throbber
Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 1 of 53
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`The Honorable John C. Coughenour
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`STEVEN FLOYD, individually and on behalf
`of all others similarly situated,
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`Plaintiff,
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`UNITED STATES DISTRICT COURT
`WESTERN DISTRICT OF WASHINGTON
`AT SEATTLE
`
`
` Case No. 2:22-cv-01599-JCC
`
`PLAINTIFF’S OMNIBUS
`OPPOSITION TO DEFENDANTS’
`MOTIONS TO DISMISS
`
`NOTE ON MOTION CALENDAR:
`May 19, 2023
`
`REDACTED VERSION
`
`v.
`
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`AMAZON.COM, INC., a Delaware
`corporation, and APPLE INC., a California
`corporation
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`
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`Defendants.
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`PLAINTIFF’S OMNIBUS OPPOSITION TO
`DEFENDANTS’ MOTIONS TO DISMISS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
`

`

`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 2 of 53
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`TABLE OF CONTENTS
`
`Page
`PRELIMINARY STATEMENT .........................................................................................1 
`BACKGROUND .................................................................................................................3 
`LEGAL STANDARD ..........................................................................................................7 
`ARGUMENT .......................................................................................................................8 
`A. 
`Plaintiff Has Pleaded a Per Se Violation of the Sherman Act. ................................9 
`Group Boycotts Agreed to by Competitors Have Long Been
`1. 
`Subjected to Per Se Treatment. ....................................................................9 
`The Boycott Agreement is a Naked Horizontal Restraint and
`thus Per Se Unlawful. ................................................................................11 
`Defendants Have No Credible Defense to the Per Se Rule. ......................13 
`Apple’s “Dual Distribution” Model Does Not Foreclose
`a. 
`Per Se Treatment. ...........................................................................13 
`Defendants’ Anti-Counterfeiting Justification for the Boycott
`Agreement is Made for Litigation and Implausible. ......................16 
`Even if the Boycott Agreement Were Not a Naked Group Boycott,
`it Would be Subject to the Modified Per Se Rule. .....................................18 
`Plaintiff Also Has Plausibly Pleaded a Claim Under the Rule of Reason
`Standard. ................................................................................................................19 
`The Boycott Agreement Caused Actual Detrimental Effects on
`1. 
`Competition, and Thus No Inquiry into Market Definition or Market
`Power is Required. .....................................................................................20 
`The Antitrust Markets Pleaded in the Complaint are Plausible and
`Supported by Detailed Factual Allegations. ..............................................24 
`Contrary to Defendants’ Arguments, the Relevant Antitrust
`a. 
`Markets Should Be Defined as Two-Sided Under Amex and
`Ninth Circuit Law. .........................................................................27 
`In the Alternative, There are Relevant One-Sided Antitrust
`Submarkets for the Sale of Smartphones and Tablets on
`Online Marketplaces. .....................................................................30 
`In the Alternative, there are Relevant Antitrust Submarkets
`for the Sale of Smartphones and Tablets on Online
`One-Stop Shops. ............................................................................36 
`Amazon has Market Power in the Markets Alleged. .....................38 
`
`b. 
`
`b. 
`
`c. 
`
`d. 
`
`2. 
`
`3. 
`
`4. 
`
`2. 
`
`B. 
`
`
`
`I. 
`II. 
`III. 
`IV. 
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`PLAINTIFF’S OMNIBUS OPPOSITION TO - i
`DEFENDANTS’ MOTIONS TO DISMISS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
`

`

`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 3 of 53
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`C. 
`D. 
`
`Plaintiff Floyd Has Alleged an Antitrust Injury to Himself. .................................41 
`Should the Court Dismiss Any Portion of Plaintiff’s Claim, Plaintiff
`Seeks Leave to Amend. ..........................................................................................43 
`CONCLUSION ..................................................................................................................44 
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`V. 
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`PLAINTIFF’S OMNIBUS OPPOSITION TO - ii
`DEFENDANTS’ MOTIONS TO DISMISS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
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`

`

`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 4 of 53
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`
`
`TABLE OF AUTHORITIES
`
`CASES
`
`Page(s)
`
`AT&T Corp. v. JMC Telecom, LLC,
`470 F.3d 525 (3d Cir. 2006).....................................................................................................15
`
`Aya Healthcare Servs., Inc. v. AMN Healthcare, Inc.,
`9 F.4th 1102 (9th Cir. 2021) ....................................................................................................20
`
`Brantley v. NBC Universal, Inc.,
`675 F.3d 1192 (9th Cir. 2012) .................................................................................................22
`
`Brown Shoe Co. v. U.S.,
`370 U.S. 294 (1962) .....................................................................................................24, 30, 34
`
`In re Capacitors Antitrust Litig.,
`106 F. Supp. 3d 1051 (N.D. Cal. 2015) ...................................................................................43
`
`Consol. Credit Agency v. Equifax, Inc.,
`2004 WL 5644363 (C.D. Cal. Aug. 5, 2004) ...........................................................................14
`
`Cont’l Ore Co. v. Union Carbide & Carbon Corp.,
`370 U.S. 690 (1962) ...................................................................................................................8
`
`Dang v. San Francisco Forty Niners,
`964 F. Supp. 2d 1097 (N.D. Cal. 2013) ...................................................................................35
`
`Dimidowich v. Bell & Howell,
`803 F.2d 1473 (9th Cir. 1986), opinion modified on denial of reh’g, 810 F.2d
`1517 (9th Cir. 1987) ...........................................................................................................14, 15
`
`Elecs. Commc'ns Corp. v. Toshiba Am. Consumer Prods., Inc.,
`129 F.3d 240 (2d Cir. 1997).....................................................................................................15
`
`Epic Games, Inc. v. Apple Inc.,
`No. 21-16506, slip op. (9th Cir. Apr. 24, 2023) .............................................................. passim
`
`Epic Games, Inc. v. Apple Inc.,
`559 F. Supp. 3d 898 (N.D. Cal. 2021), aff’d in part, rev’d in part on other
`grounds and remanded in part by, No. 21-16506, slip op. (9th Cir. Apr. 24,
`2023) ........................................................................................................................................41
`
`Frame-Wilson v. Amazon.com, Inc.,
`591 F. Supp. 3d 975 (W.D. Wash. 2022) ...............................................................19, 26, 30, 36
`
`FTC v. Indiana Fed. of Dentists,
`476 U.S. 447 (1986) .............................................................................................................3, 38
`
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`PLAINTIFF’S OMNIBUS OPPOSITION TO - iii
`DEFENDANTS’ MOTIONS TO DISMISS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
`

`

`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 5 of 53
`
`
`
`FTC v. Meta Platforms, Inc.,
`2023 WL 2346238 (N.D. Cal. Feb. 3. 2023) .....................................................................24, 25
`
`FTC v. Staples, Inc.,
`970 F. Supp. 1066 (D.D.C. 1997) ..........................................................................30, 31, 33, 34
`
`FTC v. Whole Foods Mkt., Inc.,
`548 F.3d 1028 (D.C. Cir. 2008) .........................................................................................25, 34
`
`In re German Auto. Mfrs. Antitrust Litig.,
`612 F. Supp. 3d 967 (N.D. Cal. 2020), aff'd, 2021 WL 4958987 (9th Cir. Oct.
`26, 2021) ..................................................................................................................................38
`
`In re Google Digital Advert. Antitrust Litig.,
`2022 WL 4226932 (S.D.N.Y. Sept. 13, 2022) .........................................................................15
`
`Hahn v. Oregon Physicians’ Serv.,
`868 F.2d 1022 (9th Cir. 1988) .................................................................................................10
`
`Hicks v. PGA Tour, Inc.,
`897 F.3d 1109 (9th Cir. 2018) .....................................................................................25, 30, 35
`
`High Tech. Careers v. San Jose Mercury News,
`996 F.2d 987 (9th Cir. 1993) ...................................................................................................25
`
`In re High-Tech Emple. Antitrust Litig.,
`856 F. Supp. 2d 1103 (N.D. Cal. 2012) .....................................................................................9
`
`Honey Bum, LLC v. Fashion Nova, Inc.,
`63 F.4th 813 (9th Cir. 2023) ....................................................................................2, 11, 16, 18
`
`Image Tech. Servs. v. Eastman Kodak Co.,
`125 F.3d 1195 (9th Cir. 1997) ...................................................................................................2
`
`Klor's, Inc. v. Broadway-Hale Stores, Inc.,
`359 U.S. 207 (1959) .................................................................................................................10
`
`Knevelbaard Dairies v. Kraft Foods, Inc.,
`232 F.3d 979 (9th Cir. 2000) .....................................................................................................8
`
`Krehl v. Baskin-Robbins Ice Cream Co.,
`664 F.2d 1348 (9th Cir. 1982) .................................................................................................14
`
`Laurence J. Gordon, Inc. v. Brandt, Inc.,
`554 F. Supp. 1144 (W.D. Wash. 1983) ....................................................................................14
`
`Lopez v. Smith,
`203 F.3d 1122 (9th Cir. 2000) .................................................................................................43
`
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`PLAINTIFF’S OMNIBUS OPPOSITION TO - iv
`DEFENDANTS’ MOTIONS TO DISMISS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
`

`

`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 6 of 53
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`
`
`Maya v. Centex Corp.,
`658 F.3d 1060 (9th Cir. 2011) .................................................................................................43
`
`Movie 1 & 2 v. United Artists Commc’ns, Inc.,
`909 F.2d 1245 (9th Cir. 1990) .................................................................................................13
`
`In re NCAA Athletic GIA Cap Antitrust Litig.,
`375 F. Supp. 3d 1058 (N.D. Cal. 2019), aff’d, 958 F.3d 1239 (9th Cir. 2020) ...................8, 19
`
`In re NCAA I-A Walk-On Football Players Litig.,
`398 F. Supp. 2d 1144 (W.D. Wash. 2005) ...........................................................................9, 26
`
`In re NCAA Student-Athlete Name & Likeness Licensing Litig.,
`990 F. Supp. 2d 996 (N.D. Cal. 2013) .......................................................................................8
`
`NCAA v. Bd. of Regents of the Univ. of Okla.,
`468 U.S. 85 (1984) .........................................................................................................3, 38, 40
`
`Newcal Indus., Inc. v. Ikon Off. Sol.,
`513 F.3d 1038 (9th Cir. 2008) ......................................................................................... passim
`
`Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co.,
`472 U.S. 284 (1985) .............................................................................................................2, 10
`
`Ohio v. Am. Express Co.,
`138 S. Ct. 2274 (2018) ..................................................................................................... passim
`
`Operating Eng’rs’ Pension Tr. Fund v. Clark’s Welding & Mach.,
`2009 WL 1324049 (N.D. Cal. May 8, 2009) .............................................................................8
`
`Optronic Techs., Inc. v. Ningbo Sunny Elec. Co.,
`20 F.4th 466 (9th Cir. 2021) ....................................................................................................32
`
`PBTM LLC v. Football Nw., LLC,
`511 F. Supp. 3d 1158 (W.D. Wash. 2021) .................................................................................9
`
`PLS.Com, LLC v. Nat'l Ass'n of Realtors,
`32 F.4th 824 (9th Cir. 2022), cert. denied, 143 S. Ct. 567 (2023) ................................... passim
`
`PSKS, Inc. v. Leegin Creative Leather Prods., Inc.,
`615 F.3d 412 (5th Cir. 2010) ...................................................................................................14
`
`Rebel Oil Co. v. Atl. Richfield Co.,
`133 F.R.D. 41 (D. Nev. 1990), rev’d in part on other grounds, 51 F.3d 1421
`(9th Cir. 1995) ..........................................................................................................................26
`
`Red Diamond Supply, Inc. v. Liquid Carbonic Corp.,
`637 F.2d 1001 (5th Cir. 1981) .................................................................................................14
`
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`PLAINTIFF’S OMNIBUS OPPOSITION TO - v
`DEFENDANTS’ MOTIONS TO DISMISS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
`

`

`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 7 of 53
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`
`
`Silvas v. E*Trade Mortg. Corp.,
`514 F.3d 1001 (9th Cir. 2008) ...................................................................................................8
`
`State of Cal. v. Am. Stores Co.,
`872 F.2d 837 (9th Cir. 1989), rev’d on other grounds, 495 U.S. 271 (1990) ....................33, 34
`
`Streamcast Networks, Inc. v. Skype Tech., S.A.,
`547 F. Supp 2d 1086 (C.D. Cal. 2007) ....................................................................................35
`
`Syufy Enters. v. Am. Multicinema, Inc.,
`793 F.2d 990 (9th Cir. 1986) ...................................................................................................26
`
`Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
`551 U.S. 308 (2007) ...................................................................................................................8
`
`Thurman Indus., Inc. v. Pay ’N Pak Stores, Inc.,
`875 F.2d 1369 (9th Cir. 1989) ...........................................................................................23, 34
`
`Times-Picayune Pub. Co. v. U.S.,
`345 U.S. 594 (1953) .................................................................................................................25
`
`Twin City Sportservice, Inc. v. Charley O’Finley & Co., Inc.,
`512 F.2d 1264 (9th Cir. 1975) ...........................................................................................25, 34
`
`United Energy Trading, LLC v. Pac. Gas & Elec. Co.,
`200 F. Supp. 3d 1012 (N.D. Cal. 2016) ...................................................................................41
`
`U.S. v. Bertelsmann SE & & Co. KGAA,
`2022 WL 16949715 (D.D.C. Nov. 15, 2022) ..........................................................................24
`
`U.S. v. Cont’l Can Co.,
`378 U.S. 441 (1964) .................................................................................................................25
`
`U.S. v. Gen. Motors Corp.,
`384 U.S. 127 (1966) .....................................................................................................10, 12, 13
`
`White Motor Co. v. U.S.,
`372 U.S. 253 (1963) ...........................................................................................................10, 12
`
`OTHER AUTHORITIES
`
`Rule 12(b)(6) ........................................................................................................................8, 25, 26
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`PLAINTIFF’S OMNIBUS OPPOSITION TO - vi
`DEFENDANTS’ MOTIONS TO DISMISS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
`

`

`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 8 of 53
`
`GLOSSARY OF TERMS
`
`
`Term
`
`Complaint
`¶__
`
`Apple MTD
`
`Amazon MTD
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`Definition
`Amended Class Action Complaint, filed February 27,
`2023, ECF No. 37.
`Complaint, ¶ __.
`Apple Inc.’s Motion to Dismiss, filed March 27,
`2023 (under seal), ECF No. 45.
`Amazon.com’s Motion to Dismiss the Amended
`Complaint, filed March 27, 2023, ECF No. 42.
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`PLAINTIFF’S OMNIBUS OPPOSITION TO - vii
`DEFENDANTS’ MOTIONS TO DISMISS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
`

`

`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 9 of 53
`
`
`
`I.
`PRELIMINARY STATEMENT
`This case concerns a horizontal agreement between two of the largest retailers in the
`United States to eliminate virtually all third-party merchants offering Apple products on
`Amazon’s online marketplace (“Amazon Marketplace”). Before the agreement, Amazon
`Marketplace was a place where consumers could obtain genuine Apple products—particularly
`iPhones and iPads—at substantial discounts from hundreds of sellers offering these products on
`the marketplace. Because of the active price competition between third-party merchants on
`Amazon Marketplace, Amazon was unable to “win” many transactions as a retailer on the
`platform. The low prices offered by third-party merchants likewise drove commerce away from
`Apple’s retail stores, disciplining the prices Apple could charge on the same products. In short, it
`was a functioning market and consumers enjoyed the fruits of competition—lower prices and
`more choice.
`With third-party merchants cutting into their profit margins, Amazon and Apple flexed
`their might to eliminate them. They did so through a written agreement (effective January 1,
`2019) that removed all but seven of the 600 third-party merchants offering Apple products from
`Amazon Marketplace. With fewer merchants and virtually no competition on its platform,
`Amazon immediately became the platform’s dominant seller of iPhones and iPads. And as
`intended, the discounts that prevailed prior to the agreement evaporated and prices have persisted
`at supracompetitive levels ever since.
`Amazon and Apple’s agreement (hereinafter the “Boycott Agreement”) is known in
`antitrust economics as a “group boycott” or “concerted refusal to deal.” It is a collective effort by
`two competitors aimed at excluding hundreds of other competitors from the market. Restraints of
`this sort are (like price fixing) among the few restraints so contrary to free-market principles that
`they can be condemned under the Sherman Act per se without further analysis of anticompetitive
`effects. While these principles date back more than a century, just weeks ago, the Ninth Circuit
`
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`PLAINTIFF’S OMNIBUS OPPOSITION TO – 1
`DEFENDANTS’ MOTIONS TO DISMISSS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
`

`

`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 10 of 53
`
`
`
`reaffirmed that “naked” boycotts like the Boycott Agreement—i.e., boycotts with the overt
`objective of excluding competitors—remain per se unlawful.1
`Defendants challenge application of the per se rule, arguing primarily that “dual
`distribution” schemes are evaluated under the rule of reason. No question, Apple is a dual
`distributor in that it retails its products both directly and through a network of resellers. But this
`does not protect the Boycott Agreement from per se invalidation. Defendants misconstrue the
`“dual distribution” caselaw, which offers no protection for fundamentally horizontal restraints
`that, like the Group Boycott, do not concern the parties’ vertical distribution arrangement. See
`infra, Section IV.A.1.-3.
`If the Boycott Agreement is not a “naked” boycott (and it is), it would still be subject to
`the so-called “modified per se rule” arising from Nw. Wholesale Stationers, Inc. v. Pac.
`Stationery & Printing Co., 472 U.S. 284, 298 (1985) and its progeny. Defendants do not address
`the modified per se rule and make no independent argument against its application. At a
`minimum, the modified per se rule cannot be foreclosed at this juncture because its application
`turns on factual questions such as market power and procompetitive justifications, which cannot
`be resolved on the pleadings. See infra, Section IV.A.4.
`Even if no per se standard applied, Plaintiff has adequately pleaded a claim under the rule
`of reason framework.
`First, Defendants principally challenge Plaintiff’s proposed relevant markets,
`disregarding that market definition generally is “a factual determination for the jury.”2
`Moreover, relevant markets do not need to be defined where, as here, there is direct evidence of
`anticompetitive effects in the form of higher prices, reduced output, or diminished choice. See
`infra, Section IV.B.1.
`To the extent the Court reaches market definition, Plaintiff has plausibly alleged relevant
`submarkets for smartphone transactions and tablet transactions on Online Marketplaces.
`
`
`1 See Honey Bum, LLC v. Fashion Nova, Inc., 63 F.4th 813, 820 (9th Cir. 2023).
`2 Image Tech. Servs. v. Eastman Kodak Co., 125 F.3d 1195, 1203 (9th Cir. 1997).
`PLAINTIFF’S OMNIBUS OPPOSITION TO – 2
`DEFENDANTS’ MOTIONS TO DISMISSS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
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`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 11 of 53
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`
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`Defendants’ arguments to the contrary misconstrue controlling law on two-sided markets (most
`prominently, Ohio v. Am. Express Co., 138 S. Ct. 2274, 2284 (2018) (“Amex”)) and, in many
`instances, the substance of Plaintiff’s allegations. See infra, Section IV.B.2.a. Even if the market
`were treated as one-sided or expanded to include other online one-stop shops, Plaintiff has
`prophylactically pleaded alternative relevant markets for these scenarios that encompass all
`reasonable substitutes. See infra, Section IV.B.2.b.-c.
`Second, Defendants question Amazon’s market power largely by challenging Plaintiff’s
`ability to define relevant markets in which market share can be assessed. Putting aside that
`Plaintiff has defined markets in which Amazon’s shares are dominant, market shares are just an
`“indirect” way of proving market power. Market power is, by definition, the “ability to raise
`prices above those that would be charged in a competitive market,”3 and the direct way to show
`it is with proof of supracompetitive prices and reduced output,4 both of which Plaintiff alleges
`here. See infra, Section IV.B.2.d.
`
`Amazon further challenges Plaintiff Floyd’s allegations of individualized injury, but like
`the class he seeks to represent, Mr. Floyd alleges that he paid higher prices as a result of the
`Boycott Agreement. That is a cognizable antitrust injury, and Plaintiff alleges it with
`particularity, including with respect to the specific product (a new iPad) Mr. Floyd purchased.
`See infra, Section IV.C.
`Plaintiff respectfully submits that Defendants’ motions to dismiss should be denied in
`their entirety.
`
`II.
`BACKGROUND
`Apple is the world’s largest technology company with two channels of distribution. See ¶
`1. Apple sells its products through its own network of stores, including its online storefront. See
`¶ 26. Apple also distributes products through a network of third-party distributors and resellers,
`including Amazon and the third-party merchants on its platform. See id. This includes officially
`
`
`3 NCAA v. Bd. of Regents of the Univ. of Okla., 468 U.S. 85, 109 n.38 (1984).
`4 See FTC v. Indiana Fed. of Dentists, 476 U.S. 447, 461 (1986).
`PLAINTIFF’S OMNIBUS OPPOSITION TO – 3
`DEFENDANTS’ MOTIONS TO DISMISSS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
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`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 12 of 53
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`licensed “Authorized Resellers” and other distributors who lawfully obtain Apple products from
`intermediaries and bring them to market. See id. ¶¶ 26-27.
`Amazon Marketplace is the world’s largest online store. ¶ 1. At least 60 percent of all
`online product searches begin on Amazon Marketplace, and more than 200 million consumers
`shop there every month. ¶ 31. Amazon plays essentially two roles on its marketplace. As the
`platform operator, Amazon intermediates sales of products offered by third-party merchants,
`charging a fee for the platform’s services. ¶ 32. Amazon is also a retailer—that is, Amazon has
`its own inventory of products that it sells on Amazon Marketplace in competition with third-
`party merchants. ¶¶ 34, 41.
`Amazon and Apple compete in the sale of Apple products, both against each other and
`with third-party resellers operating on Amazon Marketplace. ¶¶ 40-41.5 When Amazon or one of
`its retailers sells an Apple product, that is a sale Apple cannot capture on its own website, and
`vice versa. Prior to the Boycott Agreement, there was active price competition in this sphere,
`particularly due to the 600 third-party merchants offering bona fide iPhones and iPads on
`Amazon Marketplace. See ¶¶ 42-43, 48. To attract consumers, it was not uncommon for these
`third-party merchants to offer genuine devices at prices discounted 20 percent off the prices
`charged by Apple in its own storefront. See ¶ 45.
`These discounted prices were a boon to competition and consumers, but a problem for
`Amazon and Apple. For Amazon, actively competing third-party merchants made it extremely
`difficult for Amazon to win transactions on its marketplace (i.e., sell its own inventory of Apple
`products), particularly with respect to iPhones and iPads, Apple’s flagship products. ¶ 46. To
`compete, Amazon had to discount its own pricing but, even then, it was unable to secure a
`substantial share of platform sales. See id. For Apple, discounts on Amazon Marketplace put
`
`
`5 As addressed further below, the intrabrand competition is asymmetrical in that Amazon (as
`a platform with one-stop-shop functionality) disciplines Apple’s pricing more than Apple
`disciplines the prices offered by Amazon and its third-party merchants. See ¶¶ 84-98. While this
`asymmetry has implication for market definition, it does not change the undisputed fact that
`Amazon and Apple compete.
`
`PLAINTIFF’S OMNIBUS OPPOSITION TO – 4
`DEFENDANTS’ MOTIONS TO DISMISSS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
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`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 13 of 53
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`downward pressure on the prices it could sustain in its own storefront. ¶ 41. This undermined
`Apple’s strategy of maintaining high prices for its products and driving sales to its own online
`store, where its profit margins are higher. See ¶ 28.
`Unable to solve this problem unilaterally, Amazon and Apple took collective action by
`entering an agreement (the “Boycott Agreement”) that denies most third-party Apple resellers
`access to the market. Negotiations around the agreement began in 2017 and, from the outset, they
`centered on “gating” third-party merchants. See ¶ 49. While Defendants now contend (see infra
`at Section IV.3.b.) that the Boycott Agreement combats counterfeiting, the Boycott Agreement
`actually eliminates sellers officially licensed by Apple as Authorized Resellers. Defendants’
`internal correspondence (revealed by the Italian Competition Authority (“AGCM”) after an
`investigation) shows that little (if any) concern was given to which third-party merchants should
`be permitted to operate on Amazon Marketplace. See ¶¶ 49, 72.
`In the end, the Boycott Agreement restricts the permissible number of resellers to “no
`more than 20” per country, and in the United States, only seven third-party Apple resellers are
`permitted to offer Apple products on Amazon Marketplace. ¶¶ 49, 51. This amounts to a 98
`percent reduction to the approximately 600 third-party merchants selling iPhones and iPads on
`Amazon Marketplace prior to the Boycott Agreement. In exchange for gating these third-party
`merchants, Amazon was granted (by Apple) a steady supply of Apple products at discounts
`reaching 10 percent. ¶ 53.
`With few third-party merchants remaining, the Boycott Agreement allowed Amazon to
`win most Apple product transactions on its platform, a dramatic reversal from the pre-Boycott
`state-of-affairs. Virtually all sales on Amazon are completed through the “buy box,” which
`features one seller, selected algorithmically with price being a key determinant. See ¶¶ 35, 43.
`Before the Boycott Agreement, Amazon almost never won the buy box for iPhone and iPad
`sales. After, with virtually all third-party Apple resellers eliminated, Amazon won an
`overwhelming and increasing majority of these sales. See ¶ 8.
`
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`PLAINTIFF’S OMNIBUS OPPOSITION TO – 5
`DEFENDANTS’ MOTIONS TO DISMISSS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
`

`

`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 14 of 53
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`It is not simply a matter of Amazon seizing more sales for itself. As would be expected,
`
`and as was intended, the elimination of third-party merchants also eroded price competition and
`led to substantially higher prices on Apple products. The trendline is unmistakable. The chart
`below, taken from the Complaint, counterposes the number of distinct sellers offering iPhones
`and iPads on Amazon Marketplace against the average buy box prices they offered (measured as
`the percentage of Apple’s list prices). As shown, prior to the Boycott Agreement, the number of
`sellers was generally increasing and average prices were falling, dropping below 80 percent of
`Apple’s list prices. See ¶ 58. The Boycott Agreement inverted this trend. With the elimination of
`98% of sellers, the pricing discounts that characterized the pre-agreement period immediately
`evaporated (i.e., prices increased relative to Apple’s list prices).
`
`PLAINTIFF’S OMNIBUS OPPOSITION TO – 6
`DEFENDANTS’ MOTIONS TO DISMISSS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
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`Case 2:22-cv-01599-KKE Document 52 Filed 04/24/23 Page 15 of 53
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`Overall, Plaintiff’s analysis of the available pricing data indicates that the Boycott
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`Agreement prompted a 10 percent increase in buy box prices for iPhones and iPads. See ¶ 60.
`This increase was not limited to particular devices or models. As shown in the Complaint, prices
`increased on both iPhones and iPads and across product vintages. See ¶ 53 (individual charts for
`both iPhones and iPads); ¶ 59 (increases across vintages).
`
`Plaintiff Steven Floyd was one of the consumers who paid these higher prices. He
`purchased an iPad from Amazon for $319.99. See ¶ 23. Plaintiff alleges that, but for the Boycott
`Agreement and its deterioration of price competition, he would have paid less and had the option
`of purchasing from a wider array of sellers. See ¶ 156. Alleging that the Boycott Agreement
`constitutes an unlawful Group Boycott under the Sherman Act, Plaintiff seeks damages and all
`available remedies for himself, as well as a proposed class of consumers similarly situated. See ¶
`145.
`
`III. LEGAL STANDARD
`In reviewing a motion to dismiss, a court should liberally construe the claims, accept as
`true all well-pleaded facts and allegations in the complaint, and draw all reasonable inferences in
`
`PLAINTIFF’S OMNIBUS OPPOSITION TO – 7
`DEFENDANTS’ MOTIONS TO DISMISSS
`Case No. 2:22-cv-01599-JCC
`011121-11/2240132 V1
`
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