Unpublished Disposition, 865 F.2d 1271 (9th Cir. 1989)

MEMORANDUM^* 

Plaintiff/appellant Royal Service, Inc. ("Royal") appeals an adverse summary judgment on its Sherman Act and Robinson-Patman Act claims. We affirm largely on the basis of the district court's reasoning in granting the summary judgment to defendant/appellee Goody Products, Inc. ("Goody"). See C.R. No. 437, pp. 81-88.

Royal makes essentially two arguments on appeal. First, Royal claims that the district court applied the wrong legal standards to plaintiff's Sherman Act monopolization and attempted monopolization claims by requiring Royal to show some actual injury to competition in the relevant market. Second, Royal seems to be arguing that, in any case, the evidence raises a triable issue of fact on the question of injury to competition.

With respect to Royal's section 2 claims of monopolization and attempted monopolization, the district court correctly ruled that a Rule of Reason analysis was appropriate rather than a per se analysis. See C.R. No. 437, p. 82, and cases cited therein. Royal does not take direct issue with this conclusion, but nevertheless argues, relying upon Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), that its section 2 claims do not require evidence of injury to competition. See Reply Brief at 2. Royal's reliance on Aspen Skiing is misplaced. In Aspen Skiing, the Court noted that the challenged conduct under a monopolization claim must be "fairly characterized as 'exclusionary' or 'anticompetitive'--to use the word in the trial court's instructions--or 'predatory,' to use a word scholars seem to favor." 472 U.S. at 602; see also 472 U.S. at 605-608; Oahu Gas Service Inc., v. Pacific Resources, Inc., 838 F.2d 360, 368 (9th Cir. 1988.)

The district court also properly treated Royal's other section 2 claim, that of attempted monopolization. To succeed on such a claim, Royal must show "predatory or anticompetitive conduct directed to accomplishing the unlawful purpose." Transamerica Computer Co., Inc. v. IBM Corp., 698 F.2d 1377, 1383 (9th Cir. 1983).¹ 

Although Royal has produced evidence to demonstrate that jobbers are necessary for the smaller manufacturers to compete in the market, Royal has failed to explain why or how Goody's decision to sell directly to some retailers, even at a price lower than Goody's price to non-supporting jobbers,²  has harmed or will harm competition in the hair accessory market. As the district court said:

[T]here is no evidence that rack jobbers have failed or are likely to fail as a result of defendant's selling direct.

On the contrary, the only evidence which the court has before it is that plaintiff [rack jobber] was able to substitute other manufacturers' goods for defendant's goods, which were comparable in quality and lower in price, while the stores that switched from plaintiff to defendant changed from offering customers several brands to only one, which was, in fact, defendant's brand.

Plaintiff has not shown to the court by any evidence that individual retail outlets constitute the relevant geographical market. Furthermore, the evidence reveals that some of the stores have switched back from direct purchasing to rack jobbers.

[T]o infer that [manufacturers or jobbers or retailers] would be likely to suffer injury in the future, the court believes, is unreasonable and unwarranted. In other words, the court believes that if the jury were to find that such injury would be likely to occur, that would be something that no reasonable jury or trier of fact could find under the evidence which has been submitted to the court.

C.R. No. 437, pp. 85-87.

We emphasize that the testimony of Dr. Leitzinger fails to carry the day for Royal. According to Dr. Leitzinger, Goody's large size, complete product line, and automated facilities indicate that Goody's actions will reduce competition in the market. C.R. No. 416, paragraphs 72-77. Dr. Leitzinger does not, however, explain why this is so. He merely concludes that "any conduct which limits the competitive abilities of other firms can be expected to significantly reduce competition overall." He does not say that Goody's actions have in fact limited the competitive abilities of other firms, nor does he explain how this is likely to occur in the future. Presumably, any such limitation of competitive abilities would result from a decrease in the number of rack jobbers willing to carry the products of other firms. But here again, Dr. Leitzinger fails to say that jobbers have in fact gone out of business or are likely to go out of business in the future. The best that Dr. Leitzinger can do is say that "assuming rack jobbers in Northern California heed Goody's warning [or go out of business for not heeding the warning] ... competition from other manufacturers is significantly reduced." C.R. No. 374, p 77 (emphasis added). We agree with the district court's characterization of Royal's evidence generally as "speculative and theoretical." C.R. No. 437, p. 86.

Accordingly, the summary judgment for Goody is

AFFIRMED.