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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1992
- **Citation:** 503 U.S. 977

## Text

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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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0129%3A3. Public record. Not legal advice.