Gorlick Distribution Centers L v. Car Sound Exhaust System Inc, et al

Filing

FILED PER CURIAM OPINION (ALEX KOZINSKI, RICHARD A. PAEZ and JOHNNIE B. RAWLINSON) AFFIRMED. FILED AND ENTERED JUDGMENT. [8710205]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

GORLICK DISTRIBUTION CENTERS,
LLC, a Washington limited liability
company,
Plaintiff-Appellant,

No. 10-36083
D.C. No.
2:07-cv-01076RAJ

v.
CAR SOUND EXHAUST SYSTEM , INC.,
Defendant,

OPINION

and
ALLIED EXHAUST SYSTEMS, INC., a
California corporation,
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of Washington
Richard A. Jones, District Judge, Presiding
Argued and Submitted October 12, 2011
Resubmitted June 19, 2012
Seattle, Washington
Filed July 19, 2013

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Before: Alex Kozinski, Chief Judge, Richard A. Paez and
Johnnie B. Rawlinson,* Circuit Judges.
Per Curiam Opinion;
Partial Concurrence and Partial Dissent by Judge Paez

SUMMARY**

Antitrust
The panel affirmed the district court’s summary judgment
in an action alleging that the defendant, the plaintiff’s
competitor in auto parts markets, violated antitrust laws in the
receipt of favorable prices from a manufacturer.
The panel held that the plaintiff did not show that the
defendant knowingly received discriminatory prices not
justified by savings to the manufacturer, in violation of the
Robinson-Patman Act. The panel concluded that the plaintiff
failed to show that the defendant had actual knowledge, trade
knowledge, or a duty to inquire whether the favorable prices
it received might be prohibited by the Act.
The panel also held that the plaintiff did not show that the
defendant entered into an agreement in restraint of trade with
the manufacturer, in violation of the Sherman Act. Affirming

*

Judge Rawlinson was drawn as a member of this panel following the
death of Judge Beezer in March 2012.
**

This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.

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on different grounds from the district court, the panel held
that, under a rule of reason analysis, even assuming the
defendant and the manufacturer had an agreement, the
Sherman Act claim failed because the plaintiff produced no
evidence that the vertical restraint actually injured
competition.
Concurring in part and dissenting in part, Judge Paez
wrote that he would affirm the dismissal of the RobinsonPatman Act claims. Disagreeing with the majority’s decision
to reach the merits of the Sherman Act claim, he wrote that he
would remand that claim to the district court for further
proceedings, including further development of the record on
the alleged anticompetitive effect of the defendant’s
agreement with the manufacturer.

COUNSEL
David C. Lundsgaard (argued) and Diane M. Meyers, Graham
& Dunn PC, Seattle, Washington, for Plaintiff-Appellant.
Timothy G. Leyh (argued), Randall T. Thomsen and
Katherine Kennedy, Danielson Harrigan Leyh & Tollefson
LLP, Seattle, Washington, for Defendant-Appellee.

OPINION
PER CURIAM:
Plaintiff Gorlick Distribution Centers and defendant
Allied Exhaust Systems compete fiercely in the auto parts
markets in Washington, Oregon and California. Gorlick

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believed that Allied was receiving favorable prices from a
manufacturer, and thus turned from the marketplace to the
courts. We must decide whether Allied (1) knowingly
received discriminatory prices not justified by savings to the
manufacturer, in violation of the Robinson-Patman Act, and
(2) entered an agreement in restraint of trade with the
manufacturer, in violation of the Sherman Act.
I. Background
Gorlick and Allied distribute aftermarket automotive
parts. Both deal in products made by Car Sound Exhaust
System, a muffler and catalytic converter manufacturer.
Gorlick challenges the preferential terms that Car Sound
allegedly offered to Allied but not to Gorlick, including free
shipping of its product to the Pacific Northwest; lower prices
on merchandise; volume discount pricing even when the
volume requirements weren’t met; and higher year-end sales
rebates. Gorlick alleges that Allied knew these favorable
shipping, pricing and rebate terms were not justified by cost
differences, in violation of section 2(f) of the RobinsonPatman Act, 15 U.S.C. § 13(f).1 Allied doesn’t dispute, for
the most part, that it received advantageous terms. Instead,
Allied argues that it didn’t know what prices other
distributors received, and therefore couldn’t knowingly have
received discriminatory prices. Allied also argues that the
preferential terms had valid defenses under the RobinsonPatman Act.

1

Gorlick’s original complaint also named Car Sound as a defendant, but
Gorlick eventually dismissed Car Sound from the case.

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Gorlick further alleges that Car Sound’s shipping policy
was the product of an agreement or conspiracy between
Allied and Car Sound in restraint of trade, in violation of
section 1 of the Sherman Act, 15 U.S.C. § 1. Because it
incurred shipping, handling and storage costs not borne by
Allied, Gorlick claims it had difficulty matching its
competitor’s prices for Car Sound products.
After discovery, the district court granted summary
judgment for Allied on all but one of the claims. It held that
there was a genuine issue as to whether Allied’s receipt of
free shipping from Car Sound and knowledge that Gorlick
had to pay its own shipping costs violated the RobinsonPatman Act. Rather than proceed to trial, Gorlick voluntarily
dismissed the remaining claim and timely appealed the
district court’s grant of partial summary judgment for Allied.2
II. Discussion
We review de novo the district court’s grant of a motion
for summary judgment. Goodman v. Staples The Office
Superstore, LLC, 644 F.3d 817, 822 (9th Cir. 2011). We
must determine, viewing the evidence in the light most
favorable to the nonmoving party, whether there are any
genuine issues of material fact and whether the district court
correctly applied the law. Id.

2
W e ordered the parties to brief whether Gorlick’s dismissal without
prejudice violated our final judgment rule. Because we detect no intent to
manipulate our appellate jurisdiction, we’re satisfied that Gorlick appeals
from a final judgment. See James v. Price Stern Sloan, Inc., 283 F.3d
1064, 1070 (9th Cir. 2002).

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A. Robinson-Patman Act Claims
The Robinson-Patman Act targets “the perceived harm to
competition occasioned by powerful buyers” that have “the
clout to obtain lower prices for goods than smaller buyers
could demand.” Volvo Trucks N. Am., Inc. v. Reeder-Simco
GMC, Inc., 546 U.S. 164, 175 (2006). The act prohibits
sellers from discriminating on price in the sale of like goods,
and thereby reducing competition, unless the price
differential can be justified by savings to the seller. See
15 U.S.C. § 13(a). The act contains a counterpart provision
that makes it unlawful for buyers “knowingly to induce or
receive a discrimination in price which is prohibited by this
section.” Id. § 13(f).
Buyers are not liable if they are innocent beneficiaries of
discriminatory prices. See Automatic Canteen Co. of Am. v.
FTC, 346 U.S. 61, 70–71 (1953). Plaintiff thus bears the
burden of showing that the buyer knew both that (1) he was
receiving a lower price than a competitor and (2) the seller
would have “little likelihood of a defense” for offering that
price. Id. at 74, 79–80. Restricting liability to situations
where the buyer knowingly accepted illegal prices prevents
section 2(f) from “putting the buyer at his peril whenever he
engages in price bargaining.” Id. at 73.
The district court assumed that the prices Allied paid were
prohibited by the Robinson-Patman Act. Nevertheless, it held
that Gorlick had not raised a genuine issue of fact as to
whether Allied had the requisite knowledge under section
2(f). Gorlick appeals, arguing that the district court
overlooked evidence that Allied had actual knowledge, trade
knowledge and a duty to inquire whether it was receiving
prohibited prices.

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1. Actual Knowledge
Allied was undoubtedly aware of its favored position
among Car Sound buyers. Its salesmen bragged that they
were “buying better” than their competition, and internal
memos trumpeted Allied’s superior purchasing discounts.
Gorlick also suggests that Allied would have known it was
receiving better prices because it could “reverse engineer”
wholesale prices from retail prices.
But Allied is not liable under section 2(f) unless Gorlick
shows Allied knew the prices it received likely did not qualify
for a Robinson-Patman Act defense, see id. at 71, a burden
Gorlick fails to meet. Gorlick and Allied were very different
Car Sound customers. Allied made Car Sound its flagship
brand, purchased Car Sound products in much higher
volumes and provided promotional services for Car Sound
products that Gorlick did not. A Car Sound executive
testified that Allied promoted only Car Sound products, while
Gorlick pushed products sold by Car Sound’s competitors.
Even if Allied knew it received superior prices and discounts,
Gorlick presents no evidence that Allied knew these benefits
resulted from anything other than the significant differences
in how the two companies did business.
Gorlick argues that, at the summary judgment stage, we
must infer that Allied knew it was receiving unfair prices
because Car Sound offered it bulk discounts even when it
failed to buy bulk quantities. According to Gorlick, where a
seller publishes its prices, any departure from the schedule
places the buyer on notice that he is receiving discriminatory
prices. But the Robinson-Patman Act doesn’t prohibit buyers
from haggling for a better deal. Id. at 73. To put a buyer at
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would do enormous damage to the “sturdy bargaining
between buyer and seller for which scope was presumably
left” by our antitrust laws. Id. at 74. The receipt of betterthan-published prices, without more, does not satisfy section
2(f)’s knowledge requirement.
In any event, Gorlick itself received advantageous pricing
even when it failed to meet Car Sound’s targets. In 2004 and
2006, Gorlick didn’t buy enough product to qualify for a
rebate, but Car Sound gave it credit anyway. A Car Sound
executive testified that his company offered all distributors
“trailer pricing” even when they purchased less than a
trailer’s worth of parts. A buyer’s receipt of discounted
prices doesn’t run afoul of the act “if all purchasers were
given an equal opportunity to purchase [at] the less
expensive” price. FLM Collision Parts, Inc. v. Ford Motor
Co., 543 F.2d 1019, 1025 (2d Cir. 1976).
Gorlick offered other evidence of Allied’s alleged actual
knowledge, none of which raises a triable issue of fact. It
points to an e-mail in which Car Sound informed Allied that,
because of its settlement with Gorlick, it would
“unfortunately” have to offer the two companies the same
prices. But Gorlick hasn’t explained why we should assume
that Allied knew what prices its competitor was getting
before the litigation began. Gorlick also introduced a meeting
agenda showing that Allied was planning to ask Car Sound to
raise Gorlick’s prices. But these pre-meeting notes don’t
show that Allied ever followed through with the request, nor
are they accompanied by evidence that Car Sound acceded or
even took the request seriously.

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2. Trade Experience Knowledge
Gorlick argues that, even if Allied did not actually know
it was receiving discriminatory prices, its “trade experience”
would have placed Allied on notice that those prices were
prohibited by the Robinson-Patman Act. Gorlick has two
routes to making a prima facie case of trade knowledge.
First, it may show that Allied secured “a substantial price
differential” while knowing that Car Sound sold its products
to Gorlick in the same quantities, in the same manner and
“with the same amount of exertion.” See Automatic Canteen,
346 U.S. at 80. Second, if there were differences in the
quantities ordered or manner of sale, Gorlick must
demonstrate that Allied knew those differences did not justify
the price breaks it received. Id.
Because Allied and Gorlick were very different
customers, only the second test is relevant here. Allied was
Car Sound’s “number one account” and purchased roughly
fifteen times the dollar amount of product that Gorlick did.
Allied also developed an electronic ordering system that
reduced errors and streamlined its dealings with Car Sound.
Gorlick hasn’t presented evidence that Allied knew the deals
it received were anything other than an incentive for its
continued loyalty, much less that Allied had any insight into
the pricing Car Sound offered competitors. Car Sound’s
president testified that “we never show the price of one
company to another.”
Gorlick cites to In re D & N Auto Parts Co., 55 F.T.C.
1279 (1959), but that case can be distinguished on its facts.
There, the Federal Trade Commission concluded that auto
parts jobbers who “were successful operators in a highly
competitive market and knew the facts of life so far as the

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automotive parts market was concerned” should have known
that their discounts were unjustified by the volume and
manner of their purchases. Id. at 1295. But the jobbers there
had joined together in membership corporations to secure
discounts and rebates based, not on the volume of their
individual purchases, but on the combined quantities
purchased by the group. Id. Gorlick hasn’t explained why
Allied, which was not part of such an organization, should
have known that the favorable prices it received from Car
Sound were unwarranted.
3. Duty to Inquire
Finally, Gorlick argues that Allied’s dealings with Car
Sound put it on inquiry notice that it was receiving
discriminatory prices not within a Robinson-Patman Act
defense. Gorlick identifies only one case where we found
that a buyer had a duty to inquire, Fred Meyer, Inc. v. FTC,
359 F.2d 351 (9th Cir. 1966), rev’d on other grounds,
390 U.S. 341, 358 (1968), but there the buyer induced the
preferential prices and insisted that none of its competitors be
offered the same deal. Id. at 365–66.
Gorlick produced no evidence showing that Allied did
anything of the sort. The closest its comes is the meeting
agenda showing that Allied planned to ask Car Sound to raise
Gorlick’s prices but, as discussed above, there is no evidence
that Allied followed through or that Car Sound acquiesced.
Holding that Allied had a duty to inquire into the prices
offered to its competitors would drastically expand the scope
of that duty, and we decline to do so here.
In sum, we affirm the grant of summary judgment
because Gorlick fails to show that Allied had actual

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knowledge, trade knowledge or a duty to inquire whether the
favorable prices it received might be prohibited by the
Robinson-Patman Act.
B. Sherman Act Claim
Section 1 of the Sherman Act proscribes contracts,
combinations or conspiracies that unreasonably restrain trade.
15 U.S.C. § 1; State Oil Co. v. Khan, 522 U.S. 3, 10 (1997).
We test the legality of a restraint under the rule of reason,
asking whether it “is such as merely regulates and perhaps
thereby promotes competition or whether it is such as may
suppress or even destroy competition.” FTC v. Indiana
Fed’n of Dentists, 476 U.S. 447, 458 (1986). To sustain a
section 1 claim under the rule of reason, a plaintiff must show
(1) the parties to the agreement intend to harm or restrain
competition, (2) the agreement actually injures competition
and (3) “the restraint is unreasonable as determined by
balancing the restraint and any justifications or procompetitive effects of the restraint.” Cal. Dental Ass’n v.
FTC, 224 F.3d 942, 947 (9th Cir. 2000).
Gorlick claims that Allied and Car Sound together
devised a shipping policy that violated section 1. Car Sound
would ship its products to Allied’s facilities in the Pacific
Northwest without charge but refused to ship to Gorlick
outside of California, even if Gorlick paid the shipping costs.
Gorlick worked around the refusal by having Car Sound
products delivered to its California warehouses and
transporting the goods to the Northwest at its own expense.
The district court rejected Gorlick’s section 1 claim,
concluding that the evidence, viewed in the light most
favorable to Gorlick, failed to establish that Allied and Car

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Sound acted in concert to limit Gorlick’s access to Car Sound
products in the Pacific Northwest. Even if the evidence
established that Car Sound refused to ship to Gorlick outside
of California, the district court wasn’t persuaded that Car
Sound made this decision “at Allied’s behest.” In the
alternative, it held the Sherman Act claim time-barred.
We affirm, but on different grounds. See Rano v. Sipa
Press, Inc., 987 F.2d 580, 584 (9th Cir. 1993). Even
assuming that Allied and Car Sound had an agreement, the
Sherman Act claim fails because Gorlick produced no
evidence that the vertical restraint actually injured
competition. See Cal. Dental Ass’n, 224 F.3d at 947.
1. Anticompetitive effects
Gorlick complains that the alleged Allied–Car Sound
agreement handicapped its ability to sell Car Sound products
at competitive prices. But the antitrust laws “were enacted
for the protection of competition, not competitors.”
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477,
488 (1977) (internal quotation marks omitted). Gorlick must
demonstrate injury to competition in the market as a whole,
not merely injury to itself as a competitor. See Brantley v.
NBC Universal, Inc., 675 F.3d 1192, 1200 (9th Cir. 2012);
McDaniel v. Appraisal Inst., 117 F.3d 421, 423 (9th Cir.
1997); Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 887 (9th
Cir. 1982).
Gorlick tries to translate its individual harm into harm to
competition by relying on the concentrated nature of the
market. As it notes, Gorlick and Allied together account for
seventy percent of the market in parts of Oregon and
Washington. Because Gorlick is Allied’s main rival, Gorlick

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argues that anything that hobbles its own business gives
Allied increased market power and hurts competition overall.
This theory of anticompetitive harm might be plausible if
we were looking only at the market for Car Sound products.
But, as Gorlick concedes, the relevant market is “the market
for aftermarket automotive exhaust products provided
through traditional warehouse distributors.” A number of
other manufacturers, including CATCO, Eastern, Walker,
Flowmaster, Jones Exhaust, Schultz and the International
Muffler Company, serve this market and provide substitutable
products.
It doesn’t matter whether Car Sound’s products are fully
interchangeable with those of its competitors because perfect
fungibility isn’t required. United States v. E.I. du Pont de
Nemours & Co., 351 U.S. 377, 394 (1956). If it were, “only
physically identical products would be a part of the market.”
Id. Instead, products must be reasonably interchangeable,
such that there is cross-elasticity of demand. Brown Shoe Co.
v. United States, 370 U.S. 294, 325 (1962).
Nothing in the record suggests that the price Allied
charged for Car Sound products was insensitive to the prices
charged for competing products. That companies make a
significant investment in new product lines isn’t surprising,
and it’s certainly not probative of whether products are
sensitive to price competition. And even if Allied charges
higher prices than Gorlick for Car Sound products, that says
nothing about how competitive Car Sound’s products were
vis-a-vis other brands. In short, Gorlick fails to show how the
alleged Allied–Car Sound pact dampens competition among
these interchangeable brands, several of which it sells.
Absent an allegation that Car Sound was the only, or even the

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dominant, brand of automotive exhaust parts, the supposed
arrangement between Car Sound and Allied doesn’t affect
competition in the relevant market.
So long as other manufacturers compete with Car Sound,
which they do, and Gorlick sells those other brands, which it
does, vibrant interbrand competition will act as a check on
any intrabrand advantage that Allied may receive on Car
Sound products. If Allied tries to charge monopoly prices on
Car Sound parts, consumers will simply switch to the other
brands. Nothing in the alleged Allied–Car Sound agreement
affects Gorlick’s ability to sell competing products. In fact,
Gorlick was the principal distributor for CATCO, Car
Sound’s main competitor, and had exclusive arrangements
with at least two other suppliers.
Perhaps recognizing that the record supports the existence
of strong interbrand competition, Gorlick focuses instead on
intrabrand competition among Car Sound distributors. But it
is interbrand competition that is “the primary concern of
antitrust law.” Continental T. V., Inc. v. GTE Sylvania Inc.,
433 U.S. 36, 52 n.19 (1977). Gorlick claims that a reduction
in interbrand competition isn’t required where there’s a
concentrated market, but the only case it cites for this
proposition is an out-of-circuit district court decision from
1988.
The Supreme Court has recognized that vertical restraints
on intrabrand competition can actually promote interbrand
competition and are therefore consistent with a competitive
market. See Leegin Creative Leather Prods., Inc. v. PSKS,
Inc., 551 U.S. 877, 889–92 (2007). In that case, a leather
belts manufacturer refused to sell its products to retailers that
discounted below a certain price. Id. at 883. The Court held

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that such vertical price restraints are not a per se violation of
section 1, because, among other procompetitive effects, they
help protect investments in customer service. Id. at 890–91,
907. A manufacturer might wish retailers to advertise its
products, conduct demonstrations or hire knowledgeable
employees. Id. at 890–91. In the absence of a price restraint,
a discounting retailer that provides no such services might
undercut a competitor that has spent resources generating
demand for the manufacturer’s product. Id. This free-riding
could ultimately hurt consumers:
If the consumer can . . . buy the product from
a retailer that discounts because it has not
spent capital providing services or developing
a quality reputation, the high-service retailer
will lose sales to the discounter, forcing it to
cut back its services to a level lower than
consumers would otherwise prefer.
Id. at 891.
Allied provided just these sorts of benefits to Car Sound.
Before Allied began selling Car Sound’s products in the
Pacific Northwest, Car Sound had no presence in the region.
Allied built brand recognition for the company by hosting
seminars for muffler shops and making sales calls—
“missionary work,” as Allied called it—alongside Car Sound
employees. Gorlick, on the other hand, aggressively drove
down the price for Car Sound products. Had Car Sound
extended it free shipping, Gorlick might have undercut
Allied’s investment in the product line. Far from hampering
competition, the alleged vertical restraint helped ensure that
Allied would continue promoting Car Sound parts, so they
could compete effectively against products offered by other

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manufacturers. See Continental T. V., 433 U.S. at 54–55;
8 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ch.
16A–3, at 136–42 (3d ed. 2010).
In sum, Gorlick hasn’t provided a plausible explanation
for how the alleged agreement between a manufacturer and
a distributor, concerning a product line without market
dominance, causes harm to competition in the entire
automotive exhaust product market. While Gorlick may be
unhappy that Allied got a better deal, it can’t turn its
individual grievance into a general claim of harm to
competition.
Furthermore, its allegation of market
concentration isn’t proof of anticompetitive harm because Car
Sound’s competitors, whose products Gorlick continues to
sell, act as a check on Allied’s ability to increase prices
across the board.
2. Issue Fairly Raised Below
Gorlick protests that the record on anticompetitive effects
is undeveloped and that it would be prejudiced if we affirmed
the district court on that ground. But the parties discussed the
anticompetitive effect of the alleged Allied–Car Sound
agreement in supplemental briefs before the district court.
Gorlick had a chance to present its side of the argument, and
even included expert economic testimony. Furthermore, the
parties conducted supplemental briefing following oral
argument before us. There’s no indication of what more
Gorlick would prove if it had another opportunity.
Sending this issue back to the district court would be a
waste of time and judicial resources. There are no disputed
material facts. Even assuming that a vertical agreement
existed and that it affected the price of Car Sound products,

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there’s no plausible showing of harm to competition in the
market for automotive exhaust products as a whole. Gorlick
loses as a matter of law.
*

*

*

Favorable prices that improve one distributor’s
competitive position do not necessarily violate the antitrust
laws. Here, Gorlick hasn’t shown that Allied knew the price
advantages it received resulted from any factor other than its
large volume of purchases and enthusiastic salesmanship of
Car Sound products. Nor has Gorlick demonstrated that any
alleged agreement between Allied and Car Sound stifled
competition in the market for aftermarket auto parts as a
whole. We must return this capitalist rumble to the forum
where it belongs: the market.
AFFIRMED.

PAEZ, Circuit Judge, concurring in part and dissenting in
part:
I join Parts I and II.A of the majority opinion and would
affirm the dismissal of Gorlick’s Robinson-Patman Act
claims. But I cannot agree with the majority’s decision to
reach the merits of Gorlick’s Sherman Act claim. I would
remand that claim to the district court for further proceedings,
including further development of the record on the alleged
anticompetitive effect of Allied’s agreement with Car Sound.
The district court would then be in the best position,
assuming there are no genuine factual disputes, to apply the
rule of reason analysis.

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“In the absence of genuine issues of material fact, we may
affirm the district court’s summary judgment on any ground
supported by the record, regardless of whether the district
court relied upon, rejected, or even considered that ground, if
the movant is entitled to judgment as a matter of law.” In re
ATM Fee Antitrust Litig., 686 F.3d 741, 748 (9th Cir. 2012)
(internal citations and quotations omitted). Here, while the
majority’s analysis may ultimately be correct, I do not think
the thin record in this case supports such a determination.
The majority recognizes that Gorlick’s theory of
anticompetitive harm—which was not the basis for Allied’s
motion for summary judgment—“might be plausible,” except
that the majority seems to assume that aftermarket
automobile exhaust parts are fungible and thus that “vibrant
interbrand competition will act as a check on any intrabrand
advantage that Allied may receive on Car Sound.” The
record, however, does not support the conclusion that such
products are “substitutable” or “interchangeable.” The record
only provides oblique and out-of-context hints that
aftermarket auto exhaust parts are so fungible. The only
evidence supporting such an inference comes from a
deposition of Allied manager Lawrence Contreras. While
testifying that he could infer his competitors’ prices from
Allied’s profit margins, the following exchange took place:
Q: When you say “they,” who is buying at the
same rate as you?
A: Anyone that would have the same like
product, not necessarily same brand.
Q: Same like product?

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Case: 10-36083

07/19/2013

ID: 8710205

DktEntry: 48-1

G ORLICK D ISTRIB . C TRS . V . C AR S OUND E XHAUST S YS .

Page: 19 of 20

19

A: Like product, not brand name.
Q: So like — let’s take Walker versus
MagnaFlow [Car Sound]. Is there a Walker
product that is like a MagnaFlow product —
A: Yes.
Q: — in the context that you just used?
A: Yes.
Q: What would that be? Give me an example.
A: Mufflers, catalytic converters, tubing, parts
and accessories. They’re all pretty close.
The other hints in the record are passing references in
depositions discussing the origins of the aftermarket market
(“Catalytic converters were just being developed as a
replacement part on a car. Prior to that they were — had to be
purchased from the car dealer.”), and the existence of several
competitors manufacturing catalytic converters. In my view,
this evidence does not conclusively establish that aftermarket
catalytic converters are fully interchangeable products such
that vibrant intrabrand competition can be assumed,
particularly in light of other suggestions in the record that
individual brands may be distinguishable. For example, a
former Gorlick General Manager testified about the
“investment” companies make in “shepherding [a new] line”
of a particular product, suggesting that customers may
systematically prefer one brand over another. Moreover,
Gorlick did present some evidence that the market was
sensitive to competition for distribution of Car Sound

Case: 10-36083

07/19/2013

ID: 8710205

DktEntry: 48-1

20 G ORLICK D ISTRIB . C TRS . V . C AR S OUND E XHAUST S YS .
products. Gorlick’s expert opined that there was a likelihood
of anticompetitive effects from the allegedly wrongful
agreement between Allied and Car Sound. One of several
factors the expert relied on was a muffler retailer’s statement
bemoaning Car Sound’s decision to prevent Gorlick from
selling Car Sound products in his area because the retailer
“relie[d] on Gorlick’s to get a fair price” on Carsound
products. The expert also opined that Allied was able to
maintain monopoly prices while the alleged illegal agreement
was in effect. If interbrand competition was as robust as the
majority presumes, Allied would have been unlikely to
sustain higher prices on Car Sound products—and muffler
shops would be indifferent to Gorlick’s ability to sell Car
Sound products.
Even assuming, arguendo, that the anticompetitive issue
was fairly presented below, I do not see how Allied can
prevail on summary judgment on this record, particularly
when we must consider what little evidence there is in the
light most favorable to Gorlick. Goodman v. Staples The
Office Superstore, LLC, 644 F.3d 817, 822 (9th Cir. 2011).
Although we invited supplemental briefing on the
anticompetitive effects issue, I am not persuaded that we
should exercise our discretion to reach the merits of Gorlick’s
Sherman Act claim. Because of the way Allied’s summary
judgment motion evolved in the district court, the issue was
not thoroughly developed there, and I am reluctant to resolve
this claim on the merits when it was never the basis for
Allied’s summary judgment motion. Accordingly, I would
remand the Sherman Act claim to the district court for further
proceedings.

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