This amicus curiae brief argues for reversal of a lower court decision on a company's price-setting practices that is an affront to a free-market economy.Technology and Industry

Bork, Robert H.

Litan, Robert E.

English

Research Papers in Economics

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The attached material is posted on regulation2point0.org with permission.  
  JOINT CENTER  
   AEI-BROOKINGS JOINT CENTER FOR REGULATORY STUDIES 
 
 
 
 
Why the Minnesota Supreme Court Should Overturn a 
Lower Court Decision on Price-Setting:  
Part 2 
 
 
 
Robert H. Bork and Robert E. Litan  
 
 
 
 
Brief 02-2 
 
June 2002 
 
  
Ronald Peterson, et al. individually and on behalf 
of all others similarly situated, 
 
    Respondents, 
 
  vs. 
 
BASF Corporation, 
 
    Appellant. 
 
   
 
 
 
 
Court of Appeals Docket No. C3-02-857 
 
 
 
 
 
 
 
REQUEST FOR LEAVE TO PARTICIPATE AS AMICUS CURIAE 
 
BY ROBERT H. BORK AND ROBERT E. LITAN,  
SCHOLARS OF THE AEI-BROOKINGS JOINT CENTER  
FOR REGULATORY STUDIES 
 
IN SUPPORT OF PETITIONER BASF CORPORATION 
 
 
 
 
 
 
 
 
 
SONNENSCHEIN NATH & ROSENTHAL   Robert H. Bork 
William R. Skallerud (#0161676)      1150 17
th Street, N.W. 
630 Pillsbury Center          Washington, DC 20036 
200 South Sixth Street        (202) 862-5851 
Minneapolis, MN 55402-1409      Robert E. Litan 
(612) 664-0369          1775 Massachusetts Avenue, N.W. 
              Washington, DC 20036 
Of Counsel            (202) 797-6120 
              SCHOLARS OF THE AEI-BROOKINGS 
              JOINT CENTER FOR REGULATORY  
              STUDIES 
 
              Proposed Amicus Curiae 
 
          
Ronald Peterson, et al., individually and on behalf 
of all others  similarly situated, 
 
    Plaintiff, 
 
 
  vs. 
 
BASF Corporation, 
 
    Defendant. 
 
   
 
 
 
 
Court of Appeals Docket No. C3-02-857 
 
 
 
 
 
 
 
REQUEST FOR LEAVE TO PARTICIPATE AS AMICUS CURIAE 
 
TO:  THE MINNESOTA COURT OF APPEALS  
  Following Rule 129 of Minn. R. Civ. App. P, Robert H. Bork and Robert E. Litan, 
scholars of the AEI-Brookings Joint Center for Regulatory Studies (“AEI-Brookings”), request 
leave to file a brief amicus curiae in support of Appellant BASF Corporation and to recommend 
that this Court reverse the judgment below.   
NATURE OF APPLICANT’S INTEREST 
Applicants’ interest in this case reflects a broad public policy perspective.  AEI-
Brookings was established by the American Enterprise Institute (“AEI”) and the Brookings 
Institution (two leading “think tanks”) in 1998 to help improve the economic regulatory process.  
The AEI, founded in 1943, sponsors original research relating to policy issues affecting the 
foundations of a free society, including competitive free enterprise in the open market.  The 
Brookings Institution, founded in 1916, also promotes scholarship to improve the quality of U.S. 
public policies.  Both institutions are independent, non-partisan, non-profit organizations which 
support and publish the work of first rank scholars.  We, as individual applicants, participate as 
scholarly experts in studies of the costs and benefits of various regulatory initiatives and  
2 
programs, as well as judicial proceedings that have regulatory implications, such as this case.  
We have both filed several briefs stating public interest positions in U.S. courts.  This appeal 
concerns a significant departure from settled law that can have important implications for 
economic regulation throughout the United States.  
REASONS WHY AN AMICUS CURIAE BRIEF IS DESIRABLE 
We as scholars of AEI-Brookings are here concerned with the harm to competition 
resulting from trial court rulings admitting evidence and adopting jury instructions that allowed 
the jury to find causation of injury and damages for consumer fraud based on its view of “unfair” 
pricing and “unfair” disclosure when different prices are charged for two products -- not leaving 
it to the market to decide what is a fair price.  This is economically harmful as a general matter; 
it is especially harmful where the two products are separately patented and sold in separate fields 
of use.  We, as scholars of AEI-Brookings, also will address rulings that allowed a jury to find 
causation of injury and damages based on plaintiffs’ blatantly illegal “right-to-boycott” claim.  
Plaintiffs asserted they were fraudulently denied access to information about a product which, if 
possessed, would have enabled them to organize an effective horizontal group boycott of that 
product’s sales to drive down its price.  The antitrust laws do not permit this kind of self-help.  
Moreover, plaintiffs’ lost opportunity to organize a boycott is too speculative and remote to 
support their claim.  Our views on these three judicial errors have not yet been presented to this 
Court.   
The application of the New Jersey Consumer Fraud Act by the Minnesota trial court 
violates the Due Process Clause of the Fourteenth Amendment of the U.S. Constitution under the 
80-year-old precedent of United States v. L. Cohen Grocery Co. 255 U.S. 81 (1921).  In Cohen, a 
seller of sugar was charged with violating a Missouri law making it unlawful for a merchant to 
set an unjust or unreasonable price for “necessaries” sold in the market.  Without dissent, the  
3 
U.S. Supreme Court found the statute unconstitutionally vague, leaving open “the widest 
conceivable inquiry, the scope of which no one can foreshadow or adequately guard against” as 
to what is a reasonable price (Id. At 89).  A precondition for the justiciability of an issue is 
establishing satisfactory criteria for judicial determination of what may be presented to a fact 
finder.  Baker v. Carr, 369 U.S. 186, 210 (1962).  However, no such criteria were put forward or 
applied in this case.  The jury was permitted the unguided discretion to decide that the price 
difference between the two separately patented and separately marketed BASF products was 
sufficient and appropriate proof of liability and damages.  The verdict creates the awful 
possibility that BASF, and any other business subject to the New Jersey Consumer Fraud Act, or 
another like it, face penal sanctions anywhere in the United States for the “unreasonableness” of 
charging lawfully different prices.  Plaintiffs, at an early stage in this litigation, disavowed, as 
they should have, any claim of illegal price discrimination by BASF.  Consumer fraud statutes 
are not back door price discrimination laws.   
This bad law is based on bad economics because it invites a jury’s subjective and 
unguided judgment of reasonable price.  It is law, based on standard economics, that a private 
seller has the right to set whatever price it wants, and to sell or not sell to whomever it chooses.  
If the price is too high, or the offer to sell excludes too many potential customers, or not enough 
relevant information about the product is made publicly available, other suppliers are likely to 
enter the market and offer more choice, at better prices, with better information.  Supply and 
demand alone determine what are objectively reasonable prices  -- not courts, price 
administrators, or juries.  Federal and state antitrust laws, including those of New Jersey and 
Minnesota, have long recognized “the right of trader or manufacturer engaged in an entirely 
private business, freely to exercise his own independent discretion as to parties with whom he 
will deal.”  United States v. Colgate & Co., 250 U.S. 300, 307 (1919).    
4 
The trial court below restricts this right.  It leads to bad policy -- that a price differential 
between different classes of customers in different markets for different patented products is 
damaging to consumers who lack access to a less expensive product caused by lack of 
information, field of use licenses, or regulatory or labeling restrictions under federal or state law.  
This trial result undermines what are ubiquitous and beneficial marketing and pricing strategies, 
long practiced and promoted in U.S. marketing.  The mischief set afoot by letting juries decide 
the reasonableness of prices, and the adequacy of disclosure of differential prices, in determining 
whether there has been deception in the marketplace is hard to overestimate.  This is both radical 
economic policy and a serious departure from settled law.   
There is a second serious error with a potentially profound adverse effect.  At trial, the 
plaintiffs offered evidence of causation and injury premised on the lack of sufficient information 
(provided by BASF) about Poast Plus®, one of its patented pesticides, to permit buyers to 
exercise concerted action to force a reduction in the price of another patented pesticide, Poast®.  
The “fraud” to which plaintiffs pointed were lawful marketing strategies because there is no legal 
duty on BASF to disclose the information plaintiffs lack.  Plaintiffs have asserted at trial that by 
being fraudulently denied this information, they have been deprived of the opportunity to 
organize and implement a horizontal group boycott of Poast®.  The U.S. Supreme Court has 
found such boycotts to be per se unlawful, whether organized by sellers or buyers.  Even if the 
concerted boycott, which non-disclosure “frustrated,” sought in part to influence governmental 
action, that is no defense.  Federal Trade Commission v. Superior Court Trial Lawyers Ass’n, 
493 U.S. 411, 423 (1990).  One cannot sustain damages by being deprived of the opportunity to 
break the law.   
Third, to the extent plaintiffs’ claimed damages do not just depend upon being deprived 
of the opportunity to commit a crime, as a matter of law, this forgone opportunity for self-help is  
5 
too speculative and remote to justify recovery.  It is “hornbook law” that damages are not 
recoverable where they are “speculative or their amount and nature” is unprovable.  Zenith Radio 
Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 339 (1971).  The verdict below is a direct 
challenge to U.S. laws and policies promoting free and open market competition.   
These are among the issues our proposed brief will address. We believe our expertise as 
scholars of AEI-Brookings on these matters can be helpful to this Court. 
 
CONCLUSION 
For these reasons, we respectfully urge this Court to reverse the judgment below and to 
grant us leave to participate in proceedings before this Court as amicus curiae. 
 
DATED: June 7, 2002              Respectfully submitted, 
 
SONNENSCHEIN NATH & ROSENTHAL 
 
______________________ 
William R. Skallerud (#0161676) 
630 Pillsbury Center 
200 South Sixth Street 
Minneapolis, MN 55402-1409 
(612) 664-0369 
 
Of Counsel 
Robert H. Bork 
1150 17
th Street, N.W. 
Washington, DC 20036 
(202) 862-5851 
Robert E. Litan 
1775 Massachusetts Avenue, N.W. 
Washington, DC 20036 
(202) 797-6120 
 
SCHOLARS OF THE AEI-BROOKINGS 
JOINT CENTER FOR REGULATORY 
STUDIES 
 
Proposed Amicus Curiae 
 
 
 
25050021v7 

Why the Minnesota Supreme Court Should Overturn a Lower Court Decision on Price-Setting: Part 2

http://regulation2point0.org/wp-content/plugins/download-monitor/download.php?id=106

Why the Minnesota Supreme Court Should Overturn a Lower Court Decision on Price-Setting: Part 2

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics