Civil Action No. 19

1080 (JDB)

SURESCRIPTS, LLC,

Defendant.

MEMORANDUM OPINION

The Federal Trade Commission petitions this Court for equitable reliei including a

permanent injunction and monetary relief, against Surescripts , LLC pursuant to Section 13(b) of

the FTC Act. See 15 U.S.C. $ 53(b). The FTC alleges that Surescripts has violated Section 2 of

the Sherman Act by maintaining a monopoly in two markets-electronic prescription routing and

eligibility (explained below)-through anticornpetitive conduct, including an exclusive loyaltybased pricing policy. Surescripts moves to dismiss, arguing (1) that the Court lacks subject matter

jurisdiction under Section l3(b) of the FTC Act, and (2) that the FTC fails to state a claim under

Section 2 of the Sherman Act because it does not allege either that Surescripts employed predatory

pricing or that Surescripts's market behavior violated the rule of reason. For the reasons explainedbelow, the Court will deny Surescripts's motion.

BlcxcRouNt

At the pleadings stage, the Court assumes the facts alleged in the complaint are true and

presents them in the light most favorable to the plaintiff-here, the FTC. Felter v. Kempthorne,

473 F.3d 1255,1257 (D.C. Cir. 2007). Sulescripts is a health information technology company

operating in two complementary markets: electronic prescription routing ("routing") and

v

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(often the patient's pharmacy benefit manager ("PBM")) to a prescriber's EHR. Id. Surescriptscharges pharmacies a fee for each routing transaction and charges PBMs a fee for each eligibility

transaction. Id. T 49.

According to the FTC, Surescripts mainlains at least a 95Yo share (by transaction volume)

in each market using various anticompetitive measures. Id. lifl 2-3. Beginning around 2009,

Surescripts implemented a pricing policy that rewarded "loyal" (i.e., exclusive) customers with

lower prices. Id. T 2. "To be considered exclusive, Surescripts requires that a pharmacy . . . route

100% of its transactions ttn'ough and only through the Surescripts network." Id. 1l 66 (internal

quotation marks omitted). "The same structure exists for PBMs in eligibility." Id. 1167. For

routing, the cost to non-loyal customers varies by volume, but can be as high as I more than

for loyal customers; for eligibility, as high as | *o... Id. T1l 70_71. Surescripts structured itscontracts with EHR providers such that loyalty in either the routing or eligibility markets resultedin an incentive payment to the EHR provider of I of the fees paid by the customers in that

market; exclusivity in both markets resulted in an incentive payrnent of ! of the fees from bothmarkets. Id. n 77 .

The FTC contends that "[t]hose effectively exclusive contracts foreclosed at least 7}Yo of

each market, eliminating multiple competitive attempts from other companies. . . that offered

lower prices and greater innovation." Id. 113. The FTC notes that these loyalty contracts are

especially effective at excluding competition in the routing and eligibility markets because, given

2
hindered customers

 ability to 

multihome

 and 

significantly elevat[ed] the critical mass fof

initial customers] a Surescripts cornpetitor would need to become a viable network in'either routing

or eligibility." Id.

Beyond the loyalty program, Surescripts employed "threats and other non-merits based

competition" to keep its customers from working with its competitors. Id. fl 4. For instance, whena competitor, Emdeon, attempted to enter the market through contracts with Allscripts, a largeEHR, Surescripts relied on its market power to force Allscripts into exclusive contracts that

prevented a renewal of Allscripts's contract with Emdeon. Id. ll'1T I l0-1 1. Surescripts also entered

into a non-compete agreement with another competitor, RelayHealth, which prevented

RelayHealth from capturing up to 15-20o/o of the routing market. Id. T 5; see also id. TT 88-99.

The FTC alleges that these exclusive arrangements have allowed Superscripts to impose

heightened prices on large portions of the markets, see. e.q., id. llfl 187-95, and have stifled

innovation and reduced quality in the two e-prescribing markets, id. lTT 196*215.

Surescripts moves to dismiss the FTC's complaint, arguing that this case is both

procedurally and substantively defective. Surescripts, LLC's Mot. to Dismiss Compl. ("Def.'sMot.") [ECF No. 32] 1T'1T 1-3. First, Surescripts argues that the Court lacks subject matter

jurisdiction over the request for a permanent injunction because the FTC cannot establish that this

case is "proper" under Section 13(b) of the FTC Act. Id. T 1; see also 15 U.S.C. $ 53(b). Second,

Surescripts argues that the FTC's complaint fails to state a claim under Section 2 of the Sherman

J
couft presumes the truth of a complaint's factual allegations, though it is 

not bound to accept as

true a legal conclusion couched as a factual allegation." Bell Atl. Corp. v. Twombly, 550 U.S.

544,555 (2007) (internal quotation omitted). The court then asks whether the facts alleged suffice

"to state a claim to relief that is plausible on its face." Aú*eqqhal, 556 U.S. 662,678 (2009)(internal quotation omitted). The court considers "facts alleged in the complaint, any documents

either attached to or incorporated in the complaint and matters of which fthe Court] may take

judicial notice." Mpo), v. Rhee, 758 F.3d 285,291 n.l (D.C. Cir.2014) (internal quotation

omitted).

Under Rule l2(b)(l), a court has an affirmative obligation to ensure that it is acting within

the scope of its jurisdictional authority. Grand Lodge of the Fraternal Order of Police v. Ashcroft,

185 F. Supp. 2d9,13 (D.D.C. 2001). "[The] court must dismiss a case when it lacks subject matter

jurisdiction." Randolph v. ING Life Ins. & Annuity Co., 486 F. Supp. 2d l, 4 (D.D.C. 2007).

"[P]laintiff s factual allegations in the complaint. . . will bear closer scrutiny in resolving a

l2(bxl) motion than in resolving a l2(bX6) motion for failure to state a claim." Grand Lodge,

185 F. Supp. 2d at 13-14 (internal quotation marks omitted). And the coufi may consider material

other than allegations in the complaint in determining whether it has jurisdiction to hear the case.

See Settles v. U.S. Parole Comm'n,429 F.3d 1098, I 107 (D.C. Cir. 2005).

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13-29.. Surescripts argues that.section 13(b) of the FTC Act limits the Court's power to issue

permanent injunctions upolt request by the FTC to "proper cases," which Surescripts intetprets as

'oroutine, straightforward" cases. Id. at l7-18 see also l5 U.S.C. $ 53(b). This case, Surescriptscontinues, does not qualify as routine or straightforward because it involves complex and novel

issues of antitrust law, such as how to understand the two-sided e-prescription markets of routingand eligibility in light of the Supreme Court's recent decision in Ohio v. American Express Co

("Amex"), 138 S. Cf.2274 (2018). Def.'s Mem. at2419.

The FTC responds in two ways. First, the FTC argues that the "proper cases" language in

Section 13(b) does not limit courts' jurisdiction to hear cases brought under the Act. Pl. FTC's

Mem. of Law in Opp'n to Def. Surescripts, LLC's Mot. to Dismiss Compl. ("PI.'s Opp'n") [ECF

No. 361 at10-12. The FTC argues that the language of Section 13(b) does not clearly speak to

courts' power to adjudicate such claims. Pl.'s Opp'n at 11 (citing Arbaugh v. Y&H Corp., 546

U.S. 500, 515-16 (2006)). Second, the FTC contends that this case is "proper" because that term

just means "any case in which a permarlent injunction would be 'appropriate,' i.e., any case in

which a law enforced by the FTC has been violated and equitable remedies are needed to make

harmed consumers whole." Id. at 13. The FTC has the stronger argument on both points.

A. Whether "Proper Cases" Is a Jurisdictional RequirementThe Supreme Court has established a clear-statement rule for determining whether

statutory elements constitute jurisdictional requirements. See Arbaush, 546 U.S. at 515. "[W]hen

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seeking equitable relief even include the word 'Jurisdiction," let alone a clear statement that any

of the statutory requirenrents are jurisdictional. As the Third Circuit recently concluded when

analyzingthe same provision, "Section 13(b) includes no indicia that Congress intended to rank a

statutory limitation . . . as jurisdictional." FTC v. Shire ViroPharma. Inc. ,917 F.3d 147, 154 (3d

Cir. 2019) (internal quotation marks omitted).

Surescripts's best textual argument for reading "proper cases" as a jurisdictional

requirement comes from the label of Section l3(a)-"Power of Commission; jurisdiction ofcourts." Reply Mem. in Supp. of Surescripts, LLC's Mot. to Disrniss Compl. ("Def.'s Reply")

[ECFNo.39] at4. Because Section 13(a) "is identical to Section 13(b) in structure," Surescripts

argues that the latter section too should be read as jurisdictional. Id. Under Arbaush, however,

the inquiry is whether Congress "clearly states that a threshold limitation on a statute's scope" is

jurisdictional, and Surescripts's structural argument from Section 13(a)'s label falls short of this

high bar. 546 U.S. at 515 (emphasis added). Indeed, Section 13(b)-the actual section at issue

here-has a separate and distinct label ("Temporary restraining orders; preliminary injunctions")

that does not include any reference to jurisdiction. See 15 U.S.C. $ 53(a)-(b); cf. Reed Elsevier.

Inc. v. Muchnick. 559 U.S. 154, 164 (20i0) (noting that the Copyright Act's registration

requirement for bringing an infringement action "is located in a provision 'separate' from thosegranting federal courts subject-matter jurisdiction over those respective claims")

Surescripts also emphasizes that the FTC has itself cited Section 13(b) as the basis for

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. 

Finally, although not dispositive, it is worth noting that the opposite. conclusion would

create a cumbersome threshold test whenever the FTC seeks a permanent injunction. Pl.'s Opp'n

at20-21.; see also Tr. of Mot. Hr'g [ECF No. 4l] at49:3-6 (arguing that the FTC's "interpretationis the one that relies on the plain language of the statute and doesn't saddle the Court with the

burden of deciding what a routine case is or not"). Under defendant's jurisdictional interpretation,courls would need to decide whether the claims brought are "straightforward" or "routine" and toassess the novelty or complexity of the claims' merits before deciding whether to hear the case in

the first place. Pl.'s Opp'n at20-21. This requirement is unwieldly and, given the dearth of textual

support for a jurisdictional reading, suggests that the "proper cases" element is not jurisdictional.

B. Whether the FTC Pleaded a "Proper Case"

The FTC also prevails on the substance of this issue, for even if "proper cases" is

jurisdictional, the agency has pleaded sufficient facts to clear the mark. Cf. Def.'s Reply at 3

(arguing that the "proper cases" question can be addressed under either Fed. R. Civ. P. l2(b)(l) or

Fed. R. Civ. P. 12(bX6)).

Surescripts argues for a narrow interpretation of "proper cases" that limits the FTC's power

to seek permanent injunctions to instances of routine fïaud or other straightforward violations of

the FTC's substantive statutes. Def.'s Mem. at 17-18. Surescripts insists that "proper cases"

cannot consist of "'all cases' in which the FTC asserts a violation of the laws it enforces" because

that would render the phrase superfluous. Id. at 11. Surescripts also points to the legislative

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cases that rely on a narrow interpretatiou of "proper cases"-FTc v. Abbott Labs., Civ. A. No. 92-

1364,1992WL335442 (D.D.C. Oct. 13,1992), and FTC v. Vy'orld Travel Vacation Brokers. Inc.,

861 F.2d 1020 (7th Cir. 1988)-as well as public statements by fonner FTC officials framing

"proper cases" as involving straightforward violations. Def.'s Mem. at 18-24.

There is thus considerable weight to Surescripts's argument that "proper cases" is not

synonymous with "all cases," for such an interpretation would make the phrase superfluous. At

the same time, this Court's task is not to define the tertn "proper cases" for all scenarios, but to

determine whether this case is proper. The FTC grounds its legal argument here in Circuit

precedent, United States v. Microsoft Corp. ,253 F.3d 34 (D.C. Cir. 2001) (en banc) (per curiam),

and does not seek to rely on its agency expertise to develop the law. See Pl.'s Opp'n at21; Tr. ofMot. Hr'g at 6J:12-16 (FTC noting that "Microsoft is the primary authority in this case" and

suggesting that the Court will not "have to go much beyond Microsoft"). Under suchcircumstances, the Court concludes that the complaint adequately alleges a "proper case."

In terms of the statutory text, the language of Section 13(b) affords little evidence one way

or the other, but it is at least not necessary to read the phrase "ptoper cases" so narrowly as to mean"straightforward" or "non-novel" cases, as Surescripts suggests. Def.'s Mem. at22-24. Given

that the phrase "proper cases" is embedded in the second "Provided" portion of Section l3(b), thephrase might be seen as merely distinguishing between those disputes suited for a temporary

injunction-the subject of most of Section 13(b)-and those cases better suited for a permanent

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district couft determined that the targeted entity did not have fair notice or that an administrative

proceeding would be more "proper," then the court might rule against a permanent injunction. See

id. at 3 I ; see also id. at 9-1 3 . The text alone, then, thus does not dictate either Surescripts's nalrow

reading of "proper cases" or the FTC's broader interpretation.

Looking beyond the text, all other factors suggest that a broader reading is correct. In terms

of case law, a number of other courts have concluded that "propet cases" include more than

"routine" violations. See. e.g., FTC v. Evans Prods. Co. ,77 5 F .2d 1084, 1086-87 (9th Cir. 1985)

(noting that Section 13(b) may authorize a permanent injunction in instances beyond the routine

fraud case); FTC v. AmeriDebt. Inc. ,373 F. Supp. 2d 558, 562-63 (D. Md. 2005) (agreeing with

the FTC's reading of "proper case" as "simply one that involves a violation of any provision of

law enforced by the Commission" (internal quotation marks omitted)); see also Pl.'s Opp'n at 17-

20. Indeed, the FTC states that it has often relied on "section l3(b) in a wide variety of non-

'routine"' cases. See Pl.'s Opp'n at 18 & n.17 (citing FTC v. Qualcomm Inc., No. 17-CV-00220-

LHK, 2019 WL 2206013 (N.D. Cal. May 21,2019); FTC v. Cepþlqq-lnc., No. 2:08-cv-2141-

MSG,2019 WL 2lll253 (E.D. Pa. Feb. 2l ,2019); FTC v. AbbVie Inc.,329F. Supp. 3d 98 (E.D.

Pa.2018)); see also FTC v. Mylan Labs.. Inc. ,62F. Supp. 2d25,36 (D.D.C. 1999) ("[T]his Court

finds that the permanent injunction proviso may be used to enjoin violations of any provision oflaw enforced by the FTC." (internal quotation marks omitted)).

Surescripts's authorities to the contrary are all wanting. In World Travel, the Seventh

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V/orld Travel. noted that "Federal Courls have shied away from accepting direct court actions by

the Commission. . . if the offending conduct interjects the court into areas of Commission

expertise involving the creation and monitoring of new concepts of unfair competitive trade

practice." 1992 WL 335442, at *2. But Abbott Labs. cites no authority other than World Travel

for this gloss on Section 13(b), and World Travel elsewhere acknowledges that "[a] substantialargument can be made that the statutory language, when read with [the] legislative history, permits

the FTC to proceed under the last proviso of 13(b) for any violation of a statute administered bythe FTC." 861 F.2d at 1028.

Surescripts's other arguments fare no better. To the extent that the Court considers

legislative history, the Senate report cited by Surescripts does highlight the ability of the FTC toseek a permanent injunction immediately "in the routine fraud case." Def.'s Mem. at 18 (quotingSenate Committee on Commerce, Magnuson-Moss 'Warranty-Federal Trade Commission

Improvement Act, S. Rep. No. 93-151, af 3l (1973)). But the repoft does not say that such

circumstances are the only time that the FTC can seek such an injunction. See id. Likewise, manyofthe statements and academic articles that Surescripts marshals fi'om former FTC Commissionersand other agency officials conclude that permanent injunctions are ill suited for cases requiring theFTC's expertise and the development of law through the administrative process, but they do not

then go on to preclude a case brought under circuit precedent. See id. at2l23.

Surescripts's argument thus largely rests on authorities that acknowledge straightforward

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II. tr'ailure to State a Claim Under Section 2 of the Sherman Act

Surescripts next argues that the FTC's claim should be dismissed under

Fed. R. Civ. P. 12(bX6) because the FTC's complaint fails to allege a violation of Section 2 of the

Sherman Act. See Def.'s Mem. at 2945. First, Surescripts suggests that the FTC's

monopolization claim must fail because Surescripts's loyalty program was entirely optional and,therefore, its low prices could constitute anticompetitive conduct only if they were "predatory,"which Surescripts denies. Id. at 30-31. Surescripts emphasizes that the FTC's complaint did not

plead the necessary elements of predatory pricing. Id. at33-34. Second, Surescripts argues that,

even under the framework of exclusive dealing, the FTC's claim would fail under the rule of reason

because the FTC's complaint did not adequately allege that Surescripts's loyalty programs created

any anticompetitive effects. Id. at3445. Once again,the FTC has the stronger argument on bothfronts.

Contracts v

The offense of monopolization has two elements: "(1) the possession of monopoly power

in the relevant market and (2) the willful acquisition or maintenance of that power as distinguishedfrom growth or development as a consequence of a superior product, business acumen, or historicaccident." United States v. Grinnell Corp.,384 U.S. 563,510-71 (1966). Surescripts does notchallenge the allegation that the company maintains a monopoly over the routing and eligibility

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alleges that Surescripts's loyalty programs-and the implicit threat to charge non-exclusivecustomers higher prices-prevented the entrance of competitors into e-prescribing markets.Compl. tl 58. The absence of competitors, in turn, allegedly led to increased prices for pharmacies

and PBMs and lower incentive payments for EHRs. See id.'1lT 187-93. At least on the face of itscomplaint, then, the FTC appears to allege facts sufficient to state a claim under Section 2 of theSherman Act. See Iqbal, 556 U.S. at 678.

Surescripts's argurnents to the contrary are unavailing. First, the company emphasizes that

its loyalty programs are entirely optional and thus do not necessarily constitute exclusive contracts.See Def.'s Mem. at 31. But a contract need "not contain specific agreements not to use the

fservices] of a competitor" as long as "the practical effect . . . is to prevent such use." Tampa Elec

Co. v. Nashville Coal Co., 365 U.S. 320,326 (1961) (quoting United Shoe Mach. Corp. v. United

States, 258 U.S. 451,457 (1922)). The FTC alleges that the threat of increased prices had the

"practical effect" of preventing customers from working with other e-prescribing platforms, "sincedoing so would trigger the massive penalty provisions in their contracts with Surescripts . . . and

cost routing fand eligibility] customers millions of dollars through increased prices or, for EHRs,decreased incentive payments." Compl. \ 129; see also id. I 79 (alleging that EHRs that "violate[]

the exclusivity commitment" must "pay back [to Surescripts] the incentive fees for historical

transaction volume"). Surescripts highlights that some customers, like Kroger, did manage to

"multihome" and have a non-exclusive relationship with Surescripts, Def.'s Mem. af 31, but the

T2
foreclose less than 40o/o or 50Yo of the market share). Here, the govetnment has pleaded facts

demonstrating such substantial fbreclosure. See. e.s., Cornpl. TT 3, 135.

Surescripts next suggests that optional low pricing loyalty programs are unlawful only

when they constitute "predatory" pricing, which the FTC has not pled. Def.'s Mem. at 31. Butnone of the authorities Surescripts cites stands for the proposition that a plaintiff rnust allege

predatory pricing to succeed on a Section 2 claim. For instance, Pac. Bell Tel. Co. v. Linkline

Commc'ns. Inc., 555 U.S. 438 (2009), did not concern effectively exclusionary contracts, but

price-squeezing. Id. at 451 In Concord Boat Corn v. Rrrrns\,r¡ick Cnrn 207 F.3d 1039 (8th Cir

2000), the court examined a loyalty discount program that required at most 80% compliance in the

boat market, making the exclusive pressures created by the program materially different than the

dynamics arising from Surescripts's total loyalty scheme. Id. at 1044. And in NicSand - Inc. v3M Co., 507 F.3d 442 (6fh Cir. 2007) (en banc), the defendant 3M was not a monopolist. Id. at

45t-52.

Surescripts also mischaracterizes the holdings in Microsoft. It quotes the court's statement

that "offering a customer an attractive deal is the hallmark of competition" unless that price is

"predatory," but that statement concerned only Microsoft's offering Internet Explorer free ofcharge. Microsoft,253F3dat67-68; Def.'s Mem. at 31. The relevant portion of the enbanc

D.C. Circuit's decision for this case is its ruling that Microsoft's exclusive contracts did violate

Section 2 of the Sherman Act; the court noted that Microsoft's exclusive dealing with fourteen of

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real threat to Microsoft's monopoly." Id. at71.

Like the behavior at issue in Microsoft, Surescripts's alleged practice of charging loyal

pharmacies and PBMs less, and paying loyal EHRs greater incentives, do not need to constitutepredatory pricing for Surescripts's exclusionary practices to constitute illegal maintenance of anronopoly. See Grinnell, 384 U.S. at570-71. "'Where, as here, a dominant supplier enters into defacto exclusive dealing affangements with every customer in the market, other firms may be driven

out not because they cannot compete on a price basis, but because they are never given anopportunity to compete . . . ." ZF Meritor. LLC v. Eaton Corp., 696 F.3d 254,28I (3d Cir. 2012).

Surescripts argues that Third Circuit cases like ZF Meritor have not been adopted in the

D.C. Circuit and that (for this Court) predatory pricing still remains an essential element of proving

that a loyalty program is unlawful. Def.'s Mem. at32-33. However, although the D.C. Circuithas cast doubt on the Third Circuit's decision in LePase's Inc. v. 3M ,324 F .3d 141 (3rd Cir. 2003)

(en banc), see FTC v. Church & Dwight Co., 665 F.3d 1372, 1316 (D.C. Cir.20l l), much of that

criticism was focused on the conclusion that "bundling" rebates (i.e., requiring retailers to camy

multiple ploducts to receive certain rebates) are anticompetitive, rather than on the Third Circuit's

discussion of the exclusionary practices in question here, see id. at 1316-17. And even without

these persuasive precedents, the FTC's allegations still state a claim of monopolization under the

D.C. Circuit's decision in Microsoft. See 253 F.3d at69-71.

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anticompetitive effect on competition," which in an. exclusive dealing case means that

Surescripts's conduct "foreclosefd] competition in a substantial share of the line of commerce

affected." Id. at 35 (quoting Microsoft, 253 F.3d at 69). In particular, Surescripts suggests that,because the FTC concedes that both routing and eligibility are two-sided markets, "the FTC must

plausibly plead foreclosure of a substantial share of each of those markets as a whole." Id.

Surescripts insists that the FTC's complaint fails to allege either anticompetitive effects or

foreclosure. Id.

The Court concludes, to the contrary, that the FTC has met its burdens. Exclusivity

provisions covering about 40-50% of the relevant market have been found to foreclose

competition illegally, see Microsoft,253 F.3d at70, and Surescripts's loyalty program allegedly

places 70-80% of the routing and eligibility markets into effectively exclusive contracts, Pl.'s

Opp'n at 35; Compl. nnll2-76. Surescripts insists that, under the Supreme Couft's recent

decision in Arnex, the FTC must plead facts showing "anticompetitive effects in the market as a

whole and cannot focus only on the effects on one side." Def.'s Mem. at37; see also id. at 35-40.But the FTC's complaint does just what Surescripts wants, alleging that Surescripts's loyalty

program "foreclosed at least 70o/o of each market," i.e., at least70Yo of both two-sided markets at

issue. Compl. fl3 (emphasis added); see also id. lT 187 ("But for Surescripts's anticompetitive

course of conduct, the net price (taking into account both sides of the network) of the routing

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6J8 ("A claim has facial plausibility when the plaintiff pleads factual content that allows the court

to draw the reasonable inference that the defendant is liable for the misconduct alleged.").

Surescripts acknowledges, for instance, that the corlplaint includes an allegation that, "in the

routing market, the FTC states that [a cornpetitor] charges [certain] pharmacies lower prices thandoes Surescripts," but notes that "the FTC does not make any allegations concerning EHRs'incentive payments from Surescripts or fthe competitor] for those [same] routing transactions."

Def.'s Mem. at 39. Surescripts similarly concedes that the cornplaint alleges that a competitorcharged one PBM a lower price than Surescripts, but highlights the absence of "facts showing

higher net-transaction prices across that market as a whole." Id.

This argument is wrong for two reasons. First, Surescripts reads too much into Amex.

That case concerned an alleged restraint of trade in violation of Section I of the Sherman Act, and

the Supreme Court determined that plaintiffs failed to offer evidence that the price of credit-card

transactions was higher than would be expected in a competitive market because the plaintiffsprovided no "reliable measure of Amex's transaction price or profit margins." 138 S. Ct. at2288.

The Court also concluded that "Amex's increased merchant fees reflect[ed] increases in the value

of its services and the cost of its transactions, not an ability to charge above a competitive price."Id. Amex was not a monopolist. Id. ar 2282 ("Visa . . . has 45Yo of the market as measured by

transaction volume. Amex and MasterCard trail with26.40/o and23.3o/o, respectively . . . .").

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by blocking entrants into the market. Microsoft, 253 F.3d at 59. The FTC has done just that. See.

e.s., Compl. '1i11 3, 135. 172-81

But, even assuming that Surescripts is correct in its interpretation of Amex, the FTC still

pleaded sufficient facts addressing the totality of both two-sided markets. In addition to charging

lower fees to pharmacies and PBMs, the FTC alleges that one competitor was also willing to pay

higher incentives to EHRs. Id.ll 192. Thus, on both sides of the market, Surescripts stood to gainabove-market returns, charging higher fees and paying out lower incentives than its competitors.

The FTC also alleges that Surescripts engaged in other anticompetitive conduct, like forcing key

customers to terminate association with competitors. Id. T I 11. The FTC alleges that this conduct

hurt innovation, decreased output, and lowered quality. fd. IT 196-215. Surescripts's response is

largely factual, denying the FTC's allegations. Def.'s Mem. at 4142. But such denials are not

adequate grounds for dismissing the FTC's cornplaint; rather, they speak to the merits and the need

for further factual development through discovery.

Finally, Surescripts argues that the FTC failed to plead sufficient facts showing that

Surescripts's business practices foreclosed market competition to a "substantial" degree. Id. at

4245. Surescripts observes that exclusive dealing is illegal only if the anangement"substantially" weakens competition, see Eisai. Inc. v. Sanofi Aventis U.S.. LLC, 821 F.3d 394,

403-04 (3d Cir. 2016), and insists that its contracts, even if facially exclusive, were easily

t7
Under Supreme Court precedent, the relevant inquiry is fact intensive:

To determine substantiality in a given case, it is necessary to weigh the probableeffect of the contract on the relevant area of effective competition, taking intoaccount the relative strength of the parties, the proportionate volume of commerceinvolved in relation to the total volume of commerce in the relevant market area,

and the probable immediate and future effects which pre-emption of that share of

the market might have on effective competition therein.

Tampa Elec., 365 U.S. at 329 Even if the contracts were short term and easily terminable, the

FTC argues that their exclusive terms, when combined with the nature of the two relevant marketsand Surescripts's dominant monopoly position, had the effect of foreclosing large parts of both

markets and harming competition. Pl.'s Opp'n at 31-32; cf. Microsoft, 253 F.3d at 70-71

(analyzing whether Microsoft's exclusive contracts had "a signihcant effect in preserving its

monopoly"). Further factual development may vindicate Surescripts's position, but the FTC's

cornplaint contains sufficient facts to move beyond the pleadings stage.

Cot'lcl-ustoN

For all the foregoing reasons, Surescripts's motion to dismiss will be denied. A separate

order will issue on this date.

lsl

JOHN D. BATES

United States District Judge

Daled: January 17.2020

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