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.”).