Court Opinion

ID: 3052299
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:41:20.653882+00
Date Added: 2024-06-11T12:46:42.213654
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

RICK-MIK ENTERPRISES INC.; MIKE          
M. MADANI; ALFRED BUCZKOWSKI,
on behalf of themselves and those
                                                 No. 06-55937
similarly situated,
                Plaintiffs-Appellants,
                                                  D.C. No.
                                                CV-05-08212-R
                  v.
                                                  OPINION
EQUILON ENTERPRISES, LLC, doing
business as Shell Oil Products US,
                Defendant-Appellee.
                                         
        Appeal from the United States District Court
           for the Central District of California
         Manuel L. Real, District Judge, Presiding

                    Argued and Submitted
           February 12, 2008—Pasadena, California

                       Filed July 11, 2008

       Before: Betty B. Fletcher and N. Randy Smith,
    Circuit Judges, and Samuel P. King,* District Judge.

                     Opinion by Judge King

   *The Honorable Samuel P. King, Senior United States District Judge
for the District of Hawaii, Sitting by Designation.

                               8499
8502           RICK-MIK v. EQUILON ENTERPRISES

                         COUNSEL

Thomas P. Bleau (argued), Martin R. Fox, Gennady L.
Lebedev, H. Michael Song, Bleau Fox & Fong, Los Angeles,
California, for the plaintiffs-appellants.

Bradley S. Phillips (argued), Fred A. Rowley, Jr., Munger
Tolles & Olson, Los Angeles, California, for the defendant-
appellee.

                          OPINION

KING, District Judge:

   Equilon Enterprises, LLC (“Equilon”) does business as
Shell Oil Products. Equilon’s standard franchise agreement
requires its franchisees, Shell and Texaco gasoline stations, to
use Equilon to process credit-card transactions. In addition to
payment for sales of petroleum products, Equilon allegedly
gets (1) transaction fees associated with the processing, or (2)
some kind of unspecified “kickback” from unidentified banks
that process the transactions, or both. Rick-Mik Enterprises,
Inc., Mike M. Madani, and Alfred Buczkowski (collectively
“Rick-Mik”) are Equilon franchisees who — on behalf of
themselves and other, similarly-situated Equilon franchisees
— allege that Equilon violated antitrust laws by illegally tying
two distinct products (the franchises and the credit-card pro-
cessing services). Rick-Mik contends franchisees could pay
                RICK-MIK v. EQUILON ENTERPRISES             8503
lower transaction fees from others for credit-card processing.
Rick-Mik also alleges that Equilon illegally agreed with banks
to price-fix processing fees.

   The district court dismissed the antitrust and related state-
law counts from Rick-Mik’s complaint. We affirm because:
(1) Rick-Mik’s complaint failed to allege market power in the
relevant market; (2) in the alleged franchising context, credit-
card processing services are not a product distinct from the
franchise itself; (3) the price-fixing allegations were imper-
missibly vague; and (4) Rick-Mik waived the opportunity to
attempt to cure these deficiencies.

                       BACKGROUND

   Rick-Mik appeals an order dismissing five of six counts of
its complaint alleging antitrust violations against Equilon. The
complaint alleged an unlawful tie between Equilon’s fran-
chises (the “tying” product) and credit- and debit-card pro-
cessing services (the “tied” product) which Equilon requires
as part of the franchise agreement.

   Shortly after Rick-Mik’s complaint was filed, in lieu of an
answer, Equilon moved to dismiss counts one (violation of the
Sherman Act, 15 U.S.C. § 1, for unlawful tying); two (viola-
tion of the Sherman Act, 15 U.S.C. § 1, for unlawful price fix-
ing); three (California state law violations for unlawful tying);
four (California state law violations for unlawful price-
fixing); and six (California state law violations for unfair
competition). Count five, which Equilon did not move to dis-
miss, claimed violations of California’s franchise investment
law.

   Because the appeal is from an order granting a motion to
dismiss, we assume the factual allegations of the complaint
are true. Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d
979, 984 (9th Cir. 2000). The question is whether the allega-
8504              RICK-MIK v. EQUILON ENTERPRISES
tions, together with the attachments to the complaint,1 set
forth viable antitrust theories. The relevant parts of the com-
plaint are set forth verbatim:

        20. EQUILON refines and markets substantial
      volumes of gasoline and other petroleum products
      under both the Shell and Texaco brand names in all
      or parts of 31 states, selling petroleum products to
      approximately 9,000 Shell and Texaco-branded retail
      outlets.

         21. Combined with its affiliate, Motiva Enter-
      prises LLC (hereafter “Motiva”), EQUILON and
      Motiva (collectively referred to as “Retail USA” by
      Shell Oil Company, the parent company of both
      EQUILON and Motiva) rank number one in the
      industry in branded gasoline stations. At 13 percent,
      EQUILON and Motiva also rank number one in total
      gallons of gasoline sold in the United States.

        22. EQUILON’s annual gross revenue is approxi-
      mately $24 billion.

        23. EQUILON is number one in market share in
      Oregon, Arizona, Nebraska, Oklahoma, Missouri,
      Arkansas and Kentucky. EQUILON is number two
      in market share in Alaska, Hawaii, California,
      Nevada, Idaho, Wyoming, Colorado, New Mexico,
      Indiana and Illinois.

        24. EQUILON has four refineries, refining
      approximately 753,000 barrels of petroleum products
      per day and owns a 50 percent interest in Motiva’s
  1
   “In determining whether a plaintiff can prove facts in support of his or
her claim that would entitle him or her to relief, we may consider facts
contained in documents attached to the complaint.” Tyler v. Cuomo, 236
F.3d 1124, 1131 (9th Cir. 2000) (citation omitted).
           RICK-MIK v. EQUILON ENTERPRISES                8505
three refineries, refining approximately 865,000 bar-
rels of petroleum products per day.

   25. EQUILON owns an interest in approximately
10,000 miles of pipeline used to transport its petro-
leum products throughout the United States.

   26. With 75 percent of all Americans living within
five miles of a Shell-branded gasoline station,
EQUILON and Motiva serve, on average, more than
six million customers per day and sell approximately
19 billion gallons of gasoline per year, most of
which is purchased by customers’ credit and/or debit
cards issued by thousands of banks, banking associa-
tions and financial institutions throughout the States.

   27. EQUILON requires each and everyone one
[sic] of its Shell and Texaco-branded franchisees to
execute a standardized “Retail Sales Agreement,”
including Plaintiffs, before they can purchase petro-
leum products from EQUILON for resale to consum-
ers. A true and correct copy of a Plaintiff RICK-MIK
ENTERPRISES, INC.’s Retail Sales Agreement
effective September 1, 2004, is attached hereto and
incorporated herein by reference as Exhibit “A”.

   28. Plaintiff RICK-MIK ENTERPRISES, INC.’s
Retail Sales Agreement attached hereto as Exhibit
“A” is virtually identical to all of the other Retail
Sales Agreements EQUILON requires each one of
its franchisees to sign before they can purchase
petroleum products from EQUILON for resale to
consumers.

   29. EQUILON’s Retail Sales Agreements requires
[sic] Plaintiffs, and the Class that Plaintiffs repre-
sent, to accept all credit and debit cards authorized
exclusively by EQUILON and requires that all credit
8506           RICK-MIK v. EQUILON ENTERPRISES
    and debit card transactions at each one of its fran-
    chisees’ stations, including Plaintiffs’ stations, to be
    [sic] processed solely through EQUILON, which
    Plaintiffs must accept as a condition of EQUILON
    before they can purchase Shell and/or Texaco petro-
    leum products from EQUILON for resale to consum-
    ers.

       30. Paragraph 12(a) of the Retail Sales Agreement
    states, in part “As long as Seller [EQUILON] elects
    to accept specified credit cards, credit identifications,
    debit cards, pre-paid cards, or other transaction
    authorization cards (collectively “Transaction
    Cards”) in the state in which Retailer’s Station is
    located, Retailer [Plaintiffs] shall accept all Transac-
    tion Cards identified in Seller’s Transaction Card
    guide (“Guide”) for the purchase of authorized prod-
    ucts and services. Retailer shall account for and pro-
    cess all such transactions in strict compliance with
    the terms set forth in the Guide, as may be amended
    by Seller from time to time.”

       31. Paragraph 12(b) of the Retail Sales Agreement
    states, in part “Seller [EQUILON] shall accept from
    Retailer [Plaintiffs] all transactions generated as a
    result of purchases made with authorized Transac-
    tion Cards and processed in accordance with the
    terms of the Guide. At Seller’s option, Seller shall
    pay the amount of the transactions to Retailer, after
    deducting any processing fee in effect under Seller’s
    then current Guide.”

       32. In accordance with its Retail Sales Agreement,
    EQUILON processes all its franchisees’ daily credit
    and debit card sales in batches through its own com-
    puterized Electronic Point of Sale (“EPOS”) system
    and charges each franchisee a processing fee. Each
    franchisee’s daily credit and debit card batches are
           RICK-MIK v. EQUILON ENTERPRISES                8507
then held by EQUILON and later applied to the
franchisee’s next gasoline invoice when due after
deducting EQUILON’s processing fee, resulting in a
delay in payment to the franchisee.

   33. Absent EQUILON’s requirement that its fran-
chisees process all credit and debit card transactions
through EQUILON, Plaintiffs, and the Class that
Plaintiffs represent, would be able to purchase credit
and debit card processing services through many
other credit and debit card processing service provid-
ers on more favorable terms and conditions.

   34. Plaintiffs are informed, believe and based
thereon allege that EQUILON has conspired with
numerous banks, banking associations and financial
institutions throughout the United States to fix, peg
and stabilize the price of credit and debit card pro-
cessing fees, commonly referred to as the “Merchant
Discount Fee,” charged to Plaintiffs and the mem-
bers of the Class Plaintiffs represent.

   35. Plaintiffs are informed, believe and based
thereon allege that EQUILON receives compensa-
tion in the form of a “kick back” from numerous
banks, banking associations and financial institutions
throughout the United States from the Merchant Dis-
count Fee as consideration for its unlawful agree-
ment to fix prices of credit and debit card processing
fees and tying arrangement, which is not reimbursed
to EQUILON’s franchisees.

   36. The exploration, production, transportation,
storage, refining, distribution, marketing, and selling
of crude oil and gasoline is carried on in and sub-
stantially affects interstate and foreign commerce,
and the conspiracy among EQUILON and the
numerous banks, banking associations and financial
8508           RICK-MIK v. EQUILON ENTERPRISES
    institutions throughout the United States to fix the
    price of credit and debit card processing fees charged
    to retail gasoline dealers substantially affects,
    impedes, and unreasonably restrains competition by
    credit and debit card processing service providers
    within the retail gasoline industry and between and
    among the various states of the United States, and
    foreign countries and the United States.

       37. By reason of the violations alleged herein,
    Plaintiffs, and the members of the Class Plaintiffs
    represent, have paid and continue to pay higher
    credit and debit card processing fees that than [sic]
    they would have in a free and competitive market.

       38. By reason of the violations alleged herein,
    Plaintiffs, and all persons similarly situated, have
    sustained injury to their franchises in amounts yet to
    be ascertained, including but not limited to over-
    charges in credit and debit card processing fees, loss
    of sales, profits and business goodwill, increased
    prices paid to defendants for gasoline and other
    petroleum products, the value of their businesses as
    going concerns and the increased costs of doing
    business, including any debts incurred.

   Equilon’s standard franchise agreement or “Retail Sales
Agreement,” and Shell’s Franchise Disclosure Statement were
attached to the complaint. A key provision is paragraph 12 of
the Disclosure Statement regarding “Transaction Cards.”
Paragraph 12 provides in full:

    12.   TRANSACTION CARDS.

       (a) As long as Seller [Equilon] elects to accept
    specified credit cards, credit identifications, debit
    cards, pre-paid cards, or other transaction authoriza-
    tion cards (collectively “Transaction Cards”) in the
           RICK-MIK v. EQUILON ENTERPRISES                8509
state in which Retailer’s Station is located, Retailer
shall accept all Transaction Cards identified in Sell-
er’s Transaction Card guide (“Guide”) for the pur-
chase of authorized products and services. Retailer
shall account for and process all such transactions in
strict compliance with the terms set forth in the
Guide, as may be amended by Seller from time to
time. If Seller amends the Guide, Seller shall provide
Retailer with notice. Seller may assess Buyer a
Transaction Card processing fee (which includes any
VSAT related charges) for providing such services.

   (b) Seller shall accept from Retailer all transac-
tions generated as a result of purchases made with
authorized Transaction Cards and processed in
accordance with the terms in the Guide. At Seller’s
option, Seller shall pay the amount of the transac-
tions to Retailer, after deducting any processing fee
in effect under Seller’s then current Guide, by: (1)
check to Retailer; (2) a credit to Retailer’s bank
account by EFT; or (3) setting off the amount against
Retailer’s account with Seller.

  (c) For each transaction not authorized, disputed
by a customer, or otherwise subject to chargeback
under the Guide, Seller may either charge the
amount to Retailer’s account or require Retailer to
make immediate refund to Seller, including refund
by draft of EFT initiated by Seller, without any
deduction for any processing fee.

  (d) This Article 12(d) is not applicable to Retailers
who lease Retailer’s Station from Seller. In order to
provide efficient service to the motoring public,
Retailer shall comply with Seller’s software and
hardware standards, established from time to time by
Seller, relating to electronic Point of Sale (“EPOS”)
systems, including, but not limited to, Seller
8510           RICK-MIK v. EQUILON ENTERPRISES
    approved compatible hardware, customer activated
    terminals, integrated and non-integrated EPOS sys-
    tems, and other requirements necessary to electroni-
    cally accept and process the Transaction Cards at all
    times during the term of this Agreement. Retailer
    shall upgrade the EPOS system with any new release
    of the software within 9 months after notice from
    Seller. Further, if Seller loans or leases any imprin-
    ter, EPOS terminal, or other related equipment to
    Retailer in connection with acceptance of the Trans-
    action Cards, Retailer shall (1) comply with the
    terms of the Guide, (2) execute any applicable Seller
    agreements, relating to the use of such equipment
    and (3) reimburse Seller for any charges for use of
    such equipment (whether third party or internal)
    incurred by Seller.

       (e) Without limiting any rights available to Seller,
    if Retailer fails to comply with this article or the
    Guide, Seller may limit or terminate Retailer’s right
    to participate in Seller’s Transaction Card program.
    Further, Seller may terminate its Transaction Card
    program at any time upon notice to Retailer.

   The district court granted Equilon’s motion to dismiss “in
its entirety.” Equilon then filed an answer to the remaining
claim, count five. After Equilon moved for summary judg-
ment on count five, the parties stipulated to dismiss that count
so judgment could be entered and Rick-Mik could appeal the
dismissal of the antitrust counts. This timely appeal followed.

                 STANDARD OF REVIEW

  The court reviews de novo the district court’s order of dis-
missal for failure to state an antitrust claim. Knevelbaard
Dairies, 232 F.3d at 984 (citation omitted).

  Federal Rule of Civil Procedure 8(a)(2) requires only “a
short and plain statement of the claim showing that the
                RICK-MIK v. EQUILON ENTERPRISES             8511
pleader is entitled to relief[.]” Nevertheless, in antitrust mat-
ters, “[f]actual allegations must be enough to raise a right to
relief above the speculative level[.]” Bell Atl. Corp. v. Twom-
bly, ___ U.S. ___, 127 S. Ct. 1955, 1965 (2007) (citations
omitted). “[A] plaintiff’s obligation to provide the grounds of
his entitlement to relief requires more than labels and conclu-
sions, and a formulaic recitation of the elements of a cause of
action will not do[.]” Id. at 1964-65 (internal quotation marks,
brackets, and citation omitted). A Sherman Act § 1 claim “re-
quires a complaint with enough factual matter (taken as true)
to suggest that an agreement was made.” Id. at 1965.

   In Twombly, at least in antitrust matters, the Supreme Court
“retired” the familiar language derived from Conley v. Gib-
son, 355 U.S. 41, 45-46 (1957), which provided “the accepted
rule that a complaint should not be dismissed for failure to
state a claim unless it appears beyond doubt that the plaintiff
can prove no set of facts in support of his claim which would
entitle him to relief.” 127 S. Ct. at 1968 (quoting Conley).
Twombly opined that the “no set of facts” language “has
earned its retirement” and “is best forgotten[.]” Id. at 1969.
Thus, “[a]t least for the purposes of adequate pleading in anti-
trust cases, the Court specifically abrogated the usual ‘notice
pleading’ rule[.]” Kendall v. Visa U.S.A., Inc., 518 F.3d 1042,
1047 n.5 (9th Cir. 2008).

                        DISCUSSION

                       I.   Tying Claim

   [1] “A tying arrangement is a device used by a seller with
market power in one product market to extend its market
power to a distinct product market.” Cascade Health Solu-
tions v. PeaceHealth, 515 F.3d 883, 912 (9th Cir. 2008) (cita-
tion omitted). “To accomplish this objective, the seller
conditions the sale of one product (the tying product) on the
buyer’s purchase of a second product (the tied product).” Id.
(citations omitted). “Tying arrangements are forbidden on the
8512            RICK-MIK v. EQUILON ENTERPRISES
theory that, if the seller has market power over the tying prod-
uct, the seller can leverage this market power through tying
arrangements to exclude other sellers of the tied product.” Id.

   “For a tying claim to suffer per se condemnation, a plaintiff
must prove: (1) that the defendant tied together the sale of two
distinct products or services; (2) that the defendant possesses
enough economic power in the tying product market to coerce
its customers into purchasing the tied product; and (3) that the
tying arrangement affects a ‘not insubstantial volume of com-
merce’ in the tied product market.” Id. at 913 (citation omit-
ted).

   [2] Not all tying arrangements are illegal. Rather, ties are
prohibited where a seller “exploits,” “controls,” “forces,” or
“coerces” a buyer of a tying product into purchasing a tied
product. See, e.g., Jefferson Parish Hosp. Dist. No. 2 v. Hyde,
466 U.S. 2, 12 (1984) (“The essential characteristic of an
invalid tying arrangement lies in the seller’s exploitation of its
control over the tying product to force the buyer into the pur-
chase of a tied product that the buyer either did not want at
all, or might have preferred to purchase elsewhere on different
terms.”), abrogated on other grounds by Illinois Tool Works
Inc. v. Indep. Ink, 547 U.S. 28 (2006); PeaceHealth, 515 F.3d
at 913. The injury is reduced competition in the market for the
tied product. See Jefferson Parish, 466 U.S. at 12 (“When
such ‘forcing’ is present, competition on the merits in the
market for the tied item is restrained and the Sherman Act is
violated.”). As the Supreme Court recently reiterated, “the
justification for the challenge [against ties] rested on either an
assumption or a showing that the defendant’s position of
power in the market for the tying product was being used to
restrain competition in the market for the tied product.” Illi-
nois Tool Works Inc., 547 U.S. at 34. Thus, “in all cases
involving a tying arrangement, the plaintiff must prove that
                   RICK-MIK v. EQUILON ENTERPRISES                      8513
the defendant has market power in the tying product.” Id. at
46.2 And to prove it, it must first be properly alleged.

  a.    The market power allegations are flawed.

   The alleged tying product here is gasoline franchises. Rick-
Mik has a contract for an Equilon franchise to sell Shell
branded gasoline and diesel. The alleged tied product is
credit-card processing services. Rick-Mik alleges it cannot get
a franchise without the “tied” credit-card processing services.

   [3] Rick-Mik’s complaint does not allege that Equilon has
market power in the relevant market, which is the market for
the tying product — gasoline franchises. Indeed, other than
stating that “[Equilon] rank[s] number one in the industry in
branded gasoline stations,” there are no specific allegations at
all as to the franchise market. The complaint alleges nothing
about, for example, what percentage of gasoline franchises are
Equilon’s (Shell/Texaco) as compared to other franchises like
Chevron, Mobil, Marathon Oil, or Union 76. There are no fac-
tual allegations as to the percentage of gasoline retail sales
that are made through non-franchise outlets. There are no fac-
tual allegations regarding the amount of power or control that
Equilon has over prospective franchisees. There are no factual
allegations regarding the relative difficulty of a franchisee to
switch franchise brands.
   2
     In so holding, the Court overruled prior precedent that indicated tying
arrangements involving patents provided presumptive market power. Illi-
nois Tool Works Inc., 547 U.S. at 42. The Court traced the history of anti-
trust tying jurisprudence, observing that, in the earlier part of the 20th
Century, the Court disapproved of such arrangements. Id. at 33-34. The
trend has changed. “Over the years, however, this Court’s strong disap-
proval of tying arrangements has substantially diminished.” Id. at 35. A
similar trend in antitrust law is seen in other relevant cases as well. See,
e.g., Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S. Ct. 2705,
2725 (2007) (requiring application of the rule of reason, abrogating a per
se analysis for vertical price restraint allegations and explicitly overruling
past precedent).
8514            RICK-MIK v. EQUILON ENTERPRISES
   [4] If Equilon lacks market power in the gasoline-franchise
market, there can be no cognizable tying claim. For, in that
case, Equilon has no power to force, exploit, or coerce a
franchisee to purchase a tied product such as credit card pro-
cessing (if the processing is a distinct product for tying pur-
poses) or to affect competition in the tied-product market.
Such an arrangement would not raise antitrust concerns. Jef-
ferson Parish, 466 U.S. at 11-12. A failure to allege power in
the relevant market is a sufficient ground to dismiss an anti-
trust complaint. Cf., e.g., Queen City Pizza, Inc. v. Domino’s
Pizza, Inc., 124 F.3d 430, 443 (3d Cir. 1997) (“Because plain-
tiffs failed to plead any relevant tying market, the claim was
properly dismissed.”); Tanaka v. Univ. of S. Cal., 252 F.3d
1059, 1063 (9th Cir. 2001) (“Failure to identify a relevant
market is a proper ground for dismissing a Sherman Act
[restraint of trade] claim.”) (citation omitted); Will v. Compre-
hensive Accounting Corp., 776 F.2d 665, 671 (7th Cir. 1985)
(“[Plaintiffs] did not establish market power . . . as a matter
of law. This failure makes every other element of the [tying]
anti-trust case irrelevant.”).

   Rick-Mik argues that it alleged sufficient facts to infer that
Equilon has sufficient economic power in the gasoline-
franchise market, which has significant barriers to entry. It
points to statistics indicating Equilon is an important player in
the petroleum industry. According to paragraphs 20-26 of the
complaint: (1) Equilon sells petroleum products to approxi-
mately 9,000 Shell and Texaco-branded retail outlets; (2) it
ranks first in the industry in branded gasoline stations; (3) at
13 percent of the market, it ranks first in total gallons of gaso-
line sold in the United States; (4) it has annual gross revenues
of approximately $24 billion; (5) it is number one or two in
gasoline market share in 17 states; (6) it has four refineries,
refining approximately 753,000 barrels of petroleum products
per day and owns a 50 percent interest in Motiva’s three refin-
eries, refining approximately 865,000 barrels of petroleum
products per day; (7) it owns an interest in approximately
10,000 miles of pipeline used to transport its petroleum prod-
                RICK-MIK v. EQUILON ENTERPRISES              8515
ucts throughout the United States; and (8) it serves, on aver-
age, more than six million customers per day and sells
approximately 19 billion gallons of gasoline per year, most of
which is purchased by customers’ credit or debit cards issued
by thousands of banks, banking associations and financial
institutions throughout the United States.

   [5] All of those allegations, however, relate to the retail
gasoline market — a market where Rick-Mik is a seller — not
the relevant market for franchises where it is a buyer. Further,
the statistics alleged in the complaint do not distinguish
between franchise-based sales and other potential types of
sales (e.g., sales by directly-owned outlets or sales to other
distributors). Thus, the complaint fails to allege market power
in the relevant market.

   Nor is Rick-Mik’s complaint saved by the allegation that
“Shell and Texaco-branded gasolines are protected by various
trademarks, copyrights and patents providing EQUILON suf-
ficient economic power over Plaintiffs in connection with its
tying products to appreciably restrain competition in the tied
product market.” Even construing that allegation as one alleg-
ing market power in the gasoline franchise market as opposed
to the gasoline retail market, it lacks the factual specificity
required “to raise a right to relief above the speculative level.”
See Twombly, 127 S. Ct. at 1965. Because intellectual prop-
erty rights are no longer presumed to confer market power,
see Illinois Toolworks Inc., 547 U.S. at 42-43, Rick-Mik’s
conclusory allegation that Equilon’s intellectual property
rights nonetheless do confer market power, unaccompanied
by supporting facts, is insufficient.

   Finally, the complaint’s allegation of a contractual fran-
chise relationship also fails to plead market power. A tying
claim generally requires that the defendant’s economic power
be derived from the market, not from a contractual relation-
ship that the plaintiff has entered into voluntarily. See, e.g.,
Queen City Pizza, Inc., 124 F.3d at 443 (“where the defen-
8516           RICK-MIK v. EQUILON ENTERPRISES
dant’s ‘power’ to ‘force’ plaintiffs to purchase the alleged
tying product stems not from the market, but from plaintiffs’
contractual agreement to purchase the tying product, no claim
will lie.”); United Farmers Agents Ass’n v. Farmers Ins.
Exch., 89 F.3d 233, 236-37 (5th Cir. 1996) (“Economic power
derived from contractual agreements such as franchises . . .
‘has nothing to do with market power, ultimate consumers’
welfare, or antitrust.’ ”) (citation omitted); Chawla v. Shell
Oil Co., 75 F. Supp. 2d 626, 639-40 (S.D. Tex. 1999) (follow-
ing United Farmers); cf. Maris Distrib. Co. v. Anheuser-
Busch, 302 F.3d 1207, 1222 (11th Cir. 2002) (“The fact that
Anheuser-Busch had considerable power over many aspects
of Maris’s business by virtue of the provisions of the contract
to which they agreed (at least 3 separate times) reveals little
about the issue of whether Anheuser-Busch had market power
in the broader, relevant market for the purchase and sale of
equity ownership interests in beer distributorships.”). While
the allegation of a contractual relationship does not necessar-
ily doom a tying claim at the pleading stage, it also does not
remedy a complaint’s failure to properly plead market power.

  [6] In sum, the market power allegations of Rick-Mik’s
complaint are inadequate.

  b.   Credit-card processing is not a distinct product.

   There is another fatal flaw in Rick-Mik’s complaint.
Equilon’s franchises are not a separate and distinct product
from the credit-card processing services that are part of the
franchise.

  [7] Franchises, almost by definition, necessarily consist of
“bundled” and related products or services — not separate
products. See Phillips v. Crown Cent. Petroleum Corp., 602
F.2d 616, 628 (4th Cir. 1979) (“[T]he very essence of a fran-
chise is the purchase of several related products in a single
competitively attractive package.”); Will, 776 F.2d at 670-71
& n.1 (“ ‘[F]ranchises’ (the tying product here) are just names
                RICK-MIK v. EQUILON ENTERPRISES             8517
and methods of doing business, not ‘products’ and some
courts have held that as a matter of law there cannot be a tie-
in between a name and a product . . . . [A] method of doing
business (the franchise) is not sold separately from the ingre-
dients that go into the method of business.”); see also Chawla,
75 F. Supp. 2d at 639-40 (rejecting similar tying theory that
dealers were being coerced into “utiliz[ing] the bank chosen
by Defendants to process the associated credit card transac-
tions” because “[r]eceipt and processing of retail customers’
payments for retail gasoline purchases is an integral part of a
gasoline dealer’s function.”).

   With franchises, “the proper inquiry is . . . whether [the
allegedly tied products] are integral components of the busi-
ness method being franchised. Where the challenged aggrega-
tion is an essential ingredient of the franchised system’s
formula for success, there is but a single product and no tie
in exists as a matter of law.” Principe v. McDonald’s Corp.,
631 F.2d 303, 309 (4th Cir. 1980).

   [8] Here, Equilon’s credit card services are an essential part
of its franchise. Its agreement authorizes Equilon to use credit
card proceeds to pay off a franchisee’s account (i.e., money
the franchisee owes Equilon for the gasoline Equilon delivers
to the franchisee). The agreement also authorizes Equilon to
charge or refund unauthorized transactions to the franchisee,
helping secure the integrity of point-of-sale transactions.
Equilon pays the amount of the credit transactions (minus a
transaction fee) to the franchisee by check, by crediting its
bank account, or by setting that amount off from the amount
in the franchisee’s account with Equilon. The arrangement
gives Equilon some ability to ensure the quality and reliability
of credit card processing and helps guard against franchise
default and unauthorized transactions. See Sheridan v. Mara-
thon Petroleum Co. LLC, ___ F.3d ___, 2008 WL 2486581,
at *5 (7th Cir. June 23, 2008) (rejecting similar tying allega-
tions, observing that “[t]he combination of card and card pro-
cessing enables [the gasoline franchisor] to offset in an
8518              RICK-MIK v. EQUILON ENTERPRISES
economical and expeditious manner revenues from credit card
sales against costs of gasoline sold to the dealers.”).

   [9] Equilon points to the many other areas which are part
and parcel of a franchise: signs, advertising, marketing,
appearance, as well as methods of delivery and payment. Sim-
ilarly, the method of receiving and processing credit transac-
tions is an integral part of the franchise’s operation. The
franchise and the method of processing credit transactions are
not separate products, but part of a single product (the fran-
chise).3

   There are also no separate products under a test set forth in
Jefferson Parish. The existence of distinct products depends
upon “the character of the demand for the two items.” 466
U.S. at 19. There must be “a sufficient demand for the pur-
chase of [the tied product] separate from [the tying product]
to identify a distinct product market[.]” Id. at 21. To deter-
mine this, the “purchaser demand” test of Jefferson Parish
“examine[s] direct and indirect evidence of consumer demand
for the tied product separate from the tying product.” United
States v. Microsoft Corp., 253 F.3d 34, 86 (D.C. Cir. 2001).
“Direct evidence addresses the question whether, when given
a choice, consumers purchase the tied good from the tying
good maker, or from other firms.” Id. “Indirect evidence
includes the behavior of firms without market power in the
tying good market, presumably on the notion that (competi-
tive) supply follows demand. If competitive firms always
  3
   Rick-Mik relies on Siegel v. Chicken Delight, Inc., 448 F.2d 43 (9th
Cir. 1971), and Roberts v. Elaine Powers Figure Salons, 708 F.2d 1476
(9th Cir. 1983) to argue that control evidences economic power by
Equilon over its franchisees. Those cases relied on the old theory that ties
are “presumptively unlawful,” Elaine Powers, 708 F.2d at 1479, and that
the trademarks did not extend to the tied product, Chicken Delight, 448
F.2d at 48. People don’t generally think of Shell when they think of credit-
card processing; they think of gasoline. But those tests are no longer rele-
vant after Jefferson Parish and Illinois Toolworks, Inc..
                  RICK-MIK v. EQUILON ENTERPRISES                  8519
bundle the tying and tied goods, then they are a single prod-
uct.” Id.

   [10] Applying the “character of demand” test, Rick-Mik’s
complaint fails to plead facts necessary to assess whether
credit-card services are distinct from the franchise agree-
ments. The relevant “purchaser” is the franchisee (not the
general consumer of credit card processing services), but the
complaint sets forth no allegations about the franchisee mar-
ket’s demand for credit card services. One could assume there
is a billion dollar market for credit card processing in the gen-
eral economy, but, under Jefferson Parish, the question is
what is the market for separate credit card processing services
among franchisees in general (or gasoline franchisee in partic-
ular). There are no facts pled indicating the existence of a sep-
arate market for credit-card processing services among
franchisees.

   [11] Thus, for several reasons, we conclude that separate
products are not at issue here.4 With franchises, the franchisee
knows the contractual limitations and duties before entering
into the contract. A complaint about such contractual obliga-
tions is not an antitrust matter. See, e.g., Queen City Pizza,
124 F.3d at 443; United Farmers, 89 F.3d at 236.

                          II.   Price Fixing

   The price-fixing claim fails for vagueness. After Twombly,
we readily conclude that Rick-Mik’s complaint lacks specific
details of an illegal price-fixing scheme. See Twombly, 127
S. Ct. at 1964-65 (“[A] formulaic recitation of the elements of
a cause of action will not do.”) (citation and internal editorial
marks omitted). A Sherman Act § 1 claim “requires a com-
plaint with enough factual matter (taken as true) to suggest
that an agreement was made.” Id. at 1965.
  4
    Given this conclusion, we need not consider whether the tying allega-
tions would also fail under the “rule of reason.”
8520           RICK-MIK v. EQUILON ENTERPRISES
   The complaint merely alleges that Equilon “conspired with
numerous banks, banking associations and financial institu-
tions throughout the United States to fix, peg and stabilize the
price of credit and debit card processing fees, commonly
referred to as the ‘Merchant Discount Fee,’ charged to Plain-
tiffs and the members of the Class Plaintiffs represent.” It
continues: “EQUILON receives compensation in the form of
a ‘kick back’ from numerous banks, banking associations and
financial institutions throughout the United States from the
Merchant Discount Fee as consideration for its unlawful
agreement to fix prices of credit and debit card processing
fees and tying arrangement, which is not reimbursed to
EQUILON’s franchisees.”

   [12] All that is alleged is there was an agreement on price.
The co-conspirator banks or financial institutions are not men-
tioned. The nature of the conspiracy or agreement is not
alleged. The type of agreements are not alleged. And the dis-
cernible theories do not implicate antitrust laws.

   If the complaint is that Equilon agreed with banks on a
price to provide credit card processing services for fran-
chisees, it would be an “[o]rdinary sales contract[,]” not an
illegal antitrust agreement. See 49er Chevrolet, Inc. v. Gen-
eral Motors Corp., 803 F.2d 1463, 1467 (9th Cir. 1986).

  If Equilon was a competitor with the unidentified banks it
would be a “horizontal price-fixing” theory — an agreement
between competitors to price-fix in a market. But Equilon
does not compete with banks in the credit-card services mar-
ket, and the complaint does not allege such a price-fixing con-
spiracy.

   If the agreement was to set a minimum retail price — credit
card services purchased from banks by Equilon and then
resold to franchisees — such a vertical “resale price mainte-
nance” scheme is not a valid per se antitrust violation. See
Leegin Creative Leather Prods., 127 S. Ct. at 2725 (requiring
                  RICK-MIK v. EQUILON ENTERPRISES                    8521
application of the rule of reason and abrogating a per se anal-
ysis for vertical price restraint allegations).

   [13] All that is alleged is that Equilon receives “kickbacks”
(or perhaps commissions) from banks for processing the
transactions of Equilon’s franchisees. Such an arrangement
does not violate antitrust laws. See Mesirow v. Pepperidge
Farm, Inc., 703 F.2d 339, 343 (9th Cir. 1983) (rejecting price-
fixing claim where a distributor delivered and maintained a
manufacturer’s products for a commission).5 The district court
correctly determined that the complaint failed to state a claim
for illegal price-fixing.

                       III.   Leave to Amend

   When Rick-Mik opposed Equilon’s motion to dismiss
before the district court, Rick-Mik mentioned that it should be
given leave to amend its complaint “if the district court was
inclined to find a failure to state a claim.” The district court,
however, simply granted Equilon’s motion to dismiss in its
entirety (as to five counts). After dismissal of those counts,
Rick-Mik made no effort to amend.

   [14] Rick-Mik did not mention leave-to-amend in its open-
ing brief on appeal. Equilon pointed out this omission. Rick-
Mik responded in its reply brief that it should have at least
been given the opportunity to amend its complaint. By wait-
ing until its reply brief, Rick-Mik waived the argument
regarding leave to amend. See Indep. Towers of Wash. v.
Wash., 350 F.3d 925, 929 (9th Cir. 2003) (“[W]e ‘review only
issues which are argued specifically and distinctly in a party’s
opening brief.’ ”) (quoting Greenwood v. Fed. Aviation
Admin., 28 F.3d 971, 977 (9th Cir. 1994)).
  5
   The state law antitrust claims are derivative of the federal law claims.
Because the federal claims fail, the state law claims fail. County of Tuol-
umne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001).
8522               RICK-MIK v. EQUILON ENTERPRISES
  Such waiver is not absolute; the court can “review an issue
not raised in a petitioner’s opening brief if the failure to do so
would result in manifest injustice.” Alcaraz v. INS, 384 F.3d
1150, 1161 (9th Cir. 2004) (internal quotation marks omitted).
But the “manifest injustice” exception does apply here.

   First, Rick-Mik did not even need permission to amend
before the district court if it truly wanted to amend its com-
plaint. Under Federal Rule of Civil Procedure 15(a), “a party
may amend its pleading once as a matter of course . . . before
being served with a responsive pleading.” A motion to dis-
miss is not a responsive pleading within the meaning of Rule
15(a). See, e.g., Rhoades v. Avon Prods., Inc., 504 F.3d 1151,
1158 n.5 (9th Cir. 2007). Here, Equilon had only filed a
motion to dismiss; it had not answered. Rick-Mik could have
responded to the motion by amending its complaint. Mayes v.
Leipziger, 729 F.2d 605, 607 (9th Cir. 1984). And it could
have filed an amended complaint even after the district court
granted the motion. Id. (“ ‘Neither the filing nor granting of
. . . a motion [to dismiss] before answer terminates the right
to amend; an order of dismissal denying leave to amend at
that stage is improper[.]’ ”) (quoting Breier v. Northern Cal.
Bowling Proprietors’ Ass’n, 316 F.2d 787, 789 (9th Cir.
1963)). Under Rule 15(a), Rick-Mik had an absolute right to
amend, which ended upon the filing of a “responsive plead-
ing” (e.g., an answer) “ ‘or the entry of final judgment follow-
ing dismissal of its action.’ ” Id. (quoting Worldwide Church
of God, Inc. v. State of Cal., 623 F.2d 613, 616 (9th Cir. 1980)).6

   Second, assuming Rick-Mik still had a right to amend its
complaint after the district court’s dismissal, it waived the
right again by allowing judgment to enter so it could appeal
the dismissal on the merits. See Jarvis v. Regan, 833 F.2d
149, 155 (9th Cir. 1987) (“Where a final judgment is entered
  6
    Equilon filed an answer shortly after the district court’s order granting
its motion to dismiss. The answer, however, only responded to the remain-
ing count (count five) that was not addressed in the motion to dismiss.
               RICK-MIK v. EQUILON ENTERPRISES             8523
following dismissal of an action, the plaintiff no longer has
the right to amend the complaint as a matter of course.”) (cita-
tions omitted). After the district court dismissed the antitrust
counts, Rick-Mik stipulated with Equilon to dismiss the
remaining count. It allowed judgment to enter specifically so
that it could appeal the granting of the motion to dismiss the
other counts. By doing so, it waived its right to amend. See
Univ. Club v. City of New York, 842 F.2d 37, 39 (2d Cir.
1988) (“[The district court] allowed the plaintiffs . . . ‘leave
to replead a selective prosecution claim if a meaningful one
can be asserted.’ . . . That opportunity was, of course, waived
by [their] decision to appeal rather than amend their com-
plaint.”); cf. 6 Charles Alan Wright et al., Federal Practice
and Procedure § 1483, at 588 (2d ed. 1990) (“[Dismissing
with leave to amend] will afford the party against whom the
dismissal is granted the option of amending the pleading or of
having a judgment entered against him and taking an
appeal.”).

   [15] Accordingly, we decline to remand to allow Rick-Mik
to amend its complaint.

                       CONCLUSION

   Rick-Mik’s complaint was fundamentally flawed. The
complaint failed to allege market power in the relevant tying
market (gasoline franchises, not retail gasoline). The fran-
chises are not separate products, for tying purposes, from
credit-card processing services; instead, such processing is an
inherent part of the franchises. The price-fixing allegations
were impermissibly vague. And questions about further
amendment of the complaint were waived.

  AFFIRMED.