Full opinion text
PER CURIAM: City Gas Company of Florida appealed from a $4.76 million dollar judgment entered against it after the district court found that City Gas had violated federal antitrust laws. Consolidated Gas Co. of Fla. v. City Gas Co. of Fla., 665 F.Supp. 1493 (S.D.Fla.1987). A panel of this court affirmed. Consolidated Gas Co. of Fla. v. City Gas Co. of Fla., 880 F.2d 297 (11th Cir.1989). A majority of the active judges in regular active service ordered that the appeal be reheard by the court of appeals en banc. This order vacated the panel opinion. Consolidated Gas Co. of Fla. v. City Gas Co. of Fla., 889 F.2d 264 (11th Cir.1989). Having considered the briefs and heard oral argument in the case en banc, the court now reinstates the panel’s opinion reported at 880 F.2d 297, affirming the judgment of the district court. AFFIRMED. Judges Johnson and Kravitch, concurring in part and dissenting in part, concur in affirm-anee of the judgment of the district court. Thus, a majority of seven judges agrees to affirm the judgment of the district court.
JOHNSON, Circuit Judge, concurring in part and dissenting in part in which KRAVITCH, Circuit Judge, joins: While I concur in the Court's opinion that City Gas Company of Florida refused to deal in violation of section 2 of the Sherman Act, 15 U.S.C.A. § 2 (“section 2”), I am constrained to dissent from the Court’s holding that the territorial agreement between City Gas and Peoples Gas Systems, Inc. (“Peoples”) is not immune from section 2 liability under the state action doctrine. I. FACTS A. Background City Gas is a major distributor of natural gas in southern Florida. City Gas purchases natural gas from Florida Gas Transmission Company (“FGT”). City Gas then distributes the gas to its approximately 100,000 customers through a network of pipes. City Gas and Peoples are the two largest natural gas utilities in Florida. Both entered the natural gas business in 1960, when they applied for and received allocations (i.e., permits) from the Federal Energy Regulatory Commission (“FERC”) to purchase and resell natural gas from FGT. After a brief period of competition for customers, City Gas and Peoples entered into an agreement not to compete (“the territorial agreement”). The territorial agreement provided each party with a service area where the other would not solicit customers. City Gas and Peoples submitted the territorial agreement to the Florida Public Service Commission (“FPSC”), and on November 9, 1960, the FPSC entered an order stating: It is our opinion that territorial agreements which will minimize, and perhaps even eliminate, unnecessary and uneconomical duplication of plant and facilities which invariably accompany expansion into areas already served by a competing utility, are definitely in the public interest and should be encouraged and approved by an agency such as this, which is charged with the duty of regulating public utilities in the public interest. Florida Railroad and Public Utilities Commission, Order No. 3051 (November 9, 1960) [hereinafter “Order”]. Chapter 366 of the Florida Statutes (“chapter 366”) empowers the FPSC “to regulate and supervise each public utility with respect to its rates and service and the issuance and sale of its securities.” Fla.Stat.Ann. § 366.04. In fixing rates, the FPSC is authorized to consider “the efficiency, sufficiency, and adequacy of the facilities provided and the services rendered; the cost of providing such service and the value of such service to the public; [and] the ability of the utility to improve such service and facilities....” Id. at § 366.041. The FPSC may also “require repairs, improvements, additions, and extensions to the plant and equipment of any public utility when reasonably necessary to promote the convenience and welfare of the public_” Id. at § 366.05. After 1974, the Florida statute expressly provided the FPSC with the power to authorize territorial agreements between electric utilities. Section 366.04(2) provided: “In the exercise of its jurisdiction, the [FPSC] shall have power over rural electric cooperatives and municipal electric utilities for the following purposes: ... (d) To approve territorial agreements between and among rural electric cooperatives, municipal electric utilities, and other electric utilities under its jurisdiction.” Id. at § 366.04(2) (West Supp.1989). The statute said nothing about territorial agreements among natural gas utilities such as City Gas and Peoples. In 1965, however, the Florida Supreme Court held that the FPSC had implied authority under chapter 366 to approve or forbid the territorial agreement between Peoples and City Gas. City Gas Co. v. Peoples Gas System, Inc., 182 So.2d 429, 436 (Fla.1965). B. Procedural History 1. District Court On April 23, 1983, Consolidated filed its complaint in the present action. The amended complaint alleged that City Gas’s actions constituted an attempt to monopolize and monopolization in violation of section 2. Consolidated asked for treble damages under 15 U.S.C.A. § 15 and injunctive relief under 15 U.S.C.A. § 26. City Gas counterclaimed that Consolidated’s restrictive covenants and easements in Bel Aire precluded City Gas from competing for Consolidated’s customers in violation of 15 U.S.C.A. §§ 1, 2, and 14. The district court held a nine-day bench trial in October 1985. The court determined that the territorial agreement violated section 2 and rejected City Gas’s defense that because the FPSC approved the agreement the territorial agreement was exempt from antitrust liability under the state action doctrine of Parker v. Brown, 317 U.S. 341, 351, 63 S.Ct. 307, 313, 87 L.Ed. 315 (1943). Consolidated Gas Co. v. City Gas Co., 665 F.Supp. 1493 (S.D.Fla.1987). 2. Panel Opinion On appeal, City Gas argued that it was immune from antitrust liability' for the territorial agreement and the refusal to deal with Consolidated under the state action doctrine. The panel unanimously rejected these arguments and affirmed the district court. The panel held that because chapter 366 explicitly authorized territorial agreements between electric utilities without mentioning gas utilities, the statute did not clearly articulate a state policy favoring territorial agreements among gas utilities and, therefore, state action immunity could not apply. Consolidated Gas Co. v. City Gas Co., 880 F.2d 297, 301-02 (11th Cir.1989). The panel rejected City Gas’s argument that the Florida Supreme Court decision in City Gas Co., holding that chapter 366 impliedly authorized territorial agreements among gas companies, was sufficient to invoke the state action doctrine. Id. at 303. II. ANALYSIS A person (or corporation) violates section 2 when he (1) possesses monopoly power in the relevant market and (2) willfully acquires or maintains that power through means other than growth or development as a consequence of superior products, business acumen, or historical accident. United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1703-04, 16 L.Ed.2d 778 (1966). In Parker, however, the Supreme Court recognized that in passing the Sherman Act Congress did not intend to restrain state action or official action directed by a state to restrain competition. Parker, 317 U.S. at 351, 63 S.Ct. at 313. In California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980), the Supreme-Court found that the Parker doctrine applied to private parties who restrain competition in violation-of the Sherman Act if (1) the challenged restraint was implemented pursuant to a clearly articulated and affirmatively expressed state policy, and (2) the policy.was actively supervised by the state. Id. at 105, 100 S.Ct. at 943. In Southern Motor Carriers Rate Conference v. United States, 471 U.S. 48, 105 S.Ct. 1721, 85 L.Ed.2d 36 (1985), the Supreme Court reaffirmed the applicability of the Midcal two-pronged test to private parties’ claims of state action immunity and held that a state policy that permits but does not compel anticompetitive conduct may be clearly articulated for purposes of the first prong of Midcal. Id., 471 U.S. at 61, 105 S.Ct. at 1729. City Gas argues that the territorial agreement is immune from antitrust liability under Midcal and Southern Motor Carriers. Consolidated argues that the territorial agreement is not entitled to immunity because chapter 366 does not constitute a clearly articulated state policy authorizing such agreements and the state does not actively supervise such a policy. 1. Clearly Articulated State Policy In Southern Motor Carriers, the United States sued two rate bureaus — groups of private carriers that jointly set rates — for violations of the antitrust laws. Southern Motor Carriers, 471 U.S. at 50, 105 S.Ct. at 1723. The rate bureaus submitted their rate proposals to the public service commissions in each state for approval or rejection. Id. Of the four states involved, three had statutes explicitly permitting collective ratemaking. Id. at 63, 105 S.Ct. at 1730. The Court held that these statutes satisfied the first prong of Midcal. Id. The fourth state, Mississippi, had no statute addressing collective ratemaking. Mississippi statutes did, however, authorize the State Public Service Commission to regulate common carriers and to prescribe just and reasonable rates. Id. (citing Miss.Code Ann. §§ 77-7-1, 221). The Court held that this statute made clear the legislature’s intent that rates should be determined by a regulatory agency rather than by the market. Id. at 63-64, 105 S.Ct. at 1730. This intent, the Court held, was sufficient to pass the first prong of Midcal. Id. at 64-65, 105 S.Ct. at 1730-31. A private party acting pursuant to an anticompetitive regulatory program need not “point to specific, detailed legislative authorization” for its challenged conduct. As long as the state as sovereign clearly intends to displace competition in a particular field with a regulatory structure, the first prong of the Midcal test is satisfied. Id. at 64, 105 S.Ct. at 1730. The Court noted that requiring express statutory authorization of every action that an agency might take to implement a policy would diminish the flexibility of agencies and consequently their usefulness to state governments. Id. In the present case, chapter 366 grants the FPSC broad powers to regulate public utilities, including natural gas distributors. Section 366.05 authorizes the FPSC to regulate repairs and extensions of facilities. See Town of Hallie v. City of Eau Claire, 471 U.S. 34, 42, 105 S.Ct. 1713, 1718, 85 L.Ed.2d 24 (1985) (statute authorizing city to provide sewage services and to determine the areas to be served would logically result in anticompetitive conduct, and, therefore, the legislature must have intended such conduct). The Florida Supreme Court has interpreted chapter 366 to empower the FPSC to authorize territorial agreements between natural gas distributors. City Gas Co., 182 So.2d at 436. This statute, as interpreted by the Florida courts, demonstrates the Florida legislature’s intent to displace competition with a regulatory scheme. Chapter 366, therefore, satisfies the first prong of Midcal. The Court holds today that the Florida Supreme Court opinion in City Gas Co. is irrelevant under the first prong of Midcal because the applicability of federal antitrust law is an issue of federal law. The Court is correct in part; the issue of whether Midcal is satisfied is one of federal law. The content, however, of the state law to which the federal courts apply the Midcal test is determined under state law. See Cotton States Mut. Ins. Co. v. Anderson, 749 F.2d 663, 667 (11th Cir.1984). Accordingly, this Court must apply the Midcal test to the Florida statute as interpreted by the Florida courts. See City of Eau Claire, 471 U.S. at 44-45 n. 8, 105 S.Ct. at 1719 n. 8 (“Although the Wisconsin Supreme Court’s opinion does not, of course, decide the question presented here of the city’s immunity under the federal antitrust laws, it is instructive on the question of the state legislature’s intent in enacting the statutes_” (emphasis in original)). The Court concludes that the Florida Supreme Court should not have the last word on the proper interpretation of chapter 366 and endorses the district court’s critique of the Florida Supreme Court’s analysis of the Florida statute. Consolidated Gas, 880 F.2d at 303 (recounting district court’s analysis of chapter 366’s language). Because the Florida Supreme Court is the final authority on the meaning of chapter 366, we should not endorse such a critique. Cotton States, 749 F.2d at 667 (“ '[sjtate courts have a right to construe their own statutes,’ and federal courts are bound by that state interpretation.” (citation omitted)). 2. Active Supervision The Court also holds that the agreement was not actively supervised by the state. The active supervision prong of Midcal stems from the Supreme Court’s recognition that where private parties engage in anticompetitive conduct they are likely to act in their own interests rather than in the interests of the state. Patrick v. Burget, 486 U.S. 94, 100, 108 S.Ct. 1658, 1662, 100 L.Ed.2d 83 (1988). The active supervision prong ensures that the state action doctrine will immunize only the particular activities of private parties that, in the judgment of the state, further state regulatory policies. Id. In Patrick, the Supreme Court stated that in order to satisfy the active supervision requirement, the state must exercise "ultimate control over challenged anticompetitive conduct.” Id. at 101, 108 S.Ct. at 1663. The active supervision prong of the Mid-cal test requires that state officials have and exercise power to review particular anticompetitive acts of private parties and disapprove those that fail to accord with state policy. Absent such a program of supervision, there is no realistic assurance that a private party’s anticom-petitive conduct promotes state policy, rather than merely the party’s individual interests. Id. In Patrick, the plaintiff challenged the peer-review process in a hospital after a peer-review panel threatened to revoke his hospital' privileges. Id. at 97, 108 S.Ct. at 1661. The Supreme Court held that the peer-review process was not entitled to state action immunity because there was no active supervision by the state. Id. at 100, 108 S.Ct. at 1662. The Court rejected the defendants’ arguments that the state actively supervised the peer-review process through the State Health Division, the State Board of Medical Examiners, and the state judiciary because the defendants failed to show that any of these state entities actually reviewed, or even could review, peer-review decisions regarding hospital privileges. Id. at 101, 108 S.Ct. at 1663. In the present case, I would hold that the state actively supervised the territorial agreement. The FPSC actually reviewed the territorial agreement and approved it. First, the FPSC found that it had the authority to accept or reject the territorial agreement. The Order stated that because the territorial agreement purported to .impinge on the FPSC’s authority to order additions and extensions to plant and equipment of Peoples and City Gas, the territorial agreement could not be valid without the FPSC’s approval. Order at 1. Second, the Order approved the territorial agreement; the FPSC found that the territorial agreement was consistent with the state’s policy of procuring for the public essential utility services at reasonable costs. Id. Accordingly, FPSC’s Order satisfies the active supervision requirement of Midcal. III. CONCLUSION Because the Florida regulatory scheme satisfied both prongs of Midcal, I believe that the district court erred in holding that the territorial agreement is not entitled to state action immunity. . FGT operates the only pipeline transporting natural gas into Florida. . The natural gas industry in Florida is regulated by the FERC and the Florida Public Service Commission ("FPSC"). At the federal level, the FERC regulates the wellhead cost of natural gas (i.e., cost from the producer to the wholesaler) and the wholesale price paid by retail distributors such as City Gas. At the state level, the FPSC regulates the retail rates charged by distributors such as City Gas. Retail rates are determined through a process known as a “rate case.” . The FPSC was formerly the Florida Railroad and Public Utilities Commission. . The statute defines "public utility" as including natural gas distributors, but not LP gas distributors. Fla.Stat.Ann. § 366.02. . Section 366.04 was revised in 1989 and the new statute expressly empowers the FPSC to approve territorial agreements between natural gas utilities. See 1989 Fla.Sess.Law Serv. 89-292 § 2 (West). . In City Gas Co., Peoples had sued under the territorial agreement to prevent City Gas from selling bottled gas in Peoples service area. City Gas's answer claimed that the territorial agreement was void under state and federal antitrust laws. City Gas Co., 182 So.2d at 431. The Florida Supreme Court held that because the FPSC had the authority to approve the territorial agreement the agreement was not invalid under Florida antitrust laws. The court did not reach the federal issues. Id. at 436. . The Court found that the judiciary was an inadequate supervisor because no statute expressly provided for judicial review of privilége terminations, and because state courts did not review privilege terminations on the merits for compliance with state policy. Patrick, 486 U.S. at 104-05, 108 S.Ct. at 1664-65. . The FPSC has reviewed the validity of the territorial agreement on two subsequent occasions. First, in 1965, the FPSC entered an order withdrawing part of its approval of the territorial agreement. Peoples Gas Systems, Inc. v. Mason, 187 So.2d 335, 337 (Fla.1966). The Florida Supreme Court overturned the FPSC's decision because there was no showing of changed circumstances from 1960, when the FPSC promulgated the Order. Id. at 339 (FPSC may,withdraw or modify its approval only after proper notice ’ and hearing, and upon a showing of changed circumstances). Second, in 1972 the FPSC rescinded and then .reaffirmed its approval of the territorial agreement. FPSC Order Nos. 5495, 5800. Accordingly, the FPSC’s active supervision is continuing.
TJOFLAT, Chief Judge, dissenting: I. INTRODUCTION At first blush, this ease appears to involve a straightforward application of section 2 of the Sherman Act, 15 U.S.C. § 2 (1988). A natural gas utility,. City Gas Company (City Gas), with an apparent monopoly in the natural gas business in south Florida, refused to sell wholesale natural gas to another company, Consolidated Gas Company (Consolidated), that wanted to enter the natural gas business too. Consolidated brought suit under sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15(a), 26 (1988), claiming that City Gas refused to deal in violation of section 2 and thus requesting an injunction ordering City Gas to supply wholesale natural gas to Consolidated and damages. The district court held in favor of Consolidated and granted the requested relief. On closer inspection, however, the case’s stripes begin to change. Because of certain factual peculiarities of this case — peculiarities that the district court deempha-sized — established theories of liability under section 2 simply do not apply. To begin with, City Gas operates only at the retail distribution level of the natural gas business; the company does not, and never has, operated at the wholesale level of that business. That is, City Gas obtains a supply of gas from the region’s only wholesale supplier, Florida Gas Transmission Company (FGT), and then distributes that gas to commercial and residential customers. City Gas has chosen to operate only on that level, and its natural gas rates — which are set by the Florida Public Service Commission (FPSC) based on a detailed analysis of City Gas’ operation, see 1989 Fla.Stat. ch. 366, infra 1332-1333 — reflect the specifics of its operation on the retail level. For City Gas to enter the wholesale supply business as well as the retail distribution business would fundamentally change the nature of its operation and thus the structure of its rate base. Consolidated, however, wanted City Gas to alter the nature of its operation and enter the wholesale natural gas business. Consolidated, moreover, wanted City Gas to make this change so that Consolidated could itself enter the retail distribution business and compete with City Gas. And Consolidated thought that City Gas should do this, not because competition would necessarily benefit natural gas consumers in general, but because City Gas provided the most economical source of wholesale gas for Consolidated. According to Consolidated, under these circumstances, section 2 of the Sherman Act required City Gas to do what Consolidated wanted. Unbelievably enough, Consolidated persuaded the district court that City Gas should be required fundamentally to change the nature of its operation and sell wholesale natural gas to Consolidated so that Consolidated could compete against City Gas in the retail distribution business. Consolidated also persuaded the district court that established theories of liability under section 2 mandated this result. What is even more unbelievable, Consolidated has also persuaded this court, sitting en banc, on these same points. This court, therefore, affirms the district court’s decision. With all due respect, I strongly dissent. In my view, the district court’s decision is unsupported by established antitrust law. Because the district court did not take proper account of the fact that City Gas was not in the business of selling natural gas at wholesale, the district court improperly concluded that City Gas possessed monopoly power in the relevant market for purposes of section 2. Based on that erroneous conclusion, the district court also improperly applied to these facts the primary theories of liability under section 2— namely, the “essential facilities doctrine” and the “intent test.” The district court’s decision, therefore, has no basis in established antitrust law. Instead, the district court in effect created a new rule of liability under section 2. Neither the district court, nor this court today, however, has considered the practical implications of this rule. Having failed to do so, the district court could not have properly applied this new rule in the present case. Even if today’s court upholds this new rule, therefore, I would reverse the district court’s decision and remand for further proceedings as required by the rule. In my view, though, a thorough consideration of the new rule’s practical implications leads unavoidably to the conclusion that this new rule should be struck down. In attempting to apply the rule, the district courts of this circuit will face insurmountable difficulties in fashioning and implementing effective remedies. Even if the courts can overcome these difficulties, which I doubt, the rule will lead to results that will be flatly inconsistent with the policies behind the antitrust laws. In addition to these fundamental points, I also dissent from the district court’s conclusion that the state-action immunity doctrine of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), did not protect City Gas’ conduct from antitrust liability. I dissent as well from the district court’s conclusion that a 1960 territorial agreement between City Gas and Peoples Gas, Inc. (Peoples Gas), another retail distributor of natural gas in Florida, provided an alternate basis for liability under section 2. This dissent is organized as follows: in part II, I restate the factual background of the case. In part III, I demonstrate that City Gas’ territorial agreement with Peoples Gas provides no basis for liability. I then turn to the more fundamental problems with the district court’s decision. In part IV, I criticize the district court’s conclusion that City Gas possessed monopoly power in the relevant market. In part V, I discuss the formulas for determining liability on which the district court relied: the essential facilities doctrine and the intent test. As I demonstrate, none of these formulas provides a basis for liability here. I then discuss some recent Supreme Court and lower court decisions also relied on by the district court. None of these decisions control the present case either. Next, having established that the district court’s decision has no basis in established antitrust law, I assume that the district court established a new rule of antitrust law and, in part VI, consider the practical implications of that rule. As this part shows, the rule will be impossible to apply, and even if it can be applied, it will produce results that are inconsistent with the policies behind the antitrust laws. For those reasons, I conclude that Congress could not have intended such a rule to be developed under section 2. Because the court today nevertheless upholds this rule, I also demonstrate that the district court failed to apply it properly in the present case. On that basis, I would vacate the district court’s decision and would remand the case for further proceedings as I describe. In part VII, I then take up the issue of state-action immunity, demonstrating that in this case, the doctrine protects City Gas from antitrust liability. Finally, I conclude the dissent in part VIII. II. BACKGROUND This case involves two retail distributors of natural gas in Florida. Consolidated, the plaintiff in this case, entered the gas distribution business in the early 1960s and decided to distribute LP gas. ’ Consolidated received its LP gas by rail or truck from wholesale suppliers and stored it in its own tanks. Consolidated then transported the LP gas from its storage tanks to its customers through a series of underground pipes located in easements. City Gas, the defendant in this case, entered the retail gas business in 1949, also as an LP gas company. In the early 1960s, however, when natural gas became available for resale in Florida, City Gas began to supply natural gas as well. Natural gas differs from LP gas in that it is transportable only by pipeline. In addition, unlike the unregulated interstate trade of LP gas, the Federal Energy Regulatory Commission (FERC) regulates the transportation of wholesale natural gas through interstate pipelines. FGT owns the interstate pipeline supplying wholesale gas in Florida. In order to acquire a supply of natural gas for resale from FGT, therefore, City Gas had to obtain FERC authorization, which it did. City Gas also had to build a lateral pipe to connect the pipesystem that it used to transport LP gas to FGT’s pipeline. In September 1960, City Gas also entered into a territorial agreement with Peoples Gas, another natural gas retail supplier in Florida. Pursuant to this agreement, the two companies determined which territories each would serve and agreed not to compete with one another in those territories. The companies requested, and received, approval of this agreement by the FPSC, which was charged by statute to supervise and regulate public utilities, see Fla.Stat. ch. 366 (1987). In subsequent litigation between the two companies, the Florida Supreme Court upheld the agreement as consistent with state antitrust laws and also held that the FPSC had authority under chapter 366 of the Florida Statutes, see id., to approve such agreements. See City Gas Co. v. Peoples Gas Sys., 182 So.2d 429, 435-36 (Fla.1965). When City Gas entered the natural gas business, the price of natural gas was higher than that of LP gas, but both were relatively low. That remained the case until 1973, when the Arab Oil Embargo (an event beyond City Gas’ control) skyrocketed world oil prices, including the price of LP gas. Until the early 1980s, however, natural gas suppliers were not in much better shape. Although federal regulation of wholesale rates kept the price of natural gas relatively low, a national shortage of natural gas severely limited its availability for resale. By 1981, things began to change: a natural gas surplus developed. As a result, LP distributors such as Consolidated found themselves unable to compete with natural gas prices; they were forced to convert to natural gas, a process that Consolidated began in early March 1982. On the other hand, those companies such as City Gas, which had risked entering the natural gas business at a time when the future of natural gas was relatively uncertain, found themselves in a position to enjoy the benefits of their initiative. A combination of historical accident (the rise in oil prices as the result of events in the Arab world) and business initiative (investing in the natural gas trade) resulted in economic benefits for companies such as City Gas. In February 1982, one month before Consolidated undertook its conversion, City Gas began to market its natural gas to Consolidated’s LP gas customers. These marketing efforts included door-to-door solicitations, mailing campaigns, and newspaper advertisements. As a result of these efforts, City Gas signed several customers that Consolidated had previously served. In order to serve these customers, City Gas expanded its pipeline into Consolidated’s service area. Consolidated undertook to convert to natural gas. On March 9, 1982, Consolidated “wrote a letter to FGT requesting that FGT begin providing it with natural gas, and that FGT construct the necessary pipeline facilities.” Consolidated Gas Co. v. City Gas Co., 665 F.Supp. 1493, 1504 (S.D.Fla.1987). As the district court found, FGT responded on April 2, 1982, stating that Consolidated would need a natural gas allocation from FERC in order to purchase wholesale gas from FGT and that Consolidated would have to reimburse FGT approximately $250,000.00 for the cost of connecting to FGT’s pipeline. FGT suggested that Consolidated instead arrange to connect to City Gas’ pipesystem. On May 21, 1982, Consolidated applied to FERC for the allocation approving its connection to FGT’s pipeline. On June 21, 1982, City Gas filed a petition to intervene in the application proceedings in order to oppose Consolidated’s requested allocation. City Gas questioned whether Consolidated’s LP gas distribution system could operate at the pressures required for natural gas delivery and also whether FGT’s natural gas supply was adequate to serve Consolidated as well as City Gas. On November 21, 1983, an administrative law judge granted Consolidated’s application, and FERC affirmed on September 19, 1984. FERC ruled, however, that FGT had to pay the connection costs. The entire administrative process lasted approximately twenty-eight months. The district court found that City Gas’ intervention in the FERC proceedings delayed the approval process for approximately one year. According to the district court, if City Gas had not intervened, the entire process would have taken only six to nine months, and Consolidated would have received a temporary allocation within ninety days of filing its application. The district court further found that, as a result of City Gas’ intervention and the resulting delay in the proceedings, Consolidated’s business was “severely hurt”: “During the course of the proceedings, City Gas began providing service to seven of Consolidated’s eight commercial customers and the bulk of its residential customers.” Id. at 1510. Presumably, City Gas’ provision of service to Consolidated’s customers resulted from City Gas’ marketing efforts and the fact that (because of historical accident and its own business initiative) it was equipped to expand and supply natural gas to those customers. The district court, however, concluded these activities “were not simply ordinary business expansions, but rather, were basic components of City Gas’ strategy to force Consolidated to sell out.” Id. at 1507. Based on these facts, the district court found that “Consolidated was left with only [one] alternative if it was to remain in business: the purchase of natural gas directly from City Gas.” Id. at 1510. City Gas and Consolidated had already entered into negotiations regarding the possibility of such purchases. They could not, however, arrive at an acceptable price for the transaction. City Gas initially offered to sell gas for resale at cost plus ten cents per therm and later at cost plus five cents per therm. Consolidated rejected the offers as unreasonable and brought suit under sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15(a), 26, claiming that City Gas’ conduct constituted a refusal to deal in violation of section 2 of the Sherman Act. The district court agreed with Consolidated and held that City Gas’ offered prices were unreasonably high, thus constituting a refusal to deal in violation of section 2. The district court also found, however, that City Gas had never before sold gas at wholesale. Although it had entered into a contract in 1965 to sell wholesale gas to another retail distributor, Florida Gas, that contract was abandoned by the parties and City Gas never performed under it. Aside from that isolated (and unperformed) contract, .City Gas operated entirely at the retail level. Consolidated claimed that City Gas violated section 2 of the Sherman Act both by offering to sell gas to Consolidated at unreasonably high prices, which constituted a refusal to deal under section 2, and by entering into a territorial agreement with Peoples Gas. In part III, I consider the territorial agreement and show that it provides no basis for liability in the present case. In parts IV through VI, I then turn to the purported refusal to deal, demonstrating that it provides no basis for liability either. Finally in part VII, I show that even if City Gas' conduct justifies the imposition of liability under section 2, City Gas is immune under the state-action immunity doctrine of Parker, 317 U.S. at 341, 63 S.Ct. at 307. III. THE TERRITORIAL AGREEMENT The court today adopts the district court’s holding that City Gas’ territorial agreement with Peoples Gas constituted a violation of section 2. I disagree with that holding and would reverse on that basis. Section 2 of the Sherman Act provides in pertinent part: “[ejvery person who shall monopolize, or attempt tu monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony_” 15 U.S.C. §.2 (1988). As the Supreme Court stated in United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1704, 16 L.Ed.2d 778 (1966): The offense of monopoly under § 2 of the Sherman Act has two elements: (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. The district court analyzed the territorial agreement under this standard and held that it constituted a “willful acquisition” of monopoly power under the second prong. As I discuss below, the district court should never have reached this issue in the first place because City Gas did not possess monopoly power in the relevant market. See infra at 1275-1283. Putting the monopoly power issue aside for the moment, however, the district court erred in holding City Gas liable under section 2 based on the territorial agreement. Section 2 itself provides no cause of action for a private plaintiff. Private plaintiffs bring such actions under section 4 of the Clayton Act, 15 U.S.C. § 15, which provides an action for treble damages for “any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws.” Before a private plaintiff can challenge a monopolist’s conduct under section 2 of the Sherman Act, therefore, it must satisfy the requirements of section 4 of the Clayton Act. Although section 4 is broadly worded, courts have interpreted the section’s “injured ... by reason of” language as imposing a causation requirement on the private plaintiff. As this court has stated, the plaintiff must show “a causal relationship between the antitrust violation [alleged] and the injury [sustained].” Cable Holdings, Inc. v. Home Video, Inc., 825 F.2d 1559, 1561 (11th Cir.1987) (quoting National Indep. Theater Exhibitors, Inc. v. Buena Vista Distribution Co., 748 F.2d 602, 607 (11th Cir.1984), cert. denied, 471 U.S. 1056, 105 S.Ct. 2120, 85 L.Ed.2d 484 (1985)). To satisfy this “causal relationship” requirement, the plaintiff must show that the violation is “a material cause of,” Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n. 9, 89 S.Ct. 1562, 1571 n. 9. 23 L.Ed.2d 129 (1969), or “materially contributed to,” Cable Holdings, 825 F.2d at 1562, its injury. Beyond this obvious requirement, the plaintiff must also prove “antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977) (emphasis original); see Associated Gen. Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519, 539-40, 103 S.Ct. 897, 909, 74 L.Ed.2d 723 (1983) (refining Brunswick test); Blue Shield v. McCready, 457 U.S. 465, 476-78, 102 S.Ct. 2540, 2546-48, 73 L.Ed.2d 149 (1982) (same); see also Cargill, Inc. v. Monfort, Inc., 479 U.S. 104, 113-15, 107 S.Ct. 484, 491, 93 L.Ed.2d 427 (1986) (antitrust injury requirement also applies in suits for injunctive relief under section 16 of Clayton Act). Although the antitrust injury analysis is somewhat complex, I do not belabor it here. In my view, Consolidated has not satisfied even the basic element of the causation requirement with respect to the territorial agreement: that agreement is simply not a material cause of Consolidated’s injury. Without giving any apparent thought to this causation requirement, the district court summarily concluded that the territorial agreement constituted a “willful acquisition ... of monopoly power” under the second prong of the Grinnell standard and, on that basis, imposed liability on City Gas under section 2. Whether or not the agreement constituted a “willful acquisition” under the Grinnell standard, the agreement also had to satisfy the causal connection requirement of section 4. As I demonstrate now, it did not do so. Consolidated’s injury, as stated in its amended complaint, was the economic loss that followed from its inability to enter the natural gas market as a retail gas distributor. Consolidated, of course, traced that injury to conduct by City Gas. The district court considered two specific forms of conduct by City Gas: (1) its refusal to supply wholesale gas to Consolidated; and (2) its territorial agreement with Peoples Gas. Putting aside the issue of liability under section 2, the refusal to deal would be a material cause of Consolidated’s injury: Consolidated could not enter the retail gas market without a supply of gas; City Gas refused to provide such a supply; Consolidated, therefore, could not enter the market and suffered economic loss as a result. No such causal connection exists, however, between Consolidated’s injury and the territorial agreement. That agreement relates to competition between City Gas and Peoples Gas, two retail distributors of natural gas. Pursuant to the agreement, each company took control of a given distribution area and agreed not to compete for control of the other company’s distribution area. The direct causal result of the agreement, therefore, was that City Gas could operate in its distribution area without competition from Peoples Gas. Given that no other competitor seriously challenged City Gas’ control of that distribution area, the agreement may have ensured City Gas’ acquisition of monopoly power in that distribution area. Even without the agreement, however, a single company would eventually have gained control over what became City Gas’ territory. After an initial period of competition, a single natural gas distributor almost inevitably acquires a natural monopoly in a given distribution area. Although the territorial agreement might have affected this process in the present case, I doubt that its absence would have changed the present situation. City Gas, as the company already operating in its current area, would probably have acquired the natural monopoly over service in that area, and if City Gas had not, another company would have done so. With or without the territorial agreement, Consolidated would still have been in the same position: trying to enter the retail distribution market in an area under the control of a monopolist. Even if the territorial agreement was a material cause of City Gas’ acquisition of monopoly power, it still would not have been a material cause of Consolidated’s injury: City Gas’ possession of monopoly power did not cause Consolidated’s injury. Rather, that injury was caused by how City Gas chose to exercise its monopoly power. Of course, the fact that City Gas had monopoly power was an important condition underlying the whole case. That power led Consolidated to request a supply of wholesale gas from City Gas in the first place and gave City Gas the choice whether or not to sell the gas in the second place. That power, standing alone, however, did not injure Consolidated. City Gas could just as easily have used its monopoly power to help Consolidated as to hurt Consolidated. City Gas’ decision about how to exercise its monopoly power, therefore, determined whether or not Consolidated was injured. Thus, the territorial agreement, even if it was a material cause of City Gas’ acquisition of monopoly power, was not a material cause behind City Gas’ decision on how to exercise that power or behind that decision’s result — i.e., Consolidated’s injury- The district court’s improper treatment of the territorial agreement in this case resulted, in my view, from a failure to grasp the distinction between a private antitrust suit under section 4 of the Clayton Act, which challenges conduct as violative of section 2 of the Sherman Act, and a government enforcement action brought directly under the Sherman Act, see supra notes 1, 10-11. The Grinnell case, for example, involved a government action. The district court, however, cited Grinnell (and only Grinnell) for the proposition that “if as a result of horizontal market division a company acquires monopoly power, it ... violates § 2 of the Sherman Act.” 665 F.Supp. at 1523 (citing Grinnell, 384 U.S. at 576, 86 S.Ct. at 1706-07). Because Grinnell involved a government enforcement action, it does not support the application of this rule to the present case, which of course is a private action. The government in Grinnell brought suit directly under section 2 and therefore did not need to prove that an injury was causally related to the defendant’s conduct. It merely needed to prove an antitrust violation in and of itself. The “willful acquisition” component of Grinnell reflects the specifics of that kind of a case: the government could make a case by proving that the defendant had improperly acquired its monopoly power, whether or not the defendant had actually used that power anticompetitively to injure a competitor. Thus, the government must prove, under the second prong of the Grinnell standard, only that the company with monopoly power acted anticompetitively in a general way. A showing that the company engaged in “the willful acquisition ... of monopoly power,” Grinnell, 384 U.S. at 570-71, 86 S.Ct. at 1704, would satisfy that requirement in a case like Grinnell. In a private action under section 2, however, such a showing would not be sufficient to prove liability, unless the company’s “willful acquisition” directly caused the plaintiff’s injury. In order to satisfy section 4’s causation requirement in the present case, therefore, Consolidated would have to show a causal relationship between the territorial agreement and its injury. Because Consolidated has made no such showing, nor in my view could it make such a showing, I would reverse the district court’s holding that the territorial agreement provided a basis for imposing liability on City Gas under section 2. IV. MONOPOLY POWER Putting aside the issue of the territorial agreement, the court today also adopts the district court’s holding that City Gas refused to deal in violation of section 2 of the Sherman Act. Again, as the Supreme Court stated in Grinnell, 384 U.S. at 570-71, 86 S.Ct. at 1704: The offense of monopoly under § 2 of the Sherman Act has two elements: (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. The district court held that City Gas’ conduct implicated both of these elements and thus constituted an antitrust violation. I first analyze the district court’s discussion of City Gas’ monopoly power; then, in Part V, I address the district court’s discussion of the “willful acquisition or maintenance” element. The district court held, and the court today agrees, that City Gas possessed monopoly power in both the wholesale and retail natural gas markets. I agree that City Gas had monopoly power in the retail natural gas market; however, I question whether City Gas had monopoly power in the wholesale natural gas market. That City Gas had such power in the wholesale market, moreover, is crucial to the theories on which the district court and this court today have based City Gas’ antitrust liability. In conducting its monopoly power analysis, the district court followed the standard approach, first defining the relevant product and geographic markets and then determining whether City Gas possessed monopoly power within those markets. With respect to the relevant product market, the district court restated the Supreme Court’s holding in United States v. E.I. DuPont de Nemours & Co., 351 U.S. 377, 404, 76 S.Ct. 994, 1012, 100 L.Ed. 1264 (1956), that the “market is composed of products that have reasonable interchangeability for the purposes for which they are produced — price, use and qualities considered.” 665 F.Supp. at 1516 (quoting DuPont). The district court concluded that the relevant product market was limited to natural gas and did not include LP gas because of its prohibitive expense. The district court then defined the relevant geographic market as “the area of effective competition in the known line of commerce ... in which the seller operates, and to which the purchaser can practicably turn for supplies.” Id. at 1518 (quoting Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327, 81 S.Ct. 623, 628, 5 L.Ed.2d 580 (1961)). Applying this definition, the district court concluded that the relevant geographic market was City Gas’ service area and was not limited to Consolidated’s service area. The district court next considered whether City Gas possessed monopoly power within this market. The district court defined monopoly power as “the ‘power to control prices or exclude competition,’ ” id. at 1519 (quoting Grinnell, 384 U.S. at 571, 86 S.Ct. at 1704), and stated that “[frequently courts have approached the problem by defining first the relevant product and geographic markets and then computing the defendants’ market share from this statistical data," id. The district court then found that “[i]n the wholesale market, City Gas sold 100% of the natural gas requested for resale in its service area.” Id. Based on this finding, the district court held that City Gas possessed monopoly power within the wholesale natural gas market. On appeal, the panel adopted this holding as well. See Consolidated Gas Co. v. City Gas Co., 880 F.2d 297, 300-01 (11th Cir.1989). City Gas has challenged this holding, contending that it could not possibly have monopoly power because it sold no wholesale gas whatsoever. Rather, City Gas claims, FGT sells 100% of the gas for resale in the relevant service area. In response to this argument, the panel reasoned that although City Gas had never sold gas for resale, it had power to do so and had in fact entered into a contract (in 1965) to supply gas for resale to a retail natural gas distributor named Florida Gas. That contract, however, was abandoned by the parties, and it is undisputed that City Gas never actually sold gas at wholesale— either to Florida Gas or to anyone else. Putting the Florida Gas contract aside for a moment, I first demonstrate in section A that City Gas could not have possessed monopoly power in the relevant market defined by the district court because City Gas never actually operated in that market. I then consider in section B the abandoned contract and conclude that it has no relevance to the issue of whether City Gas possessed monopoly power in the wholesale market in this case. A. The Relevant Market. I suggest that the monopoly power issue is more complicated than the district court’s analysis reflects. Consider first the complexities of the factual situation here. Consolidated wants gas for resale. FGT supplies gas for resale, but in order to acquire gas from FGT, City Gas must spend $250,000 to construct a lateral pipeline and must wait approximately two years for a FERC allocation. City Gas distributes gas at retail but also has the “power” to supply gas for resale to Consolidated. City Gas, however, has never actually sold gas for resale, although it considered doing so and even went as far as entering into a contract to do so (which was subsequently abandoned and never performed, see infra at 1282-1283). Now, assuming for the moment that Consolidated' really did not have the option of obtaining gas from FGT — the cost and delay involved were just too prohibitive — Consolidated must then acquire gas from City Gas or it will be unable to compete. It would seem, therefore, that City Gas has the power to control prices and exclude competition in the relevant market. At least with respect to Consolidated, City Gas does not compete with any other wholesale supplier: City Gas can independently set the wholesale price and restrict (or deny entirely) Consolidated’s ability to acquire a wholesale supply. This is exactly the conclusion that the district court reached. This conclusion assumes, however, that City Gas is a wholesale gas supplier. We know that City Gas has the power to supply gas at wholesale— the panel emphasized that point — but (as the district court itself found) City Gas has chosen not to exercise that power. It has the potential to sell gas at wholesale, but it simply has not yet undertaken to exercise that potential. In my view, this fact must be addressed before the district court can conclude that City Gas has monopoly power in the wholesale market. Neither the district court nor the court today has adequately addressed this point, though; nor, in my view, could they do so. The district court has defined a market that simply does not exist. In support of my conclusion, in subsection 1,1 first consider a basic but -very important issue: what is a market? I then show in subsection 2 that the district court’s construction of the relevant market is inconsistent with the basic notion of a market. I focus specifically on the district court’s conclusion regarding the relevant geographic market in this case. 1. The Concept of a Market. Economists hold that a market exists when buyers and sellers exchange goods or services. See, e.g., The MIT Dictionary of Modern Economics 263 (D. Pearce ed. 1986) (market is “any context in which the sale and purchase of goods and services takes place”); J. Hanson, A Dictionary of Economics and Commerce 255 (6th ed. 1986) (“In a wider sense, however, a market can signify any area in which buyers and sellers are in contact with one another_”); see also C. Ferguson & J. Gould, Microeconomic Theory 259 (4th ed. 1975). This idea of exchange can also be defined in terms of supply and demand: an exchange can occur if a buyer wants goods or .services that a seller can supply. However defined, exchange is a function of price. A buyer’s desire to buy and a seller’s desire to sell are qualified by price: the parties desire to proceed only at a certain price, or within a certain range of prices. Beyond that price, or outside of that range of prices, the parties do not desire to proceed with the transaction at issue. The market, then, is the mechanism by which price is established. The market serves as such a mechanism by providing a history of transactions (both complete and incomplete) in the context of which parties negotiate their price. A market, obviously, exists independently of whether or not a given transaction is completed — i.e., whether the parties agree to a price. A failed transaction merely becomes part of the history that serves as the context for future negotiations. The present case, however, involves something entirely different than a failed transaction in an established market. In the present case, no market existed in which the parties could reach an acceptable price. Neither City Gas nor any other retail distributor in the region has ever sold gas at wholesale to another retail supplier. The parties in this case could refer to no history of transactions (or prices) as a basis for setting a price term for their potential transaction. When the transaction failed in this case, therefore, its failure reflected the absence of an established market that could have enabled the parties to negotiate an exchange. The transaction’s failure, moreover, meant that no such market came into existence as a result of the transaction. Thus, the absence of a market for the transaction at issue in the present case explains, at least in part, the inability of City Gas and Consolidated to agree to a transaction price. More importantly, the absence of a market — both as a context for the transaction or as a result of the transaction — meant that the district court here could not determine what the transaction price should have been. Consider a hypothetical situation: in 1970, Senior Partner at a large law firm with a respected antitrust practice strolls into the office of Acme Rocket and Spaceship’s President. Acme, of course, built the spacecraft that recently landed on the moon. President greets Senior Partner (they went to college together) and asks him what’s on his mind. Senior Partner (who has been billing 3000 hours a year for thirty-five years) tells President that he wants a branch office orbiting the moon and would like Acme to supply a spaceship for that purpose. Senior Partner also indicates that he can find no other company capable of building such a spaceship for him. President says that Acme can do the job, and the two begin to discuss a price. Senior Partner says that his firm will be willing to pay five million dollars. President smiles politely and gently suggests that the required spaceship would cost nearly a billion dollars to design and build. Senior Partner responds that at most his firm could manage to pay ten million. President then says that because Senior Partner is such an old friend, and the publicity from the spaceship would be so good, Acme could build it for half price, or $500 million. Senior Partner says he understands and resigns himself to spending the rest of his career in his two-floor corner office in New York. President claps him on the back, and the two head off to the golf course. As this negotiation suggests, no “market” for private spaceships existed at the time. True, Senior Partner wanted a spaceship, and Acme could theoretically have built one — that is, a supply and demand existed for private spaceships. But no history of a price existed for such a transaction, and the negotiation obviously failed to establish one. No price existed because no market existed — no mechanism by which the parties to this potential transaction could establish a' price. Following the district court’s reasoning in the present case, however, one would have to conclude that a market for private spaceships did exist in 1970 and, in addition, that Acme possessed monopoly power in that market. These conclusions are obviously ludicrous, but -they necessarily follow from the district court’s definition of a market: potential demand plus potential supply. 2. The District Court’s Analysis. With this discussion of the idea of a market in mind, I now consider the district court’s specific conclusions regarding the relevant market in this case. I focus on the district court’s analysis of the relevant geographic market. As I discuss above, the district court defined the relevant geographic market as “the area of effective competition in the known line of commerce ... in which the seller operates, and to which the purchaser can practicably turn for supplies.” 665 F.Supp. at 1518 (quoting Tampa Electric, 365 U.S. at 327, 81 S.Ct. at 628). This definition consists of two parts: defining the relevant area first in terms of where the seller sells and then in terms of where the purchaser can go to purchase. Both parts emphasize a market’s practical realities: with respect to the seller, the inquiry looks to the “area of effective competition,” and with respect to the purchaser, the inquiry looks to the area where the purchaser “can practicably turn for supplies.” Tampa Electric, 365 U.S. at 327, 81 S.Ct. at 628 (emphasis added). Two questions arise from the district court’s application of this inquiry. First, I question whether a firm could in fact be a “seller” under this definition if the firm does not operate, and has never operated, in the “area of effective competition” at issue. I doubt that a firm can properly be labeled a wholesale “seller” of a product if that firm sells that product only on the retail level. Second, I question whether a firm wanting to purchase supplies at wholesale can “practicably turn” to an entity that does not deal in the product at issue. The district court, however, answered both of these questions in the affirmative, and in so doing developed a new rule of antitrust liability. That is, if given the circumstances of a market, a purchaser can “practicably turn” nowhere for its supplies, then a court is justified to compel another entity, even though it is not in the supply business at issue, to enter that business in order to provide the purchaser with its supplies. At bottom, this is the principle underlying the district court’s analysis of the monopoly power issue in the present ease. The district court backed into its holding that City Gas possessed monopoly power after concluding that Consolidated had no other practicable source of supply. Not only is that conclusion itself erroneous, as I discuss below, see infra at 1275-1283, but as a result of that conclusion, the district court constructed the relevant geographic market so as to cut out FGT — the regional wholesale supplier of natural gas. In my view, a properly constructed wholesale market in this case would necessarily include FGT. The relevant market must include FGT because City Gas is not a “seller” as defined in Tampa Electric. .Thus, Consolidated could not practicably turn to City Gas for its supply. Without FGT’s presence, therefore, no wholesale market would exist. This would be the case, moreover, whether or not Consolidated could practicably turn to FGT for its natural gas supply. As I suggest below, however, the district court erred in concluding that Consolidated could not have done so. Based on its findi