An Economic Analysis of Matsushita

• Author: Roger D. Blair,Richard E. Romano,James M. Fesmire
• DOI: 10.1177/0003603X9103600203
• Published date: 01 June 1991
• Date: 01 June 1991
• Subject Matter: Article

The Antitrust Bulletin/Summer 1991

An economic analysis

of

Matsushita

BY ROGER D. BLAIR,* JAMES M. FESMIRE,**

and RICHARD E. ROMANO***

1. Introduction

355

The Supreme Court's Matsushita decision! continued the trend

toward greater economic sophistication in judicial reasoning.>

This litigation involved a complaint about predatory pricing in

* Huber Hurst Professor of Business and Legal Studies, College of

Business Administration, University of Florida, Gainesville.

** Professor of Economics, University of Tampa.

***

Associate

Professor

of

Economics,

University

of

Florida,

Gainesville.

AUTHORS' NOTE: We thank the College

of

Business Administration

of

the University

of

Florida

for

financial support. Our colleagues. Elias

Dinopoulos

and Jon Hamilton,

and

an anonymous referee

provided

useful comments, but cannot be blamedfor what follows.

Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corpora-

tion, 106 S. Ct. 1348 (1986).

2This greater sophistication can be traced at least to the Court's

decision in Continental TV v. GTE Sylvania, 433 U.S. 36 (1977), which

recognized the value of vertical restraints that faciitate interbrand compe-

tition at the expense of intrabrand competition.

C 1991by Fcdcrol Legal Publlcaticns, Inc.

356 : The antitrust bulletin

the U.S. consumer electronics market that allegedly spanned two

decades. Finding that the alleged predation was not a reasonable

economic inference given the facts presented, the Supreme Court

affirmed alower court's decision to dismiss the complaint of

Zenith

and NUE on a motion for summary judgment."

This

decision leaves us in the dark as to what actually happened since

neither the Court nor the litigants provided much in the way of

an alternative explanation. In its place, we offer three alternative

and more plausible explanations than predation, and examine

arguments

that

Zenith

and NUE

might

have

made

on

their

behalf. Although we agree with the

Court's

rejection

of

the

predatory pricing allegation, whether or not the outcome was

appropriate is less clear.

Initially, we provide some background on the Matsushita

litigation: the allegations and facts, the decision, its procedural

significance, and the questions it raises. Next, in light of the facts

and allegations, we analyze several alternative explanations for

the behavior of the Japanese producers, drawing our own conclu-

sions as to what transpired in this market. Finally, we consider

the normative implications of

our

conclusions and add some

closing remarks.

II.

The

Matsushita litigation

Zenith and NUE complained that 21 Japanese manufacturers

of consumer electronics products began conspiring to monopo-

lize the U.S. market as early as 1953. It alleged that the Japanese

producers violated sections 1 and 2 of the Sherman Act, section

2(a) of the Robinson-Patman Act, and section 73 of the Wilson

Tariff Act. The core of the complaint was simple: the Japanese

consumer electronics industry was a cooperative oligopoly that

conspired to raise prices in Japan and thereby earn excess profits

Summary judgment is a procedural means of disposing of a case

without atrial.

If

the court finds that there is no genuine issue of

material fact, then the defendant is entitled to a judgment in its favor as

a matter of law.