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In re Japanese Electronic Products Antitrust Litigation Zenith Radio Corp.

filed: December 12, 1986.



Author: Gibbons


GIBBONS, Circuit Judge:

Before: SEITZ, GIBBONS, and MESKILL*, Circuit Judges

n* Hon. Thomas J. Meskill, United States Circuit Judge for the Second Circuit, sitting by designation.

This matter is before us on remand from the Supreme Court, Matsushita Electric Industrial Co. v. Zenith Radio Corp., U.S. , 475 U.S. 574, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). The plaintiffs, American manufacturers of consumer electronic products, sued Japanese manufacturers of such products, alleging antitrust and antidumping violations of American law. The district court granted summary judgment in favor of all defendants on all claims. Zenith Radio Corp. v. Matsushita Electric Industrial Co., 494 F. Supp. 1190 (E.D. Pa. 1980) (granting summary judgment on the 1916 Antidumping Act claims), 513 F. Supp. 1100 (E.D. Pa. 1981) (granting summary judgment on the conspiracy claims). Exercising the plenary review appropriate for summary judgment cases, this court in two separate opinions affirmed in part and reversed in part. In re Japanese Electronic Products, 723 F.2d 238, 723 F.2d 319 (3d Cir. 1983). The defendants in whose favor summary judgments were not affirmed petitioned for certiorari. The Supreme Court granted certiorari on the antitrust segment of the case, which involved claims under Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2 (1982). The Supreme Court judgment, dated March 26, 1986, provides:

THIS CAUSE came on to be heard on the transcript of the record from the [United States Court of Appeals for the Third Circuit] and was argued by counsel.

ON CONSIDERATION WHEREOF, it is ordered and adjudged by the Court that the judgment of the above court in this cause is reversed with costs, and that this cause is remanded to the United States Court of Appeals for the Third Circuit for further proceedings in conformity with the opinion of this Court.

Although we dealt with the Sherman Act claims and the claims under the Antidumping Act of 1916, 15 U.S.C. § 72 (1982), in two separate opinions, this court entered a single judgment. This judgment has now been reversed and remanded by the Supreme Court, with a direction that "this cause" be remanded for further proceedings in conformity with its opinion. Thus it appears that we are directed to reconsider not only the Sherman Act claims, but the entire case. Complicating the picture further, the opinion of the Supreme Court provides:

On remand, the Court of Appeals is free to consider whether there is other evidence that is sufficiently unambiguous to permit a trier of fact to find that petitioners conspired to price predatorily for two decades despite the absence of any apparent motive to do so.

106 S. Ct. at 1362. This language also appears to suggest that we must reconsider the Antidumping Act claims on which the Supreme Court did not grant certiorari, as well as the Sherman Act claims which it did review. We find this suggestion to be somewhat confusing since the Supreme Court had the very same summary judgment record before it that this court had considered, and does exercise the same plenary review of the propriety of the district court summary judgment.

Faced with a seemingly ambiguous direction, this court directed the parties to file briefs addressing: a) the appropriate disposition of the case in light of the Supreme Court direction on remand; b) whether the law with respect to permissible inferences of concert of action announced by the Court for Sherman Act claims applies to concert of action issues arising under other statutes, such as the Antidumping Act of 1916; and c) what disposition should be made of the Antidumping Act claims if these inferences do apply. We now conclude: (1) that the Sherman Court's direction that this court may consider "other evidence" means that other evidence already in the summary judgment record may be considered; (2) that there is no evidence in the record supporting an inference of a predatory pricing conspiracy among the defendants in the American market other than than which the Supreme Court has already held to be legally insufficient; and (3) that the Supreme Court's holding that there is insufficient evidence of a conspiracy to price predatorily in the American market requires the affirmance of the summary judgment on the Antidumping Act claim.

The conspiracy on which the plaintiffs rely in support of their Sherman Act claims is a horizontal conspiracy among Japanese manufacturers of consumer electronic products to maintain artificially high prices in the Japanese home market to help support sales at low prices in the American export market, thereby injuring American manufacturers competing with them in the latter market. When this court first reviewed the summary judgment record, we concluded it permitted findings that there are high entry barriers in the Japanese home market; that the Japanese manufacturers have higher fixed costs and higher debt-equity ratios than their American counterparts; that the Japanese manufacturers, individually and in the aggregate, created higher plant capacities than could reasonably be absorbed by the Japanese home market, thereby creating an incentive to dispose of the excess capacity in a market outside Japan. 723 F.2d at 238. We also concluded that there is direct and circumstantial evidence of an agreement to stabilize Japanese home market prices to realize the profits needed to support sales at low prices in the United States. Id. at 309. Despite these conclusions, the Supreme Court conclusively held that the defendants "had no motive to enter into the alleged conspiracy." 106 S. Ct. at 1360. In addition, this court previously referred to evidence that the defendants' export sales generally were at prices which produced losses, often as high as twenty-five percent on sales. 723 F.2d at 311. We also noted that the five-company rule permitted an inference that allocation of customers in the United States, combined with price fixing in Japan, was intended to concentrate the effects of dumping upon American competitors while eliminating competition among the Japanese manufacturers in either market. Id. The Supreme Court, however, conclusively held that "in light of the absence of any rational motive to conspire, neither [defendants'] pricing practices, nor their conduct in the Japanese market, nor their agreements respecting prices and distribution in the American market, suffice to create a 'genuine issue for trial.'" 106 U.S. at 1362. These holdings are the law of the case and are binding on this court. Consequently, the plaintiffs are now foreclosed from arguing that there was a motive to enter into the alleged conspiracy. They are also foreclosed from arguing that the direct and circumstantial evidence to which this court referred in its prior opinion is sufficient to overcome a motion for summary judgment. What is left open by the Supreme Court's remand, therefore, can only be a consideration of evidence other than pricing practices in the American market, conduct in the Japanese market, and agreements respecting customer allocation in the American market. Such evidence, moreover, must suffice to overcome the law of the case that there was no motive to conspire.

Plaintiffs' brief on remand essentially argues that the Supreme Court misunderstood their case when it assumed that their conspiracy theory was an alleged agreement to sell in the United States below cost -- a conspiracy the Supreme Court deemed economically senseless. Instead, plaintiffs now contend that the conspiracy was one to sell in the American market at below the competitive market price, but above marginal cost. Manufacturers with excess capacity and high fixed costs, plaintiffs contend, have a rational motive to enter into such a conspiracy. This argument, ...

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