                                                                                                                           Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


9-16-2005

Harrison Aire Inc v. Aerostar Intl Inc
Precedential or Non-Precedential: Precedential

Docket No. 04-2904




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                                   PRECEDENTIAL

  UNITED STATES COURT OF APPEALS
       FOR THE THIRD CIRCUIT



           Nos. 04-2904 & 04-3052



          HARRISON AIRE, INC.,
                     Appellant in No. 04-2904

                      v.

   AEROSTAR INTERNATIONAL, INC.;
      RAVEN INDUSTRIES, INC.,
                   Appellants in No. 04-3052



On Appeal from the United States District Court
   for the Eastern District of Pennsylvania
     D.C. Civil Action No. 02-cv-01258
      (Honorable Michael M. Baylson)



            Argued March 7, 2005

      Before: SCIRICA, Chief Judge,
     ROTH and BECKER, Circuit Judges
                  (Filed September 16, 2005)

JOHN K. WESTON, ESQUIRE (ARGUED)
JULIE C. PARKER, ESQUIRE
Sacks, Weston, Smolinsky, Albert & Luber
510 Walnut Street, Suite 400
Philadelphia, Pennsylvania 19106
       Attorneys for Appellant/Cross-Appellee,
       Harrison Aire, Inc.

JEFFREY A. OSHIN, ESQUIRE (ARGUED)
Hardin, Kundla, McKeon, Poletto & Polifroni
673 Morris Avenue
P.O. Box 730
Springfield, New Jersey 07081
      Attorney for Appellees/Cross-Appellants,
      Aerostar International, Inc. and Raven Industries, Inc.



                  OPINION OF THE COURT



SCIRICA, Chief Judge.

       In this antitrust action, we address allegations of unlawful
monopolization and tying in the aftermarket for replacement hot
air balloon fabric. The District Court granted defendants’
motion for summary judgment, finding no triable issue of

                                2
monopoly power in the relevant product market.           We will
affirm.

                                I.

       Harrison Aire, a hot air balloon ride operator, alleges
antitrust violations by Raven Industries and its balloon-
manufacturing subsidiary, Aerostar International. Consistent
with our standard of review on summary judgment, we recount
the facts in the light most favorable to the non-moving party,
appellant Harrison Aire.

        Terry Harrison, the sole owner and proprietor of Harrison
Aire, is an FAA-licensed pilot and aircraft mechanic. After a
twenty-three year career at Eastern Airlines, he retired in 1973
to launch the Harrison Aire enterprise from an airstrip in central
New Jersey. The company owns and operates several hot air
balloons which it charters for recreational day trips over the
New Jersey countryside. Since the mid 1990s, the business has
suffered cash-flow problems. Harrison Aire blames its losses,
in part, on the prohibitive expense of replacement balloon
fabric, which it contends is a result of Raven/Aerostar’s
monopolization of the relevant balloon fabric aftermarket.

       Raven Industries is a diversified manufacturing company
based in Sioux Falls, South Dakota. From the 1970s through
1986, it manufactured hot air balloons and replacement balloon
fabric. In 1986, Raven formed Aerostar International as a
wholly-owned subsidiary to take over its balloon business.
Aerostar International manufactures and sells hot air balloons in

                                3
a market of at least five competitors and also produces and sells
replacement balloon fabric.

       Hot air balloons are regulated from cradle to grave by the
Federal Aviation Administration. The FAA certifies balloon
design and manufacturing standards, 14 C.F.R. § 21.11-53,
requires the manufacturer to provide a maintenance manual
along with its aircraft, id. § 21.50, reviews the content of the
manual, id. § 31.82, and certifies replacement part designs for
airworthiness, id. 21.303. The FAA’s “maintenance manual”
and “replacement part” regulations bear on this appeal.

        Balloon manufacturers are required to provide their
customers with a balloon maintenance manual, known as an
“ICA” (Instructions for Continued Airworthiness), which sets
forth recommended and required maintenance procedures. The
manual is in two parts. The first, known as the “FAA accepted”
section, establishes manufacturer-recommended but not FAA-
required protocols. The second, known as the “Airworthiness
Limitation Section,” establishes FAA requirements affecting
flight safety.

       Regulations also govern the manufacture and sale of
replacement balloon parts, including replacement fabric. All
replacement parts must be “of such a quality” that the repaired
balloon is “at least equal to its original or properly altered
condition.” 14 C.F.R. § 43.13(b). The FAA authorizes third-
party manufacturers to sell aftermarket parts, including
replacement fabric, provided they first obtain FAA certification


                               4
that the product is equal to or better than the original. Id. §
21.303.

       Replacement fabric extends the service life of a hot air
balloon. The top half of the balloon “envelope”—the material
encapsulating the hot air—tends to deteriorate more rapidly than
the bottom half. By replacing top-half fabric after 300 to 500
hours of use, balloon owners are able to extend the aircraft’s
service life for an additional 200 to 300 hours. Generally, it is
more economical to replace fabric in this manner than to
purchase an entirely new envelope. Harrison Aire followed this
practice in maintaining its fleet of Raven/Aerostar balloons.

       Harrison Aire purchased its first Raven balloon in 1978.
The parties’ dispute over fabric replacement began shortly
thereafter. According to Terry Harrison, Raven advised him that
he could not purchase replacement fabric from other
manufacturers because installation of third-party fabric would
render the balloon unairworthy. In 1982, Raven revised its
balloon maintenance manuals to make this policy explicit,
warning Raven balloon owners that “only fabric which has been
tested and approved according to Raven factory standards may
be used for repair of Raven envelopes. Failure to comply with
this requirement constitutes a departure from type design and
renders the balloon unairworthy.” This language appeared in the
FAA-approved, rather than the FAA-required, section of Raven
maintenance manuals. Reading the manual in the light most
favorable to Harrison Aire, it warned that only Raven-brand
fabric should be used in Raven balloons.

                               5
        Terry Harrison repeatedly complained to Raven,
believing its insertion of the “warning” into the balloon manual
transformed the fabric policy into an FAA requirement that
legally barred him from obtaining cheaper fabric elsewhere. On
several occasions between 1982 and 1986, Harrison confronted
Raven representatives about the manual language, but was told
that no other aftermarket product was equal to or better than
Raven fabric, and that only Raven fabric was consistent with
airworthiness standards.        Harrison understood this as a
representation that he was required to purchase Raven fabric in
order to comply with the FAA’s “equal to or better” standard for
replacement parts. Harrison Aire contends that from 1978 to
1986, Raven misled the company into believing the purchase of
Raven fabric was mandated by law, when in fact it was merely
recommended by the manufacturer.

        In February 1986, Raven Industries formed Aerostar
International to take over its hot air balloon business. Aerostar
continued Raven’s balloon operation essentially uninterrupted,
and became the new focus of Harrison Aire’s campaign to
purchase fabric from third-party sources. Shortly after Aerostar
was incorporated, Harrison registered several complaints with
Aerostar about “being forced” to use Raven/Aerostar fabric.
Nevertheless, despite its understanding that Aerostar balloons
required Aerostar replacement fabric, Harrison Aire purchased
a “big ride” Aerostar balloon in 1986 that is the subject of this
litigation.



                               6
        By 1995, Harrison Aire’s “big ride” Aerostar balloon
required a major fabric replacement. By this time, two other
manufacturers had received FAA approval to produce
aftermarket fabric for Aerostar balloons. See 14 C.F.R. §
21.303 (authorizing the manufacture of replacement balloon
parts upon receipt of a “Parts Manufacturer Approval” from the
FAA). Harrison investigated one of the approved sellers,
Custom Nine Designs, but decided against purchasing their
fabric because of concerns that it lacked quality. Harrison never
contacted the other approved supplier, Head Balloons. Viewing
Aerostar-brand fabric as its only option and as prohibitively
expensive, Harrison Aire retired the “big ride” balloon in 1996
rather than repairing it.

       Harrison eventually realized that installation of third-
party fabric was legally permissible. In July 2000, following an
administrative proceeding between the FAA and a third-party
balloon repair service, an Administrative Law Judge concluded
the fabric “warning” found in Aerostar’s maintenance manual
was not legally binding. In re Braden’s Balloons Aloft, Inc.,
FAA No. CP99SWO037 (July 26, 2000). Harrison contends the
Braden’s decision provided him notice, for the first time, that
his company was not required to purchase Aerostar-brand fabric.

       In March 2002, Harrison Aire filed suit in federal court,
alleging, inter alia, antitrust injury arising from
Raven/Aerostar’s monopolization of the aftermarket for
replacement Aerostar balloon fabric and from the unlawful tying
of Aerostar-brand fabric to Aerostar balloons. But for

                               7
Raven/Aerostar’s allegedly misleading and exclusionary
aftermarket fabric policy, Harrison Aire contends that its “big
ride” balloon would have been repaired in 1996 and still
operational. The District Court granted summary judgment to
defendants, holding they lacked sufficient market power in the
relevant product market. Harrison Aire, Inc. v. Aerostar Int’l,
Inc., 316 F. Supp. 2d 186 (E.D. Pa. 2004).1

                               II.

       The District Court had jurisdiction under the federal
antitrust laws, 15 U.S.C. § 15 (providing cause of action and
treble damage remedy), and 28 U.S.C. § 1331. We have
jurisdiction under 28 U.S.C. § 1291. Our summary judgment
standard of review is plenary. In re Flat Glass Antitrust Litig.,
385 F.3d 350, 357 (3d Cir. 2004) (drawing all reasonable
inferences in favor of the non-moving party).




   1
    Harrison Aire’s complaint included both federal antitrust
counts and supplemental claims under state law. On May 3,
2004, the District Court granted Raven/Aerostar’s motion for
summary judgment in part, dismissing the antitrust counts and
ordering trial on the state law counts. The parties then
stipulated to final judgment with prejudice against Harrison
Aire on the surviving claims, in order to facilitate an
immediate appeal on the antitrust issues. Accordingly, the
state law claims are not at issue and our analysis is confined
to the federal antitrust claims.

                               8
       Significantly, however, “antitrust law limits the range of
permissible inferences” that can be drawn “from ambiguous
evidence.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 588 (1986); see also Monsanto Co. v. Spray-Rite
Serv. Corp., 465 U.S. 752, 764 (1984). To avoid deterring pro-
competitive behavior, “certain inferences may not be drawn
from circumstantial evidence in an antitrust case.” In re Flat
Glass Antitrust Litig., 385 F.3d at 357 (quoting Intervest, Inc. v.
Bloomberg, L.P., 340 F.3d 144, 160 (3d Cir. 2003)).

        To survive a motion for summary judgment, an antitrust
plaintiff must produce economically plausible evidence
supporting the elements of its claim. See Matsushita, 475 U.S.
at 588; Ideal Dairy Farms v. John Labatt, Ltd., 90 F.3d 737,
748-50 (3d Cir. 1996) (applying Matsushita in section 2 action);
Zenith Radio Corp. v. Matsushita Elec. Indus. Co., 513 F. Supp.
1100, 1140 (E.D. Pa. 1981) (“It is now settled that summary
judgment is appropriate in those antitrust cases where plaintiffs,
after having engaged in extensive discovery, fail to produce
‘significant probative evidence’ in support of the allegations in
their complaint.”) (citations omitted). “If the plaintiff’s theory
is economically senseless, no reasonable jury could find in its
favor, and summary judgment should be granted.” Eastman
Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 468-69
(1992).




                                9
                              III.

       We begin with Harrison Aire’s monopolization claim.
Under section 2 of the Sherman Act, monopolization consists of:
“(1) the possession of monopoly power in the relevant market
and (2) the willful acquisition or maintenance of that power as
distinguished from growth or development as a consequence of
a superior product, business acumen, or historic accident.”
United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966);
see also 15 U.S.C. § 2; LePage’s, Inc. v. 3M, 324 F.3d 141 (3d
Cir. 2003) (en banc) (reviewing section 2 case law and
explaining the “willful acquisition or maintenance” element).

        Monopoly power is defined as “the power to control
prices or exclude competition.” United States v. E.I. du Pont de
Nemours & Co., 351 U.S. 377, 391 (1956). More precisely, it
is “the power to charge a price higher than the competitive price
without inducing so rapid and great an expansion of output from
competing firms as to make the supracompetitive price
untenable.” Am. Academic Suppliers, Inc. v. Beckley-Cardy,
Inc., 922 F.2d 1317, 1319 (7th Cir. 1991); see also United States
v. Dentsply Int’l Inc., 399 F.3d 181, 189 (3d Cir. 2005)
(emphasizing a monopolist’s power “to maintain market share”)
(emphasis in original) (quoting United States v. Syufy Enters.,
903 F.2d 659, 665-66 (9th Cir. 1990)).

      Monopoly power can be demonstrated with either direct
evidence of supracompetitive pricing and high barriers to entry,
see Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1434 (9th


                               10
Cir. 1995), or with structural evidence of a monopolized market.
Because “direct proof is only rarely available, courts more
typically examine market structure in search of circumstantial
evidence of monopoly power.” United States v. Microsoft, 253
F.3d 34, 51 (D.C. Cir. 2001) (en banc) (citations omitted).

                               A.

       H arrison A ire       contends A erostar charged
supracompetitive prices for its fabric, based on the uncontested
fact that Aerostar’s fabric is more expensive than that of its
aftermarket competitors. But this alone does not support a
reasonable inference of monopoly power. Competitive markets
are characterized by both price and quality competition, and a
firm’s comparatively high price may simply reflect a superior
product. Blue Cross & Blue Shield United v. Marshfield Clinic,
65 F.3d 1406, 1412 (7th Cir. 1995) (“Generally you must pay
more for higher quality.”). Therefore, “when dealing with a
heterogeneous product or service . . . a reasonable finder of fact
cannot infer monopoly power just from higher prices.” Id. at
1411-12.

       Here, the record is clear that balloon fabric is a
heterogeneous product. Fabric is sold in various weaves and
grades, of differing strength and durability. The record
demonstrates that Aerostar fabric is of comparatively high
quality. Although Harrison considered purchasing fabric from
one of Aerostar’s aftermarket competitors, Custom Nine
Designs, he rejected the product because Custom Nine “didn’t


                               11
prove to me that it wasn’t a bogus part.” Furthermore, Custom
Nine’s president acknowledged that Aerostar’s “diamond
weave” fabric was a superior aftermarket product to his own.
Because it is undisputed that balloon fabric, and particularly
Aerostar fabric, is differentiated by composition and quality,
Aerostar’s comparatively high price does not, by itself, support
a reasonable inference of monopoly power.

                               B.

        Turning to Harrison Aire’s circumstantial evidence of
monopoly power, we note the structural indicators of a
monopolized market. In a typical section 2 case, monopoly
power is “inferred from a firm’s possession of a dominant share
of a relevant market that is protected by entry barriers.”
Microsoft, 253 F.3d at 51; see also Fineman v. Armstrong World
Indus., Inc., 980 F.2d 171, 201-03 (3d Cir. 1992) (explaining
market share analysis). Plaintiffs relying on market share as a
proxy for monopoly power must plead and produce evidence of
a relevant product market, of the alleged monopolist’s dominant
share of that market, and of high barriers to entry. Queen City
Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 436 (3d Cir.
1997) (market definition); Fineman, 980 F.2d at 201-03 (3d Cir.
1992) (market share); Microsoft, 253 F.3d at 82 (barriers to
entry).

      Additional factors are relevant in the aftermarket context.
Aftermarket monopolization cases require a more
comprehensive analysis, because market share data standing


                               12
alone is not necessarily a reliable proxy for monopoly power.
SMS Syst. Maint. Servs. Inc. v. Digital Equip. Corp., 188 F.3d
11, 16 (1st Cir. 1999). Many firms supply unique and/or
proprietary aftermarket parts and services for their primary
market products. As a result, they “can be expected to have a
very high percentage” share of the relevant aftermarket. Id. But
high aftermarket share is not necessarily indicative of monopoly
power—i.e., the power to charge and maintain a
supracompetitive price—because aftermarket behavior generally
is disciplined by competition in the primary product market. If
the primary market is competitive, a firm exploiting its
aftermarket customers ordinarily is engaged in a short-run
game—for when buyers evaluate the “lifecycle” cost of the
product, the cost of the product over its full service life, they
will shop elsewhere. Eventually, the aftermarket “monopolist”
lacks customers to exploit. See Parts & Elec. Motors, Inc. v.
Sterling Elec., Inc., 866 F.2d 228, 236 (7th Cir. 1988) (Posner,
J., dissenting) (describing the exploitation of aftermarket
customers as a “suicidal” business practice); SMS, 188 F.3d at
16 (“firms concerned with the long term cannot afford to bite
the hands that feed them”).

       This portrayal is conventional antitrust theory. See 2A
Philip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 564b,
at 322-28 (2d ed. 2002). But as explained in Kodak, it “may not
accurately explain the behavior of the primary and derivative
markets for complex durable goods” where “significant
information and switching costs” sever the usual link between


                               13
the primary market and the aftermarket. 504 U.S. at 473.
Information costs are barriers that prevent primary market
consumers from evaluating the lifecycle costs of a product. Id.
at 473-74. For primary market competition to discipline
aftermarket behavior, consumers require information on, among
other things, the expected cost, quality and availability of
aftermarket products such as parts and service. Perfect
information is not required for the primary market to check the
aftermarket. See Jefferson Parish Hosp. Dist. No. 2 v. Hyde,
466 U.S. 2, 27 (1984) (holding, in tying case, that imperfect
information does not necessarily “generate the kind of monopoly
power that justifies condemnation”); SMS, 188 F.3d at 19 n.3
(“perfect information about the aftermarket is not required”).
But sometimes lifecycle pricing information is particularly
difficult or impossible for primary market customers to acquire,
as in the case of a unilateral change in aftermarket policy
targeting “locked in” customers. Kodak involved this type of
market failure. See Queen City Pizza, 124 F.3d at 440 (“The
Kodak case arose out of concerns about unilateral changes in
Kodak’s parts and repairs policies.”)

       Kodak involved a primary market for photocopiers and
an aftermarket for Kodak parts and service. The primary market
was competitive. But Kodak controlled nearly 100% of the
parts aftermarket, and 80% to 95% of the service market. 504
U.S. at 480. Historically, Kodak’s customers had been able to
obtain copier repair service from independent service
organizations that charged “substantially” less than Kodak. 504


                              14
U.S. at 457. Later, however, after customers were locked in to
Kodak copiers, Kodak changed its aftermarket policy to sell
replacement parts only to those customers who also purchased
Kodak service or who repaired their own machines. Id. at 458.
This policy change led to higher aftermarket prices. Id. at 465.
In other words, Kodak used its power in the replacement parts
market to “squeeze the independent service providers out of the
repair market and to force copier purchasers to obtain service
directly from Kodak, at higher cost.” Queen City Pizza, 124
F.3d at 440.

        The Supreme Court held the independent service
organizations’ tying and monopolization claims against Kodak
could not be dismissed on summary judgment following
truncated discovery. Kodak, 504 U.S. at 486. On the key
question of monopoly power in the parts and services
aftermarket, the Court cited evidence of (1) supracompetitive
pricing, id. at 469; (2) Kodak’s dominant share of the relevant
aftermarket, id. at 480; (3) significant information costs that
prevented lifecycle pricing by primary market customers, id. at
475; and (4) high “switching costs” that served to “lock in”
Kodak’s aftermarket customers, id. at 477. Together, this
evidence supported a reasonable inference of monopoly power
in the relevant aftermarket, precluding summary judgment.

        In broad terms, Kodak stands for the proposition that
market reality is the touchstone of antitrust analysis. Where the
plaintiff comes forward with concrete evidence of a
monopolized market, the defendant “bears a substantial burden

                               15
in showing that it is entitled to summary judgment.” 504 U.S.
at 469.     On the more specific issue of aftermarket
monopolization, Kodak held that primary market competition
does not necessarily preclude monopoly power in the relevant
aftermarket where a unilateral policy change targets “locked-in”
customers.

        But Kodak does not transform every firm with a
dominant share of the relevant aftermarket into a monopolist.
To create a triable question of aftermarket monopoly power, the
plaintiff must produce “hard evidence dissociating the
competitive situation in the aftermarket from activities occurring
in the primary market.” SMS, 188 F.3d at 17 (1st Cir. 1999).

        In considering the effect of primary market competition
on aftermarket behavior, we address at the outset the relevant
market definition. Some courts have viewed the primary and
aftermarket as comprising a single relevant product market. See
id.; PSI Repair Servs., Inc. v. Honeywell, Inc., 104 F.3d 811, 820
(6th Cir. 1997). But this may not always be the case. Relevant
market definition is a function of reasonably available product
substitutes. Du Pont, 351 U.S. at 395 (1956). Products are
included in a single relevant market when they “have the
ability—actual or potential—to take significant amounts of
business away from each other.” Allen-Myland, Inc. v. IBM
Corp., 33 F.3d 194, 206 (3d Cir. 1994) (quoting SmithKline
Corp. v. Eli Lilly & Co., 575 F.2d 1056, 1063 (3d Cir. 1978));
see also Rothery Storage & Van Co. v. Atlas Van Lines, Inc.,
792 F.2d 210, 218 (D.C. Cir. 1986). Under this framework, we

                               16
believe the relevant market here is that for replacement fabric
for Aerostar balloons. The primary balloon market is distinct
from the fabric aftermarket because fabric is a complement to,
not a substitute for, the primary good. Nevertheless, these
complementary products are linked by consumer demand such
that competition in the foremarket may discipline behavior in
the aftermarket. The proper inquiry, then, focuses on the
existence of monopoly power, i.e., “whether competition in the
equipment market will significantly restrain power in the service
and parts market.” Kodak, 504 U.S. at 470 n.15.

        One important consideration is whether a unilateral
change in aftermarket policy exploits locked-in customers.
Queen City Pizza, 124 F.3d at 440 (3d Cir. 1997); SMS, 188
F.3d at 19 (1st Cir. 1999); Alcatel USA, Inc. v. DGI Tech., Inc.,
166 F.3d 772, 783 (5th Cir. 1999); PSI, 104 F.3d at 820 (6th Cir.
1997). As the Court of Appeals for the Seventh Circuit has
explained: “The Court did not doubt in Kodak that if spare parts
had been bundled with Kodak’s copiers from the outset, or
Kodak had informed customers about its policies before they
bought its machines, purchasers could have shopped around for
competitive lifecycle prices. The material dispute that called for
a trial was whether the change in policy enabled Kodak to
extract supra-competitive prices from customers who had
already purchased its machines.” Digital Equip. Corp. v. Uniq
Digital Tech., Inc., 73 F.3d 756, 763 (7th Cir. 1996); accord
SMS, 188 F.3d at 17-19 (1st Cir. 1999); PSI, 104 F.3d at 820
(6th Cir. 1997).


                               17
        We emphasize, however, that an “aftermarket policy
change” is not the sine qua non of a Kodak claim. An
aftermarket policy change is an important consideration, but
only one of several relevant factors. As noted, the Kodak
plaintiffs came forward with evidence of (1) supracompetitive
pricing, (2) Kodak’s dominant share of the relevant aftermarket,
(3) significant information costs that prevented lifecycle pricing,
and (4) high “switching costs” that served to “lock in” Kodak’s
aftermarket customers.

       Here, in contrast, Harrison Aire has failed to meet its
burden of dissociating competition in the primary market from
conditions in the aftermarket. It is undisputed that the primary
balloon market is competitive. And unlike the plaintiffs in
Kodak, Harrison Aire has failed to produce evidence of
supracompetitive pricing, of dominant aftermarket share, of
information costs preventing lifecycle pricing, or of a change in
aftermarket policy targeting locked-in customers. Together,
these evidentiary failures compel summary judgment for the
defendant.

       Harrison Aire purchased its first Raven balloon in 1978.
From that time on, Terry Harrison believed that Raven required
him to use Raven-brand replacement fabric. Harrison repeatedly
complained about this policy. From 1982, when Raven first
published its allegedly exclusionary “warning” about third-party
replacement fabric, and continuing through 1986, when Raven
formed Aerostar, Terry Harrison on several occasions
confronted Raven representatives about their restrictive fabric

                                18
policy. Similarly, immediately after Aerostar’s incorporation in
February, 1986, Harrison registered several complaints about
“being forced” to buy Aerostar fabric.             Yet knowing
Raven/Aerostar’s restrictive fabric policy, Harrison Aire entered
the competitive primary market in 1986 to purchase the “big
ride” Aerostar balloon that is the subject of this lawsuit.

        The transparency of Raven/Aerostar’s aftermarket fabric
policy, and Harrison Aire’s undisputed knowledge of it, cuts
strongly against an inference of monopoly power. SMS is
instructive on this point. Like Harrison Aire, the plaintiffs in
SMS produced some evidence of switching costs, 188 F.3d at 20,
but failed to come forward with sufficient evidence of
supracompetitive pricing, id. at 24, and significant information
barriers to lifecycle pricing, id. at 18-19, to survive summary
judgment on the issue of monopoly power. In affirming
summary judgment for the defendant, the court in SMS engaged
in a comprehensive analysis under the relevant Kodak factors.
In particular, SMS emphasized the transparency of the
defendant’s aftermarket policy, explaining that readily available
aftermarket information allows reasonably diligent primary
market customers to engage in lifecycle pricing. Id. at 18-19.
This, in turn, checks aftermarket monopolization. See id. at 19
(“[T]he transparency of [defendant’s] allegedly monopolistic
policy represents a salient departure from the Kodak scenario.”).

      Raven/Aerostar’s aftermarket policy was transparent and
known to Harrison Aire at all relevant times. Neither
information costs nor a unilateral change in aftermarket policy

                               19
prevented Harrison Aire from shopping for competitive lifecycle
balloon prices when it purchased the “big ride” balloon at issue
in 1986. Furthermore, after full discovery, Harrison Aire has
not produced other evidence dissociating competitive conditions
in the primary balloon market from conditions in the aftermarket
for replacement fabric. The record here is clear that Harrison
Aire got precisely the balloon and the aftermarket fabric that it
bargained for in the competitive primary market.

       Lacking any evidence of significant information barriers
to lifecycle pricing, or any other evidence dissociating
competitive conditions in the primary market and the
aftermarket, summary judgment is proper on Harrison Aire’s
monopolization claim.

                               IV.

        Harrison Aire also alleges unlawful tying under section
1. The claim lacks merit. “Tying is defined as selling one good
(the tying product) on the condition that the buyer also purchase
another, separate good (the tied product).” Town Sound &
Custom Tops, Inc. v. Chrysler Motors Corp., 959 F.2d 468, 475
(3d Cir. 1992) (en banc). “The antitrust concern over tying
arrangements is limited to those situations in which the seller
can exploit its power in the market for the tying product to force
buyers to purchase the tied product when they otherwise would
not.” Queen City Pizza, 124 F.3d at 442-43 (quoting Town
Sound, 959 F.2d at 475); see also Microsoft, 253 F.3d at 84.
Tying requires “appreciable economic power” in the tying


                               20
product market. Kodak, 504 U.S. at 464; Brokerage Concepts
v. U.S. Healthcare, Inc., 140 F.3d 494, 516-17 (3d Cir. 1998).

        Harrison Aire contends Raven/Aerostar unlawfully tied
its hot air balloons (the tying product) to its replacement fabric
(the tied product), but fails to produce any evidence of
appreciable market power in the tying product market. As
noted, it is undisputed that the primary market for hot air
balloons is competitive. Absent this essential element, we will
affirm summary judgment on the tying claim.

                               V.

        As an alternative holding, the District Court concluded
Harrison Aire failed to properly allege antitrust injury under
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477
(1977). This was error. Brunswick held the antitrust laws
protect consumers, not competitors, and that antitrust plaintiffs
must show a causal connection between the defendant’s anti-
competitive conduct and injury to consumers. Id. at 488-89.
Injury to competitors does not suffice. Here, Harrison Aire is a
consumer of balloon fabric, and it claims antitrust injury in the
form of business losses caused by high fabric prices, which in
turn allegedly were caused by Raven/Aerostar’s exclusionary
conduct in the relevant fabric market.            This type of
injury—prohibitively high consumer prices resulting from
allegedly monopolistic behavior—is the type the antitrust laws
are designed to redress. See Town Sound, 959 F.2d at 486 (3d
Cir. 1992) (en banc) (explaining antitrust injury); U.S. Gypsum


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Co. v. Ind. Gas Co., 350 F.3d 623, 626-28 (7th Cir. 2003)
(same).

        The District Court concluded that “[a]ny injuries that
Plaintiff suffered would have come from Defendants’
misrepresentations, not from any market power, abuse of market
power or other anticompetitive conduct.” 316 F. Supp. 2d at
224. But these purported misrepresentations are alleged to have
had an anticompetitive effect in the aftermarket—namely the
exclusion of more efficient competitors. Harrison Aire alleges
that Aerostar used misleading manual language, and the
imprimatur of FAA acceptance, to consolidate its position in the
fabric aftermarket. This, in turn, allegedly prevented Harrison
and consumers like him from purchasing lower-cost fabric from
Aerostar’s competitors. These allegations satisfy the antitrust
injury requirement.

       The District Court found antitrust injury lacking because
the manual “did not forbid Plaintiff from purchasing other
manufacturers’ fabric and that a reasonable investigation on this
point by Plaintiff would have disclosed . . . that Plaintiff could
buy replacement fabric from anyone who manufactured [it] to
the FAA standards.” Id. at 217. In other words, the District
Court held that no injury to consumers could be shown because
no jury could find that Harrison Aire reasonably relied on the
manual.

      It is true that further investigation by Harrison Aire might
have revealed that Aerostar’s replacement-fabric instructions


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were not legally binding. But the record is not clear that
Harrison Aire’s reliance on the manual was unreasonable.
Indeed, it appears that the FAA, like Harrison Aire, viewed
Aerostar’s manual as restricting the use of non-Aerostar fabric
in Aerostar balloons. Not until the Braden’s decision in 2000
did the FAA recognize the Aerostar manual as non-binding.
Since the FAA itself interpreted Aerostar’s manual as restricting
the use of third-party fabric, the reasonableness of Harrison
Aire’s reliance on that manual presents a jury question. A jury
could have found that Harrison reasonably believed that
Aerostar’s manuals prevented him from buying lower-priced
fabric from competitors. Because this alleged exclusion of
competitors, to the detriment of consumers, is the sort of harm
the antitrust laws are intended to prevent, summary judgment
was improper on the issue of antitrust injury. While we hold
Harrison Aire’s antitrust claims ultimately fail for lack of
monopoly/market power in the relevant market, they are not
defective for failure to allege antitrust injury.

                       CONCLUSION

       For the reasons set forth, we will affirm the judgment of
the District Court.




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