FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

RICK-MIK ENTERPRISES INC.; MIKE 

M. MADANI; ALFRED BUCZKOWSKI,

on behalf of themselves and those No. 06-55937 similarly situated,

Plaintiffs-Appellants, D.C. No.  CV-05-08212-R

v.

OPINION EQUILON ENTERPRISES, LLC, doing

business as Shell Oil Products US,

Defendant-Appellee. 

Appeal from the United States District Court

for the Central District of California

Manuel L. Real, District Judge, Presiding

Argued and Submitted

February 12, 2008—Pasadena, California

Filed July 11, 2008

Before: Betty B. Fletcher and N. Randy Smith,

Circuit Judges, and Samuel P. King,* District Judge.

Opinion by Judge King

*The Honorable Samuel P. King, Senior United States District Judge

for the District of Hawaii, Sitting by Designation. 

8499
COUNSEL

Thomas P. Bleau (argued), Martin R. Fox, Gennady L.

Lebedev, H. Michael Song, Bleau Fox & Fong, Los Angeles,

California, for the plaintiffs-appellants. 

Bradley S. Phillips (argued), Fred A. Rowley, Jr., Munger

Tolles & Olson, Los Angeles, California, for the defendantappellee. 

OPINION

KING, District Judge: 

Equilon Enterprises, LLC (“Equilon”) does business as

Shell Oil Products. Equilon’s standard franchise agreement

requires its franchisees, Shell and Texaco gasoline stations, to

use Equilon to process credit-card transactions. In addition to

payment for sales of petroleum products, Equilon allegedly

gets (1) transaction fees associated with the processing, or (2)

some kind of unspecified “kickback” from unidentified banks

that process the transactions, or both. Rick-Mik Enterprises,

Inc., Mike M. Madani, and Alfred Buczkowski (collectively

“Rick-Mik”) are Equilon franchisees who — on behalf of

themselves and other, similarly-situated Equilon franchisees 

— allege that Equilon violated antitrust laws by illegally tying

two distinct products (the franchises and the credit-card processing services). Rick-Mik contends franchisees could pay

8502 RICK-MIK v. EQUILON ENTERPRISES
lower transaction fees from others for credit-card processing.

Rick-Mik also alleges that Equilon illegally agreed with banks

to price-fix processing fees. 

The district court dismissed the antitrust and related statelaw counts from Rick-Mik’s complaint. We affirm because:

(1) Rick-Mik’s complaint failed to allege market power in the

relevant market; (2) in the alleged franchising context, creditcard processing services are not a product distinct from the

franchise itself; (3) the price-fixing allegations were impermissibly vague; and (4) Rick-Mik waived the opportunity to

attempt to cure these deficiencies. 

BACKGROUND

Rick-Mik appeals an order dismissing five of six counts of

its complaint alleging antitrust violations against Equilon. The

complaint alleged an unlawful tie between Equilon’s franchises (the “tying” product) and credit- and debit-card processing services (the “tied” product) which Equilon requires

as part of the franchise agreement. 

Shortly after Rick-Mik’s complaint was filed, in lieu of an

answer, Equilon moved to dismiss counts one (violation of the

Sherman Act, 15 U.S.C. § 1, for unlawful tying); two (violation of the Sherman Act, 15 U.S.C. § 1, for unlawful price fixing); three (California state law violations for unlawful tying);

four (California state law violations for unlawful pricefixing); and six (California state law violations for unfair

competition). Count five, which Equilon did not move to dismiss, claimed violations of California’s franchise investment

law. 

Because the appeal is from an order granting a motion to

dismiss, we assume the factual allegations of the complaint

are true. Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d

979, 984 (9th Cir. 2000). The question is whether the allegaRICK-MIK v. EQUILON ENTERPRISES 8503
tions, together with the attachments to the complaint,1

 set

forth viable antitrust theories. The relevant parts of the complaint are set forth verbatim: 

20. EQUILON refines and markets substantial

volumes of gasoline and other petroleum products

under both the Shell and Texaco brand names in all

or parts of 31 states, selling petroleum products to

approximately 9,000 Shell and Texaco-branded retail

outlets. 

21. Combined with its affiliate, Motiva Enterprises LLC (hereafter “Motiva”), EQUILON and

Motiva (collectively referred to as “Retail USA” by

Shell Oil Company, the parent company of both

EQUILON and Motiva) rank number one in the

industry in branded gasoline stations. At 13 percent,

EQUILON and Motiva also rank number one in total

gallons of gasoline sold in the United States. 

22. EQUILON’s annual gross revenue is approximately $24 billion. 

23. EQUILON is number one in market share in

Oregon, Arizona, Nebraska, Oklahoma, Missouri,

Arkansas and Kentucky. EQUILON is number two

in market share in Alaska, Hawaii, California,

Nevada, Idaho, Wyoming, Colorado, New Mexico,

Indiana and Illinois. 

24. EQUILON has four refineries, refining

approximately 753,000 barrels of petroleum products

per day and owns a 50 percent interest in Motiva’s

1

“In determining whether a plaintiff can prove facts in support of his or

her claim that would entitle him or her to relief, we may consider facts

contained in documents attached to the complaint.” Tyler v. Cuomo, 236

F.3d 1124, 1131 (9th Cir. 2000) (citation omitted). 

8504 RICK-MIK v. EQUILON ENTERPRISES
three refineries, refining approximately 865,000 barrels of petroleum products per day. 

25. EQUILON owns an interest in approximately

10,000 miles of pipeline used to transport its petroleum products throughout the United States. 

26. With 75 percent of all Americans living within

five miles of a Shell-branded gasoline station,

EQUILON and Motiva serve, on average, more than

six million customers per day and sell approximately

19 billion gallons of gasoline per year, most of

which is purchased by customers’ credit and/or debit

cards issued by thousands of banks, banking associations and financial institutions throughout the States.

27. EQUILON requires each and everyone one

[sic] of its Shell and Texaco-branded franchisees to

execute a standardized “Retail Sales Agreement,”

including Plaintiffs, before they can purchase petroleum products from EQUILON for resale to consumers. A true and correct copy of a Plaintiff RICK-MIK

ENTERPRISES, INC.’s Retail Sales Agreement

effective September 1, 2004, is attached hereto and

incorporated herein by reference as Exhibit “A”. 

28. Plaintiff RICK-MIK ENTERPRISES, INC.’s

Retail Sales Agreement attached hereto as Exhibit

“A” is virtually identical to all of the other Retail

Sales Agreements EQUILON requires each one of

its franchisees to sign before they can purchase

petroleum products from EQUILON for resale to

consumers. 

29. EQUILON’s Retail Sales Agreements requires

[sic] Plaintiffs, and the Class that Plaintiffs represent, to accept all credit and debit cards authorized

exclusively by EQUILON and requires that all credit

RICK-MIK v. EQUILON ENTERPRISES 8505
and debit card transactions at each one of its franchisees’ stations, including Plaintiffs’ stations, to be

[sic] processed solely through EQUILON, which

Plaintiffs must accept as a condition of EQUILON

before they can purchase Shell and/or Texaco petroleum products from EQUILON for resale to consumers. 

30. Paragraph 12(a) of the Retail Sales Agreement

states, in part “As long as Seller [EQUILON] elects

to accept specified credit cards, credit identifications,

debit cards, pre-paid cards, or other transaction

authorization cards (collectively “Transaction

Cards”) in the state in which Retailer’s Station is

located, Retailer [Plaintiffs] shall accept all Transaction Cards identified in Seller’s Transaction Card

guide (“Guide”) for the purchase of authorized products and services. Retailer shall account for and process all such transactions in strict compliance with

the terms set forth in the Guide, as may be amended

by Seller from time to time.” 

31. Paragraph 12(b) of the Retail Sales Agreement

states, in part “Seller [EQUILON] shall accept from

Retailer [Plaintiffs] all transactions generated as a

result of purchases made with authorized Transaction Cards and processed in accordance with the

terms of the Guide. At Seller’s option, Seller shall

pay the amount of the transactions to Retailer, after

deducting any processing fee in effect under Seller’s

then current Guide.” 

32. In accordance with its Retail Sales Agreement,

EQUILON processes all its franchisees’ daily credit

and debit card sales in batches through its own computerized Electronic Point of Sale (“EPOS”) system

and charges each franchisee a processing fee. Each

franchisee’s daily credit and debit card batches are

8506 RICK-MIK v. EQUILON ENTERPRISES
then held by EQUILON and later applied to the

franchisee’s next gasoline invoice when due after

deducting EQUILON’s processing fee, resulting in a

delay in payment to the franchisee. 

33. Absent EQUILON’s requirement that its franchisees process all credit and debit card transactions

through EQUILON, Plaintiffs, and the Class that

Plaintiffs represent, would be able to purchase credit

and debit card processing services through many

other credit and debit card processing service providers on more favorable terms and conditions. 

34. Plaintiffs are informed, believe and based

thereon allege that EQUILON has conspired with

numerous banks, banking associations and financial

institutions throughout the United States to fix, peg

and stabilize the price of credit and debit card processing fees, commonly referred to as the “Merchant

Discount Fee,” charged to Plaintiffs and the members of the Class Plaintiffs represent. 

35. Plaintiffs are informed, believe and based

thereon allege that EQUILON receives compensation in the form of a “kick back” from numerous

banks, banking associations and financial institutions

throughout the United States from the Merchant Discount Fee as consideration for its unlawful agreement to fix prices of credit and debit card processing

fees and tying arrangement, which is not reimbursed

to EQUILON’s franchisees. 

36. The exploration, production, transportation,

storage, refining, distribution, marketing, and selling

of crude oil and gasoline is carried on in and substantially affects interstate and foreign commerce,

and the conspiracy among EQUILON and the

numerous banks, banking associations and financial

RICK-MIK v. EQUILON ENTERPRISES 8507
institutions throughout the United States to fix the

price of credit and debit card processing fees charged

to retail gasoline dealers substantially affects,

impedes, and unreasonably restrains competition by

credit and debit card processing service providers

within the retail gasoline industry and between and

among the various states of the United States, and

foreign countries and the United States. 

37. By reason of the violations alleged herein,

Plaintiffs, and the members of the Class Plaintiffs

represent, have paid and continue to pay higher

credit and debit card processing fees that than [sic]

they would have in a free and competitive market. 

38. By reason of the violations alleged herein,

Plaintiffs, and all persons similarly situated, have

sustained injury to their franchises in amounts yet to

be ascertained, including but not limited to overcharges in credit and debit card processing fees, loss

of sales, profits and business goodwill, increased

prices paid to defendants for gasoline and other

petroleum products, the value of their businesses as

going concerns and the increased costs of doing

business, including any debts incurred. 

Equilon’s standard franchise agreement or “Retail Sales

Agreement,” and Shell’s Franchise Disclosure Statement were

attached to the complaint. A key provision is paragraph 12 of

the Disclosure Statement regarding “Transaction Cards.”

Paragraph 12 provides in full: 

12. TRANSACTION CARDS. 

(a) As long as Seller [Equilon] elects to accept

specified credit cards, credit identifications, debit

cards, pre-paid cards, or other transaction authorization cards (collectively “Transaction Cards”) in the

8508 RICK-MIK v. EQUILON ENTERPRISES
state in which Retailer’s Station is located, Retailer

shall accept all Transaction Cards identified in Seller’s Transaction Card guide (“Guide”) for the purchase of authorized products and services. Retailer

shall account for and process all such transactions in

strict compliance with the terms set forth in the

Guide, as may be amended by Seller from time to

time. If Seller amends the Guide, Seller shall provide

Retailer with notice. Seller may assess Buyer a

Transaction Card processing fee (which includes any

VSAT related charges) for providing such services.

(b) Seller shall accept from Retailer all transactions generated as a result of purchases made with

authorized Transaction Cards and processed in

accordance with the terms in the Guide. At Seller’s

option, Seller shall pay the amount of the transactions to Retailer, after deducting any processing fee

in effect under Seller’s then current Guide, by: (1)

check to Retailer; (2) a credit to Retailer’s bank

account by EFT; or (3) setting off the amount against

Retailer’s account with Seller. 

(c) For each transaction not authorized, disputed

by a customer, or otherwise subject to chargeback

under the Guide, Seller may either charge the

amount to Retailer’s account or require Retailer to

make immediate refund to Seller, including refund

by draft of EFT initiated by Seller, without any

deduction for any processing fee. 

(d) This Article 12(d) is not applicable to Retailers

who lease Retailer’s Station from Seller. In order to

provide efficient service to the motoring public,

Retailer shall comply with Seller’s software and

hardware standards, established from time to time by

Seller, relating to electronic Point of Sale (“EPOS”)

systems, including, but not limited to, Seller

RICK-MIK v. EQUILON ENTERPRISES 8509
approved compatible hardware, customer activated

terminals, integrated and non-integrated EPOS systems, and other requirements necessary to electronically accept and process the Transaction Cards at all

times during the term of this Agreement. Retailer

shall upgrade the EPOS system with any new release

of the software within 9 months after notice from

Seller. Further, if Seller loans or leases any imprinter, EPOS terminal, or other related equipment to

Retailer in connection with acceptance of the Transaction Cards, Retailer shall (1) comply with the

terms of the Guide, (2) execute any applicable Seller

agreements, relating to the use of such equipment

and (3) reimburse Seller for any charges for use of

such equipment (whether third party or internal)

incurred by Seller. 

(e) Without limiting any rights available to Seller,

if Retailer fails to comply with this article or the

Guide, Seller may limit or terminate Retailer’s right

to participate in Seller’s Transaction Card program.

Further, Seller may terminate its Transaction Card

program at any time upon notice to Retailer. 

The district court granted Equilon’s motion to dismiss “in

its entirety.” Equilon then filed an answer to the remaining

claim, count five. After Equilon moved for summary judgment on count five, the parties stipulated to dismiss that count

so judgment could be entered and Rick-Mik could appeal the

dismissal of the antitrust counts. This timely appeal followed.

STANDARD OF REVIEW

The court reviews de novo the district court’s order of dismissal for failure to state an antitrust claim. Knevelbaard

Dairies, 232 F.3d at 984 (citation omitted). 

Federal Rule of Civil Procedure 8(a)(2) requires only “a

short and plain statement of the claim showing that the

8510 RICK-MIK v. EQUILON ENTERPRISES
pleader is entitled to relief[.]” Nevertheless, in antitrust matters, “[f]actual allegations must be enough to raise a right to

relief above the speculative level[.]” Bell Atl. Corp. v. Twombly, ___ U.S. ___, 127 S. Ct. 1955, 1965 (2007) (citations

omitted). “[A] plaintiff’s obligation to provide the grounds of

his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of

action will not do[.]” Id. at 1964-65 (internal quotation marks,

brackets, and citation omitted). A Sherman Act § 1 claim “requires a complaint with enough factual matter (taken as true)

to suggest that an agreement was made.” Id. at 1965. 

In Twombly, at least in antitrust matters, the Supreme Court

“retired” the familiar language derived from Conley v. Gibson, 355 U.S. 41, 45-46 (1957), which provided “the accepted

rule that a complaint should not be dismissed for failure to

state a claim unless it appears beyond doubt that the plaintiff

can prove no set of facts in support of his claim which would

entitle him to relief.” 127 S. Ct. at 1968 (quoting Conley).

Twombly opined that the “no set of facts” language “has

earned its retirement” and “is best forgotten[.]” Id. at 1969.

Thus, “[a]t least for the purposes of adequate pleading in antitrust cases, the Court specifically abrogated the usual ‘notice

pleading’ rule[.]” Kendall v. Visa U.S.A., Inc., 518 F.3d 1042,

1047 n.5 (9th Cir. 2008). 

DISCUSSION

I. Tying Claim

[1] “A tying arrangement is a device used by a seller with

market power in one product market to extend its market

power to a distinct product market.” Cascade Health Solutions v. PeaceHealth, 515 F.3d 883, 912 (9th Cir. 2008) (citation omitted). “To accomplish this objective, the seller

conditions the sale of one product (the tying product) on the

buyer’s purchase of a second product (the tied product).” Id.

(citations omitted). “Tying arrangements are forbidden on the

RICK-MIK v. EQUILON ENTERPRISES 8511
theory that, if the seller has market power over the tying product, the seller can leverage this market power through tying

arrangements to exclude other sellers of the tied product.” Id.

“For a tying claim to suffer per se condemnation, 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.” Id. at 913 (citation omitted). 

[2] Not all tying arrangements are illegal. Rather, ties are

prohibited where a seller “exploits,” “controls,” “forces,” or

“coerces” a buyer of a tying product into purchasing a tied

product. See, e.g., Jefferson Parish Hosp. Dist. No. 2 v. Hyde,

466 U.S. 2, 12 (1984) (“The essential characteristic of an

invalid tying arrangement lies in the seller’s exploitation of its

control over the tying product to force the buyer into the purchase of a tied product that the buyer either did not want at

all, or might have preferred to purchase elsewhere on different

terms.”), abrogated on other grounds by Illinois Tool Works

Inc. v. Indep. Ink, 547 U.S. 28 (2006); PeaceHealth, 515 F.3d

at 913. The injury is reduced competition in the market for the

tied product. See Jefferson Parish, 466 U.S. at 12 (“When

such ‘forcing’ is present, competition on the merits in the

market for the tied item is restrained and the Sherman Act is

violated.”). As the Supreme Court recently reiterated, “the

justification for the challenge [against ties] rested on either an

assumption or a showing that the defendant’s position of

power in the market for the tying product was being used to

restrain competition in the market for the tied product.” Illinois Tool Works Inc., 547 U.S. at 34. Thus, “in all cases

involving a tying arrangement, the plaintiff must prove that

8512 RICK-MIK v. EQUILON ENTERPRISES
the defendant has market power in the tying product.” Id. at

46.2 And to prove it, it must first be properly alleged. 

a. The market power allegations are flawed. 

The alleged tying product here is gasoline franchises. RickMik has a contract for an Equilon franchise to sell Shell

branded gasoline and diesel. The alleged tied product is

credit-card processing services. Rick-Mik alleges it cannot get

a franchise without the “tied” credit-card processing services.

[3] Rick-Mik’s complaint does not allege that Equilon has

market power in the relevant market, which is the market for

the tying product — gasoline franchises. Indeed, other than

stating that “[Equilon] rank[s] number one in the industry in

branded gasoline stations,” there are no specific allegations at

all as to the franchise market. The complaint alleges nothing

about, for example, what percentage of gasoline franchises are

Equilon’s (Shell/Texaco) as compared to other franchises like

Chevron, Mobil, Marathon Oil, or Union 76. There are no factual allegations as to the percentage of gasoline retail sales

that are made through non-franchise outlets. There are no factual allegations regarding the amount of power or control that

Equilon has over prospective franchisees. There are no factual

allegations regarding the relative difficulty of a franchisee to

switch franchise brands. 

2

In so holding, the Court overruled prior precedent that indicated tying

arrangements involving patents provided presumptive market power. Illinois Tool Works Inc., 547 U.S. at 42. The Court traced the history of antitrust tying jurisprudence, observing that, in the earlier part of the 20th

Century, the Court disapproved of such arrangements. Id. at 33-34. The

trend has changed. “Over the years, however, this Court’s strong disapproval of tying arrangements has substantially diminished.” Id. at 35. A

similar trend in antitrust law is seen in other relevant cases as well. See,

e.g., Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S. Ct. 2705,

2725 (2007) (requiring application of the rule of reason, abrogating a per

se analysis for vertical price restraint allegations and explicitly overruling

past precedent). 

RICK-MIK v. EQUILON ENTERPRISES 8513
[4] If Equilon lacks market power in the gasoline-franchise

market, there can be no cognizable tying claim. For, in that

case, Equilon has no power to force, exploit, or coerce a

franchisee to purchase a tied product such as credit card processing (if the processing is a distinct product for tying purposes) or to affect competition in the tied-product market.

Such an arrangement would not raise antitrust concerns. Jefferson Parish, 466 U.S. at 11-12. A failure to allege power in

the relevant market is a sufficient ground to dismiss an antitrust complaint. Cf., e.g., Queen City Pizza, Inc. v. Domino’s

Pizza, Inc., 124 F.3d 430, 443 (3d Cir. 1997) (“Because plaintiffs failed to plead any relevant tying market, the claim was

properly dismissed.”); Tanaka v. Univ. of S. Cal., 252 F.3d

1059, 1063 (9th Cir. 2001) (“Failure to identify a relevant

market is a proper ground for dismissing a Sherman Act

[restraint of trade] claim.”) (citation omitted); Will v. Comprehensive Accounting Corp., 776 F.2d 665, 671 (7th Cir. 1985)

(“[Plaintiffs] did not establish market power . . . as a matter

of law. This failure makes every other element of the [tying]

anti-trust case irrelevant.”). 

Rick-Mik argues that it alleged sufficient facts to infer that

Equilon has sufficient economic power in the gasolinefranchise market, which has significant barriers to entry. It

points to statistics indicating Equilon is an important player in

the petroleum industry. According to paragraphs 20-26 of the

complaint: (1) Equilon sells petroleum products to approximately 9,000 Shell and Texaco-branded retail outlets; (2) it

ranks first in the industry in branded gasoline stations; (3) at

13 percent of the market, it ranks first in total gallons of gasoline sold in the United States; (4) it has annual gross revenues

of approximately $24 billion; (5) it is number one or two in

gasoline market share in 17 states; (6) it has four refineries,

refining approximately 753,000 barrels of petroleum products

per day and owns a 50 percent interest in Motiva’s three refineries, refining approximately 865,000 barrels of petroleum

products per day; (7) it owns an interest in approximately

10,000 miles of pipeline used to transport its petroleum prod8514 RICK-MIK v. EQUILON ENTERPRISES
ucts throughout the United States; and (8) it serves, on average, more than six million customers per day and sells

approximately 19 billion gallons of gasoline per year, most of

which is purchased by customers’ credit or debit cards issued

by thousands of banks, banking associations and financial

institutions throughout the United States. 

[5] All of those allegations, however, relate to the retail

gasoline market — a market where Rick-Mik is a seller — not

the relevant market for franchises where it is a buyer. Further,

the statistics alleged in the complaint do not distinguish

between franchise-based sales and other potential types of

sales (e.g., sales by directly-owned outlets or sales to other

distributors). Thus, the complaint fails to allege market power

in the relevant market. 

Nor is Rick-Mik’s complaint saved by the allegation that

“Shell and Texaco-branded gasolines are protected by various

trademarks, copyrights and patents providing EQUILON sufficient economic power over Plaintiffs in connection with its

tying products to appreciably restrain competition in the tied

product market.” Even construing that allegation as one alleging market power in the gasoline franchise market as opposed

to the gasoline retail market, it lacks the factual specificity

required “to raise a right to relief above the speculative level.”

See Twombly, 127 S. Ct. at 1965. Because intellectual property rights are no longer presumed to confer market power,

see Illinois Toolworks Inc., 547 U.S. at 42-43, Rick-Mik’s

conclusory allegation that Equilon’s intellectual property

rights nonetheless do confer market power, unaccompanied

by supporting facts, is insufficient. 

Finally, the complaint’s allegation of a contractual franchise relationship also fails to plead market power. A tying

claim generally requires that the defendant’s economic power

be derived from the market, not from a contractual relationship that the plaintiff has entered into voluntarily. See, e.g.,

Queen City Pizza, Inc., 124 F.3d at 443 (“where the defenRICK-MIK v. EQUILON ENTERPRISES 8515
dant’s ‘power’ to ‘force’ plaintiffs to purchase the alleged

tying product stems not from the market, but from plaintiffs’

contractual agreement to purchase the tying product, no claim

will lie.”); United Farmers Agents Ass’n v. Farmers Ins.

Exch., 89 F.3d 233, 236-37 (5th Cir. 1996) (“Economic power

derived from contractual agreements such as franchises . . .

‘has nothing to do with market power, ultimate consumers’

welfare, or antitrust.’ ”) (citation omitted); Chawla v. Shell

Oil Co., 75 F. Supp. 2d 626, 639-40 (S.D. Tex. 1999) (following United Farmers); cf. Maris Distrib. Co. v. AnheuserBusch, 302 F.3d 1207, 1222 (11th Cir. 2002) (“The fact that

Anheuser-Busch had considerable power over many aspects

of Maris’s business by virtue of the provisions of the contract

to which they agreed (at least 3 separate times) reveals little

about the issue of whether Anheuser-Busch had market power

in the broader, relevant market for the purchase and sale of

equity ownership interests in beer distributorships.”). While

the allegation of a contractual relationship does not necessarily doom a tying claim at the pleading stage, it also does not

remedy a complaint’s failure to properly plead market power.

[6] In sum, the market power allegations of Rick-Mik’s

complaint are inadequate. 

b. Credit-card processing is not a distinct product. 

There is another fatal flaw in Rick-Mik’s complaint.

Equilon’s franchises are not a separate and distinct product

from the credit-card processing services that are part of the

franchise. 

[7] Franchises, almost by definition, necessarily consist of

“bundled” and related products or services — not separate

products. See Phillips v. Crown Cent. Petroleum Corp., 602

F.2d 616, 628 (4th Cir. 1979) (“[T]he very essence of a franchise is the purchase of several related products in a single

competitively attractive package.”); Will, 776 F.2d at 670-71

& n.1 (“ ‘[F]ranchises’ (the tying product here) are just names

8516 RICK-MIK v. EQUILON ENTERPRISES
and methods of doing business, not ‘products’ and some

courts have held that as a matter of law there cannot be a tiein between a name and a product . . . . [A] method of doing

business (the franchise) is not sold separately from the ingredients that go into the method of business.”); see also Chawla,

75 F. Supp. 2d at 639-40 (rejecting similar tying theory that

dealers were being coerced into “utiliz[ing] the bank chosen

by Defendants to process the associated credit card transactions” because “[r]eceipt and processing of retail customers’

payments for retail gasoline purchases is an integral part of a

gasoline dealer’s function.”). 

With franchises, “the proper inquiry is . . . whether [the

allegedly tied products] are integral components of the business method being franchised. Where the challenged aggregation is an essential ingredient of the franchised system’s

formula for success, there is but a single product and no tie

in exists as a matter of law.” Principe v. McDonald’s Corp.,

631 F.2d 303, 309 (4th Cir. 1980). 

[8] Here, Equilon’s credit card services are an essential part

of its franchise. Its agreement authorizes Equilon to use credit

card proceeds to pay off a franchisee’s account (i.e., money

the franchisee owes Equilon for the gasoline Equilon delivers

to the franchisee). The agreement also authorizes Equilon to

charge or refund unauthorized transactions to the franchisee,

helping secure the integrity of point-of-sale transactions.

Equilon pays the amount of the credit transactions (minus a

transaction fee) to the franchisee by check, by crediting its

bank account, or by setting that amount off from the amount

in the franchisee’s account with Equilon. The arrangement

gives Equilon some ability to ensure the quality and reliability

of credit card processing and helps guard against franchise

default and unauthorized transactions. See Sheridan v. Marathon Petroleum Co. LLC, ___ F.3d ___, 2008 WL 2486581,

at *5 (7th Cir. June 23, 2008) (rejecting similar tying allegations, observing that “[t]he combination of card and card processing enables [the gasoline franchisor] to offset in an

RICK-MIK v. EQUILON ENTERPRISES 8517
economical and expeditious manner revenues from credit card

sales against costs of gasoline sold to the dealers.”). 

[9] Equilon points to the many other areas which are part

and parcel of a franchise: signs, advertising, marketing,

appearance, as well as methods of delivery and payment. Similarly, the method of receiving and processing credit transactions is an integral part of the franchise’s operation. The

franchise and the method of processing credit transactions are

not separate products, but part of a single product (the franchise).3

There are also no separate products under a test set forth in

Jefferson Parish. The existence of distinct products depends

upon “the character of the demand for the two items.” 466

U.S. at 19. There must be “a sufficient demand for the purchase of [the tied product] separate from [the tying product]

to identify a distinct product market[.]” Id. at 21. To determine this, the “purchaser demand” test of Jefferson Parish

“examine[s] direct and indirect evidence of consumer demand

for the tied product separate from the tying product.” United

States v. Microsoft Corp., 253 F.3d 34, 86 (D.C. Cir. 2001).

“Direct evidence addresses the question whether, when given

a choice, consumers purchase the tied good from the tying

good maker, or from other firms.” Id. “Indirect evidence

includes the behavior of firms without market power in the

tying good market, presumably on the notion that (competitive) supply follows demand. If competitive firms always

3Rick-Mik relies on Siegel v. Chicken Delight, Inc., 448 F.2d 43 (9th

Cir. 1971), and Roberts v. Elaine Powers Figure Salons, 708 F.2d 1476

(9th Cir. 1983) to argue that control evidences economic power by

Equilon over its franchisees. Those cases relied on the old theory that ties

are “presumptively unlawful,” Elaine Powers, 708 F.2d at 1479, and that

the trademarks did not extend to the tied product, Chicken Delight, 448

F.2d at 48. People don’t generally think of Shell when they think of creditcard processing; they think of gasoline. But those tests are no longer relevant after Jefferson Parish and Illinois Toolworks, Inc.. 

8518 RICK-MIK v. EQUILON ENTERPRISES
bundle the tying and tied goods, then they are a single product.” Id.

[10] Applying the “character of demand” test, Rick-Mik’s

complaint fails to plead facts necessary to assess whether

credit-card services are distinct from the franchise agreements. The relevant “purchaser” is the franchisee (not the

general consumer of credit card processing services), but the

complaint sets forth no allegations about the franchisee market’s demand for credit card services. One could assume there

is a billion dollar market for credit card processing in the general economy, but, under Jefferson Parish, the question is

what is the market for separate credit card processing services

among franchisees in general (or gasoline franchisee in particular). There are no facts pled indicating the existence of a separate market for credit-card processing services among

franchisees. 

[11] Thus, for several reasons, we conclude that separate

products are not at issue here.4 With franchises, the franchisee

knows the contractual limitations and duties before entering

into the contract. A complaint about such contractual obligations is not an antitrust matter. See, e.g., Queen City Pizza,

124 F.3d at 443; United Farmers, 89 F.3d at 236. 

II. Price Fixing

The price-fixing claim fails for vagueness. After Twombly,

we readily conclude that Rick-Mik’s complaint lacks specific

details of an illegal price-fixing scheme. See Twombly, 127

S. Ct. at 1964-65 (“[A] formulaic recitation of the elements of

a cause of action will not do.”) (citation and internal editorial

marks omitted). A Sherman Act § 1 claim “requires a complaint with enough factual matter (taken as true) to suggest

that an agreement was made.” Id. at 1965. 

4Given this conclusion, we need not consider whether the tying allegations would also fail under the “rule of reason.” 

RICK-MIK v. EQUILON ENTERPRISES 8519
The complaint merely alleges that Equilon “conspired with

numerous banks, banking associations and financial institutions throughout the United States to fix, peg and stabilize the

price of credit and debit card processing fees, commonly

referred to as the ‘Merchant Discount Fee,’ charged to Plaintiffs and the members of the Class Plaintiffs represent.” It

continues: “EQUILON receives compensation in the form of

a ‘kick back’ from numerous banks, banking associations and

financial institutions throughout the United States from the

Merchant Discount Fee as consideration for its unlawful

agreement to fix prices of credit and debit card processing

fees and tying arrangement, which is not reimbursed to

EQUILON’s franchisees.” 

[12] All that is alleged is there was an agreement on price.

The co-conspirator banks or financial institutions are not mentioned. The nature of the conspiracy or agreement is not

alleged. The type of agreements are not alleged. And the discernible theories do not implicate antitrust laws. 

If the complaint is that Equilon agreed with banks on a

price to provide credit card processing services for franchisees, it would be an “[o]rdinary sales contract[,]” not an

illegal antitrust agreement. See 49er Chevrolet, Inc. v. General Motors Corp., 803 F.2d 1463, 1467 (9th Cir. 1986). 

If Equilon was a competitor with the unidentified banks it

would be a “horizontal price-fixing” theory — an agreement

between competitors to price-fix in a market. But Equilon

does not compete with banks in the credit-card services market, and the complaint does not allege such a price-fixing conspiracy. 

If the agreement was to set a minimum retail price — credit

card services purchased from banks by Equilon and then

resold to franchisees — such a vertical “resale price maintenance” scheme is not a valid per se antitrust violation. See

Leegin Creative Leather Prods., 127 S. Ct. at 2725 (requiring

8520 RICK-MIK v. EQUILON ENTERPRISES
application of the rule of reason and abrogating a per se analysis for vertical price restraint allegations). 

[13] All that is alleged is that Equilon receives “kickbacks”

(or perhaps commissions) from banks for processing the

transactions of Equilon’s franchisees. Such an arrangement

does not violate antitrust laws. See Mesirow v. Pepperidge

Farm, Inc., 703 F.2d 339, 343 (9th Cir. 1983) (rejecting pricefixing claim where a distributor delivered and maintained a

manufacturer’s products for a commission).5 The district court

correctly determined that the complaint failed to state a claim

for illegal price-fixing. 

III. Leave to Amend

When Rick-Mik opposed Equilon’s motion to dismiss

before the district court, Rick-Mik mentioned that it should be

given leave to amend its complaint “if the district court was

inclined to find a failure to state a claim.” The district court,

however, simply granted Equilon’s motion to dismiss in its

entirety (as to five counts). After dismissal of those counts,

Rick-Mik made no effort to amend. 

[14] Rick-Mik did not mention leave-to-amend in its opening brief on appeal. Equilon pointed out this omission. RickMik responded in its reply brief that it should have at least

been given the opportunity to amend its complaint. By waiting until its reply brief, Rick-Mik waived the argument

regarding leave to amend. See Indep. Towers of Wash. v.

Wash., 350 F.3d 925, 929 (9th Cir. 2003) (“[W]e ‘review only

issues which are argued specifically and distinctly in a party’s

opening brief.’ ”) (quoting Greenwood v. Fed. Aviation

Admin., 28 F.3d 971, 977 (9th Cir. 1994)). 

5The state law antitrust claims are derivative of the federal law claims.

Because the federal claims fail, the state law claims fail. County of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001). 

RICK-MIK v. EQUILON ENTERPRISES 8521
Such waiver is not absolute; the court can “review an issue

not raised in a petitioner’s opening brief if the failure to do so

would result in manifest injustice.” Alcaraz v. INS, 384 F.3d

1150, 1161 (9th Cir. 2004) (internal quotation marks omitted).

But the “manifest injustice” exception does apply here. 

First, Rick-Mik did not even need permission to amend

before the district court if it truly wanted to amend its complaint. Under Federal Rule of Civil Procedure 15(a), “a party

may amend its pleading once as a matter of course . . . before

being served with a responsive pleading.” A motion to dismiss is not a responsive pleading within the meaning of Rule

15(a). See, e.g., Rhoades v. Avon Prods., Inc., 504 F.3d 1151,

1158 n.5 (9th Cir. 2007). Here, Equilon had only filed a

motion to dismiss; it had not answered. Rick-Mik could have

responded to the motion by amending its complaint. Mayes v.

Leipziger, 729 F.2d 605, 607 (9th Cir. 1984). And it could

have filed an amended complaint even after the district court

granted the motion. Id. (“ ‘Neither the filing nor granting of

. . . a motion [to dismiss] before answer terminates the right

to amend; an order of dismissal denying leave to amend at

that stage is improper[.]’ ”) (quoting Breier v. Northern Cal.

Bowling Proprietors’ Ass’n, 316 F.2d 787, 789 (9th Cir.

1963)). Under Rule 15(a), Rick-Mik had an absolute right to

amend, which ended upon the filing of a “responsive pleading” (e.g., an answer) “ ‘or the entry of final judgment following dismissal of its action.’ ” Id. (quoting Worldwide Church

of God, Inc. v. State of Cal., 623 F.2d 613, 616 (9th Cir. 1980)).6

Second, assuming Rick-Mik still had a right to amend its

complaint after the district court’s dismissal, it waived the

right again by allowing judgment to enter so it could appeal

the dismissal on the merits. See Jarvis v. Regan, 833 F.2d

149, 155 (9th Cir. 1987) (“Where a final judgment is entered

6Equilon filed an answer shortly after the district court’s order granting

its motion to dismiss. The answer, however, only responded to the remaining count (count five) that was not addressed in the motion to dismiss. 

8522 RICK-MIK v. EQUILON ENTERPRISES
following dismissal of an action, the plaintiff no longer has

the right to amend the complaint as a matter of course.”) (citations omitted). After the district court dismissed the antitrust

counts, Rick-Mik stipulated with Equilon to dismiss the

remaining count. It allowed judgment to enter specifically so

that it could appeal the granting of the motion to dismiss the

other counts. By doing so, it waived its right to amend. See

Univ. Club v. City of New York, 842 F.2d 37, 39 (2d Cir.

1988) (“[The district court] allowed the plaintiffs . . . ‘leave

to replead a selective prosecution claim if a meaningful one

can be asserted.’ . . . That opportunity was, of course, waived

by [their] decision to appeal rather than amend their complaint.”); cf. 6 Charles Alan Wright et al., Federal Practice

and Procedure § 1483, at 588 (2d ed. 1990) (“[Dismissing

with leave to amend] will afford the party against whom the

dismissal is granted the option of amending the pleading or of

having a judgment entered against him and taking an

appeal.”). 

[15] Accordingly, we decline to remand to allow Rick-Mik

to amend its complaint. 

CONCLUSION

Rick-Mik’s complaint was fundamentally flawed. The

complaint failed to allege market power in the relevant tying

market (gasoline franchises, not retail gasoline). The franchises are not separate products, for tying purposes, from

credit-card processing services; instead, such processing is an

inherent part of the franchises. The price-fixing allegations

were impermissibly vague. And questions about further

amendment of the complaint were waived. 

AFFIRMED.

RICK-MIK v. EQUILON ENTERPRISES 8523