lepage’s inc. v. 3m 141 - berkeley lawlepage’s inc. v. 3m 141 cite as 324 f.3d 141 (3rd cir....

141LEPAGE’S INC. v. 3MCite as 324 F.3d 141 (3rd Cir. 2003)

Cir.1986); United States v. Smith, 793F.2d 85, 87 (3d Cir.1986), we conclude thatinasmuch as we are affirming the judg-ment of conviction and sentence we shouldaffirm the order denying bail pending ap-peal.2 Certainly it would be strange togrant bail pending appeal at the precisetime the appeal was failing. See 18 U.S.C.§ 3143(b)(B). We make our determinationwith respect to bail without prejudice toBarnes seeking bail from the district courtin the pending section 2255 proceeding.3

For the foregoing reasons we will affirmthe judgment of conviction and sentenceentered December 26, 2001, and the orderdenying bail entered February 19, 2002.

,

LEPAGE’S INCORPORATED; Le-Page’s Management Company, L.L.C.,Appellees/Cross–Appellants

v.

3M (MINNESOTA MINING AND MAN-UFACTURING COMPANY); KrollAssociates, Inc. Minnesota Miningand Manufacturing Company, Appel-lant/Cross–Appellee.

Nos. 00–1368, 00–1473.

United States Court of Appeals,Third Circuit.

Argued July 12, 2001.

Reargued En Banc Oct. 30, 2002.

Filed March 25, 2003.

Competitor brought antitrust actionagainst manufacturer of transparent tape.

The United States District Court for theEastern District of Pennsylvania, John R.Padova, J., 2000 WL 280350, entered judg-ment in favor of competitor on monopoliza-tion claim, and manufacturer appealed.The Court of Appeals, 277 F.3d 365, re-versed, and rehearing en banc was grant-ed. On rehearing, the Court of Appeals,Sloviter, Circuit Judge, held that: (1) man-ufacturer’s exclusionary conduct could vio-late Sherman Act’s monopolization provi-sion, even if manufacturer never priced itstransparent tape below its cost; (2) manu-facturer’s conduct had anticompetitive ef-fect; (3) manufacturer’s conduct did nothave legitimate business justification; and(4) competitor’s damages expert was notrequired to disaggregate damages causedby manufacturer’s unlawful activity fromthose caused by its lawful activity whenestimating damages.

Affirmed.

Greenberg, Circuit Judge, filed dis-senting opinion in which Circuit JudgesScirica and Alito joined.

1. Monopolies O12(1.3)

A monopolist willfully acquires ormaintains monopoly power in violation ofSherman Act when it competes on somebasis other than the merits. Sherman Act,§ 2, as amended, 15 U.S.C.A. § 2.

2. Monopolies O17(1.8, 1.12)

Exclusionary conduct of manufacturerwith monopoly power in transparent tapemarket, such as offering bundled rebates

2. Arguably the appeal in the bail appeal ismoot in view of our disposition of the mainappeal. We are satisfied, however, that this isnot so because our opinion does not necessar-ily terminate Barnes’ direct appellate pro-ceedings as he may petition for rehearing or

seek a writ of certiorari from the UnitedStates Supreme Court.

3. We do not intend to imply that if Barnesseeks bail the court should grant his applica-tion. Rather, we do not reach that question.

142 324 FEDERAL REPORTER, 3d SERIES

and entering into exclusive dealing con-tracts, could violate Sherman Act’s monop-olization provision, even if manufacturernever priced its transparent tape below itscost. Sherman Act, § 2, as amended, 15U.S.C.A. § 2.


Monopolist will be found to violateSherman Act’s monopolization provision ifit engages in exclusionary or predatoryconduct without a valid business justifica-tion. Sherman Act, § 2, as amended, 15U.S.C.A. § 2.


Bundled rebates offered to retailersby manufacturer with monopoly power intransparent tape market was exclusionaryconduct under Sherman Act’s monopoliza-tion provision, even if manufacturer’sprices remained above its costs; rebateswere offered to many of competitor’s ma-jor customers and were conditioned onpurchases spanning six of manufacturer’sdiverse product lines, and size of the re-bates was linked to number of productlines in which sales targets were met.Sherman Act, § 2, as amended, 15U.S.C.A. § 2.


Exclusive dealing contracts enteredinto with large customers by manufacturerwith monopoly power in transparent tapemarket, and its payments to other largecustomers that were designed to achievesole-source supplier status was exclusion-ary conduct in violation of Sherman Act’smonopolization provision. Sherman Act,§ 2, as amended, 15 U.S.C.A. § 2.


Exclusivity arrangements may be anelement in a monopolization claim. Sher-man Act, § 2, as amended, 15 U.S.C.A.§ 2.


Exclusionary conduct of manufacturerwith monopoly power in transparent tapemarket, such as offering bundled rebatesand entering into exclusive dealing con-tracts, had anticompetitive effect, as re-quired to support monopolization claim un-der Sherman Act; demand for competitor’sprivate-label tape decreased significantlyfollowing the introduction of manufactur-er’s rebates, and significant entry barriersprevent competitors from entering thetape market. Sherman Act, § 2, asamended, 15 U.S.C.A. § 2.


Courts must look to the monopolist’sconduct taken as a whole rather than con-sidering each aspect in isolation in deter-mining whether the conduct had an anti-competitive effect. Sherman Act, § 2, asamended, 15 U.S.C.A. § 2.


Exclusionary conduct of manufacturerwith monopoly power in transparent tapemarket, such as offering bundled rebatesand entering into exclusive dealing con-tracts, did not have legitimate businessjustification, as defense to monopolizationclaim; acting to further manufacturer’seconomic interests was not a valid businessjustification, and savings resulting fromhaving single shipments and invoices didnot approach millions of dollars manufac-turer paid to its customers in rebates.Sherman Act, § 2, as amended, 15U.S.C.A. § 2.


Defendant’s assertion that it acted infurtherance of its economic interests doesnot constitute the type of business justifi-cation that is an acceptable defense to amonopolization claim. Sherman Act, § 2,as amended, 15 U.S.C.A. § 2.


11. Federal Courts O823Court of Appeals reviews district

court’s decision to admit or exclude experttestimony for abuse of discretion.

12. Monopolies O28(9)Damages expert in monopolization ac-

tion may construct a reasonable offense-free world as a yardstick for measuringwhat, hypothetically, would have happened‘‘but for’’ the defendant’s unlawful activi-ties. Sherman Act, § 2, as amended, 15U.S.C.A. § 2.

13. Monopolies O28(8)Credibility of transparent tape manu-

facturer’s and it competitor’s damages ex-perts was for the jury to determine incompetitor’s monopolization action againstmanufacturer. Sherman Act, § 2, asamended, 15 U.S.C.A. § 2.

14. Monopolies O28(7.6)Competitor’s damages expert was not

required to disaggregate damages causedby transparent tape manufacturer’s unlaw-ful activity from those caused by manufac-turer’s lawful activity when estimatingdamages in competitor’s monopolizationaction; manufacturer’s actions, taken as awhole, were found to violate ShermanAct’s monopolization provision, makingsuch disaggregation unnecessary, if notimpossible. Sherman Act, § 2, as amend-ed, 15 U.S.C.A. § 2.

15. Monopolies O28(8)Jury instructions in competitor’s mo-

nopolization action against transparenttape manufacturer provided jury with ade-quate guidance of how to distinguish be-tween unlawful predation and lawful con-duct; district court told jury that to findfor competitor, it had to find by prepon-derance of the evidence that manufacturerwillfully maintained its monopoly powerthrough exclusionary or predatory con-duct, summarized actions that competitor

contended were unlawfully exclusionary orpredatory, and provided list of factors todetermine whether manufacturer’s conductwas exclusionary or predatory. ShermanAct, § 2, as amended, 15 U.S.C.A. § 2.

16. Federal Courts O822

In the absence of a misstatement oflaw, jury instructions are reviewed forabuse of discretion.

Barbara W. Mather, Jeremy Heep, Pep-per Hamilton LLP, Philadelphia, PA, Pe-ter Hearn, Peter Hearn, P.C., Philadel-phia, PA, Mark W. Ryan, Kerry LynnEdwards, Donald M. Falk, Robert L.Bronston, David A.J. Goldfine, Mayer,Brown, Rowe & Maw, Washington, DC,Roy T. Englert, Jr. (Argued), Robbins,Russell, Englert, Orseck & Untereiner,Washington, DC, for Appellees/Cross–Ap-pellants.

M. Laurence Popofsky (Argued), Ste-phen V. Bomse, Paul Alexander, Marie L.Fiala, Heller Ehrman White & McAuliffe,San Francisco, CA, John G. Harkins, Jr.,Harkins Cunningham, Philadelphia, PA,for Appellant/Cross–Appellee.

Argued July 12, 2001.

BEFORE: SLOVITER, ALITO, andGREENBERG, Circuit Judges.

Reargued En Banc Oct. 30, 2002.

BEFORE: BECKER, Chief Judge,SLOVITER, SCIRICA, NYGAARD,ALITO, McKEE, AMBRO, FUENTES,SMITH and GREENBERG, CircuitJudges.

Filed March 25, 2003


OPINION OF THE COURT

SLOVITER, Circuit Judge.

SLOVITER, Circuit Judge, with whomBecker, Chief Judge, Nygaard, McKee,Ambro, Fuentes, and Smith, CircuitJudges, join:

Minnesota Mining and ManufacturingCompany (‘‘3M’’) appeals from the DistrictCourt’s order entered March 14, 2000, de-clining to overturn the jury’s verdict forLePage’s in its suit against 3M under Sec-tion 2 of the Sherman Act (‘‘§ 2’’). 3Mraises various objections to the trial court’sdecision but essentially its position is alegal one: it contends that a plaintiff can-not succeed in a § 2 monopolization caseunless it shows that the conceded monopo-list sold its product below cost. Becausewe conclude that exclusionary conduct,such as the exclusive dealing and bundledrebates proven here, can sustain a verdictunder § 2 against a monopolist and be-cause we find no other reversible error, wewill affirm.

I.

FACTUAL BACKGROUND

3M, which manufactures Scotch tape forhome and office use, dominated the UnitedStates transparent tape market with amarket share above 90% until the early1990s. It has conceded that it has a mo-nopoly in that market. LePage’s,1 foundedin 1876, has sold a variety of office prod-ucts and, around 1980, decided to sell ‘‘sec-ond brand’’ and private label transparenttape, i.e., tape sold under the retailer’sname rather than under the name of the

manufacturer. By 1992, LePage’s sold88% of private label tape sales in the Unit-ed States, which represented but a smallportion of the transparent tape market.Private label tape sold at a lower price tothe retailer and the customer than brand-ed tape.

Distribution patterns and consumer ac-ceptance accounted for a shift of some tapesales from branded tape to private labeltape. With the rapid growth of office su-perstores, such as Staples and Office De-pot, and mass merchandisers, such asWal–Mart and Kmart, distribution pat-terns for second brand and private labeltape changed as many of the large retail-ers wanted to use their ‘‘brand names’’ tosell stationery products, including trans-parent tape. 3M also entered the privatelabel business during the early 1990s andsold its own second brand under the name‘‘Highland.’’

LePage’s claims that, in response to thegrowth of this competitive market, 3M en-gaged in a series of related, anticompeti-tive acts aimed at restricting the availabil-ity of lower-priced transparent tape toconsumers. It also claims that 3M de-vised programs that prevented LePage’sand the other domestic company in thebusiness, Tesa Tuck, Inc., from gaining ormaintaining large volume sales and that3M maintained its monopoly by stiflinggrowth of private label tape and by coor-dinating efforts aimed at large distribu-tors to keep retail prices for Scotch tapehigh.2 LePage’s claims that it barely wassurviving at the time of trial and that it

1. The plaintiffs in this action are LePage’sIncorporated and LePage’s ManagementCompany, L.L.C. Inasmuch as we can discernno distinction between their interests, we re-fer to them jointly as LePage’s.

2. It appears that at least at the times materialto this action, there were no other domesticmanufacturers of transparent tape. Therewere, however, foreign manufacturers butthey did not play a significant role in thedomestic market and 3M does not contendotherwise.


suffered large operating losses from 1996through 1999.

LePage’s brought this antitrust actionasserting that 3M used its monopoly overits Scotch tape brand to gain a competitiveadvantage in the private label tape portionof the transparent tape market in theUnited States through the use of 3M’smulti-tiered ‘‘bundled rebate’’ structure,which offered higher rebates when custom-ers purchased products in a number of3M’s different product lines. LePage’salso alleges that 3M offered to some ofLePage’s customers large lump-sum cashpayments, promotional allowances and oth-er cash incentives to encourage them toenter into exclusive dealing arrangementswith 3M.

LePage’s asserted claims for unlawfulagreements in restraint of trade under § 1of the Sherman Act, monopolization andattempted monopolization under § 2 of theSherman Act, and exclusive dealing under§ 3 of the Clayton Act. After a nine weektrial, the jury returned its verdict for Le-Page’s on both its monopolization and at-tempted monopolization claims under § 2of the Sherman Act, and assessed damagesof $22,828,899 on each. It found in 3M’sfavor on LePage’s claims under § 1 of theSherman Act and § 3 of the Clayton Act.3M filed its motions for judgment as amatter of law and for a new trial, arguingthat its rebate and discount programs andthe other conduct of which LePage’s com-plained did not constitute the basis for avalid antitrust claim as a matter of law andthat, in any event, the court’s charge to thejury was insufficiently specific and Le-Page’s damages proof was speculative.3

The District Court granted 3M’s motionfor judgment as a matter of law on Le-Page’s ‘‘attempted maintenance of monop-oly power’’ claim but denied 3M’s motion

for judgment as a matter of law in allother respects and denied its motion fornew trial. Le Page’s Inc. v. 3M, No. CIV.A.97–3983, 2000 WL 280350 (E.D.Pa.Mar.14, 2000). The Court subsequentlyentered a judgment for trebled damages of$68,486,697 to which interest was to beadded. LePage’s filed a cross appeal onthe District Court’s judgment dismissingits attempted maintenance of monopolypower claim.

On appeal, the panel of this court beforewhich this case was originally argued re-versed the District Court’s judgment onLePage’s § 2 claim by a divided vote. Le-Page’s Inc. v. 3M, Nos. 00–1368 and 00–1473, 2002 WL 46961 (3d Cir. Jan. 14,2002). This court granted LePage’s mo-tion for rehearing en banc and, pursuantto its practice, vacated the panel opinion.LePage’s Inc. v. 3M, Nos. 00–1368 and 00–1473 (3d Cir. Feb. 25, 2002) (order vacat-ing panel opinion). The appeal was thenorally argued before the court en banc.

II.

JURISDICTION AND STANDARDOF REVIEW

The District Court had jurisdiction overthis case pursuant to 28 U.S.C. §§ 1331and 1337(a) because LePage’s broughtthese claims under the Sherman and Clay-ton Acts. We have jurisdiction over thisappeal pursuant to 28 U.S.C. § 1291.

We exercise plenary review over an or-der granting or denying a motion for judg-ment as a matter of law. Shade v. GreatLakes Dredge & Dock Co., 154 F.3d 143,149 (3d Cir.1998). When, as here, a defen-dant makes such a motion, a court shouldgrant it ‘‘only if, viewing the evidence inthe light most favorable to the nonmovant

3. 3M unsuccessfully had moved for a judg-ment as a matter of law at the close of Le-

Page’s case and after the close of the entirecase.


and giving it the advantage of every fairand reasonable inference, there is insuffi-cient evidence from which a jury reason-ably could find liability.’’ Lightning Lube,Inc. v. Witco Corp., 4 F.3d 1153, 1166 (3dCir.1993). Thus, we review the evidenceon the appeal in the light most favorable toLePage’s. As the historical facts are notin sharp dispute, and our opinion turnslargely on legal determinations, we reviewquestions of law underlying the jury ver-dict on a plenary basis. Bloom v. Consoli-dated Rail Corp., 41 F.3d 911, 913 (3dCir.1994).

Our review of a jury’s verdict is limitedto determining whether some evidence inthe record supports the jury’s verdict.See Swineford v. Snyder County, 15 F.3d1258, 1265 (3d Cir.1994) (‘‘A jury verdictwill not be overturned unless the record iscritically deficient of that quantum of evi-dence from which a jury could have ration-ally reached its verdict.’’).

III.

MONOPOLIZATION — APPLICABLELEGAL PRINCIPLES

Section 2 of the Sherman Act provides:Every person who shall monopolize,

or attempt to monopolize, or combine orconspire with any other person or per-sons, to monopolize any part of the tradeor commerce among the several States,or with foreign nations, shall be deemedguilty of a felony, and, on convictionthereof, shall be punished by fine notexceeding $10,000,000 if a corporation,or, if any other person, $350,000, or byimprisonment not exceeding three years,or by both said punishments, in the dis-cretion of the court.

15 U.S.C. § 2 (2002). A private party maysue for damages for violation of this provi-sion and recover threefold the damagesand counsel fees. Id. § 15.

Because this section is in sweeping lan-guage, suggesting the breadth of its cover-age, we look to the Supreme Court deci-sions for elucidation of the standard to beused in cases alleging monopolization.Elucidation came in United States v. Grin-nell Corp., 384 U.S. 563, 86 S.Ct. 1698, 16L.Ed.2d 778 (1966), where the Court de-clared that a defendant company whichpossesses monopoly power in the relevantmarket will be found in violation of § 2 ofthe Sherman Act if the defendant willfullyacquired or maintained that power. Id. at570–71, 86 S.Ct. 1698.

In this case, the parties agreed that therelevant product market is transparenttape and the relevant geographic market isthe United States.4 Moreover, as to theissue of monopoly power, as we notedabove, 3M concedes it possesses monopolypower in the United States transparenttape market, with a 90% market share. Infact, the evidence showed that the house-hold penetration of 3M’s Scotch-brand tapeis virtually 100%. Therefore we need notdwell on the oft-contested issue of marketpower. See Robert Pitofsky, New Defini-tions of Relevant Market and the Assaulton Antitrust, 90 Colum. L.Rev. 1805,1807 (1990) (‘‘In monopoly enforcement un-der section 2 of the Sherman Act, thepivotal inquiry is almost always whetherthe challenged party has substantial mar-ket power in its relevant market.’’).

[1] The sole remaining issue and ourfocus on this appeal is whether 3M tooksteps to maintain that power in a manner

4. Although 3M originally challenged LePage’sselection of the United States as the relevantgeographic market, the District Court heldthat LePage’s had introduced sufficient evi-

dence from which the jury could properly findthat the relevant geographic market is theUnited States and 3M does not challenge thatmarket definition on appeal.


that violated § 2 of the Sherman Act. Amonopolist willfully acquires or maintainsmonopoly power when it competes on somebasis other than the merits. See AspenSkiing Co. v. Aspen Highlands SkiingCorp., 472 U.S. 585, 605 n. 32, 105 S.Ct.2847, 86 L.Ed.2d 467 (1985).

[2] LePage’s argues that 3M willfullymaintained its monopoly in the transpar-ent tape market through exclusionary con-duct, primarily by bundling its rebates andentering into contracts that expressly oreffectively required dealing virtually exclu-sively with 3M, which LePage’s character-izes as de facto exclusive. 3M does notargue that it did not engage in this con-duct. It agrees that it offered bundledrebates and entered into some exclusivedealing contracts, although it argues thatonly the few contracts that are expresslyexclusive may be considered as such. In-stead, 3M argues that its conduct waslegal as a matter of law because it neverpriced its transparent tape below its cost.5

This is the most significant legal issue inthis case because it underlies 3M’s argu-ment. In its brief, 3M states ‘‘[a]bove-costpricing cannot give rise to an antitrustoffense as a matter of law, since it is thevery conduct that the antitrust laws wishto promote in the interest of making con-sumers better off.’’ Appellant’s Br. at 30.For this proposition it relies on the Su-preme Court’s decision in Brooke GroupLtd. v. Brown & Williamson TobaccoCorp., 509 U.S. 209, 222, 113 S.Ct. 2578,125 L.Ed.2d 168 (1993). It is an argument3M repeated frequently during its oral ar-gument before the en banc court. Counselstated, ‘‘if the big guy is selling above cost,it has done nothing which offends the

Sherman ActTTTT’’ Tr. of Oral Argument,Oct. 30, 2002, at 11. This was the theoryupon which 3M’s counsel responded to allthe questions from the court. When askedwhether its theory is that because no onecontended that 3M sold below its cost, thatis ‘‘the end of the story,’’ its counsel re-sponded, ‘‘[w]ith the exception of the in-consequential express contract, absolute-ly.’’ Id.

It is therefore necessary for us, at theoutset, to examine whether we must accept3M’s legal theory that after Brooke Group,no conduct by a monopolist who sells itsproduct above cost — no matter how ex-clusionary the conduct — can constitutemonopolization in violation of § 2 of theSherman Act. The history of the interpre-tation of § 2 of the Sherman Act demon-strates the lack of foundation for 3M’spremise.

Although § 2 of the Sherman Act mayhave received less judicial and scholarlyattention than several of the other morefrequently invoked antitrust provisions,the Supreme Court, in a series of deci-sions, has made clear the type of conductthat will be held to constitute monopoliza-tion in violation of § 2.

The modern era begins with the decisionby Judge Learned Hand in United Statesv. Aluminum Co. of America, 148 F.2d 416(2d Cir.1945) (‘‘Alcoa’’ ). Because fourmembers of the Supreme Court were dis-qualified, the Supreme Court was requiredto apply the provision of the ExpeditingAct, Section 29 of Title 15, U.S.C., 1940ed., currently 28 U.S.C. § 2109, to certifythe case to the three most senior judges ofthe relevant circuit.6 Under the statute,

5. 3M states that its pricing was above its costshowever costs are calculated, and LePage’shas not contested 3M’s assertion.

6. The three most senior judges of the circuitwere, fortuitously, the legendary panel of

Judges Learned Hand, Thomas Swan, andAugustus Hand.


the decision of that court was ‘‘final andconclusive,’’ thus equating it to a decisionof the Supreme Court.

At the time in question, Alcoa was thesole domestic producer of aluminum andthus had a monopoly that the Governmentsought to disband. In the opinion on lia-bility, the court enunciated certain princi-ples that remain fully applicable today.One such principle is that it does not followthat a company that has a monopoly has‘‘monopolized’’ the market because ‘‘it maynot have achieved monopoly; monopolymay have been thrust upon it.’’ Id. at 429.As the court explained, ‘‘persons may un-wittingly find themselves in possession of amonopoly, automatically so to say: that is,without having intended either to put anend to existing competition, or to preventcompetition from arising when none hadexisted; they may become monopolists byforce of accident.’’ Id. at 429–30. On theother hand, the court then quoted JusticeCardozo’s statement in United States v.Swift & Co., 286 U.S. 106, 116, 52 S.Ct.460, 76 L.Ed. 999 (1932), that ‘‘size carrieswith it an opportunity for abuse that is notto be ignored when the opportunity isproved to have been utilized in the past.’’Alcoa, 148 F.2d at 430.

The court determined that Alcoa, whichcontrolled over 90% of the aluminum mar-ket, had utilized its size for abuse. Thecourt, noting that there had been at least‘‘one or two abortive attempts’’ by othersto enter the industry, concluded that Alcoa‘‘effectively anticipated and forestalled allcompetition, and succeeded in holding thefield alone.’’ Id. at 430. Finding Alcoa inviolation of § 2, the court continued:

Nothing compelled it to keep doublingand redoubling its capacity before othersentered the field. It insists that it neverexcluded competitors; but we can thinkof no more effective exclusion than pro-gressively to embrace each new opportu-

nity as it opened, and to face everynewcomer with new capacity alreadygeared into a great organization, havingthe advantage of experience, trade con-nections and the elite of personnel.

Id. at 431.

One year later, in American Tobacco Co.v. United States, 328 U.S. 781, 66 S.Ct.1125, 90 L.Ed. 1575 (1946), the SupremeCourt endorsed the Alcoa decision whenupholding a jury verdict finding a § 2 vio-lation. The government brought a crimi-nal action against various tobacco compa-nies that between 1931 and 1939 accountedat all times for more than 68%, and usuallyfor more than 75%, of the nation’s domes-tic cigarette production. Defendants wereconvicted and fined after the jury foundthey had violated §§ 1 and 2 of the Sher-man Act by conspiring to control the priceof leaf tobacco, to acquire less expensivesupplies of tobacco they did not need inorder to deprive rival manufacturers ofcheaper brands, to control cigarette prices,and to force cigarette distributors to treatrival brands less favorably.

The court of appeals affirmed, findingthe verdicts to be supported by sufficientevidence. The Supreme Court grantedthe tobacco companies’ petitions for certio-rari only as to their § 2 claims, seeking toanswer the specific question ‘‘whether ac-tual exclusion of competitors is necessaryto the crime of monopolization under § 2of the Sherman Act.’’ Id. at 784, 66 S.Ct.1125. Answering that question in the neg-ative, the Court stated that ‘‘[n]eitherproof of exertion of the power to excludenor proof of actual exclusion of existing orpotential competitors is essential to sustaina charge of monopolization under theSherman Act.’’ Id. at 810, 66 S.Ct. 1125.Furthermore, and importantly, the Courtexplicitly ‘‘welcome[d] this opportunity toendorse’’ certain passages from JudgeHand’s opinion. Id. at 813, 66 S.Ct. 1125.


Of particular relevance, the AmericanTobacco Court endorsed Judge Hand’s un-derstanding of the Sherman Act, namelythat the Act contemplated the notion that‘‘ ‘unchallenged economic power deadensinitiative’ ’’ and ‘‘ ‘that immunity from com-petition is a narcotic, and rivalry is a stim-ulant, to industrial progress.’ ’’ Id. (quot-ing Alcoa, 148 F.2d at 427). It furtherquoted Alcoa for the previously mentionedpropositions that monopolies can be‘‘thrust’’ upon entities rather than achievedand that specific intent under § 2 was notrequired ‘‘ ‘for no monopolist monopolizesunconscious of what he is doing.’ ’’ Id. at813–14, 66 S.Ct. 1125 (quoting Alcoa, 148F.2d at 432).

Section 2 of the Sherman Act was nextconsidered by the Supreme Court in Lo-rain Journal Co. v. United States, 342U.S. 143, 72 S.Ct. 181, 96 L.Ed. 162 (1951).The United States had brought a civil suitagainst the publisher of the Lorain Jour-nal, the only business disseminating newsand advertising in the town of Lorain,Ohio, alleging that it attempted to monopo-lize in violation of § 2 of the Sherman Actbecause it refused to sell advertising topersons that patronized the small radiostation that was established in a nearbycommunity. The Supreme Court held thatalthough a trader has discretion as to theparties with whom he will deal ‘‘[i]n theabsence of any purpose to create or main-tain a monopoly,’’ id. at 155, 72 S.Ct. 181(quoting United States v. Colgate & Co.,250 U.S. 300, 307, 39 S.Ct. 465, 63 L.Ed.992 (1919)), the action of the Journal con-stituted a purposeful means of regainingits previous monopoly over the mass dis-semination of news and advertising. Id.Because this was an attempt to monopolizein violation of § 2, the Court approved theentry of an injunction ordering the Journalto print the advertisements of the custom-ers of the radio station.

Thereafter, in United States v. GrinnellCorp., 384 U.S. 563, 86 S.Ct. 1698, 16L.Ed.2d 778 (1966), the Supreme Courtreiterated that monopoly power alone isnot necessarily unlawful. The Court sum-marized its prior cases, stating that § 2 ofthe Sherman Act required two elements:‘‘(1) the possession of monopoly power inthe relevant market and (2) the willfulacquisition or maintenance of that poweras distinguished from growth or develop-ment as a consequence of a superior prod-uct, business acumen, or historic accident.’’384 U.S. at 570–71, 86 S.Ct. 1698.

In Grinnell, the United States filed acivil suit against several companies thatoffered central station protective services,such as fire and burglary protective de-vices, alleging violations of §§ 1 and 2 ofthe Sherman Act. Referring to the two-pronged test under § 2, the Court foundthat both prongs had been satisfied. Notonly did the companies have monopolypower (87% of the accredited central sta-tion service business), but also they largelyachieved this power through the aid ofpricing practices, acquisitions of competi-tors, and noncompetition covenants, all ofwhich were deemed to be ‘‘unlawful andexclusionary practices.’’ Id. at 576, 86S.Ct. 1698.

The Court’s later decision in Aspen Ski-ing Co. v. Aspen Highlands Skiing Corp.,472 U.S. 585, 105 S.Ct. 2847, 86 L.Ed.2d467 (1985), is even more pertinent to thecase before us. In Aspen Skiing, a casethat also reached the Court only on the§ 2 violation, Ski Co., the owner of threeof the four major downhill skiing facilitiesin Aspen, Colorado, discontinued its priorpractice of cooperating with the owner ofthe fourth facility by issuing an inter-changeable 6–day pass that could be usedon any of the four facilities. It replacedthat pass with a 3–area, 6–day ticket fea-turing only its mountains. It offered the


plaintiff, Highlands, owner of the fourthfacility, reinstatement of the 4–area ticketonly if Highlands would accept a fixedpercentage of the revenue that was consid-erably below Highlands’ historical averagebased on usage. Ski Co. took additionalactions that made it extremely difficult forHighlands to market its own multiareapackage to replace the joint offering, andHighlands’ share of the market declinedalong with its revenues from associatedskiing services. The jury found that SkiCo. possessed monopoly power and award-ed Highlands a substantial money judg-ment as treble damages. The court ofappeals affirmed, holding there was suffi-cient basis in Ski Co.’s actions to demon-strate an abuse of its monopoly power.

In the Supreme Court, Ski Co. argued‘‘that even a firm with monopoly power hasno duty to engage in joint marketing witha competitor, that a violation of § 2 cannotbe established without evidence of substan-tial exclusionary conduct, and that none ofits activities can be characterized as exclu-sionary.’’ Aspen Skiing, 472 U.S. at 600,105 S.Ct. 2847. The Supreme Courtagreed with the legal proposition, but re-ferred to its earlier opinion in LorainJournal where it held that a monopolist’sright to refuse to deal was not unqualified.Id. at 600–01, 105 S.Ct. 2847. After re-viewing all the circumstances, it affirmedthe judgment for Highlands in a unani-mous opinion. It held that the jury hadample basis to reject Ski Co.’s businessjustification defense and noted that Ski Co.failed to offer any efficiency justificationwhatever for its pattern of conduct. Id. at608, 105 S.Ct. 2847. The Court stated,‘‘[a]lthough Ski Co.’s pattern of conductmay not have been as ‘bold, relentless, andpredatory’ as the publisher’s actions inLorain Journal, the record in this casecomfortably supports an inference that themonopolist made a deliberate effort to dis-courage its customers from doing business

with its smaller rival.’’ Id. at 610, 105S.Ct. 2847 (quoting Lorain Journal, 342U.S. at 149, 72 S.Ct. 181 (citation omit-ted)).

In a significant passage about the con-duct that constitutes monopolization in vio-lation of § 2, the Court stated that whenthe issue is monopolization rather than anattempt to monopolize, ‘‘evidence of intentis merely relevant to the question whetherthe challenged conduct is fairly character-ized as ‘exclusionary’ or ‘anticompeti-tive’ — to use the words in the trial court’sinstructions — or ‘predatory,’ to use aword that scholars seem to favor.’’ Id. at602, 105 S.Ct. 2847. The Court continued,‘‘[w]hichever label is used, there is agree-ment on the proposition that ‘no monopo-list monopolizes unconscious of what he isdoing.’ ’’ Id. (quoting Alcoa, 148 F.2d at432).

In Eastman Kodak Co. v. Image Tech-nical Servs., Inc., 504 U.S. 451, 112 S.Ct.2072, 119 L.Ed.2d 265(1992), 18 indepen-dent service organizations (‘‘ISO’s’’) thatserviced Kodak copying and micrographicequipment brought an antitrust actionagainst Kodak for its policies that soughtto limit the availability of Kodak parts toISO’s. They alleged Kodak’s policies wereunlawful under both §§ 1 and 2 of theSherman Act. The Supreme Court consid-ered the issues under the two provisionsseparately. In its analysis under § 2, theCourt first held that Kodak’s control ofnearly 100% of the parts market and 80%to 95% of the service market was sufficientto support a claim of monopoly power (anissue that is conceded here). As to theissue whether Kodak adopted its parts andservice policies as part of a scheme ofwillful acquisition or maintenance of mo-nopoly power, the Court stated that therewas evidence that Kodak ‘‘took exclusion-ary action to maintain its parts monopolyand used its control over parts to strength-


en its monopoly share of the Kodak servicemarket.’’ Id. at 483, 112 S.Ct. 2072.Thus, Kodak could escape liability under§ 2 only if it could explain its actions onthe basis of valid business reasons, anissue as to which there were factual ques-tions which made the district court’s grantof summary judgment for Kodak inappro-priate. Id.

This extensive review of the SupremeCourt’s § 2 decisions is set forth to pro-vide the background under which we mustevaluate 3M’s contention that it was enti-tled to judgment as a matter of law on thebasis of the decision in Brooke Group Ltd.v. Brown & Williamson Tobacco Corp.,509 U.S. 209, 113 S.Ct. 2578, 125 L.Ed.2d168 (1993), a decision that was primarilyconcerned with the Robinson–Patman Act,not § 2 of the Sherman Act. In BrookeGroup, Liggett, a cigarette manufacturerresponsible for the ‘‘innovative develop-ment’’ of generic cigarettes, claimed thatBrown & Williamson, which introduced itsown line of generic cigarettes, ‘‘cut priceson generic cigarettes below cost and of-fered discriminatory volume rebates towholesalers to force Liggett to raise itsown generic cigarette prices and introduceoligopoly pricing in the economy segment[of the national cigarette market].’’Brooke Group, 509 U.S. at 212, 113 S.Ct.2578. It filed a Robinson–Patman actionon the basis of these allegations. Brown &Williamson’s deep price discounts or re-bates were concededly discriminatory, notcost justified, and resulted in substantialloss to it. The Supreme Court majorityheld that the defendant was entitled to

judgment as a matter of law because therewas no evidence of injury to competition.Id. at 243, 113 S.Ct. 2578. The Court alsoheld that the evidence did not show thatBrown & Williamson’s alleged scheme‘‘was likely to result in oligopolistic pricecoordination and sustained supracompeti-tive pricing in the generic segment of thenational cigarette market. Without this,Brown & Williamson had no reasonableprospect of recouping its predatory lossesand could not inflict the injury to competi-tion the antitrust laws prohibit.’’ Id.7

Unlike 3M, Brown & Williamson waspart of an oligopoly, six manufacturerswhose prices for cigarettes ‘‘increased inlockstep’’ and who ‘‘reaped the benefits ofprices above a competitive level.’’ Id. at213, 113 S.Ct. 2578. Brown & Williamsonhad 12% of the oligopolistic market. Itsconduct and pricing were at all times nec-essarily constrained by the presence ofcompetitors who could, and did, react to itsconduct by undertaking similar price cutsor pricing behavior.8

Assuming arguendo that Brooke Groupshould be read for the proposition that acompany’s pricing action is legal if itsprices are not below its costs, nothing inthe decision suggests that its discussion ofthe issue is applicable to a monopolist withits unconstrained market power. More-over, LePage’s, unlike the plaintiff inBrooke Group, does not make a predatorypricing claim. 3M is a monopolist; a mo-nopolist is not free to take certain actionsthat a company in a competitive (or even

7. In contrast, the District Court here notedthat 3M had conceded that it ‘‘ ‘could laterrecoup the profits it has forsaken on Scotchtape and private label tape by selling morehigher priced Scotch tape TTT if there wouldbe no competition by others in the privatelabel tape segment when 3M abandoned thatpart of the market to sell only higher-priced

Scotch tape.’ ’’ Le Page’s, 2000 WL 280350,at *7 (quoting Defendant’s Mem. at 30).

8. The Brooke Group opinions, both for themajority and the dissent, discuss the respons-es by members of the oligopoly to the intro-duction of discounted cigarettes. Id. at 239–40, 113 S.Ct. 2578; id. at 247–48, 113 S.Ct.2578 (Stevens, J., dissenting).


oligopolistic) market may take, becausethere is no market constraint on a monopo-list’s behavior. See, e.g., Aspen Skiing,472 U.S. at 601–04, 105 S.Ct. 2847.

[3] Nothing in any of the SupremeCourt’s opinions in the decade since theBrooke Group decision suggested that theopinion overturned decades of SupremeCourt precedent that evaluated a monopo-list’s liability under § 2 by examining itsexclusionary, i.e., predatory, conduct.Brooke Group has been cited only fourtimes by the Supreme Court, three timesin cases that were not even antitrust casesfor propositions patently inapplicablehere.9 In the only antitrust case of thefour, NYNEX Corp. v. Discon, Inc., 525U.S. 128, 137, 119 S.Ct. 493, 142 L.Ed.2d510 (1998), the Court considered whetherthe per se rule applicable to group boycottsunder § 1 of the Sherman Act should beapplied ‘‘where a single buyer favors oneseller over another, albeit for an improperreason.’’ Id. at 133, 119 S.Ct. 493. Holdingthat the rule of reason applies, the Courtquoted Brooke Group for the propositionthat ‘‘[e]ven an act of pure malice by onebusiness competitor against another doesnot, without more, state a claim under thefederal anti-trust laws.’’ Id. at 137, 119S.Ct. 493 (quoting Brooke Group, 509 U.S.at 225, 113 S.Ct. 2578). The opinion doesnot discuss, much less adopt, the proposi-tion that a monopolist does not violate § 2unless it sells below cost. Thus, nothingthat the Supreme Court has written sinceBrooke Group dilutes the Court’s consis-tent holdings that a monopolist will befound to violate § 2 of the Sherman Act if

it engages in exclusionary or predatoryconduct without a valid business justifica-tion.

IV.

MONOPOLIZATION —EXCLUSIONARY

CONDUCT

A.

Illustrative Cases

Before turning to consider LePage’s al-legation that 3M engaged in exclusionaryor anticompetitive conduct and the evi-dence it produced, we consider the type ofconduct § 2 encompasses.

As one court of appeals has stated:‘‘ ‘Anticompetitive conduct’ can come in toomany different forms, and is too dependentupon context, for any court or commenta-tor ever to have enumerated all the variet-ies.’’ Caribbean Broad. Sys., Ltd. v. Cable& Wireless PLC, 148 F.3d 1080, 1087(D.C.Cir.1998) (reversing in part the dis-trict court’s dismissal of complaint andholding that radio station’s claim that de-fendants made misrepresentations to ad-vertisers and the government in order toprotect its monopoly stated § 2 ShermanAct claim).

Numerous cases hold that the enforce-ment of the legal monopoly provided by apatent procured through fraud may violate§ 2. Walker Process Equip., Inc. v. FoodMach. & Chem. Corp., 382 U.S. 172, 174,86 S.Ct. 347, 15 L.Ed.2d 247 (1965); seealso Medtronic Ave, Inc. v. Boston Scien-

9. Brooke Group is cited in Gustafson v. AlloydCo., 513 U.S. 561, 570, 115 S.Ct. 1061, 131L.Ed.2d 1 (1995), for the statutory construc-tion rule that identical words used in differentparts of the same act are intended to have thesame meaning; in Strickler v. Greene, 527U.S. 263, 300 n. 3, 119 S.Ct. 1936, 144L.Ed.2d 286 (1999), a federal habeas case, by

Justice Souter in his partial concurrence/par-tial dissent, in discussing the term ‘‘reason-able probability;’’ and in Weisgram v. MarleyCo., 528 U.S. 440, 454, 120 S.Ct. 1011, 145L.Ed.2d 958 (2000), in connection with dis-cussing the weight to be given an expert opin-ion.


tific Corp., No. CIV. A. 98–478–SLR, 2001WL 652016 (D.Del. Mar.30, 2001) (paten-tee could have violated § 2 by bringinginfringement action on patent procured byfraud). Predatory pricing by a monopolistcan provide a basis for § 2 liability. SeeU.S. Philips Corp. v. Windmere Corp., 861F.2d 695 (Fed.Cir.1988) (reversing districtcourt’s directed verdict and ordering newtrial on § 2 claims due to evidence thatcompany had 90% of rotary electric shavermarket, existence of substantial entry bar-riers, and company had drastically reducedprices to eliminate potential competitors).A monopolist’s denial to competitors ofaccess to its ‘‘essential’’ goods, services orresources has been held to violate § 2. SeeOtter Tail Power Co. v. United States, 410U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359(1973) (finding § 2 violation where monop-olist utility company refused to sell whole-sale to municipalities and refused to trans-fer competitors’ power over its lines); seealso Fishman v. Estate of Wirtz, 807 F.2d520 (7th Cir.1986) (finding corporation lia-ble under § 2 for refusing to lease ChicagoStadium to plaintiff, a potential buyer ofthe Chicago Bulls basketball team, afterdetermining Stadium to be essential toprofessional basketball in Chicago area).An arbitrary refusal to deal by a monopo-list may constitute a § 2 violation. SeeByars v. Bluff City News Co., Inc., 609F.2d 843 (6th Cir.1979) (remanding case todistrict court for fact-finding to determinewhether defendant possessed monopolypower and unlawfully refused to deal inviolation of § 2). Even unfair tortiousconduct unrelated to a monopolist’s pricingpolicies has been held to violate § 2. SeeInt’l Travel Arrangers, Inc. v. WesternAirlines, Inc., 623 F.2d 1255 (8th Cir.1980)(upholding treble damages antitrust awardagainst airline with monopoly power afterfinding sufficient evidence that airlineplaced false, deceptive, and misleading ad-

vertisements discouraging public patron-age of travel group charters).

A recent decision of the United StatesCourt of Appeals for the Sixth Circuit,Conwood Co., L.P. v. U.S. Tobacco Co.,290 F.3d 768 (6th Cir.2002), cert. de-nied, ––– U.S. ––––, 123 S.Ct. 876, 154L.Ed.2d 850 (2003), presents a good illus-tration of the type of exclusionary conductthat will support a § 2 violation. Thatcourt upheld the jury’s award to plaintiffConwood of $350 million, which trebledwas $1.05 billion, against United StatesTobacco Company (‘‘USTC’’) because ofUSTC’s monopolization. USTC was thesole manufacturer of moist snuff until the1970’s when Conwood, Swisher, and Swed-ish Match, other moist snuff manufactur-ers, entered the moist snuff market. Notunexpectedly, USTC’s 100% market sharedeclined and it took the action that formedthe basis of Conwood’s complaint againstUSTC alleging, inter alia, unlawful mo-nopolization in violation of § 2 of the Sher-man Act.

The evidence that the district court andthe court of appeals held proved thatUSTC systematically tried to exclude com-petition from the moist snuff market in-cluded the following: USTC (1) removedand destroyed or discarded racks that dis-played moist snuff products in the storeswhile placing Conwood products in USTCracks in an attempt to bury Conwood’sproducts; (2) trained its ‘‘operatives totake advantage of inattentive store clerkswith various ‘ruses’ such as obtaining nom-inal permission to reorganize or neaten themoist snuff section’’ in an effort to destroyConwood racks; (3) misused its position ascategory manager (manages productgroups and business units and customizesthem on a store by store basis) by provid-ing misleading information to retailers inan effort to dupe them into carrying USTCproducts and to discontinue carrying Con-


wood products; and (4) entered into exclu-sive agreements with retailers in an effortto exclude rivals’ products. Id. at 783.

On appeal, USTC — like 3M — did notchallenge that it had monopoly power andagreed that the relevant product was moistsnuff and the geographic market was na-tionwide. Id. at 782–83. Instead, USTCcontended that Conwood had failed to es-tablish that USTC’s power was acquired ormaintained by exclusionary practices rath-er than by its legitimate business practicesand superior product. Id. at 783. Boththe district court and the court of appealsrejected USTC’s argument, finding thatthere was sufficient evidence for a jury tofind willful maintenance by USTC of mo-nopoly power by engaging in exclusionarypractices in violation of § 2 of the Sher-man Act. Id. at 788.

Similarly, 3M sought to meet the compe-tition that LePage’s threatened by exclu-sionary conduct that consisted of rebateprograms and exclusive dealing arrange-ments designed to drive LePage’s and anyother viable competitor from the transpar-ent tape market.

B.

Bundled Rebates

[4] In considering LePage’s conductthat led to the jury’s ultimate verdict, wenote that the jury had before it evidence ofthe full panoply of 3M’s exclusionary con-duct, including both the exclusive dealingarrangements and the bundled rebateswhich could reasonably have been viewedas effectuating exclusive dealing arrange-ments because of the way in which theywere structured.

Through a program denominated Execu-tive Growth Fund (‘‘EGF’’) and thereafterPartnership Growth Fund (‘‘PGF’’), 3M of-fered many of LePage’s major customerssubstantial rebates to induce them to elim-

inate or reduce their purchases of tapefrom LePage’s. Rather than competingby offering volume discounts which areconcededly legal and often reflect cost sav-ings, 3M’s rebate programs offered dis-counts to certain customers conditioned onpurchases spanning six of 3M’s diverseproduct lines. The product lines coveredby the rebate program were: Health CareProducts, Home Care Products, Home Im-provement Products, Stationery Products(including transparent tape), Retail AutoProducts, and Leisure Time. Sealed App.at 2979. In addition to bundling the re-bates, both of 3M’s rebate programs setcustomer-specific target growth rates ineach product line. The size of the rebatewas linked to the number of product linesin which targets were met, and the num-ber of targets met by the buyer deter-mined the rebate it would receive on all ofits purchases. If a customer failed tomeet the target for any one product, itsfailure would cause it to lose the rebateacross the line. This created a substantialincentive for each customer to meet thetargets across all product lines to maxim-ize its rebates.

The rebates were considerable, not‘‘modest’’ as 3M states. Appellant’s Br. at15. For example, Kmart, which had con-stituted 10% of LePage’s business, re-ceived $926,287 in 1997, Sealed App. at2980, and in 1996 Wal–Mart received morethan $1.5 million, Sam’s Club received$666,620, and Target received $482,001.Sealed App. at 2773. Just as significant asthe amounts received is the powerful in-centive they provided to customers to pur-chase 3M tape rather than LePage’s inorder not to forego the maximum rebate3M offered. The penalty would have been$264,000 for Sam’s Club, $450,000 forKmart, and $200,000 to $310,000 for Amer-ican Stores.


3M does not deny that it offered theseprograms although it gives different rea-sons for the discounts to each customer.Instead it argues that they were no moreexclusive than procompetitive lawful dis-count programs. And, as it responds toeach of LePage’s allegations, it returns toits central premise ‘‘that it is not unlawfulto lower one’s prices so long as they re-main above cost.’’ Appellant’s Br. at 36(citing Brooke Group, 509 U.S. at 222, 113S.Ct. 2578).

However, one of the leading treatisesdiscussing the inherent anticompetitive ef-fect of bundled rebates, even if they arepriced above cost, notes that ‘‘the greatmajority of bundled rebate programs yieldaggregate prices above cost. Rather thananalogizing them to predatory pricing,they are best compared with tying, whoseforeclosure effects are similar. Indeed,the ‘package discount’ is often a close anal-ogy.’’ Phillip E. Areeda & Herbert Ho-venkamp, Antitrust Law ¶ 794, at 83(Supp.2002).

The treatise then discusses the anticom-petitive effect as follows:

The anticompetitive feature of packagediscounting is the strong incentive itgives buyers to take increasing amountsor even all of a product in order to takeadvantage of a discount aggregatedacross multiple products. In the anti-competitive case, which we presume is inthe minority, the defendant rewards thecustomer for buying its product B ratherthan the plaintiff’s B, not because defen-dant’s B is better or even cheaper.Rather, the customer buys the defen-dant’s B in order to receive a greaterdiscount on A, which the plaintiff doesnot produce. In that case the rival cancompete in B only by giving the custom-er a price that compensates it for theforegone A discount.

Id.The authors then conclude:

Depending on the number of productsthat are aggregated and the customer’srelative purchases of each, even anequally efficient rival may find it impos-sible to compensate for lost discounts onproducts that it does not produce.

Id. at 83–84.

The principal anticompetitive effect ofbundled rebates as offered by 3M is thatwhen offered by a monopolist they mayforeclose portions of the market to a po-tential competitor who does not manufac-ture an equally diverse group of productsand who therefore cannot make a compa-rable offer. We recognized this in ourdecision in SmithKline Corp. v. Eli Lilly& Co., 575 F.2d 1056 (3d Cir.1978), wherewe held that conduct substantially identi-cal to 3M’s was anticompetitive and sus-tained the finding of a violation of § 2.SmithKline is of interest not because thepanel decision is binding on the en banccourt but because the reasoning regardingthe practice of bundled rebates is equallyapplicable here. The defendant in Smith-Kline, Eli Lilly & Company, the pharma-ceutical manufacturer, sold three of its ce-phalosporins to hospitals under the tradenames Kefzol, Keflin and Keflex. Cepha-losporins are broad spectrum antibioticsthat were at that time indispensable tohospital pharmacies. Lilly had a monopo-ly on both Keflin and Keflex because of itspatents. However, those drugs faced com-petition from the generic drug cefazolinwhich Lilly sold under the trade nameKefzol and which plaintiff SmithKline soldunder the trade name Ancef.

Lilly’s profits on the patented Keflinwere far higher than those it received fromits sales of Kefzol where its pricing wasconstrained by the existence of Smith-Kline. To preserve its market position inKeflin and discourage sales of Ancef and


even of its own Kefzol, id. at 1061, Lillyinstituted a rebate program that provideda 3% bonus rebate for hospitals that pur-chased specified quantities of any three ofLilly’s five cephalosporins. SmithKlinebrought a § 2 monopolization claim, alleg-ing that Lilly used these multi-line volumerebates to maintain its monopoly over thehospital market for cephalosporins.

The district court (Judge A. LeonHigginbotham, later a member of thiscourt) found that Lilly’s pricing policy vio-lated § 2. SmithKline Corp. v. Eli Lilly &Co., 427 F.Supp. 1089 (E.D.Pa.1976). Weaffirmed by a unanimous decision. Al-though customers were not forced to selectwhich cephalosporins they purchased fromLilly, we recognized that the effect of therebate program was to induce hospitals toconjoin their purchases of Kefzol with Kef-lin and Keflex, Lilly’s ‘‘leading sellers.’’SmithKline, 575 F.2d at 1061. As westated, ‘‘[a]lthough eligibility for the 3%bonus rebate was based on the purchase ofspecified quantities of any three of Lilly’scephalosporins, in reality it meant thecombined purchases of Kefzol and theleading sellers, Keflin and Keflex.’’ Id.The gravamen of Lilly’s § 2 violation wasthat Lilly linked a product on which itfaced competition with products on whichit faced no competition. Id. at 1065.

The effect of the 3% bundled rebate wasmagnified by the volume of Lilly productssold, so that ‘‘in order to offer a rebate ofthe same net dollar amount as Lilly’s,SmithKline had to offer purchasers of An-cef rebates of some 16% to hospitals ofaverage size, and 35% to larger volumehospitals.’’ Id. at 1062. Lilly’s rebatestructure combining Kefzol with Keflin andKeflex ‘‘insulat[ed] Kefzol from true pricecompetition with [its competitor] Ancef.’’Id. at 1065.

LePage’s private-label and second-tiertapes are, as Kefzol and Ancef were in

relation to Keflin, less expensive but other-wise of similar quality to Scotch-brandtape. Indeed, before 3M instituted its re-bate program, LePage’s had begun to en-joy a small but rapidly expanding toeholdin the transparent tape market. 3M’s in-centive was thus the same as Lilly’s inSmithKline: to preserve the market posi-tion of Scotch-brand tape by discouragingwidespread acceptance of the cheaper, butsubstantially similar, tape produced by Le-Page’s.

3M bundled its rebates for Scotch-brandtape with other products it sold in muchthe same way that Lilly bundled its re-bates for Kefzol with Keflin and Keflex.In both cases, the bundled rebates re-flected an exploitation of the seller’s mo-nopoly power. Just as ‘‘[cephalosporins][were] carried in TTT virtually every gener-al hospital in the country,’’ SmithKline,575 F.2d at 1062, the evidence in this caseshows that Scotch-brand tape is indispens-able to any retailer in the transparent tapemarket.

Our analysis of § 2 of the Sherman Actin SmithKline is instructive here wherethe facts are comparable. Speakingthrough Judge Aldisert, we said:

With Lilly’s cephalosporins subject tono serious price competition from othersellers, with the barriers to entering themarket substantial, and with the pros-pects of new competition extremely un-certain, we are confronted with a factualcomplex in which Lilly has the awesomepower of a monopolist. Although it en-joyed the status of a legal monopolistwhen it was engaged in the manufactureand sale of its original patented prod-ucts, that status changed when it insti-tuted its [bundled rebate program].The goal of that plan was to associateLilly’s legal monopolistic practices withan illegal activity that directly affectedthe price, supply, and demand of Kefzol


and Ancef. Were it not for the [bundledrebate program], the price, supply, anddemand of Kefzol and Ancef would havebeen determined by the economic lawsof a competitive market. [Lilly’s bun-dled rebate program] blatantly revisedthose economic laws and made Lilly atransgressor under § 2 of the ShermanAct.

Id. at 1065.

The effect of 3M’s rebates were evenmore powerfully magnified than those inSmithKline because 3M’s rebates requiredpurchases bridging 3M’s extensive productlines. In some cases, these magnified re-bates to a particular customer were asmuch as half of LePage’s entire prior tapesales to that customer. For example, Le-Page’s sales to Sam’s Club in 1993 totaled$1,078,484, while 3M’s 1996 rebate toSam’s Club was $666,620. Similarly, Le-Page’s 1992 sales to Kmart were$2,482,756; 3M’s 1997 rebate to Kmartwas $926,287. The jury could reasonablyfind that 3M used its monopoly in trans-parent tape, backed by its considerablecatalog of products, to squeeze out Le-Page’s. 3M’s conduct was at least as anti-competitive as the conduct which this courtheld violated § 2 in SmithKline.

C.

Exclusive Dealing

[5] The second prong of LePage’sclaim of exclusionary conduct by 3M wasits actions in entering into exclusive deal-

ing contracts with large customers. 3Macknowledges only the expressly exclusivedealing contracts with Venture and Pami-da which conditioned discounts on exclusiv-ity. It minimizes these because they rep-resent only a small portion of the market.However, LePage’s claims that 3M madepayments to many of the larger customersthat were designed to achieve sole-sourcesupplier status.

[6] 3M argues that because the juryfound for it on LePage’s claims under § 1of the Sherman Act and § 3 of the ClaytonAct, these payments should not be relevantto the § 2 analysis. The law is to thecontrary.10 Even though exclusivity ar-rangements are often analyzed under § 1,such exclusionary conduct may also be anelement in a § 2 claim. U.S. Healthcare,Inc. v. Healthsource, Inc., 986 F.2d 589,593 (1st Cir.1993) (observing that exclusivi-ty may also ‘‘play a role TTT as an elementin attempted or actual monopolization’’).

3M also disclaims as exclusive dealingany arrangement that contained no ex-press exclusivity requirement. Once againthe law is to the contrary. No less anauthority than the United States SupremeCourt has so stated. In Tampa Elec. Co.v. Nashville Coal Co., 365 U.S. 320, 327, 81S.Ct. 623, 5 L.Ed.2d 580 (1961), a case thatdealt with § 3 of the Clayton Act ratherthan § 2 of the Sherman Act, the Courttook cognizance of arrangements which,albeit not expressly exclusive, effectivelyforeclosed the business of competitors.11

10. The jury’s finding against LePage’s on itsexclusive dealing claim under § 1 of the Sher-man Act and § 3 of the Clayton Act does notpreclude the application of evidence of 3M’sexclusive dealing to support LePage’s § 2claim. See, e.g., Barr Labs., Inc. v. AbbottLabs., 978 F.2d 98, 110–12 (3d Cir.1992)(considering § 2 of the Sherman Act claimsafter rejecting claims based on the same evi-dence under § 1 of the Sherman Act and § 3of the Clayton Act); SmithKline, 427 F.Supp.

at 1092, aff’d, 575 F.2d 1056 (imposing § 2Sherman Act liability for exclusionary con-duct, after rejecting an exclusive dealingclaim under § 3 of the Clayton Act).

11. If the dissent’s citation to FTC v. MotionPicture Advertising Serv. Co., 344 U.S. 392, 73S.Ct. 361, 97 L.Ed. 426 (1953), suggests that aone year exclusive dealing contract should beconsidered as per se legal under § 2, that isnot supported by a reading of the decision.


LePage’s introduced powerful evidencethat could have led the jury to believe thatrebates and discounts to Kmart, Staples,Sam’s Club, National Office Buyers and‘‘UDI’’ were designed to induce them toaward business to 3M to the exclusion ofLePage’s. Many of LePage’s former cus-tomers refused even to meet with Le-Page’s sales representatives. A buyer forKmart, LePage’s largest customer whichaccounted for 10% of its business, toldLePage’s: ‘‘I can’t talk to you about tapeproducts for the next three years’’ and‘‘don’t bring me anything 3M makes.’’App. at 302–03, 964. Kmart switched to3M following 3M’s offer of a $1 million‘‘growth’’ reward which the jury could haveunderstood to require that 3M be its solesupplier. Similarly, Staples was offeredan extra 1% bonus rebate if it gave Le-Page’s business to 3M. 3M argues thatLePage’s did not try hard enough to retainKmart, its customer for 20 years, but therewas evidence to the contrary.12 In anyevent, the purpose and effect of 3M’s pay-ments to the retailers were issues for thejury which, by its verdict, rejected 3M’sarguments.

The foreclosure of markets through ex-clusive dealing contracts is of concern un-

der the antitrust laws. As one of theleading treatises states:

unilaterally imposed quantity discountscan foreclose the opportunities of rivalswhen a dealer can obtain its best dis-count only by dealing exclusively withthe dominant firm. For example, dis-counts might be cumulated over lengthyperiods of time, such as a calendar year,when no obvious economies result.

3A Phillip E. Areeda & Herbert Hoven-kamp, Antitrust Law ¶ 768b2, at 148 (2dEd.2002); see also 11 Herbert Hoven-kamp, Antitrust Law ¶ 1807a, at 115–16(1998) (quantity discounts may foreclose asubstantial portion of the market). Dis-counts conditioned on exclusivity are‘‘problematic’’ ‘‘when the defendant is adominant firm in a position to force man-ufacturers to make an all-or-nothingchoice.’’ Id. at 117 n. 7 (citing LePage’s,1997 WL 734005 (E.D.Pa.1997)).

The Court of Appeals for the District ofColumbia relied on the evidence of fore-closure of markets in reaching its decisionon liability in United States v. MicrosoftCorp., 253 F.3d 34, 69 (D.C.Cir.2001). Inthat case, the court of appeals concludedthat Microsoft, a monopolist in the operat-ing system market, foreclosed rivals in the

In that case, the FTC had appealed from adecision of the Fifth Circuit holding that ex-clusive contracts are not unfair methods ofcompetition. The Supreme Court reversed,supporting the FTC’s decision that the exclu-sive contracts of the respondent (a producerand distributor of advertising motion pic-tures), unreasonably restrain competition andtend to monopoly. It was the respondentwho argued that exclusive contracts of a du-ration in excess of a year are necessary for theconduct of the business of the distributors.This argument was rejected by the SupremeCourt. The Supreme Court’s decision did notsuggest that exclusive dealing arrangementsentered into by a monopolist (which the re-spondent in that case was not), together withother exclusionary action, did not violate § 2of the Sherman Act.

12. At trial, LePage’s presented the testimonyof James Kowieski, its former senior vicepresident of sales, who described LePage’sefforts following Kmart’s rejection of its bid.LePage’s made a desperate second sales pre-sentation attended by its president, App. at957 (‘‘I felt it was very critical to our compa-ny’s success or failure, so I insured that Mr.Les Baggett, our president, attended the meet-ing with me.’’), where LePage’s vainly offeredadditional price concessions, App. at 959(‘‘We went through the cost savings, the bene-fits, and we came up with some, again, priceconcessions, and some programs of a specialbuy once a year, because, I mean, as far as wewere concerned, we were on our last leg.’’).


browser market from a ‘‘substantial per-centage of the available opportunities forbrowser distribution’’ through the use ofexclusive contracts with key distributors.Id. at 70–71. Microsoft kept usage of itscompetitor’s browser below ‘‘the criticallevel necessary for [its rival] to pose areal threat to Microsoft’s monopoly.’’ Id.at 71. The Microsoft opinion does notspecify what percentage of the browsermarket Microsoft locked up — merelythat, in one of the two primary distribu-tion channels for browsers, Microsoft hadexclusive arrangements with most of thetop distributors. Id. at 70–71. Signifi-cantly, the Microsoft court observed thatMicrosoft’s exclusionary conduct violated§ 2 ‘‘even though the contracts forecloseless than the roughly 40% or 50% shareusually required in order to establish a§ 1 violation.’’ Id. at 70.

One noted antitrust scholar has written:We might thus interpret the Microsoft

holding as follows: Conduct that inten-tionally, significantly, and without busi-ness justification excludes a potentialcompetitor from outlets (even thoughnot in the relevant market), where ac-cess to those outlets is a necessarythough not sufficient condition to waginga challenge to a monopolist and fear ofthe challenge prompts the conduct, is‘‘anticompetitive.’’

Eleanor M. Fox, What Is Harm to Compe-tition? Exclusionary Practices and Anti-competitive Effect, 70 Antitrust L.J. 371,390 (2002).

LePage’s produced evidence that theforeclosure caused by exclusive dealingpractices was magnified by 3M’s discountpractices, as some of 3M’s rebates were‘‘all-or-nothing’’ discounts, leading custom-ers to maximize their discounts by dealing

exclusively with the dominant market play-er, 3M, to avoid being severely penalizedfinancially for failing to meet their quota ina single product line. Only by dealingexclusively with 3M in as many productlines as possible could customers enjoy thesubstantial discounts. Accordingly, thejury could reasonably find that 3M’s exclu-sionary conduct violated § 2.

V.

ANTICOMPETITIVE EFFECT

[7] It has been LePage’s position inpursuing its § 2 claim that 3M’s exclusion-ary ‘‘tactics foreclosed the competitive pro-cess by preventing rivals from competingto gain (or maintain) a presence in themarket.’’ Appellee’s Br. at 45–46. Whena monopolist’s actions are designed to pre-vent one or more new or potential competi-tors from gaining a foothold in the marketby exclusionary, i.e. predatory, conduct, itssuccess in that goal is not only injurious tothe potential competitor but also to compe-tition in general. It has been recognized,albeit in a somewhat different context, thateven the foreclosure of ‘‘one significantcompetitor’’ from the market may lead tohigher prices and reduced output. RolandMach. Co. v. Dresser Indus., Inc., 749 F.2d380, 394 (7th Cir.1984).

The Microsoft court treated exclusion-ary conduct by a monopolist as more likelyto be anticompetitive than ordinary § 1exclusionary conduct. The inquiry in Mi-crosoft was whether the monopolist’s con-duct excluded a competitor (Netscape)from the essential facilities that would per-mit it to achieve the efficiencies of scalenecessary to threaten the monopoly. 253F.3d at 70–71.13 In Microsoft, the court of

13. In one of the two distribution channelsavailable for browsers, Microsoft had lockedup almost all the high volume distributors.

Microsoft, 253 F.3d at 70–71. In the seminalTerminal Railroad case, an association of rail-road operators locked up the cheapest route


appeals determined that Microsoft hadforeclosed enough distribution links to un-dermine the survival of Netscape as a via-ble competitor. Id. at 71.

Similarly, in this case, the jury couldhave reasonably found that 3M’s exclusion-ary conduct cut LePage’s off from keyretail pipelines necessary to permit it tocompete profitably.14 It was only afterLePage’s entry into the market that 3Mintroduced the bundled rebates programs.If 3M were successful in eliminating com-petition from LePage’s second-tier or pri-vate-label tape, 3M could exercise its mo-nopoly power unchallenged, as Tesa Tuckwas no longer in the market.

The District Court, recognizing that‘‘this case presents a unique bundled re-bate program that the jury found had ananti-competitive effect,’’ Le Page’s, 2000WL 280350, at *5, denied 3M’s motion forjudgment as a matter of law (‘‘JMOL’’),stating:

Plaintiff introduced evidence that Scotchis a monopoly product, and that 3M’sbundled rebate programs caused distrib-utors to displace Le Page’s entirely, orin some cases, drastically reduce pur-chases from Le Page’s. Tr. Vol. 30 at105–106; Vol. 27 at 30. Under 3M’srebate programs, 3M set overall growthtargets for unrelated product lines. Inthe distributors’ view, 3M set these tar-gets in a manner which forced the dis-tributor to either drop any non-Scotchproducts, or lose the maximum rebate.PX 24 at 3M 48136. Thus, in order to

qualify for the maximum rebate underthe EGF/PGF programs, the recordshows that most customers diverted pri-vate label business to 3M at 3M’s sug-gestion. Tr. Vol. 28 at 74–75; PX23, 28,32, 34, 715. Similarly, under the newerBrand Mix rebate program, 3M sethigher rebates for tape sales which pro-duced a shift from private label tape tobranded tape. Tr. Vol. 31 at 79. PX393 at 534906.

Furthermore, Plaintiff introduced ev-idence of customized rebate programsthat similarly caused distributors toforego purchasing from Le Page’s ifthey wished to obtain rebates on 3M’sproducts. Specifically, the trial recordestablishes that 3M offered Kmart acustomized growth rebate and MarketDevelopment Funds payment. In orderto reach the $15 million sales target andqualify for the $1 million rebate, howev-er, Kmart had to increase its consumerstationary purchases by $5.5 million.Kmart substantially achieved this‘‘growth’’ by dropping Le Page’s andanother private label manufacturer,Tesa. PX 51 at 3M 102175, PX 121 at156838. Likewise, 3M customized a pro-gram with Staples that provided for anextra 1% bonus rebate on Scotch tapesales ‘‘if Le Page’s business is given to3M.’’ PX 98 at 3M 149794. Finally, 3Mprovided a similar discount on Scotchtape to Venture Stores ‘‘based on thecontingency of Venture dropping privatelabel.’’ PX 712 at 3M 450738. Thus,

across the Mississippi river, the sole railroadbridge crossing at St. Louis. United States v.Terminal R.R. Ass’n, 224 U.S. 383, 32 S.Ct.507, 56 L.Ed. 810 (1912). The SupremeCourt determined that the defendant’s agree-ment to provide access to the bridge to otherrailroads on discriminatory terms violated § 1of the Sherman Act.

14. In the transparent tape market, super-stores like Kmart and Wal–Mart provide acrucial facility to any manufacturer–they sup-ply high volume sales with the concomitantsubstantially reduced distribution costs. Bywielding its monopoly power in transparenttape and its vast array of product lines, 3Mforeclosed LePage’s from that critical bridgeto consumers that superstores provide, name-ly, cheap, high volume supply lines.


the jury could have reasonably conclud-ed that 3M’s customers were forced toforego purchasing Le Page’s private la-bel tape in order to obtain the rebateson Scotch tape.

Id. (emphasis added).

In the same opinion, the District Courtfound that ‘‘[LePage’s] introduced substan-tial evidence that the anticompetitive ef-fects of 3M’s rebate programs caused LePage’s losses.’’ Id. at *7. The jury wascapable of calculating from the evidencethe amount of rebate a customer of 3Mwould lose if it failed to meet 3M’s quota ofsales in even one of the bundled products.The discount that LePage’s would havehad to provide to match the discounts of-fered by 3M through its bundled rebatescan be measured by the discounts 3M gaveor offered. For example, LePage’s pointsout that in 1993 Sam’s Club would havestood to lose $264,900, Sealed App. at 1166,and Kmart $450,000 for failure to meet oneof 3M’s growth targets in a single productline. Sealed App. at 1110. Moreover, theeffect of 3M’s rebates on LePage’s earn-ings, if LePage’s had attempted to match3M’s discounts, can be calculated by com-paring the discount that LePage’s wouldhave been required to provide. Thatamount would represent the impact of3M’s bundled rebates on LePage’s abilityto compete, and that is what is relevantunder § 2 of the Sherman Act.

The impact of 3M’s discounts was appar-ent from the chart introduced by LePage’sshowing that LePage’s earnings as a per-centage of sales plummeted to below zero–to negative 10%–during 3M’s rebate pro-gram. App. at 7037; see also App. at 7044(documenting LePage’s healthy operatingincome from 1990 to 1993, rapidly declin-ing operating income from 1993 to 1995,and large operating losses suffered from

1996 through 1999). Demand for Le-Page’s tape, especially its private-labeltape, decreased significantly following theintroduction of 3M’s rebates. Although3M claims that customers participating inits rebate programs continued to purchasetape from LePage’s, the evidence does notsupport this contention. Many distribu-tors dropped LePage’s entirely.

Prior to the introduction of 3M’s rebateprogram, LePage’s sales had been sky-rocketing. Its sales to Staples increasedby 440% from 1990 to 1993. Following theintroduction of 3M’s rebate program whichbundled its private-label tape with its oth-er products, 3M’s private-label tape salesincreased 478% from 1992 to 1997.15 Le-Page’s in turn lost a proportional amountof sales. It lost key large volume custom-ers, such as Kmart, Staples, AmericanDrugstores, Office Max, and Sam’s Club.Other large customers, like Wal–Mart,drastically cut back their purchases.

As a result, LePage’s manufacturingprocess became less efficient and its profitmargins declined. In transparent tapemanufacturing, large volume customersare essential to achieving efficiencies ofscale. As 3M concedes, ‘‘ ‘large customerswere extremely important to [LePage’s],to everyone.’ TTT Large volumes TTT per-mitted ‘long runs,’ making the manufactur-ing process more economical and predicta-ble.’’ Appellant Br. at 10 (quoting trialtestimony of Les Baggett, LePage’s for-mer president and CEO) (citation omitted).

There was a comparable effect on Le-Page’s share of the transparent tape mar-ket. In the agreed upon relevant marketfor transparent tape in the United States,LePage’s market share dropped 35% from1992 to 1997. In 1992, LePage’s net salesconstituted 14.44% of the total transparent

15. In 1992, 3M’s private-label tape sales were$1,142,000. By 1997, its private-label tape

sales had increased to $5,464,222. SealedApp. at 489.


tape market. By 1997, LePage’s sales hadfallen to 9.35%. Sealed App. at 489. Final-ly, in March of 1997, LePage’s was forcedto close one of its two plants. That sameyear, the only other domestic transparenttape manufacturer, Tesa Tuck, Inc., bowedout of the transparent tape business en-tirely in the United States. Had 3M con-tinued with its program it could have even-tually forced LePage’s out of the market.

[8] The relevant inquiry is the anti-competitive effect of 3M’s exclusionarypractices considered together. As the Su-preme Court recognized in Cont’l Ore Co.v. Union Carbide & Carbon Corp., 370U.S. 690, 699, 82 S.Ct. 1404, 8 L.Ed.2d 777(1962), the courts must look to the monop-olist’s conduct taken as a whole ratherthan considering each aspect in isolation.The Court stated, ‘‘ ‘in a case like the onebefore us [alleging § 1 and § 2 violations],the duty of the jury was to look at thewhole picture and not merely at the indi-vidual figures in it.’ ’’ Id. (citation omit-ted). See also City of Anaheim v. S. Cal.Edison Co., 955 F.2d 1373, 1376 (9th Cir.1992) (‘‘[I]t would not be proper to focuson specific individual acts of an accusedmonopolist while refusing to consider theiroverall combined effect TTT We are deal-ing with what has been called the ‘syner-gistic effect’ of the mixture of the ele-ments.’’) (emphasis added). This court,when considering the anticompetitive ef-fect of a defendant’s conduct under theSherman Act, has looked to the increase inthe defendant’s market share, the effectsof foreclosure on the market, benefits tocustomers and the defendant, and the ex-tent to which customers felt they wereprecluded from dealing with other manu-facturers. Barr, 978 F.2d at 110–11.

The effect of 3M’s conduct in strength-ening its monopoly position by destroyingcompetition by LePage’s in second-tiertape is most apparent when 3M’s various

activities are considered as a whole. Theanticompetitive effect of 3M’s exclusivedealing arrangements, whether explicit orinferred, cannot be separated from theeffect of its bundled rebates. 3M’s bun-dling of its products via its rebate pro-grams reinforced the exclusionary effect ofthose programs.

3M’s exclusionary conduct not only im-peded LePage’s ability to compete, butalso it harmed competition itself, a sinequa non for a § 2 violation. LePage’spresented powerful evidence that competi-tion itself was harmed by 3M’s actions.The District Court recognized this in itsopinion, when it said:

The jury could reasonably infer that3M’s planned elimination of the lowerpriced private label tape, as well as thelower priced Highland brand, wouldchannel consumer selection to the higherpriced Scotch brand and lead to higherprofits for 3M. Indeed, Defendant con-cedes that ‘‘3M could later recoup theprofits it has forsaken on Scotch tapeand private label tape by selling morehigher priced Scotch tape TTT if therewould be no competition by others in theprivate label tape segment when 3Mabandoned that part of the market tosell only higher-priced Scotch tape.’’

Le Page’s, 2000 WL 280350, at *7.

3M could effectuate such a plan becausethere was no ease of entry. See Advo, Inc.v. Phila. Newspapers, Inc., 51 F.3d 1191,1200 (3d Cir.1995) (commenting that easeof entry would prevent monopolist’s preda-tory pricing scheme from succeeding); seealso Edward A. Snyder & Thomas E. Kau-per, Misuses of the Antitrust Laws: TheCompetitor Plaintiff, 90 Mich. L.Rev. 551,564 (1991) (finding ‘‘barriers to entry’’ tobe one of two necessary conditions forexclusionary conduct, the other being‘‘market power’’).


The District Court found that there was‘‘substantial evidence at trial that signifi-cant entry barriers prevent competitorsfrom entering the TTT tape market in theUnited States. Thus, this case presents asituation in which a monopolist remainsunchecked in the market.’’ Le Page’s,2000 WL 280350, at *7. In the time periodat issue here, there has never been a com-petitor that has genuinely challenged 3M’smonopoly and it never lost a significanttransparent tape account to a foreign com-petitor.

There was evidence from which the jurycould have determined that 3M intended toforce LePage’s from the market, and thencease or severely curtail its own private-label and second-tier tape lines. For ex-ample, by 1996, 3M had begun to offerincentives to some customers to increasepurchases of its higher priced Scotch-brand tapes over its own second-tierbrand. The Supreme Court has madeclear that intent is relevant to provingmonopolization, Aspen Skiing, 472 U.S. at602, 105 S.Ct. 2847, and attempt to monop-olize, Lorain Journal, 342 U.S. at 154–55,72 S.Ct. 181.

3M’s interest in raising prices is well-documented in the record. In internalmemoranda introduced into evidence byLePage’s, 3M executives boasted that thelarge retailers like Office Max and Stapleshad no choice but to adhere to 3M’s de-mands. See Sealed App. at 2585 (‘‘Eitherthey take the [price] increase TTT or wehold orders TTTT’’); see also Sealed App. at2571 (3M’s directive when Staples objectedto price increase was ‘‘orders will be held ifpricing is not up to date on 1/1/98’’). Le-Page’s expert testified that the price ofScotch-brand tape increased since 1994,after 3M instituted its rebate program.App. at 3246–47. In its opinion, the Dis-trict Court cited the deposition testimonyof a 3M employee acknowledging that the

payment of the rebates after the end of theyear discouraged passing the rebate on tothe ultimate customers. App. at 2092.The District Court thus observed, ‘‘therecord amply reflects that 3M’s rebateprograms did not benefit the ultimate con-sumer.’’ Le Page’s, 2000 WL 280350, at*7.

As the foregoing review of the evidencemakes clear, there was sufficient evidencefor the jury to conclude the long-termeffects of 3M’s conduct were anticompeti-tive. We must therefore uphold its verdicton liability unless 3M has shown adequatebusiness justification for its practices.

VI.

BUSINESS REASONSJUSTIFICATION

[9, 10] It remains to consider whetherdefendant’s actions were carried out for‘‘valid business reasons,’’ the only recog-nized justification for monopolizing. See,e.g., Eastman Kodak, 504 U.S. at 483, 112S.Ct. 2072. However, a defendant’s asser-tion that it acted in furtherance of itseconomic interests does not constitute thetype of business justification that is anacceptable defense to § 2 monopolization.Paraphrasing one corporate executive’swell publicized statement, whatever isgood for 3M is not necessarily permissibleunder § 2 of the Sherman Act. As onecourt of appeals has explained:

In general, a business justification isvalid if it relates directly or indirectly tothe enhancement of consumer welfare.Thus, pursuit of efficiency and qualitycontrol might be legitimate competitivereasons TTT, while the desire to maintaina monopoly market share or thwart theentry of competitors would not.

Data Gen. Corp. v. Grumman Sys. Sup-port Corp., 36 F.3d 1147, 1183 (1st Cir.1994) (citing Eastman Kodak, 504 U.S. at


483, 112 S.Ct. 2072; Aspen Skiing, 472U.S. at 608–11, 105 S.Ct. 2847).

It can be assumed that a monopolistseeks to further its economic interests anddoes so when it engages in exclusionaryconduct. Thus, for example, exclusionarypractice has been defined as ‘‘a method bywhich a firm TTT trades a part of itsmonopoly profits, at least temporarily, fora larger market share, by making it un-profitable for other sellers to compete withit.’’ Richard A. Posner, Antitrust Law:An Economic Perspective 28 (1976). Oncea monopolist achieves its goal by excludingpotential competitors, it can then increasethe price of its product to the point atwhich it will maximize its profit. Thisprice is invariably higher than the pricedetermined in a competitive market. Thatis one of the principal reasons why monop-olization violates the antitrust laws. Thefact that 3M acted to benefit its own eco-nomic interests is hardly a reason to over-turn the jury’s finding that it violated § 2of the Sherman Act.

The defendant bears the burden of ‘‘per-suad[ing] the jury that its conduct wasjustified by any normal business purpose.’’Aspen Skiing, 472 U.S. at 608, 105 S.Ct.2847. Although 3M alludes to its custom-ers’ desire to have single invoices and sin-gle shipments in defense of its bundledrebates, 3M cites to no testimony or evi-dence in the 55 volume appendix thatwould support any actual economic effi-ciencies in having single invoices and/orsingle shipments. It is highly unlikelythat 3M shipped transparent tape alongwith retail auto products or home improve-ment products to customers such as Sta-

ples or that, if it did, the savings stemmingfrom the joint shipment approaches themillions of dollars 3M returned to custom-ers in bundled rebates.

There is considerable evidence in therecord that 3M entered the private-labelmarket only to ‘‘kill it.’’ See, e.g., SealedApp. at 809 (statement by 3M executive ininternal memorandum that ‘‘I don’t wantprivate label 3M products to be successfulin the office supply business, its distribu-tion or our consumers/end users’’). Thatis precisely what § 2 of the Sherman Actprohibits by covering conduct that main-tains a monopoly. Maintaining a monopo-ly is not the type of valid business reasonthat will excuse exclusionary conduct.3M’s business justification defense waspresented to the jury, and it rejected theclaim. The jury’s verdict reflects its viewthat 3M’s exclusionary conduct, whichmade it difficult for LePage’s to competeon the merits, had no legitimate businessjustification.

VII.

DAMAGES

As an alternative to its argument that itis entitled to JMOL on liability, 3M claimsthat it is entitled to a new trial due to theDistrict Court’s error in sustaining Le-Page’s damages award. It gives two rea-sons. First, it contends that the damagetheory proffered by Terry Musika, Le-Page’s damages expert, was based on im-proper assumptions and should have beenexcluded.16 Second, 3M argues that Musi-ka’s theory failed to disaggregate the dam-

16. 3M does not challenge Musika’s expertqualifications. Nonetheless, we note that heholds a master’s degree in public finance, is aformer partner at a major accounting firm,and at the time of trial was President andCEO of a business consulting firm. Further-more, Musika frequently has served as a

court-appointed bankruptcy trustee, as an ex-pert for various government agencies, includ-ing the Department of Justice and Securitiesand Exchange Commission, and as an expertwitness in complex cases, including five anti-trust cases.


ages based on lawful versus unlawful con-duct by 3M.

[11] We review the District Court’s de-cision to admit or exclude expert testimonyfor abuse of discretion. Kumho Tire Co.v. Carmichael, 526 U.S. 137, 152, 119 S.Ct.1167, 143 L.Ed.2d 238 (1999). Further-more, we review de novo LePage’s dam-ages evidence to determine whether as amatter of law it can support the jury’sverdict. Stelwagon Mfg. Co. v. TarmacRoofing Sys., Inc., 63 F.3d 1267, 1271 (3dCir.1995).

To determine the amount of profits Le-Page’s lost between 1993 and 2000 due to3M’s antitrust violations, Musika con-structed a ‘‘lost market share’’ model. Ap-pellant’s Br. at 72. Musika first calculatedthe total United States transparent tapesales during the damages period, usingactual financial data from 1992 to 1997 andprojecting total sales from 1998 to 2000.Next, he determined how those saleswould be divided between branded andprivate-label parts of the market, project-ing a 1% shift each year from branded toprivate-label tape sales. In arriving at 1%,Musika considered the actual growth inprivate-label tape sales, the actual growthrate of all private-label products (i.e. notjust tape), the growth rate of large cus-tomers, and 3M’s internal projections.

After determining the size of both seg-ments of the market, Musika estimatedLePage’s share of the market, predictingthat LePage’s would have retained its 3.5%share of the branded-label segment and its88% share of the private-label segment.He opined that LePage’s share of the over-all market for transparent tape would haveincreased from 14.44% in 1992 to 21.2% in2000 but for 3M’s unlawful conduct. Fi-nally, Musika subtracted LePage’s actualsales from his projected sales to determineLePage’s lost sales due to 3M’s unlawfulconduct. He calculated LePage’s project-

ed profit margin by looking at LePage’sactual profit margin for each year andadjusting it to show declining prices andLePage’s consequential decreasing effi-ciency due to decreasing sales. Based onthose adjustments, LePage’s profit margindecreased every year during the damagesperiod. Musika concluded that but for3M’s unlawful conduct, LePage’s wouldhave earned an extra $36 million dollars.

[12] Importantly, 3M does not chal-lenge Musika’s basic approach to calculat-ing damages, conceding that ‘‘an expertmay construct a reasonable offense-freeworld as a yardstick for measuring what,hypothetically, would have happened ‘butfor’ the defendant’s unlawful activities.’’Appellant’s Reply Br. at 37(citing Calla-han v. A.E.V., Inc., 182 F.3d 237, 254–58(3d Cir.1999); Rossi v. Standard Roofing,Inc., 156 F.3d 452, 484–87 (3d Cir.1998)).

Instead, 3M’s motion for judgment as amatter of law attacked Musika’s underly-ing assumptions, the primary assumptionbeing that 3M did not want to succeed inthe private-label segment as it did notwant to harm its high-margin sales ofScotch brand. The District Court rejected3M’s objections to LePage’s damagesclaims, stating that ‘‘the record TTT dem-onstrates that Mr. Musika’s assumptionswere grounded in the past performances ofScotch, Highland and Le Page’s tapes, aswell as 3M’s own internal projections forfuture growth.’’ Le Page’s, 2000 WL280350, at *8.

[13] The credibility of LePage’s and3M’s experts was for the jury to deter-mine. Inter Med. Supplies, Ltd. v. EBIMed. Sys., Inc., 181 F.3d 446, 462–63 (3dCir.1999). Musika was extensively cross-examined and 3M presented testimonyfrom its own damages expert who predict-ed more conservative losses to LePage’s.In the end, the jury found Musika to be


credible. 3M’s disappointment as to thejury’s finding of credibility does not consti-tute an abuse of discretion by the DistrictCourt in allowing Musika’s testimony.

[14] 3M next argues that Musika im-properly failed to disaggregate damages,thereby providing the jury with no mecha-nism to discern damages arising from 3M’slawful conduct or other facts from dam-ages arising from 3M’s unlawful conduct.According to 3M, this resulted in imper-missible guesswork and speculation on thepart of the jury.

In Bonjorno v. Kaiser Aluminum &Chem. Corp., 752 F.2d 802, 812 (3d Cir.1984), this court stated that ‘‘[i]n con-structing a hypothetical world free of thedefendants’ exclusionary activities, theplaintiffs are given some latitude in calcu-lating damages, so long as their theory isnot wholly speculative.’’ Id. Once a juryhas found that the unlawful activity causedthe antitrust injury, the damages may bedetermined without strict proof of what actcaused the injury, as long as the damagesare not based on speculation or guesswork.Id. at 813. The Bonjorno court noted thatit would be extremely difficult, if not im-possible, to segregate and attribute a fixedamount of damages to any one act as thetheory was not that any one act in itselfwas unlawful, but that all the acts takentogether showed a § 2 violation. Id.

Similarly, 3M’s actions, taken as awhole, were found to violate § 2, thusmaking the disaggregation that 3M speaksof to be unnecessary, if not impossible. Inany event, we fail to see how the juryengaged in speculation or guesswork. TheDistrict Court clearly charged the jury todisregard losses not caused by 3M: ‘‘Youmay not calculate damages based only onspeculation or guessingTTTT You may notaward damages for injuries or lossescaused by other factors.’’ App. at 5689.

We find no evidence that the jury failedreasonably to follow these instructions.

For the foregoing reasons, we will notdisturb the jury’s damages award to Le-Page’s.

VIII.

JURY INSTRUCTIONS

[15, 16] 3M also argues that it shouldbe awarded a new trial because of alleg-edly improper jury instructions. In theabsence of a misstatement of law, jury in-structions are reviewed for abuse of dis-cretion. Bhaya v. Westinghouse ElectricCorp., 922 F.2d 184, 191 (3d Cir.1990).Because the District Court provided thejury with meticulous instructions, method-ically explaining this area of the law in amanner understandable to lay persons, weconclude that it did not abuse its discre-tion.

The District Court, in instructing thejury on Count I, which encompassed Le-Page’s claim of unlawful maintenance ofmonopoly power under § 2, explained:

Count I in this case is unlawful mainte-nance of monopoly power.

LePage’s alleges that it was injuredby 3M’s unlawful monopolization in theUnited States market for invisible andtransparent tape for home and officeuse.

To win on their claim of monopoliza-tion, LePage’s must prove each of thefollowing elements by a preponderanceof the evidence.

First, that 3M had monopoly power inthe relevant market.

Secondly, that 3M willfully maintainedthat power through predatory or exclu-sionary conductTTTT

And thirdly, that LePage’s was in-jured in its business or property because


of 3M’s restrictive or exclusionary con-duct.

App. at 5663–64.

3M complains that the District Courtfailed to provide guidance that would in-struct the jury how to distinguish betweenunlawful predation and lawful conduct.However, in explaining LePage’s mainte-nance of monopoly claim, the DistrictCourt told the jury that in order to find forLePage’s, it would have to find by a pre-ponderance of the evidence that 3M will-fully maintained its monopoly powerthrough exclusionary or predatory con-duct. App. at 5663. It then summarizedthose of 3M’s actions that LePage’s con-tended were unlawfully exclusionary orpredatory, including 3M’s rebate program,market development fund, its efforts tocontrol, reduce or eliminate private-labeltape, and its efforts to raise the priceconsumers pay for Scotch tape. Thereaf-ter, the judge provided the jury with thefollowing factors to determine whether3M’s conduct was either exclusionary orpredatory: ‘‘its effect on its competitors,such as LePage’s, its impact on consumers,and whether it has impaired competition,in an unnecessarily restrictive way.’’ App.at 5670.

Relevant portions of the charge were asfollows:

The law directs itself not against con-duct which is competitive, even severelyso, but rather against conduct whichtends to destroy competition itself.

App. at 5655.

LePage’s must prove that 3M willfullymaintained monopoly power by predato-ry or exclusionary conduct, rather thanby supplying better products or services,or by exercising superior business judg-ment, or just by chance. So willful

maintenance of monopoly power, that’san element LePage’s has to prove.

App. at 5668.To prove that 3M acted willfully, Le-Page’s must prove either that 3M en-gaged in predatory or exclusionary actsor practices, with the conscious objectiveof furthering the dominance of 3M in therelevant market, or that this was thenecessary direct consequence of 3M’sconduct or business arrangement.

App. at 5668.I’m now giving you what LePage’s con-tentions are as to what 3M did or didnot do, that constituted predatory orexclusionary conduct. Number one,3M’s rebate program, such as the EGF,executive growth fund, or the PGF, thepartnership growth fund, and the brandmix program. Number two, 3M’s mar-ket development fund called the MDS insome of the testimony, and other pay-ments to customers conditioned on cus-tomers achieving certain sales goals orgrowth targets. Third, 3M’s efforts tocontrol, or reduce, or eliminate privatelabel tape. Four, 3M’s efforts to switchcustomers to 3M’s more expensivebranded tape, and Five, 3M’s efforts toraise the price consumers pay for Scotchtape. LePage’s claims that all of thesethings that I’ve just gone through waspredatory or exclusionary conduct.Now, 3M denies in every respect thatthese actions were predatory or exclu-sionary. 3M contends that these actionswere, in fact, pro-competitive.

App. at 5668–69.Exclusionary conduct and predatoryconduct comprehends, at the most, be-havior that not only, one, tends to impairthe opportunities of its rivals, but also,number two, either does not furthercompetition on the merits, or does so inan unnecessarily restrictive way. If 3Mhas been attempting to exclude rivals on


some basis other than efficiency, youmay characterize the behavior as preda-tory.

App. at 5670.However, you may not find that a com-petent, willfully maintained monopolypower, if that company has maintainedthat power, solely through the exerciseof superior foresight or skill in industry,or because of economic or technologicalefficiencies, or because of size, or be-cause of changes in customer and con-sumer preferences, or simply becausethe market is so limited that it is impos-sible to efficiently produce the product,except by a plan large enough to supplythe whole demand.

App. at 5670–71.Now with respect to Count 1, unlawfullymaintaining monopoly power, mere pos-session of monopoly power, if lawfullyacquired, does not violate the antitrustlaws.

App. at 5671.In determining whether there has beenan unlawful exercise of monopoly power,you must bear in mind that a companyhas not acted unlawfully simply becauseit has engaged in ordinary competitivebehavior that would have been an effec-tive means of competition if it were en-gaged in by a firm without monopolypower, or simply because it is a largecompany and a very efficient one.

App. at 5672.

The trial court further noted that if thejury found the evidence to be insufficientto prove any of the elements, it had to findfor 3M and against LePage’s. It was care-ful to note that intense business competi-tion was not considered predatory or ex-clusionary, explaining:

The acts or practices that result in themaintenance of monopoly power mustrepresent something other than the con-

duct of business that is part of the nor-mal competitive process or even extraor-dinary commercial success. [3M] mustrepresent conduct that has made it verydifficult or impossible for competitors toengage in fair competition.

App. at 5671.

The District Court closely followed theABA sample instructions when instructingthe jury as to predatory and exclusionaryconduct, including its instructions distin-guishing between procompetitive and anti-competitive conduct. See ABA, SampleJury Instructions in Civil Antitrust CasesC–20 to C–21 (1999 Ed.). Furthermore,the jury instructions were a modified ver-sion of those given in Aspen Skiing, whichthe Supreme Court did not find objectiona-ble. 472 U.S. at 596–97, 105 S.Ct. 2847.

3M contends that the District Court wasobligated to take into account the decisionin Brooke Group when crafting its juryinstructions. As we have explained,Brooke Group involved claims of predatorypricing, a claim LePage’s never allegedagainst 3M. It follows that the DistrictCourt need not have, indeed should nothave, instructed the jury as to claims notat issue in the case.

The jury was given the following ques-tions on Count I:

(1) Do you find that LePage’s has prov-en, by a preponderance of the evidence,that the relevant market is invisible andtransparent tape for home and office usein the United States?

(2) Do you find that LePage’s has prov-en, by a preponderance of the evidence,that 3M unlawfully maintained monopolypower as defined under the instructionsfor Count I?; [and]

(2.1) Do you find that LePage’s hasproven, as a matter of fact and with afair degree of certainty, that 3M’s un-lawful maintenance of monopoly power


injured LePage’s business or propertyas defined in these instructions?

App. at 6523. The jury answered ‘‘yes’’ toeach of the three questions. It awardedLePage’s more than $22 million before tre-bling.

The District Court gave the jury a thor-ough, clear charge as to the § 2 claim.Based on its sound instructions, the jurydecided that LePage’s had met its eviden-tiary burden as to its § 2 claim. Nothingin the jury charge constitutes reversibleerror.

IX.

CROSS APPEAL

ATTEMPTED MONOPOLIZATION

LePage’s cross appeals from the DistrictCourt’s order granting judgment as a mat-ter of law to 3M on LePage’s claim that3M illegally attempted to maintain its mo-nopoly. In overturning the jury’s verdictfor LePage’s on this claim, the DistrictCourt stated that ‘‘ ‘an attempted mainte-nance of monopoly power’ ’’ is ‘‘inherentlyillogical.’’ Le Page’s, 2000 WL 280350, at*2.

LePage’s argues that the courts andcommentators have repeatedly found thatdefendants can be guilty of both monopoli-zation and attempted monopolizationclaims arising out of the same conduct.See, e.g., Am. Tobacco Co., 328 U.S. at 783,66 S.Ct. 1125 (affirming judgment that de-fendants were guilty of monopolization andattempted monopolization); Earl Kintner,2 Federal Antitrust Law § 13.1 n.5 (1980).It emphasizes that in Lorain Journal, theSupreme Court upheld a § 2 attemptedmonopolization judgment against the de-fendant newspaper, holding that ‘‘a singlenewspaper, already enjoying a substantialmonopoly in its area, violates the ‘attemptto monopolize’ clause of § 2 when it uses

its monopoly to destroy threatened compe-tition.’’ 342 U.S. at 154, 72 S.Ct. 181.

We need not consider the correctness ofthe District Court’s ruling on the attempt-ed monopolization claim because we upholdits decision on the monopolization claim.The jury returned the same amount ofdamages on both claims and LePage’s con-cedes that under those circumstances dis-cussion of the attempted monopolization isunnecessary.

X.

CONCLUSION

Section 2, the provision of the antitrustlaws designed to curb the excesses of mo-nopolists and near-monopolists, is theequivalent in our economic sphere of theguarantees of free and unhampered elec-tions in the political sphere. Just as de-mocracy can thrive only in a free politicalsystem unhindered by outside forces, soalso can market capitalism survive only ifthose with market power are kept incheck. That is the goal of the antitrustlaws.

The jury heard the evidence and thecontentions of the parties, accepting someand rejecting others. There was ampleevidence that 3M used its market powerover transparent tape, backed by its con-siderable catalog of products, to entrenchits monopoly to the detriment of LePage’s,its only serious competitor, in violation of§ 2 of the Sherman Act. We find no re-versible error. Accordingly, we will affirmthe judgment of the District Court.

GREENBERG, Circuit Judge,dissenting.

I respectfully dissent as I would reversethe district court’s order denying the mo-tion for judgment as a matter of law on themonopolization claim but affirm on Le-Page’s’s cross-appeal from the motion


granting 3M a judgment as a matter of lawon the attempted maintenance of monopolyclaim. While I recognize that the majorityopinion describes the factual backgroundof this case, I nevertheless also will setforth its background as I believe that amore specific exposition of the facts leadsto a conclusion that LePage’s’s case shouldnot have survived 3M’s motion for a judg-ment as a matter of law.

As the majority indicates, 3M dominatedthe United States transparent tape marketwith a market share above 90% until theearly 1990s. LePage’s around 1980 decid-ed to sell ‘‘second brand’’ and private labeltape, i.e., tape sold under the retailer’s,rather than the manufacturer’s name, anendeavor successful to the extent that Le-Page’s captured 88% of private label tapesales in the United States by 1992. More-over, growth of ‘‘second brand’’ and privatelabel tape accounted for a shift of sometape sales from branded tape to privatelabel tape so the size of the private labeltape business expanded. In the circum-stances, not surprisingly, during the early1990s, 3M also entered the private labeltape business.

As the majority notes, LePage’s claimsthat, in response to the growth of thiscompetitive market, 3M engaged in a ser-ies of related, anticompetitive acts aimedat restricting the availability of lower-priced transparent tape to consumers. Inparticular, it asserts that 3M devised pro-grams that prevented LePage’s and theother domestic company in the business,Tesa Tuck, Inc., from gaining or maintain-ing large volume sales and that 3M main-tained its monopoly by stifling growth ofprivate label tape and by coordinating ef-forts aimed at large distributors to keepretail prices for Scotch tape high. Le-Page’s barely was surviving at the time oftrial and suffered large operating lossesfrom 1996 through 1999.

This case centers on 3M’s rebate pro-grams that, beginning in 1993, involvedoffers by 3M of ‘‘package’’ or ‘‘bundled’’discounts for various items ranging fromhome care and leisure products to audio/vi-sual and stationery products. Customerscould earn rebates by purchasing, in addi-tion to transparent tape, a variety of prod-ucts sold by 3M’s stationery division, suchas Post–It Notes and packaging products.There is no doubt but that these programscreated incentives for retailers to purchasemore 3M products and enabled them tohave single invoices, single shipments anduniform pricing programs for various 3Mproducts. 3M linked the size of the re-bates to the number of product lines inwhich the customers met the targets, anaggregate number that determined the re-bate percentage the customer would re-ceive on all of its 3M purchases across allproduct lines. Therefore, if customersfailed to meet growth targets in multiplecategories, they did not receive any rebate,and if they failed to meet the target in oneproduct line, 3M reduced their rebatessubstantially. These requirements are atthe crux of the controversy here, as Le-Page’s claims that customers could notmeet these growth targets without elimi-nating it as a supplier of transparent tape.

In practice, as 3M’s rebate programevolved, it offered three different types ofrebates: Executive Growth Fund, Partner-ship Growth Fund and Brand Mix Re-bates. 3M developed a ‘‘test program’’called Executive Growth Fund (‘‘EGF’’) fora small number of retailers, 11 in 1993 and15 in 1994. Under EGF, 3M negotiatedvolume and growth targets for each cus-tomer’s purchases from the six 3M con-sumer product divisions involved in theEGF program. A customer meeting thetarget in three or more divisions earned avolume rebate of between 0.2–1.25% oftotal sales.


Beginning in 1995, 3M undertook to endthe EGF test program and institute a re-bate program called Partnership GrowthFund (‘‘PGF’’) for the same six 3M con-sumer products divisions. Under thisprogram, 3M established uniform growthtargets applicable to all participants. Cus-tomers who increased their purchasesfrom at least two divisions by $1.00 andincreased their total purchases by at least12% over the previous year qualified forthe rebate, which ranged from 0.5% to2%, depending on the number of divisions(between two to five divisions) in whichthe customer increased its purchases andthe total volume of purchases.

In 1996 and 1997, 3M offered price in-centives called Brand Mix Rebates to twotape customers, Office Depot and Staples,to increase purchases of Scotch brandtapes. 3M imposed a minimum purchaselevel for tape set at the level of OfficeDepot’s and Staples’s purchases the previ-ous year with ‘‘growth’’ factored in. Toobtain a higher rebate, these two custom-ers could increase their percentage ofScotch purchases relative to certain lower-priced orders.

The evidence at trial focused on theparties’ dealings with a limited number ofcustomers and demonstrated that Le-Page’s problems were attributed to a num-ber of factors, not merely 3M’s rebateprograms. Thus, I describe this evidenceat length.

Wal–Mart

Before 1992, Wal–Mart bought privatelabel tape only from LePage’s but, in Au-gust 1992, decided to buy private labeltape from 3M as well. In response, Le-Page’s lowered its prices and increased itssales to Wal–Mart. In 1997, Wal–Martstopped buying private label tape but of-fered LePage’s’s branded tape as its ‘‘sec-ond tier’’ offering. In 1998, however, Wal–

Mart told LePage’s that it was going toswitch to a tape program from 3M. Le-Page’s’s president then visited Wal–Martfollowing which it changed its plans andretained LePage’s as a supplier. After-wards, Wal–Mart designed a test compar-ing LePage’s’s brand against a 3M Scotchutility tape to determine who would winWal–Mart’s ‘‘second tier’’ tape business.LePage’s added more inches (approximate-ly 20% more) to its rolls of tape and wonthe test. 3M continued, however, to sellScotch brand tapes to Wal–Mart, and Le-Page’s saw its sales to Wal–Mart declineto approximately $2,000,000 annually bythe time of trial. LePage’s claims thatWal–Mart cut back on its tape purchasesto qualify for 3M’s bundled rebate of$1,468,835 in 1995.

Kmart

Kmart accounted for 10% of LePage’s’sannual tape sales when LePage’s lost itsbusiness to 3M in 1993. Kmart asked itssuppliers, including 3M, to provide a singlebid on its entire private label tape businessfor the following year. LePage’s’s presi-dent believed, however, that Kmart was‘‘too lazy to make a change,’’ and that itwould ‘‘never put their eggs in one basket’’by giving all its business to 3M. LePage’soffered the same price it had offered theprevious year but also offered a volumerebate. 3M offered a lower price and wonthe bid. Kmart asked for rebates and‘‘market development’’ funds as part of theprivate label tape bid process. 3M offered$200,000 for promotional activities and a$300,000 volume rebate if Kmart pur-chased $10,000,000 of 3M’s Stationery Di-vision products.

LePage’s claims that 3M offered Kmart$1,000,000 to eliminate LePage’s and Tesaas suppliers and to make 3M its sole tapesupplier. LePage’s points to a 3M docu-ment outlining 3M’s goal for Kmart to


exceed $15,000,000 in 3M purchases withthe reward being that Kmart would re-ceive $75,000 in each of the first two quar-ters and $100,000 in the last two quartersfor promotional activities and would re-ceive $650,000 as a volume rebate if thesales exceeded $15,000,000. If the saleswere less, 3M would decrease the rebateaccordingly, e.g., a $400,000 rebate for$13,000,000 of sales. LePage’s claims that,as a practical matter, Kmart had to elimi-nate LePage’s and Tesa to reach thegrowth 3M required in order to qualify forthe rebate. LePage’s asserts that, despiteits efforts to regain the private label busi-ness from Kmart, one Kmart buyer told itthat he could not talk to LePage’s abouttape products for the next three years.

Staples

Staples had been a LePage’s customerfor several years. From 1990 to 1993,LePage’s increased its sales to Staples by440%, growing from $357,000 to $1,954,000.In 1994, Staples considered reducing sup-pliers and asked LePage’s and 3M fortheir best offers in 1994. LePage’s as-sumed that if 3M did make a good offer,LePage’s would have a chance to make abetter proposal. LePage’s did not makeits lowest offer, and 3M won the account.When LePage’s went back to Staples witha new price, it was told that the decisionhad been made. LePage’s claims that 3Moffered an extra 1% bonus rebate onScotch products if Staples eliminated Le-Page’s as a supplier (a ‘‘growth’’ rebatethat only could be met by converting all ofStaple’s private label business to 3M). 3Mpaid Staples an advertising allowance infour payments totalling $1,000,000 in 1995and gave it $500,000 in free merchandisedelivered during Staples’s fiscal year 1994.3M refers to a ‘‘$1.5 million settlement’’with Staples and refers to multiple pay-ments for different purposes. LePage’s,however, implies that these payments bore

some connection to Staples’s award of itssecond-tier tape business to 3M.

Office Max

In 1998, after a dispute between OfficeMax and LePage’s, Office Max accepted3M’s offer that matched but did not beatLePage’s’s price. LePage’s objected to3M’s matching whatever price LePage’soffered, and also objected to 3M’s ‘‘clout’’payment. Office Max required its suppli-ers to make payments to help advertisethe Office Max name, and LePage’s hadpaid this ‘‘clout’’ payment in the yearsprevious to 1998 when it refused to pay itbecause of its dispute with Office Max.Nevertheless, the buyer for Office Maxtestified that its decision to give its busi-ness to 3M was not related to its pricingand rebate program but rather to the con-sistency of its service.

Walgreens

Walgreens had purchased private labeltape from LePage’s from 1992 until 1998,when it decided to import tape from Tai-wan. LePage’s’s chief executive officer ac-knowledged that LePage’s did not lose theaccount due to 3M’s activities.

American Stores

Until 1995, LePage’s’s sales of privatelabel tape to American Stores exceeded$1,000,000 annually. According to Le-Page’s, a month after American Storesdecided that it would try to maximize 3M’sPGF rebate, it shifted its tape business to3M. In 1995, American Stores decided tostop buying LePage’s tape, principally be-cause of quality concerns. In a letter toJames Kowieski, Senior Vice President ofSales at LePage’s, Kevin Winsauer, themanager of the private label department atAmerican, wrote: ‘‘After much delibera-tion comparing the pros and cons of Le-


Page’s program and 3M’s program, I havedecided to award the business to 3M. 3M’sproposal was very competitive and I amsure LePage’s would meet their costs toretain the business. However, the deci-sion to move to 3M is primarily based onQuality.’’ SJA 2050–51 (emphasis in origi-nal). When American Stores decided topurchase from 3M, it was not participatingin any rebate programs, and Winsauer tes-tified that he was not aware that therewere rebate programs. He also testifiedthat even without the volume incentiveprograms, 3M’s price was still slightly low-er than LePage’s’s.

Dollar General, CVS, and Sam’s Club

LePage’s lost Dollar General’s privatelabel business to a foreign supplier butlater won the business back. According toLePage’s’s president, Dollar General usedthe bid for imported tape to leverage aprice reduction from LePage’s. 3M bid onthe CVS account, but LePage’s retainedCVS as a customer by lowering its pricesand increasing its rebate. At Sam’s Club,LePage’s tape had been selling well whenits buyers were directed by senior man-agement to ‘‘maximize’’ all purchases from3M to maximize the EGF/PGF rebate.Subsequently, Sam’s Club stopped pur-chasing from LePage’s.

Other distributors and buying groups

LePage’s claimed that 3M’s pricingpractices prevented or hindered it fromselling private label tape to certain compa-nies: (1) Costco. Costco, however, neverhas sold private label tape. (2) Office De-pot. Office Depot also never has sold pri-vate label tape. LePage’s tried to con-vince Office Depot to buy private labeltape in 1991 or 1992 (before 3M imple-mented the rebate programs), but OfficeDepot decided to continue purchasing 3Mbrand tape. (3) Pamida and Venture

Stores. LePage’s claimed that 3M offeredthese stores discounts conditioned on ex-clusivity, thereby preventing LePage’sfrom selling private label tape to them.LePage’s lost Venture Stores’ business in1989, five years before 3M provided thediscount at issue. (4) Office BuyingGroups. 3M offered an optional 0.3%price discount to certain buying groups ifthey exclusively promoted certain 3Mproducts in their catalogs. If the buyinggroup carried a lower value brand alterna-tive to 3M’s main brand (its second line),then the group would receive a lower an-nual volume rebate. LePage’s viewedthese kind of contract provisions as a ‘‘pen-alty’’ that coerced buying group membersto purchase tape only from 3M. For exam-ple, if a buying group promoted the prod-ucts of a competitor, it lost rebates forpurchases in three categories of products.3M argues that LePage’s could have of-fered its own discount or rebate but in-stead refused in one instance to pay thestandard promotional fee charged suppli-ers for inclusion in a catalog.

Notwithstanding the evidence whichdemonstrates that LePage’s lost businessfor reasons that could not possibly be at-tributable to any unlawful conduct by 3M,it argues that 3M willfully maintained itsmonopoly through a ‘‘monopoly broth’’ ofanticompetitive and predatory conduct. Iwould reject LePage’s’s argument as Iagree with 3M that LePage’s simply didnot establish that 3M’s conduct was illegal,as LePage’s did not demonstrate that 3M’spricing was below cost (a point that is notin dispute) and, in the absence of suchproof, the record does not supply any oth-er basis on which we can uphold the judg-ment.

There are two elements of a monopoli-zation claim under section 2 of the Sher-man Act: ‘‘(1) the possession of monopolypower in the relevant market and (2) the


willful acquisition or maintenance of thatpower as distinguished from growth or de-velopment as a consequence of a superiorproduct, business acumen, or historic acci-dent.’’ United States v. Grinnell Corp.,384 U.S. 563, 570–71, 86 S.Ct. 1698, 1704,16 L.Ed.2d 778 (1966). Willful mainte-nance involves using anticompetitive con-duct to ‘‘foreclose competition, to gain acompetitive advantage, or to destroy acompetitor.’’ Eastman Kodak Co. v. Im-age Technical Servs., 504 U.S. 451, 482–83,112 S.Ct. 2072, 2090, 119 L.Ed.2d 265(1992) (internal quotation marks omitted).LePage’s contends that 3M’s bundled re-bates were anticompetitive and predatory.It also argues that 3M’s other practices,such as exclusionary contracts and thetiming of its rebates, were also anticom-petitive and predatory. I discuss theseclaims in the order I have stated them.

LePage’s primarily complains of 3M’suse of bundled rebates. While, as themajority recognizes, we have held that re-bates on volume purchases are lawful, seeAdvo, Inc. v. Philadelphia Newspapers,Inc., 51 F.3d 1191, 1203 (3d Cir.1995), Le-Page’s seeks to avoid that principle bypointing out that 3M offered higher re-bates if customers met their target growthrate in different product categories, in ef-fect linking the sale of private label tapewith the sale of other products, such asScotch tape, which customers had to buyfrom 3M. Thus, LePage’s explains:

3M understood that, as a practical mat-ter, every retailer in the country had tocarry Scotch-brand tapeTTTT It there-fore decided to structure its rebates intobundles that linked that product with

the product segment in which it did facecompetition from LePage’s (second-linetape)TTTT To increase the leverage onthe targeted segment, 3M further linkedrebates on transparent tape with thosefor many other productsTTTT The rivalwould have to ‘compensate’ the customerfor the amount of rebate it would losenot only on the large volume of Scotch-brand tape it had to buy, but also forrebates on many other products pur-chased from 3M.

Br. of Appellee at 40.

In making its argument LePage’s reliesin part on SmithKline Corp. v. Eli Lilly &Co., 575 F.2d 1056 (3d Cir.1978), which, asthe majority notes, does not bind this enbanc court but nevertheless can have prec-edential value. In SmithKline, Eli Lilly &Co. had two products, Keflin and Keflex,on which it faced no competition, and oneproduct, Kefzol, on which it faced competi-tion from SmithKline’s product, Ancef.See id. at 1061. Lilly offered a higherrebate of 3% to companies that purchasedspecified quantities of any three (which,practically speaking, meant combined pur-chases of Kefzol, Keflin and Keflex) ofLilly’s cephalosporin products. See id.‘‘Although hospitals were free to purchaseSmithKline’s Ancef with their Keflin andKeflex orders with Lilly, thus avoiding thepenalties of a tie-in sale,1 the practicaleffect of that decision would be to deny theAncef purchaser the 3% bonus rebate onall its cephalosporin products.’’ Id. at1061–62 (internal footnote added). Be-cause of Lilly’s volume advantage, to offera rebate of the same net dollar amount asLilly’s, SmithKline would have had to offer

1. 3M also avoids the penalties of a tie-in sale,because its customers were free to purchaseits Scotch tape by itself. To prove an illegaltie-in, a plaintiff must establish that the agree-ment to sell one product was conditioned onthe purchase of a different or tied product;the seller ‘‘has sufficient economic power

with respect to the tying product to appreci-ably restrain free competition in the marketfor the tied product and a ‘not insubstantial’amount of interstate commerce is affected.’’Northern Pac. Ry. Co. v. United States, 356U.S. 1, 6, 78 S.Ct. 514, 518, 2 L.Ed.2d 545(1958).


companies rebates ranging from 16% foraverage size hospitals to 35% for largervolume hospitals for their purchase of An-cef. See id. at 1062.

We concluded that Lilly willfully ac-quired and maintained monopoly power bylinking products on which it faced no com-petition (Keflin and Keflex) with a compet-itive product, resulting in the sale of allthree products on a non-competitive basisin what otherwise would have been a com-petitive market between Ancef and Kefzol.See id. at 1065. Moreover, this arrange-ment would force SmithKline to pay re-bates on one product equal to rebates paidby Lilly based on sales volume of threeproducts. See id. Expert testimony andthe evidence on pricing showed that in thecircumstances SmithKline’s prospects forcontinuing in the Ancef market were poor.

LePage’s argues that it does not have toshow that 3M’s package discounts couldprevent an equally efficient firm frommatching or beating 3M’s package dis-counts. In its brief, LePage’s contendsthat its expert economist explained that3M’s programs and cash payments havethe same anticompetitive impact regard-less of the cost structure of the rival sup-pliers or their efficiency relative to that of3M. See Br. of Appellee at 43. LePage’salleges that the relative efficiency or coststructure of the competitor simply affectshow long it would take 3M to foreclose therival from obtaining the volume of businessnecessary to survive. See id. ‘‘Competi-tion is harmed just the same by the loss ofthe only existing competitive constraintson 3M in a market with high entry barri-ers.’’ Id. The district court stated thatLePage’s introduced substantial evidencethat the anticompetitive effects of 3M’srebate program caused its losses. See Le-Page’s Inc. v. 3M, No. Civ. A. 97–3983,2000 WL 280350, at *7–*8 (E.D.Pa.Mar.14, 2000). The majority finds that

‘‘3M’s conduct was at least as anticompeti-tive as the conduct which [we] held violat-ed § 2 in SmithKline.’’ Maj. Op. at 157.

I disagree with the majority’s use ofSmithKline. SmithKline showed that itcould not compete by explaining how muchit would have had to lower prices for bothsmall and big customers to do so. Smith-Kline ascertained the rebates that Lillywas giving to customers on all three prod-ucts and calculated how much it wouldhave had to lower the price of its productif the rebates were all attributed to theone competitive product. In contrast, Le-Page’s did not even attempt to show that itcould not compete by calculating the dis-count that it would have had to provide inorder to match the discounts offered by3M through its bundled rebates, and thusits brief does not point to evidence alongsuch lines.

While I recognize that it is obvious fromthe size of 3M’s rebates as compared toLePage’s’s sales that LePage’s would havehad to make substantial reductions inprices to match the rebates 3M paid toparticular customers, LePage’s did notshow the amount by which it lowered itsprices in actual monetary figures or bypercentage to compete with 3M and howits profitability thus was decreased. Rath-er, LePage’s merely maintains, throughthe use of an expert, that it would havehad to cut its prices drastically to competeand thus would have gone out of business.Furthermore, it is critically important torecognize that LePage’s had 67% of theprivate label business at the time of thetrial. Thus, notwithstanding 3M’s rebates,LePage’s was able to retain most of theprivate label business. In the circum-stances, it is ironical that LePage’s com-plains of 3M’s use of monopoly power asthe undisputed fact is that LePage’s, not3M, was the dominant supplier of privatelabel tape both before and after 3M initi-


ated its rebate programs. Indeed, the rec-ord suggests that inasmuch as LePage’scould not make a profit with a 67% shareof the private label sales, it must haveneeded to be essentially the exclusive sup-plier of such tape for its business to beprofitable as it in fact was when it had an88% share of the private label tape salesbusiness.

Although I am not evaluating the ex-pert’s method of calculating damages as Iwould not reach the damages issue, I em-phasize that simply pointing to an expertto support the contention that the compa-ny would have gone out of business, with-out providing even the most basic pricinginformation, is insufficient. ‘‘Expert testi-mony is useful as a guide to interpretingmarket facts, but it is not a substitute forthem.’’ Brooke Group Ltd. v. Brown &Williamson Tobacco Corp., 509 U.S. 209,242, 113 S.Ct. 2578, 2598, 125 L.Ed.2d168 (1993); see also Matsushita Elec. In-dus. Co. v. Zenith Radio Corp., 475 U.S.574, 594 n. 19, 106 S.Ct. 1348, 1360 n. 19,89 L.Ed.2d 538 (1986); Advo, 51 F.3d at1198–99; Virgin Atlantic Airways Ltd. v.

British Airways PLC, 69 F.Supp.2d 571,579 (S.D.N.Y.1999) (‘‘[A]n expert’s opinionis not a substitute for a plaintiff’s obli-gation to provide evidence of facts thatsupport the applicability of the expert’sopinion to the case.’’), aff’d, 257 F.3d 256(2d Cir.2001). Without such pricing in-formation, it is difficult even to begin toestimate how much of the market shareLePage’s lost was due to 3M’s bundledrebates. In fact, the evidence that I de-scribed above conclusively demonstratesthat LePage’s lost private sale tape busi-ness for reasons not related to 3M’s re-bates. Furthermore, some experts havequestioned the validity of attributing allthe rebates to the one competitive prod-uct in situations such as these.2 I do notneed, however, to decide the validity ofthat method of calculation, as LePage’sdoes not even attempt to meet that lessstrict test by calculating how much itwould have had to lower its prices tomatch the rebates, even if they all wereaggregated and attributed to private labeltape.3

2. One court has mentioned a hypothetical sit-uation where a low-cost shampoo makercould not match a competitor’s package dis-count for shampoo and conditioner eventhough both products were priced above theirrespective costs. See Ortho Diagnostic Sys.,Inc. v. Abbott Labs., Inc., 920 F.Supp. 455,467 (S.D.N.Y.1996). In that case, the courtsuggested that the bundled price could beunlawful under section 2 even though neitheritem in the package was priced below cost. Ifthe entire package discount were attributed tothe one product where the two parties com-pete, the low-cost shampoo maker could notlower its prices on the product enough tomatch the total discount without selling belowits cost. See id. at 467–69. Commentators,however, suggests that this analysis is incor-rect. See III PHILLIP E. AREEDA & HERBERT

HOVENKAMP, ANTITRUST LAW: AN ANALYSIS OF ANTI-

TRUST PRINCIPLES AND THEIR APPLICATION ¶ 749, at467 n.6 (rev. ed.1996).

One aspect of this method of calculationworth noting is that the volume of the prod-

ucts ordered has a drastic effect on how muchthe competitor would have to lower its pricesto compete. For example, suppose in a simi-lar rebate program, a company was the onlyproducer of products A and B but faced com-petition in C. If a customer orders 100 unitseach of A, B, and C at a price of $1.00 each, a3% rebate would be $9.00 (3% of the total of$300.00). If the rebate on all three productswere attributed to product C, then the com-petitor would have to lower its price to $0.91in order to compete with it. The resultswould be starkly different, however, if a cus-tomer orders 100 units of A and B but onlyneeds 10 units of C. Then the 3% rebate onthe total purchase amount of $210.00 wouldbe $6.30. If the rebate was attributed solelyto product C, then a competitor would have tolower its price to $.37 on product C in orderto match the company’s price.

3. The closest LePage’s comes to supplyingsuch information in its brief is its statementthat ‘‘LePage’s made repeated efforts to save


LePage’s also has not satisfied thestricter tests devised by other courts con-sidering bundled rebates in situations suchas that here. In a case brought by amanufacturer of products used in screen-ing blood supply for viruses, Ortho Diag-nostic Systems, Inc. v. Abbott Laborato-ries, Inc., 920 F.Supp. 455 (S.D.N.Y.1996),the district court held, inter alia, that thedefendant’s discount pricing of products inpackages did not violate the Sherman Act.The defendant, Abbott Laboratories, man-ufactured all five of the commonly usedtests to screen the blood supply for virus-es. Ortho claimed that Abbott violatedsections 1 and 2 of the Sherman Act bycontracting with the Council of CommunityBlood Centers to give those members ad-vantageous pricing if they purchased apackage of four or five tests from Abbott,thereby using its monopoly position insome of the tests to foreclose or impaircompetition by Ortho in the sale of thosetests available from both companies. Seeid. at 458. The district court stated thatto prevail on a monopolization claim in ‘‘acase in which a monopolist (1) faces com-petition on only part of a complementarygroup of products, (2) offers the productsboth as a package and individually, and (3)effectively forces its competitors to absorbthe differential between the bundled andunbundled prices of the product in whichthe monopolist has market power,’’ theplaintiff must allege and prove ‘‘either that(a) the monopolist has priced below itsaverage variable cost or (b) the plaintiff isat least as efficient a producer of the com-petitive product as the defendant, but thatthe defendant’s pricing makes it unprofit-able for the plaintiff to continue to pro-duce.’’ Id. at 469.

Holding that the discount package pric-ing did not violate the Sherman Act, theOrtho court explained that any other rulewould involve too substantial a risk thatthe antitrust laws would be used to protectan inefficient competitor against pricecompetition that would benefit consumers.See id. at 469–70 (‘‘The antitrust laws werenot intended, and may not be used, torequire businesses to price their productsat unreasonably high prices (which penal-ize the consumer) so that less efficientcompetitors can stay in business.’’) (inter-nal quotation marks omitted).

In this case, as the majority acknowl-edges, LePage’s now does not contend that3M priced its products below average vari-able cost, an allegation which, if made, inany event would be difficult to prove. SeeAdvo, 51 F.3d at 1198–99. Moreover, Le-Page’s’s economist conceded that LePage’sis not as efficient a tape producer as 3M.Thus, in this case section 2 of the ShermanAct is being used to protect an inefficientproducer from a competitor not usingpredatory pricing but rather selling abovecost. While the majority contends thatBrooke Group, a case on which 3M heavilyrelies, is distinguishable as none of thedefendants there had a monopoly in themarket, the fact remains that the Court indescribing section 2 of the Sherman Actsaid flat out in Brooke Group that ‘‘a plain-tiff seeking to establish competitive injuryfrom a rival’s low prices must prove thatthe prices complained of are below an ap-propriate measure of its rival’s costs.’’Brooke Group, 509 U.S. at 222, 113 S.Ct.at 2587. LePage’s simply did not do this.

I realize that the majority indicates that‘‘LePage’s unlike the plaintiff in BrookeGroup, does not make a predatory pricing

its tape business with Staples, reducing itsprices to 1990 levels, and then reducing themagain, to keep its plant open and people work-ing.’’ Br. of Appellee at 11. This is not close

enough. Of course, Lepage’s’s prices overallwere low enough for it to have 67% of theprivate label business.


claim.’’ Maj. Op. at 151. But that circum-stance weakens rather than strengthensLePage’s’s position as it merely confirmsthe lawfulness of 3M’s conduct. Further-more, the circumstance that 3M is notdealing in an oligopolistic market shouldnot matter as the harm that LePage’sclaims to have suffered from the bundledrebates would be no less if inflicted bymultiple competitors. Moreover, monopo-list or not, 3M, even in the absence ofLePage’s and Tesa from the private labelbusiness, would not be the only supplier ofprivate label tape for there are foreignsuppliers as is demonstrated plainly by theevidence that both Walgreens and DollarGeneral dealt with such suppliers.

Contrary to the majority’s view, this isnot a situation in which there is no busi-ness justification for 3M’s actions. Thispoint is important inasmuch as it is diffi-cult to distinguish legitimate competitionfrom exclusionary conduct that harmscompetition, see United States v. MicrosoftCorp., 253 F.3d 34, 58 (D.C.Cir.), cert. de-nied, 534 U.S. 952, 122 S.Ct. 350, 151L.Ed.2d 264 (2001), and some cases sug-gest that when a company acts against itseconomic interests and there is no validbusiness justification for its actions, then itis a good sign that its acts were intendedto eliminate competition.

For example, Aspen Skiing Co. v. AspenHighlands Skiing Corp., 472 U.S. 585, 608,105 S.Ct. 2847, 2860, 86 L.Ed.2d 467(1985), discussed by the majority, setsforth the lack of a valid business reason asa basis for finding liability. In that case,the Court affirmed a jury verdict for theplaintiff under section 2 of the ShermanAct where the defendant monopolist hadstopped cooperating with the plaintiff tooffer a multi-venue skiing package for As-pen skiers. The Court held that becausethe defendant had acted contrary to its

economic interests, by losing business andcustomers, there was no other rationale forits conduct except that it wished to elimi-nate the plaintiff as a competitor. See id.at 608, 105 S.Ct. at 2860; see also East-man Kodak, 504 U.S. at 483, 112 S.Ct. at2091 (exclusionary conduct properly is con-demned if valid business reasons do notjustify conduct that tends to impair theopportunities of a monopolist’s rivals or ifa valid asserted purpose would be servedfully by less restrictive means).

On the other hand, in Concord BoatCorp. v. Brunswick Corp., 207 F.3d 1039,1043, 1063 (8th Cir.), cert. denied, 531 U.S.979, 121 S.Ct. 428, 148 L.Ed.2d 436 (2000),where boat builders brought an antitrustaction against a stern drive engine manu-facturer, the court held, inter alia, that theevidence was insufficient to find that theengine manufacturer’s discount programsrestrained trade and monopolized the mar-ket. Brunswick offered a higher percent-age discount when boat builders bought ahigher percentage of their engines from it,but there was no allegation that its pricingwas below cost. See id. at 1044, 1062. InConcord Boat the district court cited thedistrict court opinion in this case when 3Mfiled its motion to dismiss. See LePage’sInc. v. 3M, No. Civ. A. 97–3983, 1997 WL734005 (E.D.Pa. Nov.14, 1997). The Con-cord Boat district court agreed with theplaintiff that it was not the price (abovecost or not) that was relevant but the‘‘strings’’ attached to the price and that thedistrict court here was correct to distin-guish Brooke Group since there were no‘‘strings’’ attached (bundled rebates) inBrooke Group. In Concord Boat, the‘‘strings’’ attached were the exclusivityprovisions. See Concord Boat Corp. v.Brunswick Corp., 21 F.Supp.2d 923, 930(E.D.Ark.1998).

The Court of Appeals for the EighthCircuit, however, disagreed with the dis-


trict court in Concord Boat. The court ofappeals opinion reflected an application ofBrooke Group’s strong stance favoring vig-orous price competition and expressingskepticism of the ability of a court to sepa-rate anticompetitive from procompetitiveactions when it comes to above-cost strate-gic pricing. See Concord Boat, 207 F.3d at1061. More importantly, the court per-ceived that Brooke Group should be con-sidered even with claims based on pricingwith strings. See id. ‘‘If a firm has dis-counted prices to a level that remainsabove the firm’s average variable cost, theplaintiff must overcome a strong presump-tion of legality by showing other factorsindicating that the price charged is anti-competitive.’’ Id. (citing Morgan v. Pon-der, 892 F.2d 1355, 1360 (8th Cir.1989))(internal quotation marks omitted). Thecourt stated that a section 2 defendant’sproffered business justification is the mostimportant factor in determining whetherits challenged conduct is not competitionon the merits. See id. at 1062. The courtdistinguished cases such as SmithKlineand Ortho where products were bundledsince they involved two markets. See id.Of course, here we are dealing with asingle market.

Unlike the situation of the defendant inAspen, 3M’s pricing structure and bundledrebates were not contrary to its economicinterests, as they likely increased its sales.In fact, that is exactly what LePage’s iscomplaining about. Furthermore, otherthan the obvious reasons such as increas-ing bulk sales, market share and customerloyalty, there are several other potential‘‘procompetitive’’ or valid business reasonsfor 3M’s pricing structure and bundledrebates: efficiency in having single in-voices, single shipments and uniform pric-ing programs for various products. More-over, the record demonstrates that, withthe biggest customers, 3M’s rebates werenot eliminating the competitive process, as

LePage’s still was able to retain somecustomers through negotiation, and eventhough it lost other customers, the losseswere attributable to their switching to for-eign suppliers or changing suppliers be-cause of quality or service without regardto the rebates. Furthermore, overall Le-Page’s was quite successful in holding itsshare of the private label sales as it had67% of the business at the time of the trial.

In sum, I conclude that as a matter oflaw 3M did not violate section 2 of theSherman Act by reason of its bundledrebates even though its practices harmedits competitors. The majority decisionwhich upholds the contrary verdict riskscurtailing price competition and a methodof pricing beneficial to customers becausethe bundled rebates effectively loweredtheir costs. I regard this result as a sig-nificant mistake which cannot be justifiedby a fear that somehow 3M will raiseprices unreasonably later. In this regardI reiterate that in addition to LePage’sthere are foreign suppliers of transparenttape so that with or without LePage’sthere will be constraints on 3M’s pricing.

LePage’s also claims that, through avariety of other allegedly anticompetitiveactions, 3M prevented LePage’s fromcompeting. LePage’s asserts that 3Mforeclosed competition by directly pur-chasing sole-supplier status. There wassome dispute as to whether the contractswere conditioned on 3M being the solesupplier, and 3M claims that there areonly two customers for which there is anyevidence of a sole supplier agreement. Irecognize, however, that although most of3M’s contracts with customers were notconditioned on exclusivity, practicallyspeaking some customers dropped Le-Page’s as a supplier to maximize the re-bates that 3M was offering. Moreover,United Shoe Machinery Corp. v. UnitedStates, 258 U.S. 451, 458, 42 S.Ct. 363,


365, 66 L.Ed. 708 (1922), explained that acontract that does not contain specificagreements not to use the products of acompetitor still will come within the Clay-ton Act as to exclusivity if its practicaleffect is to prevent such use.

Even assuming, however, that 3M didhave exclusive contracts with some of thecustomers, LePage’s has not demonstratedthat 3M acted illegally, as one-year exclu-sive contracts have been held to be reason-able and not unduly restrictive. See Fed.Trade Comm’n v. Motion Picture Adver.Serv. Co., 344 U.S. 392, 395–96, 73 S.Ct.361, 363–64, 97 L.Ed. 426 (1953) (holdingthat evidence sustained the Commission’sfinding that the distributor’s exclusivescreening agreements with theater opera-tors unreasonably restrained competition,but stating that the Commission had foundthat the term of one-year exclusive con-tracts had become a standard practice andwould not be an undue restraint on compe-tition). See also Advo, 51 F.3d at 1204.In Tampa Electric Co. v. Nashville CoalCo., 365 U.S. 320, 327, 81 S.Ct. 623, 627–28,5 L.Ed.2d 580 (1961), the Court stated thateven if in practical application a contract isfound to be an exclusive-dealing arrange-ment, it does not violate section 3 of theClayton Act unless the court believes itprobable that performance of the contractwill foreclose competition in a substantialshare of the line of commerce affected.Using that standard, although LePage’s’smarket share in private label tape hasfallen from 88% to 67%, it has not beenestablished that, as a result of the alleged-ly exclusive contracts, competition wasforeclosed in a substantial share of the lineof commerce affected. Indeed, in view ofLePage’s’s two-thirds share of the private

label business, its attack on exclusivityagreements is attenuated.

There appear to be very few cases sup-porting liability based on section 2 of theSherman Act for exclusive dealing, assome cases suggest that if, as is the casehere under the jury’s findings, there is noliability under section 3 of the Clayton Act,it is more difficult to find liability underthe Sherman Act since its scope is morerestricted,4 In any event, the record showsonly two allegedly exclusive contracts(with the Venture and Pamida stores), and‘‘[b]ecause an exclusive deal affecting asmall fraction of a market clearly cannothave the requisite harmful effect uponcompetition, the requirement of a signifi-cant degree of foreclosure serves a usefulscreening function.’’ Microsoft, 253 F.3dat 69. The Microsoft court explained thatalthough exclusive contracts are common-place, particularly in the field of distribu-tion, in certain circumstances the use ofexclusive contracts may give rise to a sec-tion 2 violation even though the contractsforeclose less than the roughly 40 to 50%share usually required to establish a sec-tion 1 violation. See id. at 69–70. In thiscase, it cannot be concluded that the twocontracts with Venture and Pamida wereresponsible for the total drop in LePage’s’smarket share. Furthermore, even if all3M’s contracts were considered exclusive,LePage’s’s total drop in market share wasonly 21%, and some of this loss was shownin the record to be due to quality or ser-vice consistency concerns, as well as for-eign competition, rather than to 3M’s tac-tics. Therefore, there was not enoughforeclosure of the market to have an anti-competitive effect.

LePage’s also claims that by calculatingthe rebates only once a year, 3M made it

4. It is more common for charges of exclusivedealing to be brought under section 1 of theSherman Act or the Clayton Act, which the

jury found that 3M did not violate. See, e.g.,Barr Labs., Inc. v. Abbott Labs., 978 F.2d 98,110 (3d Cir.1992).


more difficult for a purchaser to pass onthe savings to its customers, thereby mak-ing it harder for companies to switch sup-pliers and keeping retail prices and mar-gins high. As I discussed above, one-yearcontracts may be considered standard, andeven if they make it more unlikely thatrebates are passed on in the form of lowerretail prices, the discounts could be appliedtowards lowering retail prices the follow-ing year or towards other costs by compa-nies that are factored into the retail prices(such as advertising). In the circum-stances, I am satisfied that this conductdoes not qualify as predatory or anticom-petitive so as to establish liability undersection 2 of the Sherman Act.

LePage’s also alleges that 3M enteredthe retail private label tape portion of themarket to destroy the market and therebyincrease its sales of branded tape, but thecase law does not support liability undersection 2 for this type of action. InBrooke Group, 509 U.S. at 215, 113 S.Ct.at 2584, Liggett/Brooke Group alleged thatBrown & Williamson Tobacco Corporation(‘‘B & W’’) sold generic cigarettes in orderto decrease losses of sales in its brandedcigarettes. B & W sold generic cigarettesat the same list price as Liggett but alsooffered large volume rebates to certainwholesalers so they would buy their gener-ic cigarettes from B & W. See id. at 216,113 S.Ct. at 2584. B & W wanted to takea larger part of the generic market fromLiggett and drive Liggett to raise priceson generic cigarettes, which B & W wouldmatch, thereby encouraging consumers toswitch back to branded cigarettes. See id.at 216–17, 113 S.Ct. at 2584. The Courtheld that because B & W had no reason-able prospect of recouping its predatorylosses and could not inflict the injury tocompetition that antitrust laws prohibit, itdid not violate the Robinson–Patman Act

or the Sherman Act. See id. at 243, 113S.Ct. at 2598. In this case, however, 3Mdid not use below average variable costpricing (LePage’s does not charge predato-ry pricing) and therefore 3M did not havepredatory costs to recoup.

I recognize that LePage’s attempts todistinguish Brooke Group on the groundthat ‘‘3M used other techniques [i.e., tech-niques other than predatory pricing] toextinguish the private-label category sub-jecting itself to different legal standards,’’Br. of Appellee at 55, but I neverthelesscannot accept LePage’s’s argument on thispoint. While LePage’s does not contendthat 3M engaged in predatory pricing, itdoes contend that the goal of 3M’s otherconduct was ‘‘to extinguish the private-label category, subjecting itself to differentlegal standards’’ than those applicable inBrooke Group. See id. Moreover, though3M denies that it was attempting to elimi-nate the private label category of transpar-ent tape, the record supports a findingthat it had that intent. I am satisfied,however, that its efforts to eliminate theprivate label aspect of the transparenttape market are not unlawful as, ‘‘exam-ined without reference to its effects oncompetitors,’’ it is evident that in view of3M’s dominance in brand tape, that it wasrational for it to want the sale of tape to beconcentrated in that category of the mar-ket. See Stearns Airport Equip. Co. v.FMC Corp., 170 F.3d 518, 523 (5th Cir.1999). Thus, we should not uphold theverdict on that basis.

Accordingly, I conclude that 3M’s ac-tions in the record, including the bundledrebates and other elements of the ‘‘monop-oly broth,’’ were not anticompetitive andpredatory as to violate section 2 of theSherman Act.5 Thus, I would reverse the

5. While I do not discuss the point I agree with the district court’s disposition of the attempt-


judgment of the district court and remandthe case for entry of judgment in favor of3M. Judge Scirica and Judge Alito join inthis opinion.

,

William R. MARKLE Appellant

v.

Joanne A. BARNHART, Commissionerof Social Security.

No. 02–3128.

United States Court of Appeals,Third Circuit.

Argued Jan. 28, 2003.

Filed March 26, 2003.

Claimant for Supplemental SecurityIncome (SSI) sought review of ALJ’s deci-sion that he was not disabled. The UnitedStates District Court for the Western Dis-trict of Pennsylvania, Donetta W. Am-brose, J., affirmed. Claimant appealed. TheCourt of Appeals, Debevoise, Senior Dis-trict Judge, sitting by designation, heldthat: (1) ALJ’s ruling that claimant hadfull scale IQ score of greater 70 was notsupported by substantial evidence; (2)ALJ’s findings established the second cri-terion for entitlement to benefits underregulation, a physical or other mental im-pairment imposing additional and signifi-cant work-related limitations of function;and (3) on remand, ALJ would be directedto complete Step 3 of evaluation process bydeveloping record and determining wheth-er claimant’s mental retardation had onset

date before age 22, in which event hewould be entitled to benefits sought.

Reversed and remanded.

1. Social Security and Public WelfareO143.60

ALJ’s finding that Supplemental Se-curity Income (SSI) claimant had full scaleIQ of greater than 70 was not supportedby substantial evidence; record did notprovide basis for rejection of full scale IQscore of 70 reported by licensed psycholo-gist after consultative evaluation, and vari-ous activities in which claimant was able toengage were not inconsistent with qualify-ing mental retardation. Social SecurityAct, § 205(g), as amended, 42 U.S.C.A.§ 405(g); 20 C.F.R., Part 404, Subpart P,App. 1, § 12.05, subd. C.


ALJ’s findings that claimant had se-vere chronic obstructive pulmonary dis-ease (COPD), hypertension, obesity, goutand diminished intelligence established hehad physical or other mental impairmentimposing additional and significant work-related limitations of function, the secondcriterion for entitlement to social securitydisability benefits. 20 C.F.R., Part 404,Subpart P, App. 1, § 12.05, subd. C.


On remand of social security disabilitycase, ALJ would be directed to completeStep 3 of evaluation process by developingrecord and determining whether claimant’smental retardation had onset date beforeage 22, in which event he would be entitledto benefits sought. 20 C.F.R., Part 404,Subpart P, App. 1, § 12.05, subd. C.

ed maintenance of monopoly claim.

lepage’s inc. v. 3m 141 - berkeley lawlepage’s inc. v. 3m 141 cite as 324 f.3d 141 (3rd cir....

Documents