Opinion ID: 223505
Heading Depth: 2
Heading Rank: 1

Heading: Sufficiency of the Alleged Market

Text: We review an award of summary judgment de novo, affirming only if there is no genuine issue as to any material fact, and if the moving party is entitled to a judgment as a matter of law. Allianz Ins. Co. v. Lerner, 416 F.3d 109, 113 (2d Cir.2005). To state a claim under § 7 of the Clayton Act, §§ 1 or 2 of the Sherman Act, or New York's Donnelly Act, a plaintiff must allege a plausible relevant market in which competition will be impaired. See, e.g., United States v. E.I. du Pont de Nemours & Co., 353 U.S. 586, 593, 77 S.Ct. 872, 1 L.Ed.2d 1057 (1957) (Determination of the relevant market is a necessary predicate to a finding of a violation of the Clayton Act because the threatened monopoly must be one which will substantially lessen competition within the area of effective competition. (internal quotation marks omitted)); Chapman v. New York State Div. for Youth, 546 F.3d 230, 238 (2d Cir.2008) (Sherman Act); Benjamin of Forest Hills Realty, Inc. v. Austin Sheppard Realty, Inc., 34 A.D.3d 91, 823 N.Y.S.2d 79, 83 (2006) (Donnelly Act). The relevant market must be defined as all products `reasonably interchangeable by consumers for the same purposes,' because the ability of consumers to switch to a substitute restrains a firm's ability to raise prices above the competitive level. Geneva Pharm. Tech. Corp. v. Barr Labs. Inc., 386 F.3d 485, 496 (2d Cir.2004) (quoting E.I. du Pont de Nemours & Co., 351 U.S. at 395, 76 S.Ct. 994). [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. Chapman, 546 F.3d at 238 (quoting Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 436 (3d Cir.1997)). Here, the district court correctly concluded that the market alleged in the City's complaint is legally insufficient because it is defined by the City's preferences, not according to the rule of reasonable interchangeability and cross-elasticity of demand. The market alleged in the City's complaint ignores the competition existing among insurance providers for the City's business, as well as the health insurance market for other large employers in the region. The City does not allege any factor that would prevent insurance companies other than those it selects for the Health Benefits Program from proposing competitive products should the merged firm raise its premiums to supracompetitive prices. The arguments the City raises on appeal are unavailing. The City first argues that the insurance plans it approves constitute a unique market because they reflect the City's sound policy choices. A single purchaser's preferences, however, cannot define a market. We faced a similar argument in Hack v. President and Fellows of Yale College, in which the plaintiffs complained that Yale was illegally tying dormitory housing to their education and alleged that Yale, because of its uniqueness, constituted its own market for education. 237 F.3d 81, 86-87 (2d Cir.2000), abrogated on other grounds by Swierkiewicz v. Sorema N.A., 534 U.S. 506, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002). We rejected this contention, holding that, although Yale is unique, ... in a collegiate sense, it does not constitute its own tying market because there are many institutions of higher learning providing superb educational opportunities. Id. at 86. Here, although the approved insurance plans may have been particularly suitable to the City's needs, the City does not allege any reason why other similar insurance plans are unsuitable or why the numerous insurance providers in the area could not or would not design suitable plans to compete with those that the City selected. The City next argues that its proposed market is distinct from a single-purchaser market because the employees who select their insurance coverage also constitute purchasers. However, the employees choose health coverage only from the plans that the City has already selected for inclusion in the Health Benefits Program. The employees' ability to choose among the plans in the Health Benefits Program does not change the fact that the competition among insurance providers for the business of the City and other large employers would constrain the ability of the merged firm to set its premium above a competitive price. It thus cannot save the City's artificially narrow market definition. Finally, the City argues that the district court erred in failing to consider its expert report, which, it argues, establishes the harm to competition that would result from the merger. The district court, however, granted summary judgment on the basis that the alleged relevant market is legally insufficient. The City's expert report was thus irrelevant.