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Western Power Sports Inc. v. Polaris Industries Partners L.P.

filed: December 11, 1991; As Amended December 23, 1991.

WESTERN POWER SPORTS, INC., PLAINTIFF-APPELLANT,
v.
POLARIS INDUSTRIES PARTNERS L.P.; POLARIS INDUSTRIES L.P.; POLARIS INDUSTRIES ASSOCIATES L.P.; POLARIS INDUSTRIES CAPITAL CORPORATION, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the District of Idaho; Marion J. Callister, District Judge, Presiding; D.C. No. CV-88-1191-MJC.

Before: Browning, Canby and Trott, Circuit Judges.

MEMORANDUM

Polaris Industries (Polaris) is a manufacturer of snowmobiles, all-terrain-vehicles (ATVs) and other products. Polaris is the only manufacturer that sells snowmobiles to wholesale distributors; other snowmobile manufacturers sell directly to retailers. Western is a wholesale distributor of snowmobiles and other products. Beginning in the late 1980's, Polaris allegedly required its snowmobile distributors, including Western, to purchase specified quantities of ATVs and terminated the snowmobile distributorship agreements of distributors who failed to purchase their allotment of ATVs.

When the market for ATVs experienced a serious downturn, Western objected to this arrangement. Eventually, Western refused to purchase the allotted number of Polaris ATVs and Polaris terminated its snowmobile distributorship. This suit followed. Western alleges Polaris had imposed an illegal "tying arrangement" in violation of section 1 of the Sherman Act, 15 U.S.C. § 1, section 3 of the Clayton Act, 15 U.S.C. § 14, and Idaho antitrust law. Western also asserts other state law claims. The district court granted summary judgment for Polaris on all claims. We reverse.

To establish a tying arrangement that is illegal per se, the plaintiff must show (1) the tying of two products; (2) defendant had sufficient economic power in the tying product market to affect the tied product market, and (3) an effect on a substantial volume of commerce in the tied product market. Bhan v. NME Hospitals, Inc., 929 F.2d 1404, 1411 (9th Cir. 1991).

A tying arrangement exists when a seller refuses to sell one product (the tying product) unless the purchaser agrees to purchase another product (the tied product). Northern Pacific Railway Co. v. United States, 356 U.S. 1, 5 (1958); Bhan, 929 F.2d at 1411. The district court concluded there was a genuine issue of material fact as to whether a tying arrangement existed. Viewing the evidence in the light most favorable to Western, see Tzung v. State Farm Fire And Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir. 1989), we reach the same conclusion. Western offered evidence sufficient to permit a trier of fact to decide Polaris had tied sales of the two products -- that is, had required distributors to purchase ATVs in order to obtain snowmobiles -- including a statement by Polaris' director of product development admitting the existence of a tying arrangement.*fn1

To determine whether Polaris possessed sufficient power in the snowmobile market to affect commerce in the ATV market, the snowmobile market must first be defined. "Defining the relevant market is a factual inquiry. . . ." Oltz v. St. Peter's Community Hospital, 861 F.2d 1440, 1446 (9th Cir. 1988). Thus, the relevant market may be determined on summary judgment only if there is no genuine issue of material fact on this question. See Bhan, 929 F.2d at 1413 & n.9.

Polaris offered evidence the relevant market was either the retail market for snowmobiles or the market for wholesale distributorships generally. However, Western offered evidence, including the testimony of Professor Whitelaw, sufficient to permit a trier of fact to find the tying product market was the wholesale market for snowmobiles.

Since the relevant market for the tying product was disputed, the district court could not conclude Polaris' power in that market was not sufficient to allow Polaris to affect a substantial volume of commerce in the tied product. If Western's evidence is credited, Polaris had 100% of the tying product market, presumptively sufficient to give Polaris the market power required to establish a per se violation. See Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U.S. 2, 16 (1984) (defendant's monopoly of the tying market gives defendant sufficient market power to allow plaintiff to establish a per se violation).*fn2

Polaris argues summary judgment was nevertheless appropriate because Western would not have purchased ATVs from any manufacturer if not compelled to purchase them from Polaris. Polaris relies on the following statement in Jefferson Parish :

When a purchaser is "forced" to buy a product he would not have otherwise bought even from another seller in the tied-product market, there can be no adverse impact on competition because no portion of the market which would otherwise have been available to other sellers has been foreclosed.

466 U.S. at 16.

If interpreted as Polaris interprets it, this passage would appear to be at odds with another earlier in the Jefferson Parish opinion in which the Court said competition was restrained and the Sherman Act violated when the seller exploited its power over the tying product to force the buyer to purchase a tied product the buyer "either did not want at all, or might have preferred to purchase elsewhere. . . ." 466 U.S. at 12 (emphasis added). But see Wells Real Estate, Inc. v. Greater Lowell Board of Realtors, 850 F.2d 803, 814-15 (1st Cir. 1988) (reconciling the two passages by interpreting the "no adverse impact" passage as applying to plaintiff's showing as to the "not insubstantial" volume of commerce foreclosed by the tie).

We need not resolve the ambiguity. The record did not establish the factual predicate for applying the Jefferson Parish statement Polaris relied upon, even read as Polaris would read it. Western offered evidence it was initially enthusiastic about selling Polaris' ATVs and there is no indication Western would have been any less enthusiastic about selling other manufacturers' ATVs. Evidence showed that when the retail ATV market declined, Western objected to Polaris' alleged practice of requiring it to purchase more ATVs than the retail market could bear, but this evidence does not establish Western wished to withdraw ...


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