WYNN, Circuit Judge:
Under the Sherman Act, a plaintiff making monopoly and attempted monopoly claims must allege a relevant geographic market to help the court determine whether the defendant has monopoly power. In this case, the district court held that Supreme Court precedent required including in the relevant geographic market definition all locations where product suppliers are headquartered. Yet the Supreme Court case upon which the district court relied, Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961), requires no such thing. Rather, it requires that courts consider, in defining the relevant geographic market, where sellers operate and where purchasers can predictably turn for supplies. If U.S. consumers can predictably turn to supplies only in the United States, then the United States is the relevant geographic market. Because that is what Kolon Industries Incorporated alleged here, the district court erred in dismissing its counterclaim for failure to sufficiently plead a relevant geographic market.
This is a case about whether E.I. du Pont de Nemours and Company ("DuPont") attempted to wield, and did wield, monopoly power over the U.S. para-aramid fiber market in violation of Section 2 of the Sherman Act. Para-aramid fibers are strong, complex synthetic fibers used to make, among other things, body armor, tires, and fiber optic cables. Three para-aramid producers—American DuPont, Dutch Teijin, and Korean Kolon—sell their para-aramid fibers to U.S. consumers. Other para-aramid producers exist but do not sell into the U.S. market. DuPont is the unquestioned industry leader in the U.S. para-aramid market. Indeed, for many years, DuPont was the only para-aramid producer in the U.S. market, and it currently sells over 70 percent of the para-aramid fibers purchased in the United States.
In February 2009, DuPont brought a trade secrets suit against Kolon, a relative newcomer to para-aramid production. Kolon counterclaimed that DuPont had monopolized and had attempted to monopolize the para-aramid market in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2.
DuPont moved, under Federal Civil Procedure Rule 12(b)(6), to dismiss Kolon's Counterclaim. The district court granted that motion on December 18, 2009, on the bases that: (a) Kolon inadequately pled the relevant geographic market within which competition for para-aramid fibers takes place; and (b) Kolon failed to plead adequately unlawful exclusionary conduct on the part of DuPont. E.I. Du Pont De Nemours & Co. v. Kolon Indus., Inc., 683 F.Supp.2d 401 (E.D.Va.2009). The district court allowed Kolon to amend, but Kolon declined in favor of an immediate appeal. The district court therefore entered a final judgment against Kolon under Civil Procedure Rule 54(b).
We review de novo the district court's grant of DuPont's motion to dismiss. Sucampo Pharm., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 550 (4th Cir. 2006). When ruling on a Rule 12(b)(6) motion to dismiss, "a judge must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). To survive the motion, a complaint (or counterclaim, as is the case here) must contain sufficient facts to state a claim that is "plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Nevertheless, a complaint "need only give the defendant fair notice of what the claim is and the grounds upon which it rests." Coleman v. Md. Ct. of Apps., 626 F.3d 187, 190 (4th Cir.2010) (internal quotation marks omitted). Further, "like the district court, [we] draw all reasonable inferences in favor of the plaintiff." Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 253 (4th Cir.2009).
Kolon contends that DuPont violated Section 2 of the Sherman Act
To run afoul of Section 2, a defendant must be guilty of illegal conduct "to foreclose competition, to gain a competitive advantage, or to destroy a competitor." Eastman Kodak, 504 U.S. at 482-83, 112 S.Ct. 2072 (internal quotation marks omitted). Conduct that might otherwise be lawful may be impermissibly exclusionary under antitrust law when practiced by a monopolist. Indeed, "a monopolist is not free to take certain actions that a company in a competitive . . . market may take, because there is no market constraint on a monopolist's behavior." LePage's, Inc. v. 3M, 324 F.3d 141, 151-52 (3d Cir.2003) (citing Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 601-04, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985)). And although not per se illegal, exclusive dealing arrangements can constitute an improper means of acquiring or maintaining a monopoly. See, e.g., United States v. Grinnell Corp., 384 U.S. 563, 576, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966); Tampa Electric, 365 U.S. at 324, 327, 81 S.Ct. 623; United States v. Microsoft Corp., 253 F.3d 34, 70-71 (D.C.Cir.2001); Advanced Health-Care Servs., 910 F.2d at 142, 148-49.
In analyzing Sherman Act Section 2 claims such as the ones Kolon makes here, courts begin with a preliminary inquiry into market definition, which serves as a tool to determine the defendant's market power. See Consul, Ltd. v. Transco Energy Co., 805 F.2d 490, 493-95 (4th Cir.1986). The market definition has two components—the relevant product market and the relevant geographic market. Id. at 493; RCM Supply Co., Inc. v. Hunter Douglas, Inc., 686 F.2d 1074, 1076 (4th Cir.1982). Generally, in a Section 2 case, a plaintiff must allege both as a threshold matter. Id.; Consul, 805 F.2d at 493-95. Here, the parties do not dispute the relevant product market, which is the para-aramid fiber market. The disagreement here centers on the relevant geographic market.
The relevant geographic market inquiry focuses on that geographic area within which the defendant's customers who are affected by the challenged practice can practicably turn to alternative supplies if the defendant were to raise its prices or restrict its output. William C. Holmes, Antitrust Law Handbook § 3:4 (West 2009); see also Herbert Hovenkamp, Federal Antitrust Policy § 3.6 (West 2005) ("The relevant geographic area for antitrust purposes is some geographic area in which a firm can increase its price without 1) large numbers of its customers quickly turning to alternative supply sources outside the area; or 2) producers outside the area quickly flooding the area with substitute products.").
The standard for determining the relevant geographic market announced in Tampa Electric
RCM Supply, 686 F.2d at 1077 (quoting, with approval, district court's jury instructions and expressly recognizing them as "aptly" paraphrasing Tampa Electric's standard for determining relevant geographic market); see also Consul, 805 F.2d at 495 ("The formulation approved by this court in RCM Supply is helpful: the geographic market should consist of an area in which the defendants operate and which the plaintiff can reasonably turn to for supplies.") (internal quotation marks omitted).
As the RCM Supply jury instructions suggest, "`market definition is a question of fact. . . .'" Coastal Fuels of Puerto Rico, Inc. v. Caribbean Petroleum Corp., 79 F.3d 182, 196 (1st Cir.1996) (quoting Weiss v. York Hosp., 745 F.2d 786, 825 (3d Cir.1984)); see also, e.g., Oahu Gas Serv., Inc. v. Pac. Res., Inc., 838 F.2d 360, 363 (9th Cir.1988) ("Our previous decisions establish that both market definition and market power are essentially questions of fact."); Westman Comm'n Co. v. Hobart Int'l, Inc., 796 F.2d 1216, 1220 (10th Cir.1986) ("We recognize that market definition is a question of fact . . . ."); Heatransfer Corp. v. Volkswagenwerk, A.G., 553 F.2d 964, 979 (5th Cir.1977) ("Relevant market is essentially a question of fact . . . ."). This makes sense, given that determining the relevant geographic market is a fact-intensive exercise centered on the commercial realities of the market and competition. See, e.g., Eastman Kodak, 504 U.S. at 453, 112 S.Ct. 2072 ("The proper market definition in this case can be determined only after a factual inquiry into the `commercial realities' faced by consumers."); Todd v. Exxon Corp., 275 F.3d 191, 199 (2d Cir.2001) (Sotomayor, J.) (noting that "market definition is a deeply fact-intensive inquiry").
The commercial realities considered when defining the relevant geographic market include: where the parties market their products; the size, cumbersomeness, and perishability of the products; regulatory requirements impeding
The Supreme Court has noted that "although the geographic market in some instances may encompass the entire Nation, under other circumstances it may be as small as a single metropolitan area." Brown Shoe Co. v. United States, 370 U.S. 294, 337, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). Therefore, in Brown Shoe, a Clayton Act case, the geographic market was properly limited to cities of a certain size where two shoe companies sold goods. Id. Similarly, this Circuit has stated that "the relevant market has been found to be a single city, a group of cities, a state, or several states." Am. Football League, 323 F.2d at 129 (footnotes omitted).
Consequently, dismissal of an antitrust claim for failure to adequately plead the relevant market can be problematic. As then-Judge, now-Justice Sotomayor noted in Todd:
Todd, 275 F.3d at 199-200 (footnotes omitted) (reversing district court's dismissal of
Stated differently, "dismissals at the pre-discovery, pleading stage remain relatively rare and are generally limited to" certain types of "glaring deficiencies," such as failing to allege a relevant market. Allen v. Dairy Farmers of Am., Inc., 748 F.Supp.2d 323, 339 (D.Vt.2010) (stating that dismissals are "generally limited to instances in which the complaint either: (1) fails to allege a geographic market or the boundaries of a relevant geographic market; (2) defines a geographic market in an unreasonably and implausibly narrow manner; or (3) alleges a contradictory and vague delineation of the relevant geographic market. Here, none of those glaring deficiencies are present in the Amended Complaint. As a result, the proper market definition in this case can be determined only after a factual inquiry into the commercial realities faced by consumers." (internal quotation marks and citations omitted)).
In this case, Kolon pled that the relevant geographic market was "worldwide supply of para-aramid fiber to commercial purchasers in the United States."
In other words, Kolon pled that the United States functions as a distinct market for para-aramid fibers. Further, Kolon pled market realities that could have led to the United States' being a distinct market—that is, technical, legal, and other barriers to entry, as well as DuPont's anticompetitive contracts with key para-aramid consumers. Kolon therefore pled a plausible, distinct relevant geographic market. Indeed, even the district court recognized that Kolon pled that U.S. consumers "have considerable difficulty in turning to the products of foreign manufacturers," that Kolon gives "specific reasons" for these difficulties, and that this and "other commercial realities" "mitigate[] [sic] toward the plausibility of Kolon's proposed market definition." [J.A. 730-32]
The district court nevertheless concluded that "[t]he market, per Tampa Electric,. . . must be expanded to include the areas
[J.A. 740-41] The district court so concluded with no information before it, on DuPont's Rule 12(b)(6) motion, about what para-aramid fiber supplies exist in those headquarter countries or the extent to which the presumed supplies in those countries could be diverted to U.S. consumers. As a matter of fact, the district court deemed such commercial realities irrelevant: "Even if there is considerable evidence
The district court reached this conclusion despite the fact that no federal appellate court has held that supplier headquarter sites must, as a matter of law, be included in the relevant geographic market definition in Sherman Act cases. The district court instead relied on a 1981 law review article—William M. Landes & Richard A. Posner, Market Power in Antitrust Cases, 94 Harv. L.Rev. 937 (1981).
Id. at 963.
As the district court itself recognized, however, the "model proposed by Landes and Posner is less persuasive when exclusive dealing arrangements are alleged. When a `distant seller' (id.) is prevented from effectively competing in the American market by anticompetitive conduct, the anticompetitive actor's exclusive deals prevent the distant seller from injecting a rapid influx of competing product in response to a price increase." [J.A. 739] That is precisely what Kolon alleged in its Counterclaim.
Further, Landes's and Posner's model, by its own terms, applies only to suppliers with "nonnegligible sales in the market for a continuous period of several years. This is necessary to deal with the case where distant sellers make sporadic or insignificant sales in the market in question. . . ." Landes & Posner, supra, at 967. Kolon
Regardless of Landes's and Posner's construct, in RCM Supply, our paraphrasing of Tampa Electric's standard makes plain that this Circuit does not interpret Tampa Electric to require suppliers' headquarter locations to be included in relevant market definition without regard to whether consumers can actually turn to those places for supplies. RCM Supply, 686 F.2d at 1077. In fact, the RCM Supply jury was instructed to find the relevant geographic market to be the Washington, D.C. area if it found that RCM could practically turn only to supplies in that area. Id. The jury was further instructed that, to determine to what area "RCM can practically turn for supplies, you should consider whether there are any differences in transportation costs, distribution facilities, customer inventory or any other factor that would cause the Plaintiff to turn to the suppliers solely within" the Washington area. Id. That is, one must look at the commercial realities to define the relevant market.
Similarly, in United States v. Pabst Brewing Co., 384 U.S. 546, 548, 86 S.Ct. 1665, 16 L.Ed.2d 765 (1966), a Clayton Act case, the Supreme Court approved of a geographic market for beer sales that was limited to Wisconsin or a tri-state area of Wisconsin, Illinois, and Michigan—even though a significant portion of the beer sold in Wisconsin was brewed elsewhere. See United States v. Pabst Brewing Co., 233 F.Supp. 475, 481 (E.D.Wis.1964), rev'd, 384 U.S. 546, 86 S.Ct. 1665, 16 L.Ed.2d 765 (noting that "beer was sold in Wisconsin by 69 breweries" but only "38 breweries were operated in that state").
RCM Supply, Brown Shoe, Pabst Brewing, Dentsply, and other cases
Here, Kolon pled a relevant geographic market—the United States. Further, Kolon pled plausible reasons for limiting the geographic market to the United States. Kolon therefore cleared the hurdle of pleading a plausible relevant geographic market. Whether Kolon's proffered relevant geographic market definition will hold up upon a fact-intensive inquiry remains to be seen. But dismissing Kolon's Counterclaim on its face was error.
Nonetheless, DuPont attempts to preserve its 12(b)(6) victory by comparing the inadequate complaint in Twombly, 550 U.S. 544, 127 S.Ct. 1955, to Kolon's Counterclaim here. But this case is no Twombly. In Twombly, the class-action plaintiffs brought an antitrust conspiracy claim but then failed to allege a conspiracy, i.e., an illegal agreement, instead alleging merely parallel business conduct. Twombly, 550 U.S. 544, 127 S.Ct. 1955. Here, in contrast, Kolon unquestionably alleged a relevant geographic market. As the record shows, Kolon alleged a distinct U.S. market and then explained why it was so.
DuPont further contends that Kolon's Counterclaim must fail because of the Berry Amendment, which generally prohibits the Department of Defense from buying supplies from foreign producers such as Kolon. See 10 U.S.C. § 2533a. However, the extent to which DuPont's dominant market position can be attributed to the Berry Amendment—something the district court attempted to analyze by inappropriately going beyond the Counterclaim—cannot be determined at the motion-to-dismiss stage. Further, Kolon's Counterclaim restricts its market definition to commercial purchasers. Under these circumstances, dismissal was inappropriate.
Finally, DuPont contends that, according to the U.S. Department of Justice's and Federal Trade Commission's Horizontal Merger Guidelines, considering foreign supply into the U.S. market while limiting the relevant geographic market to the United States is appropriate only where price discrimination is alleged. DuPont argues that, because Kolon did not use the
DuPont cites no binding authority for either the proposition that such a market definition is permissible only where price discrimination is alleged or the proposition that the specific words "price discrimination" must be used to allege price discrimination. See United States v. Dean Foods Co., Case No. 10-CV-59, 2010 WL 1417926, at *5 (E.D.Wis. April 7, 2010) (holding that plaintiff was not required "to include magic words in order to survive a motion to dismiss" when claiming defendant's ability to price-discriminate—i.e., impose a small but significant and nontransitory increase in price on customers unable to turn to alternative supply).
Meanwhile, Kolon pled that DuPont dominated the U.S. para-aramid market, that U.S. para-aramid consumers pay more than consumers elsewhere, but that, despite high prices, para-aramid fiber supply in the United States remains low. These allegations suggest price discrimination that would support Kolon's contention that DuPont possessed sufficient market power such that it was a monopolist. See, e.g., In re Brand Name Prescription Drugs Antitrust Litig., 186 F.3d 781, 783 (7th Cir. 1999) ("Price discrimination implies market power, that is, the power to charge a price above cost (including in `cost' a profit equal to the cost of equity capital) without losing so much business so fast to competitors that the price is unsustainable.").
In sum, Kolon pled a distinct relevant geographic market and provided numerous reasons for defining the market as it did. Kolon's plausible relevant geographic market was sufficient to withstand a Rule 12(b)(6) motion to dismiss, and the district court erred in holding otherwise.
The district court also concluded that Kolon failed to adequately plead anti-competitive conduct. Kolon contends that this determination rested on information inappropriately considered on a motion to dismiss and on inferences in DuPont's, instead of Kolon's, favor. We agree.
When ruling on a Rule 12(b)(6) motion to dismiss, "a judge must accept as true all of the factual allegations contained in the complaint." Erickson, 551 U.S. at 94, 127 S.Ct. 2197. See also Advanced Health-Care Servs., 910 F.2d at 147 ("The factual allegations of the plaintiff with respect to the relevant markets and the defendants' market shares must be accepted as true at this point."). The complaint "need only give the defendant fair notice of what the claim is and the grounds upon which it rests." Coleman, 626 F.3d at 190 (internal quotation marks omitted). And "all reasonable inferences" must be drawn in favor of the complainant. Nemet Chevrolet, 591 F.3d at 253.
In deciding whether a complaint will survive a motion to dismiss, a court evaluates the complaint in its entirety, as well as documents attached or incorporated into the complaint. Sec'y of State for Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir.2007); Phillips v. LCI Int'l Inc., 190 F.3d 609, 618 (4th Cir.1999) (stating that "a court may consider [a document outside the complaint] in determining whether to dismiss the complaint" where the document "was integral to and explicitly relied on in the complaint" and there was no authenticity challenge). However, the district court cannot go beyond these documents on a Rule 12(b)(6) motion; if it does, it converts the motion into one for summary judgment. Fed. R.Civ.P. 12(b), 12(d), 56. Such conversion is not appropriate where the parties have not had an opportunity for reasonable discovery.
Additionally, statements by counsel that raise new facts constitute matters beyond the pleadings and cannot be considered on a Rule 12(b)(6) motion. Dolgaleva v. Va. Beach City Pub. Sch., 364 Fed.Appx. 820, 825 (4th Cir.2010) (citing Hamm v. Rhone-Poulenc Rorer Pharms., Inc., 187 F.3d 941, 948 (8th Cir.1999)); cf. Smith v. Local No. 25, Sheet Metal Workers Int'l Ass'n, 500 F.2d 741, 744-45 (5th Cir.1974) (treating a Rule 12(b)(6) dismissal order as converted into summary judgment because district court relied on materials outside the pleadings, including oral argument). In Dolgaleva, rather than considering only the face of the complaint, the district court allowed the defendant to dispute allegations during a hearing. The district court then improperly dismissed the complaint based on statements the defendant made at the hearing. Dolgaleva, 364 Fed.Appx. at 825-26. (citing Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir.2001) (finding error where the district court "assumed the existence of facts that favor defendants based on evidence outside plaintiffs' pleadings, [and] took judicial notice of the truth of disputed factual matters")).
Similarly, in this case, the district court went beyond Kolon's Counterclaim in ruling on DuPont's motion to dismiss. The district court relied upon a statement made by DuPont's counsel during oral argument that "Kolon had access to all of DuPont's relevant supply agreements during the time period in question." [J.A. 712] The district court reiterated several times that "DuPont asserts that these are the only supply agreements relevant to Kolon's claims" and that "DuPont has affirmed, at oral argument in open court, that it has disclosed all supply agreements pertinent to Kolon's claims." [J.A. 745-46] The district court then made plain that it accepted the statement as true and would evaluate Kolon's complaint in light thereof: "These documents, in essence, are Kolon's case for anticompetitive conduct." [J.A. 747]
Similarly, the district court stated:
[J.A. 745] The problem: Kolon never suggested in its Counterclaim that it had received all of DuPont's contracts relevant to Kolon's antitrust claims. And it would surely have been difficult for Kolon to know whether it had all relevant DuPont contracts given that nothing in the record indicates that full discovery had been undertaken.
Nevertheless, the district court's anticompetitive conduct analysis is riddled with reliance on DuPont's statement about the contracts. For example, the district
We hold that the district court erred in accepting statements beyond the Counterclaim and making inferences on that basis in favor of DuPont. And because the record indicates that the parties had not yet had the opportunity to conduct reasonable discovery, converting the motion to dismiss to one for summary judgment, where such statements, if appropriately presented, could be considered, would have been error. See Gay, 761 F.2d at 178 ("Because Gay was not afforded an opportunity for reasonable discovery, the district court's treatment of the motion to dismiss as a motion for summary judgment was an abuse of discretion.").
It remains for us to determine whether the district court's error was harmless. Where a district court errs in going beyond the complaint on a Rule 12(b)(6) motion, the error is harmless if the complaint would not have withstood the motion to dismiss on its face. Dolgaleva, 364 Fed.Appx. at 826. Stated differently, we can affirm the dismissal of the complaint "on any basis fairly supported by the record." Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 222 (4th Cir. 2002). We therefore look to Kolon's Counterclaim to determine whether Kolon sufficiently pled its two Sherman Act claims, taking Kolon's allegations as true and making all reasonable inferences in its favor. See Erickson, 551 U.S. at 94, 127 S.Ct. 2197; Nemet Chevrolet, 591 F.3d at 253.
As stated earlier, a monopolization violation consists of two elements: (1) the possession of monopoly power in the relevant market, and (2) willful maintenance of that power. Eastman Kodak, 504 U.S. at 480, 112 S.Ct. 2072; Cavalier Tel., 330 F.3d at 183. To violate Section 2, a defendant must engage in conduct "to foreclose competition, gain a competitive advantage, or to destroy a competitor." Eastman Kodak, 504 U.S. at 482-83, 112 S.Ct. 2072 (internal quotation marks omitted).
As to the first element, possession of monopoly power, this Court has previously noted that "when monopolization has been found the defendant controlled seventy to one hundred per cent of the relevant market." White Bag Co. v. Int'l Paper Co., 579 F.2d 1384, 1387 (4th Cir.1974) (citations omitted). See also, e.g., Dentsply, 399 F.3d at 188 (noting that Dentsply "has had a persistently high market share between 75% and 80% on a revenue basis, in the artificial tooth market" and holding that "Dentsply's share of the market is more than adequate to establish a prima facie case of power") (internal quotation marks omitted); Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480, 489 (5th Cir.1984) ("Supreme Court cases,
Here, the district court assumed that Kolon adequately pled possession of monopoly power. That assumption was correct, given that Kolon pled, among other things, that: numerous barriers to entry into the U.S. para-aramid fiber market exist and supply is low; DuPont has long dominated the U.S. para-aramid fiber market; and DuPont currently controls over 70 percent of that market, i.e., that "DuPont's market share remains greater than 70% of all sales by purchase volume of para-aramid fiber in the United States." [J.A. 559, 748] See Advanced Health-Care Servs., 910 F.2d at 147 ("In its complaints, the plaintiff contends that [defendants] have a dominant share of the [product] markets in their respective relevant geographic areas and that this constitutes monopoly power or a dangerous probability of actual monopolization. These allegations could, if proven, support a finding of monopolization or a dangerous probability of monopolization of the relevant DME markets at stake.").
Further, regarding the relevant market, there is no dispute that the product market is that for para-aramid fibers. And we have already held that the pled geographic market, para-aramid fiber supply to commercial consumers in the United States, was sufficient to withstand DuPont's Rule 12(b)(6) motion.
As to the second element of a monopolization claim, willful maintenance of monopoly power, Kolon's Counterclaim focuses on DuPont's use of essentially exclusive agreements with key para-aramid fiber purchasers. Although not per se illegal, exclusive dealing arrangements may be an improper means of acquiring or maintaining a monopoly. See, e.g., Grinnell, 384 U.S. at 576, 86 S.Ct. 1698; Tampa Electric, 365 U.S. at 324, 327, 81 S.Ct. 623; Microsoft, 253 F.3d at 70-71.
In Tampa Electric, the Supreme Court held that an exclusive dealing arrangement does not violate antitrust law unless its probable effect is to "foreclose competition in a substantial share of the line of commerce affected." 365 U.S. at 327, 81 S.Ct. 623. The market share foreclosed is important because, for the contract to adversely affect competition, "the opportunities for other traders to enter into or remain in that market must be significantly limited. . . ." Id. at 328, 81 S.Ct. 623. In Tampa Electric, the pertinent contract affected less than one percent of the relevant market, which was "quite insubstantial," and did not violate the Clayton or Sherman Acts. Id. at 333, 335, 81 S.Ct. 623. "Because an exclusive deal affecting a small fraction of a market clearly cannot have the requisite harmful effect upon competition, the requirement of a significant degree of foreclosure serves a useful screening function" for such antitrust cases. Microsoft, 253 F.3d at 69.
In Microsoft, the D.C. Circuit indicated that "[a] monopolist's use of exclusive contracts, in certain circumstances, may give rise to a [Sherman Act] § 2 violation even though the contracts foreclose less than [a] roughly 40% or 50% share. . . ." Id. at 70. Microsoft had exclusive agreements with fourteen of the top fifteen access providers in North America, ensuring that its browser was offered as the default browser or as the only browser to the majority of internet users in that area. Id. at 70-71. The exclusive deals helped maintain Microsoft's
Here, Kolon alleged that DuPont's use of multi-year exclusive contracts with high-volume para-aramid fiber purchasers constituted improper anticompetitive conduct. Kolon alleged that DuPont used the contracts "with the highest volume purchasers in the most important commercial sustainable para-aramid categories," committing those valuable customers such as "leading U.S. producers of optic fiber" and "one of the largest U.S. branded tire manufacturers" to buying from DuPont. [J.A. 564] Kolon pled that the contracts "not only limited the overall volume of para-aramid supply available to competition, but has also severely limited Kolon from competition for the most important customers in categories needed to gain a foothold for effective competition to DuPont." [J.A. 564]
Kolon complained that "[b]ecause DuPont's supply contracts severely restricted access to customers and preclude effective competition, DuPont's conduct has had a direct, substantial and adverse effect on competition. And DuPont's anticompetitive conduct has allowed it to control output and increase prices for para-aramid fiber in the United States." [J.A. 565] And "[b]y precluding Kolon from competition for these customers when demand for para-aramid fibers has significantly increased and supply is low, DuPont's conduct has constrained the only potential entrant to the United States in decades from effectively entering the market, reducing if not practically eliminating additional competition, as well as preserving and growing DuPont's monopoly position." [J.A. 565] These allegations are sufficient to withstand a motion to dismiss. See Advanced Health-Care Servs., 910 F.2d at 147 (allegation of a dominant market share coupled with exclusionary conduct sufficient to withstand a motion to dismiss).
DuPont argues that the agreements it produced to Kolon and which may properly be considered on its motion to dismiss doom Kolon's exclusivity claim. We disagree. As DuPont notes, the agreements required customers to buy somewhat less than all of their para-aramid fiber requirements from DuPont. However, as the district court stated, it may be unrealistic to expect consumers to seek out a mere 15 percent of their requirements for a specialized, integrated product like para-aramid fibers from a second supplier.
Further, despite DuPont's argument to the contrary, the "meet or release" clauses are also restrictive. As the district court indicated, "to win business that DuPont controls by a supply agreement with a `meet or release' clause, Kolon must make a shot-in-the-dark price offer, hope that the offer beats DuPont's price (which it has no way of knowing) by 2% or more, then hope that DuPont decides not to match Kolon's price. . . . Although these clauses may provide some incremental check on DuPont's ability to raise prices to anticompetitive levels, they pose a formidable hurdle to competing for the customers who have agreed to these deals." [J.A. 756]
DuPont also contends that the purportedly exclusive agreements were not sufficient in duration to prevent Kolon from entering and competing in the market.
In sum, Kolon adequately pled all elements of its monopolization claim. We therefore have no basis on which to affirm the district court's dismissal of that claim and reverse.
Attempted monopolization employs "methods, means and practices which would, if successful, accomplish monopolization, and which, though falling short, nevertheless approach so close as to create a dangerous probability of it." M & M Med. Supplies & Serv., Inc. v. Pleasant Valley Hosp., Inc., 981 F.2d 160, 166 (4th Cir.1992) (internal quotation marks omitted). To state a claim for attempted monopolization, a claimant must plead: (1) the use of anticompetitive conduct, (2) with specific intent to monopolize, and (3) a dangerous probability of success. Spectrum Sports, 506 U.S. at 456, 113 S.Ct. 884; Advanced Health-Care Servs., 910 F.2d at 147.
In this case, we held above that Kolon adequately pled DuPont's use of anticompetitive, exclusive agreements with high-volume para-aramid customers. Kolon has therefore cleared the bar as to the first element—anticompetitive conduct.
As to the second element, specific intent to monopolize, this Court has previously stated that "[s]pecific intent may be inferred from the defendant's anticompetitive practices." M & M Med. Supplies, 981 F.2d at 166. We have already held that Kolon adequately pled anticompetitive practices. Further, Kolon alleged various actions undertaken by DuPont over time to protect its dominant market position, including: successfully seeking and obtaining a ban against imports of certain para-aramid fibers into the United States in 1986; "scar[ing] off" others in the industry through trade disputes; and fighting the U.S. International Trade Commission's revocation of antidumping duties on para-aramid fibers. [J.A. 557-59] Kolon has therefore sufficiently pled specific intent to monopolize.
The third and final element of Kolon's attempted monopolization claim is a dangerous probability of success. "In order to determine whether there is a dangerous probability of monopolization, courts have found it necessary to consider the relevant market and the defendant's ability to lessen or destroy competition in that market." Spectrum Sports, 506 U.S. at 456, 113 S.Ct. 884. Given that we held above that Kolon adequately pled actual monopolization, we can reach no conclusion other than that Kolon adequately pled a dangerous probability of success as to DuPont's attempted monopolization.
Because Kolon adequately pled all elements of its attempted monopolization claim, we have no basis on which to affirm the district court's dismissal and therefore reverse. See Advanced Health-Care Servs., 910 F.2d 139 (allegation of dominant market share coupled with exclusionary conduct sufficient to withstand motion
In sum, the district court erred both in holding that Tampa Electric required the Netherlands and Korea to be included in Kolon's relevant geographic market definition and in considering facts beyond the pleadings and construing them against Kolon to dismiss Kolon's Counterclaim. Because Kolon plausibly pled monopolization and attempted monopolization in violation of Section 2 of the Sherman Act, we reverse.
REVERSED.
[J.A. 561]
