                                                                   FILED
                                                       United States Court of Appeals
                                                               Tenth Circuit

                                                             March 14, 2017
                                     PUBLISH               Elisabeth A. Shumaker
                                                               Clerk of Court
                      UNITED STATES COURT OF APPEALS

                                  TENTH CIRCUIT


 SUTURE EXPRESS, INC.,

        Plaintiff - Appellant,

 v.                                                  No. 16-3065

 OWENS & MINOR DISTRIBUTION,
 INC.; CARDINAL HEALTH 200,
 LLC,

        Defendants - Appellees.

 ---------------------------

 JOSEPH P. BAUER; WILLIAM S.
 CHOI; JOSHUA P. DAVIS; JOHN B.
 KIRKWOOD; IOANNIS LIANOS;
 BARRY NALEBUFF; IVAN REIDEL,

       Amici Curiae.


          APPEAL FROM THE UNITED STATES DISTRICT COURT
                   FOR THE DISTRICT OF KANSAS
                    (D.C. No. 2:12-CV-02760-DDC)


Sanford I. Weisburst (Stephen R. Neuwirth, David M. Cooper, and Yelena
Konanova of Quinn, Emanuel, Urquhart & Sullivan, LLP, New York, New York;
Daniel M. Abuhoff, Michael Schaper, and Erica S. Weisgerber of Debevoise &
Plimpton, L.L.P., New York, New York; Sean Delphey of Quinn, Emanuel,
Urquhart & Sullivan, L.L.P., Washington, D.C., with him on the briefs), New
York, New York, for Plaintiff - Appellant.

Paula W. Render and Shari Ross Lahlou (Michael Sennett and Eric P. Berlin of
Jones Day, Chicago, Illinois; Michelle K. Fischer of Jones Day, Cleveland, Ohio,
and Clifton S. Elgarten and Luke van Houwelingen of Crowell & Moring, LLP,
Washington, D.C., with them on the brief), for Defendants - Appellees.

David A. Balto, Bradley A. Wasser, and Matthew C. Lane of Law Offices of
David A. Balto, Washington, D.C., for Amici Curiae.


Before KELLY, LUCERO, and MURPHY, Circuit Judges.


KELLY, Circuit Judge.


      Plaintiff-Appellant Suture Express, Inc. appeals from the district court’s

entry of summary judgment in favor of Cardinal Health 200, LLC (“Cardinal”)

and Owens & Minor Distribution, Inc. (“O&M”) under Section 1 of the Sherman

Antitrust Act, Section 3 of the Clayton Act, and the Kansas Restraint of Trade Act

(“KRTA”). See Suture Express, Inc. v. Owens & Minor Distrib., Inc., No. 12-

2760-DDC-KGS, 2016 WL 1377342 (D. Kan. Apr. 7, 2016). Finding jurisdiction

under 28 U.S.C. § 1291, we affirm.




                                       -2-
                                   Background 1

A.    The Business

      Suture Express, Cardinal, and O&M compete in the medical-and-surgical

(“med-surg”) supply and distribution market. Cardinal and O&M, along with one

other company not part of this lawsuit, Medline Industries, Inc. (“Medline”), are

national broadline distributors, meaning they contract with hospitals and other

acute healthcare providers to distribute a full line of med-surg products. This

includes about 30 categories, ranging from custom surgical kits, bedpans, and

hospital gowns to IV sets and solutions, gloves, and needles and syringes. In

total, Cardinal distributes more than 300,000 individual med-surg products, while

O&M distributes more than 220,000. 7 J.A. 1380; 10 J.A. 1723 n.2. Many of

these med-surg products are heavy or bulky, so Cardinal and O&M use a network

of regional distribution centers to store the inventory and then use trucks to make

deliveries to the hospitals. Cardinal operates 48 such distribution centers; O&M,

43.

      In 1998, Suture Express entered the med-surg market. Instead of


      1
        The majority of these background facts were stipulated by the parties and
recounted in the district court’s Pretrial Order. 7 J.A. 1291–1301. Because this is
an appeal from the district court’s grant of Cardinal and O&M’s motion for
summary judgment, to the extent facts are disputed we assume that any
nonconclusory version presented by Suture Express is correct. Multistate Legal
Studies, Inc. v. Harcourt Brace Jovanovich Legal & Prof’l Publ’ns, Inc., 63 F.3d
1540, 1545 (10th Cir. 1995) (citing Eastman Kodak Co. v. Image Tech. Servs.,
Inc., 504 U.S. 451, 456 (1992)).

                                        -3-
competing as another broadline distributor, however, Suture Express specialized

in supplying only one category of med-surg: sutures. In 2002, it also began

distributing endomechanical supplies, which are used for minimally invasive or

laproscopic surgeries. These two product categories, together known as “suture-

endo,” differ from other med-surg in that they are typically smaller and lighter. A

box of sutures, for example, is smaller than a box of Kleenex tissues and weighs

not much more than the empty box. Suture-endo products also have a high-dollar

value relative to their size and weight, and there exists a broader variety of these

products than of any other single category of med-surg.

      Because of these distinctive characteristics of suture-endo, Suture Express

utilized a different distribution model. Instead of using regional warehouses and

delivering products by truck, Suture Express stocked all its inventory in a single

warehouse in Lenexa, Kansas, and then contracted with FedEx to provide

overnight delivery to ordering hospitals. By specializing in suture-endo, and by

using this new distribution model, Suture Express was often able to have on hand

a broader variety of suture-endo than did the broadline distributors — who, after

all, had many more product categories to keep stocked across many more

warehouses.

      This specialization also allowed Suture Express to achieve very high fill

rates. A fill rate is the percentage of “filled” orders by a distributor on a timely

basis. If a distributor timely ships nine of the ten items a customer orders, the fill

                                          -4-
rate for that order is 90%. Fill rates are important to hospitals because they can

directly affect when services can be provided: if the suture-endo the hospital

ordered yesterday did not come in today as expected, a surgeon might have to

delay a surgery. Suture Express has maintained a fill rate higher than 99%, which

is often higher than the rates achieved by O&M and Cardinal for the same product

categories. See 6 J.A. 1127–29.

B.    The Market

      For purposes of this case, the relevant market is limited to the national

distribution of med-surg products to acute care providers. Suture Express, 2016

WL 1377342, at *4. That market is divided into two broad categories: (1) suture-

endo, which comprises roughly 10% of the overall med-surg market; and (2)

“other-med-surg,” which includes everything else — the other 90%. This division

is somewhat artificial because no acute care provider needs only suture-endo but

not other-med-surg — or vice versa — but it is helpful since Suture Express

mainly provides one category but not the other. 7 J.A. 1294.

      According to Suture Express’s expert witness, Professor Einer Elhauge, the

suture-endo market has grown over time, expanding from about $1.97 billion in

distribution revenues in 2007 to roughly $2.36 billion in 2012. During that same

time period, Suture Express was able to capture between 8% and 10% of the

market. 23 J.A. 3069; 2 J.A. 352. In comparison, during these six years,

Cardinal’s share of the suture-endo market declined from 30% to 26%, and

                                        -5-
O&M’s share grew from 40% to 42%. 2 J.A. 352.

      In the other-med-surg market, Cardinal and O&M together accounted for

the majority of sales to acute care providers. Id. at 353. Between 2007 and 2012,

Cardinal’s share of other-med-surg sales decreased from 31% to 27%, while

O&M’s share grew from 33% to 38%. Id.

      Broadly speaking, the rest of the med-surg distribution market was

generally controlled by (a) Medline, the third national broadline distributor, and

(b) regional distributors, such as Seneca Medical, MMS, Inc., and the Claflin

Company. These companies are not parties to the case, and their specific shares

of the acute provider market are not clear. Their presence, however, is not

insignificant. Medline, for instance, doubled the amount of its revenue coming

from total med-surg sales between 2008 and 2012. In that last year, the

company’s total med-surg revenues approximated roughly half of O&M’s and

about two-thirds of Cardinal’s. 2 See 11 J.A. 1998, 2021. Likewise, its total

suture-endo sales equated to nearly two-thirds of Suture Express’s, and to roughly

a quarter of Cardinal’s and 15% of O&M’s suture-endo sales to acute care

providers. See id. at 1998; 23 J.A. 3069.

      Some of the regional distributors have also grown their market shares —

though, again, it is not clear from the record by how much or what percentage of


      2
        “Total” sales includes those made to both acute and non-acute care
providers, rather than simply to acute care providers.

                                        -6-
the relevant markets they control. Seneca Medical, for example, distributes about

90,000 different products across 12 states, has grown by about 50% in the last

half-decade, and controls about 15% of the med-surg market in its region. 8 J.A.

1416–24; see Suture Express, 2016 WL 1377342, at *10. Cardinal, O&M, and

Suture Express have all won and lost contracts against Medline and certain

regional distributors.

      There are approximately 4800 acute care providers that are consumers in

the med-surg market. 1 J.A. 48. They have three main choices in how they

purchase medical supplies. First, they can contract directly with med-surg

manufacturers and perform distribution functions themselves. Second, they can

contract with distributors, allowing the hospital to place one or two main orders

instead of many separate orders across manufacturers. Third, the hospitals and

hospital systems can group together to consolidate purchasing power to negotiate

favorable contracts with one or more distributors or manufacturers. Of course,

these three options are not mutually exclusive.

      Most med-surg distributors use a “cost-plus markup” fee arrangement, by

which the customer is charged the cost of the product plus a negotiated fixed

percentage distribution fee. There can also be additional costs, and certain

rebates, depending on the nature of the customer’s contract with the distributor(s)

and/or manufacturer(s). Suture Express, for instance, typically charges a $7 per

day per location freight fee on top of its cost-plus markup.

                                        -7-
      Between 2007 and 2012, average markups decreased for Cardinal, O&M,

and Suture Express, as well as for some of the regional distributors. This was

true both in the other-med-surg and the suture-endo markets, though markups in

the other-med-surg market were higher throughout the time period, even through

the more substantial decline in that market. 2 J.A. 332. Within the suture-endo

market specifically, Cardinal’s and O&M’s markups were always higher than

Suture Express’s — though, again, all declined somewhat between 2007 and

2012. Id. at 361. Finally, overall profit margins for O&M and Cardinal have also

declined since 2008. 11 J.A. 2023–24.

C.    The Bundling Package

      After Suture Express entered the suture-endo market and steadily grew its

market share, Cardinal and O&M responded by instituting bundling packages in

their contracts. Though these packages took different forms, the overarching

result was that the customer would pay more (usually one percent more) for its

other-med-surg orders unless it also ordered its suture-endo through the same

distributor. For instance, some Cardinal contracts required the customer to

purchase all its suture-endo from Cardinal or face markups on its other-med-surg

orders; other contracts required the customer to purchase a certain percentage

(e.g., 95%) of all its med-surg from Cardinal or pay price markups. O&M

instituted similar packages, making the price of other-med-surg increase if the




                                        -8-
customer did not also buy its suture-endo through O&M. 3 However, in at least

some of the contracts, if the hospital purchased its suture-endo directly from the

manufacturer, no penalty would be charged; such purchases were exempted from

the percentage requirement. See 6 J.A. 956; 5 J.A. 830.

      Whether viewed as a bundling discount (as Cardinal and O&M officially

describe it) or as a penalty (as Suture Express and some internal communications

at Cardinal and O&M call it), the effect was that customers ended up paying more

overall if they ordered suture-endo through Suture Express and other-med-surg

through Cardinal / O&M than if they just ordered everything through their

broadline distributor — even though Suture Express charged less for its suture-

endo than did Cardinal or O&M. For instance, before the bundling terms were

put into effect, one hospital would typically buy about $750,000 worth of suture-

endo per year and about $7,000,000 of other-med-surg. Buying the former from

Suture Express and the latter from Cardinal would save the hospital about

$18,750. But with the bundling term added, Cardinal would increase the

hospital’s other-med-surg markup by one percent if it did not also buy its suture-

endo from Cardinal. Since this would translate into a $70,000 increase on the

hospital’s other-med-surg, the $18,000 in suture-endo savings would not be worth

the price of doing business with Suture Express. 24 J.A. 3301; 18 J.A. 2615–16;

      3
        Medline, the other national broadline distributor who is not a party to this
case, used similar bundling packages. So did many of the regional distributors,
such as Seneca Medical and MMS.

                                        -9-
2 J.A. 400 n.234.

D.    Suture Express’s Claim and the Opinion Below

      Suture Express sued Cardinal and O&M, alleging that their bundling

arrangements constituted an illegal tying practice in violation of federal and state

antitrust laws. On cross motions for summary judgment, the district court granted

summary judgment for Cardinal and O&M. Suture Express, 2016 WL 1377342,

at *36. The court held that Suture Express’s federal claims failed as a matter of

law because it could not establish that either Cardinal or O&M individually

possessed sufficient market power in the other-med-surg market that would permit

it to restrain trade in the suture-endo market. Id. at *25. Even were this not the

case, however, the court also held that (a) Suture Express could not establish

antitrust injury because it had not shown that competition itself had been harmed,

id. at *26–28, and (b) Cardinal and O&M cited sufficient procompetitive

justifications for the bundling arrangement to overcome any harm caused by any

anticompetitive effects resulting from the bundle, id. at *28–32. As for the state

law claim, the court ruled that Suture Express could not show antitrust injury or

that Cardinal’s or O&M’s bundling practices were designed to impede

competition.

      On appeal, Suture Express argues that these conclusions were in error.

According to Suture Express, the district court erred in its market power analysis

by not considering the effects in the tied (suture-endo) market, by not

                                        - 10 -
appropriately considering Professor Elhauge’s application of the discount-

attribution test, by accepting that bundle-to-bundle competition is necessarily

procompetitive, and by concluding that reasonable jurors could not find market

power based on evidence about the other-med-surg market. Aplt. Br. at 31–50.

Likewise, Suture Express contends that reasonable jurors could find antitrust

injury in the suture-endo market and that Cardinal’s and O&M’s bundling terms

were not procompetitive. Id. at 50–61. And finally, Suture Express says that the

district court erred in its KRTA analysis because reasonable jurors could find that

Cardinal and O&M violated the state antitrust law regardless of whether they also

violated federal law. Id. at 62.



                                     Discussion

      We review the district court’s grant of summary judgment de novo, making

all reasonable factual inferences in the light most favorable to the nonmovant,

Suture Express. Fed. R. Civ. P. 56(a); Multistate Legal Studies, 63 F.3d at 1545

(citing Eastman Kodak, 504 U.S. at 456).

A.    Section 1 of the Sherman Act

      Section 1 of the Sherman Act prohibits unreasonable restraints of trade.

See 15 U.S.C. § 1; Law v. NCAA, 134 F.3d 1010, 1016 (10th Cir. 1998). Tying

arrangements do not necessarily constitute illegal restraints. A tie-in exists when

a seller conditions its sale of a product (the “tying” product) on the purchase of a

                                        - 11 -
second product (the “tied” product). See Ill. Tool Works Inc. v. Indep. Ink, Inc.,

547 U.S. 28, 31 (2006). In addition to outright refusals to sell two products

separately, tie-ins can also include instances of discount bundling — when a

seller charges less for a package of two products linked together than the sum of

the prices at which it sells each product individually. See X Phillip E. Areeda &

Herbert Hovenkamp, Antitrust Law ¶ 1758 (3d ed. 2011) [hereinafter Areeda &

Hovenkamp]; see also Cascade Health Sols. v. PeaceHealth, 515 F.3d 883,

900–01 (9th Cir. 2007) (explaining differences and similarities between a package

discount and a traditional tie).

      Since tying arrangements can be used for good or for ill (i.e., can have

procompetitive or anticompetitive effects), the arrangement itself is only

problematic when it is used to unreasonably restrain trade. Indeed, “[b]uyers

often find package sales attractive; a seller’s decision to offer such packages can

merely be an attempt to compete effectively — conduct that is entirely consistent

with the Sherman Act.” Jefferson Par. Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 12

(1984), abrogated on other grounds by Ill. Tool Works, 547 U.S. at 31.

      The Supreme Court has explained that illicit tying arrangements occur

“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 13–14. Thus, “the essential characteristic of an invalid tying arrangement

lies in the seller’s exploitation of its control over the tying product to force the

                                         - 12 -
buyer into the purchase of a tied product that the buyer either did not want at all,

or might have preferred to purchase elsewhere on different terms.” Id. at 12.

      As with most other antitrust claims, tying arrangements can be analyzed

using a per se rule or a rule of reason. See id. at 15–16, 18. The four elements of

a per se tying violation are: (1) two separate products are involved; (2) the sale or

agreement to sell one product is conditioned on the purchase of the other; (3) the

seller has sufficient economic power in the tying product market to enable it to

restrain trade in the tied product market; and (4) a “not insubstantial” amount of

interstate commerce in the tied product is affected. Sports Racing Servs., Inc. v.

Sports Car Club of Am., Inc., 131 F.3d 874, 886 (10th Cir. 1997) (citations

omitted).

      On Cardinal and O&M’s initial motion to dismiss, the district court ruled

that Suture Express could not establish a plausible per se tying violation but that

it was free to move forward under the rule of reason. See Suture Express, Inc. v.

Cardinal Health 200, LLC, 963 F. Supp. 2d 1212, 1219–20 (D. Kan. 2013).

Under the rule of reason, the plaintiff has the burden of showing that the

defendant “unreasonably restrained competition” in violation of the Sherman Act.

Hyde, 466 U.S. at 29; see also Fortner Enters., Inc. v. U.S. Steel Corp. (Fortner

I), 394 U.S. 495, 499–500 (1969) (“A plaintiff can still prevail on the merits

whenever he can prove, on the basis of a more thorough examination of the

purposes and effects of the practices involved, that the general standards of the

                                        - 13 -
Sherman Act have been violated.”). This “necessarily involves an inquiry into the

actual effect of the [tying arrangement] on competition.” Hyde, 466 U.S. at 29.

      Beyond this general proposition, caselaw on tying claims under the rule of

reason is “amazingly sparse.” Town Sound & Custom Tops, Inc. v. Chrysler

Motors Corp., 959 F.2d 468, 482 (3d Cir. 1992) (en banc). Because the Supreme

Court has continued to add more real-market analysis to the requirements of a per

se tying claim, though, the rule of reason seems to be mainly different in degree,

not necessarily in kind. See Hyde, 466 U.S. at 34 (O’Connor, J., concurring).

One difference, however, is that the rule of reason is more receptive to

procompetitive justifications for the tying arrangement and more willing to

examine the effects of that arrangement in both the tying and tied markets. See

generally IX Areeda & Hovenkamp, supra, ¶¶ 1728b-f, 1730b–c. And, as with the

rule of reason in other contexts, there is a burden-shifting component to the

analysis. First, the burden falls on the plaintiff to establish a prima facie showing

of a substantially adverse effect on competition. If that occurs, then the burden

shifts to the defendant to come forward with evidence of procompetitive

justifications for the practice. Finally, the burden then shifts back to the plaintiff

to rebut the defense by showing either that the proffered justification is

illegitimate, that the challenged conduct is not necessary to achieve the legitimate

objectives, or that the objectives can be achieved by other means that negatively

affect competition far less. See Law, 134 F.3d at 1019 (explaining rule-of-reason

                                         - 14 -
burden shifting in horizontal price-fixing context); see also United States v.

Microsoft Corp., 253 F.3d 34, 95–96 (D.C. Cir. 2001) (per curiam) (applying

framework to Section 1 tying).

      Suture Express argues that Cardinal’s and O&M’s bundling package meets

all four elements of a per se tying claim — and thus, implicitly, that the

arrangement unreasonably restrains competition and violates the rule of reason.

First, the two product categories involved are other-med-surg (the “tying

product”) and suture-endo (the “tied product”). Second, the agreement to sell

other-med-surg at a favorable price is conditioned on the purchase of suture-endo.

Third, Cardinal and O&M together comprise nearly 70% of the tying (other-med-

surg) market, enabling them to restrain trade in the tied (suture-endo) market.

Fourth, a significant amount of commerce in the suture-endo market is negatively

affected since acute care providers cannot get the better deal at Suture Express

due to the bundling packages.

      Applying the rule of reason on summary judgment, the district court found

genuine factual disputes on the first and second factors, 4 but ruled for Cardinal

and O&M on the third — that Suture Express could not prove that Cardinal or


      4
        Again, under the rule of reason, the plaintiff bears the burden of showing
that the restraint of trade is, on balance, unreasonable. See Law, 134 F.3d at
1019. Thus, the per se “elements” are in fact more akin to “factors” under this
analysis, useful for providing a framework forward but perhaps not themselves
actual requirements for a plaintiff to establish a prima facie case. See Fortner I,
394 U.S. at 499–500.

                                        - 15 -
O&M individually possessed sufficient power in the other-med-surg market that

would allow either of them to restrain trade in the suture-endo market. The court

then went on to consider whether Suture Express had established antitrust injury

(no), whether any justifications for the bundling arrangement existed (yes), and

the overall market effects of the bundle (procompetitive). We consider each

finding in turn as necessary.

             1.    Market Power

      “[I]n all cases involving a tying arrangement, the plaintiff must prove that

the defendant has market power in the tying product.” Ill. Tool Works, 547 U.S.

at 46. Market power is the power “to force a purchaser to do something that he

would not do in a competitive market,” Hyde, 466 U.S. at 14, and often takes the

form of a seller’s ability “to raise price and restrict output,” Eastman Kodak, 504

U.S. at 464 (quoting Fortner I, 394 U.S. at 503). To demonstrate market power, a

plaintiff “may show evidence of either power to control prices or the power to

exclude competition.” Reazin v. Blue Cross & Blue Shield of Kan., Inc., 899

F.2d 951, 966 (10th Cir. 1990) (emphasis, internal quotation marks, and citation

omitted). Importantly, this power over price can take the form of a tying

arrangement if the price could have been raised but the tie was demanded instead.

Fortner I, 394 U.S. at 504.

      Market power is important because if the defendant has substantial power

in the tying market, then the tie has the potential of injuring competition by

                                        - 16 -
forcing consumers to take the tied product just to get the tying one. See Hyde,

466 U.S. at 12. Without power in the tying market, we would expect that a

customer would not feel obliged to take the tie, as he could simply go elsewhere

to buy the tying and tied products separately. Town Sound & Custom Tops, 959

F.2d at 476; X Areeda & Hovenkamp, supra, ¶ 1734a.

      Though the majority of Supreme Court (and our) cases discussing the need

to prove market power as part of a tying claim are per se cases, we see no reason

why the same theoretical underpinning would not make the inquiry relevant under

a rule of reason analysis. Even so, we note “that the Supreme Court has

suggested that there may be situations in which a specific and detailed showing of

market power may not be necessary in a section 1 Rule of Reason case.” Reazin,

899 F.2d at 966; see also FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 460–61

(1986) (explaining in Section 5 Federal Trade Commission Act case that “[s]ince

the 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, proof of actual detrimental effects . . . can obviate the need for an

inquiry into market power, which is but a surrogate for detrimental effects”

(internal quotation marks and citation omitted)). We also acknowledge that there

is a circuit split about whether a tying case examined under the rule of reason




                                        - 17 -
presents such a situation. 5

      We need not weigh in on the dispute at this time, however, given that all

parties here assumed that market power was required and therefore presented

detailed evidence to support their positions. See Aplt. Br. at 29; Aplee. Br. at 21;


      5
         Compare Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d
494, 511 (3d Cir. 1998) (“Where appreciable tying market power cannot be
shown, inquiry into the tied product market cannot be avoided, and the plaintiff
therefore has the more difficult burden of showing that the arrangement violated
the rule of reason because it unreasonably restrained competition in the tied
product market.”), Breaux Bros. Farms, Inc. v. Teche Sugar Co., 21 F.3d 83, 88
(5th Cir. 1994) (noting plaintiffs could prevail in absence of showing market
power if they proved an “unreasonable restraint of trade”), and Grappone, Inc. v.
Subaru of New England, Inc., 858 F.2d 792, 799 (1st Cir. 1988) (Breyer, J.)
(examining competitive effects under rule of reason after determining plaintiffs
had not shown market power to satisfy per se rule), with PSI Repair Servs., Inc. v.
Honeywell, Inc., 104 F.3d 811, 815 n.2 (6th Cir. 1997) (explaining that “market
power in the tying product market is an indispensable requirement under either
per se or rule-of-reason analysis” because the two theories have “merge[d]”), Dig.
Equip. Corp. v. Uniq Dig. Techs., Inc., 73 F.3d 756, 761 (7th Cir. 1996)
(“[S]ubstantial market power is an indispensable ingredient of every claim under
the Rule of Reason.”), and Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d
1486, 1502–03 (11th Cir. 1985) (listing per se elements in rule of reason
analysis).

       The Supreme Court’s most recent foray into tying analysis did not resolve
the issue. In Illinois Tool Works, the Court held that a patent in the tying market
would no longer be dispositive of market power for purposes of a per se tying
claim, and therefore required a plaintiff to prove market power instead of simply
relying on the presumption. 547 U.S. at 45. In abolishing that presumption,
though, the Court did not necessarily abrogate the rule from Hyde applicable to
the rule of reason: “When . . . the seller does not have either the degree or the
kind of market power that enables him to force customers to purchase a second,
unwanted product in order to obtain the tying product, an antitrust violation can
be established only by evidence of an unreasonable restraint on competition in the
relevant market.” 466 U.S. at 17–18; see id. at 29.


                                       - 18 -
cf. Reazin, 899 F.2d at 968 n.24. Instead, we will simply assume without

deciding that a showing of tying market power is required under the rule of

reason.

      With this said, we do think that tied market effects can be appropriate

evidence of tying market power in a rule of reason case, though it cannot be

dispositive. The Supreme Court suggested as much in Eastman Kodak, 504 U.S.

at 477. In that case, Kodak sold photocopiers, and then also sold (a) replacement

parts and (b) repair service. In response to independent service agents offering

repair service at a lower price, Kodak restricted the sale of replacement parts to

buyers who either also purchased the Kodak repair service or who repaired their

own machines. The independent agents then sued Kodak, alleging the company

unlawfully restrained competition by tying the sale of service (tied market) to the

sale of the parts (tying market). Kodak responded that the arrangement could not

be unlawful because it lacked market power in the tying (parts) market since if it

raised prices there it would suffer corresponding losses in the photocopier market.

The Supreme Court rejected this proposed legal rule and consequently denied

summary judgment to Kodak, instead noting that it would at least be reasonable

for a jury to infer that Kodak had market power “to raise prices and drive out

competition in the aftermarkets [i.e., (a) parts and (b) service], since respondents




                                        - 19 -
offer direct evidence that Kodak did so.” 6 Id.

      Following Eastman Kodak, the Ninth Circuit considered evidence of tied-

market effects in a Section 2 case, noting that the lower pricing of the tied good

— there, primary and secondary health services — by the plaintiff was evidence

of an illicit tying arrangement by the defendant, who had tied access to its tertiary

health services (tying market) to purchase of its primary and secondary services

(tied market). See PeaceHealth, 515 F.3d at 915. The court concluded that,

“while not dispositive evidence of an illegal tie, it is a permissible inference that

a rational customer would not purchase [the defendant’s] allegedly overpriced

product in the absence of a tie.” Id.

      As Cardinal and O&M point out, neither Eastman Kodak nor PeaceHealth

are quite on all fours with this case because the defendants in those cases

exercised a near-monopoly in the tying market. Aplee. Br. at 38–40; see Eastman

Kodak, 504 U.S. at 464 (Kodak parts available almost “exclusively” from Kodak);

PeaceHealth, 515 F.3d at 915 (“PeaceHealth was the only provider of tertiary


      6
         Justice Scalia dissented because (among other reasons) he thought the
Court erred in accepting the plaintiffs’ market definition and in its analysis of
aftermarket effects in the per se claim. But, supporting the use of direct evidence
under the rule of reason, he wrote: “I would instead evaluate the aftermarket tie
alleged in this case under the rule of reason, where the tie’s actual
anticompetitive effect in the tied product market, together with its potential
economic benefits, can be fully captured in the analysis. Disposition of this case
does not require such an examination, however, as [plaintiffs] apparently waived
any rule-of-reason claim they may have had in the District Court.” Eastman
Kodak, 504 U.S. at 502–03 (Scalia, J., dissenting) (citation omitted).

                                        - 20 -
services in the relevant geographic market.”). Thus, they contend, the direct

evidence was used either as further support of coercion, as in PeaceHealth, or to

reject an economic theory and proposed rule of law, as in Eastman Kodak, but it

was not used to demonstrate market power.

      These distinctions, however, only confirm that we should not consider

direct evidence of tied market effects as conclusive — a warning the Supreme

Court has also issued. See U.S. Steel Corp. v. Fortner Enters., Inc. (Fortner II),

429 U.S. 610, 618 (1977) (finding evidence that customers paid a noncompetitive

price for the tied good insufficient by itself to support illicit tying claim). That

the evidence is not dispositive, however, does not mean it should not be

considered. See PeaceHealth, 515 F.3d at 915. Since market power is the power

to “force a purchaser to do something that he would not do in a competitive

market,” Hyde, 466 U.S. at 14, if a purchaser has indeed been coerced into doing

something he would not normally do, why would it not follow that this coercion

could be (though is not necessarily) because of market power in the tying market?

And under the rule of reason, why should such evidence not at least be

considered, especially when (as here) there exists a genuine issue of material fact

as to coercion? 7 See Suture Express, 2016 WL 1377342, at *17. We think it

      7
         Cardinal and O&M also argue that PeaceHealth is inapposite because the
court’s discussion on direct effects in the tied market took place during its
discussion of economic coercion — i.e., whether the sale of one product was
conditioned on the purchase of another. Aplee. Br. at 40. This is true, but it does
not mean the two elements were unrelated. In fact, they were: the Ninth Circuit

                                         - 21 -
should be.

      At last, then, we turn to the evidence presented in this case and to the

district court’s consideration of it. The district court held that Suture Express had

not met its burden of producing evidence that demonstrated Cardinal’s or O&M’s

ability to exclude competition or control price. As to the first, the court found

that neither of the companies could exclude competition in the tying market since

there was evidence the opposite was occurring, with regional and national

competitors growing and expanding during the pertinent time period. See id. at

*24. Further, since Medline and the regional distributors also offered similar

bundling packages, competition was not excluded in the tied market, either: it

simply took the form of bundle-to-bundle competition. Id. (Though the district

court did not label it as such, this is, of course, direct evidence of tied market

effects.) These bundling packages, the court also found, did not result in

prohibitively high switching costs for customers, which could be indicative of

market exclusion. Though some customers noted that the cost of switching

distributors required an investment of time and overhead, the court concluded that

“the record is filled with examples of customers who, in fact, have switched

distributors on a regular basis.” Id. at *22.

      As for pricing, the court found that evidence of Cardinal’s and O&M’s


described its inquiry as whether “the defendant possesses enough economic power
in the tying product market to coerce its customers into purchasing the tied
product.” PeaceHealth, 515 F.3d at 913.

                                         - 22 -
declining profit margins in the other-med-surg market revealed that they did not

have the ability to control prices in that market. Id. at *25. The court thought the

evidence showing consolidation in the buyer (i.e., acute care provider) market

instead demonstrated enhanced bargaining power, which could also help explain

Cardinal’s and O&M’s inability to control pricing. In sum, the court wrote, “the

undisputed facts demonstrate a market where O&M and Cardinal compete

vigorously against Medline, certain regional distributors, and each other. And,

after three or four years, O&M and Cardinal can retain only about half of their

acute care customers. These facts preclude any triable dispute about defendants’

market power.” Id.

      This is persuasive evidence of a lack of market power. Suture Express

contends, though, that it is not enough to settle the question as a matter of law.

For instance, it notes that tying market share is very relevant to the inquiry, and

contends that even if 31% and 38% market shares (Cardinal’s and O&M’s high

points, respectively) would not be enough to win under the per se rule, it should

nevertheless be enough to survive summary judgment under the rule of reason.

See Aplt. Br. at 40 (citing Breaux Bros., 21 F.3d at 87).

      Perhaps. Though the Supreme Court has noted that a hospital’s 30%

market share lacked the “kind of dominant market position that obviates the need

for further inquiry into actual competitive conditions,” Hyde, 466 U.S. at 27,

courts have used that benchmark as a floor for plaintiffs seeking to prove a per se

                                        - 23 -
claim, e.g., Grappone, 858 F.2d at 796. In a rule of reason case, it is reasonable

to conclude that other indicia can tip the balance in favor of a showing of market

power, even if one begins with a lower showing of market share. See Breaux

Bros., 21 F.3d at 87–88 (allowing plaintiff to proceed under rule of reason when

it showed that defendant controlled 17.5% of the tying market). But just as

“market share alone is insufficient to establish market power,” Reazin, 899 F.2d

at 967 (citations omitted), it is also insufficient to counteract the other market

realities present here that point to increased competition and lower prices.

      Suture Express responds that this other evidence is actually misleading.

First, it contends that Professor Elhauge’s calculations that between 56% and 64%

of the suture-endo market was bound by contracts with Cardinal and O&M and

thus could not buy suture-endo from Suture Express constitute direct evidence of

Cardinal’s and O&M’s power over price. See Aplt. Br. at 37. This is because, it

says, “in the but-for world without the challenged conduct,” buyers would have

bought suture-endo from Suture Express and paid less. Id. at 38.

      Second, Suture Express argues that bundle-to-bundle competition does not

itself demonstrate an inability to raise prices or exclude competition. It could be,

for instance, that all the firms offering the bundle are inefficient producers of one

of the product categories. This would make consumers worse off in a world

without the more efficient specialist. See Amicus Br. at 10–14.

      Third, Suture Express points to Professor Elhauge’s analysis under the

                                         - 24 -
discount attribution test as demonstrating coercion and therefore market power.

Aplt. Br. at 48–50. Under this test, the full amount of the bundled discount is

allocated to the tied product, and if the resulting price of that product is below the

defendant’s incremental cost to produce it, then the bundle is possibly coercive.

See PeaceHealth, 515 F.3d at 909–10. Here, Professor Elhauge concluded that

“77% of [Cardinal’s and O&M’s] customers with bundled penalties had

incremental prices on Suture/Endo that were below cost.” 6 J.A. 1009.

      We have problems accepting that these arguments reveal significantly

probative evidence by which a jury could find that Cardinal or O&M has enjoyed

market power. For instance, Suture Express’s contention that the acceptance of

the package by 56–64% of the suture-endo market, though certainly evidence to

consider, is ultimately unavailing. As the Supreme Court has explained, “this

approach depends on the absence of other explanations for the willingness of

buyers to purchase the package.” Fortner II, 429 U.S. at 618 n.10. And here,

other explanations abound — such as the fact that many of the acute care

purchasers simply preferred consolidating their purchases and having fewer

distributors to deal with. See Suture Express, 2016 WL 1377342, at *7–8

(providing examples of why hospitals switched between med-surg providers); 10

J.A. 1746 n.34 (deposition testimony of customers switching to broadline

distributors for consolidation reasons); see also It’s My Party, Inc. v. Live Nation,

Inc., 811 F.3d 676, 688 (4th Cir. 2016) (“[T]he productive synergies created when

                                         - 25 -
sellers package complementary products . . . obviously saves distribution and

consumer transaction costs.” (internal quotation marks and citation omitted)).

      Additionally, that Suture Express and Cardinal / O&M charged different

prices does not itself show power over price. To do that, one would have to look

at the costs borne by each defendant and its margins. And since the entire reason

that Suture Express’s business model works is that it is able to distribute suture-

endo alone at a lower cost than Cardinal and O&M can distribute other-med-surg

and suture-endo together, it is logical that Cardinal’s and O&M’s costs would be

higher. That is not a result of market power, but of different distribution models.

      Nor does one have to accept the theoretical position that bundle-to-bundle

competition necessarily creates a competitive market to conclude that there is

sufficient evidence here of actual competition that precludes a finding of market

exclusion. Medline has more than doubled its med-surg sales between 2008 and

2014. Regional distributors have likewise grown. And all three parties compete

with and have won and lost contracts to these other distributors. A market in

which competitors are growing and margins are shrinking is inconsistent with the

claim that Cardinal and O&M can exclude competition and control prices.

      As for the discount attribution test, the district court found that there

existed a genuine issue of fact regarding the conditioning element, and we do not

disagree with that assessment. But it is this element, not market power, to which

the discount attribution test would be applicable. And this is only if the test can

                                        - 26 -
properly be used to show coercion by a non-monopolist, a proposition for which

we can find no support in the caselaw. Cf. Collins Inkjet Corp. v. Eastman Kodak

Co., 781 F.3d 264, 270–74 (6th Cir. 2015) (applying test in Section 1 tying claim

as “standard for coercion” to defendant with a 100% market share); PeaceHealth,

515 F.3d at 906 (applying test to near-monopolist in Section 2 attempted

monopolization claim); X Areeda & Hovenkamp, supra, ¶ 1758a (describing

discount attribution test as more effective than the buyer behavior test because the

latter “does not measure coercion”). Though market power and coercion are of

course related, that there is a factual dispute about one does not itself raise a

dispute about the other.

      In sum, we do not think a reasonable jury could conclude that either

Cardinal or O&M possesses market power sufficient to force the tie. Even if

there were a genuine issue as to market power, however, or even if a showing of

market power were not required under the rule of reason, we do not think Suture

Express has carried its burden of showing antitrust injury.

      2.     Antitrust Injury

      As part of any claim under Section 1 of the Sherman Act, the plaintiff must

establish “an injury of the type the antitrust laws were intended to prevent.”

Cohlmia v. St. John Med. Ctr., 693 F.3d 1269, 1280 (10th Cir. 2012) (citation

omitted). This means that the plaintiff must show the challenged restraint

actually injured competition, not merely a competitor. SCFC ILC, Inc. v. Visa

                                         - 27 -
USA, Inc., 36 F.3d 958, 965 (10th Cir. 1994); see also Law, 134 F.3d at 1017.

      Suture Express contends that Cardinal’s and O&M’s anticompetitive

behavior did just this. As evidence that it was the suture-endo market as a whole

that was harmed, Suture Express offers the report of its expert witness, who

examined the contract terms for a number of the largest hospital systems serviced

by Cardinal and O&M. Sales under these contracts comprised roughly half of all

the other-med-surg sold by the two companies. See 2 J.A. 361–94. 8 Professor

Elhauge concluded that from 2007 to 2012, between 59% and 79% of suture-endo

sales Cardinal made to acute care customers were under contracts that made

pricing of other-med-surg contingent in some way on the purchase of suture-endo.

Id. at 417. For O&M, those percentages ranged from 95% to 97%. Id.

Multiplying these percentages by each company’s share of the suture-endo

market, Professor Elhauge calculated that Cardinal’s bundling arrangements

restrained between 18-22%, and O&M’s between 38-42%, of the suture-endo

market. Thus, according to Suture Express, 56-64% of the suture-endo market

was restrained by their contracts from purchasing suture-endo from Suture

Express. Aplt. Br. at 36. These foreclosed customers ended up paying $36

million more for suture-endo than they would have had they bought from Suture


      8
          Professor Elhauge explained that he could not examine 100% of
Cardinal’s and O&M’s contracts because of the arduousness of the task (there
were thousands of individual contracts) and because neither defendant produced
all of the agreements. 2 J.A. 362, 380–81.

                                       - 28 -
Express. Id. at 19–20; 2 J.A. 420–21.

      This, Suture Express says, is the crux of the antitrust harm inquiry, which it

frames as “whether, in the but-for world without the challenged conduct, buyers

would have paid less than they paid in the actual world with the conduct.” Aplt.

Br. at 38. The answer, it provides, is yes: “Absent Defendants’ bundling terms,

hospitals would have purchased from Suture Express at its lower price.” Id. at

35.

      But there is a problem with this conclusion: it fails to note that the “but-for

world” existed for almost half the market (since 36–44% of the market was not

constrained), yet less than half of that market “purchased from Suture Express at

its lower price.” In 2007, Suture Express accounted for only 16% of unrestrained

suture-endo sales; that number increased to 41% in 2010, and fell to 24% in 2012.

2 J.A. 414; Aplt. Br. at 18. We note this not because we think that every

unrestrained purchase would need to take advantage of the lower price offered by

Suture Express for its harm theory to be viable, but because the formulation as

presented raises questions about the “but-for world” it models compared to the

real-world market that actually existed — and whether it was really competition

that was harmed instead of simply one competitor. 9

      9
        Suture Express points to Fortner I for the proposition that it need only
show that “any appreciable number of buyers” is affected, not the entire market.
Aplt. Br. at 36 (quoting 394 U.S. at 504). While (again) not suggesting that
Suture Express must demonstrate harm to 100% of the suture-endo market, it is
worth pointing out that this discussion by the Supreme Court concerned what

                                        - 29 -
      Additionally, as the district court understood, simply comparing the

average price and mark-ups between the three competitors fails to show that

competition itself was harmed across the market. Suture Express, 2016 WL

1377342, at *27. Again, the record tends to show the opposite: overall med-surg

revenues increased between 2007 and 2012, even as increased competition drove

Cardinal’s and O&M’s profit margins down.

      Accordingly, we do not think Suture Express has demonstrated

substantially adverse effects on competition caused by Cardinal and O&M. What

the Supreme Court said in a Section 2 context remains true here: “The purpose of

the [Sherman] Act is not to protect businesses from the working of the market; it

is to protect the public from the failure of the market. The law directs itself not

against conduct which is competitive, even severely so, but against conduct which

unfairly tends to destroy competition itself.” Spectrum Sports, Inc. v. McQuillan,

506 U.S. 447, 459 (1993). The evidence in this case — the decrease in markups

charged, the consolidation of buyer power, the growth of regional competitors,

the success of Medline — reveals a med-surg market that is becoming more, not

less, competitive. There is simply not enough probative evidence for a jury to

find that Cardinal’s or O&M’s bundling practices constitute an injury of the kind

the antitrust laws are intended to prevent. Since we affirm the district court on



constitutes “sufficient economic power” in the tying market — not what counts as
harm to competition in the tied market. See 394 U.S. at 502–04.

                                        - 30 -
this point, we need not continue on to an examination of procompetitive

justifications offered to support the bundling practices.

B.    Section 3 of the Clayton Act

      Section 3 of the Clayton Act prohibits persons engaging in commerce from

making a lease or sale of goods “where the effect of such lease, sale, or contract

for sale . . . may be to substantially lessen competition or tend to create a

monopoly in any line of commerce.” 15 U.S.C. § 14. Although the language

differs from that of the Sherman Act, “at least for allegations of unlawful tying

arrangements, the required showings under both [acts] are identical.” Smith

Mach. Co. v. Hesston Corp., 878 F.2d 1290, 1299 (10th Cir. 1989). Because we

conclude that its Sherman Act claim should not be reinstated, Suture Express’s

Clayton Act claim likewise fails. Accordingly, we do not reach Cardinal and

O&M’s argument that the Clayton Act does not even apply here because Suture

Express has challenged their distribution services rather than any actual goods

they provide. Aplee. Br. at 60 n.24.

C.    Kansas Restraint of Trade Act

      The Kansas Restraint of Trade Act prohibits all agreements or contracts

“made with a view or which tend to prevent full and free competition in the . . .

sale of articles imported into [Kansas]” and those “designed or which tend to

advance, reduce or control the price or the cost to the producer or to the consumer

of any such products or articles.” Kan. Stat. Ann. § 50-112. Though the KRTA

                                         - 31 -
was originally enacted in 1897, Kansas courts have recognized that it “remains

largely undeveloped.” O’Brien v. Leegin Creative Leather Prods., Inc., 277 P.3d

1062, 1068 (Kan. 2012). The Kansas Supreme Court has, however, emphasized

that its law is not the same as its federal counterparts. Id.

      In the leading case interpreting the KRTA, the plaintiffs alleged vertical

and horizontal price-fixing under Kan. Stat. Ann. §§ 50-101 and 51-112. Id. at

1067, 1070. In its analysis, the Kansas Supreme Court explained that the KRTA

does not provide for the use of the rule of reason, id. at 1083, but that it still

requires a showing of antitrust injury, id. at 1075. Such an injury requirement,

the court continued, was adopted “from federal antitrust jurisprudence” and

“equates to the Kansas concept of causation, or the requirement that a plaintiff’s

theory of damages . . . correspond to an economic effect that the statute or case

law rule invoked as the basis for liability aims to prevent.” Id. (internal quotation

marks and citation omitted). Thus, in the case before it, the court held that the

plaintiffs had raised a genuine issue of material fact because they had shown “that

consumers actually paid prices for [the defendant’s] goods inflated by its pricing

combinations or arrangements with retailers.” Id. at 1078.

      Here, as we have noted above, Suture Express has not carried its burden of

showing a legally viable antitrust injury “of the type the antitrust laws were

intended to prevent.” See Cohlmia, 693 F.3d at 1280. We do not think that result

changes under the KRTA.

                                          - 32 -
      Finally, Suture Express points out that the Kansas statute prohibits not only

agreements that actually harm full and free competition, but also acts that are

made “with a view or which tend to prevent” such competition. Kan. Stat. Ann. §

50-112. This is true. As the O’Brien court recognized, “a plaintiff [under the

KRTA] does not have to show that the arrangement actually succeeds in

increasing prices.” 277 P.3d at 1075. But Suture Express has not met this

burden, either. The documents it cites showing Cardinal’s and O&M’s internal

discussions of the competitive threat Suture Express posed and their need to

respond show only that the companies realized they needed to adapt to the

changing market in order to compete more effectively. The communications do

not raise a genuine issue of material fact about whether Cardinal or O&M

intended to prevent full and free competition — only that they themselves wanted

to engage in it.



                                    Conclusion

      We AFFIRM the judgment of the district court. Viewing the evidence in

the light most favorable to Suture Express, we do not think the company can

survive summary judgment under Section 1 of the Sherman Act, Section 3 of the

Clayton Act, or the Kansas Restraint of Trade Act. There simply is not enough

probative evidence by which a reasonable jury could find that Cardinal’s and

O&M’s bundling arrangement unreasonably restrained trade in violation of

                                        - 33 -
federal or state antitrust law.

      Finally, we GRANT the parties’ motions to seal the unredacted versions of

their briefs and volumes 2–25 of the joint appendix. The common-law right of

access to judicial records is “not absolute,” and we may seal documents if the

public’s right of access is outweighed by competing interests. JetAway Aviation,

LLC v. Bd. of Cty. Comm’rs, 754 F.3d 824, 826 (10th Cir. 2014). Simply

because the judicial records are subject to a protective order in the district court,

as they are here, does not mean that we must follow suit; instead, the parties must

present “a real and substantial interest that justifies depriving the public of access

to the records that inform our decision-making process.” Id. (citation omitted).

Cardinal, O&M, and Suture Express have done this. The joint appendix contains

confidential documents, financial information, and contracts, the confidential

nature of which outweighs the public’s right of access.




                                         - 34 -
