United States District Court, D. Oregon
J. CROOKS PERKINS COIE LLP, SUSAN E. FOSTER SHYLAH R. ALFONSO
DAVID S. STEELE PERKINS COIE LLP, JON B. JACOBS PERKINS COIE
LLP ATTORNEYS FOR PLAINTIFF
TRIPLETT RICHARD K. HANSEN SCHWABE, WILLIAMSON & WYATT,
P.C., J. MARK GIDLEY WHITE & CASE LLP, HEATHER M. BURKE
WHITE & CASE LLP ATTORNEYS FOR DEFENDANT
OPINION & ORDER
A. HERNÁNDEZ UNITED STATES DISTRICT JUDGE
CollegeNet, Inc., brings this antitrust action for violations
of Sections 1 and 2 of the Sherman Act against Defendant The
Common Application, Inc. Plaintiff brings seven claims for
relief: (1) Horizontal Restraint of Trade in the Admissions
Markets; (2) Horizontal Restraint of Trade in the Online
College Application Processing Market; (3) Exclusive Dealing;
(4) Tying; (5) Monopolization; (6) Attempted Monopolization;
and (7) Conspiracy to Monopolize. Defendant moves to dismiss
all of Plaintiff's claims and transfer this action to the
Eastern District of Virginia. The Court denies
Defendant's Motions to Dismiss and Transfer.
CollegeNET is a Portland-based corporation that offers
various web-based administrative services to higher education
and non-profit organizations, including customized online
application forms, processing services, and contact
management services. First Am. Compl. (“FAC”)
¶ 6, ECF 75. Defendant The Common Application is a
Virginia-based nonprofit corporation comprised of 549
non-profit member colleges and universities. Id. at
¶ 7. It offers a standard college application data
service, application forms, and processing services.
was formed in 1975 as a limited group of selective colleges
seeking to simplify the college admissions process.
Id. at ¶¶ 13, 38. The application was
initially a paper form that was universally accepted by all
member colleges, eliminating the need for applicants to write
their basic information more than once. Id. at
¶ 13. According to Plaintiff, Defendant has since
“transformed itself into a dominant online college
application processing provider.” Id. at
¶ 14. As it grew, Defendant's members began to
“understand that Common Application was providing
tangible monetary benefits to them at the expense of
applicants. What started out as a service to simplify the
college application process for students had become a
pipeline of applicants” Id. at ¶ 48.
According to Plaintiff, membership grew “not to serve
students but in part to secure a boost in applications,
application fees, and rankings.” Id.
alleges that Defendant is not a single entity, but rather a
“consortium of competitors” that have
participated with Defendant as co-conspirators in connection
with the alleged antitrust violations. Id. at
¶¶ 8, 84. A majority of Defendant's steering
committee or board of directors is made up of admissions
officers from member colleges. Id. at ¶ 85. The
board discusses and approves membership agreements, Common
Application changes, and restraints. Id. at ¶
86. Each year, member colleges sign an agreement with
Defendant to abide by its rules and regulations. Id.
at ¶ 88.
Evolution of Defendant's Unlawful Conduct
alleges various anticompetitive behavior resulting from
membership restrictions and restraints, including but not
limited to: (a) Tying and Bundling/Forced Purchase
Requirements; (b) Exclusivity Restrictions; (c) the
“Equal Treatment” Requirement; and (d) Uniformity
Requirements. Id. at ¶ 15. Plaintiff suggests
that none of these requirements-which Defendant operated
without for 25 years-is necessary to achieve any legitimate
or procompetitive goal of the Common Application.
Id. at ¶ 16. According to Plaintiff, these
restraints “have the primary effect of suppressing
competition to provide online college application processing
services to applicants and colleges, reducing net output, and
excluding rival providers.” Id. They
“are not ancillary to or reasonably necessary to carry
out Common Application's official mission.”
Id. at ¶ 159.
2003, Defendant “redefined its ‘equal
treatment' requirement.” Id. at ¶ 46.
Specifically, it began requiring members to “encourage
the use of the Common Application” by “(1)
charging an application fee to Common Applicants that was
‘no greater than the fee charged for [their] other
accepted applications; (2) providing ‘an equally
prominent link to the Common App Online wherever [they]
post[ed] a link to another online application; and (3) not
‘explicitly offer[ing] any special benefits to students
regardless of the application they choose.'”
Id. It also began charging non-exclusive members a
higher fee per application than was charged to exclusive
members. Id. at ¶ 47.
2005-06, Defendant entered into agreements with Naviance and
ApplyYourself (“AY”). Naviance is the
“largest provider of planning and advising systems for
secondary schools” with an “electronic document
transmission system . . . integrated into more than 5, 500
schools.” Id. at ¶ 55. Defendant became
“tightly integrated” with Naviance's system,
and college counselors familiar with Naviance
“encourage[d] students to apply to college through the
Common App.” Id. Defendant also awarded an
“exclusive Online College Application Processing
Services contract” to AY from 2007 to 2013.
Id. at ¶ 56.
this time, Defendant also made several changes to its
services and pricing structure. Plaintiff alleges that
Defendant's “typical pattern was to begin by
offering additional ‘optional' services and then,
after a few years, (1) bundle the services with its core
offering, (2) make their use mandatory, and/or (3) impose
penalties on members who did not agree to use Common
Application's services exclusively.” Id.
at ¶ 58. In the mid-2000's, for example, Defendant
introduced supplemental forms and payment processing
services. Id. at ¶ 59. Initially, members could
pay for membership, applications, application payment
processing, supplemental applications, and maintenance of
supplemental applications separately. Id. But, in
the late 2000's, Defendant “bundled all of its
distinct services (except for payment processing) into a
single offering for one all-in fee.” Id. at
¶ 61. In other words, Common Application still charged a
membership fee and a fee per application, but the
supplemental application and other services were
“free.” Id. In addition, members who
were fully exclusive and did not use other application
providers were charged $4.00 per application processed as
opposed to the standard $5.50 fee per application.
Id. at ¶¶ 61-62. Defendant also began
“restricting member institutions' ability to
customize and personalize their Institutional
Supplements.” Id. at ¶ 64.
2011, Defendant announced its intent to end its contract with
AY and-in 2014 with its fourth-generation system
“CA4”-to bring the online processing staff,
software, and infrastructure in-house. Id. at ¶
66. According to Plaintiff, Defendant was equipping itself to
“‘handle the full volume of the entire American
college application process.'” Id. at
alleges that CA4 was a “woefully deficient,
technologically backwards, glitch-riddled product that would
never survive in a competitive marketplace.”
Id. at ¶ 68. By further homogenizing the
college application process, CA4 made it “harder for
applicants and Colleges to identify good
‘matches.'” Id. at ¶ 79. CA4
eliminated file uploads and used text boxes that were limited
to 650 words. Id. Applicants were further limited in
the number of versions of essays they could upload and to
answering four specific essay prompts. Id. at
addition, Defendant made further changes to its pricing and
membership structure. Under its new three-tiered membership
structure, all members had to (1) use Defendant's Common
Application for all form and payment processing-including
Institutional Supplements-for Common Applicants; (2) accept
all Common Applicant evaluation forms (including final
transcripts) online, for schools that chose to send them
online; and (3) accept the Common Application fee waiver.
Id. at ¶¶ 74-75. In addition,
“Exclusive I” members had to use the Common
Application as their only admission application for
full-time, undergraduate, degree-seeking applicants, and
“Exclusive II” members had to (1) establish
uniform fees for all applicants; (2) use the Common
Application as their only transfer application; and (3) use
Slideroom.com for their Arts Supplement (if they offered
one). Id. at ¶¶ 76, 77. According to
Plaintiff, the “penalties” for choosing to be a
Non-Exclusive versus Exclusive II member are
“extreme.” Id. at ¶ 78.
2000, Defendant's membership has grown substantially,
reaching 549 members in the 2014-2015 academic year.
Id. at ¶ 44. With that growth, its total
revenue increased from $339, 046 in 2003 to $14.5 million in
2013. Id. It processed 3.45 million applications in
the 2013-2014 application cycle. Id. at ¶ 82.
In addition, in 2014 Defendant eliminated its “holistic
admission membership requirement, ” allowing
“virtually any College . . . to join Common
Application.” Id. at ¶ 83.
Anticompetitive Effects and Injury
Plaintiff alleges that Defendant's agreements and the
challenged restraints have had various anticompetitive
effects. They have harmed competition in the Admissions and
Online College Application Processing Markets. Id.
at ¶ 149. They have resulted in lower “Net Output,
” defined as the net value derived from Online College
Application Processing services including (1) quality,
functionality, features, ease of use and level of
innovativeness of Application Processing services; (2) the
ability of applicants and Colleges to find good matches; (3)
the ability to predict yield or matriculation; and (4) the
amount of time and money spent by Colleges and applicants
using these services. Id. at ¶¶ 21, 151,
153-56. According to Plaintiff, the equal treatment
requirement in particular has reduced competition among
members to offer better alternatives to the Common
Application. It amounts to a group boycott and an agreement
to suppress demand for application services. Id. at
¶¶ 151-52. Plaintiff alleges that Defendant has
impermissibly tied its Standard College Application Data
service to its Online Application Processing service through
its “one-price-for-all-services model.”
Id. at ¶ 153. The exclusivity provisions have
also foreclosed rival providers by making it
“prohibitively expensive for members to use and offer
to applicants those rivals' services.” Id.
at ¶ 154. The uniformity requirements have similarly
reduced Net Output by decreasing the value that applicants
derive from the application process and limiting their
ability to find a good match. Id. at ¶ 155.
has also been injured by the restraints. Plaintiff alleges
that it has lost over 200 college customers to Common
Application in the last 10-15 years. Id. at ¶
37. Prior to the alleged restraints, Plaintiff asserts that
it hosted Common Application Institutional Supplements and
supported Common Application member colleges in other ways.
Id. Plaintiff attributes its losses to these
to Plaintiff, members receive certain benefits from the
restraints. Id. at ¶ 157. The restraints allow
them to spend less on online application processing services
without a reduction in applicants. Id. at ¶
157(a). They boost their application numbers, fees, and
rankings. Id. at ¶ 157(c). Plaintiff alleges
that early members in particular have a “significant
financial interest and have invested substantial time and
effort” in the commercial joint venture such that they
are motivated to prevent competition. Id. at ¶
The Relevant Markets
alleges that there are four relevant markets in which to
analyze the effects of Defendant's allegedly unlawful
restraints: “(1) the market for applicants to Colleges
(the “Student Application Market”); (2) the
market for admission to Colleges (the “College
Admissions Market”) ((1) and (2) collectively, the
‘Admissions Markets'); (3) the Online College
Application Processing Market and each of its submarkets; and
(4) the College market for Standard College Application Data
Services.” Id. at ¶ 90. In the
alternative, Plaintiff contends that the Admissions Markets
may be limited to Elite Colleges, defined as top-50
universities and top-50 liberal arts colleges by U.S. News
& World Report. Id. at ¶¶ 18, 91.
contends that the Online Application Processing Market is a
distinct product market. Id. at ¶ 92. It is
limited in geographic scope to the United States, and
suppliers include: Defendant, Plaintiff, Applications Online
LLC (“AOL”), XAP Corporation, Hobsons U.S., and
AY. Id. at ¶¶ 33, 93. Plaintiff alleges
that the market does not include applications to graduate
programs (which cost more and are not a reasonable substitute
for the college product) or student information systems
(“SIS”) (which are more limited products and
require significant investment from the college).
Id. at ¶¶ 96-106. Plaintiff alleges that
barriers to entry are high because of the high fixed costs
involved in entering the industry and the difficulty
obtaining and retaining customers due to Defendant's
entrenchment and exclusivity agreements. Id. at
¶¶ 107-10. Plaintiff also alleges that
Defendant's exclusivity agreements, equal treatment
requirements, bundling/forced purchase requirements, and
tying behavior disincentivize offering other applications and
have made switching costs high. Id. at ¶¶
110-13. Plaintiff contends that Defendant's share of this
market is 60%: “In 2014-15, an estimated 9.4 million
undergraduate applications will be submitted, with 5-6
million processed online by third-party providers, and
approximately 3.6 million of which will be processed by
Common Application.” Id. at ¶ 115.
Standard College Application Service Market is a distinct
product market. Unlike the Online Application Processing
Market, “which includes full application form
development and processing, ” the Standard College
Application Data Service “provides a generic,
text-based data entry form for applicants to input their
background information required by more than one
College.” Id. at ¶ 118. Plaintiff alleges
that there are no reasonable substitutes for access to this
product, which generates an “applicant pipeline.”
Id. at ¶ 121. Competitors in this market
include AOL (provider of the Universal College Application)
and Defendant. Id. at ¶¶ 24, 122.
Plaintiff alleges that Defendant's share of this market
is 90%. Id. at ¶ 122.
Student Application Market and College Admissions Markets are
also distinct product markets. Id. at ¶ 124.
They are supplied by Online Application Processing providers.
Id. at ¶ 125. The Student Application Market is
limited to applications for admission to full-time, four-year
degree programs at Colleges (“regionally accredited,
non-profit, undergraduate colleges and universities”).
Id. at ¶ 124. Similarly, the College Admissions
Market is comprised of full-time, four-year College degree
programs. Id. Plaintiff contends that graduate
programs; part-time or two-year programs; programs at
non-regionally accredited, for-profit schools; or non-US
institutions are not substitutes for Colleges and thus
excludable from these markets. Id. at ¶ 127.
Plaintiff contends that Defendant will process 40-45% of
College applications in 2014- 15 year and therefore controls
at least 40-50% of the Student Application Market.
Id. at ¶ 129. Plaintiff alleges that this
number is an understatement of Defendant's market power,
or “their ability to reduce Net Output without losing
applicants” as a result of the network effects of its
applicant pipeline. Id. at ¶ 130. There are
also high barriers to entry in this market. Id. at
College Admissions Market is the market for admission to
full-time, four-year College degree programs. Id. at
¶ 138. For the reasons discussed in the preceding
paragraph, this market excludes other degree programs, and
Defendant has similar market share and market power.
Id. at ¶¶ 139-40. Plaintiff contends that
the ability of Defendant to offer a product with
“inferior functionality” at a high cost with
limitations on Colleges' advertising opportunities and
the ability of applicants to find a good College (without
losing users) is direct evidence of Defendant's
“unconstrained exercise of their market power.”
Id. at ¶ 137.
filed this case in the District of Oregon on May 8, 2014.
Compl., ECF 1. On May 15, 2015, the Court granted
Defendant's first Motion to Dismiss Plaintiff's
claims for failure to plead antitrust injury. Opinion &
Order, ECF 96. On appeal, the Ninth Circuit reversed the
decision of the district court and remanded this case for
further proceedings. Mandate, ECF 112. On July 12, 2018,
Defendant filed its Motion to Dismiss, and on August 3, 2018,
Defendant filed its Motion to Transfer. Def. Mot. Dismiss,
ECF 137; Def. Mot. Transfer, ECF 146.
Motion to Dismiss
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) tests the sufficiency of the claims. Navarro v.
Block, 250 F.3d 729, 732 (9th Cir. 2001). “All
allegations of material fact are taken as true and construed
in the light most favorable to the nonmoving party.”
Am. Family Ass'n, Inc. v. City & Cnty. of
S.F., 277 F.3d 1114, 1120 (9th Cir. 2002). 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[, ]” meaning “the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (internal quotation
marks omitted). In other words, a complaint must contain
“well-pleaded facts” that “permit the court
to infer more than the mere possibility of
misconduct[.]” Id. at 679.
the court need not accept conclusory allegations as truthful.
See Warren v. Fox Family Worldwide, Inc., 328 F.3d
1136, 1139 (9th Cir. 2003) (“[W]e are not required to
accept as true conclusory allegations which are contradicted
by documents referred to in the complaint, and we do not
necessarily assume the truth of legal conclusions merely
because they are cast in the form of factual
allegations.”) (internal quotation marks, citation, and
alterations omitted). A motion to dismiss under Rule 12(b)(6)
will be granted if a plaintiff alleges the
“grounds” of his “entitlement to
relief” with nothing “more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action[.]” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). “Factual
allegations must be enough to raise a right to relief above
the speculative level on the assumption that all the
allegations in the complaint are true (even if doubtful in
fact)[.]” Id. (citations and footnote
Motion to Transfer Venue
U.S.C. § 1404 governs motions to transfer venue:
“For the convenience of parties and witnesses, in the
interest of justice, a district court may transfer any civil
action to any other district or division where it might have
been brought.” The purpose of the § 1404(a) is to
“prevent the waste of time, energy and money and to
protect litigants, witnesses, and the public against
unnecessary inconvenience and expense.” Van Dusen
v. Barrack, 376 U.S. 612, 616 (1964) (internal citation
and quotation marks omitted). The decision whether to
transfer venue lies in the discretion of the district court.
28 U.S.C. § 1404; Jones v. GNC Franchising,
Inc., 211 F.3d 495, 498 (9th Cir. 2000) (Under section
1404(a), "the district court has discretion to
adjudicate motions for transfer according to an
individualized, case-by-case consideration of convenience and
fairness.") (internal quotation omitted).
burden is on the moving party to demonstrate that the balance
of conveniences favoring the transfer is high. The defendant
must make “a clear showing of facts which . . .
establish such oppression and vexation of a defendant as to
be out of proportion to plaintiff's convenience, which
may be shown to be slight or nonexistent.” Dole
Food Co. v. Watts, 303 F.3d 1104, 1118 (9th Cir. 2002).
parties filed requests for judicial notice. Typically,
“when the legal sufficiency of a complaint's
allegations is tested by a motion under Rule 12(b)(6), review
is limited to the complaint.” Lee v. City of Los
Angeles, 250 F.3d 668, 688 (9th Cir. 2001).
“Indeed, factual challenges to a plaintiff's
complaint have no bearing on the legal sufficiency of the
allegations under Rule 12(b)(6).” Id. However,
without turning a motion to dismiss into a motion for summary
judgment, the Court may consider “material which is
properly submitted as part of the complaint, ”
documents not physically attached to the complaint if their
authenticity is not contested and they are relied on in the
complaint, and documents that are subject to judicial notice.
Id. at 688-89.
may take judicial notice of information “not subject to
reasonable dispute because it (1) is generally known within
the trial court's territorial jurisdiction; or (2) can be
accurately and readily determined from sources whose accuracy
cannot reasonably be questioned.” Fed.R.Evid. 201(b).
Courts may take judicial notice of SEC filings, press
releases, or contents of a website, when they are
“matters of public record.” See Lee, 250
F.3d at 688-89; see also Nw. Pipe Co. v. RLI Ins.
Co., No. 3:09-CV-01126-BR, 2014 WL 1406595, at *5 (D.
Or. Apr. 10, 2014). When a court takes judicial notice of a
public record, “it may do so not for the truth of the
facts recited therein, but for the existence of the ...