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                United States District Court
                        for the
                Eastern District of Oklahoma






                     Case No. CIV 96-196 B




                UNITED STATES OF AMERICA,

                        Plaintiff

                           v.

               CITY OF STILWELL, OKLAHOMA, et al.,

                       Defendants




          REPLY OF UNITED STATES TO DEFENDANTS'
          RESPONSE TO UNITED STATES' MOTION FOR
                    SUMMARY JUDGMENT









                     JOHN R. READ
                     MICHELE B. CANO
                     U.S. Department of Justice
                     Antitrust Division
                     325 7th Street, N.W., Suite 500
                     Washington, D.C. 20530-0001
                     Attorneys for the United States


Page i .       

                     Table of Contents

Table of Contents............................................................................................................................. i

Table of Authorities.......................................................................................................................... ii

I.  DEFENDANTS' REFUSAL TO SELL UTILITY SERVICES INDIVIDUALLY
   TO SOME CUSTOMERS WAS A PER SE ILLEGAL TIE.............................................. 2

   A.  Defendants' Tying of Sewer, Water and Electricity Was Per Se Illegal................... 2

   B.  Defendants' Claim of Possible Exceptions to the All-or-None Policy Is Not
        a Defense.................................................................................................................. 5

   C.  There Is No Genuine Dispute That Defendants Conditioned the Sale of
        Sewer and Water on the Sale of Electricity at Skywood, Candle Ridge, and
        DHS......................................................................................................................... 8

   D.  Each Part of the Per Se Test Is Undisputedly Met................................................. 13

II.   DEFENDANTS HAVE MONOPOLIZED THE SALE OF ELECTRICITY IN
   THE ANNEXED AREAS................................................................................................. 13

   A.  The Test for Monopolization, Like the Test for a Per Se Illegal Tie, Is
        Undisputed............................................................................................................. 13

   B.  Defendants Possess Monopoly Power In the Sale of Electricity in the Annexed
        Areas...................................................................................................................... 14

III. JURISDICTION................................................................................................................ 17

IV. CONCLUSION.................................................................................................................. 19


Page ii .       

                      Table of Authorities

Cases:

Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986)................................................................... 3

Anesthesia Advantage, Inc. v. Metz Group, 912 F.2d 397 (10th Cir. 1990)................................. 18

Catalano v. Target Sales, Inc., 446 U.S. 643, (1980)..................................................................... 9

Crane v. Intermountain Health Care, Inc., 637 F.2d 715 (10th Cir. 1980)
   (en banc)............................................................................................................................ 18

Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984)........................................... 3

Detroit City Dairy, Inc. v. Kowalski Sausage Co.,
   393 F. Supp. 453 (E.D. Mich. 1975)................................................................................... 6

Eastman Kodak Co. v. Image Technical Servs., Inc.,
   504 U.S. 451 (1992)............................................................................................................ 3

Federal Trade Commission v. Superior Court Trial Lawyers Assoc.,
   493 U.S. 411 (1990)............................................................................................................ 9

International Salt Co. v. United States, 332 U.S. 392 (1947)..................................................... 2, 6

Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2 (1984)......................................... 2, 7

Little Ceaser Enterprises, Inc. v. Smith, 172 F.R.D. 236 (E.D. Mich. 1997)................................ 10

Multistate Legal Studies, Inc. v. Harcourt Brace Jovanovich Legal and
   Professional Publications, Inc.
, 63 F.3d 1540 (1995), cert. denied,
   116 S.Ct. 702 (1996);.......................................................................................................... 3

Northern Pacific Railway Co. v. United States, 356 U.S. 1 (1958)............................................ 2, 3

Northeast Oklahoma Electric Cooperative Inc. v. Oklahoma,
   808 P.2nd 680 (Ok. 1991).................................................................................................. 12

Photovest Corp. v. Fotomat Corp., 606 F.2d 704 (7th Cir. 1979)
   cert. denied, 445 U.S. 917 (1980)...................................................................................... 10

Reazin v. Blue Cross & Blue Shield, 899 F.2d 951 (10th Cir.), cert. denied,
   497 U.S. 1005 (1990)........................................................................................................ 14


Page iii      

Sharp v. Hall, 181 P.2d 972 (Ok. 1947).......................................................................................... 9

Shoppin' Bag of Pueblo, Inc. v. Dillon Cos., 783 F.2d 159 (10th Cir. 1986)............................... 14

Standard Oil Co. v. United States, 337 U.S. 293 (1949)................................................................. 2

Systemcare, Inc. v. Wang Laboratories Corp.,
   117 F.3d 1137 (10th Cir. 1997) (en banc)........................................................................... 3

United States v. Grinnell Corp., 384 U.S. 563 (1966).................................................................. 13

United States v. Trenton Potteries Co., 273 U.S. 392 (1927)......................................................... 9

Universal Money Centers, Inc. v. American Telephone & Telegraph, 22 F.3d 1527
   (10th Cir.), cert. denied, 115 S. Ct. 655 (1994)................................................................... 3

Warriner Hermetics, Inc. v. Copeland Refrigeration Corp.
   463 F.2d 1002 (5th Cir.) cert. denied, 409 U.S. 1086 (1972)............................................. 3


Statutes & Treatises:

Sherman Act, 15 U.S.C. &167;&167; 1 & 2 (1982)...............................................................................passim

Oklahoma Rural Electric Cooperative Act, as amended, Okla. Stat. Ann.,
   tit. 18 &167; 437.2(k) (West 1986 & Supp. 1996) ................................................................... 15

Okla. Stat. Ann., tit. 11 &167; 21-121 (West 1986 & Supp. 1996).............................................. 8, 12

Retail Electric Supplier Certified Territory Act, tit 17 &167; 158.25 & 28 (West 1986)..................... 15

An Analysis of Antitrust Principles and Their Application, Areeda, Hovenkamp,
   and Elhauge, Antitrust Law, Vol. X, (Little, Brown & Co. 1996).................................... 11


Page iv      


                United States District Court
                        for the
                Eastern District of Oklahoma



UNITED STATES OF AMERICA, )  
)  
Plaintiff, )  
)  
v. ) Case No. CIV 96-196 B
)  
CITY OF STILWELL, OKLAHOMA )  
et al., )  
)  
Defendants. )  


                REPLY OF THE UNITED STATES TO
               DEFENDANTS' RESPONSE TO UNITED
          STATES' MOTION FOR SUMMARY JUDGMENT


        The United States' dispositive summary judgment motion ultimately turns on
whether there is a genuine dispute that the defendants (City of Stilwell and the Stilwell Area
Development Authority ("ADA")) in fact did what the United States claims they did: refused to
sell sewer or water services unless a customer agreed to purchase their electricity services. There
is clearly no genuine dispute as to the remaining facts that establish per se liability -- (1) sewer,
water and electricity services are separate products; (2) defendants have sufficient power in the
sale of sewer and water services (with market shares above 90%); and (3) the volume of
electricity at issue is not de minimis. Thus, if defendants did condition the sale of sewer and
water on the sale of electricity, the per se rule applies and the United States is entitled to enjoin
such conduct in the future.


Page 2 . . . . . .       

        As shown below, defendants cannot and do not genuinely deny that they have
engaged in such conduct. Rather they offer various excuses for their conduct, (e.g., one of the
apartment complexes harmed by the conduct is filled with "dysfunctional" families), but such
excuses are immaterial to the applicability of the per se rule. Thus, summary judgment is
appropriate and will permit the Court to avoid an unnecessary trial.

I.  DEFENDANTS' REFUSAL TO SELL UTILITY SERVICES INDIVIDUALLY TO
   SOME CUSTOMERS WAS A PER SE ILLEGAL TIE

   A. Defendants' Tying of Sewer, Water and Electricity Was Per Se Illegal

        The law is clear. Congress has outlawed tying arrangements -- selling one product
only on the condition that the consumer also buys another separate product. This often forces
consumers into buying a product they do not want or buying the product from a supplier that they
would not otherwise choose. As a result, the Supreme Court has declared such tying
arrangements illegal per se, making the quantum of harm caused by the arrangement, the putative
benefits of the arrangement, the justifications for the arrangement, and the price charged for the
bundled products all irrelevant. 1
        To avoid summary judgment, defendants must come forward with admissible
evidence that could cause a reasonable fact-finder to decide an outcome determinative (or


Page 3 . . . . . . . .       

material) fact in favor of defendants. 2 The defendants have not done so. Instead, they have made
only irrelevant and unsupported assertions.
        The applicable legal test has four parts and simply asks whether defendants (1)
sold separate products or services, (2) conditioned the sale of one product or service on the sale
of another, (3) had sufficient economic power in the sale of the tying services (i.e., sewer and
water), and (4) conditioned more than a de minimis volume of commerce in the tied service
(electricity). 3


Page 4      

        Defendants admit prong one of the test: that sewer, water, and electric services
are separate products. 4 Defendants do not deny the facts establishing prong three -- that they
have sufficient economic power in sewer and water services. For example, they do not dispute
that the provision of sewer and water is necessary, that they have market shares above 90% for
those services, and that self-service (e.g., drilling a well or installing a septic tank) is usually not
an economically attractive option (even where it is legally or logistically available). 5
        As to prong four, defendants do not dispute that $10,000 of commerce is not de
minimus
and is sufficient to meet this part of the test. 6 Thus, if defendants tied at all, then the
fourth prong is satisfied since each separate example of tying cited by the United States


Page 5 .       

(Skywood, Candle Ridge, and Oklahoma Department of Human Services ("DHS")) involves more
than $10,000 per year of commerce in electric power. 7
        As three of the four prongs are not genuinely disputed by defendants, summary
judgment turns on prong two -- did the defendants refuse to sell their utilities separately?
Defendants do not dispute that they did so. Instead, they offer factual assertions which, even if
true, would at most offer rationalizations for their conduct or attempt to reduce its impact --
precisely the sort of evidence the per se rule deems irrelevant.

   B.  Defendants' Claim of Possible Exceptions to the All-or-None Policy Is Not a
        Defense.

        The United States provided with its summary judgment motion conclusive
admissible evidence that defendants conditioned the sale of sewer and water services on the sale
of electrical services. See SOF at  33-34 (citing and attaching defendants' Answer to the
Complaint, 8 defendants' own documents, 9 their interrogatory responses, 10 and the testimony of


Page 6 . .       

their utility superintendent 11 ). Defendants now claim, for the first time, that the policy was limited
to the unannexed parts of the City. In support they cite the April 1994 vote of the utility boards
which put the following language in its building permits -- "No service will be provided, unless all
services are used" -- followed by a statement that the only "exceptions" that may be made are "in
the case of annexed areas" or where the defendants cannot feasibly extend water or sewer lines.
See Exh. 14 to SOF. The existence of exceptions, however, does not save defendants' conduct.
In fact, by asserting that they made "exceptions," the defendants impliedly concede that in general
they refused to sell sewer and water services unless the customer agreed to purchase electricity
from them. 12


Page 7 .       

        The statement regarding "exceptions" does not mean (as defendants would
apparently have the Court assume) that defendants never tied the separate utilities in the annexed
areas. 13 To the contrary, defendants admitted in their own interrogatory responses that they
applied the all-or-none policy to the Skywood and DHS complexes, 14 both of which are located in
annexed areas. 15
        As Scottie Adair, the superintendent of utilities, testified, the "exception" language
adopted in the April 1994 vote was meant only to indicate that the defendants would not tie sewer
and water to electricity in those instances where Oklahoma law barred the City from selling
electricity. As defendants explain in their brief, under Oklahoma law, once a customer takes
power from an electric provider for one facility, it cannot change the provider to that facility


Page 8 . .       

without the permission of the original electric provider. 16 When the City would annex a new area,
long-time residents of that area often had already purchased power from Ozarks Rural Electric
Cooperative Corporation ("Ozarks") because, until that time, only Ozarks served the area.
        Thus, under Oklahoma law, the City could not sell electricity to those residents
without Ozarks' consent; and the City had to make an exception to its policy so that it could sell
water or sewer services to those customers that were committed by Oklahoma law to Ozarks.
The exception referenced annexed areas, because such customers resided only in those areas. 17
Significantly, Mr. Adair conceded that, whenever someone new moved into an annexed area --
whose electric service was "up for grabs" -- the defendants would tie the service of sewer and
water to the service of electricity in order to secure the new electric account. Adair Dep. at 54
(attached as Exh. 1). There were no exceptions to the tie-in policy for the customers who were
"up for grabs."

   C.  There Is No Genuine Dispute That Defendants Conditioned the Sale of Sewer and
        Water on the Sale of Electricity at Skywood, Candle Ridge, and DHS.

        Defendants spend a great deal of time challenging the three tying examples
(Skywood, Candle Ridge and DHS) established by the United States. In the end, however,
defendants never dispute the dispositive facts -- (1) that in each instance the customer was told


Page 9 . . . .       

that he could not just buy one or two utilities, but had to buy all three, if he wanted any; (2) that
the customer could not viably get sewer and water services from anyone besides defendants; and
(3) that the customer's optimal choice was to purchase one or two, but not all three, of the City's
services. 18
        Rather than challenge the above facts, defendants simply make four irrelevant or
unsupported claims. Defendants' first claim is that each of these consumers agreed to take all
three utilities in exchange for something (i.e., an easement, a plat amendment, or annexation into
the city). See Defs. Response to SOF at  41-46. But, at most, such exchanges may change the
effective total "price" that the consumer paid for all three utilities. The per se rule was specifically
designed to avoid an inquiry into the reasonableness of the price or exchange. 19 Further,
defendants' refusal to amend a plat or grant a customary easement unless the customer agreed to
take all three utilities does not negate the coercive effect of refusing to sell sewer and water
services unless the customer agreed to also buy electricity. 20 Rather it simply proves the United


Page 10 . .       

States' contention that the defendants discriminated against those who would not purchase all of
their utilities from them and that the defendants "put some teeth" into their all-or-none policy. 21
        Second, astoundingly, defendants appear to argue as to one of the examples --
Skywood -- that the customer deserved to be deprived of competition because the apartment
complex houses low-income dysfunctional families that require extra police protection. That
claim is wholly irrelevant under the controlling four-part per se test. Courts are not to determine
which customers deserve to be protected by the antitrust laws and which do not. The antitrust
laws protect the right of all Stilwell customers to choose their electric supplier -- a right they were
entitled to exercise without fear of losing vital water or sewer services.
        Third, defendants claim that many people chose to buy electricity from the City
because its rates were lower and its service better than Ozarks. That again is not a consideration
under the four-part per se test. Courts do not try to determine what mix of price, terms and
service is "best" for each customer -- the policy of the antitrust laws is that each customer is
entitled to make that choice itself, without being limited by the illegal conduct of sellers. All that
matters here is that some customers may have preferred Ozarks (perhaps they wanted its
discounts and free placement of wires underground, see U.S. Reply to SOF at  32) and were


Page 11 .       

deprived of their choice. If they purchased Ozarks' power, they lost sewer and water services.
The case authority is clear that, under the per se rule, the reasonableness of the price charged is
irrelevant. See, supra at 9, n. 18. If defendants believed their price/service mix was clearly
superior, they should have been willing to test that mix in the marketplace, not impose an illegal
tie. 22
        Finally, defendants try to dismiss two of the three specific examples by claiming
that Ozarks could not have legally served the entity. 23 Defendants do not say what impact this
assertion has on the analysis (i.e., whether it excuses the all-or-none policy). That silence is
understandable. The assertion is not relevant to any portion of the four-part per se test.
        The claim is also false; Ozarks was not barred from serving DHS. Defendants
simply assert the argument without citing any supporting authority. See Defs. Brief at 13. While
the City of Stilwell filed a complaint against Ozarks seeking, among other things, to enjoin Ozarks
from serving additional customers in the annexed areas, such as DHS, the Court never issued the
requested injunction and the City eventually dropped the matter. See Crozier Dep. at 65
(attached as Exh. 3).


Page 12 . .       

        Defendants also claim that Ozarks could not provide power to the last set of
Skywood buildings because the City had provided electricity to the first two sets of buildings.
Oklahoma law, however, permits a customer to chose a separate electric supplier for each
separate "facility" that it owns. 24 The final apartment buildings in Skywood were clearly separate
"facilities" from those Skywood buildings that had been built earlier. The three separate Skywood
complexes had different owners, were built in different years with separate federal grants, were
architecturally different, needed different building permits, and did not receive their electricity
from the same meter. See Affidavit of Steve Rucker (attached as Exh. 2).
        If defendants are persuaded Ozarks could not serve the Skywood complexes, they
could have taken the claim to court. But that claim and the DHS claim, regardless of their merits,
gave defendants no right to resort to illegal self-help by tying the sale of sewer and water to
electricity.


Page 13 . . . .       

   D. Each Part of the Per Se Test Is Undisputedly Met.

        In conclusion, as to the four-part per se tying test, defendants admitted to prong
one -- that sewer, water and electricity are separate products. For prong two, defendants
admitted that, for at least some customers, they only offered the utility services as a package. For
prong three, defendants do not dispute that they are the dominant (indeed legal monopoly)
provider of sewer and water. And for prong four, there is no dispute that the volume of
electricity at issue for either Skywood, Candle Ridge, or DHS totals more than $10,000 per year
and therefore is not de minimis. Thus, the defendants' all-or-none utility policy is per se illegal.

II.   DEFENDANTS HAVE MONOPOLIZED THE SALE OF ELECTRICITY IN THE
   ANNEXED AREAS.

   A.  The Test for Monopolization, Like the Test for a Per Se Illegal Tie, Is Undisputed.

        Defendants also violated section 2 of the Sherman Act, 15 U.S.C. &167; 2, by
monopolizing electric service to new retail customers in the annexed areas of Stilwell. Defendants
acknowledge that the two elements required to prove monopolization are:
        (1) the possession of monopoly power in the relevant market and
        (2) wilful acquisition or maintenance of that power as distinguished
        from growth or development as a consequence of a superior
        product, business acumen, or historic accident.

United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966).
        With regard to the second element, defendants do not dispute that conditioning the
sale of sewer and water upon the sale of electricity is conduct that satisfies the second element of
monopolization -- "wilful acquisition or maintenance of [monopoly] power." As discussed at


Page 14 . . .       

pages 5-12 supra, there is no genuine dispute that defendants refused to sell sewer or water
service.
        With regard to the first element, defendants do not dispute that here the "relevant
market" is the provision of retail electric service to new customers in the post-1961 annexed
territory of the City of Stilwell. See Defs. Brief at 11-12. Thus, the only issue for section 2
monopolization is whether the City has monopoly power in that relevant market. As shown
below, possession of such power is clear.

   B.  Defendants Possess Monopoly Power In the Sale of Electricity in the Annexed
        Areas.

   Defendants do not dispute that, if they can control prices and exclude competition in the
target electricity market, they possess monopoly power. 25 The City's power to control prices is
unquestioned. Defendants admit in their brief that the City has power to set its own rates without
any regulatory approval. See Defs. Brief at 12. Further, defendants make no claim that the
electricity rates they charged were in any way affected by competitive pressure from Ozarks when
they tied the sale of sewer, water and electricity. Indeed, given the customers' need for sewer and
water, the City's electric rates were set without any regard or reference to what Ozarks was
charging.
   Similarly, defendants' power to exclude competition is also undisputed. Oklahoma law
prohibits everyone except the City and Ozarks from providing electric power in the annexed


Page 15 . .       

areas. 26 And, through the all-or-none policy, the City acquired the ability to prevent Ozarks, its
only competitor, from gaining new customers. Indeed, the City cannot point to a single customer
that was willing or able to forego sewer and water from the City in order to get electricity from
Ozarks.
   In their response, defendants assert that Ozarks won three customers in the annexed areas
--  Cherokee Nation Industries, the Maryetta School additions, and the Petit-Jean poultry plant
(now known as Tyson Foods). But, examination of these examples underscores the United
States' point -- that the City had the power through the all-or-none policy to exclude Ozarks as a
viable competitive threat. Ozarks won Cherokee Nations' business in 1971, thirteen years before
the City began its all-or-none policy. 27 The Maryetta School was a long-time customer of Ozarks,


Page 16      

and the City never solicited its business because the City's power lines were located far from the
school when the additions were built. 28
   Finally, Ozarks served the poultry plant because the City, in this one instance, preferred to
secure 600 new jobs and avoid paying a large debt to the federal government, more than it wanted
to enforce its all-or-none policy. William Langley and Charles Crozier both testified that the
Tyson situation was unique and that the City would actually have been worse off if it had enforced
the all-or-none policy and not "allowed" Ozarks to serve the plant. See Langley Dep. at 69-80
(attached as Exh. 4); Crozier Dep. at 18-24 (attached as Exh. 3). In the late 1980's, the City lined
up Hudson Foods to build a poultry processing plant near the City. See Langley Dep. at 69
(attached as Exh. 4); Crozier Dep. at 18 (attached as Exh. 3). Based on the number of new jobs
anticipated from the plant, the City received an Urban Development Action Grant from the federal
government. See Crozier Dep. at 18-19 (attached as Exh. 3); Langley Dep. at 69 (attached as
Exh. 4). However, when there was a downturn in the poultry industry, Hudson canceled its plans
to build the plant. See Langley Dep. at 69 (attached as Exh. 4); Crozier Dep. at 18 (attached as
Exh. 3).
   Stilwell then had to secure a new company to avoid paying the federal grant loan back.
Crozier Dep. at 18-19 (attached as Exh. 3). Consequently, several Stilwell citizens solicited Petit
Jean to build a poultry processing plant on the Hudson Food site. Langley Dep. at 4 (attached as


Page 17 .       

Exh. 4); Crozier Dep. at 18-20 (attached as Exh. 3). Petit Jean asked for a special industrial
electric rate to locate in the Stilwell area. Since Ozarks was able to offer its customers a special
economic development rate that was one-third of the City's electrical rate, the group of citizens
recommended that the City Council let Ozarks serve Petit Jean. 29 The City Council then passed a
resolution to "allow" Ozarks to serve Petit Jean which got Stilwell off the hook for the federal
grant and created over 600 jobs for the City of Stilwell. 30
   Given that these are the only examples of Ozarks' "competitive" success that defendants
can provide to the Court, they confirm rather than negate the evidence that the City possesses
monopoly power in the relevant market. That power was unquestionably enhanced by the
all-or-none utility policy. Thus, summary judgment is appropriate for the United States' claim
under Section 2 of the Sherman Antitrust Act.

III.  JURISDICTION
        Defendants assert that their challenged activity did not substantially affect
interstate commerce because Ozarks' and ERC's transactions were local, and each of the out-of-
state items defendants purchased was provided within Stilwell's corporate limits. 31 These


Page 18 . .       

assertions misstate the legal test for interstate commerce and are irrelevant. The effect on
interstate commerce does not turn on the "site" of any discreet transaction; rather the test is
whether defendants' challenged activity substantially affected interstate commerce even if the
activity occurred on a "purely local level." 32 The United States has submitted ample uncontested
facts that meet the test, 33 while defendants have offered only the legally irrelevant "transaction
site" argument in response.
        Defendants also appear to argue that the Tenth Circuit, in Crane v. Intermountain
Health Care, Inc
., 637 F.2d 715 (10th Cir. 1980) (en banc), requires a showing that the
"probable effect of the alleged act is to reduce the flow of goods in interstate commerce." Defs.
Brief at 14. This is clearly wrong. As set forth in the United States' SJ Brief at 22, the law does
not require that the flow of interstate commerce be actually diminished; it is sufficient to show
that such commerce is affected in more than a de minimus way. The United States has submitted
ample evidence showing the effect on interstate commerce, see n. 33, supra, and is therefore
entitled to summary judgment on this issue.


Page 19 .       

IV.       CONCLUSION

             For the foregoing reasons, the Court should find on summary judgment
that defendants have violated sections 1 and 2 of the Sherman Act.

                          Respectfully submitted,




                          JOHN R. READ
                          MICHELE B. CANO
                          U.S. Department of Justice
                          Antitrust Division
                          325 7th Street, N.W., Suite 500
                          Washington, D.C. 20530-0001
                          (202) 307-0468

January 8, 1998

.


FOOTNOTES


1 See, e.g., Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 15 (1984) (per se rule avoids "inquiry into actual market conditions"); Northern Pacific Railway Co. v. United States, 356 U.S. 1, 5 (1958) (stating that the per se rule conclusively deems tying practices illegal "without elaborate inquiry as to the precise harm they have caused or the business excuse for their use"); Standard Oil Co. v. United States, 337 U.S. 293, 305 (1949) (stating that when the Supreme Court, in International Salt Co. v. United States, 332 U.S. 392 (1947), found the tie to be per se illegal it "deemed irrelevant that there was no evidence as to the actual effect of the tying clauses upon competition").

2 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Universal Money Centers, Inc. v. American Telephone & Telegraph, 22 F.3d 1527, 1529 (10th Cir.), cert. denied, 115 S. Ct. 655 (1994).

3 See Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 462 (1992); Northern Pac. Ry., 356 U.S. at 5-6; Systemcare, Inc. v. Wang Laboratories Corp., 117 F.3d 1137, 1139 (10th Cir. 1997) (en banc); Multistate Legal Studies, Inc. v. Harcourt Brace Jovanovich Legal and Professional Publications, Inc., 63 F.3d 1540, 1546 (1995), cert. denied, 116 S.Ct. 702 (1996). Defendants only cite two antitrust cases substantively, neither of which holds otherwise nor offers support for their opposition to the United States' summary judgment motion. In Systemcare, Inc. v. Wang Laboratories Corp., 117 F.3d 1137 (10th Cir. 1997) (en banc), the court held that tying arrangements constituted agreements under section 1 of the Sherman Act. The sentence that defendants attempt to quote (albeit with some errors) did not change, as defendants suggest, the standard of proof in tying cases from preponderance of the evidence to clear and convincing. E.g., Warriner Hermetics, Inc. v. Copeland Refrigeration Corp. 463 F.2d 1002, 1016 (5th Cir.) (applying preponderance of evidence standard in tying case) cert. denied, 409 U.S. 1086 (1972). The court made no statement regarding the evidentiary standard, but simply stated that tying arrangements induced or forced the buyer to purchase the second good or service even if it only wanted the first. Defendants' reference to Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), is also unavailing. In Copperweld, the Supreme Court held that a wholly-owned subsidiary could not conspire with its parent corporation. Nothing in Copperweld contradicts the principles that the buyers in a case such as this case should be allowed to make their purchasing decisions independent of the defendants' sales decisions and should not be forced into the Hobson's choice of taking all utilities or none because no other alternative is offered.

4 See United States' Reply to Defendants' Response to Statement of Material Facts to Which There Is No Genuine Issue ("U.S. Reply to SOF") at  25. Thus, there is no economic requirement that sewer, water, and electric service be bundled. They can be and generally are sold separately.

5 See id. at  10-22. Defendants admit without equivocation all the facts establishing the sufficiency of their market power in sewer services. See id. at  10-13. Defendants' sewer monopoly alone gives them sufficient economic power to restrain competition in the sale of electricity once they tie sewer and electricity services together. In defendants' Response to Statement of Material Facts to Which There Is No Genuine Issue ("Defs. Response to SOF"), defendants make some contradictory assertions related to their power over water services. Specifically, they contend both that they compete with the rural water districts ("RWDs") in the provision of water service in annexed areas and also that the RWDs have an exclusive right to serve those annexed areas. But, as set forth in the U.S. Reply to SOF: (1) the case cited by defendants holds that RWDs' right to serve in the annexed area is not exclusive; (2) defendants do not deny that each time Stilwell has annexed into RWD territory and requested a customer, the RWD has agreed to turn over its water line, meter and/or customer; and (3) consequently, no customers have ever been able to choose competitively between RWD and Stilwell in the provision of water. See U.S. Reply to SOF at  15-17.

6 See United States' Memorandum in Support of Summary Judgment ("U.S. SJ Brief"), filed Nov. 13, 1997, at 15 and cases cited therein.

7 See Letter from Mr. Cole to Mr. Read dated October 21, 1997, supplementing defendants' interrogatory responses. Appendix 2 of the letter states that the electric revenues in 1996 were $10,784 for the final Skywood complex; $11,443 for Candle Ridge; and $11,246 for DHS. The letter is attached as Exh. 10 to United States' Statement of Material Facts To Which There Is No Genuine Issue ("SOF") filed November 13, 1997. See also U.S. Reply to SOF at  52.

8 Defendants stated in paragraph 3 of their Answer that the City "admits to having adopted an all-or-none' utility policy within its corporate limits under authority granted by the State of Oklahoma." See Exh. 1 to SOF.

9 Under the heading "Discussion and possible action on including policy of Utility Department and Area Development Authority in building permits, and approval of application form for said permits," the May 2, 1994 Minutes of the Stilwell City Council record: "Scottie Adair, Utility Superintendent, stated that their policy now requires that customers must take all three services of the city, water sewer, and electric, and not just one or two. Scottie requested the council approve the resolution approving this policy." The Minutes next state that a motion to approve the policy was made and carried. Nothing further regarding the policy (including any exception or limitation) is recorded in the minutes. See Minutes of the May 2, 1994 meeting (Exh. 15 to SOF).

10 When asked to state the dates that the all-or-none policy had been in effect before its formal approval by the City Council on May 2, 1994, defendants stated, "This has been an informal policy for a number of years, but specific dates are not available." When asked whether the City Council's approval of the all-or-none policy "reflects, modifies, or supersedes prior practices and policies," defendants stated, "Reflects prior practices." See Defendants Answer to CID at  6(b) and 6(d) (Exh. 2 to SOF).

11 See Adair Dep. at 51-54 (attached as Exh. 1).

12 Long-standing Supreme Court precedent establishes that tying arrangements are per se illegal even when not always applied or enforced. See International Salt Co. v. United States, 332 U.S. 392, 398 (1947); see also Detroit City Dairy, Inc. v. Kowalski Sausage Co., 393 F. Supp. 453, 466 (E.D. Mich. 1975) (listing cases where an exception to a tying arrangement did not prevent application of the per se rule). Contrary to defendants' bald assertion at page 8 of their brief, they do not have a right to tie products within Stilwell's corporate limits. Maintaining an "all or none" utility policy in the non-annexed portions of the City is still per se illegal under the four-part test. It requires people to purchase services that they might otherwise not want in order to get the one service they need. See Jefferson Parish, 466 U.S. at 12 (tying arrangements cause buyers to purchase products or services they do not want).

13 Defendants were asked in a pre-complaint Civil Investigative Demand interrogatory to identify each person who obtained an exception or waiver from the all-or-none utility policy. They identified only three people, all of whom lived outside of the City and its normal service area, and were offered certain City services in return for a needed easement. See CID Response  6(c)(6) (Exh. 2 to SOF) & Adair Dep. at 73 (attached as Exh. 1). Thus, even these three people hardly qualify as "exceptions" to the all-or-none policy, and the fact that defendants did not list any exceptions in the annexed areas should preclude them from claiming now that the entire area was excepted.

14 See CID Response  6(c)(5) (Exh. 2 to SOF). In responding to the request to identify each of the customers and premises to which the all-or-none policy approved by the City Council on May 2, 1994 was applied, defendants answered, "Skywood Apartments and Human Services Building."

15 See U.S. Reply to SOF at  39, 46. In discussing those examples now, defendants argue that those customers chose to buy all three utilities from defendants in exchange for favors (i.e., the removal of an easement) or pursuant to a previous agreement. Defendants never, however, deny the critical point that they gave those customers only the option of buying all three of the utilities or none at all.

16 See Okla. Stat. Ann., tit. 11 &167; 21-121 (West 1986 & Supp. 1996).

17 Adair Dep. at 53-54 (attached as Exh. 1). Defendants offer no alternative explanation for this "exception." Indeed, Larry Eagleton is silent as to the meaning or implementation of this "exception" even though he supplied a lengthy affidavit (Exh. 1 to Defs. Response to SOF) and defendants identified him as a participant in the development or implementation of the all-or-none policy. See CID Response  6(c)(2) (Exh. 2 to SOF).

18 All three of these examples occurred in areas that the City has annexed since 1961, thus proving that the exception to the all-or-none policy did not apply to all residents of the annexed areas. See U.S. Reply to SOF at  36 & 42; Adair Dep. at 126-27 (attached as Exh. 1).

19 See, e.g., Federal Trade Commission v. Superior Court Trial Lawyers Assoc., 493 U.S. 411, 424 (1990); Catalano v. Target Sales, Inc., 446 U.S. 643, 647 (1980); United States v. Trenton Potteries Co., 273 U.S. 392, 395-402 (1927). Additionally, by throwing other items into the mix and changing the real price these particular consumers paid for their bundle of utilities, defendants engaged in price discrimination and may have violated regulations regarding their utility rates. See Sharp v. Hall, 181 P.2d 972 (Ok. 1947) (municipal-owned utilities may not charge discriminatorily).

20 To be illegal a tying arrangement need only be an "added inducement" to the purchase. It is not relevant that the buyer would have bought the product from the same seller anyway. See Little Ceaser Enterprises, Inc. v. Smith, 172 F.R.D. 236, 257 (E.D. Mich. 1997). Thus, the Seventh Circuit held that it was irrelevant to the legality of a tying arrangement that the buyer desired the tied good and never sought to purchase it from an alternative seller. Photovest Corp. v. Fotomat Corp., 606 F.2d 704, 725 (7th Cir. 1979), cert. denied, 445 U.S. 917 (1980).

21 U.S. Reply to SOF at  34, 40-46. Any argument that these consumers agreed to buy electricity from Stilwell for reasons other than the tie is not supported by any evidence (and irrelevant). There is no testimonial or documentary evidence from which a reasonable fact-finder could conclude that the customer would have been able to obtain adequate sewer and water from someone other than defendants. For example, defendants admit that the developer of DHS tried and failed to procure sewer and water from elsewhere. Defs. Reply to SOF at  47. Additionally, defendants do not dispute that the Skywood developer had to agree to defendants' terms after they shut off its water and made its apartment complex uninhabitable. Defs. Reply to SOF at  40, 41.

22 As Areeda, Hovenkamp and Elhauge state in their antitrust treatise: The best way to test whether buyers would otherwise have taken the defendant's tied product would be to offer the tying and tied products separately. If the best the defendant can say about an otherwise unlawful tie is that it has no effect, there is little reason to tolerate it. Areeda, Hovenkamp, and Elhauge, Antitrust Law, Vol. X, An Analysis of Antitrust Principles and Their Application (Little, Brown & Co. 1996) at 296.

23 Defendants do not argue that Ozarks was legally barred from serving Candle Ridge.

24 See Okla. Stat. Ann., tit. 11 &167; 21-121 (West 1986 & Supp. 1996); see also, Northeast Oklahoma Electric Cooperative Inc. v. Oklahoma, 808 P.2d 680, 682 (Ok. 1991) (referencing Oklahoma Corporation Commission's decision that each building of a thirty-three building hospital was a separate point of delivery for electricity and hence a separate consumer)

25 See, e.g., Reazin v. Blue Cross & Blue Shield, 899 F.2d 951, 966-67 (10th Cir.), cert. denied, 497 U.S. 1005 (1990); Shoppin' Bag of Pueblo, Inc. v. Dillon Cos., 783 F.2d 159, 164 (10th Cir. 1986).

26 See Oklahoma Rural Electric Cooperative Act, as amended, Okla. Stat. Ann., tit. 18 &167; 437.2(k) (West 1986 & Supp. 1996); Retail Electric Supplier Certified Territory Act, tit 17 &167; 158.25 & 28 (West 1986).

27 William Langley, board chairman for defendant ADA, testified that the Cherokee Nations Industries facility was built in 1971 or 1972, many years before the all-or-nothing policy prevented Ozarks from fairly competing for new customers in the annexed areas: Q   Okay. What's C.N.I.? A   Cherokee Nation Industries. Q  And that's different from the Mankiller [Health Clinic] we talked about? A   Yes, it is. Q   When was that built? A   In 71, 72. Langley Dep. at 135 (attached as Exh. 4); see also U.S. Reply to SOF at  33 (stating, based on defendants' interrogatory responses, that the all-or-none policy begin in 1985).

28 Defendants provide no support for their claim that Ozarks won the right to service the Maryetta School additions. Mr. Eagleton's affidavit, which is all defendants cite, states nothing regarding the Maryetta School except that he is a member of the Board of the Education. See Exh. 1 to Defs. Response to SOF. Thus, there is no genuine dispute regarding the Maryetta School. Indeed, any claim that the City could legally have served the Maryetta additions would be inconsistent with the City's claim that Ozarks was legally barred from serving the third Skywood complex.

29 Langley Dep. at 75-77 (attached as Exh. 4). This also shows the error of defendants' contention that its prices are always lower than Ozarks.

30 Langley Dep. at 76 (attached as Exh. 4); Crozier Dep. at 23 (attached as Exh. 3). Since the Petit Jean/Tyson site is located in annexed territory, Ozarks had a right to serve Petit Jean and the City Council's vote was entirely superfluous, unless the City was voting to make an exception to its all-or-none utility policy for Petit Jean.

31 Defs. Brief at 14 & Response to SOF at  9. Defendants' additional assertion that Ozarks and ERC are not Arkansas businesses because they also conduct business in Stilwell is also unsupported. It is undisputed that both companies are headquartered in Arkansas. See U.S. Reply to SOF at  26, 35. Mr. Crozier, Vice President of Oklahoma Operations of Ozarks Electric, testified that the Board of Directors (which sets the business policies for Ozarks' entire operation) and the President and CEO of Ozarks (Mr. Crozier's boss) are located in Fayetteville, Arkansas. See Crozier Dep. at 6 (attached as Exh. 3). Mr. Rucker, Vice President of ERC, who oversaw the construction of ERC's properties in Stilwell, works out of ERC's principal office in Barling, Arkansas. See Rucker Dep. at 3-4 (attached as Exh. 5). Whether or not Ozarks and ERC obtain licenses to conduct business in Oklahoma, harming them harms Arkansas corporations and affects interstate commerce.

32 See, e.g., Anesthesia Advantage, Inc. v. Metz Group, 912 F.2d 397, 400 (10th Cir. 1990) & U.S. SJ Brief at 21-23 and cases cited therein.

33 See U.S. SJ Brief at 22-23; and U.S. Reply to SOF at  6-9, 26-32, 35.