United States Court of Appeals,
Fifth Circuit.
No. 93-1715.
GREAT WESTERN DIRECTORIES, INC., Plaintiff-Appellee-Cross
Appellant,
v.
SOUTHWESTERN BELL TELEPHONE COMPANY, et al., Defendants-
Appellants-Cross Appellees.
CANYON DIRECTORIES, INC., Plaintiff-Appellee-Cross Appellant,
v.
SOUTHWESTERN BELL TELEPHONE COMPANY, et al., Defendants-
Appellants-Cross Appellees.
Sept. 20, 1995.
Appeals from the United States District Court for the Northern
District of Texas.
Before WISDOM, REYNALDO G. GARZA and GARWOOD, Circuit Judges.
REYNALDO G. GARZA, Circuit Judge:
I. Summary and Procedural History
Plaintiffs-Appellees, Great Western Directories, Inc. (Great
Western) and Canyon Directories, Inc. (Canyon), filed suit alleging
that Defendants-Appellants, Southwestern Bell Telephone Company, et
al. (collectively, "SWB"), violated Sections 1 and 2 of the Sherman
Act, violated the Texas Free Enterprise and Antitrust Act, violated
the Texas Deceptive Trade Practices Act, and tortiously interfered
with business relations. Appellants allegedly orchestrated an
"affiliation wide concerted action" to extend the SWB monopoly of
the yellow pages market and to eliminate competition by raising the
costs of doing business as an independent directory and by reducing
1
the price of advertising in its wholly owned classified directory
by 40%.
A jury returned a verdict in favor of Great Western and
Canyon. The jury found damages of $5 million on Great Western's
antitrust claims, $50,000 in actual and $50,000 in additional
damages on its DTPA claims, and $50,000 in actual and $50,000 in
punitive damages for its tortious interference claims. The jury
found damages of $9,400 on Canyon's antitrust claims, $10,000 in
actual and $10,000 in additional damages under its DTPA claims, and
$10,000 in actual and $10,000 in punitive damages on its tortious
interference claims. Both plaintiffs were awarded attorneys' fees.
Following the verdict, Appellants moved for JNOV and for a new
trial. On July 27, 1990, the district court entered judgment on
the verdict, awarding Great Western $15 million and Canyon $28,200
in trebled antitrust damages and awarding both plaintiffs
attorneys' fees; no damage award was made on the state law claims.
On May 8, 1992, the district court held a hearing on Appellees'
motion for injunctive relief and on Appellants' motions for
judgment as a matter of law and new trial. On July 2, 1993, the
district court entered a final judgment granting a permanent
injunction and denying Appellants' post-trial motions.
On July 9, 1993, Appellants filed a motion to stay the
injunction pending appeal. On July 29, 1993, Appellants filed its
notice of appeal. On December 7, 1993, the district court entered
its final judgment, denied Appellants' motion for stay, and refused
to extend its injunction beyond the parties.
2
II. Parties and Subject Matter
Southwestern Bell Corporation (SWB) is a holding company;
Southwestern Bell Telephone Company (Telephone), SWB's wholly owned
subsidiary, provides telephone service to its customers in
Arkansas, Kansas, Missouri, Oklahoma, and Texas. Telephone
publishes and provides the "white pages" to its telephone
customers. In order to publish the white pages Telephone must
compile and maintain a database of names, addresses, and telephone
numbers of all its customers. This compilation is known in the
telecommunications world as directory listing information (DLI).
Southwestern Bell Yellow Pages (Yellow Pages), another wholly
owned subsidiary of SWB, licenses DLI1 from Telephone for use in
publishing its classified, or yellow pages, directory. Telephone
licenses DLI to independent publishers, such as Great Western and
Canyon. Great Western is based in Amarillo, Texas and publishes a
competing yellow pages (classified) directory in eleven cities in
Texas and Oklahoma. Canyon publishes a single directory in Canyon,
Texas (near Amarillo). Canyon is a "niche" publisher whose
directory caters to local advertisers who do not need to advertise
outside of their immediate geographic area.
III. Facts
1
DLI is provided in a variety of formats. One form is known
as the "book on the street" paper or "BOS-paper". BOS-paper is a
published compilation of names, addresses and telephone numbers,
that is, the white pages. Another format is known as "subscriber
listing update service" (update service). The update service
consists of two components. The first component, the "initial
load", is a copy of Telephone's DLI on magnetic tape as of a
given date. The second component, the "updates", is a monthly
update of the initial load.
3
Appellants and Appellees paint distinctly different pictures
of the facts in this case. However, some facts are uncontested.
In June 1988 Yellow Pages improved its classified directories in
certain markets and instituted a rate reduction in Amarillo. The
rate reduction consisted of a 40% across-the-board reduction in
advertising rates as well as various incentives enabling
advertisers who maintained existing expenditure levels to receive
additional advertising. Effective January 1, 1989, Telephone
increased its DLI prices from $0.30 to $0.50 for the initial load,
and the update to $1.00.
The incidents leading up to the rate reduction and the DLI
price increase are hotly contested as are the effects. Appellants
and Appellees each give their own economic explanation of the
causes and effects of the changes instituted by SWB. Briefly,
Appellees contend SWB adopted a strategy to eliminate the
competition and slow their declining market share. This was
accomplished by a two-prong attack—raising the prices and imposing
restrictive conditions on the sale of the DLI, while at the same
time improving the quality of telephone directories published by
Yellow Pages and reducing the prices charged for the
advertisements. Because Great Western operates at a low marginal
profit of two percent of its sales, reflecting its emphasis on
expansion, the change in DLI prices forced Great Western out of its
Richardson market and prevented it from entering its Little Rock
market.
Appellants, on the other hand, contend that Yellow Pages'
4
share of the advertising directory market was shrinking, and
accordingly made improvements to their directories and instituted
a rate reduction of 40% in Amarillo on a trial basis. Pursuant to
studies conducted of DLI prices in other markets, Telephone decided
to increase its DLI price. Appellees continued to compete; in
fact, Appellees' revenues and market shares increased after the DLI
price change. Great Western's decision to abandon Richardson and
not to enter Little Rock was based on their fear that SWB would
increase its DLI prices in the future.
IV. Summary of the Law
Standard of Review
This Court reviews a district court's refusal to grant a
judgment as a matter of law de novo, applying the same standards as
the district court. The trial court, in entertaining a directed
verdict, views the evidence in the light most favorable to the
party against whom the motion is made. On appeal, this Court must
consider the evidence in its strongest light in favor of the party
against whom the motion was made, and must give him the advantage
of every fair and reasonable intendment that the evidence can
justify.2 A judgment notwithstanding the verdict (JNOV) should be
granted by the trial court
only when the facts and inferences point so strongly and
overwhelmingly in favor of the moving party that a reasonable
juror could not arrive at a contrary verdict, [while] viewing
the facts in the light most favorable to the nonmovant and
giving that party the advantage of every fair and reasonable
2
Continental Ore Co. v. Union Carbide Corp., 370 U.S. 690,
696, n. 6, 82 S.Ct. 1404, 1409, n. 6, 8 L.Ed.2d 777 (1962).
5
inference that the evidence justifies.3
Antitrust Law
Appellees raised two Section 2 claims: monopoly and attempted
monopoly. They contend that Appellants violated Section 2 under
both of these theories by abusing an essential facility and through
market leveraging. The jury returned a verdict in favor of
Appellees finding that:
(1) defendants monopolized and attempted to monopolize the
alleged relevant markets for telephone directory advertising
by denying reasonable access to an essential facility, that
is, Telephone's DLI;
(2) defendants monopolized the same alleged markets by
leveraging monopoly power over DLI in an illegal restraint of
competition in the telephone directory advertising markets;
and
(3) defendants attempted to monopolize the alleged telephone
directory advertising markets by increasing the price of DLI
to Yellow Pages and its competitors while at the same time
substantially reducing Yellow Pages' rates for telephone
directory advertising and substantially enhancing its
directories.
The offense of monopoly under Section 2 consists of two
elements: (1) possession of monopoly power in the relevant market,
and (2) willful acquisition or maintenance of that power as opposed
to acquiring market dominance through competitively desirable means
or through events beyond its control.4 Monopoly power is the power
to control prices or exclude competition.5 Several factors are
3
Spuler v. Pickar, 958 F.2d 103, 105 (5th Cir.1992).
4
United States v. Grinnell Corp, 384 U.S. 563, 570-71, 86
S.Ct. 1698, 1704, 16 L.Ed.2d 778 (1966).
5
United States v. E.I. duPont de Nemours & Co., 351 U.S.
377, 391, 76 S.Ct. 994, 1005, 100 L.Ed. 1264 (1956).
6
determinative of a finding of monopoly power: high market share,6
affirmative actions that have excluded actual or potential
competitors, profit levels, and barriers that would thwart entry.7
It should be noted that the purpose of the market definition and
market power inquiry is to determine whether an arrangement has the
potential for genuine adverse affects on competition. Proof of
actual detrimental effects can obviate the need for the inquiry
into market power.8
In addition to establishing the existence of monopoly power,
it must be demonstrated that the defendant "willfully" acquired or
maintained its monopoly power. This involves an inquiry as to
whether the defendant has acquired or exploited its monopoly power
through competitively undesirable means. What are undesirable
means? The responses of the courts were to distinguish between
those exclusionary effects that are inherent in the forces of free
competition and those that are substantially enhanced or made
possible by the possession and exploitation of monopoly power.
Specific intent to maintain a monopoly power is not required;
however, it is relevant in determining whether the challenged
conduct is exclusionary or anticompetitive.
An attempted monopoly in violation of Section 2 consists of
6
Eastman Kodak Co. v. Image Technical Services, Inc., 504
U.S. 451, 481-83, 112 S.Ct. 2072, 2090, 119 L.Ed.2d 265 (1992).
7
WILLIAM C. HOLMES, ANTITRUST LAW HANDBOOK, 352-53 (1994
ed.).
8
FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 106 S.Ct.
2009, 90 L.Ed.2d 445 (1986).
7
3 elements: (1) a showing that the defendant has engaged in
predatory or anticompetitive conduct, (2) proof that the defendant
specifically intended to acquire monopoly power in the relevant
market, and (3) a dangerous probability that an actual monopoly
position will ultimately be achieved. Predatory or anticompetitive
conduct is that which unfairly tends to be exclusionary or tends to
destroy competition. Specific intent is the intent to accomplish
the forbidden objective, an intent that goes beyond the mere intent
to do the act. Intent may be inferred by anticompetitive practices
or proven by direct evidence. Dangerous probability of achieving
an actual monopoly position is customarily assessed by looking at
the defendant's market share. If the defendant possesses a large
share, it will likely be concluded that the defendant's conduct, if
undeterred, will result in an actual monopoly.9 Control of key
materials is also determinative.
V. Discussion
Exclusionary Conduct
Appellants argue that under both a monopoly or attempted
monopoly theory, Appellees must show that Appellants' conduct was
improperly exclusionary, that is, that the conduct caused injury to
9
See e.g. Advanced Health Care Serv. v. Radford Comm. Hosp.,
910 F.2d 139 (4th Cir.1990) (85 percent); Movie 1 & 2 v. United
Artists Communications, Inc., 909 F.2d 1245 (9th Cir.1990) (96
percent); United States v. American Airlines, Inc., 743 F.2d
1114 (5th Cir.1984). In contrast, proof that the defendant's
share is minimal will result in a finding that an actual monopoly
is improbable. See, e.g., Langenderfer, Inc. v. S.E. Johnson
Co., 917 F.2d 1413 (6th Cir.1990) (30 percent declining share);
C.A.T. Industrial Disposal, Inc. v. Browning-Ferris Industries,
884 F.2d 209 (5th Cir.1989) (10 percent market share insufficient
as a matter of law).
8
competition.10 Because Canyon and Great Western continued to profit
after the price increase, and because Great Western could have
profitably expanded, Appellants argue there is no evidence to show
that Appellants' conduct was exclusionary. This is Appellants'
main argument and it is pervasive throughout its brief.
Appellants contend that in order for Appellees to succeed
under a Section 2 antitrust claim, they must present evidence of
injury to competition. This is not entirely true. Section 2,
under both a claim of monopoly and a claim of attempted monopoly,
proscribes exclusionary conduct. Injury to competition is NOT an
element of Section 2. "[P]roving an injury to competition is not
an element of a monopolization-based antitrust claim."11 However,
as a practical matter, evidence of an injury must exist if
Appellees are to obtain damages.12 Additionally, evidence of injury
to competition supports a finding of exclusionary conduct.
Nevertheless, the proper inquiry is whether Appellants engaged in
exclusionary, anticompetitive, or predatory conduct.
Exclusionary conduct is conduct that tends to exclude or
restrict competition and is not supported by a valid business
10
Although the jury found Appellant liable under several
theories of antitrust law, including monopoly, attempted
monopoly, leveraging, and unreasonable denial of an essential
facility; the briefs focus on the issue of exclusionary conduct
and anticompetitive effect. Because exclusionary conduct is the
linchpin in this case, we will focus upon it.
11
Mahone v. Addicks Utility Dist. of Harris County, 836 F.2d
921, 939 (5th Cir.1988).
12
See id. (recognizing that Section 4 of the Clayton Act
comes with a specific injury requirement).
9
reason. Exclusionary conduct comprehends behavior that not only
tends to impair the opportunities but also does not further
competition on the merits or does so in an unnecessarily
restrictive way.13 An attempt to exclude or actual exclusion is
conduct based on something other than efficiency, that is, without
a valid business purpose. Antitrust law does not require a
plaintiff to prove that the defendant's conduct totally eliminated
all competition or made it so unprofitable as to eliminate the
plaintiff as a competitor. The plaintiff is required to show that
a monopolist's unjust conduct handicapped its competitors.14 It is
not necessary to exclude competitors to be guilty of
monopolization.15
Appellants' argument, that the DLI price increase had no
adverse effect on competition and was not exclusionary, is not
supported by the evidence taken in the light most favorable to
Appellees. Appellees identify extensive evidence, if believed by
the jury, that precludes a judgment as a matter of law. First, a
jury could find that SWB's purpose in raising the DLI price and
imposing more restrictive terms was to recapture its market share,
13
Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S.
585, 605 n. 32, 105 S.Ct. 2847, 2859 n. 32, 86 L.Ed.2d 467
(1985).
14
Aspen Skiing Co., 472 U.S. at 605, 105 S.Ct. at 2858.
15
Hanover Shoe v. United Shoe Machinery Corp., 392 U.S. 481,
496, 88 S.Ct. 2224, 2233, 20 L.Ed.2d 1231 (1968); see also
Poster Exchange v. National Screen Service Corp., 431 F.2d 334,
339 n. 13 (5th Cir.1970) (holding that a monopolist's decision to
charge retail prices to competing wholesaler was unlawful if done
"to gain a competitive advantage").
10
to prevent expansion of current independents, and to prevent new
independents from entering the market. SWB identified one of its
competitive weaknesses as "low start-up costs" for independents.
"Competitor's low margin and high risk strategy leaves [them]
vulnerable to expense driven attacks."16 The only cost or expense
for independents that SWB controlled was the price of DLI. SWB
long since recognized that DLI was "vital to the publishing
industry" and "without sharing this updated information with
competing directory publishers, telephone companies are able to
leverage their monopoly position in the telephone service area into
the competitive directory market."17 Most telling is the evidence
indicating that Kaufman, Yellow Pages' president, suggested a DLI
price increase.18 An expert of economics testified that increasing
Yellow Pages' own cost of production was "economically irrational
but for its anti-competitive effect [on independents]."19 Later,
Kaufman questioned why the DLI had been raised to $1.00 when it
could have been even higher so that "we might [be able] to ... get
16
Although the planning documents from which these quotes
were taken do not specifically recommend increasing the price of
DLI, a jury could easily make the inferential hop.
17
Affidavit of former Yellow Pages President A.C. Parsons.
18
Several individuals testified at trial that Kaufman
suggested looking into DLI prices to increase Telephone's
revenues.
19
SWB argues on appeal that by passing this cost on to the
independents, it can thereby reduce the amount of basic telephone
service to its customers. This was argument was not presented to
the jury and the district court found it meritless, as do we. We
cannot say as a matter of law that this post-trial explanation
accurately stated the true purpose and effect of the DLI price
increase.
11
rid of some publishers." A jury could find that by raising the
cost of production SWB intended to "get rid of" some of the low
margin competitors, and thereby, capture even more of the directory
market.
In Lehrman v. Gulf Oil Corp.20 this Court discussed the
difficulty of determining whether a business's practices are
anticompetitive.
Few business practices are anticompetitive on their face....
The circumstances surrounding the use of a particular business
practice give strong clues as to what those who employ the
practice hope to accomplish by it, and what those individuals
hope to accomplish may shed light on whether the practice does
in fact have the hoped for ... anticompetitive effect. In
short, when a firm displays an anticompetitive animus in the
operation of an otherwise ambiguous business practice, what
the firm seeks to accomplish provides as sure an indicator of
the actual effect of the practice on competition as can be
found in the shifting sands of antitrust litigation.
There is some evidence, from studies undertaken by SWB and comments
made by Kaufman, that the price increase was intended to restrict
the competition. Appellants argue correctly that this is not a
substitute for exclusionary conduct or injury to competition.
Nevertheless, it is one more "indicator" of SWB's exclusionary
conduct the jury can take into account.
Second, there is evidence that other Companies' DLI prices
were only one-third of the price Telephone was charging, and that
the terms at which SWB offered the listings were restrictive. For
small independents, like Canyon, SWB's required purchase of the
entire directory even if the publisher only wanted small portions
20
464 F.2d 26, 38 n. 9 (5th Cir.), cert. denied, 409 U.S.
1077, 93 S.Ct. 687, 34 L.Ed.2d 665 (1972).
12
of the listings, substantially increased the fixed costs of
operation. Independents were required to purchase both the
residential and business updates; independents also had to
contract to take updates for a period of two years; and if the
publisher stopped taking updates within the two years, the
publisher could not obtain listings again for another two years.21
Third, the evidence supports a finding that Appellants'
conduct had an anti-competitive effect on the market. Both the
number of publishers' licensing listings and the number of
competitive directories sharply declined. The price increase
threatened to put Canyon out of business, forced it to increase
prices to advertisers—adversely affecting the consumer, and reduced
its number of customers. The change contributed to Great Western's
decline in profit margin, forced its withdrawal from Richardson,
forced it to abandon its plans to enter Little Rock, and halted its
historical pattern of entering two to three markets per year.
Canyon's and Great Western's continued survival does not preclude
them of a remedy.
The crux of Appellants' argument is the contention that
Appellees failed to show an antitrust injury. Appellants contend
that Great Western not only profited after the DLI price increase,
but its profits increased over the previous year. Appellees
21
After the district court questioned the two year
requirement at a preliminary injunction hearing, SWB reduced the
two year obligation to two months. For the two month period
independents had to purchase both business and residential
listings, thereafter, they could purchase updates for business
only or both.
13
maintain that the DLI price increased the costs of listings to
Great Western as percentage of its sales from 1.87% to 4.56%,
exceeding Great Western's 2% profit margin. In other words, Great
Western could not maintain its previous increasing rate of
expansion and retain its 2% marginal profit. The issue becomes
whether this is an injury. Appellees' profits increased in 1989,
just not as much as they would have; and for a low profit margin
competitor, the price increase halted Great Western's expansion.
Pierce v. Ramsey Winch Co.22 is helpful in shedding light upon
this issue. In Pierce the plaintiff was a distributor of, among
other things, Ramsey cranes. Because Pierce bought the cranes at
a substantial discount, due to large purchases made in cash, Pierce
was able to sell them individually at a lower price than the
manufacturer Ramsey. Therefore, Ramsey refused to supply them to
Pierce. Pierce proceeded to buy them from another manufacturer and
also focused on other products. After the supply termination,
Pierce was able to operate at a profit level even higher than when
selling Ramsey cranes. This Court held that despite the increase
in profit, Pierce could still establish an antitrust injury by
showing it would have earned an even higher profit selling Ramsey
cranes but for the actions of Ramsey. Appellees argue analogously
that they suffered a similar injury; but for SWB's DLI price
increase, Great Western and Canyon would have earned an even higher
profit.
The issue before this Court is whether Great Western and
22
753 F.2d 416, 436 (5th Cir.1985).
14
Canyon suffered an antitrust injury despite an increase in profit.
We find that they did. There is sufficient evidence of
exclusionary conduct and intent to exclude. This evidence coupled
with the fact that Appellees, low profit margin competitors, could
have profited more than they did leads this Court to conclude that
these actions were sufficient to establish an antitrust injury
under Pierce.
Opportunity Lost
Appellants contend the district court erred in denying its
motion for directed verdict against Great Western for two reasons.
First, Great Western's fear of future price increases is too
speculative to support a damage award for abandoning the Richardson
market and failing to enter the Little Rock market. Second, Great
Western has no standing to sue for its failure to enter Little
Rock. We will discuss each in turn.
There is no evidence, Appellants argue, that Great Western
could not compete in Little Rock and Richardson at the existing DLI
prices. In fact, the district court acknowledged that it was the
fear of future price increases, not present DLI prices, that forced
Great Western to abandon Richardson and Little Rock. Great
Western's claims are not ripe. Appellants contend if Telephone
raised DLI prices to exclusionary levels in the future, then Great
Western would be entitled to relief.
The court instructed the jury not to award damages unless they
were in fact attributable to the alleged wrongful conduct. The
jury could find and the court did find that the enhanced investment
15
risk was a material cause of Great Western's abandonment of
Richardson and failure to enter Little Rock. Additionally, this
Court stated that in cases where the defendant's acts are motivated
by intent to injure the plaintiff, the inferential leap to the
finding of fact of damage is not great.23 The district court found
"the harm to Great Western and to fair competition was caused by
what Defendants did and by what Great Western knew they wanted to
do, would do, and could continue doing without legal redress being
sought." The evidence reveals that SWB had tripled its DLI prices
twice within four years and implemented conditions designed to
deter new entry. An expert witness testified that investment
decisions necessarily take into account risk. The value of a
Little Rock entry before the DLI increase was reasonably certain,
but not guaranteed. By increasing the risk to new entrants, SWB
raised barriers to entry. Great Western not only had to consider
present elevated DLI prices but also the risk of future increases
over the three year period it takes to enter the market.
Appellant cites several old non-Fifth Circuit cases for the
proposition that a plaintiff cannot obtain damages that are to be
suffered in the future.24 These cases are distinguishable. The
23
Affiliated Capital Corp. v. City of Houston, 735 F.2d
1555, 1565 (5th Cir.1984) (en banc).
24
Flintkote v. Lysfjord, 246 F.2d 368, 395 (9th Cir.), cert.
denied, 355 U.S. 835, 78 S.Ct. 54, 2 L.Ed.2d 46 (1957);
Connecticut Importing Co. v. Frankfort Distilleries, Inc., 101
F.2d 79, 81 (2d Cir.1939); Bailey's Bakery, Ltd. v. Continental
Baking Co., 235 F.Supp. 705, 716-17 (D.Haw.1964), aff'd, 401 F.2d
182 cert. denied, 393 U.S. 1086, 89 S.Ct. 874, 21 L.Ed.2d 779
(1969).
16
evidence reveals that SWB's conduct elevated the risk of entry into
the respective markets now, not in the future, to such a degree
that a jury could find the risk of entry prevented Great Western
from entering the markets. As the district court stated it was
what SWB did and what it could and would continue to do that caused
injury.
Appellants' second argument is based on standing. Appellants
contend Great Western has no standing to sue for abandoning its
plans to enter the Little Rock market unless it can establish a
business or property interest protected by Section 4.25 To
establish this interest, Great Western must show that it intended
and was prepared to enter the market. Jayco Systems, Inc. v. Savin
Business Machines Corp., 777 F.2d 306, 313-314 (5th Cir.1985),
cert. denied, 479 U.S. 816, 107 S.Ct. 73, 93 L.Ed.2d 30 (1986).
Ample evidence exists in the record of Great Western's intent to
enter the Little Rock market. Appellee had begun investigations
into the market, and had set a 1989 date for publication of a
Little Rock directory. However, there is not substantial evidence
that Great Western was prepared to enter the Little Rock market.
In assessing a company's preparedness to expand, courts have
25
Great Western alleges that SWB never raised the issue of
preparedness in any of its motions for directed verdict, thus
permitting this Court to review for plain error only.
Preparedness, though, is only an element of standing under the
antitrust claims. SWB expressly challenged the appellee's
standing under antitrust in its motions for directed verdict.
SWB also stated in its discussion of Great Western's tortious
interference claim that Great Western was unprepared to enter the
Little Rock Market. Regardless of the standard of review, Great
Western put on no evidence of key aspects of standing as will be
discussed.
17
looked to several factors: the ability of the plaintiff to finance
the business and purchase the necessary facilities and equipment,
consummation of contracts by the plaintiff, affirmative action by
the plaintiff to enter the business, and background and experience
in the prospective business. Id.26
This Circuit has typically found lack of standing where a
plaintiff lacked evidence on all the preparedness factors. Id. at
315-316 (plaintiff showed no ability to obtain financing); Hayes,
597 F.2d at 974-975 (plaintiff failed to prove ability to finance
or contracts made); Martin, 365 F.2d at 634 (plaintiff failed to
prove any of the four factors).27 While we do not hold that every
plaintiff in every case must show all four of the factors to merit
standing, we find Great Western's showing to be insubstantial.
While Great Western has experience, there is no evidence of
affirmative steps taken, contracts made or financing arranged in
preparation to enter the Little Rock market. The sum total of
Great Western's preparation was review of pricing information, two
26
See also Hayes v. Solomon, 597 F.2d 958, 973 (5th
Cir.1979), cert. denied 444 U.S. 1078, 100 S.Ct. 1028, 62 L.Ed.2d
761 (1980); Martin v. Phillips Petroleum Corp., 365 F.2d 629,
633-34 (5th Cir.), cert. denied 385 U.S. 991, 87 S.Ct. 600, 17
L.Ed.2d 451 (1966); Gas Utilities Co. v. Southern Natural Gas
Co., 996 F.2d 282, 283 (11th Cir.1993), cert. denied, --- U.S. --
--, 114 S.Ct. 687, 126 L.Ed.2d 654 (1994); Curtis v. Campbell-
Taggart, 687 F.2d 336, 338 (10th Cir.), cert. denied, 459 U.S.
1090, 103 S.Ct. 576, 74 L.Ed.2d 937 (1982).
27
Accord Gas Utility Co., 996 F.2d at 283 (lack of
preparedness to enter new market when no contracts consummated
and no financing); Curtis, 687 F.2d at 338 (experience in
proposed business operation, unaccompanied by contracts and
financing, not enough to establish "business or property"
interest).
18
visits to Little Rock by a corporate officer and setting of a
publication date. Great Western has only demonstrated that it
intended to enter the market, not that it was prepared to do
business there.
Great Western urges us to find its situation analogous to that
of the plaintiff in Heatransfer Corp. v. Volkswagenwerk A.G. where
we found standing in absence of all four of the factors of
preparedness for a plaintiff who intended to expand production, not
move into a new market. 553 F.2d 964, 988 n. 20 (5th Cir.1977).28
The plaintiff in Heatransfer had standing in absence of all four
factors of preparedness because little preparation was needed. No
significant modification of plaintiff's production facilities was
necessary for its expansion. Nor did plaintiff need to obtain new
contract rights or additional sources of financing. Id.
In contrast, for a plaintiff moving into a new market, such as
Great Western, the showing of preparedness is fundamental. We
stated that,
"even though an antitrust plaintiff operates a going concern,
he must demonstrate his preparedness and intent to expand that
business into a new market if he claims that the expansion of
that business into a new market has been foreclosed to him by
the monopolistic activities of the defendant." Id.
Great Western was not in the position of the plaintiff in
Heatransfer. There were significant barriers to entry to the
Little Rock market. Costs to enter the market were estimated at
$1.6 million. Additionally, Great Western would have had to
28
See also Cable Holdings v. Home Video, 825 F.2d 1559, 1562
n. 3 (11th Cir.1987) (citing Heatransfer with approval).
19
establish a new customer base and new contracts. Under these
facts, Great Western cannot claim that little or no preparation was
required.
Great Western argues that "its plans to enter Little Rock
were kept secret" to prevent entrenchment in the market by SWB.
However, this Court's eyes are open only to what is in the record.
We will not attempt to divine Great Western's machinations but will
look to what the company actually did in preparation. Preparation
is an element for standing under Section 4 and Great Western did
little. Because Great Western was not prepared to enter the Little
Rock market, it had no standing to protect an alleged interest in
that market. We reverse and remand to the District Court with
instructions to dismiss the Little Rock claim.
Injunction
We review the propriety of a district court's decision to
issue a permanent injunction for an abuse of discretion.29 The
factual underpinnings are reviewed for clear error, while the
application of legal principles is reviewed de novo.30 For the
29
Securities & Exchange Commission v. MacElvain, 417 F.2d
1134, 1137 (5th Cir.1969) (finding that the district court did
not abuse its discretion in entering a permanent injunction),
cert. denied, 397 U.S. 972, 90 S.Ct. 1087, 25 L.Ed.2d 265 (1970).
30
The district court apparently adopted Appellee's proposed
findings in support of the injunction. Such findings merit
heightened scrutiny. Falcon Constr. Co. v. Economy Forms Corp.,
805 F.2d 1229, 1232 (5th Cir.1986) ("A district court that adopts
one party's suggested findings essentially verbatim leaves doubt
whether it has discharged its duty to review the evidence for
itself and reached its decision on the basis of its own
evaluation for the evidence rather than that of an advocate.").
20
reasons discussed below, we affirm the district court's decision to
issue the permanent injunction.
Appellants contend that the district court erred in granting
Appellees' injunctive relief because (a) Appellee failed to show
the requisite threatened loss or damage, (b) the evidence was
insufficient to support Appellees' claim that the updates were
essential and the update prices prohibited new entry, and (3) there
is no basis for the 13.5 cent amount. Section 16 of the Clayton
Act empowers federal courts to grant an injunction "against
threatened loss or damage by a violation of the antitrust laws."
Appellants' argument is merely more of the same—there is no
evidence of a threatened loss. The evidence is sufficient to
support a finding that the updates were properly included in the
instructions. Testimony from Richard O'Neal, Great Western's
founder,31 corroborated by SWB business plans32 explained the need
to maintain current information through updates. In determining
the 13.5 cent price the district court considered the average price
per listing charged by other regional Bell operating companies, the
effect it would have on basic telephone ratepayers, and the costs
of providing the data to independents. Appellant complains that by
imposing such a low price, the district court is in effect forcing
telephone customers to subsidize operations of the independent
31
Richard O'Neal stated the updates are essential for the
independents to call on new businesses and to distribute new
directories.
32
Former Yellow Pages president explained that directory
publishers need updated information to develop sales leads and to
deliver directories to newly connected users.
21
directories. The cost of compiling and maintaining the DLI falls
squarely upon the ratepayers, when it should be shared more by
independents who pay merely pennies more than the cost of copying
the data. However, any regulated business can make the same
argument and courts nevertheless have uniformly applied antitrust
laws to them.33 Additionally, the district court could find that
the 13.5 cent price provided an adequate margin over costs.
On cross-appeal, Great Western and Canyon argue that the
injunction should apply across the five state market and not merely
where the plaintiffs are located. Broader relief embraces the
public interest served by private antitrust lawsuits,34 while narrow
relief places the plaintiffs in a preferred status over its
competitors.35 Furthermore, Appellees contend that if Great Western
could not expand, neither could any other independent.
The district court narrowed its injunction because it found
that the evidence in this case did not justify injunctive relief in
markets other than where the plaintiffs compete. No evidence of
direct harm in these markets was provided. Also, the district
court recognized that it can grant injunctive relief to non-parties
but only if necessary to give the named plaintiffs the continuing
33
See e.g., OtterTail Power Co. v. United States, 410 U.S.
366, 372-75, 93 S.Ct. 1022, 1027-28, 35 L.Ed.2d 359 (1973);
Alameda Mall, Inc. v. Houston Lighting & Power Co., 615 F.2d 343,
353-54 (5th Cir.1980).
34
See Wilk v. American Medical Association, 671 F.Supp. 1465
(N.D.Ill.1987), aff'd, 895 F.2d 352 (7th Cir.1990).
35
See Loew's Inc. v. Milwaukee Towne Corp., 201 F.2d 19, 22-
23 (7th Cir.1952), cert. denied, 345 U.S. 951, 73 S.Ct. 865, 97
L.Ed. 1374 (1953).
22
relief to which they are entitled.36 We find no error requiring
reversal.
We AFFIRM the court below in every respect with the exception
that we REVERSE the claim of Great Western with regard to its
entering the Little Rock market. The court below will make the
necessary changes in its judgment because of the dismissal by us of
the Little Rock claim of Great Western.
36
See Professional Ass'n of College Educators v. El Paso
County Community College Dist., 730 F.2d 258, 274 (5th Cir.),
cert. denied, 469 U.S. 881, 105 S.Ct. 248, 83 L.Ed.2d 186 (1984).
23