United States v. Syufy Enterprises

In 1981, Raymond Syufy, owner of Syufy Enterprises, (Syufy) (defendant) opened a deluxe movie theater with six screens in Las Vegas. Syufy’s theater was so fine and well-run that consumer attendance increased, and distributors wanted the first run of their movies to be shown at Syufy’s theater. A bidding war resulted and Syufy’s three competitors failed. Syufy bought his competitor’s theaters, leaving Syufy as the only competitor in the first-run market in Las Vegas. Despite this, Syufy did not excessively raise admission prices or decrease licensing fees. Syufy lacked the power to exclude competition. Syufy gained success through effectiveness and business acumen, not by erecting barriers to market entry through anti-competitive practices. Yet, the United States (plaintiff) sued Syufy claiming that the company’s effective competition was itself a structural barrier preventing other companies from entering the first-run exhibition market. The government reasoned that although there were no legal barriers present, still new competitors might find the market unattractive because competing against Syufy would be an expensive proposition and might yield little profits. The government argued that Syufy’s horizontal integration or lateral action in purchasing competitors had given Syufy monopoly power. The United States brought an antitrust action for violation of § 2 of the Sherman Act. A district court found that Syufy did not hold monopoly power. The United States appealed to the Ninth Circuit. A new competitor entered the first-run market in Las Vegas before the Ninth Circuit issued its ruling.