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Case: 23-55662, 01/26/2024, ID: 12853101, DktEntry: 24, Page 1 of 40
No. 23-55662
IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
–––––––––––––––––––––––––––––––––––––––––––––
COSTAR GROUP, INC.; COSTAR
REALTY INFORMATION, INC.,
Plaintiffs-counter-defendants-Appellees,
v.
COMMERCIAL REAL ESTATE EXCHANGE,
INC.,
Defendant-counter-claimant-Appellant.
–––––––––––––––––––––––––––––––––––––––––––––
On Appeal from the United States District Court
for the Central District of California,
No. 2:20-cv-08819 (Hon. Consuelo B. Marshall)
–––––––––––––––––––––––––––––––––––––––––––––
BRIEF FOR AMICUS CURIAE FEDERAL TRADE COMMISSION
IN SUPPORT OF NEITHER PARTY
–––––––––––––––––––––––––––––––––––––––––––––
Of Counsel:
GEOFFREY M. GREEN
PATRICIA M. MCDERMOTT
KARNA ADAM
KATHLEEN CLAIR
ELIZABETH GILLEN
AUSTIN R. HEYROTH
FEDERAL TRADE COMMISSION
Washington, D.C. 20580
ANISHA S. DASGUPTA
General Counsel
MARIEL GOETZ
Acting Deputy General Counsel
for Litigation
BRADLEY DAX GROSSMAN
Attorney
FEDERAL TRADE COMMISSION
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
(202) 326-2994
bgrossman@ftc.gov
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TABLE OF CONTENTS
TABLE OF AUTHORITIES ................................................................................... iii
INTRODUCTION .....................................................................................................1
INTEREST OF THE FEDERAL TRADE COMMISSION......................................2
BACKGROUND .......................................................................................................3
SUMMARY OF ARGUMENT .................................................................................6
ARGUMENT .............................................................................................................8
I.
The District Court Misclassified The Challenged Conduct As A
Unilateral Refusal To Deal ................................................................................10
A. The Sherman Act Prohibits Monopolists From Imposing
Anticompetitive Restraints On Customers’ Dealings With Rivals ............10
B. The District Court Failed To Analyze The Practical Effects Of
CoStar’s Exclusionary Conduct As The Sherman Act Requires ...............13
C. The Unilateral-Refusal-To-Deal Doctrine Is Irrelevant To This Case.......14
II. The District Court Improperly Absolved CoStar From Liability Based
On Language In Its Contracts, While Overlooking CoStar’s Alleged
Misconduct In Implementing And Enforcing Those Contracts ........................17
A. CREXi Alleges That CoStar’s Contracts And Its Conduct Were
Exclusionary ...............................................................................................18
B. The District Court Improperly Weighed Competing Factual
Inferences....................................................................................................20
III. The District Court Erred In Rejecting CREXi’s Monopoly Power
Allegations.........................................................................................................22
A. CREXi Established Monopoly Power With Well-Pleaded
Allegations That CoStar Controlled Prices And Excluded
Competition ................................................................................................23
1. CoStar controlled prices. ...................................................................24
2. CoStar excluded competition. ............................................................25
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B. The District Court Was Wrong To Dismiss CREXi’s Monopoly
Power Claim For A Supposed Lack Of Separate Output Allegations .......26
1. A plaintiff need not show restricted output in addition to
supracompetitive prices and excluded competition. ..........................27
2. The district court improperly disregarded CREXi’s restricted
output allegations ...............................................................................30
CONCLUSION ........................................................................................................31
CERTIFICATE OF COMPLIANCE
ii
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TABLE OF AUTHORITIES
Cases
Aerotec Int’l, Inc. v. Honeywell Int’l, Inc.,
836 F.3d 1171 (9th Cir. 2016) ...........................................................................19
Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,
472 U.S. 585 (1984)................................................................................ 6, 10, 15
Calif. Dental Ass’n v. FTC,
526 U.S. 756 (1999).................................................................................... 28, 29
Cascade Health Solutions v. PeaceHealth,
515 F.3d 883 (9th Cir. 2008) ...............................................................................9
Chase Mfg., Inc. v. Johns Manville Corp.,
84 F.4th 1157 (10th Cir. 2023) ................................................... 9, 12, 13, 17, 21
Chung Le v. Zuffa, LLC,
No. 2:15-cv-01045-RFB-BNW, 2024 WL 195994 (D. Nev. Jan. 18,
2024) ..................................................................................................................28
Cost Mgmt. Servs., Inc. v. Washington Natural Gas Co.,
99 F.3d 937 (9th Cir. 1996) ...............................................................................25
Daniels-Hall v. Nat’l Educ. Ass’n,
629 F.3d 992 (9th Cir. 2010) ...................................................................... 14, 21
Eastman Kodak Co. v. Image Tech. Servs., Inc.,
504 U.S. 451 (1992).................................................................................... 16, 23
Epic Games, Inc. v. Apple, Inc.,
67 F.4th 946 (9th Cir. 2023) ................................................. 8, 22, 23, 24, 25, 27
Forsyth v. Humana, Inc.,
114 F.3d 1467 (9th Cir. 1997) ...........................................................................24
FTC v. Ind. Fed’n of Dentists,
476 U.S. 447 (1986).............................................................................................3
FTC v. Qualcomm Inc.,
969 F.3d 974 (9th Cir. 2020) ...............................................................................8
Greyhound Computer Corp., Inc. v. IBM Corp.,
559 F.2d 488 (9th Cir. 1977) ...................................................................... 25, 29
iii
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In re ATM Fee Antitrust Litig.,
No. C 04-2676 CRB, 2010 WL 2557519 (N.D. Cal. Jun. 21, 2010) ................30
In re CoStar Group, Inc., Lonestar Acquisition Sub, Inc. and LoopNet, Inc.,
Docket No. 4368 (FTC Aug. 29, 2012) ...............................................................3
In re Nat’l Football League’s Sunday Ticket Antitrust Litig.,
933 F.3d 1136 (9th Cir. 2019) .............................................................................9
Khoja v. Orexigen Therapeutics, Inc.,
899 F.3d 988 (9th Cir. 2018) .............................................................................22
Lacey v. Maricopa Cnty.,
693 F.3d 896 (9th Cir. 2012) .............................................................................24
Lorain J. Co. v. United States,
342 U.S. 143 (1951)........................................................................ 1, 7, 9, 11, 13
McWane, Inc. v. FTC,
783 F.3d 814 (11th Cir. 2015) ........................................................ 12, 13, 18, 20
MetroNet Servs. Corp. v. Qwest Corp.,
383 F.3d 1124 (9th Cir. 2004) ...........................................................................15
Minnesota Made Hockey Inc. v. Minnesota Hockey Inc.,
789 F. Supp. 2d 1133 (D. Minn. 2011)....................................................... 25, 26
NCAA v. Bd. of Regents,
468 U.S. 85 (1984).............................................................................................24
New York v. Facebook, Inc.,
549 F. Supp. 3d 6 (D.D.C. 2021) .......................................................................16
New York v. Meta Platforms, Inc.,
66 F.4th 288 (D.C. Cir. 2023) ............................................................................16
Novell, Inc. v. Microsoft Corp.,
731 F.3d 1064 (10th Cir. 2013) ................................................................ 7, 9, 16
O’Bannon v. NCAA,
802 F.3d 1049 (9th Cir. 2015) ...........................................................................28
Ohio v. Am. Exp. Co.,
138 S. Ct. 2274 (2018) ............................................................................ 8, 21, 27
iv
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Otter Tail Power Co. v. United States,
410 U.S. 366 (1973).................................................................................... 10, 15
Pac. Bell Tel. Co. v. linkLine Communications, Inc.,
555 U.S. 438 (2009).................................................................................... 10, 15
Produce Pay, Inc. v. Izguerra Produce, Inc.,
39 F.4th 1158 (9th Cir. 2022) ............................................................................14
Realcomp II, Ltd. v. FTC,
635 F.3d 815 (6th Cir. 2011) ...............................................................................3
Rebel Oil Co. v. Atlantic Richfield Co.,
51 F.3d 1421 (9th Cir. 1995) ................................................................ 27, 28, 29
SD3, LLC v. Black & Decker (U.S.) Inc.,
801 F.3d 412 (4th Cir. 2015) .............................................................................22
Tampa Elec. Co. v. Nashville Coal Co.,
365 U.S. 320 (1961).................................................................................... 13, 18
Team Schierl Cos. v. Aspirus, Inc.,
No. 22-CV-580-JDP, 2023 WL 6847433 (W.D. Wis. Oct. 17, 2023) ..............19
United States v. Am. Tobacco Co.,
221 U.S. 106 (1911)...........................................................................................20
United States v. AMR Corp.,
335 F.3d 1109 (10th Cir. 2003) .........................................................................29
United States v. Dentsply Int’l, Inc.,
399 F.3d 181 (3d Cir. 2005) ....................................................................... 11, 13
United States v. Grinnell Corp.,
384 U.S. 563 (1966).......................................................................... 7, 22, 25, 29
United States v. Microsoft Corp.,
253 F.3d 34 (D.C. Cir. 2001) ................................................................ 24, 27, 29
United States v. Syufy Enters.,
903 F.2d 659 (9th Cir. 1990) .............................................................................24
Verizon Communications Inc. v. Law Offices of Curtis V. Trinko,
540 U.S. 398 (2004)...........................................................................................15
v
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ZF Meritor, LLC v. Eaton Corp.,
696 F.3d 254 (3d Cir. 2012) ....................................................................... 17, 18
Statutes
15 U.S.C. § 1 ..........................................................................................................1, 5
15 U.S.C. § 2 ..........................................................................................................1, 5
15 U.S.C. § 41 ............................................................................................................2
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INTRODUCTION
In this antitrust case, Commercial Real Estate Exchange (CREXi) alleges
that CoStar, a monopolist provider of commercial real estate (CRE) listing,
information, and auction platforms, entrenched its market dominance by forcing
brokers not to do business with CREXi and other would-be rivals of CoStar.
According to CREXi, CoStar imposed de facto exclusionary contracts and
technological barriers that prevented brokers from sharing their listings and
otherwise working with CoStar’s rivals. CREXi alleges that these practices
violated Sections 1 and 2 of the Sherman Act. 15 U.S.C. §§ 1 & 2. The district
court dismissed the antitrust counts for failure to state a claim.
The Federal Trade Commission is concerned that the district court
committed three fundamental legal errors that, unless corrected, could shield
harmful monopolistic conduct from antitrust review.
First, the district court deemed CoStar’s conduct lawful by relying on the
principle that a business may unilaterally refuse to deal with its rivals. But that
principle has no bearing when, as here, a monopolist allegedly forces its customers
not to transact with those rivals. See, e.g., Lorain J. Co. v. United States, 342 U.S.
143, 152-53 (1951). Such conduct raises serious anticompetitive concerns if it
helps a monopolist secure or maintain its dominant position. But the district court
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failed to engage in any case-specific analysis of the challenged conduct’s
exclusionary effects.
Second, the district court contravened motion-to-dismiss standards by
elevating CoStar’s version of the facts over CREXi’s. The court failed to credit
CREXi’s allegations that CoStar, in practice, blocked brokers from sharing
photographs, listings, and other information with CREXi and threatened brokers
who did so. The court was required to accept those well-pleaded allegations as true
and grant all reasonable inferences in CREXi’s favor.
Third, the district court erred in declaring CREXi’s allegations of monopoly
power insufficient. CREXi met its pleading burden by alleging that CoStar raised
prices to supracompetitive levels, acting without regard to the conduct of other
market participants, while also excluding competition. This suffices under
established precedent.
INTEREST OF THE FEDERAL TRADE COMMISSION
The Federal Trade Commission is an independent agency charged with
promoting fair competition. See 15 U.S.C. §§ 41-58. The FTC has developed over
100 years’ expertise investigating and litigating anticompetitive mergers and
conduct cases. The FTC’s enforcement responsibilities cover a wide range of
industries and encompass all violations of the Sherman Act as well as other unfair
and anticompetitive practices. See FTC v. Ind. Fed’n of Dentists, 476 U.S. 447,
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454 (1986). The FTC has investigated or challenged a range of mergers and
anticompetitive conduct involving the real estate business and CRE technology
platforms, including the merger between CoStar and LoopNet.1
Because the FTC has a strong interest in ensuring the proper application of
the antitrust laws, the FTC regularly submits amicus briefs in private antitrust
cases. The FTC files this brief in support of neither party, pursuant to Federal Rule
of Appellate Procedure 29(a)(2). Although the FTC takes no position on the merits
of either party’s claims or factual allegations, we are concerned that the district
court’s legal errors, if uncorrected, could significantly impair both public and
private antitrust enforcement of meritorious cases against monopolists of all
stripes.
BACKGROUND
CRE brokers depend on third-party information platforms to publicize and
find available properties, to conduct research for assessing potential transactions,
and to auction properties. First Amended Counterclaims (FACC) ¶¶ 141-144, 148-
See, e.g., Compl., In re CoStar Group, Inc., Lonestar Acquisition Sub, Inc. and
LoopNet, Inc., Docket No. 4368 (FTC Aug. 29, 2012); Realcomp II, Ltd. v. FTC,
635 F.3d 815 (6th Cir. 2011) (upholding FTC administrative order against real
estate association that unlawfully restrained the sharing of certain types of
residential listings to the public).
1
3
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150, 153-154, 171.2 According to CREXi, CoStar is the dominant provider of
technology platform services for the CRE industry. FACC ¶¶ 1, 3, 21, 360.3 CoStar
offers CRE brokers a platform called LoopNet to share and access listings, and a
tool called LoopLink to display the brokers’ listings on their individual websites.
FACC ¶¶ 3-4, 39-41. CoStar is also a leading provider of CRE information
services to help customers research and evaluate properties. FACC ¶¶ 39-41.
Finally, CoStar operates a platform that facilitates online auctions of commercial
properties. FACC ¶¶ 3, 153-54. CREXi is a rival to CoStar in each of these
services and an upstart provider of CRE technology platforms. FACC ¶ 2, 15, 18.
CREXi alleges that CoStar holds monopoly power in the markets for CRE
listing, information, and auction services, as evidenced by its dramatic price
increases without regard to prices charged by rivals offering comparable or
superior products. FACC ¶¶ 208-27. These markets all feature significant barriers
to entry. FACC ¶¶ 166-172.
The FACC appear in partially redacted form at 2-ER-075-278 and under seal in
unredacted form at 4-ER-557-697.
2
Consistent with the legal standards for resolving motions to dismiss, this brief
assumes the truth of all facts alleged in the counterclaims. As the counterclaims
disclose, the FTC is currently investigating some of the alleged conduct at issue in
this case. See FACC ¶¶ 31-33. This brief is based solely on the complaint
allegations and not any information the FTC may have learned in this or any other
matter. The existence of the investigation should not be construed as a
determination that CREXi’s factual allegations are true or that any violation of law
has occurred or is occurring.
3
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CoStar allegedly wields its monopoly power to block customers from doing
business with CREXi and other CoStar rivals. E.g., FACC ¶¶ 44-47, 64-69. For
instance, CoStar imposes contractual terms upon its CRE broker customers that, in
practice, bar brokers from sharing their “own listing information … with CoStar’s
competitors” on threat of losing access to CoStar’s services. FACC ¶¶ 6, 55-58,
60-63. Relatedly, CREXi alleges that CoStar employs technological blocks that
impede customers from sharing their listings with CoStar’s competitors via the
brokers’ public websites if the brokers use CoStar’s LoopLink tool to publish those
listings on their websites. FACC ¶¶ 4-5, 39-43.
CREXi alleges that, through this conduct, CoStar impairs competition and
preserves its monopoly power, FACC ¶¶ 44-47, 64-69, 227, violating Sections 1
and 2 of the Sherman Act, 15 U.S.C. §§ 1 & 2. The district court dismissed
CREXi’s amended counterclaims in relevant part, holding that they failed to allege
a plausible antitrust violation. 1-ER-22.
Specifically, the district court deemed CREXi’s allegations of monopoly
power insufficient. 1-ER-20-22. According to the court, CREXi failed to establish
“direct evidence of CoStar’s market dominance”: although CREXi alleged that
CoStar charged supracompetitive prices, the court concluded that CREXi did not
also allege that CoStar “restricted output,” which the court believed was required.
1-ER-20.
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The district court also held that CREXi’s allegations failed to establish that
CoStar engaged in anticompetitive conduct. Although the counterclaims
challenged restrictions that CoStar placed on its customers, the court relied on the
principle that “a business generally has the right to refuse to deal with its
competitors.” 1-ER-12 (emphasis added). In the court’s view, CoStar’s restrictions
were part of a “legitimate refusal to provide free aid and assistance to a
competitor.” 1-ER-13-14. The court found that CoStar’s written contracts did not
expressly forbid brokers from sharing their listing information with CoStar’s rivals,
“so long as [ ] they do not take the images or information directly from LoopNet or
LoopLink.” 1-ER-16.
SUMMARY OF ARGUMENT
The district court’s dismissal rested on three critical errors that, if widely
adopted, could make it prohibitively difficult to plead a case of unlawful
monopolization, harming competition and the public.
1.
The court incorrectly treated CoStar’s alleged misconduct as a
“legitimate refusal” to deal essentially immune from antitrust review. Although the
Supreme Court has applied heightened liability standards to a firm’s unilateral
refusal to deal with rivals, see, e.g., Aspen Skiing Co. v. Aspen Highlands Skiing
Corp., 472 U.S. 585, 608, 610-11 (1984), that doctrine does not apply when a
monopolist “limit[s] the abilities of third parties to deal with rivals.” Novell, Inc. v.
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Microsoft Corp., 731 F.3d 1064, 1072 (10th Cir. 2013) (Gorsuch, J.) (emphasis
added). Because CoStar allegedly blocked its customers from dealing with rivals,
the court was required to undertake a fact-based inquiry as exemplified by Lorain
Journal, 342 U.S. at 152-53.
2.
The court went beyond its proper role at this stage by finding as fact
that CoStar’s contracts do not prevent customers from sharing their images and
listings with other platforms. The court was required to credit CREXi’s wellpleaded allegations that (1) CoStar intended its contracts to deter brokers from
sharing their own images and listings with CoStar’s rivals, (2) customers
understood the contracts that way, (3) CoStar threatened to sue brokers who shared
information with rivals, and (4) brokers actually refrained from working with rivals
because of these provisions. FACC ¶¶ 6, 29, 50, 60-68, 112-114. Because CoStar’s
contracts allegedly prevented brokers from working with CoStar’s rivals in
practice, the express terms of those contracts were not dispositive. Antitrust
liability turns on the practical effects of CoStar’s conduct as a whole, not isolated
language within its contracts.
3.
The court improperly rejected CREXi’s allegations of monopoly
power, which is the “power to control prices or exclude competition.” United
States v. Grinnell Corp., 384 U.S. 563, 571 (1966) (citation omitted). CREXi’s
allegations, taken as true, directly showed that CoStar both controlled prices and
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excluded competition. The court erred when faulting CREXi for failing to make
separate allegations regarding output.
ARGUMENT
In dismissing CREXi’s antitrust counterclaims, the district court misapplied
core Sherman Act principles and the legal standards for resolving motions to
dismiss. These errors, if repeated by other courts, could imperil effective antitrust
enforcement.
Section 2 of the Sherman Act forbids monopolization, which requires a
showing that the defendant (1) possessed monopoly power in the relevant market
and (2) willfully acquired or maintained that power through anticompetitive,
predatory, or exclusionary conduct. Epic Games, Inc. v. Apple, Inc., 67 F.4th 946,
998 (9th Cir. 2023), cert. denied, 2024 WL 156474 (Jan. 16, 2024). Section 1 of
the Sherman Act forbids agreements that unreasonably restrain trade. FTC v.
Qualcomm Inc., 969 F.3d 974, 988-89 (9th Cir. 2020). “Restraints that are not
unreasonable per se are judged under the ‘rule of reason.’” Id. at 989 (quoting
Ohio v. Am. Exp. Co., 138 S. Ct. 2274, 2284 (2018)).
The rule of reason generally applies when determining whether conduct is
anticompetitive under Sections 1 and 2. Epic, 67 F.4th at 974. The court must
“examine the facts peculiar to the business, the history of the restraint, and the
reasons why it was imposed, to determine the effect on competition in the relevant
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product market.” In re Nat’l Football League’s Sunday Ticket Antitrust Litig., 933
F.3d 1136, 1150 (9th Cir. 2019) (emphasis added). “Anticompetitive conduct is
behavior that tends to impair the opportunities of rivals and either does not further
competition on the merits or does so in an unnecessarily restrictive way.” Cascade
Health Solutions v. PeaceHealth, 515 F.3d 883, 894 (9th Cir. 2008).
Courts bypass the typical analysis of anticompetitive effects and apply a
different liability standard in the “narrow situation[]” where a plaintiff challenges a
monopolist’s unilateral refusal to deal directly with its rivals. Chase Mfg., Inc. v.
Johns Manville Corp., 84 F.4th 1157, 1173 (10th Cir. 2023) (citing Aspen Skiing,
472 U.S. at 610-11). By contrast, courts undertake a fact-intensive analysis of
effects when the conduct “involves some assay by the monopolist into the
marketplace,” by, for example, “limit[ing] the abilities of third parties to deal with
rivals.” Novell, 731 F.3d at 1072. A monopolist thus may violate the Sherman Act
by “forcing” its customers “to boycott a compet[itor]” as a condition of doing
business. Lorain J., 342 U.S. at 152-53.
In this case, the district court committed three key errors when dismissing
CREXi’s antitrust counterclaims: the court (1) incorrectly applied the unilateralrefusal-to-deal-with-rivals framework to CoStar’s alleged restrictions on its
customers; (2) erroneously absolved CoStar from liability by overlooking CREXi’s
factual allegations concerning the practical effects of CoStar’s conduct; and (3)
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improperly rejected CREXi’s monopoly power allegations concerning CoStar’s
control of prices and successful efforts to exclude competitors.
I.
The District Court Misclassified The Challenged Conduct As A
Unilateral Refusal To Deal
The district court applied an incorrect framework by declaring CoStar’s
conduct a “legitimate refusal to provide free aid and assistance to a competitor,”
and thus exempting it from scrutiny into whether that conduct actually harmed
competition. 1-ER-13-14. This ruling was error. The refusal-to-deal framework
applies only to a firm’s “purely unilateral” refusal to deal with rivals, Pac. Bell Tel.
Co. v. linkLine Communications, Inc., 555 U.S. 438, 448 (2009) (linkLine), which
CoStar’s alleged violations were not.4 Because CoStar allegedly placed restraints
on its customers that prevented them from working with CoStar’s rivals, the court
was required to analyze the restraints’ potential anticompetitive effects.
A. The Sherman Act Prohibits Monopolists From Imposing
Anticompetitive Restraints On Customers’ Dealings With Rivals
Bedrock antitrust precedents establish that a monopolist can violate the
Sherman Act by imposing conditions that have the effect of preventing third
Although unilateral refusals to deal sometimes can violate the antitrust laws (see
Aspen Skiing, 472 U.S. at 608, 610-11; Otter Tail Power Co. v. United States, 410
U.S. 366, 377-78 (1973)), the district court did not acknowledge those precedents
or analyze how they would apply to CoStar’s conduct.
4
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parties from doing business with the monopolist’s would-be rivals. The district
court cited none of these rulings, which are essential to resolving this appeal.
The Supreme Court made this principle clear in Lorain Journal, where a
newspaper with a monopoly on local news coverage “refused to accept local
advertisement[s]” from companies that advertised or were about to advertise with a
radio station that had recently started to compete for advertisers. 342 U.S. at 14650. Many customers exclusively advertised with the newspaper because they
“could not afford to discontinue their newspaper advertising in order to use the
radio” station. Id. at 153. The Supreme Court ruled that the newspaper’s “attempt
to regain its monopoly [on local advertisements] ... by forcing advertisers to
boycott a competing radio station violated § 2.” Id. at 152.
Similar decisions abound in the circuit courts. For instance, in United States
v. Dentsply Int’l, Inc., 399 F.3d 181 (3d Cir. 2005), a dominant false teeth supplier
“required agreement” by its “dealers not to handle competitors’ teeth” on pain of
losing access to the monopolist’s products. Id. at 190. The dominant supplier
coerced several customers into not dealing with the supplier’s rivals, and it
terminated or threatened to terminate customers who nonetheless tried to work
with a rival. Id. These actions were anticompetitive, as they “effectively choked off
the market for artificial teeth, leaving only a small sliver for competitors.” Id. at
196.
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Similarly, in McWane, Inc. v. FTC, 783 F.3d 814 (11th Cir. 2015), a
monopolist pipe fittings supplier employed an exclusivity policy that temporarily
blocked sales to customers who had purchased from the supplier’s rivals. Id. at
820-21. Several customers stopped working with rivals “in order to avoid the
devastating result of being cut off” from the monopolist’s products. Id. The
Eleventh Circuit upheld the Commission’s finding that the exclusivity policy
harmed competition by “stunt[ing] the growth of” the monopolist’s “only rival in
the … market—and prevent[ing] it from emerging as an effective competitor who
could challenge [the monopolist’s] supracompetitive prices.” Id. at 839.
Most recently, in Chase Manufacturing, a dominant thermal insulation
supplier told customers to “stop doing business with [an upstart rival] or lose
access to [the monopolist’s] enormous thermal-insulation inventory.” 84 F.4th at
1171-72. The monopolist’s coercion was successful, and multiple customers
“dropped competing product lines [from the rival] because they could not survive
without access to the dominant manufacturer.” Id. at 1174. The district court
dismissed after applying the heightened standards for refusals to deal with rivals.
Id. at 1173. The Tenth Circuit reversed, holding that the plaintiff was entitled to
prove at trial that the monopolist’s “concentrated market position,
supracompetitive prices, and several threats … deprived the market of access to
[the rival’s] less expensive, superior” product. Id. at 1177.
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The core teaching of these cases is that when a monopolist allegedly
prevents its customers from assisting or dealing with the monopolist’s potential
rivals, the court must examine “the reality of the [relevant] market and the practical
effect of [the monopolist’s] conduct.” Id. at 1173. If the effect is anticompetitive,
the conduct violates the antitrust laws.
B. The District Court Failed To Analyze The Practical Effects Of
CoStar’s Exclusionary Conduct As The Sherman Act Requires
The allegations in this case closely resemble the facts of Lorain Journal,
Dentsply, McWane, and Chase Manufacturing. As the district court recognized,
CoStar alleges that CREXi “impos[es] exclusionary contractual restrictions to
prevent brokers from using competitors’ services.” 1-ER-15-16, 24 (citing FACC
¶¶ 55-69). Nonetheless, the court failed to undertake any case-specific analysis of
market realities and practical effects of the exclusionary restrictions as the law
requires. See Chase Mfg., 84 F.4th at 1173; McWane, 783 F.3d at 834-40
(discussing Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 326-29 (1961)).
CREXi’s well-pleaded allegations describe the harmful practical effects of
CoStar’s scheme. In practice and coupled with its conduct, CoStar’s exclusionary
contracts bar users of CoStar’s services from sharing information with CoStar’s
competitors, including the customers’ own listings, and impede customers from
working with rival CRE platforms—all on threat of losing access to CoStar’s musthave services. FACC ¶¶ 6, 55-58, 60-69; see also FACC ¶¶ 4-5, 39-43 (describing
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CoStar’s technological blocks and their consequences). CREXi alleges that
“brokers, buyers, and competition would benefit from brokers being able to widely
publicize their CRE listings on different platforms.” FACC ¶ 69. CoStar’s conduct
was anticompetitive because it “squelch[ed] meaningful competition between
different platforms, resulting in inflated prices, suppressed output, and smothered
innovation.” FACC ¶ 69; see also FACC ¶ 49.
At the motion-to-dismiss stage, the district court was required to accept
CREXi’s factual allegations as true and draw reasonable inferences in CREXi’s
favor concerning the anticompetitive effects. See Daniels-Hall v. Nat’l Educ.
Ass’n, 629 F.3d 992, 998 (9th Cir. 2010).5 Instead, the court did the opposite: it
counterfactually treated CoStar’s alleged violations as a unilateral refusal to deal,
sidestepping the required analysis of anticompetitive effects. See 1-ER-12-16. In
the process, the district court contravened motion-to-dismiss precedent by adopting
a “characterization” of CoStar’s conduct “at odds with [CREXi’s] allegations.” See
Produce Pay, Inc. v. Izguerra Produce, Inc., 39 F.4th 1158, 1162 (9th Cir. 2022).
C. The Unilateral-Refusal-To-Deal Doctrine Is Irrelevant To This Case
The unilateral-refusal-to-deal-with-rivals framework does not fit the facts of
this case. The Supreme Court has applied this standard in two related-but-narrow
Of course, CoStar remains free to argue at trial or in a summary judgment motion
that CREXi’s allegations are unsupported by the evidence, that its actions did not
produce anticompetitive effects, or that they were procompetitive on balance.
5
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situations: first, where a defendant refuses to sell a requested product or service
directly to a rival, 6 and second, where a defendant agrees to deal directly with
rivals but fails to offer “terms and conditions that the rivals find commercially
advantageous.”7 Neither situation exists here. Indeed, CREXi expressly disavows
any claim that CoStar should be required to grant CREXi “access to CoStar-owned
data” or to allow CREXi to use “CoStar’s websites to populate CREXi with
listings.” E.g., FACC ¶ 12. Rather, CREXi seeks to deal with third-party brokers
and is blocked by the contractual and technological barriers that CoStar imposes on
brokers. FACC ¶ 12.
Moreover, the policy concerns behind the unilateral-refusal-to-deal-withrivals framework have no salience here. Courts recognize that “compelling
negotiation between competitors” poses unique risks that could facilitate horizontal
collusion and require courts to dictate the “proper price, quantity, and other terms
of dealing” between rivals. MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124,
1131 (9th Cir. 2004) (emphasis added) (quoting Verizon Communications Inc. v.
Law Offices of Curtis V. Trinko, 540 U.S. 398, 408 (2004)). In response to this
See Aspen Skiing, 472 U.S. at 608-11 (refusal to sell ski lift tickets to a competitor
to be used in a joint ticket offering); Otter Tail, 410 U.S. at 371 (electric utility
company’s refusal to sell wholesale power to municipal distribution systems).
6
See linkLine, 555 U.S. at 450-51 (rival challenged an existing deal with the
defendant that charged high wholesale prices to the rival in the face of low retail
prices).
7
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policy problem, the refusal-to-deal-with-rivals framework is “underinclusive” and
deliberately errs toward generating “false negatives,” i.e., finding no liability even
in the face of otherwise compelling evidence of anticompetitive harm. Novell, 731
F.3d at 1075 (cleaned up). But CREXi does not seek an order requiring CoStar to
do business with CREXi, only to end the exclusionary barriers imposed on thirdparty brokers.
Expanding the unilateral-refusal-to-deal-with-rivals doctrine beyond its
proper boundaries is unwarranted. In antitrust cases, the Supreme Court generally
disfavors “[l]egal presumptions that rest on formal distinctions,” instead
“prefer[ring] to resolve antitrust claims on a case-by-case basis, focusing on the
particular facts disclosed by the record.” Eastman Kodak Co. v. Image Tech.
Servs., Inc., 504 U.S. 451, 466-67 (1992) (cleaned up, emphasis added).
Accordingly, courts may not apply the unilateral-refusal-to-deal-with-rivals
framework when, as here, the plaintiff seeks to remedy harm caused by a
monopolist’s “interfere[nce] with the relationship between rivals and third
parties.” New York v. Facebook, Inc., 549 F. Supp. 3d 6, 32 (D.D.C. 2021), aff’d
sub nom. New York v. Meta Platforms, Inc., 66 F.4th 288 (D.C. Cir. 2023)
(emphasis added); see also Novell, 731 F.3d at 1072. That is why, in Chase
Manufacturing, the Tenth Circuit overturned a district court’s decision to
“borrow[] a standard from refusal-to-deal-with-rivals caselaw” to absolve a
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monopolist from liability for restricting customers’ ability to work with the
monopolist’s rivals. 84 F.4th at 1173. The district court committed the same
analytical error here; this Court should correct it.
II.
The District Court Improperly Absolved CoStar From Liability Based
On Language In Its Contracts, While Overlooking CoStar’s Alleged
Misconduct In Implementing And Enforcing Those Contracts
The district court committed a second critical error by exculpating CoStar
based on its siloed interpretation of the contract terms. In the process, the court
overlooked allegations that CoStar deployed those contracts to threaten customers
and deter them from sharing any information with CoStar’s rivals, and that
customers understood the contracts to have that effect, modifying their behavior
accordingly. In analyzing exclusionary contracts under Section 2, the court must
“look past the terms of the contract to ascertain the relationship between the parties
and the effect of the agreement in the real world.” ZF Meritor, LLC v. Eaton Corp.,
696 F.3d 254, 270 (3d Cir. 2012) (cleaned up). The district court neglected this
essential task.
Instead, the district court simply held that “CoStar’s contractual provisions
prohibiting use of CoStar-modified images do not constitute anticompetitive
conduct,” because the court improperly assumed that the contracts allowed brokers
to share “their own images” with rival platforms. 1-ER-16 (emphasis added). But
CREXi’s allegations refute that assumption. CREXi alleges that, in practice,
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CoStar “threaten[ed]” brokers who “simply … shar[ed] the brokers’ own listing
information and photographs with CoStar’s competitors.” FACC ¶ 62 (emphasis
added). Even when brokers considered CoStar’s breach-of-contract claims to be
“frivolous,” they still avoided working with CREXi out of fear of “costly
litigation” and losing access to CoStar’s services. FACC ¶ 66; see also FACC ¶ 6.
CREXi’s allegations, taken as true, create a plausible inference that CoStar’s
conduct had the real-world effect of thwarting customers from sharing information
with rival platforms. The district court prematurely resolved factual issues in
finding otherwise.
A. CREXi Alleges That CoStar’s Contracts And Its Conduct Were
Exclusionary
Under the Sherman Act, the district court was required to evaluate CoStar’s
conduct, not just its contracts. When a monopolist imposes restrictions that have
the “practical effect” of tying up customers, it can harm competition. Tampa Elec.,
365 U.S. at 326-27. Accordingly, “[a]n express exclusivity requirement … is not
necessary” if the evidence shows that the real-world effect of the monopolist’s
conduct is anticompetitive. ZF Meritor, 696 F.3d at 270; accord McWane, 783
F.3d at 834-35 (when a defendant’s exclusionary “program” harms competition, a
“conventional exclusive dealing contract” is not required to establish liability).
Rather, a plaintiff can show that the defendant used “extra-contractual conditions”
to “coerce buyers into purchasing a substantial amount of their needs from the
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seller.” Aerotec Int’l, Inc. v. Honeywell Int’l, Inc., 836 F.3d 1171, 1182-83 (9th
Cir. 2016). “What matters are the actual restraints the defendant imposes on the
market, not words on a page.” Team Schierl Cos. v. Aspirus, Inc., No. 22-CV-580JDP, 2023 WL 6847433, at *10 (W.D. Wis. Oct. 17, 2023) (“A rule that looked
only at the express terms of the contract could be too easily evaded.”).
The counterclaims allege that the relevant contract terms amount to
“agreement[s] to not support, or even share equivalent data with, CoStar’s
competitors,” and create a “chilling effect on brokers’ willingness to work with
competitors.” FACC ¶ 60. CREXi alleges that CoStar “declares that listings posted
by brokers on the LoopNet website are ‘proprietary to LoopNet’ and forbids
brokers from providing those same listings to CoStar’s competitors.” FACC ¶¶ 6,
50, 61. Even if a broker simply shares its “own listings” with a CoStar rival,
CoStar nonetheless “threatens brokers that they are in ‘prima facie breach’ of
contract.” FACC ¶¶ 6, 50, 61-63.
The counterclaims also include concrete examples showing that brokers
“widely understood” CoStar’s threats as “foreclosing their ability to work with
competing platforms.” FACC ¶¶ 64-69; see Aerotec, 836 F.3d at 1183 (recognizing
that other circuit courts have held that plaintiffs can establish de facto exclusive
dealing through “evidence that buyers understood offers as conditional on the
buyer forgoing purchases from competitor manufacturers”). Some brokers saw
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CoStar’s legal threats as specious, but refused to work with CREXi anyway out of
fear of being sued or losing access to CoStar’s industry-essential services. FACC
¶¶ 64, 66. This outcome was “inten[tional],” as CoStar sought “to prevent brokers
from using competitors’ services.” FACC ¶ 6. The real-world effect has been to
“chok[e] off the supply of brokers and CRE listings to potential competitors,”
thereby enabling “CoStar to charge supracompetitive prices.” FACC ¶ 6.
These nonconclusory allegations establish precisely the type of “market
realities” that make out a case of exclusionary conduct, if supported by evidence.
See McWane, 783 F.3d at 833-35. Although the district court alluded to some of
these allegations, it ruled only that CoStar’s “contractual provisions” were not
anticompetitive. 1-ER-16 (emphasis added). But even if a contract were legal in
isolation, it may still be a tool for illegal monopolization. Cf. United States v. Am.
Tobacco Co., 221 U.S. 106, 182-83 (1911). The court neglected to ask the proper
Sherman Act question: Was CoStar’s conduct in implementing and enforcing its
contracts anticompetitive? Because CREXi’s allegations create a reasonable
inference that the answer is yes, the district court’s failure to credit those
allegations was erroneous.
B. The District Court Improperly Weighed Competing Factual
Inferences
In addition to misapplying the Sherman Act, the district court contravened
basic pleading standards by granting dispositive weight to CoStar’s disputed view
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of the contracts and their effects. Under Rule 12(b)(6), the court was required to
take CREXi’s factual allegations as true and construe them in the light most
favorable to CREXi. E.g., Daniels-Hall, 629 F.3d at 998. Instead, the court
improperly credited CoStar’s version of the facts over CREXi’s well-pleaded
allegations.
CoStar defended itself below by arguing that its contracts allowed brokers to
share their original images and listings with CREXi. See CoStar’s Mot. to Dismiss
CREXi’s FACC, D. Ct. ECF 198, at 24-26. But CREXi alleges the opposite: While
parts of CoStar’s contracts say that customers are free to share listing information
with other platforms, those “promises [were] illusory and contradicted by CoStar’s
actions as well as other CoStar contractual terms.” FACC ¶ 52. In CREXi’s telling,
apart from what the contracts may have stated, CoStar threatened brokers who
shared even their original photos and listings with CoStar’s rivals, which chilled
brokers from dealings with CREXi. See supra pp. 19-20; FACC ¶¶ 107-08, 111.
Resolving a fact-specific dispute over the competitive effects of an alleged
exclusivity scheme is inappropriate on a motion to dismiss. See Am. Express, 138
S. Ct. at 2284 (determining a restraint’s “actual effect on competition” requires a
“fact-specific assessment”) (cleaned up); accord Chase Mfg., 84 F.4th at 1176. But
the district court chose a different—and improper—path: it proclaimed as fact that
brokers dealing with CoStar “still maintain the rights to their original images”
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under the language of the contracts, so brokers “can give those images or listings to
CREXi or any other third-party listing service.” 1-ER-16. The court thus implicitly
rejected CREXi’s allegation that brokers were not free to share such information in
practice.
That ruling amounts to a premature weighing of facts that this Court’s
precedents condemn. Although CoStar may press its theories about the restraints’
practical effects after discovery, the district court had no basis to “accept … as
uncontroverted and true” a defendant’s “own version of the facts at the pleading
stage.” Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018).
Doing so would make it “near impossible for even the most aggrieved plaintiff to
demonstrate a sufficiently ‘plausible’ claim for relief.” Id.8
III.
The District Court Erred In Rejecting CREXi’s Monopoly Power
Allegations
Finally, the district court was wrong to dismiss CREXi’s allegations that
CoStar was a monopolist in the relevant markets. See 1-ER-18-22. Monopoly
power is “the power to control prices or exclude competition.” Grinnell, 384 U.S.
at 571 (citation omitted); accord Epic, 67 F.4th at 998. Here, CREXi
As the Fourth Circuit has observed, “post-Twombly appellate courts have often
been called upon to correct district courts that mistakenly engaged in [a] premature
weighing exercise in antitrust cases” by crediting the defendant’s version of the
facts in response to a motion to dismiss. SD3, LLC v. Black & Decker (U.S.) Inc.,
801 F.3d 412, 425 (4th Cir. 2015) (collecting cases).
8
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unambiguously met its pleading burden by alleging facts directly establishing that
CoStar both controlled prices and excluded competition.9
The district court incorrectly faulted CREXi for not making “any allegations
regarding restricted output.” 1-ER-20. Separate allegations regarding output were
unnecessary here, as CREXi’s counterclaims directly established anticompetitive
effects in the form of sustained supracompetitive prices and excluded competition.
But in any event, CREXi did make allegations regarding restricted output, which
the district court simply overlooked. See FACC ¶¶ 69, 177, 226.
A. CREXi Established Monopoly Power With Well-Pleaded Allegations
That CoStar Controlled Prices And Excluded Competition
CREXi pleaded facts identifying the relevant product and geographic
markets; CoStar does not challenge the sufficiency of these allegations. 1-ER-19.
Further, CREXi pleaded facts that, taken as true, directly show CoStar’s monopoly
power within those markets.10 “There is universal agreement that monopoly power
While Section 2 of the Sherman Act requires a showing of “monopoly power,”
Section 1 requires “market power.” Epic, 67 F.4th at 982-83, 998. The two
concepts differ in “degree”: monopoly power requires “something greater” than
market power. Id. at 998 (quoting Eastman Kodak, 504 U.S. at 481). While CREXi
raises both Section 1 and Section 2 claims, we focus on monopoly power here
because CREXi has readily satisfied the pleading requirements for market power
and for monopoly power.
9
A plaintiff can establish monopoly power through either direct or indirect
evidence. Epic, 67 F.4th at 998. This brief addresses only the direct evidence
alleged in CREXi’s counterclaims.
10
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is the power to exclude competition or control prices.” United States v. Syufy
Enters., 903 F.2d 659, 664 (9th Cir. 1990) (emphasis added). CREXi alleges in
painstaking detail that CoStar in fact did both.
1. CoStar controlled prices.
A monopolist is a firm that “can profitably raise prices substantially above
the competitive level.” United States v. Microsoft Corp., 253 F.3d 34, 51 (D.C. Cir.
2001) (en banc). In particular, setting prices “without considering rivals’ prices” is
“something a firm without a monopoly would [be] unable to do.” Id. at 57-58.
Here, CREXi alleges just that: CoStar charged supracompetitive prices
undisciplined by the actions of its competitors for an extended period of time. This
is the quintessential monopoly-power showing. 11
Specifically, CREXi alleges that CoStar’s prices are not materially affected
by the prices of rivals with “product features comparable or superior to those of
CoStar.” FACC ¶ 226. Thus, CoStar was able to increase its prices after acquiring
“A supracompetitive price is simply a price above competitive levels.” Epic, 67
F.4th at 984 (cleaned up). Of course, a firm “routinely charg[ing] higher prices”
than certain competitors is not by itself evidence of monopoly power. See Forsyth
v. Humana, Inc., 114 F.3d 1467, 1476 (9th Cir. 1997), overruled in part on other
grounds by Lacey v. Maricopa Cnty., 693 F.3d 896 (9th Cir. 2012). The inquiry is
not whether prices are “high” in some abstract sense, but instead whether prices are
above the level that would exist in a competitive marketplace. See, e.g., NCAA v.
Bd. of Regents, 468 U.S. 85, 109 n.38 (1984). Here, CREXi sufficiently alleges the
relevant markets and alleges evidence of supracompetitive pricing beyond just
CoStar’s high prices.
11
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LoopNet by 300 to 500 percent. 1-ER-20; FACC ¶ 215. Then, after another rival
exited the market, CoStar subjected the market to another 80 percent price
increase. FACC ¶¶ 197, 217. Indeed, CoStar raised prices “every time” it acquired
a competitor. FACC ¶ 218. Those prices have been “substantially above
competitive levels” for years. FACC ¶¶ 226-27. CoStar’s customers reported that
they were forced to accept CoStar’s price increases because (in their own words)
“no website can really compete.” FACC ¶¶ 213-14.
This Court long has recognized that a firm’s “ability to manage its prices
with little regard to competition” “support[s] an inference of market dominance.”
Greyhound Computer Corp., Inc. v. IBM Corp., 559 F.2d 488, 497 (9th Cir. 1977).
That is precisely what CREXi’s allegations show here. CoStar’s ability to charge
prices above the competitive level is the hallmark of monopoly power.
2. CoStar excluded competition.
A plaintiff also can directly show monopoly power through well-pleaded
allegations that the defendant excluded competition. See Epic, 67 F.4th at 998;
Cost Mgmt. Servs., Inc. v. Washington Natural Gas Co., 99 F.3d 937, 950-51 (9th
Cir. 1996) (citing Grinnell, 384 U.S. at 571). For example, in Minnesota Made
Hockey Inc. v. Minnesota Hockey Inc., 789 F. Supp. 2d 1133 (D. Minn. 2011), the
court credited the plaintiffs’ monopoly-power allegations where a dominant youth
hockey league issued a rule that barred players from also competing in rival
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leagues. Id. at 1145. Because this rule led numerous parents to withdraw their
children from other leagues, demonstrating the power to exclude competition, the
complaint successfully pleaded the defendant’s monopoly power. Id.
Likewise, the district court here should have credited CREXi’s allegation
that CoStar’s contracts, threats, and technological blocks excluded competition
from rival platforms, thereby establishing monopoly power. As described above,
CREXi alleges that CoStar’s contractual terms have prevented numerous broker
customers from working with and using rival CRE platforms (FACC ¶¶ 64-69,
136-139, Ex. A), and that CoStar’s technology blocks have prevented brokers from
sharing their own CRE listings from their own websites with CoStar’s rivals
(FACC ¶¶ 44-47, 136-39, Ex. A). The effect of these restrictions is that rival
platforms have been unable to provide “meaningful competition” in the relevant
markets. FACC ¶ 69. The counterclaims give numerous examples of individual
brokers who were directly thwarted from using rival platforms because of CoStar’s
alleged exclusionary practices. FACC ¶¶ 44-47, 64-69, 136-139, Ex. A.
B. The District Court Was Wrong To Dismiss CREXi’s Monopoly
Power Claim For A Supposed Lack Of Separate Output Allegations
The district court dismissed CREXi’s direct allegations of monopoly power
with a terse assertion that “CREXi does not make any allegations regarding
restricted output.” 1-ER-20. The court exclusively relied on this Court’s prior
observation that “[i]f the plaintiff puts forth evidence of restricted output and
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supracompetitive prices, that is direct proof of injury to competition which a
competitor with market power may inflict.” Rebel Oil Co. v. Atlantic Richfield Co.,
51 F.3d 1421, 1434 (9th Cir. 1995). The district court’s ruling was in error, both
because no separate output allegations were required, and because CREXi did
allege restricted output.
1. A plaintiff need not show restricted output in addition to
supracompetitive prices and excluded competition.
A defendant may show monopoly power through direct evidence of the
“actual exercise” of such power, Rebel Oil, 51 F.3d at 1434, or other conduct that
is “difficult to explain unless” the defendant is a monopolist, including either
supracompetitive pricing or excluding competition, Microsoft, 253 F.3d at 57-58.
Although Rebel Oil observed that a firm may prove monopoly power directly with
“evidence of restricted output and supracompetitive prices,” Rebel Oil, 51 F.3d at
1434, it did not suggest that this was the only form of direct proof available. The
district court was wrong to construe Rebel Oil in this manner.
Since Rebel Oil, the Supreme Court and this Court have repeatedly clarified
that a plaintiff can directly prove injury to competition with evidence of “reduced
output, increased prices, or decreased quality in the relevant market.” E.g., Am.
Express, 138 S. Ct. at 2284 (emphasis added). As this Court has stressed, “showing
a reduction in output is one form of direct evidence, but it ‘is not the only
measure.’” Epic, 67 F.4th at 983 (quoting O’Bannon v. NCAA, 802 F.3d 1049,
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1070 (9th Cir. 2015)). Thus, in O’Bannon, the Court “quickly” rejected the
argument that plaintiffs needed to show decreased output in addition to increased
prices, since “raising price, reducing output, and dividing markets have the same
anticompetitive effects.” 802 F.3d at 1070-71 (quoting Calif. Dental Ass’n v. FTC,
526 U.S. 756, 777 (1999)).12 Notably, earlier this month a district court in this
Circuit recognized that Epic and O’Bannon are “controlling in-circuit prec[ed]ent”
on this point. See Chung Le v. Zuffa, LLC, No. 2:15-cv-01045-RFB-BNW, 2024
WL 195994, at *5 & n.7 (D. Nev. Jan. 18, 2024) (emphasizing that “either reduced
purchases or reduced prices may be relied upon as direct evidence” of monopsony
power). Here, either pricing or output allegations are sufficient to allege direct
evidence of monopoly power.
Indeed, as Rebel Oil itself recognized, the monopoly-power inquiry asks
whether the defendant is able “unilaterally to raise prices above competitive
levels.” 51 F.3d at 1434. As discussed on pp. 24-25, CREXi’s allegations establish
that CoStar repeatedly imposed dramatic and supracompetitive price increases
unchecked by rivals with comparable or superior products. Because CREXi’s
The discussions about direct evidence in Epic and O’Bannon take place in the
context of assessing direct evidence of anticompetitive effects, as does the passage
in Rebel Oil on which the district court relied in insisting that CREXi must make
separate pleadings regarding output. See 51 F.3d at 1434 (noting that “direct
evidence of the injurious exercise of market power”— i.e., anticompetitive
effects—sufficed to show direct evidence of monopoly power) (citation omitted).
12
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alleged “evidence indicates that [CoStar] has … profitably” raised prices above the
competitive level in the relevant markets without regard to the actions of rivals,
“the existence of monopoly power is clear.” Microsoft, 253 F.3d at 51 (citing Rebel
Oil, 51 F.3d at 1434); accord Greyhound, 559 F.2d at 497. CREXi also separately
alleges that CoStar in fact excluded competition—an independent pathway by
which it sufficiently pleaded monopoly power. See Grinnell, 384 U.S. at 571.
Given the totality of allegations establishing that CoStar met the definitions
of monopoly power, the district court’s focus on output was unfounded. It would
be superfluous to require allegations of reduced output when a plaintiff has already
proffered well-pleaded allegations of control over prices and exclusion of
competition. “If firms raise price, the market’s demand for their product will fall,
so the amount supplied will fall too—in other words, output will be restricted.”
Calif. Dental, 526 U.S. at 777 (cleaned up). See also United States v. AMR Corp.,
335 F.3d 1109, 1115 n.6 (10th Cir. 2003) (“prices and productive output are two
sides of the same coin”) (cleaned up). Accordingly, at the motion-to-dismiss stage,
an allegation of sustained supracompetitive pricing itself creates a plausible
inference of reduced output. As Judge Breyer of the Northern District of California
has explained, “because price and output are inversely correlated,” when a
monopolist charges supracompetitive prices for an extended period, this “implies
that marketwide output … has been lower than it would have been” if the
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monopolist had charged a competitive price. In re ATM Fee Antitrust Litig., No. C
04-2676 CRB, 2010 WL 2557519, at *10-11 (N.D. Cal. Jun. 21, 2010) (denying
motion to dismiss in relevant part).
2. The district court improperly disregarded CREXi’s restricted
output allegations
Even assuming arguendo that allegations of reduced output were necessary
here, CREXi did just that. CREXi made well-pleaded allegations of reduced
output, which the district court failed to acknowledge or credit. CREXi alleges that
“CoStar’s de facto contractual exclusivity squelches meaningful competition
between different platforms, resulting in … suppressed output.” FACC ¶ 69.
CoStar exploited its “dominant market position and barriers to entry” to prevent
rivals from “increasing their output” by adding “brokers and listings” to their
platforms. FACC ¶ 177. CoStar “purposely designed” its restraints so that
competitors “cannot increase output in the short run to bring CoStar’s prices
down.” FACC ¶ 226.
In any event, CREXi’s allegations regarding supracompetitive pricing and
exclusion of competition were themselves sufficient to show monopoly power. The
district court’s improper output requirement, if widely adopted, could obscure—
rather than illuminate—courts’ inquiries into monopoly power and anticompetitive
conduct.
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CONCLUSION
This Court should correct the three fundamental errors that led the district
court to dismiss CREXi’s counterclaims: (1) its inappropriate application of a
unilateral-refusal-to-deal-with-rivals framework; (2) its failure to consider
CREXi’s allegations of exclusionary conduct beyond the literal terms of CoStar’s
contracts; and (3) its rejection of CREXi’s allegations providing direct evidence of
monopoly power.
31
Case: 23-55662, 01/26/2024, ID: 12853101, DktEntry: 24, Page 39 of 40
Respectfully submitted,
ANISHA S. DASGUPTA
General Counsel
MARIEL GOETZ
Acting Deputy General
Counsel for Litigation
January 26, 2024
/s/ Bradley Grossman
BRADLEY DAX GROSSMAN
Attorney
FEDERAL TRADE COMMISSION
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
bgrossman@ftc.gov
202-326-2994
Of Counsel:
GEOFFREY M. GREEN
PATRICIA M. MCDERMOTT
KARNA ADAM
KATHLEEN CLAIR
ELIZABETH GILLEN
AUSTIN R. HEYROTH
FEDERAL TRADE COMMISSION
Washington, D.C. 20580
32
Case: 23-55662, 01/26/2024, ID: 12853101, DktEntry: 24, Page 40 of 40
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
Form 8. Certificate of Compliance for Briefs
Instructions for this form: http://www.ca9.uscourts.gov/forms/form08instructions.pdf
9th Cir. Case Number(s) 23-55662
I am the attorney or self-represented party.
This brief contains 6,979 words, including 0 words manually counted in any
visual images, and excluding the items exempted by FRAP 32(f). The brief’s type
size and typeface comply with FRAP 32(a)(5) and (6).
I certify that this brief (select only one):
[ ] complies with the word limit of Cir. R. 32-1.
[ ] is a cross-appeal brief and complies with the word limit of Cir. R. 28.1-1.
[X] is an amicus brief and complies with the word limit of FRAP 29(a)(5), Cir. R.
29-2(c)(2), or Cir. R. 29-2(c)(3).
[ ] is for a death penalty case and complies with the word limit of Cir. R. 32-4.
[ ] complies with the longer length limit permitted by Cir. R. 32-2(b) because (select
only one):
[ ] it is a joint brief submitted by separately represented parties.
[ ] a party or parties are filing a single brief in response to multiple briefs.
[ ] a party or parties are filing a single brief in response to a longer joint brief.
[ ] complies with the length limit designated by court order dated _____________.
[ ] is accompanied by a motion to file a longer brief pursuant to Cir. R. 32-2(a).
Signature /s/ Bradley Grossman
Date January 26, 2024
(use “s/[typed name]” to sign electronically-filed documents)
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.