Medical Supply Company Can’t Revive Tying Claims Against Rivals

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By Eleanor Tyler

Suture Express Inc. couldn’t prove that its rivals in medical-surgical supply illegally restrained competition by offering bundled pricing on a broad array of products, according to a March 14 decision ( Suture Express, Inc. v. Owens & Minor Distrib., Inc. , 2017 BL 78558, 10th Cir., No. 16-3065, 3/14/17 ).

The U.S. Court of Appeals for the Tenth Circuit affirmed a lower court’s dismissal of Suture Express’ claims against national suppliers Owens & Minor Distribution Inc. (O&M) and Cardinal Health 200 LLC.

Suture Express’s case has been pending while the law on what it takes to prove illegal tying has shifted. The appellate court decision shows how much more difficult it will be to prove tying claims under a tightening standard.

Suture Express claimed that the defendants bundled key products together to keep out competition. The plaintiff is a less comprehensive seller, but offers lower prices on a few products.

The court said that Suture Express failed to prove that either rival had the market power to create an illegal tie, which forces a customer to buy some products at a higher price to ensure supply of a different, critical product that can’t be obtained elsewhere.

Even if Suture Express could prove the defendants had market power to create such a tie, the court said the plaintiff didn’t prove that competition as a whole suffered from its rivals’ conduct. Suture Express alleged that Cardinal and O&M tied up more than half of the larger market for specific products, keeping those customers from buying the came goods cheaper from Suture Express.

But the court noted that half of the customers that weren’t tied to a supplier still didn’t choose to buy from Suture Express. Because Cardinal and O&M’s margins kept dropping, while overall medical and surgical supply market revenues increased, the court reasoned that competition in the overall market was functioning just fine.

Suture Express brought its claims in 2012, alleging that Cardinal and O&M had restrained trade since 2007. The district court allowed Suture Express’ claims to proceed, but it found in favor of Cardinal and O&M when Suture Express couldn’t produce evidence needed to prove Sherman Act, Clayton Act and state law violations.

Debevoise & Plimpton in New York and Quinn Emanuel Urquhart & Sullivan in New York represented Suture Express. Crowell & Moring in Washington represented O&M, while Jones Day in New York represented Cardinal Health.

To contact the reporter on this story: Eleanor Tyler in Washington at etyler@bna.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bna.com

For More Information

The court's decision is at http://src.bna.com/mXU.

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