By Don T. Hibner, Jr.

In All Star Carts and Vehicles, Inc., et al. v. BFI Canada Income Fund, et al., Case No. 2:08-cv-01816-LDW-AKT, August 1, 2012, the District Court for Eastern District of New York recently granted defendants’ motion for summary judgment on the grounds that the plaintiffs failed to establish the element of “dangerous probability” for an antitrust claim for attempted monopolization under Section 2 of the Sherman Act.  Plaintiffs are members of a certified class consisting of “all persons and entities that have contracted with, and purchased small containerized waste disposal services in the relevant market directly from defendants.”  The relevant time period is from May 5, 2000 forward.  The relevant business market described in the complaint is the market for “small containerized waste hauling and disposal services”.  The relevant geographic market is alleged to consist of Long Island, New York.

Plaintiffs seek damages and injunctive relief for alleged overcharges within the relevant market.  The court held that the use of 7-10 year exclusive dealing contracts with “evergreen” renewal provisions in a concentrated trash hauling market was not sufficient to raise a genuine issue of attempted monopolization.  This is so notwithstanding the fact that the relevant market consisted of two major firms with 39% and 25% market share respectively, for a total of 64%, with the remaining portion made up of competing firms with approximately 10% share each.  Although that market share had been relatively stable through time, the respective 39% and 25% shares enjoyed by two of the defendants nonetheless was held legally insufficient, and summary judgment on the attempted monopolization claim was therefore found appropriate.

Citing the seminal attempt to monopolize case of Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993) the court notes that an element of an attempt to monopolize claim under Section 2 is a dangerous probability of achieving monopoly power as a result of the defendants’ course of conduct.  It notes that while a specific intent to monopolize may be inferred from the course of anticompetitive conduct, the element of a dangerous probability of success must be separately established, and by an analysis of the size, shape, dynamics, and proclivities of a properly defined relevant product and geographic product, citing Volvo North America Corp. v. Men’s Intern. Professional Tennis Council, 857 F.2d 55, 74 (2d Cir. 1988).

The court noted that the highest market shares attributable to the defendants, based upon admissible evidence in the record, was 39% and 25%.  Other defendants each had approximately 10% market share each.  The court was much influenced by the declarations from ten competitors in the market, that stated that they used similar exclusive dealing contracts with “evergreen” renewal provisions, as used by the defendants.  The declarations stated that such contracts were in “common industry use”.  The declarants also identified 89 companies that compete in the relevant market for small containerized waste hauling services on Long Island, New York.  Plaintiffs themselves identified 59 competing providers.  An expert witness for plaintiffs testified that with the exception of the presence of “evergreen” contracts, there were no significant technical or financial barriers to entry.  The plaintiffs’ expert testified at deposition that she had not conducted any study that would lead to the conclusion that a defendant had the ability to raise prices in the relevant market.  Finally, the court relied on declarations from competitors that stated that there was robust competition and low barriers to entry.  The declarations characterized the waste carting industry on Long Island as “highly competitive”.

Since Swift & Co. v. United States, 196 U.S. 375 (1905), an attempt to monopolize under Section 2 has been closely analogized to the criminal law of attempt.  As Justice Holmes pointed out, not every act “done with intent to produce an unlawful result constitutes an attempt.  It is a question of proximity and degree.”  Swift at 402.  “The distinction between mere preparation and attempt is well known in the criminal law.”  Id.

Quoting from Commonwealth v. Peaslee, an opinion by Justice Holmes when on the Supreme Judicial Court of Massachusetts, Justice White wrote in Spectrum Sports:

Where acts are not sufficient in themselves to produce a result which the law seeks to prevent – for instance, the monopoly – but require further action in addition to the mere forces of nature to bring that result to pass, an intent to bring it to pass is necessary in order to produce the dangerous probability that it will happen.

506 U.S. at 455, quoting 177 Mass. 267, 272 (1901).

In a nutshell, attempt to monopolize is not a “shared monopoly” theory. That would describe a combination or conspiracy to monopolize, which was not alleged. Rather, it describes the activities of an individual defendant engaged in a course of conduct that is intended to, and but for an interruption or miscalculation, would have actually resulted in obtaining a monopoly – namely the power to raise price and exclude competition. These are not the facts present on the record in All Star Carts.

While not discussed by the court, it is more likely that the industry structure of a local trash hauling market could resemble a “tight oligopoly.” One might expect that the dynamics of route economics would be present. One might expect that each of the participants would use exclusivity contracts to develop sufficient route density for efficient scale and scope. Network externality effects would be sought, and would be in evidence. It would be counter-intuitive to expect an atomistic market or widely shifting shares. The economics of route efficiency seemingly describe the structure of the market, as evidenced in the record before the court. One might also expect that customers might welcome the benefits of exclusivity in securing stable trash hauling services.

One must wonder, however, whether the plaintiffs would have had a longer lease on life if they had included a Section I claim or claims. A Sherman I claim or a series of claims, would have been aided, arguably, by the concept of “quantitative substantiality”, as recognized in the venerable 1949 Standard Stations case, and more recently in United States v. Dentsply International, 399 F.3d 181 (3d Cir. 2005), and the shifting patterns that could be drawn from market share data, as a function of the height of entry barriers, and the dynamics of change within a given market. See, Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421 (9th Cir. 1995).

While the court was correct in dismissing the “contract power” arguments also presented by plaintiffs, it also noted that the market power proclivities that may flow from a given form of contract must be considered within the context of the market to which it is used, in order to better understand the dynamics of the market structure and shape presented. See, e.g., United Farmers Agents Association, Inc. v. Farmers Insurance Exchange, 89 F.3d 233, 236-37 (5th Cir. 1996).

Perhaps by presenting these arguments and authorities within the framework of a series of Section I claims, a genuine issue of material fact could have been presented, at least for a while longer. However, the court was correct in determining that an attempt to monopolize case, this was not.