Maintenance

The most prominent advocate of this position was Bob Hubbard, Assistant Attorney General in New York.  New York has a unique statute entitled “Price-fixing prohibited,” although the actual text of the statutue says something slightly different.  Mr. Hubbard pointed to a number of instances in which the NY AG office treated resale price maintenance as per se illegal under this state after Leegin.  The most important of these cases, New York v. Tempur-Pedic, is currently on appeal.  The Appellate Division’s opinion will be important in determining if NY law is actually more stringent than the Sherman Act. 

Perhaps the most surprising discussion of state action against RPM was from Kip Sturgis, Assistant Attorney General for North Carolina.  Mr. Sturgis asserted that the North Carolina AG office still considers RPM to be per se illegal under North Carolina law even though North Carolina’s antitrust statute has been consistently interpreted to mirror federal antitrust standards.  Mr. Sturgis prosecuted a gasoline distributor under a per se theory, shortly after Leegin was decided, but that case settled.  Therefore, there is no North Carolina case law supporting (or specifically contradicting) Mr. Sturgis’s theory. 

Manufacturers and distributors should be aware that state enforcers still care about resale price maintenance.  It is not just New York, Maryland and California that are active in this area.  Even states that are generally considered pro-business (e.g. North Carolina) may bring resale price maintenance cases.  To make sure that your company is in compliance with state (and federal law), it is important to develop a comprehensive and manageable pricing policy.

The new law stands to benefit lenders, retailers and consumers alike. Womble Carlyle attorney Jay Rogers has co-authored a new article on the Brazilian Positive Credit Registry for Credit Today.

Brazilian attorneys AndrA(c) de Almeida and Caio Iadocico de Faria Lima of the Almeida law firm in SAPSo Paulo, Brazil joined Rogers in writing the article.

Jay Rogers advises U.S. and foreign companies in mergers and acquisitions; corporate and capital structures; dispute resolution, including cross-border arbitration, litigation and mediation; commercial relationships with vendors, customers and lenders; U.S. and foreign Customs matters; immigration issues; and economic development incentives offered by local, state and national governments. He previously practiced in Brazil and Mexico, and is fluent in Portuguese and Spanish. Rogers practices in Womble Carlyleas Greenville, S.C., office.

As we have mentioned previously in the blog, companies still face real risks with respect to resale price maintenance despite the Supreme Court’s 2007 ruling that such policies are not per se illegal. See Leegin Creative Leather Products, Inc. v. PSKS, Inc., 127 S.Ct. 2705 (2007).

A recent $35 million class action settlement involving retail giant Babies R Us is one example of the continued risks. See McDonough v. Toys aRa Us, et al., No. 2:06-cv-0242-AB (E.D. Pa.) and Elliott v. Toys aRa Us, et al., No. 2:09-cv-06151-AB (E.D. Pa.).

In this case plaintiffs alleged that Babies R Us, a dominant retailer of baby products, coerced manufacturers of baby products to adopt resale price maintenance polices that insulated Babies R Us from price competition — particularly internet retailers. Babies R Us allegedly threatened not to carry the manufacturer’s products unless the manufacturers agreed to prevent internet retailers from discounting their products.

The court granted plaintiff’s motion to certify the class in July 2009. The court recognized that vertical price restraints are analyzed under the rule of reason, under Leegin, but the court found that plaintiffs could prove their case under the rule of reason because the RPM policies were instituted at the request and direction of a dominant retailer — rather than as a means for the manufacturers to more effectively compete against each other.

A $35 million settlement agreement was announced in January 2011.

There seem to be two big lessons from this case: (1) RPM policies need to come from the top down — not from the bottom up; and (2) beware of email communications between manufacturers and retailers.

Make sure you follow your antitrust attorney’s advice about the correct way to implement a RPM polices consistent with the Supreme Court’s Colgate decision.

Bioelements markets a line of beauty-care products it claims have quasi-medical properties such as reducing wrinkles. Products such as this — also known as “cosmesceuticals” because they supposedly merge the attributes of cosmetics and pharmaceuticals — are sometimes the target of investigations by state and federal regulators for overstating their medical benefits. This time, however, the California Attorney General brought suit against Bioelements for vertical price fixing — also known as resale price maintenance (“RPM”).

RPM used to be per se illegal under federal antitrust laws, until the Supreme Court’s decision in Leegin Creative Leather v. PSKS. In that case, the Supreme Court held that a manufacturer may reach an agreement with its retailers as to minimum resale price without automatically violating federal antitrust laws. Instead of being per se illegal, such agreements are analyzed under the rule of reason — a fact specific inquiry that balances the anticompetitive effects and procompetitive benefits of a particular restraint. At the time the Leegin decision was said to have opened the door for all sorts of vertical price fixing agreements between manufacturers and retailers. Such has not been the case, however, because certain states, such as California and New York, have threatened to prosecute such arrangements under state antitrust laws. RPM agreements may still be per se illegal under state antitrust law, even if such agreements are not per se illegal under federal law.

This is what happened in the Bioelements case. The California Attorney General’s complaint alleges that Bioelements entered into dozens of “Internet Only Accounts Agreements” with third party companies for the distribution and sale of its products over the Internet. These contracts stated that “Accounts are prohibited from charging more or less than the Manufacturer’s Suggested Retail Price (MSRP).”

The Attorney General’s press release stated: “Bioelements operated a blatant price fixing scheme by requiring online retailers to sell its products at high prices…. Price manipulation harms consumers, competition and our business community.” The United States Supreme Court, however, would disagree with this assertion because in Leegin the Court held that RPM is not always anticompetitive and can have procompetitive benefits. The United States Supreme Court, however, does not have the last say when it comes to interpreting state antitrust law.

Although Bioelements‘ distribution agreement referred to “MSRP,” it was not a lawful Colgate policy. Instead of merely suggesting prices and unilaterally terminating discounting retailers, Bioelements made its retailers “agree” not to sell below MSRP. Thus, the agreement went beyond a unilateral Colgate policy.

Given that Bioelements sells products — cosmesceuticals — that are sometimes the target of false advertising investigations, it would not be surprising if the Attorney General discovered the price fixing agreements while investigating false advertising claims. It would be unwise, however, to presume that the Attorney General will only bring vertical price-fixing claims against companies she suspects of false advertising. Since Leegin, regulators have investigated or brought claims against several respected manufacturers — such as Herman Miller and Toys-R-Us — for vertical price fixing.

For more information on how to structure pricing and distribution policies that do not violate state and federal antitrust law, contact Jason Hicks or Mark Poovey.

Tempur-Pedic manufactures 80-90% of the visco-elastic foam mattresses sold in the United States. Tempu-Pedic sells its mattresses through distributors and directly to consumers through its own website. Tempur-Pedic sets the minimum retail price its distributors can charge, and it adheres to those minimum prices when selling mattresses through its own website.

Plaintiff, a consumer who purchased a Tempur-Pedic mattress, alleges that Tempur-Pedic’s enforcement of retail price maintenance agreements with its distributors constitute unlawful vertical price fixing. Plaintiff also alleges that, when selling mattresses directly to consumers via its website, Tempur Pedic is acting as a distributor, and thus its agreement/conspiracy to set prices with other distributors constitutes horizontal price fixing which is per se unlawful.

The majority recognized that Plaintiff’s vertical price fixing claim was governed by the rule of reason. (There was no discussion about whether a quick-look analysis or some other truncated analysis should govern the vertical price fixing claims). The majority dismissed the vertical price fixing claim because Plaintiff had not properly alleged that visco-elastic foam mattresses constitute a separate and district relevant submarket from mattresses generally. The crux of this holding is that, under Twombly, an antitrust plaintiff must plead detailed facts “‘plausibly suggesting’ the relevant submarket’s composition.” The court explained:

Jacobs’s skimpy allegations of the relevant submarket do not meet this obligation. The complaint alleges, without elaboration, that a[v]isco-elastic foam mattresses comprise a relevant product market, or sub-market, separate and distinct from the market for mattresses generally, under the federal antitrust laws.a This conclusional statement merely begs the question of what, exactly, makes foam mattresses comprise this submarket. The complaint provides no factual allegations of the cross-elasticity of demand or other indications of price sensitivity that would indicate whether consumers treat visco-elastic foam mattresses differently than they do mattresses in general. Consumer preferences for visco-elastic foam mattresses versus traditional innerspring mattresses, and the costs associated with their sale, may vary widely, may vary little, or may not vary at all. Jacobs’s complaint, however, gives no indication of which of these is the case. The allegations that visco-elastic foam mattresses are more expensive than traditional innerspring mattresses and that visco-elastic foam mattresses have aunique attributesa are similarly of little help. They do not indicate the degree to which consumers prefer visco-elastic foam mattresses to traditional mattresses because of these unique attributes and differences in price. Would, for example, a consumer whose innerspring mattress was due for replacement be more likely to purchase another innerspring mattress or substitute a visco-elastic foam model for it? Are visco-elastic foam mattresses put to different uses (as luxury goods, such as in fine hotels and within higher income brackets) than are traditional mattresses? These types of questions, which our precedent makes clear are crucial to understanding whether a separate market exists, go unanswered in the complaint.

Moreover, ‘the broader economic significance of a submarket must be supported by demonstrable empirical evidence.’… While we acknowledge that Jacobs did not have the chance to undertake extensive discovery because this case was dismissed on a Rule 12(b)(6) motion, he nevertheless had the obligation under Twombly to indicate that he could provide evidence plausibly suggesting the definition of the alleged submarket. Such an indication is conspicuously lacking here; in its place is the unsupported assertion that visco-elastic foam mattresses constitute a distinct submarket of the larger mattress market.

The dissenting opinion, on the other hand, argues that “the majority goes too far when it interprets Twombly to require a plaintiff to include actual evidence in the complaint” and the majority’s “demand for ‘empirical evidence’ at this stage of litigation is improper.” According to the dissent, “[p]roduct market analysis is detailed and complicated” and “simply cannot be determined on a motion to dismiss.” Therefore, the dissent would have accepted as true Plaintiff’s “bald” factual allegation that foam mattresses constitute a distinct and relevant submarket without requiring additional facts regarding the “cross-elasticity of demand” for mattresses generally.

(The majority also held that plaintiff failed to allege anticompetitive effects, but this ruling largely flows from the ruling that plaintiff failed to allege that foam mattresses were a separate relevant market because, given Tempur-Pedic’s 80-90% market share, it would have had market power if the market was limited to foam mattresses.)

Plaintiff’s horizontal price fixing claim was based on the theory that Tempur-Pedic, acting as a distributor when selling mattresses directly to consumers through its website, entered into a horizontal price fixing agreement with its distributors. Unlike vertical price fixing, horizontal price fixing is per se illegal and, therefore, there is no need to allege or prove a relevant product market. The district court dismissed the horizontal price fixing theory because (1) courts generally treat dual distribution models (i.e. when manufacturers also compete against their distributors by selling directly to consumers) as vertical rather than horizontal in nature; and (2) Plaintiff did not allege a freestanding horizontal agreement among Tempur-Pedic, as a distributor, and its distributors.

The majority noted that the Eleventh Circuit has not established a bright-line rule that all dual distribution models are vertical rather than horizontal. Therefore, the majority based its ruling on the second rationale. In so doing, the majority again applied Twombly and concluded that Plaintiff’s allegation that Tempur-Pedic (acting as a distributor) tacitly colluded with its distributors to fix prices was not plausible because it was just as likely that Tempur-Pedic and its distributors were independently acting in their own economic self-interest. (The majority’s economic analysis heavily relies on the fact that Tempur-Pedic was a manufacturer and a distributor; therefore, the majority seems to conflate the two rationales articulated by the district court).

Again the dissent argues that the majority’s opinion goes too far, explaining:

My judicial experience and common sense leads me to conclude that it is entirely plausible that TPX and its distributors colluded to set prices. Indeed, it is totally implausible that TPX and its distributors set prices independently of each other. Horizontal price-fixing is still a per se violation, and this allegation satisfies the plausibility pleading standard: it is entirely plausible that this uniformity in pricing is the result of collusion rather than market forces. Jacobs has a colorable horizontal price fixing claim, and his horizontal price-fixing claim should have been allowed to proceed.

As a whole, the Eleventh Circuit’s decision demonstrates how different judges can come to very different conclusions regarding the “plausibility” of a plaintiff’s allegations of conspiracy and relevant market. The majority’s opinion shows how difficult a hurdle Twombly and Leegin can be for a price fixing claim. On the other hand, the dissent’s opinion shows that application of Twombly and Leegin can differ wildly from judge to judge. Therefore, manufacturers should not take too much comfort in the majority’s analysis. Additionally, this case only involved price fixing claims under the Sherman Act. As noted elsewhere in this blog, state law may impose more stringent prohibitions on price fixing than federal law.

In “the latest installment in a contentious litigation”, defendant Research In Motion recently obtained an order granting its motion to dismiss plaintiff Eatoni’s claims that RIM violated Section 2 of the Sherman Act and equivalent portions of New York’s Donnelly Act. Eatoni Ergonomics, Inc. v. Research In Motion Corp., No. 08-Civ. 10079 (WHP) (S.D.N.Y. Dec. 5, 2011), Memorandum and Order, p. 1 (Pauley, J.).

The course of this litigation began with RIM filing an action in 2005 for a declaratory judgment that it had not infringed Eatoni’s ‘317 patent for a “reduced QWERTY” keyboard and supporting software. That case settled with Eatoni granting a license to the ‘317 patent to RIM and a release of all claims of infringement. Further disputes resulted in an arbitration that led to RIM agreeing to collaborate with plaintiff on the development of a mutually agreed upon product. RIM’s management rejected the resulting joint design. Eatoni then filed this suit in 2008.

Infringing A Patent As Maintenance Of Monopoly Power

Eatoni alleged that RIM’s alleged infringement of plaintiff’s ‘317 patent constituted an antitrust violation. Plaintiff’s theory of liability was contained in a treatise stating that “in some limited circumstances, the costs of intellectual property infringement . . . on intellectual property owners can create significant barriers to entry, facilitating maintenance of monopoly power.” Op. at 5, quoting H. Hovenkamp, et al., IP and Antitrust: An Analysis of Antitrust Principles Applied to Intellectual Property Law 11-59 (2d ed. 2010).

The court found that plaintiff had not alleged facts supporting such a contention. Op. at 5 (“Eatoni has not plausibly alleged that RIM’s purported infringement imposed substantial costs or barriers to entry”).  In addition, the court stated that no court had ever adopted such a theory, and refused to do so itself. Op. at 5 (“the court has not found any case in which patent infringement has been considered anticompetitive conduct”).

Even assuming that the infringement of a patent could present sufficient foreclosure opportunities to constitute exclusionary power, in the court’s view the claim was defeated by plaintiff having given defendant a license to the ‘317 patent and a “full and complete release” of claims, including “any past, current, or future claims” for patent infringement. Op. at 6. Plaintiff’s allegation that RIM infringed the ‘317 patent was precluded by the license and release.

Refusal To Deal

Eatoni also asserted Section 2 liability based on Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 427 U.S. 585 (1985). Plaintiff described Aspen Skiing as standing for the proposition that a monopolist’s refusal to deal is anticompetitive when the parties were previously engaged in a “cooperative venture.” Opinion at 6-7. Eatoni argued that RIM’s refusal to develop a joint product with plaintiff facilitated defendant’s willful maintenance of monopoly power.

The court noted that Aspen Skiing is “at or near the outer boundary of § 2 liability.” Op. at 7, quoting Verizon Communications v. Trinko, 540 U.S. 398, 409 (2004). A unilateral refusal deal is typically lawful. Op. at 6 (citing cases). That rule applied here. No duty to deal had arisen here because the unique facts in Aspen Skiing were absent – there was no lengthy commercial relationship causing dependence like Aspen Skiing. Op. at 7. Nor does it appear that plaintiff sufficiently alleged facts supporting an inference that defendant’s motives were exclusionary, such as the allegation of forfeiture of short term gains in Aspen Skiing, or that the rejection of the joint design was without a procompetitive justification.

Combination Of Lawful Acts As Unlawful

Plaintiff also asserted that unilateral acts that were lawful individually could be “aggregated into an unlawful ‘course of conduct.’” Op. at 8. Plaintiff relied on Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 698-99 (1962) (antitrust plaintiff “should be given the full benefit of [its] proofs without tightly compartmentalizing the various factual components and wiping the slate clean after scrutiny of each”).

The court restricted the language from Continental Ore, which concerned evaluating unlawful acts in the context of related facts, “to ‘evaluating the character and effect of a conspiracy.’” Op. at 8, quoting Continental Ore, 370 U.S. at 699.  The court rejected the argument that the Supreme Court held that lawful conduct could be combined with other lawful conduct to violate the antitrust laws. One cannot create something by adding nothing to nothing. Op. at 8. “[T]he sum of zero and zero is zero . . . .” Id.

Essential Facility

Defendants filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) on the ground that the allegations of the complaint did not sufficiently allege a claim of “conspiracy” under the Valentine Act. In granting the motion, the District Court held that the plaintiffs had failed to plead a sufficient factual basis for any of the claims in the second amended class action complaint. Accordingly, the action has been dismissed.

In essence, the court held that, in the words of the Bard, plaintiffs were “hoisted by their own petard.” See William Shakespeare, Hamlet (1602). Here, the “petard” was the Ohio Department of Transportation (DOT)’s misapplication of the state’s “Buy Ohio” law. Under the “Buy Ohio” law, state agencies can give a bidding preference to providers of products manufactured or mined in Ohio. The Ohio Department of Administrative Services (DAS) sets the criteria and procedures for awarding bids under its provisions. There are two requirements of relevance here. First, DAS must grant waivers of compliance when the program would result in state agencies “paying an excessive price for the product”. Second, contract awards must be “competitive”. If there are two or more qualified bidders offering products produced or mined in Ohio, this is deemed to be “sufficient competition” to prevent an excessive price from being extracted.

DOT, however, had its own version of the application of the “Buy Ohio” law. While DOT was required to seek and obtain a “release and permit” from DAS to award a contract to a provider of out of state rock salt, it failed to do so. Rather, it interposed its own requirements. The “Buy Ohio” law requires awarding a contract to a provider of Ohio produced or mined products where the provider’s contract price does not exceed the price offered by a bidder offering out of state products by 5%. However, DOT considered that two bids from in-state producers was sufficient, and would obviate the need to secure out of state bids. On this basis, the only two in-state producers of rock salt in Ohio, namely Morton and Cargill, were deemed to be “sufficient competition”. On this basis, DOT rejected bids from non-Ohio rock salt producers. As a result, either Cargill or Morton would be awarded any rock salt contract put to bid.

By this means, DOT eliminated competitive bidding by any company other than the two indigenous producers. This created a “duopoly”, and by its interpretation, imposed impermeable barriers to entry by competing out of state producers. Ohio’s two underground rock salt mines are both under Lake Erie. One mine is leased to Cargill, and the other to Morton. Each has a 100 year lease. Thus, by the interpretation given the “Buy Ohio” procurement law by DOT, bids by the two indigenous producers “locked out” all potential competition.

Not surprisingly, and fully consistent with George Stigler’s “A Theory of Oligopoly“, 72 J.P. Econ. 4 (1964), the market shares of the incumbents were substantially stable, with each company re-winning the same customer year after year, with little switchover, and where bidding patterns suggested the use of complementary bids, designed to maintain duopolistic interdependence.

In 2009, the Office of the Inspector General of Ohio (OIG) investigated the industry and came to the conclusion that the market place for rock salt was behaving non-competitively. The OIG report also noted that the incumbents’ profit margins were “unusually high”, and markedly higher than in counties to the south where the “lock-out” provisions were not in operation. Importantly, however, the OIG report also noted that it had “failed to find evidence that [Cargill and Morton] communicated on salt bids.”

In granting the motion to dismiss, the Northern District of Ohio went through the litany of analysis of Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009). The court held that to find an agreement, the defendants’ conduct “must tend to rule out the possibility that the defendants were acting independently”. Twombly, supra, at 554. Mere “parallel conduct [with] a bare assertion of conspiracy” is insufficient to raise a claim of anticompetitive conduct from speculative to plausible.

The court noted that the DOT was responsible for the formation and maintenance of the duopolistic market structure for the northern counties. Thus, it is not surprising that abiding by the Stiglerian analysis of “interdependence”, it was unnecessary for the duopolists to engage in any level of concerted activity that would trigger liability under the Valentine Act. The court also noted that this was not a situation where limited but tailored discovery would be helpful. It noted that in the OIG’s investigation, subpoenas duces tecum had produced upwards of 300,000 pages of documentary evidence, but no evidence of actionable collusion. Acting like “good duopolists”, any such additional contact would have been unnecessary. Such is the workings of a market characterized by interdependence.

Thus, it can be said that the state of Ohio got exactly what it had bargained for, namely a rock salt market that was on an inherently slippery, anticompetitive slope. The dysfunction of the market place that the state of Ohio created for itself guaranteed that Cargill and Morton would be able to earn supra-competitive rents by each sticking to its own territories and maintaining its supremacy with its particular customers. A bidding war would have been inherently contrary to the economic self-interest of each of the duopolists.

As the State of Ohio Department of Transportation created the oligopoly, economic self-interest and rudimentary price theory teach that the state of Ohio was bound to reap exactly what it had sown. In “cleaning up” the complaint, the court also disposed of the remaining counts alleging deceptive practices and fraud. These counts were dismissed for lack of standing. In each case, the court held that the state of Ohio, through a misinterpretation of its own internal law, had received exactly what it had bargained for.

Master Cool’s antitrust counterclaim alleged that SPX maintained a market share of 85-90%, and used its dominant market position to impose exclusivity agreements. It alleged “antitrust injury” in the market for ARRR equipment “in the form of reduced competition, innovation, and consumer choice”, in violation of Section 2. The U.S. District Court, Northern District of Ohio dismissed the counterclaim on a FRCP 12(b)(6) motion, on the ground that, as a matter of law, the allegations were insufficient to allege an actionable injury to the competitive process, as opposed to a competitor. SPX Corporation v. Master Cool U.S.A., Inc., Case No. 3:10-CV-1266, ND, Ohio, 6/24/11.

Citing Iqbal, 129 S.Ct. at 1949, the court found that the alleged facts were insufficient to allege a plausible monopoly power maintenance claim. This was because, inter alia, the one year exclusive contracts are equally available to other distributors and competitors in the market. Thus, PSX’s competitors, including Master Cool, could have engaged in competition for the same distributors, by engaging in competitive conduct of the same variety as engaged in by SPX. This being the case, the only plausible conclusion would be that at most, the counterclaim presents a case of competitor substitution, not elimination. There were no allegations that the limited exclusive dealing contracts were not competitively available to other actual or potential competitors in the relevant market, which was alleged to be a market for automotive refrigerant recycling and recovery machines and services. The court cited Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380, 393 (7th Cir. 1984) for the proposition that if an agreement does not exclude a significant competitor, the agreement could not possibly harm competition. In Roland, the court stated:

The exclusion of one or even several competitors for a short time or even a long time, is not ipso facto [an] unreasonable [restraint of trade]. 749 F.2d at 394.
 

However, unmentioned and undiscussed is the line of authority stemming from United States v. Dentsply Int’l, 399 F.3d 181 (3d Cir. 2005), cert. denied, 126 S.Ct. 1023 (2006). In Dentsply, the Third Circuit reversed the dismissal of a Department of Justice Antitrust Division complaint that alleged illegal monopoly power maintenance through a not seemingly dissimilar use of short term “at will” exclusive dealing contracts. Similar to the allegations of SPX’s market share in Master Cool’s counterclaim, the DOJ Antitrust Division complaint in Dentsply was that Dentsply had maintained a 75-80% market share from 1993 to 2005, and that its market share had been shown to be “impermeable”. The DOJ argued that in the context of Dentsply’s control of the relevant market, even the use of short-term exclusivity agreements, otherwise available to rivals, whether current competitors or potential entrants, were sufficient to deny efficient scale entry, and thus constituted an artificially imposed and maintained barrier to entrance or expansion. Further, the Dentsply court noted that Dentsply had been able to successfully impose a series of price increases within the relevant market without fear that the increases would not be followed by its smaller competitors. Thus, the pricing history constituted at least an inference of a “price umbrella” such that a smaller competitor’s ability to utilize at least the same competitive tools as Dentsply was insufficient to constrain successful price increases by the dominant competitor, namely Dentsply. As the Third Circuit noted, Dentsply had . . . “effectively choked off the market for artificial teeth, leaving only a small sliver for competitors”. See, 399 F.2d at 196.

Even before the Third Circuit’s decision in Dentsply, there had been a series of conflicting decisions on the use of short term exclusivity practices as sufficient indicators of effective foreclosure, which would constitute insurmountable artificially imposed barriers to entry or expansion, which would trigger a Section 2 monopoly power maintenance offense. Compare LePage’s, Inc. v. 3-M, 324 F.2d 141 (3d. Cir. 2003) (substantial discounts based on purchases of multiple product lines actionable, where through attribution, one or more of the product lines would have been at below a measure of permissible cost) with Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039 (8th Cir. 2000) (discounts based on high share of orders lawful where prices above cost, contracts are short-term, and entry is easy). See also, R.J. Reynolds Tobacco Co. v. Phillip Morris, Inc., 199 F.Supp. 2d 362 (MDNC 2002) (even defendant with market power may engage in promotional advertising and product positioning campaigns through funding of in-store display incentives, where rivals could gain same display space through use of similar competing practices).

What are the distinguishing factors between these lines of authorities? In a world where Twombly and Iqbal predominate, a bit of limited discovery might go a long way. Absent such discovery, which essentially converts a 12(b)(6) motion into a subsequent motion for summary adjudication, one must fall back on urging the district court to use its common sense as to what is “plausible” and what is “toothless”, and hope that Dentsply-type allegations will be taken as initially sufficient to mutate a seemingly competitively neutral practice into one that is “impermeable” and such to constitute an artificially imposed barrier to entry of expansion, through the effective denial of efficient entry or expansion scale to rivals. The beat goes on. Stay tuned.