Opposition Brief — Alaska Airlines, Inc. v. United Airlines, Inc.

No. 91-1242 5 thinenditd fe

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1991

NORTHWEST AIRLINES, INC.,

Petitioner,

V.

AMERICAN AIRLINES, INC.,

Respondent.

BRIEF OF RESPONDENT AMERICAN AIRLINES, INC.

IN OPPOSITION TO PETITION FOR A WRIT OF

CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE NINTH CIRCUIT

RoBERT E. COOPER*

J. Epp STEPP, JR.

STEVEN C. MCCRACKEN

MARK E. WEBER

GIBSON, DUNN & CRUTCHER

333 South Grand Avenue

Los Angeles, California 90071

(213) 229-7000

Attorneys for Respondent

AMERICAN AIRLINES, INC.

*Counsel of Record

PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203

Sedat ath. «maith Wiha

QUESTIONS PRESENTED

This case involves the application of Section 2 of the

Sherman Act, 15 U.S.C. §2, to the unilateral activity of

a firm possessing lawfully acquired and maintained mo-

nopoly power in one market that allegedly gave that firm

some competitive advantage, although not a monopoly or

a threatened monopoly, in a second market. Respondent

American Airlines, Inc. respectfully disagrees with

Petitioner’s statement of the questions presented by the

application of Section 2 in such circumstances. Moreover,

Petitioner fails to alert the Court to the fact that the

undisputed material facts established in the trial court

would preclude a finding for Petitioner even on the strained

reading of Section 2 that Petitioner offers. Thus,

Respondent would state the questions presented by this

case as follows:

(1) Under this Court’s decision in Copperweld Corp.

v. Independence Tube Corp., 467 U.S. 752 (1984), does

a firm violate Section 2 of the Sherman Act if it

allegedly uses a lawfully acquired and maintained ‘“‘es-

sential facility” or lawfully acquired and maintained

monopoly power in one market to gain a competitive

advantage in a second market, when the firm does

not monopolize or attempt to monopolize the second

market?

(2) Even if Section 2 could be violated without any

showing of either actual or attempted monopolization,

did the undisputed material facts support the entry

of summary judgment in favor of Respondent because

of Petitioner’s failure to raise any triable issue with

respect to the elements of Petitioner’s ‘“‘essential fa-

cility” and monopoly leveraging claims?

ii

THE PARTIES TO THIS PROCEEDING

The caption of the case in this Court contains the names

of all parties. American Airlines, Inc. is a wholly owned

subsidiary of AMR Corporation.

The following are also subsidiaries or affiliates of AMR

Corporation:

Air Services, Inc.

American Airlines Decision Technologies, Inc.

AA Capital

AMR Capital Corporation

AMR Commuter Finance, Inc.

AMR Commuter Finance II, Inc.

AMR Eagle, Inc.

AMR Information Services, Inc.

AMR Insurance Ltd. (Bermuda)

AMR Investment Services, Inc.

AMR Leasing Corporation

AMR Properties, Inc.

AMR Services Corporation

Avenue H Properties, Inc. (Texas)

Blue Sky Number One, Inc.

/FW Terminal Corporation (49%)\Texas)

AMR/American Airlines Foundation (Texas)

The following are subsidiaries of American Airlines, Inc.:

AA Credit Corporation

AA Ventures I, Inc.

Admirals Club, Inc. (Mass.)

Air California, Inc.

AirCal, Inc.

Air Data Center, Inc.

American Airlines Australian Tours, Inc.

American Airlines de Italy, Inc.

American Airlines de Mexico, S.A. (Mexico)

American Airlines de Venezuela, S.A. (Venezuela)

American Airlines Fuel Corporation

American Airlines Overseas Finance, N.V. (Nether-

lands Antilles)

ill

American Inter-Island, Inc.

AMR Ventures I, Inc.

AMR Ventures II, Inc.

AMR Ventures III, Inc.

AMR Ventures IV, Inc. (Nevada)

AMR Ventures Holding Company, Inc.

Flagship Hotels, Inc.

iv

TABLE OF CONTENTS

USERS FGI EGE vccnssnssstssvcsicesisccecsenenssnesses

THE PARTIES TO THIS PROCEEDING ..................

aE NUR Waiiaciiinlnevesasulbesncstennesvexisenienbaieniiens

P|, RRR een Ta a Oe

I. THE DECISION BELOW IS COMPELLED BY

THIS COURT’S OPINION IN COPPERWELD,

AND IS CONSISTENT WITH ALL OTHER DE-

CRIMES OE BORN GAPE socesusacecessascnctsnsnsens

Il.

A.

TO THE EXTENT THERE IS A CONFLICT

AMONG THE CIRCUITS REGARDING THE

MONOPOLY LEVERAGING THEORY, THE

VIEW OF THE NINTH CIRCUIT IS COR-

RECT AND REPRESENTS THE TREND

AMONG THE CIRCUITS AFTER

TIED» secnenncnnnsdcoescasutiinanininieresrass

. THERE IS NO CONFLICT AMONG THE

CIRCUITS REGARDING THE “ESSEN-

TIAL FACILITY” DOCTRINE, AND THE

VIEW OF THE NINTH CIRCUIT IS

A PIIMGE : spccsihnsucinsuiouncseaumtenadisaneintedbibeuiae

EVEN UNDER PETITIONER’S INCORRECT

INTERPRETATION OF SECTION 2, SUM-

MARY JUDGMENT FOR RESPONDENT WAS

STILL THE APPROPRIATE OUTCOME ON

THE FACTS OF THIS CASE ............ccccccessees

13

16

A. SUMMARY JUDGMENT FOR AMERICAN

SHOULD BE AFFIRMED BECAUSE THE

UNDISPUTED FACTS SHOWED THAT

AMERICAN DID NOT: “USE” ITS AL-

LEGED CRS MONOPOLY POWER IN THE

AIR TRANSPORTATION MARKET, AND

DID NOT GAIN ANY UNWARRANTED

COMPETITIVE ADVANTAGE IN THAT

MAREE cnccccccccccscnssecsvessseoversesvesssensevesreess 19

B. SUMMARY JUDGMENT FOR AMERICAN

SHOULD BE AFFIRMED BECAUSE THE

UNDISPUTED FACTS SHOWED THAT

AMERICAN NEVER DENIED NORTH-

WEST ACCESS TO SABRE, AND THAT

SUCH ACCESS WAS NOT

TRCSEEVEEIARS ssevscnvciesernssovecsesnnosscsnevsenseess 22

III. PETITIONER’S CHALLENGES ARE FACT

BOUND, AND WERE NOT ASSERTED IN THE

CORTE RAIA csvecnsssnrssescacsivenesnoyeresnctscsessve 23

COE FEIe . ctdadeciuntcnincevesinercecctnninevenweduarnacsvententnenss 25

TABLE OF AUTHORITIES

CASES: Page(s)

Advanced Health-Care Services v. Radford Com-

munity Hospital, 910 F.2d 139, 149 n.17 (4th

Cp. TE eee in dicen conan 14

Alaska Airlines, Inc. v. United Air Lines, Inc., 948

F.2d GRC GE Cae. SBE) ncsesconcrsssesssccorrssevnenses passim

Arthur S. Langenderfer, Inc. v. S.E. Johnson Co.,

917 F.2d 1413 (1990), cert. denied, __ U.S.

mene» AAR Re CE ME Gshancndteacenssencssesiisenes 16

Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,

472 Wie. GH Ge itaccnsdtssepeasanshneieicdncscncneneses 11

Associated Press v. United States, 326 U.S. 1

(1965): ...0ccucuianusahehbaniaiiahabilualiatanensspnteneuaisavasssases 17

Association for Intercollegiate Athletics for Women

v. National Collegiate Athletic Association, 735

F.2d GFT Gea Gaels ee wissibeniatbskshostsrseectinsss 14,15

Ball Memorial Hospital, Inc. v. Mutual Hospital

Insurance, Inc., 784 F.2d 1325 (7th Cir.

1906) ..cccendacauescnisieaceeee manasa inven sauiess 21

Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d

263 (2d Cir. 1979), cert. denied, 444 U.S. 1093

(1960) ...cssssnapeesnsnnaice eeaaeaiaden demas caatadieidaunsehbeers passim

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

(1962) ....:nsiscanessdiseicabbabiabniadedaeebdaeleineasbalebbers 11

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

U.S. 47 GONE ae ll

Catlin v. Washington Energy Co., 791 F.2d 1343

(Sth Cle, SI insssscckecacavariena eenticaseassesincciensxas 14,19

Celotex Corp. v. Catrett, 477 U.S. 317 (1986) ....... 12,25

City of Chanute v. Williams Natural Gas Co., 743

F. Supp. 1437 (D.Kan. 1990), affd on other

grounds, ___F.2d___, 1992-1 Trade Cas.

(CCH) ¢ 69,703 (20th Cir, TORR) .......cccccccnsee0s: 15

Consolidated Gas Co. of Florida v. City Gas Co. of

Florida, 665 F. Supp. 1493 (S.D. Fla. 1987),

affd, 880 F.2d 297 (11th Cir. 1989) ............. 22

vii

Table of Authorities Continued

Page

Continental Cablevision of Ohio, Inc. v. American

Electric Power Co., 715 F.2d 1115 (6th cir.

BI clit clciiaiastiasiociaidiabiaancnndichinenonninbinnaanvanepnacicans 21

Copperweld Corp. v. Independence Tube Corp., 467

Be EE A RIIPEED ce lincsosatrnateiabtiksnccenedionscncieunabesnss passim

Delaware & Hudson Railway Co. v. Consolidated

Rail Corp., 902 F.2d 174, 177-79 (2d Cir. 1990),

cert. denied, __ U.S. __, 111 S.Ct. 2041

I ais eas nadia edguickenaaddavndsunantnnbaakonesiiiosiuenses 17,22

Directory Sales Management Corp. v. Ohio Bell

Telephone Co., 833 F.2d 606 (6th Ci. 1987) .... 17,238

EEOC v. FLRA, 476 U.S. 19 (1986) ou... rene 23

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

SIN 0d, A dis dicd sGenikanah estnusianbeennbeareebacetsonesdeserese 17

Foremost Pro Color, Inc. v. Eastman Kodak Co.,

703 F.2d 534 (9th Cir. 1983), cert. denied, 465

IE £5. os aciaarenaanetnebensenbuenonanseses 11

Grason Electric Co. v. Sacramento Municipal Util-

ity Dist., 571 F. Supp. 1504 (E.D. Cal 1983),

rev'd on other grounds, 770 F.2d 883 (9th Cir.

1985), cert. denied, 474 U.S. 1103 (1986) ....... 15

H.L. Hayden Co. v. Siemens Medical Systems, Inc.,

672 F. Supp. 724 (S.D.N.Y. 1987), aff'd, 879

ee Re EE GE, ROD secassoncesovessvsvornsesenseasss 12

Hecht v. Pro-Football Inc., 570 F.2d 982 (D.C. Cir.

1977), cert. denied, 4386 U.S. 956 (1978) ........ 17

In re Air Passenger Computer Reservations Systems

Antitrust Litigation, 694 F. Supp. 1443 (C.D.

Cal. 1988), aff'd sub nom. Alaska Airlines, Inc.

v. United Air Lines, Inc., 948 F.2d 536 (9th

IIE i Liisi cia seunleneaeeinneaniacauensianinnineanes passim

International Distribution Centers, Inc. v. Walsh

Trucking Co., Inc., 812 F.2d 786 (2d Cir.), cert.

denied, 482 U.S. 915 (1987) «........cccrscccccresseees 12

——

viii

Table of Authorities Continued

Page

Kerasotes Michigan Theatres, Inc. v. National

Amusements, Inc., 854 F.2d 135 (6th Cir. 1988),

cert. dismissed sub nom. G.K.C. Michigan The-

atres, Inc. v. National Amusements, Inc., 490

ie | I I eect rok ee 15

Key Enterprises of Delaware, Inc. v. Venice Hos-

pital, 919 F.2d 1550 (11th Cir. 1990) 0.00000... 14

Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255 (7th

Cir.), cert. denied, 455 U.S. 921 (1981) .......... 12

M&M Medical Supplies & Service v. Pleasant Valley

Hosmtal, 738 F.Supp 1017 (S.D.W.Va.

PTE soiasnidinainisndenuintics Michasadananeelibstnelnicadianeeesevisene 15

MCI Communications Co. v. AT&T, 708 F.2d 1081

(7th Cir.), cert. denied, 464 U.S. 891 (1983) .. 18

Oahu Gas Service, Inc. v. Pacific Resources, Inc.,

829 F.2d 1471 (9th Cir. 1987), cert. denied,

—— U.S. =, 109 §.Ct. 180 (1988) ......ccccccccee 20

Olympia Equipment Leasing v. Western Union Tel-

egraph Co., 797 F.2d 370 (7th Cir. 1986), cert.

Se A Ce WE MEOED daciecerrsrecesdencenecsces 11,18

Otter Tail Power Co. v. United States, 410 U.S. 366

CIRPUI shine teelnenaimaepnnniiactsidadur at ciaaictieuncetictce ieein, 13

Rice v. Sioux City Memorial Park Cemetery, 349

isi SOF MIP cksscsalassiasapaaiticdnciniincanstbeaaaoasanctiousces 19

Richter Concrete Corp. v. Hill-Top Concrete Corp.,

691 F.2d 818 (6th Cir. 1982) .................ccccee0s. 12

Steagald v. United States, 451 U.S. 204 (1981) ..... 24

Syufy Enterprises v. American Multicinema, 793

F.2d 990 (9th Cir. 1986), cert. denied, 479 U.S.

Be Ns caichaercsichcdalittackaiehb daukadacésiestessanmabewsasnoise 14

Twin Laboratories, Inc. v. Wieder Health & Fitness,

900 F.2d 566 (2d Cir. 1990) 0... cee eeeees 15,17,21

United States v. Griffith, 334 U.S. 100 (1948) ...... 12,13

United States v. Johnston, 268 U.S. 220 (1925) .... 23

United States v. Terminal Railroad Association, 224

SP. GO MRUEIND icssnsceMesceecenanscessnseeseseiecssasscaiace 16

Table of Authorities Continued

Page

United States v. Western Electric Co., 1990-1 Trade

Cas. (CCH) ¢ 68,973 (D.C. Cir. 1990) ............. 15

Williamsburg Wax Museum, Inc. v. Historic Fig-

ures, Inc., 810 F.2d 243 (D.C. Cir. -1987) ...... 21

RULES AND REGULATIONS:

BA SF ne ED - Cavvnachlniciavasnssccnviscensecndnusetsapasvaisentans 2

Rule 56(c), Federal Rules of Civil Procedure ........ 12,25

STATUTES:

Section 1 of the Sherman Act, 15 U.S.C. §1....... 9,25

Section 2 of the Sherman Act, 15 U.S.C. §2...... passim

Section 3 of the Clayton Act, 15 U.S.C. §14........ 25

OTHER AUTHORITIES:

Areeda, Essential Facilities: An Epithet In Need Of

Limiting Principles, 58 ANTITRUST L.J. 841

FIIIEE ‘saccheainsveiises nuntaviaaaducsuetaprcennentenenesiarnatevpiiians 17

P. Areeda & H. Hovenkamp, ANTITRUST LAw (1989

UID civvcccconcovenzencevasvssssetauonvesosavvencisomenviaveeveess 11

III P. Areeda & D. Turner, ANTITRUST LAW

SD skcchactnnseastniichdaratucsucsasmeussataniersusabiaveninns uence 17

R. Bork, THE ANTITRUST PARADOX (1978) ............. 14

Bowman, Jr., Tying Arrangements and the Lever-

aging Problem, 67 YALE L.J. 19 (1957) ......... 14

Harlan, Some Aspects of the Judicial Process in the

Supreme Court of the United States, 33 AUSTL.

Rahs: SEE SID ‘achcchsndenischnctiusnsonsdavarkirmsbintiecnntenvns 16

Markovits, Tie-ins, Leverage, and the American An-

titrust Laws, 80 YALE L.J. 195 (1970) .......... 14

Note, The Legal and Regulatory Implications of

Airline Computer Reservations Systems, 103

ERARY.. Te. TV. BOO CESS) weccssscicvrssevscsensecsncs 17

L, Deva, AWTETRUGT CIOTT) ccsecesssvccvevvencescesescceess 22

R. Posner & F. Easterbrook, ANTITRUST (2d ed.

RINNE ccscasaehcadcaasassheusdcsnsestecaicumdariansuenitwlaniabesines 14

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1991

No. 91-1242

NORTHWEST AIRLINES, INC.,

Petitioner,

Vs

AMERICAN AIRLINES, INC.,

Respondent.

BRIEF OF RESPONDENT AMERICAN AIRLINES, INC.

IN OPPOSITION TO PETITION FOR A WRIT OF

CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE NINTH CIRCUIT

Respondent American Airlines, Inc. (‘‘American’’) re-

spectfully submits this Brief in opposition to the Petition

for a Writ of Certiorari filed by Petitioner Northwest Air-

lines, Inc. (‘“‘Northwest” or ‘‘Petitioner’’).'

- OPINIONS BELOW

American does not disagree with the citation to the

opinions below contained in the Petition.

‘The Petition for a Writ of Certiorari involves two cases that were

consolidated below. The first case involves Alaska Airlines, Inc. and

Transtar Airlines Corporation as Petitioners, and United Air Lines,

Inc., as Respondent. American is not a party to that action. The second

case involves only Northwest as Petitioner and American as Respondent.

American only responds to those arguments and contentions in the

Petition for Certiorari that pertain to the claims asserted by Northwest

against American.

STATEMENT OF JURISDICTION

American does not disagree with the Statement of the

basis for jurisdiction in this Court contained in the Petition.

STATUTE INVOLVED

American agrees that Section 2 of the Sherman Act, 15

~ U.S.C> §2, is central to the resolution of this case. Section

2 provides, in pertinent part:

“Every person who shall monopolize, attempt to mo-

nopolize, or combine or conspire with any other per-

son or persons, to monopolize any part of the trade

or commerce among the several States, or with for-

eign nations, shall be deemed guilty of a felony... .”

15 U.S.C. §2.

American disagrees that 14 C.F.R. §255 is at issue in

this case. No claims for violation of that regulation were

alleged below, and no such claims could have been alleged

because the Department of Transportation has exclusive

jurisdiction over the enforcement of its regulation. More-

over, this action, which was commenced only days after

the effective date of the regulation, involves conduct that

predated the regulation.

STATEMENT OF THE CASE

The Court has been asked by Northwest to review the

Ninth Circuit’s affirmance of summary judgment in favor

of American on a claim that it was unlawful for American

to use alleged monopoly power in the market for the pro-

vision of computerized reservation system (“CRS’’) ser-

vices to airlines to achieve a competitive advantage in the

market for air transportation.2, However, Petitioner has

*The case also involved claims that American had unlawfully mo-

nopolized the closely related market for the provision of CRS services

conceded that American obtained the alleged monopoly

power in the market for providing CRS services to airlines

lawfully as a result of American’s innovation and business

acumen, and has conceded further that American did not

monopolize or attempt to monopolize the air transportation

market. Alaska Airlines, Inc. v. United Air Lines, Inc.

(hereinafter “Alaska Airlines”), 948 F.2d 536, 546 (9th)

Cir. 1991) (Petitioner’s Appendix (‘‘Pet. App.’’) at

17a) (‘‘Plaintiffs. ..concede that each defendant’s control

of its CRS did not create a dangerous probability that the

defendants would monopolize the downstream air trans-

portation market.”’). See also 948 F.2d at 542, 546 (Pet.

App. at 10a, 18a).? The trial court and the Ninth Circuit,

relying upon this Court’s decision in Copperweld Corp. v.

Independence Tube Corp., 467 U.S. 752, 767-68 (1984), held

at 4a n.4). American argued (unsuccessfully) before the Ninth Circuit

that the trial judgment barred relitigation of certain issues that are

essential to Petitioner’s ‘‘essential facility’’ and monopoly leveraging

claims. Id., 948 F.2d at 539-40 (Pet. App. at 5a-6a). American continues

to believe that such a barrier exists.

>There is no question but that these matters were conceded below.

In its brief in the Ninth Circuit, Petitioner admitted that each defendant

had “acquired a lawful monopoly in the market for computerized re-

servation services to airlines.’ Appellants’ Opening Brief at p. 2. See

also id. at p. 18 (‘‘Plaintiffs’ second claim was that each defendant had

lawfully acquired monopoly power in the relevant product market of

CRS services provided to airlines. . . .’”). Moreover, the trial court found,

on the undisputed facts before it, that there was no evidence that would

permit a reasonable jury to find that American had either monopolized

or attempted to monopolize the air transportation market. Jn re Air

Passenger Computer Reservations Systems Antitrust Litigation (“In re

CRS”), 694 F. Supp. 1443, 1455 (C.D.Cal. 1988) (Pet. App. at 38a-

39a) (‘In this case there is no danger than American will monopolize

the market for air transportation.”) Northwest did not appeal that

finding to the Ninth Circuit. Indeed, in its statement of the issues

presented to the Ninth Circuit and in its argument regarding monopoly

leveraging, Petitioner conceded that it was not claiming that American's

conduct threatened monopolization in the downstream, air transporta-

tion market. Appellants’ Opening Brief at pp. 2-3 & 32. In this Court,

in its statement of the Question Presented for Review at page i, North-

west further concedes that the question presented here must assume

that there is no threat of monopolization in the air transportation mar-

ket (‘although falling short of actual or attempted monopolization’’).

that the unilateral action of a firm that does not threaten

monopolization does not violate Section 2 of the Sherman

Act.

This case arises from the competition in the airline in-

dustry following deregulation of the industry by Congress

in 1978. Prior to deregulation, the airlines had their fares,

routes and services regulated by the Civil Aeronautics

Board. Congress determined that regulation had stifled

innovation and competition in the industry, and therefore

removed the regulatory restrictions to encourage the air-

lines to compete and to bring about greater benefits for

consumers.

American had been an innovator even during the days

of regulation. American was the first airline to introduce

“Super Saver’ fares, thereby injecting at least some price

competition into an otherwise stagnant process. In 1976

American pioneered a technological revolution in the travel

industry by introducing SABRE, American’s computerized

reservation system or ‘“‘CRS.”* American spent over $400

million dollars on the design and operation of SABRE.

Those expenditures began during a time when American

was either losing money or barely breaking even on its

airline operations. American’s risk-taking, innovation and

commitment to excellence made SABRE the premier CRS

in the world, and travel agents, airlines and consumers

have benefited from SABRE’s technological advance-

ments.° Today, all of these groups benefit from the com-

‘A CRS is made up of a centrally located computerized data base

that is linked by phone lines to terminals located throughout the coun-

try, and in some foreign countries. The central data base contains

information about flights, fares and reservations for a year into the

future for the entire industry. A travel agent can access that data from

a remote terminal, select an itinerary, make a booking, and print a

ticket. Similar information is available about car rentals, hotels, and

other travel-related services, and similar transactions can be processed

regarding those products. Alaska Airlines, supra, 948 F.2d at 538 (Pet.

App. at 2a-3a).

*As American's Chairman testified: “(W]e did. . .exactly what com-

panies are supposed to do in a free enterprise society. We figured out

puterized services provided by SABRE and the three other

CRSs available in the United States.

During the time that American was investing in new

CRS technology, Northwest was earning substantially

higher profit margins on its airline operations than was

American, and was reinvesting those profits in new air-

craft or distributing the profits to its shareholders.* North-

west did not invest in a CRS in the early days, when the

risk was great and acceptance was questionable. It was

not until 1987 that Northwest purchased a part interest

in an existing system, PARS, that had been developed by

Trans World Airlines, Inc.

American’s investment in SABRE proved to be a risk

that was worth taking. SABRE has been profitable. How-

ever, it is conceded that any competitive advantage in the

air transportation market gained by American as a result

of its CRS was not sufficient to threaten monopolization

of that market.’ During the relevant period, American’s

there was a need for something. . [we] put the assets in it and created

a team of people absolutely dedicated to making it the best. And the

result has been that we have got a very successful system.”” Excerpt

of Record of American Airlines, Inc. in the Ninth Circuit (‘‘ER’’) at

4:73.

* Northwest’s Annual Report in 1984 boasted that it had been prof-

itable every year since 1950, and had paid cash dividends to share-

holders for 30 consecutive years. ER at 21:221. In its 1988 Annual

Report, Northwest reported record earnings and its “39th straight year

of profitability.” ER at 21:228. Between 1970 and 1988, while American

was investing heavily in SABRE, Northwest paid out to its shareholders

about $220 million in dividends. ER at 4:60.

* While Petitioner asserts that American gained a competitive ad-

vantage in the air transportation market from its ownership of SABRE,

no evidence of any such advantage was presented to the courts below.

For purposes of discussing the applicability of Copperweld to the “‘es-

sential facility” theory and the monopoly leveraging doctrine, American

presumes for purposes of argument that proof of a competitive advan-

tage short of threatened monopolization could have been presented.

However, as argued at Parts II and III, infra, Petitioner's failure to

offer proof of any such competitive advantage provides an independent

ground for denying certiorari in this case.

share of the domestic air transportation industry was never

greater than 14%.

Northwest, having ignored American’s labors to develop

a CRS while spending its profits on other assets or dis-

tributing them to shareholders, now claims that American

should be punished for its foresight, and forced to share

the benefits of its investment with those who took no risks

and made no investment, as if they were part owners.®

The fact is that American has permitted Northwest and

other airlines to benefit from the development of SABRE.

From the day SABRE was introduced, Northwest has been

a participating carrier in SABRE and its flights and fares

have been listed in SABRE and available for sale by travel

agents using SABRE. Northwest complains that American

got a competitive advantage because, for a period of time,

American’s flights were given a preference in SABRE dis-

plays over the flights of others, including Northwest, and

because Northwest had to pay a fee for bookings received

through SABRE, while American did not pay itself a fee.”

But American made the investment in SABRE, and took

the risk. Its actions were perfectly reasonable, and had no

anticompetitive effects.

The trial court (U.S. District Judge Edward Rafeedie,

Central District of California) found that even if everything

* According to American’s Chairman, American had to “‘scrape’’ to

get the money for SABRE “while we were selling off our 747s." ER

at 4:47-48. Meanwhile, Northwest was buying 747s and making sub-

stantial distributions to its shareholders. See note 6, supra.

* Northwest was a co-host in SABRE prior to November of 1984,

and as such received a preference for its flights over those of non-co-

hosts, including the flights of Northwest’s primary competitor, United.

Similarly, as a co-host, Northwest paid a booking fee that was sub-

stantially less than that paid by many other non-co-host airlines. North-

west does not complain about these instances of more favorable

treatment. Moreover, Northwest’s own witnesses testified that there

was nothing wrong with American giving its own flights some pref-

erential treatment in its own CRS. ER 8:130; 16:186. Northwest’s

witnesses also acknowledged that the booking fee that its CRS, PARS.

had charged, which was the same as that charged by SABRE, was

reasonable. ER 17:188.

that Northwest had alleged were true and were viewed in

the light most favorable to Northwest, American’s actions

did not amount to a violation of Section 2. Relying upon

the words of the statute and this Court’s decision in Cop-

perweld, the trial court noted that Section 2 prohibits un-

lawful monopolization or attempted monopolization.'° The

court then held that there was no violation of Section 2,

whether one used the “essential facility’’ theory or the

monopoly leveraging doctrine, because there was no evi-

dence that would suggest that there was the required dan-

gerous probability that American would successfully

monopolize the air transportation market."! The Ninth Cir-

cuit affirmed in a unanimous opinion written by Judge

Hall, and joined by Judges Norris and Trott.

SUMMARY OF ARGUMENT

In Copperweld this Court pronounced the law that ap-

plies to this case. The Court held that the conduct of a

single firm is governed only by Section 2’s prohibition of

threatened monopolies. The Court stated:

The conduct of a single firm is geverned by Section

2 alone and is unlawful only when it threatens actual

monopolization. It is not enough that a single firm

appears to “restrain trade” unreasonably, for even a

‘© The statute’s prohibition of conspiracies and combinations to mo-

nopolize was never at issue in this case.

1 It is conceded by Petitioner that the fundamental issue here is the

scope and application of Section 2, whether the analysis is done under

the rubric of monopoly leveraging or “essential facility.’’ Petition at p.

12. The words of the statute define’ a violation, and the related ‘‘doc-

trines” or theories used by the courts have vitality only to the extent

that they are properly based upon the words of the statute—they cannot

be independent grounds for imposing Section 2 liability. See In re Air

Passenger Computer Reservations Systems Antitrust Litigation (here-

inafter “In re CRS”), 694 F. Supp. 1443, 1455 (C.D. Cal. 1988), aff'd,

948 F.2d 536 (9th Cir. 1991) (Pet. App. at 37a) (‘The essential facilities

doctrine must be tied to the particular statutory provision under which

relief is sought. The doctrine itself is an abstraction designed to assist

the courts in determining whether the statute has been violated.’’).

vigorous competitor may leave that impression. . . . In

part because it is sometimes difficult to distinguish

robust competition from conduct with long-run anti-

competitive effects, Congress authorized Sherman Act

scrutiny of single firms only when they pose a danger

of monopolization. Judging unilateral conduct in this

manner reduces the risk that the antitrust laws will

dampen the competitive zeal of a Single aggressive

entrepreneur.

467 U.S. at 767-68 (citations and footnotes omitted). The

trial court and the Ninth Circuit below followed the holding

of Copperweld, and have done nothing inconsistent with

the decisions of this Court. Thus, there is no basis for

anting certiorari in this case pursuant to Rule 10.1(c) of

the Rules of this Court (conflicts with prior decisions of

the Supreme Court).

The decision below does conflict with the Second Cir-

cuit’s thirteen-year-old, pre-Copperweld decision in Berkey

Photo, Ine. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir.

1979), cert. denied, 444 U.S. 1093 (1980). However, it is

Berkey that is incorrectly decided, not this case. See 444

U.S. at 1094 (Justices Rehnquist and Powell dissented from

the denial of certiorari in Berkey, stating that Berkey’s

theory is “‘little less than bizarre.””). Moreover, Berkey was

decided before Copperweld. As other Circuits focus upon

the impact of Copperweld, they are likely to reject Berkey

as the Ninth Circuit did here. Thus, while a conflict in

the Circuits might technically exist, it is a conflict that

should correct itself without intervention by this Court,

and is not a basis for granting certiorari in this case pur-

suant to Rule 10.1(a) (conflicts among the Circuits).

Finally, even if this Court were to grant certiorari, re-

pudiate Copperweld, and disagree with the Ninth Circuit’s

legal holdings regarding the “essential facility”’ and mo-

nopoly leveraging doctrines, the Petitioner in this case still

would not be entitled to a reversal of the summary judg-

ment granted against it because the undisputed material

facts do not provide a basis for a trial. The undisputed

facts show that Northwest had access to SABRE, the al-

leged ‘‘essential facility,” at all times. They also show that

American did not use any alleged monopoly power in the

market for providing CRS services to airlines to gain an

advantage in the air transportation market, nor did it do

anything else that was anticompetitive in the air trans-

portation market. Thus, this case is fact bound, and not

a proper vehicle for defining the scope of the “essential

facility” and monopoly leveraging doctrines, if such further

definition is required.

For these reasons, this Court should deny certiorari in

this action and permit the orders of the trial court and

the Ninth Circuit to become final.

ARGUMENT

I. THE DECISION BELOW IS COMPELLED BY THIS

COURT’S OPINION IN COPPERWELD, AND IS CON-

SISTENT WITH ALL OTHER DECISIONS OF THIS

COURT

This Court specifically addressed and unequivocally lim-

ited the scope of Section 2 in Copperweld. The Court

stressed that Section 2 was substantially narrower in reach

than the conspiracy provision, Section 1 (15 U.S.C. §1).

467 U.S. at 774-75. Capturing the essence of Section 2,

the Court stated: ‘Congress authorized Sherman Act scru-

tiny of single firms only when they pose a danger of mon-

opolization.” 467 U.S. at 768.”

2 Petitioner contends that Copperweld is a Section 1 conspiracy case

and has no applicability to Section 2. That is not correct. In Copperweld

the Court was called upon to decide whether the conduct of a parent

company and its wholly-owned subsidiary was the conduct of a single

entity (and thereby judged under Section 2) or the conduct of a con-

spiracy (and thereby judged under Section 1). By defining the differ-

ences between the two statutory provisions, the Court focused upon

why the inquiry was so important. See 467 U.S. at 769 (the distinction

between Section 1 and Section 2 was ‘necessary for a proper under-

standing of the terms ‘contract, combination...or conspiracy’ in

§1’’) (emphasis added).

10

In defining the scope of Section 2, the Court in Cop-

perweld observed that there could be single firm conduct

that restrained trade, but would violate neither Section 1

nor Section 2. Still, the Court concluded that such a sta-

tutory scheme was “eminently sound”:

It cannot be denied that §1’s focus on concerted be-

havior leaves a “gap” in the Act’s proscription against

unreasonable restraints of trade... .An unreasonable

restraint of trade may be effected not only by two

independent firms acting in concert; a single firm may

restrain trade to precisely the same extent if it alone

possesses the combined market power of those same

two firms. Because the Sherman Act does not prohibit

unreasonable restraints of trade as such—but only re-

straints effected by a contract, combination, or con-

spiracy—it leaves untouched a single firm’s anti-

competitive conduct (short of threatened monopoliza-

tion) that may be indistinguishable in economic effect

from the conduct of two firms subject to §1 liability.

We have already noted that Congress left this “gap”

for eminently sound reasons. Subjecting a single firm’s

every action to judicial scrutiny for reasonableness

would threaten to discourage the competitive enthu-

siasm that the antitrust laws seek to pro-

mote. ...Moreover, whatever the wisdom of the

distinction, the Act’s plain language leaves no doubt

that Congress made a purposeful choice to accord dif-

ferent treatment to unilateral and concerted conduct.

Had Congress intended to outlaw unreasonable re-

straints of trade as such, §1’s requirement of a con-

tract, combination, or conspiracy would be superfluous,

as would the entirety of 2.

467 U.S. at 774-75.

Copperweld, of course, is the product of the language

chosen by Congress to express its will. Section 2 provides:

‘Every person who shall monopolize or attempt to monop-

olize. . shall be guilty of a felony.” 15 U.S.C. 82 (emphasis

added). The statute prohibits unilateral conduct that

11

threatens actual monopolization of a relevant market. At

no place does Section 2 make it unlawful for a single firm

to gain a competitive advantage. See P. Areeda & H. Hov-

enkamp, ANTITRUST LAW, 4626.1 at p. 511 (1989

Supp.) (“{I]n any event, §2 is concerned with monopoly or

the threat of it. Liability not connected with that concern

has no place within this statute.’’). The act of seeking an

advantage over competitors is the essence of competition—

the goal the antitrust laws encourage. The antitrust laws

protect competition, not competitors. Brunswick Corp. v.

Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977); Brown

Shoe Co. v. United States, 370 U.S. 294, 320 (1962).

The analysis does not change when a firm lawfully pos-

sesses monopoly power in a relevant market. Section 2

prohibits monopolization—the unlawful acquisition or main-

tenance of monopoly power. Aspen Skiing Co. v. Aspen

Highlands Skiing Corp., 472 U.S. 585, 602 (1985). Lawfully

acquired and maintained monopoly power is an asset of

the firm that has developed it pursuant to foresight, busi-

ness acumen, and drive. That asset may be used to com-

pete, so long as the firm does not engage in conduct that

threatens the creation of an unlawful monopoly. Olympia

Equipment Leasing v. Western Union Telegraph Co., 797

F.2d 370, 375-76 (7th Cir. 1986), cert. denied, 480 U:S.

934 (1987) (‘‘[T]he lawful monopolist should be free to com-

pete like everyone else; otherwise the antitrust laws would

be holding an umbrella over inefficient competitors.”’); F'o-

remost Pro Color, Inc. v. Eastman Kodak Co., 703 F.2d

534, 543-44 (9th Cir. 1983), cert. denied, 465 U.S. 1038

(1984) (“(T]he Sherman Act. . .does not render unlawful all

monopolies. ...A monopolist, no less thai any other com-

petitor, is permitted and indeed encouraged to compete

aggressively on the merits.”’).

Northwest conceded below that it could not show any

support for a claim that American’s conduct threatened

unlawful monopolization of any relevant market. In the

market for providing CRS services to airlines, Northwest

claimed that American had monopoly power, but conceded

that any such monopoly power was lawfully obtained as

12

a result of American’s innovative development of SABRE.

In the market for air transportation, the undisputed evi-

dence showed that the industry was extremely competitive,

that American’s market share was less than 14%, and that

American’s low market share had been stable over time.

Northwest conceded that there was no triable issue of fact

regarding threatened monopolization of the air transpor-

tation market."

There is no support in the decisions of this Court for

the argument that the alleged use of lawfully acquired

monopoly power to gain a mere competitive advantage is

enough to violate Section 2. Petitioner’s reliance on United

States v. Griffith, 334 U.S. 100 (1948), is misplaced. This

Court’s holding in Griffith was that the-defendants had

“formed a conspiracy in violation of §§ 1 and 2 of the

[Sherman] Act.” 334 U.S. at 109. Thus, Griffith was a

concerted action case and was decided under the antitrust

principles applicable to such cases, not those applicable to

single firm conduct. Ignoring Griffith’s holding, Petitioner

cites to a single statement from the opinion: “(T]he use

of monopoly power, however lawfully acquired,. . .to gain

‘s Petitioner complains that the trial court drew inferences and made

factual assumptions from the market share information. After American

presented market share and other information that tended to rebut any

inference of threatened monopolization of the air transportation market,

the burden was on Northwest to come forward with evidence that would

support a jury finding to the contrary. Rule 56(c), Federal Rules of

Civil Procedure. See Celotex Corp. v. Catrett, 477 U.S. 317 (1986).

Northwest came forward with nothing—not one shred of evidence show-

ing any anticompetitive effect in the air transportation market. To the

extent that the trial court relied purely upon market share information,

it was because that was all that was before the trial court. Moreover,

such reliance is perfectly proper. Richter Concrete Corp v. Hill-Top

Conerete Corp., 691 F.2d 818, 826 (6th Cir. 1982); Lektro-Vend Corp.

v. Vendo Co., 660 F.2d 255, 271 (7th Cir.), cert. denied, 455 U.S. 921

(1981) (30% market share insufficient to Support attempt to moncpolize

claim); H.L. Hayden Co. v. Siemens Medical Systems, Inc., 672 F. Supp.

724 (S.D.N.Y. 1987), aff'd, 879 F.2d 1005 (2d Cir. 1989) (20% market

share insufficient); International Distribution Centers, Inc. v. Walsh

Trucking Co., Inc., 812 F.2d 786 (2d Cir.), cert. denied, 482 U.S. 915

(1987) (50% market share insufficient).

13

a competitive advantage. . .is unlawful.’’ 334 U.S. at 107.

But this isolated dicta cannot be reconciled with the later

statement by this Court in Copperweld: ‘‘It is not enough

that a single firm appears to ‘restrain trade’.”” Copperweld,

supra, 467 U.S. at 767. Thus, Griffith’s holding is con-

sistent with Copperweld and with the holding of the courts

below. The interpretation that Petitioner attempts to place

upon a single statement from Griffith, taken out of con-

text, is unreasonable, for it would render that statement

inconsistent with this Court’s decision in Copperweld.

Petitioner also relies upon Otter Tail Power Co. v. United

States, 410 U.S. 366 (1973). However, in Otter Tail the

evidence established that the defendant had ‘‘attempted to

monopolize and had monopolized the retail distribution of

electric power in its service area” by refusing to provide

certain towns access to its wholesale electric power facility.

410 U.S. at 368, 371, 377-79 (emphasis added). Thus, Otter

Tail’s holding is consistent with Copperweld and with the

holdings of the courts below. It rested on a finding of

monopolization and attempted monopolization of the down-

stream market.

A. TO THE EXTENT THERE IS A CONFLICT AMONG

THE CIRCUITS REGARDING THE MONOPOLY LE-

VERAGING THEORY, THE VIEW OF THE NINTH

CIRCUIT IS CORRECT AND REPRESENTS THE

TREND AMONG THE CIRCUITS AFTER COPPER-

WELD

As discussed above, the trial court and the Ninth Circuit

followed the teachings of Copperweld and the language of

Section 2 exactly, and the results are clearly correct.

Petitioner relies on the thirteen-year-old—and pre-Copper-

weld—decision of the Second Circuit in Berkey as the basis

for claiming a conflict among the Circuits with respect to

the theory of monopoly leveraging.’* That conflict, to the

\« Petitioner actually abandoned its monopoly leveraging claim in the

trial court by failing to argue the theory in its papers and by express

representation to the court. While Respondent’s judicial estoppel ar-

14

extent it exists, is not sufficient to warrant certiorari in

this case.

Berkey is clearly wrong, and is much criticized. Ass’n

for Intercollegiate Ath. for Women v. N.C.A.A., 735 F.2d

577, 586n.14 (D.C. Cir. 1984) (noting “‘the substantial ac-

ademic criticism cast upon the leveraging concept,’ and

citing R. Posner & F. Easterbrook, ANTITRUST, 802-10,

870-71 (2d ed. 1981); R. Bork, THE ANTITRUST PARADOX,

365-66, 372-75 (1978); Markovits, Tie-ins, Leverage, and

the American Antitrust Laws, 80 YALE L.J. 195, 199-205

(1970); and Bowman, Jr., Tying Arrangements and the Le-

veraging Problem, 67 YALE L.J. 19, 21-29 (1957)). To some

extent Berkey can do little harm, however, because it is

fact bound. Significantly, Berkey did not hold that the

defendant was liable under a theory of monopoly lever-

aging. The Second Circuit merely sent the case back with

instructions to revisit the issue. In doing so, the Second

Circuit also added many qualifying statements that sub-

stantially diluted the impact of the broader language about

leveraging.

While it would not be wrong for this Court to affirm

the Ninth Circuit and disapprove Berkey, American sub-

mits that it is unnecessary. Other courts have questioned

Berkey’* or have not followed it..* The Second Circuit has

gument was rejected by the Ninth Circuit (Alaska Airlines, supra, 948

F.2d at 539-40, 546 n.15 (Pet. App. at 5a-6a, 18a n.15)), Respondent

continues to believe that its estoppel position has merit.

‘* The Eleventh and the Fourth Circuits have questioned Berkey with-

out reaching the issue. Key Enterprises of Delaware, Inc. v. Venice

Hospital, 919 F.2d 1550, 1567-68 (11th Cir. 1990) (‘...we harbour

some reservations about the Second Circuit’s conclusion that no attempt

to monopolize the leveraged market need be provided. . .’’); Advanced

v. Washington Energy Co., 791 F.2d 1343, 1347 (9th Cir. 1986) (it is

“an elaborate fiction at best” that a firm “‘monopolizes” the market

in which it has lawful monopoly power by using that power to gain an

advantage in another market); Syufy Enterprises v. American Multi-

cinema, 793 F.2d 990, 998 n.10 (9th Cir. 1986), cert. denied, 479 U.S.

15

itself characterized some of the related passages in Berkey

as “dictum.” Twin Laboratories, Inc. v. Wieder Health &

Fitness, 900 F.2d 566, 570 (2d Cir. 1990) (distinguishing

Berkey).

As the courts have become more aware of this Court’s

pronouncement in Copperweld, they will inevitably reject

Berkey. This process can be seen clearly in the Sixth Circuit.

In Kerasotes Michigan Theatres, Inc. v. National Amuse-

ments, Inc., 854 F.2d 135 (6th Cir. 1988), cert. dismissed

sub nom. G.K.C. Michigan Theatres, Inc. v. National Amuse-

ments, Inc., 490 U.S. 1087 (1989), the Sixth Circuit ap-

peared to follow Berkey without reference to Copperweld.'"

However, in a more recent decision by the Sixth

1031 (1987). See also Grason Electric Co. v. Sacramento Municipal

Utility Dist., 571 F. Supp. 1504, 1517 (E.D. Cal 1983), rev'd on other

grounds, 770 F.2d 883 (9th Cir. 1985), cert. denied, 474 U.S. 1103

(1986). The D.C. Circuit has questioned Berkey’s validity. Association

for Intercollegiate Athletics for Women v. National Collegiate Athletic

Association, 735 F.2d 577, 586 n.14 (D.C. Cir. 1984) (noting “the sub-

stantial academic criticism cast upon the leveraging concept’’). Recently,

the D.C. Circuit has addressed the leveraging question in a way that

would be inconsistent with Berkey, although there was no mention of

Berkey in the opinion. United States v. Western Electric Co., 1990-1

Trade Cas. (CCH) 468,973 at p. 63,259-60 (D.C. Cir. 1990) (per cur-

iam) (‘{U]nless the entering [firm] will have the ability to raise prices

or restrict output [i.e., monopoly power] in the market it seeks to enter,

there can be no substantial possibility that it could use its monopoly

power [in the other market] to ‘impede competition.’ ’’).

‘City of Chanute v. Williams Natural Gas Co., 743 F. Supp. 1437,

1461 (D.Kan. 1990) (projecting that the Tenth Circuit would not rec-

ognize monopoly leveraging as an independent Section 2 offense), aff'd

on other grounds, ___ F.2d —__, 1992-1 Trade Cas. (CCH) 469,703

(10th Cir. 1992); M&M Medical Supplies & Service v. Pleasant Valley

Hospital, 738 F.Supp. 1017, 1021 (S.D.W.Va. 1990) (leveraging claim

must be treated as a claim for attempted monopolization).

* Kerasotes was not actually a leveraging case, and does not conflict

with the decisions of the courts below. In Kerasotes the counter-

defendants were charged with conspiring to monopolize and to attempt

to monopolize the market for exhibiting first-run films in Flint, Mich-

igan. Thus, Kerasotes not only involved concerted activity, but it also

involved claims of actual monopolization or attempted monopolization

of the downstream market, not a mere competitive advantage in that

market.

16

Circuit where Copperweld was brought to the court’s at-

tention, the Sixth Circuit relied heavily upon the same

language from Copperweld that was cited by the courts

below in this case, and gave Kerasotes a narrow interpre-

tation consistent with the teachings of Copperweld. Arthur

S. Langenderfer, Inc. v. S.E. Johnson Co., 917 F.2d 1413,

1422-23, 1426-27 (1990), cert. denied, __ U.S. __, 112

S.Ct. 274 (1991). The process has corrected the situation

in the Sixth Circuit without intervention by this Court.

Thus, there is no need to grant certiorari in this case

because the decisions below were clearly correct, and any

conflict among the Circuits is likely to resolve itself over

time in light of the guidance provided by this Court in

Copperweld. The courts are recognizing, as the Ninth Cir-

cuit has recognized, that the language of Section 2 compels

proof of unlawful monopolization or attempted monopoli-

zation in at least one market to support a finding of li-

ability. See Harlan, Some Aspects of the Judicial Process

in the Supreme Court of the United States, 33 Austl. L.J.

108 (1959) (‘“{E]ven where a ‘true’ conflict may be said to

exist, certiorari will sometimes be denied where it seems

likely that the conflict may be resolved as a result of future

cases in the Court of Appeals.’’).

B. THERE IS NO CONFLICT AMONG THE CIRCUITS

REGARDING THE “ESSENTIAL FACILITY” DOC-

TRINE, AND THE VIEW OF THE NINTH CIRCUIT

IS CORRECT

The opinions of the lower courts discussing the ‘‘essen-

tial facility” doctrine have used different types of lan-

guage, but have all been decided consistent with

Copperweld and the language of Section 2. The “essential

facility”” concept was coined in connection with fact situ-

ations where a firm or a group of firms controlled an

asset that was “essential” to other firms that wished to

compete.'* By definition, if the asset was essential to one’s

‘*The concept was first used in connection with boycotts organized

by groups of competitors against outsiders. See, e.g., United States v.

17

ability to compete, denial of access to that asset would

result in the monopolization of the relevant market by the

firm or firms holding the asset. Thus, the concept of es-

sentiality in the ‘essential facility” doctrine keeps the the-

ory in accord with the language of Section 2 and the

teachings of Copperweld.

For example, in Hecht v. Pro-Football Inc., 570 F.2d 982

(D.C. Cir. 1977), cert. denied, 436 U.S. 956 (1978), the

court noted that if access to a truly “essential” facility is

denied, “‘all possible competition is by definition excluded.”’

570 F.2d at 993 n.45. In Twin Laboratories, Inc. v. Wieder

Health & Fitness, supra, the Second Circuit held: ‘“‘As the

word ‘essential’ indicates, a plaintiff must show more than

inconvenience or even some economic loss; he must show

that an alternative to the facility is not feasible.” 900 F.2d

at 570. In Delaware & Hudson Railway Co. v. Consolidated

Rail Corp., 902 F.2d 174 (2d Cir. 1990), cert. denied, —

U.S. __, 111 S.Ct. 2041 (1991), plaintiff met its burden

at the summary judgment stage by showing that denial of

access to the defendant’s railroad tracks could amount to

actual monopolization of the relevant market for trans-

porting newsprint because access was “essential’”’ to the

ability to compete in the newsprint shipping market. 902

F.2d at 176, 179."

Terminal Railroad Association, 224 U.S. 383 (1912), and Associated

Press v. United States, 326 U.S. 1 (1945). These cases involved con-

certed activity and therefore were judged under different principles

than would be applied to single firm conduct. III P. Areeda & D.

Turner, ANTITRUST Law, 4729 at p. 242-43 (1978); Areeda, Essential

Facilities: An Epithet In Need Of Limiting Principles, 58 ANTITRUST

L.J. 841, 844-45 (1990); Note, The Legal and Regulatory Implications

of Airline Computer Reservations Systems, 103 Harv. L. Rev. 1930,

1938 (1990). A concerted action case expressly relied upon by Petitioner

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

owners of Chicago Stadium conspired to monopolize market for profes-

sional basketball in Chicago by denying access to stadium).

18 Directory Sales Management Corp. v. Ohio Bell Telephone Co., 833

F.2d 606 (6th Cir. 1987), which is also relied upon by Petitioner, actually

involved the affirmance of summary judgment for defendant on an

“essential facility’ claim where the court found that the simultaneous

18

The Seventh Circuit has distinguished between those

occasions when denial of access to an allegedly ‘‘essential’’

facility eliminated competition and resulted in monopoli-

zation or threatened monopolization (MCI Communications

Co. v. AT&T, 708 F.2d 1081, 1133 (7th Cir.), cert. denied,

464 U.S. 891 (1983)), and those where denial of access

caused a competitive disadvantage (Olympia Equipment

Leasing v. Western Union Telegraph Co., 797 F.2d 370

(7th Cir. 1986), cert. denied, 480 U.S. 934 (1987)). The

Ninth Circuit expressly adopted the approach taken by the

Seventh Circuit. Alaska Airlines, supra, 948 F.2d at 543-

44 (Pet. App. at 12a-13a).

Thus, there is no conflict between the Ninth Circuit’s

holding below regarding the ‘essential facility’’ claim and

the holdings of other courts. All have required proof that

the denial of access to the “essential” asset would amount

to the unlawful monopolization or attempted monopoliza-

tion of the market in which that asset is used to compete.

The conceded absence of any such threatened monopoli-

zation of the air transportation market was a valid basis

for the rulings of the courts below.

II. EVEN UNDER PETITIONER’S INCORRECT INTER-

PRETATION OF SECTION 2, SUMMARY JUDGMENT

FOR RESPONDENT WAS STILL THE APPROPRIATE

OUTCOME ON THE FACTS OF THIS CASE

Even if the monopoly leveraging and “‘essential facility”

doctrines were a basis for imposing antitrust liability in-

dependent of the words of Section 2 (which they are not),

the undisputed material facts before the trial court none-

theless supported the entry of summary judgment for

American.” Thus, any consideration of those overriding

delivery of yellow pages and white pages was extremely advantageous

for the yellow pages publisher, but was not “essential” to the ability

to compete in the publication of yellow pages directories. 833 F.2d at

612-13.

* The trial court arguably found that Petitioner was entitled to a

trial of its monopoly leveraging claim but for the application of Cop-

perweld’s requirement that there be proof of threatened monopolization

19

legal issues presented by Petitioner would be academic in

this case. See Rice v. Sioux City Memorial Park Cemetery,

349 U.S. 70, 74 (1955) (review should be limited to those

important legal issues that are ‘‘beyond the academic or

the episodic’’).

A. SUMMARY JUDGMENT FOR AMERICAN SHOULD

BE AFFIRMED BECAUSE THE UNDISPUTED FACTS

SHOWED THAT AMERICAN DID NOT “USE” ITS

ALLEGED CRS MONOPOLY POWER IN THE AIR

TRANSPORTATION MARKET, AND DID NOT GAIN

ANY UNWARRANTED COMPETITIVE ADVANTAGE

IN THAT MARKET

To support the imposition of antitrust liability for mo-

nopoly leveraging under Petitioner’s theory, the defendant

must “use” the monopoly power it supposedly possesses

in one market to gain an “unwarranted competitive ad-

vantage” in the other. Berkey, supra, 603 F.2d at 275.

However, not all advantages gained by an alleged monop-

olist are the result of the use of monopoly power. Even

Berkey recognized that there were advantages and benefits

that might flow to an integrated firm for reasons separate

from and independent of that firm’s monopoly power. Ber-

key, supra, 603 F.2d at 276. See also Catlin v. Washington

Energy Co., supra, 791 F.2d at 1347.

The alleged ‘‘use’”” of CRS monopoly power by American

is tied to two things: the use of airline preference in

SABRE displays, and the charging of booking fees.

It is conceded that American used preference in ranking

flights in SABRE displays prior to November of 1984. Was

this use of preference a ‘‘use” of monopoly power? It could

not have been. Every CRS, including those that were very

of the downstream market. In re CRS, supra, 694 F. Supp. at 1473-

74 (Pet. App. at 72a-74a). However, given the court’s holding, this

discussion was dicta. American respectfully submits here, as it did in

the Ninth Circuit, that the trial court’s grant of summary judgment in

favor of American would have been warranted even without reliance

upon Copperweld because of Petitioner’s failure to offer proof of the

other elements of its monopoly leveraging claim.

20

small and which are not alleged to be ‘‘monopolists,”’ gave

the flights of their owners or partners some form of pref-

erence in their displays. In re CRS, supra, 694 F. Supp.

at 1473 (Pet. App. at 72a) (‘Display biasing can be ac-

complished by any firm which is vertically integrated in

both the CRS and air transportation market. Biasing has

been used since the inception of the CRS.’’). Nor was the

use of preference done with an anticompetitive purpose—

unless it is a violation of the antitrust laws to attempt to

maximize one’s sales as compared with those of one’s com-

petitors. Oahu Gas Service, Inc. v. Pacific Resources, Inc.,

829 F.2d 1471, 1475 (9th Cir. 1987), cert. denied, __ U.S.

——, 109 S.Ct. 180 (1988) (a single firm’s conduct does not

violate Section 2 if it has any legitimate economic motive,

even if the firm acts with the specific intent to maintain

or increase its market share). Northwest’s own witnesses

conceded that the use of display preference was not wrong

(ER 8:130; 16:186), and Northwest did not seek damages

in the trial court for sales allegedly lost as a result of display

preference. USAir Plaintiffs’ Memorandum of Points and

Authorities in Opposition to Defendants’ In Limine Motion

to Exclude Section 2 Damage Claims (March 25, 1988) at

11, 13; Memorandum of Points and Authorities of the USAir

Plaintiffs in Opposition to Defendant American’s Motion for

Summary Adjudication on the Issue of Antitrust Immunity

(April 28, 1988) at 2.

Similarly, the charging of booking fees to Northwest

could not constitute the “use” of monopoly power. The

fees were always modest and were only assessed when a

passenger actually made a booking and did not cancel prior

to departure. Alaska Airlines, supra, 948 F.2d at 539 (Pet.

App. at 3a-4a) (‘The $1.75 fee to secure a booking is of

little consequence because a $300 or $400 fare may oth-

erwise be lost... .CRS fees are a relatively small part of

the total costs incurred by a ‘booked’ airline when it pro-

vides air transportation to a paying passenger... .’’).

Moreover, SABRE’s booking fees were the same as those

charged by other CRSs, including PARS both prior to and

after Northwest purchased an interest in it. All CRSs

eee

21

charged booking fees for the simple reason that a CRS

costs a great deal of money to develop and operate, and

to give away its services would be folly.”!

Finally, there was no evidence before the trial court

that would warrant a trial on whether American’s use of

preference or its charging of a booking fee actually caused

competitive injury in the air transportation market.

Petitioner offered no evidence below of any unwarranted

competitive effects in the air transportation market other

than non-specific claims that American’s CRS shifted rev-

enues from other airlines to American. There was no show-

ing that there was an actual effect on the competitive

process. Even if it is presumed, in the absence of any

evidence, that Northwest might have had more bookings

if American’s flights had not had preference in SABRE,

and that perhaps Northwest would have been even more

profitable if it did not have to pay booking fees, there was

no evidence before the trial court that either thing had

any effect on Northwest’s ability to compete, or on com-

petition in the marketplace in general. See Twin Labo-

ratories, Inc. v. Wieder Health & Fitness, 900 F.2d 566

(2d Cir. 1990) (affirming summary judgment against

plaintiff despite defendant’s refusal to advertise plaintiff's

products in defendant’s magazines; even though plaintiff’s

expert claimed that plaintiff would have grown more had

it been granted access to the magazines, the denial did

#1 Even if American had charged a ‘monopoly price’ for access to

SABRE, which it obviously did not because it charged the same rates

as every other CRS, such conduct would not amount to the anticom-

petitive ‘‘use’’ of monopoly power. The charging of a high price—even

a “monopoly price’ charged by a lawful monopolist—is not an anti-

competitive act. Williamsburg Wax Museum, Inc. v. Historic Figures,

Ine., 810 F.2d 243, 252 (D.C. Cir. 1987) (‘{[A]n excessive price alone

does not establish a violation of the antitrust laws, because imposition

of a high price is not, in and of itself, an anticompetitive act.’’). See

also Ball Memorial Hospital, Inc. v. Mutual Hospital Insurance, Inc.,

784 F.2d 1325, 1339 (7th Cir. 1986); Continental Cablevision of Ohio,

Inc. v. American Electric Power Co., 715 F.2d 1115, 1120 (6th cir.

1983). The charging of a high price can attract new entry and result

in greater competition.

ie

‘a is

22

not keep plaintiff or others from competing). Thus, even

under Berkey, summary judgment for American was

proper.

B. SUMMARY JUDGMENT FOR AMERICAN SHOULD

BE AFFIRMED BECAUSE THE UNDISPUTED FACTS

SHOWED THAT AMERICAN NEVER DENIED

NORTHWEST ACCESS TO SABRE, AND THAT SUCH

ACCESS WAS NOT “ESSENTIAL”

Even under Petitioner’s view of the “essential facility’’

theory, there must be proof of a denial of access to a

facility that is essential to a firm’s ability to compete in

a downstream market. It is an undisputed fact that North-

west’s flights, fares and seat availability were listed in

SABRE from the day SABRE was first offered to travel

agencies. Alaska Airlines, supra, 948 F.2d at 545 (Pet.

App. at 16a) (‘“‘American [has] never refused any of the

plaintiffs access’). There have been cases where the owner

of an essential facility has set its prices so high as to

amount to a practical denial of access. See Delaware &

Hudson Railway Co. v. Consolidated Rail Corp., 902 F.2d

174, 177-79 (2d Cir. 1990), cert. denied, __ U.S. __,

111 S.Ct. 2041 (1991); Consolidated Gas Co. of Florida v.

City Gas Co. of Florida, 665 F. Supp. 1498, 1534-35 (S.D.

Fla. 1987), aff'd, 880 F.2d 297 (11th Cir. 1989). However,

this is not such a case. The record before the trial court

showed that American charged booking fees that were the

same as those charged by other CRSs, and no airline,

including Northwest, ever declined to participate in

SABRE because of the booking fees. Thus, there is no

evidence that access was denied.”

Moreover, the undisputed evidence also supports sum-

mary judgment for American on the ground that SABRE

is not an “essential” facility. The record shows that there

were always a number of ways in which an airline could

sell its tickets, including at least three other CRSs. ER

= See L. Sullivan, Antitrust, at 117-18 and 126-27 (1977) (the price

that the owner of an “essential facility’’ may charge may be a high

price and may even include monopoly profits).

a ae

23

5:78-89; 26:243-44; 31:251; 32:252. SABRE accounted for

only 26 percent of the reservations made on airlines. Jd.

One very successful airline, Southwest, never participated

in any CRS. Thus, while SABRE might be ‘“‘an excellent

means of reaching potential customers,” it was not essen-

tial. See Directory Sales Management Corp. v. Ohio Bell

Telephone Co., 833 F.2d 606, 612-13 (6th Cir. 1987). See

also In Re CRS, supra, 694 F. Supp. at 1455 (Pet. App.

at 38a).

III. PETITIONER’S CHALLENGES ARE FACT BOUND,

AND WERE NOT ASSERTED IN THE COURTS BE-

LOW

Petitioner charges that the courts below improperly re-

solved fact issues on the basis of economic theory at the

summary judgment stage. Pet. at pp. 16-20. These new

claims, raised for the first time in this Court, are mis-

represented and do not provide a basis for granting

certiorari. See United States v. Johnston, 268 U.S. 220,

227 (1925) (“We do not grant a certiorari to review evi-

dence and discuss specific facts.’’).

The material facts were not disputed below. Petitioner

conceded that there was insufficient evidence to support a

finding that American had unlawfully monopolized or at-

tempted to monopolize the market for the provision of CRS

services to airlines. Petitioner also conceded that there was

insufficient evidence to support a finding of unlawful mon-

opolization or attempted monopolization of the air trans-

portation market. These were the material facts that must

draw any court to conclude that there was insufficient

evidence to support a finding that Section 2 had been

violated.

The fact issues raised by Petitioner in this Court are

not only not material, they are raised in this Court for

the first time contrary to established prohibitions. EEOC

v. FLRA, 476 U.S. 19, 24 (1986) (‘Our normal practice,

from which we see no occasion to depart on this occasion,

is to refrain from addressing issues not raised in the Court

of Appeals.’’). Petitioner seeks to characterize the problem

24

as one that occurred in the Court of Appeals, and thereby

tries to justify its delay in raising these issues. However,

the factual record was established in the trial court, and

the Court of Appeals merely affirmed that the trial court

had acted properly. The failure to object in the Ninth

Circuit to the trial court’s findings as to the undisputed

material facts precludes Petitioner from raising such claims

now. Steagald v. United States, 451 U.S. 204, 209 (1981)

(the right to raise factual issues before the Supreme Court

may be lost ‘“‘when [a party] has acquiesced in contrary

findings by [the courts below]’’).

These supposed fact issues are also bogus. For example,

there was no evidence of any “price squeeze’”’ resulting

from onerous booking fees. American’s booking fees were

no higher than those charged by every other CRS (in-

cluding the CRS partially owned by Petitioner). Moreover,

the undisputed facts established that those booking fees

were too modest to put any airline into a “‘squeeze.”” Alaska

Airlines, supra, 948 F.2d at 539 (Pet. App. at 3a-4a) (“‘The

$1.75 fee to secure a booking is of little consequence be-

cause a $300 or $400 fare may otherwise be lost... .CRS

fees are a relatively small part of the total costs incurred

by a ‘booked’ airline when it provides air transportation

to a paying passenger... .’’).

The citation to air transportation market share data in

the opinions of the lower courts is not tinustial, Market

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25

sible evidence that would at least create a jury question

on the issue of monopolization.** Rule 56(c), Federal Rules

of Civil Procedure. Petitioner chose not to offer any evi-

dence of competitive impact in the downstream air trans-

portation market. Indeed, Petitioner conceded that

monopolization of the air transportation market was not

threatened. Thus, the lower courts’ citation to the market

share data was justified, and did not involve any improper

“‘fact-finding.’’*5

CONCLUSION

For the reasons set forth above, this case, which was

correctly decided below, does not raise issues that are

proper for review on a petition for certiorari.

|

Dated: March 16, 1992

Respectfully submitted,

ROBERT E. CooPpEerR*

J. Epp STEPP, JR.

STEVEN C. McCCRACKEN

MARK E. WEBER

GIBSON, DUNN & CRUTCHER

333 South Grand Avenue

Los Angeles, California 90071

(213) 229-7000

Attorneys for Respondent

AMERICAN AtRthin&s; INC

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