US: Vertical Restraint

This article will address developments in vertical restraints law in the US over the past year. For an overview of the law generally, the reader should consult the chapter on US vertical restraints in The Antitrust Review of the Americas 2014.

Price restraints

There have been few developments in the area of price restraints. Without any mention of Leegin,1 in which the US Supreme Court rejected per se illegality for minimum resale price maintenance agreements, the Federal Trade Commission evaluated a claim of resale price maintenance in McWane, Inc2 under the rule of reason. Pursuant to a supply contract between McWane, Inc and Sigma Corporation for ductile iron pipe fittings manufactured by McWane, Sigma was required to sell the fittings at a price not less than 98 per cent of McWane’s published pricing.3 In reversing the administrative law judge’s determination that the pricing restraint was unlawful, the Commission noted that Sigma was only one of many distributors of McWane fittings in the US market and that there was no evidence that the price restraint had ‘market-wide effects’.4

Rejection of Leegin under the antitrust laws of some states remains unchanged. In an unpublished decision, a California court of appeal noted that vertical price fixing continues to be per se illegal under the state’s antitrust law, the Cartwright Act.5

Non-price restraints on distribution

Applying the rule of reason in cases alleging non-price vertical restraints, courts have focused on the restraints’ impact on inter-brand competition. The plaintiff in Gorlick Distribution Centers, LLC v Car Sound Exhaust System, Inc6 contended that a supplier of exhaust components for the automotive aftermarket, Car Sound, violated section 1 of the Sherman Act by giving favourable shipping terms to a competing automotive parts retailer in the Pacific Northwest, Allied. The plaintiff, Gorlick, complained that Car Sound shipped products to Allied’s facilities in the Pacific Northwest without charge but refused to ship products to Gorlick facilities outside of California even if Gorlick offered to pay shipping costs. Gorlick incurred additional costs in competing against Allied in the Pacific Northwest, because it had to ship products from California. Noting that the evidence showed that Car Sound was only one of several firms competing in the relevant market for the sale of exhaust parts and that it was not dominant, the court of appeals, in affirming summary judgment for Allied, held that Gorlick had failed to show any adverse effect on inter-brand competition. The court turned aside Gorlick’s claim that the restraint was unlawful because it limited intra-brand competition, observing that Allied had provided valuable promotional services for Car Sound products that amply justified the restraint.7

In denying defendant’s motion for summary judgment in United States v American Express Co,8 the court held that there were issues of fact as to whether American Express’s anti-steering rules were an unlawful vertical restraint under section 1 of the Sherman Act. The rules were intended to prevent merchants from steering customers to use other credit cards by, among other things, stating that they prefer other cards or criticising the American Express card. American Express argued that the government could not prove that it had market power and therefore could not prevail under the rule of reason. The court rejected the argument by pointing out that there is no need to prove market power if a plaintiff can prove that a restraint has actual adverse effects on competition in a relevant market, and it noted that the government had argued that it could prove such effects at trial.9 As for market power, the court held that market share was not dispositive and that, even though American Express had only a 26.4 per cent share of the general purpose credit and charge card volume, market power could be proven by taking into account other factors such as the percentage of cardmembers who refuse to patronise a merchant that does not accept the American Express card and American Express’s ability to raise discount rates for merchants outside the travel and entertainment industries.10

Non-price restraints on purchasing; most-favoured nation clauses

Tying arrangements

Tying claims have been the subject of a number of decisions in the past year. We will look at the most important of them.

Two separate products and tied sales

The court in Aerotec International v Honeywell International11rejected a claim that Honeywell had tied repair services to parts needed for the repairs. Aerotec, a competitor of Honeywell in the maintenance, repair and overhaul of auxiliary power units (APUs) for commercial aircraft, purchased parts from Honeywell needed for the repair of APUs manufactured by Honeywell. Aerotec alleged that Honeywell, the largest manufacturer of APUs for commercial aircraft, uses its dominant position in the market for repair parts for its APUs to coerce owners into purchasing repair services from Honeywell. The court turned aside Aerotec’s allegation of a tie-in, distinguishing Eastman Kodak Co v Image Technical Services.12 In granting summary judgment for Honeywell, the court held that there was no evidence that: (i) customers were prevented from buying Aerotec’s services as a result of the alleged tie-in; or (ii) Aerotec had been unable to sell repair services to owners of aircraft with Honeywell APUs as a result of any policy or practice by Honeywell to sell repair parts only to APU owners who use Honeywell repair services.13

In contrast, even though a strict tie-in was not alleged in Suture Express, Inc v Cardinal Health 200, LLC,14 the court held that a tying claim had been stated under section 1 of the Sherman Act where a loyalty discount programme effectively penalised customers that did not purchase certain products from the defendants. The plaintiff alleged that distributors of single-use medical and surgical supplies (med-surg supplies), unlawfully tied their sale to the purchase of sutures and devices used for minimally invasive surgery, called endomechanical products (endo products). The plaintiff distributed only sutures and endo products, and these were a comparatively small part of the range of products comprising med-surg supplies. It alleged that the defendants implemented a loyalty discount programme that effectively tied the sale of sutures and endo products to other products in the med-surg category. Under the programme, a hospital or other customer was eligible for a discount on all med-surg supplies if it purchased 90 per cent or more of its sutures and endo products from the defendants.15 The defendants argued in motions to dismiss that there was no tie-in because they did not require customers to purchase sutures and endo products in order to obtain other med-surg supplies. The court rejected the argument, holding that the discount programme had the effect of a tying arrangement, even though a ‘strict tie-in’ was not alleged.16

Conditioned or coerced sales

In response to an allegation in Aerotec International (see above) that Honeywell achieved the same effect as a tie-in by bundling parts and repairs at a discount, the district court observed that there was no evidence that customers had thereby been prevented from buying repair services from Aerotec. It held that Aerotec had failed to allege that the bundling of discounts had coerced customers into buying repair services from Honeywell and pointed to the fact that 46 per cent of APU repairs involved the purchase of parts separately from performance by Honeywell of repair services.17

Power in the tying product market

The need to show that a defendant has power in the market for the tying product or service was addressed as an element of proof in two cases. A tying claim against Blue Cross and Blue Shield of Illinois was dismissed for failure to allege that it had market power in the market for alleged tying services, inpatient and outpatient hospital services.18 In Suture Express (see above) the court noted that the plaintiff had alleged that, as a result of the defendants’ loyalty discount programme, it had lost a significant number of customers. When considered in combination with allegations of predatory pricing, high entry barriers and parallel pricing, the court held that it was ‘plausible to infer that each defendant has sufficient market power in the tying products to coerce buyers to accept the alleged tying arrangement,’19 and it denied the defendants’ motions to dismiss.

Adverse effect in the market for the tied product

The court in Sidibe v Sutter Health20 considered whether the plaintiffs had adequately alleged that the defendant’s conduct had affected competition in the market for the tied product. The plaintiffs in this class action were individuals in the San Francisco Bay area who were enrolled in a health plan offered by a commercial health insurer having a contractual relationship with Sutter Health. They alleged that Sutter Health, which controlled more than 31 hospitals and whose network included some 2,500 physicians, had unlawfully conditioned insurers’ access to inpatient hospital services on their agreement to purchase specialty provider services from all Sutter Health providers. Inpatient hospital services are the cluster of services consumed by patients who spend one or more nights in a hospital and include physician services and services of nurses and technicians.21 Specialty provider services are those from specialists, such as cardiologists or oncologists.22 The alleged tie had the effect of forcing health insurers to include every Sutter Health physician or physician group as a participating provider.23

The court dismissed the tying claim because plaintiffs had failed to allege that the contractual requirement had an adverse effect on competition in the market for the tied services – specialty provider services. After weighing the parties’ arguments as to what effect a plaintiff must show on the market for the tied product or service, the court held that a plaintiff ‘must prove facts showing a significant negative impact on competition in the tied product market’.24 Because the plaintiffs had failed to plead facts ‘showing an effect on a “not insubstantial volume of commerce” in a defined [tied service] market,’25 there was, according to the court, no claim stated under the per se rule or under the rule of reason.

Proof of illegal tying under the rule of reason requires that a plaintiff show that the tie has a substantially adverse effect upon competition in the market for the tied product.26 The court in Suture Express held that plaintiff had carried its pleading burden by alleging that the defendants’ conduct had caused injury to the plaintiff. From the plaintiff’s position in the market, it could be inferred that the injury affected not just the plaintiff but the market in general. There, the plaintiff alleged that it was the only significant specialty distributor of sutures and endo products in the relevant market, namely, domestic acute care providers that purchase med-surg supplies; that it had lost accounts as a result of the conduct; that hospitals and other acute care providers were barred from buying goods from the plaintiff as a result of the conduct; and that it deprived such providers of access to a more comprehensive product line, superior service and lower distribution fees.27

If a plaintiff is proceeding under a per se theory of illegal tying, it has been held that there is no need to separately plead or prove anti-competitive effects. In denying a motion to dismiss, the court noted in Cablevision Systems Corporation v Viacom International Inc28 that if a ‘plaintiff succeeds in establishing the existence of sufficient market power to create a per se violation, the plaintiff is also relieved of the burden of rebutting any justifications the defendant may offer for the tie.’29 A plaintiff seeking to prove a per se illegal violation must still show, however, that the tie-in involves a not insubstantial amount of interstate commerce in the tied market.30

Exclusive dealing arrangements

Exclusive dealing arrangements continue to provide fertile grounds for claims for monopolisation or attempted monopolisation under section 2 of the Sherman Act and for claims under section 3 of the Clayton Act and section 1 of the Sherman Act.

Pure exclusive dealing arrangements

The court in In re Pool Products Distribution Antitrust Litigation31looked at the legality of supply agreements between the only nationwide wholesale distributor of commercial and residential swimming pool products, Pool Corporation (Pool), and the three largest manufacturers of those products, controlling more than 50 per cent of the sales of pool products at the wholesale level. Under a preferred vendor programme with the manufacturers, Pool required them to discontinue favourable pricing or sale of products to Pool’s rival distributors.32 Since Pool’s agreements barred a substantial share of manufacturers from supplying its rivals with products, thereby driving up rivals’ costs, and could not be shown to promote inter-brand competition, the court held, in denying motions to dismiss, that plaintiffs had adequately alleged that Pool had engaged in exclusionary conduct that would support a claim of attempted monopolisation under section 2 of the Sherman Act.33

Applying the rule of reason, the court held that plaintiffs had also stated a claim for violation of section 1 of the Sherman Act. After finding that plaintiffs had adequately alleged that Pool had market power and that the manufacturers had ‘substantial clout’ in the industry, the court held that it could reasonably be inferred that the agreements with each manufacturer were capable of causing substantial harm to competition.34 In the absence of countervailing pro-competitive benefits, the court held that the exclusionary conduct alleged in the complaint was sufficient to state a claim against Pool and each of the three manufacturers.35

Failure to show how many customers had been locked into contracts with exclusive dealing provisions was fatal to a claim under section 1 in Aerotec International.36 Without this evidence, there was no way to ascertain whether Honeywell’s repair service agreements with APU owners had significant anti-
competitive effects in the relevant market. Although Aerotec pointed to a reduction in its own market share as a result of losing business to Honeywell, the record showed that there were at least 49 service providers in the relevant market. Given Aerotec’s small market share, there was no basis for extrapolating from its injury to an inference of injury to the market as a whole.37

There was no dispute in Kolon Industries Inc v EI DuPont de Nemours & Co38 that DuPont had entered into long-term, multi-year exclusive supply agreements with certain US key customers for para-aramid fibre used in the manufacture of body armour, tyres and other products. Kolon Industries, a competitor, contended that DuPont had entered into the agreements with high-volume customers in segments of the US market through which Kolon had sought to enter the market. It contended that the agreements with 21 customers choked off the ‘critical bridge’ to its entry into the US market.39 Even though there were approximately 1,000 potential commercial customers in the US for para-aramid, Kolon contended that DuPont had blocked market access through exclusive dealing agreements with the accounts. The court of appeals affirmed the district court’s entry of summary judgment for DuPont, noting that there was no evidence that access to the foreclosed accounts ‘was necessary to achieve scale in the broader US para-aramid market’.40Kolon thus failed to establish that the agreements had foreclosed competition in a substantial share of the market.

In McWane,41 the Federal Trade Commission found unlawful foreclosure. There, the Commission considered whether McWane’s distribution programme, the ‘Full Support Program’ (FSP), was exclusionary. McWane manufactured ductile iron fittings for pipes used in the transport of pressurised water in municipal and regional waterworks projects. It controlled 45–50 per cent of the US market for the fittings, and this fact, in combination with high barriers to entry, gave it monopoly power in the market for domestic fittings.42 Under the FSP, McWane would sell fittings only to those distributors that agreed to purchase exclusively from McWane. McWane was the only full-line supplier of domestic fittings and it informed distributors that they would not be able to buy from it if they sourced any fittings from Star Pipe Products, Inc (Star), the only other domestic fittings supplier.43 Since the FSP significantly impaired access of McWane’s only rival, Star, to the main channel of distribution, it was proper to find that harm to competition had been proved.44

McWane objected that Star’s lagging sales were the result of factors other than the FSP, but the Commission held that it was sufficient to show that the exclusive dealing policy ‘contributed significantly’ to the decline in sales.45 There was no need to show that it was the sole cause of the decline, and the evidence established that the FSP contributed to distributors’ reluctance to buy from Star. The Commission found that the FSP was exclusionary:

McWane’s program forced its distributors to carry McWane domestic fittings exclusively. McWane thus deprived its rivals, mainly Star, of distribution sufficient to achieve efficient scale, thereby raising costs and slowing or preventing effective entry. The result harmed competition by increasing barriers to entry and allowing McWane to maintain its monopoly position, which prevented meaningful price competition and deprived consumers of the ability to choose among the products, terms of sale, and services of varying suppliers of domestic fittings.46

Once harm to competition had been shown, the burden shifted to McWane to demonstrate that the FSP promoted pro-competitive objectives.47 The first objective – to preserve sales volume – benefited McWane, but the Commission noted that there was no evidence that it was in any way pro-competitive and beneficial to consumers. The second objective – to prevent customers from cherry-picking the most popular fittings and not buying from the rest of the line – similarly failed as a pro-competitive justification for the programme,48 and the Commission affirmed the administrative law judge’s determination that McWane had used the FSP to maintain its monopoly in violation of section 5 of the FTC Act.

In order to prevail on an exclusive dealing claim, there is no need to show total market foreclosure. It was held in Suture Express49 that foreclosure equal to the defendants’ combined market share (72 per cent) more than satisfied the level of foreclosure needed to state a claim for unlawful exclusive dealing under section 3 of the Clayton Act. Similarly, there is no requirement that an exclusive dealing arrangement completely bar a customer from purchasing goods from a competitor of its supplier. Complete exclusion is not the test of liability.50

The duration of an exclusive dealing agreement is relevant to evaluation of its impact on competition, and the court in PNY Technologies, Inc v SanDisk Corporation51 held that contracts with short terms that could easily be terminated by either party for any reason could not ‘plausibly foreclose competition’.52

In weighing the effect of an exclusive dealing arrangement on a competitor’s access to distribution channels, the court in PNY Technologies considered availability of access to alternate channels. The plaintiff, PNY, alleged that SanDisk Corporation had entered into exclusive dealing agreements with retailers that prevented them from carrying products made by PNY and other competitors. The agreements, according to PNY’s complaint, cut off SanDisk competitors from nearly half of the retail store distribution of secure digital cards used in flash memory system products.53 SanDisk argued that PNY could sell directly to consumers if it chose to do so and that this was an available alternate distribution path. The court agreed, turning aside PNY’s allegations as ‘nothing but bare conclusions’54 and dismissing its exclusive dealing claim.

Partial exclusive dealing arrangements

Even though an agreement may not explicitly preclude a customer from purchasing goods from a supplier’s competitor, it may have a comparable effect if it provides incentives that discourage purchasing from the competitor. A common version of such an agreement is one that uses market-share discounts and the exclusionary effects of this type of agreement are receiving increased judicial scrutiny.

The court considered the exclusionary effects of a market-share discount agreement in Eisai Inc v Sanofi-Aventis US, LLC.55 At issue was the distribution of pharmaceutical products used to treat blood clots. The plaintiff, Eisai Inc, marketed Fragmin. The defendants, Sanofi-Aventis US, LLC and an affiliate (collectively, Sanofi), marketed Lovenox. Sanofi had monopoly power in the relevant market (the LTC market), ranging from an 81–92 per cent share during the period in question. In its sale of Lovenox to hospitals, Sanofi offered discounts in relation to the amount of Lovenox bought by a hospital in a four-month period. As the percentage of Lovenox purchases increased in relation to a hospital’s total purchase of LTC drugs, the discount increased. If, for example, a hospital’s purchases of Lovenox equaled or exceeded 90 per cent of its total purchases of LTC drugs in a period and it bought less than US$100,000 of the drugs in the period, the discount would be 18 per cent. If purchases of this size were in the range of 75–79 per cent, the discount was 9 per cent. As the size of purchases increased, the percentage of discount increased for a given market share.56

Since this was not a pure exclusive dealing arrangement, a threshold issue for the court in deciding Sanofi’s motion for summary judgment was whether to evaluate the legality of the discount programme under the price–cost test or under the rule of reason. Sanofi contended that the price–cost test should be applied since Eisai was challenging its pricing practices. Under this test, there is no antitrust liability if the defendant’s pricing is above cost.57 Eisai contended that the discount programme amounted to a de facto exclusive dealing arrangement and should therefore be evaluated under the rule of reason. There was no dispute that Sanofi was selling Lovenox above cost.

The court analysed the Sanofi discount programme in relation to the rebate programme reviewed by the Third Circuit in ZF Meritor, LLC v Eaton Corp58 in which market share discounts were offered in combination with long-term supply agreements and other incentives to secure orders for heavy-duty truck transmissions. In contrast to the Third Circuit’s application of rule of reason analysis to the practices under review in ZF Meritor, the court concluded that Sanofi’s discounts were subject to the price–cost test. Even though Eisai showed in its summary judgment papers that the discounts had exclusionary effects, the court applied the price-cost test because it found that ‘price is the predominant mechanism of exclusion under Sanofi’s practices’.59 It rejected Eisai’s argument that the Lovenox marketing programme excluded rivals by multiple other means, finding that all of them ‘relate…back to price’.60 Eisai contended, for example, that the programme prevented customers from buying less expensive products from rivals, but the court noted that Eisai’s market share had actually increased during the relevant period – presumably as a result of customers choosing Fragmin instead of Lovenox – and that there was no penalty for a Lovenox customer switching to another brand. Unlike the facts before the court in ZF Meritor, ‘Sanofi did not threaten to cut off its customers’ supply, and there is no evidence that hospitals feared the loss of Sanofi as a supplier by buying rival drugs’.61 Since the price–cost test applied and there was no claim that Sanofi had sold Lovenox below cost, there was no liability under the Sherman Act.62

In denying a motion to dismiss, the court in Pro Search Plus, LLC v VFM Leonardo, Inc63 ruled that the plaintiff had adequately alleged a de facto exclusive dealing arrangement in violation of section 1 of the Sherman Act. The plaintiff, Pro Search, provided digital photographs for use by hotels and online travel agencies on their websites, and it competed against defendant, VFM Leonardo (VFML), for this service and the provision of an online distribution platform for the photographs and other content. Although VFML did not have explicitly exclusive contracts with any hotels, travel agencies or the intermediary used by hotels to display photographs used by online travel agencies, Pro Search alleged that VFML’s monopoly in the relevant markets effectively prevented them from dealing with a competitor. It alleged that VFML’s monopoly made dealing with VFML ‘an economic necessity’ and made ‘the cost of switching prohibitive’.64 VFML contended that its contracts did not prevent Pro Search from reaching customers through alternative channels of distribution, but the court observed that the theoretical possibility that an alternative channel might be available did not preclude evidence that ‘a de facto exclusive dealing arrangement could prevent a potential alternative channel of distribution from actually being used.’65 Citing ZF Meritor and other cases, the court held that Pro Search had adequately pleaded the existence of a de facto exclusive dealing arrangement.66

Most-favoured nation clauses – the Apple case

The court found in United States v Apple, Inc67 that use of a most-favoured nation clause by Apple, Inc in contracts with publishers was in furtherance of a per se illegal price-fixing agreement. In connection with introduction of the iPad, Apple sought to reach agreement with major publishers on distribution of e-books in a way that would permit them to be read by iPad owners. Before the introduction by Apple of its iBooks Store in 2010, Amazon had 90 per cent of the market for retail distribution of e-books in the US, which were readable by Amazon customers on its Kindle e-reader device. Amazon charged readers US$9.99 for new book titles and bestselling titles under what was known as the wholesale pricing model.68 Apple proposed, in contrast, that the retail price for e-books be set by the publisher under an agency pricing model. Publishers had objected to Amazon’s US$9.99 price point because it threatened the profitability of hardcover editions and sales at offline stores.

In its negotiations with publishers, Apple insisted on inclusion of a most-favoured nation (MFN) clause in any distribution agreement, namely, a promise by the publisher that it would sell a new release to Apple at a price equal to its lowest price to any other retailer. The trial court found that the publishers understood that they would have to move Amazon from the wholesale pricing model to the agency model if the arrangement with Apple were to prove profitable. Otherwise, Apple would, by operation of the MFN clause, be selling titles at US$9.99 alongside Amazon. The trial court rejected Apple’s argument that the MFN clause was needed solely to protect Apple from price competition, finding, instead, that it provided an incentive for publishers to abandon the wholesale pricing model:

Because of the MFN, Apple concluded that it did not need to include as an explicit term in its Agreements a demand that a Publisher Defendant move all of its resellers to agency. The MFN was sufficient to force the change in model. The economics of the Agreements were, simply put, ‘terrible’ for the Publishers. The Publisher Defendants already expected to lose revenue from their substitution of an agency model for the wholesale model of e-book distribution. Unless a Publisher Defendant followed through and transformed its relationships with Amazon and other resellers into an agency relationship, it would be in significantly worse terms financially as a result of its agency contract with Apple.69

The evidence showed that publishers that had concluded e-book distribution agreements with Apple in January 2010 thereafter notified Amazon that they would require it to convert to the agency pricing model and that Amazon acquiesced. The government sought to show that Apple had violated section 1 of the Sherman Act by facilitating the publishers’ conversion to the agency pricing model, and the trial court found for the government:

Apple is liable here for facilitating and encouraging the Publisher Defendants’ collective, illegal restraint of trade. Through their conspiracy they forced Amazon (and other resellers) to relinquish retail pricing authority and then they raised retail e-book prices. Those higher prices were not the result of market forces but of a scheme in which Apple was a full participant.70

The case is pending on appeal in the Second Circuit, No. 13-3741(L).

Notes

  1. Leegin Creative Leather Prods v PSKS, Inc, 551 US 877 (2007).
  2. In the Matter of McWane, Inc, 2014 FTC LEXIS 28 (FTC 2014).
  3. Id at *28.
  4. Id at *106.
  5. Alsheikh v Superior Court of Los Angeles County, 2013 Cal. App. Unpub. LEXIS 7187, at *3 (Cal. Ct. App. 7 October 2013) (‘vertical price fixing is a per se violation of the Cartwright Act,’ unaffected by the holding in Leegin).
  6. 2013 US App. LEXIS 14635 (9th Cir. 2013).
  7. Id at *18–19.
  8. 2014 US Dist. LEXIS 63169 (SDNY 2014).
  9. Id at *24–30.
  10. Id at *30–41.
  11. 2014 US Dist. LEXIS 38651 (D. Ariz. 2014)
  12. 504 U.S. 451 (1992).
  13. 2014 US Dist. LEXIS 38651, at *13–14.
  14. 963 F.Supp.2d 1212 (D. Kan. 2013).
  15. Id at 1217.
  16. Id at 1221.
  17. Aerotec Int’l v. Honeywell Int’l, 2014 US Dist. LEXIS 38651, at *16–17 (D. Ariz. 2014).
  18. Marion HealthCare v S Ill Healthcare, 2013 US Dist. LEXIS 120722, at *35–38 (SD Ill. 2013).
  19. 963 F.Supp.2d at 1221.
  20. 2013 US Dist. LEXIS 160512 (ND Cal. 2013).
  21. Id at *11.
  22. Id at *13–14.
  23. Id at *9.
  24. Id at *45 (quoting In re Webkinz Antitrust Litig, 2010 US Dist. LEXIS 111810 (ND Cal. 2010)).
  25. Id at *47 (citation omitted).
  26. Suture Express, Inc v Cardinal Health 200, LLC, 963 F.Supp.2d 1212, 1220 (D. Kan. 2013).
  27. Id
  28. 2014 US Dist. LEXIS 84498 (SDNY 2014).
  29. Id at *5 (quoting In re Wireless Tel Servs Antitrust Litig, 385 F.Supp. 2d 403, 414 (SDNY 2005)).
  30. Id at *4 (‘The parties generally agree that, to determine whether a particular tying arrangement is illegal per se, a court must examine whether there exists: (1) a tying and tied product; (2) evidence of actual coercion by the seller that forced the buyer to accept the tied product; (3) sufficient economic power in the tying product market to coerce purchaser acceptance of the tied product; and (4) the involvement of a ‘not insubstantial’ amount of interstate commerce in the tied market.’). Accord, eg, Aerotec Int’l v Honeywell Int’l, 2014 US Dist. LEXIS 38651, at *12–13 (D. Ariz. 2014) (‘For a tying claim to be considered a per se violation, “a plaintiff must prove: (1) that the defendant tied together the sale of two distinct products or services; (2) that the defendant possesses enough economic power in the tying product market to coerce its customers into purchasing the tied product; and (3) that the tying arrangement affects a ‘not insubstantial volume of commerce’ in the tied product market”’ (quoting Cascade Health Solutions v PeaceHealth, 515 F.3d 883, 913 (9th Cir. 2008))).
  31. 940 F.Supp.2d 367 (E.D. La. 2013).
  32. Id at 374.
  33. Id at 387–92.
  34. Id at 398.
  35. Id at 399.
  36. Aerotec Int’l v Honeywell Int’l, 2014 US Dist. LEXIS 38651 (D. Ariz. 2014).
  37. Id at *22–23.
  38. 2014 US App. LEXIS 6161 (4th Cir. 2014).
  39. Id at *41.
  40. Id at *43.
  41. In the Matter of McWane, Inc, 2014 FTC LEXIS 28 (FTC 2014).
  42. Id at *42–47.
  43. Id at *55–56.
  44. Id at *73.
  45. Id at *67.
  46. Id at *60.
  47. Id at *85.
  48. Id at *90–91.
  49. Suture Express, Inc v Cardinal Health 200, LLC, 963 F.Supp.2d 1212, 1228-29 (D. Kan. 2013).
  50. Id at 1228. Accord, eg, PNY Techs v SanDisk Corp, 2014 US Dist. LEXIS 58108, at *17 (ND Cal. 2014) (‘Actual exclusivity is not a prerequisite to finding unlawful exclusive dealing under the rule of reason [...] If the effect of the agreement is to suppress competition, the fact that the agreement does not explicitly mandate exclusivity is of no moment’).
  51. 2014 US Dist. LEXIS 58108 (ND Cal. 2014).
  52. Id at *21.
  53. Id at *3–5.
  54. Id at *30.
  55. 2014 US Dist. LEXIS 46791 (DNJ 2014).
  56. Id at *9–12.
  57. Id at *42. The test is based on Brooke Group Ltd v Brown & Williamson Tobacco Corp, 509 US 209 (1993).
  58. 696 F.3d 254 (3d Cir. 2012), cert. denied, 133 S.Ct. 2025 (2013).
  59. 2014 US Dist. LEXIS 46791, at *73.
  60. Id at *82.
  61. Id at *74.
  62. Id at *85. The court also analysed the market-share discount programme under the rule of reason and held, in the alternative, that there was no basis for liability even if the programme were viewed as a de facto exclusive dealing arrangement. Id at *95–106.
  63. 2013 US Dist. LEXIS 169856 (CD Cal. 2013).
  64. Id at *16–17.
  65. Id at *19 (italics in original).
  66. Id at *20.
  67. 952 F.Supp.2d 638 (SDNY 2013).
  68. Id at 649.
  69. Id at 692.
  70. Id at 709.

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