Crossover grading

[Peter_Spaeth]

Originally Posted by benjulmag

One of the things that has guided me well as an attorney is what I call the smell test.

If,

(I) company B is the industry leader and has a publicly stated policy of objectively evaluating all submissions explicitly including submissions of slabbed company A cards;

(II) company B as a matter of internal policy has a policy against crossing over cards in company A's slabs, which policy can be proven;

(III) company B when returning the uncrossed over cards to the submitter states the reason for the refusal to cross over is that the cards are either altered or do not merit the same grade;

(IV) these occurrences occur on a regular basis;

(V) company B's profitability goes down, which decrease can be proven to correlate to company B's internal policy of refusing to objectively evaluate slabbed company A cards in crossover submittals;

Then,

company A has an actionable claim for damages against company B.

And to go further, if company B can be proven to have similar policies with similar results against all the other TPG companies in the market, such that that the end result is company B is left as the only TPG company in the industry,

Then

there are antitrust implications.


Let me worry about whether what I state to be fact can be proven. Assuming they can, I believe the conclusions I have drawn stand a very good chance of being correct if tested.

All I can go on is all the years of practice I have had including many antitrust cases some pretty high profile. I would personally value that more than your smell test -- antitrust law can be very technical -- but whatever. If you think you know more about antitrust law than I do, cool. PS in your (V) you have the wrong company's profitability going down (I think anyhow). You might want to fix that. If you truly meant to say B, then you haven't articulated any theory of harm to A, have you? Not that any of that matters really to the question.

Kinder, gentler version of above -- just because big company A does something to hurt small company B, even badly hurt it, it doesn't necessarily implicate the antitrust laws. It might, but there are lots of reasons it might not. It's a very complex subject that even the Supreme Court struggles with at times.

[benjulmag]

Originally Posted by Peter_Spaeth

All I can go on is all the years of practice I have had including many antitrust cases some pretty high profile. I would personally value that more than your smell test -- antitrust law can be very technical -- but whatever. If you think you know more about antitrust law than I do, cool. PS in your (V) you have the wrong company's profitability going down you might want to fix that.

Kinder, gentler version of above -- just because big company A does something to hurt small company B, even badly hurt it, it doesn't necessarily implicate the antitrust laws. It might, but there are lots of reasons it might not. It's a very complex subject that even the Supreme Court struggles with at times.

In the example I give, company B has a stated policy of crossing over a card from company A if the card meets company B's criteria. So what point are you making by saying that they did not have to have that policy? I am not talking about that fact pattern. I initiated this thread to discuss what if any legal implications there might be to company B if it can be proven that the real reason it did not do the crossover is not because its specified criteria is not met but only because the card came from company A, and this practice is repeated over and over.

As far as antitrust law is concerned, I am not stating that it is not complicated, nor that I profess to have more expertise or experience in it then you do. Nor am I stating that this is a cut and dry legal matter. My intent is to initiate discussion about a practice that I have heard takes place, and if it does, it reeks to the bone. If company B wants to have a policy of not crossing over company A's cards, great, then say so. But unless they explicitly state that is their policy, I believe they have a duty to objectively evaluate crossover submissions.

While I agree that antitrust law may be complicated, the economic principles on which I understand it to be based I believe are pretty basic. I am familiar with many of the Supreme Court cases on this subject and the struggles the Court has had. So to the extent you are insinuating that if our hobby ends up with company B having a near 100% market share, coupled it being proven the company did not objectively evaluate submissions in accordance with its stated policies, it is very unlikely that company A has any legal recourse or that there are not antitrust implications, I respectfully disagree.

PS. Thank you for pointing out I had the wrong company's profitability going down. I have corrected that.

[Peter_Spaeth]

How is antitrust law the source of that duty? There are all sorts of things that might rise to the level of a business tort but aren't an antitrust violation.

From an economic perspective, what's the difference if they make it an explicit policy or not? It seems to me if you concede they could refuse to cross SGC cards without violating the antitrust laws, then by the same token they could say they would cross them but then not do it. Sure. maybe one seems more underhanded or distasteful or sleazy, but so what, the economic effect is the same so the antitrust analysis which concerns itself with economic effect should be the same. Either way, the bottom line is that they don't cross SGC cards. It's not an antitrust issue IMO. Maybe the submitters get screwed because they pay on false pretenses, but that has nothing to do with SGC's potential claim.

One other thing I alluded to earlier. SGC would be insane to want to publicize that PSA wouldn't cross its cards. It makes SGC look bad on multiple levels.

[benjulmag]

Originally Posted by Peter_Spaeth

From an economic perspective, what's the difference if they make it an explicit policy or not?

The signal they are giving the hobby by its refusal to cross over.

If company B explicitly states that they objectively evaluate all crossovers, then its refusal to do a crossover is an expressed opinion the card is either altered or not worthy of the same numerical grade. It this in fact occurs over and over and it creates an impression in the hobby that company A offers an inferior grading service, that can cause company A to lose customers, in the same manner a false advertising campaign can.

If though the impression the hobby gets is the reason company A's cards are never crossed over by company B is because company B as a matter of policy does not consider crossovers, the hobby would not get the same impression that company A offers an inferior grading service, and as a result company A would not lose those customers.

[Peter_Spaeth]

Originally Posted by benjulmag

The signal they are giving the hobby by its refusal to cross over.

If company B explicitly states that they objectively evaluate all crossovers, then its refusal to do a crossover is an expressed opinion the card is either altered or not worthy of the same numerical grade. It this in fact occurs over and over and it creates an impression in the hobby that company A offers an inferior grading service, that can cause company A to lose customers, in the same manner a false advertising campaign can.

If though the impression the hobby gets is the reason company A's cards are never crossed over by company B is because company B as a matter of policy does not consider crossovers, the hobby would not get the same impression that company A offers an inferior grading service, and as a result company A would not lose those customers.

If company A does not have an inferior grading service, why are people seeking to cross its cards into company B's holders in droves, such that company B's refusal to do so is capable of badly hurting company A?

[benjulmag]

Originally Posted by Peter_Spaeth

If company A does not have an inferior grading service, why are people seeking to cross its cards into company B's holders in droves, such that company B's refusal to do so is capable of badly hurting company A?

And so therefore company B has a free rein to say anything it wants or through its deceptive trade practices give false impressions about company A's product?

[Peter_Spaeth]

Originally Posted by benjulmag

And so therefore company B has a free rein to say anything it wants or through its deceptive trade practices give false impressions about company A's product?

Nonresponsive. I never said there could not be a business tort here though I'm skeptical without some overt defamation. But you said there was an economic/antitrust difference between just refusing to cross and saying you would but not doing it, and you articulated that difference as the latter suggested A had an inferior product, so I am responding to that. If A is claiming it's hurt because B won't rebrand its product as B's product, what does that tell you about A's assessment of its own product, or the market's?

A should be critically examining itself and asking why people are trying switch its cards to B's holders, not making it painfully obvious that it has an inferior product by suing B.

I think B would welcome such a suit actually -- what great publicity to have high profile dealers/collectors explain why they wanted to get their cards out of A's holders and into B's.

[wondo]

I currently have 36 cards from BGS submitted to PSA for crossover inspection. I put my minimum grade at .5 lower than the current BGS grade. I'll post results when I receive them. BTW, its all the same modern card.

[Peter_Spaeth]

Originally Posted by wondo

I currently have 36 cards from BGS submitted to PSA for crossover inspection. I put my minimum grade at .5 lower than the current BGS grade. I'll post results when I receive them. BTW, its all the same modern card.

If you have 36 SP Jeters mazel tov.

[Peter_Spaeth]

Corey consider this example. A small pharma company with one drug loses much of its market share when Merck develops a blockbuster drug for the same indication. Small co. goes to Merck and says, I need to license your drug and become an authorized seller to stay in business. Merck says no. Lawful refusal to deal.

Change the facts. Merck says yes, but then breaches the bargain and never delivers the product. Small co. might have a breach of contract claim now, but it still doesn't have an antitrust claim; the economic effect is the same whether the refusal is straightforward or sleazy. Put another way, every wrongful act by a monopolist does not thereby become an antitrust violation.

[benjulmag]

Originally Posted by Peter_Spaeth

Corey consider this example. A small pharma company with one drug loses much of its market share when Merck develops a blockbuster drug for the same indication. Small co. goes to Merck and says, I need to license your drug and become an authorized seller to stay in business. Merck says no. Lawful refusal to deal.

Change the facts. Merck says yes, but then breaches the bargain and never delivers the product. Small co. might have a breach of contract claim now, but it still doesn't have an antitrust claim; the economic effect is the same whether the refusal is straightforward or sleazy. Put another way, every wrongful act by a monopolist does not thereby become an antitrust violation.

Two responses.

1. One of the points I was making is that company A could very well have a legal claim for damages from company B that is not predicated on antitrust violation.

2. In my fact pattern company B's practices results it having a (near) 100% market share. So let's change your example a bit. Let's say that Merck has a business model in which it always breaches its license agreements with small companies. Merck as a result gains a 100% market share, the result being there are no companies spending R&D dollars to develop new drugs out of a belief they will be eventually put out of business by Merck. Are you saying that does not have antitrust implications?

[oldjudge]

The market has judged via its’ valuations that PSA has a superior product. If PSA refused to cross SGC’s cards (and there is no blanket policy, some cards do cross)they would not be diminishing their value, the marketplace has already done that. For all the cards that PSA refuses to cross to an equivalent grade they are doing nothing to the card’s value. For the cards they do cross they are increasing their value and indirectly the value of the SGC brand.
However, there is no reason for PSA to worry about SGC. Look at the lines in front of each company’s booths at the National and judge for yourself whether this battle isn’t already over.

[wondo]

Originally Posted by Peter_Spaeth

If you have 36 SP Jeters mazel tov.

Peter,
Very funny - all the same serial number, too!!!

Actually just some Tiger Woods rookies. My experience with crossing from both BGS and SGC has been more than reasonable. From a marketing standpoint, I like a version of the car analogy. Think of a Lincoln driver going into a GM dealership and driving out in a Malibu. The driver has paid and downgraded, but is now in a GM product. The dealership is happy; never thought of not accepting the crossover. Maybe it isn’t a perfect comp, but I like it!