In Vaughn Med Equip Repair Serv, LLC v Jordan Reses Supply Co(1) a federal court in Louisiana dismissed antitrust claims asserted against a medical device manufacturer and others finding, among other things, that the plaintiff's allegation that the defendants dominated a market limited to the manufacturer's own products was insufficient to plead a properly defined relevant market. The decision is the latest in a line of cases refusing to permit antitrust plaintiffs to allege market power by artificially limiting the market to a single manufacturer's product.
The plaintiff was a distributor of continuous positive airway pressure devices (CPAPs), used to treat sleep apnea, some of which were manufactured by defendant Respironics, Inc. The dispute arose out of the plaintiff's desire to distribute Respironics' products to the Department of Veterans Affairs (VA). The defendants took the position that only a different distributor was authorised to sell to VA medical centres.
In addressing the defendants' motion to dismiss, the court issued a series of rulings dismissing some claims and upholding others. One key aspect of the decision was its evaluation of the claims under Sections 1 and 2 of the Sherman Act, each of which required proper allegations of 'market power' to be sustained (the court held that the plaintiff had failed to plead any per se unlawful horizontal agreements). The court concluded that the plaintiff's complaint only alleged harm to a market limited to the sale of Respironics CPAPs to VA medical centres, and that such a market was too narrow to be sustained. The court stated that a market artificially confined to a single manufacturer's products was not proper under the law, and that a properly defined market had to include CPAPs sold by Respironics' competitors, as well as CPAPs sold to different types of customers (ie, not only the VA).
This decision is consistent with prior rulings that have rejected attempts by plaintiffs to bring antitrust cases based on a defendant's alleged dominance of a market limited to its own products. While courts have sometimes permitted plaintiffs to allege markets limited to the aftermarket servicing of a single manufacturer's product (on the theory that the customers had already locked themselves into the manufacturer's product, see, for example, Eastman Kodak Co v Image Tech Servs, Inc (504 US 451, 481 (1992))), in most cases such claims are not sustained.(2)
For further information on this topic please contact Eric J Stock or Dennis Mendoza Quinio at Hogan Lovells US LLP by telephone (+1 212 918 3000), fax (+1 212 918 3100) or email ([email protected] or [email protected]).
Endnotes
(1) No 10-00124, 2010 WL 3488244 (ED La August 26 2010).
(2) See, for example, PSKS, Inc v Leegin Creative Leather Prods, Inc (615 F3d 412 (5th Cir 2010)): "the [lower] court also correctly rejected the claim that Brighton products constitute their own market. In rare circumstances, a single brand of a product or service can constitute a relevant market for antitrust purposes…But that possibility is limited to situations in which consumers are "locked in" to a specific brand by the nature of the product.".