Nova Designs, Inc., Dba Performance Diver, Plaintiff-Counterdefendant-Appellant v. Scuba Retailers Association Professional Association of Dive Instructors, Electronic Instrumentation & Technology, Inc., Defendant-Counter Eit Manufacturing Opinion Princeton Tectonics Scuba Times Beuchat Usa, Inc. Robert Holston Harry Truitt Sal Zammitti, Performance, Inc., a North Carolina Corporation, Counter-Defendant, and International Padi, Inc.
Docket: 98-55358
Court: Court of Appeals for the Ninth Circuit; February 7, 2000; Federal Appellate Court
The case involves Nova Designs, Inc. (Performance Diver), which sells scuba equipment through mail-order catalogs and alleges antitrust violations against the Professional Association of Dive Instructors (PADI) and other defendants. Performance claims that PADI conspired to block its market access by pressuring retailers to boycott it and prevent advertising in scuba magazines. The allegations specifically cite violations of the Sherman Act and the Cartwright Act, as well as tortious interference and unfair competition.
The district court granted summary judgment for PADI, ruling that Performance had waived its right to claim under the rule of reason, thus applying a per se analysis. The court found that Performance did not provide sufficient evidence of an agreement among PADI's retailers, nor evidence of PADI's market power or obstruction of market access required for competition. The Ninth Circuit has jurisdiction under 28 U.S.C. § 1291 and reviews the summary judgment de novo.
PADI's motion for summary judgment asserted a lack of evidence supporting claims of conspiracy, while Performance's opposition only argued that PADI's agreement with Rodale was inherently unlawful, without presenting any evidence of an unreasonable restraint of trade under a rule of reason analysis. The district court determined that Performance had effectively abandoned a rule of reason claim, focusing instead on the per se analysis. Performance did not contest this characterization but attributed its failure to argue the rule of reason to PADI's lack of argument on that basis in its motion. The burden was on Performance to provide evidence of a rule of reason violation, which it failed to do, thus precluding it from contesting the judgment on those grounds.
Additionally, the document discusses the specifics of the agreement between PADI and Rodale dated January 13, 1992. Rodale sought access to PADI's membership database to promote subscriptions for a new diving magazine in exchange for free advertising. The agreement included provisions ensuring that Rodale's advertising policies would align with industry standards regarding scuba equipment safety and certification requirements. A significant aspect of the agreement was a no mail order advertising policy to protect PADI's relationships with member retailers and to ensure safety standards. However, after Rodale initially accepted an advertising insert from Performance in March 1992, PADI expressed concerns about the implications for retail competition. Following this, Rodale reverted to a no mail order policy in May 1992. Ultimately, PADI terminated its agreement with Rodale in July 1992.
In Continental T.V. Inc. v. GTE Sylvania Inc., the Supreme Court established that the rule of reason is the standard for Section 1 antitrust analysis, with per se illegality reserved for conduct that is evidently anticompetitive. Recent rulings emphasize that a departure from the rule of reason requires demonstrable economic effects. The short-lived agreement between PADI and Rodale regarding the exchange of customer information and advertising does not satisfy per se rule criteria, as there is insufficient evidence of its adverse economic impact on competition. Performance's claim that this agreement constitutes a horizontal group boycott is unsupported, as mere membership in PADI does not imply an agreement among retailer members, and pressure from members does not establish collusion. Additionally, for a per se violation, there must be evidence of market power or control over market access, which has not been demonstrated for PADI or its members. Since PADI and Rodale are not direct competitors, the per se rule for group boycotts does not apply. Consequently, Performance's Sherman Act claims fail, undermining its § 2 conspiracy to monopolize claim. The disposition of these claims also affects Performance's state law claims under the California Cartwright Act, which parallels the Sherman Act. Performance's arguments for tortious interference and unfair competition lack sufficient evidence or analysis, leading to the affirmation of the summary judgment in favor of PADI.
