Chapter 4 - Constitutional Authority to Regulate Business s14

BLTC-9e Case Problem with Sample Answer Chapter 39: Promoting Competition

39–6 Case Problem with Sample Answer

When Deer Valley Resort Co. (DVRC) was developing its ski resort in the Wasatch Mountains near Park City, Utah, it sold parcels of land in the resort village to third parties. Each sales contract reserved the right of approval over the conduct of certain businesses on the property, including ski rentals. For fifteen years, DVRC permitted Christy Sports, LLC, to rent skis in competition with DVRC’s ski rental outlet. When DVRC opened a new midmountain ski rental outlet, it revoked Christy’s permission to rent skis. This meant that most skiers who flew into Salt Lake City and shuttled to Deer Valley had few choices: they could carry their ski equipment onto their flights, take a shuttle into Park City and look for cheaper ski rentals there, or rent from DVRC. Christy filed a suit in a federal district court against DVRC. Was DVRC’s action an attempt to monopolize in violation of Section 2 of the Sherman Act? Why or why not? [Christy Sports, LLC v. Deer Valley Resort Co., 555 F.3d 1188 (10th Cir. 2009)]

Sample Answer:

No. DVRC’s action does not represent an attempt to monopolize in violation of the Sherman Act. DVRC merely returned to a position that it had a right to from the beginning. In their contract DVRC had expressly informed Christy that their relationship could change at any time. Thus Christy knew from the beginning that its ski rental business could operate only with DVRC’s permission, subject to DVRC’s business judgment. If DVRC had terminated a profitable relationship without any economic justification, it might have shown a willingness to forego short-term profits to achieve an anticompetitive end. But there is no indication that DVRC terminated a profitable business relationship or that DVRC was motivated by anything other than a desire to make more money. Rather than foregoing short-term profits, DVRC can expect to increase short-term profits by operating its own ski rental facility. The court in the case on which this problem is based dismissed Christy’s suit, a decision that the U.S. Court of Appeals for the Tenth Circuit affirmed.