Fortner Enterprises, Inc. v. United States Steel Corp.
1969 U.S. LEXIS 3320, 22 L. Ed. 2d 495, 394 U.S. 495 (1969)
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Rule of Law:
Sufficient economic power in a tying arrangement may be inferred from the tying product's unique or desirable attributes, such as offering uniquely advantageous credit terms not available from competitors, and does not require proof of dominance or monopoly power in the tying market.
Facts:
- Fortner Enterprises, Inc. was a real estate development company seeking to develop land in the Louisville, Kentucky area.
- United States Steel Corp. sold prefabricated houses through its Homes Division and provided financing through its wholly owned subsidiary, the U.S. Steel Homes Credit Corp.
- To obtain loans totaling over $2,000,000 from the Credit Corp. for land purchase and development, Fortner was required to agree to erect a prefabricated house manufactured by U.S. Steel on each of the lots purchased with the loan proceeds.
- The financing offered by U.S. Steel's subsidiary was for 100% of the cost of land acquisition and development, which Fortner's president stated was uniquely advantageous and unavailable from any other source during that period.
- Fortner alleged that it was subsequently charged artificially high prices for the U.S. Steel houses and that the materials proved to be defective and unusable.
Procedural Posture:
- Fortner Enterprises, Inc. filed suit against United States Steel Corp. and its subsidiary in a U.S. District Court seeking treble damages and an injunction for alleged violations of the Sherman Act.
- After pretrial proceedings, the District Court entered summary judgment for the defendants, United States Steel.
- Fortner Enterprises, Inc. (appellant) appealed the summary judgment to the United States Court of Appeals.
- The Court of Appeals affirmed the District Court's judgment without a written opinion.
- The United States Supreme Court granted certiorari to review the case.
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Issue:
Does a tying arrangement, in which uniquely favorable credit terms (the tying product) are conditioned on the purchase of prefabricated houses (the tied product), raise sufficient questions of fact regarding the defendant's economic power in the credit market to survive a motion for summary judgment?
Opinions:
Majority - Mr. Justice Black
Yes. A tying arrangement where a seller conditions uniquely favorable credit terms on the purchase of its product raises sufficient questions of fact about the seller's economic power to defeat a motion for summary judgment. The standard for 'sufficient economic power' in a per se tying case does not require the defendant to have a monopoly or dominant position in the tying product market. Such power can be inferred from the tying product's uniqueness or its desirability to consumers, which prevents them from seeking alternatives. Unusually advantageous credit terms, especially when competitors are unable or unwilling to offer similar terms, can be evidence of such power. Furthermore, the requirement that a 'not insubstantial' amount of commerce be affected refers to the total dollar-volume of business foreclosed, not a percentage of the relevant market. Given the disfavor of summary judgment in complex antitrust litigation, Fortner's allegations about the unique credit and the volume of commerce foreclosed were sufficient to warrant a trial.
Dissenting - Mr. Justice White
No. Offering favorable credit terms conditioned on the purchase of a product does not, without more direct proof of market power in the credit market itself, establish a per se illegal tying arrangement. The provision of uniquely advantageous credit is functionally equivalent to a price reduction on the tied product (the houses) and should be viewed as a form of price competition, which the Sherman Act is meant to encourage, not prohibit. The majority's logic effectively eliminates the well-established requirement of showing actual market power in the tying product, as any buyer who accepts a financing deal must have viewed it as advantageous. Without independent proof that U.S. Steel held power in the credit market, this arrangement should not be deemed per se illegal.
Dissenting - Mr. Justice Fortas
No. This transaction is not a tying arrangement of two separate products but rather a single, integrated sale of houses with ancillary financing, and therefore the per se rule is inapplicable. The credit provided by U.S. Steel was not a separate product sold on the general market but was solely and entirely ancillary to its primary goal of selling prefabricated houses. The tying doctrine was developed to prevent a seller from using leverage in one market (e.g., a patented machine) to force a purchase in a separate market. Applying this doctrine where the only 'leverage' is better financing or a lower price for the overall package distorts the rule into an instrument that penalizes legitimate and common forms of price competition.
Analysis:
This decision significantly lowered the evidentiary threshold for plaintiffs in tying cases to survive summary judgment. It clarified that 'sufficient economic power' does not require market dominance but can be inferred from the uniqueness and desirability of the tying product, effectively broadening the scope of what constitutes illegal tying leverage. By treating uniquely favorable credit as a potential source of tying power, the Court expanded the types of commercial transactions subject to per se antitrust scrutiny, affecting many common financing arrangements where a seller provides credit to facilitate the sale of its own goods. The ruling also reinforced the judiciary's general reluctance to grant summary judgment in complex antitrust litigation where motive and intent are central issues.
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