*1 DICKSON, Mark H. Plaintiff-

Appellant,

Carey Ebert, Bankruptcy D. Trustee Gravity, Inc., Trustee-

Appellant, Loop N, Plaintiff, West CORPORATION;

MICROSOFT Com- Computer

paq Corporation; Dell

Computer; Nec, Packard Bell Incor-

porated, Defendants-Appellees.

No. 01-2458. Appeals,

United States Court of

Fourth Circuit.

Argued June

Decided Oct.

Francisco, California, Dell; Appellee for Coston, Saad, D. L. William Martin Vena- L.L.P., ble, Civiletti, Baetjer, Howard & D.C., Compaq; Washington, Appellee for Foerster, Busey, Brian Morrison & G. L.L.P., McLean, A. Virginia; Penelope Foerster, Preovolos, Morrison & San Francisco, California, Pack- Appellee for ard Bell. GREGORY,

Before WILLIAMS MICHAEL, JR., Judges, Circuit Judge Senior United District for States Virginia, sitting the Western District of designation. by published opinion. Judge

Affirmed Kellogg, Kellogg, ARGUED: Michael K. majority opinion, WILLIAMS wrote Huber, Hansen, Evans, P.L.L.C., Todd & joined. Judge which Senior MICHAEL D.C., Washington, Appellants. David Judge dissenting GREGORY wrote a Tulchin, Cromwell, Bruce Sullivan & New opinion. York, York; Smith, Paul New M. Jenner Block, L.L.C., D.C., Washington, & OPINION Hansen, BRIEF: Mark

Appellees. ON C. *6 WILLIAMS, Judge. Circuit Benz, Attaway, Steven F. K. Kel- Scott Huber, Hansen, Evans, logg, & Todd Ebert, Carey Mark H. Dickson and D. P.L.L.C., D.C.; Washington, Stephen R. Inc., Gravity, trustee in bankruptcy for Leftwich, Berry, Gregory J. Daniel Ba- (collectively, Gravity) appeal the district ruch, Leftwich, D.C.; Berry Washington, & court’s under dismissal Federal Rule of Roach, Nix, Roach, Nelson Patterson & 12(b)(6) Gravity’s Civil Procedure con- Texas, Daingerfield, Appellants. Daryl against sumer class action claims Microsoft Libow, Matelis, A. Joseph J. Sullivan & Corporation and three original equipment Cromwell, York, York; New New Thomas (OEMs)' Compaq Comput- manufacturers — Burt, Wallis, W. Richard J. Steven J. Corporation (Compaq), Computer er Dell Aeschbacher, Corporation, Microsoft Red- (Dell), Electronics, Corporation PB and mond, F. Washington; Brockmey- Michael (PB) (collectively, Inc. the OEM Defen- er, Wolfe, Piper, Marbury, Rudnick & dants)' the United States District —in L.L.P., Baltimore, Maryland; Charles B. Maryland. Court for the District of For McCracken, Casper, Montgomery, Walker below, the reasons set forth we affirm. Rhoads, L.L.P., & Philadelphia, Pennsyl- vania; Berman, Berman, Hagens Steve W. I. L.L.P., Seattle, Washington, for Appellee Podolsky, February Microsoft. R. In Susan Jenner & filed Block, L.L.C., D.C.; Washington, this action in Jerold S. the United States District Steiner, Columbia, Solovy, alleg Barbara S. Jenner & for the District of Court Block, L.L.C., Illinois; Chicago, ing “hub-and-spoke” conspiracy Samuel R. between Miller, Kahn, L.L.P., Folger, Levin & Microsoft and the Defendants to re- San OEM trade, (IE), strain in violation Explorer Microsoft’s Internet brow- Act, software, Sherman and a to maintain ser and other application soft- ware alleged monopolies1 Microsoft’s in the sale with Microsoft’s operating software; (4) operating systems,2 word and the inclusion of processing, long-term distribu- software, contracts, tion spreadsheet exclusive dealing violation distribu- 2§ tion proposed arrangements, per-processor the Sherman Act.3 The li- cense class action fees.4 separate consists of two classes. The first composed class is In exchange for agreeing to provi- these purchasers, “United States Octo- between sions, the OEM Defendants allegedly re- present, ber 1993 and the of Microsoft benefits, ceived various including discounts or

Windows MS DOS software operating and “greater cooperation software from ... and sold personal installed com- product Microsoft in development.” Grav- puters compatible with Intel x86/Pentium ity, Inc. v. Corp., 127 F.Supp.2d Microsoft purchased directly architecture from Com- 728, (D.Md.2001); 732 n. 5 see also United (J.A. Dell, 103.) paq, or at [PB].” The States v. Corp., 84 F.Supp.2d Microsoft composed second class is of “United States (D.D.C.1999) (stating that Compaq purchasers, between October 1993 and several enjoyed other OEMs “early access present, of Microsoft word processing code”). source Windows Gravity also software Microsoft spreadsheet and/or alleges the agreements benefitted software installed personal and sold with OEM by Defendants allowing them to sell computers compatible with Intel x86/Penti- computer more hardware than they would um purchased architecture directly from have sold if relevant software markets (J.A. Dell, 103.) Compaq, [PB].” competitive were by ensuring OEM Defendants would not be undercut Gravity alleges that the OEM Defen- offering rivals either comparable hard- dants and Microsoft violated Sherman ware with lower-priced software or compa- byAct entering licensing agreements into rable without hardware software. following anticompetitive provi- (1) prohibition sions: against removing claims the restrictive licens- icons, folders, or menu Start entries from ing agreements were predicated, at least the Windows desktop; a prohibition in part, perceived on the threat from *7 against modifying the initial Windows boot emerging platforms. “middle-ware” Grav- sequence; the integration ity’s of Internet is that theory platforms middleware Supreme monopoly pow- 1.The Court Operating systems defines 2. platforms function as for prices applications, er as software "the to control or exclude such as word process- ing spreadsheet programs. and competition.” United States v. du Pont de E.I. Nemours & Gravity 3. also asserted a class claim action 994, 1264(1956). 100 L.Ed. precisely, "More against individually monopoliza- Microsoft for monopolist a a profitably firm is if it can raise management tion litigation sup- case prices substantially above the competitive lev- software, port Gravity voluntarily but has dis- el.” Corp., States v. United Microsoft prejudice. missed claim this with (D.C.Cir.2001) Phillip F.3d (citing 2A E. & Per-processor Areeda Herbert Hovenkamp, royalties Antitrust license fees are ¶ (1995)). requires Microsoft Law at 85 the OEM As the Circuit Defendants D.C. noted, pay personal computers pur- that are "merely sold possessing monopoly power is licensing agreement containing suant to violation,” not itself an antitrust but “it is "particular microprocessor type.” United necessary monopoli- element of a [Section 2] Corp, States v. 1995 WL at charge.” zation Microsoft Id. (D.D.C. 1995). Aug.21, *2 Defendants Microsoft and OEM feasibly replace operating could most soft- the First Amended Com- allowing developers to moved to dismiss by functions ware (FAC). were those motions interfacing plaint with middle- While programs write submission, the Panel on under Judicial system.5 operating ware rather than the transferred the ac- Litigation Multidistrict Corp., United States Microsoft (D.C.Cir.2001). to the United States District Court tion The D.C. Circuit it Maryland, where was the District threat of middleware explained has approximately sixty-four coordinated monopoly to Microsoft’s platforms against Microsoft. other antitrust actions systems market follows: operating The antitrust actions were consoli- other If a consumer could have access to Gravity’s action. single dated into a class applications regardless he desired — complaint was not consolidated these system simply he operating uses— only complaint it was the actions because by browser on his installing particular alleging against claims OEMs as defen- longer then he would no feel computer, Corp. Antitrust dants. In re Microsoft Windows order to compelled select F.Supp.2d 704 & n. Litig., applications; those he have access to (D.Md.2001). system could other operating select In court dis January the district solely upon its than Windows based failure to Gravity’s missed FAC for state words, In quality price. other dismissal, Gravity Following claim. this operating systems market for would be leave to file a Amended moved for Second competitive. (SAC). SAC, Gravity In Complaint Gravity at that Micro- alleges Id. also separate conspiracies two vertical challenges competing has from soft faced Compaq Dell and Microsoft and between software, operating such as DR DOS. PB Gravity and Microsoft.6 did not name alle repeated as a defendant.7 its licensing on trade in the restraints gations anticompetitive conduct and in agreements allegedly have denied the class licensing cluded a claim that Microsoft’s competitive members the choice of soft- the distri agreements “bundl[ed] t[ied] supra- have products ware resulted middleware, of Microsoft’s the In bution competitive operat- for Microsoft’s prices browser, Explorer ternet with Microsoft’s ing system application software. (J.A. software.” operating Windows allege any conspiracy does not be- 465.) The district court denied leave to tween Microsoft and the OEM Defendants ground futility, file the on the SAC price to set the resale of the software. also failed to concluding the SAC Instead, overcharges were claims upon a claim which relief could be state passed on to the consumers the OEM *8 granted. pur- Defendants when the consumers (PCs) personal computers appeal, Gravity from the contends that both chased On § 1 complaints allege proper claims under OEM Defendants. separate Netscape Navigator program- allege and the Java 7. did not ming language examples of middleware between Microsoft and PB in the SAC be- products multiple sys- operating written plaintiffs purchased none of the named cause tems. 5.) (Appellant’s a PC PB. Br. at 20 n. from 6. For a discussion of the distinction between "hub-and-spoke” conspiracy separate conspiracies, vertical see at 202-03. infra § 2 Act. also who entered into such in agreements of Sherman in

argues ap that the district court erred aggregate rather than two or three agree- rule plying purchaser the indirect of Illi in ments isolation. Specifically, the D.C. Illinois, nois Brick Co. U.S. highlighted Circuit prohibitions (1977), “(1) 52 L.Ed.2d 707 to fore- against: icons, removing any desktop damages. address compensatory folders, (2) close We entries; or ‘Start’ menu alter- argument each in turn. ing the initial sequence; boot oth- altering appearance erwise of the Win-

II. desktop.”9 dows Id. at 61. It affirmed turning Before our consideration of the district court’s conclusion that Micro- error, Gravity’s claims of a brief overview soft used the restrictions in the licensing injunc- public enforcement action for agreements predominance to ensure the by the federal brought govern- tive relief market, IE in the browser thereby gaining against ment nineteen states Microsoft market share in the browser market for in the District Court for the United States purpose maintaining Microsoft’s mo- District of Columbia is warranted.8 See nopoly in operating systems market.10 Corp., United States v. Microsoft Only the third restriction held to was have (D.C.Cir.2001). § In analyzing justified by been pro- Microsoft’s need to Microsoft, the against claim D.C. Circuit tect copyrighted its work. Id. at 63. The upheld finding the district court’s that Mi- D.C. Circuit held that the first two restric- monopoly power crosoft has the market “represent tions uses of mar- Microsoft’s for operating system software for Intel- ket protect monopoly, its unre- software, compatible PCs with its Windows deemed any legitimate justification” gained which has more than 95% market and, therefore, that imposition Microsoft’s id. at 51-58. It further af- share. See of these restrictions violated 2 of the finding firmed the district court’s that Mi- Sherman Act. Id. at 64. “engag[ed] exclusionary crosoft had [or anticompetitive] distinguished conduct ‘as III. growth development

from aas conse- mind, quence superior product, background this business acu- With ” men, purpose or historic accident’ for the we evaluate the district court’s dismissal of maintaining monopoly power Gravity’s reviewing its When complaint. operating systems grant market. Id. at 58. In district a motion court’s to dismiss detailing anti-competitive complaint pursuant Microsoft’s con- Sherman Act to Fed duct, 12(b)(6), primarily the D.C. Circuit on eral relied Rule Civil Procedure “we licensing agreements underlying allegations the same must determine whether cover Gravity’s complaint, although ing comprise all the elements that focused dealings theory Microsoft’s with all of the OEMs for relief have been stated as re- Although Gravity's complaint pri- automatically adding was filed and from icons or fold- public shape sup- toor resolution of the enforcement ers different in size or from those n action, similar, predicate plied by the factual and on Microsoft. appeal, Gravity upon many relies of the D.C. 10.For a detailed discussion of the relation- general findings support Circuit’s for its ship operating between the browser and the propositions. *9 systems anticompetitive markets and the ef- example, licensing agreements pro- 9. For fect of the restrictions on the OEMs’ license browsers, causing any ability promote hibited OEMs from user interface rival see Micro- soft, desktop other than the Windows to launch 253 F.3d at 59-64. 202 1, under section whose arising & claim as one Co. v. Miller

quired.” Estate Constr. 213, stringent.” Co., proof elements of are not 14 220 Holding Smith Cir.1994) (internal the district court’s disagree Id. We marks omit- quotation § ted) A 1 violation reasoning regard. this Employing v. (citing United States 186, 189, § under 2 ... Ass’n, legally 74 distinct from that “is Plasterers 347 U.S. (1954)); 452, though overlap the two sections 618 Mun. 98 L.Ed. S.Ct. Co., § 2 a under is monopoly sense that a Bd. Albertville v. Ala. Power Utils. (“A (11th Cir.1991) § under 1.” 1493, species of trade restraint 1501

934 F.2d Co., Socony-Vacuum v. Oil facts so that United States plead must sufficient 811, 150, 59, 224 n. 60 84 antitrust viola- 310 U.S. S.Ct. each element of the (1940). identified.”). “Moreover, prac The same kind of the L.Ed. 1129 tion can be tices, therefore, may that evidence violations must be stated terms allegations Md. & Milk Pro. Ass’n v. conclusory.” Estate both. See Va. vague are neither nor States, “Although United 362 U.S. 80 S.Ct. 14 F.3d at 220-21. Constr. (1960) (“[Sections 847, 4 L.Ed.2d plaintiffs [1 can 880 we will assume kind they allege closely overlap, in their and the same prove 2] the facts that practices may ... show violations proper predatory ‘it is not to assume complaint, [both].”); Jeffrey E. Thomas & ... have violated the Sullivan the defendants Harrison, Understanding Antitrust and ways that have not been L. antitrust laws ” 6.08, § Implications its Economic alleged.’ (quoting Id. at Associated (2d 1994) ([The §in prohibition ed. Contractors v. Cal. State Council Gen. against conspiracies] pro combinations or Carpenters, 459 U.S. (1983)). deal of the behavior great scribes same 1). Thus, § even if prohibited outset, al At the we note that claim, § 2 allege possible failed to it is Gravity alleges violations of both though § sufficiently alleged 1 claim. 2,§ § 1 and the district court did not See, e.g., Image Kodak Eastman Co. separately sufficiency examine the of Grav Inc., Servs., 451, 481, 112 Tech. ity’s claims when it dismissed the FAC. (de- (1992) 119 L.Ed.2d 265 The district court determined that the al § 2 scribing the “the more standard as § § 2 conspiracies 1 and were “co leged standard”). stringent monopoly they purportedly terminous” because § Micro To establish a violation of goal: maintaining shared a common Act,11Gravity prove the Sherman monopolies. Gravity, F.Supp.2d soft’s (1) contract, conspiracies following Because the “co elements: combi at 730. alesce,” court, nation, conspiracy; imposed reasoned the district or sufficiency be unreasonable restraint of trade. Oksanen allegations of both “must Page Hosp., 2 v. Mem’l gauged by the elements of a section (en Cir.1991) banc). “Otherwise, If is able plaintiffs claim.” Id. could prove § a violation of it then must requirements conspira circumvent the of a claim, injury, re of “antitrust cy monopolize including prove existence say injury which the anti quirement type that a defendant be shown to prevent laws were intended to specific have acted with the intent to mo trust their that flows from that which makes defen- nopolize, simply by characterizing contract, States, foreign "Every among the or with 11. Section 1 states: combi- several otherwise, nations, hereby illegal.” of trust or declared to be nation in the form or (West 1997). conspiracy, of trade commerce U.S.C.A. 1 in restraint

203 dants’ acts unlawful.” Atl. v.Co. amounts to multiple conspiracies between Richfield 328, 334, USA Petroleum 495 U.S. 110 the common defendant and each of the 1884, (1990); S.Ct. 109 L.Ed.2d 333 Conti 768-69, other 772, Id. at defendants. 66 Airlines, Airlines, nental Inc. v. United 1239; S.Ct. Joseph F. A McSorley, Porta- Inc., (4th 499, Cir.2002); 277 F.3d 508 Ok ble Guide to Federal Conspiracy Law 145 sanen, 708; 945 F.2d at see 2 generally (1996) (“While the may hub view its deal- Phillip E. Areeda & Herbert Hovenkamp, ings with spokes part of a single ¶¶ 360-63, Law Antitrust at 191-227 agreement, spoke may sim- concerned (1995). requirements These apply actions.”). ply with his or her own equal Gravity’s force to damages claims for relief; injunctive only relevant Gravity does not argue it is being injunctive relief, distinction that for able to meet test for establishing a injury “the only itself need be threatened.” “rim” between the OEM Defendants and ¶ 360b, 2 & Hovenkamp Areeda at 193. 53.) Microsoft.12 (Appellant’s Br. at In stead, it us to urges follow the Sixth Cir A. cuit, which Gravity adopted asserts has respect With to the first ele proposition that a rimless wheel conspiracy ment, FAC, Gravity alleged a single constitutes single, general conspiracy in “hub-and-spoke,” or “rimless wheel” con the context Sherman Act. See Elder spiracy among the OEM Defendants Beerman Corp. Stores v. Federated Dep’t A Microsoft. rimless wheel conspiracy is Stores, Inc., (6th 459 F.2d Cir. one in which various defendants enter into 1972) (setting forth requirements for prov separate agreements with a common de ing “rimless wheel” conspiracy); see also fendant, but where the have no defendants Products, Herrick, Impro Inc. v. 715 F.2d another, connection with one than other Cir.1983) 1279 n. 14 (noting the common defendant’s involvement is question “[t]here some whether con each transaction. Kotteakos v. United spiracy provisions of Sections 1 States, apply Sherman Act to a hub-and-spoke (1946) (“[T]he L.Ed. pattern was that conspiracy,” but declining to resolve the of separate spokes meeting at a common issue after suggesting that such a theory center, though may we add without the appropriate). was Nothing in the Su rim of the wheel to spokes.” enclose the (internal Kotteakos, omitted)). preme Court’s holding how quotation marks In Kotteakos, ever, Supreme suggests that such a proposition Court made clear Rather, conspiracy rimless wheel correct or permissible. is not a the Su single, general conspiracy preme but instead was clear: a Court wheel without a single A conspiracy generally Squillacote, Cir.2000) criminal 221 F.3d actors, (“A by "overlap key single demonstrated conspiracy exists where there is methods, goals.” United agreement, States Strick- one overall general or one busi- land, (4th Cir.2001) (inter- (internal quotation ness venture.” marks quotation omitted); omitted)). nal marks and argue citations Because does not Bowens, see United States v. allegations also that its are sufficient to demon- (4th Cir.2000) (holding type overlap only that was strate this but instead for the adopting error district court refuse concept advocates our of a rim- jury multiple conspiracies conspiracy, instruct less wheel we need not decide where there was evidence of meth- applies common whether same test to demon- operation ods of participants and common single ap- strate a criminal interest); linked a mutual ply States v. United of the Sherman Act. context *11 (4th HGSI, miculite, 307 F.3d Ltd. v. Kottea conspiracy.13 single

rim is not to Cir.2002), activity susceptible Thus, “concerted 1239. kos, 66 S.Ct. 328 U.S. in activity which by is section sanction that Gravi- district court agree we with resources, join their parties multiple single, plead a in its FAC ty’s attempt to in or power together economic rights, or between conspiracy rimless wheel that, for but achieve an outcome der to must be and Microsoft OEM Defendants concert, by naturally be frustrated would rejected. way (by profit- interests of competing their to its failure effort to cure In an choices).” Gravity Id. at *9. maximizing conspiracy, viable legally allege that sufficiently alleged Microsoft has vertical con separate the SAC alleged in re their pooled Defendants the OEM Compaq Microsoft spiracies between Fur sources, power. economic rights, Compaq and Dell. Microsoft and between and Dell thermore, Compaq to the extent allegations also that these argue Dell economic against that it was their argue concerted demonstrate to are insufficient § 1 conspiracies into interests to enter Gravity is un § 1 because action under Microsoft, Gravity has we note that law, able, to demonstrate matter of as a and Dell received Compaq that alleged unity “a shared Microsoft that either exchange in and other benefits financial and under design or a common purpose licensing agreements. entering into for Spray-Rite Co. v. standing.” pur Monsanto allegations are sufficient These 12(b)(6) to Corp., poses Serv. of Rule demonstrate (1984) (internal quo economically plausible.14 conspiracy §a was omitted). ., e.g., Spectators’ thisAs Cf Communica and citation tation marks Network, Country Inc. v. Colonial tion Ver Virginia recently emphasized court in Kotteakos for civil actions was drawn applying Kottea- 13. confusion in The dissent's analyzing error. purposes its reli harmless by is reference kos understandable Circuits, Eighth both Sixth and ance on the event, if we to further In even were misinterpreted Kottea have appear to which holding in Kotteakos set forth distort clear (citing Elder-Beerman at 216-17 kos. Post Eighth by following Circuits the Sixth and Stores, Inc., Dep't Corp. v. Federated Stores dissent, our res- suggested the manner Prods., (6th Cir.1972); Impro unaffect- Gravity's claims be olution of Herrick, 715 F.2d Inc. v. Regardless has al- of whether ed. Elder-Beerman, Cir.1983)). the Sixth Cir- In conspiracy among leged single the OEM (hat discussion in much "[t]here cuit stated separate or two Defendants Microsoft indicating possibili- decision the Kotteakos § 2 would be agreements, 1 and its claims might theory ty a 'rimless wheel' that such allege subject failure to facts dismissal though appropriate not civil case used in a significant anti- demonstrating a likelihood Elder-Beerman, 459 F.2d at case.” a criminal competitive effects. Products, Eighth Circuit Impro In by de- Sixth error compounded the Circuit's however, allegations are Arguably, these in Elder-Beerman for scribing set forth test of law demonstrate a matter insufficient as (which conspiracy adopted wheel a rimless specific Compaq possessed or Dell that either dissent, 216-17) con- post at and then by the monop- Microsoft's intent to maintain conspiracy con- cluding a rimless wheel Net- § 2. See TV Communications olies under single in civil actions. conspiracy stitutes a Television, Inc., work, Inc. v. Turner Network Prods., 1279 & n. 14. Impro 715 F.2d at Cir.1992) ("Be- 1026-27 however, 964 F.2d suggests, Nothing in Kotteakos have no ra- operators would cause the cable wheel of a rimless the definition monopolistic envi- create [a tional motive to conspiracy is civil or turns whether ronment], provide allegations nature; do TVCN's Eighth and the the Sixth criminal in conspire specific intent an inference contrary apparently stems belief Circuits’ conspiracy.”). goal achieve criminal and stated distinction between from the Club, (5th Cir.2001) ly 220-22 acquiesced in the restraint with the *12 (analyzing relevant and concluding caselaw knowledge that it would have anticompeti that a vertical could be shown effects.”); tive Duplan Corp. v. Deering § though 1 even it likely under would be Inc., 979, Milliken 594 F.2d 982 Cir. Anheuser Busch’s against 1979) economic inter (“Where, here, as the [defendants] conspire est to competition restrain a were knowing participants in a scheme market in which it purchaser). was a whose trade, effect was to restrain the fact that their motives were different from or Moreover, “the ‘combination or even in conflict with those of the other conspiracy’ element of a section 1 violation immaterial.”). conspirators is Accordingly, negated by is not that one or fact more Gravity’s allegations regarding the com co-conspirators unwillingly, acted mercial agreements license are sufficient reluctantly, only response or to coer 12(b)(6) for purposes of to set forth two Partners, cion.” MCM Inc. v. Andrews- separate vertical conspiracies between Mi Assocs., 967, Bartlett & 62 F.3d crosoft and Compaq and between Micro Cir.1995); In re Brand Prescription Name soft and Dell. Drugs Litig., 599, Antitrust 123 F.3d (7th Cir.1997) (noting that the wholesaler’s B.

participation would be actionable if even jury found “were they tools of the nextWe address whether Gravity manufaeturers-reluctant accomplices, yet alleged which, facts proven true, if that.”); liable less see also establish that conspiracies the two sepa United States v. United Gypsum States rately imposed unreasonable restraints of Co., 422, 13, 438 U.S. 436 n. trade in interstate commerce. Continen (1978) (“[T]he general Airlines, rule tal at 508. In assessing F.3d that a civil [is] can violation liability established under generally courts evalu by proof of either an unlawful purpose or ate agreements pursuant to one of three effect.”). anticompetitive an (“[T]he The co-con approaches. Id. at 508-09 Su need not spirators share the preme same motive Court has authorized three methods goal; (1) or it is allege sufficient to analysis: per analysis, se for obvi co-conspirators “acquiesc[ed] in illegal ously restraints, (2) anticompetitive quick- scheme.” United States v. Paramount look analysis, for procom those with some Pictures, Inc., petitive justification, S.Ct. the full ‘rule (1948); 92 L.Ed. 1260 reason,’ see also Va. of impact restraints whose net Vermiculite, Ltd. v. W.R. Grace & 156 on competition is particularly difficult to (4th Cir.1998) (“It determine.”). is not the possibility Because necessary that [Historic Green Springs, anticompetitive effects resulting from ei have Inc.] shared Grace’s anticom licensing agreement obvious, ther is not we petitive in entering motive pro into a analyze the two licensing agreements at restraint; scribed is sufficient individually—pursuant to the “full” issue— HGSI, regardless motive, of its own Id.; mere- rule of reason analysis.15 cf., e.g., Justice City Brandeis in perhaps Bd. Trade thereby promotes competition of 246 U.S. States, Chicago v. United or may suppress whether it is as such (1918), explained 62 L.Ed. 683 destroy even competition. To determine rule of reason as follows: question ordinarily court con- legality The true test peculiar is whether the re- sider the facts to the business to imposed straint merely regulates such applied; which the restraint is its condition theoretically monopoly maintenance of full (applying at 59-60 Microsoft, affecting price competition harm could § 2 vio- claimed analysis to reason rule of in- For ways. in various output lations). and/or Micro- could allow stance, agreements analysis, reason rule of In the market leverage its soft is eval aof restraint “the reasonableness advan- markets to obtain relevant software competition impact on on its uated based (such as secondary market tage some market.” the relevant within as a whole *13 con- market), upon not based the browser Oksanen, This evalua F.2d at 708. but performance efficient choice or sumer “anticompeti showing of requires tion market mere fact of Microsoft’s from the agreement the from resulting tive effect” Micro- market. See in the power primary “anti- To have an trade. in of restraint anticompet- (finding F.3d at 62-66 soft, 253 effect,” harm “must conduct competitive li- resulting from Microsoft’s itive effects harm thereby and competitive process the with based agreements OEMs censing F.3d at 58. Microsoft, 253 consumers.” monopoly leveraging of Microsoft’s upon will competitors many to one or “[H]arm sup- market to system operating in power di Act] “The [Sherman Id. not suffice.” market); competition browser press which is conduct against not rects itself Feldman, De- Cooper generally Robin see so, severely against but competitive, even Antitrust, 87 Geo. Leveraging in fensive destroy unfairly to tends conduct which (1999) L.J.2079, 2080, (discussing (internal quotation Id. itself.” competition and the leveraging theory” “traditional omitted). Thus, the inquiry into marks theory and leveraging “Chicago school” “by begins of the restraint lawfulness leveraging” can “defensive concluding that challenged ways in the which identifying consumers for harm to potential create impair competi possibly might restraint pri- of the in the maintenance by aiding 1503a, at & 7 Areeda tion.” Hovenkan^ Similarly, respect mary monopoly). type possible identifying After 372. dealing components to the exclusive pro we must alleged, competition harm to harm potential licensing agreements, that harm is “to whether ceed determine firms that rival software to consumers likely signifi and but only possible access from be foreclosed or browsers will cant,” requires “examination which consumers, competi- denying consumers to circumstances,” market including market allowing supracompetitive tive choice and ¶¶ 1503b, at 7 id. 1503a and share. power mar- respect to software pricing 374-77. monopoly Microsoft has kets for which arguably fees also

power. Per-processor licensing “discourage could OEMs from cause systems competing operating alleges Compaq’s and/or with a for PCs price to aided OEMs raise with Microsoft agreements Dell’s recoup the operating system to competing monopolies Microsoft’s maintenance Microsoft,” theoretically result- paid fee processing, system, word operating PC soft- for Microsoft’s ing prices Aiding the increased markets. spreadsheet good is not because relevant This imposed; facts. was after the restraint before and effect, objectiona- save an otherwise intention will and its the restraint the nature reverse; but because regulation history of the re- ble probable. actual or exist, may help knowledge the court straint, of intent the reason believed to evil consequences. predict interpret remedy, pur- facts particular adopting the for attained, all Id. at sought to be pose or end 709; opportunities ware decreased rival see also Leaseways, General Inc. gain software firms to access to consum- Ass’n, v. Nat’l Truck Leasing ers. United States v. Corp., 159 Cir.1984) (stating Microsoft that in rule (D.D.C.1995), F.R.D. rev’d on oth- of analysis, reason the plaintiff must grounds, er (D.C.Cir.1995); 56 F.3d 1448 “prove that the defendant has sufficient generally al, see Kenneth C. Baseman et market competition restrain sub- Plays Hardball: The Use Ex- Microsoft not, ... stantially. If inquiry is at an clusionary Pricing and Technical Incom- end; practice lawful”); 7 Areeda & patibility to Maintain Power in Markets ¶ 1503b, Hovenkamp at 376 (“[V]irtually all Operating System Software, Anti- courts applying the rule of reason require trust Bull. 267-68 (criticizing show, ... minimum, at a licenses). per-processor that the defendants play significant role “Theorizing impair- about conceivable market.”). [allegedly th[e] restrained] competition not, course, ments of does *14 prove any that impairment such oc- has curred or likely,” is or much less is “sub- Gravity provided has allega stantial in magnitude.” 7 Areeda & Ho- tions of Microsoft’s power market in ¶ 1503a, venkamp Thus, at 373. next we markets, relevant software in the form of must examine Gravity sufficiently whether Microsoft’s shares in these markets.17 has alleged the of likelihood a substantial failed, however, allege to facts re anti-competitive harm by caused the two (considered garding Compaq’s or Dell’s licensing agreements market at issue share and concedes individually), inquiry an the PC requires that market is that allege and, to “fiercely competitive” therefore, facts demonstrating “that played defendants significant a in neither Compaq role nor Dell power has in the Oksanen, the relevant market.” 945 F.2d PC market.18 Gravity, 168 F.Supp.2d at 16. Nor do we suggest any whether such anti- ability fined single as a seller to raise of effect, competitive likely if shown to be price (internal and output.” restrict quo- Id. magnitude, omitted). substantial in out- be tation marks Market share is de- weighed by pro-competitive justification. percentage fined "[t]he of a market that is See, e.g., Microsoft, 253 (noting, F.3d at 59 by controlled a firm.” Black's Law Dictio- under traditional analysis, 1991). rule of reason nary if ed. power gener- Market identified, successfully ally demonstrates anti- part, examining in by market effect, competitive See, Chin, Note, then the e.g., burden shifts share. Andrew Antitrust proffer defendant procompetitive jus- Theory A Chance: Horizontal Unified of conduct). (cid:127) Doctrine, tification for its Merger 106 Yale L.J. 1169-72 (1997) (discussing away movement from strict Gravity alleged that Microsoft "maintained on reliance calculation market of share in (in monopoly 90%) range share of analysis). in the purposes antitrust For of Rule personal computer operating 12(b)(6), mar Gravity's software we allegations consider re- throughout (J.A. ket” periods,” the "class garding Microsoft’s market share sufficient to 473), and a market allege maintained in the power share Microsoft's in relevant soft- range of processing in the word 80-90% ware markets. spreadsheet throughout software markets period. purposes, class For antitrust 18.Gravity market contends that because relevant power power software, purchaser "is the to force a markets are in there is no need to something do that he would not do in a com Compaq's power or evaluate Dell's in the PC petitive market.” Eastman Kodak Compaq’s Co. Im market. and Dell's in the Servs., Inc., age Tech. however, analysis, PC is critical market (1992) (internal pre-install both because OEMs Microsoft's quotation omitted). PCs; marks "It has been de- on their operates software neither inde- opera- or the entrance stantially hindered Uniq Corp. v. 544; Equip. Digital also see markets in software rivals of these Inc., tion Techs., Digital num- significant access to J.) them or denied Cir.1996) (Easterbrook, (“Computer Similarly, of software. rivals; of consumers ber prices vigorous are manufacturers pow- market allege the the failure to given economy’s of our this is one drop daily; Dell, unable to Gravity is sectors.”). or Compaq of Gravity fur- er competitive most forced, or is has Compaq or Dell show that only thing “[t]he concedes that ther force, supracompetitive able to likely to be from Dell] [Compaq distinguishes ... soft- undesirable consumers for prices which alacrity with is the OEMs other assuming Consequently, licensing] ware features. accepting [the acquiesced in they possessed and Dell each Compaq relatively favorable obtain agreements the PC market insignificant portion products.” for its Microsoft from prices output pricing ability to control no at 544. Given F.Supp.2d Gravity, 168 (as light proper market market is PC that the PC Gravity’s concession share or allege market Gravity’s failure to Mi- light and in competitive,” “fiercely demonstrating OEMs, market facts other other agreements crosoft’s licensing agreements— law, the two power), unable, as a matter Gravity is incapa- individually considered agreements Microsoft’s demonstrate —would maintaining or lever- succeeding in Dell, ble when considered Compaq and alleged monopolies, Microsoft’s aging causing any capable individually, *15 substantially could agreement in- that neither competition. For harm to substantial of, prevent or the usage share reduce the Compaq’s stance, having alleged without browsers, of, operat- rival market, rival promotion in the PC or share power Dell’s or manufacturers, or ri- system software ing that rival to demonstrate Gravity is unable manufacturers.19 software val applications or Dell Compaq firms’ access software T.V., Inc. GTE e.g., Continental Cf., those component of important an was 54, 36, 19, Inc., n. 97 52 433 U.S. Sylvania, compete in ability to potential firms’ (1977) (conclud- 2549, 568 53 L.Ed.2d markets, S.Ct. that Microsoft’s or software that, require- a although contractual ing sub- Compaq and with Dell agreements 1562, 100, 9, Thus, 23 L.Ed.2d 129 S.Ct. n. 89 114 market. pendently in software (1969) ("It illegality enough is ability com to influence Compaq’s and Dell's injury; markets relevant software of the petition be a material cause shown agreements Mi separate through their possible all alterna- plaintiff not exhaust need ability to influ dependent on their crosoft fulfilling injury his burden in tive sources of competition the PC market. ence in 4.”). injury compensable Cf.Jeffer under proving Hyde, 2 v. 466 U.S. Hosp. No. son Parish Dist. allegation share or mar- an market Without (1984) 2, 18, L.Ed.2d 104 S.Ct. Dell, however, or power Compaq either ket tying validity ("[A]ny inquiry into showing. latter cannot make the Cf. arrangement on market focus Bowl-O-Mat, 429 Corp. v. Pueblo Brunswick sold, products two are markets which 477, 487-88, 50 L.Ed.2d U.S. S.Ct. forcing anticompetitive is where for that (1977) antitrust (holding an claim impact.”). has its when a matter of law fails as loss without suffered the identical have would it need not show asserts anticompetitive con- regard claimed to the Compaq agreements Microsoft's 363a-b, ¶ duct); Hovenkamp & at 2 Areeda a sole cause of anticom- Dell were each (noting cause can be that no material 219-23 only that tire petitive need show effects but independent where cause demonstrated cause" of a "material agreements were each inju- antitrust (cid:127)fully for the claimed accounts Radio anticompetitive See Zenith effects. Inc., Research, ry). U.S. Corp. v. Hazeltine ment that Sylvania distributors sell televi- competitive market a pig-headed refusal to sion sets from authorized locations limited satisfy preferences, customers’ or an at- competition among the distributors tempt charge items, for unwanted does (“intrabrand resale of Sylvania televisions not lead to monopoly prices; instead it competition”), it ultimately promoted com- leads to ruin as rivals step to take the petition with other brands television business.”). Moreover, with respect to the (“interbrand sets competition”) and stating exclusive dealing component of Gravity’s that the competitiveness of the interbrand claim, absent an allegation regarding Com- “provides market significant check on paq’s or Dell’s or share in the PC exploitation of intrabrand pow- market market, there is no basis in Gravity’s com- er”); Parish Hosp. Dist. No. 2 v. Jefferson plaint for concluding that either of the two Hyde, 13-14, U.S. 80 licensing agreements issue, when con- (1984) (“we have condemned sidered individually, likely to foreclose tying arrangements when the seller has a significant share relevant software some special ability usually called ‘mar- — markets. See Tampa Electric Co. v. ket power’ force a purchaser to do —to Nashville Coal something that he would do in a com- 5 L.Ed.2d 580 (holding market”); petitive id. at 104 S.Ct. 1551 that an exclusive contract does not violate (“If only a single purchaser were ‘forced’ Clayton Act probable unless its effect with respect item, to the purchase of a tied is to “foreclose competition in a substantial impact resultant competition share of the line of affected”); commerce not be sufficient to warrant the concern of Microsoft, 253 F.3d at 68-70 (discussing antitrust law.... [W]e have refused to the exclusive dealing aspects of Microsoft’s condemn tying arrangements unless sub- agreements that, concluding even stantial volume of commerce is foreclosed when the cumulative effect of Microsoft’s thereby.”); 37-38, id. at 97 S.Ct. 2549 agreements considered, were the agree- (O’Connor, J., concurring) (evaluating tie—(cid:127) *16 ments did not enough foreclose of the rele- noting ins and to show an adverse vant browser market to constitute a impact consumers, plaintiff the general- violation). ly must demonstrate things: two market power in the tying product market and a — The court district afforded threat that the Gravi seller will acquire market ty ample opportunity power allege in to market); the facts dem product Digi- tied — onstrating (Easter- tal or Equip. Corp., Compaq’s power Dell’s in the at 761 J.) (“Let brook, market, ask, PC then, refused, Gravity us but whether the contend ing inclusion an various reasons that [operating system] Compaq’s and one’s power [PC] not—is a Dell’s means to and share in the PC market —‘tie-in’ output reduce and create is monopoly profits. immaterial Compaq’s and (sep Dell’s arate) Unless the seller has power, market ability the to influence in competition ”); (“In answer is no .... id. at 762 the relevant software markets.20 ap On Gravity allege did Compaq ing and ability Dell of a competition firm's to affect in "largest were the PC and makers” were example, market. Compaq For and Dell "among largest the distributors of may possess Microsoft’s each only percent five products.” 11.) (Appellant’s share, Br. at The dis- market many whereas other OEMs sent relies on this allegation as possess sufficient percent each four of the market Compaq share, respective case, and Dell's influences in despite which being largest the the PC Post at Being "larg- distributors, market. the PC makers and software neither market, however, est” in a says relevant Compaq noth- nor would ability, Dell have the conspirators’ of one allegation that, which the a mat to assert it continues peal, to demonstrate is sufficient power in market power Dell’s law, and Compaq’s ter of effects. anticompetitive § 1 irrelevant to its a likelihood is market the PC Gravity’s monopoly power, instance, assuming as true Microsoft’s For claim because to demon market ways, adequate Microsoft’s variety of allegations regarding in a is markets, anti- of substantial the likelihood strate relevant software in the share ar each address competitive We effects. its software agreed to sell had Microsoft gument Dell, below. agree- an such only Compaq potential have had ment that Mi argues first markets, in software competition harm in the power market significant crosoft’s market, irrespec- in the PC ultimately to demon is markets sufficient software or share power Dell’s Compaq’s or tive of mar in those anticompetitive effects strate arrangement, No such in the market. PC or Dell’s Compaq’s regard without kets however, alleged here. The market. PC power or share however, § 1 inquiry, focus of relevant that the dis argues next of the con anticompetitive effects Micro have evaluated court should trict therefore, conspiracy; spiracy qua both inside “exclusionary conduct soft’s conspi must demonstrate alleged,” and combinations and outside the competi itself agreement ratorial affected effects re anticompetitive potential for have obtained that would not ways tion aggregate. from conduct sulting this Com Spectators’ agreement. absent 49-50.) SAC, how Br. at (Appellant’s (not Network, at 225 munication among ever, allege did not the combi the issue is “whether ing that OEMs; alleged dis all Microsoft and individual conspiracy, nation or each conspiracies between Microsoft crete power conspirator, [market] has and Dell. Conse and Microsoft Compaq market.”); in the relevant competition hurt correctly deter court quently, district Dentists, 476 U.S. Fed’n FTC v. Ind. cumu that it could not consider mined agreements with Microsoft’s lative harm of (1986) (“[T]he into inquiries purpose of the to con instead was required all OEMs but is to market definition market agree- individually—Microsoft’s has arrangement whether determine sider' — evaluate and Dell to Compaq ments effects genuine adverse potential *17 anticompet- for added)). agreement’s potential each To (emphasis competition.” in itive effects.21 sure, imagine can circumstances one ac- harm Microsoft's conspiracies 21. The cumulative separate with Mi through their crosoft, agreements competition licensing in the relevant the two to affect tions ''outside” Cf., e.g., Parish software subject markets. to review at issue has been Jefferson 2, Hyde, 26 & n. Hosp. 2 v. No. Dist. will be further public action and enforcement 1551, (1984) (hold- 2 80 L.Ed.2d class ac- subject in the consumer to review law, thirty percent ing, that as matter individually brought against tions Microsoft insufficient to relevant market is share of the against brought by OEMs and in suits Accordingly, Gravity’s power). confer market 209-10, above, supra Microsoft. noted As Compaq were the allegations Dell inquiry § 1 is not Microsoft's focus this distributors largest and software PC makers alone, standing but the extent to actions provide whatsoever to conclude no basis each of the actions with which its concerted PC market had share of the either sufficient promoted Microsoft's OEMs two individual software competition in the affect relevant markets. Likewise, it is untrue that Com Similarly, without allegations paq Dell, co-conspirators of regarding the market power or share Microsoft, responsible are all of Micro Compaq or inDell market, the PC soft’s unilateral acts with other OEMs who is unable show a conspiracy to monopo were not members of the alleged conspira lize § under 2.22See 3A Areeda & Hoven cies. above, As noted ¶ each licensing kamp (“[I]n at 370 those instances agreement must be treated as a separate where power is a prerequisite to holding conspiracy, and only acts taken in further an agreement to be an unreasonable re ance of that alleged conspiracy appro straint of trade [under § ... 1] it would priately considered in determining the ad make no sense to hold the agreement same verse effects the claimed restraints on § offensive to proof without of power.”). trade, not acts of conspirator one taken in The offense of monopolization requires a furtherance of other possible, con distinct showing “anticompetitive effect.” Mi spiracies. United Bonetti, v. States crosoft, 253 F.3d Thus, Cf. at 58. § viable (4th 277 F.3d Cir.2002) (noting, conspiracy to monopolize claim in a criminal that a conspiracy, co-conspirator clude allegations which, if proven true, is hable for “all substantive offenses of his would establish that the agreements Com co-conspirator that are both reasonably paq and Dell made with Microsoft could foreseeable and in furtherance of the con have had an (when anticompetitive effect spiracy”); also United States v. Santia considered See, separately). cf. e.g., id. at 50 go, (2d Cir.1990) 872-73 (discussing the meaning of “monopoliza (concluding that the single conspiracy test 2);§ tion” within U.S. Mfg., Anchor Inc. applies to determine co-conspira whether v. Industries, Rule Inc., 7 F.3d tor conduct is reasonably (11th Cir.1993) foreseeable and (listing the likelihood of an in furtherance of the conspiracy); United anticompetitive effect as one of the ele Gooden, States 892 F.2d 725 Cir. ments of a conspiracy to monopolize under 1989) (same). Indeed, to hold 2);§ otherwise Seagood Trading Corp. v. Jerrico, would be to suggest Inc., distinction Cir.1991) between a single conspiracy (“[A] and multiple section 1 claim and a section con conspiracies involving common defendant spiracy to monopolize claim require the is one without a difference. showing-the same threshold existence of an agreement trade.”). Thus, restrain we agree Ac with the district court cordingly, for the reasons set forth above state claim, viable regarding the inadequacies required Gravity’s was to allege which, facts if § 1 allegations, Gravity’s § 2 proven true, claim also would demonstrate that Com- fails aas matter of law. paq’s or Dell’s individual agreements with Microsoft were likely result an anti- Gravity suggests that these conclusions competitive effect. Without alleging facts are irreconcilably at odds with the D.C. demonstrating Compaq’s Dell’s power Circuit’s conclusions in public enforce- *18 or share in the market, PC action, was ment that contending the D.C. Cir- unable to make such a showing. cuit implicitly recognized that Microsoft’s monopoly power or otherwise restrained spire with person other persons, or to trade. monopolize any part of the trade or com- merce among States, the several or with 22. Section 2 states: nationals, foreign shall be guilty deemed of Every person who monopolize, shall or at- felony.... tempt monopolize, to or combine or (West con- 1997). 15 U.S.C.A. 2 12(b)(6) stage Rule the at dismissed and be Compaq with

licensing agreements the doubts court the “merely because contention, howev- This § 1. violated Dell Advanced ultimately prevail,” will plaintiff D.C. of the nature the er, misapprehends Cmty. Servs., v. Inc. Health-Care the district Notably, Radford holding. Circuit’s Cir.1990) 139, 145n. 8 F.2d Hosp., held action enforcement public court omitted). Nev- marks (internal quotation arrangements dealing the exclusive that to failure dismissal ertheless, avoid including licensing agreements, Microsoft’s “colorably must claim, plaintiff the not state did violate Compaq, with agreement its entitle which, proven, if reason, concluding facts ] state[ rule of the § 1 under (internal quotation Id. vari- relief.” with him to arrangements Microsoft’s “that consistently have omitted). We enough marks foreclose did not ous firms facts of allegation an require § 1 viola- this held to constitute market relevant plaintiffs the of Microsoft, each element of supportive v. States United tion.” Co., 14 only Constr. (D.D.C.2000). Estate claim. antitrust F.Supp.2d pleading” “notice (holding court that the district at 220 F.3d found § 1 violation the all ele- tying covering alleged “allegations requires Microsoft’s upon was based theory for relief’ IE, D.C. comprise Circuit and that ments and Windows of omitted); Mun. F.3d Microsoft, 253 marks (internal ruling. quotation that vacated 84-95, Albertville, § 2 at conducting F.2d Moreover, its Bd. Utils. of facts so sufficient evaluated (“A plead Circuit D.C. plaintiff analysis, li- antitrust of Microsoft’s of effects anticompetitive each element that identified.”)). contrary Of all OEMs. “A with agreements can be censing violation above, analysis providing tantamount course, set forth would be as view from exemption on depends litigation effects with anticompetitive antitrust of Carriers, “signifi- Inc. v. Ford 12(b)(6).” the defendants’ Car Rule identification 1101, 1106-07 market —an relevant within role” cant Motor exam- when Cir.1984). different is much that inquiry Microsoft’s harm cumulative

ining the Micro Gravity alleges Although examining when it is than conduct Dell Compaq with agreements soft’s agree- individual Microsoft’s effects ef anticompetitive individually produced for which OEMs with two ments basis any factual provide not fects, it does regarding information provide declines Moreover, allegation.23 this support Thus, nothing in power. or market share no has it clear made Gravity has suggests action enforcement public regarding evidence providing intention via- § 2 claims § 1 and Gravity’s or Compaq or share the market ble. dis additional thus, not seek Dell; does it respect development covery or factual “summary recognize that We power. share of market the issue in to sparingly used should procedures conclusory its accept Instead, us to it asks motive where litigation antitrust complex agreements that Microsoft’s assertion roles,” Poller leading play intent indi Dell, considered when 464, Compaq Sys., 368 U.S. Broadcasting Columbia significant a likelihood (1962), vidually, created 486, 7 L.Ed.2d soft in the relevant effects anticompetitive should complaint an antitrust solely rely 12(b)(6), proceeds to Rule '‘unexceptional” under dissent notes While its to find legal Gravity's conclusions bare rely may not that a proposition *19 at 221 n. Post complaint sufficient. to dismissal avoid legal conclusion on a bare

213 ware regard markets without to Compaq’s fects is dependent upon Compaq’s and or Dell’s market or share in the PC Dell’s respective abilities to affect competi- market. This we cannot do. pleader “The tion the PC (“[I]f market. Post at 35 12(b)(6)] may not [Rule evade require the conspiracy only included OEMs, minor by merely ments alleging bare legal con then the conspiracy would presumably clusion; if the facts not do at least outline have no power to cause significant anti- adumbrate violation of the Sherman competitive effects.”). Consequently, by Act, the plaintiffs get will merely nowhere failing to allege Compaq’s and Dell’s mar- by dressing them up in the language of ket share or power, Gravity has failed to Carriers, antitrust.” Inc., Car 745 F.2d at set forth factual allegations necessary to (internal quotation 1106 omitted). marks support the basic elements § of its 1 and Because has failed to allege facts § 2 claims. See McLain v. Real Estate which, true, if would establish that the two Orleans, Bd. New 232, 444 243, U.S. 100 licensing agreements at issue are unrea 502, S.Ct. 62 441 L.Ed.2d (noting sonable restraints on trade that caused that to liability establish under the Sher- antitrust injury consumers, to §its 1 and Act, man a showing of either an anticom- § 2 claims fail as a matter of law. Cf. petitive effect or an anticompetitive pur- Mavis, Dunn & Inc. v. Nu-Car Drivea pose is necessary). Inc., way, 241, (6th Cir.1982) 691 F.2d 245 (“Since the complaint does not allege facts IV. Illinois Brick suggesting that [the manufacturer’s] refus- al deal any significant had anticompeti- Even if agreed we with Gravi tive market, effect on ty there that it is no rule has sufficient claims un of reason alleged.”). case § der 1 2 purposes of Rule 12(b)(6), we would affirm the district This court recently concluded that court’s conclusion that barred Supreme Court’s holding in Swierkiewicz from seeking compensatory damages Sorema, relief N.A., 506, 534 U.S. 122 S.Ct. under the purchaser indirect 992, 152 rule of (2002), Illi L.Ed.2d 1 did not alter the Brick Illinois, nois Co. v. 720, 431 basic U.S. 97 pleading requirement that a 2061, (1977).24 52 L.Ed.2d set forth A facts sufficient to allege each brief review of the evolution of element of his claim. indirect See Iodice v. United purchaser States, rule is 270, helpful F.3d Cir.2002) understand its (“Even application Gravity’s days these claims. In of notice pleadings Hano Shoe, ver complaint Inc. v. asserting a United Shoe negligence Corp., Mach. claim 481, disclose U.S. each of the 88 S.Ct. elements is present (1968), (internal order sufficient.” defendant in a Sherman suit, citations quotation Act omitted)); marks manufacturer of machinery for see also Swierkiewicz, shoes, making S.Ct. at 997 defended on the ground (relying upon a distinction between plaintiff, “evi- a shoe manufacturer that dentiary standards” and “pleading require- had bought the defendant’s machinery, had ment[s]”). As the dissent recognizes, a passed monopoly overcharge to its sufficient allegation of anticompetitive ef- customers, own the wholesale purchasers Illinois rule, Brick’s purchaser indirect (1986); 93 L.Ed.2d 427 Campos v. Tick applicable, when only bars compensatory etmaster, 1998); Cir. damages relief and apply injunc does McCarthy Serv., Inc., v. Recordex tive relief. Colorado, Cargill, See Inc. v. (3d 1996). Monfort of 856-57 Cir. 111 n. *20 two ratio providing damages, sue for in- can not been had shoes, hence and its of of danger the it avoids rule: for the nales that an held Court Supreme The

jured. against “overlapping recoveries” multiple, permit- not would defendant antitrust indirect by and direct seller original the suit damages a against to defend ted “evidentiary the it avoids and purchasers, shifted had the that ground the in deter uncertainties” and complexities wrongdoing defendant’s cost the overcharge any amount mining the ex- Court The customers. plaintiffs the to the intermediary the through passed its decision for the rationale plained 730-33, 97 at S.Ct. Id. purchaser. indirect follows: con expressly Court Supreme 2061. buyer the that be shown if it could Even indirect to the exceptions two templated to, in and response in price his raised (1) pur the indirect where rule: purchaser that and of, overcharge the amount the preexist a through goods acquired chaser sales had total and margin profit his the “where cost-plus contract ing declined, re- would there thereafter not or controlled is owned purchaser direct difficulty of insuperable nearly the main n. 16. Illinois & at Id. customer.” its plain- particular that the demonstrating might be there whether unclear left Brick raised not have would not could or tiff the amount in which for eases exceptions overcharge the absent prices his on to passed that was overcharge the had higher price maintained be deter could purchasers tier lower Since discontinued. overcharge been preci mechanical simply and mined pass- applicability establishing the Court thereafter, Supreme sion, but con- require would defense ing—on of over the amount even where held that virtual- each of these vincing showing clear, indirect allowing on is passed charge task figures, unascertainable ly damages claims pursue purchasers insurmountable. prove normally Brick, Illinois inconsistent with would be Hanover 2224. The 493, 88 S.Ct. at new Id. to create refused the Court United, explained further UtiliCorp Court Shoe v. Kansas exception. only “would have customers plaintiffs 110 S.Ct. Inc., 497 U.S. law. Moreover, the anti-trust enforcing in (1990). Utili

tiny stake” cau Court United, Supreme at Id. Corp creat against courts federal lower tioned were Brick, who plaintiffs, In Illinois Brick Illinois exceptions new ing blocks, of concrete purchasers indirect (“The 110 S.Ct. Id. rule. theory on the damages to recover sought Shoe underlying Hanover rationales contractors, incorporat who masonry equal apply Brick will Illinois defen from purchased blocks concrete ed believe We nonetheless cases. all force masonry struc other into walls and dants stated our for exists justification ample overcharge tures, on the passed exceptions to out not to carve decision contractors, in who general the blocks (internal quotation rule.” purchaser direct into en structures masonry corporated omitted)). marks general con buildings, and tire admonition, courts several this overcharge Despite on the turn passed tractors excep- “co-conspirator recognized those have bids submitted plaintiffs See, Paper e.g., Brick. to Illinois Brick, at 726- tion” Illinois buildings. Indus., 281 Paper Nippon v. Inc. Sys. extended The Court Cir.2002); Lowell 629, 631-32 F.3d only di held rule Shoe Hanover Cyanamid American violator antitrust from purchasers rect *21 (11th Cir.1999); Campos v. Ticket attempt to for recover Microsoft’s illegal master Corp., 140 F.3d overcharge that allegedly passed was on to Cir.1998); In re Brand Name Prescrip Gravity. Accordingly, Gravity’s claim is tion Drugs, 604-05; 123 F.3d at Arizona materially indistinguishable from the claim v. Shamrock Foods under consideration in Brick, Illinois (9th Cir.1984). Gravity asserts that its inclusion of a conspiracy allegation is these cases proposition stand insufficient to circumvent the Illinois Illinois Brick inapplicable is any when Brick rule. conspiracy has alleged, been but we inter Nevertheless, pret Gravity argues these cases as standing that Illi- for the more nois ought Brick narrow not to proposition control that Illinois Brick because the policy inapplicable to a concerns particular type underlying of conspir Illinois Brick acy price-fixing conspiracies. are not implicated First, McCar here. — Cf. thy v. Serv., Inc., Recordex contends that there is no danger (3d 1996) 854-55 Cir. (refusing duplicative adopt to a recovery because the OEMs co-conspirator exception plaintiffs where “apparently have elected not to sue Micro- have alleged soft.” (Appellant’s 69.) intermediaries Br. at The Su- immediately upstream colluded to over- preme Court Brick, in Illinois however, charge). Were we to adopt Gravity’s “recognize[d] that purchasers direct some- broader interpretation, the Illinois Brick times may refrain from bringing a treble— rule would be inverted solely upon based damages suit for fear of disrupting rela- artful pleading. Such a result is contrary tions with their suppliers.” Brick, Illinois to Illinois Brick itself as well as the Su- 431 U.S. at Yet, 97 S.Ct. 2061. preme Court’s clear directive in UtiliCorp majority concluded that “on balance ... United against crafting new exceptions to legislative purpose creating a group the Illinois Brick rule. Far more reason- of private attorneys general to enforce able is the proposition that, to the extent a anti-trust laws ... is better by served court were recognize to a co-conspirator holding purchasers direct injured be to exception Brick, to Illinois such an excep- the full extent of the overcharge paid by tion grounded would be the damages them than attempting apportion theory underlying conspiracy. overcharge among all may have ab- For example, the rationale for concluding (internal sorbed part of it.” Id. quotation that Illinois Brick does not apply omitted). marks price-fixing conspiracy is that no over- Gravity also argues that its charge has claims do been passed on to the consum- not require the complex er: price-trac- task of When dealer illegally has conspired ing because with a the consumers’ damages manufacturer with respect to the price difference paid by consumer, between the “but-for” price then “the con- they sumer would only paid have party for the paid who has Windows overcharge.” software absent the illegal Areeda & conspiracy and Hovenkamp ¶ 371h, at they amount actually We paid need not resolve it. This whether we argument recognize misses point, co-conspira- that to cal- exception tor culate Illinois price, Brick’s the “but-for” indirect the court would purchaser rule for a price-fixing conspira- required to determine the over-charge, cy because no such conspiracy if any, has been al- for Microsoft’s software that was leged Instead, here. Gravity’s compensa- passed on to consumers—the exact analy- tory damages claim is premised on an sis that Illinois Brick forbids. aof articulation one rejected Court that, preme suggests Finally, conspira- conspiracy. wheel” “rimless apportion- difficulty is any there extent Kottea- rejected by cy envisioned—and this avoid the court could —

ing damages, *22 conspiracy wheel rimless “A kos states: over- of the awarding 100% difficulty by into enter defendants which various one in not Gravity does consumer. to the charge de- common awith agreements separate should however, consumers why explain, no have defendants fendant, the where bottom, but Gravi- At a windfall. awarded be than another, other one with identi- connection virtually are arguments ty’s policy in involvement defendant’s in the common Brennan by Justice raised cal those The Ante, at 202-203. 748-65, at each transaction.” Id. dissent. Brick Illinois his Kotteakos the that because J., dissenting). majority says Of (Brennan, S.Ct. 2061 “rimless a of a variant rejected rejected Court considered course, were they The too. must we conspiracy, the indirect formulating wheel” majority the that Gravi- liberty reasoning is that not at rule, problem and we purchaser the adopt here. we should that arguing choices policy ty is not those to reevaluate was conspiracy Illinois of definition conclude specific we Accordingly, compensa- claims rejected Kotteakos. Gravity’s Brick bars § 2 § 1 and the damages tory was underlying crime Kotteakos, the In violations. Na- under loans to obtain conspiracy fraudulent by false and Act Housing tional V. conspiracy of the The center statements. § 2 § 1 and Gravity’s conclude We Brown, who was in man named was a that, in law and of a matter fail claims ob- fraudulently brokering of business Gravity’s Brick bars event, Illinois clients. co-conspirator his loans for tained damages. compensatory recover ability to All of 753, 66 S.Ct. at 328 U.S. dis- of the judgment Thus, affirm we loans, but obtain the used Brown clients court. trict was services Brown’s use of client’s each use. client’s other every of independent AFFIRMED. one, multiple but not involved Id.Kotteakos co- Brown’s dissenting. only did Not GREGORY, Judge, conspiracies. Circuit agreements express no have conspirators at majority, ante agree I was themselves, participation their among meet need not claims Gravity’s partic- way dependent in no also 2§ of the of standards rigorous more Brown’s services. of other users ipation dis- However, respectfully I Act. Sherman analogy offered upon drew The Court would suc- not Whether sent. explain appeals by the court merits, stated clearly it has on the ceed loot their dispose who “Thieves point: § 2 of the Sher- § 1 and both claims under ‘fence’—do single single receiver—a to a Act. man confeder- alone become fact by that more than takes it may, but they ates: I. to make a ‘fence’ he is knowledge that when first error its makes majority S.Ct. Id. them such.” single aof allegations Gravity’s rejects Kotteakos, Gravity out- In contrast v. United on Kotteakos relying conspiracy, wheel” a “rimless elements of lined States, U.S. as follows: Kotteakos, the Su- (1946). In L.Ed. (1) that is an there overall—unlawful The law has been clear that there need

plan or common existence; design in not be an express agreement between ev- (2) that knowledge ery conspirator that others order for single con- involved is inferable spiracy to each member to be formed. Circuit, Interstate because his Inc. knowledge unlawful States, United nature of subject of the conspiracy (1939) (“[I]t 83 L.Ed. 610 is ele- [,] but knowledge on part each mentary that an unlawful conspiracy may member of the exact scope of the opera- be and often is formed without simulta- tion or the number of people involved is neous action or agreement on part *23 not required; and the conspirators”); see also United States (3) there must be a v. showing Masonite Corp., of each 265, 316 275, U.S. member’s participation. S.Ct. 86 L.Ed. 1461 (“Here, Circuit, Interstate ... [i]t was Elder-Beerman Corp. Stores v. Federated enough that, knowing that Stores, Dep’t Inc., concerted ac- 459 F.2d 146-47 tion was (6th contemplated Cir.1972) invited, and the dis- (emphasis deleted and add- gave tributors ed); their Prods., Impro adherence to the Herrick, Inc. v. scheme and it.”); participated Cir.1983) United (quoting Tillett, v. States Elder-Beerman). Whether we should Cir.1985) (stating adopt plaintiff this test in toto I would not show decide that each alleged today, conspirator but I “participated believe that this definition of a in the conspiracy “rimless wheel” with knowledge conspiracy is of useful for essential nature of purposes case, plan.”). of this and is consistent with well-established interpretations of the In Circuit, Interstate Inc. v. United Sherman Act. States, film exhibitors suggested that film

The critical difference between the test distributors insert clauses into their distri- Gravity urges, and the test Kotteakos bution re- contracts requiring minimum ticket jected lies in requirement prices “that knowl- certain films. The distributors edge that others must accepted be involved infer- suggestion is nearly unanimous- able to each member ly. because of The Court his held that an agreement knowledge among nature the distributors could be of inferred: unlatvful ” subject the conspiracy (emphasis add- Each [distributor] was aware that all ed). Id. Gravity has alleged that the na- were in active competition and that with- ture of the conspiracy, by design by and out substantially unanimous action with necessity, was broader than any one respect to the restrictions ... there was agreement between Microsoft and an risk of a substantial loss of the business OEM, and that knowledge of that interde- good will of ... exhibitors, but pendent design was inferable to each that with it there was the prospect of member of the conspiracy. Regardless of profits. increased whether any OEM desired the partic- 306 U.S. at 59 S.Ct. 467. Such is the ipation (and of other OEMs they conceiv- case with the OEMs. It takes no stretch of ably might have), Gravity alleges that logic to infer that the OEMs knew that each joined OEM a conspiracy which it plans Microsoft’s contemplated the cooper- was, knew nature, its just broader than ation of other It is agreement OEMs. itself and Microsoft. to participate in this plan common allegations

These are plainly sufficient formed a single conspiracy. “Acceptance to state a claim under the Sherman Act. by competitors, previous without agree- satisfy to burden Gravity’s part of participate

ment, an invitation which, “rule of reason.” consequence necessary plan, of interstate out, restraint carried con if standard pleading majority’s The un- to establish commerce, is sufficient pro recent Court’s Supreme flicts Act.” the Sherman under require lawful pleading on federal nouncement Circuit, system, Interstate “[Ujnder pleading a notice ments. allega- Thus, find I would require appropriate is not a claim. to state sufficient tions facie establishing prima facts plead N.A., Sorema, Swierkiewicz case.” II. 506, 122 S.Ct. U.S. pleading notice simplified (2002). has “This finds next majority rules discovery true, liberal relies which, if proven “facts standard allege failed to define motions judgment summary conspiracies two that the establish dispose facts issues re- disputed unreasonable imposed separately “Rule at 998. Id. claims.” commerce.” unmeritorious in interstate trade straints *24 applies standard 8(a)’s simplified pleading that there agreed if I Ante, Even exceptions.” actions, certain all civil not one to conspiracies two were made has Court Thus, Supreme the that Grav- Id. case, question no there is this in term, an that clear, past just this adequate. crystal than are more ity’s pleadings determine not does evidentiary standard more from far requires majority The Swierkiew complaint. aof adequacy the notice under appropriate than is 506, 122 N.A., Sorema, 534 U.S. v. icz a from state Aside standards. pleading (2002). It is 1 997, 992, 152 L.Ed.2d for a demand jurisdiction of ment therefore, require plain- to inappropriate, 8(a) Procedure of relief, Civil Federal Rule evidentia- to that going facts to plead tiffs “a short than more nothing requires complaint. in a ry standard that showing the claim of statement plain case, this liability in that agree IWhile relieff.]” to is entitled pleader un- likelihood, would be determined all in 997, 506, 122 S.Ct. U.S. see, standard, e.g., “rule of reason” to der of a claim The elements T.V., Sylvania, Inc. v. GTE § 1 of Continental of in violation trade restrain 2549, L.Ed.2d Inc., 97 S.Ct. U.S. that (1) action concerted Act Sherman “rule of (1977), to it me seems Estate trade. unreasonably restrains standard, not evidentiary Co., is Holding reason” Smith v. Miller Co. Constr. ordinarily Courts requirement. Cir.1994); (4th pleading Oksanen 213, 220 before inquiry undertake factual to have F.2d Hosp., 945 Memorial Page v. rea- “rule of whether determined it is majority, Cir.1991). According to If se rules per apply. rules se per the second son” pled adequately not Gravity has not do effects anticompetitive apply, then of restraint element, an unreasonable Brink- States W.F. See United the matter. plead Gravity failed to trade, because Inc., Constr. ley & Son This is neces- the OEMs. market shares of Cir.1986) cir- this (noting 1162, n. 10 says, because majority sary, the violations antitrust per se recognizes cuit market individual OEMs’ prove of so, requirement is no and, there doing in conspiracy’s prove to order in power results). con- The anticompetitive proof market conspiracy’s power. market effects. proof regardless illegal prove duct turn, required power, effects, Id. which anticompetitive potential

Additional specificity regarding relevant markets for the sale of personal OEMs’ power market is not necessary. computer word processing and spread- While anticompetitive effect is often prov- sheet software. As participants in these en through analysis of the relevant market they markets have joined Microsoft ex- definition and market power, it can also be tensive licensing and agreements other proven through actual anticompetitive ef- with the purpose and effect of monopoliz- fects. FTC v. Dentists, Indiana Fed’n ing and restraining trade in these relevant 447, 460-61, 90 markets, and they have benefitted sub- (1986); L.Ed.2d 445 Areeda, VII P. Anti- stantially from this common anticompeti- trust Law p. (1986). The Su- scheme.”). tive preme Court made clear that it is inappro- The Court finds Gravity’s allegations priate to require plaintiff plead facts power market deficient, but only because which may he need succeed on the misunderstands Gravity’s argument re- merits the claim. Swierkiewicz, 122 garding power. market According S.Ct. at 997 (holding need not majority, Gravity argued appeal plead facts establishing prima facie case Microsoft’s monopoly is the only relevant of employment discrimination, part be- factor in determining whether the conspir- cause it would be “incongruous to require acy had to harm competition. a plaintiff, in order to survive a motion to This is not correct. Gravity has asserted dismiss, to plead more facts than he may the district court was wrong to re- ultimately need to prove to succeed on the quire it plead that each OEM defendant if merits direct evidence of discrimination *25 had sufficient power market in the hard- discovered”). is Gravity has pled actual ware market to cause the injury alleged, anticompetitive ¶¶ effects. See Compl. pointing out that the relevant market 59, 62-63, 68-69, 91-92, 95, 107, 115-117, software, and the relevant entity is the 123-124, 150, 152, 154-156. Accordingly, (either conspiracy a bilateral or single con- the complaint should withstand a motion to spiracy). Appellant’s Br. 49; at id. dismiss. (“The at 50 district court in erred assess- To the extent that Gravity intends to ing only Compaq’s or Dell’s market power rely on market power to demonstrate the rather than the power market of the com- likelihood of significant anticompetitive ef- binations between each of them and Micro- fects, the relevant issue is whether the soft.”). It is clear that Gravity under- conspiracy market power had in the soft- stands the importance OEMs, of the and markets, ware not whether the defendant the pleadings, read in the light most favor- OEMs had market power in th'e PC hard- to Gravity, able do suggest not otherwise. ware market. Gravity has adequately 8(f) See (“All also Fed.R.Civ.P. pleadings pled the conspiracy’s See, market power. shall be so construed as to do substantial ¶ e.g., (“Microsoft Compl. and these justice.”). named co-conspirators have power the prices control or exclude competition Setting in aside confusion regarding these relevant markets and Gravity’s have commit- argument, the majority has iden- ted overt acts in furtherance of their tified an con- important issue concerning mar- ¶ spiracy to monopolize.”); (“[The id. power. ket While Microsoft has a monop- are OEMS] Microsoft’s three largest oly dis- in the relevant markets, software if the in tributors the relevant market for Mi- included only OEMs, minor crosoft operating software, and among Mi- then the conspiracy would presumably very crosoft’s largest distributors in the have no power to significant cause anti- Cir.1990), we F.2d 139 Hospital, ante, at 209-210 effects. See competitive “colorably must plaintiff that a this stated whether dispute parties 20. The n. entitle which, proven, if or a issue liability facts state[ ] aas treated be should But, in that 7; Ap- n. 8. at Id. at 145 Br. issue, relief.” Appellants’ him to causation Electronics’ dis Dell, and PB district court’s the case, Compaq, we .reversed pellees re- not does majority acknowledging the complaint, atBr. of the missal n. 19. at 207-208 ante that dispute, the has stated solve Court Supreme “the that should issue which heading under am plaintiff The giving prior ‘dismissals ma- because irrelevant ultimately go is discovery should opportunity ple deficiency single only a identifies jority Bldg. Hospital very sparingly.’ granted plead failure pleadings: Gravity’s Hosp., Rex Trustees v.Co. PC in the market shares OEMs’ defendant (1976).” 747, 96 S.Ct. this is 211. Yet at Ante market. com- specificity Lack of Id. to a dis- the defendants to entitle enough case. of that concern was not the plaint missal. that suggested never Court This in- the OEMs identifies complaint every supporting facts plead detailed must Microsoft’s they are volved, states con- To the conclusion. subsidiary factual distributors, identifies largest OEM decidedly permissive employed trary, we conduct, states anticompetitive asserted adequacy judging standard con- anticompetitive conspiracy’s v. Miller Co. Constr. In Estate complaint. ef- anticompetitive significant had duct Holding & Smith Moreover, effects. fects, identifies complaint Cir.1994), confirm we monopolist, adjudicated is an Microsoft that each facts so “sufficient provide in the relevant market clear violation antitrust element defendant markets, software (internal quo- identified,” at 222 id. can be largest players among OEMs omitted); we never but tation citation simply There market. the PC hardware detailed, facts underlying suggested one which from argument no conceivable Rather, complaint. *26 required are a failure solely conclude, on based could factual vague overly with was our concern defendants share, the that plead market un- conclusions legal and mere allegations against the claims of not on notice any facts. by supported they rest. on which grounds them and 99 48, 78 S.Ct. at U.S. Conley, 355 See in that allegations Act full The Sherman approach reject the (“The Rules Federal follows: read case as in which skill of game ais pleading that conspired combined and/or Providence decisive may be by counsel misstep one defendants, Smith Miller & with principle accept the outcome Connor, Smith, Calloway, V. Gordon facilitate is to pleading of purpose Associates, and oth- Inc. merits.”). B. The Conner Jack proper decision unreasonably trade the PC to restrain ers market specific OEMs’ by area metropolitan subsidiary Washington, fact. D.C. best, is, at market deprive conspiring combining and/or cases number cites a majority The cause Property, The the Pattersons at See ante standards. pleading involving at in foreclosure to be sold Property however, cases, those None 211-213. the Pattersons leave price For ex- this case. holding in support drive assets, and otherwise no Health- in Advanced is true ample, it out of Construction and Estate them Community Services, Inc. v. Care Radford

221 real estate development business the Nippon Paper Co., Ltd., Indus. 281 F.3d Washington, (7th D.C. metropolitan area. Cir.2002); 629 Lowell v. American The combination Cyanamid conspiracy Co., pro- and/or 177 1228, (11th F.3d 1233 adverse, Cir.1999) (“Illinois duced anticompetitive effects Brick simply does not within the apply relevant product where the complaint and geo- alleges a verti cal graphic conspiracy market. The objects pass-on.”); no and con- In re Brand duct of the Name Prescription combination Drugs conspira- Anti and/or Litig., trust cy 599, (7th were 123 F.3d illegal. Cir. 1997) (Posner, C.J.) (“[A]ny indirect-pur 14 F.3d at 221 n. 15. We held that a chaser defense would go by board “provide, whenever possible, since [plaintiffs] would then be direct time, some details of the place purchasers from the conspirators.”); Ari effect conspiracy; it is not enough zona v. Shamrock Foods 729 F.2d merely to state that conspiracy has taken 1208, (9th 1212-14 Cir.1984); Fontana place.” Id. at 221. Gravity’s claims, in Aviation, Inc. v. Cessna Co., 617 Aircraft contrast, are replete with all manner of 478, F.2d Cir.1980); see II also fifty-eight pages of detail.1 The detail — Phillip al., E. Areeda et Antitrust Lato defendants in this case know exactly what ¶ 346h, (2d (“Whether at 2000) ed. is alleged conduct to have violated the anti- adopts one a co-conspirator exception or laws, trust which is all that Rule 8 re- regards this situation as outside Illinois quires. It is not for us to change the rules domain, Brick’s there is tracing no civil procedure mid-stream. “A require- apportionment to done.”); McCar cf. ment greater specificity particular v. thy Serv., Inc., Recordex 842, 80 F.3d claims is a result that must be obtained by (3d Cir.1996) (noting exception but process of amending the Federal declining to apply it because upstream Rules, by and not judicial interpretation.” suppliers joined were not defendants); Swierkiewicz, 122 In re Litig., Antitrust Beef (5th Cir.1979) (same); Jewish Hosp. III. Ass’n v. Enters., Stewart Mech. Finally, the majority Cir.1980) holds the di- (noting exception purchaser rect rule of but declining to apply Illinois Co. Brick because vertical Illinois, 431 failed). allegations U.S. 97 S.Ct. (1977), Shoe, and Hanover The decision in Hanover Shoe was moti-

Inc. v. United Shoe Machinery Corp., 392 vated the Court’s desire to maximize U.S. 20 L.Ed.2d 1231 *27 by deterrence allocating the right to sue to (1968), precludes recovery. I disagree, the most efficient enforcer of antitrust law. and join would Seventh, the Ninth, and The rationale was that indirect purchasers Circuits, Eleventh each of which has held have comparatively small injury, and that it does not. Paper Systems, Inc. v. consequently less incentive to sue. Hano- majority 1. The also parenthetically quotes exactitude, nor recovery must appear immi- Mun. Utils. Bd. Albertville v. Bd, Alabama Pow- nent.” of Mun Utils. 934 F.2d at 1501. Co., (11th er 934 F.2d Cir.1991): 1501 Carriers, Finally, Car Inc. v. Ford Motor plaintiff "A plead sufficient facts so that Cir.1984), stands for each of alleged element the antitrust violation unexceptional the and proposition well-worn ’' can be identified. Ante at 212-213. But the plaintiff that a must at least "outline or majority important omits the qualifier con- Act, adumbrate" a violation of the Sherman tained "However, paragraph: same the relying instead of legal on a bare conclusion. alleged facts need not be spelled out with Id. Litig., Monopolization Milk 2224; re Midwest 494, 88 S.Ct. at Shoe, U.S. ver Cir.1984). 528, 531 F.2d 745, 97 S.Ct. at Brick, U.S. Illinois make would defense have passing-on A that 2061. cases the rejects majority The purchas- direct for effective less purchas- litigation a direct recognized unanimously recovery in well, reduction the cases given those sue, ers as saying that to right er’s apportioning of complexities I the as conspiracies. as well price-fixing with dealt pur- indirect and direct between damages a substantial- presents case this that think at Shoe, U.S. Hanover com- is not chasers. situation. identical ly logical is the Brick Illinois the overcharge paid any about plaining Illinois In Shoe. Hanover corollary Rather, Gravity to is to Microsoft. OEMs dam- “passed-on” denied Brick, the Court ulti- conspiracy’s the about complaining manufac- aof purchasers indirect to Gravi- ages consumer. overcharge of the mate Shoe, Hanover Because goods. turer’s defendant that the argues actually ty damages such recovery for deny to pur- failure software discounts received OEMs Illi- recovery. words, duplicative to lead would other In from Microsoft. chased 730-31, Brick, at U.S. monopoly nois the some shared Microsoft full ensure therefore cases The two to one were If the OEMs. with profits and deterrence maximizing recovery while monopo- its all gave that Microsoft assume recovery. duplicative avoiding would there then OEMs to the profits ly simply would The OEMs pass-on. no be such plaintiffs Permitting consumers, a resale like in overcharging aof part were intermediaries sue much How scheme. price maintenance above prices retail raise conspiracy is retained Microsoft monopoly profits its Hano- consistent level is competitive conspirators how the a matter merely Judge As Brick. Illinois ver Shoe illegali- their the fruits allocated for the Sev- recently wrote Easter —brook Gravity. relevant directly not is ty, and to sue middlemen right “The enth Circuit: seeking to Gravity is damages is sometimes joined price between the difference prove ‘exception’ co-conspirator to as referred the Windows actually paid consumers better Brick, it would be but to Illinois price. for” “but and the software Illinois Shoe Hanover recognize calculating difficulty of the Much non-conspirator first to the allocate Brick disaggregat- from come will price for” “but to collect right chain distribution from hardware of PC price ing Sys., Paper damages.” 100% difficulty, how- This software. Microsoft read- correct This 631-32. Brick. of Illinois concern ever, Brick. Illinois Shoe of Hanover ing middleman. is no there when can occur It by giving deterrence It maximizes if Microsoft occur, example, It the most to sue right Windows- brand its own sold lingering built As for to sue. incentive measuring difficulty PC. Mere operated inter- conspiring whether over doubt recov- to preclude anot reason damages is concern *28 plaintiff, the best mediary is Pictures, RKO Radio Bigelow ery. See law case recovery, the multiple regarding L.Ed. U.S. importance recognized rightly has wrongdoer (“[I]n where cases re- the suit—a intermediary in joining plaintiffs aof subject incorporated has this case. inmet been has quirement which product single in a trademark 855; re patent In McCarthy, See, e.g., other contributed had defendant 1163; In which F.2d at Litig., Antitrust Beef elements value or utility ... this Court with the abusive and unethical conduct of has sustained recovery of the full amount litigants and lawyers. I find troubling the profits defendant’s where his own majority’s unhesitating willingness to cut wrongful action has made it impossible for off compensation to injured all consumers to show in what proportions based on hypothetical abuses of liberal he and the defendant have contributed to pleading rules. The interests of consum- (citations the profits”) omitted); J. Truett ers are far more weighty than the majority Payne Co. v. Chrysler Corp., Motors 451 is willing to recognize. Moreover, the con- 557, 566-67, U.S. 68 cern about “artful pleading” has nothing (1981) (“[I]t L.Ed.2d 442 does not come whatsoever do with Illinois Brick and very good grace for the wrongdoer to Hanover Shoe. The purchaser direct rule insist specific upon proof certain of is designed to encourage and incentivize injury inflicted.”) which has itself (quota- private enforcement of the laws, antitrust omitted). tion not immunize corporate wrongdoers from Aside having from problem litigate antitrust disaggrega- claims.

tion, calculating the “but price for” may involve determining elasticities of supply IV. and demand —the complexity identified by Illinois Brick —but more no so than The most aspect unfortunate of this case of the other cases in which that, middlemen is to the extent Gravity’s claims have conspired with manufacturers. And merit, there consumers will be left uncompensat- will be duplicative no liability. Moreover, more, ed. Even raising procedural bar determining elasticities of supply and de- for consumers’ may claims further stifle mand can complicate any attempt to mea- technological By innovation. giving com- sure damages is not occasioned solely —“it fort to those entrenched interests presence of intermediaries.” Paper seek to protect quo, status today’s Sys., 281 F.3d at 633. The real concern of decision increases the likelihood of future Hanover Shoe and Illinois Brick is the anticompetitive conduct. To those who complexity of measuring the pass-on of an would introduce disruptive technologies, actual overcharge, and its potential nega- this ruling a strong creates disincentive to tive effect deterrence and compensa- innovate. Without innovation, we all lose. tion, not the mere difficulties determin- I respectfully dissent. ing what the price would have been in a competitive market.2 The majority’s rule

is essentially a free pass to any conspiracy

that can make the damage it inflicts diffi-

cult to pin down. now, Until that has

never been the law.

The majority reasons that adopting

Gravity’s argument would plaintiffs lead

plead a conspiracy that did not exist in

order to evade Yet, Illinois Brick. there mechanisms, primarily Rule to deal 2. To the litigation extent that the subsequently Microsoft, Paper Sys., see 281 F.3d at I issues, revealed true Illinois Brick such as agree if might that Illinois require Brick then the defendant OEMs switched sides and sued Gravity's dismissal of claims.