                     United States Court of Appeals
                       FOR THE EIGHTH CIRCUIT

                             ___________

                             No. 96-4208
                             ___________

The Corner Pocket of Sioux Falls, Inc.,              *
et al.,                       *
                            *
    Plaintiffs - Appellants, *     Appeal from the United
States
                            * District Court for the
    v.                      * District of South Dakota.
                            *
Video Lottery Technologies, Inc., et al.,            *
                            *
    Defendants - Appellees.   *
                      ___________

                           Submitted: June 9, 1997
                              Filed:    August 29, 1997
                            ___________

Before LOKEN and ROSS, Circuit Judges,                 and   FENNER,*
    District Judge.
                    ___________

LOKEN, Circuit Judge.

    In 1989, the State of South Dakota initiated a video
lottery regulated by the South Dakota Lottery Commission.
See S.D. CODIFIED LAWS Ch. 42-7A. In this type of lottery,
games of chance are played on coin-operated, computer-
controlled video machines.       The video lottery machines are
privately owned, but the State owns the



      *
      The HONORABLE GARY A. FENNER, United States District Judge for
the   Western District of Missouri, sitting by designation.
operating software and controls the games through a central computer
system. The machines repay players 80-95% of the amounts wagered. The
State takes a portion of the remaining gross revenues (initially 22%, now
50%)by electronically sweeping the machine owner’s bank
account. See generally Chance Mgmt., Inc. v. State of
South Dakota, 97 F.3d 1107, 1108 (8th Cir. 1996), cert.
denied, 117 S. Ct. 1083 (1997); Poppen v. Walker, 520
N.W.2d 238, 249 (S.D. 1994).
    In November 1993, the Lottery Commission investigated
the video lottery machine market and concluded there was
effective competition. Plaintiffs nonetheless commenced
this antitrust class action in June 1994, alleging that
Video Lottery Technologies, Inc. (“VLT”), manufacturer of
the most popular video lottery machines, had refused to
sell its machines to new customers for the purpose of
enforcing a conspiracy among vending machine distributors
to allocate territories and fix prices, all in violation
of Section 1 of the Sherman Act, 15 U.S.C. § 1.
Following discovery, the district court1 granted summary
judgment for defendants on the ground that plaintiffs had
failed to present sufficient evidence of an unlawful
conspiracy. Plaintiffs appeal, launching a three-pronged
attack on the district court’s decision. We affirm.
    A. Plaintiffs first argue that the district court
erred in applying the legal standard for granting
summary judgment in antitrust cases.           Plaintiffs
criticize the court’s “heavy reliance” on Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588
(1986), where the Supreme Court stated that “conduct as
consistent with permissible competition as with illegal
conspiracy does not, standing alone, support an inference

       1
       The HONORABLE RICHARD H. BATTEY, Chief Judge of the United
States District Court for the District of South Dakota.

                                   -2-
of antitrust conspiracy.”    Relying primarily on cases
from the Third and Ninth Circuits, plaintiffs argue that
this portion of Matsushita does not apply to this case
because the conspiracy they allege served defendants’
economic interests. However, we are among the majority
of courts and commentators who read Matsushita more
broadly. See




                           -3-
Lovett v. General Motors Corp., 998 F.2d 575, 578-79 (8th
Cir. 1993), cert. denied, 510 U.S. 1113 (1994); City of
Mt. Pleasant, Iowa v. Associated Elec. Co-op, Inc., 838
F.2d 268, 273 (8th Cir. 1988); II AREEDA AND HOVENKAMP, ANTITRUST LAW
¶ 322, at 70-72, 75-81 (rev. ed. 1995). In its Memorandum Opinion
and Order, the district court discussed at length the
appropriate       summary      judgment    standard  in   complex
antitrust cases, carefully reviewing these relevant
cases. We conclude that the court properly articulated
and applied the governing summary judgment standard of
this Circuit.

    B.   Plaintiffs next argue that the district court
engaged in improper summary judgment fact-finding when it
accepted defendants’ explanations for market conditions
that, in plaintiffs’ view, evidence an unlawful
conspiracy.    To put this issue in context, we must
briefly describe the South Dakota video lottery machine
market.

     The private sector participants in the South Dakota
video lottery are defined by statute.         The State
separately licenses video lottery machine manufacturers
and distributors, who manufacture and sell the machines;
“operators,” who own the machines and account to the
State for their revenues; and gambling “establishments,”
where the machines are played by consumers of this
government-sponsored gambling.     See S.D. CODIFIED LAWS
§§ 42-7A-1(15-17), 41-45.     Licensed manufacturers and
distributors must sell their machines to licensed
operators, who typically lease the machines to licensed
establishments. Only bars, restaurants, and inns that
sell    alcoholic   beverages    may   become   licensed

                                 -4-
establishments. Operators and establishments negotiate
their respective shares of the machine revenues remaining
after the State takes its cut. Typically, those shares
are stated as a percentage “split,” such as 50-50.
    The South Dakota video lottery commenced in October
1989.    By the end of 1989, six manufacturers were
licensed to sell video lottery machines approved by the
State.     Not surprisingly, those best prepared to
distribute    these   machines   were   the   established
distributors    of   coin-operated    vending   machines,
businesses that for years




                           -5-
had placed juke boxes, pool tables, pinball machines, and
dart boards in bars and restaurants around the State.
These distributors and their trade association, the Music
and Vending Association (“MVA”), had successfully lobbied
the Legislature to authorize a video lottery. When the
lottery began, MVA members had obtained operator licenses
and were ready to supply video lottery machines to
licensed establishments located on the operators’ well-
established vending machine routes.

     As the lottery got underway, something unanticipated
occurred   --   South   Dakota   gamblers   overwhelmingly
preferred to play video lottery machines manufactured by
VLT.    But these popular machines proved hard to get.
Beginning as early as the fall of 1989, newly-established
operators,    including   licensed   establishments   that
obtained operator licenses so they could buy their own
machines, had difficulty buying machines from VLT. To
outsiders, it appeared that VLT was refusing to deal with
anyone other than well-established vending machine
distributors and those “squeaky wheels” who threatened
litigation or complained to the Lottery Commission.
Though VLT denied such an exclusionary policy and the
Lottery Commission’s investigation concluded that the
marketplace was sufficiently competitive, the named
plaintiffs -- two licensed operators and three licensed
establishments -- smelled an unlawful conspiracy and
began this action against VLT, certain licensed operators
who are long-standing vending machine distributors, and
the MVA.

    Plaintiffs’ Allegations. Although the lawsuit was
initially prompted by VLT’s refusal to sell video lottery

                            -6-
machines to plaintiffs and others from the fall of 1989
to late 1993, plaintiffs’ antitrust claims evolved
through discovery and the summary judgment process to
include the following allegations:

    -- MVA and the operator defendants conspired to
allocate operator territories in South Dakota.     MVA
members have their own distribution routes and went to
great lengths to avoid competing in each other’s
territories. For example, MVA member




                          -7-
protocol is to refer a competitor’s complaining customer
to that competitor, rather than try to obtain the
account.

    -- MVA and the operator defendants conspired to fix
prices by agreeing to make video lottery machines
available to establishments for a 50-50 split of the net
revenues. In 1989, one MVA member circulated a sample
lease agreement showing a 60-40 split.       The operator
defendants then agreed to adopt the 50-50 split, which
was reflected in over 80% of their contracts with
establishments between 1989 and 1993.            When the
conspiracy broke down,2 the operators’ share of negotiated
splits decreased.

    -- VLT knowingly enforced the operator conspiracy by
refusing to sell its video lottery machines directly to
establishments, or to licensed operators other than the
operator conspirators.     VLT’s policy of not selling
machines to operators who leased to establishments at 90-
10 or 80-20 splits helped enforce the cartel’s conspiracy
to impose 50-50 splits on establishments. VLT assumed the
role of cartel enforcer out of gratitude for help MVA
members gave VLT in quickly obtaining a South Dakota
manufacturer license, and out of fear that MVA would
otherwise use its influence to tarnish VLT’s reputation


      2
        Paradoxically, plaintiffs allege that the conspiracy broke down as a result of
the Lottery Commission’s investigation but argue that the Commission’s report --
which found the video lottery machine marketplace competitive -- should be ignored
as irrelevant. In our view, the heavily regulated nature of this business is highly
relevant in determining whether “the inference of conspiracy is reasonable in light of
the competing inferences of independent action.” Matsushita, 475 U.S. at 588.

                                         -8-
in other States.

    Defendants’ Response.      In moving for summary
judgment, defendants painted a very different picture of
the video lottery machine market than plaintiffs’
conspiracy-dominated portrait:




                           -9-
    -- When the video lottery began, long-time vending
machine distributors had well-defined territories or
routes, typically encompassing the area in which customer
machines can be serviced in one day’s drive.        These
operators concentrated on placing the new video lottery
machines with existing bar, restaurant, and hotel
customers in their traditional territories.          When
supplies of the popular VLT machines became limited,
operators served their existing customers first. There
was no agreement to allocate territories or customers.
Many MVA members have overlapping routes, and plaintiffs
have no evidence describing defendants’ behavior along
route overlaps, where one might reasonably expect to find
competition absent a conspiracy.

     -- The 50-50 revenue split was common in the coin-
operated vending machine industry long before the video
lottery.   When the lottery was new and its prospects
uncertain,    licensed   operators   and  establishments
reasonably adopted this equitable-looking split; indeed,
the named plaintiffs and other non-MVA operators did so.
When   the   initial   leases   expired, operators   and
establishments renegotiated based upon actual experience
with VLT machines.       Establishments with profitable
machines demanded and received more generous splits.
Thus, the increase in split variety (pricing diversity),
which plaintiffs attribute to the conspiracy breaking
down, is entirely consistent with what would have
happened in a competitive marketplace.

    -- VLT was not the enforcer for an operator cartel.
Throughout the alleged conspiracy, VLT sold machines to
non-MVA members, to new entrants in the operator market,

                           -10-
and occasionally to establishments that obtained operator
licenses and could lawfully buy machines. VLT’s refusals
to deal are explained by factors other than the alleged
conspiracy. First, VLT’s sales policy, which predated
its entry into the South Dakota market, was to sell
machines to vending machine distributors, not retail
establishments. VLT markets to distributors because it
believes that well-serviced machines will be more popular
and generate more revenues, because in VLT’s experience
bars and restaurants do not properly service machines,
and because VLT does not wish to perform the service
function. VLT prefers well-established




                           -11-
distributors experienced in servicing machines.      This
policy explains many of VLT’s refusals to deal during the
alleged conspiracy period, including its refusal to sell
to operators who leased machines at 90-10 or 80-20
splits, terms that VLT considered tantamount to resale.
A manufacturer may refuse to deal for these reasons, so
long as it does so independently. See Monsanto Co. v.
Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984); Weather
Wise Co. v. Aeroquip Corp., 468 F.2d 716, 718 (5th Cir. 1972), cert.
                        Second, the immediate success of
denied, 410 U.S. 990 (1973).
VLT’s machines in South Dakota meant that VLT received
many more orders than it could fill. In the 1989-1992
period, virtually all buyers encountered back order
delays. When forced to prioritize, VLT understandably
favored its best customers -- well-established vending
machine distributors -- and other prospective buyers who
threatened litigation or complained to the Lottery
Commission. Thus, as the Lottery Commission concluded,
factors other than the alleged conspiracy explain why
plaintiffs encountered difficulty in obtaining VLT
machines.

    In granting summary judgment to defendants, the
district court concluded that VLT had rationally
explained its policy of selling only to selected
operators, that the prevalence of 50-50 splits was non-
actionable conscious parallelism by the defendant
operators, and that the operators’ practice of staying
within their well-established service routes did not
evidence   an   agreement    to   allocate   territories.
Plaintiffs contend the court usurped the jury’s function
by inferring lawful conduct from defendants’ descriptions
of the marketplace. We disagree. Because “antitrust law


                                -12-
limits the range of permissible inferences from ambiguous
evidence in a § 1 case,” the court must necessarily weigh
the summary judgment evidence of both parties in
determining whether plaintiffs’ evidence “tends to
exclude the possibility that the alleged conspirators
acted independently.” Matsushita, 475 U.S. at 588.

    After carefully reviewing the record, we agree with
the district court that the objectively observable market
conditions are consistent with defendants’ assertions (i)
that VLT acted unilaterally in choosing customers for its
video lottery machines in




                           -13-
South Dakota, and (ii) that the operator defendants acted
independently in buying and leasing VLT’s machines.
Regarding the former, VLT has given legitimate business
reasons for its sales practices, which we may not lightly
disregard.    See Lovett, 998 F.2d 580-81; Illinois
Corporate Travel, Inc. v. American Airlines, Inc., 806
F.2d 722, 726 (7th Cir. 1986).3 Regarding the operators’
conduct, giving priority to customers in an established
territory is to be expected, particularly when VLT
machines are in short supply, and the prevalence of 50-50
splits in the early years of the video lottery is
parallel conduct that, standing alone, lacks probative
value.    See Pumps and Power Co. v. Southern States
Indus., Inc., 787 F.2d 1252, 1258 (8th Cir. 1986).

    At oral argument, plaintiffs pointed to a letter sent
from defendant Hub Music to Ramkota, Inc., a chain of
licensed establishments, as direct evidence of price-
fixing. The letter appears to be a joint proposal on
behalf of MVA operators to lease VLT machines on common
terms (including a 50-50 split) to the various Ramkota
hotels located “in their respective areas.”     There is
nothing in the record putting this proposal in context,
and plaintiffs apparently did not argue its significance
to the district court.4 Because the letter disclosed the

      3
        Though VLT received at least one written complaint from an operator
customer about another operator’s “cost cutting,” complaints by distributors are not
sufficient to overcome the presumption of unilateral decision-making. See Lovett,
998 F.2d at 578; H.J., Inc. v. International Tel. & Tel. Corp., 867 F.2d 1531, 1544-
45 (8th Cir. 1989).
      4
       After oral argument, defendants moved to exclude the letter or to expand the
record on appeal to include the author’s deposition testimony regarding the letter.

                                        -14-
author’s affiliation with MVA, plaintiffs suggest it is
proof of a general agreement among MVA members to fix
standard lease terms.    But it could also have been a
specific proposal on behalf of multiple suppliers none of
whom could satisfy the needs of a multi-location
customer, which from an antitrust




We deny that motion because the letter was part of the record before the district
court, and the deposition passages encompassed by the motion to expand the record
were not.

                                      -15-
standpoint is a very different document indeed. Without
more context, the letter is too ambiguous to help
plaintiffs defeat summary judgment.

    For the foregoing reasons, we conclude that, absent
additional evidence of concerted action, the market
conditions emphasized by plaintiffs do not prove that
“the inference of conspiracy is reasonable in light of
the competing inference[] of independent action.”
Matsushita, 475 U.S. at 588.

    C.    Finally, plaintiffs’ argue that the district
court erred in discounting affidavits and secretly taped
conversations, testimonial evidence that plaintiffs
contend provides sufficient additional evidence of the
alleged conspiracy to withstand summary judgment. This
evidence consisted of the following:

    1.   In response to defendants’ motion for summary
judgment, plaintiffs submitted an affidavit by Bill Welk,
a former partner of defendant James Koehler in developing
motels.   Welk averred that Koehler was late for a May
1989 business flight and explained that he had been
meeting with MVA members at the “Goose Camp,” where they
agreed to “limit the area within which they conducted the
video lottery business” and not compete in each other’s
route areas. Defendants responded with affidavits and
business records establishing that Welk and Koehler could
not have had such a meeting and conversation before
January 1990. Plaintiffs responded with a second Welk
affidavit in which he admitted confusion regarding the
dates, reaffirmed that the conversation with Koehler did
occur, and promised a third affidavit supplying the

                           -16-
proper dates.     Plaintiffs never submitted a third
affidavit.
    The district court noted that the Welk affidavit
could be rejected on procedural grounds because
plaintiffs disclosed neither Welk as a witness nor the
substance of his affidavit during discovery. Based on
the summary judgment record, the court dismissed Welk’s
alleged conversation with Koehler as a “factual
impossibility” that did not raise a genuine issue of
material fact.     We agree.    Plaintiffs inexcusably
concealed Welk




                          -17-
during discovery and then sprung his affidavit testimony during the summary
judgment briefing process.5 Despite years to perfect this sneak attack,
presumably with the aid of Welk’s business records, plaintiffs submitted
an affidavit in which every verifiable detail was incorrect.           When
defendants pointed out the errors, including the critical error as to the
date of the alleged conversation, Welk promised to clarify his recollection
and then reneged on that promise.        “Where a party emphatically and
wittingly swears to a fact, it bears a heavy burden -- even in the summary
judgment context -- when it seeks to jettison its sworn statement.”
Pyramid Sec. Ltd. v. IB Resolution, Inc., 924 F.2d 1114, 1123 (D.C. Cir.
                                cf. Prosser v. Ross, 70
1991), cert. denied, 502 U.S. 822 (1992);
F.3d 1005, 1008 (8th Cir. 1995); Wilson v. Westinghouse
Elec. Corp., 838 F.2d 286, 289 (8th Cir. 1988).      The
district court properly disregarded the Welk affidavits.


    2.   Plaintiffs submitted a secretly tape-recorded
conversation in May 1993 between the principals of
plaintiff G & T Gaming and James Trucano, brother of
defendant Michael Trucano. The ostensible purpose of the
meeting was to urge Trucano to use his personal
connections to help G & T obtain VLT machines.
Plaintiffs cite the resulting conversation as evidence
the defendant operators did not compete for each other’s
accounts and VLT only sold to MVA members. Trucano left
the coin-vending distributor business in South Dakota in
1988, prior to the start-up of the video lottery. At his
deposition, he denied firsthand knowledge of the South
Dakota video lottery machine market, and plaintiffs have
no evidence he participated in the conspiracy.       His


      5
        According to the Lottery Commission’s November 1993 Report, witnesses
at the Commission’s hearing included “[o]ne licensed establishment owner, Bill
Welk of
Aberdeen.” Thus, concealment of Welk’s assertions was unconscionable. A
reasonable inference is that plaintiffs knew Welk’s accusations against his former
partner and current litigation adversary, Koehler, would not withstand scrutiny.

                                        -18-
comments in the taped conversation are ambiguous as to
whether operators avoid “stealing” accounts because of an
agreement not to do so, and




                           -19-
lend no support to plaintiffs’ theory that VLT enforced
an operators’ conspiracy. The district court properly
discounted this tape as non-probative, inadmissible
hearsay.

    3. Plaintiffs submitted two secretly tape-recorded
conversations in 1993 between Charles Huber, a G & T
Gaming principal, and a competing operator, defendant
James Koehler, owner of defendant Hub Music. Ostensibly,
Huber was seeking either an “allotment” of VLT machines
or to sell G & T Gaming to Koehler. In the course of
their lengthy conversations, Huber repeatedly made
statements or asked questions in a way that invited the
unsuspecting Koehler to acknowledge an operators’
conspiracy. Each time, Koehler either flatly denied that
an   anticompetitive    agreement    existed,   responded
                                       6
ambiguously, or changed the subject.      Nothing Koehler

     6
       For example, Huber’s question, what happens if an MVA member “doesn’t
play by the rules,” produced the following dialog:

     Koehler:    [It means y]ou’re no longer friends.

     Huber:      I mean fine you’re no longer friends but I mean there’s gotta be
                 more hold than that.

     Koehler:    No.

     Huber:      They don’t get a supply of product or they get sanctioned or I
                 assume you don’t have anything in writing between all of the
                 members.

     Koehler:    We don’t no, we’re trying . . . as an association we’re trying to
                 make everybody more profitable -- we can do a better job,
                 service our locations better, have money to reinvest[. Y]ou

                                      -20-
said is inconsistent with unilateral behavior.     The
district court properly discounted these tapes as too
ambiguous for a reasonable jury to infer that a
conspiracy existed. Accord Richards v. Neilson Freight
Lines, 810 F.2d 898, 903-04 (9th Cir. 1987).




            know you make it sound like we’re doing price fixing . . . .

                                 -21-
    4. Plaintiffs submitted three secretly tape-recorded
telephone conversations in April, May, and August 1993
between G & T Gaming and Dana Waggener, who had just
resigned as VLT’s sales manager to work for a competing
manufacturer.7 Waggener said that he left VLT because he
did not like its policy of not selling to all licensed
operators and that VLT “protected the hell out of” the
operators it preferred, who “kinda had their roots in the
industry.”      Waggener’s   ambiguous   statements   are
consistent with VLT’s explanation of its sales policy and
therefore do not support an inference that VLT acted as
the enforcer of an operator-level conspiracy. Moreover,
the statements were made while Waggener was working for
a VLT competitor and were not in furtherance of the
alleged conspiracy. Thus, the district court properly
discounted these tapes as non-probative, inadmissible
hearsay. See Fed. R. Evid. 801(d)(2)(E); United States
v. Snider, 720 F.2d 985, 992 (8th Cir. 1983), cert.
denied, 465 U.S. 1107 (1984).

      The judgment of the district court is affirmed.

      A true copy.

            Attest:

                   CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT




      7
        Waggener later returned to VLT, so his deposition testimony did not support
plaintiffs’ conspiracy claim. Like the district court, we do not consider whether
plaintiffs may avoid summary judgment by relying on secretly taped conversations
that the unsuspecting declarant later disavows under oath.

                                       -22-
