Opinion ID: 775962
Heading Depth: 3
Heading Rank: 2

Heading: Anticompetitive Effect As an Indication of Market Power

Text: 38 Plaintiff's alleged product market would support the 80-90% market share figure for defendants. Market power defined as a percentage market share, however, is not the only way to demonstrate defendants' ability to depress salaries. See Toys R Us, Inc. v. FTC, 221 F.3d 928, 937 (7th Cir. 2000) (explaining that the share a firm has in a properly defined relevant market is only a way of estimating market power, which is the ultimate consideration). If a plaintiff can show that a defendant's conduct exerted an actual adverse effect on competition, this is a strong indicator of market power. In fact, this arguably is more direct evidence of market power than calculations of elusive market share figures. See Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d 90, 98 (2d Cir. 1998) (stating that market power may be proven directly by evidence of the control of prices... or it may be inferred from one firm's large percentage share of the relevant market) (emphasis added); Toys R Us, 221 F.3d at 937 (stating that market power may be proven through direct evidence of anticompetitive effects or by proving relevant product and geographic markets and by showing that the defendant's share exceeds whatever threshold is important for the practice in the case) (emphasis added). 39 In this Circuit, a threshold showing of market share is not a prerequisite for bringing a § 1 claim. See K.M.B. Warehouse Distributions, Inc. v. Walker Mfg. Co., 61 F.3d 123, 129 (2d Cir. 1995). If a plaintiff can show an actual adverse effect on competition, such as reduced output... we do not require a further showing of market power. Id. (citation omitted); see also Capital Imaging Assocs. v. Mohawk Valley Med. Assocs., 996 F.2d 537, 546 (2d Cir. 1993) (explaining that plaintiff may avoid a `detailed market analysis' by offering `proof of actual detrimental effects, such as a reduction of output') (quoting FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 460-61 (1986)). If, for example, the plaintiff in this case could prove that (1) defendants engaged in information exchanges that would be deemed anticompetitive under Gypsum and (2) such activities did in fact have an anticompetitive effect on the market for MPT labor in the oil and petrochemical industry, we would not deny relief on the basis of market share figures. On remand, therefore, the court should consider whether plaintiff has demonstrated anticompetitive effects as part of the court's assessment of defendants' market power. 40 Defendants mistake this approach for the quick look or truncated rule of reason inquiry that the Supreme Court has endorsed in certain contexts. Defendants are correct to assert that in California Dental Ass'n v. FTC the Supreme Court limited the use of the quick look to cases in which the probable anticompetitive effects of the alleged conduct would be intuitively obvious and easily... ascertained with even a rudimentary understanding of economics. 526 U.S. 756, 759, 770 (1999); see, e.g., Indiana Dentists, 476 U.S. at 459- 60 (agreement to withhold a particular desired service); Nat'l Soc'y of Prof'l Eng'rs v. United States, 435 U.S. 679, 692 (1978) (agreement to refuse to discuss prices with potential customers). The alleged conduct in this case - the exchange of information - is not so inherently or intuitively anticompetitive. The Supreme Court has said as much and specifically prescribed a full rule of reason. See Gypsum, 438 U.S. at 441 n.16 (The exchange of price data and other information among competitors does not invariably have anti-competitive effects....). We do not suggest that the district court can avoid conducting a full analysis of the pro- and anticompetitive characteristics of the arrangement in this case. 41 The use of anticompetitive effects to demonstrate market power, however, is not limited to quick look or truncated rule of reason cases. This Court's precedents discussed above were not quick look cases; they merely accepted alternative ways of demonstrating market power. See K.M.B. Warehouse, 61 F.3d at 127 (applying rule of reason); Capital Imaging, 996 F.2d at 545-46 (applying rule of reason); Tops Mkts., 142 F.3d at 98-99 (analyzing market power in the context of a § 2 monopolization claim); see also United States v. Brown Univ., 5 F.3d 658, 668 (3d Cir. 1993) (stating that under the traditional rule of reason a plaintiff may satisfy [its] burden by proving the existence of actual anticompetitive effects, such as reduction of output [or] increase in price) (citation omitted). The question of whether plaintiff has alleged adverse effects on competition and antitrust injury sufficient to survive a Rule 12(b)(6) motion is addressed infra Part VI.