Conley Publishing Group Ltd. v. Journal Communications, Inc.
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2003 WI 119 SUPREME COURT CASE NO.: OF WISCONSIN 01-3128 COMPLETE TITLE: Conley Publishing Group Ltd., Freeman Newspapers LLC and Lakeshore Newspapers, Inc., Plaintiffs-Appellants, v. Journal Communications, Inc., and Journal Sentinel, Inc., Defendants-Respondents. ON CERTIFICATION FROM THE COURT OF APPEALS OPINION FILED: SUBMITTED ON BRIEFS: ORAL ARGUMENT: February 11, 2003 SOURCE OF APPEAL: COURT: COUNTY: JUDGE: Circuit Waukesha Donald J. Hassin July 17, 2003 JUSTICES: CONCURRED: DISSENTED: NOT PARTICIPATING: ATTORNEYS: For the plaintiffs-appellants there were briefs by W. Stuart Parsons, Brian D. Winters, Steven J. Berryman, Robert J. Pluta, and Quarles & Brady LLP, Milwaukee, and oral argument by Steven J. Berryman. For the defendants-respondents there was a brief by John R. Dawson, James T. McKeown, G. Michael Halfenger, Paul Bargren, and Foley & Lardner, Milwaukee, and oral argument by John R. Dawson. An amicus curiae brief was filed by Robert H. Friebert, Matthew W. O'Neill, and Friebert, Finerty & St. John, S.C., Milwaukee, and Anne Berlemann Kearney, Joseph D. Kearney, and Appellate Consulting Group, Milwaukee, on behalf of the Wisconsin Utilities Association. An amicus curiae brief was filed by Daniel Blinka, Milwaukee, William C. Gleisner, III, Madison, and R. George Burnett and Liebmann, Conway, Olejniczak & Jerry, S.C., Green Bay, on behalf of the Wisconsin Academy of Trial Lawyers. 2 2003 WI 119 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 01-3128 (L.C. No. 00 CV 222) STATE OF WISCONSIN : IN SUPREME COURT Conley Publishing Group Ltd., Freeman Newspapers LLC and Lakeshore Newspapers, Inc., FILED Plaintiffs-Appellants, JUL 17, 2003 v. Journal Communications, Inc., and Journal Sentinel, Inc., Cornelia G. Clark Clerk of Supreme Court Defendants-Respondents. APPEAL from a Judgment of the Circuit Court for Waukesha County, Donald Hassin, Judge. ¶1 Affirmed. DAVID T. PROSSER, J. This case involves allegations of predatory pricing by one Wisconsin newspaper against another. The Circuit Court for Waukesha County, Donald J. Hassin, Judge, dismissed the antitrust claims of Conley Publishing Group Ltd., et al., (Conley) against Journal Communications, Inc., and Journal Sentinel, Inc., (collectively, the Journal) and granted the defendants summary judgment. Conley appealed. The case is No. now before us on certification from the court of 01-3128 appeals, pursuant to Wis. Stat. (Rule) § 809.61 (2001-02).1 ¶2 our The court of appeals has certified three issues for review. decision First, in Brooke should Group the Ltd. United v. Brown States & Supreme Williamson Court Tobacco Corp., 509 U.S. 209 (1993), be adopted as the law in Wisconsin governing predatory pricing under Wis. Stat. § 133.03? does the opinion federal rule testimony governing set forth the in admissibility Daubert v. Second, of expert Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) an evidentiary rule we have not adopted in Wisconsin affect the applicability of Brooke Group to Wisconsin law? Third, does Wisconsin's predatory pricing law require a plaintiff to "disaggregate" its damages in order to survive summary judgment? ¶3 We hold that a claim of predatory pricing under Wis. Stat. § 133.03 must conform to the requirements established in Brooke federal Group for similar Sherman Antitrust claims Act. A under Section plaintiff 2 alleging of the that a defendant engaged in predatory pricing must prove that (1) the prices and other direct revenues from the practice complained of are below an appropriate measure of the defendant's costs; and (2) the defendant has a dangerous probability of recouping its investment "losses" in these below-cost prices by later raising prices above competitive levels. 1 Applying these standards, we All references to the Wisconsin Statutes are to the 200102 version unless otherwise noted. 2 No. conclude that evidence to the plaintiffs permit a have reasonable not jury presented to 01-3128 sufficient conclude that the Journal either engaged in below-cost pricing or, assuming that it did, that there is a dangerous probability of the Journal recouping the losses that it may have incurred from its Sundaydaily conversion program. Accordingly, we affirm the circuit court's decision to grant summary judgment. ¶4 Because the plaintiffs' action fails to survive summary judgment on these grounds, we need not address whether the circuit court properly granted summary judgment on the issue of causation, either on the basis of insufficient evidence or on the basis damages. of plaintiffs' failure to "disaggregate" their Finally, because the parties to this action have not contested the admissibility of any expert's opinion, we decline to reevaluate, at this time, the standard for admitting expert testimony under Wis. Stat. § 907.02. I. BACKGROUND FACTS AND PROCEDURAL HISTORY ¶5 The Waukesha Freeman is a paid, daily newspaper that was founded in 1859. It is distributed to residents of Waukesha County as an afternoon paper Monday through Friday. There is also a Saturday morning edition but no Sunday newspaper. the Freeman international provides news, its coverage primary of focus state, is national, on the While and Waukesha community. ¶6 The Freeman's only competitor in the Waukesha County paid daily newspaper market is the Milwaukee Journal Sentinel (the Journal Sentinel). As of 2000, when this suit was filed, 3 No. the Journal newspaper Sentinel readership controlled market in Freeman controlled roughly 22%. roughly 78% Waukesha of 01-3128 the County, daily while the In 1996 the Freeman had 28% of the market. ¶7 The Journal Sentinel southeastern Wisconsin and, to is a distributed lesser extent, throughout the rest of Wisconsin, and its daily edition is the only local paid daily newspaper in some southeastern Wisconsin counties, including Unlike the Freeman, the Journal Sentinel has Milwaukee County. a Sunday edition, which is the only local paid Sunday newspaper in Milwaukee, Ozaukee, and Waukesha Counties. ¶8 In August 2000 Conley Publishing Group, Ltd., Freeman Newspapers, action Journal LLC, against and Lakeshore Journal Sentinel, and Newspapers, Sentinel, Journal Inc., the Inc.,2 filed this publisher of the Inc.3 In its Communications, second amended complaint, Conley alleged that the Journal was monopolizing readership violation of of or attempting paid daily Wisconsin's Wisconsin Statutes. to monopolize newspapers Antitrust in Act, the Waukesha market County Chapter 133 of for in the Relevant to this appeal are Conley's claims 2 Conley Publishing has published the Freeman since it purchased the newspaper in May 1997. Throughout this opinion we will refer to the plaintiffs collectively as "Conley," unless otherwise indicated. 3 Journal Sentinel, Inc., is a wholly owned subsidiary of Journal Communications, Inc. The Milwaukee Journal Sentinel was formed as the result of the April 1995 merger of Wisconsin's two largest newspapers, the Milwaukee Journal (an afternoon daily) and the Milwaukee Sentinel (a morning daily). 4 No. 01-3128 that the Journal engaged in predatory pricing of its newspapers in order to drive the Freeman out of business. ¶9 In particular, Conley alleged that, beginning in the middle of 1996, the Journal began targeting subscribers to the Freeman by offering a "Sunday-daily conversion program." This conversion program, which is the basis of Conley's predatory pricing claim, operated as follows. The Journal hired a marketing company to contact residents of Waukesha County who subscribed to the Sunday edition of the Journal Sentinel but not to the daily Journal Sentinel. These residents included subscribers who received the Freeman during the week as well as subscribers who received no local daily newspaper. The Journal then offered these Sunday subscribers the opportunity to receive the daily Journal Sentinel at no additional cost for the remainder of their Sunday Journal Sentinel contract, provided that the subscribers subscription. Sunday-only Sentinel shortened the length of their Sunday For example, the Journal would offer a 52-week subscriber up at no additional to 49 cost, weeks if of the daily the subscriber Journal agreed to shorten the existing Sunday subscription term to 49 weeks.4 ¶10 During the period that the conversion offered, the Freeman's circulation declined. Freeman's publisher, during the 4 10 years program was According to the prior to 1996, the Similar plans were offered to other Sunday-only subscribers based on their current contract length. Thirteenweek and 26-week subscribers could covert to Monday through Sunday service by reducing their contact terms to 9 and 23 weeks, respectively. 5 No. Freeman's circulation 22,000 subscribers. remained relatively constant at 01-3128 around By the end of 1997, however, the Freeman's circulation had dropped to 17,466, down 3,958 from the beginning of 1996. a In 1998, the only year that the Journal did not offer Sunday-conversion program in Waukesha County, gained a marginal number (91) of subscribers. 2001, the Freeman subscribers. in had a circulation of the Freeman As of June 11, approximately 15,900 The Freeman's decline in circulation led to a loss subscription and advertising revenue. Conley quantifies these losses at somewhere between $1,108,800 and $3,853,067 from the time it acquired the Freeman in 1997 until the dismissal of its action.5 ¶11 The Journal eventually filed a motion for summary judgment, which the circuit court granted on October 12, 2001. The court's ruling was based on its determination that Conley had failed to provide sufficient evidence to raise a genuine issue of claim; material (2) a fact finding supporting that the (1) its Journal's predatory conduct pricing caused the Freeman's loss or injury; and (3) a finding on the amount of damages attributable behavior. Conley to the Journal's appealed, arguing alleged that anticompetitive it had offered sufficient evidence for the case to survive summary judgment. The court of appeals certified the appeal to this court. 5 One of Conley's damages experts estimated the Freeman's losses from the program to be $1,560,345. 6 No. ¶12 01-3128 Additional relevant facts will be presented as needed throughout this opinion. II. STANDARD OF REVIEW ¶13 We review a grant of summary judgment applying the same methodology as the circuit court. Allis, 2000 WI 126, ¶26, 239 Robinson v. City of W. Wis. 2d 595, 619 N.W.2d 692. Although our review is de novo, we benefit from the circuit court's analysis. See Yahnke v. Carson, 2000 WI 74, ¶10, 236 Wis. 2d 257, 613 N.W.2d 102. only when "the interrogatories, Summary judgment is appropriate pleadings, and admissions depositions, on file, answers together to with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." well-established purpose of Wis. Stat. § 802.08(2). summary judgment "The procedure is to determine the existence of genuine factual disputes in order to Yahnke, 236 'avoid trials where there is nothing to try.'" Wis. 2d 257, ¶10 (internal quotation marks omitted). When a non-moving summary party contests the appropriateness of judgment, we draw all reasonable factual inferences in favor of that party. See Strasser v. Transtech Mobile Fleet Serv., Inc., 2000 WI 87, ¶32, 236 Wis. 2d 435, 613 N.W.2d 142. ¶14 Interpretation of Chapter 133 and its application to claims of anticompetitive conduct are questions of law, which we answer independently Prosthetic Supply, of Inc. the courts v. Mikulsky, Wis. 2d 45, 640 N.W.2d 764. 7 below. 2002 See WI World 26, ¶8, Wide 251 No. 01-3128 III. PREDATORY PRICING LAW AND BROOKE GROUP ¶15 Conley alleges that conversion program in Waukesha predatory pricing scheme the Journal's County that is an violates Sunday-daily anti-competitive Wis. Stat. § 133.03. This section, which is modeled after 15 U.S.C. § 2 (2000),6 the federal Sherman Antitrust Act of 1890, provides in subsection 2 that: Every person who monopolizes, or attempts to monopolize, or combines or conspires with any other person or persons to monopolize any part of trade or commerce may be fined not more than $100,000 if a corporation, or, if any other person, may be fined not more than $50,000 or imprisoned for not more than 7 years and 6 months or both. Wis. Stat. § 133.03(2). government Although enforcement, Chapter 133 subsection also (2) implies authorizes private actions for persons injured by violations of its prohibitions. See Wis. Stat. § 133.18. relief fees. that includes Such treble private damages plaintiffs and reasonable may seek attorney Id. ¶16 Predatory pricing occurs "chiefly in cases in which a single firm, having a dominant share of the relevant market, cuts its prices in order to force competitors out of the market, or perhaps to deter potential entrants from coming in." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 6 Wisconsin's statute may be traced to Chapter 219, Laws of 1893. See Pulp Wood Co. v. Green Bay Paper & Fiber Co., 157 Wis. 604, 625, 147 N.W. 1058 (1914). 8 No. U.S. 574, 584 n.8 (1986).7 under antitrust laws for 01-3128 The practice has been prohibited many years. See Phillip Areeda & Donald F. Turner, Predatory Pricing and Related Practices Under Section 2 of the Sherman Act, 88 Harv. L. Rev. 697, 697 (1975); see also Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 117-18 (1986). While claims premised on this theory have been litigated with some frequency in the federal courts, there is presently claims no under Wisconsin case § 133.03(2). law governing The dearth predatory of state pricing antitrust precedent is not surprising because the scope of Chapter 133 is limited to intrastate transactions. See Reese v. Associated Hosp. Serv., 45 Wis. 2d 526, 532, 173 N.W.2d 661 (1970). ¶17 Chapter Recognizing the relative infrequency of actions under 133, Wisconsin courts have followed federal court interpretations of Sections 1 and 2 of the Sherman Act and have construed Wisconsin antitrust statutes in conformity with these 7 See also Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222 (1993) (predatory pricing claims arise when a "business rival has priced its products in an unfair manner with an object to eliminate or retard competition and thereby gain and exercise control over prices in the relevant market"); Cargill, Inc. v. Monfort of Colo. Inc., 479 U.S. 104, 117 (1986) ("Predatory pricing may be defined as pricing below an appropriate measure of cost for the purpose of eliminating competitors in the short run and reducing competition in the long run."); Northeastern Tel. Co. v. Am. Tel. & Tel. Co., 651 F.2d 76, 86 (2d Cir. 1981) (describing a predatory pricing scheme as "the deliberate sacrifice of present revenues for the purpose of driving rivals out of the market and then recouping the losses through higher profits earned in the absence of competition") (internal quotations omitted). 9 No. federal court interpretations.8 01-3128 This is longstanding policy. We have pointedly declared that "the construction of sec. 133.01(1) [presently 133.03] is controlled by federal decisions under the Sherman Act." Prentice v. Title Ins. Co. of Minn., 176 Wis. 2d 714, 724, 500 N.W.2d 658 (1993) (quoting State v. Waste Mgmt. of Wis., Inc., 81 Wis. 2d 555, 569 n.12, 261 N.W.2d 147 (1978)); see also Pulp Wood Co. v. Green Bay Paper & Fiber Co., 157 Wis. 604, 625, 147 N.W. 1058 (1914) (citing cases). But see Carlson & Erickson Builders, Inc. v. Lampert Yards, Inc., 190 Wis. 2d 650, 665, 529 N.W.2d 905 (1995) (characterizing federal antitrust decisions as not controlling but interpretations of state antitrust statutes). merely guiding Our tradition of following federal antitrust law is nearly a century old, and 8 See, e.g., Prentice v. Title Ins. Co. of Minn., 176 Wis. 2d 714, 724, 500 N.W.2d 658 (1993); State v. Waste Mgmt. of Wis., Inc., 81 Wis. 2d 555, 569 n.12, 261 N.W.2d 147 (1978); City of Madison v. Hyland, Hall & Co., 73 Wis. 2d 364, 375, 243 N.W.2d 422 (1976); State ex rel. Nordell v. Kinney, 62 Wis. 2d 558, 563, 215 N.W.2d 405 (1974); John Mohr & Sons, Inc. v. Jahnke, 55 Wis. 2d 402, 410, 198 N.W.2d 363 (1972); Reese v. Associated Hosp. Serv., 45 Wis. 2d 526, 532, 173 N.W.2d 661 (1970); State v. Lewis & Leidersdorf Co., 201 Wis. 543, 549, 230 N.W. 692 (1930); Pulp Wood, 157 Wis. at 625. Most of these cases refer to Wis. Stat. § 133.01, which was renumbered as Wis. Stat. § 133.03 by the repeal and recreation of Chapter 133 in 1980. See § 2, ch. 209, Laws of 1979. Federal courts applying Wisconsin law have also commonly followed this principle of interpreting Wisconsin antitrust law consistent with federal precedent. See, e.g., Westowne Shoes, Inc. v. Brown Group, Inc., 104 F.3d 994, 998 (7th Cir. 1997); Henry G. Meigs, Inc. v. Empire Petroleum Co., 273 F.2d 424, 430 (7th Cir. 1960); Lerma v. Univision Communications, Inc., 52 F. Supp. 2d 1011, 1015-16 (E.D. Wis. 1999); Emergency One, Inc. v. Waterous Co., Inc., 23 F. Supp. 2d 959, 962 (E.D. Wis. 1998). 10 No. 01-3128 Conley has not presented, nor have we located, any Wisconsin appellate deviated decision from applying following a Wisconsin clear antitrust federal law standard on that has similar antitrust matters.9 ¶18 important Our adherence to federal antitrust precedent supports Wisconsin policies. First and foremost, when the Wisconsin legislature enacted the state's mini-Sherman Act, it intended for courts to construe Chapter 133 consistent with the interpretations provided for analogous federal laws. In Grams v. Boss, 97 Wis. 2d 332, 294 N.W.2d 473 (1980), we explained: We have repeatedly stated that sec. 133.01, Stats., [presently 133.03] was intended as a reenactment of the first two sections of the federal Sherman Antitrust Act of 1890, 15 U.S.C. secs. 1 and 2, with application to intrastate as distinguished from interstate transactions and that the question of what acts constitute a combination or conspiracy in restraint of trade is controlled by federal court decisions under the Sherman Act. 9 Conley cites to Wisconsin appellate court decisions having generally held that federal court interpretations of a federal statute for which there is a state analog are not binding on Wisconsin courts construing that state law. However, none of the cases Conley cites involve application of antitrust law. See Weber v. Weber, 176 Wis. 2d 1085, 1092 n.7, 501 N.W.2d 413 (1993) (regarding interpretations of federal rules of civil procedure to comparable state rules of civil procedure); Hoell v. LIRC, 186 Wis. 2d 603, 610, 522 N.W.2d 234 (Ct. App. 1994) (citing Marten Transp., Ltd. v. DILHR, 176 Wis. 2d 1012, 102122, 501 N.W.2d 391 (1993)) (regarding construction of federal employment discrimination laws on interpretation of the Wisconsin Fair Employment Act); see also State v. CardenasHernandez, 219 Wis. 2d 516, 528, 579 N.W.2d 678 (1998) (construction of federal rules of evidence versus state counterparts); State v. Rochelt, 165 Wis. 2d 373, 384, 477 N.W.2d 659 (Ct. App. 1991) (same); State v. Blalock, 150 Wis. 2d 688, 702, 442 N.W.2d 514 (Ct. App. 1989) (same). 11 No. Id. at 346. 01-3128 In the decades since this approach was adopted, we have relied upon the legislature's power to revise Chapter 133 if Wisconsin court adherence to federal antitrust doctrine is found to be objectionable.10 ¶19 We also conform our antitrust doctrine to the decisions of federal courts because Wisconsin courts have much less experience in antitrust matters than federal courts. case highlights that rationale. As noted by the This court of appeals in its certification, there is no Wisconsin case law on the subject of predatory pricing under Wis. Stat. § 133.03(2). Until now, no Wisconsin case has ever cited the 1993 Brooke Group decision or Utah Pie Co. v. Continental Baking Co., 386 U.S. 685 (1967), the principal "primary-line injury" case before Brooke Group. Meanwhile, precedent particularly the with breadth regard to of federal antitrust predatory pricing provides the guidance of well-developed judicial experience in these matters. Conforming state law doctrine to federal law in this subject area avoids inconsistency and the resultant need for speculation as to the parameters of limited Wisconsin law. ¶20 Consistency also achieves uniform treatment between state and federal antitrust laws for Wisconsin businesses and promotes predictability. Both Chapter 133 and federal antitrust law have the same primary goal, which is to promote competition. Compare Carlson, 190 Wis. 2d at 10 662 ("Antitrust laws For a Wisconsin statutory initiative, Wis. Stat. § 100.30, which is Wisconsin's unfair sales act. 12 are see No. intended to prevent restraints on free 01-3128 competition"), with Matsushita, 475 U.S. at 594 ("competition . . . [is] the very conduct the antitrust laws are designed to protect"). Both prohibit the same types of conduct, namely, restraints of trade and monopolizing unfair business or attempting practices. to monopolize Therefore, markets adherence to through federal court precedent minimizes conflict between the enforcement of state and federal antitrust laws and avoids subjecting Wisconsin businesses to divergent regulatory and civil liability for the same conduct. ¶21 Conley asks this court to depart from our longstanding practice and to ignore elements of the controlling federal law on predatory pricing. The seminal federal case addressing predatory pricing is the United States Supreme Court decision in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993). According to the United States Supreme Court, to succeed on a claim of predatory pricing a plaintiff must prove, first, that the defendant's "prices complained of are below an appropriate measure of its rival's 13 costs," id. at 222, and, No. second, that the defendant has a dangerous 01-3128 probability of recouping its investment in below-cost prices, id. at 224.11 ¶22 to Characterizing the Brooke Group test as overly hostile antitrust Court's claims, standard for Conley urges establishing this court predatory to modify pricing.12 the In 11 Brooke Group's analysis spoke also in terms of a "reasonable prospect" of recoupment, Brooke Group, 509 U.S. at 210, because the plaintiff in that case alleged "primary-line" price discrimination under the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(a) (2000). The Court noted that the Robinson-Patman Act requires the lesser "reasonable possibility" standard as compared to the Sherman Act's "dangerous probability" standard. Id. at 222. However, the Court made it clear that the primary-line competitive injury being alleged in that case is of the same general character as the injury suffered by predatory pricing schemes under Section 2 of the Sherman Act and that the two-part analysis established in the case applies equally under both Acts. Id. at 221-22. 12 In its certification memo, the court of appeals wrote that "it is Brooke Group's addition of the 'recoupment' element of a predatory pricing claim that renders it nearly impossible to succeed on a predatory pricing claim." However, the concept of recoupment was discussed long before Brooke Group. For instance, in Northeast Telephone Co. v. American Telephone & Telegraph Co., 651 F.2d 76 (2d Cir. 1981), Circuit Judge Irving R. Kaufman wrote: For unremunerative pricing to make economic sense, the predator must be assured that he will be able to recoup his short term losses in the future. But because a dollar now is worth more than a dollar later (because of both inflation and the time value of money), he must be reasonably certain that once his prey has fallen, he will be able to reap supranormal returns. 14 No. particular, Conley disputes establishing recoupment. Brooke Group's 01-3128 formula for Under Brooke Group, to establish the requisite prospect of recoupment under the second prong of a predatory pricing analysis, "[t]he plaintiff must demonstrate that there is a likelihood that the predatory scheme alleged would cause a rise in prices above a competitive level that would be sufficient to compensate for the amounts expended on the predation, including the time value of the money invested in it." Id. at 225. ¶23 Conley parses the preceding statement into two parts: (1) the likelihood of a rise in the predator's prices above a competitive level; sufficient to period and below-cost of interrelated adopting compensate the price for the losses pricing. reasons the (2) for second Conley why half this of incurred then court the increase be during the offers should Brooke would multiple, refrain Group from recoupment standard. ¶24 the First, Conley contends that embracing both parts of recoupment prong is inconsistent with the legislative command in Wis. Stat. § 133.01 that Chapter 133 be interpreted in a manner which gives "the most liberal construction to Id. at 89 (emphasis added). In Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 (1986), Justice Powell wrote: "The forgone profits may be considered an investment in the future. For the investment to be rational, the [predator] must have a reasonable expectation of recovering, in the form of later monopoly profits, more than the losses suffered." Id. at 588-89 (emphasis added). 15 No. 01-3128 achieve the aim of competition," Carlson, 190 Wis. 2d at 662, and with the aspiration for "vigorous private enforcement of antitrust laws." Id. at 664 (quoting Illinois Brick Co. v. Illinois, 431 U.S. 720, 745 (1977)). offer little elements this pricing. help, however, court should in determining adopt for Wisconsin Stat. § 133.01 discriminatory business (Emphasis added.) practices These hortatory statements a claim condemns which what of only destroy substantive predatory "unfair and competition." Despite Conley's intimations, Brooke Group does not eliminate or even constrict the enforcement of true antitrust violations. The decision simply defines what an antitrust violation is, at least under the theory of predatory pricing, and what aggressive business practices must accomplish to cross the line and improperly thwart the aims of competition. Therefore, citation to § 133.01 and discussion of the benefits of private enforcement beg the question of whether conduct that does not meet the standard set in Brooke Group is anticompetitive and unlawful, and should thus be prohibited. ¶25 Conley advances another argument for ignoring second element of Brooke Group's recoupment standard. the According to Conley, the standard creates an evidentiary burden that no plaintiff can ever meet, resulting in a near impossibility of plaintiffs surviving summary judgment with claims of predatory pricing. Conley points to recent commentary observing that "[j]udicial enforcement is at a low level following the Supreme Court's most important predatory times [i.e., Brooke Group]. pricing decision in modern Indeed, since Brooke was decided in 16 No. 01-3128 1993, no predatory pricing plaintiff has prevailed on the merits in the federal courts." Patrick Bolton et al., Predatory Pricing: Strategic Theory and Legal Policy, 88 Geo. L.J. 2239, 2241 (2000). ¶26 That predatory pricing claims have rarely, if ever, prevailed under the Brooke Group standard speaks little about the merits of the standard.13 the issue whether in deciding predatory practice. It is. Contrary to Conley's assertions, whether pricing to is, or adopt Brooke should be, Group a is not prohibited Nor is the issue whether evidence can ever be presented to satisfy the standards for proving a true instance of predatory pricing. Such evidence can circumstances where predation has occurred.14 quarrel is over how predatory pricing is be marshaled in Rather, Conley's defined and the 13 There is substantial evidence that predatory pricing claims in federal courts had severe difficulty prevailing even before Brooke Group was decided. See generally Frank H. Easterbrook, Predatory Strategies and Counterstrategies, 48 U. Chi. L. Rev. 263, 314 (1981). 14 Even the source that Conley offers to show the difficulty of surviving summary judgment in predatory pricing cases postBrooke Group cites three cases where federal courts refused to grant a defendant's motion for summary disposition of a predatory pricing claim. Patrick Bolton et al., Predatory Pricing: Strategic Theory and Legal Policy, 88 Geo. L.J. 2239, 2260 n.124 (2000) (citing Multistate Legal Studies, Inc. v. Harcourt Brace Jovanovich Legal & Prof'l Publ'ns, 63 F.3d 1540 (10th Cir. 1995); Aventura Cable Corp. v. Rifkin/Narragansett S. Fla. CATV Ltd. P'ship, 941 F. Supp. 1189 (S.D. Fla. 1996); Servicetrends, Inc. v. Siemens Med. Sys., Inc., 870 F. Supp. 1042 (N.D. Ga. 1994)). These cases were later settled out of court, precluding their chance to succeed on the merits. See Bolton et al., supra, at 2259 & n.118. 17 No. 01-3128 criteria courts must use to assess whether a particular business practice Brooke violates the prohibition Group sets accomplishing this assessment. prerequisites for recoupment plausible. forth a against rational and reasoned Other under predatory pricing. method articulations predatory for of the pricing are Yet, even these alternative standards must face the ever-present quandary of predatory pricing litigation: standards so aggressively over-inclusive competitive that conduct, they or prohibit so Are the lawful, under-inclusive yet that they encourage unlawful conduct and permit it to go unpunished? See Herbert Hovenkamp, Federal Antitrust Policy: The Law of Competition and Its Practice § 6.5a at 281 (2d ed. 1999).15 ¶27 standard In by erroneously Brooke Group, observing awards the that damages Court justified overzealous based on its legal litigation that unwarranted pricing claims stifles legitimate competition. predatory According to the Court: [The Brooke Group] prerequisites to recovery are not easy to establish, but they are not artificial obstacles to recovery; rather, they are essential 15 Conley's argument questioning the merit of requiring recoupment levels sufficient to compensate the amounts spent on predation is partially of a chicken-and-egg/cause-versus-effect variety. Do predatory pricing claims rarely succeed because the Brooke Group standard is too high and omits from its purview true instances of predatory pricing? Or, does Brooke Group's standard correctly protect against false claims and the reason that these claims fail is because they do not actually allege conduct that is against the interests of competitive markets? At best, Conley's analysis dismissively entertains the second possibility. 18 No. 01-3128 components of real market injury. As we have said in the Sherman Act context, "predatory pricing schemes are rarely tried, and even more rarely successful," Matsushita, [475 U.S.] at 589, and the costs of an erroneous finding of liability are high. "[T]he mechanism by which a firm engages in predatory pricing lowering prices is the same mechanism by which a firm stimulates competition; because 'cutting prices in order to increase business often is the very essence of competition . . . [;] mistaken inferences . . . are especially costly, because they chill the very conduct the antitrust laws are designed to protect.'" Cargill, [479 U.S.] at 122 n.17 (quoting Matsushita, [475 U.S.] at 594). It would be ironic indeed if the standards for predatory pricing liability were so low that antitrust suits themselves became a tool for keeping prices high. Brooke Group, 509 U.S. at 226-27. logic of this statement. We agree with the tenor and If erroneous allegations of predatory pricing are leveled against a competitor who is merely selling at lower prices than its competitors but who has legitimate business reasons for this pricing strategy, it is not consonant with § 133.01's objective of competition to give these claims credence.16 ¶28 Adoption of a predatory pricing standard authorizing successful claims when no harmful activity has occurred would be detrimental to Wisconsin. Without the complete recoupment element of Brooke Group, there market would be competition and considerable 16 consumer uncertainty welfare whether in a Claims under Section 2 of the Sherman Act cannot succeed if a defendant's dominant market share resulted from "a superior product, business acumen, or historical accident." Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1060 (8th Cir. 2000) (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966)). 19 No. 01-3128 predatory practice has occurred that will actually harm consumer interests through the charging of monopoly prices. As the Court noted in Brooke Group, recoupment of this nature is an essential element of real market injury. not competitors, (citing Brown that Shoe Id. at 226. antitrust Co. v. law United It is competition, protects. States, 370 Id. 224 294, U.S. at 320 (1962)). ¶29 Furthermore, the language that Conley asks this court to disregard is part of a restrictive clause to the sentence describing the recoupment standard. Therefore, if this court were to delete this clause, we would necessarily be altering the meaning of recoupment as stated by the Court. is more Conley's than grammatical; argument. it Conley exposes a concedes, This observation substantive as it must, flaw that in the charging of low prices, even if it destroys a competitor, does not harm consumers unless the alleged predator later raises its prices above a competitive level and charges monopoly prices exceeding those "Recoupment is otherwise the available ultimate object in a competitive of an unlawful market. predatory pricing scheme; it is the means by which a predator profits from predation. aggregate prices enhanced." ¶30 Without in it, predatory the market, pricing and produces consumer lower welfare is Id. at 224. Without a required showing of recoupment as articulated under Brooke Group, courts would be permitted to find a dangerous probability of recoupment by inference, rather than by proof. This is precisely the legal standard that Conley 20 No. asks this court to adopt in Brooke Group's 01-3128 stead. As a replacement for the second clause of the recoupment requirement, Conley suggests that all that is required to demonstrate recoupment is a "structural" showing of the possibility of a monopoly, which would require proof of two factors: (1) that the relevant market existence of is high already barriers highly to competitors into the market. concentrated; the entry of and (2) former the or new See 3 Phillip Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application theory). In defendant's market is (2d words, if other 296 practice and sufficiently below-cost pricing the ed. a be (discussing monopoly entry difficult, would 2002) of results competitors this from into a the then the demonstration of sufficient for a to competitor succeed on a predatory pricing claim against its adversary and, as a result, be awarded treble damages from its competitor. ¶31 We recognize that leading antitrust commentators observe that the proof necessary to establish the second clause of recoupment has yet to be fully determined. Hovenkamp, supra, at 322. See Areeda & Brooke Group did not reach the issue of whether its test requires proof not only of significantly supracompetitive pricing, actual or prospective, but also of the amount and duration of that pricing. 509 U.S. at 274). business's Id. (citing Brooke Group, However, commentators also recognize that a attainment of monopoly positioning does not, ipso facto, mean that it has a dangerous probability of recouping all 21 No. its losses.17 01-3128 While the existence of a monopoly indisputably facilitates an ability to recoup losses resulting from predatory pricing, and perhaps is a necessary condition for successful recoupment, Frank H. it is not Easterbrook, Counterstrategies, monopolizing sufficient 48 U. enterprise Chi. will to assure L. find Rev. it 263, See Strategies Predatory recoupment. and 272 difficult (1981). to A charge monopoly prices for a product when the demand for that product is relatively elastic (meaning that consumer demand is sensitive to price changes), so long as reasonable substitute products are available in the relevant market.18 17 Commentators who recognize (or even recommend) Conley's market structure argument generally use market structure as a shield, not a sword, in predatory pricing litigation. It filters out unmeritorious claims and then traditional predatory pricing analysis is applied to those defendants that pass the structural prerequisites. See Richard A. Posner, Antitrust Law 217 (2d ed. 2001); Paul L. Joskow & Alvin K. Klevorick, A Framework for Analyzing Predatory Pricing Policy, 89 Yale L.J. 213, 242-50 (1979); Herbert Hovenkamp, Federal Antitrust Policy: The Law of Competition and Its Practice § 8.4a, at 346-48 (2d ed. 1999). 18 See Advo Inc. v. Phila. Newspapers, Inc., 51 F.3d 1191, 1203 (3d Cir. 1995) ("[A] monopolist can [not] charge any price it wants. . . . [A]n exclusive seller will raise prices only to the point where the higher price is not more than offset by a decrease in quantity demanded. The shape of the demand curve constrains the behavior of all sellers, even monopolists."); see also Hovenkamp, supra, § 1.2a at 13 ("A monopolist's market power is a function of the elasticity of demand for its product."); Easterbrook, supra, at 302-03 (explaining that while elasticities of demand are difficult to measure, they are essential to determining the social costs of a monopoly). 22 No. ¶32 Finally, Conley cites some scholarly criticism Brooke Group's requirement for establishing recoupment. claims that these critiques suggest a 01-3128 transitory of Conley nature to current federal antitrust doctrine on predatory pricing, which counsels against this court's full adoption of Brooke Group. We have reviewed the sources that Conley purports demonstrate a declining confidence in the Brooke Group test. These sources do not approach such a critical mass in the legal commentary that they excite a conviction that the standards set forth in Brooke Group are erroneous or otherwise imprudent.19 It is axiomatic that most judicial decisions and certainly those of the United States Supreme Court inspire some degree of commentary among other courts (or even within the same court, as in the case of a dissenting opinion) and among scholars. will invariably be critical. More Some of this commentary relevant to our present analysis is the silence within federal courts of any criticism 19 Conley cites to Patrick Bolton et al., Predatory Pricing: Strategic Theory and Legal Policy, 88 Geo. L.J. 2239 (2000); David F. Shores, Law, Facts and Market Realities in Antitrust Cases After Brooke and Kodak, 48 SMU L. Rev. 1835 (1995); Phillip Areeda & Herbert Hovenkamp, 3 Antitrust Law (2d ed. 2002). Given Conley's extensive reliance on the Areeda and Hovenkamp treatise, which Conley cites as providing some of the harshest criticisms against Brooke Group, it is worth noting that Professor Areeda was the counsel appearing on behalf of the petitioner/non-prevailing party before the United States Supreme Court in Brooke Group. See Brooke Group, 509 U.S. at 211. In addition, the Bolton article has itself been sharply criticized. See Kenneth G. Elzinga & David E. Mills, Predatory Pricing and Strategic Theory, 89 Geo. L.J. 2475 (2001). 23 No. over the Brooke Group test. In fact, federal 01-3128 courts have largely endorsed the Brooke Group rationale.20 ¶33 In any event, the relative amount of scholarly criticism advanced against Brooke Group does not affect whether that decision is pricing claims. the controlling federal law on predatory Absent the Supreme Court modifying the Brooke Group test, we adopt it in its entirety for assessing predatory pricing claims under § 133.03. depart from deferring to this court's federal We see no compelling reason to sound antitrust and longstanding principles and practice conforming of our interpretations of Chapter 133 to federal court interpretations of the Sherman Antitrust Act. 20 A sampling of some recent federal cases fully applying Brooke Group includes: Bailey v. Allgas, Inc., 284 F.3d 1237, 1245, 1256 (11th Cir. 2002); Virgin Atl. Airways Ltd. v. British Airways PLC, 257 F.3d 256, 259 (2d Cir. 2001); Bridges v. MacLean-Stevens Studios, Inc., 201 F.3d 6, 13-14 (1st Cir. 2000); Taylor Publ'g Co. v. Jostens, Inc., 216 F.3d 465, 477 (5th Cir. 2000); Stearns Airport Equip. Co., Inc. v. FMC Corp., 170 F.3d 518, 536 (5th Cir. 1999); Nat'l Parcel Servs., Inc. v. J.B. Hunt Logistics, Inc., 150 F.3d 970, 971 (8th Cir. 1998) Advo, Inc. v. Philadelphia Newspapers, Inc., 51 F.3d 1191, 1192 (3d Cir. 1995); Am. Booksellers Ass'n, Inc. v. Barnes & Noble, Inc., 135 F. Supp. 2d 1031, 1041-42 (N.D. Cal. 2001); United States v. AMR Corp., 140 F. Supp. 2d 1141, 1209-15 (D. Kan. 2001); Mathias v. Daily News, L.P., 152 F. Supp. 2d 465, 473 (S.D.N.Y. 2001). Some federal cases have limited the effect of Brooke Group, but not in settings that directly involve predatory pricing. See, e.g., LePage's Inc. v. 3M, 324 F.3d 141, 168 (3d Cir. 2003) (limiting Brooke Group to only claims of predatory pricing); Chroma Lighting v. GTE Prods. Corp., 111 F.3d 653, 658 (9th Cir. 1997) (concluding that Brooke Group does not extend to secondline price discrimination cases). 24 No. 01-3128 IV. DAUBERT v. MERRELL DOW PHARMACEUTICALS ¶34 Before turning to the sufficiency of the evidence in this case, we address a matter related to the circuit court's use of expert testimony. In certifying this appeal, the court of appeals suggested that this case presents an opportunity for this court to revisit our rejection of the standard articulated in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). The court of appeals observed what it calls a tension between the principle that Wisconsin courts conform Wisconsin antitrust law to federal law and the principle that federal antitrust case law invokes the Daubert "gatekeeper" role of a trial court in admitting expert testimony. The court of appeals suggested that we address the Daubert rule either on a broad scale or on a basis limited to antitrust cases, such as this predatory pricing claim.21 21 In the federal system, trial courts have a significant "gatekeeper" function in keeping from the jury expert testimony that is deemed unreliable. See Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993) (scientific expert testimony); Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) (general expert testimony). By contrast, the trial court's gatekeeper role in Wisconsin is limited. See Green v. Smith & Nephew AHP, Inc., 2000 WI App 192, ¶21, 238 Wis. 2d 477, 617 N.W.2d 881, aff'd, 2001 WI 109, 245 Wis. 2d 772, 629 N.W.2d 727. In Wisconsin, "Once the relevancy of the evidence is established and the witness is qualified as an expert, the reliability of the evidence is a weight and credibility issue for the fact finder and any reliability challenges must be made through cross-examination or by other means of impeachment." State v. Peters, 192 Wis. 2d 674, 690, 534 N.W.2d 867 (Ct. App. 1995); see also State v. Walstad, 119 Wis. 2d 483, 516, 518-19, 351 N.W.2d 469 (1984). 25 No. ¶35 law 01-3128 Whatever merit there may be in revisiting Wisconsin on the admissibility of expert testimony in light of Daubert, we do not believe that this case presents the proper vehicle. The Daubert standard governs the admissibility of expert opinions and deals with the threshold reliability of an expert's opinion. In the present action, the parties do not dispute the qualifications of any experts or the relevancy of their testimony. Because the admissibility of an expert's opinion was not challenged in this appeal, the Daubert issue is not sufficiently present to require a decision. Rather, as explained below, the central question presented involves how the circuit court considered the admissible expert testimony in reaching its decision to grant summary judgment. V. SUFFICIENCY OF CONLEY'S EVIDENCE ¶36 Even though the Brooke Group standard is being adopted as Wisconsin law for predatory pricing claims, Conley maintains its challenge to the circuit court's grant of summary judgment. ¶37 judgment, In response Conley to retained the Journal's an expert, present evidence of predatory pricing. motion Dr. for Frank summary Gollop, to Gollop provided an 11- page report stating, among other things, that both requirements of a predatory Sunday-daily that the pricing conversion Journal was scheme program. supplying are present in the Journal's he concluded Specifically, daily newspapers to Waukesha County subscribers for less than the relevant measure of cost, which he considered to be the incremental, or marginal, cost of 26 No. producing and recoupment, distributing Gollop stated an that newspaper.22 extra once the Journal 01-3128 As to drives the Freeman out of business it will have a monopoly in Waukesha County and, therefore, will recoup losses incurred during the time it sold newspapers at below cost. Gollop was the only expert who testified on Conley's behalf regarding the alleged predatory nature of the Journal's program. Meanwhile, the Journal offered expert testimony to disprove that any predatory pricing occurred under the program. ¶38 The circuit court ruled that Dr. Gollop failed to provide sufficient evidence as to "the material issue of whether or not the total advertising revenue . . . [a]s folded into the price of the paper is below the cost to the Journal." In other words, the court concluded that Conley had presented incomplete evidence as to whether the Journal was providing its newspapers at unprofitable levels. Regarding the recoupment element, the court determined that Conley had failed to make any showing that the Journal would eventually be charging supracompetitive prices for its paper, what probable amount the Journal would need to recoup for its losses, or even that the Journal had suffered or 22 Neither the Court in Brooke Group nor other federal courts have definitively taken a position on which various cost measures are an "appropriate measure," although many federal circuits have regarded marginal cost and average variable cost as the most appropriate. See generally Multistate Legal Studies, 63 F.3d at 1549 n.5. Whatever standard is used, "the problem of measurement is apt to be acute." Posner, supra, at 215. We do not address this issue because, on the basis of the Journal's summary judgment motion, we assume that Gollop's measure of cost was appropriate. 27 No. 01-3128 will suffer a loss as a result of the Sunday-daily conversion program. ¶39 Conley contends that the circuit court, in reaching these conclusions, usurped the function of the jury by weighing conflicting predatory expert pricing. testimony Conley regarding argues that the the existence proffered of expert testimony was sufficient to raise a genuine issue of material fact as to whether the Journal's Sunday-daily conversion program constituted predatory pricing anticompetitive practice. and, thus, is an unlawful, According to Conley, summary judgment is never appropriate when qualified experts differ. ¶40 offer We disagree with Conley and conclude that it failed to sufficient expert testimony, or other prima facie evidence, to support its antitrust claim of predatory pricing. ¶41 As to the issue of below-cost pricing, we look to the specific conduct that is questioned. The Sunday conversion plan amounted, in effect, to a temporary, net discount of no more than 50% off the newspaper's published rates for certain subscribers namely, those previously receiving Sunday service and who, after conversion, also receive daily service. The 50% discount benchmark was followed by the Journal because industry standards require that subscribers be charged at or above this rate if each subscription is to be included in the newspaper's audited circulation figures. It is undisputed in the record that the Journal has offered this Sunday-daily conversion at different times throughout the Milwaukee metropolitan area, not just in Waukesha County. In many locations where the discount 28 No. 01-3128 was offered, the Journal already monopolized both the daily and Sunday newspaper market, obviating any issue of anticompetitive conduct in those regions. ¶42 The Journal does not argue that, if circulation costs and subscription revenue were the only appropriate measures of cost and revenue, there would be no evidentiary basis for a finding of below-cost pricing. on circulation accounting The record demonstrates, based alone, that the marginal costs of producing and distributing numerous weeks of the daily newspaper to these conversion subscribers would exceed the nominal subscription revenue the Journal received by slightly decreasing the length of its Sunday newspaper obligations. Journal argues that increased Although the subscribership after the promotional period ends may, in the long term, overcome this loss, this speculative result is too tenuous a basis for determining the Journal's actual net revenue from engaging in the program. ¶43 However, the Journal does contend that subscription revenue is an incomplete measure of the revenue that is directly derived from newspaper its Sunday-daily industry, subscription conversion rates program. represent a In the minority fraction of the revenue that a newspaper publisher garners from circulating each newspaper. According to an expert for the Journal, advertising revenue generally comprises 75% to 80% of total newspaper revenue. Conley. free. These figures are not controverted by We are mindful that many newspapers are distributed Although this observation has limited effect on our legal 29 No. 01-3128 analysis,23 it underscores the fact that advertising revenue may be virtually the exclusive source of revenue for some newspapers. ¶44 directly The question, derived from then, is increased whether advertising circulation, even revenue when the circulation is generated by substantial discounts that impose no additional costs to subscribers, must be considered determining whether below-cost pricing occurred. when We conclude that these revenues must be included, as a matter of law, when making this determination in a market analysis for daily paid newspapers.24 If specific conduct is alleged to be predatory, then all revenue directly flowing from that challenged conduct must be offset against the costs of that enterprise. 23 To be sure, these free newspapers are rarely, if ever, daily newspapers, and rarely, if ever, are distributed by means of home delivery. Moreover, the relevant market in this action is that of paid daily newspapers in Waukesha County. Therefore, the existence of free weekly newspapers inside or outside of Waukesha County does not impact the legal analysis of predatory pricing. 24 In predatory pricing cases, disputes over below-cost pricing usually focus on the difficulties in calculating an Volumes of scholarship have been appropriate measure of cost. written regarding how a firm's costs during predation should be measured, and courts have wrestled over this matter. See generally Hovenkamp, supra, § 8.2-8.3 at 337-45. The "price" component from which any measure of cost is compared is frequently easier to observe: What did the firm selling its units charge to whomever receives those units? While some ancillary revenue is far too contingent, speculative, and otherwise improper to attribute to any sale, revenues from newspaper sales and distribution cannot be confined simply to the price charged to subscribers or other purchasers of the product. 30 No. ¶45 01-3128 The evidence presented by Dr. Gollop when he assessed whether the conversion program had net losses simply ignored this necessary circulation. whether measure of revenue attributable to increased Therefore, Gollop failed to adequately consider increased circulation, and its resultant increase in advertising revenue, could exceed the costs of the Sunday-daily conversion program. Because of this omission we must assume, on the basis of the summary judgment record, that each additional daily Journal Sentinel subscription generates approximately $200 in additional annual advertising revenue. The Journal offered these did figures into competing estimates. evidence and Conley not offer any Meanwhile, the only cost figures Gollop presented were losses of $66 for each subscriber who converted from a 26-week Sunday subscription to a 22-week Sunday and daily subscription. costs for Extrapolating converting a from 52-week this Sunday figure, the subscription Journal's would be proportionally larger than $66, but they would not be greater than $200. ¶46 Conley's only response to its failure to address the incremental advertising revenue earned by increased circulation is to assert that a disagreement exists between the experts as 31 No. 01-3128 to whether this factor should be included in the calculus.25 have already explained why figures addressing these We revenues must be included to satisfy a showing of predatory losses. In any event, Dr. Gollop never contended that advertising revenue should be excluded in an analysis of predatory pricing in the context of the newspaper conversion program. Gollop revenue only stated would incremental that he overcome circulation any did not losses costs from At his deposition, believe that advertising incurred from subtracting incremental circulation revenues, admitting that he did not have any figures concerning this matter: [Question]: Did your analysis take into account any increased advertising revenue associated with maintaining or increasing subscriptions? [Gollop]: It does so only in the following sense. That if each additional conversion program generates a net loss to the Journal of $66, I really didn't think it was necessary to say that one additional subscription would generate $66 in advertising revenue. If you can show that, that would be terrific. I don't have that kind of data, but I just can't believe one subscription generates $66 in added advertising revenue. [Question]: [Gollop]: You don't know one way or another? I don't. 25 Conley also suggests, based on a Journal Sentinel Circulation Department 2000 Marketing Plan that shows a net loss based on the conversion program discounts, that the Journal shows at least a $0.35 loss per daily newspapers supplied to a subscriber under the program. However, this document does not summarize all costs and revenues related to the conversion program nor does it suggest a cost analysis beyond that experienced only by the newspaper's circulation department. 32 No. Doctor Gollop's conscious disregard of revenue this 01-3128 source cannot insulate Conley from its burden of presenting sufficient prima facie evidence of predatory pricing. ¶47 It is apparent that Conley wants the best of both worlds when it comes to the role of advertising revenue in a predatory pricing claim. expert's decision not On the one hand, Conley defends its to include advertising revenue from increased circulation as an appropriate component in a revenuecost differential.26 Meanwhile, Conley complains that one of the primary suffers damages it as a result of the Sunday-daily conversion program is the loss of advertising dollars from its decreased circulation. In Conley's own words, "In the newspaper business, it is common knowledge that a decline in circulation leads to a decline in advertising revenues and that decline in advertisers leads to further declines in circulation." Conley's acknowledgment in this regard is fatal to its argument. ¶48 arguendo As to recoupment, Conley fares no better. that below-cost sales occurred, to Assuming establish the recoupment element of a predatory pricing claim Conley had to present some proof of a "dangerous probability" that the Journal would recoup the discounted value of its predation losses by charging monopolistic prices after the Freeman was driven from 26 Despite Gollop's omissions in this matter, at both his deposition and in his report Gollop proclaimed that newspapers increase circulation precisely to increase advertising revenues, that circulation and advertising sales are highly correlated, and that advertisers will pay higher advertising rates as a newspaper's circulation increases. 33 No. the market. Brooke Group, 509 U.S. at 224. 01-3128 As noted by Judge Hassin, Dr. Gollop failed to present any evidence of how much the Journal would have to increase either its subscription rates or advertising rates, or for how long, in order for the Journal Sentinel to recover any losses.27 purported Likewise, no evidence was presented regarding how the market would tolerate any price increases above competitive levels. Gollop never even surmised such results. ¶49 The Court in Brooke clearly Group stated that "[d]etermining whether recoupment of predatory losses is likely requires an estimate of the cost of the alleged predation and a close analysis of both the scheme alleged by the plaintiff and the structure and conditions of the relevant market." Group, 509 U.S. at 226. Brooke Gollop did not perform a close analysis of the scheme alleged or the conditions of the market. Without such evidence, a jury could not reasonably determine whether Conley satisfied the recoupment element of Brooke Group without engaging in sheer speculation. made clear market the Court's circumstances reasonable likely by jury result or from in The need for such evidence was additional deficiencies finding sustained that instruction in the proof scheme supracompetitive 27 that, would "If bar alleged pricing, a would the Perhaps the most fundamental hurdle facing Conley's evidence of a dangerous probability of recoupment is its failure to establish below-cost pricing. Without a complete sense of the investment that the Journal has sunk into the Sunday-daily conversion program, it is impossible to know its relative needs for recoupment. 34 No. plaintiff's case has failed." Id. 01-3128 While the Court followed this statement by indicating that the realization of a monopoly position is recoupment, a it market stopped structure" argument.28 circumstance short of that adopting would facilitate Conley's "market It is this market structure argument, and only this premise, from which Gollop concluded that the Journal could meet the recoupment requirement for a predatory pricing claim.29 In fact, we imagine that this flaw in Conley's proof is precisely why it advances the argument that this court should reject the bulk of Brooke Group's recoupment standard. ¶50 Overall, we conclude that the circuit court did not usurp the jury's fact-finding role in granting summary judgment in this case. As did the circuit court, we have not assessed the credibility of Dr. Gollop's testimony. Rather, accepting his expert testimony, we conclude that Dr. Gollop's evidence failed to address material elements of Conley's claims. Under any claim view of the facts, essential elements of Conley's cannot be proved on this record and, therefore, summary judgment is appropriate. See Schurmann v. Neau, 2001 WI App 4, ¶7, 240 Wis. 2d 719, 624 N.W.2d 157. 28 For an informative discussion of the limitations facing a newspaper operating as a monopolist in a market with competing sources of news and advertising media, see Reilly v. Hearst Corp., 107 F. Supp. 2d 1192, 1201 (N.D. Cal. 2000). 29 We accept Dr. Gollop's view that the barriers to entry in the local newspaper market are significant due to high fixed costs and the necessity of sustaining losses for a long period of time while the newspaper attempts to penetrate embedded subscriber and advertiser loyalty in incumbent papers. 35 No. ¶51 01-3128 Once again, we look to Brooke Group for guidance on the role that experts play in summary judgment proceedings in cases alleging predatory pricing.30 According to the Court: When an expert opinion is not supported by sufficient facts to validate it in the eyes of the law, or when indisputable record facts contradict or otherwise render the opinion unreasonable, it cannot support a jury's verdict. Expert testimony is useful as a guide to interpreting market facts, but it is not a substitute for them. Brooke Group, 509 U.S. at 242 (citation omitted). Expert testimony provides a jury with insight it otherwise lacks due to a layperson's unfamiliarity with complex concepts. See County of Kenosha v. C & S Mgmt., Inc., 223 Wis. 2d 373, 415, 588 N.W.2d 236 (1999). cost accounting, In the domain of predatory pricing claims, the role of various measures of cost, and market phenomena are precisely the sort of complex matters for which experts are needed. However, a jury, which is the ultimate arbiter of the veracity of the facts offered, is not required to complete a complex economic analysis when the nonmoving party does not present sufficient facts to establish an essential component of that analysis. In order to defeat a properly supported motion for summary judgment, a party may not 30 Because the function of summary judgment procedure in federal and state courts is the same, federal decisions regarding summary judgment may be considered persuasive authority in interpreting Wisconsin's summary judgment rule. Yahnke v. Carson, 2000 WI 74, ¶10, 236 Wis. 2d 257, 613 N.W.2d 102. This recognition is especially proper in the context of antitrust litigation, where federal court experience in summary proceedings involving antirust claims is much greater than state courts. 36 No. 01-3128 rest on conclusory or incomplete expert analysis that lacks a sufficient factual Newspapers, Inc., foundation. 51 F.3d See 1191, Advo 1198-99 Inc. (3d v. Phila. Cir. 1995) (affirming summary judgment dismissing predatory pricing claim because expert affidavit failed to present facts establishing a genuine issue of below-cost pricing).31 ¶52 testimony The evidence proffered by Conley, including its expert on insufficient the basis predatory to proceed pricing to a claim, jury trial. provides Because an a reasonable jury faced with this evidence would have no factual basis for concluding that the Journal's promotional scheme was operating below-cost, there are no genuine issues of material See Baxter v. DNR, 165 Wis. 2d 298, 312, 477 N.W.2d 648 fact. (Ct. App. 1991) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). "[O]nce sufficient time for discovery has passed, it is the burden of the party asserting a claim on which it bears the burden of proof at trial 'to make a showing sufficient to establish the existence of an element essential to that party's case.'" Transp. Ins. Co., Inc. v. Hunzinger Const. Co., 179 Wis. 2d 281, 291-92, 507 N.W.2d 136 (Ct. App. 1993) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). 31 See also Virgin Atl. Airways Ltd. v. British Airways PLC, 69 F. Supp. 2d 571, 579 (S.D.N.Y. 1999) ("[A]n expert's opinion is not a substitute for a plaintiff's obligation to provide evidence of facts that support the applicability of the expert's opinion to the case."), aff'd, 257 F.3d 256 (2d Cir. 2001); MidState Fertilizer Co. v. Exchange Nat'l Bank, 877 F.2d 1333, 1339 (7th Cir. 1989). 37 No. 01-3128 On the basis of the summary judgment record, Conley has failed to meet this requirement. ¶53 Finally, regarding intent. its we briefly evidence address of Journal's the Conley's argument alleged predatory Although Conley makes much of the Journal's aggressive efforts to target readership and strengthen its sales position in Waukesha County, this emphasis is not very probative of any specific anticompetitive practice. The population of Waukesha County at the time the contested programs were implemented was expanding and, as noted by Journal personnel, is composed of people the Journal assessed as the most likely to read a daily newspaper. newspapers, Competition is a very harsh reality in the world of and the market forces inherent in the daily newspaper market frequently lead to natural local monopolies. See Reilly v. Hearst Corp., 107 F. Supp. 2d 1192, 1198 (N.D. Cal. 2000). The Journal is permitted to lawfully compete against Conley, even to the extent of trying to have Freeman subscribers switch to becoming Journal Sentinel readers. See Indep. Milk Producers Co-op v. Stoffel, 102 Wis. 2d 1, 10, 298 N.W.2d 102 (Ct. App. 1980) ("It is not illegal for a company to try to attract competitor. business, Such business world."). have a practices especially are at everyday the expense occurrences of in a the It is well understood that activities that legitimate business justification anticompetitive, even by a monopolist. are not See Virgin Atl. Airways Ltd. v. British Airways PLC, 257 F.3d 256, 266 (2d Cir. 2001) ("even with monopoly power, a business entity is not guilty of 38 No. predatory market conduct when it through is excluding simply its exploiting competitors competitive 01-3128 from the advantages legitimately available to it"); United States v. AMR Corp., 140 F. Supp. 2d 1141, 1193 (D. Kan. 2001). VI. CONCLUSION ¶54 Based on the foregoing reasons, we adopt the standards articulated by the United States Supreme Court in Brooke Group as governing predatory Wis. Stat. § 133.03(2). pricing claims in Wisconsin under In addition, we conclude that, based on the summary judgment record presented before the circuit court, Conley failed to present evidence sufficient for any reasonable jury to find that the Journal's Sunday-daily conversion program constituted predatory pricing and was therefore an anticompetitive practice waged against the Freeman. unlawful, Therefore, summary judgment in favor of the Journal was appropriate. By the Court. The judgment affirmed. 39 of the circuit court is No. 1 01-3128
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