On February 23, 2009, the Federal District Court for the Southern District of New York dismissed a lawsuit brought by, Synergetics, USA, Inc. alleging that Alcon Laboratories, Inc. and Alcon, Inc. (collectively, “Alcon”) had engaged in illegal tying and predatory pricing in the eye surgery device market.
Approximately 85 percent of vitreoretinal surgeons in the United States use Alcon’s vitrectomy machine, called Accurus. The machine requires the use of Alcon-patented disposable cassettes in order to work properly. Alcon also makes a stand-alone light source and a light pipe used to deliver light into the eye during the surgery. Synergetics competes with Alcon in the market for light sources and light delivery systems. Alcon sells its accessory products in three optional packages: the “AccuPak,” comprised of a cassette with tubing and sometimes a surgical probe; the “Total Plus pack,” which includes both a cassette and a light pipe, among other products; and the “Custom- Pak,” which includes the Total Plus pack and additional items that the purchaser desires.
In a complaint filed in April 2008, Synergetics alleged that Alcon had taken advantage of its dominant market position in cassette sales by tying its light pipes to its cassettes. Synergetics claimed that Alcon does not market its cassettes without the light pipe (i.e., it did not promote or otherwise publicize the availability of AccuPak), had refused to sell the Total Plus pack without the light pipe, had denied that the two products can be purchased separately, and had priced the products such that purchasing the cassette alone cost more than purchasing the cassette bundled with a light pipe, essentially creating an “economic tie.” Synergetics further alleged that Alcon’s bundled pricing scheme constituted predatory pricing because it provides the light pipes below cost.
The district court held that Synergetics failed to put forth evidence to support the second essential element of its tying claim: actual coercion. In order to allege illegal tying in the Second Circuit, a plaintiff must plead facts to show (1) a tying and tied product; (2) actual coercion by the seller that forced a buyer to purchase the tied product; (3) economic power in the tying product market sufficient to coerce a buyer (4) anticompetitive effects in the tied market; and (5) involvement of a ‘not insubstantial’ amount of interstate commerce. According to the court, the plaintiff failed “to identify a single customer who has tried to purchase the [package without the light pipe] and been refused or a single customer who would have purchased a light pipe elsewhere but for Alcon’s putative coercion.” Furthermore, though Synergetics alleged that Alcon’s pricing scheme forced customers to purchase both items, it failed to provide enough details of the pricing scheme to support the allegation.
The court also dismissed Synergetics’ claim for predatory pricing. Under the Supreme Court’s Brooke Group test, predatory pricing requires proof that (1) the defendant’s prices are below an appropriate measure of its costs; and (2) the defendant has a dangerous probability of recouping its losses from pricing the product below cost. Although the plaintiff alleged that Alcon sold its light pipes for “free or at negative cost,” it did not explain how the prices were determined; the court reasoned that without more evidence such statements were merely conclusory. Synergetics’ complaint also lacked facts to support its assertion that Alcon would recoup its losses. The court did grant Synergetics leave to amend, however.
The Synergetics decision demonstrates the importance for plaintiffs of properly pleading their cases. Although the standard for proper pleadings is not high, the Federal Rules of Civil Procedure require plaintiffs to allege some facts to support each element of their claims. Conclusory statements and speculative accusations are simply insufficient, and they risk dismissal of a complaint before discovery even begins.