Opinion ID: 4076467
Heading Depth: 4
Heading Rank: 3

Heading: Synthesizing the Kodak Case

Text: Law Kodak makes clear that, in certain limited circumstances, a competitive primary market will not insulate a defendant from antitrust liability. But neither that case nor our subsequent case law overturns the more general principle that a plaintiff’s theory of antitrust liability must be economically plausible. Thus, in the summary judgment context, “‘antitrust law limits the range of permissible 47 We also affirmed summary judgment against the § 1 tying claim raised in Harrison Aire because “[t]ying requires appreciable economic power in the tying product market,” and the plaintiff “fail[ed] to produce any evidence of appreciable market power in the tying product market” for hot air balloons. 423 F.3d at 385 (citations and internal quotation marks omitted). 91 inferences’ that can be drawn ‘from ambiguous evidence.’” Harrison Aire, 423 F.3d at 380 (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986)). That “higher threshold” for summary judgment “is imposed in antitrust cases to avoid deterring innocent conduct that reflects enhanced, rather than restrained, competition.” In re Flat Glass Antitrust Litig., 385 F.3d 350, 357 (3d Cir. 2004). As the Supreme Court put it plainly in Kodak itself, “[i]f [a] plaintiff’s theory is economically senseless, no reasonable jury could find in its favor, and summary judgment should be granted.” 504 U.S. at 468-69. The requirement that a plaintiff make out an economically coherent theory of antitrust liability applies just as much to the pleading stage, where, to “make a § 1 claim,” a plaintiff must “identify[] facts that are suggestive enough to render a § 1 [violation] plausible,” with sufficient “context” to “raise[] a suggestion” of unlawful anticompetitive conduct. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556-57 (2007). The requirement that a plaintiff provide an economically plausible theory for its antitrust claims applies no less at trial than when a case is resolved by summary judgment or on the pleadings. With that in mind, we do not read – and have never read – Kodak to modify the requirement that a plaintiff in a tying case prove that the defendant has market power sufficient “to force a purchaser to do something that he would not do in a competitive market.” Jefferson Parish, 466 U.S. at 14. In general, we expect a vibrant and competitive primary market to discipline and restrain power in related aftermarkets. What Kodak stands for is the principle that there can be some exceptions to that expectation, when a plaintiff can produce a plausible economic theory of market 92 failure, supported by sufficient evidence. In evaluating the issues in this case, we must consider just how broadly that Kodak exception should be read. A leading antitrust treatise seems to suggest that Kodak should be read as confined to the lock-in situation that was that opinion’s focus. As that treatise distills the Kodak analysis: “Kodak could exploit locked-in customers with supracompetitive prices only if it could profitably (1) dispense with sophisticated new customers or (2) could discriminatorily overcharge only those existing customers whose exploitation would not affect new sales.” Areeda & Hovenkamp, Fundamentals, supra, § 5.12, at 5-102 (Supp. 2016).48 Those conditions will rarely obtain, and “[m]uch 48 As that treatise explains those two elements in greater detail: when a defendant has no power in the [primary] market, it cannot profitably charge supracompetitive prices for unique [aftermarket products] to “locked in” users unless: 1. it can profitably abandon selling new machines to sophisticated new customers who would understand that the machine’s cost is the sum of its nominal price plus the excess [maintenance] charges later ...; or