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Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc. - 429 U.S. 477, 97 S. Ct. 690 (1977)

Rule:

For plaintiffs to recover treble damages on account of violations of § 7 of the Clayton Act, 15 U.S.C.S. § 18, they must prove more than injury causally linked to an illegal presence in the market. Plaintiffs must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful. The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation. It should, in short, be the type of loss that the claimed violations would be likely to cause. 

Facts:

In a private antitrust action in the United States District Court for the District of New Jersey, certain bowling centers contended that Brunswick Corporation (Brunswick), which was one of the country's two largest bowling equipment manufacturers and which was the largest operator of bowling centers, had violated the antimerger provisions of 7 of the Clayton Act, 15 U.S.C.S. § 18by acquiring bowling centers that had defaulted in payments for equipment purchased from Pueblo. Pueblo Bowl-O-Mat, Inc. (Pueblo) alleged that the acquisitions might substantially lessen competition or tend to create a monopoly because Brunswick, due to its size, had the capacity to lessen competition in the markets it had entered by driving smaller competitors out of business. The jury returned a verdict for Pueblo, having been instructed in accord with Pueblo’s damages theory that their profits would have increased if Brunswick had allowed the defaulting centers to close. Pursuant to 4 of the Clayton Act 15 U.S.C.S. § 15, the District Court awarded treble damages, and, sitting as a court of equity, ordered divestiture. The United States Court of Appeals for the Third Circuit endorsed the legal theories upon which Pueblo’s claim was based, but reversed and remanded because of improper jury instructions.

Issue:

Did the court of appeals err in ruling that Pueblo was entitled to compensation for any loss "causally linked" to Brunswick's alleged violations of § 7 of the Clayton Act, 15 U.S.C.S. § 18?

Answer:

Yes

Conclusion:

The United States Supreme Court vacated and directed judgment n.o.v. for Brunswick. The court stated that the erroneous formulation made all dislocations caused by the merger actionable, regardless of whether they had anything to do with the reason the merger was condemned. The appropriate test was whether Pueblo could prove the type of loss that the claimed violations would be likely to cause, reflecting either the anticompetitive effect of the merger or of other anticompetitive acts made possible by the violations. The evidence of damages, which was limited to Pueblo’s presumed lost increase in profits had their competitors in fact failed, was insufficient as a matter of law under the correct standard.

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