Suture Express, Inc. v. Owens & Minor Distribution, Inc.
2017 U.S. App. LEXIS 4431
| 10th Cir. | 2017Background
- Suture Express (specialist distributor of sutures and endomechanical products — “suture‑endo”) sued broadline distributors Cardinal Health 200, LLC and Owens & Minor Distribution, Inc. (O&M), alleging their contract “bundling” (discount/penalty tying other‑med‑surg purchases to buying suture‑endo from the same broadline) violated federal and Kansas antitrust laws.
- Suture Express used a single‑warehouse, FedEx overnight model and achieved >99% fill rates and lower suture‑endo prices; Cardinal and O&M are national broadline distributors with many product categories and regional distribution centers.
- The relevant market was defined as national distribution of med‑surg products to acute care providers, divided into suture‑endo (~10% of market) and other‑med‑surg (~90%). Cardinal and O&M together held a large share of other‑med‑surg sales.
- Plaintiffs claimed the bundling raised other‑med‑surg markups for customers who did not buy suture‑endo from the broadline, effectively foreclosing purchases from Suture Express and harming competition in the suture‑endo market.
- The district court granted summary judgment for defendants, holding Suture Express failed to show (1) individual market power in the tying (other‑med‑surg) market, (2) antitrust injury to competition, and (3) that defendants’ procompetitive justifications did not prevail. The Tenth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendants’ bundling constituted an unlawful tying arrangement under Section 1 (rule of reason/per se elements) | Bundles conditioned favored other‑med‑surg pricing on buying suture‑endo, foreclosing 56–64% of suture‑endo market and meeting tying elements | Bundles were competitive package pricing; no individual defendant had sufficient market power in other‑med‑surg to coerce buyers | Court: Plaintiff failed to show individual tying‑market power or antitrust injury; affirmed summary judgment for defendants |
| Whether tied‑market effects (lower prices for suture‑endo) can establish market power or coercion | Tied‑market evidence and discount‑attribution test show coercion and foreclosure that indicate market power | Tied‑market effects are not dispositive; bundle acceptance can reflect procompetitive consolidation and cost differences; discount attribution is aimed at coercion not market power | Court: Tied‑market effects are admissible but not dispositive; they did not create a triable issue of market power here |
| Whether Suture Express showed antitrust injury (harm to competition vs. harm to competitor) | Expert model showing millions in overpayment and contracts that foreclosed substantial suture‑endo sales demonstrate harm to competition | Market evidence (growing rivals, falling markups, buyer consolidation) shows competition increased and defendants lacked ability to raise prices or exclude rivals | Court: Plaintiff failed to show injury of the type antitrust laws protect; market indicators favored defendants |
| Whether Kansas Restraint of Trade Act claim survives independent of federal claims | KRTA prohibits agreements that tend to prevent full and free competition; plaintiffs argue intent/tendency to foreclose suffices | Defendants argue no anticompetitive effect and federal failure forecloses state claim | Court: KRTA claim fails for same reasons; plaintiff did not show the requisite competitive harm or tendency to prevent competition |
Key Cases Cited
- Illinois Tool Works Inc. v. Independent Ink, Inc., 547 U.S. 28 (Sup. Ct. 2006) (market power required for tying claim rather than presumption from patent)
- Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (Sup. Ct. 1984) (tying doctrine principles; market power and coercion concepts)
- Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (Sup. Ct. 1992) (aftermarket/tied‑market evidence can bear on market power; jury issues)
- Fortner Enters., Inc. v. United States Steel Corp., 394 U.S. 495 (Sup. Ct. 1969) (tying/conditioning as evidence of power to raise price or foreclose buyers)
- Cascade Health Solutions v. PeaceHealth, 515 F.3d 883 (9th Cir. 2007) (discount attribution and tied‑market effects as coercion evidence)
- Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (Sup. Ct. 1993) (antitrust protects competition, not competitors)
- Reazin v. Blue Cross & Blue Shield of Kansas, 899 F.2d 951 (10th Cir. 1990) (market power shown via price control or exclusion)