Justices decline to hear Eaton Corp antitrust case

WASHINGTON Mon Apr 29, 2013 3:23pm EDT

WASHINGTON (Reuters) - The Supreme Court on Monday left intact a jury verdict against electrical and hydraulic systems maker Eaton Corp Plc (ETN.N) by declining to hear the company's appeal of antitrust claims made by a rival over the sale of heavy-truck transmissions.

Z.F. Meritor, a joint venture of Meritor Inc (MTOR.N), indirect subsidiary Meritor Transmission Corp and Z.F. Friedrichshafen AG ZFF.UL, had said Eaton violated antitrust laws by giving loyalty discounts in the form of rebates to truck makers who bought more than a certain percentage of parts from Eaton.

In its claims, Z.F. Meritor focused on long-term arrangements Eaton had with four truck manufacturers in North America: Freightliner, International Truck and Engine Corp, PACCAR Inc (PCAR.O) and Volvo Group.

The agreements also required the manufacturers to price Eaton's transmissions more favorably than Meritor's when both options were made available to purchasers.

"Although we understand that very few petitions are granted by the Supreme Court, we are disappointed that the court decided not to review our appeal," Eaton said in an emailed statement.

Meritor said it was pleased with the Supreme Court's refusal to take up the case.

Companies with big market shares may reconsider rebates and other efforts to keep customers when new rivals emerge. "Monopolists may become more wary of engaging in loyalty discounts in response to entry competition," said Steven Salop, law and economics professor at Georgetown University Law Center.

Only companies with huge market shares are likely to be affected by the Supreme Court's decision to refuse to take the case, said John Briggs, an antitrust expert with the firm Axinn Veltrop Harkrider LLP.

"This is not a pressing issue except for a small set of companies," said Briggs. "I don't believe the market had any meaningful expectation that this would be granted."

A jury in Delaware federal court ruled against Eaton. A three-judge panel of the 3rd U.S. Circuit Court of Appeals in Philadelphia upheld the finding on a 2-1 vote.

Eaton sought Supreme Court review, arguing that Meritor had failed to show the deals led to the products being sold below cost, a key way of establishing antitrust liability.

Judge Morton Greenberg, the dissenting 3rd Circuit judge, wrote in his opinion that Meritor had neither alleged nor proved that Eaton engaged in below-cost pricing.

Meritor said it was not required to make that claim in order to prove that Eaton was violating antitrust laws.

Meritor's stock rose 8 percent to $4.87 and shares of Eaton were 4 percent higher at $61.05. Eaton earlier reported a better-than-expected 28 percent rise in operating profit

The case is Eaton Corp v. Z.F. Meritor, U.S. Supreme Court, No. 12-1045.

(Reporting by Lawrence Hurley; Editing by Kevin Drawbaugh, Howard Goller, Gerald E. McCormick and Kenneth Barry)

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