Multiple Energy Techs. v. Under Armour, Inc.

MULTIPLE ENERGY TECHNOLOGIES, LLC, Plaintiff, v. UNDER ARMOUR, INC., Defendant.

2:20-CV-664-NR

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

June 29, 2021

MEMORANDUM ORDER

J. Nicholas Ranjan, United States District Judge

Defendant Under Armour, Inc. moves to dismiss Plaintiff Multiple Energy Technologies, LLC's second amended complaint in this antitrust case. ECF 64. The Court previously dismissed MET's antitrust claim based on its failure to allege that it was a "direct competitor" of Under Armour, as well as its failure to adequately define the relevant market for antitrust purposes. ECF 54; ECF 55. MET then amended its complaint, and Under Armour responded by filing the pending motion to dismiss.

This time around, Under Armour renews only one of its arguments. ECF 65, pp. 9-15. That is, Under Armour says that MET has once again failed to adequately define the market in which Under Armour allegedly engaged in anticompetitive behavior. Id. Applying the familiar standard of Rule 12(b)(6), the Court will grant the motion, and once again dismiss MET's complaint. That said, for the reasons discussed below, the Court also finds that granting leave to amend is not yet futile, and so will provide MET with one last chance to amend its complaint.

Much like its first amended complaint, MET's second amended complaint defines the relevant market as consisting of all "clothing containing recovery enhancing bioceramics," or "CCREB." ECF 58, ¶ 8. More specifically, MET adds that the CCREB market "consists of clothing such as activewear, tank tops or sleeveless shirts, t-shirts, long sleeve shirts, shorts, pants, leggings, joggers, sweatpants, sleeves, pajamas[,] and sleepwear." Id. at ¶ 14. According to MET, this clothing is "distinct and separate from other kinds of clothing," in that it is advertised by sellers and bought by consumers for its alleged "muscle recovery and performance" benefits. Id. at ¶ 15. As a result, CCREB "are consistently priced higher than traditional clothing that do not contain bioceramics," and "consumers who seek to purchase CCREB do not consider traditional clothing that does not contain bioceramics to be reasonably interchangeable." Id. at ¶¶ 17, 18.

When the Court dismissed MET's last complaint, it explained that MET's allegations had left it "unclear what clothing or type of clothing" was part of the market and, also, that MET had pled "nothing about the cross-elasticity of demand of the products in the relevant market[.]" Multiple Energy Techs., LLC v. Under Armour, Inc., No. 20-664, 2021 WL 807722, at *2 (W.D. Pa. Mar. 3, 2021) (Ranjan, J.). Under Armour now argues that these same flaws remain. According to Under Armour, the products MET has identified as part of the market are not "reasonably interchangeable." ECF 72, pp. 6-11. What's more, Under Armour suggests that MET has still alleged nothing about the "elasticity" of products within the market—i.e., that an increase in the price for one CCREB product necessarily increases demand for other like products in that market. Id.

The Court agrees that MET's allegations still fall short. MET's burden at this stage is to plausibly plead that high elasticity exists between all products within the alleged market—not just that CCREB has low elasticity with clothing products that do not incorporate bioceramics. In antitrust law, "[t]he relevant product market is defined as those commodities reasonably interchangeable by consumers for the same purposes." Tunis Bros. Co. v. Ford Motor Co., 952 F.2d 715, 722 (3d Cir. 1991) (cleaned up). Thus, products in an antitrust product market are "characterized by across-elasticity of demand," meaning "the rise in the price of a good within a relevant product market would tend to create a greater demand for other like goods in that market." Id. (cleaned up) (emphasis added).

Put another way, the relevant question here is whether MET has plausibly pled that consumers consider all the products in the alleged market to be "reasonably interchangeable" with the other products in that market. Id. As a result, MET misses the mark when it alleges and argues only that consumers do not consider CCREB to be interchangeable with non-CCREB clothing, and fails to also allege that consumers do consider products within the CCREB market to be interchangeable with each other. MET also remains vague about what products are in the market—alleging only that the market consists of clothing "such as" the list of examples provided. ECF 58, ¶ 14.¹

To survive dismissal, then, MET needed to do two things: First, it needed to say what products are in the market, with enough specificity to put Under Armour on notice of at least the rough bounds of the market.² Second, and more importantly, it needed to allege that consumers consider the products in the market to be "reasonably interchangeable" with the other products in the market. That is what the Court meant, in its first opinion, when it said that MET had pled nothing about "cross-elasticity of demand" in the CCREB market. Multiple Energy Techs., LLC, No.20-664, 2021 WL 807722, at *2. Because MET did neither of these things, dismissal is once again required.

The tougher question is whether MET deserves another chance to amend. MET's previous failure to correct the same deficiencies favors dismissal. But after careful consideration, the Court finds that, for three reasons, allowing MET to amend again would not yet be futile.

First, the Court is mindful that the bar MET must clear is not a high one. In most antitrust cases, "proper market definition can be determined only after a factual inquiry into the commercial realities faced by consumers." Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 436 (3d Cir. 1997) (citation omitted); Premier Comp Sols. LLC v. UPMC, 163 F. Supp. 3d 268, 278 (W.D. Pa. 2016) (Cercone, J.) ("Definition of the relevant product market often requires a deeply fact-intensive inquiry, and courts are hesitant to grant motions to dismiss for failure to plead a relevant market definition." (cleaned up)). Thus, MET does not have to define the market with precision just yet—it only has to plead "enough factual matter (taken as true) to suggest that" it is "plausible" that the identified products comprise a single market. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007).

Second, it is notable that MET's failure to correct its complaint seems to stem mostly from its misunderstanding of the appropriate legal standard. MET's briefing suggests that it believes the "cross-elasticity" requirement is satisfied by allegations that consumers do not consider products within the market to be interchangeable with products outside the market, rather than by allegations that all the products within the market are reasonably interchangeable. The Court has now clarified that standard and what it expects MET to allege.

Third, and most importantly, the Court will allow amendment because MET's arguments allude to a possible definition of the relevant market that could be enough to survive dismissal. MET's "theory of the case" seems to be that consumers whopurchase products in the CCREB market are driven chiefly by the bioceramics contained within the clothing, rather than by the secondary consideration of what type of clothing contains those bioceramics. See, e.g., ECF 58, ¶¶ 8, 15-18, 74; see also ECF 71, p. 12 (arguing that the "most critical component of the products in this market" is "the recovery enhancing bioceramics that are infused into these products").

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