Petition for Writ of Certiorari — Santana Products, Inc. v. Bobrick Washroom Equipment, Inc.

INTRODUCTION

This case concerns a frequently litigated issue of anti-

trust law on which the circuits are deeply divided. In

holding that in no circumstances could respondents’ in-

tentionally false statements about petitioner’s products

constitute a “restraint of trade” actionable under § 1 of the

Sherman Act, the Third Circuit aligned itself squarely

with the Fifth and Seventh Circuits. Four circuits — the

D.C., Second, Sixth, and Eighth — reject that position and

hold that false disparagements of a competitor’s product

can support a Sherman Act claim. In its enforcement ef-

forts, the United States government also takes the posi-

tion that false statements that disparage a competitor’s

product can provide the requisite proof of a restraint of

trade or an exclusionary conduct element of a Sherman

Act claim. Because this issue is frequently recurring, is

the subject of a deep and mature circuit conflict that

shows no sign of abating, is important to clarify for the

conduct of American business, and is cleanly raised in a

case that presents an ideal vehicle for the resolution of

the conflict, the petition should be granted.

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. la-32a) is

reported at 401 F.3d 123. The opinion of the district court

(Pet. App. 33a-170a) granting partial summary judgment

is reported at 249 F. Supp. 2d 463.

JURISDICTION

The judgment of the court of appeals was entered on

February 9, 2005. The court of appeals denied a petition

for rehearing on April 11, 2005. Pet. App. 17la. On June

30, 2005, Justice Souter extended the time for filing a pe-

tition for a writ of certiorari to and including August 9,

2005. Jd. at 173a. The jurisdiction of this Court is in-

voked under 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

Section 1 of the Sherman Act is set forth at Pet. App.

172a.

2

STATEMENT OF THE CASE

The parties in this case manufacture and sell partitions

used in restrooms of schools and other buildings con-

structed after competitive bidding processes.' The specifi-

cations for bidding, typically written by architects, state

what materials are permissible for building components,

such as partitions. If a bid proposes to provide compo-

nents that the specifications do not permit, it cannot be

considered. One aspect of competition among partition

suppliers is trying to induce architects and other bid

specification writers to write specifications in a way that

includes their products or excludes their competitors’

products.”

Traditionally, partitions were made from phenolic and

plastic laminate materials or metal. Respondent Bobrick

Washroom Equipment, Inc. (“Bobrick”) manufactured and

sold partitions made only from these conventional materi-

als, as other co-conspirators did. In the 1980s, petitioner

Santana Products, Inc. (“Santana”) introduced and sought

to market partitions made from high density polyethylene

(“HDPE”), an innovative material that is cheaper than

and technologically superior® to the conventional materi-

als. By the end of the 1980s, five companies offered

HDPE partitions. By approximately 1990, HDPE parti-

tions were gaining a substantial and increasing market

share, at the expense of conventional products. See C.A.

App. 11642, 11619-20, 11632, 11634, 11636, 11644.

' See, e.g., Cal. Pub. Cont. Code §§ 10300-10301 (West 2004); N.Y.

Gen. Mun. Law § 103 (McKinney 1999).

? The district court found: “The specification process for public build-

ings contracts is central to competition within the toilet partition in-

dustry.” Pet. App. 37a.

3 The technological superiority of HDPE includes greater durability,

ease of maintenance, ease of cleaning, and vandal resistance. See C.A.

App. 11622, 11630, 11636. Conventional phenolic partitions cost 44%

more than HDPE ones. See id. at 2724.

3

To combat that success, respondents formed a conspir-

acy that included manufacturers of conventional parti-

tions and their principal supplier. The conspirators held

a series of meetings in which they agreed to engage in a

campaign to disseminate to bid specifiers intentionally

false statements‘ that HDPE partitions were highly

flammable fire hazards (id. at 23-27, 157-58, 167) and to

propagandize bid specifiers to write their bid specifica-

tions in a way that would exclude use of HDPE partitions.

Among other things, Bobrick developed a “‘fire scare’

marketing campaign” (Pet. App. 134a) that the district

court ruled “is aptly characterized as a ‘fire scare,’ in-

tended to portray ... the alleged extreme hazard of

HDPE” (id.). Some of the conspirators prepared a video-

tape falsely depicting the flammability of HDPE parti-

tions and making it appear to be a fire hazard. They pro-

vided the videotape to sales representatives of the other

conspirators, so that they could use it in their sales pres-

entations. See C.A. App. 1709-10. Respondent Bobrick’s

sales representatives alone made hundreds of presenta-

tions to bid specifiers falsely describing HDPE partitions

as a fire hazard, and respondent Bobrick distributed cop- -

ies of the fire hazard videotape to architects (see id. at

596-97, 599-600, 1159-60, 1235, 1355-66), as well as a

‘ The district court noted that, in an earlier decision in this case, it

had found that “Santana’s underlying action depends upon Bobrick’s

knowing and intentional acts.” Pet. App. 47a. See also id. at 113a

(“deliberately false”). Respondents successfully argued before the dis-

trict court that the basis of Santana’s charges was that respondents

“knowingly and intentionally made false and malicious allegations and

misrepresentations with regard to [Santana’s] products.” Jd. at 9la

(internal quotation marks and brackets omitted). The district court

agreed and on that basis granted summary judgment against some

claims under the statute of limitations. Accordingly, respondents are

now judicially estopped from denying that petitioner’s allegations rest

on their knowing and intentional false statements. See New Hamp-

shire v. Maine, 532 U.S. 742, 750-51 (2001). In addition, petitioner

opposed summary judgment by proffering evidence that respondents

knew their statements were false. See C.A. App. 152, 156, 953, 1107,

1109-10, 1191, 1210-14, 9254-55, 9268, 9271, 9275, 9284-85.

4

second similar videotape that Bobrick made itself (see id.

at 155-56). Respondents placed advertisements in trade

journals, making the same false fire hazard claims. See

id. at 160-62, 2762-63, 2767, 2774, 2815-16, 2844, 2855-

66.° In addition, the conspirators agreed not to make and

sell HDPE partitions. See id. at 24, 399-400, 466-81, 648-

52, 9391-93, 9399, 9431-32, 9441-42. The three co-

conspirators that engaged in the manufacture and sale of

HDPE partitions stopped making and selling them. See

id. at 24, 11627.

Petitioner's proffered evidence showed that, as a result

of the conspirators’ campaign of intentional falsehood, ar-

chitects largely ceased specifying HDPE as permissible for

bids. See id. at 203, 204-05, 9477-78. The rapid gains in

market share achieved by HDPE partitions achieved at

the expense of the conspirators’ products abruptly

stopped. See id. at 11675-76. The conspirators regained

their market share (see id. at 202-05, 2667-69, 9421-22,

9476-78, 11620, 11656) and subsequently increased the

prices for their products (see id. at 870-72, 2724, 9434-35,

9367). Three small manufacturers of HDPE partitions

exited the industry. See id. at 24. At considerable ex-

pense, petitioner attempted to counteract the conspira-

° The district court granted summary judgment in petitioner's favor

as to the literal falsity of respondents’ “box lunch” slide-show presenta- -

tion comparing the respective flammability properties of petitioner's

and respondents’ products, Pet. App. 154a-155a; and advertising claim-

ing that respondents’ products had fire resistance superior to HDPE’s,

id. at 156a-157a. The district court further found: “There is sufficient

evidence to create a genuine dispute as to the truth of the assertion

_ that HDPE is highly flammable.” Jd. at 143a. The court also found

disputed fact issues concerning the literal falsity of the conspirators’

video demonstration of HDPE being set on fire by a cigarette lighter,

id. at 150a-151a; a Bobrick videotape demonstration of a partition be-

ing set on fire by placing a lighter fluid-soaked paper roll below it and

igniting the roll, id. at 153a-154a; advertising describing HDPE as a

“fire and smoke hazard,” id. at 158a; and a script for use by respondent

Bobrick’s salesmen describing HDPE as highly flammable, id. at 158a-

159a.

5

tors’ fire hazard campaign, but its efforts met only limited

success.°

In 1994, petitioner sued a number of the conspirators.’

As a result, the fire hazard campaign slowed and eventu-

ally stopped.® Several of the conspirators began advertis-

ing, making, and selling HDPE partitions. See id. at 111,

210-11, 235, 239. HDPE partitions then resumed their

upward growth trend in market share at the expense of

conventional partitions. See id. at 11675-76. The parties

settled that suit in 1995. See Pet. App. 6a.

In 1996, petitioner sued respondents in the Middle

District of Pennsylvania, alleging, among other things, a

conspiracy in unreasonable restraint of trade, in violation

of Sherman Act § 1, 15 U.S.C. § 1.9 After discovery, the

district court granted respondents’ motion for summary

§ Petitioner proffered evidence that the architects and specifiers to

whom the false statements were made were not knowledgeable about

fire safety issues (see C.A. App. 2044-45, 2796, 8617-18, 8621-22 ), that

it was difficult to obtain an opportunity to present petitioner’s counter-

arguments to them, and that it cost petitioner millions of dollars in an

only partly successful advertising campaign to counteract the false

statements (see id. at 710-12, 717). The district court found a triable

issue as to whether petitioner “incurred ‘loss control’ costs as a result

of” respondents’ conduct. Pet. App. 16la. Despite the summary judg-

ment posture of the case, however, the district court then went on to

make the following “findings”: “Santana has failed to show that the

challenged advertisements and other dissemination of information

were made to unsophisticated buyers. On the contrary, the architects

and specifiers were knowledgeable purchasers who were skeptical of

the ‘fire scare’ marketing. Furthermore, the ‘fire scare’ marketing was

‘readily susceptible to neutralization.’” Jd. at 120a n.47 (citing respon-

dents’ proffer of evidence).

7 Santana Prods., Inc. v. Toilet Partition Mfrs. Council, et al., Civ. A.

No. 3:94-CV-1962 (M.D. Pa.).

8 The fire hazard campaign included the period 1990 to 1994 and

beyond. See Pet. App. 6a, 46a-47a.

. Respondents had not been made defendants in the 1994 suit be-

cause at that time petitioner was unaware of and lacked evidence of

respondents’ substantial involvement in the conspiracy.

6

judgment and dismissed the § 1 claim. The district court

concluded, among other things, that the conduct of re-

spondents, while concerted,’ was not an antitrust re-

straint of trade.'!

On appeal, the Third Circuit affirmed the grant of

summary judgment solely on the ground that the con-

certed action of which petitioner complained was not a

“restraint of trade.” The court held that petitioner did not

allege “coercive measures,” Pet. App. 14a, and without co-

ercion there cannot be a restraint of trade. There was no

“enforcement device that operated to restrain trade.” Id.

at 16a.

The court termed the allegations of intentional false

statements disparaging HDPE “irrelevant because ‘decep-

tion, reprehensible as it is, can be of no consequence so far

as the Sherman Act is concerned’” and “‘antitrust law

does not compel your competitor to praise your product.’”

Id. at 14a (citation omitted). Moreover, the Third Circuit

opined, the campaign of intentional falsehood was “classic

competition on the merits of a product.” Jd. Any exclu-

sion of petitioner or its product from the market was thus

merely the result of respondent Bobrick’s “superior prod-

uct or business acumen.” Jd. at 15a (internal quotation

marks omitted). Because the Third Circuit concluded that

respondents’ intentional false statements did not consti-

tute a restraint of trade as a matter of law, the court of

'0 The district court held that the concerted action requirements for

a § 1 conspiracy were met: “Santana has proffered a plausible conspir-

acy theory: Bobrick and other non-HDPE toilet compartment manu-

facturers would have had a joint interest in excluding from the market

HDPE partitions, thereby constraining supply and increasing prices.

Santana has adduced evidence consistent with Bobrick’s involvement

in the conspiracy in the form of its communications with Formica and

Metpar. The evidence is sufficiently unambiguous that it ‘tends to ex-

clude the possibility of independent action.’” Pet. App. 102a.

'! The court of appeals stated: “The District Court held that San-

tana proved the concerted action element as to Bobrick, and Bobrick

does not challenge this finding.” Pet. App. 12a n.14.

7

appeals did not address the competitive impact of the

challenged concerted action.

REASONS FOR GRANTING THE PETITION

A deep and mature circuit conflict exists between the

D.C., Second, Sixth, and Eighth Circuits, which hold that

false disparagements of a competitor's products can be

charged as elements of a violation of the Sherman Act,

and the Third, Fifth, and Seventh Circuits, which hold

that as a matter of law such false statements cannot be

deemed a restraint of trade. The Ninth Circuit has also

rejected a false disparagement claim on the facts pre-

sented but suggested in dicta that it might entertain such

a claim under the right circumstances. .

Resolving that conflict of circuits is critical to the integ-

rity of commerce, because the competitive process rests on

businesses’ ability to know the rules, and few rules are

more fundamental to the competitive process than

whether one competitor can stymie competition by lying

about a competitor’s product. In enforcing the Sherman

Act, the United States has taken the position advocated

by petitioner here in numerous cases over the past four

decades, including in the landmark case of United States’

uv. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (en banc).

A failure by this Court to resolve the conflict thus creates

great uncertainty both to the private sector and to the

government's law enforcement efforts.

This case presents an ideal vehicle for resolving the cir-

cuit conflict, because the falsity of the statements was un-

deniable, and the court of appeals held that, as a matter

of law, such statements could not provide the restraint of

trade element of a Sherman Act claim.

I. A DEEP CIRCUIT CONFLICT EXISTS ON

WHETHER INTENTIONALLY FALSE STATE-

MENTS ABOUT A COMPETITOR’S PRODUCT

CAN SUPPORT A SHERMAN ACT CLAIM

The Third Circuit held that concerted action to exclude

a competitive product from the market by disseminating

8

intentionally false statements cannot violate Sherman Act

§ 1 as a matter of law. That holding is in stark conflict

with decisions of the Second, Sixth, Eighth, and District of

Columbia Circuits. The Third Circuit drew support for its

decision from the Fifth and Seventh Circuits.

A. Four Circuits Hold That False Product Dis-

paragement Can Support A Sherman Act

Claim

1. Eighth Circuit - Travel Arrangers

In International Travel Arrangers, Inc. v. Western Air-

lines, Inc., 623 F.2d 1255 (8th Cir. 1980), the Eighth Cir-

cuit has squarely held that false disparagement of a com-

petitor’s product supports a Sherman Act § 1 or § 2 claim.

In that case, the defendants engaged in a campaign of ad-

vertisements and other communications falsely and mis-

leadingly disparaging group charter tours, a new form of

travel service beginning to make inroads on Western’s

conventional air travel service. The Eighth Circuit held

that a conspiracy among the defendants to use false

statements to eliminate a new type of travel service vio-

lated both § 1 and § 2 of the Sherman Act when it resulted

in substantial anticompetitive market effects.

The court based its conclusion that the defendants’ con-

duct was illegal in part on the falsity of the statements

made. Unlike the Third Circuit below, which held that —

-respondents’ false statements about petitioner’s products

were “irrelevant,” the Eighth Circuit in Travel Arrangers

held that “the ad is false, deceptive and misleading” and,

as such, “must be considered in determining whether or

not an unreasonable restraint of trade occurred.” Id. at

1264 (emphasis added). The Eighth Circuit characterized

the defendants’ use of false and misleading advertising as

exclusionary and not competition on the merits:

Western did not choose to compete with ITA’s [travel

group charters (“TGCs’”)], but rather chose to pre-

vent TGCs from becoming competition in the market

9

place. Under the rule of reason, Western’s anti-TGC

campaign is an unreasonable restraint of trade.

Id. at 1268. The conduct that the Eighth Circuit con-

demned in Travel Arrangers as an unreasonable restraint

of trade is almost identical to the conduct that the Third

Circuit below immunized as not amounting to a restraint

of trade. Had this case arisen in the Eighth Circuit,

therefore, petitioner would have been entitled to a trial on

the merits, and the case would not have been summarily

dismissed on the ground that respondents’ intentionally

false statements were irrelevant under Sherman Act § 1.

2. D.C. Circuit - Microsoft

In United States v. Microsoft Corp., 253 F.3d 34 (D.C.

Cir. 2001) (en banc), the court upheld a judgment of mo-

nopolization against Microsoft. The condemned exclu-

sionary conduct included intentionally deceiving software

developers into believing that Microsoft’s version of Java

was compatible with other versions, which functioned

with both Windows and other operating systems. In fact,

Microsoft had written its version of Java so that applica-

tions written with Microsoft Java were incompatible with

other Javas and with any operating system except Win-

dows. Microsoft sought, the court found, to perpetuate its

Windows monopoly in the operating system market by

causing Java applications to be unusable with any other

operating system. Microsoft's deception was intentional

and had the purpose of eliminating a threat to Microsoft’s

monopoly power in the market for operating systems. Id.

at 76. There was no procompetitive justification for Mi-

crosoft’s campaign of deception. The D.C. Circuit there-

fore held that Microsoft's deceptive conduct was “exclu-

sionary, in violation of § 2 of the Sherman Act.” Id. at

77.'* That holding is directly contrary to the decision be-

low, which upheld summary judgment against petitioner.

'2 To the same effect is the D.C. Circuit’s earlier decision in Carib-

bean Broadcasting System, Ltd. v. Cable & Wireless PLC, 148 F.3d

1080 (D.C. Cir. 1998). In that case, the court held that a proper claim

10

The D.C. Circuit’s holding that intentional false state-

ments can support Sherman Act claims arose in the con-

text of a § 2 claim for illegal maintenance of a monopoly.

Id. This Court — as well as many courts of appeals — have

held that § 1’s prohibition on restraints of trade is a sub-

set of § 2’s prohibition on monopolization.'"® As this Court

explained in United States v. Socony-Vacuum Oil Co., 310

U.S. 150 (1940), “the two sections overlap in the sense

that a monopoly under § 2 is a species of restraint of trade

under § 1.” Id. at 224 n.59. See also Microsoft, 253 F.3d

at 70 (“[t]he basic . . . concerns relevant to §§ 1 and 2 are

admittedly the same”); Richard A. Posner, Antitrust Law

195 (2d ed. 2001) (recognizing that “falsely disparaging

the competitor's products” is an exclusionary practice that

does not require monopoly power to succeed, placing it in

the same analytic category as blowing up a competitor’s

plant). Thus, cases holding practices as illegal restraints

of trade to support monopolization apply a fortiori to con-

spiracies under § 1, because courts have recognized that

the violations prohibited under § 2 require proof of a

greater degree of anticompetitive effect than does § 1.

for relief under Sherman Act § 2 was stated where the allegations in-

cluded a charge that the defendants “made fraudulent misrepresenta-

tions to advertisers” and thus “intentionally and successfully, by means

of fraud and deceit, secured monopoly power in the relevant market.”

Id. at 1087.

'3 & g., Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451,

481 (1992) (“Monopoly power under § 2 requires . . . something greater

than market power under § 1.” ); United States v. Griffith, 334 U.S.

100, 106 (1948) (“[T]hose things which are condemned by § 2 are in

large measure merely the end products of conduct which violates § 1.”);

Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 239 (1st Cir.

1983) (Breyer, J.) (“[iJf Pacific's challenged conduct is not ‘exclusion-

ary, for purposes of Sherman Act § 2, then a fortiori, it does not vio-

late” § 1); Alexander v. National Farmers Org., 687 F.2d 1173, 1193

n.16 (8th Cir. 1982) (“[A]n unlawful conspiracy under Section 2 neces-

sarily violates Section 1 as an ‘unreasonable’ restraint of trade.”).

11

3. Second Circuit — Ayerst

In National Association of Pharmaceutical Manufactur-

ers, Inc. v. Ayerst Laboratories, 850 F.2d 904 (2d Cir.

1988), the Second Circuit considered a case similar to pe-

titioner’s case in all relevant respects. The defendants

there had sent a letter to pharmacists across the country

that the Food and Drug Administration concluded was

“false and misleading.” Jd. at 916. The district court dis-

missed on the pleadings the plaintiff's claim for a

Sherman Act violation. The Second Circuit reversed,

holding that the plaintiff “should be allowed to go forward

with the discovery process to substantiate its claim that

the [l]etter was clearly false, clearly material, and clearly

likely to induce reasonable reliance.” Jd. The court held

that a claim under § 2 of the Sherman Act could be based

entirely on the defendant’s dissemination to retailers of a

false and deceptive letter about the plaintiff’s product,

provided that the plaintiff could show substantial, rather

than merely de minimis, anticompetitive effect. The Sec-

ond Circuit recognized that there is “no redeeming virtue”

in deception, but because litigation involves administra-

tive costs it insisted on a showing of substantial anticom-

petitive effect and other factors warranting judicial inter-

vention under § 2 of the Sherman Act. Jd. (internal quo-

tation marks omitted).

4. Sixth Circuit - Conwood

The Sixth Circuit similarly upholds the position that

false and misleading representations about a competitor's

product can support a Sherman Act claim. In Conwood

Co. v. United States Tobacco Co., 290 F.3d 768 (6th Cir.

2002), the court upheld a jury verdict finding a § 2 viola-

tion where the defendant “misused its position as category

manager by providing misleading information to retailers

in an effort to dupe retailers into believing, among other

things, that USTC products were better selling so that

retailers would carry USTC products and discontinue car-

rying Conwood products.” Jd. at 783 (emphasis added).

The evidence also showed that the defendant “used its

12

monopoly power to misrepresent sales activity of moist

snuff products” and by doing so “to bury competitors’

products.” Jd. at 787 n.4. The Sixth Circuit decisively re-

jected the argument accepted here by the Third Circuit,

that such business tactics did not “amount to antitrust

violations.” Id. at 783.

Contrary to the Third Circuit’s holding below, therefore,

four circuits thus squarely hold that intentionally false

and misleading disparagement of a competitive product

can support a Sherman Act claim.

B. Two Circuits Join The Third Circuit To Hold

That False Product Disparagement Cannot

. Support A Sherman Act Claim

In rejecting the position adopted by the majority of the

circuits, the Third Circuit aligned itself with the Fifth and

Seventh Circuits. The court below read those circuits as

hewing to a rule that statements about a competitor’s

product — even if “false or misleading or incomplete or just

plain mistaken” (Pet, App. 16a (citation omitted)) — do not

give rise to an antitrust violation. Although the court be-

low may have somewhat overstated the support for its

rule from the Fifth Circuit, a recent decision of the Sev-

enth Circuit confirms that a minority of circuits hold that

false disparagements of a competitor’s product are per se

not actionable under the Sherman Act.

1. Fifth Circuit - Stearns

In holding that making intentionally false statements to

exclude competition cannot be the basis of a § 1 claim, the

Third Circuit relied on Stearns Airport Equipment Co. uv.

FMC Corp., 170 F.3d 518 (5th Cir. 1999). See Pet. App.

14a. In Stearns, the plaintiff based its § 2 claim in part on

the defendant FMC’s efforts to exclude it from the market

by persuading municipalities to write bid specifications

requiring FMC’s type of bridges, rather than the plain-

tiff’s, because of the alleged technological superiority of

FMC’s kind of bridge. The plaintiff introduced evidence

that FMC’s statements about “its products are mislead-

13

ing.” 170 F.3d at 527. The Fifth Circuit, however, re-

jected that evidence as proof of “exclusionary conduct” to

support an antitrust claim. Jd. “All of these arguments

made by FMC to its potential customers may have been

wrong, misleading, or debatable,” the Fifth Circuit said,

but “they are all arguments on the merits.” Jd. at 524. It

then added, “[t]o the extent a competitor loses out in such

a debate, the natural remedy would seem to be an in-

crease in the losing party’s sales efforts on future poten-

tial bids, not an antitrust suit.” Jd. at 525. Although the

Fifth Circuit did not go as far as the Third Circuit in view-

ing as “irrelevant” for antitrust purposes a competitor's

campaign of intentional falsehoods, the Fifth Circuit’s ap-

proach in Stearns is certainly consistent with the ap-

proach of the court below, and in conflict with that of the

D.C., Second, Sixth, and Eighth Circuits.

2. Seventh Circuit — Schachar and Sanderson

The Third Circuit also relied (Pet. App. 13a) on

Schachar v. American Academy of Ophthalmology, Inc.,

870 F.2d 297 (7th Cir. 1989). In that case, the Seventh

Circuit opined that, if “statements should be false or mis-

leading or incomplete or just plain mistaken, the remedy

is not antitrust litigation but more speech — the market-

place of ideas.” Id. at 400. In Schachar,.a medical asso-

ciation had issued a press release calling a surgical] proce-

dure “experimental.” Jd. at 398. Physicians using the

procedure sued under § 1, charging a conspiracy in re-

straint of trade on the ground that the press release

harmed their efforts to compete. The Seventh Circuit up-

held the dismissal of the doctor's suit, holding that

“{t]here can be no restraint of trade without a restraint.”

Id. at 397. The court flatly rejected the argument that

false statements about a competitor's product could ever

be a restraint of trade because such tactics were part of

the “[w]Jarfare among suppliers and their different prod-

ucts.” Id. at 399. In the Seventh Circuit’s view, unless

some coercive enforcement effort accompanied the false

14

disparagements, “there is not even the beginning of an

antitrust case.” Id.

The Seventh Circuit recently reaffirmed Schacher and

expressed agreement with the Third Circuit’s decision

below. See Sanderson v. Culligan Int Co., No. 04-3253,

2005 WL 1618817 (7th Cir. July 11, 2005). In that case,

the court flatly held that “[f]alse statements about a ni-

val’s goods do not curtail output in either the short or the

long run.” Ship op. at 4. As the Seventh Circuit con-

cluded, in conflict with the four circuits discussed in Part

I.A, “[clommercial speech is not actionable under the anti-

trust laws.” Id. at 6 (citing Pet. App. 14a-16a).

A square 4-3 conflict thus exists on whether intention-

ally false disparagements of a competitor’s product can

support a Sherman Act claim."

14 4 Ninth Circuit decision that the district court mentioned (Pet.

App. 119a n.47) is also relevant to the conflict of circuits. In American

Professional Testing Service, Inc. v. Harcourt Brace Jovanovich Legal

& Professional Publications, Inc., 108 F.3d 1147 (9th Cir. 1997), the

defendant circulated false advertisements to law schools disparaging

the plaintiff's ability to offer bar review courses. The plaintiff asserted

that this and other allegedly exclusionary conduct provided the basis

for a § 2 claim of actual and attempted monopolization. On appeal

from a district court judgment as a matter of law that overturned a

jury verdict for the plaintiff, the Ninth Circuit affirmed. Although the

court recognized that false or misleading advertising is not “competi-

tion on the merits,” id. at 1152, and it invoked the Second Circuit’s

Ayerst approach, the Ninth Circuit did not consider that prospective

students were likely to rely on the false advertising and it was uncon-

vinced that the plaintiff could not have neutralized it, id. Moreover,

the court held that the plaintiff’s proofs at trial of market power and

anticompetitive effect were insufficient to satisfy § 2. In contrast, the

Third Circuit below did not reach the factual merits of petitioner’s § 1

claim and upheld summary judgment on the ground that intentionally

false statements could not support a § 1 claim, regardless of the facts.

15

C. The Third Circuit Erred In Concluding That

A Conspiracy To Exclude Competition By Us-

ing Intentionally False Statements Can Never

State A Claim Under Sherman Act § 1

The Third Circuit held as a matter of law that an

agreement among competitors to exclude a competitive

product from the marketplace through a campaign of in-

tentional false disparagement did not involve any “re-

straint of trade” and therefore could not violate Sherman

Act § 1. See Pet. App. 13a-14a. That position is incorrect

and should be reversed by this Court.

_ The core of the Third Circuit’s rationale for concluding

that no “restraint” could be found in the conspiratorial

activity alleged here was as follows:

It is undisputed that the defendants informed po-

tential customers that Santana’s product presented

safety hazards. Santana has not, however, demon-

strated that Bobrick imposed any restraints on

trade. Santana does not allege that Bobrick en-

gaged in coercive measures that prevented Santana

from selling its products to any willing buyer or pre-

vented others from dealing with Santana. More-

over, Santana’s allegations of fraud in the manner

in which the hazards of HDPE were portrayed are

irrelevant because “deception, reprehensible as it is,

can be of no consequence so far as the Sherman Act

is concerned.” [Eastern R.R. Presidents Conf. v. No-

err Motor Freight, Inc., 365 U.S. 127, 145 (1961)); ef.

Schachar, 870 F.2d at 399 (“antitrust law does not

compel your competitor to praise your product or

sponsor your work.”).

Id. at 13a.

The Third Circuit’s concept of “restraint of trade” is

badly flawed on several grounds. First, the statute does

not prohibit “restraints of trade” as such. It prohibits

agreements and other concerted activity that are “in [un-

reasonable] restraint of trade.” 15 U.S.C. § 1 (emphasis

16

added). The proper focus of the inquiry under § 1 is there-

fore on the purpose or effect of the concerted action, in re-

lation to reducing competition in the marketplace;"® it is

not on whether the conduct that the actors jointly agreed

upon is of itself properly categorized as a coercive “re-

straint.” That cannot be the touchstone, because even

conduct legitimate by itself can be a sanctionable element

of an unlawful antitrust conspiracy when its purpose or

effect is substantially anticompetitive. '®

In similar, related contexts, this Court has repeatedly

held that intentional deception and falsehood in the mar-

ketplace can provide the basis for an antitrust violation.

For example, in Walker Process Equipment Co. v. Food

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

Court held that excluding competition by enforcing a pat-

ent procured by fraud on the Patent Office was a violation

of Sherman Act § 2. The Court reasoned that, so long as

the other elements of an antitrust claim were satisfied, a

plaintiff could prove the exclusionary conduct or restraint

of trade element with evidence of a defendant’s “fraudu-

lent procurement of a patent.” Jd. at 176.

In United States v. Singer Manufacturing Co., 374 U.S.

174 (1963), the Court based a violation of § 1 on an exclu-

sionary conspiracy that included an agreement to prevent

information necessary to the patent application process

from coming to the attention of the Patent Office. See id.

at 198 (White, J., concurring) (“Gegauf ... feared that

Singer might in self-defense draw to the attention of the

Patent Office certain earlier patents the Office was un-

aware of”). The conspiracy was, in effect, to make false

'5 See National Soc’y of Prof Eng’rs v. United States, 435 U.S. 679,

690 (1978); see also id. at 688 (the rule of reason “focuses directly on

the challenged restraint’s impact on competitive conditions”).

6 Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S.

690, 707 (1962) (collecting authorities); American Tobacco Co. v. United

States, 328 U.S. 781, 809 (1946); Swift & Co. v. United States, 196 U.S.

375. 396 (1905). 2

17

representations about a product to obtain a patent. As

Justice White explained in his concurrence, “such collu-

sion to secure a monopoly grant runs afoul of the

Sherman Act’s prohibitions against conspiracies in re-

straint of trade.” Id. at 200. See also American Soc’y of

Mech. Eng’rs v. Hydrolevel Corp., 456 U.S. 556 (1982)

(standard-setting organization held liable under § 1 be-

cause it permitted manufacturer member to act as its

agent to issue interpretation of organization’s code that

falsely communicated that competitor’s product was un-

safe).

The Third Circuit invoked an erroneous view of the law

— that intentionally false statements about a competitor’s

product are “irrelevant” (Pet. App. 14a) — as a justification

to ignore all facts that petitioner had proffered in oppo-

sition to summary judgment. These included that the

defendants’ concerted action!’ had substantial anticom-

petitive effects, including greatly lessening sales of the

competitive product in the marketplace.'® The Third

Circuit also ignored such proffered facts as: the state-

ments were intentionally false,'® likely to induce custom-

ers not to deal with petitioner,”° persisted for an extended

'7 «The District Court held that Santana proved the concerted action

element as to Bobrick, and Bobrick does not challenge this finding.”

Pet. App. 12a n.14.

- Supra p. 4.

'9 The district court held that, for summary judgment purposes,

“there were fact issues as to the literal falsity of statements made in

videos, advertisements, and other marketing material.” Pet. App. 8a.

© The district court held that “flame and smoke resistance charac-

teristics are clearly pertinent” to attempts of producers “to convince

architects and building specifiers to utilize their particular products.”

Pet. App. 110a. See also id. at la-2a (“In order to persuade govern-

ment architects to specify Bobrick’s toilet partitions for use in govern-

ment projects, [respondents] were telling architects that the partitions

of [petitioner] posed a fire hazard under fire safety codes.”). In this

case, the fire hazard charges were not only likely to induce customers

not to deal with petitioner, but in fact caused a drastic diversion of

sales from it. Supra p. 4.

18

period,” and could not effectively be neutralized. A

proper disposition of this case on remand, therefore,

would consider that evidence.

The Third Circuit stressed that respondent Bobrick did

not coerce petitioner in a way that constrained willing

buyers from dealing with it. While such coercion can vio-

late § 1,7° coercion is not a necessary ingredient of an anti-

trust violation. For example, in an exclusive dealing ar-

rangement between a willing buyer and willing seller that

forecloses other parties from dealing with the buyer or

seller, no coercion of either contracting party, or “con-

straint” of the public, is an element of the violation. The

determinative factor is whether competition in the mar-

ketplace is likely to be substantially lessened as a result

of the arrangement.” Similarly, in this Court’s decisions

finding antitrust liability for abuse of the standard-setting

process,” none of the conspirators bound themselves or

were coerced into making and selling only products com-

plying with the standard. Rather, the basis of antitrust

2! The fire hazard campaign included the period 1990 to 1994 and

beyond. See Pet. App. 6a, 46a-47a.

*2 See supra note 6.

*3 See, e.g., United States v. Dunham Concrete Prods., Inc., 501 F.2d

80, 81 n.1 (5th Cir. 1974) (Sherman Act conviction based on coercive

‘use of violence against competitors); United States Steel Corp. v. Fra-

ternal Ass'n of Steelhaulers, 431 F.2d 1046, 1047 (8d Cir. 1970) (anti-

trust violations based on interference with commerce by coercive use of

“shootings, arson, rock throwing, tire slashing, and other assorted acts

of wanton vandalism”); United States v. Bitz, 282 F.2d 465, 467 (2d Cir.

1960) (sustaining Sherman Act indictment for agreement to restrain

trade “by coercing and compelling said members to pay to the conspira-

tors various sums of money” to avoid strikes).

4 Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 329 (1961):

see Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 45-46 (1984)

(O’Connor, J., concurring in the judgment).

25 Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492

(1988); American Soc’y of Mech. Eng'rs v. Hydrolevel Corp., 456 U.S.

556 (1982).

19

liability was that the concerted action had the effects of

hindering competitors of the conspirators from selling

their products and of depriving the public of the benefit of

such competition. That is exactly the harm of respon-

dents’ concerted action in this case — not coercion, but just

exclusion from the market, thereby lessening competition

and depriving the public of the benefit of a cheaper, inno-

vative product (HDPE partitions).

The Third Circuit's invocation of Eastern Railroad

Presidents Conference v. Noerr Motor Freight, Inc., 365

U.S. 127 (1961), is also wide of the mark. Noerr immu-

nized only deception in the context of petitioning the gov-

ernment, a protected right under the First Amendment.

Neither the First Amendment nor any ramification of the

Noerr doctrine immunizes non-petitioning, intentionally

false speech in the marketplace. Thus, this Court’s test

for regulation of commercial speech, set out in Central

Hudson Gas & Electric Corp. v. Public Service Commis-

sion, 447 U.S. 557 (1980), makes its first step an inquiry

into whether the speech is “false or misleading.” If it is,

the inquiry ends and the speech receives no First Amend-

ment protection. Jd. at 566.”° In any event, the most lati-

tude to which such speech could be entitled would be to

require that the conspirators have acted with actual mal-

ice or reckless disregard for the truth. See New York

Times Co. v. Sullivan, 376 U.S. 254, 279-80 (1964).”" In

26 Accord Thompson v. Western States Med. Ctr., 535 U.S. 357, 367

(2002). See also Virginia State Bd. of Pharmacy v. Virginia Citizens

Consumer Council, Inc., 425 U.S. 748, 771 (1976) (“Untruthful speech,

commercial or otherwise, has never been protected for its own sake.”);

George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 424 F.2d 25,

32 (1st Cir. 1970) (“[T]he efforts of an industry leader to impose his

product specifications by guile, falsity, and threats on a harried archi-

tect hired by a local school board hardly rise to the dignity of an effort

to influence the passage or enforcement of laws.”).

*" See also Arlen W. Langvardt, Free Speech Versus Economic Harm:

Accommodating Defamation, Commercial Speech, and Unfair Competi-

tion Considerations in the Law of Injurious Falsehood, 62 Temple

L.Q. 903. 974 (1989) (advocating negligence standard for commercial

20

the present case, the actual-malice standard is met be-

cause respondents’ statements about HDPE were inten-

tionally false. The First Amendment therefore does not

shield respondents’ conspiracy.

Finally, the Third Circuit’s view of respondents’ cam-

paign of intentional falsehood as “classic competition on

the merits of a product,” “‘simple salesmanship’ that en-

hanced rather than subverted competition on the merits,”

and “business acumen” (Pet. App. 14a-15a (internal quo-

tation marks omitted)) grossly mischaracterizes the con-

duct. Spreading lies in the marketplace is no more “com-

petition on the merits” than shouting “Fire!” in a theater

is protected speech.” By the same token, the court’s as-

surances that respondents were not preventing petitioner

from “pushing its arguments,” and therefore it was suffi-

cient that petitioner’s remedy against respondents’ false

- and misleading statements should only be “more speech —

the marketplace of ideas,” are at odds with the economic

realities of this marketplace. Petitioner’s proffered evi-

dence showed that the cost to it of trying to neutralize re-

spondents’ campaign of intentional falsehood greatly ex-

ceeded the cost to respondents of spreading the false-

hoods,” making “more speech — the marketplace of ideas”

an economically infeasible or ineffective counter-tactic.

defamation on matters of public concern, because commercial speech

is entitled to less First Amendment protection than noncommercial

speech).

28 RAV. v. City of St. Paul, 505 U.S. 377, 382-86 (1992) (holding

that some verbal expressions are “of such slight social value as a step

to truth that any benefit that may be derived from them is clearly out-

weighed by the social interest in order and morality”; the law therefore

treats them as “a ‘nonspeech’ element of communication” and thus out-

side the protection of the First Amendment) (internal quotation marks

omitted); Schenck v. United States, 249 U.S. 47, 52 (1919).

29 Petitioner expended millions of dollars in an only partly success-

ful advertising campaign to counteract the false statements. See C.A.

App. 710-12, 717. The district court found that “Santana has proffered

evidence that Bobrick characterized the financial resources devoted to

its campaign as ‘negligible.’” Pet. App. 90a-91a.

21

Respondents’ campaign of falsehood therefore successfully

imposed much greater operating costs on petitioner and

lowered its demand curve — at relatively little cost to re-

spondents. Increasing the operating costs of a competitor

and lowering its demand curve are well-recognized exclu-

sionary practices.”

In this conflict of circuits, the Third Circuit is clearly on

the wrong side. The D.C., Second, Sixth, and Eighth Cir-

cuits are on the right side in holding that, given appropri-

ate anticompetitive effects, an antitrust claim can be

based on intentionally false product disparagement.

D. The Third Circuit’s Position Conflicts With

The Antitrust Enforcement Position Of The

United States

For decades, the United States has taken the position

that false statements about a competitor may support a

Sherman Act violation. In Walker Process Equipment, for

example, this Court characterized the United States’ posi-

tion as follows: “[T]he United States, which appears as

amicus curiae, argue[s] that if Food Machinery obtained

its patent by fraud and thereafter used the patent to ex-

clude Walker from the market through ‘threats of suit’

and prosecution of this infringement suit, such proof

39 See, e.g., Herbert Hovenkamp, Antitrust Policy After Chicago, 84

Mich. L. Rev. 213, 274-80 (1985) (summarizing and discussing earlier

scholarship on raising rivals’ costs, and suggesting “that the strategy is

both common and quite harmful to consumer welfare”); Thomas G.

Krattenmaker & Steven C. Salop, Anticompetitive Exclusion: Raising

Rivals’ Costs To Achieve Power Over Price, 96 Yale L.J. 209 (1986) (ar-

guing that many firms employ strategic behavior to raise competitors’

costs); Steven C. Salop & David T. Scheffman, Raising Rivals’ Costs, 73

Am. Econ. Rev. 267 (1983). In the Conwood case, supra, the Sixth Cir-

cuit observed that the destruction of Conwood’s display racks by UST

imposed costs on Conwood in excess of $100,000 per month plus sub-

stantial policing and administrative time, see 290 F.3d at 778, but at

little cost to UST. See also Harry S. Gerla, Federal Antitrust Law and

the Flow of Consumer Information, 42 Syracuse L. Rev. 1029, 1062-66

(1991) (explaining why counter-measures cost more than cost of pro-

ducing and disseminating false information).

22

would establish a prima facie violation of § 2 of the

Sherman Act.” 382 U.S. at 175. See also Brief for the

United States as Amicus Curiae at 14, Walker Process

Equip. Co. v. Food Mach. & Chem. Corp., No. 13 (U.S.

filed Mar. 1965) (arguing that deliberately misleading a

government office into granting patent should be held

conclusive evidence of specific intent to achieve unlawful

monopoly power).

More recently, the Department of Justice Antitrust Di-

vision has filed an amicus brief in Massachusetts School of

Law at Andover, Inc. v. American Bar Association, 107

F.3d 1026 (8d Cir. 1997), in which it stated:

It is beyond debate, for example, that untruthful

speech enjoys no absolute constitutional protection.

“Untruthful speech, commercial or otherwise, has

never been protected for its own sake.” An agree-

ment among competitors to publish false informa-

tion, for the purpose and with the effect of excluding

rivals and thereby enhancing or maintaining market

power, would thus enjoy no First Amendment im-

munity from the Sherman Act.

Brief for the United States as Amicus Curiae at 15-16, No.

96-1792, 1996 WL 33420204 (3d Cir. filed Oct. 28, 1996)

(citations omitted). It is impossible to reconcile the gov-

ernment’s position in that case with the Third Circuit’s

holding below.

Finally, the United States’ position in the landmark

case of United States v. Microsoft Corp. was that Microsoft

engaged in unreasonable restraint of trade by, in part,

falsely claiming that its version of Java software was fully

compatible with Sun’s standards, when in fact applica-

tions writers who wrote software compatible with Micro-

soft Java became foreclosed from using any operating sys-

tem other than Windows. See Brief for Appellees United

States and the State Plaintiffs at 64-65, Nos. 00-5212 &

00-5213, 2001 WL 34135295 (D.C. Cir. filed Jan. 12, 2001)

23

(“U.S. Microsoft Br.”).! The government argued (success-

fully) that such false representations and intentional dis-

ruptions of a competitor’s product were restraints of trade.

The Third Circuit’s erroneous position, which conflicts

with the federal government’s enforcement position and a

majority of circuits, thus creates uncertainty not only in

private antitrust actions, but also in the federal govern-

ment’s antitrust enforcement efforts.

E. This Case Presents An Ideal Vehicle For De-

ciding Whether Intentionally False Dispar-

agement Can Support A Sherman Act Claim

This case is an appropriate vehicle for resolving the con-

flict among the circuits, because the court below made the

issue purely one of law without questions of degree as to

the facts. Assuming all facts to be most favorable to the

non-moving party,” the Third Circuit nonetheless upheld

summary judgment against petitioner because, in its

view, even successful concerted action to exclude competi-

tion by a campaign of intentional falsehood could not be

the basis for a claim under Sherman Act § 1. The ques-

tion thus lends itself to a simple answer: either a claim

under § 1 can in some circumstances be based on inten-

tionally false product disparagement or it never can.

It is unnecessary for this Court to determine defini-

tively what is the minimum quantum of evidence suffi-

cient to support a § 1 antitrust claim based on intention-

ally false statements, or needed to withstand summary

“ Similarly, the Federal Trade Commission has brought suit

against patent owners’ use of false statements for anticompetitive pur-

poses in standard setting. See Decision and Order, Matter of Union Oil

Co., Docket No. 9305, 2005 WL 1541537 (consent order announced

June 10, 2005, pending subject to public comment); Consent Order,

Matter of Dell Computer Corp., 121 F.T.C. 616 (1996) (consent order).

32 Petitioner proffered factual proof of anticompetitive intent and ef-

fect, see, e.g., supra pp. 4-5, comparable to the facts involved in the

cases in the four circuits that recognize an antitrust claim based on

false disparagement, see supra pp. 8-12.

24

judgment. To resolve this case in its present posture, it is

necessary only to decide that the Third Circuit was wrong

in holding that no amount or kind of evidence could ever

support such a claim, because the court below held that

no disputed issue of material fact existed requiring a trial

on the merits of petitioner’s proffered evidence. See Pet.

App. 14a. Nonetheless, petitioner's proffered facts mani-

fest to this Court the kind of circumstances that the Third

Circuit’s absolute rule against such claims would leave

without redress. Those facts include proof that respon-

dents’ campaign of intentional falsehood had a purpose to

exclude competition and caused substantial actual anti-

competitive effects in the relevant market.**

Not only can such conduct substantially harm competi-

tion, as it allegedly did here, but it is without any redeem-

ing social or economic value. Intentional falsehood in the

marketplace has no procompetitive benefit to the public.

It just causes a deadweight economic loss. Indeed, vari-

ous federal and state laws proscribe it.*4 False dispar-

agement is not competition on the merits, but rather con-

duct designed to prevent such competition.

Il. THE THIRD CIRCUIT’S REFUSAL TO EVALU-

ATE THE CONSPIRACY AS A WHOLE CON-

FLICTS WITH THIS COURT'S DECISIONS

Although the principal exclusionary tactic of the co-

conspirators was a campaign of intentional false state-

ments, they agreed to and did utilize other tactics to ex-

clude HDPE partitions from the market. They agreed to

33 The facts alleged here, see supra notes 4-6 and accompanying text,

meet the standard of proof that the Second and Ninth Circuits de-

manded for a § 2 monopolization case under the Ayerst test. A § 1 case,

however, requires lesser proof than is required for § 2. See supra note

13.

34 See, e.g., Federal Trade Commission Act § 5, 15 U.S.C. § 45;

Lanham Act § 43(a), 15 U.S.C. § 1125(a); see also California Dental

Ass'n v. FTC, 526 U.S. 756. 771 n.9 (1999) (false or misleading adver-

tising has an anticompetitive effect) (citing FTC v. Algoma Lumber Co.,

291 U.S. 67, 79-80 (1934)).

25

refrain from manufacturing HDPE partitions themselves.

They also agreed to propagandize architects and other

persons writing bid specifications to write specifications

that required bidders to provide non-HDPE partitions.

The Third Circuit’s opinion does not address whether a

conspiracy having all of the elements alleged here can,

when accompanied by anticompetitive intent and effect,

violate Sherman Act § 1. Indeed, the Third Circuit com-

pletely ignored these additional elements of the conspir-

acy, although petitioner proffered evidence as to them and

briefed them as violative of § 1 at all stages of the pro-

ceeding. Yet, settled antitrust precedent recognizes that

these elements of the overall conspiracy alleged here can,

- if engaged in with anticompetitive intent or effect, support

a § 1 violation or even be sufficient by themselves to vio-

late § 1.

Agreeing not to make or sell a particular product, as the

conspirators did here,” is a recognized antitrust viola-

tion.** Indeed, even an agreement to decrease output of a

product or set an output quota for it is an antitrust viola-

tion.*’ Agreeing to propagandize architects and other bid

specification writers to write bid specifications that ex-

cluded HDPE partitions may or may not be unlawful in

itself, but surely a court must evaluate its competitive ef-

35 Several conspirators, before the formation of the conspiracy, were

engaged in the manufacture and sale of HDPE partitions along with

conventional partitions. Pursuant to the conspiracy, however, they

stopped manufacturing and selling HDPE partitions, thereby reducing

their output of the product to zero. After the conspiracy terminated,

they resumed manufacture and sale of HDPE partitions.

36 See Standard Sanitary Mfg. Co. v. United States, 226 U.S. 20

(1912) (agreement not to market second-grade enamel ware held viola-

tion of Sherman Act).

37 See United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940)

(agreement to decrease gasoline production and adhere to output quo-

tas held part of § 1 violation). See also NCAA v. Board of Regents, 468

U.S. 85, 109 (1984) (quota as to number of games member schools could

televise held “naked restriction”).

26

fect when it is part of an exclusionary conspiracy. Supra

note 16 & accompanying text.

The court below therefore committed reversible error

when it determined the legality of respondents’ agreement

to exclude HDPE partitions from the market by a cam-

paign of falsehood, in isolation rather than as a part of a

jJarger overall conspiracy. This Court has commanded

that, in analyzing an antitrust complaint, “plaintiffs

should be given the full benefit of their proof without

tightly compartmentalizing the various factual compo-

nents and wiping the slate clean after scrutiny of each.”

Continental Ore, 370 U.S. at 699. The failure by the court

below to give petitioner the benefit of the aggregate effect

of its proof improperly “dismember[ed]” the conspiracy,

contrary to this Court's established precedent. Jd. (inter-

nal quotation marks omitted).

The approach taken by the court below is also in conflict

with that of other circuits and the United States’ en-

forcement position. The Second Circuit, for example, has

made clear that a coordinated campaign of acts that re-

strain trade in the aggregate may be sufficient to impose

antitrust liability. See City of Groton v. Connecticut Light

& Power Co., 662 F.2d 921, 929 (2d Cir. 1981). Similarly,

the Ninth Circuit has held that “it would not be proper to

focus on specific individual acts of an accused monopolist

while refusing to consider their overall combined effect.”

City of Anaheim v. Southern California Edison Co., 955

F.2d 1373, 1876 (9th Cir. 1992). The Third Circuit’s ap-

proach also conflicts with the enforcement position of the

United States, which has argued that an antitrust defen-

dant “is mistaken if it means to suggest that a series of

actions, which standing alone would not be unlawful, can

never, in combination, result in a violation of the Sher-

man Act.” U.S. Microsoft Br. at 82 (citing Swift & Co. v.

United States, 196 U.S. 375, 396 (1905)).

* * * * *

: 27

As to both questions presented, therefore, the Third

Circuit’s decision conflicts with that of other courts and

the United States’ enforcement position. Resolution of

these questions is critical to commercial integrity, as they

address core issues of antitrust law. The notion that

businesses can lie about their competitors’ products is

anathema to competition on the merits. This Court

should reject the perverse positions of the Third, Fifth,

and Seventh Circuits that permit such conduct to be free

of judicial scrutiny under the Sherman Act.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

WILLIAM E. JACKSON DAVID C. FREDERICK

B. AARON SCHULMAN Counsel of Record

‘STITES & HARBISON RICHARD H. STERN

P.L.L.C. KELLOGG, HUBER, HANSEN,

1199 N. Fairfax Street TODD, EVANS & FIGEL,

Suite 900 P.L.L.C.

Alexandria, VA 22314 1615 M Street, N.W.

(703) 739-4900 Suite 400

Washington, D.C. 20036

(202) 326-7900

August 8, 2005