support its view that differences in the cost of supply justify
a finding of a separate market. As Coca-Cola points out,
evidence of cost disparity may be highly relevant to evaluating
the competitive significance of a defendant's conduct within an
already-defined market but it cannot be used to define the
market itself. See United States v. American Can Co.,
230 F. 859 (Md. 1916).
Furthermore, PepsiCo has not submitted any evidence to show
that Coca-Cola's prices are supracompetitive. As a matter of
fact, there is no pricing evidence in the record before me at
all. Even where Coca-Cola specifically points to the absence of
pricing evidence, PepsiCo comes forth with no numbers. (See,
e.g., Def.'s 56.1 Stmt. ¶ 169; Pl.'s 56.1 Response ¶ 169.) All
that appears is the most ephemeral and abstract discussion of
cost of supply and its relation to PepsiCo's ability to provide
fountain syrup at lower prices. (See Pl.'s 56.1 Response ¶
142.)*fn7 Moreover, the fact that PepsiCo could offer lower
prices if Pepsi distributed its syrup similarly to Coca-Cola
simply does not show that Coca-Cola's present prices are
supracompetitive. (See id.)
Accepting for the sake of argument that Coca-Cola's costs for
systems distribution-delivered syrup are lower, PepsiCo's
contention that Coca-Cola's margins must be higher because
Coca-Cola does not vary its prices based on the method of
delivery has no basis in the record. Not only has PepsiCo
presented no evidence as to what Coca-Cola's margins actually
are for any of the customers PepsiCo contends are at issue, but
PepsiCo has not countered Coca-Cola's argument that Coca-Cola
makes available to such customers discounts and allowances that
are not based on delivery method. Furthermore, the evidence
suggests that as a result of renewed competition in fountain
syrup in recent years, Coca-Cola's prices and profits dropped.
(See Def.'s 56.1 Stmt. ¶ 157; Dorman Decl. ¶ 12 & Exs. 13-14;
see also Gennaro Dep. Ex. 28 at PEP 004-2641 (PepsiCo
strategic plan naming "Take margin out of fountain" as "Required
Action").) PepsiCo has not submitted any contradictory evidence.
Thus, I am unable to find that this factor supports a separate
market for fountain syrup delivered through independent
6. Specialized Vendors
PepsiCo claims that it has met this criterion because
foodservice distributors offer unique efficiencies through their
consolidated delivery system. However, PepsiCo's argument is
circular. PepsiCo wants to define the product by its
distribution method through a particular type of vendor, i.e.,
fountain syrup "delivered through independent foodservice
distributors." Thus, PepsiCo is essentially arguing that
fountain syrup distributed through independent foodservice
distributors has specialized vendors, i.e., independent
foodservice distributors. This does not make sense for obvious
reasons. Thus, this factor does not weigh in favor of finding a
separate product market.
For the above reasons, PepsiCo's relevant market definition
cannot be sustained and, therefore, the monopolization and
attempted monopolization claims must fail.
III. Section 1 of the Sherman Act.
To prove a Section 1 violation of the Sherman Act, a plaintiff
must show "`a combination or some form of concerted action
between at least two legally distinct economic entities' that
`constituted an unreasonable restraint of trade either per se
or under the rule of reason.'" Primetime 24 Joint Venture v.
National Broadcasting Co., 219 F.3d 92, 103 (2d Cir. 2000)
(quoting Capital Imaging Assocs. v. Mohawk Valley Med.
Assocs., 996 F.2d 537, 542 (2d Cir. 1993)). Under the rule of
reason, a Section 1 violation requires a showing of injury to
competition in the relevant
market. See Capital Imaging Assocs., 996 F.2d at 537;
National Ass'n of Freelance Photographers v. Associated Press,
No. 97 Civ. 2267, 1997 WL 759456, at *9 (S.D.N.Y, Dec. 10,
1997). Because PepsiCo has failed properly to define the
relevant market here, there can be no Section 1 violation under
a rule of reason analysis.
The Amended Complaint alleges that Coca-Cola's loyalty policy
is, in reality, a per se illegal horizontal conspiracy among
the foodservice distributors and Coca-Cola to boycott PepsiCo.
This allegation is not supported by the evidence or the law. In
a recent decision, the Supreme Court stated, "precedent limits
the per se rule in the boycott context to cases involving
horizontal agreements among direct competitors." NYNEX Corp. v.
Discon, Inc., 525 U.S. 128, 134, 119 S.Ct. 493, 498, 142
L.Ed.2d 510 (1998). Thus, the Supreme Court reaffirmed the need
to demonstrate an agreement between or among direct competitors.
Under the facts of this case, PepsiCo must show a horizontal
agreement among foodservice distributors to boycott PepsiCo.
PepsiCo has made no such showing. The only evidence PepsiCo
relies upon is an inference of implied understanding amongst
certain foodservice distributors that Coca-Cola enforced the
same loyalty policy with each of its foodservice distributers.
(See Pl.'s 56.1 Counterstmt. ¶ 142.) This is not sufficient to
show an agreement among the distributors to boycott PepsiCo.
Indeed, in Pennsylvania v. PepsiCo, Inc., 836 F.2d 173, 180
(3d Cir. 1988), the court rejected the argument that PepsiCo's
enforcement of a vertical distribution restraint through
communications with its bottlers could be characterized as a
horizontal restraint of trade. The court found the absence of
any agreement or conspiracy "attributable solely to the
competing bottlers, without PepsiCo" dispositive. Id. Here,
PepsiCo has suggested that the same conduct, a supposed
"hub-and-spokes conspiracy," constitutes a Section 1 violation.
Again, without evidence of an agreement "attributable solely" to
the independent foodservice distributors, without Coca-Cola,
PepsiCo has failed to show a Section 1 violation.*fn8
For the foregoing reasons, Coca-Cola's motion for summary
judgment is granted. The Clerk of the Court shall mark this
action closed and all pending motions denied as moot.