Case Information
*1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA FEDERAL TRADE COMMISSION,
Plaintiff, Civil Action 19-1080 (JDB)
v SURESCRIPTS, LLC,
Defendant.
MEMORANDUM OPINION
Thе Federal Trade Commission petitions Court equitable reliei including a permanent injunction monetary relief, against , LLC pursuant Section 13(b) of FTC Act. U.S.C. $ 53(b). FTC alleges Surescripts violated Section 2 Sherman Act maintaining monopoly in two markets-electronic prescription routing and eligibility (explained below)-through anticornpetitive conduct, including an exclusive loyalty- based pricing policy. Surescripts moves to dismiss, arguing (1) Court lacks subject matter jurisdiction under Section l3(b) Act, (2) that the fails state a claim under Section the Sherman Act because not allege either that employed predatory pricing thаt Surescripts's market behavior violated rule reason. For the reasons explained below, Court will deny Surescripts's motion.
BlcxcRouNt
At the pleadings stage, the Court assumes facts alleged the complaint true and presents them light most favorable plaintiff-here, FTC. Felter Kempthorne, 1255,1257 (D.C. Cir. 2007). Sulescripts health information technology company operating two complementary markets: electronic prescription routing ("routing") and *2 eligibility, collectively known as "e-prescribing." Compl. fol lnjunctive & Other Equitable Relief ("Compl.") [ECF 1] 1. Routing involves the transmission prescription-related data from a prescriber a рharmacy via prescriber's electronic health record ("EHR") system. Id. Eligibility involves transmission a patient's forrnulary benefit information fi'om a payer (often patient's pharmacy benefit manager ("PBM")) prescriber's EHR. Id. Surescripts charges pharmacies fee for each routing transaction and charges PBMs fee for each eligibility transaction. Id. T 49.
According to FTC, Surescripts mainlains at least a 95Yo share (by transaction volume) in each market using various anticompetitive measures. Id. lifl 2-3. Beginning around 2009, Surescripts implemented pricing policy that rewarded "loyal" (i.e., exclusive) customers with lower prices. Id. T "To considered exclusive, requires that pharmacy . . . route 100% transactions ttn'ough and only through network." Id. 1l (internal quotation marks omitted). "The same structure exists for PBMs in eligibility." Id. 1167. For routing, the cost to non-loyal customers varies by volume, but can be as high as I more than *o... Id. T1l 70_71. Surescripts structured its for loyal customers; eligibility, high | contracts EHR providers such loyalty in either routing eligibility markets resulted an incentive payment the EHR provider I fees paid customers in that market; exclusivity both markets resulted incentive payrnent ! fees from both markets. n .
The contends that "[t]hose effectively exclusive contracts foreclosed at least 7}Yo each market, eliminating multiple competitive attempts from other companies. . offered *3 Surescripts's dominant position, almost all market entrants must compete customers who already use Surescripts. Id. 1132. To gain a foothold either narket, entrants must convince customers to engage "multihoming," or the simultaneous use Surescripts well one or more competitors. Id. FTC alleges that, by raising the cost multihoming, Surescripts hindered customers' ability to "multihome" and "significantly elevat[ed] critical mass fof initial customers] Surescripts cornpetitor would need to become a viable network in'еither routing eligibility." Id.
Beyond the loyalty program, Surescripts employed "threats other non-merits based competition" to keep its customers from working with its competitors. Id. fl 4. For instance, when a competitor, Emdeon, attempted to enter the market through contracts with Allscripts, large EHR, relied on market power force Allscripts into exclusive contracts that prevented renewal Allscripts's contract with Emdeon. Id. ll'1T I l0-1 Surescripts also entered non-compete agreement another competitor, RelayHealth, which prevented RelayHealth from capturing up 15-20o/o routing market. Id. T 5; sеe also id. TT 88-99. The FTC alleges these exclusive arrangements have allowed Superscripts impose heightened prices large portions markets, see. e.q., id. llfl 187-95, and have stifled innovation reduced quality in two e-prescribing markets, id. lTT 196*215. moves dismiss FTC's complaint, arguing case is both
procedurally and substantively defective. Surescripts, LLC's Mot. to Dismiss Compl. ("Def.'s Mot.") [ECF 32] 1T'1T 1-3. First, Surescripts argues that the Court lacks subject matter jurisdiction over the request for permanent injunction because cannot establish that this case "proper" under Section 13(b) Act. T 1; also U.S.C. $ 53(b). Second, Surescripts argues that the FTC's complaint fails to statе a claim under Section 2 of the Sherman
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Act because it allege that the prices offered were predatory or that Surescripts's market practices violated rule of reason. Def.'s Mot. flfl 2-3.
Lpcal Sra¡lnano
'When considering a motion to dismiss under Federal Rule Civil Procedure 12(b)(6), a couft presumes truth of a complaint's factual allegations, though it is "not bound to accept as true legal conclusion couched a factual allegation." Bell Atl. Corp. v. Twombly, 550 U.S. 544,555 (2007) (internal quotation omitted). The court then asks whether the facts alleged suffice "to state claim relief plausible on its face." Aú*eqqhal, U.S. 662,678 (2009) (internal quotation omitted). court considers "facts alleged in complaint, any documents either attached incorporated in the complaint and matters which fthe Court] may take judicial notice." Mpo), v. Rhee, 758 F.3d 285,291 n.l (D.C. Cir.2014) (internal quotation omitted).
Under Rule l2(b)(l), court has an affirmative obligation to ensure it is acting within the scope jurisdictional authority. Grand Lodge Fraternal Order Police v. Ashcroft, F. Supp. 2d9,13 (D.D.C. 2001). "[The] court must dismiss case when it lacks subject matter jurisdiction." Randolph v. ING Life Ins. & Annuity Co., 486 F. Supp. 2d l, (D.D.C. 2007). "[P]laintiff s factual allegations complaint. . will bear closer scrutiny in resolving a l2(bxl) motion than resolving a l2(bX6) motion for failure state claim." Grand Lodge, 185 F. Supp. 2d at 13-14 (internal quotation marks omitted). And coufi may consider material other than allegations complaint in determining whether jurisdiction hear case. Settles U.S. Parole Comm'n,429 1098, I 107 (D.C. Cir. 2005).
AN,qlvs¡s
I. Subiect Matter Jurisdiction Under Section l3lb) first contends the Court lacks subject matter jurisdiction over this dispute. Mem. in Supp. Surescripts, LLC's Mot. to Dismiss Compl. ("Def.'s Mem.") IECF No. 32] at 13-29.. argues that.section 13(b) FTC Act limits Court's power issue permanent injunctions upolt request by FTC to "proper cases," which Surescripts intetprets as 'oroutine, straightforward" cases. l7-18 l5 U.S.C. $ 53(b). This case, Surescripts continues, does not qualify routine straightforward because involves complex novel issues antitrust law, such how to understand two-sided e-prescription markets of routing eligibility in light Supreme Court's recent decision Ohio v. American Express Co ("Amex"), 138 S. Cf.2274 (2018). Def.'s Mem. at2419.
The FTC responds in two ways. First, the FTC argues that the "proper cases" language in Section 13(b) does not limit courts' jurisdiction hear cases brought under Act. Pl. FTC's Mem. Law Opp'n to Def. Surescripts, LLC's Mot. to Dismiss Compl. ("PI.'s Opp'n") [ECF at10-12. The FTC argues that the language Section 13(b) clearly speak to courts' power adjudicate such claims. Pl.'s Opp'n at (citing Arbaugh Y&H Corp., 546 U.S. 500, 515-16 (2006)). Second, contends case "proper" because term just means "any case whiсh a permarlent injunction would 'appropriate,' i.e., any case in which law enforced FTC has been violated and equitable remedies are needed make harmed consumers whole." Id. at The the stronger argument on both points.
A. Whether "Proper Cases" Is Jurisdictional Requirement Supreme Court has established clear-statement rule determining whether statutory elements constitute jurisdictional requirements. Arbaush, U.S. 515. "[W]hen *6 Congress does rank a statutory limitation . . . as jurisdictional, courts should treat the restriction as nonjurisdictional in character." Id. Here, the relevant provision reads: "in proper cases thе Commission may seek, and after proper proof, court may issue, a penxanent injunction." 15 U.S.C. $ 53(b). Neither specific provision nor Section 13(b)'s broader framework for seeking equitable relief even include word 'Jurisdiction," let alone clear statement any statutory requirenrents jurisdictional. As the Third Circuit recently concluded when analyzingthe same provision, "Section 13(b) includes no indicia that Congress intended rank a statutory limitation . . as jurisdictional." v. Shire ViroPharma. Inc. ,917 147, (3d Cir. 2019) (internal quotation marks omitted). best textual argument reading "proper cases" as jurisdictional
requirement comes from the label Sectiоn l3(a)-"Power Commission; jurisdiction courts." Reply Mem. Supp. Surescripts, LLC's Mot. to Disrniss Compl. ("Def.'s Reply") [ECFNo.39] at4. Because Section 13(a) "is identical Section 13(b) structure," Surescripts argues that the latter section too should read jurisdictional. Under Arbaush, however, inquiry is whether Congress "clearly states threshold limitation statute's scope" is jurisdictional, and Surescripts's structural argument from Section 13(a)'s label falls short this high bar. U.S. at 515 (emphasis added). Indeed, Section 13(b)-the actual section issue here-has a separate and distinct label ("Temporary restraining orders; preliminary injunctions") does not include any reference jurisdiction. See 15 U.S.C. $ 53(a)-(b); cf. Reed Elsevier. Inc. Muchnick. 559 U.S. 154 , (20i0) (noting that Copyright Act's registration requirement for bringing infringement action "is located provision 'separate' from those granting federal courts subject-matter jurisdiction over those respective claims") emphasizes the FTC itself cited Section 13(b) basis for *7 personal jurisdiction "empower[ing] this Couft to issue a permanent injunction." Def.'s Reply at (internal quotation and emphasis omitted); see also Compl. at 54. But the agency's fi'aming this language "empower[ing]" the Court not thereby transform the language of Section l3(b) a threshold jurisdictional requirement. Finally, although not dispositive, it is worth noting that the opposite. conclusion would
. create a cumbersome threshold test whenever the FTC seeks a permanent injunction. Pl.'s Opp'n at20-21.; Tr. of Mot. Hr'g [ECF 4l] at49:3-6 (arguing that the FTC's "interpretation is the one that relies on the plain language the statute and doesn't saddle the Court burden deciding what routine case is or not"). Under defendant's jurisdictional interpretation, courls would need to decide whether the claims brought "straightforward" or "routine" to assess novelty complexity of claims' merits before deciding whether hear case in first place. Pl.'s Opp'n at20-21. This requirement unwieldly and, given the dearth of tеxtual support for jurisdictional reading, suggests that the "proper cases" element is jurisdictional.
B. Whether the Pleaded "Proper Case"
The FTC also prevails on the substance issue, for even if "proper cases" is jurisdictional, agency has pleaded sufficient facts clear the mark. Cf. Def.'s Reply at 3 (arguing that the "proper cases" question can be addressed under either Fed. R. Civ. P. l2(b)(l) or Fed. R. Civ. P. 12(bX6)).
Surescripts argues narrow interpretation of "proper cases" that limits FTC's power seek permanent injunctions to instances routine fïaud or other straightforward violations FTC's substantive statutes. Def.'s Mem. 17-18. insists that "proper cases" cannot consist "'аll cases' in which asserts violation the laws enforces" because would render phrase superfluous. also points legislative *8 history, which suggests that at least one purpose for permanent injunction provlslon was to permit "in routine fraud case, to merely seek permanent injunction in those situations in which it not desire to funher expand upon the prohibitions Federal Trade Commission Act." Id. at l8 (internal quotation and emphasis omitted). And Surescripts cites two cases rely narrow interpretatiou of "proper cases"-FTc v. Abbott Labs., Civ. A. 92- 1364,1992WL335442 (D.D.C. Oct. 13,1992), FTC v. Vy'orld Travel Vacation Brokers. Inc., (7th Cir. 1988)-as well as public statеments fonner FTC officials framing "proper cases" involving straightforward violations. Def.'s Mem. at 18-24.
There is thus considerable weight to argument that "proper cases" is not synonymous "all cases," for such interpretation would make the phrase superfluous. At same time, this Court's task is not to define tertn "proper cases" for all scenarios, but to determine whether this case is proper. grounds legal argument here Circuit precedent, United States Microsoft Corp. ,253 F.3d 34 (D.C. Cir. 2001) (en banc) (per curiam), and does not seek rely on its agency expertise to develop the law. Pl.'s Opp'n at21; Tr. Mot. Hr'g at 6J:12-16 (FTC noting "Microsoft is primаry authority case" and suggesting Court will not "have go much beyond Microsoft"). Under such circumstances, the Court concludes that complaint adequately alleges "proper case."
In terms the statutory text, the language Section 13(b) affords little evidence one way or the other, but least necessary read the phrase "ptoper cases" so narrowly mean "straightforward" or "non-novel" cases, as suggests. Def.'s Mem. at22-24. Given the phrase "proper cases" is embedded second "Provided" portion Section l3(b), phrase might seen as merely distinguishing between those disputes suited for temporary injunctiоn-the subject most Section 13(b)-and those cases better suited permanent *9 injunction. See 15 U.S.C. $ 53(b). Or, given the requirement that the FTC must present "proper proof," "proper cases" might be interpreted involving disputes that do not require the exercise FTC's scientific expertise. See J. Howard Beales III & Timothy J. Muris, Striking Proper Balance: Redress Under Section 13(þ) FTC Act,79 Antitrust L.J. 1,31-33 (2013). If a district couft determined that the targeted entity did have fair notice or that administrative proceeding would be more "proper," then the court might rule against a permanent injunction. See id. I ; see also id. 9-1 [3] text alone, then, thus does not dictate еither Surescripts's nalrow reading of "proper cases" or FTC's broader interpretation.
Looking beyond the text, all other factors suggest broader reading correct. In terms case law, number other courts have concluded that "propet cases" include more than "routine" violations. See. e.g., FTC v. Evans Prods. Co. ,77 F .2d 1084, 1086-87 (9th Cir. 1985) (noting that Section 13(b) may authorize permanent injunction instances beyond the routine fraud case); FTC v. AmeriDebt. Inc. ,373 F. Supp. 2d 558, 562-63 (D. Md. 2005) (agreeing with FTC's reading "proper case" "simply one that involves violation any provision of law enforced by the Commission" (internal quotation marks omitted)); see also Pl.'s Opp'n at 17- Indeed, FTC states often relied "section l3(b) in wide variety non- 'routine"' cases. See Pl.'s Opp'n at & n.17 (citing FTC v. Qualcomm Inc., No. 17-CV-00220- LHK, 2019 WL 2206013 (N.D. Cal. May 21,2019); FTC v. Cepþlqq-lnc., 2:08-cv-2141- MSG,2019 WL 2lll253 (E.D. Pa. Feb. 2l ,2019); v. AbbVie Inc.,329F. Supp. 3d 98 (E.D. Pa.2018)); Mylan Labs.. Inc. ,62F. Supp. 2d25,36 (D.D.C. 1999) ("[T]his Court finds that the permanent injunction proviso may used enjoin violations of any provision law enforced by the FTC." (internal quotation marks omitted)).
Surescripts's authorities contrary are all wanting. In World Travel, the Seventh *10 Circuit held that "it quite clear that Congress at least expected that the FTC could rely on [Section l3(b)l when sought to halt straightforward violation of section [of the FTC Act] that required no applicatiоn the FTC's expertise novel regulatory issue through administrative proceedings." 861 F.2d 1028 (emphasis added). Abbott Labs., quoting this language from V/orld Travel. noted that "Federal Courls have shied away from accepting direct court actions by the Commission. . if the offending conduct interjects the court areas Commission expertise involving the creation and monitoring new concepts unfair competitive trade practice." WL 335442, at *2. But Abbott Labs. cites no authority other than World Travel for gloss on Section 13(b), and World Travel elsewhere acknowledges "[a] substantial argument can be made that the statutory language, when rеad [the] legislative history, permits FTC to proceed under the last proviso 13(b) for any violation of a statute administered by FTC." 861 1028. other arguments fare no better. To extent that Court considers legislative history, the Senate report cited does highlight ability of to seek permanent injunction immediately "in routine fraud case." Def.'s Mem. at (quoting 'Warranty-Federal Trade Commission Senate Committee on Commerce, Magnuson-Moss Improvement Act, S. Rep. 93-151, af 3l (1973)). But the repoft say such circumstances are only time can seek such injunction. See id. Likewise, many ofthe statements and academic articles that Surescriрts marshals fi'om former FTC Commissioners other agency officials conclude that permanent injunctions ill suited cases requiring FTC's expertise and development law through the administrative process, but they do not then go on preclude a case brought under circuit precedent. id. at2l23.
Surescripts's argument thus largely rests authorities acknowledge straightforward *11 cases as the paradigm applications Section l3(b), but do not preclude pursuing other claims. See Evans Prods. 775 at 1086-87. In agreement clear weight of relevant cases, the Court concludes that the FTC's complaint sufficiently pleads "proper" case a permanent injunction under Section 13(b)
II. tr'ailure State a Claim Under Section of the Sherman Act next argues FTC's claim should dismissed under Fed. R. Civ. P. 12(bX6) because FTC's complaint fails to allege violation Section Sherman Act. Def.'s Mem. 2945. First, Surescripts suggests that the FTC's monopolization claim must fail because loyalty program was entirely optional and, therefore, its low prices could constitute anticompetitive conduct only if they were "predatory," which Surescripts denies. Id. 30-31. Surescripts emphasizes that the FTC's complaint did not plead the necessary elements predatory pricing. Id. at33-34. Second, Surescripts argues that, even under the framework of exclusive dealing, FTC's claim would fail under the rule of reason because FTC's complaint did adequately allege that Surescripts's loyalty programs created any anticompetitive effects. at3445. Once again,the FTC has the stronger argument both fronts.
Contracts v The offense of monopolization two elements: "(1) possession of monopoly power relevant market (2) willful acquisition or maintenance that power distinguished from growth or development consequence superior product, business acumen, historic accident." United Stаtes Grinnell Corp.,384 U.S. 563,510-71 (1966). not challenge the allegation company maintains monopoly over routing eligibility *12 markets, see Def.'s Mem. at29-30,and thus the only question whether "Surescripts illegally maintained its monopolies through exclusionary conduct," Pl.'s Opp'n at22.
For exclusionary act to anticompetitive, "it must harm the competitive process and thereby harm consumers." Microsoft Corp.,253 58 (emphasis omitted). Ilere, the FTC alleges that Surescripts's loyalty programs-and the implicit threat to charge non-exclusive customers higher prices-prevented entrance competitors e-prescribing markets. Compl. tl 58. The absence competitors, in turn, allegedly led increased prices for pharmacies PBMs lower incentive payments for EHRs. See id.'1lT 187-93. At least on face its complaint, then, the appears allege facts sufficient to state a claim under Section 2 the Sherman Act. See Iqbal, 556 U.S. at 678. argurnents contrary are unavailing. First, company emphasizes that loyalty programs entirely optional and thus do not necessarily constitute exclusive contracts. Def.'s Mem. But contract need "not contain specific agreements use the
fservices] of competitor" long "the practical effect . . . is to prevent such use." Tampa Elec Co. v. Nashville Coal Co., U.S. 320,326 (1961) (quoting United Shoe Mach. Corp. v. United States, U.S. 451,457 (1922)). alleges that the threat increased prices had the "practical effect" of preventing customers from working with other e-prescribing platforms, "since doing so would trigger the massive penalty provisions their contracts with . . and cost routing fand eligibility] customers millions dollars through increased prices or, for EHRs, decreased incentive payments." Compl. \ 129; id. I (alleging EHRs that "violate[] the exclusivity commitment" must "pay back [to Surescripts] the incentive fees historical transaction volume"). highlights that some customers, like Kroger, did manage to "multihome" and have non-exclusive relationship Surescripts, Def.'s Mem. af 31, but
T2
test whether monopolist forecloses competition "is not total foreclosure, but whether the challenged practices bar a substantial number rivals or severely restrict the market's alnbit." United States v. Dentsplv Int'1. Inc.,399 F.3d l8l, 191 (3d Cir.2005); Microsoft,253 F.3d at 70_71 (noting that the use exclusive contracts can violate $ 2 even if contracts foreclose less than 40o/o 50Yo the market share). Here, govetnment has pleaded facts demonstrating such substantial fbreclosure. See. e.s., Cornpl. TT 3, 135. next suggests that oрtional low pricing loyalty programs are unlawful only
when they constitute "predatory" pricing, which FTC not pled. Def.'s Mem. at 31. But none authorities cites stands proposition that a plaintiff rnust allege predatory pricing to succeed a Section 2 claim. For instance, Pac. Bell Tel. Co. Linkline Commc'ns. Inc., 555 U.S. 438 (2009), did not concern effectively exclusionary contracts, but price-squeezing. Id. at In Concord Boat Corn v. Rrrrns\,r¡ick Cnrn 207 F.3d 1039 (8th Cir 2000), court examined loyalty discount program that required most 80% compliance in the boat market, making the exclusive pressures created the program materially different than dynamics arising from total loyalty scheme. Id. at 1044. And NicSand - Inc. v 3M Co., (6fh Cir. 2007) (en banc), the defendant 3M was monopolist. Id. at 45t-52.
Surescripts also mischaracterizes holdings Microsoft. It quotes court's statement "offering a customer an attractive deal is hallmark competition" unless that price is "predatory," but statement concerned only Microsoft's offering Internet Explorer free of charge. Microsoft,253F3dat67-68; Def.'s Mem. relevant portion of the enbanc D.C. Circuit's decision for this case ruling Microsoft's exclusive contracts did violate Section 2 Sherman Act; the court noted that Microsoft's exclusive dealing fourteen fiftеen access providers in North America effectively cut off one two major channels by which competitors could enter the internet browser market. Microsoft, 253 F.3d 68-71. These contracts "clearly ha[d] significant effect in preserving its monopoly; they help[ed] keep usage [Microsoft's competitor] below critical level necessary for [it] any other rival to pose a real threat Microsoft's monopoly." at71.
Like the behavior at issue in Microsoft, Surescripts's alleged practice charging loyal pharmacies and PBMs less, and paying loyal EHRs greater incentives, do not need constitute predatory pricing exclusionary practices constitute illegal maintenance a nronopoly. See Grinnell, U.S. at570-71. "'Where, here, dominant supplier enters de facto exclusive dealing affangements with every customer in the market, other firms may driven out not because they cannot compete on a price basis, but because they never given an opportunity to compete . . ." ZF Meritor. LLC Eaton Corp., 696 254,28I (3d Cir. 2012).
Surescripts argues Third Circuit cases like ZF Meritor have been adopted in the D.C. Circuit (for this Court) predatory pricing still remains essential element of proving loyalty program is unlawful. Def.'s Mem. at32-33. However, although D.C. Circuit has cast doubt on the Third Circuit's decision LePase's Inc. v. 3M ,324 F .3d 141 (3rd Cir. 2003) (en banc), see FTC v. Church & Dwight Co., 665 F.3d 1372, 1316 (D.C. Cir.20l l), much that criticism was focused on the conclusion "bundling" rebates (i.e., requiring retailers camy multiple ploducts to receive certain rebates) are anticompetitive, rather than on Third Circuit's discussion exclusionary practices question here, id. at 1316-17. And even without these persuasive precedents, FTC's allegations still state a claim monopolization under D.C. Circuit's decision Microsoft. See 253 F.3d at69-71.
I4
B. Rule of Reason
Surescripts next contends that, if its loyalty contracts are viewed exclusive dеaling, FTC's claims fail under the rule of reason. Def.'s Mem. at34. Surescripts argues "the FTC bears the burden of demonstrating Surescripts'[s] alleged contractual provisions have an anticompetitive effect on competition," which in an. exclusive dealing case means that Surescripts's conduct "foreclosefd] competition substantial share of line of commerce affected." at 35 (quoting Microsoft, 253 F.3d at 69). In particular, Surescripts suggests that, because FTC concedes that both routing and eligibility two-sided markets, "the FTC must plausibly plead foreclosure of substantial share of each of those markets аs whole." Id. Surescripts insists that the FTC's complaint fails allege either anticompetitive effects or foreclosure. Id.
The Court concludes, contrary, that the met burdens. Exclusivity provisions covering about 40-50% relevant market have been found foreclose competition illegally, see Microsoft,253 at70, and Surescripts's loyalty program allegedly places 70-80% routing eligibility markets into effectively exclusive contracts, Pl.'s Opp'n at 35; Compl. nnll2-76. insists that, under Supreme Couft's recent decision Arnex, must plead facts showing "anticompetitive effects market a whole cannot focus only the effects on one side." Def.'s Mem. at37; see also id. at 35-40. But FTC's complaint does just what wants, alleging Surescripts's loyalty program "foreclosed least 70o/o each market," i.e., least70Yo both two-sided markets at issue. Compl. fl3 (emphasis added); id. lT ("But Surescripts's anticompetitive course conduct, the net price (taking account both sides network) the routing *16 transaction would be lower. Similarly, without Surescripts's loyalty contracts, the net price (taking into account both sides of the network) of the eligibility transaction would be lower.").
Surescripts argues that these statements conclusory that the does not plead sufficient fаcts survive the motion to dismiss. Def.'s Mem. at 38; Iqbal, U.S. at 6J8 ("A claim facial plausibility when plaintiff pleads factual content that allows court draw reasonable inference defendant liable for misconduct alleged."). Surescripts acknowledges, for instance, corlplaint includes an allegation that, "in routing market, the states [a cornpetitor] charges [certain] pharmacies lower prices than
Here, on the other hand, the FTC brings claim of monopolization under Section Sherman Act against Surescripts, undisputed monopolist. Regardless Surescripts's specific above-market fees below-market incentives, the central question is whether the FTC alleged that Surescripts engaged in exclusionary conduct "harmed competition, just competitor," blocking entrants market. Microsoft, 59. The FTC has done just that. See. e.s., Compl. '1i11 3, 135. 172-81
But, even assuming that Surescripts is correct its interpretation Amex, FTC still pleaded sufficient facts addressing the totality both two-sided markets. In addition to charging lower fees to pharmacies and PBMs, FTC alleges that one competitor was also willing to pay higher incentives EHRs. Id.ll 192. Thus, on both sides market, Surescripts stood to gain above-market returns, charging higher fees and paying out lower inсentives than its competitors. The also alleges that Surescripts engaged other anticompetitive conduct, like forcing key customers to terminate association competitors. Id. T I 11. alleges that this conduct hurt innovation, decreased output, lowered quality. fd. IT 196-215. response is largely factual, denying the FTC's allegations. Def.'s Mem. But such denials not adequate grounds dismissing FTC's cornplaint; rather, they speak merits the need for further factual development through discovery.
Finally, Surescripts argues the FTC failed plead sufficient facts showing that Surescripts's business practices foreclosed market cоmpetition "substantial" degree. at 4245. Surescripts observes exclusive dealing illegal only if anangement "substantially" weakens competition, Eisai. Inc. Sanofi Aventis U.S.. LLC, F.3d 394, 403-04 (3d Cir. 2016), and insists contracts, even if facially exclusive, were easily
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terminable, of short duration, and therefore presumptively lawful, see. e.g. Roland Mach. Co. v. Dresser Indus.. Inc., F.2d380, 395 (7th Cir. 1984). Def.'s Mem. at 42.
Once again, however, Surescripts's argument turns on factual dispute ill suited the pleadings stage. Compare Pl.'s Opp'n af 30-32; Compl. TT 84-86, withDef.'s Reply at 18-20. Under Supreme Court precedent, the relevant inquiry is fact intensive:
To determine substantiality given case, necessary to weigh the probable effect the contract on the relevant area of effective competition, taking into account the relative strength parties, the proportionate volume commerce involved in relation to the total volume of commerce relevant market area, and probable immediate future effects which pre-emption share the market might have effective competition therein.
Tampa Elec., 365 U.S. at Even if contracts were short term easily terminable, argues that their exclusive terms, when combined the nature two relevant markets and Surescriрts's dominant monopoly position, had the effect foreclosing large parts both markets and harming competition. Pl.'s Opp'n 31-32; cf. Microsoft, 253 F.3d 70-71 (analyzing whether Microsoft's exclusive contracts had "a signihcant effect preserving its monopoly"). Further factual development may vindicate Surescripts's position, but the FTC's cornplaint contains sufficient facts to move beyond pleadings stage.
Cot'lcl-ustoN
For all foregoing reasons, motion to dismiss will denied. A separate order will issue on date.
lsl JOHN D. BATES United States District Judge Daled: January 17.2020 lower prices and greater innovation." Id. 113. notes these loyalty contracts are especially effective excluding competition in routing eligibility markets because, given
Notes
does Surescripts," but notes "the FTC not make any allegations concerning EHRs' incentive payments from or fthe competitor] those [same] routing transactions." Def.'s Mem. at similarly concedes that the cornplaint alleges that a competitor charged one PBM lower price than Surescripts, but highlights absence of "facts showing higher net-transaction prices across that market whole." Id. This argument is wrong for two reasons. First, Surescripts reads too much Amex. That case concerned an alleged restrаint trade in violation of Section I Sherman Act, and the Supreme Court determined that plaintiffs failed to offer evidence that the price credit-card transactions was higher than would expected a competitive market because plaintiffs provided no "reliable measure Amex's transaction price profit margins." S. Ct. at2288. Court also concluded that "Amex's increased merchant fees reflect[ed] increases the value services and the cost its transactions, not ability charge above competitive price." Amex was monopolist. Id. ar 2282 ("Visa . . has 45Yo market as measured by transaction volume. Amex MasterCard trail with26.40/o and23.3o/o, respectively . . . .").