Scheuer, 416 U.S. at 236, 94 S.Ct. 1683).
In addition, in antitrust cases, it must appear on the face of
the complaint that the plaintiff could prove no set of facts to
sustain a recovery. Ware v. Associated Milk Producers, Inc.,
614 F.2d 413 (5th Cir. 1980). The complaint need only allege
sufficient facts to state the elements of injury from an act
prohibited by the antitrust laws. Newman v. Universal Pictures,
813 F.2d 1519 (9th Cir. 1987), cert. denied, 486 U.S. 1059, 108
S.Ct. 2831, 100 L.Ed.2d 931 (1988). On the other hand, for the
court to grant this kind of motion, a defendant in an antitrust
case must meet a more stringent standard because the proof is
often in the hands of the alleged conspirators, and the plaintiff
may need an opportunity to discover the facts necessary to
withstand the motion. HRM, Inc. v. Tele-Communications, Inc.,
653 F. Supp. 645 (D.Colo. 1987); Hughes Automotive v.
Mid-Atlantic Toyota Distibutors, Inc., 543 F. Supp. 1056 (D.Md.
1982). That being said, an antitrust complaint still must
"adequately . . . define the relevant product market, . . .
allege antitrust injury, [and] . . . allege conduct in violation
of antitrust laws." Re-Alco Indus., Inc. v. National Ctr. Of
Health Educ., Inc., 812 F. Supp. 387, 391 (S.D.N.Y. 1993).
It is within this framework that the Court addresses the
present motions to dismiss.
B. The defendants' motions
1. Relevant Product Market
"Market share . . . is one of the most important factors to be
considered when determining the probable effect of the
combination of . . . competition in the relevant market." Brown
Shoe Co. v. United States, 370 U.S. 294, 343, 82 S.Ct. 1502, 8
L.Ed.2d 510 (1962). As this Court has already found that the
plaintiffs adequately set forth a claim of conspiracy in their
First Amended Complaint (see Continental II), the only question
before the Court is whether the plaintiffs have now properly
alleged the existence of an unreasonable restraint of trade,
either per se or under the "rule of reason."
The Second Circuit has held that "[i]f a . . . plaintiff
establishes the existence of an illegal contract or combination,
it must then proceed to demonstrate that the agreement
constituted an unreasonable restraint of trade either per se or
under the rule of reason." Capital Imaging Assocs., P.C. v.
Mohawk Valley Medical Assocs., 996 F.2d 537, 542 (2d Cir. 1993)
("Capital Imaging"). On a motion to dismiss, under the rule of
reason, the plaintiff must "identify the relevant product market
and allege how the net effect of the alleged violation is to
restrain trade in the relevant market." North Jersey Secretarial
Sch., Inc. v. McKiernan, 713 F. Supp. 577, 583 (S.D.N.Y. 1989).
In contrast, under the per se rule the plaintiff is excused
from defining the relevant product market. The Second Circuit in
Capital Imaging stressed, however, that "[c]onduct considered
illegal per se is invoked only in a limited class of cases where
a defendant's actions are so plainly harmful to competition and
so obviously lacking in any redeeming pro-competitive values that
they are conclusively presumed illegal without further
examination." Id. (citations omitted). The Court in Capital
Imaging continued, "[p]er se violations include, for example,
horizontal and vertical price-fixing, division of a market into
territories, certain tying arrangements, and some group boycotts
involving concerted refusals to deal with a competitor." Id. at
542-543 (citations omitted). The Second Circuit emphasized,
however, that "[m]ost cases fall outside these narrow, carefully
demarcated categories held to be illegal per se. In the general
run of cases a plaintiff must prove an antitrust injury under the
rule of reason." Id. Furthermore, courts have been extremely
reluctant to exercise the per se analysis where the alleged
conspiracy is vertical, rather than horizontal, as is the case
before this Court. See e.g., Finkelstein v.
Aetna Health Plans of N.Y., 1997 WL 419211, *5 (S.D.N.Y. July
25, 1997) (citing Business Elec. v. Sharp Elec., 485 U.S. 717,
724, 108 S.Ct. 1515, 99 L.Ed.2d 808 (1988)).
Under the rule of reason, a plaintiff who alleges an antitrust
violation bears the burden of establishing "that the challenged
action has had an actual adverse effect on competition as a whole
in the relevant market." Id. Stated another way, the plaintiff
must "allege a relevant geographic and product market in which
trade was unreasonably restrained or monopolized." Global
Discount Travel Services, LLC v. Trans World Airlines, Inc.,
960 F. Supp. 701, 704 (S.D.N.Y. 1997) (citations omitted). In
addition, the complaint must allege a relevant product market in
which the anti-competitive effects of the challenged activity can
be assessed. See Jefferson Parish Hosp. Dist. No. 2 v. Hyde,
466 U.S. 2, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984). It should be
noted that when determining the relevant product market, the
plaintiff should include all products reasonably interchangeable.
See United States v. E.I. du Pont de Nemours & Co.,
351 U.S. 377, 76 S.Ct. 994, 100 L.Ed. 1264 (1956). In other words, the
relevant product market must include all reasonable substitutes
for a product. "A properly defined market includes potential
suppliers who can readily offer consumers a suitable alternative
to the defendants' services." United States v. Long Island
Jewish Medical Center, 983 F. Supp. 121 (E.D.N.Y. 1997) (quoting
F.T.C. v. Butterworth Health Corp., 946 F. Supp. 1285, 1290
[W.D. Mich. 1996], aff'd 121 F.3d 708 [6th Cir. 1997]).
In the present case, the plaintiffs urge the Court to find that
the defendants conduct was per se illegal, thus eliminating the
relevant market requirement in their Second Amended Complaint. As
already stated, per se illegality is strictly limited to
defined categories that have "such predictable and pernicious
anticompetitive effect[s], and such limited potential for
pro-competitive benefit[s]" to warrant such treatment. State Oil
Co. v. Khan, 522 U.S. 3, 118 S.Ct. 275, 279, 139 L.Ed.2d 199
(1997). It is not obvious to this Court that the defendants
engaged in price-fixing, bid-rigging, or a conspiracy to reduce
output when they entered into an exclusive dealing arrangement.
In addition, courts have recognized that such exclusive dealing
agreements may have procompetitive effects. See e.g.,
Electronics Communications Corp. v. Toshiba America Consumer
Products, Inc., 129 F.3d 240, 245 (2d Cir. 1997); Barry v. Blue
Cross of Cal., 805 F.2d 866, 871 (9th Cir. 1986); Royal Drug
Co. v. Group Life and Health Ins. Co., 737 F.2d 1433 (5th Cir.
1984), cert. denied, 469 U.S. 1160, 105 S.Ct. 912, 83 L.Ed.2d
925 (1985); Medical Arts Pharmacy of Stamford, Inc. v. Blue
Cross & Blue Shield of Conn., Inc., 675 F.2d 502, 506 (2d Cir.
1982); Oreck Corp. v. Whirlpool Corp., 579 F.2d 126, 131 (2d
Cir. 1978) (en banc). Therefore, given the strict limitations and
the reluctance to apply the per se rule to a vertical antitrust
action, the Court finds that the plaintiff must sufficiently
plead a relevant product market.
Having decided that the per se analysis is inapplicable, the
Court turns its attention to whether the plaintiffs adequately
pled a relevant product market in their Second Amended Complaint.
The plaintiffs put forward two separate relevant product markets
in their Second Amended Complaint. The Court will consider each
2. The market for O & P health care services to HIP's HMO
patients in the eleven Counties
The plaintiffs' First Amended Complaint defined the relevant
product market as "O & P health care services to all HIP's
enrollees." 2d. Am. Compl. ¶ 88. In Continental II, however,
the Court held that this definition was "not an economically
viable product market." The Court's decision was based, in part,
on the failure of the plaintiffs to include in their definition