NicSand, Inc. v. 3M Company

534 (Trial 1698-99); 272, 281, 1244, Tr. at J.A. at 611- U.S.

589-90 118 S.Ct. 140 L.Ed.2d 1720-21) (Trial (expert testimony- 12 (plurality Tr. 387 opinion) (stating that stating highest functions of “the to the extent that defendant’s life interest brain,” observe, “the including ability greater require procedural would protec- ability judgments, to make the ability capital cases, tions in noncapital versus insight into have situations” the first such distinctions primarily “are relevant intoxicated). trial”). functions to be when lost Slagle’s prosecutor struck a multi- blows, against tude of foul Slagle as a Furthermore, even in circumstances defendant, person a and engaging against where case defendant “was panoply improper tactics to obtain his relatively straightforward strong,” we capital conviction. These blows “so infeci> granted habeas relief to defendant ed the trial with unfairness as to make prosecutorial alleging misconduct where resulting conviction a denial pro- of due “egregious inflammatory nature of Donnelly cess.” DeChristoforo, v. 416 arguments prose- the behavior and U.S. at 94 S.Ct. 1868. I re- would throughout trial” cutor leaves us “with verse judgment denying the district court’s ‘grave prosecuto- doubt’ as to whether the Slagle habeas relief his prosecutorial on injurious rial errors ‘had substantial misconduct claim. I respectfully dissent. effect in determining influence ” Million, jury’s Boyle verdict.’ v. 201 (6th Cir.2000) 711, 717, F.3d 718 (quoting Abrahamson, 619, 638, v.

Brecht 507 U.S. (1993)). 123 S.Ct. L.Ed.2d 353 conviction,

In pursuing Slagle’s the prose- egregious

cutor’s behavior so in-

flammatory grave that I have doubts about integrity Slagle’s and fairness of trial NICSAND, INC., Plaintiff-Appellant, and resulting conviction.

III. THE PROSECUTORIAL MIS- COMPANY, Defendant-Appellee. SLA- CONDUCT DEPRIVED

GLE OF A FAIR TRIAL No. 05-3431. “may A prosecutor prosecute with ear- United States of Appeals, Court vigor indeed, prosecu- nestness and [the — Sixth Circuit. should Berger, tor] do so.” U.S. at prosecutor “may S.Ct. 629. A strike Argued: Jan. 2006. blows,” liberty hard but “is not at to strike Aug. 8, Decided and Filed: foul ones. It prosecutor’s] is as much [the duty to refrain from improper methods produce

calculated to a wrongful conviction every

as it is to legitimate use means to

bring just about a one.” Id. The need for prosecutor respect boundary be-

tween hard and foul perhaps blows is nev- important prosecu-

er more than when the

tor seeking capital conviction. See Woodard, Adult

Ohio Parole Auth. v. Jr., Murray, Dennis E. Mur-

ARGUED: Co., L.P.A., Ohio, ray Murray Sandusky, & for Appellant. Murphy, Squire, James P. D.C., & Dempsey, Washington, Sanders for ON Appellee. BRIEF: Dennis E. Co., Jr., Murray, Murray Murray & Ohio, L.P.A., Sandusky, Appellant. for Murphy, P. Squire, James Sanders & D.C., Washington, Dempsey, Philip J. Ca- labrese, Squire, Dempsey, Sanders & Cleveland, Ohio, Appellee. for SILER, SUTTON, COOK, Before: Judges. Circuit COOK, J., opinion delivered SILER, J., court, joined. in which SUTTON, 555-61), (pp. J. delivered separate dissenting opinion. For the highly concentrated. relevant

OPINION “big box” retailers —Advance six period, COOK, Judge. Circuit (Advance Auto); Autozone; Auto Parts (NicSand), NicSand, marketer Inc. (CSK); Kmart; Corporation Auto CSK abrasives, anti- brought automotive for Boys; and Wal-Mart —accounted Pep 3M competitor, against trust action In NicSand had of retail sales. 80% (3M), that 3M’s execu- alleging Company market, im- of the wholesale a 67% share tion of exclusive market size of total wholesale plying $6 of such largest distributors four of the six million, upon NicSand’s sales based un- attempted and constituted abrasives million.1 approximately $4 § 2 of the under monopolization lawful granted court Act. district Sherman (Amend- Complaint The First Amended ground that on the to dismiss 3M’s motion Complaint) identifies barriers ed various inju- an “antitrust allege NicSand failed First, five entry suppliers. new We timely appealed. ry,” carried one “big box” retailers six sufficiently pleaded has find that NicSand retail automotive coated of DIY brand injury maintain its claims an antitrust Boys (Pep at a time. carried abrasives judgment accordingly we reverse abrasives.) Second, NicSand and both court. of the district these supplier to induce one of retail- instead of its to stock its abrasives ers

I. (1) to: supplier pur- competitor’s, anti- allegedly to the Prior Background. stock chase the retailer’s current abra- conduct, NicSand converted competitive sives; provide appropriate and install (do-it-yourself) retail DIY and marketed product; the racks for marketer’s display sandpaper, coated abrasives: automotive (3) abrasives, of complete line supply a discs, rolls, com- sanding sanding cloth each packaging for subca- appropriate with discs, polishing grinding pounding paper, abrasive; provide and of tegory coated discs, used finishing paper to be and —all first order. the retailer’s a discount on surfaces in the of automotive preparation Third, the were not con- although retailers manufac- did not painting. stay particular a tractually with bound abrasives, purchased rather ture the only chang- considered supplier, retailers them, bulk, pack- and cut the materials year, during their a suppliers once 3M is the consumer. aged them for retail Fourth, for appar- “annual line review.” Nic- manufacturing powerhouse; it was a 3M main- relevant ently period, all of the DIY re- competing supplier of only Sand’s “wrap-around program” a tained now, and coated abrasives tail automotive Wal-Mart, retailer re- under which the absence, of monopolist it is a in NicSand’s upon conditioned discounts 3M ceived a distinct eco- alleges be what NicSand coated complete line of abra- purchasing nomic market. sives, prepa- coated including abrasives and wood sur- ration of both automotive markets for and retail wholesale faces.2 are small DIY automotive abrasives retail $600,000 of abra- sold Complaint provides in- assume that NicSand The First Amended

1. through other channels. sives Auto- 1999 sales to formation on NicSand’s CSK, zone, and Auto 1997 sales to Advance wrap- allege that the 2. NicSand does Together, these to Kmart. and sales program itself constituted unlawful around We approximately $3.4 million. sales totaled (3M wrongly anticompetitive reads conduct. $369,000 profits $164,000, In of of Alleged Anticompetitive Conduct. CSK and began a of transactions 3M series the and represented discount 54% 122% § ran of 2 of alleges afoul NieSand and profits, respec- of NicSand’s sales Act, § 2. the Sherman 15 U.S.C. NieSand tively. alleges anticompetitive that 3M’s conduct 4.In 3M executed contract according large consisted of 3M discounts $1,000,000 with Autozone included dis- (exceeding typical first-order 2002). (spread and discount over 2001 counts) to DIY-retail-automotive-coated- Given NicSand’s 1999 sales to Autozone multi-year in return for abrasives retailers $2,200,000 $865,000, profits of and of dealing agreements. Though represented discount 23% and 58% NieSand devotes substantial attention to profits, respectively. NicSand’s sales and discounts, magnitude the grava-

men of Complaint the Amended is that 3M Complaint The Amended offers little monopolized attempted monopolize and more on nature exclusive con- through abrasives market exclusiv- allegations tracts. made NieSand has no provisions of the ity contracts that regarding only the contracts’ terms and accompanied. discounts portion allegations indirect as what

Between 3M secured ex- the relevant market the exclusive contracts clusive contracts DIY au- provide retail Nonetheless, possible foreclosed. tomotive coated four of Nic- abrasives to draw certain the allega- conclusions from Kmart, Auto, Sand’s customers: Advance complaint tions. The notes that sales CSK, ac- and Autozone. The discounts largest six retailers accounted for 80% companying 3M’s contracts constituted market and that retail 3M executed portion sizeable of NicSand’s annual sales leaving exclusive contracts with four— profits to each: (which subject Wal-Mart the wrap- In 3M executed contract program) Pep possible around Boys $300,000 with Kmart that included a dis- products. distributors for NicSand’s Nie- count. Given NicSand’s 1996 sales alleges Sand thus through exclu- $475,000 Kmart of profits up sive contracts locked business with $180,000, the represented discount 63% together two-thirds of the retailers that and of and profits, 167% NicSand’s sales of supplied 80% the retail market. Assum- respectively. that of each the six retailers accounted 1998, 2. In share, 3M a contract an equal executed would change (retail) with Advance Auto that included a increased 3M’s market share from $285,000 discount. Given NicSand’s (assuming to 20% 73% NieSand and $550,000 1997 sales to Advance of Auto split Pep Boys’s a evenly), 3M the business $272,000, and of profits rep- the discount change of 53%. And even with the more resented 52% and 105% of NicSand’s Pep Boys assumption conservative ac- profits, respectively. sales and of counted for twice the volume sales of 1998, others, 3. In of any 3M a contract the 3M’s market executed share $200,000 69%, with CSK that included a would have increased from to a dis- 23% count. change Given NicSand’s 1997 sales to of 46%. retailers, suggest large

NicSand’s brief to that it does. See the five contracts with other 22-23.) Rather, Appellee's wrap-around program Br. NieSand and that the with Wal- allega- provided reply simply alleged makes clear in its brief that its Mart a the context for only Reply illegality. tions concerned 3M’s exclusive Br. 11-12.

541 Pep II. only supply to left NicSand With 3M), (and that business with to share Boys “This court reviews de novo no able longer alleges it was NicSand a complaint dismissal of district court’s scale, of advantage of economies take to Rule of Civil Procedure under Federal raw of materials purchases in its either 12(b)(6).” Inc. v. Heating Cooling, Care & NicSand processes. production in its own (6th Std., Inc., 1008, 427 F.3d Am. on abrasives-relat- alleges it lost sales also Cir.2005). dis reviewing “In a motion to masks, and was as dust products, such claim, ed to we con miss for failure state in protection bankruptcy to forced seek light most fa complaint in the strue left as the departure 3M plaintiffs NicSand’s and determine vorable to largest retailers. can only undoubtedly to six supplier plaintiffs whether support no prove set facts filed the History. NicSand Litigation them relief.” claims that would entitle to De- this matter on complaint in original De Paytel City Venture Mich. Joint 2003, had 30, alleging cember (6th Cir.2002). troit, 287 F.3d monopolized attempted and unlawfully complaint states “The issue is whether “retail automo- the market for monopolize Act, assuming a claim under Sherman (J.A. 7.) market That sandpaper.” tive in allegations the factual to be true professional-grade included apparently degree dulging plaintiff to a reasonable abrasives, as the automotive as DIY well yet opportunity has not who retail- additional original complaint listed Research, Inc. v. discovery.” DM conduct beyond large the six distributors ers 53, 55 Pathologists, 170 F.3d Am. Coll. of coated DIY automotive abrasives retail Cir.1999). (1st employ a “lib Although we ” moved dismiss mentioned above. 3M ‘notice Leather system pleading,’ eral 1) that: grounds on the NicSand’s claims County Narcotics Intelli man v. Tarrant injury; allege NicSand failed Unit, 507 U.S. gence & Coordination 2) prod- allege failed relevant NicSand 122 L.Ed.2d S.Ct. 3) market; conduct uct 3M’s (1993), to make plaintiff requiring and thus lawful. pro-competitive of the claim plain “a statement short pleader is entitled showing filed the Amended In response, 8(a), relief,” ele essential Fed.R.Civ.P. 15, 2004, April which Complaint on claim “must be plaintiff s ments changed alleged product conclusory vague than alleged in more re- sandpaper” “DIY automotive “retail 12(b)(6) to survive Rule terms” order and re- abrasives” tail automotive coated Educ. Design Interior motion. Found. for CSK, Auto, (Kmart, Advance duced four Art & De Coll. v. Savannah Research of Autozone) 3M with whom the retailers and Cir.2001). (6th 521, 244 530 sign, F.3d unlawful exclusive contracts. had executed by issues raised There are two distinct complaint then moved dismiss first, has whether NicSand this appeal: be- three grounds asserted on same antitrust prohibited alleged conduct fore. NicSand, ac- laws; second, and whether 1, 2005, the District Court suffi- allegations, March suffered cording On to its The that by way of injury” motion to dismiss. granted 3M’s cient “antitrust plaintiff proper NicSand failed a conduct to be court concluded this or- issues in standing address the supported claims. We an plead der. Act. under the Sherman

542 Alleged goods

A. Conduct most sellers nonfungible of and Posner, A. services.” Richard Antitrust §Act 2 1. Sherman (2d ed.2001) (hereafter 22, Law 195-96 Act, 2 Section of the Sherman “Posner”). 2, proscribes § monopolization, 15 U.S.C. attempted monopolization, and combina The elements of a claim for at monopolize; tempted Nic- conspiracies monopolization slightly tions differ only ent, alleges monopolization and at Sand because ac often defendant tempted monopolization. quires requisite monopoly power by way practice. of gen § 2 the unlawful monopolization] “[I]t

A claim under of is [of erally required of requires proof Sherman Act two at demonstrate (1) possession monopo- tempted monopolization plaintiff elements: a must (2) market; (1) ly power prove in a relevant that the engaged defendant has maintenance, acquisition, willful or in predatory anticompetitive or conduct by anti-competitive of that or power (2) use specific a monopolize intent to exclusionary opposed (3) means dangerous probability achieving resulting “growth development or power.” monopoly Spectrum Sports, Inc. acumen, superior product, or business McQuillan, 447, 456, 506 U.S. 113 S.Ct. historic accident.” 884, 122 (emphasis L.Ed.2d 247 add ed). Co., “power component,” “danger Conwood Co. v. U.S. Tobacco 290 F.3d (6th Cir.2002) 768, ous (quoting probability 782 Ski- Aspen achieving monopoly pow er,” Highlands Aspen Skiing Corp., “normally Co. v. is through measured 595-96, 472 analysis U.S. 105 S.Ct. Ar Phillip of market share.” E. (1985)). “To Hovenkamp, L.Ed.2d 467 establish the eeda & Herbert Antitrust ¶ (2004 (hereafter monopolization plaintiff must Law Supp.) offense 807a “Anti 2004”). unfairly show that a either at- trust “specific defendant Law And the intent monopoly power.” component,” tained or maintained which is more burdensome Ass’n, v. City Hosp. “general Potters Med. Ctr. 800 than plaintiff intent” a must (6th Cir.1986). F.2d “Monopoly show in a “completed” monopolization claim, Conwood, power power consists ‘the to control at F.3d ” Conwood, prices competition,’ objectively. exclude nonetheless be discerned We “ Ctr., (quoting presume 290 F.3d at 782 Potters Med. monopolist ‘no monopolizes 574), 800 F.2d at doing’ de minimis control unconscious of what he ... is [and prices (exclusion over is insufficient to sustain a ‘[i]mproper that] exclusion Nearly every supplier claim. of a distinc- of superior efficiency) always result is ” (non-commodity) product deliberately tive has some intended.’ Id. As (quoting power “monopoly pen 602-03, over prices, power,” Skiing, thus U.S. 105 S.Ct. 2847) (alteration law, interesting the sense original).3 The Sixth degree “a properly term that connotes a of Circuit has thus said that “an attempted output over far price monopolization § control ex- occurs [under 2] when power the minimal possessed competitor, ceeds a dangerous probabili- [1] with Corp., 3. But see upon United States v. 253 not the intent behind it. of Evidence Microsoft 34, ("[I]n (D.C.Cir.2001) considering F.3d 59 monopolist intent behind the conduct aof monopolist’s whether the conduct on balance only helps is relevant to the extent it us under- competition harms is and therefore con- likely monopolist's stand the effect of the con- 2, exclusionary purposes § demned as of for duct.”). conduct, upon our focus is of that effect

543 ty of success, ^[2] engages anti-eompeti- same product.... To the extent alterna- tive practices ^[3] specific design of tive dealers are unavailable or entry into difficult, arrangements is such dealing or are, monopoly exclude to build which or impair opportunities may of rivals N. competition.” Smith v. destroy or § (6th Thus, 942, although raise costs. 2 Inc., their F.2d 954 Hosps., 703 Mich. not Cir.1983). problems presumed, they should be emerge can when becomes clear that Dealing Claims 2. Exclusive dealing has the exclusive effect of prolonging or the domi- strengthening form, an ex simplest “In its position. nant market dealing arrangement is contract clusive firm’s buyer ¶ for a manufacturer between (emphasis 2002 Antitrust Law 760b7 buyer purchasing from 3M, bidding added); LePage’s, Inc. v. 324 accord seller, any other or good (3d Cir.2003) (“Even from contracted though F.3d 157 buyer take all of its needs requiring arrangements often exclusivity are ana that manufact good from in the contracted exclusionary § conduct lyzed under such & Phillip claim.”). E. Areeda Herbert urer.”4 § 2 may be an element in a also ¶ (2d Laic 1800a Hovenkamp, Antitrust a firm dealing Exclusive enable 2002”). ed.2002) (hereafter Law “Antitrust position move into a of dominance that are dealing contracts exclusive Because output restrict allows it to competition, (“[W]here anti that restrain contracts prices. 229 raise See Posner typically them are against claims trust ... of scale in large there are economies § 1 Sherman cast as violations distribution,... effect exclusive [t]he [of contracts, § Act, 1 (proscribing 15 U.S.C. to increase the dealing arrangements] is combinations, conspiracies restraint entry, and necessary scale for new [thus] Act, trade), Clayton § 15 or 3 of the required entry and the time increase (forbidding dealing § 14 exclusive U.S.C. monopoly pric opportunity hence the substantially competition). lessens ing.”). Monopolization through exclusive treating logic exclusive Nonetheless it enables a dealing unlawful because is Act’s claims under the Sherman dealing position of dominance party to attain that monopoliza § which concerned superior “a by offering product, busi tion, accident,” is clear: acumen, Con or historic ness omitted) (citation wood, F.3d at 782 firm im- 290 upstream dominant

When its distribution costs raising rivals’ dealing on distributors poses exclusive to downstream dealers, by eliminating their access the latter are disabled from version of the markets.5 selling any competitors’ sellers/servicers); formulation, CTUnify, Inc. v. dealing thorized” latter exclusive In this Inc., (6th Networks, "requirements Fed.Appx. to as referred Nortel training Cir.2004) (challenge by contracts.” phone com- pany against equipment telecom manufactur- dealing thus claims differ 5. Exclusive training company whose services er and rival claims, allege distribution which exclusive products); its see manufacturer bundled with unlawfully dis- party has committed to Co., Chicago Tribune also Publ’ns. Paddock product through one or more tribute (7th Cir.1996) (contrast- 46-47 F.3d distributors, particu- often in “authorized” exclusive distribu- Heating & geographic See Care lar area. tion). Inc., (challenge Cooling, at 1008 F.3d against an an "unauthorized” seller/servicer one its "au- equipment manufacturer and 544 however, a complexity, monopoly is that down- the of a establishment cannot be the of necessary party purpose dealing.6 the exclusive

stream distributor —a dealing arrangement the exclusive no The reason that a series of exclusive —has suppliers in one of its helping interest dealing may contracts anticompetitive be by a monopoly erecting distributors, achieve barriers to that in agreeing to terms the contracts, entry may for lower cost rivals. A distributor’s of such fall victim to a profits goods problem. it collective action An increase with volume individual may agree distributor to an exclusive deal- distributes and the difference between the supplier contract with one but—on the price good. of each wholesale retail assumption that other distributors will a thing Thus the last distributor wants is patronize suppliers continue to other subject monopolistic supplier to be to a thus prevent supplier the first form- from (a prices that can raise cost distribu- ing a monopoly, or on the fear it that will tor) output. restrict a supplier When be the distributor does not take an contract seeks exclusive from the dis- advantage the offered discount—not de- tributor, expect we should the distributor mand a accurately discount that reflects compensate to demand terms possibility of future supraeompetitive possibility the contract will enable prices. Posner See 231. Distributors supplier monopoly. to secure a their might individual acts thus enable the [supplier] monopoly, Once achieves a upstream (or, formation of an monopoly mercy the distributor be at will his un- precisely, upstream more monopoly ca- less the his terms of contract pable enjoying monopoly profits), de- prevent the from [supplier] latter later spite having their a collective incentive not him a charging monopoly price or com- to do dealing liability so. Exclusive pro- pensate him future exactions. tects parties possi- downstream from this if But the distributor obtains such bility. terms, the [supplier] gain nothing will Whether series a of exclusive having competitors. excluded his dealing contracts has allowed supplier caveat, 230. important Posner one With attain unlawfully monopoly or maintain a acquiesce will distributors not to the estab- can only be determined reference to the of an upstream monopoly, particularities lishment of the market and the terms (in It is on this selling expenses, give protec- basis the Sherman Act reduction of context) § dealing arrangements 1 fluctuations, exclusive against price par- tion and —of per are se unlawful but are handled under advantage ticular newcomer to the according the Rule of to which important field Reason — to whom it is what know challenged practice courts examine whether capital expenditures justified —offer competition. has harmed Law Antitrust possibility predictable They of a market. ¶ Indeed, inquiry, 1820b. courts have useful, moreover, may trying be to a seller why articulated several reasons against establish foothold the counter- might dealing promote competition: contracts competitors. attacks of entrenched buyer, case In the [exclusive States, Standard Co. Oil Cal. United may supply, protec- contracts] assure afford 293, 306-07, U.S. 69 S.Ct. 93 L.Ed. against price, long-term tion rises in enable (1949) (citations omitted); accord Mena costs, planning on the basis of known In-Store, Inc., Corp. Mktg. sha v. News Am. expense storage obviate and risk of (7th Cir.2004) (''[C]ompeti 354 F.3d quantity necessary commodity for a rivalry, tion vital for the contract is a form of having fluctuating demand. From the encourage ... the antitrust laws rather which view, point dealing] seller's [exclusive suppress.''). than possible make the substantial their for DIY retail automotive abra- including market the exclusive of contracts — price the and that the exclusive di- magnitudes and the of sives contracts durations (In particular, increase they provide.7 rectly substantially allowed 3M to discounts and contracts Second, the market the that allege facts about its share. the claims action collective might attempted indicate whether acquired acquire has and to 3M the among downstream existed problem through monopoly power anticompeti- its make exclusive so as to the distributors specifically by providing tive conduct-— truly anticompetitive.) dealing purchasing discounts to several substantial however, details, necessary are not Such exchange multi-year large retailers in stage. pleading at the available and seldom arrangements. The dealing exclusive dealing an stage, pleading At the alleges dis- Complaint Amended that such general follow the obligations plaintiffs purpose served no business other counts plaintiff need requirements: § 2 products to than exclude NicSand’s (1) or acquired allege that the defendant market, the such the and that effect of acquiring dangerous probability of had costs, to was to raise NicSand’s exclusion (2) anticompet- monopoly power; executed effectively it from prevent competing contracts; and dealing itive exclusive market, eventually bring and to about the intent harm com- specific the possessed Third, allege the bankruptcy. claims Conwood, F.3d Pre- at 782. petition. monopo- specific that 3M the intent the monopoly power, requisite alleging DIY abra- lize the retail automotive coated market, must an economic allege plaintiff it undertook course market when sives discovery “show[ ] prior to need that allege claims also of conduct. The structure, of coverage power, retail automotive coated abrasives DIY suffi- dealing arrangement the exclusive pur- an market for constituted economic an inference of reduced cient create analysis. poses of antitrust An- affected market.” higher prices in the in holding ¶ that The district court erred Law 1820a. titrust viola- to claim antitrust NicSand failed Sufficiently Alleged NicSand Has [alleged] grounds the that “3M’s tion on Unlawful Conduct to no more than sur- amounts behavior entry in order mounting barriers alleged has We hold that NicSand sandpaper compete business.” § 2 Sherman proscribed conduct 165.) ac- (Memorandum, court J.A. First, makes Complaint Amended Act. argument cepted 3M’s monopoly regarding sufficient averments (in what NicSand precisely at conduct monopolization and Both the power. Complaint) Amended contended allege claims tempted monopolization already weAs currently required. the market controls almost 100% 7. The claims as follows: To succeed in requisite agreement sive power to output defined challenged prima Areeda/Hovenkamp ^[2] market.... facie make warrant agreement higher its claim unlawful plaintiff case for exclusive the inference sufficient ^[3] prices to deal must threatens Then it treatise in a ^[1] showing of exclusively articulates must also show properly reduced dealing exclu- soft, Antitrust facie ternative sources high entry tract tition show foreclosure warrant an inference given foreclosure other factors 253 F.3d at 58-59 case duration, ..., depending on the existence of Law 2002 liability barriers, under presence percentage, of distribution ¶ coverage give 1821; (articulating 2).§ significance See also or existence sufficient such absence or resale. compe- Micro- prima to a con- al- however, said, in already nowhere the Amended that ing or its conduct has caused claim Complaint prices did NicSand that exclu- wholesale to increase. Predatory pricing and commonplace prior sive contracts were are distinct law, offenses under antitrust there Complaint Amended and is 3M’s conduct. The requirement no price that increases only be alleges that annual line creat- reviews in (J.A. alleged order to survive a motion to agreements,” ed “de facto exclusive fact, In dismiss. price smaller the 59), that single and retailers carried a accompanying discounts the exclusive deal- DIY brand of retail automotive coated contracts, more might we believe at a any abrasives time but without con- that a action problem collective exists obligation tractual to do so. For all that is among retailers, because then it is less stage litigation, known at this in the 3M likely that the terms the contracts re- might ten-year have secured five— or the possibility flect of monopoly pricing in retailers, deals with for no business the future.8 may And indeed a firm act other purpose than to drive from NicSand monopolistically prices even when remain arrangements the market. Such would be stability such spite stable—if in occurs cry a far previ- NicSand’s account of falling costs. ous market norms. Finally, alleged NicSand has 3M is wrong suggest also product market with sufficient reference to in order to withstand a motion to products substitute to survive a motion to plaintiff dismiss must make allegations Queen Pizza, Inc., dismiss. 3M City cites regarding the terms or conditions of the Inc., Pizza, v. Domino’s 124 F.3d precise exclusive contracts or the fraction (3d Cir.1997) for rule that: of the wholesale market con such plaintiff Where the fails to define its only tracts foreclosed. NicSand needed proposed relevant market with reference make a short plain and statement of facts to the rule of interchangea- reasonable that, true, if support would a claim for bility demand, cross-elasticity 8(a). relief. Fed.R.Civ.P. NicSand alleges a proposed relevant market that claimed the contracts directly made clearly encompass does not all inter- 3M supplier the exclusive to four of the changeable products substitute even largest six eventually distributors all granted when factual inferences are gave 3M control of almost 100% of the favor, in plaintiffs the relevant market wholesale market. NicSand alleged also insufficient legally and a motion to beyond such contracts went what the granted. dismiss be industry previously required and had the Finding that “improperly exclud- purpose and harming competi effect of ed [from its market] numerous tion. interchangeable substitutable and abrasive Similarly, NicSand need not have finishing immediately products avail- alleged that 3M engaged predatory pric- able in the marketplace,” (Appellee’s Br. magnitude It is notable that the dis- hoped NicSand to exit (measured percentage (and counts as a Nic- assure some themselves of not discount sales) up Sand’s declined as 3M locked be one to have distributors not progressively larger share of the distribution so) done before none was Discov- available. is, likely market. That as seemed 3M more ery light would apparent shed on whether this monopoly position, attain a the downstream decline in did in discounts fact indicate the progressively distributors demanded smaller presence problem. of such a collective action discounts—perhaps they expected because abrasives, expensive. professional And 38), appro- contends that dismissal abrasives, packaged unlike DIY bulk priate.9 per opposed (up package, to 100 sheets Queen City Pizza do not read We per three ten package sheets plead- heavy a burden so establish abrasives) and are cut to fit retail acknowledged court ing stage. The Finally, sanding consumer tools. cases, market definition proper “in most Complaint points Amended out that 3M’s after a factual only can determined be recognizes website DIY retail automotive realities faced inquiry into the commercial professional coated abra- abrasives opin- Id. all that the by consumers.” And products. sives as distinct (in propose is to requires plaintiffs ion of a market “with complaint) their reference compelling 3M’s most criticism interchangeabili- rule of reasonable to the alleged market that it of NicSand’s is fails added). Because we ty.” (emphasis Id. account for of possibility supply the Complaint find that Amended NicSand’s likelihood that new sup substitution —the interchangeability, rule of refer the does (for example, pliers suppliers current of have dismissal would we conclude that abrasives) the professional will enter mar inappropriate on that basis. been for DIY in event ket abrasives the 3M, monopolist, attempts al- as a Complaint putative the Amended Specifically, output. Both prices sup coated raise or restrict leges that DIY retail automotive substitution interchangeable ply with ei- substitution and demand are not abrasives (abrasives (consumers switching products in for wood other ther wood abrasives increase) surfaces) response price to a factor into professional automotive coated of economic the ultimate definition quality, one considers the abrasives when market. & Blue Shield channels See Blue Cross price, packaging, distribution Clinic, each, 65 F.3d as the raw materials United of as well Marshfield Cir.1995). (7th if, And for Complaint 1410-11 exam requires. The Amended each judgment, summary are on a motion for ple, abrasives alleges first that automotive support in not forth facts put from abrasives NicSand does distinguishable wood for market that account waterproof glues of and in their their use substitution, supply its claims possibility abrasives of distribution channels. Wood decline, to be dismissed. We waterproof glues will have no need for because (unlike however, of uphold the dismissal Nic sanding wood surfaces of surfaces) stage on complaint pleading not at the does Sand’s sanding of automotive Queen requires City Pizza heat on this basis. generate enough paint to melt plead market “with plaintiff And automotive that a sanding surface. to the rule of reasonable inter are at automotive reference typically abrasives sold stores, and the changeability,” are 124 F.3d parts whereas wood abrasives supply substitution be possibility improvement sold at home centers. after measure dis alleges that DIY best assessed some Complaint Amended then Notably, much covery. NicSand will bear distinguishable automotive abrasives discovery on the issue of be- of the cost of professional automotive abrasives (which may include ex quality supply raw employ higher the latter substitution cause way in the analysis but little pert thus more market up materials and are 500% dismissal, allegations. Finding grounds of NicSand’s 9. other sufficiency court did not address district defendant) technicality. from the not a requests glue of document mere It is the that cements each litigation proceeds. purposes suit laws, prevents the antitrust abus- Standing B. Antitrust requirement es those laws. The standing antitrust ensures Generally litigants anti- prevent use laws Act, Clayton Section of the 15 U.S.C. competitive action and certain makes standing damages § provides to sue they will be able to recover “any person injured who shall be his under the antitrust when action laws or property anything business reason of challenged promote would tend to com- Though forbidden the antitrust laws.” petition in the economic sense. Anti- “ reading literal stat ‘[a] [antitrust trust reflect policies laws considered enough every encompass is broad to utes] regulating economic matters. The anti- directly harm can be attributed or standing trust requirement cer- makes indirectly consequences to the of an anti tain that laws used only to deal ” violation,’ the not trust Sixth Circuit has problems with the economic whose solu- “Congress clearly ed that intended tions policies these were to ef- intended Act be in of light Sherman construed fect. historically im common law rules (6th Cir.1991). 874, F.2d 949 877 posed significant right limits on the Because the antitrust laws were enacted in damages recover contract or tort.” Val protection competition, for “the of Landmark, 398, ley Prods. Co. v. 128 F.3d competitors,” Brown Shoe Co. v. United Cir.1997) (6th (quoting 403 Associated States, 294, 320, 1502, 370 82 U.S. S.Ct. 8 California, Gen. Cal Contractors Inc. v. of (1962), standing L.Ed.2d 510 questions fre- Carpenters, State Council 459 ifornia of quently brought by arise in cases com- one 519, 897, 529, U.S. 103 S.Ct. 74 L.Ed.2d petitor against example, another —for (1983)). injury 723 “The antitrust doctrine where one firm challenges merger a be- such is one constraint.” Id. rivals, tween two of its see Cargill, 479 Corp. In Brunswick v. Pueblo Bowl-O- 104, 427, 484, 107 U.S. S.Ct. 93 L.Ed.2d or Inc., Mat, Supreme Court held that to challenges practice a rival’s “unilateral” in an standing have antitrust action dealing, tying, such as preda- damages, “[p]laintiffs prove must tory pricing.

injury, say injury type which is to plaintiff Whenever the and consumers the antitrust were intended pre- laws divergent congruent rather than vent flows from that which makes interests, potential problem there is a in 477, defendants’ acts unlawful.” 429 U.S. finding injury.” If, “antitrust in 489, (1977).10 690, 50 97 S.Ct. L.Ed.2d 701 itself, Brunswick plaintiff and the limitation, purpose of this and of other competitors, defendant are plaintiff cases, standing limitations in antitrust higher gains prices from loses articulated the Sixth in HyPoint Circuit prices just opposite lower of — Technology, v. Inc. Hewlett-Packard Co.: consumers’ interest. the plaintiff When standing poor consumers, Antitrust is at the champion sue court policy. center all antitrust It especially grant law must be careful not to later, 104, Cargill, § held Clayton It Inc. v. under 16 of the Act. 479 U.S. 10. Monfort of Colorado, Inc., 113, (1986). that antitrust is also 107 S.Ct. 93 L.Ed.2d 427 required plaintiffs seeking injunctive relief

549 Servs., Inc., Energy 250 proper undercut deck F.3d relief (citing Corp., Peck v. Gen. functions of antitrust. Motors 894 F.2d (6th Cir.1990)). 844, 846 Ins., Hosp., Hosp. Inc. v. Mut. Mem’l Ball Cir.1986). (7th Inc., 1325, 1334 784 F.2d Competitor Standing for Exclusive as com potentially problematic As Dealing Claims be, standing may regularly courts petitor circumstances, injured In certain firm § 2 bring claims. competitors allow aby rival’s execution of a series of exclu- See, Image v. Kodak Co. e.g., Eastman dealing standing sive has sue Servs., 451, 112 504 U.S. S.Ct. Technical for antitrust violations. The Areeda/Ho- (assuming 119 L.Ed.2d 265 categori- rule vekamp treatise states the standing challenge competitor’s cally: rival standing “a has clear to chal- (cited in Law arrangement) Antitrust tying rival(s) lenge illegal the conduct of that is ¶ 3M, 348d3, 41); n. Inc. v. LePage’s, precisely because it com- tends exclude Cir.2003) (3d (rival’s § 2 chal F.3d 141 market,” petitors from the Antitrust Law discounts and exclusive lenge bundled ¶ 348a, and, concerning exclusive dealing arrangements); Co. Conwood claims, one manufacturer “[w]hen Co., 290 F.3d 789-91 Tobacco U.S. unlawfully agrees they with customers that Cir.2002) (rival’s (6th § challenge patronize suppliers, not rival the will rivals of displays plain of physical destruction have to Id. standing undoubted sue.” Energy products); also Indeck tiffs see ¶ justification competitor The for 348d3. Co., Energy v. 250 F.3d Servs. Consumers dealing is standing exclusive cases Cir.2000) (“[A]ntitrust (6th actions 977 dealing liability that exclusive exists for course, by marketplace of be initiated may, competitors. of It the benefit is rather plaintiff is a competitors.”). Whether the dealing that when unlawful exclusive oc- competitor many is one consumer or of curs, competitors are efficient advocates of standing. factors we consider to determine case, (or, consumers’ as this down- Those factors include: distributors’) stream interests: (1) the the causal connection between granting standing several instances [I]n to plain- violation and harm the policy. This rivals serves antitrust is harm tiff and whether that was intended true particularly when: (2) caused; of plain- to be the nature (a) in a position the rival is to detect a alleged injury including tiffs the status violation earlier than consumers are: competi- or plaintiff of as consumer or (3) market; di- tor in the relevant (b) injury large, the rival’s is while injury, or indirectness of

rectness injuries of individual consumers inquiry of whether the the related likely very to be small or the (4) are damages speculative; poten- have action consumers collective recovery complex duplicative tial suit, making cumber- problems their apportionment damages; likely. some or less existence of more direct victims of alleged antitrust violation. ¶ added). (emphasis Id. 348a As discussed above, Co., dealing liability & corrects Land Inc. v. Malone exclusive Southaven (6th Inc., parties of downstream Hyde, inability 715 F.2d 1085 Cir. for the 1983) collectively the formation prevent act (citing Associated Gen. Contractors 897). Cal., 537-49, same collec- upstream monopoly. an The 459 U.S. at 103 S.Ct. difficul- problem In- tive action well single And no factor is determinative. —as ty parties may that downstream price chose to absorb the increases prices unlawful conduct detect before likely that 3M to impose monopolist is as a -justifies standing in competitor ex- of the alleged Competitor market. stand- rise— dealing clusive cases. possibility. Allowing corrects this pursue NicSand to its claims vindicates

We conclude that dismissal legitimate interests that the downstream improper because NicSand’s claims unwilling distributors are either or unable that, as a support inference even com pursue themselves. petitor, NicSand an efficient advocate of the downstream distributors’ interests. Necessary Predicate Test already held that

We have NicSand’s sub Indeck Energy Services allegations of stantive exclusive dealing suffice to a motion survive to dismiss. 3M nonetheless contends that as the And we not adopt categorical while do Sixth Circuit has articulated the antitrust that all dealing rule such exclusive claims doctrine, standing NicSand has no support competitor standing, we hold that bring dealing its exclusive claims. 3M standing is competitor appropriate in ex points “necessary us predicate” test dealing competitor clusive cases where the in Valley Landmark, Prod. Co. v. 128 F.3d position is in to detect violation earlier (6th Cir.1997) Hodges (following than consumers or where collective action WSM, (6th Inc., Cir.1994)), 26 F.3d problems may plausibly prevent down precedent and the Energy later Indeck parties stream from bringing such claims. Co., Services v. Energy Consumers case, In 3M, (6th Cir.2000). F.3d 972 through series The Necessary Predicate Test. The court agreements that pur served no business in Valley Products that in held order pose other than to exclude NicSand from dismiss, survive a motion to antitrust market, the in succeeded raising NicSand’s “ plaintiffs must ... ‘allege illegal that the point costs to the were it was forced to antitrust necessary conduct was a predi- effect, leave the business. This a neces injury cate to their or that defendants sary though not step ultimate towards the plaintiffs only by could exclude engaging in injury dealing consumer that exclusive lia ” the antitrust violation.’ F.3d at bility designed prevent, apparent to was 39). (quoting Hodges, 26 F.3d at The to it NicSand before was the to down plaintiff in the case a soap was manufac- parties. addition, stream In inasmuch as turer historically sold logo-bearing we have held that NicSand’s substantive “guest amenities” to hotel and fran- motel allegations suggest possibility the of a col defendant, chisees of the Hospitality Fran- lective action problem among the down (HFS). Systems, chise Inc. (the HFS’s When way stream distributors that ex “Preferred Program” prevented Vendor anticompetitive), clusive could be franchisees from purchasing we believe that the amenities downstream distribu (neither from all two unlikely tors are vendors bring to a suit on their of which Products), Valley suspect Valley own. We that antagonizing 3M Products would undermine a sued. The court applied necessary distributor’s chances of the receiving predicate on discounts DIY retail test and held that Valley automo Prod- future, tive abrasives in ucts injuries harm had not suffered sufficient relationship support standing. distributor’s with 3M across antitrust The conduct an range products. alleged entire by Valley Rather than Products was not a nec- risk such consequences, essary each distributor predicate injury to its because ny] the same amenity alleged suffered would have suffered logoed sales loss of “[t]he injuries cancellation its vendor of its by Valley upon the result customers’ ter- directly from the cancel- agreement flowed mination of whether 3M regardless had ...; losses would have lation the sales conduct,” engaged in anticompetitive result of cancella- as a been suffered alleged was not a antitrust violation neces- into tion or not HFS entered whether injury. sary predicate to NicSand’s (Ap- arrangements tying with the 20.) short, Br. pellee’s In 3M maintains at 403. Id. franchisees.” the harm inflicted on because Nie- Hodges, followed in Sand exclusive contracts could Valley Products operated airport plaintiffs brought which the been about the distributors’ service and wished to conduct, shuttle and tour bus voluntary allegedly unlawful offer service between the Nashville shuttle inflict exclusive contracts did not antitrust (an airport Opryland park, amusement injury upon NicSand. center).

hotel, The defen- and convention exaggeration say It is no dants, Opryland and their of both owners formulation of the antitrust doctrine Tours, Opry Grand Old company, own tour preclude would all antitrust private suits companies from tour agreed to rent buses in challenging engage contracts to other- in for a plaintiffs’ exchange other than wise lawful conduct violate anti- companies not promise from those they precisely trust statutes because Opryland. The transport passengers significantly contracts. For this reason we then Opryland excluded owners of test in In necessary predicate limited of all other com- property their the buses Litigation, re Cardizem CD Antitrust panies. plaintiffs challenged The (6th Cir.2003). plaintiffs F.3d 896 The exclusion, agreement and the but the court purchas- indirect that case were direct and for want their claims dismissed drug ers who manufacturer injuries, held, sued standing. plaintiffs’ (Andrx) agreeing pay competitor alleg- did from the defendants’ $40 not result edly per delay to limit million competition, year unlawful effort its introduction lawful but from “defendants’ refusal generic version of one of manufactur- grant plaintiffs private access their argued drugs. ers’ The defendants Hodges, 26 F.3d at 39. As property.” contract was not a allegedly their unlawful Products, Valley court that the held necessary predicate plaintiffs injury be- in- plaintiffs had not suffered antitrust contract cause in of the Andrx the absence jury injury their could have oc- because entry. lawfully delayed have The could of an in the absence antitrust viola- curred view, rejected In its court this defense. tion.11 fact could have unilater- that Andrx “[t]he ally, bring and not to its legally, decided that because “[NicSand’s] contends manifestly profitable generic product to a out of injury arises the lawful claimed in assessing no relevance by supplier relationship ha[d] of its termination adequately alleged customers[,]” plaintiffs whether compa- its and because “[the plaintiff's ty likely access to Hodges drew earlier to limit court in from the The 11. Axis, Inc., Micafil, S.p.A. patents. F.2d case Because the the downstream firm's Cir.1989), (6th standing to lawfully which denied might limited downstream firm merger challenging a of one of firm merger, plaintiff's even absent the access patent The with a downstream holder. rivals merger did not cause the court that the held plaintiff complained that the transaction plaintiff injury. antitrust merged competition because the enti- harmed plaintiffs that the violation was the neces- held that the antitrust unlaw- injury.” sary predicate for their Id. at ful necessary predicate conduct that awas Moreover, it said: injuries.12 to their position, adopted, if [T]he defendants’ satisfy NicSand’s claims the nec undermining premise risks a basic essary predicate test it “ap because is not that, antitrust law as the district court parent complaint from the face of the that observed, instances, many in an other- actual unequivocally legal action legal e.g. wise setting price— action— opposed would have”—as [3M] could if illegal pursuant becomes it is to an injury, have—“caused even if [NicSand’s] agreement competitor. with a Under there had been no antitrust violation.” Id. view, the defendants’ such an action The complaint alleges that the exclusive injury would never cause antitrust be- agreements Kmart, Auto, induced Advance cause a defendant could have unilateral- CSK, change and Autozone to ly legally suppliers set price. the same to 3M. complaint NicSand The does Id. at 915 n. 19. “apparent” not make it that the distribu The panel did not consider itself to have tors would have switched in the absence of necessary overruled the predicate test be agreements. those complaint also al precedents— cause none of the relevant leges that on the basis of the exclusive Axis, Hodges, Valley or Products —“was a 3M, contract with Kmart forbid NicSand complaint allege dismissed for failure to “quote DIY on retail automotive coated injury based on a defendant’s (J.A. years.” abrasives” for “few claim could have caused the same omitted).) (emphasis only Not itwas committing without the alleged vio apparent complaint from the Rather, lation.” Id. at 914. claims were would have occurred absence necessary dismissed under the predi agreement, but also it would cate test “where it apparent ha[d] been unlikely have been for Kmart to take such complaint from the face of the that actual step refuse even supplier’s to hear a unequivocally legal action the de —to offer—in the absence a commitment plaintiffs fendant would have inju caused Last, that it do so. NicSand’s claims do if ry, even there had been no antitrust not fail necessary predicate added). test be violation.” Id. (emphasis Finding cause might NicSand have—or even would “nothing on the complaint face of the similarly injured by have—been ex suggested], much less as a established] lawful law, dealing agreements. clusive matter of As we held any physical there was above, ‘impenetrable’ legal sufficiently alleged impediment production Andrx’s dealing agreements sale of its FDA- 3M’s exclusive were id., approved generic product,” the court they unlawful. is the ulti- Whether were fact, 12. The court pending litigation. dismissed the defendants’ con- account of the In as noted, delayed tention that would have plaintiffs alleged Andrx its the court some that entry alleged patent infringement in the absence of the antitrust suit was a sham. Id. damages being “apparent” violation in order to avoid in a at 914. Far from it from pending patent infringement (by complaint suit injury the oth- that the same would defendant). possibility “merely er That have occurred in absence of the antitrust violation, disputed complaint raise[d] issue of fact that [could included affirmative be allegations not] resolved on a motion to Id. dismiss.” that Andrx would have entered the (and plaintiffs’ thereby It did not prevented alleged undermine standing complaint injury) because alleged did not estab- were it not for the antitrust delay entry lish that Andrx was certain to on violation. “ that ... rea- Discovery may ‘the Sixth Circuit has been the case. mate issue sonably aggressive using were of limited the antitrust agreements that show duration, anti- injury that did not an they recovery doctrine to bar where the no col- (perhaps effect because competitive injury, although asserted linked to an al- among the problem laws, action existed leged lective flows di- violation antitrust distributors), or DIY retail automotive that rectly that from conduct is not itself ” comprise a distinct coated abrasives do Energy antitrust violation.’ Indeck But NicSand’s com- Servs., economic market. (quoting Valley 250 F.3d at 976 403). should not dismissed because plaint Prods., be F.3d at Because the will not possibility there is a claims protect competition, antitrust laws be- prevail. injury cause Indeck’s not tied to an was competition, the court concluded necessary predi- conclude that the

We no claims: standing Indeck had for its require test does not dismissal of cate by harm allegedly claims. suffered [T]he NicSand’s company’s capacity Indeck in the was 3M’s final con- Energy Indeck Services. in the not as competitor marketplace, standing is that lacks ac- tention NicSand marketplace competition. defender of case of cording to the Circuit Indeck Sixth Although may, actions Services, Energy Inc. v. Consumers Ener- course, by marketplace be initiated com- (2000). Co., Indeck gy 250 F.3d 972 petitors, those actors in the economic developer “co-generation systems,” allege forum must at least that exclusion electricity and thermal generate en- which competitor marketplace large ergy for commercial industrial superior results in the elimination of a agreed with customers. Indeck had Gen- product or a lower-cost alternative. The co-generation sys- to develop eral Motors appeal presents record in this no indica- un- plants for two of tems GM’s competition tion harmed itself was preparations for their dertaken extensive act of the Conse- any defendants. Energy then ex- construction. Consumers alleged quently, damages the antitrust a contract GM be the exclu- ecuted specula- too Indeck are indirect and years five to ten power supplier sive anti- justify tive assertion of federal twenty of the two plants including GM’s — jurisdiction trust matter. over this preparing supply. Indeck had been GM an Energy offered across- Id. at that NicSand Consumers 977. 3M contends agreed if include alleged only the-board discount GM standing lacks because has plants itself, in the deal. injuries Indeck Indeck and not market as both to the alleged Energy whole, also that Consumers exe- “the of a such as elimination superior cuted similar exclusive with sev- or a alterna- product lower-cost other large enteen tive.” Id. industrial/commercial customers, which, with the together GM however, NicSand, has that 3M’s contract, represented over al- 80% the dealing agreements brought exclusive enjoin market. sued to leged Indeck prod- superior about of a the elimination agreement de- with GM was Complaint uct. asserts The Amended standing. nied mar- acquired and maintained its by offering superior necessary court not refer to the ket share service did test, com- greater variety products than its but rather focused on how predicate 56.) (J.A. It petitors. alleges had also directly brought the alleged violation from the following NicSand’s elimination injury. Indeck’s court noted about NicSand, contrast, the “selection [of abrasives] has only was 3M’s (J.A. 70.) substantially.” decreased In- competing DIY supplier of retail automo- deck, contrast, by only commodity supplied abrasives, tive alleged inju- coated and its products power energy'— and thermal ries did not single stem from the loss of a — and thus could not claim that the market downstream distributor but rather from became less diversified because Con- the accumulated effect of 3M’s contracts Energy’s allegedly sumers unlawful con- with the bulk of the parties. downstream Energy duct. And because Consumers alleges NicSand that the series of exclu- offered GM a substantial across-the-board dealing sive contracts raised NicSand’s discount, Indeek could not claim that the costs preventing taking advan- market had lost a lower-cost alternative. tage of various economies of scale and ultimately caused its business to fail. Nic- But a more fundamental feature distin injuries in Sand’s after 3M executed guishes Indeck from this case. Indeck’s (with Kmart), its first exclusive contract injuries single arose from a exclusive deal comparable were to those that formed the ing agreement a single downstream entire basis for Indeck’s suit. But Nic- GM, party, injuries whereas NicSand’s injuries diverged Sand’s from Indeck’s fol- from a agreements arose series of such lowing the series of transactions which with several distributors. Indeck had not allegedly attempted monopolize competed any to supply of the seventeen monopolized point, the market. At some other customers industrial/commercial simply single suffered not as a Energy with whom Consumers had se market, competitor in proxy but as cured exclusive contracts. See Indeck En Servs., Co., all ergy competitors, Inc. v. and thus all Energy competi- Consumers (E.D.Mich. Case No. 97-CV-10366-BC tion. need not point We decide at what 1999). injuries March Thus Indeck’s this occurred. If there is ever to be com- would have been the regardless same of petitor standing in Energy whether Consumers had executed competitor cases—if ever a can suffer an (and a single contract with GM continued injury that allows it to be an efficient compete lawfully indepen with other advocate for the interests of downstream power producers dent for contracts with parties must occur where a series of —it customers), the other seventeen or execut exclusive dealing allegedly contracts, ed a series of such unlawfully brings about the elimination of the market, “locking up” 80% of the as Indeck competitor other in a market. alleged. correctly The court emphasized We conclude that Indeck pi'ovides no that an plaintiffs injury must basis for this court to affirm the dismissal plausibly constitute —or at least be des of NicSand’s claims. injury cribable as—an to competition, and merely consequence it. Indeck Servs., Energy 250 F.3d at 977. Because III. injured merely Indeck was by the loss We hold that customer, Complaint Amended business to one it could not alleges § conduct that violates 2 of injuries claim that its stemmed from anti- Sherman Act competitive injury conduct. and antitrust suffi- Nothing about support reflected the cient to anticompetitive standing threat for NicSand’s Energy’s that Consumers allegedly Accordingly unlaw claims. we reverse judg- ful posed. conduct ment of the district court.

555 SUTTON, injury Judge, dissenting. damages” “the by Circuit suffered Nic- Sand do not “match rationale find the ma- Ordinarily, agree I would with the violation,” ing HyPoint [an antitrust] 12(b)(6)-stage the of this jority that Rule Tech., 949 F.2d 879 —but indeed flow permitting the counsels favor matter competition kind of anti proceed beyond pleading litigation to designed laws trust were to foster —it has standing plead- a stage. But antitrust is a cognizable injury. not established inquiry complaint and when ing-stage court, As this comes pres- case to the cognizable fails to claim of its terms state ents a unusual most candidate antitrust it as a we must dismiss antitrust case, with, protection. begin in- matter of law—lest the antitrust laws be- competitor volves claim one against treble-damages come sword rather than implicates another and thus re- classic shield against competition-de- remain the joinder laws protect antitrust Congress conduct meant stroying competition, competitors. See Brown standing,” them “Antitrust it bears to be. States, 294, Co. Shoe v. United 370 U.S. technicality. “is not It repeating, a mere 1502, (1962) 320, 82 8 S.Ct. L.Ed.2d 510 each suit with the glue cements (noting that the laws “con- antitrust laws, pre- purposes of antitrust protection cerned] of competi- HyPoint vents of those laws.” abuses ”). tion, not competitors Tech., Co., Inc. v. 949 Hewlett-Packard (6th Cir.1991). 874, F.2d 877 permitted When courts nonetheless competitor deploy one laws antitrust why court has frequently That is another, against typically has been required actions the dismissal usually, because larger one them — pleading stage at the due lack of stand competitor in some engaged form —has in other words the claimant’s —due See, predatory pricing illegal tying. cogniza to show that it suffered a failure e.g., Baking Utah Co. v. Pie Continental Energy injury. ble antitrust See Indeck Co., 685, 697-98, 1326, 386 S.Ct. 18 U.S. 87 Co., Energy 250 F.3d Servs. v. Consumers (1967) (predatory pricing); L.Ed.2d 406 (6th 972, Cir.2000); Valley 976 Prods. Co. States, Int’l Bus. Machs. Corp. v. United (6th Landmark, 398, 128 v. F.3d 406 Cir. 131, 701, 137-40, 298 U.S. 56 S.Ct. 80 1997); Corp., Peck v. Gen. Motors 894 tying); L.Ed. (illegal Spirit 1085 (6th Cir.1990); 844, Dry F.2d 846 v. Meth Airlines, Airlines, Inc., v. Nw. 431 Inc. (6th Ctr., Inc., odist Med. 893 F.2d 1334 (6th Cir.2005) 917, (predatory F.3d 921 Cir.1990); Apperson v. Fleet Carrier 3M, LePage’s, 324 F.3d pricing); Inc. v. (6th Cir.1989); 1344, Corp., F.2d 1352 879 (3rd Cir.2003) 141, (illegal 155 Bell tying); NTS, Inc., Truckstop, Inc. v. Tennessean 1123, 660 Corp., v. Cherokee Aviation F.2d (6th 86, Cir.1989); Axis, S.p.A. 875 90 F.2d (6th Cir.1981) (illegal tying). 1125 But (6th Inc., 1105, Micafil, 870 F.2d (the competitor) here NicSand smaller Cir.1989); Southaven Land v. Malone Co. engaged any concedes that 3M has not (6th Inc., Hyde, & 715 F.2d no predatory pricing form of and makes Cir.1983); Mich., Inc. v. see also N.W.S. any illegal allegations tying. about form of Co., Fed.Appx. Gen. & Liquor Wine (6th Cir.2003); still, Stranger “monopoliza- Park Ave. Radiol NicSand’s Assocs., ogy Sys., damages P.C. claim for its v. Methodist Health tion” seeks treble 98-5668, 1045098, *3, No. 1999 loss of corner on this market and its loss 1999 WL (6th on sales auto- profit margins LEXIS at *8-9 Cir. of 40-50% U.S.App. 1999). instance, According to alie- sandpaper. Nov. In this because motive to gations complaint, according amended 3M. Yet NicSand’s amended NicSand’s do-it-yourself the retail market for auto- complaint, exclusivity the retailers made pri- sandpaper in 1997 consisted motive preconditions doing one of the for business marily large retailers-—-Advanced six new supplier. complaint says with a KMart, Auto, Autozone, CSK, Boys Pep (1) to large carry that the retailers choose up and made 80% of Wal-Mart —which just sandpaper one brand of automotive sandpaper. retail market for the And (2) consumers, re-negotiate for to sale large-retailer to this market wholesalers just year, these one-brand contracts once a just players consisted of two (3) —NicSand require supplier purchase a new to (and years and 3M. In 1997 for several existing supply retailer’s of automotive that), sandpap- before Wal-Mart sold 3M (4) supplier a sandpaper, require new to er, Pep Boys sold and 3M sand- NicSand provide display equip- racks and other paper, large and the four other retailers ment, require pro- new supplier al- sandpaper. sold Before 3M’s NicSand a full sandpaper duce line of automotive misconduct, acknowledges leged NicSand (6) require supplier provide a new and that it controlled 67% of entire market discount on the retailer’s Nic- first order. sandpaper approximately and sold its complied Sand course with these re- cost. 40-50% over quirements obtaining supply busi- 2000, 3M into Between 1997 and entered complied it held in ness 3M with supply sandpaper contracts to automotive in winning them some of that business Auto, Autozone, to Advanced CSK If away. supplier retailers have made ex- prices ranging KMart did so at clusivity entry, a barrier cannot one 10% to over But 30% NicSand’s costs. claim bring against antitrust another nothing sequence sug- about events precondi- for supplier complying with that gests an antitrust violation. As to the way, tion. Put another NicSand did not market garnered share 3M over these insisting right sue 3M had years, hardly “it takes one to know one” is space; share shelf it sued because it an accredited hallmark of antitrust liabili- space just wanted that all shelf to itself — ty particularly apparent when NicSand’s — as it had it in This precisely problem solution is not to this to encour- competi- kind of all-for-one-and-all-for-one entry age suppliers of other to this tor claim that do not the antitrust laws lopsided market but 67% preserve protect. discounting, As to share. 3M’s right NicSand of course has no right being There no under the antitrust —under preserve no less—to 40-50% laws preserve laws NicSand to a 67% mar- (so margins product far on share, being preserve no right ket there concerned) allegations are does not take no margins, being imper- its 40-50% there any ingenuity fairly One can make. discounting predatory missible other doubt R & the size NicSand’s 3M’s right there pricing being 3M and no D departments for sandpaper. automotive prohibit entering 3M from into exclusive contracts, picks up NicSand arrow argue discounting

Unable to that 3M’s (and length con- left—the of 3M’s exclusive anything legitimate amounted to then, decries, What is not tracts. NicSand long-overdue) competition, Nic- apparently so much that 3M entered into exclusive Sand on the fact that 3M focuses entered four but that large into the four these retailers exclusive contracts with year. retailers that switched from to it than one NicSand did so more matter, ambiguities competitor, undoubtedly As an initial several As injured by these It of a com- was contracts. last remnant tenable cloud this lost, business that was and it would not be How these exclusive con- long are plaint: able win business back for three to them-—-the re- tracts? And who demanded years. five But to a motion to survive complaint says or 3M? All that the tailers dismiss, not only NicSand had “to show they years.” will It is that last “several cause,” injury-in-fact proximate and but amounts says whether that to two never also ... allege injury.” had “to antitrust five, years or three to whether each three Louisiana v. Hoechst Drug Wholesale Co. four contracts has the same term of the (In Roussel, Marion Inc. CD re Cardizem provisions the and what termination (6th 896, Litig.), 332 F.3d Antitrust 909-10 then, under each contract. Even Cir.2003). “injury, causally An although allegation supporting “several factual violation, related to an antitrust neverthe- ap- that NicSand years” premise is qualify injury’ less will not as ‘antitrust large one retailers proached anticompeti- unless it attributable to is (KMart), and it that “it be a said would aspect practice scrutiny, tive of the under would be years again few before NicSand it since inimical to antitrust laws to is on quote” sandpap- the retailer allowed award for from damages stemming losses complains it er. JA NicSand competition.” continued Atl. Co. Richfield ambiguity dis- cannot resolve this without Co., Petroleum 495 U.S. United States how it covery, explains never deter- 334, 110 S.Ct. 109 L.Ed.2d 333 in prices paid mined the the retailers 3M (1990) (internal quotation marks and (as why large or retailers these deals omitted). brackets 3M) not opposed would disclose in- While exclusive in some contracts hopes encourag- these terms of deals may impermissible stances create barriers still better terms. ing NicSand offer for to a and entrants new complaint in the everything Given else monopoly permit supplier charge showing that retailers held the large has not can- prices, NicSand claimed—and market, power in this it makes bargaining these tenably not claim-—-that it suffered that the perfect sense assume retailers effects. econom- anticompetitive NicSand’s years” either insisted on the “several injuries ic did not from anti- plainly result they or that at least welcomed them. terms high entry injuries trust in the nature of why not: having paid prices And NicSand market. after barriers to the Before NicSand, margins for generating 40-50% market, all, NicSand controlled 67% of why the imagine one can well retailers entry— existing barriers to used in far eager prices be to lock better would annual contracts and exclusive shelf just years for rather than with 3M several its lock the market. space preserve on —to course, retailers one. Of if the demanded competed From when term, any or welcomed this claim would large four and won the contracts with the them, NicSand, brought against to be not 3M. by formerly supplied retailers But if we considerable give entry even NicSand the barriers to caused complaint by existed, as- leeway reading gradually its still were — suming including that 3M insisted on the contracts from de enhanced as went by assuming years” in the to a term contracts facto annual term “several however, this, all of years” years— Through three to five term. “several last critical was cognizable point that still does not establish NicSand entrant; market lead- it was the injury. potential er. Yet offers no explanation NicSand NicSand’s also does not stem alleged monopolization why 3M’s competed it could not have for “sever- For market. most of the time (in NicSand years” why al term view of contracts business, losing it still controlled a high margins) it could not have won majority or at plurality least a of the mar- those dis- matching 3M’s alleges ket. NicSand never it suf- leader, counts. As the market monopoly prices imposed by fered from out, looking was on the inside any 3M or from other underhanded mo- company whatever not to reason chose nopolist tactic. appears While NicSand to compete for these contracts. with 3M complain about the discounts 3M of- alleged entry This thus did barrier fered, allege it does not that 3M was sell- (then cost, not exist when came to 3M KMart ing below and the numbers that Nic- customer) NicSand’s with “several Sand itself its offers demonstrate that the prices comfortably 3M offered were in over years” offer 1997. Nor did it exist when NicSand’s costs. While NicSand’s losses 3M came to Auto in CSK Advance propelled have 3M into a dominant in And when NicSand position, market its does not corre- only big remaining, one of the box retailers any spond allegedly anticompetitive ef- still it controlled over 40% of market the market, the fect on rather a truly due to the sheer size of its business competitive one. Even if 3M were to be- successfully Autozone. Yet 3M com still gin charging higher prices (presumably at peted for the contract. NicSand While contract), the end the years” “several it eventually bankruptcy declared in it prices is hard believe that these would (and explanation offers no no alle makes exceed the profit margins 40-50% gations) any regarding efforts before then enjoyed NicSand its during market domi- (which recoup from the business KMart nance. 1997) in entered the 3M contract or from Any about appropriate doubt resolu- (which CSK or Advance Auto entered case, me, tion of this it seems to can be 1998). in contracts Nor size does 3M’s by Energy laid to rest Indeck Services v. make a disposition difference (6th Co., Energy Consumers 250 F.3d 972 allegations. these Corp. See Brunswick Cir.2000). (In- energy There an supplier Bowl-O-Mat, Inc., Pueblo 429 U.S. deck) (Consum- alleged competitor that a 487-88, 97 S.Ct. 50 L.Ed.2d 701 Energy) ers violated by the antitrust laws (“Yet respondents’ injury ... no re bears signing exclusive supply contract with lationship competi to the size of ... period General Motors for a of five to ten tor!;]. Respondents would have suffered years. Id. 975. The contract came on the identical compensable no in loss—but the heels similar contracts with “17 jury acquired ... centers instead —had large other custom- industrial/commercial purchased by pocket parents been shallow ers,” through all of which Consumers En- Thus, .... respondents’ injury not of was ergy in excluding competition “succeeded type that the statute was intended percent from over 80 Relevant At forestall.”) (internal quotation omit marks Risk Market.” Id. Central to the resolu- ted). end, In simply NicSand has not case, one, tion of that as to this was that establishing facts that the “several only “the harm allegedly suffered In- years” term contracts created in company’s capacity deck was as a market-entry cog barriers caused it competitor marketplace, in the not as a injury. nizable antitrust of marketplace competition.” defender Id. indication,” competition, resulted “no has been There at 977. single competitor as a simply “suffered competition “that emphasized, the court market, for all com- proxy but as a in the the defen- any act of harmed itself competition.” thus for all petitors, and dam- the antitrust Consequently, dants. But this seems to invert Maj. Op. at 554. indirect and are too alleged by Indeck ages of the two the relative virtues vices of federal justify assertion speculative originally patterns. fact While NicSand matter.” over this jurisdiction retailers of the contracts with the held all able to establish Id. Even if Indeck “were competition, lost them to question relevant from the preemption contract and single lost out on a Indeck added, asserts,” “it has the court in a market alleged that it found itself injured such acts allege how failed firm controlled single dominant where of the dis- light especially competition, with exclusive 80% of the market customers, in to the rates offered counted major years with all of of 5 to con- the fact that light of customers. If and commercial industrial duration, light and in limited tracts were of entry barri- harm to the market is the free to customers were fact that the of the contracts,” it by “exclusive ers established of at the conclusion [providers] seek other Indeck, NicSand, that makes is not Id. at 977-78. the contracts.” competition in proxy better Indeck, seem, the harder was it would competi- than harm to a market rather a Energy controlled case. Consumers to com- opportunity had the tor. NicSand (80%) market of the percentage larger contracts whereas for each of the pete (Recall did not that 3M does. than 3M opportunity had that because Indeck never market be- large-retail all of the control None- existing contracts. of the exclusive NicSand shelf-space with cause it shared Indeck in that there theless, concluded we stores, has not and NicSand Boys at Pep In- competition harm to because was no any of the 20% supplies that 3M alleged allege how exclusive [the “failed to deck large by the market not controlled injured espe- competition, have contracts] retailers.) entered Energy Consumers of- the discounted rates cially light in (5-10 years) contracts longer into exclusive customers, fact light in of the fered to the (“several And Consum- years”). than 3M of limited contracts were that the exclusive dominant not unseat Energy did ers duration, fact that the light in (like did) a hindered leader 3M but market [provid- free to seek other customers were Indeck was market entrant. potential the contracts.” at the conclusion of ers] energy, as it supplier of hardly a dominant our deci- at 977-78. We rested 250 F.3d (recycling services cogeneration provided grounds and these grounds, these sion on energy), which di- to create factory waste NicSand, any- if here —with control us need for traditional minish a customer’s com- compelling having the less thing, energy. supply such rather than energy re- dealer is one exclusive plaint. When (far Indeck, short, more akin more in was dealer, exclusive by another placed akin) than NicSand. a market entrant not state competition does victim of the Indeck can Hovencamp, See Herbert majority injury. that antitrust The maintains Analysis Antitrust Law: an Antitrust ground that to- distinguished on the be 11 Anti- Application, and Their Principles a series of day’s case involves ¶ 1823(b) (2005) (“Clearly a not to several trust Law opposed with several retailers the exclusive result, injury is of antitrust As a victim one retailer. contracts with relation- whose business submits, dealing partner harm while Indeck’s majority in of a olist ship supplier “justifies competitor was terminated favor different stand- — dealing partner.”). in Id. at exclusive exclusive cases.” majority The next maintains that Indeck here, however, What we have is not a distinguished ground can be on the problem” “collective action but collective- dealing arrangements 3M’s exclusive have If sanity. say action all that one can about superior product, noting eliminated a a supplier has offered lower allegedly provides better vari- prices (though predatory prices) not to a ety products and better service than retailers, series of the existing Indeck, true, 3M. it is noted monopolist prices, refuses match those by marketplace competitors actions “must questions retailer would have far more allege at least that exclusion of the com- refusing, accepting, answer for than for petitor in marketplace results power this better deal. entities superior or a product elimination of low- this market the terms of NicSand’s develop- er-cost alternative” because these complaint suppliers were but the competition ments show “that might itself retailers. It was these retailers after all harmed act the defen- an[] initially exclusivity who demanded But dants.” 250 F.3d at 977. the court sandpaper, only for automotive re- rejected still though Indeck’s claim even viewing single choice of supplier their the company competi- that its year. they signed once That now tor’s conduct caused the market to become longer agreements for much bet- provided less because Indeck diversified prices ter not does not establish a sources of power,” “alternative electrical market failure shows the retailers’ bar- namely power, thermal whereas its com- work, gaining authority say at nothing petitor supplied only traditional electrical their adherence to duties to consumers power. Id. at 975. suggests, As Indeck Why and shareholders. not enter a multi- then, diversity of products by itself will not year a steep contract for on discount sustain a claim. NicSand its own ad- prices charging? that NicSand was That not providing mission was a lower-cost al- helps the retailers and bodes well for con- ternative. And the claim unelaborated Indeck, sumers to See 250 boot. F.3d at provided better service to (“No allegation complaint indi- allegation the retailer' —an that could be in any cates manner how [the whatsoever case, in any made even involving pure one itself was how retailer] harmed or other commodities—does not alone demonstrate by agreeing suffered ex- [retailers] [an that “competition itself harmed.” was agreement with a clusive] lower bidder for Indeck, Even majority aside [product].”). such maintains that “a series of exclusive deal- All say potential of this not to no may is anticompetitive” be be- competitor “distributors, may bring an antitrust claim cause the in agreeing to the contracts, dealing. 3M terms of such fall victim Should use its problem.” Maj. Op. collective action exclusive contracts and current market view, In 544. action dominance in the future to prob- its collective unrea establish accept higher entry, lem'—-that no retailer will sonable a potential barriers com prices supplier petitor keep might legitimate one order to have a competition supply in the claim. market when all See Standard Fashion Co. v. Ma Co., grane-Houston accepting other retailers are lower U.S. S.Ct. prices emergent potentially monop- (finding from a 66 L.Ed. 653 an anti- bring majority seeing market this case. The these where a dominant trust violation differently, issues I dissent. respectfully contracts with retail- used exclusive power excessively high barriers to create ers to entrants). But that does

prospective market leader entrenched

mean complain alleged about barriers to en-

can through imposed legitimate that were

try conspicuous result

competition most —the loss 40-50%

of which NicSand’s margins, apparently which it needed COOK; Wayne In Kenneth Re: to say in business. is this stay Nor Cook, Melissa Debtors. competitiveness of the market future to impose if chooses protection lacks Rogan, Appellant, J. James Ag- monopolist prices down road. standing to retailers would have grieved if that damages for treble occurred. sue One, Association, Bank National (“[A]s Indeck, 250 at 977 F.3d See Appellee. direct victim the antitrust viola- No. 05-6613. regard, in this could [the retailer]

tion action its own cause of should prosecute Appeals, United States Court of supplier] inappro- the actions of [the deem Circuit. Sixth priate.”). Argued: July 2006. But, point, litigation at this to allow this Filed: Aug. Decided and one monopolist to continue to allow competitor seizing sue goods. for its In

position charging less

Indeck, we record in “[t]he concluded appeal presents no indication that by any itself harmed act

competition Consequently,

of the defendants. the anti- damages alleged

trust Indeck are too speculative justify

indirect and assertion jurisdiction

of federal antitrust over this

matter.” F.3d same advantage

true here. NicSand took

very exclusivity same it now attacks to made it

charge prices that vulnerable If place.

3M’s offers the first and when same, expose it will itself

3M does (much NicSand) competition like

either legitimate complaint from

or to a competitors. But un-

retailers or excluded then, rightly as the court con-

til district

cluded, there no antitrust has been standing to

and NicSand has no antitrust

Case Details

Case Name: NicSand, Inc. v. 3M Company

Court Name: Court of Appeals for the Sixth Circuit

Date Published: Aug 8, 2006

Citation: 457 F.3d 534

Docket Number: 05-3431

Court Abbreviation: 6th Cir.