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COURT OF APPEALS TENTH APPELLATE DISTRICT FRANKLIN COUNTY, OHIO GOOGLE, INC.,
Plaintiff and Counterclaim Defendant-Appellee. vs. Case No. 11AP-l 003 ON APPEAL FROM THE FRANKLIN COUNTY COMMON PLEAS COURT Regular Calendar Defendant and Counterclaim Plaintiff-Appellant.

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MYTRIGGERS.COM, INC.,

AMENDED BRIEF OF DEFENDANT AND COUNTERCLAIM PLAINTIFF-APPELLANT MYTRIGGERS.COM, INC.
David I. Shroyer (0024099) Colley Shroyer & Abraham, LPA 536 South High Street Columbus, Ohio 43215 (614) 228-6453 Stanley M. Chesley W.B. Markovits Waite, Schneider, Bayless & Chesley Co., LPA 1513 Fourth & Vine Tower I West Fourth Street Cincinnati, Ohio 45202 (513) 621-0267 Charles F. Rule Jonathan Kanter Joseph J. Bial Daniel J. Howley Cadwalader, Wickersham & Taft LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 Attorneysfor Defendant and Counterclaim Plaintiff-Appellant my'Iriggers.com. Inc. James A. Wilson Kenneth J. Rubin Vorys, Sater, Seymour and Pease LLP 52 East Gay Street. P.O. Box 1008 Columbus, Ohio 43216-1008 (614) 464-5606 Attorneysfor Plaintiff and Counterclaim Defendant-Appellee. Google, Inc.

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TABLE OF CONTENTS Table of Authorities Assignment of Error Issues Presented I. Statement of the Case II. Procedural History III. Statement of Facts A. B. C. D. IV. Argument A. B. C. Standard ofReview Summary of Argument myTriggers has Alleged Antitrust Injury I. The Law of Antitrust Standing Introduction to Search Advertising and Google's Dominance The Nascent Threat of Vertical Search myTriggers: Launch and Growth Google's Anticompetitive Actions iii vi 1 1 2 3 3 5 6 7 11 1I 12 15 16

2. myTriggers' Counterclaim Demonstrates that myTriggers has Alleged Antitrust Injury 19 3. The Trial Court Erred in Dismissing myTriggers' Antitrust Counterclaims ..... 21 4. Harm to Competition is Even More Evident by Events that have Taken Place Since myTriggers Filed its Counterclaim 23 D. myTriggers has Alleged Exclusionary Conduct and Anticompetitive Agreements under the Valentine Act 24 1. myTriggers has Alleged Unlawful Blacklisting Agreements Prohibited by the Valentine Act 25

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2. myTriggers has Satisfied its Pleading Obligations under Ohio and Federal Law

27

3. The Trial Court Failed to Acknowledge Google's Unilateral Acts in Dismissing the Antitrust Counterclaim 30 E. The Trial Court Erred in Denying myTriggers' Motion to Amend the Antitrust Counterclaim

31 34 36

v. Conclusion
Certificate of Service Appendix Filed as Separate Document

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TABLE OF AUTHORITIES
CASES Andrx Pharmaceuticals. Inc. v. Biovail Corp. Intern. (D.C. Cir. 2001), 256 F.3d 799 Associated Gen. Contractors of Cal... Inc. v. Carpenters (1983), 459 U.S. 519 Bell Atlantic COIp. v. Twombly (2007). 550 U.S. 544 Brunswick COIp. v, Pueblo Bowl-O-Mat. Inc. (1977), 429 U.S. 477

18

16

passbn

21,23

CiK. & J.K.. Inc. \'. Fairview Shopping Ctr. COIp. (1980),
63 Ohio St.2d 20 1 Cincinnati v. Beretta US.A. Corp. (2002), 95 Ohio St. 3d 416 (2002) Doctor's Hosp. of Jefferson, Inc. v, Southeast Medical Alliance, Inc. (5th Cir. 1997), 123 F.3d301 Ferron v, Metareward, Inc. (S.D. Ohio 2010), 698 F. Supp. 2d 992 Glen Holly Entertainment v. Tektronix (9th Cir. 2003). 343 F.3d 1000 Gulf States Reorganization Group, Inc. v. Nucor COIP (lith Cir. 2006)., 466 F.3d 961 Harrison Aire, Inc. v. Aerostar Intern., Inc. (3d Cir. 2005), 423 F.3d 374 Hyland v. Homeservices of Am., Inc. (E.D. Ky. Aug. 17,2007), No.3 :05-CV -612-R, 2007 WL 2407233 Johnson v. Microsoft Corp. (Ohio App. 1 Dist. 2003). 155 Ohio App. 3d 626, 802 N.E.2d 712 Klor's, Inc. v. Broadway-Hale Stores, Inc. (1959), 359 U.S. 207
III

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11

18

30

19

18

18

28

14

13, 15,22

List v. Burley Tobacco Growers' Coop. Assn. (1926), 114 Ohio St. 361 Marx v. Ohio State University College of Dentistry (Ohio. App. 10 Dist. 1996), 1996 WL 87462 Michaels Bldg. Co. v, Ameritrust Co., N.A. (6th. Cir. 1988), 848 F.2d 674 NicSand. Inc. v, 3M Co. (6th Cir. 2007), 507 F.3d 442 Novell, Inc. v. Microsoft Corp. (4th Cir. 2007), 505 F.3d 302 O'Brien v. Univ. Community Tenants Union (1975), 42 Ohio St. 2d 242 Perrysburg Twp. v. City of Rossford (2004), 103 Ohio St. 3d 79, 814 N.E. 2d 44 PR Diamonds. Inc. v. Chandler (6th Cir. 2007), 364 F.3d 671, 680 Rainer v. Westinghouse Electric Corp. (6th Cir. 1995), 1995 U.S. App. LEXIS 24514 Szuch v. King, (Ohio App. 6 Dist. 2010), 2010 WL 4925814 Total Benefits Planning Agency. Inc. v. Anthem Blue Cross & Blue Shield (6th Cir. 2008), 552 F.3d 430 United States v. Microsoft (D.C. Cir. 2001), 253 F.3d 34 Wagner v. Circle W Mastiffs (S.D. Ohio 2010), 732 F. Supp. 2d 792 W Penn Allegheny Health .s:vs.Inc. v. UPMC (3d Cir. 2010), 627 F.3d 85 FEDERAL STATUTES 15 U.S.C. §§ 1
IV

14, 26

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23

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15 U.S.C. §§ 2 OHIO STATUTES R.C. 1331.01 COURT RULES Civ.R. 12(B) TREATISES

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25, 26

passim

2A PHILLIP E. AREEOA, HERBERT HOVENKAMP, ROGER D. BLAIR, & CHRISTINE P. DURRANCE, ANTITRUST LAW, ~348A (3D ED. 2007) 17, 18,21

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ASSIGNMENTS OF ERROR THE TRIAL COURT ERRED IN DISMISSING MYTRIGGERS' COUNTERCLAIM SEEKING RELIEF UNDER THE VALENTINE ACT BECAUSE IT DETERMINED THAT MYTRIGGERS FAILED TO STATE A CLAIM UPON WHICH RELIEF MAY BE GRANTED UNDER CIV.R. 12(B)(6). THE TRIAL COURT ERRED IN DENYING MYTRIGGERS' MOTION FOR LEAVE TO AMEND ITS COUNTERCLAIM SEEKING RELIEF UNDER THE VALENTINE ACT TO ADDRESS THE TRIAL COURT'S DISMISSAL PURSUANT TO CIV.R. 12(B)(6).

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ISSUES PRESENTED 1. WHETHER A COMPETITOR THAT HAS BEEN EXCLUDED FROM THE MARKETPLACE AS A RESULT OF A DOMINANT FIRM'S EXCLUSIONARY CONDUCT AND UNLAWFUL AGREEMENTS HAS ALLEGED ANTITRUST INJURY SUFFICIENT TO SURVIVE A MOTION TO DISMISS? WHETHER A VERTICAL SEARCH SITE THAT HAS BEEN "BLACKLISTED" AS A RESULT OF A DOMINANT SEARCH ENGINE'S AGREEMENTS WITH OTHER VERTICAL SEARCH SITES HAS SUFFICIENTLY ALLEGED UNLAWFUL AGREEMENTS IN VIOLATION OF THE VALENTINE ACT? WHETHER THE TRIAL COURT ERRED IN DENYING A MOTION FOR LEAVE TO AMEND A COUNTERCLAIM WHERE THE AMENDED COUNTERCLAIM ADDRESSES THE ISSUES IDENTIFIED BY THE TRIAL COURT IN DISMISSING THE COUNTERCLAIM PURSUANT TO CIV.R. 12(B)(6)? Statement of the Case This case arises from Google's well-documented attempt to eliminate small but growing search rivals like myTriggers. myTriggers is a shopping comparison search site that was at one

2.

3.

I.

time well-regarded by Google but later fell out of favor when Google realized myTriggers posed a competitive threat, along with other "vertical" search rivals. Failing to recognize the threat to competition that Google's conduct - both on its own and in connection with its search partners - posed to the search marketplace, the trial court erroneously dismissed myTriggers' Counterclaim under the Valentine Act. Unfortunately, the trial court was confused about a central tenet of antitrust law, which is the need for a plaintiff to establish antitrust injury. Competitors such as myTriggers are proper plaintiffs to bring an

antitrust claim against a rival whose exclusionary acts drive them from the market and, in the process, harm competition. The trial court misunderstood how competition is harmed and how Based on this misunderstanding,

the allegations in the Counterclaim establish antitrust injury.

the trial court dismissed myTriggers' antitrust Counterclaim in its entirety. This appeal follows.

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II.

Procedural History
Over two years ago, on October 2,2009, Google brought this lawsuit against myTriggers,

asserting in a one paragraph complaint an apparent claim for breach of contract. Google filed an amended complaint on January 20, 2010. myTriggers first filed an answer and counterclaim,

asserting antitrust claims, among other claims, on February 2, 2010. On April 2, 2010, Google moved to dismiss. myTriggers opposed Google's motion, as did the State of Ohio. Indeed, the Attorney General of Ohio made multiple filings arguing against Google's efforts to limit the reach of Ohio's Supporting Valentine Act. See Brief of Ohio Attorney General as Amicus Curiae Plaintiff myTriggers.com, Inc. (June 26, 2010);

Defendant

and Counterclaim

Supplement to Brief of Ohio Attorney General as Amicus Curiae (June 14,2010). On August 31, 2011, after 14 months, the Court of Common Pleas ("trial court") issued a Decision Granting Plaintiff and Counterclaim Defendant Google Inc. 's Motion to Dismiss The trial court granted Google's conclusion that "the

Defendant myTriggers.com, Inc. 's Counterclaims ("Decision").

motion to dismiss the antitrust claim based primarily on that court's counterclaim only alleges harm to myTriggers itself."

In addition, the trial court held that Decision at 9.

myTriggers' "claims of a company boycott are also insufficient."

On September 13, 20 11, the trial court indicated at a status conference that it would provide myTriggers an opportunity to seek to amend its counterclaims, and issued a Corrected Order on September 14, 2011, stating that myTriggers "shall tile its motion for leave to tile an amended answer and counterclaims with a copy of the proposed amended answer and

counterclaims

attached there no later than September 23, 2011."

On September 23, 2011, On November 3,

myTriggers followed the Court's order and tiled Amended Counterclaims.

20 11, the trial court denied leave to amend with respect to the antitrust claims. reasoning that it

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would not allow amendment due to futility and delay, although the court recognized that it had itself "played no small part" in the delay. The court entered final judgment as to the antitrust Counterclaim on November 9,2011. III. Statement of Facts A. Introduction to Search Advertising and Google's Dominance Google is the dominant search engine in the United States, with over an 80% market share. Amended Answer and Counterclaim of Defendant myTriggers.com, Inc. at ,-r5 (May 19, Inc. at ,-r3 This appeal followed.

2010) ("CC"); Amended Answer and Counterclaim of Defendant myTriggers.com, (Sept. 26, 21011) ("Am. CC"). Indeed, both federal antitrust enforcement

agencies have

concluded that Google is dominant after investigating the issue: • In rejecting Google's proposed deal with Yahoo! in :W08, the United States Department of Justice stated "[tjhe Department's investigation revealed that Internet search advertising and Internet search syndication are each relevant antitrust markets and that Google is by far the largest provider of such services, with shares of more than 70 percent in both markets." Similarly, in clearing a search deal between Microsoft and Yahoo!, the Department of Justice stated "[t]he proposed transaction will combine the back-end search and paid search advertising technology of both parties. . .. Google [is] the firm that now dominates these markets." Again, in attacking the proposed (and now rejected) Google Books class action settlement in 2010, the Department of Justice stated "[Google] holds a relatively dominant market share" of Internet search advertising. The Federal Trade Commission has similarly concluded that "Google, through AdWords business, is the dominant provider of sponsored search advertising." its

The United States District Court for the Southern District of New York has likewise acknowledged Google's market power, stating that Google's ability to deny competitors access to certain materials it owns "would further entrench Google's market power in the online search market." Am. CC,-r 16.

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When a user enters a query into a search engine, the search engine returns two types of results: natural results (sometimes referred to as "algorithmic" results (sometimes referred to as "sponsored" or "paid" results). results) and search advertising CC,-r 2. Natural results are

often returned based on an algorithm and are typically displayed on the left and bottom of a search results webpage. CC,-r 3. Paid search advertising results, on the other hand, are typically displayed at the right side of a search results webpage and at the very top of the natural results. Id. Due to Google's dominant position, many web-based businesses rely on Google tor their

livelihood through organic and paid search referrals. Am. CC,-r 9. Google derives the substantial majority of its $29 billion annual revenue from its paid search advertising platform known as AdWords. Search advertisements are displayed as a direct response to a user's keyword search, which the search platform uses to understand what type of advertisement the user might be interested in seeing. CC ~ 4. The paid search results are

generally displayed on the search results pages as a result of an auction based upon bids submitted by advertisers for specific keywords or combinations of keywords. The prevailing bid is typically determined by implementation of a variation of a "second price" auction, where the winner of the auction pays the price of the next highest bid. !d. However, Google selects

winning bids through a process that is mostly unknown to the bidder. CC,-r 10. Google's CEO, Eric Schmidt, has admitted that "people do not understand how the auctions really work." Id.

Many commentators have coined Google's advertising system a "Black Box" due to its lack of transparency. Am. CC,-r 12.

In actuality, Google employs a variety of exclusionary acts that ensure that rivals cannot divert tratlic to their own competing search websites, particularly if the effect of such diversion is substantially to compete against Google's search platform, CC,-r 10. Among these acts is

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Google's use of its opaque "quality score" that enables Google to exclude rivals.

Id.

The

outcome of an AdWords auction therefore is not solely the result of the highest bid but rather is heavily influenced by Google with limited information provided to the advertiser. Google's so-

called "quality" scoring establishes a minimum pricing threshold that differs across advertisers. The criteria for determining quality score apparently includes "Landing Page Quality," which is under Google's exclusive control. Google provides "Landing Page and Site Quality Guidelines" to advertisers, but ultimately Google determines how many ads to place on its search-results pages, which ads to place, and in which order to place them. As a result, the advertiser with the highest bid does not always get the best slots on the page and in many cases that advertiser's ads are not shown at all. CC ~ 11. B. The Nascent Threat of Vertical Search Notwithstanding Google's dominance, it is threatened with competition from "vertical Vertical search

search" sites that draw users and advertisers to their specialized search results. sites include travel search sites, local search, business-to-business

search, and shopping

comparison sites, among others. Vertical search sites are capable of providing users with highly relevant results because they concentrate on particular areas of commerce, and the visiting audiences choose to visit these sites for specitic reasons. For example, a user seeking a plane

ticket can go to a travel site without having to sift through irrelevant non-travel search results on a generic search site like Google. Google realizes this and has taken action to exclude rival sites that may divert users from Google's dominant platform, See CC ~ 10. Vertical search sites currently represent only a nascent threat to Google, but if they develop without anticompetitive interference, vertical search sites individually and collectively threaten to draw users away from Google and to provide alternative search experiences for users

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See CC '1l 7. Google realizes this threat and has even stated in its Securities [v]ertical search engines and e-

and advertisers.

Exchange Commission tilings: "We face competition from ... commerce websites such as Kayak (travel queries) . . .. such websites rather than go through Google." Am. CC ~ 6. C. myTriggers: Launch and Growth

Some users will navigate directly to

myTriggers was founded in 2005 by Glenn S. Meyers, who led an initial investment of millions of dollars to set up the company and to initiate operations. Prior to founding

myTriggers, Mr. Meyers was the founder and CEO of RareMedium Group, a Web development and Web incubator firm, which created some of the first websites for companies such as Amazon, MTV, Nickelodeon, Viacom, Goldman Sachs, and others. Due to the expertise of Mr. Meyers in Internet businesses, myTriggers attracted significant investors and the company's success enabled it quickly to build a staff of over twenty employees. Until Google's conduct caused myTriggers to cease operations, the company operated comparison shopping sites (the "myTriggers' myTriggers' Sites"). After a user would run a search on the

Sites, different products would be displayed along with a range of prices from

various merchants that sell the product. At the time, Google had a less popular (and ultimately) unsuccessful rival site called "Froogle." CC ~ 36. myTriggers implemented innovative search technologies, such as its user-selected

"persistent searches" that would alert users by email, text message or RSS feed when results that met the users' preferences were found. CC ~ 21; Am. CC ~ 32. Moreover, myTriggers

monetized many of its search results in a method - called "cost per action" - that provided what it regarded as a superior user experience to Google's method of charging search advertisers each time a user clicks on an ad. The potential disruptive effect of cost per action was well

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recognized.

CC ~ 22.

In fact, in late 2006, the New York Times ran an article featuring Indeed, one

myTriggers entitled "As Ad Costs Rise, a Move to Challenge Pay-Per-Click."

prominent advertiser stated that as more companies implemented myTriggers' model, Google's business model would "become extinct." ld. Like most e-commerce businesses, search advertising was a significant component of the marketing of the myTriggers' Sites. CC ~ 23. myTriggers began using Google's AdWords

program in November 2005 and ultimately invested heavily on developing keyword databases to be used on AdWords. CC ~ 24. Although myTriggers also used Yahoo! and Microsoft's

advertising platforms, Google's dominance in search advertising meant that the majority of myTriggers' search advertising budget was used on Google's platform. The relationship with

Google was initially profitable tor both parties. considered myTriggers to be a quality site. myTriggers' Google's

As discovery in this case has shown. Google Am. CC ~ 46-48. Indeed, Google increased myTriggers' reliance on

monthly credit limit multiple times and encouraged ld.

dominant search advertising platform,

In January 2008. Google recognized

myTriggers as a high-potential site and noted its "strong performance in 2007." CC ~ 28. D. Google's Anticompetitive Actions

Having endured commercial failures such as "Froogle" in attempting to launch its own vertical sites, Google turned to methods other than competition on the merits in order to blunt the nascent but growing threat posed by vertical search sites, such as myTriggers. Google manipulated its paid search results in order to eliminate competition from

shopping comparison verticals by artificially manipulating manner detrimental to its vertical-search rivals.

its so-called "quality scores" in a

In fact, Google's policy - undisclosed to the

public - is to "blacklist" all shopping comparison sites by artificially intlating the "quality

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scores" of these sites, thereby drastically and artificially driving up their costs for advertising via AdWords to levels that no longer allow the businesses to survive. Google publicly denies that it "blacklists" websites. Am. CC ~~ 24, 49. Google, of course, has the power manually to alter its quality-score occasion, Google does so, and secretly "whitelists' penalties. On If a

certain formerly "blacklisted" websites.

shopping comparison site that is excluded from the market as a result of Google's

unlawful

compact is not manually placed by Google on this secret "whitelist," then the site is forever blacklisted by Google and its "search partners," a practice Google denies. Am. CC ~~ 24, 49, 76. Another facet of Google's efforts to eliminate traffic to nascent vertical search rivals is a campaign to lower the prominence of these rivals in Google's natural search results. Although Google professes to the public its supposed "objectivity" and lack of "bias," in actuality Google systematically provides preferential treatment in its natural search results to low-quality results from its Google-owned vertical searches sites. CC ~ 37; Am CC ~ 11. Indeed, a Google

representative has announced that it is company "policy" to favor Google's verticals in its search results regardless of their popularity. CC ~ 37. At the same time, Google will lower the

prominence of rivals, placing links to rivals lower on the search results pages, ensuring that less traffic tlows to these rivals. As part of this anti competitive policy and in furtherance of its broad anticompetitive course of conduct, on or about March 4, 2008, Google drastically raised the minimum bids for myTriggers' keyword bids. CC ~ 29. The minimum bids that myTriggers was required to make in order to run an ad on Google (or on the sites of Google's "search partners") rose between 1,000% and 10,000%. As a result, myTriggers had a steep decline in traffic to its sites. !d.

Google informed myTriggers that - despite a history of good performance and internal Google

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emails among employees showing that myTriggers was high quality - myTriggers had poor "quality scores." CC ~ 31. It soon became clear that myTriggers could no longer place search

ads with Google or its "search partners" because it could not obtain competitive minimum bids. Due to Google's dominance, rival search sites such as Yahoo! and Microsoft could not save myTriggers. CC ~ 33. Soon thereafter, myTriggers was forced to let go nearly all of its staff,

and the company is now a shell of its former self. CC ~ 34. In addition to and in furtherance of its scheme to eliminate competition from vertical sites, Google has penalized myTriggers on numerous occasions in Google's dominant natural search results. CC ~ 37. As a result, traffic on the myTriggers' Sites dropped significantly and revenue to myTriggers likewise dropped. In light of its dominant position, Google's actions have been as destructive of

competition as they have been successful for Google.

The chart below, taken from a study of

Internet traffic changes over a two-year period between October 2007 and October 2009, indicates that Google's Product Search website has seen dramatically increased traffic since sites have

myTriggers was first penalized by Google, whereas rival shopping comparison floundered. Am. CC ~ 19.
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As the CEO of NexTag - a shopping comparison site - testified recently before the United States Senate Antitrust Subcommittee Google doesn't play fair. of the Committee on the Judiciary, "[t]oday,

Google rigs its results, biasing in favor of Google Shopping and

against competitors like us." Am. CC ~ 7. Similarly, as the CEO of Yelp. com - a local search vertical - testified under oath before the same Senate Subcommittee, "Google is no longer in the business of sending people to the best sources of information on the web. It now hopes to be a destination site itself for one vertical market after another including news, shopping, travel and now local business reviews. It would be one thing if these efforts were conducted on a level

playing field, but the reality is, they are not." Am. CC ~ 8. There are numerous other verticals that have been harmed or eliminated by Google's coordinated plan to entrench its dominance. brave enough to protest Google's Some of these vertical search companies have been Yelp, TripAdvisor. Kayak,

conduct, such as NexTag,

Foundem.com, TradeComet, and Travelocity.com, among others. Am. CC ~ 9. Numerous other sites likely cower in silence, fearing retaliation from Google's monopoly should they protest. Given that web-based businesses rely on Google for their livelihood through organic and paid search referrals. they must realize that upsetting Google could spell doom tor their future prospects on the Internet. Am. CC ~ 9. The harm to competition from Google's elimination of vertical search sites like

myTriggers has not gone unnoticed. Numerous regulatory authorities throughout the world have identified Google's conduct - the same conduct at issue in this case - as potentially extensive antitrust

anti competitive.

and these authorities are in the process of conducting

investigations of Google.

For example. in November 2010, the European Commission opened

an antitrust investigation into allegations that Google was abusing its dominant position through

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conduct identical to that experienced by myTriggers. Commission's

See Am. CC

W

114-15. The European

Commissioner Joaquin Almunia noted that "rigorous competition of all players,

including smaller and innovative ones, must be preserved for the future." ld. ~ 21. On June 24, 2011, the Wall Street Journal announced that the Federal Trade Commission was launching an investigation that included whether Google unfairly uses its market power to determine whether businesses succeed or fail by altering the amount it charges them tor placing ads. /d. ~ 112. The attorneys general in numerous states, such as Ohio and Texas are likewise investigating similar allegations of anticompetitive action by Google. ld. ~ 22, 113. Other companies in the United

States and abroad facing the same problems as myTriggers have also claimed they have suffered harm from Google's anticompetitive actions. ld. ~ 9. Google has been called to Capitol Hill to testify before the U.S. Senate Antitrust Subcommittee and that testimony illuminates and further demonstrates the serious harm to competition that has resulted from Google's actions. See Am. CC ~ 17. These regulators and legislators have no interest in myTriggers but rather are acting to preserve the competition the company, and others like it. represents. IV. Argument A. Standard of Review myTriggers is appealing two decisions by the trial court. decision granting Google's motion to dismiss myTriggers' The first is the trial court's under Rule

antitrust Counterclaim

12(b)(6), which this Court reviews de novo. See Perrysburg Twp. v. City of Rossford (Ohio Sup. Ct. 2004), 103 Ohio St. 3d 79, 81, 814 N.E. 2d 44, 48 (citing Cincinnati v. Beretta U.S.A. Corp. (Ohio Sup. Ct. 2002), 95 Ohio St. 3d 416, 2002-0hio-2480, 768 N.E.2d 1136, ~ 4-5».

The second decision being appealed is the trial court's refusal to allow myTriggers to amend its claim under the Valentine Act after the court's dismissal, which under the

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circumstances of this case is also reviewed de novo. Where, as here, the trial court's denial of a motion for leave to amend "can fairly be read to have been based on a determination that the amended complaint ... would not withstand a motion to dismiss, the denial is a legal question

that is reviewed de novo." Marx v. Ohio State University College of Dentistry (Ohio. App. 10 Dist. 1996), 1996 WL 87462, at *3 (citing Rainer v. Westinghouse Electric Corp. (6th Cir. 1995), 1995 U.S. App. LEXIS 24514); see also PR Diamonds. Inc. v, Chandler (6th Cir. 2007), 364 F.3d 671, 680 ("[W]e review a district court's denial of leave to amend tor abuse of discretion ... except in cases where the district court basis its decision on the legal conclusion

that an amended complaint could not withstand a motion to dismiss, where that review is de novo.") (internal citations omitted). B. Summary of Argument The trial court's decision dismissing myTriggers' Counterclaims under the Valentine Act in their entirety is a misapplication of the doctrine of "antitrust standing" and, in particular, "antitrust injury." Counterclaim individually demonstrates The court dismissed myTriggers' antitrust claims notwithstanding is harmed by Google's In particular, that the

alleges in detail how competition

conduct - both the Counterclaim and how

and with its network of search partners. how sites like myTriggers

pose a threat to Google's

dominance

eliminating them now - while they remain in their nascent form - will redound to Google's longterm benetit, as it will avoid having to compete against fully-formed competitors in the future. Cutting off myTriggers' oxygen in its infancy may be an effective method of eliminating the site (and others like it), but unfortunately it runs counter to more than 100 years of antitrust precedent in Ohio. The Valentine Act was drafted to codify Ohio's common law prohibiting

monopoly and was enacted shortly after a specific monopolist - the Standard Oil Trust - was

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prosecuted under that common law.

It has subsequently been used to hold

In

check the

exclusionary practices of other monopolists including, very recently, Microsoft.

To hold that

now, in the face of allegations of similar conduct against one of the world's most dominant companies, the Valentine Act is inapplicable, would render Ohio's protections against such conduct impotent. Indeed, as discussed in Section II.B.l supra, regulators around the globe -

including the Ohio Attorney General - have taken notice of the very same conduct by Google alleged in this case, and those investigations continue in earnest. Despite the fact that myTriggers undoubtedly alleges that competition has been harmed as a result of Google's conduct, the trial court admonishes myTriggers for failing to identify a specific competitor other than myTriggers that has been injured as a result of Google's

exclusionary acts. Decision at 9. Yet the law does not require myTriggers to identify specific other competitors that have been harmed in order to satisfy its burden to plead antitrust injury, so long as it alleges injury to competition as a whole. stated, anticompetitive As the United States Supreme Court has

conduct "is not to be tolerated merely because the victim is just one

merchant whose business is so small that his destruction makes little difference in the economy. Monopoly can as surely thrive by the elimination of such small business. one at a time, as it can by driving them out in large groups." U.S. 207, 213, 214. The trial court's second ground for dismissing myTriggers' antitrust counterclaim is that myTriggers failed adequately to allege Google's secret agreements with its search partners. Klor's, Inc. v. Broadway-Hale Stores, Inc. (1959), 359

Needless to say, only so much can be known about "secret" agreements absent discovery, but the court compounded its error by failing to account for the Valentine Act's express provision prohibiting "black lists" of specific competitors, such as Google's blacklisting of myTriggers.

13

Instead, the trial court misapplied a federal case that applies to pleadings in federal court. See Bell Atlantic Corp. v. Twombly (2007),550 U.S. 544. Although that case did involve an alleged agreement among various defendants under the Sherman Act, it is particularly important that the Valentine Act expressly prohibits the type of agreements at issue in myTriggers' Counterclaim.
I

antitrust

The Sherman Act contains no such provision, and the trial court erred in Furthermore, Twombly does not

applying Twombly to the facts alleged in the Counterclaim.

require the level of particularity indicated by the trial court, even if that decision were deemed applicable to this case. Finally, the trial court erred in refusing to grant myTriggers' motion to amend its antitrust Counterclaim. The trial court's reasons for denying myTriggers' motion to amend - namely, that

allowing an amendment would delay the litigation and that amending the antitrust claim would be futile - do not withstand scrutiny. First, this Court reviews the denial de novo to the extent

the trial court refused to permit the amendment on futility grounds. Second. as the record clearly shows, myTriggers is not responsible for any delay in this case and attempted to amend immediately after the trial court issued its decision? The record plainly demonstrates

myTriggers is the only entity involved in this case that has not delayed the proceedings.

I The Supreme Court of Ohio has observed that the Valentme Act is patterned after the Sherman Act, enacted by the Congress of the United States in 1890, though the court has observed that the Valentine Act is "much broader and stronger in terms than the federal enactment." List v Burley Tobacco Growers' Coop. Assn. (1926). 114 Ohio St. 361, 382. Nevertheless, the Supreme Court of Ohio has held that courts in Ohio are to interpret the Valentine Act "in light of federal judicial construction of the Sherman Act" and that "violations of the Valentine Act [are] to be judged on the same basis as violations of the Shennan Act. Johnson \'. Microsoft Corp. (Ohio App. 1 Dist. 2003), 155 Ohio App. 3d 626,802 N.E.2d 712 (citmg CtK. & J.K.. Inc. v. Fairview Shopping Ctr. COIp. (1980),63 Ohio St.2d 201). 2 The motion to dismiss, through no fault of myTriggers, was pending for approximately 15 months before it was decided.

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.,

c.

myTriggers has Alleged Antitrust Injury

The trial court dismissed myTriggers' antitrust counterclaim because, in the trial court's view, myTriggers failed to allege "antitrust injury." Decision at 8-9. In the court's view, "the

counterclaim only alleges harm to myTriggers itself' and not to competition, as is required by the Valentine Act. Importantly, the court was satisfied that competition could not be harmed it: as the complaint alleges, other vertical search sites remained in the market after Google's elimination of myTriggers. "undercuts myTriggers' being injured ... Thus did the court conclude that the existence of these sites

argument that competition as a whole within the relevant market is allegations do not contain any specific competitor other than Decision at 9. The Decision

myTriggers[']

myTriggers that has been harmed by Google's alleged conduct."

does not explain further how the allegations fail to comport with the pleading requirements for antitrust injury. Unfortunately, the court failed to recognize that harm to competition need not occur only by eliminating all competitors with a single blow of the monopolist's no less anticompetitive exclusionary sword. It is

for competition to be harmed through a scheme that systematically

eliminates competition through the monopolist's hand-picked choice as to which competitor is to be eliminated first, second, third, ad infinitum. Indeed, anti competitive conduct should not be

"tolerated merely because the victim is just one merchant whose business is so small that his destruction makes little ditference to the economy." 2010 WL 4925814 (citing Klor's). Szuch v. King (Ohio App. 6 Dist. 2010),

As the Supreme Court observed in Klor's, "[rnjonopoly can

as surely thrive by the elimination of such small businessmen, one at a time, as it can by driving them out in large groups." 359 U.S. at 213.

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As for the remaining vertical shopping sites that were left in the marketplace after Google eliminated myTriggers, the Counterclaim expressly alleges that, as partners in Google's

anticompetitive scheme to harm competition, those sites cannot be expected to protect against harm to competition. CC ~~ 13, 17. The court did not credit any of the allegations in the

Counterclaim explaining this in detail and linking it expressly to how the competitive process was harmed.3 1. The Law of Antitrust Standing In order to bring a claim under the Valentine Act, a claimant must first establish that it satisfies the requirements of "antitrust standing," a prudential doctrine developed by courts specifically in antitrust cases. As the United States Supreme Court has stated, "the focus of the doctrine of 'antitrust standing' is somewhat different from that of standing as a constitutional doctrine. Harm to the antitrust plaintiff is sufficient to satisfy the constitutional requirement of injury in tact. but the court must make a further determination plaintiff is a proper party to bring a private antitrust action." Cal.. Inc. v. Carpenters (1983), 459 U.S. 519, 535 n.21. standing

whether the

Associated Gen. Contractors of Thus, the inquiry a court must

undertake in deciding whether an entity has "antitrust standing" is not whether the claimant has pled an antitrust violation - indeed, at the pleadings stage a violation must be assumed - but

3

Subsequent to the tiling of this case. numerous antitrust regulators scrutinized Google for the very conduct at issue in this case, including the Attorney General of Ohio. See Statement of Facts, Section II.B.I, supra. Section 111.0.1, infra. These regulators also inquired specifically about the harm to myTriggers. It is inconceivable that state, federal. and foreign regulators are concerned about myTriggers' financial welfare. Rather. they plainly are investigatmg harm to competition. The Amended Counterclaim makes this clear, and these investigations are also something of which this or any court could. in its discretion. take Judicial notice.

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whether the claimant in the case under review is a "proper party" to prosecute the specific antitrust claim at issue." Though the trial court cites the oft-quoted (and undeniably correct) proposition that the antitrust laws protect competition, not competitors, that proposition does not compel the

conclusion that a rival lacks antitrust standing to challenge the conduct of a competitor or conspiracy of competitors under all circumstances. Decision at 8 (citing Wagner v. Circle W

Mastiffs, (S.D. Ohio 2010) 732 F. Supp. 2d 792, 801). To the contrary, the leading commentator has observed that "a rival clearly has standing to challenge the conduct of rival(s) that is illegal precisely because it tends to exclude rivals from the market." erroneously concluded that myTriggers' status as Google's Areeda ~ 348a. The trial court prevents

competitor effectively

myTriggers from satisfying the requirement that it plead antitrust injury. Because myTriggers is Google's competitor, the court held, Google's conduct that injures it is simply competition on the merits. Yet an examination of the relevant precedent clearly demonstrates that a competitorconduct that has the

plaintiff has standing under the antitrust laws to challenge a monopolist's result of excluding the competitor-plaintiff competition.

from the marketplace and as a result diminishes

As a competitor, myTriggers tits squarely within the class of plaintiffs having standing to challenge an alleged violation of the Valentine Act, an analysis often implemented only after discovery commences.
4

See W Penn Allegheny Health Sys. Inc. v. UPMC (3d Cir. 2010), 627

The trial court dismissed myTnggers' Counterclaim because the court held myTriggers failed to allege "antitrust injury," which is one of several elements that make up whether a private plaintiff has "antitrust standing." See 2A Phillip E. Areeda, Herbert Hovenkamp, Roger D. Blair. & Christine P. Durrance, Antitrust Law. ~ 335 (3d ed. 2007) ("Areeda") (describing elements). The trial court did not hold that myTriggers faded to allege any of the other aspects of antitrust standing. such as, for example. whether myTriggers has alleged injury-in-fact to its business or property or that its alleged injury is too remote or duplicative of another's injury.

17

.. F.3d 85, 102 ("As a general matter, the class of plaintiffs capable of satisfying the antitrust-injury requirement is limited to consumers and competitors in the restrained market and to those whose injuries are the means by which the defendants seek to achieve their anticompetitive ends")

(internal citations omitted); Harrison Aire, Inc. v. Aerostar Intern .. Inc. (3d Cir. 2005), 423 F.3d 374, 386 ("Because this alleged exclusion of competitors, to the detriment of consumers, is the sort of harm the antitrust laws are intended to prevent, summary judgment was improper on the issue of antitrust injury"); Doctor's Hosp. of Jefferson, Inc. v. Southeast Medical Alliance. Inc. (Sth Cir. 1997), 123 F.3d 301, 305 (plaintiffs "alleged losses and competitive disadvantage

because of its exclusion from [the market] fall easily within the conceptual bounds of antitrust injury, whatever the ultimate merits of its case"); Areeda ~ 348d ("courts correctly allow [competitors] to challenge bona fide exclusionary conduct by their rivals"). Indeed, it is well-established that "[a] rival has clear standing to challenge the conduct of rival(s) that is illegal precisely because it tends to exclude competitors from the market." Andrx Pharmaceuticals. Inc. v. Biovail Corp. Intern. (D.C. Cir. 200 I), 256 F.3d 799, 816-17 (internal quotation marks omitted); see also Gulf States Reorganization Group. Inc. v. Nucor Corp. (11 th Cir. 2006),466 F.3d 961, 967-68 (holding that it is the plaintiff's "exclusion from the market that denies consumers the benefit of the pressure to lower prices that would accompany [the

plaintitf's] becoming a viable competitor. Thus we conclude that [the plaintiffJ has satisfied the requirement of demonstrating antitrust injury, i.e. injury of the type against which the antitrust laws are designed to protect"). The antitrust laws allow rivals to have standing to challenge the exclusionary conduct of its competitors because "[i]t is one thing tor a business to have cast its fate with a product that disappears because of the normal forces of the market; it is another to have the rug pulled out from under a business by a conspiratorial agreement to eliminate a

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·.

competing product."

Glen Holly Entertainment v. Tektronix (9th Cir. 2003), 343 F.3d 1000,

1015 (reversing district court and holding plaintiff had alleged antitrust injury). An examination of myTriggers' Counterclaim demonstrates that myTriggers has satisfied that burden and that the trial court's decision is misguided and should be reversed.

2. myTriggers' Counterclaim Demonstrates that myTriggers has Alleged Antitrust Injury
Examining myTriggers' Counterclaim demonstrates that its antitrust claim undoubtedly belongs in the category of cases in which a competitor-plaintiff has adequately alleged antitrust

injury. First, as the trial court recognized, myTriggers describes how Google's conduct injures myTriggers (injury-in-fact): "myTriggers['] injuries tlow from Google's anticompetitive

agreements, compacts, and other conduct that has resulted in the elimination of many vertical search sites, including shopping comparison sites like myTriggers." CC ~ 39. Next, In so

myTriggers explains how Google's conduct results in a broader injury to competition.

doing, myTriggers tirst alleged that Google operates a dominant search engine, making plausible its allegation that Google has the ability to exclude from the market any Internet business that relies on search engine traffic, See, e.g., CC ~ 5 (vGoogle is the dominant search engine in the United States. platform. The vast majority of search queries are run on Google's dominant search

As a result, an enormous amount of traffic on the Internet flows from Google's

platform to other websites - including rival search platforms - unless Google takes action to divert such traffic away from other sites"). Second, myTriggers alleges that it is a "vertical" search site "that allow[s] users to shop and compare prices and products offered for sale" and that shopping comparison sites and other vertical search engines are rivals (or potential rivals) to Google's dominant search engine. CC ~ 6 ("[S]earch websites catering to specific users offer an alternative method for reaching a desired

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·.

audience.

For example, shopping comparison websites, such as those owned and operated by

myTriggers, offer an alternative for search advertisers seeking to target high-value users desiring to purchase items over the Internet"); ~ 7 ("Vertical search sites currently represent only a nascent threat to Google, but if they develop without anticompetitive interference, vertical search sites individually and collectively threaten to draw users away from Google and to provide alternative search experiences for users and advertisers"). These allegations establish that Google has the incentive to engage in conduct to exclude from the marketplace the nascent competitive threat posed by vertical search sites as a means to maintain its existing dominant position. This type of exclusionary conduct is actionable under the antitrust laws and may be challenged by competitors. See Novell. Inc. v. Microsoft Corp. established antitrust standing to and did restrain

(4th Cir. 2007), 505 F.3d 302, 316 (holding competitor-plaintiff and observing "Microsoft's activities,

Novell claims, were intended

competition in the PC operating-system market by keeping the barriers to entry into that market high"); ct. United States v. Microsoft (D.C. Cir. 2001), 253 F.3d 34, 79 (holding conduct by monopolist aimed at suppressing competition from nascent competitive threat violated federal antitrust law). Third. myTriggers makes the specific allegation that "Google employs a variety of exclusionary acts that ensure rivals cannot divert traffic to their own competing search websites, particularly if the effect of such diversion is substantially to compete against Google's dominant platform." CC ~ 10. In particular, myTriggers alleged that "Google gives preferential treatment low quality results from its own vertical search sites." CC ~

in its natural search results to ... 37.

Further, myTriggers alleged that "Google enters into agreements with a number of search

websites, including rival shopping comparison sites, that allow those sites to participate in

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AdWords keyword auctions without being subject to the same 'quality' scoring Google applies to other search rivals, including myTriggers." CC ~ 12. myTriggers explains in its Counterclaim

that "by denying search traffic to numerous competitors such as myTriggers, while sustaining traffic to other sites through its unlawful agreements, Google has directed traffic in a manner that denies rivals the ability to grow unfettered from exclusionary acts by Google and its network of partners. Google's exclusionary conduct and its unlawful agreement ensure that winners and

losers are decided in a manner that maintains Google's dominance in the search advertising market and harms competition by limiting options available to advertisers." CC ~ 17.

Finally, myTriggers explicitly connects the alleged harm to myTriggers to the alleged harm to competition: Google's "conduct has increased prices to search advertisers, decreased quality and innovation, maintained monopoly and eliminated scores of nascent competitive threats." CC ~ 39. myTriggers' allegations thus demonstrate that its injury "flows from that

which makes defendants' acts unlawful," thereby excluding rivals from the market in an effort to reduce output and raise price. Brunswick Corp. v. Pueblo Bowl-Osstat, Inc. (1977), 429 U.S.

477, 489. Indeed, the leading commentator has observed that a rival has standing to challenge conduct "that is illegal precisely because it tends to exclude rivals from the market, thus leading to reduced output and higher prices." Areeda ~348a. The Counterclaim thus makes clear that

Google's conduct falls into the category of a rival's conduct that excludes competitors - such as myTriggers and other "numerous" competing vertical search sites - from the market.

3. The Trial Court Counterclaim
Unfortunately,

Erred

in

Dismissing myTriggers'

Antitrust

the trial court's conclusion that a competitor cannot bring an antitrust

claim led it to ignore myTriggers' allegations that Google's conduct has excluded or will exclude myTriggers and other vertical search sites from the market, resulting in increased prices and

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"

II

decreased quality and innovation.

The trial court held that myTriggers'

antitrust claim

IS

deficient on the pleadings because "myTriggers[']

allegations do not contain any specific Decision

competitor other than myTriggers that has been harmed by Google's alleged conduct."

at 9. The trial court's decision is not that myTriggers failed to allege other competitors had been harmed by Google's conduct. Indeed, the Complaint specifically alleges that Google's conduct

"has resulted in the elimination of many vertical search sites, including shopping comparison sites like myTriggers." myTriggers' CC ~ 39 (emphasis supplied). Rather, the trial court dismissed

antitrust claim because myTriggers did not identify a "specific competitor other

than myTriggers" that had been eliminated as a result of Google's conduct. In so holding, the trial court created a new standard tor demonstrating antitrust injury that never previously existed. Notwithstanding the trial court's decision, a plaintiff-competitor obligated to do anything more than demonstrate competition. is not

that its exclusion may lead to harm to

Indeed, it is just as much a violation of the antitrust laws to eliminate competitors Klor 's, 359 U.S. at 214.

"one at a time" as it is to "driv] e] them out in large groups.'

Accordingly, Google's scheme intended to harm competition in a stepwise manner, as alleged in the Counterclaim, is no less actionable under the Valentine Act, and the court should not have dismissed myTriggers' antitrust case by pointing to other (favorably-treated) competitors that

may have remained in the market - even though Google has since acted to drive them from the market as welLs Even if it were true that myTriggers alleged that it was the only vertical search site harmed by Google's conduct, the Counterclaim would nevertheless satisfy the obligation to

5 See Section IlI.C.4 infra; see Google's biasing search results).

a/!10

Am. CC ~ 7 (describing former search partner NexTag's

complaints about

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.,

plead antitrust injury because, as Klor's explains, eliminating even one competitor can result in actionable harm to competition under the antitrust laws. Moreover, the primary case relied upon by the trial court, Nicsand, Inc. v. 3M Co. (6th Cir. 2007), 507 F.3d 442, does not support dismissal in this case. The complaint in NicSand involved an antitrust challenge by one manufacturer against a competitor manufacturer regarding the exclusionary effects of the competitor's contracts with downstream retailers. The court

specifically held - as is the case here but not in Nicsand - that "had [the defendant and others] conspired to eliminate NicSand from the market, that would be another matter" and NicSand might have had standing. Id. at 457. Ultimately, the NicSand decision is an example of a case in which a competitor complains about a rival's conduct that preserves or enhances competition. See Brunswick, 429 U.S. at 489. By contrast, myTriggers' Counterclaim relates to agreements and conduct that unlawfully props up the dominant monopolist rather than establishes its position in the market by competition on the merits. competitor-plaintiff bears a heavy burden Accordingly, the conclusion in NicSand that a when seeking to challenge its competitor's allegations in this

relationships with downstream distributors has no relation to myTriggers' case. For purposes of pleading - and unlike NicSand - Google's

conduct is decidedly

anticompetitive. 4. Harm to Competition is Even More Evident by Events that have Taken Place Since myTriggers Filed its Counterclaim As explained above, since myTriggers first filed its Counterclaim, numerous regulatory authorities and lawmakers into Google's worldwide, including in Ohio, have launched See Section broad-ranging These

investigations

anti competitive

conduct.

II.B, supra.

investigations by regulators and lawmakers armed with the authority and the duty to act in the best interests of their constituents cast serious doubt upon the trial court's factual conclusion -

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.t

I

r

prior to summary judgment - that myTriggers'

Counterclaim is worthy of dismissal because

myTriggers alleges harm only to itself. Investigations in the United States have been launched by the Federal Trade Commission, the United States Senate, Texas, and Ohio. Am. CC ~~ 22, 112, 113, 116. The European Commission also opened an investigation into conduct eerily similar to the conduct myTriggers alleged in its Counterclaim, in part spurred by allegations from shopping comparison verticals operating in Europe. Am. CC ~~ 21, 114-115. Indeed,

Google itself has admitted in filings to the Securities and Exchange Commission that it faces competition from vertical search engines. See Google Inc., Annual Report (Form 10-K) (Dec.

31, 2010); Google Inc., Quarterly Report (Form 10-Q) (Sept. 30, 2011). In addition, since myTriggers first tiled its Counterclaim, numerous other vertical search sites have complained about Google's conduct, including sites myTriggers specifically alleged had been favored or "whitelisted" by Google. Am. CC

mI

7-9. These sites include NexTag,

which had been favored by Google but is now complaining that "Google doesn't play fair. . . [and] rigs its results, biasing in favor of Google Shopping and against competitors" like vertical search sites. Am. CC

mI

7. Other complaining verticals include Yelp, TripAdvisor,

Kayak,

Foundem.com, TradeComet, and Travelocity.com.

Am. CC ~~ 8-9. The trial court was aware

that these investigations were proceeding against Google but held, at the pleadings stage, that Google's conduct did not amount to harm to competition. This ruling is legal error. D. myTriggers has Alleged Exclusionary under the Valentine Act Conduct and Anticompetitive Agreements antitrust

The trial court committed three additional errors in dismissing myTriggers' counterclaims.

First, the trial court erred by wrongly relying upon federal precedent to dismiss

myTriggers' claim that Google unlawfully blacklisted myTriggers as part of an anti competitive scheme with its search partners. On its face, the Valentine Act contains prohibitions not

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I.

I"

contained in the Shennan Act, upon which the Twombly decision is grounded. Indeed, unlike the Shennan Act, the Valentine Act expressly outlaws "blacklisting.t" Accordingly, for this

conduct, the trial court should only have determined whether myTriggers adequately alleged the practice of blacklisting in its Counterclaim. text of the Act. By requiring more, the trial court ignored the plain

Second, even had Twombly applied in this case, myTriggers certainly pled

enough facts to put Google on notice that its secret agreements with search partners violated the Valentine Act. Finally, in addition to alleging anticompetitive agreements, myTriggers alleges that Google's unilateral conduct designed to eliminate myTriggers is a violation of the Valentine Act. The trial court did not even address this conduct or explain why it was not a violation of the Valentine Act. 1. myTriggers has Alleged Unlawful Blacklisting Agreements Prohibited by the Valentine Act The trial court erred in applying Twombly to myTriggers' claims under the Valentine Act. Google argued below that myTriggers failed to allege enough factual detail about Google's agreements with its search partners to survive scrutiny under Twombly. By endorsing Google's argument, however, the trial court overlooked the plain text of the Valentine Act which, unlike the Shennan Act, expressly forbids blacklisting. Indeed, after (albeit limited) discovery finally

commenced in this case, myTriggers was able to be much more explicit about its allegations against Google in this regard. See Am. CC ~~ 76-77. The Supreme Court of Ohio has long-

(,The Valentine Act expressly provides, in relevant part: "(8) 'Trust' is a combination of capital, skill, or acts by two or more persons for any of the following purposes: (I) To create or carry out restrictions in trade or commerce; (2) To limit or reduce the production, or increase or reduce the price of merchandise ... ; (3) To prevent competition ... ; (4) To fix at a standard or figure, whereby its price to the public or consumer is in any manner controlled or established ... ; (5) To make, enter into, execute, or carry out... obligations ... by which they bind ... themselves not to sell., an article or commodity ... below a common standard figure or fixed value ... ; (6) To refuse to buy from, sell to, or trade with any person because such person appears on a blacklist issued by, or is being boycotted by, any foreign corporate or governmental entity." R.C. 1331.01 (emphasis supplied).

25

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recognized that, although the Valentine Act was intended to be patterned after the federal Sherman Act, Ohio's law is "much broader and stronger in terms than the federal enactment." List v. Burley Tobacco Growers' Coop. Assn. (1926), 114 Ohio St. 361, 369. Indeed, there is no mention of "blacklists" in the Sherman Act. See 15 U.S.C. §§ 1, 2. The Valentine Act, however, expressly states that "trusts" to "refuse to buy from, sell to, or trade with any person because such person appears on a blacklist issued by, or is being boycotted by, any foreign corporate entity" are unlawful. R.C. 1331.01 (8)(6). this case. confirmed this point. 7 The Counterclaims in this case allege a violation of the Valentine Act's "blacklisting" prohibition. Specitically, Google is alleged to have issued a blacklist through an anticompetitive CC ~ 13. The Counterclaim further alleges that The Ohio Attorney General, in

and pretextual "quality" scoring scheme.

Google's "search partners" must join in the boycott. As alleged in the Counterclaims. Google's partnership agreements require that its "search partners" - such as AOL.com and Ask.com penalize sites using the very same application of Google's "quality score." CC ~ 13. That is, myTriggers is unable to deal with Google's "search partners" on terms any different from those on which it must deal with Google. These allegations plainly make out a claim under the

blacklisting provision of the Valentine Act and. at a minimum. the Counterclaim should proceed as to Google's blacklisting conduct.

7 Indeed, as the State points out, Google may itself be held liable tor Its umlateral conduct, as opposed to its agreements with search partners, because Google IS itself a "trust" for purposes of the Valentine Act. See Brief of Ohio Attorney General as AmiCUSCuriae Supporting Defendant and Counterclaim Plaintiff myTriggers.com, Inc. (June 26, 2010) at 7-8.

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2. myTriggers has Satisfied its Pleading Obligations under Ohio and Federal
Law Even if the pleading standard set forth in Twombly were to apply in this case, myTriggers more than satisfies it for the "secret" agreements at issue.' Indeed, although myTriggers is

unaware of express provisions in the agreements Google has with its search partners, myTriggers does realize that it does not show up in search results found on those search partners' websites. See CC ~ 12 (Google "does not publicly disclose" all sites that are its "search partners"): id. ("precise terms of the agreements are also kept secret"). Of course, Google does not - and

cannot - deny the existence of these agreements; indeed, Google advertises their existence on its website. For example, Google's Webmaster Guidelines state: "If a site has been penalized, it AC ~

may no longer show up in results on Google.com or on any of Google's partner sites." 103.

In order to survive dismissal, the trial court would have myTriggers include allegations about agreements that it cannot possibly surmise in the absence of discovery in this case. The United States Supreme Court's holding in Twombly does not go so far as to require a party to allege facts that are unknown to it because they are kept secret. In Twombly, the Supreme Court

considered the sufficiency of allegations of an antitrust conspiracy under the Federal Rules of Civil Procedure when the plaintitf does not allege that an actual agreement exists among the coconspirators. The Supreme Court ruled that, where there were no other allegations ofan actual

agreement, antitrust plaintitfs could not survive a motion to dismiss under Rule 12(b)(6) merely

8

In addition to the fact that Twombly IS not applicable here, it is also worth pointmg out that Ohio's pleading standard has not been expressly overruled by Twombly, Accordingly, there is no reason to hold myTriggers to a higher standard for purposes of this case, and myTriggers certainly satisfies the threshold for pleading a set of facts entitling It to discovery. See 0 'Brien v. Univ. Community Tenants Union (1975), 42 Ohio St. 2d 242, 245 ("it must appear beyond doubt from the complaint that the plaintiff can prove no set of facts entitling him to recovery),"

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.'

by alleging "parallel conduct" by the supposed conspirators.

550 U.S. at 556-57 ("stating [a

Shennan Act Section 1] claim requires a complaint with enough factual matter (taken as true) to suggest that an agreement was made" and "[wjithout more, parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality"). The Supreme Court's opinion, however, did not involve

allegations of actual agreement, as is the case here. Id. at 564 ("the complaint leaves no doubt that plaintiffs rest their § 1 claim on descriptions of parallel conduct, not on any independent allegation ofactual agreement among the (defendants]") (emphasis supplied); see also Hyland

\'. Homeservices of Am., Inc. (E.D. Ky. Aug. 17,2007), No. 3:05-CV-612-R. 2007 WL 2407233 ("In applying the plausibility standard to the complaint, the Court concurred with the district court that the complaint failed because the plaintiffs based their claims on descriptions of parallel conduct, 'and not on any independent allegation of actual agreement among defendants."') iquoting Twombly, 550 U.S. at 564). Similarly, in the other federal case cited by the trial court here, Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield (6th Cir. 2008), 552 F.3d 430, the Sixth Circuit found an antitrust complaint lacking where there was no independent allegation of an actual agreement. Instead of alleging facts supporting the existence of actual agreements, the plaintiff

in Total Benefits - an insurance broker that had sued an insurer and rival brokers - alleged little beyond a bald allegation that the defendants "organized a boycott." The plaintiff provided no

factual support for this conclusory allegation and the Sixth Circuit determined that such a bald claim - which had no description of the purpose of the alleged conspiracy, by whom, or how it was accomplished - did not plausibly suggest an agreement (the tirst element of a Shennan Act Section 1 claim).

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.t

II

I

.'

myTriggers, of course, does allege actual agreements between Google and its "search partners." Indeed, myTriggers explained how these actual agreements functioned: "Google

enters into agreements with a number of search websites, including rival shopping comparison sites, that allow these sites to participate in AdWords keyword auctions without being subject to the same 'quality' scoring Google applies to other search rivals, including myTriggers." 12. "Google's agreements with 'search partners' also serve to eliminate those 'partners' providing advertisers with alternatives to Google's dominant AdWords platform." CC ~ from

CC ~ 13.

myTriggers also explained the parallel conduct taken as a result of these actual agreements. Google's "search partners" apply "the same quality scoring as Google." [d. myTriggers also specifically alleged the identities of many of the other parties in these actual agreements. See CC ~ 12. Finally, as mentioned above, myTriggers sutliciently alleged that these agreements are secret and therefore only so much can be known about them at the pleadings stage. See id. In addition to alleging the existence of Google's agreements with its search partners, myTriggers also alleges the anticompetitive purpose of these agreements: "[T[hese horizontal

agreements with competitors serve to maintain Google's dominance and eliminate competitive alternatives from the market." Id. That is because "Google realizes that its dominance in search advertising may be threatened by other search websites, including vertical search sites such as myTriggers, if users may tum to such sites to satisfy their search queries." CC ~ 50; see also CC ~~ 12-13, 16, 18,32-33,36-37,48,49,51. Whereas Google - like most antitrust defendants - would undoubtedly prefer that

myTriggers allege ever more detailed pleadings, the pleading standard in Ohio does not require myTriggers to plead detailed facts, especially facts that are only within the control of Google, such as the precise terms of its search partner agreements. Not even the heightened pleading

29

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standard for fraud requires such particularity.

Cf Michaels Bldg. Co. v. Ameritrust Co., NA.

(6th. Cir. 1988), 848 F.2d 674, 680 ("Rule 9b does not require omniscience; rather, the Rule requires that the circumstances of the fraud be pled with enough specificity to put defendants on notice as to the nature of the claim:'); Ferron v. Metareward, Inc. (S.D. Ohio 2010), 698 F. Supp. 2d 992, 997 (rejecting defendants demands for more detail on a fraud pleading, stating "The when is not reasonably within Plaintiffs knowledge absent discovery. The why is a

question of intent that can be culled by reasonable and obvious inference from the pleadings .... The complaints thus present the necessary pleading and enable Defendants to begin to mount a competent defense"). 3. The Trial Court Failed to Acknowledge Dismissing the Antitrust Counterclaim The trial court held that it was "unnecessary" Google's Unilateral Acts in

tor the Court to examine myTriggers'

allegations that Google has engaged in unlawful "unilateral conduct" that violates the Valentine Act wholly apart from its unlawful agreements with search partners. Decision at 10. This may

have been true had the court permitted the Counterclaim to survive on the basis of the unlawful agreements alleged. By dismissing the Counterclaim for failure to allege agreements, however,

the trial court was obliged to determine whether allegations of unilateral conduct give rise to a violation of the Valentine Act. By failing to address this conduct - which the trial court itself acknowledged it had not done - the court impermissibly dismissed myTriggers' Counterclaim

even ifit were correct to dismiss allegations relating to unlawful agreements (which it was not). myTriggers alleged that Google is "by far the dominant avenue search advertisers employ in reaching search users:' maintain its dominant CC ~~ 5-6. Next, with regard to actions Google has undertaken to position in the marketplace, myTriggers made numerous specific

allegations that the trial court ignored.

myTriggers alleged that Google applies an opaque

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,. . I, .'

"Landing Page Quality" score measure to raise the keyword bidding price of certain specific website-advertisers - like myTriggers - that Google fears may siphon off search traffic from its dominant site. CC ~~ 11, 17. myTriggers also alleged that Google engaged in this conduct CC ~ 31 ("'Google informed myTriggers that its sites drastically raised the minimum bids for

specifically with respect to myTriggers. had poor 'quality scores''');

CC ~ 29 ("Google

myTriggers' keyword bids ....

between 1,000% and 10,000%).

Moreover, myTriggers has alleged that Google manipulated its natural search results to give preference to Google's own search results, such as its failed shopping comparison site "Froogle." CC ~~ 36-37. Indeed, myTriggers pointed out in its Counterclaim that a Google

representative has stated it is "company policy" tor Google to favor its own verticals in search results. Not only does Google manipulate its natural search results tofavor its own products, but Google manipulates its search results to penalize non-Google verticals that could potentially erode its dominant market position. respect to myTriggers. CC ~38. By failing even to consider myTriggers' claim that Google's unilateral conduct is itself unlawful, the court erroneously dismissed myTriggers' antitrust counterclaim under the Indeed, myTriggers alleged that Google did just that with

Valentine Act. E. The Trial Court Erred in Denying myTriggers' Counterclaim Motion to Amend the Antitrust

The trial court denied myTriggers' motion to amend its antitrust claim on two grounds: (l) the amendment would be futile. and (2) allowing amendment would cause undue delay. As explained above, the Court's review of the trial court's denial is de novo because the court rested its decision in part on its determination that the allegations in the Amended Counterclaim do not improve upon the allegations in the dismissed Counterclaim. See Section lILA, supra.

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Furthermore, any delay in the case cannot be attributed to myTriggers which, unlike Google, has not sought delay." Moreover, the trial court on several occasions acknowledged the delay in

issuing a decision on the merits of the motion to dismiss and did not attribute that delay to myTriggers on any of those occasions.
10

The trial court explained that allowing myTriggers to amend its Counterclaim would be futile because, although the "quantity" of allegations in the proposed amended counterclaim had grown, "the quality has not." 11/3/11 Tr. at 52. Yet these new allegations addressed precisely pled even though myTriggers

the issues the trial court had determined were inadequately

believed that the original complaint contained sufficient allegations to inform Google as to the basis tor myTriggers' antitrust counterclaim. In particular, the trial court dismissed the antitrust Decision at 9.

Counterclaim because "the counterclaim only alleges harm to myTriggers itself" Notwithstanding myTriggers the allegations in the initial counterclaim allegations

regarding harm to competition, alleging Google's conduct

made numerous

additional

specifically

harmed market participants other than myTriggers and, as a result, harmed competition in the marketplace. See Am. CC ~~ 1-29, 99-103, 113. Moreover, as explained above, myTriggers

added allegations regarding investigations of Google by regulators to determine whether conduct just like that at issue in this case harms competition. See. e.g.. Am. CC ~~ 21, 114-115.

Although these regulators cannot possibly be concerned with the loss of myTriggers alone - but rather are plainly concerned about harrn to competition - the trial court nonetheless ignored these

'I

Motion of Plaintiff and Counterclaim Defendant Google Inc. to Stay Discovery (Mar. 22, 2010); see also Motion for Extension of Time of Plaintiff Google Inc. to File Motion to Strike Defendant myTriggers.com. Inc. 's Affirmative Defenses Pursuant to Civ. R. 12(0 (Sept. 30. 2011); Motion of Plaintiff and Counterclaim Defendant Google Inc. for Extension of Time to Comply with the Court's July 5. 2011 Order (Jul. 19.2011); 11/3/11 Tr. at 52.
10

See, e.g .• 3/8/11 Tr. at 23 ("I bear direct responsibility for the fact that this case has drug along as it has").

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.",

..

,

allegations and concluded that such conduct is inadequate to bring a claim under the Valentine Act. Because the trial court based its dismissal of myTriggers' antitrust counterclaim on a

faulty ruling that myTriggers suffered no antitrust injury, this Court must review the denial of the amended counterclaim de novo. In this light - with new facts that arose only after the tiling of the original complaint and that only bolster myTriggers antitrust counterclaim - myTriggers should be permitted to proceed under its Amended Counterclaim. The trial court also erred by attributing delay in its decision on Google's motion to

dismiss to myTriggers. As the trial court acknowledged on several occasions, it held in abeyance numerous discovery rulings while contemplating Google's motion to dismiss. Indeed,

myTriggers was unable to obtain discovery into several key issues that would support both the original antitrust counterclaim and the amended antitrust counterclaim. came time to consider myTriggers' Nonetheless, when it

motion to amend, the trial court held that permitting the 11/3/11 Tr. at 52. The trial court

antitrust counterclaim to proceed would be an undue delay.

made this ruling despite acknowledging that "the court has played no small part in the fact of the delays that brought us up to this date without any progress." [d. Indeed, no decision on

Google's motion to amend was rendered tor well over a year. I I Once the trial court issued its opinion. myTriggers acted as quickly as practicable to seek the proposed amendment to its antitrust counterclaim. Under these circumstances, refusing myTriggers an opportunity to amend

its counterclaim once it had a decision in hand is contrary to the interests of justice, and the
II Meanwhile, myTnggers acted as quickly as practicable to keep this litigation moving along. Though Google tiled its own amended complaint after it moved to dismiss myTriggers' Counterclaims, myTriggers responded to Google's motion to dismiss without seeking additional time to file an amended counterclaim. Moreover, once the trial court granted Google's motion to dismiss and the trial court stated that it would allow myTriggers to seek amendment, myTriggers did so within only two weeks.

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Court should allow myTriggers' amended antitrust counterclaim to stand. See, e.g., Turney v. Cent. Local School Dist. (1999), 85 Ohio St.3d 95, 99, 706 N.E.2d 1261 (leave to be granted liberally absent showing of bad faith, under prejudice or undue delay to opposing party). V. Conclusion For the foregoing reasons, the trial court's decision to dismiss myTriggers' claims under the Valentine Act should be REVERSED and those claims should be remanded for further proceedings. Alternatively, the trial court's decision to deny myTriggers' leave to amend its

Valentine Act claims should be REVERSED.

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Respectfully submitted,

David I. Shrog
COLLEY SHROYER & ABRAHAM, LPA

536 South High Street Columbus,OH 43215-5674 Telephone: (614) 228-6453 Facsimile: (614) 228-7122 Co-counsel for Defendant and Counterclaim Plaintiff-Appellant myTriggers.com, Inc ..

Stanley M. Chesley (O(fOO852) W.B. Markovits (0018514)
WAITE, SCHNEIDER, BAYLESS & CHESLEY CO., LPA

AJ/i .d~

lJer e-"..,.~:( c:......:iL..

1513 Fourth & Vine Tower 1 West Fourth Street Cincinnati, OH 45202 Telephone: (513) 621-0267 Facsimile:(513) 621-0262 Co-counsel for Defendant and Counterclaim Plaintiff-Appellant my'Iriggers. com, Inc.

(Admitted ~ro Hac ?rice) Jonathan Kanter (Admitted Pro Hac Vice) Joseph J. Bial (Admitted Pro Hac Vice) Daniel J. Howley (Admitted Pro Hac Vice)
CADWALADER, WICKERSHAM

aarteS:iJr

~

~ A.Utk Ou -Ie./~/)iO:A? c-.1L .

& TAFT LLP

700 Sixth Street, N.W. Washington, DC 20001 Telephone: (202) 862-2200 Facsimile: (202) 862-2400 Co-counselfor Defendant and Counterclaim Plaintiff-Appellant my'Iriggers.com, Inc. Of Counsel: Bryan B. Johnson (0003981)

ADAMS, BABNER & GITLITZ

5003 Horizons Drive, Suite 200 Columbus, OH 43220 Telephone: (614) 560-4719 Facsimile: (614) 569-3352 Email: hbj(ioabgluwyers.com Of Counsel for Defendant and Counterclaim Plaintiff-Appellant myTriggers.com, Inc.

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CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing was served upon the following counsel of record by regular U.S. Mail, postage prepaid, this 19th day of January. 2012: James A. Wilson Kenneth J. Rubin
VORYS, SATER, SEYMOUR AND PEASE

LLP

52 East Gay Street, P.O. Box 1008 Columbus, Ohio 43216-1008 Telephone: (614) 464-5606 Attorneys for Plaintiff and Counterclaim Defendant-Appellee

Google Inc.

David I. Shro¥er (0024099)

14W~,a·1:~~:

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