Full opinion text
DECISION ON MOTIONS SAMUEL P. KING, Chief Judge. I. BACKGROUND FACTS Robert’s Waikiki U-Drive, Inc., et al, (Robert’s) brought this action in 1977 against Budget Rent-A-Car Systems, Inc. (Budget) for damages resulting from certain fly-drive agreements Budget had entered into with Aloha Airlines in 1971 and Pan American World Airways in 1972, and from certain acquisitions made by Budget in 1969. The case arises under the federal antitrust laws and the antitrust and unfair competition laws of the State of Hawaii. The Court has independent jurisdiction over the state claims because of diversity of citizenship. Plaintiffs (Robert’s) were four car rental companies doing business on Oahu, Maui, Kauai and Hawaii. These companies were consolidated by merger on December 31, 1978. Robert’s is a closely-held, family-owned and operated corporation, operating under the direction of the Robert Iwamoto, Sr. family. Budget’s Hawaii operations were opened in the early 1960’s by Irwin Biekson through a licensing or franchise agreement between Budget Rent-A-Car Corporation of America and Mr. Bickson’s partnership, doing business as Budget Rent-A-Car of Hawaii. In 1969, Leisure Corporation, a subsidiary of Transamerica Corporation, acquired the independently owned, exclusive Budget licensees on the islands of Oahu, Maui and Kauai. Budget of Kauai was partially owned by Robert Iwamoto, Jr., an officer and director of various Robert’s companies, and when he sold out to Leisure, he was required to enter into a restrictive covenant that prevented him from actively participating in the car rental market in Hawaii for five years. In 1974, Leisure Corporation was merged into Transamerica. Defendant Budget now operates the Hawaii franchises and is a wholly owned subsidiary of Budget Rent-A-Car Corporation, which is also owned by Transamerica. Defendant is an Illinois corporation engaged in the car rental business in various states. Though the acquisitions of the licensees are challenged by Robert’s, the crux of the case is the fly-drive agreements. Beginning in the summer of 1971, Budget, in conjunction with Aloha Airlines, began offering fly-drive programs. The essence of these programs was that the consumer was offered a package, so that when he flew on Aloha he received a special rate on a Budget car. In the first program, an Aloha passenger who flew to Maui or Kauai could rent a Budget car for one day for $19.95. In the second program, an Aloha passenger who flew to the island of Hawaii could rent a Budget car for one day for $12.95. The third program, and the one that is at the heart of this lawsuit, was the $7.00 fly-drive package. In an agreement with Aloha, Budget promised to rent automatic compact cars to certain Aloha passengers for one day for $7.00. The regular Budget rate was $14.00. This agreement was entered into between Budget and Aloha in September 1971, and provided that Aloha was to pay Budget $7.00 for each rental. The program remained in effect through September 1973. In October of that year a new fly-drive agreement was entered into, and by its terms the payments to Budget were not to be linked to the number of cars rented, but rather were to be linked to Budget’s prorata share of the advertising costs of the programs. Robert’s contends that the Federal Aviation Act forbade an airline from reducing the airfare it was required to charge under its tariffs. Robert’s claims that although the payments to Budget from Aloha were stated to be for advertising expenses, they were in fact illegal rebates that had the effect of reducing airfares. Robert’s also claims that Budget and Aloha engaged in a fraudulent coverup to hide the true nature of the rebates from the C.A.B., from competitors and from the general public. Robert’s alleges that during the course of the coverup Budget and Aloha falsified invoices, and Aloha and its employees submitted altered documents to and gave perjured testimony before the C.A.B. In April 1972, Budget entered into a fly-drive agreement with Pan American. The agreement covered only the island of Oahu, and the fly-drives were available both to round-trip Pan American passengers and to passengers who switched from another carrier to Pan American for their return trip to the Mainland. The payments from Pan American to Budget were $5.00 per rental. In June 1972, the C.A.B. began an investigation of the Budget-Pan American fly-drive program. Richard O’Melia, Director of the Bureau of Enforcement of the C.A.B., wrote to the President of Pan American stating that the C.A.B. had received a complaint contending that the fly-drive arrangement constituted “rebates in violation of Section 403(b) [49 U.S.C. § 1373(b)] of the Federal Aviation Act and an unfair practice or an unfair method of competition within the meaning of Section 411 [49 U.S.C. § 1381] of the Act.” Robert’s alleges that during the C.A.B. investigation a false copy of the Budget-Pan American agreement was submitted to the C.A.B. The submitted agreement spoke of Pan American reimbursing Budget for one-half of the total advertising expenditures, rather than Pan American paying Budget a flat, per-car figure. Robert’s also claims that during a contemporaneous C.A.B. audit of Aloha, a similar false contract was submitted. The C.A.B. closed its informal investigation of the Budget-Pan American fly-drives without determining the legality of the arrangement. Robert’s argues that this was due to the fraud perpetrated on the C.A.B. The C.A.B. commenced a formal enforcement proceeding against Aloha in 1973. In his 1975 decision, the Administrative Law Judge determined that Aloha had violated 1) § 403(b) of the Federal Aviation Act by indirectly rebating to passengers the payments it had made to Budget; 2) § 404(b) of the Act, 49 U.S.C. § 1374(b), by making the lower airfare available only to those passengers who rented Budget cars and 3) § 411 of the Act by violating § 403(b), and “by interfering with the normal competitive processes through the use of the unlawful rebating plan to increase its market share at the expense of a competitor.” The Administrative Law Judge ordered Aloha to cease and desist from its violations of the Act. The decision of the Administrative Law Judge was affirmed by the C.A.B. in an “Opinion and Order” filed in October 1976. Aloha petitioned the Court of Appeals for the District of Columbia Circuit for review of the C.A.B.’s order. That court affirmed the C.A.B. insofar as it had determined that the 1971 fly-drive plan allowed for illegal rebates in violation of the Act, but reversed the C.A.B.’s finding that the 1973 agreement violated the Act. The court did not find substantial evidence in the record to support the latter finding. Aloha Airlines, Inc. v. C.A.B., 598 F.2d 250 (D.C. Cir. 1979). In 1972, Aloha initiated an antitrust action against Hawaiian Airlines in this Court. Hawaiian counterclaimed, charging that the fly-drive agreements were illegal under the antitrust laws. During pretrial proceedings on the counterclaim, Hawaiian asserted that the fly-drives were illegal tying arrangements. This Court rejected that claim as a matter of law. Aloha Airlines, Inc. v. Hawaiian Airlines, Inc., 68 F.R.D. 351, 353 (D.Hawaii 1975). A jury decided against Hawaiian on the counterclaim, but this Court granted a new trial because of evidence that John Sakamoto of Aloha had given perjured testimony. The counterclaim was settled before a retrial. II. ROBERT’S § 1 CLAIM AGAINST BUDGET A. The Fly-Drives as Illegal Tying Arrangements Robert’s initial contention is that the $7.00 fly-drive agreements between Budget and Aloha, and between Budget and Pan American, were tying arrangements, illegal per se under § 1 of the Sherman Act, 15 U.S.C. § 1 (1976). Robert’s moves for partial summary judgment and for an order in the form of a jury instruction to the effect that these fly-drives were “tying arrangements which are to be found illegal per se under Section 1 of the Sherman Act if Robert’s demonstrates that there was sufficient economic power in the tying product and a not insubstantial amount of commerce was affected.” The Court rejects the contentions of Robert’s that the fly-drives were illegal tying arrangements. On the surface the plan looks relatively simple. Certain Aloha customers were told that they could rent a Budget car for one day for $7.00. It appears at first glance that if there were a tying arrangement, the tying product was the discounted car rental. That was the product that was intended to, and in fact did attract customers. Clearly customers were not accepting the “onerous” discounted car rental rate in order to take advantage of the normal Aloha airfare. Nevertheless, plaintiffs ask the Court to rearrange the transaction. They contend that since in reality Budget was receiving rebates from Aloha in the amount of the discount (or nearly in the amount of the discount), the products should be viewed as a $14.00 car rental and discounted airfare. Therefore, contends Robert’s, the discounted airfare was the tying product, and the car rental was the tied product. The Court will arguendo view the arrangement in this way. The classical definition of a tie-in is “an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier.” Northern Pacific Railway Co. v. United States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958). In other words, there must be coercion. A buyer must be told that he will not get the tying product unless he purchases the tied product. “Of course where the buyer is free to take either product by itself there is no tying problem even though the seller may also offer the two items as a unit at a single price.” 356 U.S. at 6 n.4, 78 S.Ct. at 518. No fly-drive customers, however, were actually coerced. Plaintiffs do not contest the fact that consumers could travel on Aloha and rent a Budget car, or travel on Aloha and not rent a Budget car. Yet, they still argue that there was the requisite coercion. They begin and end their argument with United States Steel Corp. v. Fortner Enterprises, Inc., 429 U.S. 610, 97 S.Ct. 861, 51 L.Ed.2d 80 (1977) (Fortner II). In Fortner II, U.S. Steel had one division that sold prefabricated houses, and another that provided financing for prefabricated house purchasers. U.S. Steel agreed to lend Fortner $2,000,000 on very advantageous terms, in return for Fortner’s agreement to purchase, for $689,000, the components for 210 homes. Fortner contended that the credit terms offered were 1) not available but for the component purchase and 2) “unique.” They therefore contended that because of the size of the U.S. Steel credit department, and because of the uniqueness of the financing (it covered 100% of Fortner’s acquisition and development costs), U.S. Steel possessed “appreciable economic power” in the tying market, the market for the type of financing offered. In Fortner II the Supreme Court was considering the question of whether absent significant economic power in the credit market, the per se uniqueness of the credit offered was enough to establish appreciable market power. The Court held it was not. Quite clearly, if the evidence merely shows that credit terms are unique because the seller is willing to accept a lesser profit — or to incur greater risks— than its competitors, that kind of uniqueness will not give rise to any inference of economic power in the credit market. Yet this is, in substance, all that the record in this case indicates. Fortner II, 429 U.S. at 621-22, 97 S.Ct. at 868. What plaintiffs focus on, however, is the fact that the Court viewed discounted financing as a tying product (or a potentially tying product). Robert’s maintains that here the discounted airfare must be viewed as a different product than the non-discounted airfare, and thus the separate availability for purchase of non-discounted airfare becomes irrelevant. If a customer wanted the “unique” discounted airfare, he had to also purchase the tied car rental. The Court believes that Robert’s misreads the Fortner cases. The only financing U.S. Steel offered was the discount financing, and only to buyers of prefabricated houses. It was not in the business of offering credit per se, and it did not offer “regular” financing as well as discount financing. In this case, Aloha offered both discounted and non-discounted airfare, and the non-discounted airfare could be purchased with no car rental strings attached. This is the equivalent of the situation described in Northern Pacific. “Of course where the buyer is free to take either product by itself there is no tying problem even though the seller may also offer the two items as a unit at a single price.” 356 U.S. at 6 n.4, 78 S.Ct. at 518. The Fortner cases are inapplicable because in them the discounted financing was the only financing that was offered. There was coercion in that if the buyer wanted any financing at all from U.S. Steel, it had to purchase the houses. In Fortner II the Court recognized that the uniqueness of certain types of products gave rise to a presumption of economic power. The Court was speaking of patent monopolies, copyright monopolies and extensive land holdings. 429 U.S. at 619, 97 S.Ct. at 867. Plaintiffs contend that since Aloha was offering its rebates illegally, and other carriers (Hawaiian) could not legally compete, the discounted airfares had the same type of uniqueness as patents and copyrights. The Court rejects this contention. If a patent holder offered a patented product for $50 by itself, and for $43 if purchased with a $14 widget, that would not on the surface be an illegal tie-in. That is so even though no other manufacturer could offer the patented product for sale at any price. If the terms were such that the price for the patented product alone was so high that no one would buy it without the widget, a question of a tie-in might be raised, since the separate price could be viewed as a non-legitimate offering. However, in this case, the non-discounted rate for the airfare was market price, and even the $14 rate for the alleged tied car rental was not high. The offering of the non-discounted airfare was legitimate. Robert’s preoccupation with Hawaiian’s legal barriers to meeting Aloha’s price does not focus on the coercion question. The Fortner cases teach that legal barriers to competitors may make a product unique, but nowhere do they hold that there is coercion if the tying product is sold at market by itself, and below market in conjunction with another product. A case in point is SmithKline Corp. v. Eli Lilly & Co., 427 F.Supp. 1089 (E.D.Pa.1976), aff’d, 575 F.2d 1056 (3d Cir.), cert. denied, 439 U.S. 838, 99 S.Ct. 123, 58 L.Ed.2d 134 (1978). The simplified facts of this case are that Lilly sold two drugs, Keflin and Keflex, and it essentially had monopoly power in the market for those drugs. It also sold a third, similar drug — Kefzol. SmithKline tried to compete in the market with Ancef, a product identical to Kefzol. Lilly offered a pricing schedule to hospitals, and the practical effect of the schedule was that if the hospitals purchased a sufficient amount of Kefzol (enough to effectively exclude them from purchasing a significant amount of Ancef), they received a discount of 3% on their purchases of all three drugs. They were free to purchase Ancef, but if they did so, they would not, as a practical matter, be able to receive the 3% discount. Their purchases of Keflin and Keflex were very large, and they usually bought Kefzol, even though Ancef was cheaper. SmithKline claimed that in reality Lilly was conditioning the purchase of 3% discounted Keflin and Keflex on the purchase of expensive Kefzol. That is the same contention Robert’s is making in this case (except for the fact that here the tied product — the “$14.00” car rental — is not expensive). The district court held that the arrangement was not a tie-in. It stated that since the buyer was free to buy the non-discounted Keflin and Keflex, there was no coercion and no tie-in. It went on to state: From an abstract perspective, if one disregards the economics of the market place, hospital pharmacists had the “freedom to choose” any of Lilly’s products without having to buy a tied product; thus they were “free to take either product by itself.” . . . The economics of the marketplace precluded that freedom of choice for most hospitals; such a freedom of choice, more prevalent in theory than in operational reality, is enough to circumvent the tie-in prohibitions of the relevant antitrust laws. 427 F.Supp. at 1114. This is precisely in point. Robert’s attempts to distinguish the case by contending there was an “absence of any . . . uniqueness” in the tying products in SmithKline. This is an untenable position. Lilly had huge, monopoly-type dominance, in the market for Keflin and Keflex — two patented products — and in terms of an antitrust analysis, that is close to the maximum uniqueness possible. Other cases that the Court has examined support its conclusion that Robert’s has not shown the requisite coercion so as to make out a prima facie case of a per se violation of the Sherman Act. Defendant also argues that because neither Aloha nor Pan American had any direct economic interest in the tied product market, there was no tie-in. Robert’s avers that because 1) each fly-drive package sold by Budget increased airline revenues; 2) Budget sometimes paid commissions to Aloha and 3) Budget paid some incentive bonuses to Aloha and Pan American employees, there was the requisite economic interest in the tied product market. The law is straight forward in this area. The tying seller must have an economic interest in the tied market, see Moore v. Jas. H. Matthews & Co., 550 F.2d 1207, 1216 (9th Cir. 1977), and classically this takes the form of his trying to introduce a product into the tied market. See, e. g., Rodrigue v. Chrysler Motors Corp., 421 F.Supp. 903, 904 (E.D.La.1976). In order for one to establish an illegal tying agreement, it is necessary to show that the tying arrangement involves a seller who not only competes in the tying item’s line of commerce, but also participates for profit in the area of competition to which the tied item belongs. See also Keener v. Sizzler Family Steak Houses, 597 F.2d 453, 456 (5th Cir. 1979) (“There is no illegal tying arrangement where a ‘tying’ company has absolutely no interest in the sales of a third company whose products are favored by the tie-in”); BBD Transportation Co., Inc. v. United States Steel Corp., 1976-2 Trade Cases (CCH) ¶ 61,079 at 69,874 (N.D.Cal. August 25, 1976). Plaintiffs’ allegation that “substantial revenue” flowed to the airlines does not meet the economic interest test. Any time two products are sold as a package, there is presumably some benefit to both parties. There was an economic interest in the transaction — more particularly the part of the transaction that involved the payment for airfare — but that is not an economic interest in the tied product market. Showing revenue from the transaction as a whole is not enough. Similarly, the fact that Budget provided sales incentives to Aloha and Pan American employees did not result in Aloha and Pan American having an economic interest in the tied market. Plaintiffs’ claim as to rebates paid to Aloha by Budget presents a slightly different problem. The original $7 fly-drive agreement contained a provision that for every package that Aloha sold, Budget would pay Aloha one dollar. In Ohio-Sealy Mattress Manufacturing Co. v. Sealy, Inc., 585 F.2d 821 (7th Cir. 1978), cert. denied, 440 U.S. 930, 99 S.Ct. 1267, 59 L.Ed.2d 486 (1979), the court stated that in order for there to be a tying arrangement, the tying company must have a financial interest in the sales of the tied product. 585 F.2d at 834-35. The court noted, however, that in that case there were allegations of rebates from the producer of the tied product to the seller of the tying product. The court stated: The jury could have found from the evidence we have discussed that Sealy [manufacturer of the tying product — a franchise] forced the use of the [tied product] and was paid handsomely by Universal [manufacturer of the tied product] simply for creating a captive market in which it could and did charge a premium price. Even if the [tied product] was a superior product, such an arrangement was unlawful. 585 F.2d at 835. Although plaintiffs’ claim seemingly comes within the rubric of Ohio-Sealy, the Court finds a basic difference between the two cases. In Ohio-Sealy, defendant got the rebates because of sales of the tied product. Here, Aloha got the one dollar because it, not Budget, sold the package. Aloha’s economic stake was not in the tied market but rather in its own selling ability. In the situation contemplated in OhioSealy, the manufacturer of the tied product would kick back money to the manufacturer of the tying product for steering business its way. Buyers would be forced (presumably) to pay higher prices for the tied product if they wanted the tying product. The seller of the tying product would make money each time a tied product was sold. Here, in a complete reversal of the situation contemplated in Ohio-Sealy, the seller of the tying product, Aloha, was paying the seller of the tied product, Budget, so that Budget’s product could get a free ride. That the payment from Aloha to Budget was one dollar less when Aloha sold the product does not change the functional analysis. There was no interest in the tied product market because no money actually flowed to Aloha every time there was a car rental. Budget simply got one dollar less when Aloha sold the package. The evils that were alluded to in Ohio-Sealy are not present in this case, and the language regarding viewing a package sale as a tying arrangement because of rebates is inapposite. Aloha did not have an economic interest in the tied product market sufficient to allow the $7.00 fly-drive to be viewed as an illegal tying arrangement. The Court notes finally that it has difficulty accepting the picture painted by Robert’s — a picture that portrays the discounted airfare rather than the discounted car rental as the tying product. The Court does not feel that it need reach the question of the accuracy of the portrait. Since the requisite coercion was not present, and since Aloha and Pan American had no economic interest in the tied product market, the fly-drives were not tying arrangements amounting to per se violations of § 1 of the Sherman Act. B. Standing Plaintiffs contend that even if the conduct of Budget does not rise to the level of a per se violation of the antitrust laws, it still violates § 1 of the Sherman Act on a rule of reason analysis. Section 1 condemns unreasonable restraints of trade, and aside from several set categories of per se violations such as price fixing, the reasonableness of a particular restraint is determined by examining all the facts and circumstances surrounding the restraint. Budget first argues that plaintiffs have no standing to raise their § 1, rule of reason claims, because even if there were a conspiracy, Robert’s was not within the “target area” of that conspiracy. Budget relies on the case of Conference of Studio Unions v. Loew’s Inc., 193 F.2d 51 (9th Cir. 1951), cert. denied, 342 U.S. 919, 72 S.Ct. 367, 96 L.Ed. 687 (1952). The Court believes that a thorough analysis of the Studio Unions case is appropriate. In that case there were a group of major studios (Majors) who were accused by an association of labor unions (the Conference) of conspiring with another group of unions (IATSE) to violate the antitrust laws. The complaint charged that the Majors and IATSE conspired for the purpose of destroying the Conference and its member unions, and for the purpose of “eliminating as competitors the motion picture production companies herein described as the Independents.” 193 F.2d at 52. The alleged conspiracy was multifaceted. It included an agreement by the Majors only to hire IATSE members in most circumstances, and an agreement by IATSE to supply all the labor needs of the Majors before supplying any of the labor needs of the Independents. The Majors also agreed amongst themselves to curtail production of motion pictures and to limit competition in the distribution of motion pictures. The Conference contended that it suffered antitrust injury because the conspiracy prevented its members from working for the Majors. The court rejected this contention, holding that the conspiracy was directed toward the Independents and therefore only they had standing. According to the court, the Conference did not suffer any injury due to a lessening of competition among the commercial studios, the only real targets of the conspiracy. The court stated: A conspiracy may have many purposes and objects; the conspirators may perform an almost infinite variety of acts in furtherance of the conspiracy; but, in order to state a cause of action under the antitrust laws a plaintiff must show more than that one purpose of the conspiracy was a restraint of trade and that an act has been committed which harms him. He must show that he is within that area of the economy which is endangered by a breakdown of competitive conditions in a particular industry. Otherwise he is not injured “by reason” of anything forbidden in the antitrust laws. 193 F.2d at 54-55. Budget argues that “under the misguided theory of the fly/drives as an antitrust conspiracy, if these programs were ‘directed’ at someone, competing airlines would have been the alleged ‘targets.’ Budget’s position is that Robert’s is not in any area of the economy which is directly, and not merely incidentally, affected by the claimed wrong so as to give rise to antitrust standing.” Budget’s Reply Memorandum in Support of its Motion for Summary Judgment at 19. Budget reads Studio Unions as viewing the conspiracy alleged there as one that was intended to destroy both the Independents and the Conference. Budget claims that Studio Unions holds that even though IATSE, one of the conspirators, clearly had as its object the elimination of the Conference, the Conference was denied standing. The Court does not read Studio Unions that way. What hurt the Conference was the agreement by the Majors only to hire IATSE members. The Studio Unions court did not view this agreement on the part of the Majors as itself violative of the antitrust laws. The Studio Unions court viewed only the conduct and agreements directed at the Independents (IATSE agreeing not to furnish workers, and restraints in film distributions) as arguably violative of the antitrust laws. Since the Majors’ agreement not to use Conference workers was not an antitrust violation, the Conference was injured only incidentally as the result of the illegal conspiracy. In this case, Robert’s alleges that 1) Budget’s intent was to increase its market share (even though Aloha, obviously, was interested only in the air transportation market) and 2) the agreement did in fact restrain competition in the rental car market. Robert’s maintains that since Budget’s target was the car rental market, car rental companies have standing. In light of the Court’s interpretation of Studio Unions, the Court agrees. There can be two targets of an antitrust conspiracy, and Studio Unions is not to the contrary. The formulation of the “target area” test of standing has changed somewhat since Studio Unions, and even since In Re Multidistrict Vehicle Air Pollution, 481 F.2d 122, 128 (9th Cir.), cert. denied sub nom. Morgan v. Automobile Manufacturers Association, Inc., 414 U.S. 1045, 94 S.Ct. 551, 38 L.Ed.2d 336 (1973) (“To attain standing, a plaintiff must thus allege that the antitrust violation injured a commercial enterprise of the plaintiff in the area of the economy in which the elimination of competition occurred”). In Solinger v. A&M Records, Inc., 586 F.2d 1304, 1311 (9th Cir. 1978), the court related the test for standing: “In order to have standing under section 4 when the plaintiff has alleged violations of sections 1 and 2, Solinger must show that the injury occurred within an area of the economy that foreseeably would have been affected by the antitrust violation alleged.” The court noted specifically that foreseeability had not been used by the Multidistrict Vehicle Air Pollution court in formulating a standing test. In this case, it is certainly possible that the fly-drives could have endangered competitive conditions in the car rental market. Budget was offering cars at $7 below the market rate, and might possibly have been expected to pick up enough business to put some of its marginal competitors out of business. The allegation is that Budget’s competition had no legal way of meeting Budget’s rate, and the focus is not on what actually happened, but on what foreseeably could have happened. The Court holds that the foreseeability test is the proper one for standing, and finds that some competitive breakdown in the car rental market was foreseeable. Therefore, the Court finds that Robert’s has standing to raise its § 1, rule of reason claim. C. Injury to Competition In order to establish a prima facie case of a § 1, rule of reason violation, plaintiffs must show an injury to competition. As the Ninth Circuit has recently stated: The elements of a cause of action for an unreasonable restraint of trade under the rule of reason analysis of Sherman One are: (1) An agreement among two or more persons or distinct business entities; (2) Which is intended to harm or unreasonably restrain competition; (3) And which actually causes injury to competition. Kaplan v. Burroughs Corp., 611 F.2d 286, 290 (9th Cir. 1979); Ernest W. Hahn, Inc. v. Codding, 615 F.2d 830, 844 (9th Cir. 1980). Defendant contends that plaintiffs have made absolutely no showing as to injury to competition, and at the hearing on the instant motions, the Court closely questioned plaintiffs’ counsel on this point. The following are some of his responses to the Court’s questions as to what evidence of injury to competition has been presented by Robert’s. Yes, well, the deposition of the Iwamoto family has made it clear that in the customer lines in front of the U-drive counters, that when an Aloha Airlines plane would land, the people would flock to the Budget counters, and the rest of them were there looking around at empty spaces; and then they were trying to go over and get them out of the line. (Transcript of Hearing at 34). Well, the fact of financial information alone, sir, the Robert’s financial information and their gross revenues was [sic] going up until it hit 1972; and then it dropped. (Tr. at 34-35). And the impact on [Robert’s], it’s not a very far move to say there’s no reason why it should affect them anymore to [sic] affect everyone else. (Tr. at 37). From the evidence that the Iwamotos, that their business was hurt; from the findings of the CAB who said that other people couldn’t do it; from the admissions of Mr. Bickson who said he was selling below cost if he sold for $7. (Tr. at 38-39). And I’m saying, on competition, the evidence in this case right now is that when that Aloha Airlines landed, all the people ended up in front of Budget; and there are about six or seven or eight rental U-drives in front. Now that’s some evidence they’re affected. (Tr. at 40). Injury to competition is not bankruptcy; it’s only loss of profits. (Tr. at 40). Plaintiffs have not alleged that they went out of business because of the fly-drives. They have not alleged that anyone else went out of business because of the fly-drives. They have not alleged that because of the fly-drives consumers were forced to pay more within the car rental market. They have not alleged that because of the fly-drives Budget achieved a market position that allowed it to impose onerous terms on consumers of rented cars. They have shown no diminution in competition. As is demonstrated by the quotations from plaintiffs’ counsel’s argument, plaintiffs are alleging only that they and other competitors of Budget lost money. It is clear to the Court that their contention is that this is enough of a showing of injury to competition to withstand a motion for summary judgment. It is equally clear to the Court that they are wrong. As has been said many times, many ways, the antitrust laws protect competition, not competitors. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977). And competition is not injured simply because one or more competitors suffer a loss of income. Lessening of competition can be shown if the number of competitors is reduced appreciably, or if there are outward signs of adverse effects on competitive conditions such as rising prices, or onerous terms being imposed on consumers, but adverse impact is simply not shown by a loss of profits, or even by the total elimination of one competitor. As was stated by the Ninth Circuit in Sherman v. British Leyland Motors, Ltd., 601 F.2d 429, 450 (9th Cir. 1979): Plaintiff had to demonstrate genuine issues of material fact not only with respect to the causal connection between its injury and defendants’ actions, rather clearly appearing here, but also that its injury was of the type the antitrust laws were intended to prevent, that is, that defendants’ conduct did have some anti-competitive effect beyond plaintiff’s own loss of business or the market’s loss of a competitor. And again in Gough v. Rossmoor Corp., 585 F.2d 381, 386 (9th Cir. 1978), cert. denied, 440 U.S. 936, 99 S.Ct. 1280, 59 L.Ed.2d 494 (1979); the Ninth Circuit stated: To amount to an unreasonable restraint of trade the anticompetitive conduct must have an effect greater than its effect upon the plaintiff’s business. . . . The conduct must have an adverse impact on the competitive conditions in general as they exist within the field of commerce in which the plaintiff is engaged. Many other cases make the same point. Despite the clear case law, plaintiffs dispute this conclusion. In their Memorandum in Opposition to Defendant’s Motion for Summary Judgment, they make several points. They first contend that since Budget was “already in a position of dominance in the discount car rental industry, and indeed in the car rental industry overall, at the time it developed its fly-drive programs,” that alone is enough to allow a jury to conclude that there was an unreasonable restraint of trade. They cite Columbia Metal Culvert Co., Inc. v. Kaiser Aluminum & Chemical Corp., 579 F.2d 20 (3d Cir.), cert. denied, 439 U.S. 876, 99 S.Ct. 214, 58 L.Ed.2d 190 (1978). In the first place, as defendant points out, there is no evidence before the Court that Budget was in a position of market dominance. In the second place, Columbia Metal is inapposite. The allegations in that case were that Kaiser, which controlled 80% of the aluminum culvert market, conspired to drive one of its few competitors out of business. 579 F.2d at 32. Here, there is no contention that Budget’s market share was even close to 80%. In addition, in this ease, Budget had literally scores of competitors. Finally, there is no evidence at all that the contract or conspiracy had as its purpose putting particular competitors of Budget out of business. Robert’s first contention is untenable. Plaintiffs’ second contention is that because the “core of the fly-drive programs was the illegal reduction of air fares by Aloha,” such illegality “must be weighted heavily in the jury’s calculus of reasonableness.” Apparently plaintiffs believe that because of the illegal methods allegedly used, injury to competition need not be further shown. Defendant’s position is that under the antitrust laws, the legality or illegality of particular conduct (as measured by laws other than the antitrust laws) is totally irrelevant in determining whether there has been an unreasonable restraint of trade. Although the Court agrees with plaintiffs that the legality or illegality of a course of conduct is a relevant factor in a rule of reason case, a threshold question is, nevertheless, whether given that illegal conduct, there has been an injury to competition. The Court does not believe that the cases defendant cites stand for the proposition that assuming injury to competition, the legality or illegality of the conduct that caused such injury is irrelevant. Conduct that is arguably reasonable despite injury to competition, because of valid business or market considerations, may well be found by a jury not to be reasonable if in violation of non-antitrust laws. A jury might even be instructed that after finding injury to competition, one factor they could consider in determining whether a restraint was reasonable, was whether the restraint or conduct surrounding it violated a particular non-antitrust law or regulation. A rule of reason determination is made by looking at all facts surrounding a restraint. Defendant relies on Sitkin Smelting & Refining Co., Inc. v. FMC Corp., 575 F.2d 440 (3d Cir.), cert. denied, 439 U.S. 866, 99 S.Ct. 191, 58 L.Ed.2d 176 (1978). That case involved an allegation of sham bidding, whereby one of the bidders was given the opportunity to match the highest bid received in the bidding process. If it matched that bid, it was to be awarded the contract. Defendant cites some unconditional language from the case: “Conduct not within the scope of the Act is not made into an antitrust violation by accompanying conduct which is reprehensible under some moral or ethical standard or even illegal under some other law.” 575 F.2d at 447. Yet, the case talks of conduct not otherwise within the scope of the antitrust laws, and conduct that injures competition is within that scope, even though under some circumstances it may not violate the Sherman Act. Sitkin emphasizes the fact that there was no evidence that market prices, quantity or quality were affected. There was no evidence of any material diminution in competition. Similarly, in this case, plaintiffs have not shown any diminution in competition or adverse effect on market price. Sitkin supports the position of defendant, but it does not make the legality of conduct irrelevant in a rule of reason analysis. Defendant also cites Juneau Square Corp. v. First Wisconsin National Bank, 475 F.Supp. 451 (E.D.Wis.1979). In that case, illegal and unfair means were allegedly used to drive a competitor out of business. The district judge told the jury that in order to find an antitrust violation, they would first have to find an injury to competition. He also instructed the jury that the illegal nature of acts committed by the defendants was irrelevant. In reviewing a motion for a new trial, the court stated: Whether any of these acts also violated principles of tort law was not, in and of itself, determinative of an antitrust violation. Merely because a defendant’s acts may have constituted a tort does not automatically make that defendant’s acts violative of the Sherman Act. 475 F.Supp. at 457. The court also noted that plaintiffs had, in closing argument, presented their theory regarding the allegedly illegal conduct to the jury. Looking at the judge’s comments as a whole, this Court believes they do not stand for the proposition that the legality or illegality of conduct is irrelevant. It is irrelevant, however, in determining whether there was injury to competition, and tortious or illegal conduct does not “automatically, in and of itself,” establish an injury to competition, and therein a violation of the Sherman Act. Plaintiffs next claim that the unreasonableness of the restraints (and hence by implication the injury to competition) is ipso facto demonstrated because there was a drastic reduction in prices, “despite increasing cost pressures on all car rental companies during this period.” They cite in conjunction with this Ben Hur Coal Co. v. Wells, 242 F.2d 481, 486, (10th Cir.), cert. denied, 354 U.S. 910, 77 S.Ct. 1296, 1 L.Ed.2d 1427 (1957). That case involved a claim that the defendant sold goods at unreasonably low prices for the purpose of destroying competition or eliminating a competitor in violation of § 3 of the Robinson-Patman Act, 15 U.S.C. § 13a (1976). No claim is made with regard to that section in this case, and no evidence of any specific intent to destroy a particular competitor or competition has been shown. Budget aptly cites Martin B. Glauser Dodge Co. v. Chrysler Corp., 570 F.2d 72 (3d Cir. 1977), cert. denied, 436 U.S. 913, 98 S.Ct. 2253, 56 L.Ed.2d 413 (1978). That case involved a claim that Chrysler violated § 1, because it subsidized its partially-owned dealers without providing similar assistance to independent dealers. Though the effect of the subsidies was to lower prices to consumers, the plaintiff claimed that the subsidies were unreasonable because it could not compete, and its competitive opportunities were, therefore, unreasonably restricted. The court held that unless there was forward vertical integration that had the effect of concentrating Dodge sales in the hands of Chrysler-owned dealers, there was no antitrust violation. The court ruled that the subsidies had a pro-competitive effect at both intrabrand and interbrand levels. This was despite the fact that the subsidies obviously reduced the profits of non-subsidized dealers, and despite the fact that plaintiff claimed some of the cars sold by its subsidized competitors were sold at prices that no private venture capital dealers could afford to meet. Similarly, in this case, plaintiffs contend that because they were unable to meet Budget’s price without losing money, there was injury to competition. As the Glauser court rejected that contention, so does this Court. Plaintiffs attempt to distinguish Glauser because that case dealt only with intrabrand competition, and this one deals with interbrand competition. The Glauser court, however, did not so limit its holding, and in fact stated that the rule of reason standard is as applicable to restraints on intrabrand competition as it is to restraints on interbrand competition. 570 F.2d at 82. Plaintiffs’ final contention is that the Supreme Court in Utah Pie Co. v. Continental Baking Co., 386 U.S. 685, 87 S.Ct. 1326, 18 L.Ed.2d 406 (1967), held that there can be injury to competition when a competitor loses profits because forced to match a very low price not justified by costs. The Court noted that a jury could reasonably have concluded “that a competitor who is forced to reduce his price to a new all-time low in a market of declining prices will in time feel the financial pinch and will be a less effective competitive force.” 386 U.S. at 699-700, 87 S.Ct. at 1334. This Court first notes that Utah Pie involved a claim under Section 2(a) of the Robinson-Patman Act, 15 U.S.C. § 13(a) (1976). The relevant portion of that section forbids discriminatory pricing where the effect “of such discrimination may be substantially to lessen competition ... in any line of commerce . . . .” That section is not the same as § 1 of the Sherman Act, and, in addition, there was clear evidence of discriminatory pricing and some evidence of predatory intent in Utah Pie. Also, as defendant points out, in Utah Pie the jury found for plaintiff on the § 1 conspiracy count. Finally, this Court takes note of the fact that antitrust law has changed since 1967, and to the extent that the rationale of Utah Pie supports plaintiffs’ contentions, it clashes with the rationale of Brunswick Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977), which requires antitrust injury — injury associated with lessened competition. Given today’s legal climate, the Court views as apropos the comments of Mr. Justice Stewart, dissenting in Utah Pie: That the Court has fallen into the error of reading the Robinson-Patman Act as protecting competitors, instead of competition, can be seen from its unsuccessful attempt to distinguish cases relied upon by the respondents. Those cases are said to be inapposite because they involved “no general decline in price structure,” and no “lasting impact upon prices.” But lower prices are the hallmark of intensified competition. 386 U.S. at 705-06, 87 S.Ct. at 1337 (footnote omitted). See also Pacific Engineering & Production Co. v. Kerr-McGee Corp., 551 F.2d 790, 796 (10th Cir.), cert. denied, 434 U.S. 879, 98 S.Ct. 234, 54 L.Ed.2d 160 (1977). The Court finds that plaintiffs have not made a prima facie showing of injury to competition, a necessary component of their § 1, rule of reason cause of action. Since, as discussed above, they have also not shown any per se violations of § 1, their entire § 1 claim must be dismissed. Defendant agreed that if plaintiffs’ § 1 claim was to be dismissed, its counterclaim should be dismissed also. Thus defendant’s counterclaim will be dismissed. III. SECTION 2 CLAIMS A. Attempt to Monopolize Plaintiffs assert that the actions of Budget in participating in the fly-drives, and in engaging in other alleged anticompetitive conduct, establish a prima facie case of an attempt to monopolize under § 2 of the Sherman Act, 15 U.S.C. § 2 (1976), and under the Hawaii equivalent, Haw.Rev. Stat. § 480-9 (1976). There are four essential elements of a § 2, attempt to monopolize claim: 1) specific intent to control prices or destroy competition with respect to a part of commerce; 2) predatory or anticompetitive conduct directed to accomplishing the unlawful purpose; 3) a dangerous probability of success and 4) antitrust injury. California Computer Products Inc. v. International Business Machines, 613 F.2d 727, 736 (9th Cir. 1979); Foremost International Tours, Inc. v. Qantas Airways Ltd., 478 F.Supp. 589, 594 (D.Hawaii 1979). The first element, specific intent, can either be shown by direct proof, or by inference from proof of the second element, predatory or anticompetitive conduct directed to accomplishing the unlawful purpose. However, if the latter method is used, the conduct must be such that it can serve as the basis for a substantial claim of restraint of trade. Janich Brothers, Inc. v. American Distilling Co., 570 F.2d 848, 855-56 (9th Cir. 1977), cert. denied, 439 U.S. 829, 99 S.Ct. 103, 58 L.Ed.2d 122 (1978); Hallmark Industry v. Reynolds Metal Co., 489 F.2d 8, 12-13 (9th Cir. 1973), cert. denied, 417 U.S. 932, 94 S.Ct. 2643, 41 L.Ed.2d 235 (1974); Foremost Tours, supra, 478 F.Supp. at 594. The third element, dangerous probability of success, can be shown by direct proof of market power, but it can also be inferred from proof of specific intent to control prices or destroy competition (element 1), accompanied by predatory pricing directed toward that end (element 2). Janich, supra, 570 F.2d at 853; Hallmark, supra, 489 F.2d at 12; Lessig v. Tidewater Oil Co., 327 F.2d 459, 474 & n. 46 (9th Cir.), cert. denied, 377 U.S. 993, 84 S.Ct. 1920, 12 L.Ed.2d 1046 (1964). Thus, if the second element, predatory or anticompetitive conduct that can serve as the basis for a substantial claim of restraint of trade, is made out, in some circumstances that second element can serve as the basis for an inference of specific intent, and then in turn as the basis for an inference of dangerous probability of success. In any circumstance, plaintiffs’ first task is to establish specific intent by direct proof, by showing the requisite predatory or anticompetitive conduct or possibly by showing market power sufficient to support a finding of dangerous probability of success. Plaintiffs do not contend in their memoranda that they can establish specific intent by direct proof, but rather assert that they can show it by inference. Their relevant market is the “discount” car rental market in Hawaii, though the defendant maintains that the only market raised by the pleadings is the Hawaii car rental market in general. Defendant also contends that no evidence whatsoever regarding any discount market has been presented to the Court. The Court believes that even if it looks at the discount market as the relevant market, plaintiffs have not presented evidence sufficient to withstand summary judgment. Plaintiffs rely on certain of defendant’s conduct to support the inference of specific intent. Naturally they rely on the fly-drives, but they also claim to rely on Budget’s knowing participation in a conspiracy to violate the Federal Aviation Act, Budget’s practice of extracting unreasonably restrictive covenants in connection with its acquisitions and Budget’s 20%-25% share of the entire ear rental market, “with its share for the discount car rental market being substantially greater.” The Court first notes that it has been shown only one restrictive covenant, and does not believe that this covenant is such that it supports in any measurable degree Robert’s claim of specific intent. Therefore, all the Court will examine is the fly-drives, Budget’s conduct in connection with them and Budget’s alleged market power. Market power is relevant in several ways in connection with specific intent. First, market power is relevant when considering whether there is a substantial claim of restraint of trade from which to infer specific intent, because in a rule of reason ease, injury to competition is determined by reference to a particular market, and by reference to the market shares held by the alleged conspirators. Second, a different type of market power is relevant if a plaintiff cannot support a substantial claim of restraint of trade. He may be able to show inferable specific intent by showing market power sufficient to support a finding of dangerous probability of success, combined with conduct that does not rise to the level of a § 1 violation. See note 15 supra; cf. note 17 supra. The Court will consider the latter type of market power first. Plaintiffs have not made a showing of market power sufficient to support a finding of dangerous probability of success, even if the discount car rental market is considered as the relevant market. The only evidence regarding market share is an estimate that Budget’s present market share in the entire Hawaii car rental market is 20%-25%. There is no evidence regarding Budget’s share of the discount car market, though Robert’s naturally contends that it is significantly higher. Still, whatever market power Budget holds is market power in a very competitive market. Robert’s has presented no evidence regarding the number of companies competing in the car rental market in Hawaii. Defendant has presented some probative evidence that the number of car rental companies in Hawaii increased during the years 1973 to 1976, and was at all times over one hundred. Budget’s competitors included Hertz, Avis and National (although Robert’s might claim that those companies were not strong competitors in the discount car rental market). One of Robert’s owners testified at his deposition that he believed Robert’s fleet size and volume were greater at that time than in 1971, the year the fly-drives first started. The Court also notes that the practice that is the basis of the attempt to monopolize claim — the fly-drives — is a practice whereby Budget was renting cars for one day to certain airline customers at alleged predatory rates. Subsequent days were at regular prices. Plaintiffs have presented no evidence on the percentage of rental business that these programs accounted for, but that percentage is obviously an important factor in the Court’s determination of what market share is necessary to support a finding of dangerous probability of success. All the evidence so far presented has indicated that the car rental market in Hawaii, or even the discount car rental market in Hawaii, is highly competitive, and at least as competitive now, and at the time the lawsuit was filed, as it was during the time preceding the fly-drives. The market share necessary to support a finding of dangerous probability of success in this case is higher than has been shown to belong to any operator in the car rental (or discount car rental) business. In General Communications Engineering, Inc. v. Motorola Communications & Electronics, Inc., 421 F.Supp. 274 (N.D.Cal.1976), the court was considering dangerous probability of success in connection with a claim that Motorola had attempted to monopolize the private two-way radio communications market in Northern California and the United States. Plaintiff presented affidavits that Motorola’s share was 71%, and other evidence was that Motorola’s share was 64%. The court noted that even given this market share, the relevant market was so competitive that it virtually precluded a finding of dangerous probability of success. Though the market share required for monopoly power is perhaps different from the market share required for dangerous probability of success, the Court finds instructive the views of other courts as to what market share is necessary for monopoly power. In United States v. Aluminum Company of America, 148 F.2d 416, 424 (2d Cir. 1945) (Learned Hand, J.) the court expressed doubt as to whether a 60%-64% market share could amount to a monopoly. In Transamerica Computer Co., Inc. v. International Business Machines Corp., 481 F.Supp. 965, 986 (N.D.Cal.1979), the court found that I.B.M.’s 53.8% market share in one peripheral computer product market did not rise to the level of a monopoly share. Though these cases are only guides for the Court, they reinforce its view that plaintiffs have not presented evidence sufficient to withstand summary judgment on this issue, especially considering the fact that the relevant market is a very competitive one. Plaintiffs have not shown a market share sufficient to support a finding of dangerous probability of success. Plaintiffs, therefore, must show predatory or anticompetitive conduct that can serve as the basis for a substantial claim of restraint of trade. The Court has already determined that the conduct in this case did not rise to the level of an unreasonable restraint of trade. That forecloses the possibility that the alleged predatory and anticompetitive conduct can serve as the basis for an inference of specific intent. Plaintiffs, however, contend that there was predatory pricing. The Court notes that element 2 of the cause of action, as it is presented by Janich, is predatory pricing or anticompetitive behavior, but for this element alone to support an inference of specific intent (element 1) it must rise to the level of an unreasonable restraint of trade. The Court will, nevertheless, discuss plaintiffs’ claim, as it appears that the Ninth Circuit definition of predatory pricing tracks the Ninth Circuit definition of conduct that constitutes an unreasonable restraint of trade. In Janich, predatory pricing was defined as follows: Pricing is predatory only where the firm foregoes short-term profits in order to develop a market position such that the firm can later raise prices and recoup lost profits [citations omitted]. Therefore, the product must be such that if predatorily priced, rivals are likely to be driven out of the market or excluded, allowing the firm to raise prices. 570 F.2d at 856. Here, there is no evidence that defendant was foregoing profits, since it was receiving rebates from the airlines. In addition, as the Court noted in connection with the § 1 claims, there is no evidence that any rivals were driven out of the market or excluded. There is no evidence that anything Budget did gave it the ability to raise prices. There is no evidence that had the fly-drives continued, Budget would have been in a position to either exclude competition or raise prices. In short, there is no evidence of predatory pricing. Even the alleged below-cost pricing (excluding rebates) occurred on only a part of Budget’s total business. In Janich, the court indicated that the pricing of one product in an entire line at a low level is predatory only if it is likely to drive out or exclude rivals from the entire market. 570 F.2d at 856-57. Even if rivals are unable to sell the one low-priced product, there is no predatory pricing unless that inability to sell is likely to drive them out of the entire market — in this case either the Hawaii car rental market or the Hawaii discount car rental market. While Robert’s has presented some evidence that other car rental firms were unable to compete effectively for the patronage of certain Aloha customers, they have presented absolutely no evidence that those firms were unable to compete within other segments of the car rental or discount ear rental markets. Even were the fly-drives such an important part of the market as to provide a vehicle for a predatory pricing claim, there is no evidence that Budget was selling below marginal, or average variable cost. That is the case even if the rebates are totally ignored. In Janich, the court indicated that once a product has enough market importance to sustain a predatory pricing claim, predatory pricing can be shown by demonstrating sales below marginal cost, or where that is too difficult to show, sales below average variable cost. 570 F.2d at 857; Hanson v. Shell Oil Co., 541 F.2d 1352, 1358 (9th Cir. 1976), cert. denied, 429 U.S. 1074, 97 S.Ct. 813, 50 L.Ed.2d 792 (1977). Marginal cost has been defined as “the increment to total cost that results from producing an additional increment of output.” Areeda & Turner, Predatory Pricing and Related Practices Under Section 2 of the Sherman Act, 88 Harv.L.Rev. 697, 700 (1975). Marginal cost is sometimes difficult to ascertain from conventional business records, and average variable cost is likely to approximate marginal cost. Areeda & Turner, supra, 88 Harv.L.Rev. at 700 n.13, 716-17 & n.42; Janich, supra, 570 F.2d at 858. In this case, though there has been some deposition testimony that the $7 fly-drives were below “cost,” the context in which the statements were made indicates that the cost referred to was average cost, not marginal or average variable cost. It must be remembered that the $7 rate was only for the first day of the fly-drives. Therefore, it would be necessary to determine the average length of the car rental portion of the fly-drivers, and the average revenue to Budget from each fly-drive. Then the marginal or average variable cost of the average fly-drive would have to be determined. There has been no evidence that this cost was less than what Budget took in, even ignoring the rebates. Marginal or average variable cost parameters are suggested by this excerpt from plaintiffs’ counsel’s argument on the § 2 claims; Now, that’s a fair inference from that, that when other people are forced to sell for $7, as is our testimony replete to the depositions, that when the cars were stacked up in the parking lot — and it’s a perishable commodity; if you don’t rent today, you’ll never rent it again. It’s like a hotel room. You rent for whatever you can get if for. (Tr. at 41). If renting cars for the $7 rate was below marginal cost, it would have been unprofitable for anyone to have rented them. Businessmen do not rent for whatever they can get, if what they can get is less than marginal cost. As discussed in note 23 supra, however, this analysis may not be valid if the fly-drive cars Budget was renting would have been rented anyway. Because Robert’s has failed to make a sufficient showing as to specific intent, its attempt to monopolize claim cannot withstand summary judgment. In making this specific intent determination, the Court has also determined that plaintiffs have not presented evidence sufficient to withstand summary judgment as to whether there was 1) predatory or anticompetitive conduct that can serve as the basis f