Opinion ID: 1361188
Heading Depth: 2
Heading Rank: 3

Heading: Plaintiffs Have Failed to Define the Proper Market for Antitrust Purposes

Text: HWC claims that OCFS, in cooperation with Cornell, has conspired to create a monopoly in the market for training services to private child care providers located within the State of New York by withholding approval of supervised facilities that do not use the TCI method. HWC alleges that HCC was complicit in this arrangement because, after HWC trained HCC's staff in 2001, HWC discovered that one of HCC's training coordinators appeared in TCI's training manual and video illustrating HWC's proprietary methods. For a monopoly claim [t]o survive a Rule 12(b)(6) motion to dismiss, an alleged product market must bear a rational relation to the methodology courts prescribe to define a market for antitrust purposes  analysis of the interchangeability of use or the cross-elasticity of demand, and it must be plausible. Todd v. Exxon Corp., 275 F.3d 191, 200 (2d Cir.2001) (internal quotation marks and citation omitted). [T]he reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it determine [t]he outer boundaries of a product market. Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). Though market definition is a deeply fact-intensive inquiry [and] courts [therefore] hesitate to grant motions to dismiss for failure to plead a relevant product market, Todd, 275 F.3d at 199-200, [w]here the plaintiff fails to define its proposed relevant market with reference to the rule of reasonable interchangeability and cross-elasticity of demand, or alleges a proposed relevant market that clearly does not encompass all interchangeable substitute products even when all factual inferences are granted in plaintiff's favor, the relevant market is legally insufficient and a motion to dismiss may be granted, Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 436 (3d Cir.1997). Here we find that plaintiffs' proposed relevant market does not encompass all interchangeable substitute products. We therefore affirm the district court's dismissal of the antitrust claims. HWC contends that the relevant market for our analysis here is the market for restraint training services to private child care providers located within the State of New York. This definition is too narrow. HWC has failed to show how the market for restraint training services to child care providers is any different from the larger market for restraint training services to other businesses, agencies, and organizations. Interchangeability implies that one product is roughly equivalent to another for the use to which it is put. ... Queen City, 124 F.3d at 437(internal quotation marks and citation omitted). Plaintiffs do not contest that Handle With Care is marketed to and utilized by various organizations, institutions, and agencies that are not child care providers. Indeed, plaintiffs readily admit in their complaint that they compete for such contracts on a national and international basis. The unifying characteristic of this market is that each purchaser needs to restrain individuals, not just children. Because the reasonable interchangeability of use ... between the product itself and substitutes for it determines [t]he outer boundaries of a product market, it is apparent that the proper market here is the larger market for restraint training services to businesses, agencies, and organizations with the need to safely restrain individuals of all ages, not the more limited market for child restraint services. Brown Shoe, 370 U.S. at 325, 82 S.Ct. 1502. As the district court noted, the larger market includes social service agencies, law enforcement agencies, correctional facilities, educational facilities, and even airlines. Furthermore, we reject HWC's argument that because private child care providers in New York must have OCFS approval in order to operate, and thus that the market is specialized, it stated a plausible discrete relevant market. The relevant inquiry is not whether a private child care provider may reasonably use both approved and non-approved OCFS methods interchangeably, but whether private child care providers in general might use such products interchangeably. See Queen City, 124 F.3d at 438. HWC's proposed relevant market clearly does not encompass all interchangeable substitute products even when all factual inferences are granted in plaintiff's favor. Id. at 436. We thus agree with the district court that the Plaintiffs have not offered any theoretically reasonable explanation for restricting the product market to child care providers that require OCFS approval, or provided a sufficient factual predicate to support an inference that OCFS enjoys any substantial market power in the broader market for restraint services. Plaintiffs' proposed market is therefore legally insufficient and dismissal of the antitrust claims was appropriate. [3]