Opinion ID: 3154158
Heading Depth: 3
Heading Rank: 1

Heading: Full-Service Supermarkets

Text: Hanover Realty admits it is neither a competitor nor a consumer in the market for full-service supermarkets; it is a land owner and lessor of property, not a food retailer. It instead argues that its injuries were “inextricably intertwined” with Defendants’ attempt to monopolize that market. The Supreme Court first recognized this form of antitrust injury in McCready. McCready was an employee covered by a group health plan purchased from the defendant 15 Blue Shield. McCready, 457 U.S. at 468. Under the plan, Blue Shield agreed to reimburse subscribers such as McCready for services provided by psychiatrists, but not by psychologists. McCready was treated by a psychologist and sought reimbursement for her bills, but Blue Shield denied payment. She then filed suit against Blue Shield and a psychiatric society alleging that the two had engaged in an unlawful antitrust conspiracy to exclude psychologists from receiving payment under the Blue Shield plan. Id. at 469. The defendants argued that McCready had not suffered antitrust injury because the alleged conspiracy was directed at psychologists and not at subscribers of group health plans. Id. at 478. The Supreme Court rejected the defendants’ view of antitrust standing, explaining that the § 4 “remedy cannot reasonably be restricted to those competitors whom the conspirators hoped to eliminate from the market.” Id. at 479. Although McCready was not a competitor of the defendants, “the injury she suffered was inextricably intertwined with the injury the conspirators sought to inflict on psychologists and the psychotherapy market.” Id. at 483-84 (emphasis added). And while McCready was a consumer in the market for psychotherapy services, the Supreme Court’s explanation of why she suffered antitrust injury emphasized not her status as a market participant, but rather that she was directly targeted for harm by parties ultimately wishing to inflict a derivative harm on a competitor. As the Court noted, “[d]enying reimbursement to subscribers for the cost of treatment was the very means by which it is alleged that Blue Shield sought to achieve its illegal ends.” Id. at 479. The harm to subscribers like McCready was not only clearly foreseeable, “it was a necessary step in effecting the ends of the alleged illegal conspiracy.” Id. 16 Underscoring that its reasoning was not limited to consumers, the Court offered the following hypothetical to crystalize the nature of McCready’s injury: “If a group of psychiatrists conspired to boycott a bank until the bank ceased making loans to psychologists, the bank would no doubt be able to recover the injuries suffered as a consequence of the psychiatrists’ actions.” Id. at 484 n.21. McCready and the bank “are in many respects similarly situated,” the Court explained, even though the bank is not a customer or consumer in the psychotherapy market. See id. Both were used as conduits to harm the defendants’ actual competitors. Because imposing harm on McCready was an indispensable aspect of the scheme, the Court concluded that the injury to McCready “reflect[ed] Congress’ core concerns” in prohibiting the defendants’ conduct. Id. at 481. In contrast to McCready, where the alleged harm to the plaintiff was the primary means of the defendants’ anticompetitive conduct, harm that is secondary to the anticompetitive conduct cannot support antitrust injury. For example, we have said that, “[a]lthough a supplier may lose business when competition is restrained in the downstream market in which it sells goods and services, such losses are merely byproducts of the anticompetitive effects of the restraint,” and do not qualify as antitrust injury. W. Penn Allegheny, 627 F.3d at 102. To illustrate, in Ethypharm S.A. France v. Abbott Laboratories, 707 F.3d 223, 225-26 (3d Cir. 2013), a foreign drug manufacturer, Ethypharm, used a domestic distributor to sell one of its drugs in the United States market. After Abbott, the distributor of another drug, sued the domestic distributor for patent infringement, Ethypharm sued Abbott for antitrust violations. We rejected the notion that Ethypharm’s injury was inextricably 17 intertwined with the alleged scheme. See id. at 237. To effectuate its conspiracy, Abbott needed only to place restrictions on Ethypharm’s domestic distributor and thus any harm suffered by Ethypharm was incidental, rather than essential, to the restraint on trade. See id. at 233. Similarly, in Broadcom Corp. v. Qualcomm, Inc., 501 F.3d 297, 319-20 (3d Cir. 2007), the plaintiff’s asserted basis for antitrust standing was that the defendant’s restraint in one market injured it by suppressing the demand of participants in the restrained market for the plaintiff’s supply of goods in another market. As in Ethypharm, we said the alleged injury was not inextricably intertwined with the anticompetitive scheme because it crossed markets and was attenuated from the anticompetitive conduct. See id. at 320-21. Together, Ethypharm and Broadcom support the proposition that suppliers and other non-market participants generally do not have antitrust standing unless their injuries were the very means by which the defendants carried out their illegal ends. As we said in West Penn Allegheny, “[a]s a general matter, the class of plaintiffs capable of satisfying the antitrust-injury requirement is limited to consumers and competitors in the restrained market . . . and to those whose injuries are the means by which the defendants seek to achieve their anticompetitive ends.” 627 F.3d at 102 (emphasis added). Because Hanover Realty alleges that its harm was the essential component of Defendants’ anticompetitive scheme as opposed to an ancillary byproduct of it, we conclude that Hanover Realty has sufficiently pleaded antitrust injury under McCready. The ultimate objective of the defendants in McCready was to injure psychologists, not plan subscribers. To achieve that goal, they refused to reimburse subscribers for visits to psychologists, thereby encouraging subscribers to visit psychiatrists. Without injuring those subscribers, there 18 was no conspiracy. Likewise, McCready’s hypothetical bank, which was neither a consumer nor competitor in the psychotherapy market, sustained actionable injury because it was directly harmed as the means of injuring psychologists. Similar reasoning applies here. The end goal of Defendants’ alleged anticompetitive conduct was to injure Wegmans, a prospective competitor. To keep Wegmans out of the market, Defendants sought to impose costs not on their competitor, but on Hanover Realty, the party tasked with obtaining the necessary permits before construction could begin. Absent this relationship between Hanover Realty and Wegmans, Defendants’ conduct “would have been without purpose or effect.” Steamfitters Local Union No. 420 Welfare Fund v. Philips Morris, Inc., 171 F.3d 912, 923 (3d Cir. 1999). And Defendants would succeed in their scheme either by inflicting such high costs on Hanover Realty that it was forced to abandon the project or by delaying the project long enough so that Wegmans would back out of the agreement. In both scenarios, injuring Hanover Realty was the very means by which Defendants could get to Wegmans; Hanover Realty’s injury was necessary to Defendants’ plan. Had Wegmans purchased the property from Hanover Realty and itself applied for the permits, the costs imposed by Defendants’ challenges would have qualified as antitrust injuries. It should make no difference that the parties’ lease shifted these costs to Hanover Realty. See McCready, 457 U.S. at 479 (observing that antitrust injury “cannot reasonably be restricted to those competitors whom [defendants] hoped to eliminate from the market”). Regardless of who bore these costs, Defendants’ objective remained the same: to keep Wegmans out of the relevant market. 19 Defendants seize on language from our precedent saying “we have not extended the ‘inextricably intertwined exception beyond cases in which both plaintiffs and defendants are in the business of selling goods or services in the same relevant market,’ though they may not directly compete against each other.” See Ethypharm, 707 F.3d at 237 (quoting Broadcom, 501 F.3d at 320-21). According to Defendants, because Hanover Realty and ShopRite do not operate in the same market, “Hanover Realty cannot establish antitrust injury unless the Court were to break with Ethypharm and Broadcom and greatly expand the scope of the ‘inextricably intertwined’ exception—an expansion that would swallow the rule.” Appellees’ Br. at 19. Defendants read too much into these statements.9 As 9 We pause to note that at least one of our cases discussing antitrust injury contains language that is potentially overstated. In Barton & Pittinos, without mentioning the “inextricably intertwined” doctrine, we found no antitrust injury because the plaintiff was “not a competitor or a consumer in the market in which trade was allegedly restrained.” 118 F.3d at 184. We later cast doubt on that statement, clarifying that the conclusion in Barton, “if construed as an absolute (which arguably it need not be), may in some circumstances lead to results that conflict with Supreme Court and other precedent.” Carpet Grp. Int’l v. Oriental Rug Importers Ass’n, Inc., 227 F.3d 62, 76 (3d Cir. 2000), overruled on other grounds, Animal Science Prods., Inc. v. China Minmetals Corp., 654 F.3d 462 (3d Cir. 2011). We, of course, agree with Carpet Group and our other cases that have allowed for the possibility of antitrust injury based on a showing of harm that is inextricably intertwined with the 20 an initial matter, just because we have not extended the exception beyond parties that sell goods or services in the same market by no means suggests we shouldn’t (or can’t ) do so. In fact, McCready suggests the opposite conclusion. McCready did not sell goods or services in the psychotherapy market—she was a subscriber to a health insurance plan. Nor was the hypothetical bank in McCready even a participant in the psychotherapy market. Nonetheless, both sustained harm that was inextricably intertwined with the defendants’ misconduct. Because § 4 “does not confine its protection to consumers, or to purchasers, or to competitors, or to sellers” we must avoid placing artificial limits on who may bring suit under the antitrust laws. McCready, 457 U.S. at 472 (citations omitted). Moreover, our comments in Ethypharm and Broadcom must be read in context. As we discussed, the alleged injuries to the plaintiffs in those cases were byproducts of anticompetitive restraints in separate markets. In contrast, although Hanover Realty and ShopRite operate in separate markets, the very essence of Defendants’ scheme was to impose expense and delay on Hanover Realty as a means of keeping Wegmans out of the relevant market. Defendants’ final line of defense against a finding of antitrust injury rests on cases from other jurisdictions. In an industry notorious for low profit margins, perhaps it is not surprising that this is just the latest in a series of cases in which a supermarket allegedly employed anticompetitive tactics to keep a competitor out of the market.10 Defendants defendant’s wrongdoing, rather than harm just to competitors or consumers. 10 See, e.g., Serfecz v. Jewel Food Stores, 67 F.3d 591 (7th Cir. 1995); Southaven Land Co. v. Malone & Hyde, Inc., 715 21 rely mostly on the Sixth Circuit’s decision in Southaven Land Co. v. Malone & Hyde, Inc., 715 F.2d 1079. Southaven was an owner-lessor of commercial space and Malone operated a number of grocery stores in the neighborhood. Southaven, 715 F.2d at 1080. Malone assumed a lease to premises owned by Southaven, but the parties later agreed to cancel the agreement. However, upon learning that Southaven intended to find a grocery store to fill the vacancy, Malone refused to cancel the contract. Malone continued to pay rent on the vacant lot and did not otherwise breach any of its contractual obligations. Id. at 1087. Southaven nonetheless sued for antitrust violations, alleging that Malone intended to leave the space vacant so as to destroy competition for its other grocery stores. The Sixth Circuit rejected Southaven’s argument that its injury was inextricably intertwined with the injury Malone sought to inflict on the grocery market. Id. at 1086-87. It explained that “Southaven [a real estate lessor] is not alleged to be a member of a class of ‘consumers’ of grocery products or a class otherwise manipulated or utilized by Malone as a fulcrum, conduit or market force to injure competitors or participants” in the relevant market. Id. at 1086. Rather, Southaven’s injury was, at most, a “tangential by-product” of the alleged monopolistic conduct. Id. at 1086-87. We do not find Southaven persuasive here because it addressed a different set of facts and a different kind of F.2d 1079 (6th Cir. 1983); Acme Mkts., Inc. v. Wharton Hardware & Supply Corp., 890 F. Supp. 1230 (D.N.J. 1995); Rosenberg v. Cleary, Gottlieb, Steen & Hamilton, 598 F. Supp. 642 (S.D.N.Y. 1984). 22 injury. Southaven’s only economic harm was the vague allegation that Malone was “subvert[ing] [its] business and financial interests.” Id. at 1087. This supposed subversion of business interests was not the means by which Malone was trying to achieve its illegal ends; it was an incidental effect in the real estate rental market rather than the grocery market. Indeed, by continuing to pay rent and honoring its contractual obligations, Malone arguably did not intend to harm Southaven at all. As in Ethypharm and Broadcom, the alleged downstream harm was too attenuated to support antitrust injury. In fact, Southaven supports the view that there was antitrust injury here, for Hanover Realty was used as the “fulcrum, conduit or market force” that was missing in Southaven. Forcing Hanover Realty to pay thousands of dollars in legal fees to defend itself against alleged anticompetitive filings and imposing significant delays on the project were the very means by which Defendants sought to keep a competitor out of the market.11 For all these reasons, we conclude that Hanover Realty has sufficiently alleged antitrust injury in the market for full-service supermarkets because its injury was inextricably intertwined with Defendants’ monopolistic conduct. 11 Defendants also urge us to follow Rosenberg, a decades-old district court decision from outside this circuit. Although Rosenberg involved similar facts to those here—competitor supermarkets filing a series of lawsuits to enjoin the construction of a new supermarket—the court’s legal analysis is not persuasive. See 598 F. Supp. at 643-44. The court mechanically applied Southaven without even mentioning the possibility of antitrust injury based on the “inextricably intertwined” exception. Id. at 645. 23