## Facts

- The relevant market was heavy-duty truck transmissions sold in North America to four original equipment manufacturers (OEMs).
- OEM “data books” listed component options; listing a transmission as the “standard” or default option materially affected sales.
- Eaton was the dominant supplier in the market and entered long-term agreements (LTAs) with each OEM.
- The LTAs provided substantial conditional rebates and other incentives tied to high market-share purchase targets for Eaton transmissions.
- Some LTAs included termination or penalty provisions if an OEM failed to meet Eaton’s market-share targets.
- The LTAs contained data-book provisions requiring Eaton to be listed as the standard or preferred transmission and, in some instances, requiring competitors’ transmissions to be removed or downgraded in the data books.
- The LTAs also imposed preferential pricing or term requirements that favored Eaton over rivals.
- ZF Meritor, a smaller competitor, alleged the LTAs operated as de facto exclusive dealing that foreclosed much of the OEM channel, impaired effective competition, and contributed to its exit from the market.

## Issues

1. Whether antitrust challenges to Eaton’s conditional-rebate LTAs were governed by a price-cost (below-cost) test or by rule-of-reason exclusive dealing analysis.
2. Whether the evidence supported the jury’s finding that the LTAs were de facto exclusive dealing that foreclosed a substantial share of the market and harmed competition.
3. Whether plaintiffs proved antitrust injury caused by the alleged exclusionary conduct.
4. Whether the district court properly excluded the plaintiffs’ expert’s damages model and whether it erred by refusing to allow alternative calculations based on data already in the expert report.
5. Whether plaintiffs, having exited the market without concrete plans to re-enter, had standing to obtain prospective injunctive relief.

## Decision

- The court held plaintiffs’ claims were not subject to the price-cost test and instead were analyzed as de facto exclusive dealing under the rule of reason.
- The court affirmed the jury’s liability findings under Sherman Act §§ 1 and 2 and Clayton Act § 3, concluding sufficient evidence supported anticompetitive conduct, substantial foreclosure, and antitrust injury.
- The court found no error in admitting the plaintiffs’ expert testimony on liability issues.
- The court affirmed exclusion of the expert’s original damages model, but reversed the refusal to permit alternative damages calculations derived from data already disclosed, and remanded for further proceedings on damages.
- The court held plaintiffs lacked Article III standing for prospective injunctive relief because they had exited the market and showed no real and immediate threat of future harm; it vacated the injunction.

## Legal Principles

- Above-cost pricing does not immunize a dominant firm’s loyalty/conditional rebate program when exclusion is alleged to result from non-price contractual constraints that function as de facto exclusivity.
- Conditional rebates and related provisions may be evaluated as de facto exclusive dealing under the rule of reason when contract structure and surrounding conditions effectively limit buyers’ ability to deal with rivals.
- Exclusive dealing legality turns on market context, including the degree of foreclosure, contract duration and renewal structure, and whether the arrangement significantly restricts rivals’ access to efficient distribution channels.
- Antitrust injury requires harm of the type antitrust law addresses that flows from the challenged exclusionary conduct, not merely harm to an individual competitor.
- Prospective injunctive relief under federal antitrust law requires a concrete, imminent threat of future injury; past harm and market exit without definite re-entry plans are insufficient for standing.
- Trial courts have discretion to exclude unreliable expert damages models, but may abuse discretion by barring alternative computations that use previously disclosed data rather than introducing new materials.

## Conclusion

The Third Circuit treated Eaton’s conditional-rebate LTAs as potentially unlawful de facto exclusive dealing under rule-of-reason analysis, affirmed the verdict finding substantial foreclosure and antitrust injury despite above-cost pricing, vacated injunctive relief for lack of standing, and remanded to permit consideration of alternative expert damages calculations based on previously disclosed data.


ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254 (3d Cir. 2012)