Matsushita Electric Industrial Co. v. Zenith Radio Corp.
475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)
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Rule of Law:
To survive a motion for summary judgment in a Sherman Act § 1 case, a plaintiff must present evidence that tends to exclude the possibility that the alleged conspirators acted independently. If the factual context renders the plaintiff's claim economically implausible, the plaintiff must come forward with more persuasive evidence than would otherwise be necessary to establish a genuine issue for trial.
Facts:
- Beginning as early as 1953, a group of 21 Japanese electronics manufacturers, including Matsushita Electric Industrial Co., allegedly operated as a cartel in the Japanese market.
- Zenith Radio Corporation and National Union Electric Corporation (NUE), American competitors, alleged this group conspired to fix artificially high prices for their products in the protected Japanese market.
- The American companies claimed the Japanese firms used these high profits to fund a decades-long campaign of selling consumer electronic products (CEPs) in the United States at artificially low, predatory prices.
- The alleged goal of this scheme was to drive American manufacturers out of the U.S. market, after which the Japanese firms would monopolize the market and charge supracompetitive prices.
- As part of their export strategy, the Japanese firms established formal 'check price agreements,' setting minimum export prices to the U.S., in cooperation with Japan's Ministry of International Trade and Industry.
- The firms also agreed to a 'five company rule,' which limited each producer to selling through only five distributors in the American market.
- Despite the alleged conspiracy spanning over two decades, American firms RCA and Zenith remained the two largest sellers of television sets in the U.S. market.
Procedural Posture:
- Zenith Radio Corporation and National Union Electric Corporation (NUE) filed separate lawsuits against Matsushita Electric Industrial Co. and other Japanese electronics manufacturers in federal district court.
- The cases were consolidated in the U.S. District Court for the Eastern District of Pennsylvania.
- The defendants (Matsushita et al.) moved for summary judgment on all claims.
- After ruling that most of the plaintiffs' evidence was inadmissible, the District Court granted summary judgment for the defendants, finding no genuine issue of material fact regarding the alleged conspiracy.
- The plaintiffs (Zenith and NUE), as appellants, appealed to the U.S. Court of Appeals for the Third Circuit.
- The Court of Appeals reversed the District Court's grant of summary judgment, holding that much of the evidence was improperly excluded and that the full record was sufficient for a reasonable factfinder to infer a conspiracy.
- The defendants (Matsushita et al.), as petitioners, were granted a writ of certiorari by the U.S. Supreme Court.
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Issue:
Does evidence of parallel business conduct and other agreements, which are as consistent with permissible competition as with an economically implausible predatory pricing conspiracy, create a genuine issue of material fact sufficient to defeat a motion for summary judgment under the Sherman Act?
Opinions:
Majority - Justice Powell
No. For a claim of antitrust conspiracy to survive summary judgment, the plaintiff must present evidence that tends to exclude the possibility of independent action, especially when the alleged conspiracy is economically implausible. The predatory pricing conspiracy alleged by Zenith is economically irrational; it would require the petitioners to sustain massive losses for over two decades with no reasonable prospect of recouping those losses. The evidence presented, such as the Japanese market cartel and U.S. price agreements (the check-price and five-company rules), is ambiguous and does not tend to prove a predatory pricing conspiracy. In fact, these agreements would more logically lead to higher, not lower, prices in the U.S., which would not cause antitrust injury to competitors. Because the claim makes no economic sense and the evidence is consistent with permissible competitive behavior, Zenith failed to raise a genuine issue for trial.
Dissenting - Justice White
Yes. The majority departs from established summary judgment standards by improperly weighing the evidence and assessing the plausibility of the plaintiffs' claims, a role reserved for the factfinder. The Court of Appeals correctly found that the plaintiffs' evidence, including expert reports on below-cost sales and the interconnected nature of the defendants' actions in Japan and the U.S., was sufficient to create a genuine issue of material fact when viewed in the light most favorable to the plaintiffs. The majority's focus on its own economic theorizing invades the province of the jury. A reasonable factfinder could conclude from the evidence that the defendants engaged in a long-term conspiracy that harmed the respondents, and the case should therefore proceed to trial.
Analysis:
This case significantly raised the standard for plaintiffs to survive summary judgment in complex antitrust conspiracy cases. By introducing an 'economic plausibility' screen, the Court empowered district judges to dismiss cases where the underlying theory of the alleged conspiracy seems irrational, even in the face of some circumstantial evidence. This decision, one of a 'trilogy' of 1986 summary judgment cases, signaled a major shift toward more robust judicial gatekeeping to protect defendants from the heavy costs of discovery and trial in potentially meritless suits. It reflects a turn in antitrust jurisprudence toward prioritizing economic analysis and showing deep skepticism of predatory pricing claims, making such cases much harder to bring.
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