with an inflated invest-

ment and lowered returns” (App. B, at p. 27a).*

decision’ this t is actually more bla-

tant, Ie nsactetcing piaiatlirs proot ia support of is breach of

ee an te kl Danes otek

“Viewed most f to Greyhound, the evidence showed

Py ty customers had bargained on an

tween IBM’s sale and lease prices, attacked not on the

ground that either price was in some sense “too high”

or “too low”, but on the theory that the range between

the lease and purchase prices was in some sense

“greater” than it had been on a prior line of equipment.

The court here concluded that the “jury could have

found that IBM did increase [the] multiplier” on Sys-

tem/370 over that which had applied to System/360

and that that “restricted” plaintiff's “access” to the

market (App. B, at pp. 23a-24a). Had multipliers actu-

ally been increased, it would still be difficult to under-

stand why IBM’s offering of one multiplier on one line

of equipment made actionable under the Sherman Act

any change in that multiplier on a subsequent line of

equipment. But the plain facts are, despite the court’s

confusion, that no multipliers at all were ever increased;

no restriction on access ever occurred or was even

remotely proven. *

(d) The “Maintenance Price’ Claim. An increase

in IBM maintenance charges which was done, accord-

ing to the court, “despite decreased maintenance costs”

(App. B, at p. 24a). The court’s finding of “decreased

individual basis for some unspecified eee of r- gener-

ally defined services, and that some undetermin yy of

these services had been withheld.” (App. B, at p.

Yet it was this “evidence” which was viewed in the same opinion as

sufficient to uphold a jury verdict that IBM was guilty of a monopo-

—~¥ practice in violation of the Sherman Act (App. B, at pp. 25a-

*What the court apparently confused as an “increase” is that

multipliers on S/360 were lower at the end of that product life than

the multipliers on S/370 were at the beginning of that product life.

But this much is not even debated: the S/370 multipliers were

the same at the beginning of that product's life and at the time of

trial as the S/360 multipliers were at the beginning of that product's

life and at the time plaintiff came into existence.

ow whe’

_—

maintenance costs” was conjured solely from the hy-

pothesis that because each succeeding generation of

IBM equipment was more reliable, it was “hence less

costly to maintain” (id.). No such evidence was of-

fered. In fact, the court’s hypothesis flies in the face

of common experience that labor intensive services,

such as maintenance, have continually increased in

cost and price in all areas of our economy irrespective

of increases in reliability.

(e) The “Fixed Term Plan” Claim. In May 1971,

IBM announced optional one- and two-year term leases

for certain EDP equipment at discounts from IBM's

monthly rental prices. This was the only aspect of Grey-

hound’s antitrust claims concerning which the court of

appeals held that a directed verdict had been properly

granted (App. B, at p. 19a).

4. What the Court of Appeals Calls IBM’s General

Defense. IBM argued that even assuming Greyhound had

detined a “lease” or “risk lease” “submarket”, the acts com-

plained of—failure to reduce the purchase price, the setting

of the purchase price in the multiplier, and the separate

charge for services and for maintenance on sold machines—

were all practices which occurred in the “purchase sub-

market” and Greyhound had made no attempt to show that

IBM had any kind of power in that market. Thus, none of

the practices could possibly be considered instances of the

exercise of monopoly power. The court elided the point of

that argument, holding that Greyhound was “not required

to prove the source of IBM’s power . . . ” (App. B, at

p. 29a).

5. Attempt to Monopolize. Contrary to decisions by

this Court and every other United States Court of Appeals,

the court below concluded that a plaintiff seeking to prove

an attempt to monopolize need not show either “an appro-

priate relevant market” or “a dangerous probability of

monopolization”. The court explicitly assumed “that the

record would not support a jury finding of even a danger-

ous probability of monopolization of an appropriate mar-

ket” (App. B, at p. 30a). Nevertheless, it concluded that

if the plaintiff could prove “the required specific intent”

and “that any action by IBM was predatory in nature”, an

attempt to monopolize would be established (id.). The

court took the same acts discussed in the earlier monopo-

lization section of its opinion—which it had assumed were

“not ‘predatory’ but ‘honestly industrial’"—that is, of a kind

an ordinary enterprise might utilize with impunity” (App.

B, at p. 18a), and here characterized those same acts as

“anticompetitive activities that impaired competition with-

out a legitimate business purpose” (App. B, at p. 32a).

6. Damages. Greyhound did not put on any witnesses

to calculate, estimate or even approximate what damages

Greyhound had suffered. However, the court fashioned a

damage claim which Greyhound never made and which

ignored the district court’s conclusion that such an exercise

would be “purely speculative”.

REASONS FOR GRANTING THE WRIT

We wish to emphasize at the outset that we believe

certiorari should be granted in this case not merely because

each part of the judgment appealed from is wrong—and in

direct conflict with the principles of antitrust law estab-

lished by decisions of this Court and other circuits—but

that, singly and in combination, the immediate effects of

this judgment are intolerable.

The judgment appealed from, in total effect, condemns

competition. If allowed to stand, it would make the Sher-

man Act a restraint of trade. If allowed to continue in effect

even briefly, six other Sherman Act Section 2 cases, now

pending against IBM in the already overburdened Ninth

Circuit, will go forward at almost unimaginably high cost to

litigants and courts—all threatened by a totally erroneous

set of legal standards.*

The judgment below is wrong in its definition of a nar-

row product “submarket” in disregard of the uncontro-

verted facts of supply and demand substitutability. It is fur-

ther wrong in its conclusion that a “share” of any such mar-

ket is sufficient to establish “monopoly power” against the

conceded fact of a precipitous decline in that “share” and

against unchallenged proof of continuously improving

price and product performance, ease of entry, actual entry

and other direct evidence of vigorous competition (which

this Court and others have previously deemed inconsistent

with any such “power”). It is additionally wrong in holding

actionable concededly lawful, honest business acts which

might “exclude” competitors “unnecessarily”. Indeed, the

court held that normal competitive acts were unlawful if

*Two of those decisions are now on appeal in the Ninth Circuit

from directed verdicts in IBM’s favor, including California Computer

Products v. IBM, Civil No. C73-2331-RM (C.D. Cal. Feb. 15, 1977)

in which IBM’s motion for directed verdict was granted at the close

of plaintiff's 58-day case. Retrial of California Computer would take

more than 100 trial days. Retrial of the present case, Greyhound,

would take more than 50 trial days. A third case in the lineup,

Memorex v. IBM, Civil No. C73-2239-SC (N.D. Cal.), is now

scheduled to be tried before a jury commencing in January for a

period of at least ten months. While we believe and will urge that

California Computer and Memorex should be resolved in IBM’s favor

even if the decision below stands, our opponents will and have urged

the contrary. Thus, in its reply brief to the Ninth Circuit, California

Computer by stating that the court’s decision in Greyhound

Beet D that CalComp be accorded a new trial.” (CalComp. Reply

r., at 1

“unnecessary” even if taken outside of the market in which

the power supposedly exists and in a market in which no

power is possessed or was even claimed—and that is a self-

evidently erroneous proposition.

To ensure that such “otherwise lawful” competition

will not escape the full penalties of the Act, even where the

perpetrator does not hold a high share of a contrived “sub-

market”, the court below makes it actionable as an “attempt

to monopolize” without any showing of either relevant mar-

ket or likelihood of success. That view, so patently unsound,

which, as a practical matter proscribes almost any business

conduct a jury does not like, conflicts with decisions of this

Court and every other circuit court of appeals in the country.

To ensure that the penalty will be a sufficiently strong

deterrent to engaging in such behavior, the decision permits

treble damages to be based on extreme speculation and thus

to be wholly unpredictable in amount. That holding is

flatly inconsistent with a host of judicial decisions.

To ensure that such claims, no matter how tenuous,

will still enable the less successful competitor-claimant to

reach a jury with a “shot” at such speculative damages, the

decision constructs a “weighty presumption in favor of a

jury determination” which, coupled with a liability standard

susceptible of meaning anything, is not merely “weighty”

but insurmountable.

In short:

(1) a jury is free to find almost anything to be a

“submarket” even if plaintiff fails to prove barriers to

entry, and supply and demand substitutability are clearly

present;

(2) a jury is free to find monopoly power almost

solely from defendant’s high, but rapidly declining share

of such a “submarket”;

(3) a jury is free to find virtually any honest, lawful

practice “unnecessary” and hence a source of liability—

and even to do so without any showing of relevant mar-

kets, any power of any kind or any likelihood of achiev-

ing it;

(4) a jury is free to construct damages out of any-

thing and in any way it wants;

(5) all such questions are guaranteed to go to the

jury under instructions which are vague and potentially

all encompassing.

Surely the effect of such a decision is te spawn litigation

by those unsuccessful in the competitive marketplace;* to

impel successful companies to “soften” their competitive

activities so as to avoid the expense and penalties of such

litigation; and hence to suppress that “free and unfettered

competition”** which the Sherman Act was enacted to pro-

tect and encourage. This effect inevitably follows from the

decision below.

But the adverse impact of this decision is not confined to

its intimidation of vigorous competition. Litigation inspired

by the principles of this opinion will be typically massive

and complex. However tenuous the plaintiff's pi vof may be,

the possibility of a resolution by a court is virtually elimi-

nated—the case must continue to a jury determination as

to how narrow a market a jury may wish to define and

whether the “exclusion” which inevitably occurred was

“unnecessary”. Since the application of such a novel,

inherently ambiguous and undiscriminating standard to the

sort of complex facts involved in such litigation is a process

with which a jury trial cannot rationally cope, subsequent,

*The possibility always exists that a jury may be confused by

complex facts and incomprehensible idelines, and there the capture

of unearned profits will be trebled. Indeed, for many companies the

potential for success may be much higher in litigation than in the

marketplace.

**Northern Pacific Ry. v. United States, 356 U.S. 1, 4 (1958).

inevitable appeals in search of an intelligible standard

will plague the courts of appeals.

As noted above, there are six such actions pending

against IBM in the Ninth Circuit alone, one of which, a jury

trial of at least ten months duration, is set to commence in

January, and the others are to follow. If this case goes back

for trial, it too will last for many weeks and months. If

the plaintiffs succeed in persuading those courts that

standards enunciated in this opinion control those cases,

huge private and judicial resources, costing many millions

of dollars, will be squandered in those trials and appeals

—for, we believe, this Court will not ultimately tolerate

these standards.

Counsel for the plaintiff in CalComp v. IBM (which

was dismissed at the close of plaintiff's case after 58 days

of trial) has recently proclaimed to the Ninth Circuit

in the reply brief on appeal that the rulings in Greyhound

squarely conflict with the Tenth Circuit rulings in Telex.*

Certainly they are inconsistent with decisions of this Court

and other circuits. They disrupt the pro-competitive stream

of antitrust decisional law in this country. There are com-

pelling reasons for granting this petition and rejecting these

erroneous standards right now.

THE BASIS UPON WHICH THE COURT CONCLUDED A JURY

COULD SEPARATE A “LEASE SUBMARKET” FROM A “PUR-

CHASE SUBMARKET” IS WITHOUT LEGAL JUSTIFICATION,

In defining the relevant market, the court below re-

solved a “close question” in favor of a “lease submarket”

only with the aid of a “weighty presumption in favor of a

*Indeed, CalComp goes so far as to say:

“. . . Telex has arguable validity only if this Court is willin

to hold that the Greyhound opinion misstated the law with

respect to acquisition and maintenance of monopoly

and the acts permitted to a monopolist.” (CalComp Reply

Br., at 12)

jury determination” (App. B, at p. Lla).* But to dis-

tinguish a “lease submarket” from a “purchase submarket”

is no mean trick. The products in both “submarkets” are

not merely “reasonably interchangeable” (United States v.

E. I. DuPont de Nemours & Co., 351 U.S. 377, 395

(1956) )—they are identical; generally, the same custom-

ers both purchase and lease the same models of equipment

at the same time; and all the manufacturers of EDP equip-

ment both sell and lease their products (Tr. 3020). The

only difference between the two “markets” is the timing of

payment to the supplier** for the use of the same equip-

ment. There are no other differences of any kind, and

however one exercises one’s imagination, no other differ-

ences can be perceived.+

To Judge Wyzanski in United States v. United Shoe

Machinery Corporation, the difference between payment by

lease and purchase hardly created two distinct markets. He

*The court of appeals actually defined the market as that for the

leasing of “general a digital computers for commercial applica-

tions” (App. B, at pp. 9a-10a). The court stated that “IBM does not

challenge the adequacy of Greyhound’s evidence to establish a market

limited to general w% digital computers for commercial applica-

tions” (App. B, at p. 8a). That is not true. Greyhound did not claim

any such market, nor did it offer any proof of such a market. IBM

made no effort to refute such a contention simply because there was

none. Had such a contention been made, we would have opposed it

vigorously.

**Even the timing of payment by the customer for the use of

computer equipment is not necessarily a function of whether the

equipment is purchased or leased. A purchase transaction, for ex-

a may be fuianced by the customer's time payments to a bank.

Conversely, a supplier may not receive the full purchase price when

equipment is sold; for example, IBM offers to sell equipment under

an instalment payment plan spreading payment of the purchase price

over a multi-year period and to credit a percentage of lease payments

already made to the purchase transaction.

Title does pass from the supplier in a sale or instalment sale, but

who in effect “owns” or has a priority interest in the equipment will

vary depending upon how the transaction is financed—it could be the

supplier itself, a bank, the customer, or some combination.

ordered the defendant to sell its machines as well as lease

them in order to create more opportunities for United Shoe’s

shoe machinery competitors and thereby to diminish United

Shoe’s market power (110 F. Supp. at 349-50).

To the Ninth Circuit in this case, in contrast, the differ-

ence in timing of payment was itself sufficient to create a

distinct market. The court concluded:

“On this record a jury could infer that the need

for flexibility governed the choice between a lease

and purchase, and that there was substantial

customer resistance to shifting from one to the

other.” (App. B, at p. 12a)

In effect, the court was saying that the record was adequate

to support a jury finding that demand substitutability be-

tween lease and purchase was sufficiently low to separate

purchase and lease of the same product into different “sub-

markets”. For low demand substitutability to have been

proven—and clearly plaintiff had the burden of so doing—

required evidence, at minimum, that a legally significant

number of customers so strongly preferred lease to pur-

chase as to render purchase an inadequate substitute with-

out a drastic narrowing of the monthly-rental-price/pur-

chase-price ratio. Plaintiff produced no evidence even re-

motely establishing that proposition; on the contrary, it

was clearly established that customers Greyhound labelled

as “purchase prone” both leased and purchased the same

kinds of EDP equipment at the same points in time

(DX K-4). Common experience demonstrates that a given

decision to lease or purchase is primarily dependent upon

constantly changing factors such as availability of capital,

interest rates, tax provisions and the like. No effort was

made to deal with any of those factors.

But even more glaring was the error of law the court

committed in drawing a market definition line between

lease and purchase when the obvious supply substitutability

between the two makes any such line nonsensical.

Market definition is simply a construct for the measure-

ment of monopoly power, which, in essence, is the power to

raise price without attracting entry. Such a power may be

checked either by the ability of customers readily to switch

to a substitutable product (demand substitutability) or by

the ability of other sellers readily to make or offer the same

or an interchangeable product when the incentive to do so

exists (supply substitutability). Since a high rate of either

demand or supply substitutability will constrain the power

of the subject firm to increase price, a product market

definition which does not include both the interchangeable

product and that potentially offered by such other suppliers

will not sensibly test for monopoly power.*

The court below (App. B, at p. 8a n.4) expressly recog-

nized that any market line based solely on low demand

substitutability was obliterated in fact and law by high

supply substitutability. In addition to citing several of the

many decisions to that effect by this Court and other federal

tribunals, the court below stated:

“Attempts to exclude competition or control prices

may also be checked if other suppliers shift their

production facilities to the product in question.”

(/d.)

*See, ¢.g., United States v. Penn-Olin Chemical Co., 378 U.S. 158,

173-74 (1964); Brown Shoe Co. v. United States, 370 U.S. 294, 325

n.42 (1962); United States v. Columbia Steel Co., 334 U.S. 495, 510-

11 (1948); Yoder Bros., Inc. v. California-Florida Plant Corp., 537

F.2d 1347, 1368 (Sth Cir. 1976), cert. denied, 429 U.S. 1094 (1977);

Calnetics Corp. v. Volkswagen of America, Inc., 532 F.2d 674, 691

(9th Cir.) , cert. denied, 429 U.S. 940 (1976); Twin City Sportservice,

Inc. v. Charles O. Finley & Co., 512 F.2d 1264, 1271-73 (9th Cir.

1975); Telex Corp. vy. International Business Machines Corp., 510

F.2d 894, 916-17 (10th Cir.), cert. dismissed, 423 U.S. 802 (1975);

Mullis v. Arco Petroleum Corp., 502 F.2d 290, 296-98 (7th Cir. 1974).

Immediately thereafter, however, the court appeared totally

to have misconceived the point.

First, the court suggested that it was IBM’s burden to

prove the degree of cross-elasticity of supply rather than a

part of plaintiff's burden of establishing a relevant market

(App. B, at p. 8a n.4). Such a shift in the burden of proof

is plainly wrong. See Mullis v. Arco Petroleum Corpora-

tion, 502 F.2d 290, 296 (7th Cir. 1974).

Secondly, the court stated that supply substitutability

would be present only if “industries not presently engaged

in the leasing of general purpose commercial systems could

have shifted their operations to such a business readily”

(App. B, at p. 8a n.4). That misses the point entirely. In

determining whether leasing is an appropriate market, the

primary issue is not merely whether companies not pres-

ently leasing EDP equipment could readily shift “opera-

tions”. Rather, the dispositive question of supply substi-

tutability is whether the same manufacturers who already

both lease and sell their equipment could, if IBM raised its

lease prices, compete with IBM by readjusting their lease

prices or otherwise emphasizing lease transactions so as to

make it more attractive to potential users to lease their

equipment rather than purchase it. Obviously, substitution

can be achieved by any manufacturer with the stroke of a

pen, without shifting any “operations” whatever. That

plaintiff offered no evidence to the contrary is hardly sur-

prising; total supply substitutability from sale to lease is a

self-evident proposition.

Moreover, plaintiff made no effort to establish that

its proffered market included all or substantially all of

the firms reasonably able to satisfy consumer demand for

“risk lease” (or, as the court defined the market, “lease’’)

financing; nor did Greyhound even attempt to suggest why

financing and other institutions could not easily satisfy such

demand.* Obviously, since the role of the leasing com-

pany is strictly a financial one (see p. 6 supra) any bank,

insurance company, leasing company dealing in other prod-

ucts (e.g., airplanes) or other financial enterprise can enter

with ease (and, as Greyhound Computer and other leasing

companies freely assert, they compete with those financial

institutions in leasing computer equipment). See, e.g., DX

X at p. 13; Tr. 598-99; DX Z-1 at pp. 11-12; Tr. 1834.

The president of Greyhound Computer at the time the

action was commenced testified that, in 1966, there were

15 to 30 leasing companies who bought EDP equipment

and leased it in competition with IBM (Tr. 588-89).

In October 1966, IBM raised the lease price on most of its

EDP equipment by 3%.** An immediate influx of leasing

companies followed. The president testified that by 1969

there were between 120 and 150 such leasing companies

(excluding banks and financial instututions) (Tr. 590),

and the record shows that those leasing companies in 1967,

1968 and 1969 purchased some two billion dollars of EDP

*In United States Steel Corp. v. Fortner Enterprise, Inc., 429

U.S. 610 (1977), this Court recently addressed, in a tie-in context,

the issue of economic power in a financing market similar to the

“leasing” market involved in the present case. The Court there stated

that where “there is nothing to suggest” that competing sellers and

other lenders were unable to offer ———— financing if they chose

to do so (id. at 622 & n.15), — s failure to offer evidence of

such inability is fatal to its market power claim. Greyhound’s proof

at trial was defective in precisely the same fashion, but the court

below held the defect to be of no consequence.

**Furthermore, in March 1967, the Investment Tax Credit (26

U.S.C. §§ 38, 46-50) was reinstated after a —— of approxi-

mately 6 months. That reinstatement prov leasing companies

and other purchasers of certain EDP equipment with a 1h tax credit,

the effect of which was to provide a substantial discount on certain

purchases, and hence yet another incentive to purchase EDP equip-

ment for use in leasing to EDP users.

-c—-—

equipment and leased that equipment in competition with

IBM* (App. D).

To regard lease and purchase transactions as “means”

or “forms” of distribution, as the court below did (App. B,

at pp. 10a, 12a-13a), is neither analytically sound nor per-

tinent to the undisputed—indeed, indisputable—fact of

supply substitutability between the two. The court adopted

that characterization as a peg for citing distributor cases

that focus upon different means of distribution as a basis for

defining different markets (see App. B, at p. 10a n.8).

Those cases and that characterization are inapposite;

neither IBM nor its competitors use distributors at all, let

alone any different means of distribution. Common par-

lance, we submit, would not refer to the method of financ-

ing as a “means of distribution” and we have found no

reported decision or other precedent which supports such

a use of the term. We urged that the only distinction be-

tween lease and purchase was a method of financing and

that that was not a valid basis for defining a relevant mar-

ket. The court below enigmatically disposed of that argu-

ment as follows:

“IBM argues that both leasing and buying are

merely methods of financing the use of computer

systems. However, the Sherman Act cannot be

avoided by classifying the commercial activity in-

volved as financing.” (App. B, at p. 12a)

We never suggested any such avoidance. We did suggest

strongly that such a distinction is neither adequate nor

rational as a basis for segregating into separate markets

products which are in all respects identical, marketed by the

same companies to largely the same users, and as to which

supply substitutability from sale to lease is immediate,

*The record also was replete with evidence of numerous and

major corporations from other industries entering into the EDP busi-

ness and into direct competition with IBM in the leasing of EDP

equipment (see, e.g., DX C-4).

effortless and total—indeed, the ability to shift is self-evi-

dently possessed by every company whose identical sold

products were excluded by the court’s definition from the

market it found to exist.

We submit that if a jury were nevertheless instructed

that such a market might be defined on this sort of record,

then juries may be permitted to find any kind of market

under any set of circumstances, for a “relevant market”

under this decision is anything a jury chooses to say it is.

THE COURT BELOW INCORRECTLY HELD THAT A JURY

COULD INFER MONOPOLY POWER FROM IBM’S SHARE

OF THE NARROWLY DEFINED “LEASE” SUBMARKET

Also warranting review is the court of appeals’ error

in viewing “share”, however calculated, in any market

however defined, as dispositive of the question of monopoly

We will not discuss here the many arithmetical fallacies

engaged in by Greyhound to construct IBM’s purported

submarket “share” which the court below accepted, or how

the leasing revenues of companies within the court’s “lease

submarket” (but outside Greyhound’s proffered “risk-lease

submarket”) were somehow omitted from such “shares”.

The fact is that, using the same Court Census data stipu-

lated into evidence in this case, both the district court and

Tenth Circuit Court of Appeals concluded in Telex that

IBM had only a 35.1% share of the EDP market (see

p. 6 supra). Of course, the walling off entirely of the

total EDP revenues of some 1,800 companies shown in that

census, and the inclusion of the lease revenues only of the

101 companies selected by Greyhound, were achieved main-

ly by the market definition error discussed in the preceding

section of this petition.

Even assuming that a rational computation of “share”

was made and an economically meaningful market defined,

the fact remains that the court below barely paused to con-

POOL OE LOOT SE A AIF EAN pm 2 Ooh .

sider IBM’s loss of almost 20% of such a “share” in the

so-called “lease submarket” between 1964 and 1970. Such

a phenomenon is, we believe, so unlikely to occur in a

monopolized market that a strong inference should arise

that something fundamental is wrong with the analysis.

But the share figures were plainly talismanic and thus de-

cisive to the court below, since the other evidence cited in

support of an inference of monopoly power is trivial.*

The commitment to share as the critical determinant

of market power is erroneous in law precisely because it

blinds the court to the sort of direct evidence of vigorous,

healthy competition—entry, product and price improve-

ment, Customer sophistication and sovereignty both within

*It was also badly misunderstood. For example:

(1) The court stated that the evidence indicated IBM “never

set a price simply to meet competition” (App. B, at p. 16a).

However, the only two witnesses to address that issue gave testi-

mony of a far different nature. Mr. Cary testified that IBM

offered Superior price performance as compared to its competitors,

not that it priced its products above its Competitors (Tr. 3376-78) .

Mr. Watson S testimony was taken out of context. He testified

— y h- 7 a its competitors’ prices but that

] r upon competitiv i i i

-- on our machines” (Tr. 5697). Pee ree

(2) The court stated that IBM’s prices “were 5 to

above those of the best of its competition” (App. B, 4. Aa

But, again, the witness (Mr. Cary) testified that IBM’s price per-

— was —, + —y of its competitors, by a range of

: ion oan

competitors (Tr. 3376-78). —

(3) The court stated that “IBM’s senior vice presiden i-

fied that rental prices of some models could be focteneed sehen

proportionate decreases in demand.” (App. B, at p. 16a) In fact

that witness testified that in deciding whether to increase certain

rental prices, “I know that we looked at what the result in pricing

—price performance structure would be versus all of our competi-

tors. . . . His further testimony—that “rental demand was

inelastic” after a 3% price increase—followed immediately there-

after and was clearly premised on IBM's superior price perform-

~My is, 3 = and amount of ormance per unit of

” evan aiter that tafen | , :

ie see), price increase, as compared to its competi-

and surrounding the narrow submarket segment—that this

record so overwhelmingly establishes (App. C).

It is also, of course, completely inconsistent with this

Court’s decison in United States v. General Dynamics

Corp., 415 U.S. 486, 498-501 (1974) and United States

v. Columbia Steel Co., 334 U.S. 495, 533 (1948), and

with other decided cases. See, e.g., United States v. Inter-

national Harvester Co., 274 U.S. 693, 708-09 (1927);

Cole v. Hughes Tool Co., 215 F.2d 924, 938 (10th Cir.

1954); Travelers Insurance Co. v. Blue Cross, 481 F.2d

80 (3d Cir.), cert. denied, 414 U.S. 1093 (1973).

The court below recites IBM’s contention “that price

reduction and product improvement are characteristics of

the industry and are inconsistent with the existence of

monopoly power” (App. B, at p. 17a). It is nowhere sug-

gested that this contention is in any sense flawed or un-

supported by the record—-indeed the district court held

“that the evidence [was] insufficient to submit the ques-

tion as to defendant’s control or ability to control the mar-

ket regardless of its purported share thereof” (App. A, at

p. 2a). Instead, and necessarily, those characteristics of

the industry and IBM’s position in it are treated as accu-

rate by the court of appeals—and then effectively ignored.

Heretofore, however, all learning in the case law has in-

structed that price reduction and product improvement are

the antitheses of monopolized industry phenomena and

precisely what the competitive system is supposed to gen-

erate and the Sherman Act to ensure. Hence Judge Hand’s

classic distinction between the monopolized and the com-

petitive industry:

“Many people believe that possession of unchal-

lenged economic power deadens initiative, dis-

courages thrift and depresses energy; that immunity

from competition is a narcotic, and rivalry is a

stimulant, to industrial progress; that the spur of

constant stress is necessary to counteract an inevi-

Pee rss

_-—

+ >a -

—_

table disposition to let well enough alone.” United

States v. Aluminum Company of America, 148

F.2d 416, 427 (2d Cir. 1945).

It is the “constant stress” which makes a firm unable to

“let well enough alone” that compels price reduction and

product improvement; that compulsion is competition, and

the result is to provide consumers with exactly what our

economic system is designed to produce.

The court below finds no such virtues in price reduc-

tion and product improvement. Necessarily conceding that

the record is replete with such proof (see App. D), the court

disposes of the evidence—and the importance—of compe-

tition with two sentences: First, with respect to product

improvement,

“But rapid technological progress may provide a

climate favorable to increased concentration of

market power rather than the opposite.” (App. B,

at p. 17a)

Secondly, with respect to price reduction,

“[A] decline in prices does not necessarily imply an

absence of monopoly power; a fair profit might have

been made at even lower cost to users. See United

States v. Aluminum Company of America, 148

F.2d 416, 427 (2d Cir. 1945).”* (Id.)

*The court’s reliance on Alcoa as support for its rejection of

declining prices as disproof of monopoly power is misplaced. In

Alcoa, Judge Hand reasoned that the “narcotic” of monopoly, so

clearly present in that case, is to be condemned even if “the monopoly

has not been used to extract from the consumer more than a ‘fair’

profit” (148 F.2d at 427). The court was not there faced with a strik-

ing record of declining prices and rapidly improving price perform-

ance; the court was not there saying, as the Ninth Circuit has said,

that monopoly power is not disproved because price performance

improvements could possibly have been more extraordinary. On the

contrary, Judge Hand merely observed that where the “stimulant” of

“rivalry” is missing from an industry, as was the case in Alcoa, the

fact that extraordinary profits have not been extracted from con-

sumers does not dispose of liability under the Sherman Acct.

In support of the first assertion, the opinion refers to

two quite thin and hardly relevant law journal articles

(App. B, at p. 17a n.21).* Judge Hand, normat 2 €co-

nomic analysis, the record of extraordinary product innova-

tion in this case, and the dramatic loss of IBM’s “share” in

whatever “market” one cares to carve out of the Court

Census data—all speak eloquently to the contrary effect

insofar as the EDP industry is concerned.

Whether or not a continuing decline in prices over a

twenty year period is sufficient to disprove the existence

of monopoly power, the court’s second assertion—that a

court or jury should undertake to determine whether pro-

fits are “fair” or fairer profits might have been achieved—

would, if ever attempted, cause the greatest confusion and

difficulty. |

This Court’s familiarity with administrative rate mak-

ing should, we believe, leave it with substantial incred-

ulity that a jury could master such an undertaking or

should ever be asked to do so. A jury could never—we

believe—evaluate the “fairness” of any particular price

change without reviewing at least the whole pricing struc-

ture of defendant and plaintiff and perhaps that of the

le industry.

“~ sum, a court below exalted the significance of even

a rapidly declining share of an artificial “lease submarket”

over direct, uncontroverted proof of massive, continuous

new entry and vigorous price and product competition in

that defined “submarket”. Ease of entry, price reduction,

product improvement—that’s competition. To set aside all

*A curiosity is that one of those articles reviews the decision of

the Court of apes for the Tenth Circuit in Telex v. IBM which,

relying upon the same Court Census and the same of “ne

proof of price reduction and product bon prvenny ound A.

on all the elements of monopolization attempt to monopo whe

which the court below found against IBM. Notably, the court below

does not otherwise mention Telex v. IBM.

proof of it in favor of a mechanistic analysis based merely

on “share”—and a rapidly declining “share” at that—is to

lose sight of the very reasons for which the statute was

enacted.

THE COURT BELOW BROADLY CONDEMNS

LEGITIMATE COMPETITION

Having thus found monopoly power in a narrow slice

of a vigorously competitive market, the court announced

and applied a test which proscribes virtually all legitimate

competition by IBM.

The court below concluded that IBM cannot engage in

the kind of business conduct “an ordinary enterprise might

utilize with impunity” because “if the jury concluded IBM

possessed monopoly power in the leasing of general purpose

computers, IBM would be precluded from employing other-

wise lawful practices that unnecessarily excluded competi-

tion from the submarket”* (App. B, at p. 18a). The

court’s application of this stated rule makes plain that it is

intended to be just as broad and sweeping as it sounds.

Thus, the court has not only prohibited legitimate prac-

tices in general terms, but specifically condemns under the

Sherman Act as “anticompetitive” as to plaintiff the very

action—IBM’s 3% sales discount coincident with “unbun-

dling”—which it finds fully justified in contract law and

concedes “may have been pro-competitive”** vis-a-vis most

*The court of appeals apparently was interpreting language in

United States v. United Shoe Mach. Corp., 110 F. Supp. 295, 344-45

(D. Mass. 1953), aff'd per curiam, 347 U.S. 521 (1954). That lan-

guage, however, is inapposite here. United Shoe involved, among

other practices wholly dissimilar from anything evidenced by the

present case, the defendant’s insistence on only leasing its products,

only leasing them long-term, and then charging a penalty on cancella-

tion for replacement with a competitive machine that was more than

the lessee would nave had to pay had it simply returned the equipment

and gone out of business. We do not understand that decision nor any

decision of this Court as legislating “soft” competition by broadly

condemning legitimate competitive activity.

_ **We take “pro-competitive” to mean simply legitimate competi-

tion which, in this instance, created new marketing opportunities for

IBM and for others as well.

actual or potential suppliers. Of course, one could only

expect chaos in the minds of jurors faced with this anomaly.

On the one hand, under the court’s analysis IBM plainly

would be entitled to a peremptory jury instruction that

there was no breach of contract because Greyhound received

the benefit of the bargain it struck. On the other hand, the

jury could still find against IBM—and award treble dam-

ages—on the theory that it was not “necessary” for IBM

to do what it did.

Consider also the mindless exercise—for all involved

—in trying to determine whether it was “unnecessary” for

IBM not to increase its 12% “technological discount” still

further at some point in time despite the subsequent 3%

purchase price reduction in 1966 and the 3% general price

reduction in 1969.

The court also erred in its proscription of honestly com-

petitive practices which took place outside the defined

“submarket”. Of course, there are cases, such as United

States v. Griffith, 334 U.S. 100 (1948), which hold that

the use of power in a monopolized market to impair com-

petition outside the monopolized market may be a proper

basis of liability and the court cites some such cases.

Strangely, the court cites those cases here for a proposition

which is the obverse of that for which they stand. No prior

case holds that legitimate, competitive acts conducted out-

side the allegedly monopolized market constitute monopoli-

zation of that market. Indeed, it makes absolutely no sense

to reach such a conclusion. However, that is exactly the

conclusion reached below.

Thus, we pointed out that, assuming acceptance of

Greyhound’s separate lease and purchase markets, IBM’s

acts in setting and lowering the purchase price—the “multi-

plier”, “technological discount” and “unbundling” issues—

were all actions taken by IBM in what Greyhound called the

separate “purchase market” and that no effort had been

made to prove that IBM had any power in such a market.

To that—we believed dispositive—contention the court of

appeals, inappositely citing Griffith and its progeny, re-

sponded: “Greyhound was not required to prove the source

of IBM’s power to do what Greyhound’s evidence indicated

IBM in fact did.” (App. B, at p. 29a)

We thus reach a point where if a plaintiff convinces a

jury that a defendant has a high share of market A and takes

a legitimate business act in market B, where it has no power,

a plaintiff may recover if it can show it was in some way

affected thereby. It should be clear that something has gone

wrong with the analysis.

We think that when the court reached this point in its

analysis it found the extremely artificial distinction between

lease and purchase “submarkets” untenable. We do too,

but the court cannot have it both ways. If the markets are

separate, those acts in the purchase submarket cannot form

the basis for liability. If those acts could create liability,

the markets are not separate. Thus, if one says that pur-

chase price changes affect the amount of equipment which

will be leased, one is saying that there is cross-elasticity

between lease and purchase, ¢¢.,. they are .not distinct

“submarkets”.

Finally, the court suggests one further extension of its

proscription of legitimate business conduct. If one reads

together (as lawyers advising clients about this decision

must) (a) the language concluding that “otherwise lawful

practices that unnecessarily exclude competition from the

submarket” are forbidden, with (b) the language rejecting

direct proof of competition through price reduction and

product improvement by impugning technological progress

which “may provide a climate favorable to increased con-

centration of market power”, one must necessarily conclude

that product innovation may be banned under the court’s

test. We doubt the court intended such a result, but that

contention is presently being urged against IBM in other

lawsuits.

The result of the court’s test, then, is simply to say to a

large, dynamic corporation which routinely announces sig-

nificant product and price improvements that it must soften

up and slow down the competitive pace if its rivals may be

unable to keep up. If such a corporation is counseled that

it should move slowly and then only to meet the actions of

its competitors, surely those competitors will recognize that

competition has been shackled and will not provoke com-

petitive responses.

But courts have time and time again recognized that

competition on the merits is what the antitrust laws were

intended to foster and that, as Judge Hand stated in Alcoa,

“(t]he successful competitor, having been urged to com-

pete, must not be turned upon when he wins” (148 F.2d

at 430). Even where monopoly power has been estab-

lished, or assumed for purposes of argument, courts have

refused to proscribe legitimately competitive conduct. See,

e.g., Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429

U.S. 477, 488-89 (1977), where in ruling that “an illegal

presence in the market” cannot result in an award of treble

damages without proof that plaintiff's claimed injury “flows

from that which makes defendant's acts unlawful”, this

Court stated:

“{T]he damages respondents obtained are de-

signed to provide them with the profits they would

have realized had competition been reduced. The

antitrust laws, however, were enacted for the pro-

tection of competition, not competitors. . . . It is

inimical to the purposes of these laws to award

damages for the type of injury claimed here.”

To the same effect, the Tenth Circuit held in Telex v. IBM,

510 F.2d at 927:

“There must be some room to move for a de-

fendant who sees his market share acquired by re-

te wee e

search and technical innovations being eroded by

those who market copies of its products. It would

seem that technical attainments were not intended

to be inhibited or penalized by a construction of

section 2 of the Sherman Act to prohibit the adop-

tion of legal and ordinary marketing methods al-

ready used by others in the market, or to prohibit

price changes which are within the ‘reasonable’

range, up or down.”*

But the court below has followed a different course in its

analysis of Section 2 of the Sherman Act. It is protecting

a competitor at the obvious expense of competition, better

products and lower prices. It is doing so by injecting into

the bloodstream of competition that narcotic which Judge

Hand long ago condemned—the narcotic which deadens

the competitive nerve and seduces enterprises to “let well

enough alone”.

THE NINTH CIRCUIT'S RULE ON ATTEMPT TO MONOPO-

LIZE IS FLATLY INCONSISTENT WITH DECISIONS OF THIS

COURT AND WITH DECISIONS IN ALL OTHER CIRCUITS.

Every United States Court of Appeals, with the excep-

tion of the Ninth Circuit, has held or stated that, in order to

make out a prima facie case of attempt to monopolize, a

plaintiff must prove (in addition to specific intent to mo-

nopolize and predatory conduct) both a relevant market and

that the defendant had a dangerous probability of succeed-

*See also Pacific Engineering & Prod. Co. v. Kerr-McGee Corp.,

551 F.2d 790, 795 (10th Cir.) , cert. denied, U.S. ____ (1977);

International Air Indus., Inc. vy. Amer. Excelsior Co., 517 F.2d 714,

721 (Sth Cir. 1975), cert. denied, 424 U.S. 943 (1976); Panotex Pipe

Line Co. v. Phillips Petroleam Corp., 457 F.2d 1279, 1289 (Sth Cir.),

cert. denied, 409 U.S. 845 (1972); Fleetwry, Inc. vy. Public Service

Interstate Transp. Co., 72 F.2d 761, 763 (3d Cir. 1934), cert. denied,

293 U.S. 626 (1935); Weber v. Wynne, 431 F. Supp. 1048, 1059-60

(D.N.J. 1977); Purex Corp. v. Procter & Gamble Co., 419 F. Supp.

931, 940 (C.D. Cal. 1976).

ing in monopolizing that market.* Those decisions have

followed this Court’s repeated statement that attempt to

monopolize means the use of methods which, although fall-

ing short of actual monopolization, “approach so close as

to create a dangerous probability of it.” American Tobacco

Co. v. United States, 328 U.S. 781, 785 (1946); see also

Walker Process Equipment, Inc. v. Food Machinery &

Chemical Corporation, 382 U.S. 172, 177 (1965); Swift

& Co. v. United States, 196 U.S. 375, 396 (1905).

The dangers of eliminating from the law of attempted

monopolization the fundamental requirements of defining

a relevant market and that there be a dangerous probability

of success are obvious:

“ ‘It seems to this court clear, both on authority

and logic, that when a charge is made of attempt to

monopolize, the first question would be—‘to

monopolize what?” The answer would seem to be

“the relevant market, toward the monopolization

of which the attempt was directed.” Were this not

so, there would be the anomaly that a defendant

could be punished for attempting to do what, if

accomplished, would be legal. That is, if a defend-

dant in fact acquired a position in a relevant mar-

ket that did not amount to monopoly, how could

*E2 G R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc.,

508 Fis 547, 550 (Ist Cir. 1974), cert. denied, 421 U.S. 1004 (1975);

] ir. 1976),

States v. Empire Gas Corp., 537 F.2d 296, 298-99 (8th Cir

cert. denied, 430 U.S. 915 (1977); Agrashell, Inc. v. Hammons Prods.

973): E. J. Delaney Corp. v. Bonne Bell, Inc., 525 F.2d 296, 307

sods Cie. 1975), ron denied, 425 U.S. 907 (1976); Packard Motor

Car Co. Vv. Webster Motor Car Co., 243 F.2d 418, 420 (D.C. Cir.),

cert. denied, 355 U.S. 882 (1957).

it be wrongful for a defendant to attempt, success-

fully to acquire that position—i.e., to try to do that

which if accomplished would be valid?’” Acme

Precision Products Inc. v. American Alloys Corp.,

484 F.2d 1237, 1240 (8th Cir. 1973) (quoting

from Diamond International Corp. v. Walterhoefer,

289 F. Supp. 550, 576-77 (D. Md. 1968) )

In relying solely on “specific intent to monopolize” and

the existence of “anticompetitive conduct”, and interpreting

those elements as it has here, the court below has fashioned

a rule in Section 2 attempt cases which proscribes precisely

the sort of activity which the antitrust laws were intended to

encourage. Any business enterprise, whatever its size, seeks

to obtain all the business it profitably can handle. Certainly

it has the “specific intent” to achieve that goal. Its success

indisputably will have an impact upon its competitors. Those

are natural, intended consequences of all price or product

actions. Heretofore, such actions were not unlawful or

predatory simply by reason of such “specific intent” to be

successful. Under the decision below, all such actions may

form the basis of a jury verdict without further proof.

Indeed, any company, large or small, which undertakes

a vigorous advertising campaign, institutes a sales incentive

plan or otherwise encourages its sales force to prevail over

its competitors, all with the “specific intent” of capturing

more business, runs the risk of violating Section 2 of the

Sherman Act under the novel interpretation of the court

below. That is clearly not, and never has been, the objec-

tive of antitrust enforcement even in a “winner take all”

situation—wholly unlike the EDP industry—where only

one competitor can survive. As Judge Wyzanski has stated:

“While the phrase ‘intent to exclude,’ or its

equivalent ‘exclusionary intent,’ is reiterated in

antitrust cases, it is not easy to define its precise

meaning. Contrary to what a layman might sup-

pose, a person does not necessarily have an exclu-

sionary intent merely because he foresees that a

market is only large enough to permit one successful

enterprise, and intends that his enterprise shall be

that one and that all other enterprises shall fail.

If the evidence shows that in laying his plans and

executing them he contemplates and utilizes only

superior skill, foresight, and industry, he has not

an intent which is contrary to law. To prove that

a person has that type of exclusionary intent which

is condemned in anti-trust cases there must be evi-

dence that the person who foresees a fight to the

death intends to use or actually does use unfair

weapons.” Union Leader Corp. v. Newspapers of

New England, Inc., 180 F. Supp. 125, 140 (D.

Mass.), aff'd in pertinent part, 284 F.2d 582 (lst

Cir. 1960), cert. denied, 365 U.S. 833 (1961)

The Ninth Circuit’s anomalous attempt rule, when

added to its complete misconception of the monopolization

offense, serves to illuminate its view that vigorous competi-

tion is itself anticompetitive. The inevitable result is to

convert the battle of the marketplace, where the public is

the victor, to the battle of the courts, where those losing

out to fair (and previously encouraged) competition stand

to be winners at the public’s expense. In a world in which

almost anyone can monopolize something or attempt to

monopolize almost anything, and almost any act of vigor-

ous competition can constitute “unnecessarily” exclusion-

ary conduct in furtherance of this sort of a monopolization

“attempt”, the only dam placed on the flood of such litiga-

tion is the deterrent effect those rules have on vigorous

competition itself. If these are the standards under which we

are to live in the future, then the premises of the past—

“ _. that the unrestrained interaction of competitive

forces will yield the best allocation of our economic

resources, the lowest prices, the highest quality and

the greatest material progress, while at the same

time providing an environment conducive to the

preservation of our democratic political and social

institutions” (Northern Pacific Railway v. United

States, 356 U.S. 1, 4 (1958) )

—have truly been forsaken.

This, we submit, cannot be allowed.

CONCLUSION

For all the foregoing reasons, this petition should be

granted. In addition, if certiorari is granted, we will respect-

fully request that the Court establish an accelerated briefing

and argument schedule so that this case, of such importance

generally and of particular significance to many cases now

pending in the lower federal courts, may be decided dur-

ing this Term.

Respectfully submitted,

Tuomas D. Barr,

ALAN J. HRUSKA,

Ropert F. MULLEN,

One Chase Manhattan Plaza,

New York, N. Y. 10005

NICHOLAS DEB. KATZENBACH,

Old Orchard Road,

Armonk, New York 10504

Lioyp N. CUTLER,

Joun H. PICKERING,

James S. CAMPBELL,

1666 K Street, N.W.,

Washington, D. C. 20006

Attorneys for Petitioner

International Business Machines

Corporation

Of Counsel:

Evan R. CHESLER,

CRAVATH, SWAINE & Moore,

One Chase Manhattan Plaza,

New York, N. Y. 10005

A. DouGLas MELAMED,

Witmer, CuTLER & PICKERING,

1666 K Street, N.W.,

Washington, D. C’ 20006 November 14, 1977.

APPENDIX “A"

APPENDIX A

GREYHOUND CoMPUTER CorpP., INC.

INTERNATIONAL BUSINESS MACHINES Corp.

U. S. District Court, District of Arizona

No. Civ-72-242-Phx.

Dated July 10, 1972.

Afternoon Session

(In The Absence of the Jury)

The Court: I might say, gentlemen, that the burden

placed on the Court by your respective motions is indeed

an unhappy one.

With respect to the plaintiff’s motion for directed ver-

dict on the issue of liability, the motion is denied.

With respect to the plaintiff's motion for directed ver-

dict on the issue of monopolization, the motion is denied.

With respect to the defendant’s motion for directed

verdict on the contract issue, the motion is granted.

The Court is of the opinion that, number one, the proof

is not sufficient to submit that question to the jury, even

with appropriate instructions as to the law.

The Court is of the opinion that that issue is resolved

by the parol evidence rule, the statute of frauds, and last,

but not least, the local rules of this court.

Even considering the Uniform Commercial Code of

New York, my understanding is that the parties agree that

is the law applicable to this case. As I say, having consid-

ered that, the Court is of the opinion that that issue is fore-

closed under the parol evidence rule.

Moreover, the only two contracts in evidence have

integration clauses which limit the subject matter of the

contract.

The final motion of the defendant as to a directed ver-

dict with respect to Section 2 of the Sherman Act posed