On January 25, 2007, the Eighth Circuit affirmed the district court’s decision in HDC Medical, Inc. v. Minntech Corp., a case discussed in Issue 2 (pages 6-8). As discussed previously, the case involved allegations that Minntech violated the antitrust laws by abusing its monopoly position in multiple-use dialyzers and attempting to achieve a monopoly. HDC contended that Minntech engaged in conduct that effectively precluded the use of its competing software and germicide products with Minntech’s multiple-use dialyzer reprocessing device.
As the Eighth Circuit noted, the monopolization allegations hinged on the scope of the relevant product market in which to analyze defendant’s market position and conduct. HDC argued that the market should be limited to multiple-use dialyzers, where Minntech had a substantial share. HDC relied on the significant price difference between single- and multiple-use dialyzers to support its position. The Circuit Court disagreed with HDC, and upheld the lower court’s conclusion that there was an overall dialyzer market. Relying on Supreme Court precedent, the court noted that while a price difference is a factor in analyzing relevant markets, that fact alone is insufficient to infer separate markets. In defining a product market, courts look to demand-side factors, such as interchangeability of use. In this case plaintiff HDC failed to offer evidence beyond the price differential, such as different end uses, to support its position. Because there was no evidence that Minntech possessed monopoly power in the overall market, the court affirmed the district court’s summary judgment ruling on the monopolization charge.
Similarly, the court upheld the dismissal of the attempted monopolization claims, which principally were based on two allegations: (1) that Minntech’s warranty policy was anticompetitive (Minntech announced that it would not honor its warranty if another reprocessing solution were used in its machine); and (2) that Minntech altered its product design in order to harm competition (i.e., created a “deliberate incompatibility”). Minntech had explained that these changes were made to increase ease of use and patient safety, which the court recognized as valid business justifications. Because the court determined that there was a valid business justification for Minntech’s allegedly predatory actions, summary judgment was deemed appropriate.
This case highlights the importance in properly defining a relevant market and presenting evidence regarding demand-side substitutability – or cross-elasticity of demand – to support one’s position.
Courts and antitrust agencies are concerned about the ability of potentially competing products to constrain anticompetitive conduct, and thus require evidence beyond price differences to demonstrate likely consumer responses. The case also underscores the reluctance courts have to question firms’ design choices, and the importance of documenting one’s business justifications for conduct that may be challenged.