2:14-cv-04518
E.D. Pa.Dec 28, 2015Background
- LifeScan (Johnson & Johnson subsidiary) dominated the U.S. market for OneTouch Ultra meter‑compatible glucose test strips; UniStrip developed FDA‑approved lower‑cost compatible strips (UniStrip1) in 2013.
- UniStrip alleges LifeScan offered rebates/discounts to resellers conditioned on not buying non‑LifeScan OneTouch‑compatible strips, and threatened to reduce/terminate rebates if resellers purchased UniStrip1.
- UniStrip contends these exclusionary and bundled rebate arrangements foreclosed distribution channels, harmed competition, and maintained LifeScan’s monopoly in the relevant test‑strip submarket.
- Procedural posture: UniStrip filed a Second Amended Complaint asserting claims under Sections 1 & 2 of the Sherman Act, Section 3 of the Clayton Act, and state tort theories; LifeScan moved to dismiss the SAC.
- The court denied dismissal for Counts I (Clayton §3), II (Sherman §1), III (Sherman §2 attempt to monopolize), IV (bundling under Sherman & Clayton), and VI (tortious interference with actual contracts), but granted dismissal of Count V (tortious interference with prospective contracts).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether rule of reason or price‑cost test governs exclusive‑dealing allegations | UniStrip: exclusivity and coercive threats—not predatory pricing—so rule of reason applies | LifeScan: claims rest on pricing/rebate conduct, so Brooke Group price‑cost test should apply requiring below‑cost pleading | Court: rule of reason applies at pleading stage (aligning with ZF Meritor) |
| Clayton Act §3 exclusive‑dealing claim (Count I) | LifeScan conditioned rebates to exclude competitors, foreclosing resellers and substantially lessening competition | LifeScan contended insufficient pleading of substantial foreclosure | Court: pleadings sufficiently allege market, foreclosure and intent; Count I survives |
| Sherman Act §1 antitrust conspiracy/contract claim (Count II) | Exclusive agreements/rebate conditions are concerted actions producing anticompetitive effects | LifeScan disputes characterization as unlawful agreement | Court: allegations plausibly plead concerted action, market power, anticompetitive effect; Count II survives |
| Sherman Act §2 attempted monopolization & bundling claims (Counts III & IV) | LifeScan used bundled rebates and exclusive conditions to willfully maintain monopoly and foreclose rivals | LifeScan argued conduct was legitimate competition and required more specific pleading | Court: Plaintiff plausibly pleaded monopoly power, exclusionary conduct and bundling; Counts III & IV survive |
| Tortious interference with prospective contracts (Count V) | UniStrip: LifeScan’s threats deterred prospective resellers from contracting with UniStrip | LifeScan: privileged competitive conduct / challenged sufficiency of alleged prospective relationships | Court: dismissed — UniStrip failed to plead objectively reasonable probability of contracts or non‑privileged conduct |
| Tortious interference with actual contracts (Count VI) | UniStrip: LifeScan interfered with an actual reseller transaction (Discount Drug Mart) causing UniStrip loss | LifeScan: competition privilege argued but disputed by plaintiff | Court: claim survives as UniStrip alleged an actual contractual transaction and wrongful antitrust conduct |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for pleadings)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading requires more than conclusory allegations)
- ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254 (3d Cir. 2012) (rule of reason applies to exclusive‑dealing where exclusion, contract duration, and market power are central)
- Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (price‑cost test for predatory pricing claims)
- LePage’s Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003) (bundling/rebate schemes by a monopolist can be exclusionary)
- United States v. Dentsply Int’l, Inc., 399 F.3d 181 (3d Cir. 2005) (exclusive dealing by a monopolist can be impermissibly exclusionary)
- Barr Labs., Inc. v. Abbott Labs., 978 F.2d 98 (3d Cir. 1992) (Clayton Act §3 exclusive‑dealing analysis requires showing substantial foreclosure)
- Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430 (3d Cir. 1997) (elements for §1 Sherman Act unreasonable restraint claim)
- SmithKline Corp. v. Eli Lilly & Co., 575 F.2d 1056 (3d Cir. 1978) (elements for impermissible tying/bundling)