Opposition Brief — Elliott v. United Center

Supreme Court brief1998

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‘ . FILED

No. 97-1188 ' 7 1998

In The SE an

Supreme Court of the United States

October Term, 1997 ©

THORNTON ELLIOTT, EUGENE McQUEEN, VERNON

JOHNSON, MICHAEL CHOICE, FAMIOUS FRENCH,

MARCUS LYONS, DARRYL LANE, RONNIE NELLON,

CHARLES J. BEYER, JACKIE SMITH, SAUL LOCKETT.

ZEKE RAND, LEO JOHNSON, LAWRENCE RAND,

ROBERT JOHNSON, LOUIS DAVIS, ANTOINETTE

JOHNSON and HUBERT WEBB,

Petitioners,

vs.

THE UNITED CENTER, A JOINT VENTURE f/k/a METRO-

CHICAGO SPORTS STADIUM JOINT VENTURE,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Seventh Circuit

RESPONDENT?’S BRIEF IN OPPOSITION

HOWARD A. VOEKS

Counsel of Record

EUGENE E. GOZDECKI

GOZDECKI & DEL GIUDICE

Attorneys for Respondent

221 North LaSalle Street

Suite 2200

Chicago, Illinois 60601

(312) 782-5010

144775 (800) 274-3321 + (800) 359-6859 _ ae

A DIVISION OF COUNSEL PRESS Sennces. inc

STATEMENT PURSUANT TO RULE 29.6

Respondent, The United Center, is a joint venture and has

no parent company and no nonwholly owned subsidiaries.

TABLE OF CONTENTS

Page

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Reasons for Denying the Writ .................... 3

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TABLE OF CITATIONS

Cases Cited:

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

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Eastman Kodak Co. v. Image Technical Services, 504

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Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S.

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INTRODUCTION

Eighteen street peddlers in Chicago (the “Peanut Vendors”)

contend there is a relevant market under antitrust law for the sale

of snack food “in and around” the Chicago United Center, home

arena of the Chicago Bulls professional basketball and Chicago

Blackhawks professional hockey teams. The Peanut Vendors

contend the United Center is monopolizing this market illegally

by prohibiting spectators from bringing food with them into the

stadium. A trial court held there was no such market as a matter of

law, denied injunctive relief without an evidentiary hearing, and

dismissed the Peanut Vendors’ complaint. An appellate court

agreed. The Peanut Vendors claim these lower courts conflict with

the United States Supreme Court’s own rulings in various seminal

antitrust law decisions.

After raising and then abandoning various theories in the

courts below, the Peanut Vendors now contend the United Center’s

policy prohibiting spectators from bringing food with them into

the facility constitutes illegal tying or monopoly leveraging. Because

of this ban on outside food, purportedly sports fans attending Bulls

and Blackhawks games at the United Center are “forced” to buy

snack food from the United Center’s food concessionaires, who

operate exclusively inside the arena, rather than from the Peanut

Vendors, who install themselves on the streets leading up to the

stadium gates.

(The Peanut Vendors presume that Bulls and Blackhawks fans

cannot sit through a game without submitting to a craving for

snack food. Hence the Peanut Vendors contend the United Center

is “forcing” spectators to buy snack food from stadium

concessionaires. The Peanut Vendors also suggest, without clearly

arguing so, that sports fans have a need — and a right — in particular

to eat peanuts while watching Bulls and Blackhawks games. The

Peanut Vendors emphasize that the United Center food

concessionaires do not include peanuts among the snack foods

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they offer. The Peanut Vendors apparently believe that, especially

because the United Center food concessionaires will not satisfy

the sports fans’ need for peanuts, the Peanut Vendors must be

allowed to do so.)

The Peanut Vendors now contend they should have been given

an evidentiary hearing in the trial court to prove that presentation

of live Bulls and Blackhawks games in Chicago constitutes a stand-

alone relevant market that is being monopolized by the United

Center. Neither the trial court, however, nor the appellate court,

nor the United Center have ever disputed this issue.

What the lower courts have rejected is the Peanut Vendors’

apparent reasoning that, if Bulls and Blackhawks games are unique

“products” for which sports fans of these teams will recognize no

reasonable substitutes, then sale of snack food to Bulls and

Blackhawks fans while they are attending these games also must

be a unique “product” that constitutes a stand-alone relevant market

separate from the sale of snack food anywhere else in Chicago

where street peddlers or other snack food purveyors may wish to

operate. The Peanut Vendors allege that they can and do sell peanuts

on the streets all over Chicago, including on the streets outside

various sports arenas. However, the Peanut Vendors assume that

the particular streets outside the United Center, when those streets

are filled with Bulls and Blackhawks fans, constitute a unique

relevant market where the Peanut Vendors must be allowed to

“compete” with food concessionaires inside the stadium for sale of

snack food to sports fans about to enter the facility. —

Although the Peanut Vendors have never clearly stated this as

their ultimate theory, nevertheless the lower courts anticipated and

rejected this contention. In the words of the appellate court:

[PJeople do not go to the United Center to buy

food. ... No one argues that the United Center is

monopolizing the market for snack food in near west

Chicago [the location of the United Center], because

such an argument would be ludicrous on its face.

The United Center is obviously not monopolizing

the market for peanuts: it is staying strictly out of

the peanut business. True, its ban means that those

with a craving for peanuts must satisfy it either before

or after the game, but both price and output of

peanuts in any geographic area that would be

meaningful under the antitrust laws (at least Chicago,

we presume) are totally unaffected by the United

Center’s policies. (Petitioners’ Appendix A, p. 5a.)

The Peanut Vendors claim this reasoning conflicts with

various pronouncements of this Court. However, the Peanut

Vendors isolate statements from this Court’s decisions without

acknowledging the full context of the cases they cite. Viewed

in their proper context, none of this Court’s cited decisions

contradict the lower court rulings.

REASONS FOR DENYING THE WRIT

I. a

BROWN SHOE

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

this Court considered how the market for shoe manufacture

and sale must be analyzed. Brown Shoe Co. and Kinney Shoe

Co. wanted to merge. The government opposed their merger

because these two companies controlled a substantial share of

all shoe sales in the country. Brown Shoe Co. contended,

however, that if the shoe market were divided into appropriate

submarkets, Brown and Kinney would be seen as occupying

different submarkets.

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Brown Shoe Co. contended the market must be seen to

consist of a large number of submarkets, distinguishing not

only between men’s and women’s shoes, children’s and adult’s

shoes, but also between expensive and moderate priced shoes,

high and low quality shoes, and as to children, between infant's

shoes and older children’s shoes, boy’s shoes and girl’s shoes.

This Court rejected Brown Shoe’s argument for a myriad of

submarkets. The Court examined various practical indicia of

how the shoe market operates, and concluded that the market

should be divided into only three submarkets: men’s, women’s

and children’s shoes. /d. at 325-26.

The practical indicia this Court recognized were: industry

or public recognition of the submarket as a separate economic

entity, the product’s peculiar characteristics and uses, unique

production facilities, distinct customers, distinct prices, sensitivity

to pice changes, and specialized vendors. /d. at 325.

The Peanut Vendors contend they have satisfied these criteria

as te the existence of a submarket for food concessions at the

Unied Center simply by alleging that, in the years before the

Unied Center opened its doors in 1994, the Chicago Stadium,

the orior home arena for the Bulls and Blackhawks, did not

enfarce a ban on outside food and accordingly there were peanut

vemors operating on the streets outside the stadium, thus giving

pubic recognition to a market for food concession sales “in

andaround” the stadium. (Petitioners’ Brief, pp. 13-14.)

However, with such an easily-satisfied definition, every

indvidual business enterprise would qualify as a relevant

subnarket for antitrust purposes merely by continuing in

exitence for some period of time. Certainly in the shoe

mamfacturing industry, history would support the fact that there

hav: always been shoes of various price and quality, and shoes

for young boys as opposed to young girls. Yet this Court did

not conclude that the mere history of such a distinction by itself

sufficed to define a relevant submarket.

Applying the Brown Shoe criteria to the present case, the issue

must be whether the sale of snack food specifically to Bulls and

Blackhawks fans must be recognized as a separate market from

sale of snack food to anyone else. In that context, the appellate

court correctly concluded: “People do not go to the United Center

to buy food.” In other words, there is no public perception that the

consumption of snack food at the United Center is somehow distinct

and separate from the consumption of snack food anywhere else.

Analyzing the consumption of snack food at the United Center

under the Brown Shoe practical indicia demonstrates: (a) there are

no unique production facilities required to manufacture snack food

for sale at the United Center as compared with snack food sold

anywhere else; (b) snack food consumption is not particular only

to events held at the United Center, but is similar if not exactly the

same as snack food consumption at all other professional sports

stadiums, and indeed similar to snack food consumption at any

entertainment facility, if not also snack food consumption anywhere,

whether at work, home, school, or wherever; (c) there is nothing

in particular about the customers who purchase snack food at the

United Center that would distinguish them from snack food

purchasers at any other professional sports facility, or indeed that

would distinguish snack food consumers at the United Center from

snack food consumers anywhere else in the world; and (d) there

are no special selling mechanisms in place in the streets outside the

United Center which are not in place at virtually every location

where street peddlers or other snack food vendors may wish to

operate. Indeed, the Peanut Vendors allege that street vendors sell

peanuts outside every major sports facility in the country, and the

Peanut Vendors themselves operate on streets throughout Chicago,

including at various sports arenas other than the United Center.

Hence nothing in Brown Shoe contradicts the lower court

decisions rejecting the notion that snack food sale at the United

Center is a stand-alone relevant market.

II.

EASTMAN KODAK

In Eastman Kodak Co. v. Image Technical Services, 504

U.S. 451 (1992), this Court concluded that an evidentiary

hearing would be necessary to understand whether purchasers

of complex photocopying machines are able to appreciate the

full life cycle cost of their purchase when choosing between a

copier where the manufacturer is the only source of supply not

only for the finished product but also for replacement parts and

service, as opposed to a copier where the purchaser can obtain

parts and service from sources independent of the manufacturer.

Id. at 469-79.

Kodak argued that parts and service were not separate

relevant markets from sale of the copying machine itself,

because purchasers could appreciate the comparative price

advantages of purchasing a machine that included parts and

service exclusively from the manufacturer, compared with

purchasing a machine where parts and service are available from

an independent supplier. Therefore Kodak contended it could

not illegally monopolize a market for servicing its own

machines, where it was refusing to provide replacement parts

to independent service companies. A trial court granted Kodak’s

summary judgment motion based only on affidavits from Kodak

as to how this interaction of product, parts, and service affected

the consumer’s buying decision and the ultimate cost of the

purchase.

This Court reversed the grant of summary judgment,

concluding that because of the complexity of facts and issues

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involved: “The proper market definition in this case can be

determined only after a factual inquiry into the ‘commercial

realities’ faced by consumers.” /d. at 482.

The Peanut Vendors now contend that Eastman Kodak

prohibits a trial court from dismissing any claim of antitrust

violation without first giving the plaintiff an evidentiary hearing

to establish the existence of a relevant market. (Petitioners’ Brief,

pp. 7, 15-16.) However, the Peanut Vendors make no attempt

to demonstrate what it is about the concept of snack food

consumption at Bulls and Blackhawks games that would require

an evidentiary hearing in order to comprehend whether snack

food consumption at the United Center is a stand-alone relevant

market. Unlike Eastman Kodak, the Peanut Vendors offer no

analysis of why the “commercial realities” might require a court

to regard snack food consumption at the United Center either

as a separate product from the sports event for which the

consumer buys a ticket, or as a separate product from snack

food sold to that consumer anywhere or anytime other than at a

Bulls or Blackhawks game.

The Peanut Vendors acknowledge that the United Center

has never allowed ticket-buyers to bring food with them into

the arena since it opened its doors in 1994. (Petitioners’ Brief,

p. 2.) Hence unlike the situation in Eastman Kodak, Bulls and

Blackhawks fans attending games at the United Center are not

misled into buying tickets for these games under the mistaken

belief that they could bring their own snack food with them to

the facility and thus avoid having to pay higher prices for snack

food bought from stadium concessionaires.

Moreover, in Eastman Kodak this Court recognized that

the life cycle cost of a durable good such as a complex

photocopying machine inevitably must include replacement

parts and service. But the Peanut Vendors show no reason why

the cost of attending a Bulls or Blackhawks game inevitably

must include the price of snack food. Again as the appellate

court noted, people do not come to the United Center to buy

food. Snacking is not a necessary concomitant of sitting through

a Bulls or Blackhawks game.

A court does not require an evidentiary hearing to

comprehend these “commercial realities.” Hence the decision

of the lower courts to deny injunctive relief and dismiss the

Peanut Vendors’ complaint on the pleadings does not violate

any principle of Eastman Kodak.

Ill.

JEFFERSON PARISH

In Jefferson Parish Hospital District No. 2 v. Hyde, 466

U.S. 2 (1984), this Court concluded that a hospital that

controlled only thirty per cent of the market for surgical services

in New Orleans did not violate antitrust law by hiring its own

anesthesiologists and permitting only these persons to provide

anesthesiological services in its facility. The plaintiff was an

independent anesthesiologist who contended that the hospital’s

exclusive contract with a firm of anesthesiologists constituted

an illegal tying agreement that harmed consumers by preventing

them from selecting their own provider for such services when

they elected to undergo surgery at this hospital.

The Peanut Vendors contend the Jefferson Parish decision

rejects a concept, the ““one-monopoly-profit theory,” on which

the appellate court in the present case purportedly based its

decision. (Petitioners’ Brief, pp. 20-21.) However, the

supposedly errant reasoning of the appellate court in fact parallels

the reasoning of Jefferson Parish. The appellate court reasoned

that the United Center does not have market power in the snack

food market and therefore cannot harm consumer welfare by

virtue of its refusal to allow patrons to bring food with them

into the facility. As to how the United Center goes about

extracting a profit from its monopoly over Buils and Blackhawks

games, the appellate court stated:

The United Center can recoup the cost of putting

on the event in any of a number of ways. It can

charge very high ticket prices, and allow unlimited

numbers of food concessions in and around the

stadium, or it can charge somewhat lower ticket prices

and restrict the number of concessions (thereby

earning some of its profits from food sales).

(Petitioners’ Appendix A, p. 5a.)

The appellate court noted that such a shifting of profit

acquisition from ticket prices to food concession prices was not

prohibited by antitrust law. This was so because there was no

prospect that by looking to a captive food concession operation

to generate some of its profit the United Center was threatening

the ability of snack food purveyors to compete generally in the

Chicago market for sale of snack foods. In the words of the

appellate court, as noted in the introduction to this brief:

No one argues that the United Center is

monopolizing the market for snack food in near west

Chicago, because such an argument would be

ludicrous on its face. The United Center is obviously

not monopolizing the market for peanuts: it is staying

strictly out of the peanut business. True, its ban means

that those with a craving for peanuts must Satisfy it

either before or after the game, but both price and

output of peanuts in any geographic area that would

be meaningful under the antitrust laws (at least

Chicago, we presume) are totally unaffected by the

United Center's policies. (Petitioners’ Appendix A,

p. 5a.)

The appellate court’s analysis in the present case parallels

this Court’s reasoning in Jefferson Parish. In a concurring

opinion in Jefferson Parish, Justice O'Connor reasoned:

The ultimate decision whether a tie-in is illegal

under the antitrust laws should depend upon the

demonstratea economic effects of the challenged

agreement. It may, for example, be entirely

innocuous that the seller exploits its control over

the tying product to “force” the buyer to purchase

the tied product. For when the seller exerts market

power only in the tying-product market, it makes

no difference to him or his customers whether he

exploits that power by raising the price of the tying

product or by “forcing” customers to buy a tied

product.

466 U.S. at 41-42.

Hence a tying agreement is not illegal if the seller has

significant market power only in the tying product, but not

also in the tied product. Justice O’Connor considered that where

Jefferson Parish Hospital controlled thirty per cent of the market

for surgical services in New Orleans, the hospital “may thus

gain local market power in the provision of anesthesiology” by

virtue of its exclusive dealing contract. /d. at 42 (emphasis

added). However, Justice O’Connor concluded that it did not

require a “detailed analysis of the size of the relevant markets”

to determine that an exclusive dealing agreement between a

“firm of four anesthesiologists and one relatively small hospital”

did not threaten an unreasonable restraint on trade either as to

the availability of anesthesiological services at other hospitals

in the area or the range of employment options that other

anesthesiologists might enjoy in the community. Jd. at 45-46.