IQ Dental Supply, Inc. v. Henry Schein, Inc.

924 F.3d 57 (2019) United States Court of Appeals for the Second Circuit 2019-05-10

civil; dental-supply distributor sued the three dominant distributors under § 1 and state law, alleging they conspired to boycott an online sales portal, its partner dental associations and the plaintiff itself; district court dismissed for lack of antitrust standing; CA2 affirmed as to the indirect-boycott allegations and vacated and remanded as to the direct boycott of the plaintiff (the price-fixing claim was not pursued on appeal) (result: mixed)

Facts

  1. 1 Concerted action ("contract, combination ... or conspiracy") between separate economic decisionmakers satisfied pleaded
    But sometime around April 2014 both DDS and Arnold stopped selling through SourceOne because the Defendants pressured dental-supply manufacturers to stop supplying DDS and Arnold due to their arrangement with SourceOne.
  2. 1 Concerted action ("contract, combination ... or conspiracy") between separate economic decisionmakers satisfied pleaded
    This argument fails to recognize that the allegations of direct boycott are part of the Defendants' vast and multipronged attack on SourceOne's platforms, the SDAs, the distributors, and dental offices.
  3. 1 Concerted action ("contract, combination ... or conspiracy") between separate economic decisionmakers satisfied pleaded
    IQ has alleged that the Defendants, as part of their elaborate and extensive scheme to force SourceOne and associated entities out of business, exerted pressure on some of IQ's suppliers to boycott IQ.
  4. 7 Private antitrust injury and fact of damage (Clayton Act §§ 4, 16; Brunswick Corp. v. Pueblo Bowl-O-Mat) satisfied pleaded
    SourceOne's need for a distributor to supply its online portals opened the door for IQ.
  5. 7 Private antitrust injury and fact of damage (Clayton Act §§ 4, 16; Brunswick Corp. v. Pueblo Bowl-O-Mat) satisfied pleaded
    A plaintiff raising an antitrust claim must demonstrate antitrust injury to " 'ensure[ ] that the harm claimed by the plaintiff corresponds to the rationale for finding a violation of the antitrust laws in the first place.' " Gatt , 711 F.3d at 76 (quoting Atl. Richfield Co. v. USA Petroleum Co ., 495 U.S. 328, 342, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990) ).
  6. 7 Private antitrust injury and fact of damage (Clayton Act §§ 4, 16; Brunswick Corp. v. Pueblo Bowl-O-Mat) satisfied pleaded
    IQ has adequately pleaded an antitrust injury in accordance with our decision in Gatt.
  7. 7 Private antitrust injury and fact of damage (Clayton Act §§ 4, 16; Brunswick Corp. v. Pueblo Bowl-O-Mat) satisfied pleaded
    Instead, IQ alleges that the Defendants' actions have decreased the number of sales it has been able to make through SourceOne-affiliated websites.
  8. 7 Private antitrust injury and fact of damage (Clayton Act §§ 4, 16; Brunswick Corp. v. Pueblo Bowl-O-Mat) satisfied pleaded
    Assuming that IQ is operating in a market affected by anticompetitive conduct, the question of actual injury becomes whether IQ is worse off than it would be if the market were free of anticompetitive forces.
  9. 7 Private antitrust injury and fact of damage (Clayton Act §§ 4, 16; Brunswick Corp. v. Pueblo Bowl-O-Mat) satisfied pleaded
    IQ has alleged that the Defendants' anticompetitive conduct affected the market, and that, after it entered the market, its sales through SourceOne suffered as a result.
  10. 8 Antitrust standing / efficient enforcer test (Associated General Contractors; Illinois Brick) satisfied pleaded
    A four-factor test is employed to determine whether an antitrust plaintiff is an efficient enforcer; thus we must evaluate: (1) "the directness or indirectness of the asserted injury," (2) "the existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement," (3) "the speculativeness of the alleged injury," and (4) "the difficulty of identifying damages and apportioning them among direct and indirect victims so as to avoid duplicative recoveries."
  11. 8 Antitrust standing / efficient enforcer test (Associated General Contractors; Illinois Brick) not pleaded
    The first efficient-enforcer factor requires a direct injury: "Directness in the antitrust context means close in the chain of causation."
  12. 8 Antitrust standing / efficient enforcer test (Associated General Contractors; Illinois Brick) not pleaded
    By contrast, the Defendants here sought to put SourceOne-not IQ-out of business by undermining SourceOne's new and disruptive online sales model.
  13. 8 Antitrust standing / efficient enforcer test (Associated General Contractors; Illinois Brick) not pleaded
    And SourceOne has in fact sued the Defendants seeking to enforce the antitrust laws.
  14. 8 Antitrust standing / efficient enforcer test (Associated General Contractors; Illinois Brick) not pleaded
    This is IQ's most promising claim that it is a properly motivated plaintiff: while SourceOne and the SDAs earn a commission on the sales, neither earns a profit.
  15. 8 Antitrust standing / efficient enforcer test (Associated General Contractors; Illinois Brick) not pleaded
    The damages to which IQ lays claim-lost profits from sales it would have made through SourceOne-affiliated websites absent the Defendants' anticompetitive conduct-are exactly the same damages SourceOne's initial suppliers, DDS and Arnold, could have claimed.
  16. 8 Antitrust standing / efficient enforcer test (Associated General Contractors; Illinois Brick) not pleaded
    In sum, we agree with the district court that because IQ is not positioned to efficiently enforce the claims that the Defendants harmed it by conspiring to boycott SourceOne-affiliated websites and the SDAs, IQ does not have antitrust standing to bring these claims.
  17. 8 Antitrust standing / efficient enforcer test (Associated General Contractors; Illinois Brick) satisfied pleaded
    We find, with respect to these particular allegations, that IQ is an efficient enforcer and thus has antitrust standing to proceed with its direct boycott claim against the Defendants.
  18. 8 Antitrust standing / efficient enforcer test (Associated General Contractors; Illinois Brick) satisfied pleaded
    IQ claims that the Defendants directly pressured manufacturers to stop selling their products to IQ, and that the Defendants sought to damage IQ's business reputation with its customers.
  19. 8 Antitrust standing / efficient enforcer test (Associated General Contractors; Illinois Brick) satisfied pleaded
    The value of each lost opportunity might be calculated based on IQ's historical sales data without undue speculation.
  20. 8 Antitrust standing / efficient enforcer test (Associated General Contractors; Illinois Brick) satisfied pleaded
    Unlike the indirect claims, any damages in connection with the Defendants' direct boycott of IQ could not also be claimed by Arnold and DDS.