A California federal judge dismissed San Diego, California-based Daw Industries’ antitrust suit accusing Hanger Orthopedic Group, Austin, Texas, of conspiring to monopolize the market for microprocessor-controlled prosthetic knees, citing a lack of evidence that Hanger specifically intended to destroy competition.
Daw filed its suit against Hanger and Otto Bock U.S. HealthCare, Minneapolis, Minnesota, in San Diego Superior Court in May 2006. Hanger removed the action to federal court in June 2009.
Daw alleged that Hanger and Otto Bock “used, and conspired to use, their market dominance to try to crush a competitor” and in the process, violated California antitrust laws and protections against unfair competition. Hanger and Otto Bock, “according to a common design, plan, agreement, and or/scheme, willfully and maliciously conspired to restrain trade and otherwise to violate the antitrust law and engage in unfair and illegal trade practices.” According to the complaint, Daw specifically alleged that the defendants used their dominant position in the market and the industry to manipulate, among other things, the assignment of L-Codes to Daw’s self-learning knees (SLKs), and the defendants manipulated the price and availability to consumers of microprocessor-controlled prosthetic knees, which created non-competitive situations with the “probability of success of achieving monopoly power in the relevant market.”
Hanger claimed, among other things, that there is no evidence of any conspiracy nor any damage to competition to support Daw’s complaints and that Daws’s monopolization claims are not supported by evidence and do not make economic sense.
On September 30, U.S. District Judge John Houston signed off on a 13-page order granting Hanger’s bid for summary judgment on Daw’s claims.
The summary judgment noted that the court found sufficient evidence that Hanger and Otto Bock sought to conspire against Daw, and that Hanger’s alleged anti-competitive conduct caused injury to Daw. However, because a specific intent to control prices or destroy competition is a necessary element to establish an attempt-to-monopolize claim, and while “the evidence is sufficient to demonstrate Hanger sought to ruin Daw as a competitor, [it] falls short of demonstrating a genuine issue of material fact as to whether defendant specifically intended to control prices or destroy competition.” The ruling explained that a showing of market power is a “threshold consideration” in an antitrust case, so the evidence of competitors entering the market in 2004 and 2005, along with Hanger holding a 25 percent market share by the end of 2006, showed that Hanger lacked market power and thus Daw’s restraint of trade claim against Hanger was not substantiated. Further, Daw’s unfair business practices claim failed because it was premised on the monopolization and restraint-of-trade claims. Daw also failed to “identify the particular purchasers who have refrained from dealing with [them], and specify the transactions of which [they] claim to have been deprived,” which is necessary to prevail on a claim for trade libel, the decision said.
Daw and Otto Bock reached a settlement deal in July 2010 that called for Otto Bock and its insurers to make a lump sum payment to Daw in exchange for Daw dropping its claims against Otto Bock.
This story has been adapted from U.S. District Court, Southern District of California, Case 3:06-cv-01222-JAH-NLS, Document 172, Filed September 30, 2011.
