Cascade Health Solutions v. PeaceHealth

McKenzie-Willamette Hospital (“McKenzie”) filed a complaint 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 discrimination and intentional interference with prospective economic advantage.

Before trial, the district court granted summary judgment in favor of Peace-Health 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, conspiracy 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, price discrimination, 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.

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 *902 this case is the market for primary and secondary acute care hospital services in Lane County. Primary and secondary acute care hospital services are common medical services like setting a broken bone and performing a tonsillectomy. Some hospitals also provide what the parties call “tertiary care,” which includes more complex services like invasive cardiovascular surgery and intensive neonatal care.

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 operates 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 necessary 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.

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 follows that hospitals prefer high reimbursement rates and insurers 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 services. The district court let the remainder of McKenzie’s claims proceed to trial before a jury. On McKenzie’s monopolization and attempted monopolization claims, McKenzie’s primary theo *903 ry was that PeaeeHealth engaged in anticompetitive conduct by offering insurers “bundled” or “package” discounts. McKenzie asserted that Peace-Health offered insurers discounts of 35% to 40% on tertiary services if the insurers made PeaeeHealth their sole preferred provider for all services— primary, secondary, and tertiary. McKenzie introduced evidence of a few specific instances of PeaceHealth’s bundled discounting practices.

For example, in 2001, PeaeeHealth 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, Re-gence was paying PeaeeHealth 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 provider of primary and secondary services. When Re-gence’s contract with PeaeeHealth came up for its annual renewal, Regence solicited two proposals from PeaeeHealth. Under one proposal, PeaeeHealth would remain the only preferred provider. Under the other proposal, McKenzie would be added as a preferred provider. Peace-Health 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 services. 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 sendees under the preferred plan offered by Providence Health Plan (“Providence”). Until then, PeaeeHealth was the only preferred provider of primary, secondary, and tertiary services in the Providence preferred plan. Upon McKenzie’s admission as a preferred provider, PeaeeHealth increased its reimbursement rate with Providence from 90% to 93%. The evidence showed that insurers who made PeaeeHealth their exclusive preferred provider across all services, thus purchasing from PeaeeHealth a full complement of primary, secondary, and tertiary services, paid lower reimbursement rates than insurers who purchased tertiary services from PeaeeHealth, 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 PeaeeHealth 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 elected to pursue its remedy under federal law on the attempted monopolization claim, so the district court, pursuant 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.

PeaeeHealth appeals the judgment entered pursuant to the jury verdict in *904 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 interference.

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 anticompeti-tive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power.” Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993); Amarel v. Connell, 102 F.3d 1494, 1521 (9th Cir.1996). 3

PeaceHealth’s appeal centers on the first element of the Spectrum Sports test, the conduct element. Anticompeti-tive 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, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985). PeaceHealth contends that we should vacate the jury’s verdict because the district court incorrectly instructed the jury about when bundled discounting can amount to *905 anticompetitive conduct. This leads us to consider at some length the phenomena of bundles and bundled discounts.

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 Welfare, 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 Bundled Discounts, 89 Minn. L.Rev. 1688, 1693 (2005). As discussed above, PeaceHealth offered bundled discounts to Regence and other insurers in this case. Specifically, PeaceHealth offered insurers discounts if the insurers made PeaceHealth 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 consumers, institutional purchasers seek and obtain bundled discounts, too. See, e.g., LePage’s Inc. v. 3M, 324 F.3d 141, 154 (3d Cir.2003) (en banc) (involving rebates offered by 3M tó 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 apnea 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 oxi-metry 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 contraceptives, 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 bundled discounts as their product lines expand with the convergence 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

*906 Bundled discounts generally benefit buyers because the discounts 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 procompetitive” 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 “[bjundling obviously saves distribution and consumer transaction costs” and allows firms to “capitalize 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 discounted 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, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (“[CJutting prices in order to increase business often is the very essence of competition.”). Consistent with that principle, we should not be too quick to condemn price-reducing bundled discounts as anticompetitive, lest we end up with a rule that discourages legitimate 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, Antitmst Law 236 (2d ed.2001); Bariy 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, *907 920 F.Supp. at 467 (noting that “a firm that enjoys a monopoly on one or more of a group of complementary products, 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 situation:

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 former 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 shampoo at $5 and $3, respectively, if bought separately but at $3 and $2.25 if bought as part of a package. Absent the package pricing, A’s price for both products 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 conditioner 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 shampoo, as the customer otherwise will find A’s package cheaper than buying conditioner from A and shampoo 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 variable cost.

Id.; see also 3 Areeda & Hovenkamp, supra, ¶ 749a at 318-19 (Supp.2006) (providing a similar example). It is worth reiterating that, as the example above shows, a bundled discounter can exclude rivals who do not sell as great a number of product lines without pricing its products' below its cost to produce them. Thus, a bundled discounter can achieve exclusion without sacrificing any short-run profits. See Nalebuff, supra, 50 Antitrust Bull, at 339 (providing an example of exclusion accomplished with an increase in profits).

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 discounts 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 PeaceHealth and therefore could possibly not be able to match the discount Peace-Health offers insurers.

From our discussion above, it is evident that bundled discounts, while potentially procompetitive by offering bargains to consumers, can also pose the threat of anticompetitive 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 procom-petitive 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 Sherman-Act?

*908 2

In this case, the district court based its jury instruction regarding the anticompeti-tive 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 anticompeti-tive. 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.

The primary issue before the Third Circuit was whether 3M unlawfully maintained its monopoly power through the bundled 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, 113 S.Ct. 2578, 125 L.Ed.2d 168 (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 appropriate measure of its rival’s costs and (2) that its rival “had a reasonable prospect, or, under § 2 of the Sherman Act, a dangerous probability, of recouping its investment in below-cost prices.” Id. at 222, 224, 113 S.Ct. 2578. 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 noting 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 appropriate when the defendant is an oli-gopolist who still faces competition when it tries to recoup the losses it suffered during 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 Le-Page’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 pricing 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 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 *909 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 (Greenberg, 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 tertiary acute care products and that doing so is anticompetitive. Bundled pricing occurs when price discounts 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, PeaeeHealth 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 probability of achieving monopoly power) engaged in exclusionary 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. Le-Page’s, PeaeeHealth asserts, was wrongly decided because it allows the jury to conclude, from the structure of the market alone, that a competitor has been anticom-petitively 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).

As the bipartisan Antitrust Modernization Commission (“AMC”) 10 recently noted, the fundamental problem with the Le- *910 Page’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 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 calculating the discount that it would have had to provide in order to match the discounts offered by 3M through its bundled 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 Section 2, a plaintiff should be required to show each one of the following elements (as well as other elements of a Section 2 claim): (1) after allocating all discounts and rebates attributable to the entire bundle of products to the competitive product, the defendant 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 competition.

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 adopting 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. Rubinfeld, SM’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 *911 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, 113 S.Ct. 2578. In a normal tying case, however, while a plaintiff must prove that it was “coerced” 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 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 products, 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 savings by purchasing the package, or foregoing the savings by purchasing thé products separately.” Id. The package discount thus does not constrain the buyer’s choice as much as the traditional 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 bundled 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 measure of incremental cost. See id. ¶ 737a at 393 (2d ed.2002) (quoting Brooke Group, 509 U.S. at 223, 113 S.Ct. 2578). In Brooke Group, the Court held that “a plaintiff 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.” Brooke Group, 509 U.S. at 222, 113 S.Ct. 2578. In the course of rejecting the plaintiffs 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, 113 S.Ct. 2578 (citing Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 340, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990)). The Court went on to emphasize that “[flow 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. (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 principle 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 control without courting intolerable risks of chilling legitimate price-cutting.” Id.; accord Matsushita, 475 U.S. at 594, 106 S.Ct. 1348.

The Court recently reemphasized these principles in Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., — U.S. -, 127 S.Ct. 1069, 1078, 166 L.Ed.2d 911 (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 *912 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 outputs.” Weyerhaeuser, 127 S.Ct. at 1078.

Of course, in neither