Collins Inkjet Corporation v. Eastman Kodak Co.
781 F.3d 264
6th Cir.2015Background
- Kodak manufactured Versamark printers and controlled 100% of the market for refurbished Versamark printheads; Collins manufactured third-party Versamark ink and competed with Kodak for ink sales.
- In July 2013 Kodak adopted a refurbishment-pricing policy giving discounts to customers who used Kodak ink ("matched"), while charging higher refurbishment prices to customers using non-Kodak ink ("unmatched").
- Collins sued under §1 of the Sherman Act (tying), seeking a preliminary injunction to bar Kodak from charging higher refurbishment rates to Collins’ customers; the district court granted the injunction.
- The district court found (1) likely coercion of buyers to purchase Kodak ink via the differential pricing and (2) Kodak’s market power in the refurbished printhead aftermarket; it rejected Collins’ non-antitrust claims but found a likelihood of antitrust success.
- On appeal Kodak challenged the coercion standard and factual findings; the Sixth Circuit affirmed the preliminary injunction but articulated a stricter legal test for ties enforced solely by differential pricing.
Issues
| Issue | Plaintiff's Argument (Collins) | Defendant's Argument (Kodak) | Held |
|---|---|---|---|
| Whether Kodak’s differential pricing of printhead refurbishment unlawfully coerced buyers into purchasing Kodak ink (non-explicit tie) | Kodak’s higher unmatched refurbishment price coerces "all rational buyers" to switch to Kodak ink, constituting an illegal tie | District court used too lenient a coercion standard; mere price advantage is not a tie unless it is predatory | Differential pricing can be an unlawful tie only if it is economically equivalent to selling the tied product below the defendant’s cost (discount-attribution); record suggested Kodak’s pricing likely met that test, so Collins likely to succeed |
| Whether Kodak had sufficient market power in the tying product (refurbished printheads) | Kodak’s 100% share of refurbished printheads plus high switching and information costs gave Kodak market power | Kodak argued primary market competition, Sophisticated buyers, and prior pricing history limited its market power | Court found strong likelihood Kodak had market power in the aftermarket given 100% share, high switching costs, and information asymmetries |
| Irreparable harm and balance of equities for preliminary injunction | Loss of market share, goodwill, and competition would cause irreparable, hard-to-compensate harm to Collins | Kodak argued lost profits are calculable and Collins could cut prices to compete; injunction harms Kodak | Court held Collins faced realistic prospect of irreparable harm and injunction would not unduly harm Kodak or public interest |
| Proper cost measure for discount-attribution test | Collins: Kodak’s own costs should be used to test predation; proof suggests Kodak sold ink below its cost | Kodak urged focus on plaintiff’s costs or that price competition is lawful if equally efficient rivals can compete | Court held the correct cost measure is defendant’s (Kodak’s) incremental cost; discount-attribution uses defendant’s costs to determine coercion |
Key Cases Cited
- N. Pac. Ry. Co. v. United States, 356 U.S. 1 (recognition of tying as potentially unlawful restraint)
- Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (tying requires coercion and appreciable market power)
- Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (aftermarket market-power considerations; information and switching costs)
- Fortner Enters., Inc. v. U.S. Steel Corp., 394 U.S. 495 (appreciable economic power and substantial commerce requirements for tying)
- Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (predatory pricing requires prices below an appropriate measure of cost)
- Cascade Health Solutions v. PeaceHealth, 515 F.3d 883 (discount-attribution test for bundled discounts; allocation of bundle discount to competitive product)
- NicSand, Inc. v. 3M Co., 507 F.3d 442 (distinguishing hard competition from anticompetitive conduct; antitrust injury requirement)
- Virtual Maintenance, Inc. v. Prime Computer, Inc., 957 F.2d 1318 (discussed prior Sixth Circuit tying analysis regarding coercion)
- PSI Repair Servs., Inc. v. Honeywell, Inc., 104 F.3d 811 (district-court standard for aftermarket information/switching-cost concerns)