Source: https://www.robinskaplan.com/resources/articles/plausibility-and-the-non-conspiracy-elements-of-antitrust-claims
Timestamp: 2019-04-18 21:30:00+00:00

Document:
In Bell Atlantic Co. v. Twombly, the Supreme Court injected a “plausibility” standard into Rule 12(b)(6) for claims asserting an alleged antitrust conspiracy. Since then, lower courts, scholars, and practitioners have written volumes in an attempt to clarify this new standard. Now, seven years in, Twombly — along with the Court’s holding in Ashcroft v. Iqbal, that Twomby’s plausibility standard applies to “all civil actions” — has started to reshape the standard for pleading several other non-conspiracy elements of antitrust claims. As a collection of recent federal cases show, standards have begun to emerge for what it means to plausibly allege other, non-conspiracy elements of a federal antitrust claim.
Every private antitrust claim requires a showing an “antitrust injury”—an ”injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.” A recent Ninth Circuit decision has clarified just how much Twombly raises the bar for pleading an antitrust injury based on overcharge allegations. Before Twombly, a plaintiff bringing a purchaser action to recover overcharges could usually satisfy this element by alleging and then proving that it paid inflated prices as a result of the defendant’s anticompetitive conduct.
The Ninth Circuit found that this overcharge claim was not plausible under Twombly because Apple kept its 99¢ download price constant before and after the alleged monopoly began and there was no allegation that prices declined after the monopoly ended. The court also found that the plaintiff’s allegations failed to negate “other ‘obvious alternative explanations’ for the music pricing,” including the possibility that Apple “kept the music prices low to incentivize customers to purchase the iPod” or used low pricing to undercut its rivals.
The result? When it comes to overcharges and the needed antitrust injury, plausibility is as much a test of economic logic as it is of factual detail. To succeed after Somers, a plaintiff’s overcharge theory must not only rise above mere conclusion (i.e., describe the overcharge in sufficient factual detail)—it must also demonstrate economic sense in light of the market facts.
After Twombly, these requirements have seen further tightening. Increasingly, courts now also demand concrete factual allegations that plausibly support the proposed market definition. For instance, a recent decision by a California federal district court, Sidibe v. Sutter Health, exemplifies the importance of plausibility when it comes to pleading the existence of a “relevant market” in an antitrust claim.
Sidibe embodies the level of precision that federal courts may now demand in antitrust litigation under the Twombly plausibility standard when it comes to pleading the existence of a relevant market. Muddled or unstated market definitions—due to presentation of multiple possible definitions or a mere methodology for arriving at a definition—may be all a court needs to dismiss an antitrust claim on the basis of implausibility. The same goes for market definitions that lack a sufficiently comprehensible foundation of facts to back them up.
To succeed, antitrust plaintiffs must also often allege that the given defendant(s) exercised monopoly power in the plaintiff’s stated geographic and product markets. The plausibility standard now requires antitrust litigants to devote more thought as to how to plead this element. For example, in Intellectual Ventures, LLC v. Capital One, a Virginia federal district court recently dismissed antitrust counterclaims based partly on the defendant’s failure to plausibly allege that the plaintiff held monopoly power in the “relevant markets” at issue.
“Capital One d[id] not allege IV’s share” of the relevant market—instead, Capital One alleged that IV exercised monopoly power because “IV ha[d] demanded and received ‘supracompetitive prices’” in licensing its financial patents.
As Twombly and its progeny continue to reshape the antitrust pleading landscape, pleadings standards for affirmative defenses remain relatively uncharted territory. Currently, lower courts have not yet reached agreement as to whether Twombly and Iqbal apply to the pleading of affirmative defenses. Thus, it remains to be seen how defendants pleading affirmative defenses in antitrust cases will fare against plaintiffs that demand application of the Twombly plausibility standard.
For example, the issue may arise in a price-discrimination claim under the Robinson-Patman Act where a buyer claims that a seller has lessened competition by selling the same product at different prices to similar buyers. There, a plaintiff could moves to strike the defendant’s affirmative defenses based on cost-justification, meeting-competition, or functional-discount if they are not supported by plausible factual allegations. Application of Twombly and Iqbal to this kind of pleading—or to the pleading of other affirmative defenses—could develop Twombly/Iqbal plausibility into a significant tool for antitrust plaintiffs.
Defendant Retailers are aware that they are not ‘efficient’ in comparison to the Plaintiffs and that the only thing that keeps the Defendant Retailer in business is buying goods at illegally low prices that do not have any legitimate cost-justification, meeting-competition, or functional discount defense.
Going forward, Twombly’s increased demand for plausibility seems destined to spread no matter which party makes the allegation.
Certainly, the main effect of Twombly is to increase scrutiny of the conspiracy-related elements of an antitrust claim. That said, recent decisions in cases like Somers, Sidibe, Intellectual Ventures, and AutoZone show that the Twombly plausibility standards are profoundly influencing all aspects of antitrust pleading, potentially including affirmative defenses. And even though Judge Richard Posner cautioned in Text Messaging that an antitrust complaint will not have to establish each element by a “preponderance of the evidence,” it still seems clear that such complaints must still be supported by economic logic and market facts. Plaintiffs and defendants alike should take note of this reality and rethink how they plead their antitrust theories accordingly.
 Bell Atlantic Co. v. Twombly, 550 U.S. 544, 557 (2007).
See, e.g., Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).
Somers v. Apple, Inc., 729 F.3d 953, 962-966 (9th Cir. 2013).
See, e.g., Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 489 (1968) (“[W]hen a buyer shows that the price paid by him . . . is illegally high and also shows the amount of the overcharge, he has made out a prima facie case of injury and damage within the meaning of § 4 [of the Clayton Act].”).
Somers, 729 F.3d at 962-966.
The relevant product market “includes all reasonably interchangeable products” Craftsmen Limousine, Inc. v. Ford Motor Co., 491 F.3d 380, 388 (8th Cir. 2007).
The relevant geographic market is the “area in which consumers can practically seek alternative sources of the product.” Id.
See Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F. 3d 430, 436 (3d Cir. 1997) (collecting cases).
Sidibe v. Sutter Health, No. C 12-04854 LB, 2013 U.S. Dist. LEXIS 160512, at *31-39 (N.D. Cal. Nov. 7, 2013).
See, e.g., United States v. Grinnell Corp., 384 U.S. 563, 570-571 (1966) (explaining that one of the elements of “[t]he offense of monopolization under § 2 of the Sherman Act” is “the possession of monopoly power in the relevant market”).
No. 1:13-cv-00740 (AJT/TRJ), 2013 U.S. Dist. LEXIS 177836, at *19-21 (E.D. Va. Dec. 18, 2013).
Iqbal, 556 U.S. at 680 (explaining the Court’s ruling in Twombly).
Compare, e.g., Hayne v. Green Ford Sales, Inc., 263 F.R.D. 647, 650 (D. Kan. 2009) (“[T]he Court agrees with . . . applying the heightened [Twombly] pleading standard to affirmative defenses.”), with, e.g., Wells Fargo & Co. v. United States, 750 F. Supp. 2d 1049, 1051 (D. Minn. Oct. 27, 2010) (“The Court strongly agrees with those judges who have found that Iqbal and Twombly do not apply to the pleading of affirmative defenses.”).
Text Messaging, 630 F.3d at 629.

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