Cascade Health Solutions v. PeaceHealth , 515 F.3d 883 ( 2008 )


Menu:
  •                   FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    CASCADE HEALTH SOLUTIONS fka           
    MCKENZIE-WILLAMETTE HOSPITAL,
    an Oregon nonprofit corporation,
    Plaintiff-Appellant,
    v.
    PEACEHEALTH, a Washington State
    nonprofit corporation,
    Defendant-Appellee,           No. 05-35627
    and                           D.C. No.
    PACIFICSOURCE HEALTH PLANS,                CV-02-06032-ALH
    Defendant,
    REGENCE BLUECROSS
    BLUESHIELD OF OREGON;
    PROVIDENCE HEALTH PLAN;
    MCKENZIE-WILLAMETTE REGIONAL
    MEDICAL CENTER ASSOCIATES, LLC,
    Defendant-Intervenors.
    
    1569
    1570           CASCADE HEALTH v. PEACEHEALTH
    MCKENZIE-WILLAMETTE HOSPITAL,           
    Plaintiff-Appellee,
    v.
    PEACEHEALTH, a Washington State
    nonprofit corporation,
    Defendant-Appellant,
    and                          No. 05-35640
    PACIFICSOURCE HEALTH PLANS,                   D.C. No.
    Defendant,        CV-02-06032-HA
    REGENCE BLUECROSS
    BLUESHIELD OF OREGON;
    PROVIDENCE HEALTH PLAN;
    MCKENZIE-WILLAMETTE REGIONAL
    MEDICAL CENTER ASSOCIATES, LLC,
    Defendant-Intervenors.
    
    MCKENZIE-WILLAMETTE HOSPITAL,           
    Plaintiff-Appellee,
    No. 05-36153
    v.
          D.C. No.
    PEACEHEALTH, a Washington State             CV-02-06032-HA
    nonprofit corporation,
    Defendant-Appellant.
    
    CASCADE HEALTH v. PEACEHEALTH           1571
    MCKENZIE-WILLAMETTE HOSPITAL,             No. 05-36202
    an Oregon nonprofit corporation,             D.C. No.
    Plaintiff-Appellant,       CV-02-06032-HA
    v.
           ORDER
    PEACEHEALTH,                               AMENDING
    Defendant-Appellee.          OPINION AND
    AMENDED
          OPINION
    Appeal from the United States District Court
    for the District of Oregon
    Ancer L. Haggerty, District Judge, Presiding
    Argued and Submitted
    March 6, 2007—Portland, Oregon
    Filed September 4, 2007
    Amended February 1, 2008
    Before: Ronald M. Gould, Richard A. Paez, and
    Johnnie B. Rawlinson, Circuit Judges.
    Opinion by Judge Gould
    CASCADE HEALTH v. PEACEHEALTH            1575
    COUNSEL
    M. Laurence Popofsky, Heather N. Leal, and Adam J. Grom-
    fin, Heller Ehrman LLP, San Francisco, California, James H.
    Sneed and Linda M. Holleran, McDermott, Will & Emery,
    Washington, D.C., Peter H. Glade, Markowitz, Herbold,
    Glade & Mehlhaf, P.C., Portland, Oregon, for defendant-
    appellant and cross-appellee PeaceHealth.
    Thomas M. Triplett, Kelly T. Hagan, William B. Crow,
    Nancy M. Erfle, and Michael T. Garone, Schwabe, William-
    son & Wyatt, P.C., Portland, Oregon, Laurence E. Thorp,
    Thorp, Purdy, Jewett, Urness & Wilkinson, P.C., Springfield,
    Oregon, for plaintiff-appellee and cross-appellant Cascade
    Health Solutions.
    1576           CASCADE HEALTH v. PEACEHEALTH
    Jerrold J. Ganzfried, James F. Rill, Scott E. Flick, and
    Thomas J. Dillickrath, Howrey LLP, Washington, D.C., John
    Thorne and Paul J. Larkin, Jr., Verizon Communications, Inc.,
    Arlington, Virginia, Douglas S. Grandstaff, Caterpillar, Inc.,
    Peoria, Illinois, for amici curiae Verizon Communications
    Inc. and Caterpillar Inc.
    Aidan Synnott, Paul, Weiss, Rifkind, Wharton & Garrison
    LLP, New York, New York, for amici curiae law professors
    Daniel A. Crane, Thomas A. Lambert, Thomas D. Morgan, D.
    Daniel Sokol, and Richard C. Squire.
    Michael Barnes, Sonnenschein Nath & Rosenthal LLP, San
    Francisco, California, for amicus curiae Catholic Healthcare
    Association of the United States.
    Craig E. Stewart and Brian M. Hoffstadt, Jones Day, San
    Francisco, California, Sharon Douglass Mayo, Arnold & Por-
    ter LLP, San Francisco, California, for amici curiae Pacific
    Bell Telephone Co. and Visa U.S.A. Inc.
    David T. McDonald, Kirkpatrick & Lockhart Preston Gates
    Ellis LLP, Seattle, Washington, for amicus curiae Microsoft
    Corp.
    Thomas H. Tongue, Brian R. Talcott, and David P. Rossmil-
    ler, Dunn Carney Allen Higgins & Tongue, LLP, Portland,
    Oregon, for amicus curiae Pacific Source Health Plans.
    Michael E. Kipling, Kipling Law Group PLLC, Seattle,
    Washington, for amicus curiae Regence BlueCross
    BlueShield of Oregon.
    Jonathan M. Jacobson, Wilson Sonsini Goodrich & Rosati
    Professional Corporation, New York, New York, Scott A.
    Sher, Wilson Sonsini Goodrich & Rosati Professional Corpo-
    ration, Washington, D.C., Deborah L. Galvin, Kraft Foods,
    Inc., Northfield, Illinois, Brian R. Henry, The Coca-Cola
    CASCADE HEALTH v. PEACEHEALTH                1577
    Company, Atlanta, Georgia, Debra A. Valentine, United
    Technologies Corp., Hartford, Connecticut, for amici curiae
    Genentech, Inc., Honeywell International Inc., Kimberly-
    Clark Corp., Kraft Foods, Inc., The Coca-Cola Company, and
    United Technologies Corp.
    Thomas A. Miller, Robins Kaplan Miller & Ciresi L.L.P., Los
    Angeles, California, K. Craig Wildfang and Andrew M. Kep-
    per, Robins Kaplan Miller & Ciresi L.L.P., Minneapolis, Min-
    nesota, David A. Balto, Washington, D.C., for amici curiae
    American Antitrust Institute, Consumer Federation of Amer-
    ica, and Consumers Union.
    ORDER
    In a separate order filed concurrently with this order, we
    certified a question on Oregon price discrimination law to the
    Oregon Supreme Court. Accordingly, the opinion filed on
    September 4, 2007 is AMENDED as follows.
    First, the last paragraph before section “I,” originally:
    We vacate the jury’s verdict in favor of McKenzie
    on the attempted monopolization, price discrimina-
    tion, and tortious interference claims, and we vacate
    the district court’s summary judgment in favor of
    PeaceHealth on the tying claim. We also vacate the
    district court’s award of attorneys’ fees, costs, and
    expenses. We remand for further proceedings.
    shall be replaced by the paragraph:
    We vacate the jury’s verdict in favor of McKenzie
    on the attempted monopolization and tortious inter-
    ference claims, and we vacate the district court’s
    summary judgment in favor of PeaceHealth on the
    1578           CASCADE HEALTH v. PEACEHEALTH
    tying claim. We also vacate the district court’s award
    of attorneys’ fees, costs, and expenses. We certify a
    question to the Oregon Supreme Court on the price
    discrimination claim. We stay further proceedings
    pending resolution of the price discrimination ques-
    tion certified to the Oregon Supreme Court.
    Second, the entire text of the section titled “II B,” concerning
    Oregon state price discrimination law, shall be replaced with:
    After trial, the jury also returned a verdict in favor
    of McKenzie on its claim of primary-line price dis-
    crimination under Oregon state law. Because the
    validity of that jury verdict rests upon an unsettled
    question of Oregon antitrust law, we have certified
    that question to the Oregon Supreme Court.
    Third, the section titled “IV,” originally:
    The final issue before us is the appeal and cross-
    appeal of the district court’s award of attorneys’ fees
    and costs to McKenzie. Because we have vacated the
    district court’s judgment in favor of McKenzie on
    the merits of McKenzie’s attempted monopolization,
    price discrimination, and tortious interference
    claims, McKenzie is no longer a prevailing party for
    the purposes of Federal Rule of Civil Procedure
    54(d)(1) and § 4(a) of the Clayton Act, 15 U.S.C.
    § 15(a). McKenzie is thus not entitled to attorneys’
    fees, costs, and expenses, and we vacate the district
    court’s order awarding fees, costs, and expenses to
    McKenzie. If McKenzie prevails on remand, it may
    renew its request for attorneys’ fees and costs. We
    dismiss McKenzie’s cross-appeal on attorneys’ fees
    and costs as moot.
    shall be replaced with:
    CASCADE HEALTH v. PEACEHEALTH                  1579
    The final issue before us is the appeal and cross-
    appeal of the district court’s award of attorneys’ fees
    and costs to McKenzie. Because we have vacated the
    district court’s judgment in favor of McKenzie on
    the merits of McKenzie’s attempted monopolization
    and tortious interference claims, McKenzie is no lon-
    ger a prevailing party for the purposes of Federal
    Rule of Civil Procedure 54(d)(1) and § 4(a) of the
    Clayton Act, 15 U.S.C. § 15(a). McKenzie is thus
    not entitled to attorneys’ fees, costs, and expenses,
    and we vacate the district court’s order awarding
    fees, costs, and expenses to McKenzie for those
    claims. If McKenzie prevails on remand, it may
    renew its request for attorneys’ fees and costs. We
    dismiss McKenzie’s cross-appeal on attorneys’ fees
    and costs as moot. We withhold a determination of
    attorneys’ fees, costs, and expenses for McKenzie’s
    price discrimination claim pending resolution of the
    question certified to the Oregon Supreme Court.
    Fourth, the section titled “V,” originally:
    To summarize: In No. 05-35640, we VACATE the
    judgment in favor of McKenzie and REMAND for
    further proceedings. In No. 05-35627, we VACATE
    the summary judgment in favor of PeaceHealth and
    REMAND for further proceedings. In No. 05-
    36153, we VACATE the district court’s order
    awarding attorneys’ fees and costs to McKenzie. In
    No. 05-36202, we DISMISS the appeal as moot.
    Each party shall bear its own costs on appeal.
    shall be replaced with:
    To summarize: In No. 05-35640, we VACATE the
    judgment in favor of McKenzie on its monopoliza-
    tion and tortious interference claims. We certify a
    question to the Oregon Supreme Court on the price
    1580           CASCADE HEALTH v. PEACEHEALTH
    discrimination claim. In No. 05-35627, we
    VACATE the summary judgment in favor of Peace-
    Health. In No. 05-36153, we VACATE the district
    court’s order awarding attorneys’ fees and costs to
    McKenzie. In No. 05-36202, we DISMISS the
    appeal as moot. Each party shall bear its own costs
    on appeal. We STAY further proceedings pending
    resolution of the price discrimination question certi-
    fied to the Oregon Supreme Court.
    and the footnote that was originally footnote 31 with the fol-
    lowing text:
    In No. 05-35627, we also decline to address McKen-
    zie’s Noerr-Pennington arguments because these
    related to an evidentiary ruling and the issue may not
    arise on a retrial. Further, we hold that the district
    court’s jury instruction on combination or conspiracy
    was not an abuse of discretion.
    shall be placed at the conclusion of the amended sentence:
    In No. 05-35627, we VACATE the summary judg-
    ment in favor of PeaceHealth.
    OPINION
    GOULD, Circuit Judge:
    McKenzie-Willamette Hospital (“McKenzie”) filed a com-
    plaint in the district court against PeaceHealth asserting seven
    claims for relief. Five of the claims arose under the federal
    antitrust laws: monopolization, attempted monopolization,
    conspiracy to monopolize, tying, and exclusive dealing. The
    other two claims arose under Oregon state law: price discrimi-
    nation and intentional interference with prospective economic
    advantage.
    CASCADE HEALTH v. PEACEHEALTH               1581
    Before trial, the district court granted summary judgment in
    favor of PeaceHealth on McKenzie’s tying claim. After a two-
    and-a-half-week trial, the jury rendered a verdict in favor of
    PeaceHealth on McKenzie’s claims of monopolization, con-
    spiracy to monopolize, and exclusive dealing. However, the
    jury found in favor of McKenzie on McKenzie’s claims of
    attempted monopolization, price discrimination, and tortious
    interference. The jury awarded McKenzie $5.4 million in
    damages, which the district court trebled for a final award of
    $16.2 million. The district court also awarded McKenzie
    $1,583,185.57 in attorneys’ fees, costs, and expenses.
    We vacate the jury’s verdict in favor of McKenzie on the
    attempted monopolization and tortious interference claims,
    and we vacate the district court’s summary judgment in favor
    of PeaceHealth on the tying claim. We also vacate the district
    court’s award of attorneys’ fees, costs, and expenses. We cer-
    tify a question to the Oregon Supreme Court on the price dis-
    crimination claim. We stay further proceedings pending
    resolution of the price discrimination question certified to the
    Oregon Supreme Court.
    I
    A
    McKenzie and PeaceHealth are the only two providers of
    hospital care in Lane County, Oregon. The jury found and, for
    the purposes of this appeal, the parties do not dispute, that the
    relevant market in this case is the market for primary and sec-
    ondary acute care hospital services in Lane County. Primary
    and secondary acute care hospital services are common medi-
    cal services like setting a broken bone and performing a ton-
    sillectomy. Some hospitals also provide what the parties call
    “tertiary care,” which includes more complex services like
    invasive cardiovascular surgery and intensive neonatal care.
    1582              CASCADE HEALTH v. PEACEHEALTH
    In Lane County, PeaceHealth operates three hospitals while
    McKenzie operates one. McKenzie’s sole endeavor is
    McKenzie-Willamette Hospital, a 114-bed hospital that offers
    primary and secondary acute care in Springfield, Oregon.
    McKenzie does not provide tertiary care. In the time period
    leading up to and including this litigation, McKenzie had been
    suffering financial losses, and, as a result, merged with Triad
    Hospitals, Inc.1 so that it could add tertiary services to its
    menu of care.
    The largest of PeaceHealth’s three facilities is Sacred Heart
    Hospital, a 432-bed operation that offers primary, secondary,
    and tertiary care in Eugene, Oregon. PeaceHealth also oper-
    ates Peace Harbor Hospital, a 21-bed hospital in Florence,
    Oregon and Cottage Grove Hospital, an 11-bed hospital in
    Cottage Grove, Oregon. In Lane County, PeaceHealth has a
    90% market share of tertiary neonatal services, a 93% market
    share of tertiary cardiovascular services, and a roughly 75%
    market share of primary and secondary care services.
    To understand the antitrust issues in this case, it is neces-
    sary to appreciate the structure of the market in which this
    case arises. The market for hospital services and medical care
    is complex. However, based on the record, there appear to be
    three major participants in the market for hospital services:
    hospitals, insurers, and patients. Hospitals, like those operated
    by PeaceHealth and McKenzie, provide services to patients
    and sell services to insurers. Insurers are usually commercial
    health insurance companies that seek to buy medical services
    from hospitals on the best terms possible. The insurers in turn
    sell insurance services to patients and employers. Patients buy
    health insurance from insurers (often through their employers)
    and sometimes buy services from hospitals.
    1
    As a result of the merger, McKenzie’s name changed to Cascade
    Health Solutions. For the purposes of this opinion, we, like the parties,
    continue to refer to Cascade Health Solutions as McKenzie.
    CASCADE HEALTH v. PEACEHEALTH                       1583
    In the transaction between a hospital that sells care services
    and an insurer that buys care services, the price agreed upon
    is often referred to as a “reimbursement rate.” For example,
    in a hospital-insurer contract, the agreed upon price might be
    “a 90% reimbursement rate.” A 90% reimbursement rate price
    means that, when the insurer must purchase services from the
    hospital, the insurer gets a 10% discount off the hospital’s
    regular price, also called the charge master or list price. It fol-
    lows that hospitals prefer high reimbursement rates and insur-
    ers prefer low reimbursement rates, as each group pursues its
    own economic interest.
    B
    Before trial, the district court granted summary judgment to
    PeaceHealth on McKenzie’s tying claim, concluding that
    McKenzie had not presented any evidence that PeaceHealth
    “coerced” insurers into purchasing primary and secondary
    services from it in order for the insurers to obtain tertiary ser-
    vices. The district court let the remainder of McKenzie’s
    claims proceed to trial before a jury. On McKenzie’s monopo-
    lization and attempted monopolization claims, McKenzie’s
    primary theory was that PeaceHealth engaged in anticompeti-
    tive conduct by offering insurers “bundled” or “package” dis-
    counts. McKenzie asserted that PeaceHealth offered insurers
    discounts of 35% to 40% on tertiary services if the insurers
    made PeaceHealth their sole preferred provider for all
    services—primary, secondary, and tertiary. McKenzie intro-
    duced evidence of a few specific instances of PeaceHealth’s
    bundled discounting practices.
    For example, in 2001, PeaceHealth was the only preferred
    provider of hospital care under the preferred provider plan
    (“PPP”) of Regence BlueCross BlueShield of Oregon
    (“Regence”).2 At that time, Regence was paying PeaceHealth
    2
    In a preferred provider plan, health care providers contract with an
    insurer to provide health care to the insurer’s customers. The insurer’s cus-
    tomers pay much higher prices if they obtain services from providers other
    than those with whom their insurer has contracted.
    1584           CASCADE HEALTH v. PEACEHEALTH
    a 76% reimbursement rate for all of PeaceHealth’s medical
    services, including primary, secondary, and tertiary services.
    Around that time, pursuant to McKenzie’s request, Regence
    considered adding McKenzie to the PPP as a preferred pro-
    vider of primary and secondary services. When Regence’s
    contract with PeaceHealth came up for its annual renewal,
    Regence solicited two proposals from PeaceHealth. Under
    one proposal, PeaceHealth would remain the only preferred
    provider. Under the other proposal, McKenzie would be
    added as a preferred provider. PeaceHealth offered an 85%
    reimbursement rate for all services if it remained Regence’s
    sole preferred provider of primary, secondary, and tertiary
    services, and a 90% reimbursement rate if McKenzie was
    added as a preferred provider of primary and secondary ser-
    vices. Regence thereafter declined to include McKenzie as a
    preferred provider.
    That same year, McKenzie sought and received admission
    as a preferred provider of primary and secondary services
    under the preferred plan offered by Providence Health Plan
    (“Providence”). Until then, PeaceHealth was the only pre-
    ferred provider of primary, secondary, and tertiary services in
    the Providence preferred plan. Upon McKenzie’s admission
    as a preferred provider, PeaceHealth increased its reimburse-
    ment rate with Providence from 90% to 93%. The evidence
    showed that insurers who made PeaceHealth their exclusive
    preferred provider across all services, thus purchasing from
    PeaceHealth a full complement of primary, secondary, and
    tertiary services, paid lower reimbursement rates than insurers
    who purchased tertiary services from PeaceHealth, but at least
    some primary and secondary services from McKenzie.
    The jury rejected McKenzie’s claims of monopolization,
    conspiracy to monopolize, and exclusive dealing in its verdict
    for PeaceHealth on those issues. However, the jury found in
    favor of McKenzie on its claims of attempted monopolization,
    price discrimination, and tortious interference. The jury
    awarded damages of $5.4 million on each claim. McKenzie
    CASCADE HEALTH v. PEACEHEALTH                  1585
    elected to pursue its remedy under federal law on the
    attempted monopolization claim, so the district court, pursu-
    ant to § 4(a) of the Clayton Act, 15 U.S.C. § 15(a), trebled the
    jury’s $5.4 million award on the attempted monopolization
    claim for a final damage award of $16.2 million. The district
    court denied PeaceHealth’s motion for judgment as a matter
    of law on the claims the jury decided in McKenzie’s favor,
    and also awarded McKenzie $1,583,185.57 in attorneys’ fees
    and costs.
    PeaceHealth appeals the judgment entered pursuant to the
    jury verdict in McKenzie’s favor. McKenzie cross-appeals the
    district court’s grant of summary judgment to PeaceHealth on
    McKenzie’s tying claim. Both parties appeal the district
    court’s award of attorneys’ fees and costs.
    II
    We first address PeaceHealth’s appeal of the jury verdict in
    McKenzie’s favor on McKenzie’s claims of attempted
    monopolization, price discrimination, and tortious interfer-
    ence.
    A
    We address initially the attempted monopolization claim.
    Section 2 of the Sherman Act makes it illegal to “attempt to
    monopolize . . . any part of the trade or commerce among the
    several States, or with foreign nations.” 15 U.S.C. § 2. “[T]o
    demonstrate attempted monopolization a plaintiff must prove
    (1) that the defendant has engaged in predatory or anticompe-
    titive conduct with (2) a specific intent to monopolize and (3)
    a dangerous probability of achieving monopoly power.” Spec-
    trum Sports, Inc. v. McQuillan, 
    506 U.S. 447
    , 456 (1993);
    Amarel v. Connell, 
    102 F.3d 1494
    , 1521 (9th Cir. 1996).3
    3
    The focus in attempted monopolization cases on a defendant’s “spe-
    cific intent” to monopolize and on the “dangerous probability” that
    1586               CASCADE HEALTH v. PEACEHEALTH
    PeaceHealth’s appeal centers on the first element of the
    Spectrum Sports test, the conduct element. Anticompetitive
    conduct is behavior that tends to impair the opportunities of
    rivals and either does not further competition on the merits or
    does so in an unnecessarily restrictive way. Aspen Skiing Co.
    v. Aspen Highlands Skiing Corp., 
    472 U.S. 585
    , 605 n.32
    (1985). PeaceHealth contends that we should vacate the jury’s
    verdict because the district court incorrectly instructed the
    monopoly will result traces its roots to the Supreme Court’s earliest pro-
    nouncements on the Sherman Act. Over one hundred years ago, Justice
    Holmes explained that the Sherman Act permits claims
    against combinations in restraint of commerce among the states
    and against attempts to monopolize the same. Intent is almost
    essential to such a combination, and is essential to such an
    attempt. Where acts are not sufficient in themselves to produce
    a result which the law seeks to prevent—for instance, the
    monopoly,—but require further acts in addition to the mere
    forces of nature to bring that result to pass, an intent to bring it
    to pass is necessary in order to produce a dangerous probability
    that it will happen. But when that intent and the consequent dan-
    gerous probability exist, this statute, like many others, and like
    the common law in some cases, directs itself against that danger-
    ous probability as well as against the completed result.
    Swift & Co. v. United States, 
    196 U.S. 375
    , 396 (1905) (citation omitted).
    By contrast, in monopolization cases, monopolistic intent can be inferred
    from the exclusionary conduct of a firm with monopoly power. United
    States v. Aluminum Co. of Am., 
    148 F.2d 416
    , 432 (2d Cir. 1945) (Hand,
    J.) (noting that, in a monopolization case, “no intent is relevant except that
    which is relevant to any liability, criminal or civil: i.e. an intent to bring
    about the forbidden act”); United States v. United Shoe Mach. Corp., 
    110 F. Supp. 295
    , 346 (D. Mass. 1953) (“Defendant intended to engage in the
    leasing practices and pricing policies which maintained its market power.
    That is all the intent which the law requires when both the complaint and
    the judgment rest on a charge of ‘monopolizing’, not merely ‘attempting
    to monopolize’. Defendant having willed the means, has willed the end.”),
    aff’d, 
    347 U.S. 521
    (1954). In attempted monopolization cases, though, the
    defendant firm “has not yet achieved a position of power in the market but
    is trying to build up such a position. Being without power to exploit or
    exclude, such a firm must be shown to have a specific intent to achieve
    these results.” A.D. Neale & D.G. Goyder, The Antitrust Laws of the
    United States of America 93 (3d ed. 1980).
    CASCADE HEALTH v. PEACEHEALTH               1587
    jury about when bundled discounting can amount to anticom-
    petitive conduct. This leads us to consider at some length the
    phenomena of bundles and bundled discounts.
    1
    [1] Bundling is the practice of offering, for a single price,
    two or more goods or services that could be sold separately.
    A bundled discount occurs when a firm sells a bundle of
    goods or services for a lower price than the seller charges for
    the goods or services purchased individually. See Daniel A.
    Crane, Mixed Bundling, Profit Sacrifice, and Consumer Wel-
    fare, 55 Emory L.J. 423, 425 (2006); David S. Evans &
    Michael Salinger, Why Do Firms Bundle and Tie?, 22 Yale J.
    on Reg. 37, 41 (2005); Thomas A. Lambert, Evaluating Bun-
    dled Discounts, 
    89 Minn. L
    . Rev. 1688, 1693 (2005). As dis-
    cussed above, PeaceHealth offered bundled discounts to
    Regence and other insurers in this case. Specifically, Peace-
    Health offered insurers discounts if the insurers made Peace-
    Health their exclusive preferred provider for primary,
    secondary, and tertiary care.
    Bundled discounts are pervasive, and examples abound.
    Season tickets, fast food value meals, all-in-one home theater
    systems—all are bundled discounts. Like individual consum-
    ers, institutional purchasers seek and obtain bundled dis-
    counts, too. See, e.g., LePage’s Inc. v. 3M, 
    324 F.3d 141
    , 154
    (3d Cir. 2003) (en banc) (involving rebates offered by 3M to
    retailers who purchased 3M’s full line of health care, home
    care, home improvement, stationary, retail auto, and “Leisure
    Time” products); Invacare Corp. v. Respironics, Inc., No.
    1:04-CV-1580, 
    2006 WL 3022968
    , at *1 (N.D. Ohio Oct. 23,
    2006) (involving a medical device manufacturer who bundled
    the masks worn by persons with obstructive sleep apena with
    the devices that blow air into the masks); Masimo Corp. v.
    Tyco Health Care Group, L.P., No. CV 02-4770, 
    2006 WL 1236666
    , at *9 (C.D. Cal. Mar. 22, 2006) (involving rebates
    offered by Tyco to hospitals that purchased both Tyco’s
    1588               CASCADE HEALTH v. PEACEHEALTH
    oximetry and non-oximetry products together); J.B.D.L. Corp.
    v. Wyeth-Ayerst Labs., Inc., No. 1:01-CV-704, 
    2005 WL 1396940
    , at *3 (S.D. Ohio June 13, 2005) (involving rebates
    offered by Wyeth to pharmacy benefit managers based on
    combined purchases of estrogen-replacement drugs, oral con-
    traceptives, an antidepressant, an antibiotic, a calcium channel
    blocker, and a beta blocker), aff’d, 
    485 F.3d 880
    (6th Cir.
    2007). The varied and pervasive nature of bundled discounts
    illustrates that such discounts transcend market boundaries.
    On the one hand, the world’s largest corporations offer bun-
    dled discounts as their product lines expand with the conver-
    gence of industries.4 On the other hand, a street-corner vendor
    with a food cart—a merchant with limited capital—might
    offer a discount to a customer who buys a drink and potato
    chips to complement a hot dog. The fact that such diverse
    sellers offer bundled discounts shows that such discounts are
    a fundamental option for both buyers and sellers.5
    4
    For example, in the telecommunications field, it is common for compa-
    nies to offer not only phone service, but also Internet access and television
    service, and many of these companies offer bundled discounts to custom-
    ers who purchase their entire package. See Ken Belson, Dial M for
    Merger, N.Y. Times, Jan. 28, 2005, at C1; Ken Belson, Cable’s Rivals
    Lure Customers with Packages, N.Y. Times, Nov. 22, 2004, at C1.
    5
    That bundled discounts are a common feature of our current economic
    system is relevant to our analysis of allegedly anticompetitive conduct
    under § 2 of the Sherman Act. The Supreme Court, in assessing the stare
    decisis effect of its prior precedents under § 1 of the Sherman Act,
    recently noted that “[f]rom the beginning the Court has treated the Sher-
    man Act as a common-law statute,” and that “[j]ust as the common law
    adapts to modern understanding and greater experience, so too does the
    Sherman Act’s prohibition on ‘restraint[s] of trade’ evolve to meet the
    dynamics of present economic conditions.” Leegin Creative Leather
    Prods., Inc. v. PSKS, Inc., 
    127 S. Ct. 2705
    , 2720 (2007) (third alteration
    in original). The frequency with which we see bundled discounts in varied
    contexts does not insulate such discounts from antitrust review, but it
    heightens the need to ensure that the rule adopted does not expose inven-
    tive and legitimate forms of price competition to an overbroad liability
    standard.
    CASCADE HEALTH v. PEACEHEALTH                       1589
    Bundled discounts generally benefit buyers because the dis-
    counts allow the buyer to get more for less.6 
    Lambert, supra
    ,
    
    89 Minn. L
    . Rev. at 1726 (suggesting that bundled discounts
    always provide some immediate consumer benefit in the form
    of lower prices); 3 Phillip E. Areeda & Herbert Hovenkamp,
    Antitrust Law ¶ 749b at 324 (Supp. 2006) (explaining that
    “[t]he great majority of discounting practices are procompeti-
    tive” and “reflect hard bargaining”). Bundling can also result
    in savings to the seller because it usually costs a firm less to
    sell multiple products to one customer at the same time than
    it does to sell the products individually. United States v.
    Microsoft Corp., 
    253 F.3d 34
    , 87 (D.C. Cir. 2001) (per
    curiam) (noting that “[b]undling obviously saves distribution
    and consumer transaction costs” and allows firms to “capital-
    ize on certain economies of scope”); 
    Crane, supra
    , 55 Emory
    L.J. at 430-33 (discussing how package discounts can create
    economies of scope and transaction costs savings).7
    Not surprisingly, the Supreme Court has instructed that,
    because of the benefits that flow to consumers from dis-
    counted prices, price cutting is a practice the antitrust laws
    aim to promote. See Matsushita Elec. Indus. Co. v. Zenith
    Radio Corp., 
    475 U.S. 574
    , 594 (1986) (“[C]utting prices in
    order to increase business often is the very essence of compe-
    6
    The Supreme Court has recognized the principle that package pricing
    is usually procompetitive, noting that “[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 Parish Hosp. Dist. No. 2 v. Hyde, 
    466 U.S. 2
    , 12 (1984).
    7
    The academic literature provides other examples of ways in which sell-
    ers benefit from bundling. See, e.g., 
    Crane, supra
    , 55 Emory L.J. at 430-
    43 (suggesting sellers can use bundles to instill customer loyalty, lower net
    prices to consumers by eliminating multiple monopoly-price markups on
    complementary goods, and price discrimination); see also Antitrust Mod-
    ernization Comm’n, Report and Recommendations 95 (2007) (suggesting
    sellers can use bundled discounts to increase demand in lieu of advertis-
    ing, encourage use of a new product, or enter a new market).
    1590            CASCADE HEALTH v. PEACEHEALTH
    tition.”). Consistent with that principle, we should not be too
    quick to condemn price-reducing bundled discounts as anti-
    competitive, lest we end up with a rule that discourages legiti-
    mate price competition. See Barry Wright Corp. v. ITT
    Grinnell Corp., 
    724 F.2d 227
    , 234 (1st Cir. 1983) (Breyer, J.).
    However, it is possible, at least in theory, for a firm to use
    a bundled discount to exclude an equally or more efficient
    competitor and thereby reduce consumer welfare in the long
    run. See Richard A. Posner, Antitrust Law 236 (2d ed. 2001);
    Barry Nalebuff, Exclusionary Bundling, 50 Antitrust Bull.
    321, 321 (2005). For example, a competitor who sells only a
    single product in the bundle (and who produces that single
    product at a lower cost than the defendant) might not be able
    to match profitably the price created by the multi-product
    bundled discount. See Ortho Diagnostic Sys., Inc. v. Abbott
    Labs., Inc., 
    920 F. Supp. 455
    , 467 (S.D.N.Y. 1996). This is
    true even if the post-discount prices for both the entire bundle
    and each product in the bundle are above the seller’s cost. See
    
    Ortho, 920 F. Supp. at 467
    (noting that “a firm that enjoys a
    monopoly on one or more of a group of complementary prod-
    ucts, but which faces competition on others, can price all of
    its products above average variable cost and yet still drive an
    equally efficient competitor out of the market”). Judge
    Kaplan’s opinion in Ortho provides an example of such a situ-
    ation:
    Assume for the sake of simplicity that the case
    involved the sale of two hair products, shampoo and
    conditioner, the latter made only by A and the for-
    mer by both A and B. Assume as well that both must
    be used to wash one’s hair. Assume further that A’s
    average variable cost for conditioner is $2.50, that its
    average variable cost for shampoo is $1.50, and that
    B’s average variable cost for shampoo is $1.25. B
    therefore is the more efficient producer of shampoo.
    Finally, assume that A prices conditioner and sham-
    poo at $5 and $3, respectively, if bought separately
    CASCADE HEALTH v. PEACEHEALTH                1591
    but at $3 and $2.25 if bought as part of a package.
    Absent the package pricing, A’s price for both prod-
    ucts is $8. B therefore must price its shampoo at or
    below $3 in order to compete effectively with A,
    given that the customer will be paying A $5 for con-
    ditioner irrespective of which shampoo supplier it
    chooses. With the package pricing, the customer can
    purchase both products from A for $5.25, a price
    above the sum of A’s average variable cost for both
    products. In order for B to compete, however, it must
    persuade the customer to buy B’s shampoo while
    purchasing its conditioner from A for $5. In order to
    do that, B cannot charge more than $0.25 for sham-
    poo, as the customer otherwise will find A’s package
    cheaper than buying conditioner from A and sham-
    poo from B. On these assumptions, A would force B
    out of the shampoo market, notwithstanding that B
    is the more efficient producer of shampoo, without
    pricing either of A’s products below average vari-
    able cost.
    Id.; see also 3 Areeda & Hovenkamp, supra, ¶ 749a at 318-19
    (Supp. 2006) (providing a similar example). It is worth reiter-
    ating that, as the example above shows, a bundled discounter
    can exclude rivals who do not sell as great a number of prod-
    uct lines without pricing its products below its cost to produce
    them. Thus, a bundled discounter can achieve exclusion with-
    out sacrificing any short-run profits. See 
    Nalebuff, supra
    , 50
    Antitrust Bull. at 339 (providing an example of exclusion
    accomplished with an increase in profits).
    [2] In this case, McKenzie asserts it could provide primary
    and secondary services at a lower cost than PeaceHealth.
    Thus, the principal anticompetitive danger of the bundled dis-
    counts offered by PeaceHealth is that the discounts could
    freeze McKenzie out of the market for primary and secondary
    services because McKenzie, like seller B in Judge Kaplan’s
    example, does not provide the same array of services as
    1592           CASCADE HEALTH v. PEACEHEALTH
    PeaceHealth and therefore could possibly not be able to match
    the discount PeaceHealth offers insurers.
    [3] From our discussion above, it is evident that bundled
    discounts, while potentially procompetitive by offering bar-
    gains to consumers, can also pose the threat of anticompeti-
    tive impact by excluding less diversified but more efficient
    producers. These considerations put into focus this problem:
    How are we to discern where antitrust law draws the line
    between bundled discounts that are procompetitive and part of
    the normal rough-and-tumble of our competitive economy
    and bundled discounts, offered by firms holding or on the
    verge of gaining monopoly power in the relevant market, that
    harm competition and are thus proscribed by § 2 of the Sher-
    man Act?
    2
    In this case, the district court based its jury instruction
    regarding the anticompetitive effect of bundled discounting
    on the Third Circuit’s en banc decision in LePage’s Inc. v.
    3M, 
    324 F.3d 141
    (3d Cir. 2003) (en banc). In that case, the
    plaintiff, LePage’s, was the market leader in sales of “private
    label” (i.e., store brand) transparent tape. See 
    id. at 144.
    As
    LePage’s market share fell and its profitability declined, it
    brought suit asserting that 3M, who manufactured Scotch
    tape, some private label tape, and many other products that
    LePage’s did not produce (like healthcare products and retail
    automotive products), leveraged its monopoly over Scotch
    brand tape to monopolize the private label tape market. 
    Id. at 145,
    154. Specifically, LePage’s alleged that 3M’s multi-
    tiered bundled rebate structure was anticompetitive. 
    Id. at 145.
    The bundled rebate structure offered progressively
    higher rebates when customers increased purchases across
    3M’s different product lines—discounts LePage’s could not
    offer because it did not sell the same diverse array of products
    as 3M. See 
    id. A jury
    found that 3M’s conduct violated § 2
    of the Sherman Act and 3M appealed. 
    Id. CASCADE HEALTH
    v. PEACEHEALTH                1593
    The primary issue before the Third Circuit was whether 3M
    unlawfully maintained its monopoly power through the bun-
    dled discount program. See 
    id. at 146-47.
    3M argued that its
    bundled rebate structure was legal as a matter of law because
    it never priced below cost. 
    Id. at 147.
    3M relied heavily on the
    United States Supreme Court’s decision in Brooke Group Ltd.
    v. Brown & Williamson Tobacco Corp., 
    509 U.S. 209
    (1993).
    In Brooke Group, a primary-line price discrimination case
    brought under the Robinson-Patman Act, the Supreme Court
    held that, in a single product predatory pricing case, a plaintiff
    must prove (1) that its rival’s low prices were below an appro-
    priate measure of its rival’s costs and (2) that its rival “had a
    reasonable prospect, or, under § 2 of the Sherman Act, a dan-
    gerous probability, of recouping its investment in below-cost
    prices.” 
    Id. at 222,
    224. In LePage’s, the Third Circuit, in a
    7-3 en banc decision, refused to apply Brooke Group’s below-
    cost pricing requirement to bundled discounting.
    The Third Circuit first distinguished Brooke Group by not-
    ing that the defendant in that case was an oligopolist while
    3M was a monopolist. 
    LePage’s, 324 F.3d at 151-52
    . The
    court reasoned that while Brooke Group’s requirement of
    below-cost pricing with a probability of recoupment is appro-
    priate when the defendant is an oligopolist who still faces
    competition when it tries to recoup the losses it suffered dur-
    ing the predation period, below-cost pricing and a probability
    of recoupment should not be required when the defendant is
    a monopolist whose behavior will be unconstrained by the
    market after it eliminates its lone rival. See 
    id. The court
    in
    LePage’s also noted that the plaintiff in Brooke Group simply
    challenged the defendant’s pricing practices, not bundling
    accomplished through discounting. See 
    id. at 151.
    The court
    reasoned that Brooke Group did not require below-cost pric-
    ing for any pricing practice to be deemed exclusionary. See 
    id. The court
    noted that “[t]he principal anticompetitive effect
    of bundled rebates as offered by 3M is that when offered by
    a monopolist they may foreclose portions of the market to a
    1594             CASCADE HEALTH v. PEACEHEALTH
    potential competitor who does not manufacture an equally
    diverse group of products and who therefore cannot make a
    comparable offer.” 
    Id. at 155.
    The Third Circuit concluded
    that the jury could reasonably have found that 3M used its
    monopoly in transparent tape along with its extensive catalog
    of other products to exclude LePage’s from the market and
    that 3M did not present any adequate business justification for
    its bundled discounting program. 
    Id. at 164,
    169. The court
    thus affirmed the jury verdict in LePage’s favor, 
    id. at 169,
    even though LePage’s economist testified that LePage’s was
    not as efficient a tape producer as 3M, see 
    id. at 177
    (Green-
    burg, J., dissenting).8
    In this case, the district court used LePage’s to formulate
    its jury instruction. Specifically, the district court instructed
    the jury that
    plaintiff . . . contends that defendant has bundled
    price discounts for its primary, secondary, and terti-
    ary acute care products and that doing so is anti-
    competitive. Bundled pricing occurs when price dis-
    counts are offered for purchasing an entire line of
    services exclusively from one supplier. Bundled
    price discounts may be anti-competitive if they are
    offered by a monopolist and substantially foreclose
    portions of the market to a competitor who does not
    provide an equally diverse group of services and
    who therefore cannot make a comparable offer.
    As 3M did in LePage’s, PeaceHealth argues that the jury
    instruction incorrectly stated the law because it allowed the
    jury to find that a defendant with monopoly power (or, in the
    case of an attempted monopolization claim, a dangerous prob-
    8
    Judge Scirica and then-Judge Alito joined Judge Greenburg’s dissent
    from the majority opinion. The Third Circuit reaffirmed the rule of
    LePage’s in United States v. Dentsply Int’l, Inc., 
    399 F.3d 181
    , 187 (3d
    Cir. 2005).
    CASCADE HEALTH v. PEACEHEALTH                       1595
    ability of achieving monopoly power) engaged in exclusion-
    ary conduct by simply offering a bundled discount that its
    competitor could not match. The instruction did not require
    the jury to consider whether the defendant priced below cost.
    LePage’s, PeaceHealth asserts, was wrongly decided because
    it allows the jury to conclude, from the structure of the market
    alone, that a competitor has been anticompetitively excluded
    from the market.9 We generally review jury instructions for
    abuse of discretion, but we review de novo whether jury
    instructions correctly stated the law. Voohries-Larson v.
    Cessna Aircraft Co., 
    241 F.3d 707
    , 713 (9th Cir. 2001).
    [4] As the bipartisan Antitrust Modernization Commission
    (“AMC”)10 recently noted, the fundamental problem with the
    LePage’s standard is that it does not consider whether the
    bundled discounts constitute competition on the merits, but
    simply concludes that all bundled discounts offered by a
    9
    After oral argument, we issued an order inviting amicus briefing on the
    issue of whether a plaintiff seeking to establish the anticompetitive con-
    duct element of an attempted monopolization claim by showing that the
    defendant offered bundled discounts must prove that the defendant’s
    prices were below the defendant’s costs. Cascade Health Solutions v.
    PeaceHealth, 
    479 F.3d 726
    , 727 (9th Cir. 2007). We also sought input on
    the appropriate measure of costs if a plaintiff must prove below-cost pric-
    ing. 
    Id. Finally, we
    asked amici who were arguing that a plaintiff should
    not be required to prove below-cost pricing to suggest alternative stan-
    dards for the trier of fact to use in determining whether bundled discounts
    are anticompetitive. 
    Id. We thank
    the many amici who accepted our invita-
    tion for their thoughtful briefs.
    10
    Congress created the AMC in the Antitrust Modernization Commis-
    sion Act of 2002, Pub. L. No. 107-273, §§ 11051-60, 116 Stat. 1758,
    1856-59. The Act entrusted the AMC with four tasks: (1) soliciting the
    views of all parties concerned with the federal antitrust laws; (2) examin-
    ing whether the antitrust laws needed modernization; (3) evaluating pro-
    posals to modernize the antitrust laws; and (4) submitting a report to the
    President and Congress containing a statement of the AMC’s findings and
    conclusions and recommending any legislative or administrative action the
    AMC considered appropriate. See 
    id. §§ 11053,
    11058. The procedure for
    appointing the twelve commissioners ensured that both major political
    parties were equally represented on the AMC. See 
    id. § 11054.
    1596           CASCADE HEALTH v. PEACEHEALTH
    monopolist are anticompetitive with respect to its competitors
    who do not manufacture an equally diverse product line. Anti-
    trust Modernization Comm’n, Report and Recommendations
    97 (2007) [hereinafter AMC Report]. The LePage’s standard,
    the AMC noted, asks the jury to consider whether the plaintiff
    has been excluded from the market, but does not require the
    jury to consider whether the plaintiff was at least as efficient
    of a producer as the defendant. Id.; see also 
    LePage’s, 324 F.3d at 175
    (Greenberg, J., dissenting) (noting that “LePage’s
    did not even attempt to show that it could not compete by cal-
    culating the discount that it would have had to provide in
    order to match the discounts offered by 3M through its bun-
    dled rebates”). Thus, the LePage’s standard could protect a
    less efficient competitor at the expense of consumer welfare.
    As Judge Greenberg explained in his LePage’s dissent, the
    Third Circuit’s standard “risks curtailing price competition
    and a method of pricing beneficial to customers because the
    bundled rebates effectively lowered [the seller’s] costs.”
    
    LePage’s, 324 F.3d at 179
    (Greenberg, J., dissenting).
    The AMC also lamented that LePage’s “offers no clear
    standards by which firms can assess whether their bundled
    rebates are likely to pass antitrust muster.” AMC 
    Report, supra, at 94
    . The Commission noted that efficiencies, and not
    schemes to acquire or maintain monopoly power, likely
    explain the use of bundled discounts because many firms
    without market power offer them. 
    Id. at 95.
    The AMC thus
    proposed a three-part test that it believed would protect pro-
    competitive bundled discounts from antitrust scrutiny. The
    AMC proposed that:
    Courts should adopt a three-part test to determine
    whether bundled discounts or rebates violate Section
    2 of the Sherman Act. To prove a violation of Sec-
    tion 2, a plaintiff should be required to show each
    one of the following elements (as well as other ele-
    ments of a Section 2 claim): (1) after allocating all
    discounts and rebates attributable to the entire bun-
    CASCADE HEALTH v. PEACEHEALTH                 1597
    dle of products to the competitive product, the defen-
    dant sold the competitive product below its
    incremental cost for the competitive product; (2) the
    defendant is likely to recoup these short-term losses;
    and (3) the bundled discount or rebate program has
    had or is likely to have an adverse effect on competi-
    tion.
    
    Id. at 99.
    The AMC reasoned that the first element would (1)
    subject bundled discounts to antitrust scrutiny only if they
    could exclude a hypothetical equally efficient competitor and
    (2) provide sufficient clarity for businesses to determine
    whether their bundled discounting practices run afoul of § 2.
    
    Id. at 100.
    The AMC concluded that the three-part test would,
    as a whole, bring the law on bundled discounting in line with
    the Supreme Court’s reasoning in Brooke Group. 
    Id. 3 We
    must decide whether we should follow LePage’s or
    whether we should part ways with the Third Circuit by adopt-
    ing a cost-based standard to apply in bundled discounting
    cases.
    Observers have commented that, in some respects, bundled
    discounts are similar to both predatory pricing and tying. See
    
    Nalebuff, supra
    , 50 Antitrust Bull. at 365; Daniel L. Rubin-
    feld, 3M’s Bundled Rebates: An Economic Perspective, 72 U.
    Chi. L. Rev. 243, 252-56 (2005). As the Supreme Court
    explained in Brooke Group, a plaintiff in a single product
    predatory pricing case must establish that the defendant priced
    below cost and that there was a probability the defendant
    could recoup the losses it suffered during the predation
    period. See Brooke 
    Group, 509 U.S. at 222
    . In a normal tying
    case, however, while a plaintiff must prove that it was “co-
    erced” into buying the tied products from the defendant, a
    plaintiff does not need to prove that the defendant priced the
    products below cost, and therefore the plaintiff also does not
    1598            CASCADE HEALTH v. PEACEHEALTH
    need to prove any recoupment of losses. See Datagate, Inc. v.
    Hewlett-Packard Co., 
    60 F.3d 1421
    , 1423-24 (9th Cir. 1995).
    However, “[o]ne difference between traditional tying by
    contract and tying via package discounts is that the traditional
    tying contract typically forces the buyer to accept both prod-
    ucts, as well as the cost savings.” 3 Areeda & Hovenkamp,
    supra, ¶ 749b2 at 332 (Supp. 2006). Conversely, “the package
    discount gives the buyer the choice of accepting the cost sav-
    ings by purchasing the package, or foregoing the savings by
    purchasing the products separately.” 
    Id. The package
    discount
    thus does not constrain the buyer’s choice as much as the tra-
    ditional tie. For that reason, the late-Professor Areeda and
    Professor Hovenkamp suggest that “[a] variation of the
    requirement that prices be ‘below cost’ is essential for the
    plaintiff to establish one particular element of unlawful bun-
    dled discounting—namely, that there was actually ‘tying’—
    that is, that the purchaser was actually ‘coerced’ (in this case,
    by lower prices) into taking the tied-up package.” 
    Id. at 331.
    In addition, the Supreme Court has forcefully suggested
    that we should not condemn prices that are above some mea-
    sure of incremental cost. See 
    id. ¶ 737a
    at 393 (2d ed. 2002)
    (quoting Brooke 
    Group, 509 U.S. at 223
    ). In Brooke Group,
    the Court held that “a plaintiff seeking to establish competi-
    tive injury resulting from a rival’s low prices must prove that
    the prices complained of are below an appropriate measure of
    its rival’s costs.” Brooke 
    Group, 509 U.S. at 222
    . In the
    course of rejecting the plaintiff’s argument that a predatory
    pricing plaintiff need not prove below-cost pricing, the Court
    wrote that it has “rejected . . . the notion that above-cost
    prices that are below general market levels or the costs of a
    firm’s competitors inflict injury to competition cognizable
    under the antitrust laws.” 
    Id. at 223
    (citing Atl. Richfield Co.
    v. USA Petroleum Co., 
    495 U.S. 328
    , 340 (1990)). The Court
    went on to emphasize that “[l]ow prices benefit consumers
    regardless of how those prices are set, and so long as they are
    above predatory levels, they do not threaten competition.” 
    Id. CASCADE HEALTH
    v. PEACEHEALTH               1599
    (internal quotation omitted). The Court also noted the broad
    application of the principle that only below-cost prices are
    anticompetitive, stating that “[w]e have adhered to this princi-
    ple regardless of the type of antitrust claim involved.” 
    Id. (internal quotation
    omitted). “As a general rule,” the Court
    concluded, “the exclusionary effect of prices above a relevant
    measure of cost either reflects the lower cost structure of the
    alleged predator, and so represents competition on the merits,
    or is beyond the practical ability of a judicial tribunal to con-
    trol without courting intolerable risks of chilling legitimate
    price-cutting.” Id.; accord 
    Matsushita, 475 U.S. at 594
    .
    The Court recently reemphasized these principles in
    Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co.,
    
    127 S. Ct. 1069
    , 1078 (2007), a case in which the Court held
    that Brooke Group’s below-cost pricing requirement applies
    in cases in which the plaintiff alleges that the defendant
    engaged in predatory bidding—the practice of bidding up
    input costs to drive rivals out of business. Specifically, the
    Court held that a predatory bidding “plaintiff must prove that
    the alleged predatory bidding led to below-cost pricing of the
    predator’s outputs. That is, the predator’s bidding on the
    [input] side must have caused the cost of the relevant output
    to rise above the revenues generated in the sale of those out-
    puts.” 
    Weyerhaeuser, 127 S. Ct. at 1078
    .
    Of course, in neither Brooke Group nor Weyerhaeuser did
    the Court go so far as to hold that in every case in which a
    plaintiff challenges low prices as exclusionary conduct the
    plaintiff must prove that those prices were below cost. But the
    Court’s opinions strongly suggest that, in the normal case,
    above-cost pricing will not be considered exclusionary con-
    duct for antitrust purposes, and the Court’s reasoning poses a
    strong caution against condemning bundled discounts that
    result in prices above a relevant measure of costs.
    The Supreme Court’s long and consistent adherence to the
    principle that the antitrust laws protect the process of compe-
    1600              CASCADE HEALTH v. PEACEHEALTH
    tition, and not the pursuits of any particular competitor, rein-
    force our conclusion of caution concerning bundled discounts
    that result in prices above an appropriate measure of costs.
    The Court voiced this principle most notably in Brunswick
    Corp. v. Pueblo Bowl-O-Mat, 
    429 U.S. 477
    (1977). In that
    case, the plaintiffs challenged, under § 7 of the Clayton Act,11
    Brunswick’s acquisition of unprofitable bowling centers. 
    Id. at 479-80.
    The plaintiffs, like McKenzie, sought treble dam-
    ages under § 4 of the Clayton Act. The Court considered the
    “narrow” issue of “whether antitrust damages are available
    where the sole injury alleged is that competitors were contin-
    ued in business, thereby denying [the plaintiffs] an anticipated
    increase in market shares.” 
    Id. at 484.
    The Court observed
    that the damages the plaintiffs sought were “designed to pro-
    vide them with the profits they would have realized had com-
    petition been reduced.” 
    Id. at 488.
    Noting that “[t]he antitrust
    laws, however, were enacted for ‘the protection of competi-
    tion not competitors,’ ” the Court reasoned that “[i]t is inimi-
    cal to the purposes of these laws to award damages for the
    type of injury claimed here.” 
    Id. (quoting Brown
    Shoe Co. v.
    United States, 370 U.S., 294, 320 (1962)). The Court con-
    cluded:
    We therefore hold that for plaintiffs to recover treble
    damages on account of § 7 violations, they must
    prove more than injury causally linked to an illegal
    presence in the market. Plaintiffs must prove anti-
    trust injury, which is to say injury of the type the
    antitrust laws were intended to prevent and that
    flows from that which makes defendants’ acts
    unlawful. The injury should reflect the anticompeti-
    tive effect either of the violation or of anticompeti-
    tive acts made possible by the violation.
    11
    Section 7 of the Clayton Act forbids acquisitions that “substantially
    . . . lessen competition[ ] or tend to create a monopoly.” 15 U.S.C. § 18.
    CASCADE HEALTH v. PEACEHEALTH               1601
    
    Id. at 489.
    Subsequent to Brunswick, the Court has often reinforced
    the principle that the antitrust laws’ prohibitions focus on pro-
    tecting the competitive process and not on the success or fail-
    ure of individual competitors. See, e.g., Volvo Trucks N. Am.,
    Inc. v. Reeder-Simco GMC, Inc., 
    546 U.S. 164
    , ___ 
    126 S. Ct. 860
    , 872 (2006) (“Interbrand competition, our opinions
    affirm, is the primary concern of antitrust law.” (internal quo-
    tation omitted)); Spectrum 
    Sports, 506 U.S. at 458
    (“The pur-
    pose 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 con-
    duct which is competitive, even severely so, but against con-
    duct which unfairly tends to destroy competition itself.”); Atl.
    
    Richfield, 495 U.S. at 331
    (holding that a firm does not incur
    an antitrust injury when it loses sales to a competitor charging
    nonpredatory prices pursuant to a vertical, maximum-price-
    fixing scheme); Cargill, Inc. v. Monfort of Colo., Inc., 
    479 U.S. 104
    , 113 (1986) (extending antitrust injury requirement
    to suits for injunctive relief under § 16 of the Clayton Act, 15
    U.S.C. § 26); J. Truett Payne Co. v. Chrysler Motors Corp.,
    
    451 U.S. 557
    , 562 (1981) (extending antitrust injury require-
    ment to price discrimination suits arising under § 2 of the
    Clayton Act). The Court’s reasoning and conclusions in
    Brooke Group, as reaffirmed recently in Weyerhauser,
    accordingly show a measured concern to leave unhampered
    pricing practices that might benefit consumers, absent the
    clearest showing that an injury to the competitive process will
    result. 
    Microsoft, 253 F.3d at 58
    ; Concord Boat Corp. v.
    Brunswick Corp., 
    207 F.3d 1039
    , 1060-61 (8th Cir. 2000).
    One of the challenges of interpreting and enforcing the
    amorphous prohibitions of §§ 1 and 2 of the Sherman Act is
    ensuring that the antitrust laws do not punish economic
    behavior that benefits consumers and will not cause long-run
    injury to the competitive process. A bundled discount, how-
    ever else it might be viewed, is a price discount on a collec-
    1602                 CASCADE HEALTH v. PEACEHEALTH
    tion of goods. The Supreme Court has undoubtedly shown a
    solicitude for price competition. In Weyerhaeuser, Justice
    Thomas, writing for the Court, reminded us that, in Brooke
    Group, the Court had cautioned that “the costs of erroneous
    findings of predatory-pricing liability were quite high because
    [t]he mechanism by which a firm engages in predatory pricing
    —lowering prices—is the same mechanism by which a firm
    stimulates competition, and therefore, mistaken findings of
    liability would chill the very conduct the antitrust laws are
    designed to protect.” 
    Weyerhaeuser, 127 S. Ct. at 1075
    (inter-
    nal quotations omitted, alteration in original).
    [5] Given the endemic nature of bundled discounts in many
    spheres of normal economic activity, we decline to endorse
    the Third Circuit’s definition of when bundled discounts con-
    stitute the exclusionary conduct proscribed by § 2 of the Sher-
    man Act. Instead, we think the course safer for consumers and
    our competitive economy to hold that bundled discounts may
    not be considered exclusionary conduct within the meaning of
    § 2 of the Sherman Act unless the discounts resemble the
    behavior that the Supreme Court in Brooke Group identified
    as predatory.12 Accordingly, we hold that the exclusionary
    12
    McKenzie contends that Brooke Group is not persuasive in this case
    because Brooke Group dealt with liability for primary-line price discrimi-
    nation in violation of § 2(a) of the Robinson-Patman Act, whereas this
    case arises under § 2 of the Sherman Act. However, the Court made clear
    in Brooke Group that, whether a predatory pricing claim arises under
    § 2(a) of the Robinson-Patman Act or § 2 of the Sherman Act, the con-
    cerns are essentially the same, noting that:
    There are, to be sure, differences between the two statutes. For
    example, we interpret § 2 of the Sherman Act to condemn preda-
    tory pricing when it poses “a dangerous probability of actual
    monopolization,” whereas the Robinson-Patman Act requires
    only that there be “a reasonable possibility” of substantial injury
    to competition before its protections are triggered. But whatever
    additional flexibility the Robinson-Patman Act standard may
    imply, the essence of the claim under either statute is the same:
    A business rival has priced its products in an unfair manner with
    an object to eliminate or retard competition and thereby gain and
    exercise control over prices in the relevant market.
    Brooke 
    Group, 509 U.S. at 222
    (citations omitted).
    CASCADE HEALTH v. PEACEHEALTH                      1603
    conduct element of a claim arising under § 2 of the Sherman
    Act cannot be satisfied by reference to bundled discounts
    unless the discounts result in prices that are below an appro-
    priate measure of the defendant’s costs.13
    4
    The next question we must address is how we define the
    appropriate measure of the defendant’s costs in bundled dis-
    counting cases and how we determine whether discounted
    prices fall below that mark. Defining the appropriate measure
    of costs in a bundled discounting case is more complex than
    in a single product case. In a single product case, we may sim-
    ply ask whether the defendant has priced its product below its
    incremental cost of producing that product because a rival that
    produces the same product as efficiently as the defendant
    should be able to match any price at or above the defendant’s
    cost. However, as we discussed above, a defendant offering
    a bundled discount, without pricing below cost either the indi-
    vidual products in the bundle or the bundle as a whole, can,
    in some cases, exclude a rival who produces one of the prod-
    ucts in the bundle equally or more efficiently than the defen-
    dant. Thus, simply asking whether the defendant’s prices are
    below its incremental costs might fail to alert us to bundled
    discounts that threaten the exclusion of equally efficient
    rivals. Nonetheless, we are mindful that, in single product
    pricing cases, the Supreme Court has not adopted rules con-
    demning prices above a seller’s incremental costs. With these
    considerations in mind, we assess the rules the parties and
    amici propose for us to use in bundled discounting cases to
    determine the appropriate measure of a defendant’s costs and
    whether a defendant has priced below that level.
    13
    Of course, even if the exclusionary conduct element is satisfied by
    bundled discounts at price levels that yield a conclusion of below-cost
    sales, under the appropriate measure, there cannot be Sherman Act § 2 lia-
    bility for attempted monopolization unless the other elements of a specific
    intent to monopolize and dangerous probability of success are satisfied.
    1604           CASCADE HEALTH v. PEACEHEALTH
    PeaceHealth and some amici urge us to adopt a rule they
    term the “aggregate discount” rule. This rule condemns bun-
    dled discounts as anticompetitive only in the narrow cases in
    which the discounted price of the entire bundle does not
    exceed the bundling firm’s incremental cost to produce the
    entire bundle. PeaceHealth and amici argue that support for
    such a rule can be found in the Supreme Court’s single prod-
    uct predation cases—Brooke Group and Weyerhaeuser.
    We are not persuaded that those cases require us to adopt
    an aggregate discount rule in multi-product discounting cases.
    As we discussed above, bundled discounts present one poten-
    tial threat to consumer welfare that single product discounts
    do not: A competitor who produces fewer products than the
    defendant but produces the competitive product at or below
    the defendant’s cost to produce that product may nevertheless
    be excluded from the market because the competitor cannot
    match the discount the defendant offers over its numerous
    product lines. This possibility exists even when the defen-
    dant’s prices are above cost for each individual product and
    for the bundle as a whole. See 
    Ortho, 920 F. Supp. at 467
    ;
    
    Nalebuff, supra
    , 50 Antitrust Bull. at 359 (“Whether or not a
    collection of goods is sold at a profit does not reveal whether
    one-good rivals were foreclosed.”). Under a discount aggrega-
    tion rule, anticompetitive bundled discounting schemes that
    harm competition may too easily escape liability.
    [6] Additionally, as commentators have pointed out,
    Brooke Group’s safe harbor for above-cost discounting in the
    single product discount context is not based on a theory that
    above-cost pricing strategies can never be anticompetitive, but
    rather on a cost-benefit rejection of a more nuanced rule. 3
    Areeda & Hovenkamp, supra, ¶ 749b at 324 (Supp. 2006);
    
    Lambert, supra
    , 
    89 Minn. L
    . Rev. at 1704; see also Verizon
    Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 
    540 U.S. 398
    , 414 (2004) (explaining that while above-cost preda-
    tory pricing schemes may exist, they are “ ‘beyond the practi-
    cal ability of a judicial tribunal to control’ ” (quoting Brooke
    CASCADE HEALTH v. PEACEHEALTH                1605
    
    Group, 509 U.S. at 223
    )). That is, the safe harbor rests on the
    premise that “any consumer benefit created by a rule that per-
    mits inquiry into above-cost, single-product discounts, but
    allows judicial condemnation of those deemed legitimately
    exclusionary, would likely be outweighed by the consumer
    harm occasioned by overdeterring nonexclusionary dis-
    counts.” 
    Lambert, supra
    , 
    89 Minn. L
    . Rev. at 1705; see
    
    Weyerhaeuser, 127 S. Ct. at 1075
    (noting the high costs of
    erroneous findings of predatory-pricing liability because
    “[t]he mechanism by which a firm engages in predatory
    pricing—lowering prices—is the same mechanism by which
    a firm stimulates competition” (alteration in original, internal
    quotations omitted)); 3 Areeda & Hovenkamp, supra, ¶ 749b
    at 324 (Supp. 2006) (noting that “our measurement tools are
    too imprecise to evaluate [above-cost discounting] strategies
    without creating an intolerable risk of chilling competitive
    behavior”). So, in adopting an appropriate cost-based test for
    bundled discounting cases, we should not adopt an aggregate
    discount rule without inquiring whether a rule exists that is
    more likely to identify anticompetitive bundled discounting
    practices while at the same time resulting in little harm to
    competition.
    The first potential alternative cost-based standard we con-
    sider derives from the district court’s opinion in Ortho. This
    standard deems a bundled discount exclusionary if the plain-
    tiff can show that it was an equally efficient producer of the
    competitive product, but the defendant’s bundled discount
    made it impossible for the plaintiff to continue to produce
    profitably the competitive product. As the district court in
    Ortho phrased the standard: a plaintiff basing a § 2 claim on
    an anticompetitive bundled discount “must allege and prove
    either that (a) the monopolist has priced below its average
    variable cost or (b) the plaintiff is at least as efficient a pro-
    ducer of the competitive product as the defendant, but that the
    defendant’s pricing makes it unprofitable for the plaintiff to
    continue to produce.” 
    Ortho, 920 F. Supp. at 469
    . Under this
    standard, above-cost prices are not per se legal. Cf. Brooke
    1606            CASCADE HEALTH v. PEACEHEALTH
    
    Group, 509 U.S. at 222
    . Instead, this standard treats below-
    cost prices as simply one beacon for identifying discounts that
    create the risk of excluding firms that are as efficient as the
    defendant—the unique anticompetitive risk posed by bundled
    discounts. See 
    Ortho, 920 F. Supp. at 466-67
    . Under Ortho’s
    standard, an above-cost discount can still be anticompetitive
    if a plaintiff proves it is as efficient a producer as the defen-
    dant, but is excluded because the defendant sells in more
    product markets than the plaintiff and can “spread the total
    discount over all those product lines and . . . force competitors
    to provide the entire dollar amount of the discount on a smal-
    ler collection of products.” 
    Lambert, supra
    , 
    89 Minn. L
    . Rev.
    at 1728. As compared to the discount aggregation rule,
    Ortho’s approach does a better job of identifying bundled dis-
    counts that threaten harm to competition.
    However, one downside of Ortho’s standard is that it does
    not provide adequate guidance to sellers who wish to offer
    procompetitive bundled discounts because the standard looks
    to the costs of the actual plaintiff. A potential defendant who
    is considering offering a bundled discount will likely not have
    access to information about its competitors’ costs, thus mak-
    ing it hard for that potential discounter, under the Ortho stan-
    dard, to determine whether the discount it wishes to offer
    complies with the antitrust laws. Also, the Ortho standard,
    which asks whether the actual plaintiff is as efficient a pro-
    ducer as the defendant, could require multiple suits to deter-
    mine the legality of a single bundled discount. While it might
    turn out that the plaintiff in one particular case is not as effi-
    cient a producer of the competitive product as the defendant,
    another rival might be. This second rival would have to bring
    another suit under the Ortho approach. We decline to adopt
    a rule that might encourage more antitrust litigation than is
    reasonably necessary to ferret out anticompetitive practices.
    See Bell Atl. Corp. v. Twombly, 
    127 S. Ct. 1955
    , 1966-67
    (2007); see also Manual for Complex Litigation (Fourth) § 30
    (2004) (“Antitrust litigation can . . . involve voluminous docu-
    mentary and testimonial evidence, extensive discovery, com-
    CASCADE HEALTH v. PEACEHEALTH                       1607
    plicated legal, factual, and technical (particularly economic)
    questions, numerous parties and attorneys, and substantial
    sums of money . . . . Antitrust trials usually are long, and there
    often are controversies over settlements and attorney fees.”).
    Accordingly, we do not adopt Ortho’s approach, which we
    believe would be unduly cumbersome for sellers to assess and
    thus might chill procompetitive bundled discounting.
    [7] Instead, as our cost-based rule, we adopt what amici
    refer to as a “discount attribution” standard.14 Under this stan-
    dard, the full amount of the discounts given by the defendant
    on the bundle are allocated to the competitive product or
    products. If the resulting price of the competitive product or
    products is below the defendant’s incremental cost to produce
    them, the trier of fact may find that the bundled discount is
    exclusionary for the purpose of § 2. This standard makes the
    defendant’s bundled discounts legal unless the discounts have
    the potential to exclude a hypothetical equally efficient pro-
    ducer of the competitive product.15 Cf. 
    Ortho, 920 F. Supp. at 14
          In the academic literature, this standard is sometimes referred to as a
    “discount allocation” or “discount reallocation” standard. See e.g., Daniel
    A. Crane, Multiproduct Discounting: A Myth of Nonprice Predation, 72
    U. Chi. L. Rev. 27, 28 (2005).
    15
    A variation of the example from Ortho illustrates how the discount
    attribution standard condemns discounts that could not be matched by an
    equally or more efficient producer of the competitive product. Recall that
    the example involves A, a firm that makes both shampoo and conditioner.
    A’s incremental cost of shampoo is $1.50 and A’s incremental cost of con-
    ditioner is $2.50. A prices shampoo at $3 and conditioner at $5, if pur-
    chased separately. However, if purchased as a bundle, A prices shampoo
    at $2.25 and conditioner at $3. Purchased separately from A, the total
    price of one unit of shampoo and one unit of conditioner is $8. However,
    with the bundled discount, a customer can purchase both products from A
    for $5.25, a discount of $2.75 off the separate prices, but at a price that
    is still above A’s variable cost of producing the bundle. Applying the dis-
    count attribution rule to the example, we subtract the entire discount on
    the package of products, $2.75, from the separate per unit price of the
    competitive product, shampoo, $3. The resulting effective price of sham-
    poo is thus $0.25, meaning that, if a customer must purchase conditioner
    1608              CASCADE HEALTH v. PEACEHEALTH
    469 (deeming bundled discounts anticompetitive if the actual
    plaintiff is excluded but equally efficient).
    In their leading treatise on antitrust law, Professors Areeda
    and Hovenkamp support an approach that focuses on whether
    a bundled discount excludes a hypothetical equally efficient
    rival. Rejecting Ortho’s “actual plaintiff” standard, they
    explain:
    [W]e would not require a showing that the actual
    plaintiff be equally efficient. The relevant question is
    not necessarily whether a particular plaintiff was
    equally efficient, but whether the challenged bun-
    dling practices would have excluded an equally effi-
    cient rival, without reasonable justification. This rule
    is preferable on grounds of both administrability and
    principle. On the first, proving whether a hypotheti-
    cal equally efficient rival is excluded by a multipro-
    duct discount is typically quite manageable. By
    contrast, proof that the plaintiff is equally efficient
    can be quite difficult, particularly in cases where the
    defendant produces a larger product line than the
    plaintiff and there are joint costs.
    A requirement that the bundling practice be suffi-
    ciently severe so as to exclude an equally efficient
    from A at the separate price of $5, a rival who produces only shampoo
    must sell the shampoo for $0.25 to make customers indifferent between
    A’s bundle and the separate purchase of conditioner from A and shampoo
    from the hypothetical rival. A’s pricing scheme thus has the effect of
    excluding any potential rival who would produce only shampoo, and
    would produce it at an incremental cost above $0.25. However, as we
    noted above, A’s incremental cost of producing shampoo is $1.50. Thus,
    A’s pricing practices exclude potential competitors that could produce
    shampoo more efficiently than A (i.e., at an incremental cost of less than
    $1.50). A’s discount could thus be considered exclusionary under our rule,
    supporting Sherman Act § 2 liability if the other elements were proved.
    CASCADE HEALTH v. PEACEHEALTH                   1609
    single-product rival, and without an adequate busi-
    ness justification, seems to strike about the right bal-
    ance between permitting aggressive pricing while
    prohibiting conduct that can only be characterized as
    anticompetitive. Requiring the defendant’s pricing
    policies to protect the trade of higher cost rivals is
    overly solicitous of small firms and denies customers
    the benefits of the defendant’s lower costs. Further,
    if the practice will exclude an equally efficient rival,
    then it will exclude whether or not the rival is
    equally efficient in fact.
    3 Areeda & Hovenkamp, supra, ¶ 749a at 322-23 (Supp.
    2006) (footnotes omitted); accord 
    Nalebuff, supra
    , 50 Anti-
    trust Bull. at 328-29. Judge Posner’s work on antitrust law
    also supports an approach that asks whether a bundled dis-
    count excludes a hypothetical equally efficient rival, stating
    that the acts of a monopolist should be deemed exclusionary
    if “the challenged practice is likely in the circumstances to
    exclude from the defendant’s market an equally or more effi-
    cient competitor.” 
    Posner, supra, at 194-95
    .
    Areeda and Hovenkamp also support using a discount attri-
    bution approach to determine if a bundled discount is exclu-
    sionary. They state:
    To see whether a package price is “exclusionary” . . .
    one simply attributes the entire discount on all prod-
    ucts in the package to the product for which exclu-
    sion is claimed. If the resulting price is less than the
    defendant’s cost, then the package discount is exclu-
    sionary as against a rival who makes only one of the
    two goods in the package.
    3 Areeda & Hovenkamp, supra, ¶ 749b2 at 335-36 (Supp.
    2006) (footnotes omitted); accord 
    Nalebuff, supra
    , 50 Anti-
    trust Bull. at 328. The discount attribution standard has also
    been used by two of the district courts in the small number of
    1610                 CASCADE HEALTH v. PEACEHEALTH
    published opinions dealing with allegedly exclusionary bun-
    dled discounts. See Info. Res., Inc. v. Dun & Bradstreet Corp.,
    
    359 F. Supp. 2d 307
    , 307 (S.D.N.Y. 2004) (“When price dis-
    counts in one market are bundled with the price charged in a
    second market, the discounts must be applied to the price in
    the second market in determining whether that price is below
    that product’s average variable cost.”); Virgin Atl. Airways
    Ltd. v. British Airways PLC, 
    69 F. Supp. 2d 571
    , 580 n.8
    (S.D.N.Y. 1999) (holding that a bundled discount is exclu-
    sionary “if the competitive product in the bundle [was] sold
    for a price below average variable cost after the discounts on
    the monopoly items in the bundle were subtracted from the
    price of that competitive product”), aff’d, 
    257 F.3d 256
    (2d
    Cir. 2001). The discount attribution standard is also the stan-
    dard endorsed by the AMC. AMC 
    Report, supra, at 99
    (requiring plaintiff to prove that “after allocating all discounts
    and rebates attributable to the entire bundle of products to the
    competitive product, the defendant sold the competitive prod-
    uct below its incremental cost for the competitive product”).
    The discount attribution standard provides clear guidance
    for sellers that engage in bundled discounting practices. A
    seller can easily ascertain its own prices and costs of produc-
    tion and calculate whether its discounting practices run afoul
    of the rule we have outlined. See 
    Nalebuff, supra
    , 50 Antitrust
    Bull. at 330. Unlike under the Ortho standard, under the dis-
    count attribution standard a bundled discounter need not fret
    over and predict or determine its rivals’ cost structure.16
    16
    Professor Nalebuff identifies the practical problem of calculating a
    rival firm’s costs as a compelling argument in favor of a standard that
    focuses on whether bundled discounts would exclude a hypothetical
    equally efficient competitor:
    There is . . . a practical problem in determining if a rival firm is
    equally efficient or not. The problem is compounded for the
    monopolist who is looking for a bright line test to know whether
    its bundled pricing might be exclusionary or not. The solution to
    both these problems is to pick the monopolist itself as the equally
    efficient rival.
    
    Nalebuff, supra
    , 50 Antitrust Bull. at 330.
    CASCADE HEALTH v. PEACEHEALTH                       1611
    We are aware that liability under the discount attribution
    standard has the potential to sweep more broadly than under
    the aggregate discount rule or the Ortho standard. However,
    there is limited judicial experience with bundled discounts,
    and academic inquiry into the competitive effects of bundled
    discounts is only beginning.17 By comparison, the Supreme
    Court’s decision in Brooke Group (prefaced by the Court’s
    discussion of predatory pricing in 
    Matsushita, 475 U.S. at 588-91
    ) marked the culmination of nearly twenty years of
    scholarly and judicial analysis of the feasibility and competi-
    tive effects of single product predatory pricing schemes.18 Cf.
    3 Areeda & Hovenkamp, supra, ¶ 749b at 323 (Supp. 2006)
    (“[T]he theory of anticompetitive discounting is in much the
    same position as the theory of predatory pricing was in the
    1970s: no shortage of theories, but a frightening inability of
    courts to assess them.”). The cost-based standard we adopt
    will allow courts the experience they need to divine the preva-
    lence and competitive effects of bundled discounts and will
    17
    Although the volume of case law dealing with bundled discounting is
    small, one thirty-year-old case shows that antitrust claims based on bun-
    dled discounting practices are nothing new under the sun. See SmithKline
    Corp. v. Eli Lilly & Co., 
    427 F. Supp. 1089
    , 1124 (E.D. Pa. 1976), aff’d,
    
    575 F.2d 1056
    (3d Cir. 1978).
    18
    A 1975 article by Professors Areeda and Turner ignited the modern
    debate about predatory pricing, see Phillip Areeda & Donald F. Turner,
    Predatory Pricing and Related Practices Under Section 2 of the Sherman
    Act, 88 Harv. L. Rev. 697 (1975), and many prominent antitrust scholars
    weighed in on the topic in the following decade-and-a-half. See, e.g., Rob-
    ert H. Bork, The Antitrust Paradox 154-55 (1978); George A. Hay, Preda-
    tory Pricing, 58 Antitrust L.J. 913 (1989); Frank H. Easterbrook,
    Predatory Strategies and Counterstrategies, 48 U. Chi. L. Rev. 263
    (1981); Paul L. Joskow & Alvin K. Klevorick, A Framework for Analyz-
    ing Predatory Pricing Policy, 89 Yale L.J. 213 (1979); William J. Bau-
    mol, Quasi-Permanence of Price Reductions: A Policy for Prevention of
    Predatory Pricing, 89 Yale L.J. 1 (1979); Oliver E. Williamson, Preda-
    tory Pricing: A Strategic and Welfare Analysis, 87 Yale L.J. 284 (1977);
    see also Wesley J. Leibeler, Whither Predatory Pricing? From Areeda
    and Turner to Matsushita, 61 Notre Dame L. Rev. 1052 (1986) (discuss-
    ing the history of predatory pricing theory in the courts and academic liter-
    ature).
    1612           CASCADE HEALTH v. PEACEHEALTH
    allow these difficult issues to further percolate in the lower
    courts. As the Solicitor General noted in his amicus brief urg-
    ing the denial of certiorari in LePage’s:
    There is insufficient experience with bundled dis-
    counts to this point to make a firm judgment about
    the relative prevalence of exclusionary versus pro-
    competitive bundled discounts. Relative to the prac-
    tice of predatory pricing analyzed in Brooke Group,
    there is less knowledge on which to assess whether,
    or to what extent, the legal approach to a monopo-
    list’s allegedly exclusionary bundled discounts
    should be driven by a strong concern for false posi-
    tives and low risk of false negatives. Further empiri-
    cal development may shed light on that question.
    Brief for United States as Amicus Curiae at 14, 3M Co. v.
    LePage’s Inc., 
    124 S. Ct. 2932
    (2004) (No. 02-1865), 
    2004 WL 1205191
    (citation omitted). Pending further judicial and
    academic inquiry into the prevalence of anticompetitive bun-
    dled discounts, we think it preferable to allow plaintiffs to
    challenge bundled discounts if those plaintiffs can prove a
    defendant’s bundled discounts would have excluded an
    equally efficient competitor.
    To summarize, the primary anticompetitive danger posed
    by a multi-product bundled discount is that such a discount
    can exclude a rival is who is equally efficient at producing the
    competitive product simply because the rival does not sell as
    many products as the bundled discounter. Thus, a plaintiff
    who challenges a package discount as anticompetitive must
    prove that, when the full amount of the discounts given by the
    defendant is allocated to the competitive product or products,
    the resulting price of the competitive product or products is
    below the defendant’s incremental cost to produce them. This
    requirement ensures that the only bundled discounts con-
    demned as exclusionary are those that would exclude an
    CASCADE HEALTH v. PEACEHEALTH                1613
    equally efficient producer of the competitive product or prod-
    ucts.
    5
    [8] The next issue before us is the appropriate measure of
    incremental costs in a bundled discounting case. In single
    product predatory pricing cases, the appropriate measure of
    incremental costs is an open question in this circuit. See Rebel
    Oil Co. v. Atl. Richfield Co., 
    146 F.3d 1088
    , 1092 (9th Cir.
    1998). The Supreme Court has likewise refused to decide the
    matter. See Brooke 
    Group, 509 U.S. at 222
    n.1; 
    Cargill, 479 U.S. at 118
    n.12.
    As our cases and the relevant academic literature thor-
    oughly discuss, firms face both fixed costs—costs that a firm
    must bear regardless of the amount of output—and variable
    costs—costs that change with the amount of output. The sum
    of fixed and variable costs is a firm’s total cost. Marginal cost
    is the increase to total cost that occurs as a result of producing
    one additional unit of output. Average cost is the sum of fixed
    costs and total variable costs, divided by the amount of out-
    put. In their oft-cited 1975 law review article, Professors
    Areeda and Turner concluded that the optimal measure of a
    firm’s cost in a predatory pricing case is marginal cost—the
    cost to produce one additional unit and the price that would
    obtain in the market under conditions of perfect competition.
    See Phillip Areeda & Donald F. Turner, Predatory Pricing
    and Related Practices Under Section 2 of the Sherman Act, 88
    Harv. L. Rev. 697, 712, 716 (1975). However, Professors
    Areeda and Turner also recognized that “[t]he incremental
    cost of making and selling the last unit cannot readily be
    inferred from conventional business accounts, which typically
    go no further than showing observed average variable cost.”
    
    Id. at 716.
    Thus, the professors adopted average variable cost
    as a surrogate for marginal cost. 
    Id. A number
    of circuits have
    adopted the Areeda-Turner formulation and concluded that
    prices below average variable cost can indicate predation. See,
    1614                 CASCADE HEALTH v. PEACEHEALTH
    e.g., Stearns Airport Equip. Co. v. FMC Corp., 
    170 F.3d 518
    ,
    532 (5th Cir. 1999); Morgan v. Ponder, 
    892 F.2d 1355
    , 1360
    (8th Cir. 1989); Barry 
    Wright, 724 F.2d at 236
    ; Ne. Tel. Co.
    v. AT&T Co., 
    651 F.2d 76
    , 87-88 (2d Cir. 1981).19
    [9] Likewise, “we have approved the use of marginal or
    average variable cost statistics in proving predation.” See Wil-
    liam Inglis & Sons Baking Co. v. ITT Cont’l Baking Co., 
    668 F.2d 1014
    , 1033 (9th Cir. 1981).20 We have also held that a
    plaintiff can establish a prima facie case of predatory pricing
    19
    At least one circuit has held that average total cost, not average vari-
    able cost, is the appropriate baseline for determining predation. See
    McGahee v. N. Propane Gas Co., 
    858 F.2d 1487
    , 1500 (11th Cir. 1988).
    However, such an approach is inconsistent with the Supreme Court’s
    instruction in Brooke Group that predatory prices are those below “ ‘some
    measure of incremental cost.’ ” Brooke 
    Group, 509 U.S. at 223
    (quoting
    
    Cargill, 479 U.S. at 117-18
    n.12) (emphasis added). As the Antitrust Law
    treatise explains:
    In the ordinary case a predator increases output out of existing
    facilities, cutting the price to predatory levels. For this reason the
    Supreme Court has emphasized that predators must have excess
    capacity from which to produce the increased output. But in that
    case, the only “incremental” cost of the predation is variable
    costs.
    3 Areeda & Hovenkamp, supra, ¶ 741c at 444 (2d ed. 2002) (footnote
    omitted).
    20
    In a number of cases decided before Brooke Group, we held that pric-
    ing below marginal cost or average variable cost provided evidence that
    a pricing scheme was predatory, but also held that that mode of proof was
    not exclusive. See Transamerica Computer Co. v. IBM Corp., 
    698 F.2d 1377
    , 1385 (9th Cir. 1983); 
    Inglis, 668 F.2d at 1033
    . We suggested that
    an above-cost pricing policy could be predatory if accompanied by evi-
    dence of predatory intent, market power, or “long-run behavior.” See
    
    Transamerica, 698 F.2d at 1387
    . Other circuits rejected the notion that
    predation could be proved through evidence of intent alone, see, e.g.,
    Barry 
    Wright, 724 F.2d at 232
    , and Brooke Group’s holding that “a plain-
    tiff seeking to establish competitive injury resulting from a rival’s low
    prices must prove that the prices complained of are below an appropriate
    measure of its rival’s costs” put to rest any notion that predation can be
    proven through evidence of intent alone, Brooke 
    Group, 509 U.S. at 222
    .
    CASCADE HEALTH v. PEACEHEALTH                      1615
    by proving that the defendant’s prices were below average
    variable cost. 
    Id. at 1036.
    We see no reason to depart from
    these principles in the bundled discounting context, and we
    hold that the appropriate measure of costs for our cost-based
    standard is average variable cost.
    6
    [10] In summary, we hold the following: To prove that a
    bundled discount was exclusionary or predatory for the pur-
    poses of a monopolization or attempted monopolization claim
    under § 2 of the Sherman Act, the plaintiff must establish that,
    after allocating the discount given by the defendant on the
    entire bundle of products to the competitive product or prod-
    ucts, the defendant sold the competitive product or products
    below its average variable cost of producing them. The dis-
    trict court’s jury instruction on the attempted monopolization
    claim, which built on the holding of LePage’s that we have
    rejected, thus contained an error of law.21
    21
    As we noted above, the AMC’s proposed standard in bundled dis-
    counting cases, in addition to requiring below-cost pricing, also contains
    two further proposed elements.
    The second element proposed by the AMC is that there is a dangerous
    probability that the defendant will recoup its investment in the bundled
    discounting program. AMC 
    Report, supra, at 99
    . This requirement,
    adopted from Brooke Group, is imported from the single product preda-
    tory pricing context, but we think imported incorrectly. We do not believe
    that the recoupment requirement from single product cases translates to
    multi-product discounting cases. Single-product predatory pricing, unlike
    bundling, necessarily involves a loss for the defendant. For a period of
    time, the defendant must sell below its cost, with the intent to eliminate
    its competitors so that, when its competition is eliminated, the defendant
    can charge supracompetitive prices, recouping its losses and potentially
    more. By contrast, as discussed above, exclusionary bundling does not
    necessarily involve any loss of profits for the bundled discounter. See
    
    Nalebuff, supra
    , 50 Antitrust Bull. at 327. As the example from Ortho
    illustrates, a bundled discounter can exclude its rivals who do not sell as
    many product lines even when the bundle as a whole, and the individual
    products within it, are priced above the discounter’s incremental cost to
    1616               CASCADE HEALTH v. PEACEHEALTH
    [11] McKenzie argues that we may nevertheless affirm the
    jury’s verdict on the principle that flawed jury instructions are
    a harmless error when the facts which needed to be proven are
    strongly supported by the evidence presented at trial. See
    Harmsen v. Smith, 
    693 F.2d 932
    , 945 (9th Cir. 1982); Cancel-
    lier v. Federated Dep’t Stores, 
    672 F.2d 1312
    , 1316 (9th Cir.
    1982). In support of this argument, McKenzie points out that
    there was “undisputed evidence of [PeaceHealth’s] higher
    prices and the need for [McKenzie] to sell beneath variable
    cost to hold Regence harmless from [PeaceHealth’s] threat-
    ened price increases.” However, as we have held, the relevant
    inquiry is not whether PeaceHealth’s pricing practices forced
    McKenzie to price below cost, but whether PeaceHealth
    produce them. The trier of fact can identify cases that present this possibil-
    ity for anticompetitive exclusion by applying the discount attribution stan-
    dard outlined above. Under that standard, the ultimate question is whether
    the bundled discount would exclude an equally efficient rival. But because
    discounts on all products in the bundle have been allocated to the competi-
    tive product in issue, a conclusion of below-cost sales under the discount
    attribution standard may occur in some cases even where there is not an
    actual loss because the bundle is sold at a price exceeding incremental
    cost. In such a case, we do not think it is analytically helpful to think in
    terms of recoupment of a loss that did not occur.
    The third element proposed by the AMC is that “the bundled discount
    or rebate program has had or is likely to have an adverse effect on compe-
    tition.” AMC 
    Report, supra, at 99
    . We view this final element as redun-
    dant because it is no different than the general requirement of “antitrust
    injury” that a plaintiff must prove in any private antitrust action. See
    
    Brunswick, 429 U.S. at 489
    (defining antitrust injury as “injury of the type
    the antitrust laws were intended to prevent and that flows from that which
    makes defendants’ acts unlawful” and noting that “[t]he injury should
    reflect the anticompetitive effect either of the violation or of anticompeti-
    tive acts made possible by the violation”).
    For these reasons, while adopting the AMC’s proposal to require below-
    cost sales to prove exclusionary conduct, we do not adopt the element of
    recoupment, which we think may be inapplicable in some cases, and we
    do not adopt the element of “adverse effect on competition” as we think
    that is superfluous in light of the general and pre-existing requirement of
    antitrust injury under Brunswick.
    CASCADE HEALTH v. PEACEHEALTH                       1617
    priced its own services below an appropriate measure of its
    cost, as we have defined that concept using the discount attri-
    bution rule. In this case, we cannot conclude that the error in
    the jury instructions was harmless. We vacate the judgment
    entered in McKenzie’s favor and remand for further proceed-
    ings consistent with our opinion.22
    B
    [12] After trial, the jury also returned a verdict in favor of
    McKenzie on its claim of primary-line price discrimination
    under Oregon state law. Because the validity of that jury ver-
    dict rests upon an unsettled question of Oregon antitrust law,
    we have certified that question to the Oregon Supreme Court.
    C
    [13] Finally, the jury found in favor of McKenzie on its
    Oregon tort law claim of intentional interference with pro-
    spective economic advantage. The parties agree that a claim
    of tortious interference under Oregon law requires a comple-
    mentary finding of a violation of the antitrust laws. See Kovac
    v. Crooked River Ranch Club & Maint. Ass’n, 
    63 P.3d 1197
    ,
    1201 (Or. Ct. App. 2003); Willamette Dental Group, P.C. v.
    Or. Dental Serv. Corp., 
    882 P.2d 637
    , 644 (Or. Ct. App.
    1994). Because we have vacated the jury’s verdict in favor of
    22
    PeaceHealth also argues that because the jury found in its favor on
    McKenzie’s claim of exclusive dealing under § 1 of the Sherman Act, it
    is entitled to judgment as a matter of law on McKenzie’s claim of
    attempted monopolization under § 2 of the Sherman Act. Our vacatur of
    the jury’s verdict on the attempted monopolization claim makes it unnec-
    essary for us to fully address that argument. However, we previously have
    held that “[t]he ‘predatory or anticompetitive conduct’ element of § 2
    attempt, like the conduct element of monopolization, encompasses more
    than violations of § 1.” Cal. Computer Prods., Inc. v. IBM Corp., 
    613 F.2d 727
    , 737 (9th Cir. 1979). Specifically, § 1 is limited to concerted activity,
    while § 2 reaches unilateral exclusive conduct. See id.; 
    Microsoft, 253 F.3d at 70
    .
    1618            CASCADE HEALTH v. PEACEHEALTH
    McKenzie on McKenzie’s antitrust claims, we also vacate the
    jury’s verdict in favor of McKenzie on McKenzie’s claim of
    intentional interference with prospective economic advantage.
    III
    We next address McKenzie’s cross-appeal.
    A
    Before trial, the district court granted PeaceHealth sum-
    mary judgment on McKenzie’s claim that PeaceHealth ille-
    gally tied primary and secondary services to its provision of
    tertiary services in violation of § 1 of the Sherman Act, 15
    U.S.C. § 1. The district court granted summary judgment
    because McKenzie presented no evidence that the insurers
    were coerced into taking the tied product.
    We review de novo the district court’s grant of summary
    judgment. Welles v. Turner Entm’t Co., 
    488 F.3d 1178
    , 1183
    (9th Cir. 2007). Federal Rule of Civil Procedure 56(c) entitles
    a party to summary judgment “if the pleadings, depositions,
    answers to interrogatories, and admissions on file, together
    with the affidavits, if any, show that there is no genuine issue
    as to any material fact and that the moving party is entitled to
    a judgment as a matter of law.” In deciding a motion for sum-
    mary judgment, we view the evidence in the light most favor-
    able to the non-moving party, and draw all justifiable
    inferences in favor of the non-moving party. Anderson v. Lib-
    erty Lobby, Inc., 
    477 U.S. 242
    , 255 (1986); Betz v. Trainer
    Wortham & Co., 
    486 F.3d 590
    , 591 (9th Cir. 2007).
    A tying arrangement is a device used by a seller with mar-
    ket power in one product market to extend its market power
    to a distinct product market. Paladin Assocs., Inc. v. Mont.
    Power Co., 
    328 F.3d 1145
    , 1159 (9th Cir. 2003). To accom-
    plish this objective, the seller conditions the sale of one prod-
    uct (the tying product) on the buyer’s purchase of a second
    CASCADE HEALTH v. PEACEHEALTH                       1619
    product (the tied product).23 See Eastman Kodak Co. v. Image
    Technical Servs., Inc., 
    504 U.S. 451
    , 461 (1992); 
    Posner, supra, at 197
    . Tying arrangements are forbidden on the theory
    that, if the seller has market power over the tying product, the
    seller can leverage this market power through tying arrange-
    ments to exclude other sellers of the tied product.24 See Jeffer-
    son Parish Hosp. Dist. No. 2 v. Hyde, 
    466 U.S. 2
    , 14 (1984);
    Fortner Enters., Inc. v. U.S. Steel Corp., 
    394 U.S. 495
    , 517-
    18 (1969) [hereinafter Fortner I] (White, J., dissenting).
    The Supreme Court has developed a unique per se rule for
    illegal tying arrangements. For a tying claim to suffer per se
    condemnation, a plaintiff must prove: (1) that the defendant
    tied together the sale of two distinct products or services; (2)
    that the defendant possesses enough economic power in the
    tying product market to coerce its customers into purchasing
    the tied product; and (3) that the tying arrangement affects a
    “not insubstantial volume of commerce” in the tied product
    market. See Paladin Assocs., 
    Inc., 328 F.3d at 1159
    (citing
    Eastman 
    Kodak, 504 U.S. at 461-62
    ).
    As to the first element, McKenzie alleged two distinct
    products: tertiary services (the tying or desired product) and
    primary and secondary services (the tied or forced product).
    As to the third element, PeaceHealth does not dispute that the
    tying arrangement affected a substantial volume of commerce
    in the market for primary and secondary services. See Fortner
    
    I, 394 U.S. at 501
    . Thus, the only issue we must decide is
    23
    A § 1 violation can also occur when the customer promises not to take
    the tied product from the defendant’s competitor, but courts “rarely
    encounter[ ]” such a situation. 10 Areeda & Hovenkamp, supra, ¶ 1752c
    n.8 at 263 (2d ed. 2004).
    24
    For criticism of the leverage theory, see 
    Bork, supra, at 372
    . See also
    Christopher R. Leslie, Cutting Through Tying Theory With Occam’s
    Razor: A Simple Explanation of Tying Arrangements, 78 Tul. L. Rev. 727,
    731-41 (2004) (summarizing the conflict between leverage theorists and
    the Chicago School).
    1620            CASCADE HEALTH v. PEACEHEALTH
    whether PeaceHealth coerced purchases of primary and sec-
    ondary services.
    McKenzie first argues that, in this particular case, it need
    not demonstrate coercion because it was a third party to the
    tying arrangements between PeaceHealth and the insurers, or,
    at the very least, that the standard for coercion is lower in
    cases brought by a third-party plaintiff. For the premise that
    the standard of coercion is lower or nonexistent for plaintiffs
    who are not parties to the tying arrangement, McKenzie relies
    heavily on the Fifth Circuit’s opinion in Heatransfer Corp. v.
    Volkswagenwerk, A.G., 
    553 F.2d 964
    (5th Cir. 1977). In that
    case, the Fifth Circuit suggested that, in cases brought by third
    parties, “[t]he fact of coercion appears less important . . .
    [than] the fact of foreclosure.” 
    Id. at 978.
    But the Fifth Circuit
    did not abandon the coercion requirement in third-party suits.
    Instead, the court concluded that if the purchaser under the
    tying arrangement is “coerced or ‘persuaded’ to buy goods
    which they otherwise would not buy, with the result being tre-
    mendous lessening of the market in which a competitor sells
    his product, such a showing is sufficient to submit the ques-
    tion of a Section 1 antitrust violation to the jury.” 
    Id. [14] Additionally,
    the suggestion that a lower (or no) coer-
    cion standard must be satisfied in third party suits, and in par-
    ticular the dictum in Heatransfer, has been criticized by
    commentators:
    A few dicta have suggested that standards for prov-
    ing a tying condition—often expressed as “coercion”
    —should be lower for defendant’s rival than for its
    customers. This distinction was rightly rejected by
    the Eleventh Circuit, which correctly pointed out that
    every plaintiff must prove the tying condition,
    although of course the competitor need not show that
    it was itself was subjected to any such condition.
    Moreover, Supreme Court discussions about the
    CASCADE HEALTH v. PEACEHEALTH                       1621
    existence of a tie have not varied according to the
    status of the plaintiff.
    10 Areeda & Hovenkamp, supra, ¶ 1752d at 264 (2d ed.
    2004) (footnotes omitted) (citing Tic-X-Press v. Omni Promo-
    tions Co., 
    815 F.2d 1407
    , 1415 n.15 (11th Cir. 1987); Hea-
    
    transfer, 553 F.2d at 978
    )). Indeed, the Supreme Court has
    emphasized that the coerced purchase of the tied product is
    the key aspect of an illegal tie:
    [T]he 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 pur-
    chase elsewhere on different terms.
    Jefferson 
    Parish, 466 U.S. at 12
    (emphasis added). Thus,
    because coercion is often the touchstone issue in assessing a
    claim of illegal tying, we reject McKenzie’s argument that,
    because it was not a party to the tying arrangement, it does
    not need to demonstrate coercion as part of its tying claim.
    [15] McKenzie next argues that, even if coercion must be
    shown in tying cases brought by third parties, there was at
    least a disputed factual issue regarding coercion in this case.
    As evidence that no coercion was present in this case, the dis-
    trict court, in granting summary judgment to PeaceHealth,
    relied heavily on the deposition testimony of Farzenah Whyte,
    Regence’s contract negotiator, who testified that Regence vol-
    untarily entered into its contracts with PeaceHealth. Peace-
    Health also points out that some insurers contracted to
    purchase PeaceHealth’s services without exclusivity, indicat-
    ing that PeaceHealth did not force those who wanted tertiary
    services to purchase primary and secondary services from
    PeaceHealth also.25 Cf. Moore v. Jas. H. Matthews & Co., 550
    25
    McKenzie has filed a motion to strike portions of PeaceHealth’s brief
    citing to evidence that insurers had alternatives to taking all services from
    1622               CASCADE HEALTH v. PEACEHEALTH
    F.2d 1207, 1217 (9th Cir. 1977) (noting that “coercion may
    be implied from a showing that an appreciable number of
    buyers have accepted burdensome terms, such as a tie-in”).
    However, when all justifiable factual inferences are drawn in
    McKenzie’s favor, there is no doubt that PeaceHealth’s prac-
    tice of giving a larger discount to insurers who dealt with it
    as an exclusive preferred provider may have coerced some
    insurers to purchase primary and secondary services from
    PeaceHealth rather than from McKenzie. We conclude that, as
    a whole, the evidence shows genuine factual disputes about
    whether PeaceHealth forced insurers either as an implied con-
    dition of dealing or as a matter of economic imperative
    through its bundled discounting, to take its primary and sec-
    ondary services if the insurers wanted tertiary services.
    First, while Whyte testified that Regence was not explicitly
    forced to deal exclusively with PeaceHealth, Whyte also testi-
    fied that the higher prices PeaceHealth would have charged
    PeaceHealth because the evidence PeaceHealth cites was not in the portion
    of the record designated to the district court on summary judgment. Spe-
    cifically, McKenzie argues that we should not permit PeaceHealth on
    appeal to refer to portions of exhibits that, while submitted to the district
    court in support of PeaceHealth’s motion for summary judgment, did not
    have their relevant portions highlighted for the district court.
    Under the district court’s Local Rule 56.1(c)(3), the moving party is
    required to highlight relevant portions of documents presented to the
    court, and under Local Rule 56.1(e), “the Court has no independent duty
    to search and consider any part of the court record not otherwise refer-
    enced in the separate concise statements of the parties.” D. Or. R. 56.1.
    However, all of the documents cited by PeaceHealth on appeal were
    before the district court, even if not highlighted. Moreover, the principal
    policy underlying local rules like Rule 56.1 is to obviate the need for the
    district court to search the record for facts relevant to summary judgment.
    Delange v. Dutra Constr., Co., 
    183 F.3d 916
    , 919 n.2 (9th Cir. 1999) (per
    curiam). Such a policy has no impact on the scope of our appellate review.
    See Fed. R. App. P. 10(a) (stating that the record on appeal consists of all
    papers and exhibits filed in the district court). We therefore deny McKen-
    zie’s motion to strike portions of PeaceHealth’s combined brief.
    CASCADE HEALTH v. PEACEHEALTH                 1623
    Regence had McKenzie been admitted to Regence’s PPP
    would have had a “large impact” on Regence. Also, Whyte
    stated that she had been “held hostage” by PeaceHealth’s
    pricing practices.
    Standing alone, the fact that a customer would end up pay-
    ing higher prices to purchase the tied products separately does
    not necessarily create a fact issue on coercion. 
    Paladin, 328 F.3d at 1162
    ; Robert’s Waikiki U-Drive, Inc. v. Budget Rent-
    a-Car Sys., Inc., 
    732 F.2d 1403
    , 1407 (9th Cir. 1984). How-
    ever, the record contains additional evidence of economic
    coercion. For example, while PeaceHealth emphasizes that
    four insurers in Lane County purchased PeaceHealth’s ser-
    vices separately, “a trivial proportion of separate sales shows
    that the package discount is as effective as an outright refusal
    to sell [the tying product] separately.” 10 Areeda &
    Hovenkamp, supra, ¶ 1758b at 327 (2d ed. 2004). In this case,
    there are twenty-eight insurers operating in Lane County. The
    fact that only four of them, or about 14% percent, made a sep-
    arate purchase may indicate some degree of coercion, placing
    this issue in the realm of disputed facts that must be tendered
    to a jury. See 
    id. at 328
    (suggesting that a less than 10% pro-
    portion of separate sales indicates an illegal tie). Additionally,
    McKenzie provided some evidence that its prices on primary
    and secondary services were lower than PeaceHealth’s prices
    on those services. Again, while not dispositive evidence of an
    illegal tie, it is a permissible inference that a rational customer
    would not purchase PeaceHealth’s allegedly overpriced prod-
    uct in the absence of a tie. See Data Gen. Corp. v. Grumman
    Sys. Support Corp., 
    36 F.3d 1147
    , 1181 (1st Cir. 1994); 10
    Areeda & Hovenkamp, supra, ¶ 1756b3 at 301 (2d ed. 2004);
    cf. Amerinet, Inc. v. Xerox Corp., 
    972 F.2d 1483
    , 1501 (8th
    Cir. 1992) (refusing to find an illegal tie in part because the
    plaintiff did not demonstrate that defendant used its market
    power in the tying product market “to shelter an inferior or
    overpriced product from competition”). McKenzie also
    offered expert testimony that Regence’s exclusive relationship
    1624               CASCADE HEALTH v. PEACEHEALTH
    with PeaceHealth made no economic sense, evidencing coer-
    cion.
    [16] Finally, the Supreme Court has condemned tying
    arrangements when the seller has the market power to force
    a purchaser to do something that he would not do in a compet-
    itive market. Jefferson 
    Parish, 466 U.S. at 17
    . PeaceHealth
    was the only provider of tertiary services in the relevant geo-
    graphic market. The substantial market power PeaceHealth
    possessed as a result of being the exclusive provider of terti-
    ary services in Lane County creates a possibility that Peace-
    Health was able to force unwanted purchases of primary and
    secondary services. In light of the evidence adduced by
    McKenzie at summary judgment, whether PeaceHealth in fact
    used its market power to effectively coerce purchases of pri-
    mary and secondary services is a question that can be
    answered only through further factual development. The need
    for further factual development renders summary judgment on
    McKenzie’s tying claim inappropriate.26 Because a trier of
    fact might reasonably determine McKenzie established a
    claim of illegal tying based on the evidence in the record, we
    vacate the district court’s order granting summary judgment
    to PeaceHealth and remand for further proceedings.27
    26
    The Supreme Court has also held that the unique character of the tying
    product can provide a basis for holding that a defendant has sufficient eco-
    nomic power in the tying product market to coerce acceptance of the tied
    product. See U.S. Steel Corp. v. Fortner Enters., Inc., 
    429 U.S. 610
    , 619
    (1977) [hereinafter Fortner II] (citing N. Pac. Ry. Co. v. United States,
    
    356 U.S. 1
    (1958); Int’l Salt Co. v. United States, 
    332 U.S. 392
    (1947)).
    The Court in Fortner II recognized that the key question in establishing
    sufficient market power is whether the seller has some cost advantage not
    shared by its competitors which makes its competitors unable to provide
    the tying product and that a mere showing that its competitors did not
    want to provide the tying product is insufficient to establish an illegal tie.
    
    Id. at 621-22.
    At the summary judgment stage, the evidence presented by
    McKenzie was sufficient to create a factual issue about whether McKenzie
    could not provide tertiary services or whether it was simply unwilling, as
    a matter of business strategy, to provide tertiary services.
    27
    If, on remand, McKenzie stakes its tying claim not on a theory that
    PeaceHealth explicitly (e.g., by contract) or implicitly coerced insurers to
    CASCADE HEALTH v. PEACEHEALTH                         1625
    B
    McKenzie raises two other issues on its cross-appeal
    related to rulings made by the district court during the course
    of the trial.
    First, McKenzie contends that the district court erred by not
    admitting into evidence what McKenzie considered to be anti-
    competitive conduct of PeaceHealth in petitioning the Oregon
    attorney general to stop the McKenzie-Triad merger or condi-
    tion approval of the merger on McKenzie taking certain
    actions. McKenzie maintains that the district court erred in
    holding that PeaceHealth’s activity was protected from anti-
    trust scrutiny under the Noerr-Pennington doctrine, which
    protects an antitrust defendant’s right to petition the govern-
    ment. See United Mine Workers v. Pennington, 
    381 U.S. 657
    ,
    purchase primary and secondary services from PeaceHealth as a condition
    to obtaining tertiary services, but on a theory that PeaceHealth’s bundled
    discounts effectively left insurers with no rational economic choice other
    than purchasing tertiary services from PeaceHealth, such a claim might
    raise the question of whether, to establish the coercion element of a tying
    claim through a bundled discount, McKenzie must prove that PeaceHealth
    priced below a relevant measure of its costs. Some commentators would
    require a plaintiff alleging that a bundled discount amounts to an illegal
    tie to prove below-cost prices. See, e.g., 3 Areeda & Hovenkamp, supra,
    ¶ 749b2 at 334 (Supp. 2006). It is unclear whether the AMC intended its
    three-part test to apply when a plaintiff alleging an illegal tying arrange-
    ment asserts that the defendant’s pricing practices coerced unwanted pur-
    chases of the tied product. See AMC 
    Report, supra, at 114
    n.157 (“The
    recommended three-part test is proposed here for challenges to bundled
    pricing practices, and its purpose, as the text explains, is to avoid deterring
    procompetitive price reductions. The Commission is not recommending
    application of this test outside the bundled pricing context, for example in
    tying or exclusive dealing cases. The Commission did not undertake to
    study tying and exclusive dealing issues more generally.”). The parties
    have not briefed this issue to us, and the parties did not raise the issue
    before the district court. We therefore leave it to the district court, if nec-
    essary, to decide the issue in the first instance on remand. Singleton v.
    Wulff, 
    428 U.S. 106
    , 121 (1976).
    1626           CASCADE HEALTH v. PEACEHEALTH
    670 (1965); E. R.R. Presidents Conference v. Noerr Motor
    Freight, Inc., 
    365 U.S. 127
    , 143-44 (1961). Because we
    vacate the jury’s verdict in Part II of our opinion, McKenzie’s
    argument, which challenges evidentiary rulings the district
    court made at trial, is moot, and we decline to address it.
    The second issue McKenzie raises on its cross-appeal is
    whether the jury instruction on “combination or conspiracy”
    to monopolize was correct. As we discussed above, the jury
    found for PeaceHealth on McKenzie’s conspiracy to monopo-
    lize claim. The district court refused to give the following
    instruction proposed by McKenzie: “The involuntary nature
    of one’s participation in a conspiracy to monopolize is no
    defense. An antitrust conspirator can be liable for damages
    even though he participates only under duress.” McKenzie
    culled this language from our opinion in Calnetics Corp. v.
    Volkswagen of America, Inc., 
    532 F.2d 674
    , 682 (9th Cir.
    1976) (per curiam), in which we wrote, “[t]he involuntary
    nature of one’s participation in a conspiracy to monopolize is
    no defense. An antitrust conspirator can be liable for damages
    even though he participates only under coercion.” McKenzie
    argues that, because this instruction was not given, the jury
    may have found in PeaceHealth’s favor because it viewed
    Regence’s participation in PeaceHealth’s alleged conspiracy
    to monopolize as involuntary.
    As we noted above, the general rule is that we “ ‘review[ ]
    jury instructions to determine whether, taken as a whole, they
    mislead the jury or state the law incorrectly to the prejudice
    of the objecting party. So long as they do not, we review the
    formulation of the instructions and the choice of language for
    abuse of discretion.’ ” City of Long Beach v. Standard Oil Co.
    of Cal., 
    46 F.3d 929
    , 933 (9th Cir. 1995) (quoting Reed v.
    Hoy, 
    909 F.2d 324
    , 326 (9th Cir. 1989)).
    [17] While McKenzie’s proposed instruction is a correct
    statement of the law of conspiracy as we explained it in Cal-
    netic Corp., it was within the district court’s discretion to
    CASCADE HEALTH v. PEACEHEALTH               1627
    refuse to give the requested instruction because the instruction
    could have confused the jury. It is true that an antitrust con-
    spirator “can be liable for damages” even though he partici-
    pates in the conspiracy only under coercion. See Flintkote Co.
    v. Lysfjord, 
    246 F.2d 368
    , 375 (9th Cir. 1957). But the only
    conspirator who could have been “liable for damages” in this
    case was PeaceHealth, the sole defendant. Conversely, if any-
    one participated in the conspiracy under coercion, it was
    Regence. “A district court has substantial latitude in tailoring
    jury instructions . . . .” Kendall-Jackson Winery, Ltd. v. E. &
    J. Gallo Winery, 
    150 F.3d 1042
    , 1051 (9th Cir. 1998). We
    conclude that the district court was within its discretion in
    refusing to give McKenzie’s proposed conspiracy instruction.
    IV
    The final issue before us is the appeal and cross-appeal of
    the district court’s award of attorneys’ fees and costs to McK-
    enzie. Because we have vacated the district court’s judgment
    in favor of McKenzie on the merits of McKenzie’s attempted
    monopolization and tortious interference claims, McKenzie is
    no longer a prevailing party for the purposes of Federal Rule
    of Civil Procedure 54(d)(1) and § 4(a) of the Clayton Act, 15
    U.S.C. § 15(a). McKenzie is thus not entitled to attorneys’
    fees, costs, and expenses, and we vacate the district court’s
    order awarding fees, costs, and expenses to McKenzie for
    those claims. If McKenzie prevails on remand, it may renew
    its request for attorneys’ fees and costs. We dismiss McKen-
    zie’s cross-appeal on attorneys’ fees and costs as moot. We
    withhold a determination of attorneys’ fees, costs, and
    expenses for McKenzie’s price discrimination claim pending
    resolution of the question certified to the Oregon Supreme
    Court.
    V
    To summarize: In No. 05-35640, we VACATE the judg-
    ment in favor of McKenzie on its monopolization and tortious
    1628              CASCADE HEALTH v. PEACEHEALTH
    interference claims. We certify a question to the Oregon
    Supreme Court on the price discrimination claim. In No. 05-
    35627, we VACATE the summary judgment in favor of Peace-
    Health.28 In No. 05-36153, we VACATE the district court’s
    order awarding attorneys’ fees and costs to McKenzie. In No.
    05-36202, we DISMISS the appeal as moot. Each party shall
    bear its own costs on appeal. We STAY further proceedings
    pending resolution of the price discrimination question certi-
    fied to the Oregon Supreme Court.
    28
    In No. 05-35627, we also decline to address McKenzie’s Noerr-
    Pennington arguments because these related to an evidentiary ruling and
    the issue may not arise on a retrial. Further, we hold that the district
    court’s jury instruction on combination or conspiracy was not an abuse of
    discretion.
    

Document Info

Docket Number: 05-35627, 05-35640, 05-36153, 05-36202

Citation Numbers: 515 F.3d 883, 2008 WL 269506

Judges: Gould, Paez, Rawlinson

Filed Date: 1/31/2008

Precedential Status: Precedential

Modified Date: 11/5/2024

Authorities (57)

Leegin Creative Leather Products, Inc. v. PSKS, Inc. , 127 S. Ct. 2705 ( 2007 )

brian-louis-delange-v-dutra-construction-co-inc-in-personam , 183 F.3d 916 ( 1999 )

United States v. Aluminum Co. of America , 148 F.2d 416 ( 1945 )

Verizon Communications Inc. v. Law Offices of Curtis v. ... , 124 S. Ct. 872 ( 2004 )

United Shoe MacHinery Corp. v. United States , 74 S. Ct. 699 ( 1954 )

Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co. , 127 S. Ct. 1069 ( 2007 )

Robert's Waikiki U-Drive, Inc. v. Budget Rent-A-Car Systems,... , 732 F.2d 1403 ( 1984 )

1998-1-trade-cases-p-72187-98-cal-daily-op-serv-4831-98-daily-journal , 146 F.3d 1088 ( 1998 )

Swift & Co. v. United States , 25 S. Ct. 276 ( 1905 )

Northeastern Telephone Company v. American Telephone and ... , 651 F.2d 76 ( 1981 )

J. Truett Payne Co. v. Chrysler Motors Corp. , 101 S. Ct. 1923 ( 1981 )

Singleton v. Wulff , 96 S. Ct. 2868 ( 1976 )

Spectrum Sports, Inc. v. McQuillan , 113 S. Ct. 884 ( 1993 )

Virgin Atlantic Airways Ltd. v. British Airways PLC , 69 F. Supp. 2d 571 ( 1999 )

Data General Corp. v. Grumman Systems Support Corp. , 36 F.3d 1147 ( 1994 )

Fed. Sec. L. Rep. P 99,010 Fred H. Harmsen v. C. Arnholt ... , 693 F.2d 932 ( 1982 )

tic-x-press-inc-v-the-omni-promotions-company-of-georgia-atlanta , 815 F.2d 1407 ( 1987 )

H. Floyd McGahee v. Northern Propane Gas Company , 858 F.2d 1487 ( 1988 )

cascade-health-solutions-fka-mckenzie-hospital-an-oregon-nonprofit , 479 F.3d 726 ( 2007 )

Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc. , 126 S. Ct. 860 ( 2006 )

View All Authorities »