Brooke Group LTD v Williamson Tobacco (1993)
Basic Facts: For 18 months, Brown Williams Tobacco (B&W) wages price war
against generic Liggett by offering volume discounts to wholesalers. Liggett
sued, claiming B&W was predatory pricing below cost for the purpose of
forcing Liggett to stop low prices and follow markets conscious parallel
practice of maintaining high prices.
Who won at the District court?
What was B&W’s market share?
Was B&W selling below cost?
What did court of appeals hold? Why?
What was issue for Supreme Court?
Law 552 - Antitrust - Instructor:
Dwight Drake
Le Page’s Inc. v. 3M Co. (3rd Cir. 2003)
Basic Facts: 3M, major scotch tape player, offered bundled loyalty rebates to
customers who hit threshold on all six bundled products. Customers
dropped Le Page’s less expensive scotch tape to get the bundled rebated.
Le Page alleged bundled rebates was Section 2 violation. 3M had 90%
share of transparent tape market. No below cost evidence.
Jury held for Le Page. Split Court of Appeals.
Majority: Upheld jury verdict. Market capitalism can survive only if market
power kept in check. Ample evidence to show 3M used its market power to
entrench its monopoly to the detriment of its only competitor.
Dissent: Rebates are price competition and price competition is good unless
predatory within the standards of Brooke Group.
Query: How does bundling compare to other non-competitive act cases?
Law 552 - Antitrust - Instructor:
Dwight Drake
Image Tech Services, Inc. v Eastman Kodak Co. (9th Cir 1998)
Basic Facts: Kodak encouraged independent service organizations (ISOs) to
service its copying and micrographic equipment in after-market, then
reversed itself and refused to sell parts to ISOs. Kodak alleged it was
entitled to withhold sale to ISOs because 65 part subjects to patents and
copyrights and, as such, were protected intellectual property that it had
complete control over. Jury found Kodak unlawfully used monopoly power.
What was alleged error on appeal re IP rights?
Where IP rights a factor in Kodak’s decision re ISOs? Was this relevant?
What % of parts were ISO products? Was this relevant?
What is IP absolute right to exclusivity?
Law 552 - Antitrust - Instructor:
Dwight Drake
CSU v. Xerox (Fed. Cir. 2000)
Basic Facts: Zerox encouraged ISOs to service its copiers, then reversed itself
and pulled plug on ISOs by refusing to sell patented parts. CSU
cannibalized machines to get parts. CSU sued for antitrust violation; X sued
of patent infringement. Dis. Ct. granted Xerox summary judgment on
antitrust claim.
Any real factual difference between this and Kodak case?
Did Xerox here have subjective intent to injure competition?
Would the pretext defense work here?
How might the Fed. Cir. and the ninth circuit view things differently?
Law 552 - Antitrust - Instructor:
Dwight Drake
Predatory Product Changes.
Query: Can a dominate firm have Section 2 exposure by making innovative
product changes that injure competitors by making it difficult or impossible
for competitors to interface with the product?
Is there a duty to help competitors?
What facts might be relevant in a particular case?
What policy considerations?
When does innovation become predatory?
Law 552 - Antitrust - Instructor:
Dwight Drake
Predatory Product Changes – The early battles.
Eastman Kodak: Camera changes that hurt peripheral competitors. Ct held
can’t use monopoly power in one market to gain advantage in another
market, even if no monopoly potential in second market. That competition is
second market is “merely distorted” not destroyed makes no difference.
AT&T: Product changes to block other long-distance carriers and other
predatory and illegal practices. Result was famous consent decree that
spun off local telephone monopolies. Theory – Long distance should be
competitive market with many players, while local service should remain a
natural monopoly for efficiency.
IBM: Mainframe peripheral changes to beat competition. Settled many, won
others. DOJ case lasted 13 years. Some thought maybe IBM breakup, but
market shifted and Reagan arrived. Much conflict and uncertainty on were
appropriate innovation ended and predatory conduct began.
Law 552 - Antitrust - Instructor:
Dwight Drake