/>iPractitioners interested in the real world application of an attempt to monopolize claim under Section 2 of the Sherman Act, will find Savory Pie Guy a “good read” for the New Year. Savory Pie Guy, LLC v. Comtec Industries, Ltd., No. 14-CV-7527, 2016 U.S. Dist. LEXIS 179317 (S.D.N.Y. December 28, 2016). Since the passage of the Sherman Act in 1890, attempted monopolization as a distinct legal theory of liability has received scant attention. It is usually bundled with a set of other but related antitrust theories of liability, including concerted activities in restraint of trade, and often tying and refusal to deal claims. For most of its existence, the theory of attempted monopolization has been under-analyzed intellectually. Savory Pie Guy provides a good and succinct analysis of the distinct elements of an attempt to monopolize claim, and their inter-relationship to the over-arching concept of “monopolization.”
In Savory Pie Guy, the District Court for the Southern District of New York makes clear that a determination of the Section 2 element of “dangerous probability” is a construct of the totality of facts, as in any determination of the ability to set prices and eliminate competition within a properly defined relevant market. Defendant Comtec Industries, Inc. (“Comtec”) is a manufacturer of dough forming equipment. It refused to deal with customers that purchased dough forming equipment, parts or services from any of its competitors for use with its machines. Savory Pie Guy, LLC (“Savory Pie”) is an entry-level producer of pastry products for sale to food establishments. On two occasions, it purchased customized die sets from Comtec. The die sets were ordered for use with a Comtec pressing machine that Savory Pie had purchased used on eBay. Comtec refused to respond to multiple requests for a subsequent order of customized die sets.
On one occasion, after attendance at an expo, Savory Pie requested a written quote from Comtec for the purchase of a new pressing machine displayed at the expo. Comtec refused to supply the machine. It notified Savory Pie that it had learned that it was using a Comtec press with parts that were not manufactured by Comtec, and that its refusal was based on its concern that the use of non-Comtec parts with its new machine was “unsafe”. Thereafter, Savory Pie purchased another Comtec pressing machine from a third-party competitor of Comtec, InLine Pie.
Savory Pie thereafter brought an action under Section 2 of the Sherman Act alleging that Comtec unlawfully restrained trade for dough forming equipment, parts and services. It complained that Comtec was in violation of Section 2 of the Sherman Act by refusing to deal with customers who purchased dough forming equipment from Comtec’s competitors, and was therefore guilty of an attempt to monopoloze.
The District Court held that Savory Pie’s claims of attempted monopolization failed. Savory Pie could not prove that Comtec held monopoly power in a properly defined relevant market. The court concluded that despite Comtec’s high market share, in excess of 50%, the evidence did not support the conclusion that Comtec could control prices and exclude competition. The court held that the there was insufficient proof of barriers to entry into the market, and that Savory Pie was able to satisfy its needs by purchasing equipment and services from third-party competitors of Comtec. Accordingly, there was no proof that Comtec could control prices and exclude competition.
Translated into the vernacular, the court held that there was insufficient evidence to show that Comtec had a “dangerous probability of achieving monopoly power” through its refusals to deal with Savory Pie. This was because at least one competitor had entered the market during the period in question, and that there were third-party companies who could support Comtec’s machines, and thus the supply needs of companies such as Savory Pie Guy. Therefore, Comtec’s 50% market share was insufficient to warrant a conclusion that its refusals to deal created a “dangerous probability” that it would monopolize the market through the complained of refusals to deal. Accordingly, summary judgment was granted and the action dismissed.
In its analysis, the District Court cited Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993). Spectrum Sports had disapproved the rulings of the Ninth Circuit in its decision in Lessig v. Tidewater Oil Co., 327 F.2d 459 (9th Cir. 1964), and held that a specific intent to achieve monopoly power and a subsequent dangerous probability of monopolization required proof that the alleged unfair or predatory conduct occurred within a relevant market context, where it could be found that the defendant possessed, or would dangerously approach, market power. Namely, the power to control prices and exclude entry into the market.
In Spectrum Sports, the Supreme Court cited to the foundational Section 2 case decided by Justice Holmes in Swift & Co. v. United States, 196 U.S. 375 (1905). There, the Supreme Court held that intent alone is insufficient to establish a dangerous probability of success. Rather, it requires inquiry into the relevant product and geographic markets, and an appropriate measurement of the defendants’ economic power in that market. Spectrum Sports held that Lessig and its progeny were inconsistent with the Sherman Act’s purpose of protecting the public from market failures, and that the Sherman Act directed itself only against conduct that unfairly tends to destroy competition.
Swift & Co. itself is a “good read” in that Justice Holmes found his prior decision in Commonwealth v. Peaslee, 59 N.E. 55, 177 Mass. 267 (1901) to be instructive. An “attempt to monopolize” is an attempt to commit a substantive crime. There, Justice Holmes writing as the Chief Justice of the Massachusetts Supreme Judicial Court, held that in an attempt to monopolize case, the question is whether the defendant’s acts come near enough to the accomplishment of the substantive offense of monopolization to be punishable. Peaslee made clear that the statute does not punish every act directed towards the commencement of the substantive crime, but only if such acts that are done in an attempt to commit it, and at least come dangerously close to its consummation. As stated by Justice Holmes, preparation is not an attempt. . . . it is a question of degree. If the preparation comes very near to the accomplishment of the act, the attempt to complete it renders the crime so probable that the act will be a misdemeanor, although there is still a locus poenitentiae, in the need of a further exertion of the will to complete the crime.
Id. at 272; see also Don T. Hibner, Jr., Attempts to Monopolize: A Concept in Search of Analysis, 34 Antitrust L.J. 165 (1967).
Savory Pie is a good read, and a contribution to our jurisprudential understanding of Section 2 of the Sherman Act.
