McGahee and Northern Propane are retail distributors of propane, a fuel used for heating. Retail distributors primarily have two types of customers: (1) residential and (2) commercial. Generally, distributors sell propane to commercial users at a lower price. Because propane is a fungible good, price is of prime importance in its unregulated market.

At the time relevant to this action, Northern Propane operated 180 retail distribution outlets in twenty-five states. One of these retail distribution outlets was based in Camilla, Georgia. Northern Propane produces and buys propane in western states and comingles the propane with other companies' propane to transport it by pipeline to Georgia. The Northern Propane district office in Camilla then takes delivery of the propane at the pipeline terminal.

In a March 1982 internal report, Northern Propane described the propane market in the Camilla district (approximately Mitchell and Baker Counties). Northern Propane estimated it had sixty percent of the total propane market within the district. Northern Propane estimated Petrolane had twenty percent of the market, but regarded Petrolane as competition only for large volume commercial accounts. Northern Propane also estimated that five competitors, working within the edges of the district, split the remaining twenty percent. Because transportation costs restrict economical delivery of propane to a twenty-five to thirty mile radius from the storage tanks and because these five competitors were based outside of the Camilla district, these competitors were only competitive with Northern Propane on the edge of the Camilla district to which they were closest. In addition, Northern Propane stated that, of other possible fuels, only "free" wood posed a competitive threat to propane in the Camilla district and that conversion to wood had stabilized.1

When Northern Propane bought the retail distribution outlet in Camilla, Floyd McGahee was its district manager. McGahee had become a fixture in the Camilla area, having worked at the same propane outlet for approximately thirty years. In June 1981, Northern Propane demoted McGahee to a salesperson position because, according to Northern Propane, he failed to keep adequate records, to keep the accounts receivable current, and to follow company directives. McGahee resigned from Northern Propane on October 9, 1981, under contentious circumstances.2

After resigning from Northern Propane, McGahee obtained an $800,000 Small Business Administration (SBA) loan to finance his April 1982 entry into the propane business in the Camilla area. By February 1982, Northern Propane had obtained a copy of McGahee's SBA loan documents and other documents related to his financial position. Before McGahee's distributorship opened, a Northern Propane internal report stated that its new "district manager has taken the offensive and will fight the former employee for the market." At the end of March 1982, Northern Propane lowered its residential prices five cents per gallon and its commercial prices four cents per gallon.3

In late April 1982, McGahee opened for business. Not only did McGahee solicit Northern Propane's customers, he also hired three of Northern Propane's drivers and repairmen. McGahee's market share went from zero percent in 1981 to twenty-three percent in 1983, while Northern Propane's market share dropped from sixty or sixty-five percent in 1981 to thirty-five percent in 1983.4 McGahee's success in acquiring a substantial share of the market was due both to his personal familiarity with the local community and to his willingness to compete with Northern Propane's prices. The direct head-to-head competition led to hard feelings, with Northern Propane's new district manager in Camilla referring to McGahee in internal documents as "Floyd The S.O.B." and setting "[c]ontribute to Floyd's financial problems" as a district goal for 1983.

During the price war, Northern Propane sold propane at prices below its average total cost. McGahee also contends that Northern Propane's own documents indicate that in some months Northern Propane sold propane to commercial customers at prices below average variable cost and cited documents that support this contention.5 McGahee also contends that Northern Propane's own documents indicate that Northern Propane sold propane in the Camilla district at lower prices than in other districts and cites documents that support this contention.6 Furthermore, Northern Propane furnished propane tanks in the Camilla district rent free while charging rent in other districts, realizing that McGahee would be limited in the number of tanks he could offer rent free.7

Our review of the district court's grant of summary judgment is plenary and is to be conducted utilizing the same legal standards as those imposed upon the district court. Mercantile Bank & Trust v. Fidelity & Deposit Co., 750 F.2d 838, 841 (11th Cir.1985). Summary judgment is appropriate only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

Three recent Supreme Court cases vacating appellate reversals of district court orders granting summary judgment illulminate the appropriate role of summary procedure. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). A common theme found in these cases is that

[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed "to secure the just, speedy and inexpensive determination of every action." Fed.R.Civ.P. 1.

Celotex, 106 S. Ct. at 2555. In Matsushita, the Supreme Court made clear that summary judgment may be especially appropriate in an antitrust case because of the chill antitrust litigation can have on legitimate price competition. 106 S. Ct. at 1360. For this reason, when opposing a motion for summary judgment, an antitrust plaintiff must present evidence that tends, when interpreted in a light most favorable to plaintiff, to exclude the possibility that defendant's conduct was as consistent with permissible competition as with illegal conduct. Id. at 1357.8

A plaintiff must show two elements to establish an attempted monopolization claim under Section 2 of the Sherman Act: (1) the specific intent on the part of the defendant to achieve a monopoly and (2) a dangerous probability the defendant would succeed. Swift & Co. v. United States, 196 U.S. 375, 396, 25 S. Ct. 276, 279, 49 L. Ed. 518 (1905); Tiftarea Shopper, Inc. v. Georgia Shopper, Inc., 786 F.2d 1115, 1118 (11th Cir.1986). The first element can be satisfied by proof of predatory pricing, Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 107 S. Ct. 484, 93 L. Ed. 2d 427 (1986), which is what McGahee has alleged in this case. A problem arises, however, in determining whether a defendant has engaged in predatory pricing.

A plaintiff who is a competing seller such as McGahee must show two elements to establish a Robinson-Patman Act claim: (1) the defendant, in the course of interstate commerce, discriminated in price between purchasers of commodities of like grade and quality and (2) a reasonable possibility that this price difference may harm competition. Falls City Industries, Inc. v. Vanco Beverage, Inc., 460 U.S. 428, 434-35, 103 S. Ct. 1282, 1288, 75 L. Ed. 2d 174 (1983); FTC v. Anheuser-Busch, 363 U.S. 536, 549, 80 S. Ct. 1267, 1274, 4 L. Ed. 2d 1385 (1960). Price discrimination, the first element, is merely a price difference. Anheuser-Busch, 363 U.S. at 549, 80 S.Ct. at 1274. Harm to competition, the second element, can be satisfied by proof of predatory pricing.9 Utah Pie Co. v. Continental Baking Co., 386 U.S. 685, 87 S. Ct. 1326, 18 L. Ed. 2d 406 (1967). Again, the problem is determining whether a defendant has engaged in predatory pricing.

A. The District Court's Test for Predatory Pricing.

In its opinion, the district court discusses the economic theory behind regulating predatory pricing, relying primarily on the work of Professors Areeda and Turner, in its quest for a test for determining when a defendant has engaged in predatory pricing. McGahee, 658 F. Supp. at 192-93. Although the district court discusses the test from International Air Industries v. American Excelsior Co., 517 F.2d 714 (5th Cir.1975), cert. denied, 424 U.S. 943, 96 S. Ct. 1411, 47 L. Ed. 2d 349 (1976), the district court adopts a test proposed by Areeda and Turner, modifying the test slightly to make it consistent with International Air. McGahee, 658 F. Supp. at 192 n. 5. Cf. Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir.1981) (decisions rendered by the former Fifth Circuit before October 1, 1981, are binding upon courts of the Eleventh Circuit). According to the district court,

[i]n International Air, the former Fifth Circuit accepted Areeda and Turner's basic premises but added a significant gloss. Specifically, the court formulated a different standard for markets in which entry barriers are extremely high. In such cases, a plaintiff can prevail by showing that the defendant is "charging a price below its short-run, profit-maximizing price...." 517 F.2d at 724.

McGahee, 658 F. Supp. at 194.

The Areeda and Turner test has two primary rules for predatory pricing claims: (1) a price at or above the defendant's average variable cost10 is conclusively deemed lawful and (2) a price below the defendant's average variable cost is conclusively deemed unlawful. Areeda & Turner, Predatory Pricing and Related Practices Under Section 2 of the Sherman Act, 88 Harv.L.Rev. 697, 733 (1975). Therefore, the Areeda and Turner test makes evidence of a defendant's subjective intent irrelevant; instead it relies wholly upon a comparison between prices and average variable cost.

In International Air, the plaintiff appealed a jury verdict for the defendant, arguing that the district court erred in refusing to direct a verdict in plaintiff's favor on its Robinson-Patman Act claim. 517 F.2d at 720. In arguing for judgment notwithstanding the jury verdict, the plaintiff relied on evidence concerning defendant's subjective intent from defendant's internal company memoranda and related circumstantial evidence. Id. at 721-23. The Fifth Circuit panel, however, said a court must apply objective evidence of predatory pricing, based on defendant's prices and costs, before it could rule as a matter of law against the defendant. Id. at 723. The court stated that

[i]n order to prevail as a matter of law,30 a plaintiff must at least show that either (1) a competitor is charging a price below his average variable cost in the competitive market or (2) the competitor is charging a price below its short-run, profit-maximizing price and barriers to entry are great enough to enable the discriminator to reap the benefits of predation before new entry is possible.31

Id. at 724.

In footnote 30 of International Air, the Fifth Circuit panel added this dicta:

Much of what we say here should be relevant to the requisite elements of a prima facie Robinson-Patman case. Indeed, in Utah Pie Co. v. Continental Baking Co., 386 U.S. 685, 696, n. 12, 702, n. 14, 87 S. Ct. 1326 [, 1333, n. 12, 1336, n. 14], 18 L. Ed. 2d 406 (1967) the Supreme Court indicated that price below "cost" is perhaps, [sic] a necessary element of a prima facie case. However, because the Court repeatedly referred to "deteriorating price structure," the opinion may hold that it is not necessary to show a price below marginal cost in order to make out a prima facie case. To the extent that the opinion stands for the latter proposition, we limit our discussion to the elements necessary to sustain a motion for directed verdict.

Id. at n. 30. In determining the appropriate test, the district court extended the dicta "should be relevant to the prima facie elements" as used in footnote 30 of International Air and followed new Fifth Circuit cases that have interpreted International Air as giving the elements of a plaintiff's prima facie case. See Adjusters Replace-A-Car, Inc. v. Agency Rent-A-Car, Inc., 735 F.2d 884 (5th Cir.1984), cert. denied, 469 U.S. 1160, 105 S. Ct. 910, 83 L. Ed. 2d 924 (1985); Bayou Bottling, Inc. v. Dr. Pepper Co., 725 F.2d 300 (5th Cir.), cert. denied, 469 U.S. 833, 105 S. Ct. 123, 83 L. Ed. 2d 65 (1984).

Accordingly, the district court applied the International Air test to defendant's motion for summary judgment. First, the district court found that the propane market had no significant barriers to entry.11 Therefore, the district court did not apply the second part of the test--the "gloss"--from International Air. Then, the district court found that the plaintiff did not produce any evidence that the defendant sold propane below its average variable cost,12 ignoring any evidence of defendant's subjective intent. McGahee, 658 F. Supp. at 192 ("the Court cannot and need not divine the intent behind defendant's pricing policy"). Following Areeda and Turner's proposed test, the district court concluded that "[t]hus, there is no issue for trial under International Air." Id. at 196.

The Areeda and Turner test is like the Venus de Milo: it is much admired and often discussed,13 but rarely embraced.14 Perhaps this reluctance to embrace is due to the substance from which it is formed. The Areeda and Turner test is carved from economic assumptions, not from antitrust statutes and judicial precedents. Perhaps this reluctance is due to attacks upon it.15 The Areeda and Turner test has been criticized for being impractical,16 for using static short-run analysis,17 and for being too permissive of predatory activity;18 these criticisms break any notion that economists19 agree that the Areeda and Turner test is best.20 We, like our sister circuits other than the Second Circuit and the Fifth Circuit, our Siamese twin, decline to embrace the Areeda and Turner test.

B. Our Quest For a Test For Predatory Pricing.

The case at bar presents an issue of first impression for the Eleventh Circuit.21 What is the appropriate test for predatory pricing when an antitrust defendant moves for summary judgment or for a directed verdict? We begin our quest for a test at sources other than the thought provoking contributions of academics. We turn first to the antitrust statutes and judicial precedent. Based on these sources, we hold that when an antitrust defendant moves for judgment as a matter of law, the test for predatory pricing must consider subjective evidence and should use average total cost22 as the cost above which no inference of predatory intent can be made.

1. The Antitrust Statutes and Their Legislative History

Under 15 U.S.C. Sec. 15, a private plaintiff such as McGahee may bring a civil action to recover threefold for damages for a violation of the substantive antitrust provisions. McGahee has alleged a Sherman Act claim and a Robinson-Patman Act claim. Predatory pricing is relevant to McGahee's claims because it is circumstantial evidence. In the Sherman Act claim, predatory pricing would be used to infer the intent necessary for an attempt to monopolize.23 In the Robinson-Patman Act claim, proof of predatory pricing would be used to infer injury to competition.24 On one hand, over one hundred years ago, Congress could not have foreseen the development of antitrust law in general, much less have foreseen the present debate over the appropriate test for predatory pricing. On the other hand, the statutes and their legislative histories reveal Congress's intent, the linchpin in interpreting a statute, as to what conduct the antitrust statutes prohibit.

In relevant part, the Sherman Act provides that "[e]very person who shall monopolize, or attempt to monopolize, ... any part of the trade or commerce among the several States ... shall be deemed guilty of a felony." 15 U.S.C. Sec. 2.25 The Congressional debates26 in 1890 indicate that Congress believed that under the common law of the individual states, "these combinations [we]re illegal without statute." 21 Cong.Rec. 2458 (1890) (Senator Teller). The public outcry over monopolies and the inadequacy of the states' common law necessitated federal legislation regulating monopolies involved in interstate commerce.27 Accordingly, Congress drafted and enacted a broad, general statute that borrowed from the common law. 21 Cong.Rec. 3152 (Senator Hoar); 21 Cong.Rec. 3148 (Senator Edmonds); 21 Cong.Rec. 2456 (Senator Sherman); Standard Oil Co. v. United States, 221 U.S. 1, 51, 31 S. Ct. 502, 512, 55 L. Ed. 619 (1910); see generally Letwin, Congress and the Sherman Antitrust Law: 1887-1890, 23 U.Chi.L.Rev. 221, 240-47 (1956). Under the common law,

prohibitions were placed upon the power of individuals to deal under such circumstances and conditions as, according to the conception of the times, created a presumption that the dealings were not simply the honest exertion of one's right to contract for his own benefit unaccompanied by a wrongful motive to injure others, but were the consequence of a contract or course of dealing of such a character as to give rise to the presumption of an intent to injure others through the means, for instance, of a monopolistic increase of prices.

Standard Oil Co., 221 U.S. at 52, 31 S.Ct. at 512 (summarizing the common law related to monopolies); see also id. at 54 & 58, 31 S. Ct. at 513 & 515 (same). Congress made Sec. 2 of the statute even broader than the common law. The common law prohibited acts that produced a monopoly, which then meant an undue restraint of trade; Sec. 2 of the statute also prohibited any attempt to monopolize, even though the acts by which the attempt was made did not themselves produce a monopoly. Id. at 61, 31 S.Ct. at 516.

In passing antitrust legislation, Congress's purpose was not only an economic one, but was also a political one, a purpose of curbing the power some individuals and corporations had over the economy. See Letwin, 23 U.Chi.L.Rev. at 247-255; Pitofsky, The Political Content of Antitrust, 127 U.Pa.L.Rev. 1051, 1052 (1979); Sullivan, Economics and More Humanistic Disciplines: What are the Sources of Wisdom for Antitrust?, 125 U.Pa.L.Rev. 1214, 1222-23 (1977). As Senator Sherman himself explained, "[i]f we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life." 21 Cong.Rec. 2457 (1890).

Enacted in 1936, the Robinson-Patman Act strengthened the 1914 Clayton Act's prohibition of price discrimination. S.Rep. No. 1502, 74th Cong., 2d Sess. 3 (1936); H.R. No. 2287, 74th Cong., 2d Sess. 3, 16 (1936); FTC v. Anheuser-Busch, Inc., 363 U.S. 536, 545, 80 S. Ct. 1267, 1272, 4 L. Ed. 2d 1385 (1960). Section 2 of the Clayton Act, as originally enacted in 1914, provided as follows:

That it shall be unlawful for any person ... to discriminate in price between different purchasers of commodities, ... where the effect of such discrimination may be to substantially lessen competition or tend to create a monopoly in any line of commerce: Provided, That nothing herein contained shall prevent ... discrimination in price in the same or different communities made in good faith to meet competition.

Clayton Act, ch. 323, Sec. 2, 38 Stat. 730 (1914) (current version at 15 U.S.C. Sec. 13 (1982)). The House Report stated that Sec. 2 of the Clayton Act was

expressly designed with the view of correcting and forbidding a common and widespread unfair trade practice whereby certain great corporations and also certain smaller concerns which seek to secure a monopoly in trade and commerce by aping the methods of the great corporations, have heretofore endeavored to destroy competition and render unprofitable the business of competitors by selling their goods, wares, and merchandise at a less price in the particular communities where their rivals are engaged in business than at other places throughout the country.... In the past it has been a most common practice of great and powerful combinations engaged in commerce--notably the Standard Oil Co., and the American Tobacco Co., and others of less notoriety, but of great influence--to lower prices of their commodities, oftentimes below the cost of production in certain communities and sections where they had competition, with the intent to destroy and make unprofitable the business of their competitors, and with the ultimate purpose in view of thereby acquiring a monopoly in the particular locality or section in which the discriminating price is made.

H.R.Rep. No. 2287, 74th Cong., 2d Sess. 8 (1914). In addition to the reasons for prohibiting price discrimination given by the House Report, the Senate Report added:

Every concern that engages in this evil practice must of necessity recoup its losses in the particular communities where their commodities are sold below cost or without a fair profit by raising the price of the same class of commodities above their fair market value in other sections or communities.

S.Rep. No. 698, 63d Cong., 2d Sess. 3 (1914). This legislative history makes plain that Sec. 2 of the Clayton Act "was born of a desire by Congress to curb the use by financially powerful corporations of localized price-cutting tactics which had gravely impaired the competitive position of other sellers." FTC v. Anheuser-Busch, Inc., 363 U.S. 536, 543, 80 S. Ct. 1267, 1271, 4 L. Ed. 2d 1385 (1959).

In relevant part, the Clayton Act today, as amended by the Robinson-Patman Act, provides that

[i]t shall be unlawful for any person ... to discriminate between different purchasers of commodities of like grade and quality ... where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy or prevent competition ...: Provided, That nothing herein contained shall prevent differentials which make only due allowances in the cost of manufacture, sale, or delivery resulting from the different methods or quantities in which such commodities are to be sold or delivered.

15 U.S.C. Sec. 13(a). The 1936 Robinson-Patman amendments to the Clayton Act, among other things, strengthened the prohibitions against price discrimination by changing the exceptions carved from the general rule (the exceptions are the parts of the statute following "Provided "). As the Senate Judiciary Committee explained,

[t]he weakness of present section 2 lies principally in the fact that: (1) It places no limit upon differentials permissible on account of differences in quantity; and (2) it permits discriminations to meet competition, and thus tends to substitute the remedies of retaliation for those of law, with destructive consequences to the central object of the bill. Liberty to meet competition which can be met only by price cuts at the expense of customers elsewhere, is in its unmasked effect the liberty to destroy competition by selling locally below cost, a weapon progressively the more destructive in the hands of the more powerful, and most deadly to the competitor of limited resources, whatever his merit and efficiency. While the bill as now reported closes these dangerous loopholes, it leaves the fields of competition free and open to the most efficient, and thus in fact protects them the more securely against inundations of mere power and size.

S.Rep. No. 1502, 74th Cong., 2d Sess. 4 (1936).

The Senate Report also explained that the amended statute's cost exception to the general rule

limits the differences in cost which may be honored in support of price differentials, to those marginal differences demonstrable as between the particular customers concerned in the discrimination. It is designed, among other things, to preclude the grant of a discrimination to a particular customer equal to the whole saving in cost resulting to the seller's entire volume of business as augmented by that customer's patronage; to preclude also differentials based on allocated or imputed, as distinguished from actual, differences in cost, representing particular facilities or departments which the favored customer may not have immediately utilized, but with which the seller cannot dispense in the general conduct of his business.

Id. at 5-6.28 Translated into the language of economists such as Areeda and Turner, this part of the legislative history makes clear that Congress intended to limit the cost exception to differences in expenses particular to a customer, such as transportation savings, but did not intend to include within the exception sales above average variable cost even by a seller with excess capacity, who could produce additional goods without increasing fixed costs. See also H.R.Rep. No. 2287, 74th Cong., 2d Sess. 17 (giving other examples of economies of scale that result in lower costs and could lead to lower prices without violating the Act).

In explaining the practices to be prohibited by the Act, the House Judiciary Committee in the House Conference Report expressed a similar concern with limiting price differences to those specific to a particular customer:

Discriminations in excess of sound economic differences between the customers concerned, in the treatment accorded them, involve generally an element of loss, whether only of the necessary minimum of profits or of actual costs, that must be recouped from the business of customers not granted them.

Id. at 8; see also S.Rep. No. 1502, 74th Cong., 2d Sess. 4 (1936) (using similar language). Therefore, differences in price, even if the lower price is only too low to provide the seller any profit, are prohibited unless the difference is justified by differences between the customers.

In summary, Congress's exact intent when enacting the antitrust statutes as to what conduct established an antitrust violation is beyond the reach of human knowledge, but the statutes, their legislative histories, and common sense indicate that Congress intended for subjective evidence of a defendant's intent to be relevant. Predatory pricing provides only objective, circumstantial evidence of predatory intent. In determining how Congress intended proof to be made of antitrust violations, common sense suggests that objective, circumstantial evidence of prices and costs and direct and circumstantial evidence of subjective intent would both be important.29 Cf. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 104 S. Ct. 1464, 79 L. Ed. 2d 775 (1984) (direct or circumstantial evidence may prove antitrust conspiracy). Furthermore, the Sherman Act being a criminal statute codifying and expanding the common law, and proof of its violation requiring a showing of specific intent, in addition to the legislative background of public outcry in 1890 against monopolies, Congressional concern with the economic and political power of large combinations and with restraining harmful but not all competition, and the distinction discussed in 1936 between differences in prices due to differences in costs related to a particular customer and to differences in price due to excess capacity, all make ignoring a defendant's subjective intent unsupportable.

The antitrust statutes and their legislative histories also indicate that Congress intended average total cost to be the objective standard used. The predatory pricing test requires a cost standard below which it may be inferred that a defendant violated the antitrust statutes. The Sherman Act and its legislative history do not offer guidance as to what measure of cost is relevant, except indicating that, as a codification of the common law, Sherman Act violations could be proven in part through objective evidence. The legislative histories of both the Clayton Act and the Robinson-Patman Act, on the other hand, both offer specific guidance. The Robinson-Patman Act itself uses the word "cost," which should be interpreted as meaning all costs.³⁰ Moreover, the legislative history specifically explains that a seller cannot sell at average variable cost, without covering any fixed costs, even if he has excess capacity. Furthermore, the Robinson-Patman Act's legislative history refers to "the necessary minimum of profits or of actual costs;" the Clayton Act's legislative history refers to "below cost or without a fair profit." In economic terms, the cost of capital, which can be understood as the expected profit necessary to induce investors to invest, are also costs.³¹ Including the cost of capital, expressed by Congress as "a fair profit" and as "the necessary minimum profit," indicates Congress intended all costs to be part of the standard.

Three recent Supreme Court cases shed light on interpreting these antitrust statutes. Although these cases do not directly address the issues in this case, they suggest the proper definition of cost and the role of subjective evidence and costs in summary procedure in antitrust cases.

In Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 107 S. Ct. 484, 93 L. Ed. 2d 427 (1986), the Supreme Court held that a private plaintiff seeking injunctive relief under 15 U.S.C. Sec. 16 must show a threat of antitrust injury, which means threat of an injury for which a plaintiff could eventually claim treble damages. In Cargill, the Court reversed the Tenth Circuit because the plaintiff did not show at the trial more than a threat of loss or damage due merely to increased competition and neither raised nor proved any claim of predatory pricing before the district court. In discussing predatory pricing, the Court first defined the term: "Predatory pricing may be defined as pricing below an appropriate measure of cost for the purpose of eliminating competition in the short run and reducing competition in the long run." Id. 107 S.Ct. at 493. The Court recognized the debate among the Circuit Courts of Appeals and among academics concerning "measure of cost" but did not indicate what "measure of cost" or "cost" was appropriate. Id. at n. 12. The Court held that for the purposes of deciding Cargill, a definition of predatory pricing consistent with a definition of pricing below cost was sufficient,

because only below-cost pricing would threaten to drive [plaintiff] from the market, see n. 9, supra, and because [plaintiff] made no allegation that [defendant] would act with predatory intent. Thus, in this case, as in Matsushita Electric Indus. Co. v. Zenith Radio Corp., supra, we find it unnecessary to "consider whether recovery should ever be available ... when the pricing in question is above some measure of incremental cost." [sic] 475 U.S. at 585, n. 9, 106 S. Ct. at 1355, n. 9, or whether above-cost pricing coupled with predatory intent is ever sufficient to state a claim of predation. See n. 11, supra.

Id. The Court concluded that the plaintiff did not prove any claim of predatory pricing because the evidence "consist[ed] only of four passing references, three in deposition testimony, to the possibility that [defendant's] prices might dip below costs." Id. at 494. The Court also commented that other factors, such as the defendant's market share capacity and the barriers to entry after competitors have been driven from the market, must also be considered, because these factors indicate whether an illegal predator is capable of successfully pursuing a predatory scheme. Id. at n. 15. The Court warned that "[c]ourts should not find allegations of predatory pricing credible when the alleged predator is incapable of successfully pursuing a predatory scheme. See infra, n. 17." Id.32

In Matsushita Electric Industrial Co. v. Zenith Radio Corporation, 475 U.S. 574, 588, 106 S. Ct. 1348, 1357 (1986), the Supreme Court held that a plaintiff seeking damages for a violation of Sec. 1 of the Sherman Act must present evidence "that tends to exclude the possibility" that the alleged conspirators acted independently. As in Cargill, the Court in Matsushita recognized the debate concerning what "cost" is relevant in a predatory pricing claim, but did not take sides in the debate. 106 S. Ct. at 1355 nn. 8 & 9. In Matsushita, rather than supporting a theory of conspiratorial predatory pricing injuring the plaintiffs, the evidence of conspiracy indicated a conspiracy that "actually tended to benefit" plaintiffs. Id. at 1356. The Court stated that "if the factual context renders [plaintiffs] claim implausible--if the claim is one that simply makes no economic sense--[plaintiffs] must come forward with more persuasive evidence to support their claim than would otherwise be necessary." Id. The Court noted that in single firm cases, much less conspiracy cases,

the likelihood that predatory pricing will benefit the predator is "inherently uncertain: the short run loss [from pricing below cost] is definite, but the long-run gain depends on successfully neutralizing the competition.... [and] on maintaining monopoly power for long enough both to recoup the predator's losses and to harvest some additional gain." 475 U.S. at 588, 106 S.Ct. at 1357.

Cargill, 107 S. Ct. at 495 n. 17 (quoting Matsushita ). Accordingly, the Court rejected the Court of Appeals' theory of conspiracy as making no practical sense.

In Utah Pie Co. v. Continental Baking Co., 386 U.S. 685, 87 S. Ct. 1326, 18 L. Ed. 2d 406 (1967), the evidence at the trial below showed that defendants, three large national companies, for over three years sold frozen pies in the Salt Lake City marketing area at prices below their cost and below their prices in other markets that were closer to their plants. The Court held this evidence was sufficient to support a finding of injury to competition despite the increasing sales volume of plaintiff, a local company, and the fact that plaintiff continued to make a profit. Id. at 702-03, 87 S.Ct. at 1336. The Court's opinion dealt with the conduct of each defendant separately, concluding that "there was some evidence of predatory intent with respect to each of these [defendants]." Utah Pie, 386 U.S. at 702, 87 S.Ct. at 1336. The Court said the first defendant "suffered substantial losses on its frozen pie sales," id. at 697, 87 S.Ct. at 1333, the second defendant had a price in Salt Lake City that "was less than its direct cost plus an allocation for overhead,"33 id. at 698, 87 S.Ct. at 1334, and the third defendant had prices that were "admittedly well below its costs," id. at 701, 87 S.Ct. at 1335. In addition, as to the first defendant, the Court held that the jury could rely on statements by the first defendant's management that plaintiff was "an unfavorable factor" that "d[u]g holes in our operation" in concluding that the first defendant's discriminatory pricing was aimed at injuring plaintiff. Id. at 696-97, 87 S.Ct. at 1332-33. Relying on this evidence to show predatory intent, the Court then relied on this predatory intent to show injury to competition. Id. See generally E. Kintner & J. Bauer, 3 Federal Antitrust Law Sec. 22.8 at 285 & nn. 165 & 166 (1983).

In summary, the recent Supreme Court cases are consistent with the conclusions drawn from the survey above of the antitrust statutes and their legislative histories. Utah Pie bears most directly on the primary issues in the case at bar--whether subjective evidence is to be used and what cost standard is to be used. In Utah Pie, the Court used evidence of subjective intent in concluding a defendant had the requisite intent. The Court did not decide what cost standard should be used in the predatory pricing test, but held that the relevant cost could be "direct cost plus an allocation for overhead," which is inconsistent with Areeda and Turner's proposed average variable cost test. Matsushita and Cargill recognize the debate over the appropriate measure of cost, but in both cases the Supreme Court declined to define an appropriate standard. In Cargill, the Court considered objective evidence other than prices and costs, which does not necessarily support the use of subjective evidence, but is inconsistent with Areeda and Turner's predatory pricing test used by the district court, which relies solely on objective evidence of prices and costs.

C. The Eleventh Circuit Test for Predatory Pricing.

Determining that subjective evidence and average total cost are relevant does not end the matter. The Eleventh Circuit test for predatory pricing must still be spelled out. As given below, the Eleventh Circuit test borrows from the tests used by a majority of our sister circuits and relies on the cases cited in the notes as in accord with our test for an explanation of the test's origins.

If a defendant's prices were above average total cost then there is no predatory pricing and thus no circumstantial evidence of predatory intent.34 Average total cost means the average of the total economic cost, which includes the necessary minimum profit.35 Average total cost should theoretically be measured by long run marginal cost, but in appropriate cases a surrogate for total cost may be used.36

If a defendant's prices were below average total cost and above short run marginal cost, then there is circumstantial evidence of predatory intent. An inference of predatory intent, however, may not rest solely on prices of this nature. To withstand judgment as a matter of law, a plaintiff must have other evidence, either objective or subjective, of predatory intent.37 See Matsushita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 1357, 89 L. Ed. 2d 538 (1986) (antitrust plaintiff must present evidence that tends to exclude the possibility that defendant's conduct was as consistent with permissible competition as with illegal conduct). The closer a defendant's price is to average total cost, the stronger this other evidence must be for the plaintiff still to avoid summary judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986) ("[t]he moving party is 'entitled to judgment as a matter of law' [if] the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof"). As suggested by Areeda and Turner, average variable cost may usually be used as a surrogate for short run marginal cost.38

If a defendant's prices were below short run marginal cost, then the circumstantial evidence is strong enough to create a rebuttable presumption of predatory intent.39 See Matsushita, 106 S. Ct. at 1357 (antitrust plaintiff must present evidence that tends to exclude the possibility that defendant's conduct was as consistent with permissible competition as with illegal conduct); Standard Oil Co. v. United States, 221 U.S. 1, 52, 31 S. Ct. 502, 512, 55 L. Ed. 619 (1910) (summarizing the common law, from which the Sherman Act borrowed, as recognizing presumptions created by objective evidence); cf. Fed.R.Evid. 301 (presumptions in general in civil actions). If a defendant's prices were below short run marginal cost and the other evidence, subjective or objective, is sufficiently probative of defendant's predatory intent, then as a matter of law defendant has the predatory intent required to establish the attempt to monopolize element of a Sherman Act claim and to establish the injury to competition element of a Robinson-Patman Act claim. International Air Industries v. American Excelsior Co., 517 F.2d 714, 723 (5th Cir.1975), cert. denied, 424 U.S. 943, 96 S. Ct. 1411, 47 L. Ed. 2d 349 (1976). Again, average variable cost may be used as a surrogate for short run marginal cost.

In McGahee's Sherman Act claim, he must show that Northern Propane intended to achieve a monopoly and that there was a dangerous probability Northern Propane would succeed. In granting summary judgment, the district court held that McGahee could not prove predatory pricing, which is the theory McGahee relies upon to establish the intent element.40 McGahee, 658 F. Supp. at 192-96. Under the Eleventh Circuit test for predatory pricing, McGahee has presented evidence from which a fact finder could infer predatory intent. First, Northern Propane does not argue that its prices were above average total cost. Second, McGahee points to three items of evidence that are more than sufficient to create a factual issue as to predatory intent for sales at prices below average total cost and above average variable cost: (1) Northern Propane's investigation of McGahee's financial position, (2) Northern Propane's new policy of rent-free tanks designed to take advantage of McGahee's weak financial position, and (3) Northern Propane's internal memorandum declaring "contribute to Floyd's financial problems" to be a goal for Northern Propane's local office. Third, McGahee has pointed to evidence that, on the record before us, could show that Northern Propane sold propane at prices below its average variable cost.41 Therefore, McGahee has presented evidence that creates a genuine issue of fact as to whether Northern Propane had the intent necessary for an attempt to monopolize claim.

The district court also alternatively held that McGahee cannot prove the second element of an attempted monopolization claim. The court stated that it found no evidence that a predatory pricing scheme had a dangerous probability of success, basing this statement on defendant's inability to charge supracompetitive prices,42 plaintiff's increasing market share,43 and the market's low entry barriers.44 McGahee, 658 F. Supp. at 196-97. Although the factors the district court discussed are relevant, proving a dangerous probability of success in achieving a monopoly requires proof of the defendant's market power. H & B Equipment Co. v. International Harvester Co., 577 F.2d 239, 242-43 (5th Cir.1978); Spectrofuge Corp. v. Beckman Instruments, Inc., 575 F.2d 256, 266 (5th Cir.1978), cert. denied, 440 U.S. 939, 99 S. Ct. 1289, 59 L. Ed. 2d 499 (1979); 3 Von Kalinowski, Anti-Trust Trade Law & Trade Regulations Sec. 9.01 [a] (1988).

When determining whether an issue of fact exists as to whether defendant's actions presented a dangerous probability of defendant achieving a monopolist's market power, a court examines the relevant market and defendant's market power before the attempt to monopolize began. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 177, 86 S. Ct. 347, 350, 15 L. Ed. 2d 247 (1965) (dicta); Multiflex, Inc. v. Samuel Moore & Co., 709 F.2d 980, 982 (5th Cir.1983), cert. denied, 465 U.S. 1100, 104 S. Ct. 1594, 80 L. Ed. 2d 126 (1984); Volasco Products Co. v. Lloyd A. Fry Roofing Co., 308 F.2d 383, 390 (5th Cir.1962) (failure to determine defendant's market share warranted withdrawal of charge from jury), cert. denied, 372 U.S. 907, 83 S. Ct. 721, 9 L. Ed. 2d 717 (1963); e.g., Quality Foods v. Latin American Business Development Corp., 711 F.2d 989, 996 (11th Cir.1983); see also Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 119-21 n. 15, 107 S. Ct. 484, 494 n. 15, 93 L. Ed. 2d 427 (1986) (emphasizing importance of market share in predatory pricing case); but see Hunt-Wesson Foods, Inc. v. Ragu Foods, Inc., 627 F.2d 919 (9th Cir.1980) (market power only a factor to consider when determining whether defendant had the specific intent to monopolize), cert. denied, 450 U.S. 921, 101 S. Ct. 1369, 67 L. Ed. 2d 348 (1981).

Determining whether a defendant possesses sufficient market power to be dangerously close to achieving a monopoly requires analysis and proof of the same character, but not the same quantum, as would be necessary to establish monopoly power for an actual monopolization claim. See generally 3 Von Kalinowski: Antitrust Laws & Trade Regulation Sec. 9.01 [a] (1988); L. Sullivan, Antitrust 137 (1977). The best test from which market power may be inferred is relative size, i.e., the percentage of market share. United States v. Grinnell Corp., 384 U.S. 563, 571, 86 S. Ct. 1698, 1704, 16 L. Ed. 2d 778 (1966). The market share necessary for a defendant to be capable of posing a threat of achieving monopoly power depends on the type of factors concerning Northern Propane and McGahee discussed by the district court. McGahee, 658 F. Supp. at 196-97. Cf. United States v. Columbia Steel Co., 334 U.S. 495, 528, 68 S. Ct. 1107, 1124, 92 L. Ed. 1533 (1948) ("the relative effect of percentage command of a market varies with the setting in which that factor is placed") (actual monopolization case); United States v. Empire Gas Corp., 537 F.2d 296, 305-07 (8th Cir.1976) (upholding finding of fact in nonjury case that retail propane distributor with 50 percent market share did not present dangerous probability of success), cert. denied, 429 U.S. 1122, 97 S. Ct. 1158, 51 L. Ed. 2d 572 (1977).

In this case, it is "undisputed"45 that Northern Propane had sixty or sixty-five percent of the relevant market when the alleged predatory pricing began. Without examining any factors to determine what market share would be necessary for Northern Propane's alleged predatory pricing to present a dangerous probability of success, we can say that a sixty or sixty-five percent market share is a sufficiently large platform from which such a scheme could be launched to create a genuine issue of material fact as to whether there was a dangerous probability that Northern Propane would succeed in achieving a monopoly. Cf. American Tobacco Co. v. United States, 328 U.S. 781, 797, 66 S. Ct. 1125, 1133, 90 L. Ed. 1575 (1946) ("over two-thirds of the entire field of cigarettes, and ... over 80 percent of the field of comparable cigarettes" held to constitute "a substantial monopoly"); Kelco Disposal v. Browning-Ferris Industries, 845 F.2d 404, 409 (2d Cir.1988) (market share above fifty-five percent sufficient, along with other market characteristics, to establish dangerous probability of success); Richter Concrete Corp. v. Hilltop Concrete Corp., 691 F.2d 818, 826 (6th Cir.1982) (decline from forty percent to thirty percent insufficient to establish defendant's "capacity to monopolize"); Cliff Food Stores, Inc. v. Kroger, Inc., 417 F.2d 203, 207 n. 2 (5th Cir.1969) (fifty percent market share may be sufficient to establish monopoly power).

In McGahee's Robinson-Patman Act claim, he must show that Northern Propane, in the course of interstate commerce, discriminated in price between different purchasers and a reasonable possibility that this price difference may harm competition. The district court held that McGahee's Robinson-Patman Act claim failed because McGahee could not establish predatory pricing.46 McGahee, 658 F. Supp. at 197. Proof of predatory pricing can satisfy the second element, harm to competition, in a Robinson-Patman claim brought against a competing seller.47 Utah Pie Co. v. Continental Baking Co., 386 U.S. 685, 87 S. Ct. 1326, 18 L. Ed. 2d 406 (1967). As already explained in relation to McGahee's Sherman Act claim, McGahee has presented evidence of predatory prices from which a fact finder could infer predatory intent. Therefore, whether Northern Propane's alleged discriminatory pricing caused injury to competition presents genuine issues of material fact.

Accordingly, the summary judgment granted by the district court is reversed. The case is remanded for further proceedings consistent with this opinion.

REVERSED AND REMANDED.