Eddins v. Redstone (134 Cal. App. 4th 290, 2005)

Opinion

BOLAND, J.

SUMMARY

More than 250 independent video retailers sued Blockbuster Inc., its parent company Viacom Inc., Viacom’s controlling shareholder, Sumner Redstone, and the home-video affiliates of five major Hollywood movie studios, alleging antitrust and price discrimination violations under California law. The complaint centers upon output revenue-sharing agreements between the movie studios and Blockbuster, under which Blockbuster purchases video cassettes of the studios’ movies for rental to consumers. Under the agreements, Blockbuster purchases the videotapes at a low initial price, in exchange for a portion of the rental revenues and a long-term commitment by Blockbuster to purchase the entire output of movies from the studios. The plaintiffs do not challenge the agreements between Blockbuster and the studios. Instead, they allege Blockbuster and the studios conspired with each other to deny the same favorable terms and conditions to distributors for independent retailers. They also allege violations of the Unfair Practices Act—which forbids secret rebates, unearned discounts, and the secret extension of special privileges not available to all purchasers who buy on like terms and conditions—and the unfair competition law.

We affirm the trial court’s summary adjudication in favor of Blockbuster and the studios on the plaintiffs’ conspiracy claim under the Cartwright Act. We reverse the court’s summary adjudication of plaintiffs’ claims for violation of the Unfair Practices Act and the unfair competition law, except with respect to intra-enterprise transactions between Blockbuster and its sister company. Specifically, we conclude that;

—Summary adjudication of the plaintiffs’ conspiracy claims is required under Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826 [107 Cal.Rptr.2d 841, 24 P.3d 493] (Aguilar), because “all of the evidence presented by the plaintiff, and all of the inferences drawn therefrom, show and imply unlawful conspiracy only as likely as permissible competition or even less likely,” so that “a reasonable trier of fact could not find for the plaintiff.” (Id. at p. 857, italics and fin. omitted.)

—The trial court erred in concluding, as a matter of law, that the Unfair Practices Act does not apply to the different prices the studios are alleged to have charged to plaintiffs’ distributors and to Blockbuster. Specifically:

—A plaintiff need not purchase on “like terms and conditions” in order to state an actionable claim that a competitor has received a secret rebate or unearned discount.

—Material questions of disputed fact exist as to whether the allegedly unearned discounts the studios gave Blockbuster were “secret” as required by the statute. The fact that the “general parameters” of Blockbuster’s revenue-sharing agreements with the studios were widely reported in the media does not establish lack of secrecy as a matter of law, because other evidence indicated that several key economic factors in the agreements were not known to plaintiffs or to the general public.

—The “functional classification” defense, which permits a supplier to charge different prices to buyers in different functional classifications, such as wholesalers (the distributors) and retailers (Blockbuster), was improperly applied in this case. Blockbuster did not perform any function justifying a differential in price.

—The trial court failed to consider evidence of harm to competition in the secondary line of commerce, between Blockbuster and its competitors, and therefore erred in finding that two studios established, as a matter of law, a “meeting competition” defense to plaintiffs’ Business and Professions Code, section 17045 claim.

—The trial court correctly concluded that, because Blockbuster and its sister company Paramount are commonly controlled, they are part of a single economic enterprise, and transactions between them cannot form the basis for a Business and Professions Code, section 17045 violation.

—Because it was error to grant summary judgment of the claims under the Unfair Practices Act, it was also error to grant summary judgment on the cause of action for violation of the unfair competition law. (Bus. & Prof. Code, § 17200 et seq.)

FACTUAL AND PROCEDURAL BACKGROUND

This action seeks treble damages, disgorgement and injunctive relief for violations of the Cartwright Act, the Unfair Practices Act and the unfair competition law. The suit was brought as a class action by Lee Eddins, doing business as Video Empire, and 250 other independent video rental retailers (collectively, Eddins) against Blockbuster Inc., the nation’s largest video rental retailer; Viacom Inc., Blockbuster’s majority shareholder; Sumner Redstone, Viacom’s controlling shareholder; and the home-video affiliates of five major Hollywood movie studios (studio defendants or studios), which distribute videocassettes of feature motion pictures to video retailers for rental to the public.

Eddins’s lawsuit alleges that, beginning in late 1997, Blockbuster and the studios conspired with each other to deny independent retailers the same favorable terms and conditions the studios provided to Blockbuster. The studios provided the favorable terms under long-term output revenue-sharing agreements the studios entered into with Blockbuster in 1997 and 1998. The studios, by allegedly denying the same terms to distributors that serve the independent retailers, fixed the prices charged to the independent retailers at an artificially high level. The suit also alleges the agreement among Blockbuster and the studios resulted in discriminatory pricing that was detrimental to the independent retailers competing with Blockbuster. Defendants moved for summary judgment, and the trial court granted their motion.

We first describe the background of the home video industry when the pertinent events occurred. We then explain the background of this case and court decisions in related litigation, and finally turn to the proceedings in this case.

1. General industry background.

The studio defendants sell videos directly to large chain-store retailers, including Blockbuster, that rent them to consumers. The studios also sell videos to distributors, that resell them to independent retailers, including Eddins and the other plaintiffs, who rent them to consumers. In 1997, when the events precipitating this lawsuit began, Blockbuster was the nation’s largest single home-video rental retailer, with 24 percent of the national market. The independent retailers, comprised of small chains and single-store owners, accounted for about 55 percent of the market.

Until late 1997, the studios employed two options for purchasing rental videos. Retailers and distributors could purchase videos at a stated price, approximately $65 per tape, a method referred to as “traditional sales.” Alternatively, they could participate in a “cherry-pick” revenue-sharing plan offered through Rentrak, one of the approximately 10 distributors in the industry. Under “cherry-pick” revenue sharing, studios sold tapes for a low up-front fee plus a percentage of retailers’ revenues from tape rentals, and the retailer selected the specific videos to purchase. Neither the traditional sales nor the cherry-pick revenue-sharing pricing models enabled retailers— whether large chains such as Blockbuster or independent retailers such as Eddins—to stock sufficient copies of “new release” titles to satisfy customer demand when it was highest, immediately after the video release of a movie. The lack of “copy depth” on newly released videos resulted in customer frustration over their inability to rent the newly released movies they most wished to see. As a consequence, the home-video market was languishing by 1997 as customers left video stores without renting a video.

Blockbuster was also languishing in 1997. According to Sumner Redstone, Blockbuster was “tanking” and the independent “moms and pops” were “outcompeting” Blockbuster. Blockbuster, however, developed an innovative concept for achieving copy depth on new releases, satisfying customer demand, and regaining its customers. Blockbuster proposed long-term, output-revenue-sharing agreements to each studio. Under the agreements, Blockbuster would obtain a significantly greater number of copies of new studio releases, paying the studio a low up-front fee for each tape—a few dollars, compared to the $65 price for traditional sales. Blockbuster would commit to taking the studio’s entire motion picture output, irrespective of the movie’s box office performance. However, the number of tapes of each movie Blockbuster would be required to purchase varied according to the movie’s box office performance. Blockbuster would share its rental revenues, and sometimes other fees, with the studio, and would provide various minimum guarantees to the studio. The aim was to achieve a 60/40 revenue split with each studio, with the studio receiving 40 percent of Blockbuster’s rental revenue. Blockbuster would guarantee the studio the same revenue stream Blockbuster paid under the traditional pricing model. Under Blockbuster’s revenue-sharing model, Blockbuster would receive more tapes for the same money it paid under traditional pricing. By virtue of Blockbuster’s minimum guarantee, the studio would receive at least the revenues received under the traditional pricing model. The studio would share in the upside, if the additional copies generated increased rentals and increased revenues.

Over the course of a year, Blockbuster persuaded every major studio to enter into output revenue-sharing agreements, beginning with Disney on November 21,1997 and ending with Fox on November 10,1998. Blockbuster’s new revenue-sharing model, with its copy depth advantage, worked extremely well, and Blockbuster’s market share grew from 24 percent in 1997 to 27 percent in 1998, and to about 40 percent by 2001. Although other large chains obtained the same type of output revenue-sharing arrangements as Blockbuster, Blockbuster’s success came at the expense of smaller chains and independents who were unable to compete. According to one studio, the industry saw a net loss of more than 5,000 independent stores during 1998 and 1999; one distributor estimated that independents were closing at a rate of 300 to 400 stores per month as of November 1998. Eventually, some independent retailers sued, alleging price discrimination and antitrust violations.

2. The Texas litigation.

In July 1999, an independent retailer in Texas filed a class action lawsuit in federal district court against Viacom and six Hollywood studios, alleging violations of sections 1 and 2 of the Sherman Act (conspiracy in restraint of trade, attempted monopolization, and conspiracy to monopolize). The third amended complaint included Blockbuster as a defendant and asserted claims for restraint of trade and concerted refusal to deal under the Sherman Act. It also asserted violations of California law (the Cartwright Act, the Unfair Practices Act, and the unfair competition law).

On January 17, 2001, the Texas plaintiffs sought to withdraw their class certification motion to the extent their claims arose under California law, and moved to dismiss those claims without prejudice. On January 31, 2001 they filed this lawsuit in California on the class’s behalf. The federal district court in Texas subsequently refused to allow plaintiffs to dismiss their California claims, finding the motion was brought in bad faith and would subject defendants to undue prejudice. A few days later, the Texas court denied plaintiffs’ motion for class certification.

In May 2002 the Texas district court denied a defense motion for summary judgment. However, in June 2002, after 10 days of trial and at the conclusion of plaintiffs’ case-in-chief, the court granted a motion by Blockbuster and the studios for judgment as a matter of law. It found “there is no legally sufficient evidence for a reasonable jury to find for the plaintiffs on all claims and there is simply no evidence that presents a sufficient conflict in substantial evidence to create a jury issue.” In a separate order denying injunctive relief, the court stated that no evidence indicated a conspiracy to exclude independent video retailers from Blockbuster-type deals, and instead the evidence showed that independent video retailers like the plaintiffs could not participate in similar deals because of the output nature of the Blockbuster deals.

The Fifth Circuit Court of Appeals, reviewing the trial court’s ruling de novo, affirmed the judgment. The court observed there was “almost no evidence whatsoever, circumstantial or otherwise, that the studios engaged in any direct communication during their respective negotiations with Blockbuster or that any studio agreed, at Blockbuster’s request, not to make output revenue-sharing terms available to independents.” (Cleveland v. Viacom Inc. (5th Cir., 2003) 73 Fed.Appx. 736, 740 [2003 U.S.App.Lexis 17717, 2003-2 Trade Cas.(CCH) f 74,125].) The court also found plaintiffs did not present significant probative evidence that the studios’ parallel conduct—in allegedly refusing to deal with the independents on similar terms—was contrary to their economic self-interest.

3. The California litigation.

Meanwhile, Eddins and the other plaintiffs in the California lawsuit moved for class certification. The motion was denied in January 2002. After Eddins filed a third amended complaint, Blockbuster and the studio defendants filed a motion for summary judgment. In addition to declarations from executives at Blockbuster, Viacom and each of the studios, the defendants supported their motion with deposition testimony and dozens of other exhibits, and lodged a condensed copy of the transcript of the 10-day Texas trial for use in connection with their motion. Eddins opposed the motion, filing hundreds of exhibits as well as excerpts from depositions and Texas trial testimony. The details of the evidence will be discussed as necessary in conjunction with our resolution of the legal issues.

The trial court held a day-long hearing, and on February 20, 2003 granted the defendants’ motion for summary judgment. Citing Aguilar, supra, 25 Cal.4th 826, the court concluded that, taken as a whole, Eddins’s evidence did not point to conspiracy as more likely than permissible competition. The court also rejected the claim that the defendants’ conduct violated the Unfair Practices Act and the unfair competition law. Judgment was entered on April 17, 2003, and this appeal followed.

DISCUSSION

I. Summary judgment was proper on Eddins’s vertical and horizontal conspiracy claims under the Cartwright Act.

Eddins contends that substantial evidence before the trial court showed that Blockbuster obtained favored deals from the major Hollywood studios and successfully asked them to deny comparable terms to independent video retailers. According to Eddins, the evidence supports (1) a horizontal conspiracy, orchestrated by Blockbuster, in which the studios agreed with each other to refuse to give distributors for independent video retailers the same output revenue-sharing terms they provided to Blockbuster, and (2) a series of vertical conspiracies to the same effect between Blockbuster and each studio. Before turning to the evidence, we first discuss the applicable law in ruling on a summary judgment motion in an antitrust action for unlawful conspiracy.

A. Aguilar established the principles to be applied to a motion for summary judgment in an antitrust conspiracy action.

In Aguilar, the Supreme Court clarified the applicable law in ruling on motions for summary judgment, both generally and particularly in an antitrust action for unlawful conspiracy. Accordingly, the following points are not subject to debate:

—Blockbuster and the studios bear the burden of persuasion of their entitlement to judgment as a matter of law, namely, that Eddins cannot establish an agreement to deny the Blockbuster terms to independent retailers.

—As the parties moving for summary judgment, Blockbuster and the studio defendants were required to make a prima facie showing of the nonexistence of any triable issue of material fact. In this case, the defendants were required to show that the studios did not agree among themselves, or individually with Blockbuster, to deny distributors the output revenue-sharing terms being provided to Blockbuster. The defendants carried this burden of production with declarations from Sumner Redstone (Viacom’s controlling shareholder), John Antioco (Blockbuster’s chief executive officer), and the studio executives responsible for the negotiations that led to their output revenue-sharing agreements with Blockbuster. Eddins does not dispute that Blockbuster and the studios made this prima facie showing.

—Since the defendants made their prima facie showing, Eddins was required to produce evidence constituting a prima facie showing sufficient to support his claim of a conspiracy to deny Blockbuster terms to independent retailers. Specifically:

—Eddins was required to present evidence “that would allow a reasonable trier of fact to find in his favor on the unlawful-conspiracy issue by a preponderance of the evidence, that is, to find an unlawful conspiracy more likely than not.” (Aguilar, supra, 25 Cal.4th at p. 852.)

—“Ambiguous evidence or inferences showing or implying conduct that is as consistent with permissible competition by independent actors as with unlawful conspiracy by colluding ones do not allow such a trier of fact so to find.” (Aguilar, supra, 25 Cal.4th at p. 852, fn. omitted.) Aguilar tells us this result is compelled by antitrust law, including the Cartwright Act. Otherwise, procompetitive conduct, “the very thing that [antitrust law] is designed to protect,” might be effectively chilled by subjecting it to undue costs in the judicial sphere. (Aguilar, supra, 25 Cal.4th at p. 852.)

—“Therefore, in addition, [Eddins] must present evidence that tends to exclude, although it need not actually exclude, the possibility that [Blockbuster and the studios] acted independently rather than collusively.” (Aguilar, supra, 25 Cal.4th at p. 852.)

—Aguilar summarized its extensive discussion of summary judgment law as follows: “To speak broadly, all of the foregoing discussion of summary judgment law in this state, like that of its federal counterpart, may be reduced to, and justified by, a single proposition: If a party moving for summary judgment in any action, including an antitrust action for unlawful conspiracy, would prevail at trial without submission of any issue of material fact to a trier of fact for determination, then he should prevail on summary judgment.” (Aguilar, supra, 25 Cal.4th at p. 855.)

Bearing these principles in mind, we turn to Eddins’s theory of the case and the evidence he claims meets plaintiffs’ burden to present “evidence that tends to exclude ... the possibility that the alleged conspirators acted independently rather than collusively,” so that a reasonable fact finder could find an unlawful conspiracy to deny comparable output revenue-sharing terms to independent retailers “more likely than not.” (Aguilar, supra, 25 Cal.4th at p. 852.) We take up the parties’ differing interpretations of the law as announced in Aguilar (pt. I.C, post) after reviewing the pertinent evidence.

B. Eddins’s evidence does not allow a reasonable trier of fact to infer the existence of a horizontal conspiracy among the studios orchestrated by Blockbuster, because none of the evidence “tends to exclude . . . the possibility” that the studios acted independently rather than collusively.

Eddins contends the evidence showed that Blockbuster obtained favored deals from the major studios in an effort to reverse a devastating competitive slide. Using coercion (threatened and actual purchase reductions) and enticement (increased revenues and supracompetitive pricing), Blockbuster persuaded the studios to agree among themselves to deny the independent retailers Blockbuster’s favored terms. Offering no direct evidence of conspiracy, Eddins relies on the theory of conscious parallelism to prove an illegal agreement among the studios.

Conscious parallelism is a pattern of uniform business conduct, not in itself unlawful. (Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. (1993) 509 U.S. 209, 227 [125 L.Ed.2d 168, 113 S.Ct. 2578] (Brooke Group).) To establish consciously parallel behavior, Eddins “must show (1) that the defendants’ business behavior was parallel, and (2) that the defendants were conscious of each other’s conduct and that their awareness was an element in their decisional process.” (Schoenkopf v. Brown & Williamson Tobacco Corp. (3d Cir. 1980) 637 E2d 205, 208 (Schoenkopf).) Evidence of conscious parallelism alone, however, does not permit an inference of conspiracy “ ‘unless the plaintiff [either] establishes that, assuming there is no conspiracy, each defendant engaging in the parallel action acted contrary to its economic self-interest,’ [citation] or offers other ‘plus factors’ tending to establish that the defendants were not engaging merely in oligopolistic price maintenance or price leadership but rather in a collusive agreement to fix prices or otherwise restrain trade.” (City of Tuscaloosa v. Harcros Chemicals, Inc. (11th Cir. 1998) 158 F.3d 548, 570-571, fns. omitted (City of Tuscaloosa)-, see 6 Areeda Antitrust Law (2002) ch. 14, ][ 1434a.) As one commentator explains: “ ‘Even the fact that competitors have knowingly charged identical prices is a neutral fact in the absence of evidence which would lead one to expect that the prices would have been different if truly independent decisions had been made.’ ” (Turner, The Definition of Agreement Under the Sherman Act: “Conscious Parallelism” and Refusals to Deal (1962) 75 Harv. L.Rev. 655, 659, quoted in City of Tuscaloosa, supra, 158 F.3d at p. 571.)

Thus, Eddins must show: (1) the defendants’ business behavior was parallel; (2) each studio’s awareness of the others’ conduct in not offering output revenue-sharing terms to independent retailers was an element in its own decision not to do so; and (3) the failure to offer such terms to distributors for independent retailers was “ ‘contrary to their economic self-interest so as not to amount to a good faith business judgment.’ ” (Royal Drug Co. v. Group Life And Health Ins. Co. (5th Cir. 1984) 737 F.2d 1433, 1437 (Royal Drug), quoting Pan-Islamic Trade Corp. v. Exxon Corp. (5th Cir. 1980) 632 F.2d 539, 559.) Many courts refer generally to the third element as a requirement to “show the existence of certain ‘plus’ factors, including: (1) actions contrary to the defendants’ economic interests, and (2) a motivation to enter into such an agreement.” (Petruzzi’s IGA v. Darling-Delaware (3rd Cir. 1993) 998 F.2d 1224, 1242 (Petruzzi’s IGA).)

The circumstantial evidence from which a conspiracy can be inferred, according to Eddins, may be summarized as follows:

—None of the studios agreed to output revenue sharing with any distributor on Blockbuster-comparable terms.

—Each studio knew the other studios were not entering into output revenue-sharing agreements with distributors on Blockbuster-comparable terms.

—Each studio acted contrary to its individual economic interest in not agreeing to output revenue sharing with distributors, because:

—Each studio increased its revenues under its agreements with Blockbuster (an undisputed point); and

—It is in a studio’s best interest to agree to comparable terms with distributors, in order to accomplish the same thing—increase its revenues—with as many independent retailers as possible.

—Further, it is contrary to a studio’s best interest to create market power in its largest buyer, but the studios knowingly did so, and collusion provides the only explanation for creating market power in one’s largest buyer.

—In addition, the reasons each studio provided for failing to offer the Blockbuster terms to distributors were pretextual. The studio executives stated they offered other types of copy depth programs and other forms of revenue sharing, rather than the Blockbuster terms, because the distributors and independents did not want the Blockbuster terms, or did not request those terms. According to Eddins, these statements by the studios are contradicted by evidence that distributors and independent retailers asked the studios for the Blockbuster terms, and that all but the very smallest independents could and would do output revenue sharing.

Eddins’s evidence founders at a number of points. Viewed as a whole, Eddins’s evidence does not tend to exclude the possibility that the studios acted independently. Accordingly, under Aguilar, a reasonable juror could not find that an unlawful agreement to deny the Blockbuster terms to distributors was more likely than not. (Aguilar, supra, 25 Cal.4th at p. 852.) We review the evidence on each of the points necessary to Eddins’s claim.

1. Consciously parallel conduct: Eddins’s evidence does not show or suggest that any studio’s conduct in not offering output revenue-sharing terms to distributors was an element in any other studio’s decision not to do so.

The five studio defendants did not enter into output revenue-sharing arrangements with distributors, at least until April 2000. The studios’ conduct was the same, and the studios were aware generally of their competitors’ practices. However, to establish consciously parallel conduct, Eddins must also show, as he concedes, that “their awareness was an element in their decisional process.” (Schoenkopf supra, 637 F.2d at p. 208.) Eddins failed to produce any evidence on this point. In other words, the evidence does not indicate that, for example, Fox’s awareness that the other studios were not making output revenue-sharing contracts with distributors played any part in its own decisions on contracts with distributors. By contrast, the evidence shows (and defendants admit) that Fox’s awareness that its competitors were making deals with Blockbuster was a factor in its decision to negotiate a deal with Blockbuster. That, however, is not the parallel conduct at issue. Not a single item of circumstantial evidence exists to suggest that one studio’s failure to offer output revenue-sharing terms to distributors was a factor in any other studio’s decision not to offer such terms to distributors.

Eddins’s brief contends the evidence “amply shows otherwise,” and the studios’ files “overflow with price verifications and copies of each others’ confidential contracts and pricing data.” The “overflow[ing]” studio files show only that the studios received information from Blockbuster and distributors about their competitors’ practices. However, “the mere possession of a competitor’s price-related documents, even with evidence of parallel pricing, has been held not to give rise to an inference of a price-fixing agreement. ” (In re Medical X-Ray Film Antitrust Litigation (E.D.N.Y. 1996) 946 F.Supp. 209, 218, citing cases; see Aguilar, supra, 25 Cal.4th at pp. 862, 863 [“evidence concerning the gathering and dissemination of . . . pricing information . . . [did] not even imply collusive, rather than independent, action”; while such information can be misused as a basis for an unlawful conspiracy, the evidence must suggest such misuse].) Eddins cites Alakayak v. British Columbia Packers, Ltd. (Alaska 2002) 48 P3d 432 (Alakayak) for the principle that “the evidence of price verifications tends to show that the defendants were conscious of each other’s conduct and that this awareness was an element in their decision-making processes.” (Id. at p. 456.) This assertion misconstrues Alakayak, because the court’s statement was specifically addressed to the evidence in that case. The court went on to show not only that all defendants in that case engaged in price verifications, but that there was “evidence that the [defendants’] knowledge of each other’s prices was an element in their decision-making.” (Ibid.) The court described testimony from one defendant’s representative on the point, and further indicated that “[o]ther testimony also tends to show that [defendants] used the price verifications in their decision-making.” (Ibid.) By contrast, and as the trial court correctly concluded, Eddins offered no evidence “tending to show that any defendant actually relied upon its awareness of the other defendants’ conduct in making its revenue-sharing decisions.”

In short, the critical element establishing conscious parallelism is entirely absent. It may well be that the pricing information in a studio’s files constitutes “verification” that the other studios’ deals with distributors were different from their deals with Blockbuster. Even so, there is no indication that this knowledge of deal terms was in any way an element in any studio’s decision not to offer output revenue sharing to distributors for independent retailers.

2. Acts against self-interest and motive for the alleged conspiracy: Eddins’s evidence does not show that any studio acted in contradiction to its individual economic interest, or that the studios had a motive to conspire with each other to deny the Blockbuster terms to distributors for independent retailers.

Even if consciously parallel behavior could be inferred from the presence of pricing information in studio files, more is required to permit an inference of conspiracy. As noted above, “before such an inference may be drawn a plaintiff must also show (1) that the defendants acted in contradiction of their economic interests, and (2) that the defendants had a motive to enter into an agreement.” (Schoenkopf supra, 637 F.2d at p. 208.) As stated in Royal Drug, to avoid summary judgment on this theory, Eddins must present “significant probative evidence” that the studios did not act independently. (Royal Drug, supra, 737 F.2d at p. 1437.)

a. Actions contrary to self-interest: Eddins’s evidence of acts by the studios contrary to economic self-interest is insufficient to permit an inference of conspiracy.

Eddins contends there is evidence that each studio acted contrary to its own economic self-interest when it failed to offer the Blockbuster terms to distributors. The evidence cited in Eddins’s separate statement of undisputed facts falls into two categories, the first of which is premised on the undisputed point that, under their Blockbuster deals, the studios increased their revenues:

—Testimony from studio executives and the studios’ economic expert, Professor Benjamin Klein, to the effect that the more output revenue-sharing agreements a studio has, the better, as the studio’s goal is to maximize revenue.

—Evidence that (a) the studios knew that output revenue-sharing agreements would give Blockbuster a competitive advantage, allowing it to increase its market share at the expense of independent retailers, and (b) under fundamental economic principles, business firms are harmed by actions that create market power in their largest buyer, and collusion is the only explanation for creating market power in one’s largest buyer.

We discuss each category in turn.

i. Increasing revenues: Eddins produced no probative evidence that the studios would have increased revenues by offering the Blockbuster terms to distributors.

According to Eddins, we may infer that each studio acted against its own economic self-interest in failing to offer the Blockbuster terms to distributors. The inference is permissible because each studio increased its revenues under its agreement with Blockbuster, and therefore also could have increased revenues by offering the same terms to distributors. Eddins asserts the failure to do so is against economic self-interest. Eddins’s argument is based on testimony from three studio executives, and the studios’ own economic expert, which merely acknowledges an economic truism. The truism is that the greater the number of successful Blockbuster-like output contracts the studio has, the better it is for the studio. To conclude this is evidence of acts against self-interest requires the simplistic assumption that output revenue-sharing contracts with distributors serving independent retailers must necessarily produce an increase in revenues, just as Blockbuster’s did, and ignores the significant differences between small retailers served by distributors and large chains. As an example, large chains with nationwide locations, such as Blockbuster, can “allocate inventory against competition.” That is, large chains can satisfy customer preferences, which vary demographically, by placing different movie genres in the store locations where they are more likely to be rented. Single-store owners cannot do that. Likewise, single-store owners may have space limitations that impede their ability to effectively handle a studio’s entire output of movie releases. And smaller retailers may be reluctant to enter into multiyear contracts to purchase a studio’s entire output of movies.

In short, Eddins’s evidence consists of the abstract proposition that more output revenue-sharing contracts equals more studio revenue, without regard to the host of differences that might affect the success of such contracts in generating increased revenues. It is simply unreasonable to infer, from Eddins’s evidence, that output revenue-sharing contracts with distributors for independent retailers would have been successful, and that the studios therefore acted against their economic interests by not promptly offering contracts to distributors for independent retailers.

ii. Blockbuster’s market power: The studios’ knowledge of Blockbuster’s increasing market power and competitive advantage, standing alone, does not permit an inference of conspiracy.

We may also conclude each studio acted against its own self-interest, and therefore infer a conspiracy, Eddins contends, because the studios knew Blockbuster would gain a competitive advantage from output revenue sharing, and creating market power in one’s largest customer is harmful. Several studio documents purportedly support this inference. The documents state the Blockbuster proposal would “place Blockbuster at a severe competitive advantage over other rental retailers,” and “significantly reduce the studio’s leverage on future transactions” (Fox); Blockbuster would exercise its market share “to eliminate competition and negotiate improved terms with studios” (Warner); with the competitive advantage of direct revenue sharing, “the large retailers, such as Blockbuster and Hollywood, are aggressively capturing market share at the expense of the smaller independent retailers” (Universal); the increase in consumer rental spending in 1998 occurred mostly at the two largest chains “who launched aggressive campaigns ... to increase market share,” and “[m]ost of these gains have happened at the expense of the smaller chains and independents who are unable to compete” (Universal); and, in a January 2000 document, “[a]ll studios have now embraced the concept of revenue sharing and are actively involved with Blockbuster and Hollywood,” and “[m]ost small retailers still don’t have reasonably priced access” (Universal).

The evidence Eddins cites shows that the studios knew that their direct revenue-sharing agreements with Blockbuster gave Blockbuster a significant competitive advantage at the expense of smaller retailers. Moreover, in the abstract, actions that “create market power” among buyers of a firm’s products may harm the firm, as studio expert Klein testified. However, no legal precedent supports the principle that, merely because a supplier knows that its largest customer intends to or has succeeded in increasing its market share through an innovative purchasing method, the supplier acts against its own economic self-interest, and we may infer a conspiracy, unless it successfully moves to counteract the significant competitive advantage obtained by the innovating customer. That is, no case permits an inference of conspiracy based solely on conduct—such as innovative purchasing agreements that are not in themselves illegal—that facilitates a customer’s gain in market share. One firm’s success in expanding its market share necessarily comes at the expense of other firms. We decline to conclude that the knowledge that these events are occurring in the marketplace permits an inference that suppliers of the innovating customer are colluding to deprive other customers of similar terms. Nothing about such knowledge, in and of itself, permits an inference that the studios agreed with each other to withhold favorable terms from the other customers, rather than that each acted, or failed to act, based on its independent business judgment that the terms were not suitable for or were not desired by the other customers. In short, without any other evidence that a studio’s decision was contrary to its economic self-interest if taken independently, the specter of increasing market share in one customer is not suggestive of conspiracy.

Eddins relies on Toys “R” Us, Inc. v. FTC (7th Cir. 2000) 221 F.3d 928 (Toys “R” Us). Toys “R” Us provides an apt example of a case finding that an inference of conspiracy was proper from conduct that was not in defendants’ legitimate economic self-interest. The case also illustrates, by contrast, the deficiencies of the evidence in Eddins’s case. We therefore consider it in some detail.

In Toys “R” Us, the court upheld a Federal Trade Commission finding that a horizontal agreement existed among a number of toy manufacturers, orchestrated by Toys “R” Us (TRU) as the ringmaster, to boycott warehouse clubs (TRU’s competitors) which were selling toys at a slender markup. Each manufacturer entered into a vertical agreement with TRU that it would sell the warehouse clubs “only highly-differentiated products (either unique individual items or combo packs) that were not offered to anything but a club . . . .” (Toys “R” Us, supra, 221 F.3d at p. 932.) These agreements eliminated the clubs’ competitive threat to TRU by denying them merchandise, forcing the clubs’ customers to buy products they did not want, and frustrating customers’ ability to compare TRU and club prices. (Ibid.) In order to obtain the vertical agreements, TRU had to overcome a major hindrance, which was the manufacturers’ reluctance to give up a new, fast-growing, and profitable channel of distribution, namely, the clubs. (Ibid.) The manufacturers “were also concerned that any of their rivals who broke ranks and sold to the clubs might gain sales at their expense, given the widespread and increasing popularity of the club format.” (Ibid.) To solve this problem, TRU orchestrated a horizontal agreement among the toy manufacturers, which TRU enforced, to boycott the clubs by selling them only highly differentiated products, as described above.

The evidence the FTC relied upon “showed that, at a minimum, [seven toy manufacturers] agreed to join in the boycott 'on the condition that their competitors would do the same.’ ” (Toys “R” Us, supra, 221 F.3d at p. 932, quoting the FTC’s opinion.) Internal memoranda from the manufacturers showed that they were trying to expand, not to restrict, the number of their major retail outlets and to reduce their dependence on TRU. The memoranda also showed that the manufacturers were specifically interested in cultivating a relationship with warehouse clubs and increasing sales at the clubs. Consequently, ’’the sudden adoption of measures under which they decreased sales to the clubs ran against their independent economic self-interest.” (Ibid.) Moreover, evidence from toy company executives and from TRU indicated that the only condition on which each toy manufacturer would agree to TRU’s demands for a vertical agreement (restricting sales of popular toys to the warehouse clubs) was an assurance that its competitors were doing the same thing. (Id. at pp. 932, 936.) This condition was imposed because each manufacturer was afraid its rivals would cheat and gain a special advantage in a popular new market niche. A TRU officer testified that he communicated the message “ ‘I’ll stop if they stop’ ” from manufacturer to competing manufacturer. (Id. at p. 932.) Evidence from the toy manufacturers also corroborated that testimony. After the boycott was underway, numerous examples in the evidence showed “TRU served as the central clearinghouse for complaints about breaches in the agreement.” (Id. at p. 933.)

The evidence in this case lacks the critical ingredients present in Toys “R” Us. Unlike Toys “R” Us, no evidence exists of vertical agreements between Blockbuster and any studio to withhold Blockbuster-like terms from independents. The only evidence is that Blockbuster asked for exclusivity from Fox and that Fox refused. (See pt. I.B.3.a, post.) Unlike Toys “R” Us, no evidence indicates Blockbuster communicated any message from studio to studio about any studio’s willingness to withhold favorable terms from independents. Unlike Toys “R” Us, no evidence indicates any studio feared acting alone in its sales to distributors, much less that any studio wanted or required assurance that others were not giving Blockbuster-like terms to distributors. And unlike Toys “R” Us, no evidence indicates Blockbuster “enforced” the alleged agreement by the studios to withhold terms from independents, and indeed no evidence showed any mechanism by which Blockbuster could enforce such an agreement. (See Petruzzi’s IGA, supra, 998 F.2d at p. 1233 [“[g]ame theory teaches us that a cartel cannot survive absent some enforcement mechanism because otherwise the incentives to cheat are too great”].)

In short, the studios knew, as the success of direct output revenue-sharing agreements became apparent, that Blockbuster’s market share—and that of other large chains—was growing, and growing at the expense of independent retailers. However, the studios’ knowledge of these market share changes is the sum total of probative evidence that the studios acted contrary to their individual economic self-interest. This evidence is insufficient to permit an inference that the studios conspired to withhold Blockbuster-comparable terms from independent retailers. In Aguilar’s terms, it is not evidence which “shows or implies unlawful conspiracy more likely than permissible competition . . . .” (Aguilar, supra, 25 Cal.4th at pp. 856-857.)

b. Motive for the alleged conspiracy: Eddins’s evidence suggests no plausible motive for a conspiracy among the studios to deprive independent retailers of Blockbuster-comparable terms.

Eddins claims that, in addition to acts against economic self-interest, evidence that a studio engaged in conduct that would be unlikely absent an understanding with the other studios is a “plus” factor suggesting a conspiracy. In support of this point, Eddins cites City of Tuscaloosa, which refers to “the implausibility that the defendants would have acted as they did had they not been unlawfully conspiring in restraint of trade” as a “plus factor.” (City of Tuscaloosa, supra, 158 F.3d at pp. 570-571, fn. 34.) Eddins’s argument fails on several levels.

First, characterizing conduct as implausible is simply another way of saying defendants acted against their individual economic self-interest. That is, defendants acted implausibly, in the absence of an agreement. City of Tuscaloosa clearly so states. (City of Tuscaloosa, supra, 158 F.3d at p. 572 [“[o]ne prominent ‘plus factor,’ to which antitrust plaintiffs often take recourse, is a showing that the defendants’ behavior would not be reasonable or explicable (i.e. not in their legitimate economic self-interest) if they were not conspiring to fix prices or otherwise restrain trade”].) Other courts likewise consider motive in tandem with actions contrary to a defendant’s economic interest. (See Schoenkopf, supra, 637 F.2d at p. 208 [before an inference of conspiracy may be drawn, plaintiff must also show defendants acted in contradiction of their economic interests and had a motive to enter into an agreement]; 6 Areeda, Antitrust Law, supra, ch. 14, ][ 1434c2 [“no conspiracy should be inferred from ambiguous evidence or from mere parallelism when the defendants have no incentive to conspire”].)

Second, in any event, Eddins’s evidence is short on any logical reason for the studios to conspire among themselves or with Blockbuster to withhold Blockbuster-comparable terms from distributors for independent retailers. Eddins contends the evidence indicated a studio would not “price discriminate in Blockbuster’s favor” without an understanding that the other studios would do so, because otherwise independents would retaliate by shifting support to nondiscriminating studios. However, “price discriminat[ion] in Blockbuster’s favor”—the revenue-sharing agreements with Blockbuster— would exist with or without an agreement among the studios to withhold comparable terms from distributors. (See fn. 22, post.) The pertinent question is whether any motive exists for the studios to agree to withhold Blockbuster-comparable terms from independent retailers. Eddins advances no plausible reason why the studios would conspire to favor Blockbuster by denying output terms to independents, when independents constituted a large segment of its customer base. (See Zoslaw v. MCA Distributing Corp. (9th Cir. 1982) 693 F.2d 870, 885 [“appellants are unable to advance any plausible reason why the major record distributors would conspire to favor certain retailers, thus limiting the retail outlets for their own products”].) While it is plausible that Blockbuster would want to disadvantage its competitors, no reason appears why the studios would agree.

Eddins answers that Blockbuster employed both coercion and enticement to induce the studios to disadvantage the independent retailers by refusing to give the Blockbuster terms to distributors for independents. The coercion consisted of threatening to and actually reducing purchases from studios which were reluctant to agree to revenue sharing. While the evidence that Blockbuster threatened to reduce purchases is undisputed, it only explains why the studios ultimately acquiesced to output revenue-sharing agreements with Blockbuster. It does not explain why they would agree not to oifer such terms to distributors that served a great many of their customers. The evidence purporting to show that Blockbuster enticed or induced the studios to agree to deny output revenue-sharing terms to distributors for independents is likewise deficient. Eddins’s separate statement identifies (1) a portion of the report of Eddins’s economic expert, Professor James L. Sweeney, and (2) a single document, entitled “Blockbuster Overview,” prepared for a Viacom executive committee meeting on February 24, 1999. The latter document contains a “Revenue Share Financial Review,” and shows the revenue increases by studio, for each studio and for Blockbuster. This document demonstrates that, except for Warner, each studio’s incremental increase in revenues, as a result of revenue sharing with Blockbuster, was greater than Blockbuster’s incremental increase in revenues. It is difficult to discern the probative value of the studios’ larger incremental increase in revenues. There is no evidence the studios knew or anticipated that their incremental revenue increases would be greater than Blockbuster’s when they acquiesced, in some cases very reluctantly, to Blockbuster’s revenue-sharing proposals. Moreover, even if the studios anticipated higher incremental revenues, the document at most merely shows why a studio would be persuaded to revenue share with Blockbuster, not why it would refuse to do so with distributors for independents.

The remaining evidence that Blockbuster enticed the studios to agree to withhold the Blockbuster terms from independent retailers is the evidence from Sweeney, Eddins’s economist. Sweeney opined in the Texas case that the prices distributors paid for videotapes were “substantially higher than the competitive price, the price arrived at by independent decision making in a workably competitive market,” and that this disparity “was the result not of competitive market forces, but of the defendants’ conduct in price fixing and price discrimination.” Sweeney determined that, but for the studios’ conduct, the competitive price for a videotape would have been $16, $2 less than the average $18 price at which studios sell DVD’s on a wholesale basis. As a result of its revenue-sharing agreements, Blockbuster paid the studios, on average, $22 per videotape. Under Sweeney’s scenario, the studios had a plausible motive to conspire, because each of them “accepted a higher than competitive price from Blockbuster as part of the inducement to entering into the conspiracy.”

We reject Sweeney’s analysis. An expert’s opinion must be supported by sufficient facts to validate it in the eyes of the law. (Brooke Group, supra, 509 U.S. at p. 242.) The evidence is undisputed that, before the Blockbuster agreements, retailers and distributors alike purchased tapes from the studios at $65 per tape. Indeed, some studios were reluctant to abandon the traditional $65 per tape price and instead agreed to revenue sharing that ultimately resulted in an average per tape price to Blockbuster of $22 per tape. Yet Sweeney opines that $22 was a “supra-competitive price,” even though it is more than $40 lower than the traditional price it replaced. The circumstances belie Sweeney’s implicit assumption that the studios acted based on an understanding that, under their revenue-sharing agreements with Blockbuster, Blockbuster would be paying a “supra-competitive price” for its videotapes. In short, no factual basis permits the inference of conspiracy that Sweeney suggests; no evidence indicates the studios thought they were obtaining a supra-competitive price from Blockbuster, giving them a plausible economic motive to conspire to withhold similar terms from distributors. As the Fifth Circuit said of other aspects of Sweeney’s testimony, “[s]uch speculative and self-serving expert testimony is an insufficient basis for plaintiffs’ claims of concerted action.” (Cleveland, v. Viacom Inc., supra, 73 Fed.Appx. at p. 741; see Aguilar, supra, 25 Cal.4th at p. 864 [expert opinion is not a substitute for market facts].)

In the end, Eddins insists both that the studios would have made more money through output revenue sharing with distributors (and therefore acted against individual interest in not doing so), and that the studios benefited from an agreement not to offer those moneymaking terms to distributors, by obtaining supra-competitive prices from Blockbuster (the same prices that they would not offer to distributors). The first prong of this scenario has no support in the evidence and the second prong is demonstrably implausible.

c. The Attorney General’s position: Amicus curiae’s contention that the trial court erred by ignoring expert testimony is without merit, because Eddins did not direct the trial court to the evidence cited by the Attorney General.

The Attorney General’s amicus curiae brief asserts that the trial court improperly ignored admissible expert testimony that the studios’ conduct was contrary to their self-interests, and therefore was more likely the result of collusion than of independent action. The Attorney General complains that the trial court acknowledged only two aspects of Eddins’s evidence, namely that each studio knew of its competitors’ deals with Blockbuster and distributors, and that the studios recognized that their economic interest required Blockbuster-type agreements with as many customers as possible. The trial court erred “by ignoring critical economic evidence” from Professor Sweeney, who opined that there was no reason the studios could not offer Blockbuster-like deals to distributors; that the studios’ revenues would increase if they did so; and that the studios’ behavior created market power in one customer, Blockbuster, and was rational only if a conspiracy existed.

We leave aside the question whether Sweeney’s evidence was probative. The Fifth Circuit rejected portions as “simplistic” and “conclusional,” and we reject, as unfounded, Sweeney’s supra-competitive pricing theory as a plausible motive for conspiracy. We also leave aside the question whether it is proper to assume the trial court did not consider evidence simply because the court did not mention it. The decisive point is that Eddins failed to direct the trial court to the evidence cited by the Attorney General. Eddins did not rely on Sweeney’s opinion on this point in plaintiffs’ opposition to summary judgment, either in the separate statement or in the accompanying memorandum of points and authorities. The trial court cannot be expected to address expressly every piece of evidence contained in a voluminous record, much less address evidentiary items on which a party has not relied to create a disputed issue of material fact. (See San Diego Watercrafts, Inc. v. Wells Fargo Bank (2002) 102 Cal.App.4th 308, 316 [125 Cal.Rptr.2d 499] [court may ignore evidence not disclosed in moving party’s separate statement of undisputed facts]; United Community Church v. Garcin (1991) 231 Cal.App.3d 327, 336 [282 Cal.Rptr. 368] [“ ‘just as is the case with the moving party’s separate statement, the opposing party is required by the statute, in connection with each fact which the opposing party disputes, to follow the statement of that fact by reference to the evidence which creates the dispute’ ”], quoting Blackman v. Burrows (1987) 193 Cal.App.3d 889, 896 [238 Cal.Rptr. 642].) We discern no reason to depart from these well-established principles.

3. The evidence of pretext: Evidence that distributors and independent retailers requested the Blockbuster terms does not tend to exclude the possibility that the studios acted independently in failing to offer those terms to distributors.

To infer a conspiracy from consciously parallel conduct, the action against economic self-interest must also be such as “ ‘not to amount to a good faith business judgment.’ ” (Royal Drug, supra, 737 F2d at p. 1437; see 6 Areeda, Antitrust Law, supra, ch. 14, f 1434c2 [“ ‘contrary to self-interest’ usually refers to the absence of an independent business reason for the challenged conduct”].) Eddins contends, in effect, that its evidence that distributors and independent retailers sought Blockbuster-comparable terms is sufficient to allow an inference that the studios agreed among themselves not to offer those terms to distributors. According to Eddins, the evidence that Ingram and Rentrak asked for comparable terms tends to exclude the possibility that the studios acted independently, that is, in the exercise of each studio’s independent business judgment.

Again, we cannot agree. As we have seen, Eddins’s evidence does not suggest a plausible motive for a conspiracy. It does not reasonably support an inference of conduct contrary to a studio’s economic self-interest. It does not include any of the customary indications of traditional conspiracy. (See fn. 11, ante.) If the evidence supported any of these “plus” factors, then Eddins’s evidence that distributors asked for the Blockbuster terms (though they never knew what those terms were), and the evidence that some independents wanted and were capable of output revenue sharing, might conceivably enhance the conspiracy hypothesis. Absent significant probative evidence of any of the “plus factors,” however, the evidence of “pretext” loses any force it might otherwise have had. In short, although Eddins correctly asserts that the question “[w]hether distributors and independents wanted and could do Blockbuster-comparable deals is a disputed issue of fact only a jury [could] resolve,” it is not a material issue. The resolution of the question in Eddins’s favor would not allow a jury to infer an agreement among the studios to withhold Blockbuster terms from independents.

Moreover, even if evidence of pretext, in the absence of other “plus” factors, could suffice in theory to create an inference of conspiracy, Eddins’s evidence of pretext fails, because it does not tend to exclude the possibility that the studios acted independently rather than collusively. (Aguilar, supra, 25 Cal.4th at p. 852.) This conclusion is demonstrable from a review of (a) Eddins’s related claim that, “[f]rom the beginning, the plan was to provide to Blockbuster revenue sharing terms that would not be offered to distributors,” and (b) the remainder of the evidence Eddins advances to support the claim that the studios’ conduct did not amount to a good faith business judgment.

a. Blockbuster’s exclusivity request: The evidence did not show that Blockbuster asked each studio to withhold comparable revenue-sharing terms from independent retailers.

Eddins’s brief asserts that plaintiffs “presented] evidence that . . . Blockbuster asked each studio not to make Blockbuster’s favored terms available to independents . . . .” This assertion is representative of the gloss Eddins places on the evidence it cites. No evidence indicates Blockbuster “asked each studio” not to make its terms available to independents. There is evidence that Blockbuster wanted exclusivity from Fox, and told Fox it wanted a special deal that it did not want offered to independents. No evidence indicates Fox agreed to this, and indeed the very evidence showing the Blockbuster demand also demonstrated that Fox had no intention of granting it Moreover, there is no evidence of a Blockbuster demand for exclusivity to any other studio. And in any event, a wrongful request by Blockbuster for exclusivity does not support an inference of conspiracy in the absence of the necessary evidence that the studios’ failure to offer output revenue sharing to distributors was “ ‘contrary to their economic self-interest so as not to amount to a good faith business judgment.’ ” (Royal Drug, supra, 737 F.2d at p. 1437.) In other words, it does not matter whether Blockbuster wanted a deal that was not available to its competitors. The question is whether one can reasonably infer the studios acquiesced to any such demands by Blockbuster. To do so, the evidence must allow a reasonable inference that the studios did not make good faith business judgments in their transactions with distributors for independents. As Aguilar instructs, the evidence or inferences reasonably drawn from it must show or imply that it is “more likely than not” that each studio’s failure to offer output revenue sharing to distributors was the result of a conspiracy, rather than the exercise of independent business judgment. (See Aguilar, supra, 25 Cal.4th at p. 852.)

b. Other evidence of pretext: The evidence of general requests by distributors for output options, and of predictions that small retailers would embrace output revenue sharing, does not tend to exclude the possibility that the studios acted independently.

The remainder of the “mountain of evidence,” purportedly demonstrating that the studios’ reasons for not making Blockbuster-comparable terms available to independent retailers were “entirely pretextual,” is no more helpful to Eddins. Stated broadly, the studios asserted a belief that distributors and independents did not want or could not make Blockbuster-type output arrangements, and Eddins’s evidence suggests the opposite. Thus:

—Each defendant studio presented direct testimony, from the studio executive responsible for negotiating its revenue-sharing agreement with Blockbuster, that the studio made no agreement with Blockbuster or with any competitor to withhold comparable terms from distributors or independent retailers. Each executive explained in considerable detail the course of the studio’s negotiations with Blockbuster on direct revenue sharing, as well as its dis