 

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

EASTMAN KODAK CO. v. IMAGE TECHNICAL SERV-
ICES, INC., et al.
certiorari to the united states court of appeals for
the ninth circuit
No. 90-1029.   Argued December 10, 1991-Decided June 8, 1992

After respondent independent service organizations (ISOs) began
 servicing copying and micrographic equipment manufactured by
 petitioner Eastman Kodak Co., Kodak adopted policies to limit the
 availability to ISOs of replacement parts for its equipment and to
 make it more difficult for ISOs to compete with it in servicing such
 equipment.  Respondents then filed this action, alleging, inter alia,
 that Kodak had unlawfully tied the sale of service for its machines
 to the sale of parts, in violation of 1 of the Sherman Act, and had
 unlawfully monopolized and attempted to monopolize the sale of
 service and parts for such machines, in violation of 2 of that Act.
 The District Court granted summary judgment for Kodak, but the
 Court of Appeals reversed.  Among other things, the appellate court
 found that respondents had presented sufficient evidence to raise a
 genuine issue concerning Kodak's market power in the service and
 parts markets, and rejected Kodak's contention that lack of market
 power in service and parts must be assumed when such power is
 absent in the equipment market.
Held:
   1.Kodak has not met the requirements of Fed. Rule Civ. Proc.
 56(c) for an award of summary judgment on the 1 claim.  Pp.7-27.
    (a)A tying arrangement-i. e., an agreement by a party to sell
 one product on the condition that the buyer also purchases a differ-
 ent (or tied) product, or at least agrees that he will not purchase that
 product from any other supplier-violates 1 only if the seller has
 appreciable economic power in the tying product market.  Pp.7-8.
    (b)Respondents have presented sufficient evidence of a tying
 arrangement to defeat a summary judgment motion.  A reasonable
 trier of fact could find, first, that service and parts are two distinct
 products in light of evidence indicating that each has been, and
 continues in some circumstances to be, sold separately, and, second,
 that Kodak has tied the sale of the two products in light of evidence
 indicating that it would sell parts to third parties only if they agreed
 not to buy service from ISOs.  Pp.8-9.
    (c)For purposes of determining appreciable economic power in
 the tying market, this Court's precedents have defined market power
 as the power to force a purchaser to do something that he would not
 do in a competitive market, and have ordinarily inferred the exist-
 ence of such power from the seller's possession of a predominate
 share of the market.  Pp.9-10.
    (d)Respondents would be entitled under such precedents to a
 trial on their claim that Kodak has sufficient power in the parts
 market to force unwanted purchases of the tied service market, based
 on evidence indicating that Kodak has control over the availability of
 parts and that such control has excluded service competition, boosted
 service prices, and forced unwilling consumption of Kodak service.
 Pp.10-11.
    (e)Kodak has not satisfied its substantial burden of showing
 that, despite such evidence, an inference of market power is unrea-
 sonable.  Kodak's theory that its lack of market power in the primary
 equipment market precludes-as a matter of law-the possibility of
 market power in the derivative aftermarkets rests on the factual
 assumption that if it raised its parts or service prices above competi-
 tive levels, potential customers would simply stop buying its equip-
 ment.  Kodak's theory does not accurately describe actual market
 behavior, since there is no evidence or assertion that its equipment
 sales dropped after it raised its service prices.  Respondents offer a
 forceful reason for this discrepancy:  the existence of significant
 information and switching costs that could create a less responsive
 connection between aftermarket prices and equipment sales.  It is
 plausible to infer from respondents' evidence that Kodak chose to
 gain immediate profits by exerting market power where locked-in
 customers, high information costs, and discriminatory pricing limited
 and perhaps eliminated any long-term loss.  Pp.11-24.
    (f)Nor is this Court persuaded by Kodak's contention that it is
 entitled to a legal presumption on the lack of market power because
 there is a significant risk of deterring procompetitive conduct.
 Because Kodak's service and parts policy is not one that appears
 always or almost always to enhance competition, the balance tips
 against summary judgment.  Pp.24-26.
   2.Respondents have presented genuine issues for trial as to
 whether Kodak has monopolized or attempted to monopolize the
 service and parts markets in violation of 2.  Pp.27-33.
    (a)Respondents' evidence that Kodak controls nearly 100% of the
 parts market and 80% to 95% of the service market, with no readily
 available substitutes, is sufficient to survive summary judgment on
 the first element of the monopoly offense, the possession of monopoly
 power.  Kodak's contention that, as a matter of law, a single brand
 of a product or service can never be a relevant market contravenes
 cases of this Court indicating that one brand of a product can consti-
 tute a separate market in some instances.  The proper market
 definition in this case can be determined only after a factual inquiry
 into the commercial realities faced by Kodak equipment owners.
 Pp.28-29.
    (b)As to the second element of a 2 claim, the willful use of
 monopoly power, respondents have presented evidence that Kodak
 took exclusionary action to maintain its parts monopoly and used its
 control over parts to strengthen its monopoly share of the service
 market.  Thus, liability turns on whether valid business reasons can
 explain Kodak's actions.  However, none of its asserted business
 justifications-a commitment to quality service, a need to control
 inventory costs, and a desire to prevent ISOs from free-riding on its
 capital investment-are sufficient to prove that it is entitled to a
 judgment as a matter of law.  Pp.29-32.
903 F.2d 612, affirmed.

 Blackmun, J., delivered the opinion of the Court, in which Rehn-
quist, C. J., and White, Stevens, Kennedy, and Souter, JJ., joined.
Scalia, J., filed a dissenting opinion, in which O'Connor and Thomas,
JJ., joined.




NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports.  Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash-
ington, D.C. 20543, of any typographical or other formal errors, in order that
corrections may be made before the preliminary print goes to press.



SUPREME COURT OF THE UNITED STATES
--------
No. 90-1029
--------
EASTMAN KODAK COMPANY, PETITIONER v.
IMAGE TECHNICAL SERVICES, INC., et al.
on writ of certiorari to the united states court of
appeals for the ninth circuit
[June 8, 1992]

  Justice Blackmun delivered the opinion of the Court.
  This is yet another case that concerns the standard for
summary judgment in an antitrust controversy.  The
principal issue here is whether a defendant's lack of market
power in the primary equipment market precludes-as a
matter of law-the possibility of market power in derivative
aftermarkets.
  Petitioner Eastman Kodak Company manufactures and
sells photocopiers and micrographic equipment.  Kodak also
sells service and replacement parts for its equipment.
Respondents are 18 independent service organizations
(ISOs) that in the early 1980s began servicing Kodak
copying and micrographic equipment.  Kodak subsequently
adopted policies to limit the availability of parts to ISOs
and to make it more difficult for ISOs to compete with
Kodak in servicing Kodak equipment.
  Respondents instituted this action in the United States
District Court for the Northern District of California
alleging that Kodak's policies were unlawful under both  1
and 2 of the Sherman Act, 15 U.S.C. 1 and 2.  After
truncated discovery, the District Court granted summary
judgment for Kodak.  The Court of Appeals for the Ninth
Circuit reversed.  The appellate court found that respon-
dents had presented sufficient evidence to raise a genuine
issue concerning Kodak's market power in the service and
parts markets.  It rejected Kodak's contention that lack of
market power in service and parts must be assumed when
such power is absent in the equipment market.  Because of
the importance of the issue, we granted certiorari.  ___ U.S.
___ (1991).
                      I
                      A
  Because this case comes to us on petitioner Kodak's
motion for summary judgment, ``[t]he evidence of [respon-
dents] is to be believed, and all justifiable inferences are to
be drawn in [their] favor.''  Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 255 (1986); Matsushita Electric Industrial Co.
v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).  Mindful
that respondents' version of any disputed issue of fact thus
is presumed correct, we begin with the factual basis of
respondents' claims.  See Arizona v. Maricopa County
Medical Society, 457 U.S. 332, 339 (1982).
  Kodak manufactures and sells complex business ma-
chines-as relevant here, high-volume photocopier and
micrographics equipment.  Kodak equipment is unique;
micrographic software programs that operate on Kodak
machines, for example, are not compatible with competitors'
machines.  See App. 424-425, 487-489, 537.  Kodak parts
are not compatible with other manufacturers' equipment,
and vice versa.  See id., at 432, 413-415.  Kodak equip-
ment, although expensive when new, has little resale value.
See id., at 358-359, 424-425, 427-428, 467, 505-506,
519-521.
  Kodak provides service and parts for its machines to its
customers.  It produces some of the parts itself; the rest are
made to order for Kodak by independent original-equipment
manufacturers (OEMs).  See id., at 429, 465, 490, 496.
Kodak does not sell a complete system of original equip-
ment, lifetime service, and lifetime parts for a single price.
Instead, Kodak provides service after the initial warranty
period either through annual service contracts, which
include all necessary parts, or on a per-call basis.  See id.,
at 98-99; Brief for Petitioner 3.  It charges, through
negotiations and bidding, different prices for equipment,
service, and parts for different customers.  See App., at
420-421, 536.  Kodak provides 80% to 95% of the service for
Kodak machines.  See id., at 430.
  Beginning in the early 1980s, ISOs began repairing and
servicing Kodak equipment.  They also sold parts and
reconditioned and sold used Kodak equipment.  Their
customers were federal, state, and local government
agencies, banks, insurance companies, industrial enterpris-
es, and providers of specialized copy and microfilming
services.  See id., at 417, 419-421, 492-493, 499, 516, 539.
ISOs provide service at a price substantially lower than
Kodak does.  See id., at 414, 451, 453-454, 469, 474-475,
488, 493, 536-537; Lodging 133.  Some customers found
that the ISO service was of higher quality.  See App.
425-426, 537-538.
  Some of the ISOs' customers purchase their own parts
and hire ISOs only for service.  See Lodging 144-147.
Others choose ISOs to supply both service and parts.  See
id., at 133.  ISOs keep an inventory of parts, purchased
from Kodak or other sources, primarily the OEMs.  See
App. 99, 415-416, 490.
  In 1985 and 1986, Kodak implemented a policy of selling
replacement parts for micrographic and copying machines
only to buyers of Kodak equipment who use Kodak service
or repair their own machines.  See Brief for Petitioner 6;
App. 91-92, 98-100, 140-141, 171-172, 190, 442-447,
455-456, 483-484.
  As part of the same policy, Kodak sought to limit ISO
access to other sources of Kodak parts.  Kodak and the
OEMs agreed that the OEMs would not sell parts that fit
Kodak equipment to anyone other than Kodak.  See id., at
417, 428-429, 447, 468, 474, 496.  Kodak also pressured
Kodak equipment owners and independent parts distribu-
tors not to sell Kodak parts to ISOs.  See id., at 419-420,
428-429, 483-484, 517-518, 589-590.  In addition, Kodak
took steps to restrict the availability of used machines.  See
id., at 427-428, 465-466, 510-511, 520.
    Kodak intended, through these policies, to make it more
difficult for ISOs to sell service for Kodak machines.  See
id., at 106-107, 171, 516.  It succeeded.  ISOs were unable
to obtain parts from reliable sources, see id., at 429, 468,
496, and many were forced out of business, while others lost
substantial revenue.  See id., at 422, 458-459, 464, 468,
475-477, 482-484, 495-496, 501, 521.  Customers were
forced to switch to Kodak service even though they pre-
ferred ISO service.  See id., at 420-422.
                      B
  In 1987, the ISOs filed the present action in the District
Court, alleging, inter alia, that Kodak had unlawfully tied
the sale of service for Kodak machines to the sale of parts,
in violation of 1 of the Sherman Act, and had unlawfully
monopolized and attempted to monopolize the sale of
service for Kodak machines, in violation of 2 of that Act.
  Kodak filed a motion for summary judgment before
respondents had initiated discovery.  The District Court
permitted respondents to file one set of interrogatories and
one set of requests for production of documents, and to take
six depositions.  Without a hearing, the District Court
granted summary judgment in favor of Kodak.  App. to Pet.
for Cert. 29B.
  As to the 1 claim, the court found that respondents had
provided no evidence of a tying arrangement between
Kodak equipment and service or parts.  See App. to Pet. for
Cert. 32B-33B.  The court, however, did not address
respondents' 1 claim that is at issue here.  Respondents
allege a tying arrangement not between Kodak equipment
and service, but between Kodak parts and service.  As to
the 2 claim, the District Court concluded that although
Kodak had a ``natural monopoly over the market for parts
it sells under its name,'' a unilateral refusal to sell those
parts to ISOs did not violate 2.
  The Court of Appeals for the Ninth Circuit, by a divided
vote, reversed.  903 F.2d 612 (1990).  With respect to the  1
claim, the court first found that whether service and parts
were distinct markets and whether a tying arrangement
existed between them were disputed issues of fact.  Id., at
615-616.  Having found that a tying arrangement might
exist, the Court of Appeals considered a question not
decided by the District Court: was there ``an issue of
material fact as to whether Kodak has sufficient economic
power in the tying product market [parts] to restrain
competition appreciably in the tied product market [ser-
vice].''  Id., at 616.  The court agreed with Kodak that
competition in the equipment market might prevent Kodak
from possessing power in the parts market, but refused to
uphold the District Court's grant of summary judgment ``on
this theoretical basis'' because ``market imperfections can
keep economic theories about how consumers will act from
mirroring reality.''  Id., at 617.  Noting that the District
Court had not considered the market power issue, and that
the record was not fully developed through discovery, the
court declined to require respondents to conduct market
analysis or to pinpoint specific imperfections in order to
withstand summary judgment.  ``It is enough that [respon-
dents] have presented evidence of actual events from which
a reasonable trier of fact could conclude that . . . competi-
tion in the [equipment] market does not, in reality, curb
Kodak's power in the parts market.''  Ibid.
  The court then considered the three business justifica-
tions Kodak proffered for its restrictive parts policy: (1) to
guard against inadequate service, (2) to lower inventory
costs, and (3) to prevent ISOs from free-riding on Kodak's
investment in the copier and micrographic industry.  The
court concluded that the trier of fact might find the product
quality and inventory reasons to be pretextual and that
there was a less restrictive alternative for achieving
Kodak's quality-related goals.  Id., at 618-619.  The court
also found Kodak's third justification, preventing ISOs from
profiting on Kodak's investments in the equipment markets,
legally insufficient.  Id., at 619.
  As to the 2 claim, the Court of Appeals concluded that
sufficient evidence existed to support a finding that Kodak's
implementation of its parts policy was ``anticompetitive''
and ``exclusionary'' and ``involved a specific intent to
monopolize.''  Id., at 620.  It held that the ISOs had come
forward with sufficient evidence, for summary judgment
purposes, to disprove Kodak's business justifications.  Ibid.
  The dissent in the Court of Appeals, with respect to the
1 claim, accepted Kodak's argument that evidence of
competition in the equipment market ``necessarily precludes
power in the derivative market.''  Id., at 622 (emphasis in
original).  With respect to the 2 monopolization claim, the
dissent concluded that, entirely apart from market power
considerations, Kodak was entitled to summary judgment
on the basis of its first business justification because it had
``submitted extensive and undisputed evidence of a market-
ing strategy based on high-quality service.''  Id., at 623.
                     II
  A tying arrangement 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 R. Co. v. United States, 356
U.S. 1, 5-6 (1958).  Such an arrangement violates 1 of the
Sherman Act if the seller has ``appreciable economic power''
in the tying product market and if the arrangement affects
a substantial volume of commerce in the tied market.
Fortner Enterprises, Inc. v. United States Steel Corp., 394
U.S. 495, 503 (1969).
  Kodak did not dispute that its arrangement affects a
substantial volume of interstate commerce.  It, however, did
challenge whether its activities constituted a ``tying ar-
rangement'' and whether Kodak exercised ``appreciable
economic power'' in the tying market.  We consider these
issues in turn.
                      A
  For the respondents to defeat a motion for summary
judgment on their claim of a tying arrangement, a reason-
able trier of fact must be able to find, first, that service and
parts are two distinct products, and, second, that Kodak has
tied the sale of the two products.
  For service and parts to be considered two distinct
products, there must be sufficient consumer demand so that
it is efficient for a firm to provide service separately from
parts.  Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466
U.S. 2, 21-22 (1984).  Evidence in the record indicates that
service and parts have been sold separately in the past and
still are sold separately to self-service equipment owners.
Indeed, the development of the entire high-technology
service industry is evidence of the efficiency of a separate
market for service.
  Kodak insists that because there is no demand for parts
separate from service, there cannot be separate markets for
service and parts.  Brief for Petitioner 15, n. 3.  By that
logic, we would be forced to conclude that there can never
be separate markets, for example, for cameras and film,
computers and software, or automobiles and tires.  That is
an assumption we are unwilling to make.  ``We have often
found arrangements involving functionally linked products
at least one of which is useless without the other to be
prohibited tying devices.''  Jefferson Parish, 466 U.S., at 19,
n. 30.
  Kodak's assertion also appears to be incorrect as a factual
matter.  At least some consumers would purchase service
without parts, because some service does not require parts,
and some consumers, those who self-service for example,
would purchase parts without service.  Enough doubt is
cast on Kodak's claim of a unified market that it should be
resolved by the trier of fact.
  Finally, respondents have presented sufficient evidence of
a tie between service and parts.  The record indicates that
Kodak would sell parts to third parties only if they agreed
not to buy service from ISOs.
                      B
  Having found sufficient evidence of a tying arrangement,
we consider the other necessary feature of an illegal tying
arrangement: appreciable economic power in the tying
market.  Market power is the power ``to force a purchaser
to do something that he would not do in a competitive
market.''  Jefferson Parish, 466 U.S., at 14.  It has been
defined as ``the ability of a single seller to raise price and
restrict output.''  Fortner Inc., 394 U.S., at 503; United
States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391
(1956).  The existence of such power ordinarily is inferred
from the seller's possession of a predominant share of the
market.  Jefferson Parish, 466 U.S., at 17; United States v.
Grinnell Corp., 384 U.S. 563, 571 (1966);  Times-Picayune
Publishing Co. v. United States, 345 U.S. 594, 611-613
(1953).               1
  Respondents contend that Kodak has more than sufficient
power in the parts market to force unwanted purchases of
the tied market, service.  Respondents provide evidence
that certain parts are available exclusively through Kodak.
Respondents also assert that Kodak has control over the
availability of parts it does not manufacture.  According to
respondents' evidence, Kodak has prohibited independent
manufacturers from selling Kodak parts to ISOs, pressured
Kodak equipment owners and independent parts distribu-
tors to deny ISOs the purchase of Kodak parts, and taken
steps to restrict the availability of used machines.
  Respondents also allege that Kodak's control over the
parts market has excluded service competition, boosted
service prices, and forced unwilling consumption of Kodak
service.  Respondents offer evidence that consumers have
switched to Kodak service even though they preferred ISO
service, that Kodak service was of higher price and lower
quality than the preferred ISO service, and that ISOs were
driven out of business by Kodak's policies.  Under our prior
precedents, this evidence would be sufficient to entitle
respondents to a trial on their claim of market power.
                      2
  Kodak counters that even if it concedes monopoly share
of the relevant parts market, it cannot actually exercise the
necessary market power for a Sherman Act violation.  This
is so, according to Kodak, because competition exists in the
equipment market.  Kodak argues that it could not have
the ability to raise prices of service and parts above the
level that would be charged in a competitive market
because any increase in profits from a higher price in the
aftermarkets at least would be offset by a corresponding
loss in profits from lower equipment sales as consumers
began purchasing equipment with more attractive service
costs.
  Kodak does not present any actual data on the equip-
ment, service, or parts markets.  Instead, it urges the
adoption of a substantive legal rule that ``equipment
competition precludes any finding of monopoly power in
derivative aftermarkets.''  Brief for Petitioner 33.  Kodak
argues that such a rule would satisfy its burden as the
moving party of showing ``that there is no genuine issue as
to any material fact'' on the market power issue.  See
Fed. Rule Civ. Proc. 56(c).
  Legal presumptions that rest on formalistic distinctions
rather than actual market realities are generally disfavored
in antitrust law.  This Court has preferred to resolve
antitrust claims on a case-by-case basis, focusing on the
``particular facts disclosed by the record.''  Maple Flooring
Mfrs. Assn. v. United States, 268 U.S. 563, 579 (1925); du
Pont, 351 U.S., at 395, n. 22; Continental T.V., Inc. v. GTE
Sylvania Inc., 433 U.S. 36, 70 (1977) (White, J., concurring
in judgment).  In determining the existence of market
power, and specifically the ``responsiveness of the sales of
one product to price changes of the other,'' du Pont, 351
U.S., at 400; see also id., at 394-395, and 400-401, this
Court has examined closely the economic reality of the
market at issue.
  Kodak contends that there is no need to examine the
facts when the issue is market power in the aftermarkets.
A legal presumption against a finding of market power is
warranted in this situation, according to Kodak, because
the existence of market power in the service and parts
markets absent power in the equipment market ``simply
makes no economic sense,'' and the absence of a legal
presumption would deter procompetitive behavior.  Matsu-
shita, 475 U.S., at 587; id., at 594-595.
  Kodak analogizes this case to Matsushita where a group
of American corporations that manufactured or sold
consumer electronic products alleged that their 21 Japanese
counterparts were engaging in a 20-year conspiracy to price
below cost in the United States in the hope of expanding
their market share sometime in the future.  After several
years of detailed discovery, the defendants moved for
summary judgment.  475 U.S., at 577-582.  Because the
defendants had every incentive not to engage in the alleged
conduct which required them to sustain losses for decades
with no foreseeable profits, the Court found an ``absence of
any rational motive to conspire.''  Id., at 597.  In that
context, the Court determined that the plaintiffs' theory of
predatory pricing makes no practical sense, was ``specula-
tive'' and was not ``reasonable.''  Id., at 588, 590, 593, 595,
597.  Accordingly, the Court held that a reasonable jury
could not return a verdict for the plaintiffs and that
summary judgment would be appropriate against them
unless they came forward with more persuasive evidence to
support their theory.  Id., at 587-588, 595-598.
  The Court's requirement in Matsushita that the plaintiffs'
claims make economic sense did not introduce a special
burden on plaintiffs facing summary judgment in antitrust
cases.  The Court did not hold that if the moving party
enunciates any economic theory supporting its behavior,
regardless of its accuracy in reflecting the actual market, it
is entitled to summary judgment.  Matsushita demands
only that the nonmoving party's inferences be reasonable in
order to reach the jury, a requirement that was not invent-
ed, but merely articulated, in that decision.  If the
plaintiff's theory is economically senseless, no reasonable
jury could find in its favor, and summary judgment should
be granted.
  Kodak, then, bears a substantial burden in showing that
it is entitled to summary judgment.  It must show that
despite evidence of increased prices and excluded competi-
tion, an inference of market power is unreasonable.  To
determine whether Kodak has met that burden, we must
unravel the factual assumptions underlying its proposed
rule that lack of power in the equipment market necessarily
precludes power in the aftermarkets.
  The extent to which one market prevents exploitation of
another market depends on the extent to which consumers
will change their consumption of one product in response to
a price change in another, i.e., the ``cross-elasticity of
demand.''  See du Pont, 351 U.S., at 400; P. Areeda & L.
Kaplow, Antitrust Analysis -342(c) (4th ed. 1988).
Kodak's proposed rule rests on a factual assumption about
the cross-elasticity of demand in the equipment and
aftermarkets: ``If Kodak raised its parts or service prices
above competitive levels, potential customers would simply
stop buying Kodak equipment.  Perhaps Kodak would be
able to increase short term profits through such a strategy,
but at a devastating cost to its long term interests.''
Brief for Petitioner 12.  Kodak argues that the Court should
accept, as a matter of law, this ``basic economic realit[y],''
id., at 24, that competition in the equipment market
necessarily prevents market power in the aftermarkets.
  Even if Kodak could not raise the price of service and
parts one cent without losing equipment sales, that fact
would not disprove market power in the aftermarkets.  The
sales of even a monopolist are reduced when it sells goods
at a monopoly price, but the higher price more than
compensates for the loss in sales.  Areeda & Kaplow, at
--112 and 340(a).  Kodak's claim that charging more for
service and parts would be ``a short-run game,'' Brief for
Petitioner 26, is based on the false dichotomy that there are
only two prices that can be charged-a competitive price or
a ruinous one.  But there could easily be a middle, optimum
price at which the increased revenues from the higher-
priced sales of service and parts would more than compen-
sate for the lower revenues from lost equipment sales.  The
fact that the equipment market imposes a restraint on
prices in the aftermarkets by no means disproves the
existence of power in those markets.  See Areeda & Kaplow,
at -340(b) (``[T]he existence of significant substitution in
the event of further price increases or even at the current
price does not tell us whether the defendant already
exercises significant market power'') (emphasis in original).
Thus, contrary to Kodak's assertion, there is no immutable
physical law-no ``basic economic reality''-insisting that
competition in the equipment market cannot coexist with
market power in the aftermarkets.
  We next consider the more narrowly drawn question:
Does Kodak's theory describe actual market behavior so
accurately that respondents' assertion of Kodak market
power in the aftermarkets, if not impossible, is at least
unreasonable?  Cf. Matsushita, supra.
  To review Kodak's theory, it contends that higher service
prices will lead to a disastrous drop in equipment sales.
Presumably, the theory's corollary is to the effect that low
service prices lead to a dramatic increase in equipment
sales.  According to the theory, one would have expected
Kodak to take advantage of lower-priced ISO service as an
opportunity to expand equipment sales.  Instead, Kodak
adopted a restrictive sales policy consciously designed to
eliminate the lower-priced ISO service, an act that would be
expected to devastate either Kodak's equipment sales or
Kodak's faith in its theory.  Yet, according to the record, it
has done neither.  Service prices have risen for Kodak
customers, but there is no evidence or assertion that Kodak
equipment sales have dropped.
  Kodak and the United States attempt to reconcile
Kodak's theory with the contrary actual results by describ-
ing a ``marketing strategy of spreading over time the total
cost to the buyer of Kodak equipment.''  Brief for United
States as Amicus Curiae 18; see also Brief for Petitioner 18.
In other words, Kodak could charge subcompetitive prices
for equipment and make up the difference with supra-
competitive prices for service, resulting in an overall
competitive price.  This pricing strategy would provide an
explanation for the theory's descriptive failings-if Kodak
in fact had adopted it.  But Kodak never has asserted that
it prices its equipment or parts subcompetitively and
recoups its profits through service.  Instead, it claims that
it prices its equipment comparably to its competitors, and
intends that both its equipment sales and service divisions
be profitable.  See App. 159-161, 170, 178, 188.  Moreover,
this hypothetical pricing strategy is inconsistent with
Kodak's policy toward its self-service customers.  If Kodak
were underpricing its equipment, hoping to lock in custom-
ers and recover its losses in the service market, it could not
afford to sell customers parts without service.  In sum,
Kodak's theory does not explain the actual market behavior
revealed in the record.
  Respondents offer a forceful reason why Kodak's theory,
although perhaps intuitively appealing, may not accurately
explain the behavior of the primary and derivative markets
for complex durable goods: the existence of significant
information and switching costs.  These costs could create
a less responsive connection between service and parts
prices and equipment sales.
  For the service-market price to affect equipment demand,
consumers must inform themselves of the total cost of the
``package''-equipment, service and parts-at the time of
purchase; that is, consumers must engage in accurate
lifecycle pricing.  Lifecycle pricing of complex, durable
equipment is difficult and costly.  In order to arrive at an
accurate price, a consumer must acquire a substantial
amount of raw data and undertake sophisticated analysis.
The necessary information would include data on price,
quality, and availability of products needed to operate,
upgrade, or enhance the initial equipment, as well as
service and repair costs, including estimates of breakdown
frequency, nature of repairs, price of service and parts,
length of ``down-time'' and losses incurred from down-
time.
  Much of this information is difficult-some of it impossi-
ble-to acquire at the time of purchase.  During the life of
a product, companies may change the service and parts
prices, and develop products with more advanced features,
a decreased need for repair, or new warranties.  In addition,
the information is likely to be customer-specific; lifecycle
costs will vary from customer to customer with the type of
equipment, degrees of equipment use, and costs of down-
time.
  Kodak acknowledges the cost of information, but sug-
gests, again without evidentiary support, that customer
information needs will be satisfied by competitors in the
equipment markets.  Brief for Petitioner 26, n. 11.  It is a
question of fact, however, whether competitors would
provide the necessary information.  A competitor in the
equipment market may not have reliable information about
the lifecycle costs of complex equipment it does not service
or the needs of customers it does not serve.  Even if
competitors had the relevant information, it is not clear
that their interests would be advanced by providing such
information to consumers.  See 2 P. Areeda & D. Turner,
Antitrust Law, -404b1 (1978).
  Moreover, even if consumers were capable of acquiring
and processing the complex body of information, they may
choose not to do so.  Acquiring the information is expensive.
If the costs of service are small relative to the equipment
price, or if consumers are more concerned about equipment
capabilities than service costs, they may not find it cost-
efficient to compile the information.  Similarly, some
consumers, such as the Federal Government, have purchas-
ing systems that make it difficult to consider the complete
cost of the ``package'' at the time of purchase.  State and
local governments often treat service as an operating
expense and equipment as a capital expense, delegating
each to a different department.  These governmental
entities do not lifecycle price, but rather choose the lowest
price in each market.  See Brief for National Association of
State Purchasing Officials et al., as Amici Curiae; Brief for
State of Ohio et al., as Amici Curiae; App. 429-430.
  As Kodak notes, there likely will be some large-volume,
sophisticated purchasers who will undertake the compara-
tive studies and insist, in return for their patronage, that
Kodak charge them competitive lifecycle prices.  Kodak
contends that these knowledgeable customers will hold
down the package price for all other customers.  Brief for
Petitioner 23, n. 9.  There are reasons, however, to doubt
that sophisticated purchasers will ensure that competitive
prices are charged to unsophisticated purchasers, too.  As
an initial matter, if the number of sophisticated customers
is relatively small, the amount of profits to be gained by
supracompetitive pricing in the service market could make
it profitable to let the knowledgeable consumers take their
business elsewhere.  More importantly, if a company is able
to price-discriminate between sophisticated and unsophisti-
cated consumers, the sophisticated will be unable to prevent
the exploitation of the uninformed.  A seller could easily
price-discriminate by varying the equipment/parts/service
package, developing different warranties, or offering price
discounts on different components.
  Given the potentially high cost of information and the
possibility a seller may be able to price-discriminate
between knowledgeable and unsophisticated consumers, it
makes little sense to assume, in the absence of any eviden-
tiary support, that equipment-purchasing decisions are
based on an accurate assessment of the total cost of
equipment, service, and parts over the lifetime of the
machine.
  Indeed, respondents have presented evidence that Kodak
practices price-discrimination by selling parts to customers
who service their own equipment, but refusing to sell parts
to customers who hire third-party service companies.
Companies that have their own service staff are likely to be
high-volume users, the same companies for whom it is most
likely to be economically worthwhile to acquire the complex
information needed for comparative lifecycle pricing.
  A second factor undermining Kodak's claim that supra-
competitive prices in the service market lead to ruinous
losses in equipment sales is the cost to current owners of
switching to a different product.  See Areeda & Turner, at
-519a.  If the cost of switching is high, consumers who
already have purchased the equipment, and are thus
``locked-in,'' will tolerate some level of service-price increas-
es before changing equipment brands.  Under this scenario,
a seller profitably could maintain supracompetitive prices
in the aftermarket if the switching costs were high relative
to the increase in service prices, and the number of locked-
in customers were high relative to the number of new
purchasers.
  Moreover, if the seller can price-discriminate between its
locked-in customers and potential new customers, this
strategy is even more likely to prove profitable.  The seller
could simply charge new customers below-marginal cost on
the equipment and recoup the charges in service, or offer
packages with life-time warranties or long-term service
agreements that are not available to locked-in customers.
  Respondents have offered evidence that the heavy initial
outlay for Kodak equipment, combined with the required
support material that works only with Kodak equipment,
makes switching costs very high for existing Kodak custom-
ers.  And Kodak's own evidence confirms that it varies the
package price of equipment/parts/service for different
customers.
  In sum, there is a question of fact whether information
costs and switching costs foil the simple assumption that
the equipment and service markets act as pure comple-
ments to one another.
  We conclude, then, that Kodak has failed to demonstrate
that respondents' inference of market power in the service
and parts markets is unreasonable, and that, consequently,
Kodak is entitled to summary judgment.  It is clearly
reasonable to infer that Kodak has market power to raise
prices and drive out competition in the aftermarkets, since
respondents offer direct evidence that Kodak did so.  It
is also plausible, as discussed above, to infer that Kodak
chose to gain immediate profits by exerting that market
power where locked-in customers, high information costs,
and discriminatory pricing limited and perhaps eliminated
any long-term loss.  Viewing the evidence in the light most
favorable to respondents, their allegations of market power
``mak[e] . . . economic sense.''  Cf. Matsushita, 475 U.S., at
587.
  Nor are we persuaded by Kodak's contention that it is
entitled to a legal presumption on the lack of market power
because, as in Matsushita, there is a significant risk of
deterring procompetitive conduct.  Plaintiffs in Matsushita
attempted to prove the antitrust conspiracy ``through
evidence of rebates and other price-cutting activities.''  Id.,
at 594.  Because cutting prices to increase business is ``the
very essence of competition,'' the Court was concerned that
mistaken inferences would be ``especially costly,'' and would
``chill the very conduct the antitrust laws are designed to
protect.''  Ibid.  See also Monsanto Co. v. Spray-Rite Service
Corp., 465 U.S. 752, 763 (1984) (permitting inference of
concerted action would ``deter or penalize perfectly legiti-
mate conduct'').  But the facts in this case are just the
opposite.  The alleged conduct-higher service prices and
market foreclosure-is facially anticompetitive and exactly
the harm that antitrust laws aim to prevent.  In this
situation, Matsushita does not create any presumption in
favor of summary judgment for the defendant.
  Kodak contends that, despite the appearance of anti-
competitiveness, its behavior actually favors competition
because its ability to pursue innovative marketing plans
will allow it to compete more effectively in the equipment
market.  Brief for Petitioner 40-41.  A pricing strategy
based on lower equipment prices and higher aftermarket
prices could enhance equipment sales by making it easier
for the buyer to finance the initial purchase.  It is undis-
puted that competition is enhanced when a firm is able to
offer various marketing options, including bundling of
support and maintenance service with the sale of equip-
ment.  Nor do such actions run afoul of the antitrust
laws.  But the procompetitive effect of the specific con-
duct challenged here, eliminating all consumer parts and
service options, is far less clear.
  We need not decide whether Kodak's behavior has any
procompetitive effects and, if so, whether they outweigh the
anticompetitive effects.  We note only that Kodak's service
and parts policy is simply not one that appears always or
almost always to enhance competition, and therefore to
warrant a legal presumption without any evidence of its
actual economic impact.  In this case, when we weigh the
risk of deterring procompetitive behavior by proceeding to
trial against the risk that illegal behavior go unpunished,
the balance tips against summary judgment.  Cf. Matsu-
shita, 475 U.S., at 594-595.
  For the foregoing reasons, we hold that Kodak has not
met the requirements of Fed. Rule Civ. Proc. 56(c).  We
therefore affirm the denial of summary judgment on respon-
dents' 1 claim.
                     III
  Respondents also claim that they have presented genuine
issues for trial as to whether Kodak has monopolized or
attempted to monopolize the service and parts markets in
violation of 2 of the Sherman Act.  ``The offense of monop-
oly 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 acci-
dent.''  United States v. Grinnell Corp., 384 U.S., at 570--
571.
                      A
  The existence of the first element, possession of monopoly
power, is easily resolved.  As has been noted, respondents
have presented a triable claim that service and parts are
separate markets, and that Kodak has the ``power to control
prices or exclude competition'' in service and parts.  du
Pont, 351 U.S., at 391.  Monopoly power under 2 requires,
of course, something greater than market power under 1.
See Fortner, 394 U.S., at 502.  Respondents' evidence that
Kodak controls nearly 100% of the parts market and 80%
to 95% of the service market, with no readily available
substitutes, is, however, sufficient to survive summary
judgment under the more stringent monopoly standard of
2.  See National Collegiate Athletic Assn. v. Board of
Regents of Univ. of Okla., 468 U.S. 85, 112 (1984).  Cf.
United States v. Grinnell Corp., 384 U.S., at 571 (87% of the
market is a monopoly); American Tobacco Co. v. United
States, 328 U.S. 781, 797 (1946) (over 2/3 of the market is
a monopoly).
  Kodak also contends that, as a matter of law, a single
brand of a product or service can never be a relevant
market under the Sherman Act.  We disagree.  The relevant
market for antitrust purposes is determined by the choices
available to Kodak equipment owners.  See Jefferson
Parish, 466 U.S., at 19.  Because service and parts for
Kodak equipment are not interchangeable with other
manufacturers' service and parts, the relevant market from
the Kodak-equipment owner's perspective is composed of
only those companies that service Kodak machines.  See du
Pont, 351 U.S., at 404 (the ``market is composed of products
that have reasonable interchangeability'').  This Court's
prior cases support the proposition that in some instances
one brand of a product can constitute a separate market.
See National Collegiate Athletic Assn., 468 U.S., at
101-102, 111-112 (1984); International Boxing Club of New
York, Inc. v. United States, 358 U.S. 242, 249-252 (1959);
International Business Machines Corp. v. United States, 298
U.S. 131 (1936).  The proper market definition in this
case can be determined only after a factual inquiry into the
``commercial realities'' faced by consumers.  United States v.
Grinnell Corp., 384 U.S., at 572.
                      B
  The second element of a 2 claim is the use of monopoly
power ``to foreclose competition, to gain a competitive
advantage, or to destroy a competitor.''  United States v.
Griffith, 334 U.S. 100, 107 (1948).  If Kodak adopted its
parts and service policies as part of a scheme of willful
acquisition or maintenance of monopoly power, it will have
violated 2.  Grinnell Corp., 384 U.S., at 570-571; United
States v. Aluminum Co. of America, 148 F.2d 416, 432 (CA2
1945); Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,
472 U.S. 585, 600-605 (1985).
  As recounted at length above, respondents have presented
evidence that Kodak took exclusionary action to maintain
its parts monopoly and used its control over parts to
strengthen its monopoly share of the Kodak service market.
Liability turns, then, on whether ``valid business reasons''
can explain Kodak's actions.  Aspen Skiing Co., 472 U.S., at
605; United States v. Aluminum Co. of America, 148 F.2d,
at 432.  Kodak contends that it has three valid business
justifications for its actions: ``(1) to promote interbrand
equipment competition by allowing Kodak to stress the
quality of its service; (2) to improve asset management by
reducing Kodak's inventory costs; and (3) to prevent ISOs
from free riding on Kodak's capital investment in equip-
ment, parts and service.''  Brief for Petitioner 6.  Factual
questions exist, however, about the validity and sufficiency
of each claimed justification, making summary judgment
inappropriate.
  Kodak first asserts that by preventing customers from
using ISOs, ``it [can] best maintain high quality service for
its sophisticated equipment'' and avoid being ``blamed for an
equipment malfunction, even if the problem is the result of
improper diagnosis, maintenance or repair by an ISO.''  Id.,
at 6-7.  Respondents have offered evidence that ISOs
provide quality service and are preferred by some Kodak
equipment owners.  This is sufficient to raise a genuine
issue of fact.  See International Business Machines Corp. v.
United States, 298 U.S., at 139-140 (rejecting IBM's claim
that it had to control the cards used in its machines to
avoid ``injury to the reputation of the machines and the
good will of'' IBM in the absence of proof that other compa-
nies could not make quality cards); International Salt Co.
v. United States, 332 U.S. 392, 397-398 (1947) (rejecting
International Salt's claim that it had to control the supply
of salt to protect its leased machines in the absence of proof
that competitors could not supply salt of equal quality).
  Moreover, there are other reasons to question Kodak's
proffered motive of commitment to quality service; its
quality justification appears inconsistent with its thesis
that consumers are knowledgeable enough to lifecycle price,
and its self-service policy.  Kodak claims the exclusive-
service contract is warranted because customers would
otherwise blame Kodak equipment for breakdowns resulting
from inferior ISO service.  Thus, Kodak simultaneously
claims that its customers are sophisticated enough to make
complex and subtle lifecycle-pricing decisions, and yet too
obtuse to distinguish which breakdowns are due to bad
equipment and which are due to bad service.  Kodak has
failed to offer any reason why informational sophistication
should be present in one circumstance and absent in the
other.  In addition, because self-service customers are just
as likely as others to blame Kodak equipment for break-
downs resulting from (their own) inferior service, Kodak's
willingness to allow self-service casts doubt on its quality
claim.  In sum, we agree with the Court of Appeals that
respondents ``have presented evidence from which a
reasonable trier of fact could conclude that Kodak's first
reason is pretextual.''  903 F.2d, at 618.
  There is also a triable issue of fact on Kodak's second
justification-controlling inventory costs.  As respondents
argue, Kodak's actions appear inconsistent with any need
to control inventory costs.  Presumably, the inventory of
parts needed to repair Kodak machines turns only on
breakdown rates, and those rates should be the same
whether Kodak or ISOs perform the repair.  More impor-
tantly, the justification fails to explain respondents'
evidence that Kodak forced OEMs, equipment owners, and
parts brokers not to sell parts to ISOs, actions that would
have no effect on Kodak's inventory costs.
  Nor does Kodak's final justification entitle it to summary
judgment on respondents' 2 claim.  Kodak claims that its
policies prevent ISOs from ``exploit[ing] the investment
Kodak has made in product development, manufacturing
and equipment sales in order to take away Kodak's service
revenues.''  Brief for Petitioner 7-8.  Kodak does not dispute
that respondents invest substantially in the service market,
with training of repair workers and investment in parts
inventory.  Instead, according to Kodak, the ISOs are free-
riding because they have failed to enter the equipment and
parts markets.  This understanding of free-riding has no
support in our caselaw.  To the contrary, as the Court of
Appeals noted, one of the evils proscribed by the antitrust
laws is the creation of entry barriers to potential competi-
tors by requiring them to enter two markets simultaneous-
ly.  Jefferson Parish, 466 U.S., at 14; Fortner, 394 U.S., at
509.
  None of Kodak's asserted business justifications, then, are
sufficient to prove that Kodak is ``entitled to a judgment as
a matter of law'' on respondents' 2 claim.  Fed. Rule. Civ.
Proc. 56(c).
                     IV
  In the end, of course, Kodak's arguments may prove to be
correct.  It may be that its parts, service, and equipment
are components of one unified market, or that the equip-
ment market does discipline the aftermarkets so that all
three are priced competitively overall, or that any anti-
competitive effects of Kodak's behavior are outweighed by
its competitive effects.  But we cannot reach these conclu-
sions as a matter of law on a record this sparse.  According-
ly, the judgment of the Court of Appeals denying summary
judgment is affirmed.
                                           It is so ordered.



SUPREME COURT OF THE UNITED STATES
--------
No. 90-1029
--------
EASTMAN KODAK COMPANY, PETITIONER v.
IMAGE TECHNICAL SERVICES, INC., et al.
on writ of certiorari to the united states court of
appeals for the ninth circuit
[June 8, 1992]

  Justice Scalia, with whom Justice O'Connor and
Justice Thomas join, dissenting.
  This is not, as the Court describes it, just -another case
that concerns the standard for summary judgment in an
antitrust controversy.-  Ante, at 1.  Rather, the case
presents a very narrow-but extremely important-question
of substantive antitrust law: Whether, for purposes of
applying our per se rule condemning -ties,- and for purposes
of applying our exacting rules governing the behavior of
would-be monopolists, a manufacturer's conceded lack of
power in the interbrand market for its equipment is
somehow consistent with its possession of -market,- or even
-monopoly,- power in wholly derivative aftermarkets for
that equipment.  In my view, the Court supplies an errone-
ous answer to this question, and I dissent.
                            I
  Per se rules of antitrust illegality are reserved for those
situations where logic and experience show that the risk of
injury to competition from the defendant's behavior is so
pronounced that it is needless and wasteful to conduct the
usual judicial inquiry into the balance between the
behavior's procompetitive benefits and its anticompetitive
costs.  See, e. g., Arizona v. Maricopa County Medical
Society, 457 U. S. 332, 350-351 (1982).  -The character of
the restraint produced by [behavior to which a per se rule
applies] is considered a sufficient basis for presuming
unreasonableness without the necessity of any analysis of
the market context in which the [behavior] may be found.-
Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U. S. 2,
9 (1984).  The per se rule against tying is just such a rule:
Where the conditions precedent to application of the rule
are met, i.e., where the tying arrangement is backed up by
the defendant's market power in the -tying- product, the
arrangement is adjudged in violation of 1 of the Sherman
Act, 15 U. S. C. 1, without any inquiry into the practice's
actual effect on competition and consumer welfare.  But see
United States v. Jerrold Electronics Corp., 187 F. Supp. 545,
560 (ED Pa. 1960), aff'd per curiam, 365 U. S. 567 (1961)
(accepting affirmative defense to per se tying allegation).
Despite intense criticism of the tying doctrine in academic
circles, see, e. g., R. Bork, The Antitrust Paradox 365-381
(1978), the stated rationale for our per se rule has varied
little over the years.  When the defendant has genuine
-market power- in the tying product-the power to raise
price by reducing output-the tie potentially enables him to
extend that power into a second distinct market, enhancing
barriers to entry in each.  In addition:
-[T]ying arrangements may be used to evade price
control in the tying product through clandestine
transfer of the profit to the tied product; they may be
used as a counting device to effect price discrimination;
and they may be used to force a full line of products on
the customer so as to extract more easily from him a
monopoly return on one unique product in the line.-
Fortner Enterprises, Inc. v. United States Steel Corp.,
394 U. S. 495, 513-514 (1969) (Fortner I) (White, J.,
dissenting) (footnotes omitted).
For these reasons, as we explained in Jefferson Parish, -the
law draws a distinction between the exploitation of market
power by merely enhancing the price of the tying product,
on the one hand, and by attempting to impose restraints on
competition in the market for a tied product, on the other.-
466 U. S., at 14.
Our Section 2 monopolization doctrines are similarly
directed to discrete situations in which a defendant's
possession of substantial market power, combined with his
exclusionary or anticompetitive behavior, threatens to
defeat or forestall the corrective forces of competition and
thereby sustain or extend the defendant's agglomeration of
power.  See United States v. Grinnell Corp., 384 U. S. 563,
570-571 (1966).  Where a defendant maintains substantial
market power, his activities are examined through a special
lens: Behavior that might otherwise not be of concern to the
antitrust laws-or that might even be viewed as procom-
petitive-can take on exclusionary connotations when
practiced by a monopolist.  3 P. Areeda & D. Turner,
Antitrust Law -813, pp. 300-302 (1978) (hereinafter 3
Areeda & Turner).
The concerns, however, that have led the courts to
heightened scrutiny both of the -exclusionary conduct-
practiced by a monopolist and of tying arrangements subject
to per se prohibition, are completely without force when the
participants lack market power.  As to the former, -[t]he
[very] definition of exclusionary conduct,- as practiced by a
monopolist, -. . . [is] predicated on the existence of substan-
tial market power.-  Id., at -813, p. 301 (1978); see, e. g.,
Walker Process Equipment, Inc. v. Food Machinery &
Chemical Corp., 382 U. S. 172, 177-178 (1965) (fraudulent
patent procurement); Standard Oil Co. of N.J. v. United
States, 221 U. S. 1, 75 (1911) (acquisition of competitors); 3
Areeda and Turner -724, at 195-197 (vertical integration).
And with respect to tying, we have recognized that bundling
arrangements not coerced by the heavy hand of market
power can serve the procompetitive functions of facilitating
new entry into certain markets, see, e. g., Brown Shoe Co.
v. United States, 370 U. S. 294, 330 (1962), permitting
-clandestine price cutting in products which otherwise
would have no price competition at all because of fear of
retaliation from the few other producers dealing in the
market,- Fortner I, supra, at 514, n. 9 (White, J., dissent-
ing), assuring quality control, see, e. g., Standard Oil Co. of
Cal. v. United States, 337 U. S. 293, 306 (1949), and, where
-the tied and tying products are functionally related, . . .
reduc[ing] costs through economies of joint production and
distribution.-  Fortner I, supra, at 514, n. 9 (White, J.,
dissenting).  -Accordingly, we have [only] condemned tying
arrangements [under the per se rule] when the seller has
some special ability-usually called `market power'-to force
a purchaser to do something that he would not do in a
competitive market.-  Jefferson Parish, supra, at 13-14.
The Court today finds in the typical manufacturer's
inherent power over its own brand of equipment-over the
sale of distinctive repair parts for that equipment, for exam-
ple-the sort of -monopoly power- sufficient to bring the
sledgehammer of 2 into play.  And, not surprisingly in
light of that insight, it readily labels single-brand power
over aftermarket products -market power- sufficient to
permit an antitrust plaintiff to invoke the per se rule
against tying.  In my opinion, this makes no economic
sense.  The holding that market power can be found on the
present record causes these venerable rules of selective
proscription to extend well beyond the point where the
reasoning that supports them leaves off.  Moreover, because
the sort of power condemned by the Court today is pos-
sessed by every manufacturer of durable goods with
distinctive parts, the Court's opinion threatens to release a
torrent of litigation and a flood of commercial intimidation
that will do much more harm than good to enforcement of
the antitrust laws and to genuine competition.  I shall
explain, in Parts II and III, respectively, how neither logic
nor experience suggests, let alone compels, application of
the per se tying prohibition and monopolization doctrine to
a seller's behavior in its single-brand aftermarkets, when
that seller is without power at the interbrand level.

                II
On appeal in the Ninth Circuit, respondents, having
waived their -rule of reason- claim, were limited to arguing
that the record, construed in the light most favorable to
them, Anderson v. Liberty Lobby, Inc., 477 U. S. 242, 255
(1986), supported application of the per se tying prohibition
to Kodak's restrictive parts and service policy.  See Image
Technical Services, Inc. v. Eastman Kodak Co., 903 F. 2d
612, 615, n. 1 (CA9 1990).  As the Court observes, in order
to survive Kodak's motion for summary judgment on this
claim, respondents bore the burden of proffering evidence
on which a reasonable trier of fact could conclude that
Kodak possesses power in the market for the alleged -tying-
product.  See ante, at 10; Jefferson Parish Hospital Dist. No.
2 v. Hyde, 466 U. S., at 13-14.
                 A
We must assume, for purposes of deciding this case, that
petitioner is without market, much less monopoly, power in
the interbrand markets for its micrographics and photocopy-
ing equipment.  See ante, at 11-12, n. 10; Oklahoma City v.
Tuttle, 471 U. S. 808, 816 (1985).  In the District Court,
respondents did, in fact, include in their complaint an
allegation which posited the interbrand equipment markets
as the relevant markets; in particular, they alleged a 1
-tie- of micrographics and photocopying equipment to the
parts and service for those machines.  1 App. 22-23.
Though this allegation was apparently abandoned in
pursuit of 1 and 2 claims focused exclusively on the parts
and service aftermarkets (about which more later), I think
it helpful to analyze how that claim would have fared under
the per se rule.
Had Kodak-from the date of its entry into the micro-
graphics and photocopying equipment markets-included a
lifetime parts and service warranty with all original
equipment, or required consumers to purchase a lifetime
parts and service contract with each machine, that bundling
of equipment, parts and service would no doubt constitute
a tie under the tests enunciated in Jefferson Parish Hospi-
tal Dist. No. 2 v. Hyde, supra.  Nevertheless, it would be
immune from per se scrutiny under the antitrust laws
because the tying product would be equipment, a market in
which (we assume) Kodak has no power to influence price
or quantity.  See Jefferson Parish, supra, at 13-14; United
States Steel Corp. v. Fortner Enterprises, Inc., 429 U. S. 610,
620 (1977) (Fortner II); Northern Pacific R. Co. v. United
States, 356 U. S. 1, 6-7 (1958).  The same result would
obtain, I think, had Kodak-from the date of its market
entry-consistently pursued an announced policy of limiting
parts sales in the manner alleged in this case, so that
customers bought with the knowledge that aftermarket
support could be obtained only from Kodak.  The foreclosure
of respondents from the business of servicing Kodak's
micrographics and photocopying machines in these illustra-
tions would be undeniably complete-as complete as the
foreclosure described in respondents' complaint.  Nonethe-
less, we would inquire no further than to ask whether
Kodak's market power in the equipment market effectively
forced consumers to purchase Kodak micrographics or
photocopying machines subject to the company's restrictive
aftermarket practices.  If not, that would end the case
insofar as the per se rule was concerned.  See Jefferson
Parish, supra, at 13-14; 9 P. Areeda, Antitrust Law
-1709c5, pp. 101-102 (1991); Klein & Saft, The Law and
Economics of Franchise Tying Contracts, 28 J. Law & Econ.
345, 356 (1985).  The evils against which the tying prohibi-
tion is directed would simply not be presented.  Interbrand
competition would render Kodak powerless to gain economic
power over an additional class of consumers, to price
discriminate by charging each customer a -system- price
equal to the system's economic value to that customer, or to
raise barriers to entry in the interbrand equipment mar-
kets.  See 3 Areeda and Turner -829d, at 331-332.
  I have described these illustrations as hypothetical, but
in fact they are not far removed from this case.  The record
below is consistent-in large part-with just this sort of
bundling of equipment on the one hand, with parts and
service on the other.  The restrictive parts policy, with
respect to micrographics equipment at least, was not even
alleged to be anything but prospective.  See 1 App. 17.  As
respondents summarized their factual proffer below:
-Under this policy, Kodak cut off parts on new products
to Kodak micrographics ISOs.  The effect of this, of
course, was that as customers of Kodak micrographics
ISOs obtained new equipment, the ISOs were unable to
service the equipment for that customer, and, service
for these customers was lost by the Kodak ISOs.
Additionally, as equipment became obsolete, and the
equipment population became all -new equipment-
(post April 1985 models), Kodak micrographics ISOs
would be able to service no equipment at all.-  2 id., at
360.
As to Kodak copiers, Kodak's restrictive parts policy had a
broader foundation: Considered in the light most favorable
to respondents, see Anderson, supra, at 255, the record
suggests that, from its inception, the policy was applied to
new and existing copier customers alike.  But at least all
post-1985 purchasers of micrographics equipment, like all
post-1985 purchasers of new Kodak copiers, could have been
aware of Kodak's parts practices.  The only thing lacking to
bring all of these purchasers (accounting for the vast bulk
of the commerce at issue here) squarely within the hypo-
theticals we have described is concrete evidence that the
restrictive parts policy was announced or generally known.
Thus, under the Court's approach the existence vel non of
such evidence is determinative of the legal standard (the
per se rule versus the rule of reason) under which the
alleged tie is examined.  In my judgment, this makes no
sense.  It is quite simply anomalous that a manufacturer
functioning in a competitive equipment market should be
exempt from the per se rule when it bundles equipment
with parts-and-service, but not when it bundles parts with
service.  This vast difference in the treatment of what will
ordinarily be economically similar phenomena is alone
enough to call today's decision into question.
                 B
In the Court of Appeals, respondents sought to sidestep
the impediment posed by interbrand competition to their
invocation of the per se tying rule by zeroing in on the parts
and service -aftermarkets- for Kodak equipment.  By
alleging a tie of parts to service, rather than of equipment
to parts-and-service, they identified a tying product in
which Kodak unquestionably held a near-monopoly share:
the parts uniquely associated with Kodak's brand of
machines.  See Jefferson Parish, 466 U. S., at 17.  The
Court today holds that such a facial showing of market
share in a single-brand aftermarket is sufficient to invoke
the per se rule.  The existence of even vibrant interbrand
competition is no defense.  See ante, at 17-18.
I find this a curious form of market power on which to
premise the application of a per se proscription.  It is
enjoyed by virtually every manufacturer of durable goods
requiring aftermarket support with unique, or relatively
unique, goods.  See P. Areeda & H. Hovenkamp, Antitrust
Law -525.1, p. 563 (Supp. 1991).  -[S]uch reasoning makes
every maker of unique parts for its own product a holder of
market power no matter how unimportant its product might
be in the market.-  Ibid. (emphasis added).  Under the
Court's analysis, the per se rule may now be applied to
single-brand ties effected by the most insignificant players
in fully competitive interbrand markets, as long as the
arrangement forecloses aftermarket competitors from more
than a de minimis amount of business, Fortner I, 394 U. S.,
at 501.  This seems to me quite wrong.  A tying arrange-
ment -forced- through the exercise of such power no more
implicates the leveraging and price discrimination concerns
behind the per se tying prohibition than does a tie of the
foremarket brand to its aftermarket derivatives, which-as
I have explained-would not be subject to per se condemna-
tion. As implemented, the Kodak arrangement challenged
in this case may have implicated truth-in-advertising or
other consumer protection concerns, but those concerns do
not alone suggest an antitrust prohibition.  See, e.g., Town
Sound and Custom Tops, Inc. v. Chrysler Motors Corp., 959
F.2d 468 (CA3 1992) (en banc).
In the absence of interbrand power, a seller's predomi-
nant or monopoly share of its single-brand derivative
markets does not connote the power to raise derivative
market prices generally by reducing quantity.  As Kodak
and its principal amicus, the United States, point out, a
rational consumer considering the purchase of Kodak
equipment will inevitably factor into his purchasing
decision the expected cost of aftermarket support.  -[B]oth
the price of the equipment and the price of parts and
service over the life of the equipment are expenditures that
are necessary to obtain copying and micrographic services.-
Brief for United States as Amicus Curiae 13.  If Kodak set
generally supracompetitive prices for either spare parts or
repair services without making an offsetting reduction in
the price of its machines, rational consumers would simply
turn to Kodak's competitors for photocopying and micro-
graphic systems.  See, e. g., Grappone, Inc. v. Subaru of
New England, Inc., 858 F. 2d 792, 796-798 (CA1 1988).
True, there are-as the Court notes, see ante, at 21--the
occasional irrational consumers that consider only the
hardware cost at the time of purchase (a category that
regrettably includes the Federal Government, whose
-purchasing system,- we are told, assigns foremarket
purchases and aftermarket purchases to different entities).
But we have never before premised the application of
antitrust doctrine on the lowest common denominator of
consumer.
The Court attempts to counter this theoretical point with
theory of its own.  It says that there are -information
costs--the costs and inconvenience to the consumer of
acquiring and processing life-cycle pricing data for Kodak
machines-that -could create a less responsive connection
between service and parts prices and equipment sales.-
Ante, at 19.  But this truism about the functioning of
markets for sophisticated equipment cannot create -market
power- of concern to the antitrust laws where otherwise
there is none.  -Information costs,- or, more accurately,
gaps in the availability and quality of consumer informa-
tion, pervade real-world markets; and because consumers
generally make do with -rough cut- judgments about price
in such circumstances, in virtually any market there are
zones within which otherwise competitive suppliers may
overprice their products without losing appreciable market
share.  We have never suggested that the principal players
in a market with such commonplace informational deficien-
cies (and, thus, bands of apparent consumer pricing
indifference) exercise market power in any sense relevant
to the antitrust laws.  -While [such] factors may generate
`market power' in some abstract sense, they do not generate
the kind of market power that justifies condemnation of
tying.-  Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466
U. S., at 27; see, e.g., Town Sound and Custom Tops, Inc.
v. Chrysler Motors Corp., supra.
   Respondents suggest that, even if the existence of
interbrand competition prevents Kodak from raising prices
generally in its single-brand aftermarkets, there remain
certain consumers who are necessarily subject to abusive
Kodak pricing behavior by reason of their being -locked in-
to their investments in Kodak machines.  The Court agrees;
indeed, it goes further by suggesting that even a general
policy of supracompetitive aftermarket prices might be
profitable over the long run because of the -lock-in- phe-
nomenon.  -[A] seller profitably could maintain supra-
competitive prices in the aftermarket,- the Court explains,
-if the switching costs were high relative to the increase in
service prices, and the number of locked-in customers were
high relative to the number of new purchasers.-  Ante, at
23.  In speculating about this latter possibility, the Court is
essentially repudiating the assumption on which we are
bound to decide this case, viz., Kodak's lack of any power
whatsoever in the interbrand market.  If Kodak's general
increase in aftermarket prices were to bring the total
-system- price above competitive levels in the interbrand
market, Kodak would be wholly unable to make further
foremarket sales-and would find itself exploiting an ever-
dwindling aftermarket, as those Kodak micrographic and
photocopying machines already in circulation passed into
disuse.
The Court's narrower point, however, is undeniably true.
There will be consumers who, because of their capital
investment in Kodak equipment, -will tolerate some level of
service-price increases before changing equipment brands,-
ante, at 23; this is necessarily true for -every maker of
unique parts for its own product.-  Areeda & Hovenkamp,
Antitrust Law -525.1b, at 563.  But this -circumstantial-
leverage created by consumer investment regularly crops up
in smoothly functioning, even perfectly competitive, mar-
kets, and in most-if not all-of its manifestations, it is of
no concern to the antitrust laws.  The leverage held by the
manufacturer of a malfunctioning refrigerator (which is
measured by the consumer's reluctance to walk away from
his initial investment in that device) is no different in kind
or degree from the leverage held by the swimming pool
contractor when he discovers a 5-ton boulder in his custo-
mer's backyard and demands an additional sum of money
to remove it; or the leverage held by an airplane manufac-
turer over an airline that has -standardized- its fleet
around the manufacturer's models; or the leverage held by
a drill press manufacturer whose customers have built their
production lines around the manufacturer's particular style
of drill press; the leverage held by an insurance company
over its independent sales force that has invested in
company-specific paraphernalia; or the leverage held by a
mobile home park owner over his tenants, who are unable
to transfer their homes to a different park except at great
expense, see generally Yee v. Escondido, 503 U. S. ___
(1992).  Leverage, in the form of circumstantial power,
plays a role in each of these relationships; but in none of
them is the leverage attributable to the dominant party's
market power in any relevant sense.  Though that power
can plainly work to the injury of certain consumers, it
produces only -a brief perturbation in competitive condi-
tions-not the sort of thing the antitrust laws do or should
worry about.-  Parts & Elec. Motors, Inc. v. Sterling Elec.,
Inc., 866 F. 2d 228, 236 (CA7 1988) (Posner, J., dissenting).
The Court correctly observes that the antitrust laws do
not permit even a natural monopolist to project its monopo-
ly power into another market, i.e., to -`exploi[t] his domi-
nant position in one market to expand his empire into the
next.'-  Ante, at 27, n. 29 (quoting Times-Picayune Publish-
ing Co. v. United States, 345 U. S. 594, 611 (1953)).
However, when a manufacturer uses its control over single-
branded parts to acquire influence in single-branded
service, the monopoly -leverage- is almost invariably of no
practical consequence, because of perfect identity between
the consumers in each of the subject aftermarkets (those
who need replacement parts for Kodak equipment, and
those who need servicing of Kodak equipment).  When that
condition exists, the tie does not permit the manufacturer
to project power over a class of consumers distinct from that
which it is already able to exploit (and fully) without the
inconvenience of the tie.  Cf., e.g., Bowman, Tying Arrange-
ments and the Leverage Problem, 67 Yale L. J. 19, 21-27
(1957).
We have never before accepted the thesis the Court today
embraces: that a seller's inherent control over the unique
parts for its own brand amounts to -market power- of a
character sufficient to permit invocation of the per se rule
against tying.  As the Court observes, ante, at 27, n. 29, we
have applied the per se rule to manufacturer ties of fore-
market equipment to aftermarket derivatives-but only
when the manufacturer's monopoly power in the equipment,
coupled with the use of derivative sales as -counting
devices- to measure the intensity of customer equipment
usage, enabled the manufacturer to engage in price discrim-
ination, and thereby more fully exploit its interbrand power.
See International Salt Co. v. United States, 332 U. S. 392
(1947); International Business Machines Corp. v. United
States, 298 U. S. 131 (1936); United Shoe Machinery Corp.
v. United States, 258 U. S. 451 (1922).  That sort of endur-
ing opportunity to engage in price discrimination is unavail-
able to a manufacturer-like Kodak-that lacks power at
the interbrand level.  A tie between two aftermarket
derivatives does next to nothing to improve a competitive
manufacturer's ability to extract monopoly rents from its consumers.
Nor has any court of appeals (save for the Ninth Circuit
panel below) recognized single-branded aftermarket power
as a basis for invoking the per se tying prohibition.  See
Virtual Maintenance, Inc. v. Prime Computer, Inc., 957 F.2d
1318, 1328 (CA6 1992) (-Defining the market by customer
demand after the customer has chosen a single supplier
fails to take into account that the supplier . . . must
compete with other similar suppliers to be designated the
sole source in the first place-); Grappone, Inc. v. Subaru of
New England, Inc., 858 F. 2d 792, 798 (CA1 1988) (-[W]e do
not see how such dealer investment [in facilities to sell
Subaru products] . . . could easily translate into Subaru
market power of a kind that, through tying, could ultimate-
ly lead to higher than competitive prices for consumers-);
A.I. Root Co. v. Computer/Dynamics, Inc., 806 F. 2d 673,
675-677, and n. 3 (CA6 1986) (competition at -small
business computer- level precluded assertion of computer
manufacturer's power over software designed for use only
with manufacturer's brand of computer); General Business
Systems v. North American Philips Corp., 699 F. 2d 965,
977 (CA9 1983) (-To have attempted to impose significant
pressure to buy [aftermarket hardware] by use of the tying
service only would have hastened the date on which Philips
surrendered to its competitors in the small business
computer market-).  See also Parts & Elec. Motors, Inc. v.
Sterling Elec., Inc., 866 F. 2d, at 233 (law-of-the-case
doctrine compelled finding of market power in replacement
parts for single-brand engine).
We have recognized in closely related contexts that the
deterrent effect of interbrand competition on the exploita-
tion of intrabrand market power should make courts
exceedingly reluctant to apply rules of per se illegality to
intrabrand restraints.  For instance, we have refused to
apply a rule of per se illegality to vertical nonprice re-
straints -because of their potential for a simultaneous
reduction of intrabrand competition and stimulation of
interbrand competition,- Continental T.V., Inc. v. GTE
Sylvania Inc., 433 U. S. 36, 51-52 (1977), the latter of
which we described as -the primary concern of antitrust
law.-  Id., at 52, n. 19.  We noted, for instance, that -new
manufacturers and manufacturers entering new markets
can use the restrictions in order to induce competent and
aggressive retailers to make the kind of investment of
capital and labor that is often required in the distribution
of products unknown to the consumer,- and that -[e]stab-
lished manufacturers can use them to induce retailers to
engage in promotional activities or to provide service and
repair facilities necessary to the efficient marketing of their
products.-  Id., at 55.  See also Business Electronics Corp.
v. Sharp Electronics Corp., 485 U. S. 717, 726 (1988).  The
same assumptions, in my opinion, should govern our
analysis of ties alleged to have been -forced- solely through
intrabrand market power.  In the absence of interbrand
power, a manufacturer's bundling of aftermarket products
may serve a multitude of legitimate purposes: It may
facilitate manufacturer efforts to ensure that the equipment
remains operable and thus protect the seller's business
reputation, see United States v. Jerrold Electronics Corp.,
187 F. Supp., at 560, aff'd per curiam, 365 U. S. 567 (1961);
it may create the conditions for implicit consumer financing
of the acquisition cost of the tying equipment through
supracompetitively-priced aftermarket purchases, see, e. g.,
A. Oxenfeldt, Industrial Pricing and Market Practices 378
(1951); and it may, through the resultant manufacturer
control of aftermarket activity, -yield valuable information
about component or design weaknesses that will materially
contribute to product improvement,- 3 Areeda & Turner
-733c, at 258-259; see also id. -829d, at 331-332.
Because the interbrand market will generally punish
intrabrand restraints that consumers do not find in their
interest, we should not-under the guise of a per se
rule-condemn such potentially procompetitive arrange-
ments simply because of the antitrust defendant's inherent
power over the unique parts for its own brand.
I would instead evaluate the aftermarket tie alleged in
this case under the rule of reason, where the tie's actual
anticompetitive effect in the tied product market, together
with its potential economic benefits, can be fully captured
in the analysis, see, e.g., Jefferson Parish Hospital Dist. No.
2 v. Hyde, 466 U. S., at 41 (O'Connor, J., concurring in
judgment).  Disposition of this case does not require such
an examination, however, as respondents apparently waived
any rule-of-reason claim they may have had in the District
Court.  I would thus reverse the Ninth Circuit's judgment
on the tying claim outright.
                III
These considerations apply equally to respondents' 2
claims.  An antitrust defendant lacking relevant -market
power- sufficient to permit invocation of the per se prohibi-
tion against tying a fortiori lacks the monopoly power that
warrants heightened scrutiny of his allegedly exclusionary
behavior.  Without even so much as asking whether the
purposes of 2 are implicated here, the Court points to
Kodak's control of -100% of the parts market and 80% to
95% of the service market,- markets with -no readily
available substitutes,- ante, at 28, and finds that the proffer
of such statistics is sufficient to fend off summary judg-
ment.  But this showing could easily be made, as I have
explained, with respect to virtually any manufacturer of
differentiated products requiring aftermarket support.  By
permitting antitrust plaintiffs to invoke 2 simply upon the
unexceptional demonstration that a manufacturer controls
the supplies of its single-branded merchandise, the Court
transforms 2 from a specialized mechanism for responding
to extraordinary agglomerations (or threatened agglomera-
tions) of economic power to an all-purpose remedy against
run-of-the-mill business torts.
In my view, if the interbrand market is vibrant, it is
simply not necessary to enlist 2's machinery to police a
seller's intrabrand restraints.  In such circumstances, the
interbrand market functions as an infinitely more efficient
and more precise corrective to such behavior, rewarding the
seller whose intrabrand restraints enhance consumer
welfare while punishing the seller whose control of the
aftermarkets is viewed unfavorably by interbrand consum-
ers.  See Business Electronics Corp., supra, at 725; Conti-
nental T.V., Inc., supra, at 52, n. 19, 54.  Because this case
comes to us on the assumption that Kodak is without such
interbrand power, I believe we are compelled to reverse the
judgment of the Court of Appeals.  I respectfully dissent.
