Matsushita Electric Industrial Company, Ltd. v. Zenith Radio Corporation

PETITIONER: Matsushita Electric Industrial Company, Ltd.
RESPONDENT: Zenith Radio Corporation
LOCATION: United States District Court for the Eastern District of Pennsylvania

DOCKET NO.: 83-2004
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 475 US 574 (1986)
ARGUED: Nov 12, 1985
DECIDED: Mar 25, 1986

ADVOCATES:
Charles F. Rule - for United States, as amicus curiae, in support of the petitioners
Donald J. Zoeller - on behalf of the petitioners
Edwin P. Rome - on behalf of the respondents

Facts of the case

In 1974, Zenith Radio Corporation, an American manufacturer of consumer electronic products, and National Union Electronic Company (collectively referred to as Zenith) sued 21 Japanese-owned or -controlled manufacturers of consumer electronics and claimed that these companies conspired to drive the American companies out of the market. According to Zenith, the Japanese companies conspired to set artificially high prices for their products in Japan to offset the artificially low prices of their products in America, which was harmful to the American companies. Zenith claimed this conspiracy was a violation of several anti-trust laws intended to prevent price-fixing. The Japanese companies filed a motion for summary judgment. After finding the bulk of Zenith’s evidence inadmissible, the district court held that the admissible evidence did not raise a genuine issue of material fact and granted the motion for summary judgment in favor of the Japanese companies.

The U.S. Court of Appeals for the Third Circuit reversed and held that most of Zenith’s evidence was admissible. On the merits of the case, and in light of the greater amount of admissible evidence, the Court of Appeals held that a reasonable factfinder could find evidence of a conspiracy and that the district court improperly granted the summary judgment in favor of the Japanese companies.

 

Question

Did the Court of Appeals apply the proper standards in evaluating the decision of the district court?

Media for Matsushita Electric Industrial Company, Ltd. v. Zenith Radio Corporation

Audio Transcription for Oral Argument - November 12, 1985 in Matsushita Electric Industrial Company, Ltd. v. Zenith Radio Corporation

Warren E. Burger:

We will hear arguments next in Matsushita v. Zenith Radio.

Mr. Zoeller, I think you may proceed whenever you're ready.

Donald J. Zoeller:

Thank you, Mr. Chief Justice, and may it please the Court:

This appeal involves the circumstances under which courts may permit factfinders to infer from a mix of evidence that there has been a conspiracy in violation of the United States antitrust laws.

In this case, the district court, after carefully reviewing and analyzing the mountain of evidence that had been gathered by the plaintiffs during the pretrial phase, determined that that evidence could not support a rational inference that the defendants had entered into and carried out the alleged conspiracy to establish low and predatory prices in the United States market.

The court accordingly granted summary judgment.

The court of appeals reversed and said a trial was necessary.

In reversing, the court of appeals made two fundamental errors.

First, it failed to follow and carry out this Court's inference standards as enunciated in the case of First National City Bank of Arizona v. Cities Service.

As a result of that error, the court was led to authorize a factfinder to speculate that pricing conduct in the United States market, indistinguishable from the kind of vigorous pricing competition fostered by the antitrust laws and beneficial to consumers, that is low prices for the purpose of getting business, was actually not competition as it appeared to be but was conspiracy.

In reversing and finding summary judgment inappropriate, the court of appeals also held and made basic reliance on its conclusion that a factfinder could incur... infer, excuse me, that conduct by the defendants which their government ordered them and said it ordered them to enter into in furtherance of a Japanese governmental program was part of a conspiracy that violated our laws.

Now, these two errors not only call for reversal in this case but established a dangerous precedent that this Court should deal with.

First of all, they are dangerous from the standpoint of antitrust policy.

Permitting an inference of conspiracy to be drawn from conduct indistinguishable from competition can chill the vigorous competition that the antitrust laws seek to foster in the interest of American consumers.

Secondly, this precedent is dangerous from the standpoint of judicial administration.

District... carving out and fashioning exceptions to this Court's inference standards in order to turn down motions for summary judgment can cause district courts to say all the monumental effort that it takes to tame and control a case of the size of this case is simply not worth it; that it will simply be frustrated by the courts above.

And this decision is dangerous from the standpoint of the relationship of the United States to its most valued trading partners.

I would like to deal first with the inference of conspiracy question.

Now, the court of appeals held that a factfinder could infer from the record in this case that the pricing activities of the defendants in the United States market were not individual competitive activities, but were coordinated and orchestrated pursuant to some common plan or some agreement.

For such an inference to be rational, however, the record should show there should be evidence of uniform prices suggestive of conspiracy, or at the very minimum that those prices showed some discernible pattern in the United States market.

There is no such evidence in this case.

The plaintiffs don't even pretend there is such evidence in this case.

The most that the evidence in this case shows, such pricing evidence as there is, is that the prices by the Japanese defendants in this market were, as the district court stated, all over the lot; that they ran at every price level in the United States market from the highest price levels on down; that they were so varied that the plaintiffs could describe the allegedly conspiratorial conduct only in terms of competition.

They say the Japanese defendants agreed to charge prices necessary to get the sale.

So does every competitor.

The court of appeals said that the jury or a factfinder could infer that these pricing activities were predatory and that they were part of an overall scheme under which supposedly high prices and profits in the Japanese market could be dumped into the United States market for the purpose of supporting low prices here; for the ultimate purpose of jointly monopolizing the United States market.

Now, for such an inference to be rational, the plaintiffs should be able to produce some evidence that there was a purpose to predation; that ultimately those who paid the price of predation could recover their predatory losses through monopoly profits at some foreseeable point where it made some sense.

They should also have some evidence that those smaller Japanese competitors, those who had smaller shares of the United States market, had a mechanism to share the burdens and benefit of predation at the one hand and monopolization at the other.

Far from showing that, the record in this case is entirely to the contrary.

The undisputed facts of this case are that from the beginning of the alleged period of conspiracy when these companies entered the United States market with zero market shares, on through the roughly 20 years covered by this case, the two market leaders in the United States, Zenith and RCA, remained the two market Leaders in the United States; lost none of their market shares.