before us would be eliminated more quickly by such competition than by litigation." Id. at 983; see also Antitrust Law, Volume IIA, Section 4C.
Hasbro, relying on recent market participants, claims that barriers to entry into the family board game market are low, precluding a finding that it has market power. Hasbro points out that a common trade magazine publishes the names of companies and individuals who can assist in the development, production, and marketing of a new game, indicating that even a manufacturer with little experience in the industry could introduce a game. (Orbanes Decl. P 26.) In addition, the president of Hasbro's Games Group, E. David Wilson, claims, and AMI does not dispute, that most successful games in recent years were introduced by small independent game manufacturers. (Wilson Decl., 6-12-96, PP 3-4.) Wilson cites as examples, Mindtrap, Advertising, Where in the World is Carmen San Diego?, Brain Quest, Pictionary, and Trivial Pursuit. (Id.; see also Angel Decl. PP 5-9 (development of Pictionary); Hesch Decl. P 8 (development of Out of Context); Ware Decl. PP 3-13 (development of Trivial Pursuit).)
AMI does not refute Hasbro's historical data, but contends in conclusory fashion that "the current board game market is rigged against potential non-Hasbro-developed staples getting a foothold in the market. Therefore, the frequency of success of new games becoming staples cannot be determined on the basis of past history." (Anspach Decl., 7-15-96, at P 45). It further claims that a successful competitor must be able to place its games in the mass retailers, which requires substantial capital investment for marketing and advertising. (AMI Oppos. Mem. 10; Second Am. Compl. P 15(D); Harrington Decl. Ex. 6, at 2; Anspach Decl., 7-15-96, PP 32-33.) AMI also points out that the attendant risk associated with introducing a new game discourages new entrants.
The Court notes that AMI's evidence relating to barriers to entry is nonspecific and largely speculative, while Hasbro's evidence is based on actual market participants. Unrebutted evidence that actual competitors have entered the market is a strong indicator that Hasbro lacks market power. See Antitrust Law, Volume IIA, PP 420b, 422c. This follows because these new entrants provide a check on Hasbro's ability to charge monopoly prices or otherwise exercise market power. In the face of Hasbro's evidence that most of the recent, successful board games have been introduced by small, independent game manufacturers, AMI has failed to set forth facts to show that barriers to entry into the putative family board game market are high.
Nevertheless, the Court need not resolve the pending motions by finding that Hasbro lacks market power in the relevant market, which in any event is usually a question of fact, not law. Sunshine Cellular v. Vanguard Cellular Sys., 810 F. Supp. 486, 493 (S.D.N.Y. 1992) (citing Jennings Oil Co. v. Mobil Oil Corp., 539 F. Supp. 1349, 1352 (S.D.N.Y. 1982)). Indeed, experts are not always essential to defining the relevant market. See United States v. Pabst Brewing Co., 384 U.S. 546, 549, 16 L. Ed. 2d 765, 86 S. Ct. 1665 (1966) (government need not prove "by an army of expert witnesses what constitutes a relevant 'economic' or 'geographic' market"). Thus, the Court assumes, for the purposes of the instant motions, that Hasbro has market power in the family board game market.
C. Antitrust Standing
To recover damages under § 4 of the Clayton Act an antitrust plaintiff must show that it has antitrust standing. Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 74 L. Ed. 2d 723, 103 S. Ct. 897 (1983). To determine whether AMI has antitrust standing, the Court must "evaluate the plaintiff's harm, the alleged wrongdoing by the defendants, and the relationship between them." Id. at 535. In Associated General, the Supreme Court recognized a number of factors relevant to a determination of antitrust standing, including the nature of plaintiff's alleged injury. Id. at 538.
1. Alleged Discrimination
AMI has not clearly articulated how it is injured by Hasbro's allegedly discriminatory practices. To the extent that Hasbro charges smaller retailers more for Hasbro games than it charges the mass retailers, AMI is benefitted because it can more easily place Anti-Monopoly in these smaller retailers. To the extent AMI claims that Hasbro charges the mass retailers too little, its claim is simply one for predatory pricing and not for discrimination. (See Anspach Decl., 2-28-96, PP 15-23.)
AMI's argument appears to rely on the fact that the retail market for family board games is being consolidated by a few mass retailers. Because this consolidation is causing the smaller retailers to go out of business, AMI allegedly cannot succeed by selling to only the smaller retailers. The Court notes that if AMI's theory of injury to small retailers based on Hasbro's allegedly unjustified discriminatory conduct were correct, it is somewhat curious that the small retailers have not instituted an action on their own behalf. Moreover, AMI has not provided factual support for its claim that the purported retailer consolidation is related to the Hasbro practices about which AMI complains.
The Court finds that AMI's theory lacks factual support, and in any event is too indirect, speculative, and tenuous to support antitrust standing. See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 230-31, 125 L. Ed. 2d 168, 113 S. Ct. 2578 (affirming summary judgment where facts do not support plaintiff's theory); Associated General, 459 U.S. at 545-46 (recognizing that the tenuous and speculative nature of the relationship between alleged antitrust violation and injury, and the existence of more direct victims, weigh heavily against a finding of antitrust standing).
Because AMI lacks antitrust standing to pursue its discrimination claims, the Court grants Hasbro's motion for summary judgment as to all of AMI's claims to the extent they allege that Hasbro discriminated against smaller retailers in favor of the mass retailers.
2. Pricing Practices
Antitrust injury, a necessary component of antitrust standing, is "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 50 L. Ed. 2d 701, 97 S. Ct. 690 (1977); Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 110 n.5, 93 L. Ed. 2d 427, 107 S. Ct. 484 (1986). Absent predatory pricing, an antitrust plaintiff cannot complain that its competitor's prices are too low. In Atlantic Richfield, the Court explained:
When a firm, or even a group of firms adhering to a vertical agreement, lowers prices but maintains them above predatory levels, the business lost by rivals cannot be viewed as an "anticompetitive" consequence of the claimed violation. A firm complaining about the harm it suffers from nonpredatory price competition "is really claiming that it [is] unable to raise prices." . . . This is not antitrust injury; indeed, "cutting prices in order to increase business is the very essence of competition."
Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 337-38, 109 L. Ed. 2d 333, 110 S. Ct. 1884 (1990) (citations omitted).
To sustain its claim for predatory pricing, AMI must prove (1) that Hasbro's prices are below an appropriate measure of Hasbro's costs; and (2) that Hasbro had a dangerous probability (or a reasonable prospect under the Robinson-Patman Act) of recouping its investment in below-cost prices. Brooke Group, 509 U.S. at 222-24. AMI has not provided factual support for either element of a below-cost pricing antitrust claim. Instead, AMI theorizes that Hasbro can achieve instant recoupment by pricing Monopoly below cost. Hasbro allegedly achieves this instant recoupment when the consumer enters TRU to buy Monopoly, but then decides to buy another Hasbro product. (Anspach Decl., 4-3-96, PP 19, 27-31.) AMI's factually unsupported theory is not sufficient to support a claim. Id. at 230-43.
To the extent that AMI claims that Hasbro's discounts and other promotional allowances cause its prices to be too low, AMI has failed to show that it has suffered antitrust injury. This is true regardless of the statute under which AMI's antitrust claims are based. Atlantic Richfield, 495 U.S. at 340; see also Cargill, 479 U.S. at 116 (holding that plaintiff must show predatory pricing under § 7 of the Clayton Act); Brooke Group, 113 S. Ct. at 2587 (holding that predatory pricing claim under both § 2 of Sherman Act and under the Robinson-Patman Act require plaintiff to show that its competitor's prices are below an appropriate measure of the competitor's costs).
D. Hasbro Has Not Violated the Antitrust Laws
To the extent that AMI might have antitrust standing, it has failed to provide factual support for its allegations of anticompetitive conduct. For example, AMI has failed to support its § 2 claim for conspiracy to monopolize or its § 1 claim alleging a "contract, combination . . . or conspiracy" in restraint of trade with evidence of concerted action. See Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 761, 79 L. Ed. 2d 775, 104 S. Ct. 1464 (1984) (recognizing that independent action is not proscribed under § 1); Volvo North America Corp. v. Men's Int'l Professional Tennis Council, 857 F.2d 55, 74 (2d Cir. 1988) (recognizing that element of conspiracy to monopolize under § 2 requires concerted action). Concerted action means "a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement." American Tobacco Co. v. United States, 328 U.S. 781, 810, 90 L. Ed. 1575, 66 S. Ct. 1125 (1946).
AMI apparently claims that, because TRU discusses its profit margin with Hasbro when it negotiates certain wholesale discounts, including post-sale markdowns to reduce inventory, there is evidence of concerted action. The Court does not agree. In Monsanto, the Supreme Court recognized that "[a] manufacturer and its distributors have legitimate reasons to exchange information about the prices and the reception of their products in the market." Monsanto Co., 465 U.S. at 762. The Court cautioned against drawing an inference of a price fixing agreement from ambiguous evidence. Id. at 763.
Calling the evidence ambiguous would be generous. AMI has not pointed to any exhibits or non-hearsay testimony to support its claim that Hasbro had an express or implied agreement to fix prices with TRU or any other retailer. A lack of factual support is fatal to AMI's conspiracy claims. See Schwimmer v. Sony Corp. of America, 677 F.2d 946, 953-54 (2d Cir.) (plaintiff failed to introduce sufficient facts from which an inference of agreement to discourage transshipping could be drawn), cert. denied, 459 U.S. 1007, 74 L. Ed. 2d 398, 103 S. Ct. 362 (1982).
The distinct and significant problem with all of AMI's antitrust claims is that they lack factual support in the record. Accordingly, all of AMI's antitrust claims are dismissed.
E. State Law Claim
"When all bases for federal jurisdiction have been eliminated from a case so that only pendent state claims remain, the federal court should ordinarily dismiss the state claims." Baylis v. Marriott Corp., 843 F.2d 658, 665 (2d Cir. 1988) (citing United Mine Workers of America v. Gibbs, 383 U.S. 715, 725, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966)). The Court is not convinced that all bases for federal jurisdiction relating to AMI's state law claim have been eliminated. On the face of the complaint it appears that there is complete diversity between AMI and Hasbro, and thus the Court may still have federal jurisdiction over AMI's state law claim. (Second Am. Compl. PP 4, 5.)
In any event, the Court believes that in this case, in which AMI has entirely failed to provide factual support for both its federal and state law claims, allowing AMI to pursue its state law claim in state court would be a waste of the resources expended to resolve the parties' dispute. Discovery is complete, and Hasbro has properly moved for summary judgment to dismiss AMI's one state law claim for tortious interference with business advantage. The Court will also resolve this aspect of Hasbro's motion.
To state a claim for tortious interference with business advantage, "a plaintiff must show (1) business relations with a third party; (2) defendants' interference with those business relations; (3) defendants acted with the sole purpose of harming the plaintiff or used dishonest, unfair, or improper means; and (4) injury to the relationship." Purgess v. Sharrock, 33 F.3d 134, 141 (2d Cir. 1994). AMI has not set forth any particular business relation with which Hasbro interfered; nor has it set forth any facts that Hasbro intended to harm AMI; nor has it set forth facts to show that Hasbro used dishonest, unfair, or improper methods to compete with AMI. Accordingly, AMI's state law claim is dismissed with prejudice.
For the reasons set forth above, Hasbro's motion for summary judgment dismissing AMI's Second Amended Complaint is granted. The Court also grants Hasbro's motion for judgment on the pleadings dismissing AMI's secondary-line Robinson-Patman Act claims. The other pending motions are disposed of in the above Memorandum and Order or are dismissed as moot. The Clerk is directed to enter judgment dismissing the Second Amended Complaint.
Dated: New York, New York
March 26, 1997
LAWRENCE M. McKENNA