Does a court of appeals err in reversing summary judgment for defendants in a Sherman Act § 1 predatory pricing conspiracy case when the plaintiffs' evidence of conspiracy is ambiguous and the alleged conspiracy makes no rational economic sense?

Petitioners were 21 Japanese corporations and Japanese-controlled American corporations that manufactured or sold consumer electronic products, mostly television sets. Respondents Zenith Radio Corporation and National Union Electric Corporation (successor to Emerson Radio) were American television manufacturers. Respondents alleged that petitioners conspired over roughly two decades, beginning as early as 1953, to drive American firms out of the American market. The alleged scheme fixed artificially high prices in Japan and, at the same time, fixed low, loss-producing prices for sets exported to the United States. Respondents relied on evidence that included high prices and cartel-like behavior in Japan, minimum 'check prices' for exports to the United States arranged with Japan's Ministry of International Trade and Industry, the 'five company rule' limiting each Japanese producer to five American distributors, rebate schemes that undercut the check prices, and expert opinion that export sales produced losses. Respondents claimed violations of §§ 1 and 2 of the Sherman Act, § 2(a) of the Robinson-Patman Act, § 73 of the Wilson Tariff Act, and the Antidumping Act of 1916. By the time of the litigation, American firms RCA and Zenith still held the two largest shares of the American television market, while petitioners' collective share had risen to about 50%.

NUE filed its complaint in the District Court for the District of New Jersey, and Zenith filed separately in 1974 in the Eastern District of Pennsylvania; the cases were consolidated in the Eastern District of Pennsylvania in 1974. After several years of discovery, petitioners moved for summary judgment. The District Court directed the parties to file final pretrial statements listing all documentary evidence, and it found the bulk of respondents' evidence inadmissible in three opinions. It then granted summary judgment for petitioners on the Sherman Act, Wilson Tariff Act, and Robinson-Patman Act claims, finding no genuine issue of material fact on the alleged conspiracy and finding any inference of conspiracy unreasonable. It ruled separately for petitioners on the Antidumping Act claims. The Court of Appeals for the Third Circuit reversed. It held much of the excluded evidence admissible, found direct and circumstantial evidence of a conspiracy sufficient to preclude summary judgment, and affirmed summary judgment as to only 3 of the 24 defendants. The Supreme Court granted certiorari, limited to whether the Court of Appeals applied the proper summary judgment standards and whether petitioners could be held liable for conduct compelled by a foreign sovereign.

(Powell, J.)

Yes. The Court of Appeals did not apply proper standards in reviewing the grant of summary judgment, and summary judgment for petitioners should be reinstated absent additional unambiguous evidence.

Respondents could not recover for the alleged cartelization of the Japanese market, for any conspiracy to raise prices in the American market, or for nonprice restraints such as the five company rule and the check prices, because those arrangements tend to benefit competitors and cause no antitrust injury. Respondents' claim therefore depends on a conspiracy to monopolize the American market through predatory pricing. To survive summary judgment, they must show a genuine issue of material fact as to that conspiracy. A nonmovant must come forward with specific facts showing a genuine issue for trial, and where the record as a whole could not lead a rational trier of fact to find for the nonmovant, summary judgment is proper. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253 (1968).

If the claim is economically implausible, the plaintiff must offer more persuasive evidence than would otherwise be necessary. Under Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984), conduct as consistent with permissible competition as with illegal conspiracy does not support an inference of conspiracy, and a § 1 plaintiff must present evidence that tends to exclude the possibility of independent action.

The alleged conspiracy makes no economic sense. Predatory pricing is speculative: it requires sustained losses in the hope of later monopoly profits, and such schemes are rarely tried and more rarely successful. A conspiracy among 21 firms is far harder to execute, because each member has an incentive to cheat and the losses and gains must be allocated. After two decades, petitioners had not achieved monopoly power, and RCA and Zenith still held the largest shares. That failure is strong evidence that no such conspiracy exists. Possible supracompetitive profits in Japan do not supply a motive to incur American losses without a likelihood of recoupment.

Mistaken inferences are especially costly because cutting prices is the essence of competition, and predatory conspiracies are self-deterring. The Court of Appeals erred because the 'direct evidence' it relied on concerned collateral conspiracies with little relevance to predatory pricing, and because it ignored the absence of a plausible motive. Without a rational motive, the evidence does not create a genuine issue for trial under Rule 56(e). On remand, the Court of Appeals may consider whether other unambiguous evidence tends to exclude independent action. The sovereign compulsion issue is not reached.

Dissent (White, J., joined by Brennan, Blackmun, and Stevens, JJ.) The Court of Appeals faithfully followed Cities Service and Monsanto and correctly concluded that the record, including significant evidence the District Court wrongly excluded, raises genuine issues of fact about a conspiracy. The majority muddies the summary judgment standard: its language suggests judges should weigh whether the evidence makes conspiracy more probable than not, contrary to the rule that all evidence is construed in the light most favorable to the nonmovant. Cities Service and Monsanto held only that particular pieces of evidence standing alone were insufficiently probative.

The majority also invades the factfinder's province. It assumes respondents could be harmed only by below-cost pricing, ignoring the DePodwin Report, which shows that Japanese cartelization increased exports and depressed American prices, and that restraints on competition among petitioners cost respondents business. The majority answered that Japanese cartelization could not have caused the depressed American prices, that the five company rule tends to raise prices and does not harm competitors, and that the expert's below-cost evidence has little probative value. It assumes petitioners prioritized profit-maximization over growth, an assumption that should be argued to the factfinder in light of evidence of long-term below-cost sales. The majority's preference for its own economic theory over the expert's is no ground to deny a trial.

Neither claimed error is real. The Third Circuit did not treat the five company rule as direct evidence of injury; it reasoned that customer allocation combined with Japanese price fixing could concentrate dumping's effects on American competitors. The Third Circuit also found the DePodwin evidence of below-cost sales sufficient to create a genuine issue, so remand is pointless. The judgment should be affirmed and the case tried.