Fleer Corp. v. Topps Chewing Gum, Inc.

• Decision Date: 28 May 1976
• Docket Number: Civ. A. No. 75-1803.
• Citation: 415 F. Supp. 176
• Parties: FLEER CORPORATION v. TOPPS CHEWING GUM, INC. and Major League Baseball Player's Association.
• Court: U.S. District Court — Eastern District of Pennsylvania

415 F. Supp. 176

FLEER CORPORATION v. TOPPS CHEWING GUM, INC. and Major League Baseball Player's Association.

Civ. A. No. 75-1803.

United States District Court, E. D. Pennsylvania.

May 28, 1976.

Matthew M. Strickler, Philadelphia, Pa., for plaintiff.

Edwin P. Rome, Philadelphia, Pa., for Topps Chewing Gum.

Norman M. Berger, Philadelphia, Pa., for Major League Baseball Player's Assoc.

MEMORANDUM

NEWCOMER, District Judge.

Fleer Corporation brought this action charging the defendants with violations of the antitrust laws in connection with the production and sale of baseball trading cards and similar products. Presently before the court is the defendants' motion to dismiss the complaint. This motion is based on three grounds — first, that Fleer lacks standing to litigate the alleged antitrust violations; second, that the complaint alleges no act which could have injured Fleer's business within the four year statute of limitations period; third, that the doctrine of collateral estoppel precludes Fleer from litigating essential issues which were decided adversely to its interests in a 1965 Federal Trade Commission proceeding. We have considered each of these arguments and have concluded that the motion should be denied.

The complaint's allegations draw the following picture. Fleer and Topps compete with one another in the manufacture of confectionary products and novelties, primarily for children. For each baseball season beginning in 1953, Topps has manufactured, distributed and sold an annual series of baseball trading cards, consisting of distinct cards for most of the then current major league baseball players. At all times the cards have been sold together with bubble gum. Since at least 1967, the cards have also been sold as separate items. Topps' baseball cards are a popular item, collected and traded by young (or youthful) sports enthusiasts. From its sales of cards, and of cards together with gum, Topps netted approximately six million dollars in sales in 1974. An essential ingredient to this enterprise and the keystone of Topps' dominance in this field is Topps' ownership of exclusive rights to use the names, pictures, signatures and biographical sketches of most current baseball players for their cards and similar products. Under a typical contract, a player awards these rights in exchange for a flat fee, and they cover the period of the first five baseball seasons thereafter during which the player is on a major league roster, with the right in Topps to extend those exclusive rights for an additional two baseball seasons. The contracts are negotiated on an ongoing basis, and their expiration dates are staggered. This arrangement severely disadvantages the prospective competitor. Even if it were so remarkably effective as to sign a contract with every ballplayer at the time his agreement with Topps expired, it would not be able to market a substantially complete set of cards for at least a few years.

Effective competition appears even more remote in the light of the complaint's allegations regarding the defendant, Major League Baseball Players Association. We are told that since at least as early as 1967, Topps, the Players Association and other persons have been engaged in a combination and conspiracy in restraint of trade in baseball cards and similar products. The Players Association is an unincorporated association which has encouraged major league baseball players to accept it as their representative in matters affecting their common interests. It is alleged that the Players Association encouraged major league baseball players to cease granting Fleer any further rights in connection with baseball trading cards. Eventually Topps and the Players Association entered into a ten year agreement under which Topps would make royalty payments to the Association in return for the Association's endorsement of Topps as the sole manufacturer and distributor of baseball trading cards and similar products. Royalties paid by Topps to the Association and to individual players amount to approximately $600,000 per year.

The complaint further states that Fleer has competed generally with Topps in the manufacture of bubble gum, candy and novelties since prior to 1960. On several occasions, most recently in 1974, Fleer has attempted to obtain the rights it would need in order to produce a set of current major league baseball player picture cards. Allegedly, the defendants have stymied these efforts by unlawful actions. Fleer says that it is eager to compete with Topps in the manufacturing and selling of baseball trading cards and similar products; that it has a continuing intention to enter that market; and that it has the equipment and the resources to do so. The only asset it lacks is a set of suitable contracts with baseball players. However, it says it can take no realistic steps to acquire this asset so long as the defendants' alleged conspiracy continues.

STANDING

In order to bring a suit for treble damages under the Clayton Act, 15 U.S.C. § 15, one must be

"injured in his business or property by reason of anything forbidden in the antitrust laws."

Fleer is not actually competing in the market in which the alleged antitrust violations have occurred but contends that these very violations are all that prevent it from entering that market and doing a vigorous business. It is not necessary to allege injury to an existing business. However, the prospective competitor must have the intention and preparedness to enter the relevant market.

Our problem is to apply the "intention and preparedness" test to the instant complaint. The defendants' contend that a bare allegation of intention and preparedness is an insufficient basis for standing under 15 U.S.C. § 15. They say the complaint must allege with specificity substantial steps taken by the plaintiff to compete in the manufacture and sale of current baseball player picture cards and similar products. It is clear that a proper plaintiff must have a more intense and concrete interest than a member of the general public, Triangle Conduit and Cable Co. v. National Electric Products Corp., 152 F.2d 398, (3rd Cir. 1945), and that its intention to compete must be more than a mere hope, Peller v. International Boxing Club, Inc., 277 F.2d 593, 596 (7th Cir. 1955). Objective signs of preparedness include among them:

"The background and experience of the principals, including their previous successes or failures in the same or a related business as well as possession of the requisite skills and abilities . . . The financial capability of the enterprise, which encompasses the extent of investment and the ability to finance operations and to make necessary purchases . . . The taking of substantial affirmative actions toward entry . . ." Denver Petroleum Corporation v. Shell Oil Company, 306 F.Supp. 289, 308 (D.Colo.1969)

We think Fleer adequately alleges the plaintiff's background and experience in product markets related to the one in dispute, and its financial capability to compete. The complaint alleges, inter alia:

"From prior to 1960 to date, Fleer has competed generally with Topps in the manufacture of bubble gum, candy and novelties . . . Continuously, from 1967 to date, Fleer has had the manufacturing and marketing capability to manufacture, distribute and sell baseball trading cards and similar products, has been prepared to enter such market, and has a continuing intention to enter such market."

Whether Fleer has alleged taking substantial affirmative steps towards entry is a close question. The complaint states that prior to 1966, and then again in 1967, and 1968, Fleer attempted to obtain contracts granting it the rights necessary for producing trading cards and similar products, but was blocked by the defendants' conspiracy. Fleer says it ran into the same obstacle in 1974 when it

"attempted to obtain the right to use the names, pictures, signatures and biographical sketches of major league base-ball players for use on pictures at least five inches by seven inches and costing at least twenty-five cents each . . ." Complaint, ¶ 12.

There is no elaboration which allows one to gauge with precision the intensity of these attempts. It is significant, however, that there are alleged repeated attempts to enter over a number of years. Interpreting the allegations in the light most favorable to Fleer, it appears that Fleer tried different approaches to the problem of entry, but ceased each attempt when its futility became apparent. This futility is summed up in paragraph 13 of the complaint, which states in part:

"At no time since prior to 1967 has Fleer, or any other potential competitor, been able (i) to contract with any significant number of major league baseball players for the right to use the players' names, pictures, signatures and biographical sketches on baseball trading cards or any similar product, or (ii) to manufacture, distribute, or sell baseball trading cards or any similar product in competition with baseball trading cards manufactured, distributed and sold by Topps . . ."

Of course, Fleer may fail to show, ultimately, that the outlook for itself and other competitors was indeed so bleak. On a motion to dismiss, however, we must assume the truth of all well pleaded allegations in the complaint. We cannot find that Fleer's steps toward entry were insubstantial if it is true that the taking of any further steps would have been a sheer waste of resources. It would be inconsistent with one purpose of the Clayton Act — to protect the business interests of the victims of monopolistic practices — to require an antitrust plaintiff to pay a courtroom entrance fee in the form of an expenditure of substantial resources in a clearly futile competitive gesture.¹ Topps contends that Fleer could have entered the market by purchasing contract rights from players as their contracts with Topps expired. However, at this point in the case we must accept...