ROBERT M. DOW, Jr., District Judge.
Before the Court is Plaintiff's motion to reconsider the Court's Opinion and Order [46] granting Defendants' motions to dismiss. For the reasons set forth below, the Court denies Plaintiff's motion. Plaintiff is given until 10/26/2015 to file a motion for leave to file an amended complaint if it believes it can overcome the deficiencies identified below consistent with Fed. R. Civ. P. 11.
Although the Court summarized the facts in its previous Opinion and Order, Plaintiff has clarified the nature of its factual allegations and legal arguments, warranting a new discussion. Plaintiff alleges that Amtrak is a monopoly created by federal statute and America's only long-distance leisure passenger rail service. Compl. [1] ¶¶ 1, 10. VBR and Yankee are tour operators who sell Amtrak vacation travel packages. Id. ¶¶ 2, 4. The relevant geographic market is the United States, and the relevant product market is "the market for Amtrak leisure travel packages sold by tour operators to consumers, either utilizing an intermediary travel agent or selling directly to the consumer-vacationer themselves." Id. ¶¶ 8, 9.
Plaintiff alleges that tour operators purchase tickets from Amtrak and combine them with other components, such as hotels, meals, local transportation, tour guides, and admission to tourist attractions, to create a travel package. Id. ¶¶ 2, 4, 16-20. They sell these travel packages to consumers through two distributional channels. Id. ¶ 8. In the first distributional channel, Amtrak sells tickets to tour operators; tour operators then sell travel packages to travel agents; and travel agents resell the travel packages to consumers. Id. In the second distributional channel, Amtrak sells tickets to tour operators, who then sell their travel packages directly to consumers.
Amtrak owns its own brand of travel packages called Amtrak Vacations®. Id. ¶ 27. Since 2006, Amtrak has contracted with Yankee, its national tour operator, to run operations under its brand, compensating Yankee through a 19% commission on tickets. Id. ¶¶ 27, 28, 14. Meanwhile, other tour operators have operated their own brands, historically receiving a lower commission. Plaintiff alleges that toward the end of 2007, Amtrak partnered with a travel agent consortium, Vacation.com, to launch an online booking tool called Rail Agent. Id. ¶ 25. Travel agents and tour operators who were members of Vacation.com could book tickets directly with Amtrak through Rail Agent. Id. By booking through Rail Agent, they could earn an 8% commission on commissionable trains from Amtrak or a 10% commission if the booking were for a party of 20 or more. Id. They could receive up to 3% additional commission—a "commission override"—depending on the growth of their quarterly revenues from the sale of Amtrak tickets. Id. Plaintiff used these commissions to expand its tour offerings, grow its business, and increase Amtrak's sales, becoming one of Amtrak's "best promoters" based on "exceptional customer service and its own marketing investments and talent." Id. ¶¶ 40-42; see also id. ¶¶ 34, 36, 38.
In February 2013, Amtrak submitted a request for proposals for its national tour operator contract. Id. ¶ 78. Plaintiff alleges that it submitted a proposal including two key terms. Id. ¶ 79. "The first key term in VBR's proposal was a commission rate of 8%, not the 19% or better rate Amtrak had been paying Yankee." Id. ¶ 80. This lower commission allegedly could have saved Amtrak approximately $3 million in commissions over three years. Id. "The second key term in VBR's proposal was that the commission rate of 8% was to be paid to any travel agent or tour operator, under VBR's aegis or not, whenever they favored Amtrak with a rail ticket purchase." Id. ¶ 81.
Amtrak rejected VBR's proposal, opting for Yankee's instead. Id. ¶ 83. In its contract with Amtrak, Yankee agreed to provide extensive services, including, but not limited to, the following:
Compl. Ex. A [1-1] at 4-26. As compensation for Yankee's services, Amtrak agreed to provide a commission on the Amtrak rail and Amtrak accommodation portion of a reservation. Id. at 11. The term of the contract was five years. Id. at 12. The contract included an option for Amtrak to extend twice for one year each time. Id.
Plaintiff alleges that Amtrak chose unwisely. There was "no sensible reason to pay Yankee $3 million more for poorer performance in contradistinction to the better service that VBR had proven itself capable of, subjectively, and that would cost Amtrak and the American taxpayer $3 million less, objectively." Id. ¶ 84. In support of its allegation of Yankee's "lackluster customer service," Plaintiff states that "[o]n numerous occasions, when VBR had to contact Yankee to purchase, for example, Glacier National Park lodging that Yankee had locked up for some specific period, VBR would experience telephone hold times exceeding ten minutes, far longer than the 20- to 40-second hold times required of Yankee under the national tour operator contract." Id. ¶ 47.
When Plaintiff lost the contract, it contacted Amtrak and learned that "Amtrak had not even considered the (at least) $3 million difference!" Id. ¶ 85. Amtrak allegedly explained that it had identified Plaintiff's proposal as nonresponsive.
The complaint alleges antitrust injury occurring through the following mechanism:
Compl. ¶¶ 107, 131; see also id. ¶¶ 113, 119, 137, 143. Plaintiff also alleges that Amtrak's new commission system will cause antitrust injury by reducing Plaintiff's revenue and hampering its ability to "innovate through better technology and marketing." Id. ¶¶ 110, 125, 134, 141, 150.
Counts I and IV respectively allege that Yankee committed monopolization in violation the Sherman Act (15 U.S.C. §§ 1, 2
Plaintiff moves for reconsideration under Federal Rule of Civil Procedure 60(b), which creates grounds for relief from a "final judgment, order or proceeding." Fed. R. Civ. P. 60(b). Because the Court previously dismissed without prejudice, its Opinion and Order was not a "final judgment, order or proceeding," and Rule 60(b) is inapplicable. That said, the Court does have inherent authority to reconsider its own orders entered prior to final judgment. See Moses H. Cone Mem. Hosp. v. Mercury Const. Corp., 460 U.S. 1, 12 (1983) ("[E]very order short of a final decree is subject to reopening at the discretion of the district judge."); Diaz v. Indian Head, Inc., 686 F.2d 558, 562-63 (7th Cir. 1982) (stating that interlocutory orders may be "reconsidered and reviewed at any time prior to final judgment") (citation and internal quotation marks omitted); Sims v. EGA Prods., Inc., 475 F.3d 865, 870 (7th Cir. 2007) ("[N]onfinal orders are generally modifiable * * *." (citation omitted)) (Cudahy, J., concurring).
It is well-established that "[m]otions for reconsideration serve a limited function: to correct manifest errors of law or fact or to present newly discovered evidence." Conditioned Ocular Enhancement, Inc. v. Bonaventura, 458 F.Supp.2d 704, 707 (N.D. Ill. 2006) (quoting Caisse Nationale de Credit Agricole v. CBI Indus., Inc., 90 F.3d 1264, 1269 (7th Cir. 1996)). In regard to the "manifest error" prong, the Seventh Circuit has explained that a motion to reconsider is proper when "the Court has patently misunderstood a party, or has made a decision outside the adversarial issues presented to the Court by the parties, or has made an error not of reasoning but of apprehension." Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990) (citation and internal quotation marks omitted); see also Wiegel v. Stork Craft Mfg., Inc., 2012 WL 2130910, at *2 (N.D. Ill. June 6, 2012) ("Reconsideration is not appropriate where a party seeks to raise arguments that could have been raised in the original briefing."); Oto v. Metropolitan Life Ins. Co., 224 F.3d 601, 606 (7th Cir. 2000) ("A `manifest error' is not demonstrated by the disappointment of the losing party. It is the `wholesale disregard, misapplication, or failure to recognize controlling precedent.'"). And with respect to the second prong, the Seventh Circuit has explained that a motion to reconsider may be appropriate if there has been "a controlling or significant change in the law or facts since the submission of the issue to the Court." Bank of Waunakee, 906 F.2d at 1191 (citation and internal quotation marks omitted). Because the standards for reconsideration are exacting, our court of appeals has stressed that issues appropriate for reconsideration "rarely arise and the motion to reconsider should be equally rare." Id.
The purpose of a Rule 12(b)(6) motion to dismiss is not to decide the merits of the case; a Rule 12(b)(6) motion tests the sufficiency of the complaint. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). As previously noted, reviewing a motion to dismiss under Rule 12(b)(6), the Court takes as true all factual allegations in Plaintiff's complaint and draws all reasonable inferences in his favor. Killingsworth, 507 F.3d at 618. To survive a Rule 12(b)(6) motion to dismiss, the claim first must comply with Rule 8(a) by providing "a short and plain statement of the claim showing that the pleader is entitled to relief" (Fed. R. Civ. P. 8(a)(2)), such that the defendant is given "fair notice of what the * * * claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Second, the factual allegations in the claim must be sufficient to raise the possibility of relief above the "speculative level," assuming that all of the allegations in the complaint are true. E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555). "A pleading that offers `labels and conclusions' or a `formulaic recitation of the elements of a cause of action will not do.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). However, "[s]pecific facts are not necessary; the statement need only give the defendant fair notice of what the * * * claim is and the grounds upon which it rests." Erickson v. Pardus, 551 U.S. 89, 93 (2007) (citing Twombly, 550 U.S. at 555). The Court reads the complaint and assesses its plausibility as a whole. See Atkins v. City of Chicago, 631 F.3d 823, 832 (7th Cir. 2011); cf. Scott v. City of Chicago, 195 F.3d 950, 952 (7th Cir. 1999) ("Whether a complaint provides notice, however, is determined by looking at the complaint as a whole.").
The Court previously dismissed Plaintiff's complaint, finding that it failed plausibly to allege antitrust injury. To state an antitrust claim under the Sherman Act, a private plaintiff must allege antitrust injury—that is, "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990) (quotation marks omitted). More specifically, a plaintiff must "show that its loss comes from acts that reduce output or raise prices to consumers." Stamatakis Indus., Inc. v. King, 965 F.2d 469, 471 (7th Cir. 1992). The Court found that Plaintiff failed to plausibly allege antitrust injury because it alleged that Yankee would reduce prices without alleging that those prices would be predatory. The Court noted that "[l]ow prices benefit consumers regardless of how those prices are set, and so long as they are above predatory levels, they do not threaten competition. Hence, they cannot give rise to antitrust injury." Atl. Richfield Co., 495 U.S. at 340.
Plaintiff moved for reconsideration, arguing that it did not and need not allege predatory pricing because its theories of anticompetitive conduct were a refusal to deal, denial of an essential facility, and exclusive dealing, not predatory pricing. Mot. to Recon. [47] at 7, 8. Concerned that it may have misapprehended Plaintiff's contentions, the Court allowed full briefing on the motion. See [52, 57]. Given its clarified understanding of the factual allegations, the Court now addresses whether Plaintiff's theory of anticompetitive conduct plausibly gives rise both to antitrust violations and antitrust injury.
Counts I and II allege violations of § 2 of the Sherman Act, which prohibits monopolization, attempted monopolization, or combinations or conspiracies to monopolize. 15 U.S.C. § 2. Monopolization requires (1) monopoly power and (2) anticompetitive conduct designed to maintain or enhance that power improperly. Olympia Equip. Leasing Co. v. W. Union Tel. Co., 797 F.2d 370, 373 (7th Cir. 1986). Attempted monopolization requires a defendant to engage in predatory or anticompetitive conduct with the specific intent to monopolize and a dangerous probability of achieving monopoly power. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993). Conspiracy to monopolize requires the existence of a combination or conspiracy, overt acts in furtherance of the conspiracy, an effect upon a substantial amount of interstate commerce, and the existence of specific intent to monopolize. Great Escape, Inc. v. Union City Body Co., 791 F.2d 532, 540-41 (7th Cir. 1986). While § 2 creates a cause of action for monopolization, attempts to monopolize, and conspiracies to monopolize, it does not create one for conspiracies to attempt to monopolize.
Regardless of whether a plaintiff alleges monopolization, attempted monopolization, or conspiracy to monopolize, § 2 requires a plausible allegation of anticompetitive conduct. See Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004) ("To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct."). Plaintiff contends that Amtrak violated § 2 through a refusal to deal, the denial of an essential facility, and exclusive dealing. The Court addresses (and rejects) each theory in turn and further explains why Plaintiff fails to state a claim under the Supreme Court's Pacific Bell decision or to plausibly allege antitrust injury.
Businesses are generally "free to choose the parties with whom they will deal, as well as the prices, terms, and conditions of that dealing." Pac. Bell Tel. Co. v. Linkline Commc'ns, Inc., 555 U.S. 438, 448 (2009). This right to refuse to deal exists for three reasons. First, it encourages competition: "Firms may acquire monopoly power by establishing an infrastructure that renders them uniquely suited to serve their customers. Compelling such firms to share the source of their advantage is in some tension with the underlying purpose of antitrust law, since it may lessen the incentive for the monopolist, the rival, or both to invest in those economically beneficial facilities." Trinko, 540 U.S. at 407-08. Second, enforced sharing "requires antitrust courts to act as central planners, identifying the proper price, quantity, and other terms of dealing—a role for which they are ill suited." Id. at 408; accord Pac. Bell, 555 U.S. at 452. Third, "compelling negotiation between competitors may facilitate the supreme evil of antitrust: collusion." Trinko, 540 U.S. at 408.
For these reasons, the Supreme Court has been "very cautious" in recognizing limited exceptions to the right not to deal. Trinko, 540 U.S. at 408. The first exception requires predatory pricing, meaning "below-cost prices that drive rivals out of the market and allow the monopolist to raise its prices later and recoup its losses." Pac. Bell, 555 U.S. at 448. The second exception requires a refusal to deal in violation of Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 605 (1985). Closely related is the essential facilities doctrine, a controversial concept articulated in MCI Commc'ns Corp. v. Am. Tel. & Tel. Co., 708 F.2d 1081 (7th Cir. 1983). See Trinko, 540 U.S. at 411 ("We have never recognized such a doctrine * * *."). If Plaintiff's claim is cognizable at all, it must fall within one or both of the latter two exceptions.
Aspen Skiing created a limited refusal-to-deal exception located "at or near the outer boundary of § 2 liability." Trinko, 540 U.S. at 399. The case involved a ski area consisting of four mountain areas, three owned by the defendant and one owned by the plaintiff. As part of a joint venture, the parties issued a joint multiple-day ticket covering all four mountains. The defendant subsequently demanded a higher percentage of revenue. When the plaintiff objected, the defendant withdrew from the deal. Faced with the prospect of declining revenue, the plaintiff reattempted to negotiate a deal, even offering to buy defendant's tickets at retail price. But the defendant refused. The plaintiff consequently sued under the Sherman Act.
The Supreme Court affirmed the judgment against the defendant because the defendant's "unilateral termination of a voluntary (and thus presumably profitable) course of dealing suggested a willingness to forsake short-term profits to achieve an anticompetitive end." Trinko, 540 U.S. at 409. In particular, the "defendant's unwillingness to renew the ticket even if compensated at retail price revealed a distinctly anticompetitive bent." Id. The evidence thus supported an inference that the defendant "was not motivated by efficiency concerns and that it was willing to sacrifice short-run benefits and consumer goodwill in exchange for a perceived long-run impact on its smaller rival." Aspen Skiing, 472 U.S. at 610-11. Put differently, the evidence suggested that the defendant's decision was "irrational but for its anticompetitive effect." Novell, Inc. v. Microsoft Corp., 731 F.3d 1064 (10th Cir. 2013); see also 3B Phillip E. Areeda & Herbert Hovenkamp, ANTITRUST LAW ¶ 772, at 223 (3d ed. 2008) (the refusal must be "irrational" but for its anticompetitive tendencies). Since deciding Aspen Skiing, the Supreme Court has declined to recognize any other cases falling within this "limited exception." Trinko, 540 U.S. at 399.
Plaintiff's claim lacks essential features of Aspen Skiing. First, unlike the defendant there, Amtrak has not terminated its dealings with Plaintiff. On the contrary, it continues to offer Amtrak tickets to Plaintiff—just not at Plaintiff's desired price. Put differently, the commissions are the functional equivalent of a contingent discount offered to wholesalers. When Amtrak removed Plaintiff's commission, it removed the discount, raising the cost of Plaintiff's tickets from wholesale to retail prices. In direct contrast, the defendant in Aspen Skiing refused to sell Plaintiff tickets "even if compensated at retail price." Trinko, 540 U.S. at 409. Thus, while Aspen Skiing involved an absolute refusal to deal, this case involves a refusal to deal at Plaintiff's desired (below-retail) price.
A claim involving a refusal to deal at a certain price is ill-suited to judicial resolution. "If forced sharing were the order of the day, courts would have to pick and choose the applicable terms and conditions. That would not only risk judicial complicity in collusion and dampened price competition. It would also require us to become `central planners,' a role for which we judges lack many comparative advantages and a role in which we haven't always excelled in the past." Novell, 731 F.3d at 1073 (citing Trinko, 540 U.S. at 407-08; 3B Phillip E. Areeda & Herbert Hovenkamp, ANTITRUST LAW ¶ 772, at 220 (3d ed. 2008)). Plaintiff's request that the Court create an equal playing field by invalidating the Amtrak-Yankee contract implicates precisely these concerns. If the Court prohibited unequal commissions, Amtrak could easily eliminate all commissions, pay Yankee through a separate mechanism, and achieve the identical effect. In other words, implementing Plaintiff's request could degenerate into a promethean effort to supervise Amtrak's dealings with tour operators—a task normally addressed by regulators, not courts.
Second, Plaintiff's claim is distinguishable from Aspen Skiing because, by attaching the Yankee-Amtrak contract to the complaint, Plaintiff itself pleads valid business reasons for Amtrak to (1) select Yankee as its tour operator and (2) pay Yankee through commissions. As to the first choice, Yankee agreed in the contract to provide Amtrak extensive services in exchange for payment.
Plaintiff contends that the Amtrak-Yankee contract was nevertheless anticompetitive for three reasons. First, Yankee provided worse customer service than Plaintiff. The Court is unpersuaded by this conclusory allegation; Plaintiff supports it only by contending that, when it called Yankee, it experienced hold times of more than ten minutes. Id. ¶ 47. It is not the judicial role to evaluate whether VBR or Yankee has better customer service. Second, Plaintiff contends that Amtrak's four reasons for finding its proposal nonresponsive were pretextual. Even if that were true, it only explain why Amtrak rejected Plaintiff's proposal, not why Amtrak lacked procompetitive reasons to choose Yankee. Third, Plaintiff argues that its offer cost $3 million less over the first three years. Because Plaintiff provides no explanation of what services it offered Amtrak, the $3 million differential fails to explain why its offer was more cost-effective than Yankee's, even if it was cheaper.
Most importantly, none of these reasons is persuasive because the question is not whether Amtrak chose the most competitive offer but whether it had any procompetitive purpose. It is not whether Amtrak optimally (or even prudently or competently) exercised its business judgment but whether it had any valid business reason. Antitrust law does not authorize courts (or disappointed bidders) to impose their business judgments on market players. Aspen Skiing's limited exception authorizes intervention only when a defendant's decision is "irrational but for its anticompetitive effect." Novell, 731 F.3d at 1075; see also 3B Phillip E. Areeda & Herbert Hovenkamp, ANTITRUST LAW ¶ 772, at 223 (3d ed. 2008) (the refusal must be "irrational" but for its anticompetitive tendencies).
In sum, by attaching the Amtrak-Yankee contract to its complaint, Plaintiff provides numerous valid business reasons for the contract that it seeks to undo. It then fails to address, let alone plausibly rebut, those reasons in the body of its complaint. "It is a well-settled rule that when a written instrument contradicts allegations in the complaint to which it is attached, the exhibit trumps the allegations." N. Indiana Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 454 (7th Cir. 1998); see also Matter of Wade, 969 F.2d 241, 249 (7th Cir. 1992) ("A plaintiff may plead himself out of court by attaching documents to the complaint that indicate that he or she is not entitled to judgment."). Accordingly, Plaintiff pleads itself out of court based on the information in the contract.
Because Plaintiff does not allege a refusal to deal that was "irrational but for its anticompetitive effects," it fails to state a claim within the outer bounds of § 2 liability recognized in Aspen Skiing.
Finding no plausible refusal to deal claim under Aspen Skiing, the Court now considers whether Plaintiff states an essential facilities claim, to whatever extent such a claim may be distinct from a refusal-to-deal claim. See Trinko, 540 U.S. at 410-11 (suggesting that the essential facilities doctrine falls partly if not wholly within the refusal-to-deal rubric); Olympia, 797 F.2d at 377 ("[Aspen Skiing] is like the essential-facility cases in that the plaintiff could not compete with the defendant without being able to offer its customers access to the defendant's larger facilities.").
In short, the essential facilities doctrine, as articulated in MCI Commc'ns Corp. v. Am. Tel. & Tel. Co., 708 F.2d 1081 (7th Cir. 1983), says that "firms controlling an essential facility [have] the obligation to make the facility available on non-discriminatory terms." MCI, 708 F.2d at 1132. The purpose of the doctrine is to prevent a monopolist from using its "control of an essential facility (sometimes called a `bottleneck') [to] extend monopoly power from one stage of production to another, and from one market into another." Id. at 1132.
As an initial matter, the Court notes that the viability of the essential facilities doctrine is in question. The doctrine "has been criticized as having nothing to do with the purposes of antitrust law," in part because consumers "are not better off if the natural monopolist is forced to share some of his profits with potential competitors." Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic, 65 F.3d 1406, 1413 (7th Cir. 1995). As Professors Areeda and Hovenkamp have explained,
3B Phillip E. Areeda & Herbert Hovenkamp, ANTITRUST LAW ¶ 773c, at 248 (3d ed. 2008) ("Lest there be any doubt, we state our belief that the essential facilities doctrine is both harmful and unnecessary and should be abandoned").
With that in mind, the Seventh Circuit's analysis in Schor v. Abbott Labs., 457 F.3d 608, 612 (7th Cir. 2006)—a factually similar case not involving the essential facilities doctrine— becomes informative here. Schor involved a defendant with a patent on a drug called Norvir. In additional to selling Norvir, the defendant also sold Kaletra, a combination drug that included Norvir as one component. The defendant allegedly monopolized the market for combination drugs by charging too much for Norvir alone and too little for Kaletra; it allegedly planned to induce patients to buy Kaletra, drive other combination vendors out of business, and permit the defendant to increase the price of both Kaletra and Norvir. The Seventh Circuit affirmed dismissal for failure to state a claim, reasoning that
Schor, 457 F.3d at 612.
Although Schor was not an essential facilities or refusal-to-deal claim, its reasoning is applicable by analogy. As in Schor, Plaintiff here alleges that Amtrak charges tour operators other than Yankee too much for the input (the ticket) and that Yankee will therefore charge consumers too little for the combination (Amtrak Vacations®), so that it can drive competitors out of business and then sell Amtrak Vacations® for more. To be sure, the facts alleged here are different in one respect: Plaintiff alleges that Amtrak created two input prices—one for Yankee and another for everyone else—and that Yankee, not Amtrak, sells Amtrak Vacations®. But the same economic principles apply because the commissions were payment for services that only Yankee provided to Amtrak; Amtrak could have created one high price for all tour operators, putting itself in the position of the defendant in Schor by acquiring Yankee or creating an in-house tour operator. Instead, it contracted with Yankee and paid it through commissions. Its decision to accomplish via contract what it could have done by acquiring Yankee or creating an in-house tour operator does not plausibly implicate the "prime concern" of the essential facilities doctrine, which is to prevent a monopolist from using its monopoly power in one market "as a lever to impede or destroy competition in other markets." MCI, 708 F.2d at 1144. Thus, the viability of Plaintiff's claim is questionable under Schor.
But even assuming that the doctrine still stands, Plaintiff fails to state an essential facilities claim. To state an essential facilities claim, a plaintiff must allege four elements: "(1) control of the essential facility by a monopolist; (2) a competitor's inability practically or reasonably to duplicate the essential facility; (3) the denial of the use of the facility to a competitor; and (4) the feasibility of providing the facility." MCI, 708 F.2d at 1132-33. Where there is a "legitimate business or technical reason" to deny access, there is no essential facilities claim. MCI, 708 F.2d at 1133.
Plaintiff's essential facilities claim is problematic for three reasons. First, it improperly defines the essential facility as Amtrak tickets at wholesale prices, rather than Amtrak tickets alone. Case law does not support a definition of an essential facility that includes a price term. It generally identifies essential facilities as the facilities alone,
Second, Plaintiff fails to plausibly allege the third element of an essential facilities claim—namely, "the denial of the use of the facility to a competitor." MCI, 708 F.2d at 1132-33. Relevant here is the degree of access required to state an essential facilities claim: no access or merely unequal access? United States v. Terminal R.R. Ass'n of St. Louis, 224 U.S. 383 (1912), the progenitor of the doctrine, required equal access to an essential facility. Since Terminal Railrod, however, the Supreme Court has made clear that to the extent the essential facilities doctrine is viable, "the indispensable requirement for invoking [it] is the unavailability of access to the `essential facilities'; where access exists, the doctrine serves no purpose." Trinko, 540 U.S. at 411. Consistent with this statement, Seventh Circuit case law has required an absolute denial or its functional equivalent. MCI involved AT&T's complete refusal to interconnect MCI to the local distribution facilities of Bell operating companies—a refusal that precluded MCI from offering certain services to its customers. MCI, 708 F.2d at 1132. Similarly, in Fishman v. Estate of Wirtz, 807 F.2d 520, 539 (7th Cir. 1986), the defendants' "discriminatory" terms were tantamount to a complete denial of access.
Plaintiff fails to allege a complete denial of access or its functional equivalent. More specifically, it fails to explain why Amtrak's commission to Yankee precludes Plaintiff from purchasing Amtrak tickets, or why access at retail prices amounts to a de facto denial of access (and perhaps it is precisely for this reason that Plaintiff attempts to define the essential facility as the tickets at wholesale prices). In effect, Plaintiff asks not for access but for access on its own terms. The essential facilities doctrine is not amenable to this demand
Plaintiff's citation to Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) is unpersuasive, regardless of whether the Court construes it as an essential facilities case or a refusal to deal case. Kodak imposes a duty to deal where changing an existing course of distribution enables a firm to "take advantage of customers' sunk costs":
Schor, 457 F.3d at 614. In contrast to copiers and maintenance service, both VBR and Yankee sell Amtrak tickets within the packages, precluding any equivalent lock-in effect.
Third, as explained above, Plaintiff pleads itself out of court by alleging a "legitimate business or technical reason" (MCI, 708 F.2d at 1133) for Amtrak's conduct.
For these reasons, Plaintiff fails to state an essential facilities claim.
Plaintiff also alleges a theory of anticompetitive conduct based on exclusive dealing.
The contention that the Amtrak-Yankee agreement forecloses competition is implausible for the reasons explained by the Second Circuit in E & L Consulting, Ltd. v. Doman Indus. Ltd., 472 F.3d 23, 26-29 (2d Cir. 2006), which parallel in many respects the Seventh Circuit's analysis in Schor. E & L concerned Doman, a defendant with a monopoly on green hem-fir lumber, and E & L, one of its distributors. Doman terminated its agreement with E & L and entered an exclusive agreement with an alternative distributor. The Second Circuit affirmed the dismissal of E & L's complaint for failure to state a claim under § 1 or § 2, reasoning that "such a vertical arrangement provides no monopolistic benefit to Doman [the defendant] that it does not already enjoy and would not continue to enjoy if the exclusive distributorship were enjoined." E & L, 472 F.3d at 29. It added:
Id. at 29-30 (internal citations omitted). The same is true here. Amtrak has not increased its surplus by hiring Yankee and paying it in the form of an exclusive commission. It could have accomplished the same effect by acquiring a tour operator or creating its own in-house tour operator.
In addition, the scenario presented here and in E & L is distinguishable from those in the cases cited by Plaintiff. Here and in E & L, a monopolist allegedly deals exclusively with one downstream player. In contrast, LePage's Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003), and ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254 (3d Cir. 2012), involve downstream buyers purchasing exclusively from one upstream seller, threatening to foreclose opportunities to other sellers. The second scenario threatens to expand the seller's market share, whereas the scenario here and in E & L provides the seller no new surplus.
Plaintiff also fails to state a claim under Pac. Bell Tel. Co. v. Linkline Commc'ns, Inc., 555 U.S. 438 (2009). Although neither party cites it, Pacific Bell is instructive. Pacific Bell was brought by internet service providers (ISPs) that sold DSL to retail customers. The defendant, AT&T, owned infrastructure and facilities that the ISPs needed to provide DSL to their customers. AT&T operated at the wholesale and retail levels, providing ISPs with wholesale DSL transport service and selling DSL directly to retail consumers. The ISPs sued AT&T under § 2 of the Sherman Act, alleging a novel price-squeezing claim. Specifically, they contended that AT&T set a high price for wholesale DSL transport service and a low price for its own retail DSL service, placing the ISPs at a competitive disadvantage and squeezing their profit margins. The Supreme Court affirmed dismissal for failure to state a claim, finding no violation either in the wholesale or retail markets.
At the wholesale level, the Court found no antitrust duty to deal because any such duty arose only from FCC regulations. See Pacific Bell, 555 U.S. at 450. Under Trinko, "a firm with no duty to deal in the wholesale market has no obligation to deal under terms and conditions favorable to its competitors." Id. at 450-51. Accordingly, "AT&T was not required to offer this service at the wholesale prices the plaintiffs would have preferred," and its wholesale prices did not violate the Sherman Act. Id. at 451.
At the retail level, the Pacific Bell plaintiffs failed to state a claim because they only alleged low retail prices, not predatory prices. As this Court explained extensively in its previous Opinion and Order, antitrust law encourages rather than prohibits low prices. "[C]utting prices in order to increase business often is the very essence of competition." Pacific Bell, 555 U.S. at 451 (quoting Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 594 (1986)). Thus, "[i]n cases seeking to impose antitrust liability for prices that are too low, mistaken inferences are `especially costly, because they chill the very conduct the antitrust laws are designed to protect.'" Id. (quoting Matsushita, 475 U.S. at 594). The Supreme Court has thus "carefully limited the circumstances under which plaintiffs can state a Sherman Act claim by alleging that prices are too low." Id. Specifically, a plaintiff must demonstrate that "(1) the prices complained of are below an appropriate measure of its rival's costs; and (2) there is a dangerous probability that the defendant will be able to recoup its investment in below-cost prices." Id. (quoting Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993) (internal quotation marks omitted)).
Taking into account both retail and wholesale prices, the Supreme Court held that combined effect was a failure to state a claim:
Pac. Bell Tel. Co., 555 U.S. at 457 (internal citations omitted).
Like the plaintiff in Pacific Bell, Plaintiff fails to state a claim; it fails to allege a duty to deal at the wholesale level, and it fails to allege predatory pricing at the retail level. The facts are not identical insofar as Yankee and Amtrak are two separate entities, whereas in Pacific Bell, AT&T alone operated at the wholesale and retail levels. However, this difference is immaterial; again, Amtrak could have accomplished the same effect by acquiring Yankee or creating an in-house tour operator.
The Court previously dismissed Plaintiff's claim because it failed to allege predatory prices. Instead of amending its complaint, Plaintiff moved to reconsider, expressly disclaiming a predatory pricing scheme and continuing to argue that Yankee's commission will enable it to drop prices and drive competitors out of business. Unless Plaintiff can allege that Yankee will adopt below-cost prices with a dangerous probability of recoupment, it can only show lower prices that benefit consumers. Plaintiff may plausibly allege reduced profits, but that is not enough to allege an antitrust violation under § 2.
For many of the same reasons, the Court continues to believe that Plaintiff fails to allege antitrust injury—in other words, "that its loss comes from acts that reduce output or raise prices to consumers." Stamatakis, 965 F.2d at 471. To the extent that Plaintiff suggests that reduced innovation without reduced output or increased prices creates antitrust injury, the Court is unpersuaded. First, it is well-established that either increased price or reduced output is necessary to show antitrust injury. See, e.g., Tri-Gen Inc. v. Int'l Union of Operating Engineers, Local 150, AFL-CIO, 433 F.3d 1024, 1031 (7th Cir. 2006) (quoting Stamatakis, 965 F.2d at 471)). Second, Plaintiff cites case law that did not involve lone allegations of reduced innovation but also increased prices or reduced output. See Free FreeHand Corp. v. Adobe Sys. Inc., 852 F.Supp.2d 1171, 1185 (N.D. Cal. 2012). Third, Plaintiff's theory that an inability to innovate constitutes antitrust injury is a variation on a theme already rejected above. Plaintiff allegedly wishes to innovate by reinvesting profits back into the company—that is, by using profits to develop new products. It contends that it will have less money to develop its products because Yankee will reduce prices, consumers will choose Yankee's products over Plaintiff's products, and Plaintiff's profits will drop. But as long as Yankee's prices are not predatory, antitrust law is not concerned with Plaintiff's lower profit margins. Accordingly, Plaintiff fails to allege antitrust injury.
Count III alleges a violation under § 1 of the Sherman Act, which prohibits contracts or conspiracies in restraint of trade or commerce. 15 U.S.C. § 1. To adequately state a claim under § 1, a plaintiff must allege: (1) a contract, combination, or conspiracy; (2) a resultant unreasonable restraint of trade in the relevant market; and (3) an accompanying injury. Denny's Marina, Inc. v. Renfro Prods., Inc., 8 F.3d 1217, 1220 (7th Cir. 1993). "There are two standards for evaluating whether an alleged restraint of trade is unreasonable: the rule of reason and the per se rule." Id. at 1220. Regardless of which rule applies, the focus is the same. Both rules "are employed to form a judgment about the competitive significance of the restraint." Nat'l Collegiate Athletic Ass'n v. Bd. of Regents of Univ. of Oklahoma, 468 U.S. 85, 103 (1984) (citation and internal quotation marks omitted).
Viewed under § 1 or § 2, the economics of Plaintiff's factual allegations remain the same.
Because Illinois law directs courts to "use the construction of the federal law by the federal courts as a guide in construing" the Illinois Antitrust Act "when the wording [of the Act] is identical or similar to that of federal antitrust law" (740 ILCS 10/11), courts have held that Illinois Antitrust Act claims "will stand or fall" with federal Sherman Act claims based on the same underlying facts and legal theories. Int'l Equip. Trading, Ltd. v. AB Sciex LLC, 2013 WL 4599903, at *3 (N.D. Ill. Aug. 29, 2013). Plaintiff has provided no reason either in its response to Defendants' motions to dismiss or in its motion to reconsider for the Court to find otherwise. Accordingly, the Court's conclusion that the Sherman Act claims are subject to dismissal portends the same result for Plaintiff's state law claims under the Illinois Act.
For the reasons stated above, the Court denies Plaintiff's motion to reconsider [46]. Plaintiff is given until 10/26/2015 to move for leave to file an amended complaint if it believes it can overcome the deficiencies identified below consistent with Fed. R. Civ. P. 11.
