424 F.Supp.3d 92
D.D.C.2020Background
- Surescripts operates two complementary two-sided e-prescribing markets: electronic prescription routing (prescriber → pharmacy) and eligibility (payer/PBM → prescriber EHR).
- FTC alleges Surescripts commands ~95% market share in each market and since ~2009 adopted a loyalty/discounting scheme that conditions lower fees or higher EHR incentives on exclusivity (100% routing through Surescripts or analogous PBM exclusivity).
- FTC alleges these ‘‘effectively exclusive’’ contracts (and other conduct such as forcing Allscripts to drop a competitor and a noncompete with RelayHealth) foreclosed ~70% of each market, raised net transaction prices, reduced innovation and quality, and harmed rivals.
- FTC sued under Section 2 of the Sherman Act (monopolization) and seeks equitable relief (including a permanent injunction) under Section 13(b) of the FTC Act; Surescripts moved to dismiss.
- Surescripts’ dismissal grounds: (1) Section 13(b) permits permanent injunctions only in "proper" (routine/non-novel) cases so this case is not within the court’s jurisdiction; (2) the complaint fails to state a Section 2 claim because loyalty discounts are optional (so only predatory pricing would be unlawful) and the FTC did not adequately plead foreclosure/anticompetitive effect under the rule of reason in two-sided markets.
- The court denied the motion to dismiss, holding Section 13(b) is not jurisdictional in the narrow sense urged by Surescripts (and, even if it were, FTC pleaded a "proper case") and that the complaint plausibly alleges exclusionary conduct sufficient to state a monopolization claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject-matter jurisdiction under 15 U.S.C. § 53(b) ("proper cases") | "Proper cases" is not a jurisdictional bar; alternatively, this dispute qualifies as a proper case because FTC alleges a statutory violation requiring equitable relief. | "Proper cases" limits permanent-injunction power to routine/straightforward matters; this complex antitrust matter is not "proper." | Court: "proper cases" is not a jurisdictional limiting requirement; even if it were, FTC pleaded facts sufficient to show a proper case. Motion denied. |
| Whether loyalty discounts/optional exclusivity require pleading predatory pricing to violate § 2 | Loyalty-based discounts and de facto exclusivity can be exclusionary without predatory pricing; FTC pleaded practical foreclosure and harm to competition. | Because discounts were optional, only predatory pricing would be unlawful; FTC did not plead predatory-pricing elements. | Court: Predatory pricing is not a necessary premise; exclusive-dealing-like practices that foreclose rivals may violate § 2 absent predatory-pricing allegations. Motion denied. |
| Pleading anticompetitive effects / foreclosure under rule-of-reason in two-sided markets (post Amex) | FTC alleged foreclosure of ~70% of each two-sided market and alleged net price effects on both sides; Amex does not immunize monopolization claims by a monopolist. | Amex requires showing anticompetitive effects across the entire two-sided market; FTC’s facts are conclusory and insufficient to show market-wide foreclosure/effects. | Court: FTC alleged foreclosure of a substantial share (70–80%) on both sides and pleaded net-price effects; Amex does not bar this monopolization claim. Motion denied. |
| Whether exclusivity is insubstantial because contracts were short-term/terminable | FTC alleges exclusivity plus Surescripts’ dominance made multihoming costly, producing substantial foreclosure and harm. | Contracts were short, terminable, and presumptively lawful; foreclosure is not substantial. | Court: Substantiality is a fact-intensive inquiry; FTC pleaded sufficient facts at the pleadings stage to survive dismissal. |
Key Cases Cited
- Arbaugh v. Y & H Corp., 546 U.S. 500 (clear-statement rule for jurisdictional elements)
- Ohio v. American Express Co., 138 S. Ct. 2274 (2018) (two-sided market analysis and requirement to show effects on whole market for § 1 claims)
- United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (exclusive contracts can preserve monopoly by foreclosing entry; guide for exclusionary conduct analysis)
- United States v. Grinnell Corp., 384 U.S. 563 (monopolization elements: monopoly power and willful maintenance)
- Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320 (test for substantial foreclosure in exclusive-dealing cases)
- Dentsply Int'l, Inc. v. Nueterra, 399 F.3d 181 (3d Cir. 2005) (exclusive-dealing can bar a substantial number of rivals and violate § 2)