Recent federal court opinions dismissing cases under Rule 12(b)(6) may provide an early off-ramp for antitrust defendants where a roadblock has often existed. Courts are increasingly dismissing cases at the12(b)(6) stage for failure to properly plead market definition and therefore failing to meet the requirements ofTwombly as to the market definition allegations of a Sherman Act claim. Antitrust plaintiffs are finding that it is progressively more difficult to proceed to discovery if the alleged product or geographic market is narrowly defined – a tactic that has frequently been used in support of allegations that an antitrust defendant has market power or to exclude potentially competing products that would decrease the alleged market share at issue. Three recent examples raise the question of whether this trend is here to stay.

Most recently, the Second Circuit in Concord Associates, L.P. v. Entertainment Properties Trust affirmed a district court’s dismissal of Sherman Act Section 1 and Section 2 claims for failure to allege a plausible antitrust market. Plaintiffs, a group of developers of “racinos” – combination casino gambling resort and race tracks – sought to open a racino in the Catskills. Plaintiffs alleged that a group of rival real estate developers and casino and gambling operators colluded to obstruct the development of plaintiffs’ racino project. Reviewing the district court’s 2014 dismissal de novo, the Second Circuit determined that plaintiffs’ proposed relevant market – the “Racing/Gaming Market in the Catskills region,” was essentially gerrymandered. Id. at *4. Plaintiffs’ market included 23 counties in New York, New Jersey, and Pennsylvania, but did not include the well-known gambling destinations of Atlantic City and Connecticut. This arbitrary line drawing, the court found, undermined the plausibility of plaintiffs’ claims and amounted to a self-exemption of the requirements of defining markets “according to the rules of interchangeability and cross-elasticity.” Id. at *6. Additionally, the court found unavailing plaintiffs’ argument that the Catskills are a unique gambling market, akin to those geographic areas that courts previously recognized as valid standalone markets such as the Atlantic City gambling and Aspen skiing markets. Id. at *5.

In another example of a court rejecting an overly narrow product market, a California federal court in Hicks v. PGA Tour, Inc. dismissed Sherman Act claims levied against the PGA Tour by a group of caddies regarding the Tour’s requirement that they wear sponsored bibs during Tour events. In Hicks, the caddies alleged two relevant markets relating to live golf events: (1) an “Endorsement Market” for products endorsed during golf tournaments; and (2) a “Live Action Advertising Market” for in-action displays of commercial advertising during golf tournaments. Defendants successfully argued that the caddies did not allege a relevant market that encompassed would-be-advertisers’ reasonable substitutes for caddie endorsements during Tour events. In dismissing the caddies’ claims, the court held that advertisers have a variety of interchangeable means of advertising (television, magazines, on-site displays etc.), and found that the two alleged product markets were unnaturally “contorted” to fit the caddies’ litigation strategy.

Finally, in Westlake Servs., LLC v. Credit Acceptance Corp., plaintiff brought antitrust claims as part of a patent infringement suit alleging that defendant fraudulently obtained patents for software that facilitates and services subprime auto loans. Plaintiff alleged that defendant’s bad faith attempt to enforce the patents constituted antitrust injury. In connection with its antitrust claims, plaintiff alleged two antitrust markets: (1) a product market for software that facilitates subprime auto loans; and (2) a product market for software that facilitates auto loans, generally. Defendant submitted a targeted motion to dismiss on the antitrust claims, and sidestepped plaintiff’s allegations of causal antitrust injury in a patent infringement suit – a common target for a motion to dismiss. Instead, defendant challenged whether plaintiff sufficiently alleged market power. In dismissing plaintiff’s claims, the court held that the Complaint did not “sufficiently allege the existence of a market for e-commerce software that facilitates auto loans, whether or not such loans are subprime.” Id. at 5. The court also held that plaintiff failed to allege whether software products in those markets were reasonably interchangeable or whether there was cross-elasticity of demand for those software products. At the same time, as defined by plaintiff, the market definition would include products that could not plausibly be considered economic substitutes, such as software used to compare auto loan financing.

Whether these decisions mark a shift in antitrust jurisprudence remains to be seen, though some key learnings emerge for antitrust practitioners and clients seeking an early exit from litigation. First, although courts may disfavor early challenges to market definitions, if a plaintiff has defined a market in such a way as to exclude common-sense substitutes (in Hicks: logical alternative advertising platforms; in Concord: renowned nearby gambling destinations), such pleadings are ripe for a 12(b)(6) motion. Second, keep it simple. A narrow motion to dismiss that attacks market definition can cleanly tee up the issue for the court and draw attention to an issue often substantively overlooked by courts at the motion to dismiss stage.