                           PUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT


MARK H. DICKSON,                         
               Plaintiff-Appellant,
                and
CAREY D. EBERT, Trustee in
Bankruptcy for Gravity, Inc.,
                 Trustee-Appellant,
                and
403 WEST LOOP 820 N,                             No. 01-2458
                            Plaintiff,
                 v.
MICROSOFT CORPORATION; COMPAQ
COMPUTER CORPORATION; DELL
COMPUTER; PACKARD BELL NEC,
INCORPORATED,
              Defendants-Appellees.
                                         
           Appeal from the United States District Court
            for the District of Maryland, at Baltimore.
                 J. Frederick Motz, District Judge.
                        (CA-00-1247-JFM)

                        Argued: June 5, 2002

                      Decided: October 28, 2002

     Before WILLIAMS and GREGORY, Circuit Judges, and
   James H. MICHAEL, Jr., Senior United States District Judge
    for the Western District of Virginia, sitting by designation.
2                DICKSON v. MICROSOFT CORPORATION
Affirmed by published opinion. Judge Williams wrote the majority
opinion, in which Senior Judge Michael joined. Judge Gregory wrote
a dissenting opinion.


                             COUNSEL

ARGUED: Michael K. Kellogg, KELLOGG, HUBER, HANSEN,
TODD & EVANS, P.L.L.C., Washington, D.C., for Appellants.
David Bruce Tulchin, SULLIVAN & CROMWELL, New York, New
York; Paul M. Smith, JENNER & BLOCK, L.L.C., Washington,
D.C., for Appellees. ON BRIEF: Mark C. Hansen, Steven F. Benz,
Scott K. Attaway, KELLOGG, HUBER, HANSEN, TODD &
EVANS, P.L.L.C., Washington, D.C.; R. Stephen Berry, J. Daniel
Leftwich, Gregory Baruch, BERRY & LEFTWICH, Washington,
D.C.; Nelson Roach, NIX, PATTERSON & ROACH, Daingerfield,
Texas, for Appellants. Daryl A. Libow, Joseph J. Matelis, SULLI-
VAN & CROMWELL, New York, New York; Thomas W. Burt,
Richard J. Wallis, Steven J. Aeschbacher, MICROSOFT CORPORA-
TION, Redmond, Washington; Michael F. Brockmeyer, PIPER,
MARBURY, RUDNICK & WOLFE, L.L.P., Baltimore, Maryland;
Charles B. Casper, MONTGOMERY, MCCRACKEN, WALKER &
RHOADS, L.L.P., Philadelphia, Pennsylvania; Steve W. Berman,
HAGENS BERMAN, L.L.P., Seattle, Washington, for Appellee
Microsoft. Susan R. Podolsky, JENNER & BLOCK, L.L.C., Wash-
ington, D.C.; Jerold S. Solovy, Barbara S. Steiner, JENNER &
BLOCK, L.L.C., Chicago, Illinois; Samuel R. Miller, FOLGER,
LEVIN & KAHN, L.L.P., San Francisco, California, for Appellee
Dell; William D. Coston, Martin L. Saad, VENABLE, BAETJER,
HOWARD & CIVILETTI, L.L.P., Washington, D.C., for Appellee
Compaq; G. Brian Busey, MORRISON & FOERSTER, L.L.P.,
McLean, Virginia; Penelope A. Preovolos, MORRISON & FOER-
STER, San Francisco, California, for Appellee Packard Bell.


                             OPINION

WILLIAMS, Circuit Judge:

  Mark H. Dickson and Carey D. Ebert, trustee in bankruptcy for
Gravity, Inc., (collectively, Gravity) appeal the district court’s dis-
                   DICKSON v. MICROSOFT CORPORATION                        3
missal under Federal Rule of Civil Procedure 12(b)(6) of Gravity’s
consumer class action claims against Microsoft Corporation and three
original equipment manufacturers (OEMs) — Compaq Computer
Corporation (Compaq), Dell Computer Corporation (Dell), and PB
Electronics, Inc. (PB) (collectively, the OEM Defendants) — in the
United States District Court for the District of Maryland. For the rea-
sons set forth below, we affirm.

                                     I.

   In February 1999, Gravity filed this action in the United States Dis-
trict Court for the District of Columbia, alleging a "hub-and-spoke"
conspiracy between Microsoft and the OEM Defendants to restrain
trade, in violation of § 1 of the Sherman Act, and a conspiracy to
maintain Microsoft’s alleged monopolies1 in the sale of operating sys-
tems,2 word processing, and spreadsheet software, in violation of § 2
of the Sherman Act.3 The proposed class action consists of two sepa-
rate classes. The first class is composed of "United States purchasers,
between October 20, 1993 and the present, of Microsoft Windows or
MS-DOS operating software . . . installed and sold with personal
computers compatible with Intel x86/Pentium architecture purchased
directly from Compaq, Dell, or [PB]." (J.A. at 103.) The second class
is composed of "United States purchasers, between October 20, 1993
and the present, of Microsoft word processing software and/or Micro-
soft spreadsheet software installed and sold with personal computers
  1
     The Supreme Court defines monopoly power as "the power to control
prices or exclude competition." United States v. E.I. du Pont de Nemours
& Co., 351 U.S. 377, 391 (1956). "More precisely, a firm is a monopolist
if it can profitably raise prices substantially above the competitive level."
United States v. Microsoft Corp., 253 F.3d 34, 51 (D.C. Cir. 2001) (cit-
ing 2A Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 501,
at 85 (1995)). As the D.C. Circuit noted, "merely possessing monopoly
power is not itself an antitrust violation," but "it is a necessary element
of a [Section 2] monopolization charge." Id.
   2
     Operating systems function as platforms for software applications,
such as word processing and spreadsheet programs.
   3
     Gravity also asserted a class action claim against Microsoft individu-
ally for monopolization of case management and litigation support soft-
ware, but Gravity has voluntarily dismissed this claim with prejudice.
4                DICKSON v. MICROSOFT CORPORATION
compatible with Intel x86/Pentium architecture purchased directly
from Compaq, Dell, or [PB]." (J.A. at 103.)

   Gravity alleges that the OEM Defendants and Microsoft violated
the Sherman Act by entering into licensing agreements with the fol-
lowing anticompetitive provisions: (1) a prohibition against removing
icons, folders, or Start menu entries from the Windows desktop; (2)
a prohibition against modifying the initial Windows boot sequence;
(3) the integration of Internet Explorer (IE), Microsoft’s Internet
browser software, and other application software with Microsoft’s
operating software; and (4) the inclusion of long-term distribution
contracts, exclusive dealing distribution arrangements, and per-
processor license fees.4

   In exchange for agreeing to these provisions, the OEM Defendants
allegedly received various benefits, including discounts on software
and "greater cooperation from Microsoft in product development."
Gravity, Inc. v. Microsoft Corp., 127 F. Supp. 2d 728, 732 n.5 (D.
Md. 2001); see also United States v. Microsoft Corp., 84 F. Supp. 2d
9, 42 (D.D.C. 1999) (stating that Compaq and several other OEMs
enjoyed "early access to Windows source code"). Gravity also alleges
that the agreements benefitted the OEM Defendants by allowing them
to sell more computer hardware than they would have sold if the rele-
vant software markets were competitive and by ensuring that the
OEM Defendants would not be undercut by rivals offering either
comparable hardware with lower-priced software or comparable hard-
ware without software.

   Gravity claims that the restrictive licensing agreements were predi-
cated, at least in part, on the perceived threat from emerging "middle-
ware" platforms. Gravity’s theory is that middleware platforms
feasibly could replace most operating software functions by allowing
developers to write programs interfacing with middleware rather than
    4
   Per-processor license fees are royalties that Microsoft requires the
OEM Defendants to pay for personal computers that are sold pursuant to
the licensing agreement containing a "particular microprocessor type."
United States v. Microsoft Corp, CIV. A. 94-1564, 1995 WL 505998, at
*2 (D.D.C. Aug. 21, 1995).
                   DICKSON v. MICROSOFT CORPORATION                    5
                       5
the operating system. United States v. Microsoft Corp., 253 F.3d 34,
74 (D.C. Cir. 2001). The D.C. Circuit has explained the threat of mid-
dleware platforms to Microsoft’s monopoly in the operating systems
market as follows:

      If a consumer could have access to the applications he
      desired — regardless of the operating system he uses —
      simply by installing a particular browser on his computer,
      then he would no longer feel compelled to select Windows
      in order to have access to those applications; he could select
      an operating system other than Windows based solely upon
      its quality and price. In other words, the market for operat-
      ing systems would be competitive.

Id. at 60. Gravity also alleges that Microsoft has faced challenges
from competing operating software, such as DR-DOS.

   The restraints on trade in the licensing agreements allegedly have
denied the class members the choice of competitive software products
and have resulted in supracompetitive prices for Microsoft’s operating
system and application software. Gravity does not allege any conspir-
acy between Microsoft and the OEM Defendants to set the resale
price of the software. Instead, it claims that overcharges were passed
on to the consumers by the OEM Defendants when the consumers
purchased personal computers (PCs) from the OEM Defendants.

   Microsoft and the OEM Defendants moved to dismiss the First
Amended Complaint (FAC). While those motions were under submis-
sion, the Judicial Panel on Multidistrict Litigation transferred the
action to the United States District Court for the District of Maryland,
where it was coordinated with approximately sixty-four other antitrust
actions against Microsoft. The other antitrust actions were consoli-
dated into a single class action. Gravity’s complaint was not consoli-
dated with these actions because it was the only complaint alleging
claims against OEMs as defendants. In re Microsoft Corp. Antitrust
Litig., 127 F. Supp. 2d 702, 704 & n.2 (D. Md. 2001).
  5
   Netscape Navigator and the Java programming language are examples
of middleware products written for multiple operating systems.
6                 DICKSON v. MICROSOFT CORPORATION
   In January 2001, the district court dismissed Gravity’s FAC for
failure to state a claim. Following this dismissal, Gravity moved for
leave to file a Second Amended Complaint (SAC). In the SAC, Grav-
ity alleged two separate vertical conspiracies between Dell and
Microsoft and Compaq and Microsoft.6 Gravity did not name PB as
a defendant.7 Gravity repeated its allegations of anticompetitive con-
duct and included a claim that Microsoft’s licensing agreements
"bundl[ed] or t[ied] the distribution of Microsoft’s middleware, the
Internet Explorer browser, with Microsoft’s Windows operating soft-
ware." (J.A. at 465.) The district court denied leave to file the SAC
on the ground of futility, concluding that the SAC also failed to state
a claim upon which relief could be granted.

   On appeal, Gravity contends that both complaints allege proper
claims under § 1 and § 2 of the Sherman Act. Gravity also argues that
the district court erred in applying the indirect purchaser rule of Illi-
nois Brick Co. v. Illinois, 431 U.S. 720 (1977), to foreclose compen-
satory damages. We address each argument in turn.

                                    II.

   Before turning to our consideration of Gravity’s claims of error, a
brief overview of the public enforcement action for injunctive relief
brought by the federal government and nineteen states against Micro-
soft in the United States District Court for the District of Columbia
is warranted.8 See United States v. Microsoft Corp., 253 F.3d 34 (D.C.
Cir. 2001). In analyzing the § 2 claim against Microsoft, the D.C. Cir-
cuit upheld the district court’s finding that Microsoft has monopoly
power in the market for operating system software for Intel-
compatible PCs with its Windows software, which has gained more
    6
     For a discussion of the distinction between a "hub-and-spoke" con-
spiracy and separate vertical conspiracies, see infra at 9-10.
   7
     Gravity did not allege a separate conspiracy between Microsoft and
PB in the SAC because none of the named plaintiffs purchased a PC
from PB. (Appellant’s Br. at 20 n.5.)
   8
     Although Gravity’s complaint was filed prior to resolution of the pub-
lic enforcement action, the factual predicate is similar, and on appeal,
Gravity relies upon many of the D.C. Circuit’s findings for general sup-
port for its propositions.
                  DICKSON v. MICROSOFT CORPORATION                       7
than 95% market share. See id. at 51-58. It further affirmed the dis-
trict court’s finding that Microsoft had "engag[ed] in exclusionary [or
anticompetitive] conduct ‘as distinguished from growth or develop-
ment as a consequence of a superior product, business acumen, or his-
toric accident’" for the purpose of maintaining its monopoly power in
the operating systems market. Id. at 58. In detailing Microsoft’s anti-
competitive conduct, the D.C. Circuit relied primarily on the same
licensing agreements underlying Gravity’s complaint, although it
focused on Microsoft’s dealings with all of the OEMs who entered
into such agreements in the aggregate rather than two or three agree-
ments in isolation. Specifically, the D.C. Circuit highlighted the pro-
hibitions against: "(1) removing any desktop icons, folders, or ‘Start’
menu entries; (2) altering the initial boot sequence; and (3) otherwise
altering the appearance of the Windows desktop."9 Id. at 61. It
affirmed the district court’s conclusion that Microsoft used the restric-
tions in the licensing agreements to ensure the predominance of IE in
the browser market, thereby gaining market share in the browser mar-
ket for the purpose of maintaining Microsoft’s monopoly in the oper-
ating systems market.10 Only the third restriction was held to have
been justified by Microsoft’s need to protect its copyrighted work. Id.
at 63. The D.C. Circuit held that the first two restrictions "represent
uses of Microsoft’s market power to protect its monopoly, unre-
deemed by any legitimate justification" and, therefore, that Micro-
soft’s imposition of these restrictions violated § 2 of the Sherman Act.
Id. at 64.

                                   III.

  With this background in mind, we evaluate the district court’s dis-
missal of Gravity’s complaint. When reviewing the district court’s
grant of a motion to dismiss a Sherman Act complaint pursuant to
  9
    For example, the licensing agreements prohibited OEMs from causing
any user interface other than the Windows desktop to launch automati-
cally and from adding icons or folders different in size or shape from
those supplied by Microsoft.
   10
      For a detailed discussion of the relationship between the browser and
the operating systems markets and the anticompetitive effect of the
license restrictions on the OEMs’ ability to promote rival browsers, see
Microsoft, 253 F.3d at 59-64.
8                 DICKSON v. MICROSOFT CORPORATION
Federal Rule of Civil Procedure 12(b)(6), "we must determine
whether allegations covering all the elements that comprise the theory
for relief have been stated as required." Estate Constr. Co. v. Miller
& Smith Holding Co., 14 F.3d 213, 220 (4th Cir. 1994) (internal quo-
tation marks omitted) (citing United States v. Employing Plasterers
Ass’n, 347 U.S. 186, 189 (1954)); Mun. Utils. Bd. of Albertville v.
Ala. Power Co., 934 F.2d 1493, 1501 (11th Cir. 1991) ("A plaintiff
must plead sufficient facts so that each element of the alleged antitrust
violation can be identified."). "Moreover, the allegations must be
stated in terms that are neither vague nor conclusory." Estate Constr.
Co., 14 F.3d at 220-21. "Although we will assume that the plaintiffs
can prove the facts that they allege in their complaint, ‘it is not . . .
proper to assume that . . . the defendants have violated the antitrust
laws in ways that have not been alleged.’" Id. at 221 (quoting Associ-
ated Gen. Contractors v. Cal. State Council of Carpenters, 459 U.S.
519, 526 (1983)).

   At the outset, we note that although Gravity alleges violations of
both § 1 and § 2, the district court did not separately examine the suf-
ficiency of Gravity’s claims when it dismissed the FAC. The district
court determined that the alleged § 1 and § 2 conspiracies were "co-
terminous" because they purportedly shared a common goal: main-
taining Microsoft’s monopolies. Gravity, 127 F. Supp. 2d at 455.
Because the conspiracies "coalesce," reasoned the district court, the
sufficiency of both allegations "must be gauged by the elements of a
section 2 claim." Id. "Otherwise, plaintiffs could circumvent the
requirements of a conspiracy to monopolize claim, including the
requirement that a defendant be shown to have acted with the specific
intent to monopolize, simply by characterizing their claim as one aris-
ing under section 1, whose elements of proof are not as stringent." Id.
We disagree with the district court’s reasoning in this regard. A § 1
violation "is legally distinct from that under § 2 . . . though the two
sections overlap in the sense that a monopoly under § 2 is a species
of trade restraint under § 1." United States v. Socony-Vacuum Oil Co.,
310 U.S. 150, 224 n.59 (1940). The same kind of practices, therefore,
may evidence violations of both. See Md. & Va. Milk Pro. Ass’n v.
United States, 362 U.S. 458, 463 (1960) ("[S]ections [1 and 2] closely
overlap, and the same kind of predatory practices may show viola-
tions of [both]."); E. Thomas Sullivan & Jeffrey L. Harrison, Under-
standing Antitrust and its Economic Implications § 6.08, at 258 (2d
                  DICKSON v. MICROSOFT CORPORATION                       9
ed. 1994) ("[The prohibition in § 2 against combinations or conspira-
cies] proscribes a great deal of the same behavior prohibited by § 1).
Thus, even if Gravity failed to allege a § 2 claim, it is possible that
it sufficiently alleged a § 1 claim. See, e.g., Eastman Kodak Co. v.
Image Tech. Servs., Inc., 504 U.S. 451, 481 (1992) (describing the § 2
standard as "the more stringent monopoly standard").

   To establish a violation of § 1 of the Sherman Act,11 Gravity must
prove the following elements: (1) a contract, combination, or conspir-
acy; (2) that imposed an unreasonable restraint of trade. Oksanen v.
Page Mem’l Hosp., 945 F.2d 696, 702 (4th Cir. 1991) (en banc). If
Gravity is able to prove a violation of § 1, it then must prove the exis-
tence of "antitrust injury, which is to say injury of the type the anti-
trust laws were intended to prevent and that flows from that which
makes defendants’ acts unlawful." Atl. Richfield Co. v. USA Petro-
leum Co., 495 U.S. 328, 334 (1990); Continental Airlines, Inc. v.
United Airlines, Inc., 277 F.3d 499, 508 (4th Cir. 2002); Oksanen,
945 F.2d at 708; see generally 2 Phillip E. Areeda & Herbert
Hovenkamp, Antitrust Law ¶¶ 360-63, at 191-227 (1995). These
requirements apply with equal force to Gravity’s claims for damages
and injunctive relief; the only relevant distinction being that for
injunctive relief, "the injury itself need only be threatened." 2 Areeda
& Hovenkamp ¶ 360b, at 193.

                                    A.

   With respect to the first element, in the FAC, Gravity alleged a sin-
gle "hub-and-spoke," or "rimless wheel" conspiracy among the OEM
Defendants and Microsoft. A rimless wheel conspiracy is one in
which various defendants enter into separate agreements with a com-
mon defendant, but where the defendants have no connection with
one another, other than the common defendant’s involvement in each
transaction. Kotteakos v. United States, 328 U.S. 750, 755 (1946)
("[T]he pattern was that of separate spokes meeting at a common cen-
ter, though we may add without the rim of the wheel to enclose the
  11
    Section 1 states: "Every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce among the
several States, or with foreign nations, is hereby declared to be illegal."
15 U.S.C.A. § 1 (West 1997).
10                DICKSON v. MICROSOFT CORPORATION
spokes." (internal quotation marks omitted)). In Kotteakos, the
Supreme Court made clear that a rimless wheel conspiracy is not a
single, general conspiracy but instead amounts to multiple conspira-
cies between the common defendant and each of the other defendants.
Id. at 768-69, 772; Joseph F. McSorley, A Portable Guide to Federal
Conspiracy Law 145 (1996) ("While the hub may view its dealings
with the spokes as part of a single agreement, a spoke may be con-
cerned simply with his or her own actions.").

   Gravity does not argue that it is able to meet the test for establish-
ing a "rim" between the OEM Defendants and Microsoft.12 (Appel-
lant’s Br. at 53.) Instead, it urges us to follow the Sixth Circuit, which
Gravity asserts has adopted the proposition that a rimless wheel con-
spiracy constitutes a single, general conspiracy in the context of the
Sherman Act. See Elder-Beerman Stores Corp. v. Federated Dep’t
Stores, Inc., 459 F.2d 138, 146 (6th Cir. 1972) (setting forth require-
ments for proving "rimless wheel" conspiracy); see also Impro Prod-
ucts, Inc. v. Herrick, 715 F.2d 1267, 1279 n.14 (8th Cir. 1983) (noting
that "[t]here is some question whether the conspiracy provisions of
Sections 1 and 2 of the Sherman Act apply to a hub-and-spoke con-
spiracy," but declining to resolve the issue after suggesting that such
a theory was appropriate). Nothing in the Supreme Court’s holding in
Kotteakos, however, suggests that such a proposition is correct or per-
missible. Rather, the Supreme Court was clear: a wheel without a rim
  12
    A single criminal conspiracy generally is demonstrated by an "over-
lap of key actors, methods, and goals." United States v. Strickland, 245
F.3d 368, 385 (4th Cir. 2001) (internal quotation marks and citations
omitted); see also United States v. Bowens, 224 F.3d 302, 308 (4th Cir.
2000) (holding that it was not error for the district court to refuse to
instruct the jury on multiple conspiracies where there was evidence of
common methods of operation and common participants linked by a
mutual interest); United States v. Squillacote, 221 F.3d 542, 574 (4th Cir.
2000) ("A single conspiracy exists where there is one overall agreement,
or one general business venture." (internal quotation marks omitted)).
Because Gravity does not argue that its allegations are sufficient to dem-
onstrate this type of overlap but instead only advocates our adopting the
concept of a rimless wheel conspiracy, we need not decide whether the
same test that applies to demonstrate a single criminal conspiracy would
apply in the context of the Sherman Act.
                  DICKSON v. MICROSOFT CORPORATION                     11
                             13
is not a single conspiracy. Kotteakos, 328 U.S. at 755. Thus, we
agree with the district court that Gravity’s attempt in its FAC to plead
a single, rimless wheel conspiracy between the OEM Defendants and
Microsoft must be rejected.

  In an effort to cure its failure to allege a legally viable conspiracy,
Gravity alleged in the SAC separate vertical conspiracies between
Microsoft and Compaq and between Microsoft and Dell. Compaq and
Dell argue that these allegations also are insufficient to demonstrate
concerted action under § 1 because Gravity is unable, as a matter of
law, to demonstrate that either shared with Microsoft "a unity of pur-
pose or a common design and understanding." Monsanto Co. v.
Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984) (internal quotation
  13
     The dissent’s confusion in applying Kotteakos is understandable by
reference to its reliance on the Sixth and Eighth Circuits, both of which
appear to have misinterpreted Kotteakos. Post at 30-31 (citing Elder-
Beerman Stores Corp. v. Federated Dep’t Stores, Inc., 459 F.2d 138 (6th
Cir. 1972); Impro Prods., Inc. v. Herrick, 715 F.2d 1267, 1279 (8th Cir.
1983)). In Elder-Beerman, the Sixth Circuit stated that "[t]here is much
discussion in the Kotteakos decision indicating the possibility that such
a ‘rimless wheel’ theory might be used in a civil case though not appro-
priate in a criminal case." Elder-Beerman, 459 F.2d at 147. In Impro
Products, the Eighth Circuit compounded the Sixth Circuit’s error by
describing the test set forth in Elder-Beerman for a rimless wheel con-
spiracy (which is adopted by the dissent, post at 29-30) and then con-
cluding that a rimless wheel conspiracy constitutes a single conspiracy
in civil actions. Impro Prods., 715 F.2d at 1279 & n.14. Nothing in Kot-
teakos suggests, however, that the definition of a rimless wheel conspir-
acy turns on whether the conspiracy is civil or criminal in nature; the
Sixth and the Eighth Circuits’ contrary belief apparently stems from the
distinction between criminal and civil actions that was drawn in Kot-
teakos for purposes of analyzing harmless error.
   In any event, even if we were to further distort the clear holding set
forth in Kotteakos by following the Sixth and Eighth Circuits in the man-
ner suggested by the dissent, our resolution of Gravity’s claims would be
unaffected. Regardless of whether Gravity has alleged a single conspir-
acy among the OEM Defendants and Microsoft or two separate agree-
ments, its § 1 and § 2 claims would be subject to dismissal for failure to
allege facts demonstrating a significant likelihood of anticompetitive
effects.
12                DICKSON v. MICROSOFT CORPORATION
marks and citation omitted). As this court recently emphasized in Vir-
ginia Vermiculite, Ltd. v. HGSI, ___ F.3d ___, 01-1850 (4th Cir. Oct.
4, 2002), "concerted activity susceptible to sanction by section 1 is
activity in which multiple parties join their resources, rights, or eco-
nomic power together in order to achieve an outcome that, but for
concert, would naturally be frustrated by their competing interests (by
way of profit-maximizing choices)." Id. at *9. Gravity has sufficiently
alleged that Microsoft and the OEM Defendants pooled their
resources, rights, or economic power. Furthermore, to the extent
Compaq and Dell argue that it was against their economic interests to
enter into § 1 conspiracies with Microsoft, we note that Gravity has
alleged that Compaq and Dell received financial and other benefits in
exchange for entering into the licensing agreements. These allegations
are sufficient for purposes of Rule 12(b)(6) to demonstrate that a § 1
conspiracy was economically plausible.14 Cf., e.g., Spectators’ Com-
munication Network, Inc. v. Colonial Country Club, 253 F.3d 215,
220-22 (5th Cir. 2001) (analyzing relevant caselaw and concluding
that a vertical conspiracy could be shown under § 1 even though it
likely would be against Anheuser-Busch’s economic interest to con-
spire to restrain competition in a market in which it was a purchaser).

   Moreover, "the ‘combination or conspiracy’ element of a section 1
violation is not negated by the fact that one or more of the co-
conspirators acted unwillingly, reluctantly, or only in response to
coercion." MCM Partners, Inc. v. Andrews-Bartlett & Assocs., 62
F.3d 967, 973 (7th Cir. 1995); In re Brand Name Prescription Drugs
Antitrust Litig., 123 F.3d 599, 615 (7th Cir. 1997) (noting that the
wholesaler’s participation would be actionable even if the jury found
that they "were tools of the manufacturers — reluctant accomplices,
yet not the less liable for that."); see also United States v. United
States Gypsum Co., 438 U.S. 422, 436 n.13 (1978) ("[T]he general
  14
    Arguably, however, these allegations are insufficient as a matter of
law to demonstrate that either Compaq or Dell possessed specific intent
to maintain Microsoft’s alleged monopolies under § 2. See TV Communi-
cations Network, Inc. v. Turner Network Television, Inc., 964 F.2d 1022,
1026-27 (10th Cir. 1992) ("Because the cable operators would have no
rational motive to create [a monopolistic environment], TVCN’s allega-
tions do not provide an inference of specific intent to conspire to achieve
the stated goal of the conspiracy.").
                     DICKSON v. MICROSOFT CORPORATION                       13
rule [is] that a civil violation can be established by proof of either an
unlawful purpose or an anticompetitive effect."). The co-conspirators
need not share the same motive or goal; it is sufficient to allege that
the co-conspirators "acquiesc[ed] in an illegal scheme." United States
v. Paramount Pictures, Inc., 334 U.S. 131, 161 (1948); see also Va.
Vermiculite, Ltd. v. W.R. Grace & Co., 156 F.3d 535, 541 (4th Cir.
1998) ("It is not necessary that [Historic Green Springs, Inc.] have
shared Grace’s alleged anticompetitive motive in entering into a pro-
scribed restraint; it is sufficient that HGSI, regardless of its own
motive, merely acquiesced in the restraint with the knowledge that it
would have anticompetitive effects."); Duplan Corp. v. Deering Mil-
liken Inc., 594 F.2d 979, 982 (4th Cir. 1979) ("Where, as here, the
[defendants] were knowing participants in a scheme whose effect was
to restrain trade, the fact that their motives were different from or
even in conflict with those of the other conspirators is immaterial.").
Accordingly, Gravity’s allegations regarding the commercial license
agreements are sufficient for purposes of 12(b)(6) to set forth two
separate vertical conspiracies between Microsoft and Compaq and
between Microsoft and Dell.

                                      B.

    We next address whether Gravity alleged facts which, if proven
true, would establish that the two conspiracies separately imposed
unreasonable restraints of trade in interstate commerce. Continental
Airlines, 277 F.3d at 508. In assessing liability under § 1, courts gen-
erally evaluate agreements pursuant to one of three approaches. Id. at
508-09 ("[T]he Supreme Court has authorized three methods of analy-
sis: (1) per se analysis, for obviously anticompetitive restraints, (2)
quick-look analysis, for those with some procompetitive justification,
and (3) the full ‘rule of reason,’ for restraints whose net impact on
competition is particularly difficult to determine."). Because the pos-
sibility of anticompetitive effects resulting from either licensing
agreement is not obvious, we analyze the two licensing agreements
at issue — individually — pursuant to the "full" rule of reason analysis.15
  15
   Justice Brandeis in Chicago Bd. of Trade v. United States, 246 U.S.
231 (1918), explained the rule of reason as follows:
       The true test of legality is whether the restraint imposed is such
       as merely regulates and perhaps thereby promotes competition or
14                  DICKSON v. MICROSOFT CORPORATION
Id.; cf., e.g., Microsoft, 253 F.3d at 59-60 (applying full rule of reason
analysis to claimed § 2 violations).

   In the rule of reason analysis, "the reasonableness of a restraint is
evaluated based on its impact on competition as a whole within the
relevant market." Oksanen, 945 F.2d at 708. This evaluation requires
a showing of "anticompetitive effect" resulting from the agreement in
restraint of trade. To have an "anticompetitive effect," conduct "must
harm the competitive process and thereby harm consumers." Micro-
soft, 253 F.3d at 58. "[H]arm to one or many competitors will not suf-
fice." Id. "The [Sherman Act] directs itself not against conduct which
is competitive, even severely so, but against conduct which unfairly
tends to destroy competition itself." Id. (internal quotation marks
omitted). Thus, an inquiry into the lawfulness of the restraint begins
"by identifying the ways in which a challenged restraint might possi-
bly impair competition." 7 Areeda & Hovenkamp ¶ 1503a, at 372.
After identifying the type of possible harm to competition alleged, we
must proceed "to determine whether that harm is not only possible but
likely and significant," which requires "examination of market cir-
cumstances," including market power and share. 7 id. ¶¶ 1503a-
1503b, at 374-77.

                                      1.

  Gravity alleges that Compaq’s and Dell’s agreements with Micro-
soft aided the maintenance of Microsoft’s monopolies in PC operating
system, word processing, and spreadsheet markets. Aiding the main-

     whether it is such as may suppress or even destroy competition.
     To determine that question the court must ordinarily consider the
     facts peculiar to the business to which the restraint is applied; its
     condition before and after the restraint was imposed; the nature
     of the restraint and its effect, actual or probable. The history of
     the restraint, the evil believed to exist, the reason for adopting
     the particular remedy, the purpose or end sought to be attained,
     are all relevant facts. This is not because a good intention will
     save an otherwise objectionable regulation or the reverse; but
     because knowledge of intent may help the court to interpret facts
     and to predict consequences.
Id. at 238.
                  DICKSON v. MICROSOFT CORPORATION                   15
tenance of a monopoly theoretically could harm competition by
affecting price and/or output in various ways. For instance, the agree-
ments could allow Microsoft to leverage its market power in the rele-
vant software markets to obtain advantage in some secondary market
(such as the browser market), not based upon consumer choice or effi-
cient performance but from the mere fact of Microsoft’s market
power in the primary market. See Microsoft, 253 F.3d at 62-66 (find-
ing anticompetitive effects resulting from Microsoft’s licensing agree-
ments with OEMs based upon Microsoft’s leveraging of monopoly
power in operating system market to suppress competition in the
browser market); see generally Robin Cooper Feldman, Defensive
Leveraging in Antitrust, 87 Geo. L.J. 2079, 2080, 2098 (1999) (dis-
cussing "traditional leveraging theory" and the "Chicago school" lev-
eraging theory and concluding that "defensive leveraging" can create
the potential for harm to consumers by aiding in the maintenance of
the primary monopoly). Similarly, with respect to the exclusive deal-
ing components of the licensing agreements, the potential harm to
consumers is that rival software firms or browsers will be foreclosed
from access to consumers, denying consumers competitive choice and
allowing supracompetitive pricing with respect to the software mar-
kets for which Microsoft has monopoly power. Per-processor fees
also arguably could "discourage OEMs from licensing competing
operating systems and/or cause OEMs to raise the price for PCs with
a competing operating system to recoup the fee paid to Microsoft,"
theoretically resulting in increased prices for Microsoft’s software and
decreased opportunities for rival software firms to gain access to con-
sumers. United States v. Microsoft Corp., 159 F.R.D. 318, 323
(D.D.C. 1995), rev’d on other grounds, 56 F.3d 1448 (D.C. Cir.
1995); see generally Kenneth C. Baseman et al., Microsoft Plays
Hardball: The Use of Exclusionary Pricing and Technical Incompati-
bility to Maintain Power in Markets for Operating System Software,
40 Antitrust Bull. 265, 267-68 (1995) (criticizing per-processor
licenses).

   "Theorizing about conceivable impairments of competition does
not, of course, prove that any such impairment has occurred or is
likely," or much less is "substantial in magnitude."16 7 Areeda &
  16
    Nor do we suggest whether any such anticompetitive effect, if shown
to be likely and substantial in magnitude, would be outweighed by a pro-
16                 DICKSON v. MICROSOFT CORPORATION
Hovenkamp ¶ 1503a, at 373. Thus, we next must examine whether
Gravity sufficiently has alleged the likelihood of a substantial anti-
competitive harm caused by the two licensing agreements at issue
(considered individually), an inquiry that requires Gravity to allege
facts demonstrating "that the defendants played a significant role in
the relevant market." Oksanen, 945 F.2d at 709; see also General
Leaseways, Inc. v. Nat’l Truck Leasing Ass’n, 744 F.2d 588, 596 (7th
Cir. 1984) (stating that in rule of reason analysis, the plaintiff must
"prove that the defendant has sufficient market power to restrain com-
petition substantially. . . . If not, the inquiry is at an end; the practice
is lawful"); 7 Areeda & Hovenkamp ¶ 1503b, at 376 ("[V]irtually all
courts applying the rule of reason require the plaintiff . . . to show, at
a minimum, that the defendants play a significant role in th[e] [alleg-
edly restrained] market.").

                                     2.

   Gravity has provided allegations of Microsoft’s market power in
the relevant software markets, in the form of Microsoft’s shares in
these markets.17 Gravity failed, however, to allege facts regarding

competitive justification. See, e.g., Microsoft, 253 F.3d at 59 (noting,
under traditional rule of reason analysis, if the plaintiff successfully dem-
onstrates anticompetitive effect, then the burden shifts to the defendant
to proffer a procompetitive justification for its conduct).
   17
      Gravity alleged that Microsoft "maintained a monopoly share (in the
range of 90%) in the personal computer operating software market"
throughout the "class periods," (J.A. at 473), and maintained a market
share in the range of 80-90% in the word processing and spreadsheet
software markets throughout the class period. For antitrust purposes,
market power "is the power to force a purchaser to do something that he
would not do in a competitive market." Eastman Kodak Co. v. Image
Tech. Servs., Inc., 504 U.S. 451, 464 (1992) (internal quotation marks
omitted). "It has been defined as the ability of a single seller to raise
price and restrict output." Id. (internal quotation marks omitted). Market
share is defined as "[t]he percentage of a market that is controlled by a
firm." Black’s Law Dictionary 971 (6th ed. 1991). Market power gener-
ally is identified, in part, by examining market share. See, e.g., Andrew
Chin, Note, Antitrust by Chance: A Unified Theory of Horizontal Merger
Doctrine, 106 Yale L.J. 1165, 1169-72 (1997) (discussing movement
away from strict reliance on calculation of market share in antitrust anal-
ysis). For purposes of Rule 12(b)(6), we consider Gravity’s allegations
regarding Microsoft’s market share sufficient to allege Microsoft’s
power in the relevant software markets.
                  DICKSON v. MICROSOFT CORPORATION                      17
Compaq’s or Dell’s market share and concedes that the PC market is
"fiercely competitive" and, therefore, that neither Compaq nor Dell
has power in the PC market.18 Gravity, 168 F. Supp. 2d at 544; see
also Digital Equip. Corp. v. Uniq Digital Techs., Inc., 73 F.3d 756,
761 (7th Cir. 1996) (Easterbrook, J.) ("Computer manufacturers are
vigorous rivals; prices drop daily; this is one of our economy’s most
competitive sectors."). Gravity further concedes that "[t]he only thing
that . . . distinguishes [Compaq and Dell] from other OEMs is the
alacrity with which they acquiesced in accepting [the licensing]
agreements to obtain relatively favorable prices from Microsoft for its
products." Gravity, 168 F. Supp. 2d at 544. Given Gravity’s conces-
sion that the PC market is "fiercely competitive," and in light of
Microsoft’s agreements with other OEMs, Gravity is unable, as a mat-
ter of law, to demonstrate that Microsoft’s agreements with Compaq
and Dell, when considered individually, are capable of causing any
substantial harm to competition. For instance, without having alleged
Compaq’s or Dell’s power or share in the PC market, Gravity is
unable to demonstrate that rival software firms’ access to Compaq or
Dell was an important component of those firms’ potential ability to
compete in the software markets, or that Microsoft’s agreements with
Compaq and Dell substantially hindered the entrance or operation of
these rivals in the software markets or denied them access to a signifi-
cant number of consumers of software. Similarly, given the failure to
allege the market power of Compaq or Dell, Gravity is unable to
show that Compaq or Dell has forced, or is likely to be able to force,
supracompetitive prices on consumers for undesirable software fea-
tures. Consequently, assuming that Compaq and Dell each possessed
an insignificant portion of the PC market and no ability to control
  18
    Gravity contends that because the relevant markets are in software,
there is no need to evaluate Compaq’s or Dell’s power in the PC market.
Compaq’s and Dell’s power in the PC market is critical in the analysis,
however, because both OEMs pre-install Microsoft’s software on their
PCs; neither operates independently in the software market. Thus, Com-
paq’s and Dell’s ability to influence competition in the relevant software
markets through their separate agreements with Microsoft is dependent
on their ability to influence competition in the PC market. Cf. Jefferson
Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 18 (1984) ("[A]ny inquiry
into the validity of a tying arrangement must focus on the market or mar-
kets in which the two products are sold, for that is where the anticompeti-
tive forcing has its impact.").
18                DICKSON v. MICROSOFT CORPORATION
pricing or output in the PC market (as is proper in light of Gravity’s
failure to allege market share or any other facts demonstrating market
power), the two licensing agreements — considered individually —
would be incapable of succeeding in maintaining or leveraging
Microsoft’s alleged monopolies, in that neither agreement could sub-
stantially reduce the usage share of, or prevent the promotion of, rival
browsers, rival operating system software manufacturers, or rival
applications software manufacturers.19 Cf., e.g., Continental T.V., Inc.
v. GTE Sylvania, Inc., 433 U.S. 36, 52 n.19, 54 (1977) (concluding
that, although a contractual requirement that distributors sell Sylvania
television sets from authorized locations limited competition among
the distributors in the resale of Sylvania televisions ("intrabrand com-
petition"), it ultimately promoted competition with other brands of
television sets ("interbrand competition") and stating that the competi-
tiveness of the interbrand market "provides a significant check on the
exploitation of intrabrand market power"); Jefferson Parish Hosp.
Dist. No. 2 v. Hyde, 466 U.S. 2, 13-14 (1984) ("we have condemned
tying arrangements when the seller has some special ability — usually
called ‘market power’ — to force a purchaser to do something that
he would not do in a competitive market"); id. at 16 ("If only a single
purchaser were ‘forced’ with respect to the purchase of a tied item,
the resultant impact on competition would not be sufficient to warrant
the concern of antitrust law . . . . [W]e have refused to condemn tying
arrangements unless a substantial volume of commerce is foreclosed
  19
     Gravity asserts that it need not show that Microsoft’s agreements
with Compaq and Dell were each a sole cause of any anticompetitive
effects but need show only that the agreements were each a "material
cause" of anticompetitive effects. See Zenith Radio Corp. v. Hazeltine
Research, Inc., 395 U.S. 100, 114 n.9 (1969) ("It is enough that the ille-
gality is shown to be a material cause of the injury; a plaintiff need not
exhaust all possible alternative sources of injury in fulfilling his burden
of proving compensable injury under § 4."). Without an allegation of
market share or market power of either Compaq or Dell, however, Grav-
ity cannot make the latter showing. Cf. Brunswick Corp. v. Pueblo Bowl-
O-Mat, 429 U.S. 477, 487-88 (1977) (holding that an antitrust claim fails
as a matter of law when the plaintiff would have suffered the identical
loss without regard to the claimed anticompetitive conduct); 2 Areeda &
Hovenkamp ¶ 363a-b, at 219-23 (noting that no material cause can be
demonstrated where an independent cause fully accounts for the claimed
antitrust injury).
                  DICKSON v. MICROSOFT CORPORATION                      19
thereby."); id. at 37-38 (O’Connor, J., concurring) (evaluating tie-ins
and noting that to show an adverse impact on consumers, the plaintiff
generally must demonstrate two things: market power in the tying-
product market and a threat that the seller will acquire market power
in the tied-product market); Digital Equip. Corp., 73 F.3d at 761
(Easterbrook, J.) ("Let us ask, then, whether the inclusion of an [oper-
ating system] with one’s [PC] — ‘tie-in’ or not — is a means to
reduce output and create monopoly profits. Unless the seller has mar-
ket power, the answer is no . . . ."); id. at 762 ("In a competitive mar-
ket a pig-headed refusal to satisfy customers’ preferences, or an
attempt to charge for unwanted items, does not lead to monopoly
prices; instead it leads to ruin as rivals step in to take the business.").
Moreover, with respect to the exclusive dealing component of Gravi-
ty’s claim, absent an allegation regarding Compaq’s or Dell’s power
or share in the PC market, there is no basis in Gravity’s complaint for
concluding that either of the two licensing agreements at issue, when
considered individually, are likely to foreclose a significant share of
the relevant software markets. See Tampa Electric Co. v. Nashville
Coal Co., 365 U.S. 320, 327 (1961) (holding that an exclusive con-
tract does not violate the Clayton Act unless its probable effect is to
"foreclose competition in a substantial share of the line of commerce
affected"); Microsoft, 253 F.3d at 68-70 (discussing the exclusive
dealing aspects of Microsoft’s agreements and concluding that, even
when the cumulative effect of Microsoft’s agreements were consid-
ered, the agreements did not foreclose enough of the relevant browser
market to constitute a § 1 violation).

   The district court afforded Gravity ample opportunity to allege
facts demonstrating Compaq’s or Dell’s power in the PC market, but
Gravity refused, contending for various reasons that Compaq’s and
Dell’s power and share in the PC market is immaterial to Compaq’s
and Dell’s (separate) ability to influence competition in the relevant
software markets.20 On appeal, it continues to assert that, as a matter
  20
     Gravity did allege that Compaq and Dell were the "largest PC mak-
ers" and were "among the largest distributors of Microsoft’s products."
(Appellant’s Br. at 11.) The dissent relies on this as a sufficient allega-
tion of Compaq and Dell’s respective influences in the PC market. Post
at 34. Being the "largest" in a relevant market, however, says nothing of
a firm’s ability to affect competition in that market. For example, Com-
20                 DICKSON v. MICROSOFT CORPORATION
of law, Compaq’s and Dell’s power in the PC market is irrelevant to
its § 1 claim because Microsoft’s monopoly power, in a variety of
ways, is adequate to demonstrate the likelihood of substantial anti-
competitive effects. We address each argument below.

   Gravity first argues that Microsoft’s significant market power in
the software markets is sufficient to demonstrate anticompetitive
effects in those markets without regard to Compaq’s or Dell’s power
or share in the PC market. The relevant focus of the § 1 inquiry, how-
ever, is the anticompetitive effects of the conspiracy qua conspiracy;
therefore, the plaintiff must demonstrate that the conspiratorial agree-
ment itself affected competition in ways that would not have obtained
absent the agreement. Spectators’ Communication Network, 253 F.3d
at 225 (noting that the issue is "whether the combination or conspir-
acy, not each individual conspirator, has the [market] power to hurt
competition in the relevant market."); FTC v. Ind. Fed’n of Dentists,
476 U.S. 447, 460 (1986) ("[T]he purpose of the inquiries into market
definition and market power is to determine whether an arrangement
has the potential for genuine adverse effects on competition." (empha-
sis added)). To be sure, one can imagine circumstances in which the
allegation of one conspirators’ market power is sufficient to demon-
strate a likelihood of anticompetitive effects. For instance, assuming
as true Gravity’s allegations regarding Microsoft’s market share in the
relevant software markets, had Microsoft agreed to sell its software
only to Compaq and Dell, such an agreement would have had the
potential to harm competition in software markets, and ultimately in

paq and Dell each may possess only five percent of the market share,
whereas many other OEMs each possess four percent of the market
share, in which case, despite being the largest PC makers and software
distributors, neither Compaq nor Dell would have the ability, through
their separate conspiracies with Microsoft, to affect competition in the
relevant software markets. Cf., e.g., Jefferson Parish Hosp. Dist. No. 2
v. Hyde, 466 U.S. 2, 26 & n.43 (1984) (holding, as a matter of law, that
thirty percent share of the relevant market is insufficient to confer market
power). Accordingly, Gravity’s allegations that Compaq and Dell were
the largest PC makers and software distributors provide no basis whatso-
ever to conclude that either had sufficient share of the PC market to
affect competition in the relevant software markets.
                  DICKSON v. MICROSOFT CORPORATION                    21
the PC market, irrespective of Compaq’s or Dell’s power or share in
the PC market. No such arrangement, however, is alleged here.

   Gravity next argues that the district court should have evaluated
Microsoft’s "exclusionary conduct both inside and outside the combi-
nations alleged," and the potential for anticompetitive effects resulting
from this conduct in the aggregate. (Appellant’s Br. at 49-50.) The
SAC, however, did not allege a conspiracy among Microsoft and all
OEMs; it alleged discrete conspiracies between Microsoft and Com-
paq and Microsoft and Dell. Consequently, the district court correctly
determined that it could not consider the cumulative harm of Micro-
soft’s agreements with all OEMs but instead was required to consider
— individually — Microsoft’s agreements with Compaq and Dell to
evaluate each agreement’s potential for anticompetitive effects.21

   Likewise, it is untrue that Compaq and Dell, as alleged co-
conspirators of Microsoft, are responsible for all of Microsoft’s uni-
lateral acts with other OEMs who were not members of the alleged
conspiracies. As noted above, each licensing agreement must be
treated as a separate conspiracy, and only acts taken in furtherance of
that alleged conspiracy are appropriately considered in determining
the adverse effects of the claimed restraints on trade, not acts of one
conspirator taken in furtherance of other possible, distinct conspira-
cies. Cf. United States v. Bonetti, 277 F.3d 441, 447 (4th Cir. 2002)
(noting, in a criminal conspiracy, that a co-conspirator is liable for
"all substantive offenses of his co-conspirator that are both reasonably
foreseeable and in furtherance of the conspiracy"); cf. also United
States v. Santiago, 906 F.2d 867, 872-73 (2d Cir. 1990) (concluding
that the single conspiracy test applies to determine whether co-
conspirator conduct is reasonably foreseeable and in furtherance of
  21
    The cumulative harm of Microsoft’s actions "outside" the two licens-
ing agreements at issue has been subject to review in the public enforce-
ment action and will be further subject to review in the consumer class
actions brought against Microsoft individually and in any suits brought
by OEMs against Microsoft. As noted above, supra at 19-20, the focus
of this § 1 inquiry is not Microsoft’s actions standing alone, but the
extent to which its concerted actions with each of the two individual
OEMs promoted Microsoft’s monopoly power or otherwise restrained
trade.
22                   DICKSON v. MICROSOFT CORPORATION
the conspiracy); United States v. Gooden, 892 F.2d 725 (8th Cir.
1989) (same). Indeed, to hold otherwise would be to suggest that the
distinction between a single conspiracy and multiple conspiracies
involving a common defendant is one without a difference.

   Thus, we agree with the district court that for Gravity to state a via-
ble § 1 claim, it was required to allege facts which, if proven true,
would demonstrate that Compaq’s or Dell’s individual agreements
with Microsoft were likely to result in an anticompetitive effect.
Without alleging facts demonstrating Compaq’s or Dell’s power or
share in the PC market, Gravity was unable to make such a showing.

    Similarly, without allegations regarding the market power or share
of Compaq or Dell in the PC market, Gravity is unable to show a con-
spiracy to monopolize under § 2.22 See 3A Areeda & Hovenkamp ¶
809, at 370 ("[I]n those instances where power is a prerequisite to
holding an agreement to be an unreasonable restraint of trade [under
§ 1] . . . it would make no sense to hold the same agreement offensive
to § 2 without proof of power."). The offense of monopolization
requires a showing of "anticompetitive effect." Microsoft, 253 F.3d at
58. Thus, a viable § 2 conspiracy to monopolize claim must include
allegations which, if proven true, would establish that the agreements
Compaq and Dell made with Microsoft could have had an anticompe-
titive effect (when considered separately). See, e.g., id. at 50 (discuss-
ing the meaning of "monopolization" within § 2); U.S. Anchor Mfg.,
Inc. v. Rule Industries, Inc., 7 F.3d 986, 1001 (11th Cir. 1993) (listing
the likelihood of an anticompetitive effect as one of the elements of
a conspiracy to monopolize under § 2); Seagood Trading Corp. v.
Jerrico, Inc., 924 F.2d 1555, 1576 (11th Cir. 1991) ("[A] section 1
claim and a section 2 conspiracy to monopolize claim require the
same threshold showing — the existence of an agreement to restrain
  22
     Section 2 states:
       Every person who shall monopolize, or attempt to monopolize,
       or combine or conspire with any other person or persons, to
       monopolize any part of the trade or commerce among the several
       States, or with foreign nationals, shall be deemed guilty of a fel-
       ony . . . .
15 U.S.C.A. § 2 (West 1997).
                  DICKSON v. MICROSOFT CORPORATION                    23
trade."). Accordingly, for the reasons set forth above regarding the
inadequacies in Gravity’s § 1 allegations, Gravity’s § 2 claim also
fails as a matter of law.

    Gravity suggests that these conclusions are irreconcilably at odds
with the D.C. Circuit’s conclusions in the public enforcement action,
contending that the D.C. Circuit implicitly recognized that Micro-
soft’s licensing agreements with Compaq and Dell violated § 1. This
contention, however, misapprehends the nature of the D.C. Circuit’s
holding. Notably, the district court in the public enforcement action
held that the exclusive dealing arrangements in Microsoft’s licensing
agreements, including its agreement with Compaq, did not violate § 1
under the rule of reason, concluding "that Microsoft’s arrangements
with various firms did not foreclose enough of the relevant market to
constitute a § 1 violation." United States v. Microsoft, 87 F. Supp. 2d
30, 53 (D.D.C. 2000). The only § 1 violation found by the district
court was based upon Microsoft’s alleged tying of Windows and IE,
and the D.C. Circuit vacated that ruling. Microsoft, 253 F.3d at 84-95.
Moreover, in conducting its § 2 analysis, the D.C. Circuit evaluated
the anticompetitive effects of Microsoft’s licensing agreements with
all OEMs. Of course, as is set forth above, the analysis of anticompe-
titive effects depends on the identification of the defendants’ "signifi-
cant role" within the relevant market — an inquiry that is much
different when examining the cumulative harm of Microsoft’s con-
duct than it is when examining the effects of Microsoft’s individual
agreements with two OEMs for which Gravity declines to provide
information regarding market share or power. Thus, nothing in the
public enforcement action suggests that Gravity’s § 1 and § 2 claims
are viable.

   We recognize that "summary procedures should be used sparingly
in complex antitrust litigation where motive and intent play leading
roles," Poller v. Columbia Broadcasting Sys., 368 U.S. 464, 473
(1962), and that an antitrust complaint should not be dismissed at the
Rule 12(b)(6) stage "merely because the court doubts the plaintiff will
ultimately prevail," Advanced Health-Care Servs., Inc. v. Radford
Cmty. Hosp., 910 F.2d 139, 145 n.8 (4th Cir. 1990) (internal quotation
marks omitted). Nevertheless, to avoid dismissal for failure to state a
claim, the plaintiff must "colorably state[ ] facts which, if proven,
would entitle him to relief." Id. (internal quotation marks omitted).
24                DICKSON v. MICROSOFT CORPORATION
We consistently have held this to require an allegation of facts sup-
portive of each element of the plaintiff’s antitrust claim. Estate Con-
str. Co., 14 F.3d at 220 (holding that "notice pleading" requires
"allegations covering all the elements that comprise the theory for
relief" (internal quotation marks omitted); Mun. Utils. Bd. of Albert-
ville, 934 F.2d at 1501 ("A plaintiff must plead sufficient facts so that
each element of the alleged antitrust violation can be identified.")). "A
contrary view would be tantamount to providing antitrust litigation
with an exemption from Rule 12(b)(6)." Car Carriers, Inc. v. Ford
Motor Co., 745 F.2d 1101, 1106-07 (7th Cir. 1984).

   Although Gravity alleges that Microsoft’s agreements with Com-
paq and Dell individually produced anticompetitive effects, it does
not provide any factual basis to support this allegation.23 Moreover,
Gravity has made clear that it has no intention of providing evidence
regarding the market power or share of Compaq or Dell; thus, it does
not seek additional discovery or factual development with respect to
the issue of market share or power. Instead, it asks us to accept its
conclusory assertion that Microsoft’s agreements with Compaq and
Dell, when considered individually, created a likelihood of significant
anticompetitive effects in the relevant software markets without
regard to Compaq’s or Dell’s market power or share in the PC mar-
ket. This we cannot do. "The pleader may not evade [Rule 12(b)(6)]
requirements by merely alleging a bare legal conclusion; if the facts
do not at least outline or adumbrate a violation of the Sherman Act,
the plaintiffs will get nowhere merely by dressing them up in the lan-
guage of antitrust." Car Carriers, Inc., 745 F.2d at 1106 (internal
quotation marks omitted). Because Gravity has failed to allege facts
which, if true, would establish that the two licensing agreements at
issue are unreasonable restraints on trade that caused antitrust injury
to consumers, its § 1 and § 2 claims fail as a matter of law. Cf. Dunn
& Mavis, Inc. v. Nu-Car Driveaway, Inc., 691 F.2d 241, 245 (6th Cir.
1982) ("Since the complaint does not allege facts suggesting that [the
manufacturer’s] refusal to deal had any significant anti-competitive
effect on the market, there is no rule of reason case alleged.").
  23
    While the dissent notes as "unexceptional" the proposition that a
plaintiff may not rely on a bare legal conclusion to avoid dismissal under
Rule 12(b)(6), it proceeds to rely solely on Gravity’s bare legal conclu-
sions to find its complaint sufficient. Post at 37 n.1.
                  DICKSON v. MICROSOFT CORPORATION                    25
   This court recently concluded that the Supreme Court’s holding in
Swierkiewicz v. Sorema, N.A., 122 S. Ct. 992 (2002), did not alter the
basic pleading requirement that a plaintiff set forth facts sufficient to
allege each element of his claim. See Iodice v. United States, 289 F.3d
270, 281 (4th Cir. 2002) ("Even in these days of notice pleadings a
complaint asserting a negligence claim must disclose that each of the
elements is present in order to be sufficient." (internal citations and
quotation marks omitted)); see also Swierkiewicz, 122 S. Ct. at 997
(relying upon a distinction between "evidentiary standards" and
"pleading requirement[s]"). As the dissent recognizes, a sufficient
allegation of anticompetitive effects is dependent upon Compaq’s and
Dell’s respective abilities to affect competition in the PC market. Post
at 35 ("[I]f the conspiracy included only minor OEMs, then the con-
spiracy would presumably have no power to cause significant anti-
competitive effects."). Consequently, by failing to allege Compaq’s
and Dell’s market share or power, Gravity has failed to set forth fac-
tual allegations necessary to support the basic elements of its §1 and
§ 2 claims. See McLain v. Real Estate Bd. of New Orleans, 444 U.S.
232, 243 (1980) (noting that to establish liability under the Sherman
Act, a showing of either an anticompetitive effect or an anticompeti-
tive purpose is necessary).

                          IV. Illinois Brick

   Even if we agreed with Gravity that it has alleged sufficient claims
under § 1 and § 2 for purposes of Rule 12(b)(6), we would affirm the
district court’s conclusion that Gravity is barred from seeking com-
pensatory damages relief under the indirect purchaser rule of Illinois
Brick Co. v. Illinois, 431 U.S. 720 (1977).24 A brief review of the evo-
lution of the indirect purchaser rule is helpful to understand its appli-
cation to Gravity’s claims. In Hanover Shoe, Inc. v. United Shoe
Mach. Corp., 392 U.S. 481 (1968), the defendant in a Sherman Act
suit, a manufacturer of machinery for making shoes, defended on the
ground that the plaintiff, a shoe manufacturer that had bought the
  24
   Illinois Brick’s indirect purchaser rule, when applicable, bars only
compensatory damages relief and does not apply to injunctive relief. See
Cargill, Inc. v. Monfort of Colorado, 479 U.S. 104, 111 n.6 (1986); Cam-
pos v. Ticketmaster, 140 F.3d 1166, 1172 (8th Cir. 1998); McCarthy v.
Recordex Serv., Inc., 80 F.3d 842, 856-57 (3d Cir. 1996).
26                DICKSON v. MICROSOFT CORPORATION
defendant’s machinery, had passed on any monopoly overcharge to its
own customers, the wholesale purchasers of its shoes, and hence had
not been injured. The Supreme Court held that an antitrust defendant
would not be permitted to defend against a damages suit on the
ground that the plaintiff had shifted the cost of the defendant’s wrong-
doing to the plaintiff’s customers. The Court explained the rationale
for its decision as follows:

     Even if it could be shown that the buyer raised his price in
     response to, and in the amount of, the overcharge and that
     his margin of profit and total sales had not thereafter
     declined, there would remain the nearly insuperable diffi-
     culty of demonstrating that the particular plaintiff could not
     or would not have raised his prices absent the overcharge or
     maintained the higher price had the overcharge been discon-
     tinued. Since establishing the applicability of the passing-on
     defense would require a convincing showing of each of
     these virtually unascertainable figures, the task would nor-
     mally prove insurmountable.

Id. at 493. The Hanover Shoe Court further explained that the plain-
tiff’s customers "would have only a tiny stake" in enforcing the anti-
trust law. Id. at 494.

   In Illinois Brick, plaintiffs, who were indirect purchasers of con-
crete blocks, sought to recover damages on the theory that masonry
contractors, who incorporated concrete blocks purchased from defen-
dants into walls and other masonry structures, passed on the alleged
overcharge for the blocks to general contractors, who incorporated the
masonry structures into entire buildings, and that the general contrac-
tors in turn passed on the overcharge to plaintiffs in the bids submit-
ted for those buildings. Illinois Brick, 431 U.S. at 726-27. The Court
extended the Hanover Shoe rule and held that only direct purchasers
from an antitrust violator can sue for damages, providing two ratio-
nales for the rule: it avoids the danger of multiple, "overlapping
recoveries" against the original seller by direct and indirect purchas-
ers, and it avoids the "evidentiary complexities and uncertainties" in
determining the amount of any overcharge passed through the inter-
mediary to the indirect purchaser. Id. at 730-33. The Supreme Court
expressly contemplated two exceptions to the indirect purchaser rule:
                  DICKSON v. MICROSOFT CORPORATION                    27
(1) where the indirect purchaser acquired goods through a preexisting
cost-plus contract and (2) "where the direct purchaser is owned or
controlled by its customer." Id. at 736 & n. 16. Illinois Brick left
unclear whether there might be exceptions for cases in which the
amount of the overcharge that was passed on to a lower tier of pur-
chasers could be determined simply and with mechanical precision,
but thereafter, the Supreme Court held that even where the amount of
overcharge passed on is clear, allowing indirect purchasers to pursue
damages claims would be inconsistent with Illinois Brick, and the
Court refused to create any new exception. Kansas v. Utilicorp
United, Inc., 497 U.S. 199, 208 (1990). Moreover, in Utilicorp
United, the Supreme Court cautioned lower federal courts against cre-
ating new exceptions to the Illinois Brick rule. Id. at 216 ("The ratio-
nales underlying Hanover Shoe and Illinois Brick will not apply with
equal force in all cases. We nonetheless believe ample justification
exists for our stated decision not to carve out exceptions to the direct
purchaser rule." (internal quotation marks omitted)).

   Despite this admonition, several courts have recognized a "co-
conspirator exception" to Illinois Brick. See, e.g., Paper Sys. Inc. v.
Nippon Paper Indus., 281 F.3d 629, 631-32 (7th Cir. 2002); Lowell
v. American Cyanamid Co., 177 F.3d 1228, 1231 (11th Cir. 1999);
Campos v. Ticketmaster Corp., 140 F.3d 1166, 1171 (8th Cir. 1998);
In re Brand Name Prescription Drugs, 123 F.3d at 604-05; Arizona
v. Shamrock Foods Co., 729 F.2d 1208, 1211 (9th Cir. 1984). Gravity
asserts that these cases stand for the proposition that Illinois Brick is
inapplicable when any conspiracy has been alleged, but we interpret
these cases as standing for the more narrow proposition that Illinois
Brick is inapplicable to a particular type of conspiracy — price-fixing
conspiracies. Cf. McCarthy v. Recordex Serv., Inc., 80 F.3d 842, 854-
55 (3d Cir. 1996) (refusing to adopt a co-conspirator exception where
plaintiffs have not alleged that the intermediaries immediately
upstream colluded to overcharge). Were we to adopt Gravity’s
broader interpretation, the Illinois Brick rule would be inverted solely
based upon artful pleading. Such a result is contrary to Illinois Brick
itself as well as the Supreme Court’s clear directive in Utilicorp
United against crafting new exceptions to the Illinois Brick rule. Far
more reasonable is the proposition that, to the extent a court were to
recognize a co-conspirator exception to Illinois Brick, such an excep-
tion would be grounded on the damages theory underlying the alleged
28                DICKSON v. MICROSOFT CORPORATION
conspiracy. For example, the rationale for concluding that Illinois
Brick does not apply to a price-fixing conspiracy is that no overcharge
has been passed on to the consumer: When a dealer has illegally con-
spired with a manufacturer with respect to the price paid by a con-
sumer, then "the consumer is the only party who has paid any
overcharge." 2 Areeda & Hovenkamp ¶ 371h, at 264. We need not
resolve whether we would recognize a co-conspirator exception to
Illinois Brick’s indirect purchaser rule for a price-fixing conspiracy
because no such conspiracy has been alleged here. Instead, Gravity’s
compensatory damages claim is premised on an attempt to recover for
Microsoft’s illegal overcharge that allegedly was passed on to Grav-
ity. Accordingly, Gravity’s claim is materially indistinguishable from
the claim under consideration in Illinois Brick, and its inclusion of a
conspiracy allegation is insufficient to circumvent the Illinois Brick
rule.

    Nevertheless, Gravity argues that Illinois Brick ought not to control
because the policy concerns underlying Illinois Brick are not impli-
cated here. First, Gravity contends that there is no danger of duplica-
tive recovery because the OEMs "apparently have elected not to sue
Microsoft." (Appellant’s Br. at 69.) The Supreme Court in Illinois
Brick, however, "recognize[d] that direct purchasers sometimes may
refrain from bringing a treble-damages suit for fear of disrupting rela-
tions with their suppliers." Illinois Brick, 431 U.S. at 746. Yet, the
majority concluded that "on balance . . . the legislative purpose in cre-
ating a group of private attorneys general to enforce anti-trust laws
. . . is better served by holding direct purchasers to be injured to the
full extent of the overcharge paid by them than by attempting to
apportion the overcharge among all that may have absorbed part of
it." Id. (internal quotation marks omitted).

   Gravity also argues that its claims do not require the complex task
of price-tracing because the consumers’ damages are the difference
between the "but-for" price that they would have paid for the Win-
dows software absent the illegal conspiracy and the amount they actu-
ally paid for it. This argument misses the point, in that to calculate the
"but-for" price, the court would be required to determine the over-
charge, if any, for Microsoft’s software that was passed on to con-
sumers — the exact analysis that Illinois Brick forbids.
                  DICKSON v. MICROSOFT CORPORATION                   29
   Finally, Gravity suggests that, to the extent there is any difficulty
in apportioning damages, the court could avoid this difficulty by
awarding 100% of the overcharge to the consumer. Gravity does not
explain, however, why consumers should be awarded a windfall. At
bottom, Gravity’s policy arguments are virtually identical to those
raised by Justice Brennan in his Illinois Brick dissent. Id. at 748-65
(Brennan, J., dissenting). Of course, they were considered and
rejected by the majority in formulating the indirect purchaser rule,
and we are not at liberty to reevaluate those policy choices here.
Accordingly, we conclude that Illinois Brick bars Gravity’s claims for
compensatory damages for the alleged § 1 and § 2 violations.

                                  V.

   We conclude that Gravity’s § 1 and § 2 claims fail as a matter of
law and that, in any event, Illinois Brick bars Gravity’s ability to
recover compensatory damages. Thus, we affirm the judgment of the
district court.

                                                           AFFIRMED

GREGORY, Circuit Judge, dissenting:

   I agree with the majority, ante at 8, that Gravity’s § 1 claims need
not meet the more rigorous standards of § 2 of the Sherman Act.
However, I respectfully dissent. Whether or not Gravity would suc-
ceed on the merits, it has clearly stated claims under both § 1 and § 2
of the Sherman Act.

                                   I.

   The majority makes its first error when it rejects Gravity’s allega-
tions of a single conspiracy, relying on Kotteakos v. United States,
328 U.S. 750, 755 (1946). In Kotteakos, the Supreme Court rejected
one articulation of a "rimless wheel" conspiracy. The conspiracy
envisioned—and rejected—by Kotteakos states: "A rimless wheel
conspiracy is one in which various defendants enter into separate
agreements with a common defendant, but where the defendants have
no connection with one another, other than the common defendant’s
30               DICKSON v. MICROSOFT CORPORATION
involvement in each transaction." Ante, at 9. The majority says that
because the Kotteakos Court rejected a variant of a "rimless wheel"
conspiracy, we must too. The problem with that reasoning is that
Gravity is not arguing that we should adopt the specific definition of
conspiracy that was rejected in Kotteakos.

   In Kotteakos, the underlying crime was conspiracy to obtain loans
under the National Housing Act by false and fraudulent statements.
The center of the conspiracy was a man named Brown, who was in
the business of brokering fraudulently obtained loans for his co-
conspirator clients. 328 U.S. at 753. All of the clients used Brown to
obtain the loans, but each client’s use of Brown’s services was inde-
pendent of every other client’s use. Id. Kotteakos involved not one,
but multiple conspiracies. Not only did Brown’s co-conspirators have
no express agreements among themselves, their participation was also
in no way dependent on the participation of other users of Brown’s
services. The Court drew upon an analogy offered by the court of
appeals to explain the point: "Thieves who dispose of their loot to a
single receiver—a single ‘fence’—do not by that fact alone become
confederates: they may, but it takes more than knowledge that he is
a ‘fence’ to make them such." Id. at 755.

   In contrast to Kotteakos, Gravity outlined the elements of a "rim-
less wheel" conspiracy as follows:

     (1) that there is an overall-unlawful plan or common
     design in existence;

     (2) that knowledge that others must be involved is infer-
     able to each member because of his knowledge of the
     unlawful nature of the subject of the conspiracy[,] but
     knowledge on the part of each member of the exact scope
     of the operation or the number of people involved is not
     required; and

     (3) there must be a showing of each alleged member’s par-
     ticipation.

Elder-Beerman Stores Corp. v. Federated Dep’t Stores, Inc., 459 F.2d
138, 146-47 (6th Cir. 1972) (emphasis deleted and added); Impro
                  DICKSON v. MICROSOFT CORPORATION                    31
Prods., Inc. v. Herrick, 715 F.2d 1267, 1279 (8th Cir. 1983) (quoting
Elder-Beerman). Whether we should adopt this test in toto I would
not decide today, but I believe that this definition of a "rimless wheel"
conspiracy is useful for purposes of this case, and is consistent with
well-established interpretations of the Sherman Act.

   The critical difference between the test Gravity urges, and the test
Kotteakos rejected lies in the requirement "that knowledge that others
must be involved is inferable to each member because of his knowl-
edge of the unlawful nature of the subject of the conspiracy" (empha-
sis added). Id. Gravity has alleged that the nature of the conspiracy,
by design and by necessity, was broader than any one agreement
between Microsoft and an OEM, and that knowledge of that interde-
pendent design was inferable to each member of the conspiracy.
Regardless of whether any OEM desired the participation of other
OEMs (and they conceivably might have), Gravity alleges that each
OEM joined a conspiracy which it knew was, by its nature, broader
than just itself and Microsoft.

   These allegations are plainly sufficient to state a claim under the
Sherman Act. The law has been clear that there need not be an
express agreement between every conspirator in order for a single
conspiracy to be formed. Interstate Circuit, Inc. v. United States, 306
U.S. 208, 227 (1939) ("[I]t is elementary that an unlawful conspiracy
may be and often is formed without simultaneous action or agreement
on the part of the conspirators"); see also United States v. Masonite
Corp., 316 U.S. 265, 275 (1942) ("Here, as in Interstate Circuit, . . .
[i]t was enough that, knowing that concerted action was contemplated
and invited, the distributors gave their adherence to the scheme and
participated in it."); United States v. Tillett, 763 F.2d 628, 632 (4th
Cir. 1985) (stating that plaintiff must show that each alleged conspira-
tor "participated in the conspiracy with knowledge of the essential
nature of the plan.").

   In Interstate Circuit, Inc. v. United States, film exhibitors sug-
gested that film distributors insert clauses into their distribution con-
tracts requiring minimum ticket prices for certain films. The
distributors accepted the suggestion nearly unanimously. The Court
held that an agreement among the distributors could be inferred:
32                DICKSON v. MICROSOFT CORPORATION
     Each [distributor] was aware that all were in active competi-
     tion and that without substantially unanimous action with
     respect to the restrictions . . . there was risk of a substantial
     loss of the business and good will of the . . . exhibitors, but
     that with it there was the prospect of increased profits.

306 U.S. at 222. Such is the case with the OEMs. It takes no stretch
of logic to infer that the OEMs knew that Microsoft’s plans contem-
plated the cooperation of other OEMs. It is the agreement to partici-
pate in this common plan that formed a single conspiracy.
"Acceptance by competitors, without previous agreement, of an invi-
tation to participate in a plan, the necessary consequence of which, if
carried out, is restraint of interstate commerce, is sufficient to estab-
lish an unlawful conspiracy under the Sherman Act." Interstate Cir-
cuit, 306 U.S. at 227. Thus, I would find that the allegations are
sufficient to state a claim.

                                    II.

   The majority next finds that Gravity has failed to allege "facts
which, if proven true, would establish that the two conspiracies sepa-
rately imposed unreasonable restraints of trade in interstate com-
merce." Ante, at 13. Even if I agreed that there were two conspiracies
and not one alleged in this case, there is no question that Gravity’s
pleadings are more than adequate.

   The majority requires far more from Gravity than is appropriate
under notice pleading standards. Aside from a statement of jurisdic-
tion and a demand for relief, Federal Rule of Civil Procedure 8(a)
requires nothing more than "a short and plain statement of the claim
showing that the pleader is entitled to relief[.]" 122 S.Ct. 992, 997.
The elements for a claim of conspiracy to restrain trade in violation
of § 1 of the Sherman Act are (1) concerted action that (2) unreason-
ably restrains trade. Estate Constr. Co. v. Miller & Smith Holding
Co., 14 F.3d 213, 220 (4th Cir. 1994); Oksanon v. Page Memorial
Hosp., 945 F.2d 696, 702 (4th Cir. 1991). According to the majority,
Gravity has not adequately pled the second element, an unreasonable
restraint of trade, because Gravity failed to plead the market shares
of the OEMs. This is necessary, the majority says, because Gravity
must prove the OEMs’ individual market power in order to prove the
                  DICKSON v. MICROSOFT CORPORATION                    33
conspiracy’s market power. The conspiracy’s market power, in turn,
is required to prove the potential for anticompetitive effects, which is
part of Gravity’s burden to satisfy the "rule of reason."

   The majority’s pleading standard conflicts with the Supreme
Court’s recent pronouncement on federal pleading requirements.
"[U]nder a notice pleading system, it is not appropriate to require a
plaintiff to plead facts establishing a prima facie case." Swierkiewcz
v. Sorema, N.A., 534 U.S. 506, 122 S.Ct. 992, 997 (2002). "This sim-
plified notice pleading standard relies on liberal discovery rules and
summary judgment motions to define disputed facts and issues and to
dispose of unmeritorious claims." Id. at 998. "Rule 8(a)’s simplified
pleading standard applies to all civil actions, with certain exceptions."
Id. Thus, the Supreme Court has made crystal clear, just this past
term, that an evidentiary standard does not determine the adequacy of
a complaint. Swierkiewicz v. Sorema, N.A., 534 U.S. 506, 122 S.Ct.
992, 997 (2002). It is inappropriate, therefore, to require plaintiffs to
plead facts going to that evidentiary standard in a complaint.

   While I agree that liability in this case, in all likelihood, would be
determined under the "rule of reason" standard, see, e.g., Continental
T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977), it seems to me
that the "rule of reason" is an evidentiary standard, not a pleading
requirement. Courts ordinarily have to undertake a factual inquiry
before it is determined whether the "rule of reason" or per se rules
apply. If per se rules apply, then anticompetitive effects do not matter.
See United States v. W.F. Brinkley & Son Constr. Co., Inc., 783 F.2d
1157, 1162, n.10 (4th Cir. 1986) (noting this circuit recognizes per se
antitrust violations and, in doing so, there is no requirement of proof
of anticompetitive results). The conduct is illegal regardless of proof
of effects. Id.

   Additional specificity regarding the OEMs’ market power is not
necessary. While anticompetitive effect is often proven through anal-
ysis of the relevant market definition and market power, it can also
be proven through actual anticompetitive effects. FTC v. Indiana
Fed’n of Dentists, 476 U.S. 447, 460-61 (1986); VII P. Areeda, Anti-
trust Law § 1511, p.429 (1986). The Supreme Court made clear that
it is inappropriate to require a plaintiff to plead facts which he may
not need to succeed on the merits of the claim. Swierkiewicz, 122
34                DICKSON v. MICROSOFT CORPORATION
S.Ct. at 997 (holding that plaintiff need not plead facts establishing
a prima facie case of employment discrimination, in part because it
would be "incongruous to require a plaintiff, in order to survive a
motion to dismiss, to plead more facts than he may ultimately need
to prove to succeed on the merits if direct evidence of discrimination
is discovered"). Gravity has pled actual anticompetitive effects. See
Compl. ¶¶ 4, 59, 62-63, 68-69, 91-92, 95, 107, 115-117, 123-124,
150, 152, 154-156. Accordingly, the complaint should withstand a
motion to dismiss.

   To the extent that Gravity intends to rely on market power to dem-
onstrate the likelihood of significant anticompetitive effects, the rele-
vant issue is whether the conspiracy had market power in the software
markets, not whether the defendant OEMs had market power in the
PC hardware market. Gravity has adequately pled the conspiracy’s
market power. See, e.g., Compl. ¶ 150 ("Microsoft and these named
co-conspirators have the power to control prices or exclude competi-
tion in these relevant markets and have committed overt acts in fur-
therance of their conspiracy to monopolize."); id. ¶ 152 ("[The
OEMS] are Microsoft’s three largest distributors in the relevant mar-
ket for Microsoft operating software, and among Microsoft’s very
largest distributors in the relevant markets for the sale of personal
computer word processing and spreadsheet software. As participants
in these markets they have joined Microsoft in extensive licensing and
other agreements with the purpose and effect of monopolizing and
restraining trade in these relevant markets, and they have benefitted
substantially from this common anticompetitive scheme.").

   The Court finds Gravity’s allegations of market power deficient,
but only because it misunderstands Gravity’s argument regarding
market power. According to the majority, Gravity argued on appeal
that Microsoft’s monopoly is the only relevant factor in determining
whether the conspiracy had the power to harm competition. This is
not correct. Gravity has asserted that the district court was wrong to
require it to plead that each OEM defendant had sufficient market
power in the hardware market to cause the injury alleged, pointing out
that the relevant market is software, and the relevant entity is the con-
spiracy (either a bilateral or single conspiracy). Appellant’s Br. at 46,
48, 49; id. at 50 ("The district court erred in assessing only Compaq’s
or Dell’s market power rather than the market power of the combina-
                  DICKSON v. MICROSOFT CORPORATION                   35
tions between each of them and Microsoft."). It is clear that Gravity
understands the importance of the OEMs, and the pleadings, read in
the light most favorable to Gravity, do not suggest otherwise. See also
Fed. R. Civ. P. 8(f) ("All pleadings shall be so construed as to do sub-
stantial justice.").

   Setting aside any confusion regarding Gravity’s argument, the
majority has identified an important issue concerning market power.
While Microsoft has a monopoly in the relevant software markets, if
the conspiracy included only minor OEMs, then the conspiracy would
presumably have no power to cause significant anticompetitive
effects. See ante, at 19 n.20. The parties dispute whether this should
be treated as a liability issue or a causation issue, Appellants’ Br. at
7; Appellees Compaq, Dell, and PB Electronics’ Br. at 28, and the
majority does not resolve the dispute, ante at 18 n.19. The heading
under which the issue should go is ultimately irrelevant because the
majority identifies only a single deficiency in Gravity’s pleadings:
failure to plead the defendant OEMs’ market shares in the PC market.
Ante at 22. Yet this is not enough to entitle the defendants to a dis-
missal.

   The complaint identifies the OEMs involved, states that they are
Microsoft’s largest OEM distributors, identifies the asserted anticom-
petitive conduct, states that the conspiracy’s anticompetitive conduct
had significant anticompetitive effects, and identifies the effects.
Moreover, Microsoft is an adjudicated monopolist, with clear market
power in the relevant software markets, and the defendant OEMs are
among the largest players in the PC hardware market. There is simply
no conceivable argument from which one could conclude, based
solely on a failure to plead market share, that the defendants are not
on notice of the claims against them and the grounds on which they
rest. See Conley, 355 U.S. at 48 ("The Federal Rules reject the
approach that pleading is a game of skill in which one misstep by
counsel may be decisive to the outcome and accept the principle that
the purpose of pleading is to facilitate a proper decision on the mer-
its."). The OEMs’ specific market power in the PC market is, at best,
a subsidiary fact.

  The majority cites a number of cases involving pleading standards.
See ante at 23-24. None of those cases, however, support the holding
36                  DICKSON v. MICROSOFT CORPORATION
in this case. For example, it is true that in Advanced Health-Care Ser-
vices, Inc. v. Radford Community Hospital, 910 F.2d 139 (4th Cir.
1990), we stated that a plaintiff must "colorably state[] facts which,
if proven, would entitle him to relief." Id. at 145 n.8. But, in that case,
we reversed the district court’s dismissal of the complaint, acknowl-
edging that "the Supreme Court has stated that ‘dismissals prior to
giving the plaintiff ample opportunity for discovery should be granted
very sparingly.’ Hospital Bldg. Co. v. Trustees of Rex Hosp., 425 U.S.
738, 747 (1976)." Id. at 144. Lack of specificity in the complaint was
not the concern of that case. This Court never suggested that a plain-
tiff must plead detailed facts supporting every subsidiary factual con-
clusion. To the contrary, we employed a decidedly permissive
standard for judging the adequacy of the complaint. In Estate Constr.
Co. v. Miller & Smith Holding Co., 14 F.3d 213 (4th Cir. 1994), we
confirmed that a complaint must provide "sufficient facts so that each
element of the alleged antitrust violation can be identified," id. at 222
(internal quotation and citation omitted); but we never suggested that
detailed, underlying facts are required in the complaint. Rather, our
concern was with overly vague factual allegations and mere legal con-
clusions unsupported by any facts.

     The full Sherman Act allegations in that case read as follows:

       Providence combined and/or conspired with the Miller &
       Smith defendants, Gordon V. Smith, Calloway, Connor,
       Jack B. Conner Associates, Inc. and others to restrain trade
       unreasonably in the Washington, D.C. metropolitan area by
       combining and/or conspiring to deprive the Pattersons of
       The Property, cause The Property to be sold in foreclosure
       at a price that would leave the Pattersons with no assets, and
       otherwise to drive them and Estate Construction out of the
       real estate development business in the Washington, D.C.
       metropolitan area. The combination and/or conspiracy pro-
       duced adverse, anticompetitive effects within the relevant
       product and geographic market. The objects and conduct of
       the combination and/or conspiracy were illegal.

14 F.3d at 221 n.15. We held that a plaintiff must "provide, whenever
possible, some details of the time, place and alleged effect of the con-
spiracy; it is not enough merely to state that a conspiracy has taken
                  DICKSON v. MICROSOFT CORPORATION                      37
place." Id. at 221. Gravity’s claims, in contrast, are replete with all
manner of detail—fifty-eight pages of detail.1 The defendants in this
case know exactly what conduct is alleged to have violated the anti-
trust laws, which is all that Rule 8 requires. It is not for us to change
the rules of civil procedure mid-stream. "A requirement of greater
specificity for particular claims is a result that must be obtained by
the process of amending the Federal Rules, and not by judicial inter-
pretation." Swierkiewicz, 122 S.Ct. at 999.

                                   III.

   Finally, the majority holds that the direct purchaser rule of Illinois
Brick Co. v. Illinois, 431 U.S. 720 (1977), and Hanover Shoe, Inc. v.
United Shoe Machinery Corp., 392 U.S. 481 (1968), precludes recov-
ery. I disagree, and would join the Seventh, Ninth, and Eleventh Cir-
cuits, each of which has held that it does not. Paper Systems, Inc. v.
Nippon Paper Indus. Co., Ltd., 281 F.3d 629 (7th Cir. 2002); Lowell
v. American Cynamid Co., 177 F.3d 1228, 1233 (11th Cir. 1999)
("Illinois Brick simply does not apply where the complaint alleges a
vertical conspiracy with no pass-on."); In re Brand Name Prescrip-
tion Drugs Antitrust Litig., 123 F.3d 599, 604 (7th Cir. 1997) (Posner,
C.J.) ("[A]ny indirect-purchaser defense would go by the board since
the [plaintiffs] would then be direct purchasers from the conspira-
tors."); Arizona v. Shamrock Food Co., 729 F.2d 1208, 1212-14 (9th
Cir. 1984); Fontana Aviation, Inc. v. Cessna Aircraft Co., 617 F.2d
478, 481 (7th Cir. 1980); see also II Phillip E. Areeda et al., Antitrust
Law ¶ 346h, at 369 (2d ed. 2000) ("Whether one adopts a co-
conspirator exception or regards this situation as outside Illinois
  1
    The majority also parenthetically quotes Mun. Utils. Bd. of Albertville
v. Alabama Power Co., 934 F.2d 1493, 1501 (11th Cir. 1991): "A plain-
tiff must plead sufficient facts so that each element of the alleged anti-
trust violation can be identified." Ante at 24. But the majority omits the
important qualifier contained in the same paragraph: "However, the
alleged facts need not be spelled out with exactitude, nor must recovery
appear imminent." Mun Utils. Bd, 934 F.3d at 1501. Finally, Car Carri-
ers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (8th Cir. 1984), stands
for the unexceptional and well-worn proposition that a plaintiff must at
least "outline or adumbrate" a violation of the Sherman Act, instead of
relying on a bare legal conclusion. Id.
38                DICKSON v. MICROSOFT CORPORATION
Brick’s domain, there is no tracing or apportionment to be done."); cf.
McCarthy v. Recordex Serv., Inc., 80 F.3d 842, 855 (3d Cir. 1996)
(noting exception but declining to apply it because the upstream sup-
pliers were not joined as defendants); In re Beef Antitrust Litig., 600
F.2d 1148, 1163 (5th Cir. 1979) (same); Jewish Hosp. Ass’n v. Stew-
art Mech. Enters., 628 F.2d 971, 977 (6th Cir. 1980) (noting excep-
tion but declining to apply it because vertical conspiracy allegations
failed).

   The decision in Hanover Shoe was motivated by the Court’s desire
to maximize deterrence by allocating the right to sue to the most effi-
cient enforcer of antitrust law. The rationale was that indirect pur-
chasers have a comparatively small injury, and consequently less
incentive to sue. Hanover Shoe, 392 U.S. at 494; Illinois Brick, 431
U.S. at 745. A passing-on defense would make litigation less effective
for direct purchasers as well, given the reduction in recovery as well
as the complexities of apportioning damages between direct and indi-
rect purchasers. Hanover Shoe, 392 U.S. at 493. Illinois Brick is the
logical corollary to Hanover Shoe. In Illinois Brick, the Court denied
"passed-on" damages to indirect purchasers of a manufacturer’s
goods. Because of Hanover Shoe, failure to deny recovery for such
damages would lead to duplicative recovery. Illinois Brick, 431 U.S.
at 730-31. The two cases therefore ensure full recovery while maxi-
mizing deterrence and avoiding duplicative recovery.

   Permitting plaintiffs such as Gravity to sue intermediaries that were
part of a conspiracy to raise retail prices above a competitive level is
consistent with Hanover Shoe and Illinois Brick. As Judge Easter-
brook recently wrote for the Seventh Circuit: "The right to sue mid-
dlemen that joined the conspiracy is sometimes referred to as a co-
conspirator ‘exception’ to Illinois Brick, but it would be better to rec-
ognize that Hanover Shoe and Illinois Brick allocate to the first non-
conspirator in the distribution chain the right to collect 100% of the
damages." Paper Sys., 281 F.3d at 631-32. This is the correct reading
of Hanover Shoe and Illinois Brick. It maximizes deterrence by giving
the right to sue to the plaintiff with the most incentive to sue. As for
any lingering doubt over whether the conspiring intermediary is the
best plaintiff, or concern regarding multiple recovery, the case law
has rightly recognized the importance of joining the intermediary in
the suit—a requirement which has been met in this case. See, e.g.,
                  DICKSON v. MICROSOFT CORPORATION                      39
McCarthy, 80 F.3d at 855; In re Beef Antitrust Litig., 600 F.2d at
1163; In re Midwest Milk Monopolization Litig., 730 F.2d 528, 531
(8th Cir. 1984).

   The majority rejects the cases that have unanimously recognized a
direct purchaser’s right to sue, saying that those cases dealt with
price-fixing conspiracies. I think that this case presents a substantially
identical situation. Gravity is not complaining about any overcharge
paid by the OEMs to Microsoft. Rather, Gravity is complaining about
the conspiracy’s ultimate overcharge of the consumer. Gravity actu-
ally argues that the defendant OEMs received discounts on software
purchased from Microsoft. In other words, Microsoft shared some of
the monopoly profits with the OEMs. If one were to assume that
Microsoft gave all its monopoly profits to the OEMs then there would
be no pass-on. The OEMs would simply be overcharging consumers,
like in a resale price maintenance scheme. How much of its monopoly
profits Microsoft retained is merely a matter of how the conspirators
allocated the fruits of their alleged illegality, and is not directly rele-
vant to Gravity. The damages that Gravity is seeking to prove are the
difference between the price consumers actually paid for the Win-
dows software and the "but for" price.

   Much of the difficulty in calculating the "but for" price will come
from disaggregating the price of PC hardware from the Microsoft
software. This difficulty, however, is not the concern of Illinois Brick.
It can occur when there is no middleman. It would occur, for exam-
ple, if Microsoft built and sold its own brand of Windows-operated
PC. Mere difficulty in measuring damages is not a reason to preclude
recovery. See Bigelow v. RKO Radio Pictures, 327 U.S. 251, 265
(1946) ("[I]n cases where a wrongdoer has incorporated the subject
of a plaintiff’s patent or trade-mark in a single product to which the
defendant had contributed other elements of value or utility . . . this
Court has sustained recovery of the full amount of defendant’s profits
where his own wrongful action has made it impossible for the plain-
tiff to show in what proportions he and the defendant have contrib-
uted to the profits") (citations omitted); J. Truett Payne Co. v.
Chrysler Motors Corp., 451 U.S. 557, 566-67 (1981) ("[I]t does not
come with very good grace for the wrongdoer to insist upon specific
and certain proof of the injury which has itself inflicted.") (quotation
omitted).
40                DICKSON v. MICROSOFT CORPORATION
   Aside from the problem of disaggregation, calculating the "but for"
price may involve determining elasticities of supply and demand—the
complexity identified by Illinois Brick—but no more so than in any
of the other cases in which middlemen conspired with manufacturers.
And there will be no duplicative liability. Moreover, determining
elasticities of supply and demand can complicate any attempt to mea-
sure damages—"it is not occasioned solely by the presence of inter-
mediaries." Paper Sys., 281 F.3d at 633. The real concern of Hanover
Shoe and Illinois Brick is the complexity of measuring the pass-on of
an actual overcharge, and its potential negative effect on deterrence
and compensation, not the mere difficulties of determining what the
price would have been in a competitive market.2 The majority’s rule
is essentially a free pass to any conspiracy that can make the damage
it inflicts difficult to pin down. Until now, that has never been the
law.

   The majority reasons that adopting Gravity’s argument would lead
plaintiffs to plead a conspiracy that did not exist in order to evade Illi-
nois Brick. Yet, there are mechanisms, primarily Rule 11, to deal with
the abusive and unethical conduct of litigants and lawyers. I find trou-
bling the majority’s unhesitating willingness to cut off compensation
to all injured consumers based on hypothetical abuses of liberal
pleading rules. The interests of consumers are far more weighty than
the majority is willing to recognize. Moreover, the concern about "art-
ful pleading" has nothing whatsoever to do with Illinois Brick and
Hanover Shoe. The direct purchaser rule is designed to encourage and
incentivize private enforcement of the antitrust laws, not immunize
corporate wrongdoers from having to litigate antitrust claims.

                                   IV.

   The most unfortunate aspect of this case is that, to the extent Gravi-
ty’s claims have merit, consumers will be left uncompensated. Even
more, raising the procedural bar for consumers’ claims may further
stifle technological innovation. By giving comfort to those entrenched
  2
   To the extent that the litigation subsequently revealed true Illinois
Brick issues, such as if the defendant OEMs switched sides and sued
Microsoft, see Paper Sys., 281 F.3d at 632, I agree that Illinois Brick
might then require dismissal of Gravity’s claims.
                  DICKSON v. MICROSOFT CORPORATION                    41
interests that seek to protect the status quo, today’s decision increases
the likelihood of future anticompetitive conduct. To those who would
introduce disruptive technologies, this ruling creates a strong disin-
centive to innovate. Without innovation, we all lose. I respectfully
dissent.
