Petition — Page Airways, Inc. v. Associated Radio Service Co.

r

— |

80- “4380

office — ee:

t, U.S.

IN THE CLERK

Srpreinw Cant uf the United States

OCTOBER TERM, 1980

PAGE AIRWAYS, INC., et al.,

Petitioners,

..

ASSOCIATED RADIO SERVICE Co.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

DONALD F.. TURNER

RONALD J. GREENE

SUSAN LoW BLOCH

WILMER, CUTLER & PICKERING

1666 K Street, N.W.

Washington, D.C. 20006

(202) 872-6000

ALEXANDER L STEVAS,

Attorneys for Page Airways, Inc.

Of Counsel: and Page Gulfstream, Inc.

AKIN, GUMP, HAUER & FELD JAY M. VOGELSON

2800 Republic National One Dallas Center, Suite 2400

Bank Bldg. Dallas, Texas 75201

Dallas, Texas 75201 Attorney for Douglas Juston

D. L. CASE

JACK PEW, JR.

4300 First National Bank Bldg.

Dallas, Texas 75202

Attorneys for Ross C. Chapin

February 2, 1981

"=

QUESTIONS PRESENTED FOR REVIEW

. Whether the unelaborated market definition cri-

teria set forth in Brown Shoe Co. v. United States

adequately instruct a jury (or a trial judge) on

how to find a relevant market.

. Whether treble damages under the antitrust laws

can be awarded for business torts that have merely

a potential effect on competition, or whether actual

injury to competition must be shown.

. Whether an appellate court can affirm a jury ver-

dict when it cannot determine whether or not the

jury relied on a correct rule of law.

1 The following were parties to the proceeding in the Court of

Appeals: Page Airways, Inc., Page Gulfstream, Inc., Douglas Jus-

ton, Ross C. Chapin, Edwin C. Hamilton, Associated Radio Serv-

ice Company, and Associated Radio Company.

Except for the parties listed above, there are no additional par-

ent corporations, partially owned subsidiaries, or affiliates of Page

Airways, Inc. or its wholly owned subsidiary Page Gulfstream, Inc.

(i)

e%

i |

TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW ................. (i)

pe VF Be Be ivy i | yb SDE rE Ete

UU MOD Sed ersttesinii cieinenitncis ecccivaleanstannaeniteicaaieenhon

JURISDICTION OF THIS COURT ...............00.0.02..........

EAE A OE TIT ME saicichiscnictnrncehensiinianinininntcsdenendildtetliic

STATEMENT OF THE CASE onnnnccnccccccccnccestyeeccscseceoee

eR gk RASA SAD OA EMRE ser

(2) District Court Proceedings ............................-.

(3) The Court of Appeals Decision ..................0.....

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

I. THE CASE INVOLVES FUNDAMENTAL

ERRORS IN THE APPROACH TO MARKET

DEFINITION THAT HAVE BEEN WIDE-

SPREAD AND REQUIRE CORRECTION BY

BE CAINE siinsisnscistiicncneiechnnteniopinisinitaieiddabaaeie 9

A. The Jury Instructions in This Case, Which

Did Little More Than Track the Language

in Brown Shoe Co. v. United States, Were

onrnriawwans NN KF

Insufficient and Misleading .........................---- 13

B. The Issues Raised Are Important and Should

Be Resolved by This Court .........0..0.......2-...... 18

Il. THE FIFTH CIRCUIT HAS ADOPTED A

UNIQUE TEST FOR DETERMINING WHEN

ACTS OF UNFAIR COMPETITION VIOLATE

THE ANTITRUST LAWS—A TEST THAT

CONFLICTS WITH THE TESTS PREVAIL-

ING IN OTHER CIRCUITS AND THAT

SHOULD BE REJECTED BEFORE MORE

BUSINESS RIVALS ARE ENCOURAGED TO

SEEK TREBLE DAMAGES FOR ORDINARY

BUSINESS TORTS .......

| PRECEDING PAGE WAS BLANK

iv

TABLE OF CONTENTS—Continued

Page

III. THE COURT, IF IT GRANTS THIS PETI-

TION, SHOULD ALSO CORRECT THE

PLAIN ERROR COMMITTED BY THE

COURT BELOW IN UPHOLDING THE VER-

DICT OF LIABILITY UNDER SECTION 2

OF THE SHERMAN ACT 27

CONCLUSION RE NGA toh 29

>.

v

TABLE OF AUTHORITIES

CASES Page

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

F.2d 269 (8th Cir.), cert. denied, 414 U.S. 1032

I a ANd ia cad sche aehoupn soocareacaeraih cai eepaheabtiadtenpttabairsie 10

Albert Pick-Barth Co. v. Mitchell Woodbury Corp.,

57 F.2d 96 (1st Cir.), cert. denied, 286 U.S.

a caledipaicaodans 20

Apex Hosiery Co. yv. Leader, 310 U.S. 469 (1940)... 20

Atlantic Heel Co. v. Allied Heel Co., 284 F.2d 879

RN I Sie lili dade cseecating nseabeinobenececed 20

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

SADT TERT RCS DAP ROO ae Tae ARNE SE a passim

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

ST I i aa, 26

Budd Co., In re, 86 F.T.C. 518 (1975) -...........22...... 13

C. Albert Sauter Co. v. Richard S. Sauter Co.,

368 F. Supp. 501 (E.D. Pa. 1978) ...................... 20

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

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

OE gliomas 13

Continental T.V., Inc. v. GTE Sylvania, Inc., 433

ME Bt, f GRR SR SNe sree Me eae nn ee 18, 21

Craig v. Sun Oil Co., 515 F.2d 221 (10th Cir.

1975), cert. denied, 429 U.S. 829 (1976) ............. 22, 23

Franklin Music Co. v. ABC, Inc., 616 F.2d 528 (3d

OR: TESS ER ate rR, RNase SA 21, 23

Frederick Chusid & Co. v. Marshall Leeman &

Co., 8326 F. Supp. 1048 (S.D.N.Y. 1971) ............. 22

George R. Whitten, Jr., Inc. V. Paddock Pool Build-

ers, Inc., 508 F.2d 547 (1st Cir. 1974), cert. de-

Siee, See- Oa BORG TROVE) sii n........;........... 22, 23

Gough Vv. Rossmoor Corp., 585 F.2d 381 (9th Cir.

1978), cert. denied, 440 U.S. 986 (1979) ............. 21

Havoco of America, Ltd. v. Shell Oil Co., 626 F.2d

Une WUE MING III ieicisscicsdtacnecCaselichincrndecadeonaninas 21

Hunt v. Crumboch, 325 U.S. 821 (1945) .....000000000. 20

> o

vi

TABLE OF AUTHORITIES—Continued

Page

Juneau Square Corp. V. First Wisconsin National

Bank of Milwaukee, 624 F.2d 798 (7th Cir.

1980), cert. denied, 49 U.S.L.W. 3409 (Dec. 1,

Sy TN Ee hoe ttbeeiintad wk, 21, 23

Kaplan Vv. Burroughs Corp., 611 F.2d 286 (9th Cir.

SINT - sesh dies sscncabiibeitaccatpiacainlalidtttiiadlbat Aah aii nichioiccteiadeiiees 21, 23

Maryland v. Baldwin, 112 U.S. 490 (1884) .......... 16, 28

Metal Lubricants Co. v. Engineered Lubricants

Co., 411 F.2d 426 (8th Cir. 1969) ........................ 20

Mr. Hanger, Inc. Vv. Rizzuto, 410 F.Supp. 1158

eR 4 Gy REECE Ae ere Pomme. 3 2 20, 22

Northwest Power Products, Inc. v. Omark Indus-

tries, Inc., 576 F.2d 83 (5th Cir. 1978), cert.

denied, 489 U.S. 1116 (1979) ........................-.--.- 21, 24

Perryton Wholesale, Inc. v. Pioneer Distributing

Co., 353 F.2d 618 (10th Cir. 1965), cert. denied,

Ms EEE PIII» ccinsscieistchatnsssalionnneesnairecuaibintipeesaien 20

Photovest Corp. Vv. Fotomat Corp., 606 F.2d 704

(7th Cir. 1979), cert. denied, 445 U.S. 917

REESE Se RE ee iy Selah eee Nee ED RT eo 10

Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225

CI clas nsccntscaenpthstchcoeschblielit da aclhbtlonciblhadaiblnddesiccmistiaciaibnanese 21

Standard Oil Co. v. United States, 337 U.S. 293

OES SG ce Semen AAS: ER Ae eee 26

Stifel, Nicolaus & Co. v. Dain, Kalman & Quail

Inc., 578 F.2d 1256 (8th Cir. 1978) -.................. 21

Sunkist Growers, Inc. v. Winckler & Smith Citrus

Products Co., 870 U.S. 19 (1962) .......000000200 16, 28

Telex Corp. Vv. IBM Corp., 510 F.2d 894 (10th

Cir.), cert. dismissed, 428 U.S. 802 (1975) ...... 18

Tower Tire and Auto Center, Inc. Vv. Atlantic

Richfield Co., 392 F.Supp. 1098 (S.D. Tex.

| PIERRE RE Tig eR eT A et 20

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

& Co., 512 F.2d 1264 (9th Cir. 1975) ................ 13

United States v. Blue Bell, Inc., 395 F.Supp. 538

(M.D. Tenn. 1975) ............ REE ESA ES Ore 10

United States v. Columbia Steel Co., 8334 U.S. 495

(1948) 13

vii

TABLE OF AUTHORITIES—Continued

Page

United States v. Von’s Grocery Co., 384 U.S. 270

(196. , PP IITTITITITIIIIIT TITTLE LITT 25

Vogue Instrument Corp. v. Lem Instruments

Corp., 40 F.R.D. 497 (S.D.N.Y. 1966) -............... 22

STATUTES ;

Clayton Act

Section 4, 15 U.S.C. § 15 (1976) ........0.00000000.... 3

Sherman Act

Section 1, 15 U.S.C. §1 (1976) 0.0.0... passim

Section 2, 15 U.S.C. §2 (1976) .....000 passim

MISCELLANEOUS

ABA ANTITRUST SECTION, ANTITRUST CIVIL JURY

II, OID na ccdeccsccthnsetenceccnchecsines 11

P. AREEDA & D. TURNER, ANTITRUST LAW (1978).. 18, 22

Boone, Single-Corporation Competitive Torts and

the Sherman Act, 2 Ga. L. REV. 372 (1968)...... 22

Handler, Twenty-Five Years of Antitrust, 73

CoLuM. L. REV. 415 (1978) .........0...... oe 9

Hutter, “Dirty Tricks” and Section One of the

Sherman Act: Federalizing State Unfair Com-

petition Law, 18 B.C. INDUS. AND Com. L. REV.

I 22

Note, Antitrust Treatment of Competitive Torts:

An Argument for a Rule of Per Se Legality

Under the Sherman Act, 58 Tex. L. REv. 415

| REGS OSSS EET e Aee eae eR de La 22

Note, The Role of Supply Substitutability in De-

fining the Relevant Product Market, 65 VA. L.

nc eeasencance 9

Note, Unfair Competition Under the Sherman Act,

59 Iowa L. REV. 1194 (1974) «2.0.0.0. 22

Note, 42 Forp. L. REV. 909 (1974) ....00000c 22

R. POSNER, ANTITRUST LAW (1976) ..........0.002000022.. 9, 13,17

Yoerg, Should a Trade Secrets Misappropriation

Claim Lie in the Procrustean Antitrust Bed?,

22 ANTITRUST BULL. 1 (1977) . vias 22

*%

IN THE

Supreme Court of the United States

OCTOBER TERM, 1980

No. 80-***

PAGE AIRWAYS, INC., et al.,

Petitioners,

Vv.

ASSOCIATED RADIO SERVICE Co.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Page Airways, Inc., Page Gulfstream, Inc., Douglas

Juston and Ross C. Chapin respectfully petition for a

Writ of Certiorari to issue to the United States Court

of Appeals for the Fifth Circuit to review that Court’s

Judgment and Opinion in Associated Radio Service Co.

v. Page Airways, Inc., No. 78-1179, entered on August 29,

1980.

OPINIONS BELOW

The Opinion of the United States Court of Appeals

for the Fifth Circuit appears in Appendix A of this peti-

tion and is reported at 624 F.2d 1342 and 1980-2 Trade

Cases {| 63,512. The Memorandum Opinion and Judgment

of the United States District Court for the Northern

District of Texas, denying Petitioners’ motion for judg-

2

ment notwithstanding the verdict with respect to Re-

spondent Associated Radio Service Co. and entering judg-

ment for Respondent for $9,048,210.00, appears in Ap-

pendix B of the petition but is not officially reported.”

The Judgment of the Court of Appeals appears in Ap-

pendix C and the Order of the Court of Appeals denying

Petitioners’ Petition for Rehearing and Suggestion for

Rehearing en banc appears in Appendix D.

JURISDICTION OF THIS COURT

The Opinion and Judgment of the Court of Appeals for

the Fifth Circuit was entered on August 29, 1980. The

timely Petition for Rehearing and Suggestion for Re-

hearing en bane were denied on November 3, 1980. The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1) (1976).

STATUTES INVOLVED

Section 1 of the Sherman: Act, 15 U.S.C. §1 (1976),

reads in pertinent 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 2 of the Sherman Act, 15 U.S.C. §2 (1976),

reads in pertinent part:

“Every person who shall monopolize, or attempt to

monopolize, or combine or conspire with any other

person or persons, to monopolize any part of the

trade or commerce among the several States, or with

foreign nations, shall be deemed guilty of a fel-

OMY, ..."

2 Two earlier rulings on procedural matters in this case are re-

ported at 414 F. Supp. 1088 (N.D. Tex. 1976), 1976-2 Trade Cases

760,971 and at 73 F.R.D. 683 (N.D. Tex. 1977), 1977-2 Trade

Cases {| 61,742.

3

Section 4 of the Clayton Act, 15 U.S.C. §15 (1976),

reads:

“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.”

STATEMENT OF THE CASE

The $9 million judgment in this private antitrust case |

rests on jury instructions reflecting long-standing defi-

ciencies in the approach to market definition, and on a

uniquely inadequate test of competitive injury which

converts the Sherman Act into a generalized treble-

damage remedy for ordinary business torts.

(1) Statement of Facts

This dispute arose out of the termination of a business

venture in which Petitioners Page Airways, Inc., its

wholly owned subsidiary Page Gulfstream, Inc. (herein-

after collectively referred to as “Page”) and Respondent

Associated Radio Service Co. (hereinafter “Associated” )

outfitted private and business aircraft at a facility in

San Antonio, Texas.

The business of outfitting aircraft consists of installing

flight equipment (“avionics”) and interiors in aircraft

to make them suitable for use by their owners.* Out-

fitters work on commercial aircraft that are being con-

8 Avionics outfitting involves the installation of the electronic

equipment, including flight control, navigation, and communication

subsystems, in the aircraft. Installation of interiors includes the

design and installation of the seats, carpeting, and other items in

the aircraft cabin.

a)

4

verted to private use, as well as on “green”* aircraft

delivered new from the factory. Today some twenty

major outfitters in this country and a few in Europe

outfit a variety of private aircraft. Associated Radio

Service Co. v. Page Airways, Inc., 624 F.2d at 1344-45;

App. A at 2a.

Respondent Associated has been in the aircraft out-

fitting business under various names and with assorted

business associates since 1948. In 1968, Associated opened

its own complete aircraft outfitting facility in Dallas,

Texas, which it continues to operate today, installing

both avionics and interiors in various aircraft. 624 F.2d

at 13845; App. A at 3a.

In 1967, Petitioner Page was asked by Grumman Cor-

poration to become a distributor of the Grumman Gulf-

stream II (G-II) and to establish an outfitting facility

in the southwest part of the country. Page thereupon

entered a five-year agreement with Associated, taking

effect in 1968, under which Page would contract to sell

outfitted G-II’s to business customers and Associated,

as a subcontractor, would install the avionics equip-

ment specified by the customers. The work would be

performed in an outfitting facility in San Antonio, Texas.

Interior installation, originally to be performed by a third

party, was soon taken over by a new enterprise jointly

operated by Page and Associated. Id. at 1345-46; App.

A at 4a.

By June 1972, Page notified Associated of its intention

not to renew the agreement when it expired in June

1973—a decision that was admittedly lawful—and began

plans to establish its own outfitting facility. Id. at 1347;

App. A at 6a. Disputes between the parties arose as

the joint operation in San Antonio was being shut down.®

4 Green aircraft are those new planes which are sold to customers

without completed avionics and interior furnishing.

5 Associated continued to operate its Dallas facility, installing

both avionics and interiors in a variety of aircraft, including some

G-II’s. Id. at 1845-47; App. A at 8a.

ll

5

Finally, Associated brought this antitrust damage action.

Id. at 1348; App. A at 8a.

(2) District Court Proceedings

Respondent Associated originally filed its complaint in

this case in October, 1973, in the United States District

Court for the Northern District of Texas. After an

initial amendment, the complaint was dismissed with

leave to amend. On June 25, 1975, Associated filed a

second complaint, charging that Page Airways, Inc., its

wholly owned subsidiary Page Gulfstream, Inc., and sev-

eral employees of Associated and Page had conspired to

eliminate Respondent as a competitor in the installation

of avionics in the Grumman G-II’s and had thereby

violated Sections 1 and 2 of the Sherman Act. The De-

fendants were alleged to have “pirated” Associated’s em-

ployees, stolen trade secrets, slandered Associated’s credit,

brought false lawsuits, engaged in commercial bribery,

and used income tax evasion to strengthen Page’s com-

petitive position.* Jd. at 1347-48; App. A at 8a-9a.

A jury trial commenced on June 6, 1977, continued for

11 weeks, and involved some 50 witnesses, 600 exhibits,

and 9,000 pages of testimony. The evidence proffered by

Associated related largely to Petitioners’ alleged bad

acts.7 Associated offered no testimony from customers

* Filing the suit with Associated was its principel supplier of

avionics equipment, Associated Radio Company. The District

Court found that the supplier had no standing to sue Petitioners

and entered judgment notwithstanding the verdict. App. B at 42a-

43a. The Court of Appeals affirmed. 624 F.2d at 1362-63; App. A at

39a-40a. Petitioners of course are not seeking to review that

judgment.

7 Petitioners had unsuccessfully sought to protect themselves

from the introduction of prejudicial and irrelevant evidence by

moving to dismiss or exclude inflammatory allegations and testi-

mony. These motions related, inter alia, to Petitioners’ alleged

°°.

6

or suppliers in the aircraft outfitting business (other

than Associated itself), nor from experts who had studied

the business. Petitioners unsuccessfully moved for a

directed verdict on the grounds, inter alia, that the evi-

dence dictated a broader market definition than the nar-

row definition proposed by Respondent, that Respondent

had shown at most injury to itself but had shown no

injury to competition, and that the evidence was insuffi-

cient to prove that Petitioners attempted to monopolize or

actually monopolized any relevant market, regardless of

how narrowly defined. Jd. at 1348, 1350, 1854; App. A

at 10a, 12a-13a, 21a; CA App. at 2362-2382, 2538-2557.

Both before and after the close of trial, Petitioners

proposed jury instructions that attempted to relate the

facts of the case to the market definition issue. CA App.

at 2391-93, 2518-27. The District Court, however, con-

cluded that the effort “to relate the facts to the law in

this case [had] resulted in either confusion or unfair-

ness,” CA App. at 2582, and abandoned the effort. Its

instructions to the jury on the critical issue of market

definition were little more than an abstract statement of

criteria listed in this Court’s decision in Brown Shoe

Co. v. United States, 370 U.S. 294 (1962). 624 F.2d at

1349-50, n.12; A>p. A at 1la-12a.

Petitioners also proposed special interrogatories direct-

ing the jury to determine whether each of the alleged

acts of unfair competition actually had occurred and, if so,

whether it had had an adverse effect on competition. CA

App. at 2472-94. The District Court, however, rejected the

interrogatories and charged the jury that each of the

alleged bad acts, if found, was evidence in support of

the antitrust claims, that it need not find a specific

injury, and that it had to find only that the conduct

tended to restrict competition or to prejudice the public

bribery of foreign officials, their alleged misuse of judicial process,

and their alleged failure to pay income tax. See Joint Appendix in

Court of Appeals (hereinafter “CA App.”) at 2274 and 2304.

7

interest. 624 F.2d at 1353, n.20 and 1858, n.27; App. A

at 20a and $la.

After brief deliberation, the jury returned a verdict

in favor of Respondent. It found that the relevant mar-

ket was the sale and installation of avionics equipment

in Grumman G-II’s only, that Petitioners had combined,

conspired, or agreed to restrain trade unreasonably in

violation of Section 1, and that Petitioners had monopo-

lized, attempted {o monopolize, or conspired to monopolize

the installation of avionics equipment in Grumman G-II’s.

It awarded $2,750,000 in damages to Associated Radio

Service Company and $550,000 to Associated Radio Com-

pany. 624 F.2d at 1848; App. A at 9a.

The trial judge, in his Memorandum Order and Judg-

ment of October 7, 1977, denied Petitioners’ motion for

judgment notwithstanding the verdict with respect to

Respondent Associated Radio Service Company and

awarded treble damages of $8,250,000.00, attorneys’ fees

. Of $757,424.00, and expenses of $40,876.00. App. B at

43a-46a, 48a. The judge found that Associated Radio

Company, the supplier of Associated, had no standing to

sue Petitioners for lost business and entered a judgment

for Petitioners notwithstanding the jury verdict for the

supplier. App. B at 42a-48a. Petitioners’ motion for a

new trial was denied on November 21, 1977. CA App. at

2622, 2675.

(3) The Court of Appeals Decision

The Court of Appeals for the Fifth Circuit affirmed

the judgment against Petitioners. The Court found suf-

ficient evidence to support the jury’s narrow market defi-

nition. It also held that the jury charge on the market

definition issue was “clear” despite the fact that it simply

repeated a list of potentially relevant factors, without

explanation and without indicating the significance of the

conflicting positions of the parties with respect to out-

fitters’ ability to move from one aircraft model to an-

other. 624 F.2d at 1348-50; App. A at 9a-12a.

8

Turning to the Section 1 violation, the Court set forth

a new two-part test for determining when acts of unfair

competition and other business torts violate Section 1 of

the Sherman Act. Neither part of its test requires a

showing of actual competitive injury; instead, the test

allows a jury to find liability if the plaintiff succeeds in

showing “(1) a market effect that would be prohibited

under the law of mergers; and (2) other conduct by de-

fendant that threatens Sherman Act values.” Id. at

1351; App. A at 16a. Applying the newly announced

test, the Court concluded that the jury instructions, re-

quiring only that the defendant’s conduct have a tendency

to injure competition or to prejudice the public interest,

were “adequate,” and that there was enough evidence to

satisfy the test in this case. Id. at 1851-58; App. A at

16a-20a.

Finally, the Court upheld the jury’s finding of a Sec-

tion 2 violation. It found that Page’s share of the sup-

posed G-II avionics market was significant enough to

support a Section 2 charge and that the collection of

alleged bad acts was sufficient to show a “pattern of

exclusionary behavior” in violation of Section 2. Id. at

1353-57; App. A at 21a-30a.®

®§ Because the Court held that “all of this conduct, taken to-

gether, rose to the level of a section 2 violation and .. . isolated

acts, standing alone, did not,” and because Hamilton, one of the de-

fendants, had been accused of engaging in only a few of the bad

acts, the Court of Appeals reversed the judgment against Hamil-

ton. 624 F.2d at 1363; App. A at 40a-4la (emphasis in original).

Petitioners had also challenged the substantial $9 million dam-

age award on a number of grounds, including the fact that the

jury was never told to distinguish between Associated’s losses

arising from the lawful termination of the subcontract relationship

and those arising from the alleged tortious acts. The Court of

Appeals nevertheless accepted the damage figure on the assump-

tion that, since the jury was aware of the termination of the sub-

contract relationship, it must have considered it and must have

decided that, despite the termination and n@w competition from

Page, Associated would have gotten the same of G-II outfit-

ting contracts that it previously had gotten through Page. Id. at

1861-62; App. A at 38a-39a.

9

REASONS FOR GRANTING THE WRIT

I. THE CASE INVOLVES FUNDAMENTAL ERRORS

IN THE APPROACH TO MARKET DEFINITION

THAT HAVE BEEN WIDESPREA:i AND REQUIRE

CORRECTION BY THIS COURT

Market definition is critical if not decisive in a wide

range of antitrust cases, including all merger cases and

all Sherman Act cases in which market power or actual

injury to competition must be shown. It is therefore

vitally important to a rational disposition of such cases

that markets be defined as accurately and sensibly as

economic analysis and practical constraints permit.

While in many cases the factual issues are com-

plex and ultimate resolution difficult, the basic ele-

ments of a correct approach to market definition are

not obscure. Yet they are widely misperceived or dis-

regarded. Market definition, both in jury and non-jury

cases, has been one of the least satisfactory and most

severely criticized areas of antitrust law.® In many cases,

® As Professor Handler has observed:

“The threshold inquiry in any merger or monopoly case is

the delineation of the relevant market. If the market is in-

correctly defined, we can anticipate that the result will usually

be likewise erroneous. The error can stem either from a mar-

ket determination that is too broad or one that is to narrow.

Unfortunately, market delineation from the very outset of

section 7 litigation has degenerated into a game. The process

of gerrymandering does no credit either to bench or bar.”

Handler, “Twenty-Five Years of Antitrust,” 73 CoLuM. L. REV. 415,

453 (1978).

To similar effect is Professor Posner’s opinion that “Cm Jarket

definition is . . . conceptually straightforward, but it has been

badly handled by the courts.” R. POSNER, ANTITRUST LAW 127

(1976).

See also Note, “The Role of Supply Substitutability in Defining

the Relevant Product Market,” 65 Va. L. REv. 129, 130 (1979) :

10

market definitions have bordered on the ludicrous—oc-

casionally overly broad, more commonly overly narrow.”

Much if not most of the difficulty is attributable to a

widespread failure to go beyond general, unelaborated

language in this Court’s decision in Brown Shoe Co.

v. United States, 370 U.S. 294 (1962), and to the fact

that the Court has not found an occasion in the inter-

vening nineteen years to reformulate and supplement

Brown Shoe’s description of: the market definition proc-

ess.1 The problem is not that the Brown Shoe criteria

“Opinions on questions of relevant market have been confusing,

as market definitions have varied from broad to narrow, seem-

ing'y with no logical consistency. The case law’s haphazard

delineations of markets and submarkets have failed to provide

an analytically sound framework upon which firms can rely in

planning mergers and other business strategies.”

10 F.g., Photovest Corp. Vv. Fotomat Corp., 606 F.2d 704 (7th Cir.

1979), cert. denied, 445 U.S. 917 (1980) (Treble damages for at-

tempting to monopolize a market consisting of retail photoprocess-

ing available through drive-thru kiosks, excluding retail photo-

processing available through any other outlets, such as drugstores,

supermarkets, etc.) ; Agrashell, Inc. v. Hammons Products Co., 479

F.2d 269 (8th Cir.) cert. denied, 414 U.S. 1082 (1973) (Jury ver-

dict of treble damages for attempting to monopolize the market for

making soft grit abrasive (SGA) out of black walnut and apricot

pit shells, excluding SGA made from other materials, such as saw-

dust, rice hulls, corn cobs and clover seeds. The Court of Appeals re-

versed for failure to prove a dangerous probability of achieving a

monopoly but did not reject the market definition) ; United States

v. Blue Bell, Inc., 395 F. Supp. 538, 542-51 (M.D. Tenn. 1975) (The

relevant product market is the sale of work clothes to industrial

rental laundries that rent the work clothes to industries and are

unaffiliated with a manufacturer of work clothes and does not in-

clude sales directly to industries or sales to industrial rental laun-

dries that are affiliated with a manufacturer of work clothes.)

11 The Court in Brown Shoe held:

“The outer boundaries of a product market are determined

by the reasonable interchangeability of use or the cross-

elasticity of demand between the product itself and substitutes

11

are wrong or that Brown Shoe was not a useful advance.

The criteria are all relevant. Rather, the basic problem

is that Brown Shoe’s undifferentiated listing of criteria

does not provide adequate or proper guidance to a fact-

finder, especially in jury cases.

This case, involving jury instructions that did little

more than track Brown Shoe’s language, is an appropri-

ate and timely opportunity for this Court to help ra-

tionalize the process of market definition. These instruc-

tions are not atypical. The problems they raise are

serious and will continue unless addressed. These very

instructions (and functionally similar ones) have been

reproduced in the ABA’s collection of sample jury in-

structions for antitrust cases.”

Moreover, the issues raised by the instructions in this

case, while basic, are relatively simple and can be deter-

mined without this Court’s having to resolve any factual

disputes. They relate to the adequacy of the jury instruc-

for it? However, within this broad market, well-defined

submarkets may exist which, in themselves, constitute product

markets for antitrust purposes. ... The boundaries of such a

submarket may be determined by examining such practical

indicia as industry or public recognition of the submarket

as a separate economic entity, the product’s peculiar charac-

teristics and uses, unique production facilities, distinct cus-

tomers, distinct prices, sensitivity to price changes, and spe-

cialized vendors. Because § 7 of the Clayton Act prohibits any

merger which may substantially lessen competition ‘in any

line of commerce’ (emphasis supplied), it is necessary to

examine the effects of a merger in each such economically

significant submarket to determine if there is a reasonable

probability that the merger will substantially lessen competi-

tion.” 370 U.S. at 825 (citations omitted).

42 The cross-elasticity of production facilities may also be

an important factor in defining a product market....

12 ABA ANTITRUST SECTION, ANTITRUST CIVIL JURY INSTRUCTIONS

127 (1980).

12

tions themselves, not to the sufficiency of the evidence.

The issues are three-fold:

1. Jury instructions that simply recite Brown Shoe’s

list of factors relevant to market definition—with no ex-

planation as to their meaning or relative significance and

no guidance as to how they are to be applied—are legally

insufficient.

2. Juries should not be told that market definition

can be arrived at by merely counting the factors point-

ing toward or against a separate market. The basic

issues in product market definition are user substitut-

a ‘lity (do buyers consider the products close substi-

tuces) and supplier substitutability (can suppliers pro-

duce the products interchangeably). Other “relevant fac-

tors” are simply evidence on these two basic issues,

and their significance varies considerably.

3. An instruction that merely tells the jury that either

a “market” or a “submarket” may be the relevant mar-

ket is inadequate and misleading. The relevance of the

“market/submarket” distinction made in Brown Shoe

needs at least to be more precisely defined. While a

case may indeed involve more than one relevant market,

there cannot ordinarily be both a clearly defined market

and an “economically significant submarket” within that

market. If buyer or supplier substitutability indicates

strongly that products A and B are in the same market,

market shares derived from an A “submarket” or a B

“submarket” will at best greatly misstate the competitive

significance of a merger or other conduct and may be

virtually meaningless.”

18 The shares of the “submarket” will overstate the significance

of, say, a merger between two firms that produce only product A

(or B), since competition from producers of B (or A) is totally dis-

regarded. The “submarket” shares will understate the significance

of a merger between an A producer and a B producer, as the share

of each will be zero in the other “submarket,” implying no hori-

zontal merger effects at all.

13

A. The Jury Instructions in This Case, Which Did

Little More Than Track the Language in Brown

Shoe Co. v. United States, Were Insufficient and

Misleading.

The underlying market definition question raised at the

trial was whether the relevant market should be narrowly

defined as the installation of avionics in G-II aircraft

models only, or more broadly defined as the outfitting of

turbine-powered business aircraft generally. The central

issue was supplier substitutability—whether or not estab-

lished outfitters can easily shift from one aircraft model

to another. It may be assumed that user substitutability

was not a significant issue—the owner of a G-II air-

craft needs an avionics and interior configuration suit-

able to a G-II. Nevertheless, as many cases and com-

mentators have recognized, lack of user substitutabil-

ity does not dictate separate markets if the products

are produced by common facilities and the produc 2rs can

and do readily shift their resources from one product

to the other in response to changing demands."

Defendants below introduced evidence that in the out-

fitting industry the technology, facilities, basic tools and

skills, avionics and other materials used in outfitting vari-

ous turbine-powered business aircraft are the same; and

that most of the established outfitters hold themselves

out as being able to outfit a variety of aircraft, do in

fact outfit a variety of aircraft, and readily move from

one type to another.” Plaintiff company is among

14 United States v. Columbia Steel Co., 334 U.S. 495, 510 (1948) ;

Calnetics Corp. v. Volkswagen of America, Inc., 582 F.2d 674 (9th

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

Inc. V. Charles O. Finley & Co., 512 F.2d 1264 (9th Cir. 1975);

Telex Corp. v. IBM Corp., 510 F.2d 894, 914-19 (10th Cir.), cert.

dismissed, 423 U.S. 802 (1975); In re Budd Co., 86 F.T.C. 518

(1975). See P. AREEDA & D. TURNER, II ANTITRUST LAW {[ 526

(1978) ; R. POSNER, ANTITRUST LAW, 127-29 (1976).

1 624 F.2d at 1349, n.11; App. A at 10a-lla; CA App. 1486-88,

1502-08, 1724-43, 1848-50, 3467.

14

those, and testimony from some of the Plaintiffs’ own

witnesses supported the proposition that the business

is broader than the outfitting of any one model.”

Plaintiff, on the other hand, introduced evidence that

shifting to a G-II installation involves start-up costs in

procuring the necessary Supplemental Type Certificates ”

and in surmounting the “learning curve,” and that out-

fitters tend to specialize in a particular aircraft type at

any given time.**

Page moved for a directed verdict on the market

issue. That motion denied, Page sought market defini-

tion instructions that would relate the law to the facts

at issue in the case. Page particularly sought such an

instruction with regard to the central issue in the case

—whether outfitters, because of their ability to shift

from one aircraft to another, should be deemed to be

in a market of outfitting turbine-powered business air-

craft generally. Instead, the District Court, in its charge

to the jury on the market definition issue, simply stated

Plaintiffs’ and Defendants’ conflicting definitions of the

relevant market, listed the Brown Shoe criteria, and

added the following:

“No one factor is necessarily decisive, but the

more of these criteria that the particular relevant

market fulfills, the more likely it is a separate

_ product/service market.

16 CA App. 110-11, 686-90, 698, 725-26, 1110-11.

17 These certificates warrant that the avionics installation in a

particular plane meets Federal Aviation Administration standards.

18 The evidence cited by the Court of Appeals that it took “up to

$3,000,000 and two and one-half years to enter the G-II avionics

installation market,” 624 F.2d at 1849, n.11; App. A at 10a-1lla,

plainly referred to the cost of creating a complete new facility, not

the cost of switching existing facilities from the outfitting of other

aircraft to the outfitting of G-II’s. CA App. at 36-37, 1008-10.

15

For the purpose of this case, it is immaterial

whether you find from a preponderance of the evi-

dence that the relevant market is a market or a

submarket. The relevant market may be either a

market or a submarket.” 624 F.2d at 1849, n.12;

App. A at 1la-12a.

The District Court rejected Page’s objections to this

charge, including the objection that it was “wholly mean-

ingless and confusing in that it fails to define the con-

siderations which go into determining the relevant mar-

ket in any way which may be understood by the jury.”

CA App. at 2573.

On appeal, in addition to arguing that there should

have been a directed verdict on the market issue, Page

again urged that the charge to the jury was insufficient

and misleading. In upholding the jury verdict, the Court

of Appeals disposed of Page’s objections as follows: —

“We think there was ample evidence of high entry

barriers and of the difficulty outfitters encountered

in switching back and forth from one model of air-

craft to the next to allow the jury to find a rela-

tively narrow market. The court’s charge on this

issue was clear and spelled out the relevant factors

for the jury to consider, and we therefore hold that

the jury’s factual finding regarding Associated’s

claim is supported by the evidence.” 624 F.2d at

1349-50; App. A at 10a-12a (footnotes omitted).

But the instructions were neither “clear” nor correct

on the crucial issue of the weight to be given the various

“relevant factors” and the factual evidence bearing on

them. Under the charge given it, the jury could have

believed Page’s evidence showing that outfitters could

and did move easily from one aircraft model to another,

rather than the evidence cited by the Court, and still

have found a narrow G-II market on the basis of “the

product’s and/or services peculiar characteristics and

uses,” “distinct prices,” and “distinct customers”—either

16

under the misleading instruction that “the more of these

criteria that the particular relevant market fulfills, the

more likely it is a separate .. . market/’or in the belief,

which the instructions did not dispel, that even though

outfitter mobility clearly pointed to a general outfitting

market, other criteria could be taken as indicating a

relevant “submarket.” ”

Thus, this case squarely raises the basic market defini-

tion issues set forth above:

First, Brown Shoe’s list of “practical indicia” is not

and did not purport to be a self-contained blueprint for

correct market definition analysis. A mere list of

“indicia” does not tell a lay jury—typically unfamiliar

with the legal and economic concepts involved—how those

indicia are to be applied or put together. (Nor indeed

does it adequately explain to a lower court how to define

markets in cases tried without a jury.) On its face, a

charge that simply tracks Brown Shoe is legally in-

adequate.

Second, Brown Shoe’s “indicia” are of varying im-

portance. The basic determinants of a product market

are user substitutability and supplier substitutability.

Products or services belong in the same market where

either (1) buyers consider them to be close substitutes

(reasonable interchangeability in use), or (2) suppliers

can and do readily shift their productive resources from

one product or service to the other in response to chang-

ing demands (reasonable interchangeability of productive

19 Because there was no way of knowing whether the jury re-

solved the disputed evidence on supply substitutability in the

manner cited by the Court of Appeals or whether it arrived at its

narrow market definition on legally erroneous grounds, the Court of

Appeals should have remanded for proper instructions. Sunkist

Growers, Inc. v. Winckler & Smith Citrus Products Co., 370 U.S. 19,

29-80 (1962) ; Maryland v. Baldwin, 112 U.S. 490, 493 (1884).

17

resources). In either event, the various suppliers are

in effective competition with each other, and hence are

comparable alternatives to whom buyers may turn. All

other “indicia” are simply evidentiary with respect to

those basic determinants, and the proper weight to be

given them varies widely. “Sensitivity to price changes”

deserves heavy weight; such evidence strongly suggests

either easy buyer or easy supplier substitutability. On

the other hand, such factors as “distinct prices,” “in-

dustry or public recognition . . . as a separate economic

entity,” or “specialized vendors,” are much less signifi-

cant, and useful only where more decisive indicators are

equivocal. Consequently, it is a critical error—too easily

inferred from Brown Shoe—to instruct a jury, as the

trial court in this case did, that “the more of these

criteria that a particular relevant market fulfills, the

more likely it is a separate product/service market.”

Third, Brown Shoe’s “market’/“submarket” distinc-

tion is confusing and potentially misleading—the very

term “submarket” suggests something less than a mar-

ket. Whenever lack of buyer and supplier substitut-

ability clearly indicates that two products are in separate

markets, there is no meaningful “broad market” encom-

passing both. On the other hand, whenever buyer and/

or supplier substitutability point clearly to a market

including two or more products, that is the relevant

market and there is no “economically significant submar-

ket” consisting of one product alone.” There seems little

2° Professor Posner makes precisely these points:

“The ‘submarket’ approach is unsound. If the ‘outer bound-

aries’ of the market include only the product’s good substitutes

in both consumption and production—which seems a fair

reading of Brown Shoe’s reformulation of the cellophane test—

then a submarket would be a group of sellers from which

sellers of good substitutes in consumption or production had

been excluded, and these exclusions would deprive any market-

share statistics of their economic significance.”

R. POSNER, ANTITRUST LAW 129 (1976).

18

doubt that misapplication of the market/submarket dis-

tinction has made a significant contribution to the du-

bious market definitions that have littered the antitrust

landscape over the past nineteen years.

B. The Issues Raised Are Important and Should Be

Resolved by This Court.

The market definition issues raised by this case are

of pervasive importance. Market shares are the basis for

presumptive liability in virtually all merger cases. The

reasonableness of those rules hinges on sensible market

definition. If markets are ill-defined, market shares lose

whatever significance they would otherwise have. An

innocuous merger may be struck down; a potentially

harmful merger may escape.

Similarly, proper market definition is critical in Sher-

man Act cases where proof of competitive injury is re-

quired either to protect possibly beneficial conduct” or

simply to screen out cases of no competitive significance.

For example, as discussed in Point II below, most courts

have concluded that it is inappropriate to assimilate busi-

ness torts into antitrust law, and accordingly that Sher-

man Act treble damages should not be awarded for busi-

ness torts unless substantial injury to competition is

shown. The latter cannot be determined without defin-

ing the market. Vague or loose market instructions, per-

mitting the finding of unduly narrow markets, under-

cut the screening function that a substantial injury

requirement is designed to perform.

As we stated at the outset, the approach to market

definition reflected in the jury charge in this case is no

aberration. The basic errors we have described are com-

21 F.9., Continental T.V., Inc. v. GTE Sylvania, Inc., 483 U.S.

86 (1977).

19

mon, and correcting them would be a long and much

needed step toward clarifying a muddled area of anti-

trust law in both jury and non-jury cases. Particulars

in the application of correct basic principles would re-

main to be resolved, but at least the lower courts would

be put on the right course.”

II. THE FIFTH CIRCUIT HAS ADOPTED A UNIQUE

TEST FOR DETERMINING WHEN ACTS OF UN-

FAIR COMPETITION VIOLATE THE ANTITRUST

LAWS—A TEST THAT CONFLICTS WITH THE

TESTS PREVAILING IN OTHER CIRCUITS AND

THAT SHOULD BE REJECTED BEFORE MORE

BUSINESS RIVALS ARE ENCOURAGED TO SEEK

TREBLE DAMAGES FOR ORDINARY BUSINESS

TORTS

In upholding the jury instructions on liability, the

Fifth Circuit has adopted a test under which simple

business torts may constitute antitrust violations when-

ever they hold some potential for injuring competition,

whether or not actual injury to competition is shown. This

new test is a significant departure from the more demand-

ing standard of actual competitive injury being adopted

by most of the circuits. Because the decision in this case

will encourage more disgruntled business rivals to use

the antitrust laws to get treble damages and attorney’s

fees for ordinary business torts, this Court should ad-

dress the question promptly and resolve the conflict.

Despite this Court’s time-honored admonition that the

antitrust laws are not designed to remedy injuries from

22 Because the market definition issues raised by this case are of

such importance to governmental as well as private enforcement of

the antitrust laws, the Court, if it grants this petition, may wish

to invite the Solicitor General to present the views of the United

States.

all business torts,” a small but influential line of cases

developed under which a conspiracy to eliminate a com-

petitor by unfair means was treated as a per se violation

of Section 1 of the Sherman Act.* Under this doctrine,

frequently referred to as the Pick-Barth per se rule, the

courts focus on the intent and conduct of the defendants

and the injury to the plaintiff; there is no concern with

the effect on competition.

23 Hunt v. Crumboch, 325 U.S. 821, 826 (1945) (“[The Sherman

Act] doe: not purport to afford remedies for all torts committed by

or against persons engaged in interstate commerce.”); Apez

Hosiery Co. v. Leader, 310 U.S. 469, 512 (1940) (“[T])he Sherman

Act was not enacted to police interstate transportation, or to afford

a remedy for wrongs, which are actionable under state law, and

result from combinations and couspiracies which fall short, both

in their purpose and effect, of any form of market control of a

commodity, such as to ‘monopolize the supply, control its price, or

discriminate between its would-be purchasers.’ ”)

*% The doctrine originated in Albert Pick-Barth Co. v. Mitchell

Woodbury Corp., 57 F.2d 96 (1st Cir.), cert. denied, 286 U.S.

552 (1982) (Plaintiff claimed that the defendant corporation

conspired with plaintiff’s employees to deprive plaintiff of its busi-

ness by soliciting plaintiff’s employees and misappropriating cus-

tomer lists and cost records. The First Circuit affirmed the plain-

tiff’s judgment, holding that “[t]o constitute an offense under

[S]ection 1 of the Sherman Act, it is not necessary, if a conspiracy

is proven, the purposes and intent of which was to eliminate by

unfair means a competitor in interstate trade, to show that the

public was affected, and to what extent.” 57 F.2d at 102.) Subse-

quently, the same court in Atlantic Heel Co. v. Allied Heel Co.,

284 F.2d 879 (lst Cir. 1960), characterized similar, albeit more

extreme, methods of unfair competition as a per se violation of

the Act. A Pick-Barth type of action was also recognized by the

Tenth Circuit in Perryton Wholesale, Inc. v. Pioneer Distrib. Co.,

858 F.2d 618 (10th Cir. 1965), cert. denied, 383 U.S. 945 (1966).

See also Metal Lubricants Co. v. Engineered Lubricants Co., 411

F.2d 426, 431 (8th Cir. 1969); Mr. Hanger, Inc. v. Rizzuto, 410

F. Supp. 1158 (S.D.N.Y. 1975); Tower Tire and Auto Center, Inc.

v. Atlantic Richfield Co., 392 F. Supp. 1098 (S.D. Tex. 1975).

Some courts extended the doctrine to find per se violations when the

conspiracy was only to injure, but not to eliminate, a competitor.

C. Albert Sauter Co. Vv. Richard S. Sauter Co., 368 F. Supp. 501

(E.D. Pa. 1978).

21

More recently, the courts have begun to recognize that

the aims of the antitrust laws are different from and

frequently antithetical to the aims of the laws against

unfair competition. While the antitrust laws are con-

cerned with adverse effects on competition, unfair com-

petition laws are largely concerned with protecting the

private interests of individual competitors. Acts of un-

fair competition do not necessarily affect market com-

petition adversely; indeed, such acts are often _pro-com-

petitive. Cf. Sears, Roebuck & Co. v. Stiffel Co., 376

U.S. 225 (1964).% Because per se rules of illegality are

appropriate only when “they relate to conduct that is

manifestly anticompetitive,” Continental T.V., Inc. v.

GTE Sylvania, Inc., 483 U.S. 36, 49-50 (1977), and

because acts of unfair competition do not fit in that

category, most of the circuits, including the Fifth Cir-

cuit, have been rejecting the Pick-Barth per se rule of

illegality for acts of unfair competition.2® Even the

progenitor of the Pick-Barth line of cases, the First

Circuit, has rejected the per se rule, at least insofar as

25 The conflict is particularly clear in the frequent cases involving

employees who break off to form a new competing company. They

may take customer lists and trade secrets with them, or in other

respects attempt to profit from their former association. However

distasteful such conduct may be from the perspective of tort law,

antitrust purposes are served by the creation of a new or more

effective competitor.

26 See Franklin Music Co. v. ABC, Inc., 616 F.2d 528, 541-42

(8d Cir. 1979), as amended Dec. 28, 1979, Jan. 8 and 9, 1980;

Northwest Power Products, Inc. v. Omark Industries, Inc., 576

F.2d 83 (5th Cir. 1978), cert. denied, 489 U.S. 1116 (1979) ; Juneau

Square Corp. v. First Wisconsin National Bank of Milwaukee, 624

F.2d 798 (7th Cir.), cert. denied, 49 U.S.L.W. 3409 (Dec. 1, 1980)

(No. 80-517) ; Havoco of America, Ltd. v. Shell Oil Co., 626 F.2d

549, 555-56 (7th Cir. 1980) ; Stifel, Nicolaus & Co. v. Dain Kalman

& Quail, Inc., 578 F.2d 1256 (8th Cir. 1978) ; cf. Kaplan v. Bur-

roughs Corp., 611 F.2d 286 (9th Cir. 1979), 1980-1 Trade Cases

| 63,028 (9th Cir. 1979); Gough v. Rossmoor Corp., 585 F.2d 881

(9th Cir. 1978), cert. denied, 440 U.S. 936 (1979).

A’

22

it stands for the broad proposition that unfair competi-

tive practices accompanied by an intent to hurt or elimi-

nate a competitor constitute per se violations of the anti-

trust laws. An adverse effect on competition must be

shown.” Similarly, the Tenth Circuit has qualified the

support it appeared to give the Pick-Barth doctrine in

1965 in the Perryton case.”®

Thus, the circuits that have considered the question

are generally agreed that “bad acts” and evil intent by

the defendant and resultant pecuniary injury to the

plaintiff are not enough to sustain antitrust liability;

the impact on competition must also be considered.”

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

508 F.2d 547, 559-62 (1st Cir. 1974), cert. denied, 421 U.S. 1004

(1975).

28 Craig v. Sun Oil Co., 515 F.2d 221, 223-24 (10th Cir. 1975),

cert. denied, 429 U.S. 829 (1976) (“Reference is made in the Perry-

ton opinion to existing competition, and it is not necessarily a per

se case despite the citation of the First Circuit cases.”). The

Fourth and Sixth Circuits apparently have not faced the issue.

The Second Circuit has also not addressed the issue, but several

of the district courts in the circuit have and almost every such

instance reveals at least a distaste for the Pick-Barth rule. See

Frederick Chusid & Co. v. Marshall Leeman & Co., 326 F. Supp.

1048 (S.D.N.Y. 1971); Vogue Instrument Corp. v. Lem Instru-

ments Corp., 40 F.R.D. 497 (S.D.N.Y. 1966); cf. Mr. Hanger, Inc.

v. Rizzuto, 410 F. Supp. 1158 (S.D.N.Y. 1975).

2° The literature is in total accord; the Pick-Barth rule has been

severely criticized. See Yoerg, Should A Trade Secrets Misappro-

priation Claim Lie in the Procrustean Antitrust Bed?, 22 ANTITRUST

BULL. 1 (1977); Hutter, “Dirty Tricks” and Section One of the

Sherman Act: Federalizing State Unfair Competition Law, 18 B.C.

INDUS. AND CoM. L. REv. 239 (1977); Boone, Single-Corporation

Competitive Torts and the Sherman Act, 2 GA. L. REV. 372 (1968) ;

Note, 42 Forp. L. Rev. 909 (1974); Note, Unfair Competition

Under the Sherman Act, 59 Iowa L. REV. 1194 (1974); P. AREEDA

& D. TURNER, III ANTITRUST LAW § 828b (1978). One author has

even advocated that some business torts be considered per se legal

insofar as antitrust law is concerned. Note, “Antitrust Treatment

of Competitive Torts: An Argument for a Rule of Per Se Legality

Under the Sherman Act,” 58 Texas L. REV. 415 (1980).

23

The conflict arises because the courts do not agree on

what that impact should be. Most of the circuits require

an actual adverse impact on competition, usually a “sub-

stantially adverse” impact.®° The Fifth Circuit, however,

now imposes treble damage liability for unfair acts that

simply have a potential for anticompetitive effects.

The leniency of the Fifth Circuit’s standard can be

seen in both the jury charge it explicitly approved and

the new test it announced. The charge to the jury in

this case defined unreasonable restraints of trade as

conduct which “tends” to restrict competition. The trial

court added that “you need not find a specific injury, but

you must find that the conduct tends or is reasonably

calculated ‘tu prejudice the public interest.”* More-

80 Juneau Square Corp. v. First Wisconsin National Bank of

Milwaukee, supra, 624 F.2d at 811 (“The Sherman Act requires

more than mere injury to a competitor. Plaintiffs must show also

that the ‘effect upon competition in the marketplace is substantially

adverse.’”); Franklin Music Co. v. ABC, Inc., supra, 616 F.2d at

541 (Plaintiff must show “a substantial impact on or restraint of

trade affecting competition in a product market.”); Kaplan v.

Burroughs Corp., supra, 611 F.2d at 291 (“[T]he primary con-

siderations in determining whether a restraint of trade is un-

reasonable are whether the intent of the restraint is anticom-

petitive and whether the restraint itself has significant anticom-

petitive effects.”) ; Craig v. Sun Oil Co., supra, 515 F.2d at 224

(“[The defendants’ conduct] had no impact on the competitive

situation, and was not actionable under the antitrust theory of

plaintiff’s case.”); George R. Whitten, Jr., Inc. v. Paddock Pool

Builders, Inc., supra, 508 F.2d at 562 (“While the relevant market

for purposes of section 2 is not necessarily that for purposes of sec-

tion 1, there still must be some consideration of the effect of a

defendant’s conduct on some significant part of the market. There

is no evidence [in the present case] whatever of harm to general

competition in the market.”).

51 The entire instruction may be found at 624 F.2d at 1358, n.20;

App. A at 20a.

24

over, despite Petitioners’ requests that it do so, the Court

did not instruct the jury to find whether the various

alleged instances of improper conduct adversely affected

competition. Rather, the jury was simply told that each

of the alleged bad acts, if it occurred, would be evidence

supporting Respondent’s Sherman Act claims. In short,

the jury charge required at most only a finding that Peti-

tioners’ conduct tended to injure competition, and taken

as a whole may not have required even that.™

On appeal, the Court below responded as follows to

Petitioners’ objections to the jury charge:

“Defendants complain about the court’s charge to

the jury, contending that it failed adequately to in-

struct them on the necessity of finding injury to

competition. We believe the charge, some of which

is set out in the margin, when viewed in its en-

tirety was adequate to withstand a challenge under

Northwest Power [Products, Inc. v. Omark Indus-

tries, Inc.].”” 624 F.2d at 1853; App. A at 20a.

Earlier in its opinion, the Court had read Northwest

Power as setting forth a two-part test under which a

jury can find a defendant liable under Sherman Act §1

for acts of unfair competition if plaintiff shows “(1)

a market effect that would be prohibited under the law

of mergers; and (2) other conduct by defendant that

threatens Sherman Act values.” Jd. at 1351; App. A

at 16a. Thus, the Fifth Circuit will find liability if

it finds that the defendant could not lawfully have

acquired the plaintiff and that defendant’s conduct

“threatens” Sherman Act values, whether or not the

“threat” results in an actual diminution of competition.

82 Under the broad “public interest” standard of the judge’s

charge, plaintiff’s counsel was permitted to argue that “[i]t is

in the public interest to have a marketplace that is not loaded down

with bribery” and was able continuously to refer to Petitioners as

“The Corrupters.” CA App. at 1900-1903.

25

This test falls far short of the requirement of ac-

tual (and usually substantial) injury that other circuits

have adopted. The first part incorporates the standards

of antimerger law. The legality of a merger turns on an

“incipiency” test; proof of actual anticompetitive effects

is not required.** And some of the judicially formulated

rules under the law of mergers permit findings of il-

legality not on the basis that the particular merger in

question would be likely to have any significant ill effects,

but rather on the basis that an accumulation of mergers

of that magnitude would lead to a substantial lessening

of competition.* Similarly, the “tends to” language of

the jury charge and the “threatens” language of the

second part of the test contemplate only incipient not

actual harm to competition.™

A probability of adverse competitive consequences

may be a sufficient basis for an antitrust court to enjoin

a defendant from engaging in some kinds of business

torts in some kinds of circumstances. But it is a totally

inappropriate test for awarding an aggrieved competitor

33 Brown Shoe Co., Inc. v. United States, supra, 370 U.S. at 818,

n.32 and 323 (“...§7 of the Clayton Act was intended to reach

incipient monopolies and trade restraints .. .” and “Congress used

the words ‘may be substantially to lessen competition’, to indicate

that its concern was with probabilities, not certainties.” (Footnotes

omitted and emphasis added.) ).

%4 See, e.g., United States v. Von’s Grocery Co., 884 U.S. 270, 278

(1966) ; Brown Shoe Co., Inc. v. United States, supra, 870 U.S. at

843-44,

%5 Actually it is difficult to imagine circumstances in which busi-

ness torts directed against a competitor would add to the market

effect of acquiring that competitor. Even if the torts eliminate

the victim, the competitive effect is no worse than merger and may

well be less, because the perpetrator does not acquire the good-will

or going concern values that merger would have yielded.

A merger test may be a useful threshold test in a variety of

business torts cases, leading to the dismissal of cases in which

es

26

triple the amount of damages suffered from lost business.

Aggrieved competitors should get damages only for in-

juries causally related to acts that actually injure com-

petition, not from acts that might injure competition.”

There is no need to belabor the obvious fact that

the difference between the “tendency” test of the Fifth

Circuit and the actual impact test of the other circuits

is more than a semantic quibble. Many decisions of this

Court comparing Sherman Act and Clayton Act tests

have stressed the difference.” It is perhaps noteworthy,

however, that plaintiff in the present case appears to be

the only party ever to pfevail in an antitrust damage

action for acts of unfair competition where the test

was not per se illegality.**

merger would have been lawful. But to find liability for business

torts because a merger would be unlawful on “incipiency” grounds

is quite another matter.

36 This Court has recently made the point, emphasizing the

difference between the prophylactic nature of the anti-merger laws

and the remedial nature of the treble-damage provisions. Brunswick

Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 485 (1977).

87 See, e.g., Brown Shoe Co. v. United States, supra, 370 U.S.

at 317-18, n.32; Standard Oil Co. v. United States, 3837 U.S. 293,

812-18 (1949).

88 The conflict is not mooted by the fact that the Court below,

having approved the jury charge under its potentiality test, cited

evidence which in its view permitted an inference of actual com-

petitive injury. Since the jury was given a “tendency” charge, the

Court of Appeals could have accepted the verdict despite the in-

struction only if the evidence of actual injury to competition were

so clear that a reasonable jury could not find otherwise. That

was not the case and the Court did not so hold. On the contrary,

there was no adverse change in market structure after the alleged

bad acts and there was overwhelming evidence in the record, in-

cluding testimony of Associated’s own officers, that the alleged

market remained intensely competitive. CA App. at 104-105. More-

over, the Court’s reliance on a comparison of prices and profits on

transactions before and after the challenged conduct was erroneous

27

The Fifth Circuit has been an influential force in the

movement toward rejecting the Pick-Barth rule. Its ar-

ticulation of a new test to replace the per se rule is likely

to be influential as well. This Court should correct the

inappropriate use of incipiency tests in unfair competi-

tion actions before more time and money is wasted liti-

gating garden-variety business torts in federal courts

under the antitrust laws.

Ill. THE COURT, IF IT GRANTS THIS PETITION,

SHOULD ALSO CORRECT THE PLAIN ERROR

COMMITTED BY THE COURT BELOW IN UP-

HOLDING THE VERDICT OF LIABILITY UNDER

SECTION 2 OF THE SHERMAN ACT

The Court below held that no one of the alleged in-

stances of improper conduct, standing alone, could sup-

port liability under Section 2 of the Sherman Act. Only

“taken together” could these acts support the jury’s ver-

dict.** The Court, however, overlooked the fact that the

jury was not so instructed. The jury was simply told

that each of the alleged instances was “evidence sup-

porting plaintiffs’ antitrust claims.” 624 F.2d at 1359,

n. 27; App. A at 3la. Thus, the jury could have easily

predicated liability on a finding that only one or two

instances of improper conduct occurred. Since the jury

was not asked to indicate its findings with respect to the

for reasons that need not be spelled out here but were elaborated

upon in the petition for rehearing below.

3° “Probably no one of the instances of improper conduct, stand-

ing alone, would lead to section 2 liability. Taken together, how-

ever, they show a pattern of exclusionary behavior sufficient to

support the jury’s verdict.” 624 F.2d at 1356; App. A at 25a.

Later in the opinion the Court was more categorical, holding:

“We reiterate that all of this conduct, taken together, rose to the

level of a section 2 violation and that isolated acts, standing alone,

did not.” Jd. at 1363; App. A at 4la (emphasis in original).

28

individual acts but was asked only conclusory questions

as to ultimate liability, one cannot tell on what basis the

jury found liability.*° Accordingly, a remand was plainly

required.*! Sunkist Growers, Inc. v. Winckler & Smith

Citrus Products Co., 370 U.S. 19, 29-80 (1962); Mary-

land v. Baldwin, 112 U.S. 490, 493 (1884).

Where, as here, the evidence necessary to convert gar-

den-variety business torts into an antitrust violation

is so thin and a jury disposition to condemn so likely,

courts must be particularly attentive to the distinction

between sufficiency of the evidence and adequacy of in-

struction. Assuming that the Court of Appeals was

correct in finding that the evidence, if construed in a

particular way, was sufficient to support liability under

Section 2, the Court could affirm only if it also found

that the jury was so instructed. This condition was not

met,*

40 Petitioners had tried to avoid this problem by proposing spe-

cific interrogatories addressed to the occurrence vel non of each

alleged bad act. CA App. at 2472-2497.

41 The evidence on each of the alleged “bad acts” was highly

controverted; one cannot say as a matter of law that the jury must

have found enough “bad acts” to satisfy the test of the Court of

Appeals.

42 The Court of Appeals made the same error in upholding the

jury’s market definition, see supra at 15-16. It also made a similar

error in affirming liability under Section 1 on the ground, inter

alia, that acquisition by Page of Associated’s San Antonio opera-

tion would have violated Clayton Act § 7. That issue was never even

raised at trial, let alone put to the jury, and Petitioners were

therefore deprived of the opportunity to present evidence on various

issues relevant to a Section 7 “potential competition” case, the

theory on which the Court of Appeals relied. See 624 F.2d at 1351-

52: App. A at 16a-18a.

29

CONCLUSION

For the foregoing reasons, Petitioners respectfully

pray that a Writ of Certiorari issue to review the J udg-

ment and Opinion of the United States Court of Appeals

for the Fifth Circuit.

Respectfully submitted,

DONALD F. TURNER

RONALD J. GREENE

SUSAN Low BLOcH

WILMER, CUTLER & PICKERING

1666 K Street, N.W.

Washington, D.C. 20006

(202) 872-6000

Attorneys for Page Airways, Inc.

Of Counsel: and Page Gulfstream, Inc.

AKIN, GUMP, HAUER & FELD JAY M. VOGELSON

2800 Republic National One Dallas Center, Suite 2400

Bank Bldg. Dallas, Texas 75201

Dallas, Texas 75201 Attorney for Douglas Juston

D. L. CASE

JACK PEW, JR.

4300 First National Bank Bldg.

Dallas, Texas 75202

Attorneys for Ross C. Chapin

February 2, 1981