Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 1 of 32
`
`
`
`Michael M. Buchman (admitted pro hac vice)
`MOTLEY RICE LLC
`777 Third Avenue, 27th Floor
`New York, NY 10017
`Tel: (212) 577-0050
`mbuchman@motleyrice.com
`Interim Lead Counsel for the Proposed Class
`[Additional Counsel Listed on Signature Page]
`
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
`
`AGUSTIN CACCURI, ADRIAN
`CENDEJAS and ALLEN NEUMARK, on
`behalf of themselves and all others similarly
`situated,
`
`Plaintiffs,
`
`v.
`
`
`
`
`SONY INTERACTIVE
`ENTERTAINMENT LLC,
`Defendant.
`
`
`
`
`Case Nos. 21-cv-03361-RS
` 21-cv-03447-RS
` 21-cv-05031-RS
`
`PLAINTIFFS’ OPPOSITION TO
`THE MOTION TO DISMISS THE
`CONSOLIDATED AMENDED
`CLASS ACTION COMPLAINT
`
` Judge: Hon. Richard Seeborg
`
` Date: December 1, 2022
`
` Time: 1:30 pm
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`STATEMENT OF ISSUES TO BE DECIDED
`On July 15, 2022, this Court entered an Order dismissing the Consolidated Class Action
`Complaint on the ground the Complaint failed to adequately allege anticompetitive conduct
`under the Sherman Act. Caccuri v. Sony Interactive Entertainment LLC, 21-cv-03361-RS, 2022
`WL 2789554, at *6 (N.D. Cal. July 15, 2022) (Seeborg, J.) (“Order”). Plaintiffs are providing the
`Court with a redline of the Consolidated Amended Class Action Complaint for efficient review
`of the revisions. See Exhibit A. The primary issue on this motion is whether the Consolidated
`Amended Class Action Complaint now adequately alleges anticompetitive conduct since:
`1.
`Plaintiffs allege that Sony has refused to deal with third-party retailers. (Counts I-
`IV).
`Plaintiffs allege that Sony voluntarily terminated a voluntary and profitable digital
`game business arrangement with retailers. (Counts I-IV).
`Plaintiffs allege Sony’s rationale for ending game-specific cards was to forgo
`short-term profits in order to exclude competition. (Counts I-IV).
`Plaintiffs allege that Sony continues to sell game specific cards directly to
`customers. (Counts I-IV).
`Despite Sony’s argument, Plaintiffs do not need to allege that Sony and third-
`party retailers were previously existing competitors before their distribution
`arrangement because there is no such requirement under Aspen Skiing Co. v.
`Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), Federal Trade Comm. v.
`Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020) or Metronet Serv. Corp. v. Qwest
`Corp., 383 F.3d 1124 (9th Cir. 2004).
`
`
`2.
`
`3.
`
`4.
`
`5.
`
`i
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`

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`Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 3 of 32
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`TABLE OF CONTENTS
`STATEMENT OF ISSUES TO BE DECIDED .............................................................................. i
`
`PRELIMINARY STATEMENT .................................................................................................... 1
`
`ARGUMENT: THE AMENDED COMPLAINT PLEADS ADDITIONAL FACTS
`RAISED IN THE ORDER ..................................................................................................... 6
`
`A.
`
`B.
`
`C.
`
`D.
`
`E.
`
`Sony’s New Argument that it is Continuing to Conduct Digital Game Business
`With Retailers Through Gift Cards is Misdirection ............................................................ 7
`
`Plaintiffs Allege Facts Demonstrating That Retailers’ Digital Game Business Was
`Profitable For Sony and Retailers And That Sony Sacrificed Short-Term Benefits
`When Terminating Retailers ............................................................................................... 9
`
`Plaintiffs Need Not Allege That The “Only Conceivable Rationale or Purpose”
`For Ending Digital Game Cards Was To Forgo Short-Term Benefits In Order To
`Exclude Competition ........................................................................................................ 11
`
`1.
`
`2.
`
`Sony’s Alleged Defenses and Inapposite Case Citations Provide No Basis
`For Dismissal at this Initial Stage of the Proceeding ............................................ 12
`
`The Amended Complaint Alleges “a willingness to sacrifice short-term
`benefits in order to obtain higher profits in the long run from the exclusion
`of competition” ..................................................................................................... 14
`
`Plaintiffs’ Allege that Sony Refused to Sell Digital Games to Retailers While
`Continuing to Sell Digital Games to Consumers on its PlayStation Store ....................... 18
`
`Aspen Skiing Does Not Require That Competition Pre-Existed Between Sony and
`Retailers To State A Refusal To Deal Claim .................................................................... 20
`
`CONCLUSION ............................................................................................................................. 24
`
`
`
`
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`ii
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`Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 4 of 32
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`TABLE OF AUTHORITIES
`
`
`
`Cases
`
`A. H. Cox & Co. v. Star Machinery Co.,
`653 F.2d 1302 (9th Cir. 1981) ............................................................................................ 14, 23
`
`Aerotec International, Inc. v. Honeywell International, Inc.,
`836 F.3d 1171 (9th Cir. 2016) ........................................................................................ 6, 18, 23
`
`Altitude Sports & Entertainment, LLC v. Comcast Corp.,
`2020 WL 8255520 (D. Colo. Nov. 25, 2020) ......................................................................... 12
`
`Apotex Corp. v. Hospira Healthcare India Private Ltd.,
`No. 18-CV-4903, 2020 WL 58247 (S.D.N.Y. Jan. 6, 2020) .............................................. 13, 22
`
`Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,
`472 U.S. 585 (1985) ........................................................................................................... passim
`
`Bushie v. Stenocord Corp.,
`460 F.2d 116 (9th Cir. 1972) .............................................................................................. 14, 23
`
`Caccuri v. Sony Interactive Entertainment LLC,
`21-cv-03361-RS, 2022 WL 2789554 (N.D. Cal. July 15, 2022) ............................................. i, 1
`
`Covad Communications Co. v. Bell Atlantic Corp.,
`398 F.3d 666 (D.D.C. 2005) ................................................................................................. 5, 23
`
`Federal Trade Commission v. Qualcomm Inc.,
`411 F. Supp. 3d 658 (N.D. Cal. 2019) .................................................................................. 4, 11
`
`Federal Trade Commission v. Qualcomm Inc.,
`969 F.3d 974 (9th Cir. 2020) ............................................................................................. passim
`
`H&C Animal Health, LLC v. Ceva Animal Health, LLC,
`499 F. Supp. 3d 920 (D. Kan. 2020) ......................................................................................... 20
`
`Illinois ex rel Burris v. Panhandle Eastern Pipe Line Co.,
`935 F.2d 1469 (7th Cir. 1991) .................................................................................................. 23
`
`Imperial Irrigation District v. California Independent System Operator Corp.,
`146 F. Supp. 3d 1217 (S.D. Cal. 2015) ............................................................................... 12, 13
`
`In re Adderall XR Antitrust Litigation,
`754 F.3d 128 (2d Cir. 2014) ............................................................................................... 13, 22
`
`In re Opana ER Antitrust Litigation,
`No. 14 C 10150, 2021 WL 2291067 (N.D. Ill. June 4, 2021) .................................................... 9
`
`iii
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`Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 5 of 32
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`
`
`Knevelbaard Dairies v. Kraft Foods,
`232 F.3d 979 (9th Cir. 2000) .................................................................................................... 19
`
`Knutson v. Daily Review, Inc.,
`548 F.2d 795 (9th Cir. 1976) .................................................................................................... 23
`
`Lee v. City of Los Angeles,
`250 F.3d 668 (9th Cir. 2001) .................................................................................................... 19
`
`LiveUniverse, Inc. v. MySpace, Inc.,
`304 F. App’x 554 (9th Cir. 2008) ............................................................................................... 6
`
`Metronet Services Corp. v. Qwest Corp.,
`383 F.3d 1124 (9th Cir. 2004) ........................................................................................... passim
`
`Novell, Inc. v. Microsoft Corp.,
`731 F.3d 1064 (10th Cir. 2013) .................................................................................... 11, 20, 23
`
`OJ Com., LLC v. KidKraft, Inc.,
`34 F.4th 1232 (11th Cir. 2022) ................................................................................................. 23
`
`Olympia Equipment Leasing Co. v. Western Union Telegraph Co.,
`797 F.2d 370 (7th Cir. 1986) .................................................................................................... 23
`
`Orthopedic Appliances, Inc. v. Tyco Health Care Group, LP,
`592 F.3d 991 (9th Cir. 2010) ................................................................................................ 8, 23
`
`Pacific Bell Telephone Co. v. linkLine Communications, Inc.,
`555 U.S. 438 (2009) ............................................................................................................ 10, 23
`
`Packaging Systems, Inc. v. PRC-Desoto International, Inc.,
`268 F. Supp. 3d 1071 (C.D. Cal. 2017) .............................................................................. 19, 20
`
`Palmdale Estates, Inc. v. Blackboard Insurance Co.,
`2021 WL 25048 (N.D. Cal. Jan. 4, 2021) ................................................................................. 24
`
`Paschall v. Kansas City Star Co.,
`727 F.2d 692 (8th Cir. 1984) .............................................................................................. 14, 23
`
`Port Dock & Stone Corp. v. Oldcastle Northeast, Inc.,
`507 F.3d 117 (2d Cir. 2007) ............................................................................................... 13, 22
`
`Simon & Simon, PC v. Align Technology, Inc.,
`533 F. Supp. 3d 904 (N.D. Cal. 2021) ............................................................................ 6, 18, 23
`
`Spectrum Sports, Inc. v. McQuillan,
`506 U.S. 447 (1993) .................................................................................................................. 24
`
`Stein v. Pacific Bell,
`172 F. App’x 192 (9th Cir. 2006) ............................................................................................... 6
`iv
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`Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 6 of 32
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`trueEx, LLC v. MarkitSERV Ltd.,
`266 F. Supp. 3d 705 (S.D.N.Y. 2017) ...................................................................................... 21
`
`United States v. United Healthcare Insurance Co.,
`848 F.3d 1161 (9th Cir. 2016) .................................................................................................. 24
`
`Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP,
`540 U.S. 398 (2004) ........................................................................................................... passim
`
`Viamedia, Inc. v. Comcast Corp.,
`141 S. Ct. 2877 (2021) ................................................................................................................ 3
`
`Viamedia, Inc. v. Comcast Corp.,
`951 F.3d 429 (7th Cir. 2020) ............................................................................................. passim
`
`Treatises
`
`Diane Coyle, Practical Competition Policy Implications of Digital Platforms, 82
`Antitrust L.J. 835 (2019) ............................................................................................................. 1
`
`Phillip E. Areeda & Herbert Hovenkamp,
`Antitrust Law: An Analysis of Antitrust Principles and Their Application (5th
`ed. 2022 Cum. Supp. 2015-2021) ............................................................................................. 12
`
`
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`Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 7 of 32
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`PRELIMINARY STATEMENT
`The Case History: This action was commenced on May 5, 2021 and a Consolidated
`Class Action Complaint (“CAC”) filed alleging that Sony Interactive Entertainment LLC
`(“Defendant” or “Sony”) monopolized the $17 billion market for Sony downloadable, digitally
`delivered video games and add-on content (“Digital Games”). See Consolidated Class Action
`Complaint (“CAC”) ¶¶ 4, 48, ECF No. 40. Plaintiffs alleged that Sony eliminated competition
`for Digital Game sales by terminating its Digital Game business relationships with all retailers
`such as Amazon, Best Buy, GameStop, and Walmart (“Retailers”), in violation of Section 2 of
`the Sherman Act, 15 U.S.C. § 2, and state law. Sony previously allowed Retailers to sell Digital
`Games for years in competition with the Sony PlayStation Store, but terminated its voluntary and
`profitable Digital Game business relationships with Retailers in April of 2019. In so doing, Sony
`erected a “walled garden” that forces consumers to purchase Digital Games exclusively from the
`PlayStation Store.1
`Defendant moved for dismissal of the action on the grounds that the CAC failed to allege:
`(i) monopoly power or a dangerous probability of achieving monopoly power in a properly
`defined antitrust market; (ii) anticompetitive conduct; (iii) anticompetitive effects or antitrust
`injury; and (iv) facts supporting its derivative California state law claims. ECF No. 45. On
`July 15, 2022, the Court issued an Order dismissing the CAC on the ground that Plaintiffs failed
`only with respect to adequately alleging anticompetitive conduct under the Sherman Act.
`Caccuri v. Sony Interactive Entertainment LLC, 21-cv-03361-RS, 2022 WL 2789554, at *6
`(N.D. Cal. July 15, 2022) (Seeborg, J.), ECF No. 60 (“Order”). But the Court did accept
`Plaintiffs’ allegations concerning: (i) monopoly power in a properly defined market; and
`(ii) anticompetitive effects or antitrust injury. Order at *2-3. Leave was granted to allege more
`facts: (i) demonstrating that Digital Game sales through Retailers was voluntary and profitable;
`
`
`1 A walled garden is a “closed digital platform[] with restrictions on access.” Diane Coyle,
`Practical Competition Policy Implications of Digital Platforms, 82 Antitrust L.J. 835, 856
`(2019).
`
`OPPOSITION TO THE MOTION TO DISMISS
`CASE NOS. 21-CV-03361, 21-CV-03447, & 21-CV-0503
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`Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 8 of 32
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`and (ii) Sony sacrificed “short-term benefits in order to obtain higher profits in the long run from
`the exclusion of competitors” when terminating Retailers. Id. at *4-5.
`The Consolidated Amended Class Action Complaint: On August 15, 2022, Plaintiffs
`filed a Consolidated Amended Class Action Complaint (“CACAC” or “Amended Complaint”)
`containing such new allegations. ECF No. 61. A red-lined copy of the Consolidated Amended
`Class Action Complaint is annexed as Exhibit A for ease of seeing the amendments. The new
`allegations address the deficiencies raised by the Court and show Sony’s longstanding and
`profitable Digital Game business relationship with Retailers. CACAC at ¶¶ 41-51. For example,
`in 2016 alone GameStop sold about a billion dollars in digital content. Id. at ¶ 44. For years,
`Sony recognized that its business relationship with Retailers was mutually beneficial and
`considered “participating retailers as a strong economic source of profitable revenue.” Id. at ¶ 42.
`Given this strong, mutually beneficial relationship, “Sony promoted sales through retailers by
`directing customers to purchase digital games from retailers because it benefitted Sony
`financially.” Id. The Amended Complaint further alleges that Sony employed multiple pricing
`structures for games created by third-party developers as well as its own in-house developers. Id.
`at ¶ 43. The Amended Complaint specifically alleges that poor financial performance or lack of
`profitability was not the impetus for Sony’s decision to terminate its Digital Game business with
`Retailers in April of 2019. 2 CACAC at ¶ 46. Quite the contrary, Sony’s relationships with
`Retailers were strong, and lucrative for both. Id. By terminating its voluntary and profitable
`relationships with Retailers, “Sony elected to sacrifice short-term sales and profits in order to
`shift all digital game sales to the PlayStation Store where prices for digital games were generally
`higher.” Id. at ¶ 47. Sony sacrificed short-term benefits when it “sustained a substantial loss of
`Software Unit Sales and corresponding revenue in digital games” as reflected in Figure 5 of the
`
`2 Sony contends it continues to sell Digital Games to Retailers through general purpose gift cards
`(“Gift Cards”). Gift Cards are typically given as a gift in place of cash. Selling a Gift Card is like
`taking cash and providing a credit towards purchasing products only from Sony. Allowing
`Retailers to sell a credit toward purchasing a variety of products is quite different from allowing
`Retailers to sell Digital Games. A person using a gift card still needs to buy the game only from
`Sony at a price set by Sony. Gift cards are not directly linked to a Digital Game, and they are not
`a Digital Game.
`
`OPPOSITION TO THE MOTION TO DISMISS
`CASE NOS. 21-CV-03361, 21-CV-03447, & 21-CV-0503
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`Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 9 of 32
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`Complaint. Id. at ¶ 47. Game software sales for the full 2019 Fiscal Year (“FY”) which ran from
`April 1, 2019 through March 31, 2020, were down from 2018. Id. But by FY 2020 (April 1,
`2020-March 31, 2021), Sony turned a financial corner and posted $17.32 billion for the fiscal
`year in sales of Digital Games and associated content. Id. Sony’s public documents establish that
`when eliminating Retailers in April of 2019, Sony sacrificed short-term benefits. Id. at ¶ 50.
`Sony’s argument that it immediately realized an increase in Digital Game revenue and profits is
`belied by its own United States Securities & Exchange Commission (“SEC”) filings for which it
`here requests judicial notice (and Plaintiffs do not object). As alleged in the Amended
`Complaint, Sony’s SEC filings show that Sony initially took a short-term financial loss (in
`Digital Game sales and operating revenue) in order to take long-term exclusive control of the
`Digital Game market. The Amended Complaint, therefore, alleges facts comparable to those in
`Aspen Skiing and Viamedia: (i) termination of a voluntary and profitable course of dealing; (ii) a
`sacrifice of short-term benefits; and (iii) a refusal to deal concerning products sold in the market
`to other customer. Order at *4-5; CACAC at ¶¶ 42, 47, 51. Moreover, Sony’s long-term
`relationship with Retailers supports an inference that the Digital Game joint arrangement was
`beneficial and profitable in accordance with Verizon Commc’ns Inc. v. L. Offs. of Curtis V.
`Trinko, LLP, 540 U.S. 398, 408-09 (2004). Id. at ¶ 42. But lest there be any doubt, the Amended
`Complaint also alleges new facts that put this case on the same footing as Aspen Skiing3 and
`Viamedia4 because Sony “elected to make an important change in a pattern of distribution that
`had originated in a competitive market and had persisted for several years.” Aspen Skiing, at 603;
`Viamedia, at 456 (quoting Aspen Skiing). In sum, the Amended Complaint adds allegations about
`anticompetitive conduct that address the concerns raised by the Court.
`The Renewed Motion to Dismiss: On September 22, 2022, Sony moved for dismissal on
`the following six grounds : (i) Sony has not refused to and is continuing to sell Digital Games to
`Retailers through Gift Cards; (ii) Plaintiffs have merely alleged that Sony collects revenues, but
`
`3 Aspen Skiing Co. v. Aspen Highlands Skiing Corp. , 472 U.S. 585, 603 (1985).
`4 Viamedia, Inc. v. Comcast Corp., 951 F.3d 429, 456 (7th Cir. 2020), cert. denied, 141 S. Ct.
`2877 (2021).
`
`OPPOSITION TO THE MOTION TO DISMISS
`CASE NOS. 21-CV-03361, 21-CV-03447, & 21-CV-0503
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`Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 10 of 32
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`not that Digital Game card sales were “profitable”; (iii) Plaintiffs have not plausibly alleged that
`the only conceivable rationale or purpose for terminating Digital Game sales to Retailers was to
`forgo short-term profits to exclude competition; (iv) Plaintiffs have not demonstrated that Sony
`actually took a short-term profit sacrifice after terminating Retailers; (v) Plaintiffs have not
`alleged that Sony still sells Digital Games on the same terms to similarly situated customers; and
`(vi) under Aspen Skiing, Plaintiffs’ refusal to deal claim is not actionable because Sony and the
`Retailers were not Digital Game competitors prior to their Digital Game distribution
`arrangement. ECF No. 67. Plaintiffs have addressed the pleading deficiencies outlined in the
`Order and properly plead anticompetitive conduct under the Sherman Act and state law.
`Defendant’s new and reconstituted arguments fail for the following reasons:
`First, Gift Cards are not a comparable substitute for Digital Game cards. Sony has not
`replaced Digital Game cards with Gift Cards. Gift Cards were previously sold by Sony as alleged
`in the CCAC. CCAC ¶ 38. Gift Cards were previously sold as a substitute or alternative to cash
`or credit cards. Moreover, Sony is not using Gift Cards as a vehicle to allow Retailers to continue
`selling, competing, or establishing their own prices for Digital Games. Sony’s argument that Gift
`Cards provide a basis for dismissing the Complaint is an inaccurate characterization outside the
`pleading because Digital Games are still only priced and sold to consumers by Sony through the
`PlayStation Store. Gift Cards are simply a payment method for products that enables Sony to
`hold the funds pending a purchase. They are not directly linked to a specific Digital Game and,
`therefore, are not the equivalent of Digital Game cards.
`Second, Plaintiffs allege, in detail, that Sony had healthy, strong, mutually beneficial and
`financially profitable business relationships with Digital Game Retailers. E.g., CACAC ¶¶ 6, 39-
`50, 52-53, 62, 68.
`Third, Sony misstates the import of FTC v. Qualcomm Inc., 411 F. Supp. 3d 658, 753
`(N.D. Cal. 2019) at this stage of the proceeding. Sony’s suggestion that the Digital Game
`business was not profitable is contra to the facts pled, and is belied by the fact that it continued
`its Digital Game business with Retailers for years before termination.
`
`OPPOSITION TO THE MOTION TO DISMISS
`CASE NOS. 21-CV-03361, 21-CV-03447, & 21-CV-0503
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`Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 11 of 32
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`Fourth, Sony’s assertion that it did not sustain a short-term sacrifice of benefits is
`contradicted by its own documents filed with the SEC. Sony lengthens the time period it uses
`through FY 2020 to include both the loss in FY 2019 and gain of benefits in FY 2020, in order to
`mask the loss and emphasize the later revenue increase. This does not change the clear
`allegations that Sony, in fact, sacrificed short-term benefits in FY 2019 to obtain benefits in the
`long run by excluding Retailer competition.
`Fifth and as noted in the Court’s Order, Plaintiffs initially alleged in the CAC that Sony
`refused to sell Digital Games to Retailers after terminating them. Sony is now selling Digital
`Games directly to consumers through its PlayStation Store. See Order at *5; see CACAC ¶¶ 6, 7,
`39-50, 52-53, 62, 68. The Court has already recognized that Plaintiffs satisfied this requirement.
`See Order at *5.
`Sixth and contrary to Defendant’s assertion, Aspen Skiing does not require Sony and the
`Retailers to have been actual competitors before they entered into their Digital Game business
`arrangement. Notably, Defendant never made this argument in its initial motion and has yet to
`cite to any portion of Aspen Skiing which requires this as a “factor.” This new element is not part
`of Aspen Skiing, Qualcomm/MetroNet, nor this Court’s Order.5 See Defendant’s Motion To
`Dismiss Plaintiffs’ Consolidated Amended Class Action Complaint (“Def. Mem.”) at 9.
`Finally, Sony prematurely raises a questionable affirmative defense that any
`anticompetitive result was an unintended consequence of its desire to maximize profits. The
`question whether Sony’s motivation was procompetitive or anticompetitive raises an issue of fact
`which cannot be determined on a motion to dismiss.6
`In sum, Plaintiffs’ amendments cure the issues raised by the Court’s Order. The new
`arguments raised by Sony are either an attempt to create new pleading elements outside of
`
`
`5 The Aspen Skiing factors are: (1) “the unilateral termination of a voluntary and profitable
`course of dealing”; (2) “a willingness to sacrifice short-term benefits in order to obtain higher
`profits in the long run from the exclusion of competition”; and (3) “that the refusal to deal
`involves ‘products that were already sold in a retail market to other customers.’” Order at *4; See
`also Def. Mem. at 9.
`6 Covad Commc’ns Co. v. Bell Atlantic Corp., 398 F.3d 666, 676 (D.D.C. 2005).
`
`OPPOSITION TO THE MOTION TO DISMISS
`CASE NOS. 21-CV-03361, 21-CV-03447, & 21-CV-0503
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`Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 12 of 32
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`recognized authority, or disputes of fact or inferences that should be resolved on a developed
`factual record at summary judgment or trial. For all these reasons, Sony’s motion to dismiss
`should be denied in its entirety.
`
`ARGUMENT: THE AMENDED COMPLAINT PLEADS
`ADDITIONAL FACTS RAISED IN THE ORDER
`Sony concedes that Aspen Skiing permits refusal to deal claims. See Def. Mem. at 7-10.
`The Supreme Court first endorsed the refusal to deal theory of anticompetitive harm in Aspen
`Skiing Co., 472 U.S. at 608, 610-11 and revisited it in Verizon, 540 U.S. at 409; Def. Mem. at 7-
`10. In MetroNet, 383 F.3d 1124, the Ninth Circuit identified three relevant circumstances under
`which the Aspen Skiing exception applies: (i) there is a unilateral termination of a voluntary and
`profitable course of dealing; (ii) there is evidence indicating “a willingness to sacrifice short-
`term benefits in order to obtain higher profits in the long run from the exclusion of competition”;
`and (iii) the refusal to deal involves products “that were already sold in a retail market to other
`customers.” Id. at 1132-33; see Def. Mem. at 9. All three conditions are present here. See Simon
`& Simon, PC v. Align Tech., Inc., 533 F. Supp. 3d 904, 914-15 (N.D. Cal. 2021). Sony’s
`reconstituted contention that the Ninth Circuit has repeatedly rejected refusal to deal cases over
`the past 18 years ignores the reality that facts to support the Aspen Skiing/MetroNet elements
`were lacking in each of those cases. Def. Mem. at 9; See Defendant’s Reply Memorandum of
`Law, p. 7 (ECF No. 52). In each of the cases Defendant cites, the Ninth Circuit found either no
`voluntary7course of business existed8 with the Plaintiff, or Defendant was continuing to do
`business with the Plaintiff, but on less than favorable terms.9 This case, however, mirrors Aspen
`Skiing and Viacom and involves the additional fact that all Retailer competition was eliminated.
`
`7 Stein v. Pac. Bell, 172 F. App’x 192 (9th Cir. 2006) (“the course of dealing between Pacific
`Bell and its competitors occurred within a congressionally-imposed regulatory scheme, and
`therefore ‘does not fit comfortably in the Aspen Skiing mold’ of voluntariness.”).
`8 LiveUniverse, Inc. v. MySpace, Inc., 304 F. App’x 554, 557 (9th Cir. 2008) (“[N]othing in the
`complaint suggests an agreement, or even an implicit understanding, between MySpace and
`LiveUniverse regarding the functionality of embedded links.”).
`9 MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124 (9th Cir. 2004) (Defendant presented
`Plaintiff with unfavorable business terms, but did not terminate the relationship); Aerotec Int’l,
`
`OPPOSITION TO THE MOTION TO DISMISS
`CASE NOS. 21-CV-03361, 21-CV-03447, & 21-CV-0503
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`Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 13 of 32
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`The Court’s Order required Plaintiffs to plead additional facts alleging that: (i) Sony had
`a voluntary and profitable course of Digital Game business with Retailers prior to terminating
`those relationships; and (ii) Sony sacrificed short-term benefits when terminating Retailers in
`order to obtain higher profits in the long run from the exclusion of competition. Plaintiffs have
`alleged additional facts satisfying these elements. CACAC ¶¶ 41-51. Plaintiffs address below
`Sony’s arguments concerning these new allegations. Plaintiffs also address below Sony’s new
`arguments unrelated to the new allegations.
`
`A.
`
`Sony’s New Argument that it is Continuing to Conduct Digital Game
`Business With Retailers Through Gift Cards is Misdirection
`For the first time, Sony now contends it is continuing to sell Digital Games through
`Retailers via “Gift Cards.” Def. Mem. at 11-12. Sony further contends that this fact is “fatal” to
`Plaintiffs’ refusal to deal claim. Id. It is not. Defendant’s argument rests on the faulty premise
`that Gift Cards are equivalent to Digital Game cards previously sold through the Retailers. Gift
`Cards are a different product. Gift Cards are: (i) a generic system of payment with a defined
`preset monetary value (e.g., $10, $25, $50, $75, and $100) and no retail competition on price;
`(ii) used to purchase a wide-array of Sony products such as Digital Games and add-on content;
`(iii) not exclusively linked to a specific Digital Game; 10and (iv) a far less efficient way to
`purchase a Sony Digital Game than the previously sold Digital Game cards. To be sure, Gift
`Cards are, as Sony concedes, designed to let purchasers use the card for far “more” than Digital
`Games. Def. Mem. at 11. Conversely, Digital Game cards were: (i) exclusively linked to a
`specific digital game (e.g., Spiderman see CACAC Figure 4 ¶ 41); (ii) sold at a Retailer’s chosen
`price within a competitive retail environment; and (iii) purchased by consumers in a highly
`efficient manner when paying the exact cost of the Digital Game plus taxes and nothing more.
`
`
`Inc. v. Honeywell Int’l, Inc., 836 F.3d 1171, 1184 (9th Cir. 2016) (no refusal to deal - Aerotec
`simply did not like business terms being offered).
`10 Citing the Amended Complaint at paragraphs 44 and 46, Sony incorrectly states Gift Cards
`“contain download codes . . . to specific game content” Def. Mem. at 4. Paragraph 41 of the
`Amended Complaint discusses only Digital Game cards – not Gift Cards – and paragraph 46
`only generically references Gift Cards.
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`OPPOSITION TO THE MOTION TO DISMISS
`CASE NOS. 21-CV-03361, 21-CV-03447, & 21-CV-0503
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`Case 3:21-cv-03361-RS Document 76 Filed 10/31/22 Page 14 of 32
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`Digital Game cards allowed consumers to purchase the specific game they wanted, with their
`preferred method of payment, at the Retailer’s chosen price which could be lower than Sony’s
`price. Gift Cards, however, are not specifically linked to a Digital Game and a precise product
`transaction cost. Sony has acknowledged that Gift Cards are not linked to Digital Games and
`constitute an inefficient way to purchase Digital Games by stating it will “introduce increased
`denominations at select retailers.” CACAC ¶ 45 n.29. But this