 American's ability to set supracompetitive prices for SABRE. The existence of alternative CRSs suggests high supply elasticity, so there exists at least a factual dispute as to whether the relevant market is "access to SABRE agents."
The more interesting question is whether the court should characterize the market for CRS access as the relevant market as a matter of law. Although market definition is a factual matter, it is often properly decided on summary judgment because issues of market definition do not involve questions of motive or intent. General Business Systems v. North American Phillips Corp., 699 F.2d 965 (9th Cir.1983) (affirming granting of summary judgment for failure to present evidence of a relevant market). The question is whether a reasonable jury could conclude that access to SABRE agents is a distinct service market, when viewed in the light most favorable to plaintiffs.
Plaintiffs have presented evidence that certain entry barriers preclude other CRS vendors from competing with American for access to SABRE agents. The existence of entry barriers suggest that elasticity of supply is low, despite the presence of alternative distribution channels. This conclusion is based upon the alleged "captive customers" relationship between SABRE and the SABRE-automated agents, maintained through long-term contracts and high liquidated damage clauses.
As stated earlier, plaintiffs argue that access to SABRE-automated agents is impaired through contractual provisions and the costs involved in making travel agents dual-CRS-capable. In defining a "market" the court must look to all products which substantially constrain the price-setting ability of the seller. Even if certain SABRE agents are stuck with long term contracts, American must make its product attractive to new travel agencies, SABRE agents whose contracts are expiring, and SABRE agents who can afford the extra expense of obtaining a second CRS. SABRE-automated agents can become ex-SABRE-automated agents as their contracts expire, or as they chose to become dual-CRS-capable. Competing CRSs can quickly expand output merely by setting up a terminal at the travel agent's office. Indeed, the virtual non-existence of start-up costs[10] would permit a competing CRS to bear some of the financial burden of making a SABRE-agent dual CRS capable.
Defendants argue that plaintiffs' claim that SABRE is a separate market for purposes of section 2 must be based upon a further, unstated, assumption: that SABRE-automated travel agents have a "captive" group of customers who buy all their air transportation through the SABRE-agents, even if the SABRE-agents do not provide a competitive level of service. If consumers are not somehow held captive by their travel agents, then basic economic theory holds that they will seek out the best service available. There is no evidence that consumers are held captive by travel agents. The consumer's freedom effects the entire system so that travel agents will demand better service from its CRS vendor, and if such service is not given, the agent will either seek alternative methods for booking flights (other CRSs, direct booking by telephone, etc.), or go out of business and make way for more competitive travel agents. This competitive pressure constrains American from charging supracompetitive prices to the carriers because the CRS vendor needs to provide access to its CRS in order to make the service attractive to travel agents. Therefore, as long as the consumer is not held captive, the CRS vendor must compete with other CRS vendors. In this case, there is no evidence that consumers are held captive by travel agents.
Defendants' theory accurately shows that American is constrained by the existence of competing CRSs. However, the *1460 question is not whether there is any form of constraint, but whether American is precluded from charging monopoly prices. While entry barriers exist and impose additional costs for entering the market, the difficult factual question is whether the barriers are high enough to allow monopoly pricing. American may be able to extract booking fees high enough to slow the growth of their airline competitors, but low enough to make participation in the system cost efficient for the carrier. See, United Airlines v. C.A.B., 766 F.2d at 1114. The test for monopoly pricing is not whether participation in the system is cost efficient for the carrier (it must be, otherwise the carrier would not participate), but whether the price is significantly higher than the seller's marginal cost. The existence of entry barriers for access to SABRE agents creates a material issue of fact as to whether other CRSs are effective substitutes for access to SABRE.
The evidence, interpreted in a light most favorable to plaintiff, could permit a reasonable jury to conclude that SABRE is a separate service market because there is evidence that airlines view each CRS as offering a unique service: access to a particular set of travel agents. A reasonable jury may conclude from the evidence that SABRE automated agents are locked into SABRE (through contractual provisions) and that American is free to extract supracompetitive booking fees from participating airlines, although the fees are not high enough to justify abandoning the system. Thus, defendants are able to set booking fees at a supracompetitive rate, and consumers will not abandon SABRE agents because the travel agency's services are not effected since supracompetitive prices are high enough to slow an airlines growth, but low enough to remain economically cost-efficient for the airlines.
The elements of monopolization under section 2 of the Sherman Act are (1) possession of monopoly power in a relevant market; (2) wilful acquisition or maintenance ("use") of that power; and (3) causal antitrust injury. Catlin v. Washington Energy Co., 791 F.2d 1343, 1347 (9th Cir.1986) (citations omitted).
Monopoly power focuses generally on a firm's ability to "control prices or exclude competition." Oahu, 838 F.2d at 366 (citations omitted). Courts have employed the following evidentiary methods in order to determine whether a defendant has market power in the relevant market; proof that defendant accounts for a high percentage of total firm sales within the market ("market share"), defendant's actual exercise of price leadership control over the industry, affirmative actions taken by defendant that has excluded actual or potential competitors, profit levels, barriers to competition in the industry that would thwart new entry at the expansion of existing competitors, and historical trends within the industry. Holmes, supra, at 148-49.
Inquiries in this area often depend heavily upon market share and barriers to entry. Oahu, 838 F.2d at 366. "A firm with a high market share may be able to exert market power in the short run, but `[s]ubstantial market power can persist only if there are significant and continuing barriers to entry.'" Id. (quoting, 2 P. Areeda & D. Turner, Antitrust Law, at section 505). A high market share will not raise an inference of market power in a market with low entry barriers or other evidence of defendant's inability to control prices or exclude competitors. Oahu, 838 F.2d at 366. "By the same token, `[a]declining market share may reflect an absence of market power, but it does not foreclose a finding of such power.'" Id. (quoting, Greyhound Computer Corp. v. International Business Machines Corp., 559 F.2d 488, 496 n. 18 (9th Cir.1977), cert. denied, 434 U.S. 1040, 98 S. Ct. 782, 54 L. Ed. 2d 790 (1978)).
Market share is used as a surrogate for information which, if available, would provide a more accurate assessment of a firm's market power. Thus, if a firm's market elasticities (supply and demand) could be shown directly, there would be no *1461 need for extrapolating market power from market share. Landes & Posner, Market Power in Antitrust Cases, 94 Harv.L.Rev. 938, 953 (1981). If a firm's marginal cost could be ascertained, its exercise of market power would be revealed merely by subtracting the price actually charged from the marginal cost of production. Id. These figures, however, are notoriously difficult (if not impossible) to determine. Therefore, courts look to market share in a relevant market as an effective surrogate for direct measurement of market power. P. Areeda & D. Turner, section 507, at 330-31.
If the relevant market may be access to SABRE agents, then defendant controls 100% of the market, and included in the determination of "relevant market" is a finding that other CRSs may not be effective substitutes for SABRE. Thus, there is a material issue of fact as to whether SABRE has market power because there is a material issue as to whether access to SABRE automated agents is a relevant market.
If the relevant market is the national CRS market, then plaintiffs must show that American has market power despite its relatively small share of the market. SABRE's share of Computerized Reservation Terminals has never exceeded 44.2%, and it appears to be declining.[11] Plaintiffs argue, however, that the market share figures do not accurately represent American's market power. Thus, plaintiffs point to the actual exercise of market power as evidence of American's monopoly power.
First of all, there is direct evidence of the defendants' exercise of monopoly power in the CRS market. The recent Department of Transportation Report shows that defendants price booking fees above marginal cost. The report indicates that SABRE's booking fees equal 233 per cent of their average costs for producing reservations during 1986, and Apollo's booking fee constitutes 192 per cent of its