Opinion

MULTIPLE ENERGY TECHNOLOGIES, LLC v. UNDER ARMOUR, INC

Court
District Court, W.D. Pennsylvania
Filed
Jun 29, 2021
Cited by
0 cases
Authority
More cited than 29.3%

The opinion

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

MULTIPLE ENERGY )

)

TECHNOLOGIES, LLC, ) 2:20-CV-664-NR

Plaintiff, )

)

v. )

)

)

UNDER ARMOUR, INC.,

)

Defendant. )

)

MEMORANDUM ORDER

J. Nicholas Ranjan, United States District Judge

Defendant Under Armour, Inc. moves to dismiss Plaintiff Multiple Energy

Technologies, LLC’s second amended complaint in this antitrust case. ECF 64. The

Court previously dismissed MET’s antitrust claim based on its failure to allege that

it was a “direct competitor” of Under Armour, as well as its failure to adequately

define the relevant market for antitrust purposes. ECF 54; ECF 55. MET then

amended its complaint, and Under Armour responded by filing the pending motion

to dismiss.

This time around, Under Armour renews only one of its arguments. ECF 65,

pp. 9-15. That is, Under Armour says that MET has once again failed to adequately

define the market in which Under Armour allegedly engaged in anticompetitive

behavior. Id. Applying the familiar standard of Rule 12(b)(6), the Court will grant

the motion, and once again dismiss MET’s complaint. That said, for the reasons

discussed below, the Court also finds that granting leave to amend is not yet futile,

and so will provide MET with one last chance to amend its complaint.

Much like its first amended complaint, MET’s second amended complaint

defines the relevant market as consisting of all “clothing containing recovery

enhancing bioceramics,” or “CCREB.” ECF 58, ¶ 8. More specifically, MET adds that

the CCREB market “consists of clothing such as activewear, tank tops or sleeveless

shirts, t-shirts, long sleeve shirts, shorts, pants, leggings, joggers, sweatpants,

sleeves, pajamas[,] and sleepwear.” Id. at ¶ 14. According to MET, this clothing is

“distinct and separate from other kinds of clothing,” in that it is advertised by sellers

and bought by consumers for its alleged “muscle recovery and performance” benefits.

Id. at ¶ 15. As a result, CCREB “are consistently priced higher than traditional

clothing that do not contain bioceramics,” and “consumers who seek to purchase

CCREB do not consider traditional clothing that does not contain bioceramics to be

reasonably interchangeable.” Id. at ¶¶ 17, 18.

When the Court dismissed MET’s last complaint, it explained that MET’s

allegations had left it “unclear what clothing or type of clothing” was part of the

market and, also, that MET had pled “nothing about the cross-elasticity of demand

of the products in the relevant market[.]” Multiple Energy Techs., LLC v. Under

Armour, Inc., No. 20-664, 2021 WL 807722, at *2 (W.D. Pa. Mar. 3, 2021) (Ranjan,

J.). Under Armour now argues that these same flaws remain. According to Under

Armour, the products MET has identified as part of the market are not “reasonably

interchangeable.” ECF 72, pp. 6-11. What’s more, Under Armour suggests that MET

has still alleged nothing about the “elasticity” of products within the market—i.e.,

that an increase in the price for one CCREB product necessarily increases demand

for other like products in that market. Id.

The Court agrees that MET’s allegations still fall short. MET’s burden at this

stage is to plausibly plead that high elasticity exists between all products within the

alleged market—not just that CCREB has low elasticity with clothing products that

do not incorporate bioceramics. In antitrust law, “[t]he relevant product market is

defined as those commodities reasonably interchangeable by consumers for the same

purposes.” Tunis Bros. Co. v. Ford Motor Co., 952 F.2d 715, 722 (3d Cir. 1991)

(cleaned up). Thus, products in an antitrust product market are “characterized by a

cross-elasticity of demand,” meaning “the rise in the price of a good within a relevant

product market would tend to create a greater demand for other like goods in that

market.” Id. (cleaned up) (emphasis added).

Put another way, the relevant question here is whether MET has plausibly

pled that consumers consider all the products in the alleged market to be “reasonably

interchangeable” with the other products in that market. Id. As a result, MET misses

the mark when it alleges and argues only that consumers do not consider CCREB to

be interchangeable with non-CCREB clothing, and fails to also allege that consumers

do consider products within the CCREB market to be interchangeable with each

other. MET also remains vague about what products are in the market—alleging

only that the market consists of clothing “such as” the list of examples provided. ECF

58, ¶ 14.1

To survive dismissal, then, MET needed to do two things: First, it needed to

say what products are in the market, with enough specificity to put Under Armour

on notice of at least the rough bounds of the market.2 Second, and more importantly,

it needed to allege that consumers consider the products in the market to be

“reasonably interchangeable” with the other products in the market. That is what the

Court meant, in its first opinion, when it said that MET had pled nothing about

“cross-elasticity of demand” in the CCREB market. Multiple Energy Techs., LLC, No.

1 MET has alleged with some precision that Under Armour “is responsible for over

60% of sales in the market for CCREB in the United States[.]” ECF 58, ¶ 20. The

Court sees no reason why MET should not be able to specify the types of clothing it

considered when calculating or estimating this number. If discovery reveals that

other types of clothing belong in the CCREB market, MET can always seek leave to

amend its complaint to include them.

2 This does not mean MET needs to provide excessive detail about the products in the

market. It only needs to clearly identify what categories of clothing the market

contains, rather than obscuring the market by providing only examples of types of

clothing the market “includes.”

20-664, 2021 WL 807722, at *2. Because MET did neither of these things, dismissal

is once again required.

The tougher question is whether MET deserves another chance to amend.

MET’s previous failure to correct the same deficiencies favors dismissal. But after

careful consideration, the Court finds that, for three reasons, allowing MET to amend

again would not yet be futile.

First, the Court is mindful that the bar MET must clear is not a high one. In

most antitrust cases, “proper market definition can be determined only after a factual

inquiry into the commercial realities faced by consumers.” Queen City Pizza, Inc. v.

Domino’s Pizza, Inc., 124 F.3d 430, 436 (3d Cir. 1997) (citation omitted); Premier

Comp Sols. LLC v. UPMC, 163 F. Supp. 3d 268, 278 (W.D. Pa. 2016) (Cercone, J.)

(“Definition of the relevant product market often requires a deeply fact-intensive

inquiry, and courts are hesitant to grant motions to dismiss for failure to plead a

relevant market definition.” (cleaned up)). Thus, MET does not have to define the

market with precision just yet—it only has to plead “enough factual matter (taken as

true) to suggest that” it is “plausible” that the identified products comprise a single

market. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007).

Second, it is notable that MET’s failure to correct its complaint seems to stem

mostly from its misunderstanding of the appropriate legal standard. MET’s briefing

suggests that it believes the “cross-elasticity” requirement is satisfied by allegations

that consumers do not consider products within the market to be interchangeable

with products outside the market, rather than by allegations that all the products

within the market are reasonably interchangeable. The Court has now clarified that

standard and what it expects MET to allege.

Third, and most importantly, the Court will allow amendment because MET’s

arguments allude to a possible definition of the relevant market that could be enough

to survive dismissal. MET’s “theory of the case” seems to be that consumers who

purchase products in the CCREB market are driven chiefly by the bioceramics

contained within the clothing, rather than by the secondary consideration of what

type of clothing contains those bioceramics. See, e.g., ECF 58, ¶¶ 8, 15-18, 74; see also

ECF 71, p. 12 (arguing that the “most critical component of the products in this

market” is “the recovery enhancing bioceramics that are infused into these products”).

If that is true, it is at least plausible that a consumer who wants to buy a

bioceramic t-shirt, but finds them out-of-stock or overpriced, is more likely to

purchase another type of bioceramic clothing (e.g., a headband or a tank-top) than to

purchase a t-shirt that lacks bioceramics. Cf. Am. Needle, Inc. v. New Orleans

Louisiana Saints, 385 F. Supp. 2d 687, 694 (N.D. Ill. 2005) (“[A] significant segment

of the market for NFL-branded headwear and apparel is purchasing the team logo. If

a store sold out of hats carrying the Chicago Bears logo, these individuals would not

necessarily find caps carrying logos for Spongebob, the University of Michigan, or

even the Chicago Bulls to be reasonable substitutes. More likely, they would purchase

a different item of apparel, such as a T-shirt or sweatshirt, or even a non-apparel item

like a mug or key chain that carries the Bears logo. The product for these consumers

is the trademarked logo.”).

Put another way, the price and demand of bioceramic t-shirts could, in fact, be

highly elastic with the price and demand of bioceramic wristbands, tank-tops, and all

other types of CCREB clothing. “A cluster of products,” such as these, “can comprise

a relevant product market if the cluster is itself an object of consumer demand.”

Sharif Pharmacy, Inc. v. Prime Therapeutics, LLC, 950 F.3d 911, 918 (7th Cir. 2020)

(cleaned up); see also Weiss v. York Hosp., 745 F.2d 786, 826 (3d Cir. 1984) (“Where,

however, several goods or services are generally offered by the same providers, it is

not unreasonable for a jury to conclude that the market for antitrust purposes

includes all of those goods or services.” (citations omitted)).3

Of course, that may or may not be true of the products here. MET has not yet

even alleged it. But for now, it seems possible, based on its arguments to date, that

MET can, if given another chance, allege a cluster of CCREB items that are

“reasonably interchangeable” with one another, despite differences such as clothing

type, so that grouping those products in a single market merely “reflects commercial

realities.” United States v. Grinnell Corp., 384 U.S. 563, 572 (1966).

While the Court will once again grant Under Armour’s motion to dismiss, it

will also give MET leave to amend its complaint one last time, if it has a factual basis

to do so. As noted above, to survive dismissal, MET must identify all the clothing

types that it believes to comprise the relevant market, and then allege that all those

products are highly elastic with all other clothing within that market.

CONCLUSION

For all the reasons discussed above, Under Armour’s motion to dismiss the

second amended complaint is GRANTED. MET must file any amended complaint

by July 9, 2021.

DATE: June 29, 2021 /s/ J. Nicholas Ranjan

United States District Judge

3 For this same reason, the Court is not convinced by Under Armour’s apparent

contention that, to satisfy the “reasonable interchangeability” requirement, the

relevant market must be subdivided to account for every consumer trait, such as

gender or age, or for all product traits, such as clothing types or sizes. See, e.g., ECF

72, pp. 7-8; ECF 65, p. 2. Instead, the pertinent question is whether the products in

the market share the important traits that drive consumers to shop only within the

alleged market, rather than considering products outside of it to be reasonable

substitutes. See, e.g., Am. Needle, Inc., 385 F. Supp. 2d at 694; Dang v. San Francisco

Forty Niners, 964 F. Supp. 2d 1097, 1107 (N.D. Cal. 2013) (concluding that plaintiff

had adequately pled antitrust market consisting of all “apparel” bearing NFL-related

logos, because “a reason why the apparel products at issue may be deemed valuable

and relevant to consumers is in their bearing of NFL-related logos and trademarks.”).

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.

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