The Tenth Circuit recently upheld a district court ruling for Owens & Minor Distribution (O&M) and Cardinal Health in a lawsuit brought by Suture Express. Suture Express alleged the defendants had engaged in illegal tying of suture-endo products through their use of bundled discount programs. The Tenth Circuit agreed with the district court’s dismissal of these claims, citing persuasive evidence that O&M and Cardinal lacked the market power needed to force a tie. The Tenth Circuit also concluded that Suture Express did not show antitrust injury.
The Tenth Circuit saw no reason why a consideration of market power would not be relevant in a rule of reason analysis, and it assumed “without deciding that a showing of tying market power is required under the rule of reason.” Suture Express argued that Cardinal’s and O&M’s shares of 31% and 38%, respectively, should be enough to survive a summary judgment under the rule of reason. However, the Tenth Circuit found that these market shares are “insufficient to counteract the other market realities present here that point to increased competition and lower prices.” Specifically, the Tenth Circuit cited evidence showing sales growth by other distributors and shrinking margins for O&M and Cardinal as inconsistent with the claim of market power. Additionally, the Tenth Circuit found that the bundled contracts had other possible explanations, and that bundle-to-bundle competition can result in a competitive marketplace.
Suture Express also argued that its expert’s discount attribution test showed 77% of defendants’ customers with bundled discount programs had incremental prices on suture-endo products that were below cost. However, the Tenth Circuit indicated it could find no support in the case law for using the discount attribution test to show coercion by a non-monopolist. (It contrasted the facts in this case to those in Eastman Kodak and PeaceHealth, where defendants were found to have market power.)
The Tenth Circuit further concluded that Suture Express failed to show antitrust injury. The Tenth Circuit cited evidence that almost half the suture-endo market was not constrained by bundled discount programs, but less than half of these unconstrained buyers purchased from Suture Express.
This decision affirms the principle that market share alone is not sufficient to establish market power.
This decision also may have important implications for how courts treat claims of below-cost bundled discounts, as it reinforces the need to show market power and harm to competition as part of these claims.