828 F.2d 1033 56 USLW 2202, 1987-2 Trade Cases 67,697: United States Court of Appeals, Fourth Circuit
828 F.2d 1033 56 USLW 2202, 1987-2 Trade Cases 67,697: United States Court of Appeals, Fourth Circuit
2d 1033
56 USLW 2202, 1987-2 Trade Cases 67,697
Metrix Warehouse, Inc., (Metrix) brought the underlying action in this case
against Mercedes-Benz of North America (MBNA) under Section 1 of the
Sherman Act.1 MBNA filed a counterclaim grounded on Section 2(c) of the
Robinson-Patman Act.2 This is an interlocutory appeal from three of the district
court's rulings in the case.
The district court upheld the jury's liability verdict on the Sherman Act claim,
but set aside its damage award to Metrix as "contrary to the weight of
evidence." The court also granted judgment notwithstanding the verdict (or
alternatively a new trial) to MBNA on its Robinson-Patman Act counterclaim.
It concluded that on the basis of the evidence presented "the jury could not
reasonably return a finding of no [antitrust] injury" on the counterclaim. The
district court certified questions of law underlying its rulings on both Metrix's
claim and MBNA's counterclaim, and we granted both parties' petitions and
consolidated them for interlocutory review. 4 We affirm both the district court's
judgment upholding MBNA's Sherman Act liability and its judgment granting a
new trial on Metrix's damages. We reverse the district court's judgment on
MBNA's counterclaim. We discuss sequentially the issues relating to Sherman
Act liability, Sherman Act damages, and the Robinson-Patman Act
counterclaim.
In this interlocutory appeal, we, of course, do not address the ultimate issue of
MBNA's Sherman Act liability. The interlocutory question we consider relates
to the Supreme Court's decision in Pick Manufacturing Co. v. General Motors
Corp., 80 F.2d 641 (7th Cir.1935), aff'd per curiam, 299 U.S. 3, 57 S.Ct. 1, 81
L.Ed. 4 (1936), and the issue is whether Pick established an automobile
exception to Sherman Act liability or, if it did not, whether MBNA proved a
business justification for its tying arrangement as a matter of law. Since our
consideration is limited in this manner, it is not necessary to decide whether
Metrix proved the requisite elements of an illegal tying arrangement. An
understanding of the interlocutory liability issues, however, requires at least a
summary of facts bearing on all the Sherman Act liability issues tried by the
district court.
6
Under the terms of the franchise agreement, MBNA retained almost complete
control over the allocation of new cars to the dealers. Its relationship with its
franchisees, however, was not limited to allocating new cars and overseeing
their sale. The agreement required each dealer to establish a customer-service
department for the repair of Mercedes-Benz automobiles. It also governed
specific repair practices. Most germane to this appeal is Section 9(c) of the
agreement, which restricted the dealers' right to choose the source of
replacement parts used in the repair of Mercedes-Benz automobiles. Entitled
"Quality of Operational Parts Used and Sold by Dealer," this provision stated
that:
Dealer shall neither sell or offer to sell for use in connection with MB passenger
cars nor use in the repair or servicing of MB passenger cars any parts other than
genuine MB parts or parts expressly approved by DBAG if such parts are
necessary to the mechanical operation of such MB passenger cars.
11
12
13
Although its business with independent garages had increased steadily, in 1976
Metrix's share of the dealer market began to slip. At the same time the evidence
reflected that retail sales of Mercedes-Benz automobiles had reached a high
point. MBNA had cut prices on some parts, but Metrix attempted to maintain
an average twenty-percent margin between its prices and those of MBNA and
had matched many of MBNA's price cuts. Nevertheless, Metrix's replacement
parts sales to dealers fell in 1977 and 1978.8 In 1979, Metrix filed this action.
14
design was to show that MBNA officials linked new car access and other
favorable treatment to the dealers' purchase of MBNA's "genuine" parts,
creating a classic tying arrangement that was per se unreasonable. Alternatively,
Metrix attempted to prove that MBNA's tying arrangement violated the
Sherman Act under the rule of reason.
15
MBNA presented multiple defenses, but the ones that we consider in this appeal
are those grounded on its interpretation of the Supreme Court's decision in Pick.
It argued below and contends here that Pick established an "automobile
exception" to the Sherman Act's proscription against tying arrangements. It also
insists on appeal that even if Pick stopped short of establishing such a blanket
exception, the Supreme Court's opinion still recognized a business justification
defense to liability for automobile tie-ins. MBNA argues that its evidence
established that defense as a matter of law, i.e., its tying arrangement was
essential to preserve the goodwill of its customers, as well as to protect itself
from its dealers' fraudulent behavior. As an independent ground for reversal,
MBNA asserts that the jury instructions on the business justification issue
improperly shifted to it the burden of proving reasonableness in Metrix's rule of
reason claim.
16
17
MBNA contends that the Supreme Court's affirmance of the Seventh Circuit's
decision in Pick carved out an "exception" to standard Sherman Act analysis of
tying arrangements.9 According to MBNA, this exception permits automobile
manufacturers to prohibit their dealers from purchasing replacement parts from
independent sources.
18
The Supreme Court affirmed the Seventh Circuit in a per curiam opinion. Pick
Manufacturing Co. v. General Motors Corp., 299 U.S. 3, 57 S.Ct. 1, 81 L.Ed. 4
(1936). Its decision, however, referred only to the issue of substantial lessening
of competition under the Clayton Act:
20 the evidence adduced at the trial the District Court found that the effect of the
Upon
clause had not been in any way substantially to lessen competition or to create a
monopoly in any line of commerce. This finding was sustained by the Court of
Appeals.
21
Under the established rule, this Court accepts the findings in which two courts
concur unless clear error is shown.
22
23
The Supreme Court's holding in Pick suggests no more than that it found no
clear error in the lower courts' factual finding, i.e., the plaintiff failed to prove
that GM's tying arrangement substantially lessened competition, as required to
establish a violation of the Clayton Act. Contrary to MBNA's contention, the
Court simply did not consider or address the "reasonableness" of the tie-in as a
matter of law, and its opinion bears none of the marks of an intended broadbased exception to the Sherman Act.11 In contrast, there was evidence in the
present case to support the jury's conclusion that MBNA's tying arrangement
had a substantial anticompetitive impact. We therefore not only disagree with
MBNA's expansive interpretation of Pick, but conclude that the evidence of
anticompetitive impact forecloses any comparison with the Supreme Court's
ruling in Pick.
24
There is a final reason why Pick cannot control the outcome of this case. Pick
was decided solely under the rule of reason; it predated the application of per se
rules to tying arrangements by more than ten years. To interpret Pick as
creating an "automobile exception," we would have to ignore our own
precedent, see Osborn v. Sinclair Refining Co., 286 F.2d 832 (4th Cir.1960),
cert. denied, 366 U.S. 963, 81 S.Ct. 1924, 6 L.Ed.2d 1255 (1961), as well as
four decades of Supreme Court precedent. Recently in Hyde, a majority of the
Court expressly reaffirmed that "[i]t is far too late in the history of our antitrust
26
MBNA's first goodwill argument--that the tie-in was necessary to ensure the
quality of the replacement parts sold by its dealerships--fails because its
evidence did not meet the standard for a directed verdict or judgment
notwithstanding the verdict. There was evidence of such quality and weight that
reasonable and fair-minded persons in the exercise of impartial judgment could
find that feasible means less restrictive than the tie-in were available to
maintain quality control. See Wyatt v. Interstate & Ocean Transport Co., 623
F.2d 888, 891 (4th Cir.1980); cf. Betaseed, 681 F.2d at 1227-28. It was
undisputed that DBAG issued product design specifications to the West
German companies that manufactured over half of the fast-moving replacement
parts that MBNA sold to the dealers. This evidence dispelled the notion that it
was not feasible to designate preferred manufacturers and provide them with
design specifications.12 The court therefore acted properly in submitting the
quality control question to the jury and in refusing to overturn its verdict.13
27
MBNA next contends that its customers expected to receive "genuine parts"
from MBNA-franchised dealerships and that this expectation constituted a valid
justification for the tying arrangement. The evidence, however, suggests that
MBNA could have satisfied its customers' expectations through less-restrictive
means. Sufficient evidence was presented, for example, to support a finding
that MBNA could have required its dealers to inform their customers of the
origin of the parts sold14 and marshaled its efforts toward informing the
consumer of the need to request MBNA's parts. In this manner, a customer who
expected MBNA parts could have purchased them.15 It is not necessary, of
course, to speculate on the jury's reasoning for rejecting MBNA's goodwill
justifications. However, the evidence suggests that MBNA's judgment of its
dealers and consumers ran contrary to the Sherman Act's policy that
competition rule the markets of trade. As the Supreme Court observed in
Times-Picayune Publishing Co. v. United States, 345 U.S. 594, 605, 73 S.Ct.
872, 878, 97 L.Ed. 1277 (1953), "any intrinsic superiority of the 'tied' product
would convince freely choosing buyers to select it over others, anyway."
Perceived consumer expectation, without more, will rarely justify an unlawful
tie-in because it is "the public, acting through the market's impersonal judgment
... [that] allocate[s] the Nation's resources and thus direct[s] the course its
economic development will take." Id.
28
In its final business justification argument, MBNA contends that the tie-in was
necessary to protect it against "free-riding" on its replacement-parts warranty. It
maintains that, absent the restraint, its dealers would submit non-MBNA parts
to MBNA for warranty reimbursement and asserts that its "right to protect itself
against this fraudulent practice should be self-evident." While MBNA, of
course, may protect itself against unfounded warranty claims, it cannot impose
a tying arrangement when less-restrictive alternatives are reasonably available.
MBNA failed to show that its "genuine" parts could not be distinguished from
those of its competitors and that it could not avoid reimbursing dealers for its
competitors' defective parts. Even assuming the parts were indistinguishable,
MBNA presented no evidence that procedures such as stamping, inscribing, or
numbering were infeasible alternatives to protect it against warranty "freeriding." Finally, MBNA did not establish that the tie-in was necessary to police
dealer misconduct. In its brief, MBNA asserts that its franchisees "commingle
aftermarket parts with Mercedes parts in the same bins and do not distinguish
between them in making repairs." This assertion, however, fails to establish that
a replacement parts tie-in was the least restrictive method of avoiding
unfounded warranty claims.16
29
31
32
If you find the tying agreement in this case were [sic] unlawful as to the
elements I have previously explained, either because they [sic] were a per se
violation of the Sherman Act or because they were unreasonable under the rule
of reason, and that MBNA caused Metrix's injury through its unlawful acts, you
will then determine whether they [sic] were, in any event, proper because it
was known [sic] as [a] legitimate business justification. The burden is on
MBNA to demonstrate the existence of such a business justification.
33
MBNA asserts that this instruction improperly placed the burden on it to prove
that its tie-in was reasonable under the rule of reason. We disagree.
34
The trial court's instruction did not shift the burden of proof. The instruction
directed the jury to make the business justification inquiry only if it first
determined that the tying arrangement violated the rule of reason. Thus, the
instruction could not have affected the jury's deliberations until after it had
determined that Metrix had proved its rule of reason case.17 In effect, it gave
MBNA a second chance to avoid an adverse outcome--an opportunity to which
it was not technically entitled under normal proof allocations in rule of reason
cases.
The trial court set aside the jury's award of damages to Metrix on its Sherman
Act claim, holding that MBNA was entitled to a new trial on damages because
the jury ignored evidence clearly demonstrating that a part of the lost profits
Metrix claimed as damages resulted from MBNA's legitimate procompetitive
business activities and not from the tying arrangement. The damages question
certified by the district court, as properly applied to the issues developed at
trial, is whether the jury's calculation of Metrix's damages was against the clear
weight of the evidence.
36
37
38
The district court set aside the jury's damage award to Metrix. It held that
MBNA was entitled to a new trial on damages because the jury ignored the
clear weight of the evidence, which established that at least part of Metrix's
claimed losses were attributable to MBNA's lawful conduct. Metrix now
contends that this was error and requests us to reinstate the jury's verdict. We
disagree and decline. In Wyatt v. Interstate & Ocean Transport Co., this court
stated that in considering a new trial motion:
39 trial court may weigh the evidence and consider the credibility of the witnesses.
[A]
Indeed, a trial judge has a duty to set aside a verdict and grant a new trial even
though it is supported by substantial evidence, "if he is of the opinion that the verdict
is against the clear weight of the evidence, or is based upon evidence which is false
or will result in a miscarriage of justice...."
40
623 F.2d at 891-92 (quoting Williams v. Nichols, 266 F.2d 389, 392 (4th
Cir.1959)). Here, the clear weight of the evidence supports the trial court's
conclusion that at least some of Metrix's claimed losses were attributable to
lawful conduct. Although Metrix was not obligated to prove its damages with
great particularity, we conclude that the trial court did not abuse its discretion in
granting MBNA a new trial on damages.19
41
42
In contrast with the "leniency" principle, our decisions also recognize that the
antitrust plaintiff must demonstrate a causal connection between the defendant's
violation and the damages claimed. See Burlington Industries, Inc. v. Milliken
& Co., 690 F.2d 380, 385 (4th Cir.1982); Lee-Moore Oil Co. v. Union Oil Co.
of California, 599 F.2d 1299, 1306 (4th Cir.1979). As stated in Allegheny
Pepsi-Cola Bottling Co. v. Mid-Atlantic Coca-Cola Bottling Co., Inc., 690 F.2d
411, 415 (4th Cir.1982), "[a]n antitrust plaintiff is entitled to recover only for
that portion of ... [its losses] caused by the defendants' unlawful conduct." See
also Dolphin Tours, Inc. v. Pacifico Creative Service, Inc., 773 F.2d 1506, 1510
(9th Cir.1985); MCI Communications Corp. v. American Telephone &
Telegraph Co., 708 F.2d 1081, 1161, 1187 (7th Cir.) (majority and dissenting
opinions), cert. denied, 464 U.S. 891, 104 S.Ct. 234, 78 L.Ed.2d 226 (1983).
43
Applying these principles, we agree with the district court that although Metrix
presented a reasonable method for estimating damages,21 the jury ignored the
clear weight of the evidence that at least part of Metrix's claimed losses were
attributable to lawful conduct. Heiden, Metrix's expert witness, conceded in
rebuttal testimony that his calculations were based on his assumption that
MBNA presented direct evidence that at least part of Metrix's claimed losses
were attributable to lawful competitive efforts commenced by MBNA during
the damage years. It established that it had reduced prices on popular parts and
instituted various procompetitive marketing programs during the years in
question. It then presented the testimony of a number of dealers who stated that
MBNA's price reductions and new programs influenced them to purchase more
from MBNA and less from the warehouse distributors.22 This direct evidence
unequivocally contradicted Heiden's assumption that MBNA's lawful conduct
had no overall impact.23 We remain sensitive to the complexities of proving
hypothetical market behavior. From our review of the record, however, we do
not conclude that the district court abused its discretion in holding that the clear
weight of the evidence established that at least some of Metrix's claimed losses
were attributable to lawful attempts by MBNA to recapture dealer sales. The
district court correctly set aside the verdict and granted MBNA a new trial on
damages.
46
In granting the judgment notwithstanding the verdict, the district court reasoned
that "Metrix, acting rationally, would not have persisted in such a program
unless it took sales from competitors," and that it was "simply irrational [for the
jury] to find that Mercedes-Benz would not have made any extra sales but for
the illegal incentive program." On appeal, Metrix contends that the jury's
finding of no antitrust injury was clearly supported by the evidence. We agree.
While injury usually results from per se violations of the antitrust laws, LeeMoore Oil, 599 F.2d at 1303, this is not always true. The discrete
48
49
monthly sales levels did not decline when it stopped paying "commissions" in
1983.
50
51
In our view, MBNA's evidence failed to sustain that burden. We cannot accept
MBNA's argument that the mere payment of "commissions" to dealership
personnel raised a necessary inference of antitrust injury to MBNA that was
disregarded by the jury. Nor can we conclude, as did the trial court, that it was
"irrational" for the jury to have made the subsidiary findings necessary to
support a conclusion of no antitrust injury. Metrix's evidence was easily
sufficient to support the jury's finding that MBNA suffered no lost sales from
the "incentive" program. Put simply, the jury's verdict was supported by
substantial evidence and was not against the clear weight of the evidence. We
therefore reverse the district court's grant of judgment notwithstanding the
verdict or, in the alternative, a new trial to MBNA on its Robinson-Patman Act
counterclaim.
52
In view of the above, the district court's judgment is affirmed in part and
reversed in part. The case is remanded for further proceedings consistent with
this opinion.
53
per curiam, 299 U.S. 3 [57 S.Ct. 1, 81 L.Ed. 4] (1936) operates to bar Metrix's
claim under Sec. 1 of the Sherman Act....
The Pick issue is clearly a controlling question of law for its determination
materially effects [sic] the outcome of the litigation.
Our consideration of the Sherman Act liability issue then is limited to this
question. The parties on appeal treat the issue as bifurcated, i.e., does Pick
establish an automobile exception that bars this action and even if not barred as
a matter of law did the business justification evidence in this case require a
directed verdict for MBNA. MBNA contends that it proved every conceivable
element of a business justification defense as delineated by Pick and its progeny
and was therefore entitled to a directed verdict. MBNA also contends that the
district court gave an erroneous instruction on the burden of proving business
justification in its rule of reason instructions. Strictly speaking, that contention
does not fit into the question certified by the district court, but it approaches
sufficiently close to the principal business justification issue that we will
determine it.
5
Metrix's evidence showed that in 1975 it had a 4.22% share of the dealer
market, but over the next four years its share dropped steadily to 1.04%
In Advance Business Systems and Supply Co. v. SCM Corp., 415 F.2d 55 (4th
Cir.1969), we recognized that tying arrangements tend to impair competition by
"prevent[ing buyers] from seeking alternative sources of supply for the tied
product ... [and by foreclosing] competing suppliers of the tied product ... from
that part of the market which is subject to the tying arrangement." Id. at 60.
While these consequences might arise from any exclusive-dealing arrangement,
the principal economic purpose of the legal prohibition against tying
arrangements is to prevent the extension of market power from one product to
another by anticompetitive means. See Jefferson Parish Hospital District No. 2
v. Hyde, 466 U.S. 2, 14-16, 104 S.Ct. 1551, 1557-60, 80 L.Ed.2d 2 (1984); Will
v. Comprehensive Accounting Corp., 776 F.2d 665, 669 (7th Cir.1985)
The Supreme Court has held consistently over the past four decades that tying
arrangements that manifest certain threshold characteristics are unreasonable
per se. See, e.g., Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2,
104 S.Ct. 1551, 80 L.Ed.2d 2 (1984); United States Steel Corp. v. Fortner
Enterprises, Inc., 429 U.S. 610, 97 S.Ct. 861, 51 L.Ed.2d 80 (1977) (Fortner II
); Northern Pacific Railway Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2
L.Ed.2d 545 (1958); International Salt Co. v. United States, 332 U.S. 392, 68
S.Ct. 12, 92 L.Ed. 20 (1947).
This court, of course, has applied the per se rule to tying arrangements where
the relevant criteria were present. See Osborn v. Sinclair Refining Co., 286
F.2d 832, 840 (4th Cir.1960), cert. denied, 366 U.S. 963, 81 S.Ct. 1924, 6
L.Ed.2d 1255 (1961); see also Phillips v. Crown Central Petroleum Corp., 602
F.2d 616, 628-29 (4th Cir.1979); Advance Business Systems, 415 F.2d at 6263.
10
15 U.S.C. Sec. 14. This section prohibits certain tying arrangements where the
effect of the tie-in "may be to substantially lessen competition ... in any line of
commerce."
11
The Court's citations to Pick in the years immediately following the decision
stood only for the Court's longstanding practice of accepting factual findings in
which two lower courts concur. See, e.g., Comstock v. Group of Institutional
Investors, 335 U.S. 211, 214, 68 S.Ct. 1454, 1456, 92 L.Ed. 1911 (1948);
United States v. Appalachian Electric Power Co., 311 U.S. 377, 403 n. 11, 61
S.Ct. 291, 297 n. 11, 85 L.Ed. 243 (1940); Virginian Railway Co. v. System
Federation No. 40, 300 U.S. 515, 542, 57 S.Ct. 592, 596, 81 L.Ed. 789 (1937).
Moreover, nothing in the Court's subsequent antitrust decisions suggests that
Pick established, even in its own day, a broad antitrust exemption for
automobile manufacturers. In Standard Oil Co. of California v. United States,
337 U.S. 293, 302-04, 69 S.Ct. 1051, 1056-57, 93 L.Ed. 1371 (1949) (Standard
Stations ), the Court identified Pick as a case that predated International Salt,
which established the per se rule against tying arrangements. The Court noted
that the decision in Pick "len[t] support to the view" that a "showing as to the
actual or probable economic consequences of [tying] agreements" is necessary
to establish a violation of Sec. 3 of the Clayton Act. In Times-Picayune
Publishing Co. v. United States, 345 U.S. 594, 607, 73 S.Ct. 872, 879, 97 L.Ed.
1277 (1953), the Court cited Pick in a discussion of the development of tying
law as a "goodwill" case falling within a doctrine whose boundaries were
drawn by International Business Machines Corp. v. United States, 298 U.S.
131, 56 S.Ct. 701, 80 L.Ed. 1085 (1936). Later citations to Pick in Fortner
Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 514 n. 9, 89 S.Ct.
1252, 1264 n. 9, 22 L.Ed.2d 495 (1969) (White, J., dissenting) (Fortner I ), and
in Hyde, 466 U.S. at 41, 104 S.Ct. at 1573 (O'Connor, J., concurring) (quoting
Fortner I, 394 U.S. at 514 n. 9, 89 S.Ct. at 1264 n. 9 (White, J., dissenting)),
similarly do not refer to the decision as an exception that has endured the
evolution of tie-in analysis. If anything, these latter citations suggest that the
Court of Appeals opinion in Pick properly may be viewed as an early example
of a possible business justification defense. See United States v. Mercedes-Benz
of North America, Inc., 517 F.Supp. 1369, 1376 (N.D.Cal.1981)
12
In Standard Stations the Supreme Court observed that "[t]he only situation ... in
which the protection of good will may necessitate the use of tying clauses is
where specifications for a substitute would be so detailed that they could not
practicably be supplied." 337 U.S. at 306, 69 S.Ct. at 1058
13
In light of the evidence presented, we cannot agree with MBNA that it proved
that "product specification is no substitute for quality control" because DBAG,
in its after-purchase testing procedures, rejects 47,000 shipments of parts
annually for failure to meet its specifications. Although DBAG's testing
procedures are documented in the record, MBNA's argument fails to account
for the uncontroverted evidence that 20% of its parts underwent no afterpurchase quality control procedures. These were the replacement parts MBNA
purchased directly from the United States distribution arms of the West
German manufacturers. As previously noted, Metrix also purchased identical
parts from these outlets and supplied them to the dealerships
14
Indeed, Section 9(D) of the franchise agreement provided that "[d]ealer shall
not represent as new, genuine MB parts or as parts approved by DBAG any
parts used by it in the repair or servicing of MB passenger cars, ... which are not
in fact new, genuine MB parts or parts expressly approved by DBAG or by
MBNA."
15
17
18
Although Metrix claimed that it lost sales between 1977 and 1981 as a result of
MBNA's tie-in, it sought damages for 1977-1983, alleging that the effect of
MBNA's unlawful conduct lingered for two years beyond its cessation
19
Our review is limited to the trial court's ruling that the jury's damage verdict
was against the clear weight of the evidence. Contrary to MBNA's argument
and the authorities it cites, the district court did not rule that Metrix failed to
prove "antitrust injury," i.e., "injury of the type the antitrust laws were intended
to prevent and that flows from that which makes defendants' acts unlawful."
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690,
697, 50 L.Ed.2d 701 (1977); compare Burlington Industries, Inc. v. Milliken &
Co., 690 F.2d 380, 386 (4th Cir.1982), and Lee-Moore Oil Co. v. Union Oil
Co. of California, 599 F.2d 1299, 1303-05 (4th Cir.1979), with Allegheny
Pepsi-Cola Bottling Co. v. Mid-Atlantic Coca-Cola Bottling Co., Inc., 690 F.2d
411, 414-15 n. 4. (4th Cir.1982)
20
21
22
MBNA presented evidence that between 1975 and 1978 it reduced prices on
hundreds of parts. MBNA's purchasing manager testified that MBNA's sales of
oil filters increased 300% as a result of price reductions ranging from 34% to
51%. Indeed, Metrix's president admitted in his testimony that Metrix's sales
had declined when MBNA reduced its prices and that some of MBNA's
reduced prices were below Metrix's costs for the same product
In 1980, MBNA increased its standard "stock order" discount providing lower
prices to dealers on certain regular purchases. Moreover, during 1980 and 1981,
MBNA established an "obsolescence allowance" that provided discounts of up
to 29% off the original list price.
Charlotte Mancine, owner of a small Mercedes-Benz dealership in Southern
California, testified that her dealership purchased replacement parts from
whomever offered the lowest price. She further stated that in 1978 she began
purchasing more parts from MBNA because its "prices were lowered and the
incentives or stock order allowances were better." Jules Barsotti, operator of
three Mercedes-Benz dealerships in the San Francisco area, testified that in the
early 1970s Metrix and other warehouse distributors supplied him with a
substantial portion of his replacement parts needs, but in the late 1970s his
purchases decreased because "Mercedes-Benz was getting more competitive
and their prices were starting to be as good, if not better" than the prices offered
by the warehouse distributors. John Burnett, a Mercedes-Benz dealer in
Maitland, Florida, testified that MBNA's price reductions caused him to reduce
his purchasing from warehouse distributors in the mid-1970s. MBNA presented
the deposition of Mehmet Kara, parts manager of a Mercedes-Benz dealership,
who testified that he analyzed the effect on "real price" of MBNA's
obsolescence program, yearly stock-order bonus, and stock allowance and
determined that his dealership made a higher profit selling MBNA parts than
warehouse distributor parts, despite the higher raw cost of MBNA's parts.
Finally, Rudolf Kraft, dealership owner in Pompano Beach, Florida, testified
that although Metrix had a more efficient delivery system, his purchases from
Metrix decreased in the late 1970s because of more competitive pricing by
MBNA.
23
The only procompetitive factors relevant to our analysis, of course, are those
that were newly instituted by MBNA during the damage years. Since Heiden's
formula compared purchasing behavior for the pre-damage years with
purchasing during the years the tie-in was enforced, factors that remained
constant over the period of comparison need not be considered in the damage
calculation
24
payees perform no services other than placing their employers' purchase orders
with Metrix.
Between February 1974 and June 1980, Metrix paid at least $119,980.80 in
cash and $394,551.53 in cash and/or merchandise to parts managers of
Mercedes-Benz dealers for the placement of approximately $13,000,000 in
spare parts orders with Metrix. Payments are mailed monthly by Metrix to the
parts managers at their home address. The value of the points is approximately
3 1/2% of the purchase price.
Id. at 246-47.
25
MBNA presented no direct evidence that Metrix's sales increased because of its
program