author: M. SMITH, Circuit Judge:

text:
    George WILLIAMS; Lorenda Overman; Gerald Chiariello, II; Steve Oetegenn; Charles Pencinger; Brian Gilderman; Joseph Ramos; Adam Daniel Jacks; Philip Kirsopp; William Kratz; William Neff; James R. Krapf, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, and Mark D. Cooperman; Gerald L. Washington; Ernest Paul Camilleri, Jr.; Scott Markowitz; Joe Diorio; Thomas Blatt; Matthew J. Bonzella; Joe Garsetti, Plaintiffs, v. YAMAHA MOTOR CO. LTD.; Yamaha Motor Corporation, U.S.A., Defendants-Appellees.
    No. 15-55924
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted February 16, 2017, Pasadena, California
    Filed March 24, 2017

      Van Bunch (argued), Bonnett Fairbourn Friedman & Balint P.C., Phoenix, Arizona; Charles Clinton Hunter and Debra Brewer Hayes, The Hayes Law Firm PC, Houston, Texas; for Plaintiffs-Appellants.
    Theane Evangelis Kapur (argued), Michael Holocek, and Timothy W. Loose, Gibson Dunn <& Crutcher LLP, Los Ange-les, California, for Defendant-Appellee.
    Before: MILAN D. SMITH, JR. and JOHN B. OWENS, Circuit Judges, and ALVIN K. HELLERSTEIN, District Judge.

      The Honorable Alvin K. Hellerstein, United States Senior District Judge for the Southern District of New York, sitting by designation.

   OPINION

M. SMITH, Circuit Judge:

This appeal challenges two separate rulings by the district court: the dismissal of Defendant-Appellee Yamaha Motor Co. Ltd. (YMC) for lack of personal jurisdiction, and the dismissal of Plaintiffs-Appellants’ claims against Defendant-Appellee Yamaha Motor Corporation, U.S.A. (YMUS) pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons set forth in this opinion, we affirm the district court on both accounts.

FACTUAL AND PROCEDURAL BACKGROUND

Appellants are a group of twenty named plaintiffs who purchased “first-generation ... four stroke outboard motors” (the Class Motors) manufactured by YMC from 2000 to 2004. Appellants brought suit against YMC, which designed and manufactured the Class Motors in Japan, and YMC’s wholly-owned subsidiary, YMUS, which imported and marketed them in California. Appellants allege that the Class Motors contained an inherent design defect that caused severe, premature corrosion in the motors’ dry exhaust system. Appellants assert that this defect caused the motors to fail after between 500 to 700 hours of use, even when properly serviced and maintained, when absent this defect an outboard motor would have an expected useful life of at least 2000 hours. Although the alleged defect manifests early in an engine’s expected lifespan, the average recreational boater only uses her engine an average of 100 hours per year. Accordingly, the defect typically will not manifest until the three-year warranty period has expired. Appellants assert on appeal that Appellees knew of the dry exhaust defect prior to the sales of the Class Motors to Appellants, and that the defect poses an unreasonable safety hazard.

Appellant Williams filed the initial complaint on behalf of himself and all others similarly situated on July 15, 2013, naming YMC and YMUS as defendants. The complaint asserted claims for violations of federal and state warranty law; California’s Consumer Legal Remedies Act, California Civil Code § 1750; and California’s Unfair Competition Law, California Business and Professions Code § 17200.

Appellees filed a motion to dismiss, in response to which Appellants filed an amended complaint. YMUS then filed a second motion to dismiss for failure to state a claim, and YMC filed a motion to dismiss for lack of personal jurisdiction. While these motions were pending, the district court consolidated this matter with two similar cases and vacated all pending motions, after which Appellants filed a consolidated class action complaint. The consolidated complaint contained, in addition to the claims asserted in the initial complaint, ten new statutory claims from five different states, as well as claims for negligence and unjust enrichment.

YMUS subsequently filed a third motion to dismiss for failure to state a claim, and YMC filed a second motion to dismiss for lack of personal jurisdiction. On August 19, 2014, the district court granted in part YMUS’s motion, dismissing Appellants’ warranty and consumer fraud claims, and granting YMC’s motion in its entirety. Appellants then filed their first amended complaint, to which YMUS responded with a fourth motion to dismiss. The district court granted YMUS’s motion entirely, but granted Appellants leave to replead their consumer fraud claims.

Finally, on February 2, 2015, Appellants filed their second amended complaint (SAC), to which YMUS responded with its fifth motion to dismiss for failure to state a claim. On April 29, 2015, the district court granted YMUS’s motion and dismissed Appellants’ only remaining claims with prejudice. Appellants now appeal the district court’s grant of YMC’s motion to dismiss for lack of personal jurisdiction, and its grant of YMUS’s fifth motion to dismiss Appellants’ consumer fraud claims.

JURISDICTION AND STANDARD OF REVIEW

We exercise jurisdiction over appeals from final decisions of the district court pursuant to 28 U.S.C. § 1291. We review de novo a district court’s dismissal of a party for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011). We similarly conduct de novo review of “a district court’s dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6).” Walker v. Beard, 789 F.3d 1125, 1131 (9th Cir. 2015).

ANALYSIS

I. The District Court Lacked General Jurisdiction Over YMC

Federal courts apply state law to determine the bounds of their jurisdiction over a party. See Fed. R. Civ. P. 4(k)(1)(A). California’s long-arm statute permits the exercise of jurisdiction to the full extent that such exercise comports with due process. Cal. Code Civ. P. § 410.10.

Under Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011), courts have general jurisdiction over a foreign corporation only if the corporation’s connections to the forum state “are so ‘continuous and systematic’ as to render [it] essentially at home in the forum State.” Id. at 919, 131 S.Ct. 2846. A corporation’s “continuous activity of some sorts within a state is [generally] not enough to support the demand that the corporation be amenable to suits unrelated to that activity.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 318, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Rather, in the paradigmatic circumstance for exercising general jurisdiction, the corporate defendant is incorporated or has its principal place of business in the forum state. Goodyear, 564 U.S. at 924, 131 S.Ct. 2846.

In Daimler AG v. Bauman, - U.S. -, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014), the Supreme Court considered for the first time “whether a foreign corporation may be subjected to a court’s general jurisdiction based on the contacts of its instate subsidiary.” Id. at 759. The plaintiffs sought to sue Daimler, a German corporation, in California on the basis that Daimler’s subsidiary’s contacts could be attributed to Daimler under an agency theory, thereby establishing Daimler’s “continuous and systematic” presence within California. Id. at 752. Daimler’s subsidiary, MBU-SA, served as Daimler’s exclusive U.S. importer and distributor and had multiple California facilities. Id. We found general jurisdiction over Daimler under an agency theory, applying a test that asked whether MBUSA’s services were “sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation’s own officials would undertake to perform substantially similar services.” Bauman v. DaimlerChrysler Corp., 644 F.3d 909, 921 (9th Cir. 2011) (quoting Doe v. Unocal Corp., 248 F.3d 915, 928 (9th Cir. 2001) (emphasis omitted)).

The Supreme Court reversed our finding of general jurisdiction, emphasizing that the test for general jurisdiction asks whether a corporation is essentially “at home” in the forum state. Daimler, 134 S.Ct. at 754, 757. The Supreme Court assumed that MBUSA could be considered “at home” in California, and that its instate contacts could be attributed to Daimler, but it rejected a theory that would permit “the exercise of general jurisdiction in every State in which a corporation ‘engages in a substantial, continuous, and systematic course of business.’ ” Id. at 760-61. In so doing, the Court noted that while general jurisdiction is not strictly limited to a corporation’s place of incorporation or principal place of business, those exemplars illustrate the need for predictability in jurisdiction and “afford plaintiffs recourse to at least one clear and certain forum in which a corporate defendant may be sued on any and all claims.” Id. at 760.

Subsequently, in Ranza v. Nike, Inc., 793 F.3d 1059 (9th Cir. 2015), we considered whether an in-state corporation’s contacts could be attributed to its foreign subsidiary to establish general jurisdiction over the subsidiary. See id. at 1065. We stated that while Daimler invalidated our previous “agency” test, it “left intact” the alternative “alter ego test for ‘imputed’ general jurisdiction.” Id. at 1071. We made clear, however, that the parent-subsidiary relationship does not on its own establish two entities as “alter egos,” and thus does not indicate that general jurisdiction over one gives rise to general jurisdiction over the other. Id. at 1070 (citing Dole Food Co. v. Patrickson, 538 U.S. 468, 474, 123 S.Ct. 1655, 155 L.Ed.2d 643 (2003); United States v. Bestfoods, 524 U.S. 51, 61, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998)). Rather, we held that “the alter ego test may be used to extend personal jurisdiction to a foreign parent or subsidiary when, in actuality, the foreign entity is not really separate from its domestic affiliate.” Id. at 1073 (emphasis omitted). To satisfy this test, “a plaintiff must make out a prima facie case (1) that there is such unity of interest and ownership that the separate personalities of the two entities no longer exist and (2) that failure to disregard their separate identities would result in fraud or injustice.” Id. (quotation marks and alterations omitted).

We first consider whether YMC itself has sufficient contacts with California for the exercise of general jurisdiction. We conclude that it does not.

YMC is incorporated and has its principal place of business in Japan, and has no offices or employees in California. Considering YMC’s California sales, “the general jurisdiction inquiry examines a corporation’s activities worldwide — not just the extent of its contacts in the forum state — to determine where it can be rightly considered at home.” Ranza, 793 F.3d at 1071 (citing Daimler, 134 S.Ct. at 762 n.20). Appellants’ own evidence indicates that YMC has 109 consolidated subsidiaries located in at least 26 different countries and spanning five continents. It further shows that in 2012, net sales in North America — a figure that includes sales in all 50 states and Canada, not merely in California — accounted for approximately 17% of YMC’s total net sales. While the California market may be important for YMC, Appellants failed to submit evidence to support a finding that YMC is “at home” in California.

Nevertheless, Appellants argue that YMUS’s California contacts may be imputed to YMC for the purpose of establishing jurisdiction. Appellants fail, however, to plead facts sufficient to make out a prima facie case that YMC and YMUS are “alter egos.” Appellants’ complaint makes almost no factual allegations regarding the nature of the parent-subsidiary relationship, and the evidence Appellants submitted in opposition to YMC’s motion to dismiss did not provide any additional clarity.

Moreover, even assuming that YMUS’s contacts could be imputed to YMC, this does not, on its own, suffice to establish general jurisdiction. In Daimler, the Court assumed that the subsidiary’s in-state contacts could be imputed to the foreign parent, but nevertheless found the exercise of general jurisdiction inappropriate. 134 S.Ct. at 760.

In short, the district court correctly found that it lacked general jurisdiction over YMC.

II. The District Court Lacked Specific Jurisdiction Over YMC

The exercise of jurisdiction over a non-resident defendant requires that the defendant “have certain minimum contacts ... such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int’l Shoe, 326 U.S. at 316, 66 S.Ct. 154 (internal quotation marks omitted). In order for a court to have specific jurisdiction over a defendant, “the defendant’s suit-related conduct must create a substantial connection with the forum State.”- Walden v. Fiore, - U.S. -, 134 S.Ct. 1115, 1121, 188 L.Ed.2d 12 (2014). The relationship between the defendant and the forum state “must arise out of contacts that the ‘defendant [itself]’ creates with the forum State.” Id. at 1122 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)). Additionally, the requisite “minimum contacts” must be “with the forum State itself, not ... with persons who reside there.” Id.

We will exercise specific jurisdiction over a non-resident defendant only when three requirements are satisfied: (1) the defendant either “purposefully directfs]” its activities or “purposefully avails” itself of the benefits afforded by the forum’s laws; (2) the claim “arises out of or relates to the defendant’s forum-related activities; and (3) the exercise of jurisdiction [] comport[s] with fair play and substantial justice, i.e., it [is] reasonable.” Dole Food Co. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002).

Addressing the first prong of the specific jurisdiction analysis, Appellants do not allege any actions that YMC “purposefully directed” at California. Appellees submitted unrebutted evidence in support of their Rule 12(b)(2) motion that YMC does not conduct any activities within the state of California, nor does it target California via marketing or advertising. The only connection Appellants identify between YMC and California is via YMUS. Accordingly, -we must ask whether YMUS’s in-state connections- may be attributed to YMC under an agency theory for the purpose of establishing specific jurisdiction.

While Daimler voided our agency approach for imputing contacts for the purpose of general jurisdiction, it left open the question of whether an agency relationship might justify the exercise of specific jurisdiction. Daimler, 134 S.Ct. at 759 n.13 (“Agency relationships, we have recognized, may be relevant to the existence of specific jurisdiction”). Appellees point to Walden’s, emphasis on the necessity of a relationship between the defendant itself and the -forum state to suggest that YMUS’s relationship to California cannot support specific jurisdiction over YMC. But Walden did not address an agency theory of jurisdiction. Rather, that case dealt with the scenario in which the connection between the defendant and the forum was provided only by the plaintiff, and could aptly be described as “random, fortuitous, or attenuated.” 134 S.Ct. at 1123 (citation omitted). This contrasts sharply with the circumstance at hand, in which the relationship between the in-state entity and the defendant is that of a parent and a subsidiary purportedly acting as that parent’s agent. If an agency theory of imputable contacts survives Daimler in the context of specific jurisdiction, then Walden’s directive that contacts must be directly between the defendant and the forum is inapposite, because imputing an instate entity’s contacts to the defendant would necessarily establish that direct connection.

Notwithstanding Daimler's express reservation on the question of agency theory’s application to specific jurisdiction, more than one district court within our circuit has expressed some uncertainty on that point post -Daimler, as “the rationale set forth in Daimler ... would seem to undermine application of [our agency test] even in specific jurisdiction cases.” Corcoran v. CVS Health Corp., 169 F.Supp.3d 970, 982 (N.D. Cal. 2016) (quoting Los Gatos Mercantile, Inc. v. E.I. DuPont De Nemours & Co., No. 13-cv-01180-BLF, 2015 WL 4755335, at *5 (N.D. Cal. Aug. 11, 2015)).

As noted supra, our agency analysis asks whether the subsidiary “performs services that are sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation’s own officials would undertake to perform substantially similar services.” Unocal, 248 F.3d at 928 (internal quotation marks omitted). The Supreme Court found in Daimler that, “[f]ormulated this way, the inquiry into importance stacks the deck, for it will always yield a pro-jurisdiction answer: Anything a corporation does through an independent contractor, subsidiary, or distributor is presumably something that the corporation would do ‘by other means’ if the independent contractor, subsidiary, or distributor did not exist.” 134 S.Ct. at 759 (internal quotation marks omitted). This criticism applies no less in the context of specific jurisdiction than in that of general jurisdiction. Accordingly, Daimler's reasoning is clearly irreconcilable with the agency test set forth in Unocal. See Miller v. Gammie, 335 F.3d 889, 892-93 (9th Cir. 2003) (holding that where a prior decision in our circuit “is clearly irreconcilable with the reasoning or theory of intervening higher authority, a three-judge panel should consider itself bound by the later and controlling authority, and should reject the prior circuit opinion as having been effectively overruled.”). The Daimler Court’s express recognition of the potential viability of agency relationships for establishing specific jurisdiction does not alter our holding. While the Court reserved judgment on the viability of agency theory as a general concept, it did not suggest that our particular formulation for finding an agency relationship should survive in the context of specific jurisdiction. To the contrary, the Daimler Court’s criticism of the Unocal standard found fault with the standard’s own internal logic, and therefore applies with equal force regardless of whether the standard is used to establish general or specific jurisdiction.

Assuming, however, that some standard of agency continues to be “relevant to the existence of specific jurisdiction,” Daimler, 134 S.Ct. at 759 n.13, Appellants fail to make out a prima facie case for any such agency relationship. Fundamental tenets of agency theory require that an agent “act on the principal’s behalf and subject to the principal’s control.” Restatement (Third) Of Agency § 1.01 (2006); see also Batzel v. Smith, 333 F.3d 1018, 1035 (9th Cir. 2003) (“Agency requires that the principal maintain control over the agent’s actions”). Accordingly, under any standard for finding an agency relationship, the parent company must have the right to substantially control its subsidiary’s activities. See, e.g., Unocal, 248 F.3d at 926; Murphy v. DirecTV, Inc., 724 F.3d 1218, 1232 (9th Cir. 2013). Appellants neither allege nor otherwise show that YMC had the right to control YMUS’s activities in any manner at all. Consequently, even assuming the validity of some formulation of agency analysis such that a subsidiary’s contacts could be attributed to its parent, Appellants failed to establish specific jurisdiction over YMC.

III. Plaintiffs Failed to Plead a Prima Facie Case of Consumer Fraud

Federal Rule of Civil Procedure 8(a)(2) requires only that a plaintiff provide “a short and plain statement of the claim showing that the pleader is entitled to relief,” such that the defendant receives “fair notice” of the claims against it. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citation omitted). A sufficiently pleaded cause of action “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. Rather, “[fjactual allegations must be enough to raise a right to relief above the speculative level.” Id.; see also Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The requirement that a plaintiff provide “plausible grounds” for her claim does not, however, “impose a probability requirement at the pleading stage.” Twombly, 550 U.S. at 556, 127 S.Ct. 1955. On the contrary, “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.” Id. (internal quotation marks omitted).

Appellants’ SAC asserts claims under a number of state consumer fraud statutes, each of which requires either an affirmative misrepresentation or an omission of material fact. Appellants allege no affirmative misrepresentation. Rather, they rely entirely on YMUS’s failure to notify consumers of the alleged dry exhaust defect. To state a claim for failing to disclose a defect, a party must allege “(1) the existence of a design defect; (2) the existence of an unreasonable safety hazard; (3) a causal connection between the alleged defect and the alleged safety hazard; and that the manufacturer knew of the defect at the time a sale was made.” Apodaca v. Whirlpool Corp., No. 13-00725 JVS (ANx), 2013 WL 6477821, at *9 (C.D. Cal. Nov. 8, 2013); see also Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1142-43 (9th Cir. 2012) (holding that where a defendant has not made an affirmative misrepresentation, a plaintiff must allege the existence of an unreasonable safety hazard and a causal connection between the defect and the hazard).

Contrary to the district court, we find that Appellants adequately pleaded Appellees’ presale knowledge of the alleged dry exhaust defect. However, we also find that Appellants failed to plausibly plead that the alleged defect constituted an unreasonable safety hazard.' We therefore affirm the district court’s dismissal of Appellants’ consumer fraud claims pursuant to Rule 12(b)(6).

A. Appellants Adequately Pleaded Appellees’ Presale Knowledge of the Alleged Dry Exhaust Defect

The SAC alleges that YMUS began receiving consumer complaints regarding dry exhaust corrosion as early as 2001. It states that “the complaints from owners regarding the dry exhaust corrosion in the First Generation Outboards were so frequent that individual Customer Relations supervisors personally handled as many as 40 or 50 different consumer complaints, or more, regarding the issue,” which was an unusually high number of complaints for Yamaha to receive regarding corrosion “this soon in the life of the engines.” The SAC goes on to explain that the high volume of calls led to the creation of “a marine-only customer relations service department in Kennesaw, Georgia, with approximately two dozen customer service employees to assist in handling the complaints,” and identifies Lindsey Foster as the Manager of Customer Relations who reviewed the complaints handled by the Kennesaw facility. Finally, the SAC explains how consumer complaints were recorded and transmitted by the Kennesaw facility so as to make YMUS management aware of the number and substance of the complaints, and states that Ms. Foster specifically reviewed the submitted complaints through YMUS’s private Customer Relations Management (CRM) database.

The district court found that the alleged consumer complaints did not support a finding of YMUS’s presale knowledge, and agreed with YMUS’s characterization of Appellants’ allegations of 2001 customer complaints as “inherently inconsistent with [their] overarching theory of the defect” because Appellants had “consistently alleged that the defect does not manifest until 500-700 hours of use, ‘which for a typical consumer using the boat 100 hours a year would take five to seven years to achieve.’ ” Williams v. Yamaha Motor Corp., U.S.A., 106 F.Supp.3d 1101, 1114 (C.D. Cal. 2015) (emphasis added by district court). The district court ignored, however, Appellants’ allegation that “the corrosion problem (which typically took 500 to 700 engine hours to manifest) had surfaced first primarily among heavy users who used their engines much more than typical recreational boat owners’ usage.” It was not “inherently inconsistent” to allege that a subset of “heavy users” encountered the defect much sooner than the typical user otherwise would.

The district court also cited multiple cases, from within this circuit and elsewhere, to illustrate the disfavored nature of customer complaints as a basis for establishing a party’s presale knowledge. These cases are, however, distinguishable. The district court particularly cited Wilson v. Hewlett-Packard Co., 668 F.3d 1136 (9th Cir. 2012), for its observation that “[s]ome courts have expressed doubt that customer complaints in and of themselves adequately support an inference that a manufacturer was aware of a defect,” because “complaints posted on a manufacturer’s webpage ‘merely establish the fact that some consumers were complaining.’ ” Id. at 1147 (quoting Berenblat v. Apple, Inc., Nos. 08-4969 JF (PVT), 09-1649 JF (PVT), 2010 WL 1460297, at *9 (N.D. Cal. Apr. 9, 2010)). The facts of Wilson, however, differ significantly from those alleged here: Wilson concerned fourteen complaints, and the plaintiffs did not identify “where or how the complaints were made” and did not provide dates for twelve of the complaints. Id. at 1148. We found that absent dates to indicate that the complaints were made pre-sale, and some evidence that defendant actually received the complaints, it would be speculative at best to find that the defendant knew of the alleged defect. See id. at 1147. Here, by contrast, Appellants gave at least approximate timing for the complaints, and explained in detail how those complaints were lodged, how YMUS responded, and the mechanism through which information travelled from consumers to YMUS management.

Wilson did not hold that consumer complaints may never support an allegation of presale knowledge. On the contrary, it cited to — and distinguished—Cirulli v. Hyundai Motor Co., No. SACV 08-0854 AG (MLGx), 2009 WL 5788762 (C.D. Cal. June 12, 2009), in which the plaintiff successfully alleged presale knowledge of a defect largely through its allegation that,

Since 1999, [Defendant] has ... constantly tracked the National Highway Traffic Safety Administration ... database to track reports of defective Sonata sub-frames. From this source, [Defendant] knew that its 1999-2004 Sonatas were experiencing unusually high levels of sub-frame deterioration, steering control arm separation, steering loss, and highway accidents.

Wilson, 668 F.3d at 1146 (quoting Cirulli, 2009 WL 5788762, at. *4). The facts alleged by the SAC are remarkably similar to those alleged in Cirulli, and provide an even stronger basis for finding presale knowledge because rather than tracking an outside database, YMUS is alleged to have set up its own proprietary complaint-tracking system to account for a similarly “unusually high level[ ]” of corrosion complaints. Id.

Importantly, Appellees have filed a motion to dismiss, not a motion for summary judgment. Discovery has not yet occurred. The district court faulted Appellants for failing to provide specific names and dates for consumer complaints, but in doing so it ignored the context of the particular consumer complaint system alleged by Appellants. Appellants specifically allege a private internal complaint system, and describe the manner in which it functions and the individual supervisor responsible for its management. In other words, Appellants do not know names and dates precisely because these complaints are not the sort of public internet posts that courts have previously found insufficient for providing notice to a company. Pre-discovery, when the court must take Appellants’ factual allegations as true, Appellants’ description of a separate consumer response system dedicated to handling an unusually high volume of complaints specific to premature corrosion in F-Series motors supports a claim of presale knowledge.

B. Appellants Failed to Plead the Existence of an Unreasonable Safety Hazard

Appellants proffer two theories of unreasonable hazard resulting from the dry exhaust defect: (1) the potential for onboard fires, and (2) the risk of accident and associated injuries due to loss of steering power. However, Appellants’ claim that the dry exhaust defect poses an unreasonable safety hazard fails due to Appellants’ own characterization of the defect. According to Appellants’ allegations, the purported defect merely accelerates the normal and expected process of corrosion in outboard motors. In other words, Appellants do not assert that the corrosion would not or should not occur absent the defect, they merely contend that the defect causes corrosion to occur earlier in a motor’s lifetime than a consumer would otherwise expect. Were we to conclude that Appellants’ allegations of premature but otherwise normal wear and tear plausibly establish an unreasonable safety hazard, we would effectively open the door to claims that all of Yamaha’s outboard motors eventually pose an unreasonable safety hazard. The factual allegations here do not support either conclusion.

Additionally, the alleged safety risk is speculative and unsupported by factual allegations. Where a plaintiff alleges a sufficiently close nexus between the claimed defect and the alleged safety issue, the injury risk need not have come to fruition. See Apodaca, 2013 WL 6477821, at *9; Ehrlich v. BMW of. N. Am., LLC, 801 F.Supp.2d 908, 918 (C.D. Cal. 2010). Nevertheless, a party’s allegations of an unreasonable safety hazard must describe more than merely “conjectural and hypothetical” injuries. Birdsong v. Apple, Inc., 590 F.3d 955, 961 (9th Cir. 2009). Here, the SAC lacks any allegations indicating that any customer, much less any plaintiff, experienced such a fire — a notable omission if the alleged unreasonable safety hazard arises in all Yamaha outboard motors sooner or later.

We further note that the standard is one of an “unreasonable” safety risk. The loss of steering power, while plausibly hazardous, is a potential boating condition of which Yamaha expressly warns consumers. Moreover, the nature of the alleged defect as being primarily one of accelerated timing rather than the manifestation of a wholly abnormal condition weighs against its characterization as “unreasonable.”

Finally, the fact that the alleged defect concerns premature, but usually post-warranty, onset of a natural condition raises concerns about the use of consumer fraud statutes to impermissibly extend a product’s warranty period. See Wilson, 668 F.3d at 1141-42 (acknowledging that unless liability for failure to disclose a defect is limited to unreasonable safety risks, “the failure of a product to last forever would become a ‘defect,’ a manufacturer would no longer be able to issue limited warranties, and product defect litigation would become as widespread as manufacturing itself’ (internal quotation marks and alteration omitted)).

CONCLUSION

The district court correctly found that it lacked either general or specific jurisdiction over YMC. Additionally, Appellants failed to state a claim for state-law consumer ¡fraud, as they failed to adequately plead that the alleged dry exhaust defect constituted an unreasonable safety hazard. We therefore AFFIRM the district court’s dismissal of YMC as a party, and AFFIRM its dismissal of Appellants’ claims against YMUS pursuant to Rule 12(b)(6).

      . This is particularly so in light of the Supreme Court's rejection of the "stream of commerce” theory for general jurisdiction. Goodyear, 564 U.S. at 927-29, 131 S.Ct. 2846.

      . Appellants cite out-of-circuit district court cases, Barriere v. Juluca, No. 12-23510-CIV, 2014 WL 652831 (S.D. Fla. Feb. 19, 2014), and Associated Energy Group, LLC v. Air Cargo Germany GMBH, 24 F.Supp.3d 602, 607 (S.D. Tex. 2014), to argue that the district court had general jurisdiction over YMC due to (1) YMUS’s status as a co-defendant in this case, (2) the allegation of in-state harm, and (3) YMC’s status as a foreign corporation. These arguments lack merit. Daimler s holding did not rest on whether the in-state entity was a party, and the location of the alleged harm has no role in the general jurisdiction analysis. Regarding YMC’s status as a foreign corporation, Daimler and Ronza both also dealt with foreign corporations with no United States principal place of business.
      Appellants further argue that YMUS’s contacts with California render this case distinguishable from Daimler, because the subsidiary in Daimler was not a California corporation. Again, this is a distinction without a difference: The Supreme Court expressly assumed that the subsidiary in that matter was properly subject to general jurisdiction in California. Daimler, 134 S.Ct. at 760. Finally, Appellants point to numerous other lawsuits YMC has litigated in the United States. See Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S. 199, 116 S.Ct. 619, 133 L.Ed.2d 578 (1996); Rissew v. Yamaha Motor Co., 129 A.D.2d 94, 515 N.Y.S.2d 352 (1987); Stephens v. Yamaha Motor Co., 627 P.2d 439 (Okla. 1981). But none of these cases found that California courts may exercise general jurisdiction over YMC. Accordingly, they have no relevance to the jurisdictional inquiry in this matter.

      . Appellants’ citation to Sinatra v. National Enquirer, Inc., 854 F.2d 1191, 1197 (9th Cir. 1988), for the proposition that “a nonresident defendant may purposefully direct its conduct toward a forum state by marketing the product through a distributor who has agreed to act as the sales agent in the forum State” is unavailing. The Sinatra court specifically found that the plaintiff actively directed the advertising and sales efforts of its in-state agent, thereby justifying the exercise of specific jurisdiction. Id. It contrasted this conduct with that found insufficient to support specific jurisdiction in Asahi Metal Industry Co. v. Superior Court of Solano County, 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987). The Asahi defendant knew that its products would be sold and used in California, and benefited economically from those sales, but “[t]he Court relied on the absence of any business solicitation or promotional conduct to determine that ... the exertion of personal jurisdiction was unreasonable.” Sinatra, 854 F.2d at 1197 (citing Asahi, 107 S.Ct. at 1033). The facts of the present matter bear far more similarity to those of Asahi than to those of Sinatra.

      . As discussed supra, Appellants have failed to make a prima facie showing that YMC and YMUS are alter egos. YMUS’s contacts can thus only be attributed to YMC if we find that the agency theory of imputed, contacts applies.

      . Appellants do allege that "Defendants ... were the agents or employees of each other and were acting at all times within the course and scope of such agency and employment ... and are legally responsible because of their relationship with their co-Defendants.” This is, however, a conclusory legal statement unsupported by any factual assertion regarding YMC's control over YMUS (or regarding any other aspect of the parent-subsidiary relationship), and we accordingly do not credit it. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

      . Appellants have asserted claims under the California Consumers Legal Remedies Act, Cal. Civ. Code §§ 1750, et seq.; California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200, et seq.; Massachusetts Consumer Protection Act, Mass. Gen. L., Ch. 93A, § 2; N.Y. Gen. Bus. L. § 349; North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat.§§ 75-1.1, et seq.; Washington Consumer Protection Act, Wash. Rev. Code §§ 19.86.010, et seq.; Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. §§ 501.201, et seq.; Texas Deceptive Trade Practices Act, Tex. Bus. & Com. Code §§ 17.12, et seq.; Rhode Island Unfair Trade Practice and Consumer Protection Act, R.G.G.L. §§ 6-13.1.1, et seq.; Virginia Consumer Protection Act, Va. Code. Ann. §§ 59.1-200, et seq.; Maryland Consumer Protection Act, Md. Code, Com. L. §§ 13-301, et seq.; New Jersey Consumer Fraud Act, N.J. Stat. §§ 56:8-1, et seq.; and Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. §§ 42-110a, et seq.

      . At oral argument, counsel for Appellees emphasized that while YMUS may have known of the dry exhaust corrosion, it did not know of an unreasonable safety hazard. This argument elides two separate prongs of the test for consumer fraud: presale knowledge of a defect,' and the status of that defect as an unreasonable safety hazard. See Apodaca, 2013 WL 6477821, at *9. In other words, counsel argued that the defect did not pose the safety risk necessary for a finding of consumer fraud. As discussed infra, we agree. That does not negate, however, YMUS's alleged presale knowledge of the premature corrosion itself.

      . The district court cases cited by the court in this matter are similarly distinguishable from the case at hand. Each of those cases dealt with an insufficiently small number of complaints, complaints posted in forums unrelated to the defendant, complaints' made after the sale dates, or some combination of these circumstances. See, e.g., Fisher v. Honda North Am., Inc., No. LA CV13-09285 JAK (PLAx), 2014 WL 2808188, at *5 (C.D. Cal. June 12, 2014) (finding a single consumer complaint predating the sale date did not plausibly suggest that defendant was on notice of a defect); Grodzitsky v. Am. Honda Motor Co., No. 2:12-cv-1142-SVW-PLA, 2013 WL 690822, at *7 (C.D. Cal. Feb. 19, 2013) (finding insufficient ten complaints submitted after sale to plaintiffs or posted to websites unrelated to defendant); Baba v. Hewlett-Packard Co., No. C 09-05946 RS, 2011 WL 317650, at *3 (N.D. Cal. Jan. 28, 2011) ("Awareness of a few customer complaints ... does not estáblish knowledge of an alleged defect.”); Oestriecher v. Alienware Corp., 544 F.Supp.2d 964, 974 n.9 (N.D. Cal. 2008) (“Random anecdotal examples of disgruntled customers posting their views on websites at an unknown time is not enough to impute knowledge upon defendants.”).
      Here, by contrast, Appellants allege that individual supervisors dealt with “40 or 50” consumer complaints, an "unusual volume,” as early as 2001. While the numbers "40 or 50” lack context from which the court could determine whether or not that is truly a sizable volume, YMUS's alleged response to those complaints — the establishment of a dedicated customer care center' — suggests that YMUS itself saw this number as significant and beyond the norm. Moreover, unlike cases in which complaints were posted to online forums, here Appellants allege not only that complaints were made directly with YMUS, but that YMUS affirmatively responded to this unusual volume of complaints by instituting a dedicated customer care center.


source: Caselaw Access Project

author: KELLY, Circuit Judge.

license: Public Domain

text:
    SUTURE EXPRESS, INC., Plaintiff-Appellant, v. 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.
    No. 16-3065
    United States Court of Appeals, Tenth Circuit.
    Filed March 14, 2017

      Sanford I. Weisburst (Stephen R. Neu-wirth, David M. Cooper, and Yelena Kona-nova 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 Del-phey 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 Houwel-ingen 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.

Background

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 competing as another broadline distributor, however, Suture Express specialized in supplying only one category of med-surg: sutures. In 2002, it also began distributing endome-chanical 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 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 bút 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 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. Med-line, 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. 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 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.

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 customer did not also buy its suture-endo through O&M. 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-eñdo 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; 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 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, 112 S.Ct. 2072).

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 second product (the “tied” product). See Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28, 31, 126 S.Ct. 1281, 164 L.Ed.2d 26 (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 procom-petitive 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, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984), abrogated on other grounds by Ill. Tool Works, 547 U.S. at 31, 126 S.Ct. 1281.

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, 104 S.Ct. 1551. 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 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, 104 S.Ct. 1551.

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, 104 S.Ct. 1551. 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, 104 S.Ct. 1551; see also Fortner Enters., Inc. v. U.S. Steel Corp. (Fortner I), 394 U.S. 495, 499-500, 89 S.Ct. 1252, 22 L.Ed.2d 495 (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 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, 104 S.Ct. 1551.

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, 104 S.Ct. 1551 (O’Connor, J., concurring). . One difference, however, is that the rale 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 rale 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 rale-of-reason 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 rale 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, but ruled for Cardinal and O&M on the third — that Suture Express could not prove that Cardinal or O&M individually possessed sufficient power in the other-med-surg market that would allow either óf 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, 126 S.Ct. 1281. 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, 104 S.Ct. 1551, and often takes the form of a seller’s ability “to raise price and restrict output,” Eastman Kodak, 504 U.S. at 464, 112 S.Ct. 2072 (quoting Fortner I, 394 U.S. at 503, 89 S.Ct. 1252). 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, 89 S.Ct. 1252.

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 forcing consumers to take the tied product just to get the tying one. See Hyde, 466 U.S. at 12, 104 S.Ct. 1551. 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, 106 S.Ct. 2009, 90 L.Ed.2d 445 (1986) (explaining in Section 5 Federal Trade Commission Act case that “[s]inee 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 presents such a situation.

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; 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, 112 S.Ct. 2072. 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 offer direct evidence that Kodak did so.” Id.

Following Eastman Kodak, the Ninth Circuit considered evidence of tied-márket 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, 112 S.Ct. 2072 (Kodak parts available almost “exclusively” from Kodak); PeaceHealth, 515 F.3d at 915 (“PeaceHealth was the only provider of tertiary 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, 97 S.Ct. 861, 51 L.Ed.2d 80 (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, 104 S.Ct. 1551, 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? See Suture Express, 2016 WL 1377342, at *17. We think it 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 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, 104 S.Ct. 1551, courts have used that benchmark as a floor for plaintiffs seeking to prove a per se 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, 104 S.Ct. 1551.

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 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, 97 S.Ct. 861. 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 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 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 Aree-da & 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 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. 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 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.

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, 113 S.Ct. 884, 122 L.Ed.2d 247 (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 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 was originally enacted in 1897, Kansas courts have recognized that it “remains largely undeveloped.” O’Brien v. Leegin Creative Leather Prods., Inc., 294 Kan. 318, 277 P.3d 1062, 1068 (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 plaintiffs 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.

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 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.

      . 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 non-conclusory 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, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992)).

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

      . 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.

      . 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, 89 S.Ct. 1252.

      . 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) ("[SJubstantial' 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, 126 S.Ct. 1281. 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, 104 S.Ct 1551; see id. at 29, 104 S.Ct. 1551.

      . 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, 112 S.Ct. 2072 (Scalia, J., dissenting) (citation omitted).

      . Cardinal and O&M also argue that Peace-Health 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 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.

      . 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.

      . 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, 89 S.Ct. 1252). 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 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, 89 S.Ct. 1252.