Spectrum Sports, Inc. v. McQuillan

PETITIONER: Spectrum Sports Inc. and Kenneth B. Leighton
RESPONDENT: Shirley and Larry McQuillan, dba Sorboturf Enterprises
LOCATION: U.S. District Court for the Southern District of California

DOCKET NO.: 91-10
DECIDED BY: Rehnquist Court (1991-1993)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 506 US 447 (1993)
ARGUED: Nov 10, 1992
DECIDED: Jan 25, 1993
GRANTED: Mar 30, 1992

ADVOCATES:
Jeffrey M. Shohet - on behalf of the Respondents
James D. Vail - on behalf of the Petitioners
Robert A. Long, Jr. - on behalf of the United States, as amicus curiae supporting the Petitioners

Facts of the case

Shirley and Larry McQuillan were the southwest distributors for products made with sorbothane, a patented elastic polymer. They had an agreement with the manufacturer to be one of five regional distributors. Gradually, the manufacturer began to take away the McQuillan’s right to distribute certain types of products, eventually revoking their rights altogether. The manufacturer only allowed one national distributor, Spectrum Sports, Inc., which was co-owned by the president of the manufacturer’s son. When the McQuillan’s business failed, they sued Spectrum for violations of the Sherman Act. The Sherman Act makes it a felony to monopolize, attempt to monopolize, or conspire to monopolize any part of the interstate commerce.

The district court instructed the jury to infer specific intent and dangerous probability of monopolization if they found that Spectrum engaged in predatory conduct. The jury found Spectrum guilty. The U.S. Court of Appeals for the Ninth Circuit affirmed, holding that there was enough evidence to show specific intent and a dangerous probability of monopolization even if the jury only considered Spectrum’s predatory conduct.

Question

Is Spectrum liable for Sherman Act violations where the jury inferred intent and a dangerous possibility of success from Spectrum’s predatory conduct?

Media for Spectrum Sports, Inc. v. McQuillan

Audio Transcription for Oral Argument - November 10, 1992 in Spectrum Sports, Inc. v. McQuillan

William H. Rehnquist:

We'll hear argument next in Number 91-10, Spectrum Sports, Inc. v. Shirley McQuillan.

Mr. Vail, you may proceed whenever you're ready.

James D. Vail:

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

In this case you are asked to reverse the decision of the Ninth Circuit Court of Appeals and to reject the rule first announced in Lessig v. Tidewater Oil.

You should do for three reasons.

First, the Lessig rule is inconsistent with this Court's section 2 jurisprudence.

Second, the Lessig rule cannot be reconciled with economic reality.

And third, the Lessig rule does not promote competition, but harms it.

These are the key facts.

Spectrum Sports and the McQuillans' distributed Sorbothane athletic insoles; each bought the Sorbothane insoles from a manufacturer and had a... and resold them to retailers.

Each of the parties had an exclusive geographic territory in which they sold the Sorbothane insoles.

Both parties started selling the soles in 1981, and Sorbo, Inc. terminated the McQuillans' distributorship in August, 1983.

Thereafter, Spectrum became the national distributor of Sorbothane insoles.

The trial court entered judgment for the McQuillans on their section 2 claim.

It also entered judgment on behalf of Spectrum Sports, finding it not to have adjudged... excuse me, finding it not to have violated section 1 in the McQuillans' price fixing claim.

The appellate court affirmed solely on its conclusion that the trial record supported the McQuillans' attempt to monopolize claim.

It declined to address any of the other issues that were presented on appeal.

The court of appeals relied on the Lessig rule, which permits a judge or a jury to find an attempt to monopolize violation without analyzing the relevant market and determining violation to have occurred based solely on the defendant's conduct.

That rule is inconsistent with the rule of this Court.

This Court has long stated that in an attempt to monopolize plaintiff must show that the defendant has a reasonable or dangerous probability of succeeding in monopolizing.

This is usually proved by examining the relevant market and examining the defendant's power in that market.

Without knowing what the defendant's market power is, a fact finder cannot determine how, if at all, the defendant's conduct will affect a particular market.

And if we--

Why... why do we care?

James D. Vail:

--We care, Your Honor, because the purpose of the antitrust laws is to protect competition, to make sure that consumers are not--

I mean this... this has a... this has a tendency to do that.

James D. Vail:

--Well, not--

Even... even... even if we don't know the market share, there's... there's... there's a tendency to protect competition, isn't there, in finding liability here?

James D. Vail:

--Our position is that that is not necessarily the case.

Without examining the conduct in the context of a relevant market, one cannot determine whether the defendant's conduct will harm competition.