Indiana Grocery, Inc. v. Super Valu Stores, Inc.

• Citation: 864 F.2d 1409
• Decision Date: 07 March 1989
• Docket Number: Nos. 88-1625,88-1739,s. 88-1625
• Parties: , 1988-2 Trade Cases 68,388 INDIANA GROCERY, INC., and Preston-Safeway, Inc., Plaintiffs-Appellants, Cross- Appellees, v. SUPER VALU STORES, INC., d/b/a Cub Foods, Markkay of Indiana, Inc., d/b/a Cub Foods, and the Kroger Co., Defendants-Appellees, Cross-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 1409

864 F.2d 1409

57 USLW 2421, 1988-2 Trade Cases 68,388

INDIANA GROCERY, INC., and Preston-Safeway, Inc., Plaintiffs-Appellants, Cross- Appellees, v. SUPER VALU STORES, INC., d/b/a Cub Foods, Markkay of

Indiana, Inc., d/b/a Cub Foods, and the Kroger

Co., Defendants-Appellees, Cross-Appellants.

Nos. 88-1625, 88-1739.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 22, 1988.

Decided Jan. 6, 1989.

Rehearing and Rehearing En Banc Denied March 7, 1989.

Donald E. Knebel, Barnes & Thornburg, Indianapolis, Ind., for plaintiffs-appellants, cross-appellees.

Patricia N. Blair, Ginsburg, Feldman & Bress, Chtd., Mark J. Spooner, Arnold & Porter, Washington, D.C., fordefendants-appellees, cross-appellants.

Before BAUER, Chief Judge, and WOOD, Jr. and FLAUM, Circuit Judges.

BAUER, Chief Judge.

Plaintiff-appellants Indiana Grocery Co., Inc. (Indiana Grocery) and Preston-Safeway, Inc. (Preston-Safeway) appeal from the district court's grant of summary judgment to defendants on all of their federal antitrust and pendent state-law counts. 684 F.Supp. 561. The plaintiffs' charges arose from pricing activity in the Indianapolis retail grocery market between 1983 and 1985. For the reasons that follow, we affirm.

I.

In mid-1982, Indiana Grocery operated 28 supermarkets in the Indianapolis area. In 1983, it sold about 13 percent of the area's groceries. Preston-Safeway in 1983 operated 12 supermarkets in the Indianapolis area and its share of area grocery sales was about 10 percent. In 1985, the owners of Indiana Grocery acquired the common stock of Preston-Safeway, which by then had already acquired additional stores from another supermarket chain that was leaving the Indianapolis area and had sold some stores to Indiana Grocery. Since 1986, all of Indiana Grocery's stores in Indianapolis have operated under the Preston-Safeway name. For simplification, we will hereinafter refer to both plaintiff-appellants as "Indiana Grocery."

Defendant-appellee The Kroger Company (Kroger) operates more than 1,400 supermarkets throughout the United States. In 1983, Kroger operated 32 supermarkets in the Indianapolis area, which together accounted for about 28 percent of area retail grocery sales. Defendant-appellee Super Valu Stores, Inc. (Super Valu), like Kroger, is a multibillion-dollar corporation. Although primarily a grocery wholesaler, Super Valu since 1980 has owned and franchised "Cub" retail food stores in various states. Cub stores are substantially larger than conventional supermarkets such as those operated by Indiana Grocery and Kroger, and offer a lower level of services to their customers in exchange for prices that normally are 6 to 10 percent lower than those of conventional stores. In late 1982, Super Valu decided to grant a Cub franchise to defendant-appellee Markkay of Indiana, Inc. (Markkay) to operate in the Indianapolis area beginning in late 1983. Thus began the entry of Super Valu and Cub into the Indianapolis retail grocery market and the events that spawned this litigation.

When the Markkay Cub opened in the autumn of 1983, other multi-grocery store firms in addition to Indiana Grocery and Kroger were operating in Indianapolis. Marsh Supermarkets, Inc., (Marsh) operated 29 stores; the Great Atlantic & Pacific Tea Co. (A & P) operated 11 (but had already decided to withdraw from the market before Cub's entry); O'Malia Food Markets, Inc. (O'Malia) operated 6; Dietel's, Inc. (Mr. D's) operated 4; Aldi, Inc., operated 4; and Seven-Eleven Supermarkets operated 4. In addition, other firms operated approximately 40 more supermarkets in the Indianapolis area.

The Markkay Cub, of course, did not just appear in Indianapolis one morning. By early 1983, Indianapolis grocers, including Indiana Grocery and Kroger, knew that Super Valu was planning to enter the area market with several Cub stores and knew of Cub stores' strategy of pricing as low or below its competitors and advertising that fact to the public. Indianapolis grocers also knew that Cub stores had been quite successful in other cities and that a substantial part of any of the Cub stores' gain in area sales would come at their loss. Existing grocers, therefore, did not sit on their hands. Kroger, for example, decided to match Cub stores' prices on most products in its stores located near anticipated Cub sites. Other competitors also reduced prices and adopted new programs in anticipation of Cub's entry.

To make a long story short, the Markkay Cub and three other Cub stores entered the Indianapolis retail grocery market between 1983 and 1986. The Cub stores' entry, as the district court put it, "engendered intense price competition among retail grocery firms." (Too intense, according to Indiana Grocery.) Indeed, prices in the Indianapolis area decreased from pre-Cub levels during the 1983-85 period and did not increase again until 1985. Even then, retail prices did not reach their pre-Cub level. By early 1985, according to the complaint, Cub stores had captured a 15 percent share of Indianapolis retail grocery sales. Nevertheless, in 1987, Kroger (with 33 stores), Marsh (with 30), Indiana Grocery (with 24), O'Malia (with 9), Mr. D's (with 5), Aldi (with 5), and Seven-Eleven (with 4), all remained in the Indianapolis retail grocery market. In addition, other firms operated approximately 38 more supermarkets.

Indiana Grocery initiated this action in February, 1985. Its original complaint alleged that Kroger, Super Valu, and Markkay each had attempted to monopolize the Indianapolis retail grocery market through predatory pricing in violation of section 2 of the Sherman Act, 15 U.S.C. Sec. 2. According to the original complaint, each defendant had priced below its average variable costs of operating in the relevant geographic market, defined as the Indianapolis Metropolitan Statistical Area ("MSA"). ¹ In June, 1986, Indiana Grocery amended its complaint to allege that each defendant had engaged in predatory pricing not in the Indianapolis MSA as a whole, but only in various "submarkets." The amended complaint also asserted additional claims against Super Valu and Markkay for price fixing and combination or conspiracy to monopolize in violation of sections 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1 and 2, and against all defendants on common law theories. After its own economist conceded in his deposition that Cub Stores' prices were not predatory, however, Indiana Grocery voluntarily dismissed its attempted monopolization claims against Super Valu and Markkay. That left Kroger as the only remaining defendant on Indiana Grocery's section 2 attempted monopolization claim. Indiana Grocery continued to allege that Super Valu and Markkay had conspired to fix maximum prices.

In the fall of 1987, the defendants filed motions for summary judgment. For purposes of its motion for summary judgment on Indiana Grocery's section 2 claim against it, Kroger accepted the former's definition of the relevant product market as supermarkets ² and did not dispute that the Indianapolis MSA could be divided into four geographic "submarkets." Kroger also did not challenge, for purposes of its motion, Indiana Grocery's allegation that Kroger's revenues fell below its average variable costs in some submarkets during certain periods, and that the retail grocery industry is characterized by high barriers to entry.

After briefing and oral argument, the district court dismissed all of Indiana Grocery's claims. With respect to the two remaining federal antitrust claims, the court held that Indiana Grocery had failed to create a genuine issue of material fact as to any of the three elements of its attempted monopolization claim against Kroger, and that it lacked standing to press its price-fixing claim against Super Value and Markkay. The court also found each of Indiana Grocery's common law claims against the various defendants deficient under Indiana law.

II.

This is Indiana Grocery's appeal from the district court's grant of summary judgment to defendants on all of its claims. Summary judgment is appropriate when the pleadings and supplemental materials present no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Oxman v. WLS-TV, 846 F.2d 448, 452 (7th Cir.1988). "In determining whether a genuine issue of material fact exists, the court must construe the facts alleged in the light most favorable to the party opposing the motion for summary judgment. On review, we consider the entire record in the same light." Oxman, 846 F.2d at 452. The Supreme Court has emphasized, however, that summary judgment may be especially appropriate in an antitrust case because of the chill antitrust litigation can have on legitimate price competition. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 594-95, 106 S.Ct. 1348, 1360, 89 L.Ed.2d 538 (1986). For this reason, an antitrust plaintiff opposing a motion for summary judgment must present evidence that tends to exclude the possibility that the defendant's conduct was as consistent with competition as with illegal conduct. Id. at 588, 106 S.Ct. at 1357.

A.

Indiana Grocery, then, must first establish that a genuine issue of material fact exists that Kroger attempted to monopolize the Indianapolis retail grocery market. According to Indiana Grocery, Kroger used entry of Super Valu's Cub stores into Indianapolis as a "cover" for its attempt to monopolize the area market through a predatory pricing scheme. To prove attempted monopolization under section 2 of the Sherman Act, ³ a plaintiff must show (1) specific intent to achieve monopoly power, (2) predatory or anticompetitive conduct directed to accomplishing this unlawful purpose, and most important for purposes of this case, (3) a dangerous probability that the attempt to monopolize will be successful. Lektro-Vend Corp....