Amicus Curiae Brief — Mobil Oil Corporation v. Jerry A. Blanton and Roy H. Healey

~

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No. 83-1896

An the Supreme Court of the Hnited

Octoper Term, 1984

Mosii O11 CORPORATION, PETITIONER

Vv.

Jerry A. BLANTON, Roy H. HEALEY

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

Rex E. Les

Solicitor General

J. Paut McGratu

Assistant Attorney General

CHARLES F. RULE

Deputy Assistant Attorney General

JERROLD J. GANZFRIED

Assistant to the Solicitor General

CATHERINE G. O’SULLIVAN

Nancy C. GARRIS_N

Attorneys

Department of Justice

Washington, D.C. 20530

(202) 633-2217

QUESTION PRESENTED

Whether the court of appeals’ erroneous statement that a

relevant market finding is not necessary to establish an

attempt to monopolize under Section 2 of the Sherman Act

warrants this Court's review of the court of appeals’ judg-

ment upholding a jury verdict for respondents where the

jury found that petitioner had attempted to monopolize a

specified relevant market and the court of appeals con-

cluded that petitioner “[hjad pointed to nothing in the

record that would lead [the reviewing court] to question the

jury’s ‘actual finding.”

(1)

TABLE OF CONTENTS

Page

tien cceeeuedeoeuevooeseseeensoeeens l

hits ceacepeeepedesaneneeseeeeseceses 3

REE SbeOh Sade scdeddedesédoccotcoceccoscce 18

TABLE OF AUTHORITIES

Cases:

Agrashell, Inc. v. Hammons Products

Co., 479 F.2d 269, cert. denied, 414 U.S. |

BE Web dubwededdeddtdedeoucccccccececece 16

Berenyi v. Immigration Director,

PPE GubSeetdesesUeeWecccccceesces 16

Berkey Photo, Inc. v. Eastman Kodak Co.,

603 F.2d 263, cert. denied, 444 U.S.

SE Mae bedddsddecewcoewesessoceccceueces 5

Commonwealth v. Peaslee, 177 Massachusetts

DID. cocceéspecconserenseroeeeses 9

Copperweld Corp. v. Independence Tube

Corp., No. 82-1260 (June 19,

RD. Sececaqncecdéeednébooees 4, 5, 6, 7, 11, 17

E.J. Delaney Corp. v. Bonne Bell, Inc.,

525 F.2d 296, cert. denied, 425 U.S.

Dt ict debistbebbelbdeheéedcececcescoesece 5,6

Edward J. Sweeaey & Sons, Inc. v. Texaco,

Inc., 637 F.2d 105, cert. denied, 451 U.S.

Di Renaeaneeaseesecoedséoeeetessooeseqe ce 16

FLM Collision Parts, Inc. v. Ford Motor

Co., 543 F.2d 1019, cert. denied, 429 U.S.

ahd Eee eRe ede eeu eséensocoese 16

IV

Page

Cases—Continued:

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

Builders, Inc., 508 F.2d 547, cert. denied,

kf * SEPT rrrT TTT TT eTTTTITTT 5, 16

Gough v. Rossmoor Corp., 585 F.2d 381,

cert. denied, 440 U.S. 936 ............55. 10, 11

Graver Tank & Mfg. Co. v. Linde Co.,

FE RE eebecccecncecencsecnccessoess 16

Greyhound Computer Corp. v. International

Business Machines Corp., 559 F.2d 488,

cert. denied, 434 U.S. 1040 .............. a

Harold Friedman, Inc. v. Kroger Co.,

eee 5

Hyde v. United States, 225 U.S. 347 ........... 9

International Boxing Club v. United States,

PPE concccpcsceccacceceseceeneece 14

Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255,

cert. denied, 455 U.S. 921 .......... ccc eeeees 5

Lessig v. Tidewater Oil Co., 327 F.2d

459, cert. denied, 377 U.S.

GED sécéccede 4, 7, 8, 10, 11, 12, 13, 14, 16, 17, 18

Martin B. Glauser Dodge Co. v. Chrysler

Corp., 570 F.2d 72, cert. denied, 436 U.S.

GED 0db0666666666806666hsdsbdbcdccccccces 14

Merit Motors, Inc. v. Chrysler Corp.,

417 F.Supp. 263, aff'd, 569 F.2d 666 .......... 5

Monsanto Co. v. Spray-Rite Service Corp.,

No. 82-914 (Mar. 20, 1984) ............405. 4,5

Page

Cases—Continued:

Nifty Foods Corp. v. Great Atlantic & Pacific

Fe Gs SE oc ddcccccccccceceeces: 5

Opper v. United States, 348 U.S. 84 .......... 13

Paterson Parchment Paper Co. v. Story

- Parchment Co., 37 F.2d 537, rev'd, 282

es BP ceeceesecosbeseeeeoceneasecscesss 7,8

Photovest Corp. v. Fotomat Corp., 606 F.2d |

704, cert. denied, 445 U.S. 917 ...........5.. 16

Rogers v. Lodge, 458 U.S. 613 .........000055 16

Spectrofuge Corp. v. Beckman Instruments,

Inc., 575 F.2d 256, cert. denied, 440 U.S.

GE ccoccccccccscccssocceccosoncevecces 5, 14

Swift & Co. v. United States, 196 U.S.

BED dececcccccoescceeuesssecccoccecccces 8,9

Tampa Electric Co. v. Nashville Coal Co.,

FED Gh BED cccccccvescscosccccecocecccess 7

Telex Corp. v. International Business Machines

Corp., 510 F.2d 894, cert. dismissed, 423 U.S.

Be cocccccecsoescodesocaneccescoceoocecs 14

United States v. Dairymen, Inc., 660 F.2d

EE Gbbnesedossebnceceboeeseaeseséocecs 5, 13

United States v. duPont & Co.,

Be EE ET Socceeeseccccoescecccecees 7, 8, 15

United States v. Empire Gas Corp.,

537 F.2d 296, cert. denied, 429 U.S.

GEE edcccccecoeenses secndseucccccococces 5

United States v. Grinnell Corp., 384 U.S.

BED ccbeccccecocesecesececccoccescoccceces 7

VI

Page

Cases—Continued:

Walker Process Equipment, Inc. v. Food

Machinery & Chemical Corp., 382 U.S.

DE dans dbdedbssdbbebetasensedeececscece 4,7

Watkins v. Sowders, 449 U.S. 341 ............ 13

White Bag Co. v. International Paper Co.,

PEED chodecedochedeeesesosococececs 5

White & White, Inc. v. American Hospital

Supply Corp., 723 F.2d 495 ........ccceeeees 7

William Inglis & Sons Baking Co. v. ITT

Continental Baking Co., 668 F.2d 1014,

CE GG EE GED bb cededéccocoscece 11

Statutes and rule:

Clayton Act, 15 U.S.C. 12 et seq. :

ih Min EE eaccccocecccncecesesss 1,2

en ED onecescsecéeseesdococes 13

Sherman Act, 15 U.S.C. | et seq. :

PEPE D Scsceceotécceeccescese 1,2, 5

PR UCU ee 1, 3, 4, 5, 6, 9, 13, 16

Washington Franchise Investment Protection

Act, Wash. Rev. Code Ann. § 19.86.010

GOGRD GRPOED Cec cncccedcaccecusscesteséccces 1

. 5 Re AS BPTTTTITTITe Tree. 13

Vil

Page

Miscellaneous:

U.S. Dep't of Justice, Merger Guidelines

(June 14, 1984):

5 * BPYYTTTTTELT LEP LPT LE EEL 13

ED ececesoceocccceccovcesecoessoeces 15

EEE Socccoccocevececesosscceseseonses 16

SEE Sceccceceecooscecescosoncnceces 7, 15

ERE nccocoecooncesoeececoseesoesoenes 16

Ju the Supreme Court of the Hnited States

Octoser Term, 1984

No. 83-1896

Mosit Orr CORPORATION, PETITIONER

Vv

Jerry A. BLANTON, Roy H. HEALEY

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE NINTH CiRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

This brief is submitted in response to the Court’s invita-

tion to the Solicitor General to express the views of the

United States.

STATEMENT

1. Respondents Blanton and Healey formerly leased and

operated Mobil service stations in the Seattle, Washington

area. They sued petitioner Mobil Oil Corp. (Mobil) seeking

damages for alleged violations of Sections | and 2 of the

Sherman Act, 15 U.S.C. 1 and 2, and Section 3 of the

Clayton Act, 15 U.S.C. 14.' By special verdict, the jury

found that Mobil had subjected Blanton and Healey to an

'They also alleged fraud, breach of contract and violation of

Washington's Franchise Javestment Protection Act (FIPA), Wash.

Rev. Code Ann. § 19.86.010 et seg. (1978). The district court granted a

directed verdict in favor of Mobil on the FIPA claim (Pet. App. A2).

(1)

2

unlawful tying arrangement in violation of Section | of the

Sherman Act and Section 3 of the Clayton Act, and that

Mobil had subjected Blanton to cocrced resale price main-

tenance and a group boycott. Pet. App. A2-A6. The jury

also found that Mobil had attempted to monopolize “a

relevant submarket consisting of sales of ‘Mobil-branded

and non-Mobil-branded oil, lubricants, and TBA&S [tires,

batteries, accessories and specialty items] to Mobil deal-

ers.’ ” Jd. at A10.? Damages resulting from this attempted

were assessed at $134,585 for Blanton and

$19,967 for Healey. Jd. at A2.* The district court trebled the

damages upon entry of judgment. E.R. 237-238.

2. Mobil appealed the attempted monopolization award,

and the Ninth Circuit affirmed.‘ The court of appeals

rejected Mobil’s contention that there was reversible error

in the jury’s relevant submarket finding.* The existence of a

?The jury found that there also existed a relevant market “for the sale

of any and ail oil, lubricants and TBAAS to gasoline station dealers”

but that Mobil had not monopolized or attempted to monopolize that

market. E.R. 243. “E.R.” refers to the Excerpt of Clerk's Record in the

court of appeals.

The jury found “$0” damages from the other antitrust violations but

it indicated that damages resulting from those violations were included

im the attempted monopolization verdict. The jury also found that

ee ee ne a > ORE

damages. Pet. App. A2.

‘Mobil also appeaied the contract-fraud awards. Blanton and Healey

the directed verdict in favor of Mobil on the FIPA

claim. The court of appeals reversed and remanded both the contract-

fraud and the FIPA judgments (Pet. App. A3, A27). Those issues are

not presented in the petition for a writ of certiorari.

‘Mobil made two other arguments in its antitrust appeal: It argued

that the special verdicts with respect to damages were inconsistent, and

that Blanton and Healey had failed to prove causal antitrust damages.

The court of appeals rejected both these arguments, and Mobil does not

raise either of them in this Court.

3

particular market, the court held, is an issue of fact, and

“Mobil has pointed ‘o nothing in the record that would lead

us to question the jury's factual finding.” Pet. App. All.

Because Mobil had not challenged the sufficiency of the

evidence as such, the court concluded that Mobil was

“apparently ask[ing the court] to rule as a matter of law that

a relevant submarket cannot consist of sales to dealers

licensed by a common oil company.” /bid. The court

declined to resolve this “legal question,” however, “because

it is clear that the jury’s attempted monopolization finding

may be sustained under Lessig v. Tidewater Oil Co., 327

F.2d 459 (9th Cir.), cert. denied, 377 U.S. 993 * * * (1964),

and its progeny.” Pet. App. All. Under what the court

referred to as the “modified Lessig doctrine,” it stated (id.

at Al2):

We cannot reverse the jury’s finding of attempted

monopoly by reason of its definition of the relevant

market because the jury's finding of per se violations of

the Sherman Act makes the relevant market finding

unnecessary to establish liability.

DISCUSSION

The court of appeals’ discussion of attempted monopoli-

zation is inconsistent with the rationale of decisions of this

Court and of other courts of appeals. Nonetheless, the

United States does not believe that further review is

warranted.

There are, to be sure, serious flaws in the court of appeals’

the court's statements that, on the facts of this case, there

was no aeed to define a relevant market before imposing

liability under Section 2 (15 U.S.C. 2) and that, under the

Ninth Circuit’s “Lessig rule,” a plaintiff may establish

attempted monopolization without proving that actual

monopolization is the probable result. Moreover, the Les-

sig rule reflects a misunderstanding of the Sherman Act's

4

“basic distinction between concerted and independent

action.” Copperweild Corp. v. Independence Tube Corp.,

No. 82-1260 (June 19, 1984), slip op. 12, quoting Monsanto

Co. v. Spray-Rite Service Corp., No. 82-914 (Mar. 20,

1984), slip op. 6.

The case does not, however, merit review at this time. In

this case, as in several other Ninth Circuit decisions that cite

Lessig v. Tidewater Oil Co., 327 F.2d 459, cert. denied, 377

U.S. 993 (1964), the Lessig rule was not the only, or even the

primary, basis for decision. Here, the jury was not instructed,

and did not find liability, in accordance with Lessig; to the

contrary, the district court instructed (Br. in Opp. App. a2)

that in order for respondents to prevail on their attempted

monopolization claim, the jury must find “a dangerous

probability that [petitioner] will achieve a monopoly of the

relevant market” (id. at a3). In response to special interrog-

atories, the jury found that a specific relevant market

existed and that Mobil had attempted to monopolize that

market. On appeal Mobil “pointed to nothing in the record

that would lead [the court] to question the jury's factual

finding” (Pet. App. All). Accordingly, the court of appeals’

judgment could be affirmed on the basis of the findings of

fact in which both lower courts concurred.

1. A dangerous probability of successful monopoliza-

tion of a relevant market is an essential element of the

offense of attempted monopolization under Section 2 of the

Sherman Act. This Court has specifically stated that “[t]o

establish * * * attempt to monopolize * * * it [is] necessary

to appraise the exclusionary power * * * in terms of the

relevant market.” Walker Process Equipment, Inc. v. Food

Machinery & Chemical Corp., 382 U.S. 172, 177 (1965).

Moreover, the Court noted last Term that “{t}he conduct of

a single firm * * * is unlawful only when it threatens actual

monopolization” (Copperweld Corp. v. Independence

Tube Corp., slip op. 12-13). All courts of appeals, other

5

than the Ninth Circuit, are in accord in holding that proof

of dangerous probability of monopolization of a relevant

market is required in order to establish an attempt to

monopolize.§

These holdings reflect the “ ‘basic distinction between

concerted and independent action’ ” under the Sherman

Act. Copperweld, slip op. 12, quoting Monsanto Co. v.

Spray-Rite Service Corp., slip op. 6. Concerted action is

illegal under Section | if it constitutes an unreasonable

restraint of trade. But single firm action that creates a.

similar restraint “is not enough” to establish liability under

Section 2, which alone governs single firm conduct. Cop-

perweld, slip op. 13. Unless it threatens to create a monop-

oly, a single firm's conduct does not violate the Sherman

6

independent centers of decisionmaking that competi-

tion assumes and demands. In any conspiracy, two or

more entities that previously pursued their own inter-

ests separately are combining to act as one for their

directions in which economic power is aimed but sud-

denly increases the economic power moving in one

particular direction. Of course, such mergings of

resources may well lead to efficiencies that benefit

cient to warrant scrutiny even in the absence of incip-

ent monopoly.

Unilateral conduct that does not threaten actual monopoli-

zation, on the other hand, is not subject to the Sherman Act

“LiJn part because it is sometimes difficult to distinguish

petitive effects.” Copperweld, slip op. 13. Judging unilateral

conduct by the standards of Section 2, which focuses on the

threat of monopoly power, “reduces the risk that the anti-

trust laws will dampen the competitive zeal of a single

aggressive entrepreneur.” Copperwelid, slip op. 13.

The danger that monopoly power will result from a

course of anticompetitive conduct can be meaningfully

evaluated only in the context of a relevant market. Market

definition is the process of isolating a product (or group of

products) and a geographic area within which a firm could

charge a price significantly higher than the price that would

prevail if there were multiple competing sellers. If a seller

“controls” only a product and geographic area that does not

constitute a relevant market, however, an increase in that

seller's price will simply cause buyers to shift to other substi-

tute products.’ Such a seller does not “control price” and,

’Similarly, manufacturers of other products that consumers do not

view as reasonable substitutes may be willing and able to shift to

production of the product “controlled” by the seller, Where such shifts

7

thus, does not have monopoly power. See United States v.

duPont & Co., 351 U.S. 377, 379 (1956); United States v.

Grinnell Corp., 384 U.S. 563, 571 (1966).*

2. More than 20 years ago, before this Court's decisions

in Walker Process and Copperweld, the Ninth Circuit

“reject{ed] the premise that probability of actual monopoli-

zation is an essential element of proof of attempt to monop-

olize.” Lessig v. Tidewater Oil Co., 327 F.2d 459, 474

(1964). It added that: “When the charge is attempt (or con-

spiracy) to monopolize, rather than monopolization, the

relevant market is ‘not in issue.’ ” Jbid.

The Ninth Circuit provided ao economic justification for

these statements. Moreover, the authorities on which Lessig

relies provide no support for the conclusions the court

reached. The opinion in Lessig quotes (327 F.2d at 474) a

footnote from this Court's opinion in duPont (351 U.S. at

395 n.23) for the proposition that market definition is “ ‘not

in issue.’ ” This Court's comment in that footnote, however,

was not directed to the legal proposition the Ninth Circuit

adopted. To the contrary, the duPont opinion extensively

discussed the concept of relevant market as it applied in

proving monopolization. The quoted footnote merely des-

cribed the opinion in Story Parchment Co. v. Paterson

Co., 282 U.S. 555 (1931), and, in so doing, stated factually

can occur relatively quickly (i... within 12 months), that manufacturing

capacity prevents the exercise of monopoly power power and should be

included in the relevant market. See Tampa Electric Co. v. Nashville

Coal Co., 365 U.S. 320, 331-333 (1961), U.S. Dep’ of Justice, Merger

Guidelines § 2.21 (June 14, 1984).

Although market share is often the best evidence of the likelihood of

successful monopolization, high market share does not always indicate

a dangerous probability. Ease of entry into the market, rapidly chang-

ing technology, and other conditions may make it inappropnate to infer

dangerous probability from market share alone. See, ¢... Whie &

=— v. American Hospital Supply Corp., 723 F.2d 495 (6th Cir.

I

that in that case “the scope of the market was not in issue.”

This was not a description or adoption of a legal principle at

all, but was merely an accurate recitation of the facts and

procedural posture of a particular case.’ Indeed, this

Court's opinion in Story Parchment reveals that while the

parties did not challenge the market definition in this Court

— and hence it was “not in issue” — the case had nonethe-

less been litigated with the confines oi a relevant market in

mind. See 282 U.S. at 559 (“This 1s an action * * * to

recover damages resulting from an alleged conspiracy * * *

to monopolize interstate trade and commerce in vegetable

parchment.”)."*

The second stated source for the Lessig rule is equally

unavailing to support the Ninth Circuit's conclusion. In

Lessig the court of appeals (327 F.2d at 474 n.46) read this

Court's reference in Swift & Co. v. United States, 196 U.S.

375, 396 (1905) to “intent and the consequent dangerous

probability” as establishing that dangerous probability may

be inferred merely from intent. The court of appeals thus

placed upon the word “consequent” more weight than its

context in Swift will bear. Justice Holmes’ opinion for the

Court in Swift states (ibid.) that intent is essential to prove

an attempt to monopolize and that “[wJhere acts are not

sufficient in themselves to produce a result which the law

*In any event, Story Parchment was, as the Court stated in duPont

(351 U.S. at 395 n.23), “based on proven ; sSeumbientonend

conspiracy to monopolize ~ It was, a case that involved

concerted rather than unilateral conduct.

“Moreover, the opimon of the court of appeals in Story Parchment

shows that while market definition was not a contested issue on appeal,

a market had nonetheless been defined. Paterson Parchment Paper Co

v. Story Parchment Co., 37 F_2d $37, 538 (ist Cir. 1930), rev'd, 282 U.S.

555 (1931) (three companies “were the only producers in this country of

no, another tententiendeen oo anew suuiiiiecnesue

a

the trade in this country”). -_ “

9

seeks to prevent — for instance, the monopoly — but

require further acts in addition to the mere forces of nature

to bring that result to pass, an intent to bring it to pass is

necessary in order to produce a dangerous probability that

it will happen. Commonwealth v. Peaslee, 177 Massachu-

setts 267, 272.” The point is simply that intent is an essen-

tial element of dangerous probability in this context, as it is

of any culpable attempt; not that intent supplants danger-

ous probability of success.’ Justice Holmes had earlier

explained the rule in his opinion for the Supreme Judicial

Court of Massachusetts in Commonwealth v. Peaslee, 177

Mass. 267, 272, 59 N.E. 55, 56 (1901):

That an overt act although coupled with an intent to

commit the crime commonly is not punishable if

further acts are contemplated as needful, is expressed

in the familiar rule that preparation is not an attempt.

But some preparations may amount to an attempt. It is

a question of degree. If the preparation comes very

near to the accomplishment of the act, the intent to

complete it renders the crime so probable that the act

will be a misdemeanor * * *.

And, in his subsequent opinion dissenting on other grounds

in Hyde v. United States, 225 U.S. 347, 387-388 (1912),

Justice Holmes recapitulated the Swift formulation in a

way that lays to rest the contention that Swift can be read to

eliminate the need to prove dangerous probability (empha-

sis added):

But combination, intention and overt act may all be

present without amounting to a criminal attempt — as

“The Court stated in Swift, 196 U.S. at 402, that determining

whether an act “done with intent to produce an unlawful result is

unlawful * * * is a question of proximity and degree.” Thus, the holding

of Swift is that the proper inquiry in an attempted monopolization case

involves intent plus the proximity of the challenged conduct to the harm

— monopolization — that Section 2 is designed to prevent.

10

if all that were done should be an agreement to murder

a man fifty miles away and the purchase of a pistol for

the purpose. There must be dangerous proximity to

success.

3. Inits original form, the Lessiy rule would in particular

cases do away with the need to define a relevant market or

to prove a dangerous probability of actual monopolization.

But, as the panel in this case concluded (Pet. App. A11),

“the sweeping language of Lessig” has been narrowed by

subsequent Ninth Circuit decisions, and that court does

“require a showing of a relevant market in circumstances

where the conduct of the attempted monopolizer is ambig-

uous or not clearly predatory.” The court (id. at Al1-A12)

found “[{tJhe current statement of the Lessig doctrine” in

Gough v. Rossmoor Corp., 585 F.2d 381, 390 (9th Cir.

1978), cert. denied, 440 U.S. 936 (1979):

[Ijn the absence of proof of relevant market and

market power, the plaintiff must prove either preda-

tory conduct or a per se violation of § 1 to prove an

attempt to monopolize.

The court of appeals in Gough recognized that a plaintiff

must prove three elements of attempted monopolization

(585 F.2d at 390):

(1) specific intent to control prices or destroy competi-

tion with respect to a part of commerce, (2) predatory

or anticompetitive conduct directed to accomplishing

the unlawful purpose, and (3) a dangerous probability

of success.

But the court added that, in the Ninth Circuit, a “short cut”

based on Lessig is available to plaintiffs (ibid. ):

proof of probability of success can be supplied by

inference drawn from proof of specific intent and * * *

proof of specific intent can in turn be supplied by

inference drawn from proof of predatory or anticom-

petitive conduct which constitutes an unreasonable

restraint of trade. ['*]

The effect of this Ninth Circuit “short cut” is to eliminate

the element of dangerous probability of actual monopoliza-

tion and, thus, to eliminate the congressionally-mandated

distinction between unilateral conduct and concerted action

(see pages 4-6, supra).'* That approach is plainly inconsist-

ent with this Court’s analysis in Copperweld (see pages 5-6,

supra).

4. Despite the inconsistency of the Ninth Circuit’s Lessig

doctrine with the holdings of this Court and of other courts

of appeals, we do not believe that this case is an appropriate

vehicle for further review. The case was not tried in the

district court under the Lessig rule, and the jury’s relevant

market finding was upheld by the court of appeals.

Moreover, although Lessig and its progeny are an unfortu-

nate source of confusion in the Ninth Circuit, we see no

21 is not clear from the Ninth Circui Ce pee

conduct,” but Gough (585 F.2d at strongly suggests

P pm an ee aged om - of trade” imposed by a single firm

would be sufficient to eliminate the requirement that dangerous proba-

bility be proved.

‘The short-cut is not based on any assumption that particular types

of conduct are so likely to lead to monopoly that it is unnecessary to

prove dangerous probability in each case. To the contrary, the Ninth

Circuit's stated purpose is to apply Section 2 to impose liability on

unilateral anticompe .itive conduct by firms that are “ ‘not dangerously

close to monopoly power.’ ” 585 F.2d at 390 n.13, quoting Greyhound

Computer Corp. v. International Business Machines Corp., 559 F.2d

488, 504 (9th Cir. 1977), cert. denied, 434 U.S. 1040 (1978). See also,

e.g., William Inglis & Sons Baking Co. v. ITT Continental Baking Co.,

668 F.2d 1014, 1029 (9th Cir. 1981) ) (as amended), cert. denied, 459

U.S. 825 (1982) (“the dangerous probability of success requirement is

not designed as a means of screening out cases of minimal concern to

antitrust policy but is instead a way of gauging more accurately the

purpose of a defendant's actions”).

12

sufficient basis in this case for departure by this Court from

its usual practice of not considering cases in which an

alternative ground adequately supports the judgment below.

a. The jury’s verdict was not based on a Lessig theory

that dangerous probability of successful monopolization

may be inferred merely from intent or particular conduct.

The jury was instructed (Br. in Opp. App. a2) that:

An attempt to monopolize has three elements: (

cific intent to monopolize; (2) some act or acts in

furtherance of an intent to monopolize; and (3) which

although insufficient to actually produce monopoly

power creates a dangerous probability that the defend-

ant will achieve a monopoly of the relevant market.

The jury also was given a detailed instruction regarding

relevant market and its relationship to monopoly power (id.

at al-a2). At Mobil’s request, the jury was further instructed

that Mobil’s “natural monopoly over [its] own products”

was not in itself an antitrust violation."

Petitioner’s objections to the monopolization and

attempted monopolization instructions did not include a

specific request for any additional instructions on relevant

market or attempted monopolization.'"* Moreover, the

“Instruction No. 31, as given to the jury, stated:

A manufacturer has a natural monopoly over his own products,

especially when these products bear the manufacturer's trade-

mark, and, standing alone, that is not an antitrust violation. You

are instructed that unless you find that Mobil used its natural

monopoly in its own products to gain monopoly control of the

market in which its products compete, it is not an antitrust

‘olati

'SIn addition to objecting to all instructions on the ground that a

directed verdict should be entered in its favor, Mobil objected to the

monopolization and attempted monopolization instructions on essen-

tially three grounds: (i) that the instructions were “unnecessary and

misleading”, (ii) that “a manufacturer has a natural monopoly over its

13

substance of the instructions was a proper statement of the

relevant law. Although respondents had requested an

instruction based on Lessig, stating that specific intent

could be inferred from per se violations of the Sherman Act,

no such instruction was given.

The jury must be presumed to have followed the instruc-

tions that were given by the court. Opper v. United States,

348 U.S. 84, 95 (1954); Watkins v. Sowders, 449 U.S. 341,

347 (1981). And it was on the basis of these instructions that

the jury found that Mobil had attempted to monopolize the

market or submarket “for the sale of Mobil-branded and

non-Mobil-branded oil, lubricants, and TBA&S to Mobil

dealers” (Pet. App. Al0). Accordingly, the attempted

monopolization verdict was based on findings of dangerous

probability of monopolization in a relevant market. And,

the court of appeals specifically ruled that on appeal Mobil

had “pointed to nothing in the record that would lead [the

court] to question the jury's factual finding” (id. at All).

The Ninth Circuit’s Lessig discussion therefore was not

necessary to its affirmance of the jury's verdict.

own products, and there is no violation of law unless defendant uses

such natural monopoly to gain monopoly control of the overall market

in which its products compete”, and (iii) that submarket analysis applies

only in cases arising under Section 7 of the Clayton Act rather than

Section 2 of the Sherman Act (Objections to Court's Instructions at 3).

The first objection is too vague to satisfy the requirements of Fed. R.

Civ. P. 51. The second is, in effect, a request for an instruction (No. 31)

that was given (see note 14, supra). The third fails to recognize that in

exercised, although other, broader markets may exist. See Merger

Guidelines, supra, § 2.11, at 4; United States v. be

F.2d 192 (6th Cir. 1981). In any event, Mobil did not object to

court's failure to give additional instructions on market definition or

attempt to monopolize.

14

b. Mobil’s petition for a writ of certiorari fails to show

that the decision below rests on the Lessig doctrine. Mobil

does not specifically challenge the jury instructions nor does

it explicitly attack the sufficiency of the evidence to support

the jury’s relevant market finding. Rather, Mobil asserts

(Pet. i, 9) that the decision below must rest on the Lessig

holding because the relevant market found by the jury is “a

market which cannot constitute a relevant market under the

federal U.S. antitrust laws.” Petitioner also argues (id. at

11) that there was legal error below in that “the relevant

market must be defined to include sales of all interchange-

able products to similarly situated dealers with whom the

Mobil dealers compete.”

Mobil’s argument is essentially that non-Mobil dealers

ble with Mobil’s and that within a given geographic area

these dealers are necessarily part of any relevant market

that includes the Mobil dealers (see Pet. 10-11). In support

of this assertion, Mobil cites cases (Pet. 6-7; Reply Br. 3 n.2)

holding that, on the facts before those courts, the relevant

market was not shown to be limited to the products of a

single company."* Those cases are not controlling here,

however. As the court of appeals in this case recognized,

market definition is an issue of fact." While the factors

'*The inarket found by the jury in this case was not limited to sales of

Mobil-branded products, nor, as Mobil suggests in its petition (Pet. 10),

was the market restricted to sales by Mobil. See Pet. App. AJ0 n.4.

"See, e.g., International Boxing Club v. United States, 358 U.S. 242,

251 (1959) (district court's finding of relevant market must be upheld

because it was not “clearly erroneous”); Telex Corp. v. International

Business Machines Corp., 510 F.2d 894, 915 (10th Cir.), cert. dismissed,

423 U.S. 802 (1975) (“plain error” in lower court's market definition);

Spectrofuge Corp. v. Beckman Instruments, Inc., 575 F.2d 256, 276

(Sth Cir. 1978) (court reviewed evidence to determine whether it was

sufficient to support jury's verdict); Martin B. Glauser Dodge Co. v.

Chrysler Corp., 570 F.2d 72, 82 n.18 (3d Cir. 1977), cert. denied, 436

U.S. 913 (1978) (relevant market is a question of fact for the jury).

15

considered in other cases are relevant in determining

whether a court has applied the correct legal standard in

making findings in a non-jury case or in instructing a jury, a

factual finding based on a particular record is not control-

ling in a different case involving different parties.

The jury in this case found a market, consisting of sales cf

Mobil-branded and non-Mobil-branded TBA&S to Mobil

dealers. Such a market may be unusual, but it is not incon-

ceivable, nor is its existence precluded by any other finding

made by the jury.'* The court of appeals held that the record

supported the jury’s relevant market finding, and this Court

substitute one commodity for another.” United States v. duPont &

Co., 351 U.S. at 393. See Merger Guidelines, supra, § 2.21. Thus even

products that are functionally interchangeable from an objective stand-

point may not be in the same market. For example, customers may

ctor ib Go Be 6 0 ne Oe ee eS

be as part of different packages of goods

rious tor enieh te ee ee insignificant

part of the total cost.

For these or other reasons, Mobil dealers might have been able to pay

similar” products. Thus, the relevant market could have been limited to

TBAA&S sales to Mobil dealers if, for example, those dealers were

subjected to price discrimination. Sellers engage in price discrimination

in an economic sense if they sell at two different prices to two groups of

customers as to whom the sellers’ costs are equal. Where price discrimi-

nation is possible, a seller can profitably impose a “small but significant

and nontransitory” increase in the price of its products to a group of

buyers who cannot easily substitute, while selling at a lower price to

another group of buyers who are more price-sensitive. In such situa-

tions, it is appropriate to view each of the two groups of buyers as a

16

customarily defers to the courts of appeals on such eviden-

tiary issues rather than undertaking its own examination of

the record."

c. This case does not appear to be one in which the Court

should depart from its normal practice and conside; an

issue that would not affect the outcome of the case. The

Lessig doctrine is obviously erroneous, but there appears to

be little risk that any of the other courts of appeals will

follow the Ninth Circuit's approach in attempted monopol-

ization cases. Indeed, most other circuits expressly have

declined to follow Lessig and its progeny.”* Moreover, even

within the Ninth Circuit the continuing impact of Lessig is

difficult to ascertain. That court rarely relies on Lessig as

the sole ground for decision in Section 2 attempt cases.

Most plaintiffs who prevail on Section 2 claims apparently

'*This Court has “frequently noted its reluctance to disturb findings

of fact concurred in by two lower courts.” Rogers v. , 458 US.

613, 623 (1982); Graver Tank & Mfg. Co. v. Linde Co., 3% U.S. 271,

275 (1949); Berenyi v. Immigration Director, 385 U.S. 630,635 (1967).

"See, e.g, Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d

05, 117 (34 Cir. 1980), cert. denied, 451 U.S. 911 (1981), Photovest

Corp. v. Fotomat Corp., 606 F.2d 704, 711-712 (7th Cir. 1979), cert.

denied, 445 U.S. 917 (1980), Spectrofuge . ¥. Beckman Instru-

ments, Inc., 575 F.2d at 276 & 2.69, FLM Collision Parts, Inc. v. Ford

Motor Co., $43 F.24 1019, 1030 (24 Cir. 1976), cert. deased, 429 U.S

1097 (1977), E.’. Delaney Corp. v. Bonne Bell, Inc., 525 F.2d at WS,

George R. Whitten, Jr., Inc. vy. Paddock, 908 F.2d at 530, Agrashell,

Inc. v. Hammons Products Co., 479 F.2d 269, 287 (8th Cir.), ceri.

denied, 414 U.S. 1022 (1973).

This is not to deny that Lessig may continue to have

serious adverse effects. It may, for example, make it more

between the Lessig doctrine and decisions of other courts of

the Ninth Circuit has not yet sat en banc to review a

case involving the Lessig doctrine . This may be due in part

to the presence of alternative grounds in those panel deci-

sions in which Lessig has been cited. Should a case arise in

which the Lessig doctrine is dispositive, the Ninth Circuit

may have an opportunity to resolve the existing conflict. In

doing so, it will have the benefit of this Court's opinion in

Copperweld, which provides an extensive explanation of

2! Because of the uncertainty in the application of Lessig, a prudent

Ninth Circuit plaintiff will attempt to prove relevant market and dan-

gerous Those who are unable to do so have apparently also

been unable in most cases to prove the other elements of a Section 2

‘ohesi

” As petitioner correctly notes (Pet. 19-21), some Ninth Circuit panels

appear to overlook the rule, others appear to require — or at least note

the presence of — a showing of dangerous probability and relevant

market, still others feel bound to follow Lessig although expressing

doubts about it.

the Sherman Act's distinction between unilateral and con-

certed action.” Until the Ninth Circuit has resolved its

intracircuit conflicts — or at least until it has deciined to

rehear en banc acase that squarely presents the Lessig issue

— it appears unnecessary for this Court to review a case in

which that doctrine provides only an alternative ground for

the judgment.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

Rex E. Lee

Solicitor General

J. Paut McGratu

Assistant Attorney General

Cuarwes F. Rue

Deputy Assistant Attorney General

Jerro_p J. GANZFRIED

Assistant to the Solicitor General

Catuerine G. O’SULLIVAN

Nancy C. GARRISON

Attorneys

Pesruary 1985

” he court of appeals denied Mobu!'s petition for rehearing en banc

on February 21, 1984 — four months before this Court decided

DO)-\985-02