Case 3:21-cv-03361-RS Document 45 Filed 02/18/22 Page 1 of 33
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`John F. Cove, Jr. (SBN 212213)
`john.cove@shearman.com
`Patrick D. Robbins (SBN 152288)
`probbins@shearman.com
`SHEARMAN & STERLING LLP
`535 Mission Street, 25th Floor
`San Francisco, CA 94105-2997
`Telephone: 415.616.1100
`Fax: 415.616.1199
`
`Ryan A. Shores (pro hac vice)
`ryan.shores@shearman.com
`Brian C. Hauser (pro hac vice)
`brian.hauser@shearman.com
`SHEARMAN & STERLING LLP
`401 9th Street, NW, Suite 800
`Washington, DC 20004
`Telephone: 202.508.8000
`Fax: 202.508.8100
`
`Attorneys for Sony Interactive Entertainment LLC
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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`
`AGUSTIN CACCURI, ADRIAN CENDEJAS,
` Case Nos.: 3:21-cv-03361-RS
`and ALLEN NEUMARK, on behalf of
` 3:21-cv-03447-RS
`themselves and all others similarly situated,
` 3:21-cv-05031-RS
`
`Plaintiffs,
`DEFENDANT’S MOTION TO DISMISS
`
`Judge: Hon. Richard Seeborg
`v.
`Date: May 12, 2022
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`Time: 1:30 pm
`SONY INTERACTIVE ENTERTAINMENT
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`LLC,
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`Defendant.
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`MOTION TO DISMISS
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`CASE NOS. 3:21-CV-03361,
`3:21-CV-03447, 3:21-CV-05031
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`Case 3:21-cv-03361-RS Document 45 Filed 02/18/22 Page 2 of 33
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`NOTICE OF MOTION AND MOTION
`TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
`PLEASE TAKE NOTICE that, on May 12, 2022 at 1:30 p.m., or as soon thereafter as the
`matter may be heard before the Honorable Richard Seeborg in Courtroom 3, 17th Floor, 450 Golden
`Gate Avenue, San Francisco, California, Defendant Sony Interactive Entertainment LLC
`(“Defendant”) by and through their undersigned counsel, will, and hereby do, move the Court,
`pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for an order dismissing with
`prejudice the Consolidated Class Action Complaint (“Complaint”) filed on December 20, 2021 by
`Plaintiffs Agustin Caccuri, Adrian Cendejas, and Allen Neumark (collectively the “Plaintiffs”)
`This motion is based upon this Notice of Motion and the accompanying Memorandum of
`Points and Authorities filed with these documents, any matters of which the Court may take judicial
`notice, the files and records in this action, and such oral and documentary evidence as this Court
`may allow at the hearing of this motion.
`
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`Dated: February 18, 2022
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`Respectfully submitted,
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`/s/ John F. Cove, Jr.
`John F. Cove, Jr. (SBN 212213)
`Patrick D. Robbins (SBN 152288)
`535 Mission Street, 25th Floor
`San Francisco, CA 94105
`Telephone: 415.616.1100
`john.cove@shearman.com
`probbins@shearman.com
`
`Ryan A. Shores (pro hac vice)
`Brian C. Hauser (pro hac vice)
`401 9th Street, NW, Suite 800
`Washington, DC 20004
`Telephone: 202.508.8058
`ryan.shores@shearman.com
`brian.hauser@shearman.com
`
`SHEARMAN & STERLING, LLP
`
`Attorneys for Defendant
`Sony Interactive Entertainment LLC
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`MOTION TO DISMISS
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`i
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`CASE NOS. 3:21-CV-03361,
`3:21-CV-03447, 3:21-CV-05031
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`Case 3:21-cv-03361-RS Document 45 Filed 02/18/22 Page 3 of 33
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`STATEMENT OF ISSUES TO BE DECIDED
`Whether the Consolidated Class Action Complaint should be dismissed under Federal Rule
`of Civil Procedure 12(b)(6) because:
`1. Plaintiffs have failed to allege monopoly power or a dangerous probability of achieving
`monopoly power in a properly-defined relevant antitrust market. (Counts I–IV).
`2. Plaintiffs have failed to allege anticompetitive conduct. (Counts I–IV).
`3. Plaintiffs have failed to allege anticompetitive effects or antitrust injury. (Counts I–IV).
`4. Plaintiffs have failed to allege facts supporting a claim for unjust enrichment. (Count V).
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`MOTION TO DISMISS
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`ii
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`CASE NOS. 3:21-CV-03361,
`3:21-CV-03447, 3:21-CV-05031
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`Case 3:21-cv-03361-RS Document 45 Filed 02/18/22 Page 4 of 33
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`TABLE OF CONTENTS
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`Page
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`B.
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`C.
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`B.
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`II.
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`III.
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`TABLE OF AUTHORITIES ......................................................................................................... iv
`PRELIMINARY STATEMENT ..................................................................................................... 1
`SUMMARY OF PLAINTIFFS’ ALLEGATIONS ......................................................................... 3
`A.
`Sony, The PlayStation, And Industry Background ..................................... 3
`B.
`The PlayStation Store And Videogame Distribution .................................. 3
`C.
`Plaintiffs And Their Claims ........................................................................ 5
`ARGUMENT .................................................................................................................................. 5
`I.
`PLAINTIFFS FAIL TO ALLEGE FACTS SHOWING THAT SONY
`POSSESSES MONOPOLY OR NEAR-MONOPOLY POWER IN A
`PLAUSIBLE RELEVANT MARKET. .................................................................. 7
`A.
`Plaintiffs’ Allegations Render Their Single-Brand Market
`Implausible. ................................................................................................. 7
`Plaintiffs’ Allegations Render Their Aftermarket Theory
`Implausible. ............................................................................................... 10
`Plaintiffs Do Not Allege That Sony Has Monopoly Power In Any
`Relevant Market. ....................................................................................... 14
`PLAINTIFFS DO NOT PLAUSIBLY ALLEGE THAT SONY ENGAGED
`IN ANTICOMPETITIVE CONDUCT. ................................................................ 15
`A.
`Sony’s Decision to Stop Offering Full-Game Download Codes to
`Third-Party Retailers Is Not Anticompetitive. .......................................... 15
`Sony’s Use Of A Wholesale Model To Sell Digital Games Is Not
`Anticompetitive. ........................................................................................ 19
`PLAINTIFFS FAIL TO PLAUSIBLY ALLEGE AN ANTICOMPETITIVE
`EFFECT OR ANTITRUST INJURY. .................................................................. 20
`A.
`Plaintiffs Have Not Alleged Facts Demonstrating The Challenged
`Conduct Caused Supracompetitive Prices Or Other Effects. .................... 21
`1.
`Plaintiffs Allege No Facts Showing That Sony Charges
`Supracompetitive Prices. ............................................................... 21
`Plaintiffs’ Allegations Of Other Alleged Anticompetitive
`Harms Are Speculative, Conclusory, And Contradicted By
`The Complaint. .............................................................................. 23
`Unilateral Termination of A Distribution Channel Does Not Cause
`Antitrust Injury. ......................................................................................... 23
`PLAINTIFFS’ STATE LAW CLAIMS FAIL. ..................................................... 25
`IV.
`CONCLUSION ............................................................................................................................. 25
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`2.
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`B.
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`MOTION TO DISMISS
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`iii
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`3:21-CV-03447, 3:21-CV-05031
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`TABLE OF AUTHORITIES
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`Page(s)
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`Cases
`
`AFMS, LLC v. United Parcel Serv. Co., No. 10-cv-05830, 2011 WL 13128436 (C.D. Cal.
`Nov. 23, 2011) ..................................................................................................................... 8, 11
`
`In re Am. Express Anti-Steering Rules Antitrust Litig., 361 F.Supp. 324 (E.D.N.Y. 2019) 7, 20, 23
`
`Am. Sales Co., v. AstraZeneca AB, No. 10-cv-60662 (PKC), 2011 WL 1465786 (S.D.N.Y.
`Apr. 14, 2011) ......................................................................................................................... 10
`
`Apotex Corp. v. Hospira Healthcare India Priv. Ltd., No. 18-cv-4903 (JMF), 2020 WL
`58247 (S.D.N.Y. Jan. 6, 2020) ................................................................................................ 17
`
`Apple, Inc. v. Psystar Corp., 586 F. Supp. 2d 1190 (N.D. Cal. 2008) ............................................ 8
`
`Ashcroft v. Iqbal, 556 U.S. 662 (2009) ........................................................................................... 5
`
`Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) ................. 15, 16, 17, 18
`
`Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990) .................................................... 19
`
`In re ATM Fee Antitrust Litig., No. 04-cv-2676 (CRB), 2010 WL 2557519 (N.D. Cal. June
`21, 2010) .................................................................................................................................... 9
`
`Blizzard Ent. Inc. v. Ceiling Fan Software LLC, 941 F. Supp. 2d 1227 (C.D. Cal. 2013) ........... 13
`
`Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) ............................................ 21
`
`Bushie v. Stenocord Corp., 460 F.2d 116 (9th Cir. 1972) ................................................... 2, 14, 17
`
`City of San Jose v. Off. of the Comm’r of Baseball, 776 F.3d 686 (9th Cir. 2015) ....................... 25
`
`Cont’l Cas. Co. v. Enodis Corp., 417 F. App’x 668 (9th Cir. 2011) ............................................ 25
`
`Coronavirus Reporter v. Apple Inc., No. 21-cv-05567-EMC, 2021 WL 5936910 (N.D. Cal.
`Nov. 30, 2021) .................................................................................................................. passim
`
`Epic Games, Inc. v. Apple Inc., No. 20-cv-05640-YGR, 2021 WL 4128925 (N.D. Cal. Sep.
`10, 2021) ........................................................................................................................... passim
`
`FTC v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020) ........................................................... passim
`
`In re German Auto. Mfrs. Antitrust Litig., No. 20-17139, 2021 WL 4958987 (9th Cir. Oct.
`26, 2021) .................................................................................................................................. 22
`
`Hicks v. PGA Tour, Inc., 897 F.3d 1109 (9th Cir. 2018) ........................................................ 4, 7, 9
`
`MOTION TO DISMISS
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`iv
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`CASE NOS. 3:21-CV-03361,
`3:21-CV-03447, 3:21-CV-05031
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`hiQ Labs, Inc. v. LinkedIn Corp., 485 F. Supp. 3d 1137 (N.D. Cal. 2020) ............................ 1, 8, 9
`
`Kentmaster Mfg. Co. v. Jarvis Prods. Corp., 146 F.3d 691 (9th Cir. 1998), amended, 164
`F.3d 1243 (9th Cir. 1999) ........................................................................................................ 11
`
`Knutson v. Daily Rev., Inc., 383 F. Supp. 1346 (N.D. Cal. 1974), modified, 401 F. Supp.
`1374 (N.D. Cal. 1975), and aff'd in part, rev’d in part on other grounds, 548 F.2d 795
`(9th Cir. 1976) ......................................................................................................................... 14
`
`LiveUniverse, Inc. v. MySpace, Inc., 304 F. App’x 554 (9th Cir. 2008) ....................................... 16
`
`MetroNet Servs. v. Qwest Corp., 383 F.3d 1124 (9th Cir. 2004) .................................................. 16
`
`N. Penn Towns, LP v. Concert Golf Partners, LLC, No. 19-cv-4540-KSM, 2021 WL
`3562849 (E.D. Pa. Aug. 12, 2021) ............................................................................................ 8
`
`Naify v. McClatchy Newspapers, 599 F.2d 335 (9th Cir. 1979) ................................................... 14
`
`Newcal Indus., Inc. v. Ikon Off. Sol., 513 F.3d 1038 (9th Cir. 2008) ................................ 10, 11, 12
`
`Novell, Inc. v. Microsoft Corp., 731 F.3d 1064 (10th Cir. 2013) (Gorsuch, J.) ............................ 18
`
`NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998) ..................................................................... 24
`
`Ohio v. Am. Express Co., 138 S. Ct. 2274 (2018) ....................................................... 11, 15, 20, 22
`
`Oracle Am., Inc. v. CedarCrestone, Inc., 938 F. Supp. 2d 895 (N.D. Cal. 2013) ..................... 8, 12
`
`Pac. Bell Tel. Co. v. linkLine Commn’cs, Inc., 555 U.S. 438 (2009) ...................................... 17, 18
`
`Pistacchio v. Apple Inc., No. 4:20-cv-07034-YGR, 2021 WL 949422 (N.D. Cal. Mar. 11,
`2021) ...................................................................................................................................... 1, 9
`
`Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117 (2d Cir. 2007) ............ 2, 14, 17, 24
`
`PSKS, Inc. v. Leegin Creative Leather Prod., Inc., 615 F.3d 412 (5th Cir. 2010) .......................... 8
`
`Rambus Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008) .................................................................... 24
`
`Rebel Oil Inc. v. Atl. Richfield Co., 51 F.3d 1421 (9th Cir. 1995) ................................................ 20
`
`Reilly v. Apple Inc., No. 21-cv-04601-EMC, 2022 WL 74162 (N.D. Cal. Jan. 7, 2022)........ 1, 7, 9
`
`Shaw v. Rolex Watch, USA, Inc., 673 F. Supp. 674 (S.D.N.Y. 1987) ........................................... 10
`
`Somers v. Apple, Inc., 729 F.3d 953 (9th Cir. 2013) ..................................................................... 22
`
`Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993) ........................................................ 5, 20
`
`State Oil Co. v. Khan, 522 U.S. 3 (1997) ...................................................................................... 20
`
`MOTION TO DISMISS
`
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`v
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`CASE NOS. 3:21-CV-03361,
`3:21-CV-03447, 3:21-CV-05031
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`Case 3:21-cv-03361-RS Document 45 Filed 02/18/22 Page 7 of 33
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`Streamcast Networks, Inc. v. Skype Techs., S.A., 547 F. Supp. 2d 1086 (C.D. Cal. 2007) ....... 9, 10
`
`Success Sys., Inc. v. Excentus Corp., 439 F. Supp. 3d 31 (D. Conn. 2020) .................................... 8
`
`In re Term Commodities Cotton Futures Litig., No. 12-cv-5126, 2013 WL 9815198
`(S.D.N.Y. Dec. 20, 2013) ........................................................................................................ 23
`
`United States v. Apple, 791 F.3d 290 (2d Cir. 2015) .............................................................. 19, 20
`
`Verizon Commc’ns Inc. v. L. Offs. of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) ................ 15, 18
`
`In re Webkinz Antitrust Litig., 695 F. Supp. 2d 987 (N.D. Cal. 2010) .......................................... 23
`
`Wolfire Games, LLC v. Valve Corp., No. 21-cv-0563-JCC, 2021 WL 5415305 (W.D.
`Wash. Nov. 19, 2021) ....................................................................................................... passim
`
`Statutes
`
`California’s Unfair Competition Law ....................................................................................... 5, 25
`
`Sherman Act ........................................................................................................................... passim
`
`Other Authorities
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`Lu, L., A Comparison of the Wholesale Model and the Agency Model in Differentiated
`Markets, 51 REV. IND. ORGAN. 151, 152 (2017). .................................................................. 19
`
`N. Statt, Sony confirms it will stop letting GameStop and other retailers sell PS4 download
`codes, THE VERGE (Mar. 25, 2019),
`https://www.theverge.com/2019/3/25/18281538/sony-playstation-4-gamestop-stop-
`selling-game-download-codes-retailers .................................................................................... 4
`
`Phillip E. Areeda & Herbert Hovenkamp, ANTITRUST LAW. ........................................................ 11
`
`Tom Marks, Report: Steam’s 30% Cut Is Actually the Industry Standard, IGN (Jan. 13,
`2020), https://www.ign.com/articles/2019/10/07/report-steams-30-cut-is-actually-the-
`industry-standard ..................................................................................................................... 22
`
`
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`MOTION TO DISMISS
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`vi
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`3:21-CV-03447, 3:21-CV-05031
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`PRELIMINARY STATEMENT
`Apparently searching for a technology platform that had yet to be sued for monopolization,
`Plaintiffs here landed on Sony Interactive Entertainment LLC (“Sony”). Lacking any viable
`antitrust theory, however, Plaintiffs stack together two of the most disfavored theories in antitrust
`law—the single-brand market and a compelled duty to work with competitors—to make out a
`monopolization claim. Specifically, Plaintiffs claim that Sony unlawfully monopolized game sales
`on its own PlayStation Store by: (1) no longer offering to third-party retailers certain full-game
`download codes that consumers could redeem on the PlayStation Store and (2) using a
`wholesale/retail distribution model.
`No antitrust case suggests these ordinary business decisions are suspect, much less
`unlawful—even if done by a monopolist (which Sony is not). Indeed, courts in a line of recent cases
`consistently rejected similar, if less radical, theories alleging “platform-monopolization.”1 Here,
`the lack of merit is even more obvious. Slapping conclusory antitrust labels on Sony’s everyday
`distribution decisions is not enough to declare Sony an illegal monopolist and force a judicial
`restructuring of its business model, as Plaintiffs wish. This Court should reject the claims as
`deficient as a matter of law.
`First, Plaintiffs’ claims rest on the flawed premise that Sony has “100% market share” of its
`own digital store. Single-brand markets, however, are extremely rare and not present here because,
`as the Complaint alleges, Sony, Microsoft, and Nintendo compete aggressively to sell both gaming
`consoles and games. To ignore this robust competition—so Plaintiffs can pronounce Sony a
`“monopolist” of itself—would ignore settled caselaw and common sense.
`Second, even if Plaintiffs adequately pled monopoly power in a relevant market (they have
`not), Plaintiffs fail to plead anything resembling anticompetitive conduct. This too requires
`
`1 E.g., Reilly v. Apple Inc., No. 21-cv-04601-EMC, 2022 WL 74162 (N.D. Cal. Jan. 7, 2022);
`Coronavirus Reporter v. Apple Inc., No. 21-cv-05567-EMC, 2021 WL 5936910 (N.D. Cal. Nov.
`30, 2021); Wolfire Games, LLC v. Valve Corp., No. 21-cv-0563-JCC, 2021 WL 5415305 (W.D.
`Wash. Nov. 19, 2021); Epic Games, Inc. v. Apple Inc., No. 20-cv-05640-YGR, 2021 WL 4128925
`(N.D. Cal. Sep. 10, 2021); Pistacchio v. Apple Inc., No. 4:20-cv-07034-YGR, 2021 WL 949422
`(N.D. Cal. Mar. 11, 2021); see also hiQ Labs, Inc. v. LinkedIn Corp., 485 F. Supp. 3d 1137 (N.D.
`Cal. 2020).
`
`MOTION TO DISMISS
`
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`1
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`CASE NOS. 3:21-CV-03361,
`3:21-CV-03447, 3:21-CV-05031
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`

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`Case 3:21-cv-03361-RS Document 45 Filed 02/18/22 Page 9 of 33
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`dismissal. Antitrust law does not restrict “the long recognized right” of a supplier, even a
`monopolist, “freely to exercise his own independent discretion as to parties with whom he will deal.”
`See FTC v. Qualcomm Inc., 969 F.3d 974, 993 (9th Cir. 2020). Indeed, it is well-settled that a
`supplier may reorganize its distribution system to terminate a third-party distributor without running
`afoul of the Sherman Act. See, e.g., Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117,
`124 (2d Cir. 2007); Bushie v. Stenocord Corp., 460 F.2d 116, 119 (9th Cir. 1972). That is all that
`happened here when Sony chose to stop offering download codes to third-party retailers.
`Nor does antitrust law punish a company for choosing a wholesale purchasing model—a
`model that is utilized by thousands, if not millions, of businesses throughout the global economy.
`Substituting rhetoric for analysis, Plaintiffs claim that Sony “force[d] publishers to cede control over
`the final retail price” of digital games to Sony. Compl. ¶ 39. Of course, that is how a wholesale
`model works: the wholesaler and retailer agree on a wholesale price and, in turn, the retailer sets the
`price of the product that it sells to consumers. In effect, Plaintiffs are asking this Court to order
`Sony to abandon a wholesale model and use a commission model instead. There is no basis in
`antitrust law for such an extraordinary request.
`Finally, Plaintiffs do not plausibly plead any anticompetitive effects or any antitrust injury
`flowing from the challenged conduct. While Plaintiffs contend that Sony’s PlayStation digital-game
`prices are “supracompetitive,” they allege no facts in the Complaint to support that conclusory
`assertion. To the contrary, the Complaint suggests, if anything, that digital-game prices on Sony’s
`PlayStation are the same or less than those of competitors who do not engage in the challenged
`conduct. Nor is there any allegation that prices changed after the challenged conduct that
`supposedly caused “supracompetitive” prices. Plaintiffs’ implausible monopolization claims, as
`well as their derivative state-law claims, should be dismissed.
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`MOTION TO DISMISS
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`2
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`3:21-CV-03447, 3:21-CV-05031
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`A.
`
`SUMMARY OF PLAINTIFFS’ ALLEGATIONS2
`Sony, The PlayStation, And Industry Background
`Sony operates the PlayStation videogame platform, which includes PlayStation game
`consoles and the PlayStation Store. Compl. ¶¶ 2, 36–37. For at least two decades, Sony has
`competed with Microsoft, which offers the Xbox videogame platform, and Nintendo, which offers
`the Switch videogame platform. Id. ¶ 25. Plaintiffs allege that, in addition to videogame consoles
`like Xbox, PlayStation, and Switch, consumers play videogames on other devices, including
`personal computers, specialized handheld devices, and smartphones. Id. ¶ 24.
`Sony released the original model of the PlayStation in 1994. Id. ¶ 30. Since then, Sony has
`released four generations. Most recently, the PlayStation 5 (“PS5”) was released on November 12,
`2020. Plaintiffs allege it became the fastest selling videogame console of all time. Id. Sony offers
`two versions of the PS5: the Base Model and the Digital Edition. Id. ¶ 31. The Base Model, like
`earlier PlayStations, has an optical disk drive that allows users to play games on physical disks and
`can also play “digital games” that users download from the PlayStation Store. Id. The Digital
`Edition, which does not contain an optical disk drive and is less expensive, plays only digital games
`that users download from the PlayStation Store. Id. Games can be developed by console
`manufacturers (first-party games) or by outside developers (third-party games). See id. ¶ 29.
`B.
`The PlayStation Store And Videogame Distribution
`Sony’s PlayStation Store, which launched in 2006, offers digital games, apps, and other
`downloadable content for use on the PlayStation. Id. ¶¶ 4–5, 35–37. When a user purchases from
`the PlayStation Store, Sony collects payment from the user and instantly delivers the digital game
`or other content to the user’s console. Id. ¶ 36. Plaintiffs allege that the PlayStation Store is the
`only place where users can purchase digital games compatible with the PlayStation. Id. ¶¶ 39, 41.
`
`
`2 For the purposes of this Motion only, this brief accepts the Complaint’s factual allegations as true
`and, accordingly any statements of fact in this brief are based on those allegations (which Sony does
`not concede). Unless noted, internal quotation marks, brackets, and citations are omitted. Like the
`Complaint, this brief refers to downloadable games as “digital games” and games stored on a
`physical disk as “physical games.”
`
`MOTION TO DISMISS
`
`
`3
`
`
`CASE NOS. 3:21-CV-03361,
`3:21-CV-03447, 3:21-CV-05031
`
`

`

`Case 3:21-cv-03361-RS Document 45 Filed 02/18/22 Page 11 of 33
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`Microsoft and Nintendo have their own dedicated stores that function similarly to the
`PlayStation Store. Id. ¶¶ 35–36. Plaintiffs allege that Microsoft and Nintendo use an “agency” or
`“commission” purchasing model, while Sony uses a “wholesale” model. Id. ¶ 37. Under the
`commission model, game publishers set the price of a game on Xbox or Switch, with the game-store
`operator receiving a 30% commission on each sale. Id. By contrast, under the wholesale model,
`Sony and the publisher/developer agree upon a wholesale price and then Sony sets the retail price
`that it will charge consumers on the PlayStation Store. Id. The Complaint characterizes this
`wholesale model as Sony “forc[ing] publishers to cede control over the final retail price.” Id. ¶ 39.
`Sony has operated the PlayStation Store under this model for many years. See id. ¶ 37 n.18 (citing
`a wholesale agreement from 2017).
`Before April 2019, one way that Sony marketed games was by offering download codes that
`consumers could use to download games from the PlayStation Store to third-party retailers, like
`Amazon or Wal-Mart, who would in turn sell them to consumers. See id. ¶¶ 40–41. In April 2019,
`Sony discontinued this offering and publicly confirmed that it would no longer distribute game-
`specific, full-game download codes through third-party retailers. Id. ¶ 41.3 Microsoft and Nintendo
`continue to offer full-game download codes through third-party retailers for their platforms. Id.
`¶ 40.
`
`Plaintiffs further allege that Sony’s business strategies have been extremely successful: sales
`of PlayStation consoles and total downloads of digital PlayStation games “sharply increased” to
`unprecedented levels between 2018 and 2021. Id. ¶¶ 2, 4, 48. At the same time, the Complaint
`
`3 According to a source cited in the Complaint, Sony stated that it would stop offering full-game,
`game-specific download codes through third-party retailers, but would continue to offer retailers
`certain other download codes that consumers could use to purchase games and content, e.g., a code
`worth $50 that consumers could use to buy any product on the PlayStation Store. Compl. ¶ 41 &
`n.24 (citing N. Statt, Sony confirms it will stop letting GameStop and other retailers sell PS4
`VERGE
`(Mar.
`25,
`2019),
`codes,
`THE
`download
`https://www.theverge.com/2019/3/25/18281538/sony-playstation-4-gamestop-stop-selling-game-
`download-codes-retailers). Both Sony’s statement and the “leaked” GameStop memo quoted in this
`article are incorporated by reference in the Complaint and therefore may be considered on a motion
`to dismiss. See Hicks v. PGA Tour, Inc., 897 F.3d 1109, 1117 (9th Cir. 2018). This brief uses
`“download code” to refer only to the full-game, Sony download codes that are the subject of the
`allegations.
`
`MOTION TO DISMISS
`
`
`4
`
`
`CASE NOS. 3:21-CV-03361,
`3:21-CV-03447, 3:21-CV-05031
`
`

`

`Case 3:21-cv-03361-RS Document 45 Filed 02/18/22 Page 12 of 33
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`suggests that competition among the major videogame consoles remains vigorous, as Sony,
`Microsoft, and Nintendo each have a “roughly equal market share.” Id. ¶ 50.
`C.
`Plaintiffs And Their Claims
`Each Plaintiff owns a PS5 Digital Edition, purchased digital games from the PlayStation
`Store, and downloaded them to his console during the putative Class Period. Id. ¶¶ 1, 14–16. As
`the PS5 Digital Edition was not released until November 12, 2020, id. ¶ 2, Plaintiffs purchased their
`consoles at least eighteen months after Sony stopped selling download codes through third-party
`retailers (and many years after Sony first adopted a wholesale model), see id. ¶¶ 37 n.18, 41.
`Plaintiffs bring claims under Section 2 of the Sherman Act, alleging monopolization and
`attempted monopolization, derivative claims under California’s Unfair Competition Law (“UCL”),
`and a claim for unjust enrichment. Id. ¶¶ 85–112. Plaintiffs claim Sony has unlawfully monopolized
`a “market” for digital PlayStation games by (1) discontinuing these download-code offerings to
`third-party retailers and (2) choosing a wholesale game purchasing model. See id. ¶ 86. Plaintiffs
`claim this conduct has resulted in “supracompetitive prices for digital PlayStation games.” Id. ¶ 87.
`Plaintiffs seek to represent a putative class of all persons who purchased digital videogame content
`directly from the PlayStation Store since April 1, 2019. Id. ¶ 71. They seek damages and an order
`“preliminarily and permanently enjoining Sony from continuing the unlawful conduct alleged.” Id.
`at 29. In other words, they ask this Court to fundamentally change the way Sony operates its
`platform.
`
`ARGUMENT
`“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted
`as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678
`(2009). To state a monopolization claim, a plaintiff must show that (1) the defendant has monopoly
`power in a properly defined antitrust market, (2) acquired or maintained through anticompetitive
`conduct, which (3) caused an antitrust injury. Qualcomm, 969 F.3d at 990. For attempted
`monopolization, a plaintiff must show (1) anticompetitive conduct, (2) a specific intent to
`monopolize, and (3) a dangerous probability of achieving monopoly power. Spectrum Sports, Inc.
`
`MOTION TO DISMISS
`
`
`5
`
`
`CASE NOS. 3:21-CV-03361,
`3:21-CV-03447, 3:21-CV-05031
`
`

`

`Case 3:21-cv-03361-RS Document 45 Filed 02/18/22 Page 13 of 33
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`v. McQuillan, 506 U.S. 447, 456 (1993). Here, Plaintiffs fail to allege facts plausibly supporting
`the elements of these claims.
`First, Plaintiffs rest their case on a single-brand market: a claimed market for “digital
`PlayStation games.” Compl. ¶ 12. Single-brand markets are highly disfavored because they almost
`always ignore the reality of competition from other brands. Here, Plaintiffs’ proposed market
`ignores competition from the other major console-based platforms, to say nothing of the other
`platforms (e.g., PCs, mobile, and streaming services). To the extent Plaintiffs attempt to rely on a
`single-brand “aftermarket” theory, this fails because they have not alleged facts showing they were
`unknowingly subject to allegedly anticompetitive conditions after being “locked in” to their
`PlayStations. The fact that third-party retailers (like Amazon or Best Buy) do not sell these full-
`game download codes for PlayStation games has long been knowable to anyone with an internet
`connection (or who visited one of their stores). Moreover, the Complaint acknowledges that Sony
`publicly confirmed it would stop providing its download codes to third-party retailers at least
`eighteen months before Plaintiffs purchased their PlayStations. See id. ¶ 41 n.24 (Sony confirmed
`discontinuation of these code sales in March 2019); id. ¶ 2 (PS5 launched in November 2020); id.
`¶¶ 14–16 (Plaintiffs purchased PS5s). Thus, Plaintiffs fail to plead facts plausibly supporting their
`proposed market, much less monopoly or near-monopoly power.
`Second, Plaintiffs fail to plead anticompetitive conduct. Sony has no duty to perpetually
`offer third-party retailers these game download codes for use on the PlayStation Store and had every
`right to discontinue those sales consistent with its chosen business model. Antitrust law does not
`forbid Sony from eliminating a middleman in favor of dealing directly with consumers. Nor is there
`anything wrong with Sony choosing a wholesale model, as