Channel-Restricted Antitrust Markets Fail Without Evidence of Non-Substitutability; Rebate “Lock-In” Alone Cannot Create a Single-Brand Market

1. Introduction

Endure Industries, Incorporated, a “relabeler” of disposable medical supplies (DMS), sued Vizient Incorporated and affiliated entities (collectively, “Vizient”), the largest U.S. group purchasing organization (GPO), after Vizient rejected Endure’s bid to supply medical tape in favor of 3M. Endure alleged monopolization and related antitrust theories (exclusive dealing, refusal to deal, “essential facilities,” and vertical rebate restraints), but the litigation turned on a threshold requirement for Rule-of-Reason claims: defining a legally sufficient relevant market.

Endure advanced two proposed product markets through its expert:

• “GPO DMS Market”: sale of DMS through GPO-negotiated and administered contracts to general acute care centers (GACs).
• “Vizient DMS Market”: sale of DMS to Vizient-member GACs (a submarket/single-brand style market).

The district court granted summary judgment for Vizient solely on the ground that Endure’s market definitions were legally insufficient. The Fifth Circuit affirmed, holding that Endure failed to raise a genuine dispute of material fact that its channel-restricted (GPO-only) and member-restricted (Vizient-only) markets included all reasonably interchangeable substitutes.

2. Summary of the Opinion

3. Analysis

3.1 Precedents Cited (and How They Shaped the Decision)

• PSKS, Inc. v. Leegin Creative Leather Prods., Inc., 615 F.3d 412 (5th Cir. 2010)
  Role: The opinion uses PSKS as a central Fifth Circuit statement of market-definition doctrine: the market must include “all commodities reasonably interchangeable by consumers for the same purposes.” It also supplies the Fifth Circuit’s caution that submarkets must satisfy the same economic test as broader markets and that single-brand markets are “rare,” generally requiring “locked in” consumers.
• United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377 (1956)
  Role: Foundational Supreme Court authority for “reasonable interchangeability” and cross-elasticity analysis (including the “cellophane” illustration). The Fifth Circuit treats cross-elasticity of demand as the conceptual backbone of product-market boundaries.
• Apani Sw., Inc. v. Coca-Cola Enters., Inc., 300 F.3d 620 (5th Cir. 2002)
  Role: Supplies a pleading/legal-sufficiency principle the court extends into the summary judgment posture: a market is legally insufficient where it clearly excludes interchangeable substitutes. The court uses this to validate early termination of antitrust claims when market definition is defective.
• Ohio v. Am. Express Co., 585 U.S. 529 (2018) (quoting Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984))
  Role: The court cites Am. Express for the Rule-of-Reason requirement to assess market power/structure and for defining the relevant market as the “area of effective competition” (the “arena” where significant substitution occurs). This frames the inquiry as substitution-centric rather than label-centric (e.g., “GPO channel” as a stand-alone market).
• Brown Shoe Co. v. United States, 370 U.S. 294 (1962), and United States v. Cont'l Can Co., 378 U.S. 441 (1964)
  Role: Provide “practical indicia” (the Brown Shoe factors) for identifying submarkets and for aligning market definition with “commercial realities.” The Fifth Circuit stresses these indicia are proxies for substitution/cross-elasticity—not a replacement test that would allow a plaintiff to define a market purely by industry custom or distribution channel.
• Heatransfer Corp. v. Volkswagen-werk, A.G., 553 F.2d 964 (5th Cir. 1977)
  Role: Cited to restate the Brown Shoe factors in Fifth Circuit form, supporting the court’s explanation of submarket analysis while emphasizing that submarkets must still live within broader economic substitution.
• Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480 (5th Cir. 1984); Eastman Kodak Co. v. Image Tech. Servs., 504 U.S. 451 (1992)
  Role: These anchor the court’s rejection of the “Vizient-member only” market. Domed Stadium Hotel supplies the general rule against single-brand markets; Eastman Kodak supplies the narrow exception (lock-in due to product nature/proprietary constraints). The court reads Fifth Circuit precedent to disfavor “purely price” lock-in theories (rebates/discounts) as insufficient.
• Dr.'s Hospital v. Southeast Medical Alliance, Inc., 123 F.3d 301 (5th Cir. 1997)
  Role: This is the opinion’s most concrete analog: a proposed market was rejected where “over thirty percent” of consumers obtained services outside the proposed market, which the court called “powerful evidence” of reasonably available alternatives. The Fifth Circuit uses this logic to treat ~30% non-GPO purchasing/outflow as fatal to Endure’s narrow GPO-only framing—despite Endure’s attempt to distinguish product vs. geographic market, relying on Brown Shoe’s statement that the criteria are “essentially similar.”
• Shah v. VHS San Antonio Partners, L.L.C., 985 F.3d 450 (5th Cir. 2021)
  Role: Supports (i) the plaintiff’s burden to articulate market boundaries and (ii) that failure to identify where consumers can practicably go for substitutes can doom a market definition. The court also uses Shah to stress Rule 56’s evidentiary demands.
• C.E. Servs., Inc. v. Control Data Corp., 759 F.2d 1241 (5th Cir. 1985)
  Role: Reaffirms that the plaintiff bears the burden of establishing a legally sufficient market—important at summary judgment where Endure relied on inferences rather than updated, specific proof.
• Skotak v. Tenneco Resins, Inc., 953 F.2d 909 (5th Cir. 1992); Campos v. Steves & Sons, Inc., 10 F.4th 515 (5th Cir. 2021); PHH Mortg. Co. v. Old Republic Nat'l Tit. Ins. Co., 80 F.4th 555 (5th Cir. 2023); Baker v. Bell, 630 F.2d 1046 (5th Cir. 1980)
  Role: These procedural authorities enforce summary-judgment discipline and appellate restraint: the court will not “sift through the record” to build a party’s case, and it will not decide issues the district court did not reach absent special circumstances.
• FTC v. Whole Foods Mkt., Inc., 548 F.3d 1028 (D.C. Cir. 2008)
  Role: The court explicitly declines to rule on Endure’s invocation of a “core customer” theory drawn from Whole Foods, citing forfeiture and nonbinding status. The mention underscores the Fifth Circuit’s insistence that novel market-narrowing theories must be pleaded and developed below.

Secondary/agency materials used as doctrine scaffolding: The opinion references the U.S. Dep't of Justice & Fed. Trade Comm'n, Merger Guidelines § 4.3 (2023) (including the Hypothetical Monopolist Test / SSNIP) and Jonathan B. Baker’s “cluster market” discussion to explain analytical tools, but the dispositive reasoning turns on record evidence of substitution and Fifth Circuit precedents about market completeness.

3.2 Legal Reasoning

A. The controlling standard: substitution, not labels

The court re-centers market definition on consumer substitution: a product market must include all reasonably interchangeable options, operationalized through cross-elasticity of demand (and, where helpful, proxies like Brown Shoe indicia and SSNIP logic). This framing is crucial because Endure’s definitions were “channel” and “membership” labels: (i) DMS “through GPOs” and (ii) DMS “to Vizient members.” The court treats those labels as hypotheses that must be validated by evidence that alternatives (direct purchasing, other channels, other GPOs) are not reasonably interchangeable.

B. Why the “GPO DMS Market” failed: meaningful out-of-market purchasing implies interchangeability

Endure’s GPO-only market excluded non-GPO routes. The court held the record itself contradicted Endure’s “no substitutes” premise:

• Endure’s expert data showed 174 of 629 GAC hospitals that left Vizient left the GPO model entirely (about 27.7%), indicating non-GPO procurement is a viable alternative for a substantial share of customers.
• Endure relied on an (acknowledged) “somewhat outdated” report stating 72% of hospital purchases ran through GPO contracts—meaning nearly 30% did not, which the court treated as “powerful evidence” of available alternatives.
• A separate “82%” figure for general medical/surgical products still implied 18% of purchasing occurred outside GPO channels, again undercutting a strict GPO-only boundary.

The opinion’s analytic move is not that any leakage defeats a market definition; rather, consistent with Dr.'s Hospital v. Southeast Medical Alliance, Inc., a substantial fraction of customers obtaining the product outside the proposed boundary is strong evidence the boundary is too narrow and excludes interchangeable substitutes. Because Endure bore the burden of production, it could not ask the court to infer that non-GPO purchasing had materially declined since older studies.

C. Why the “Vizient DMS Market” failed: “rebate lock-in” is not the Kodak-type lock-in

Endure’s second market effectively limited the market to Vizient’s own member customers—functionally a single-brand/single-firm market. The Fifth Circuit applied its settled skepticism:

• General rule: Under Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., “absent exceptional market conditions,” one brand cannot be the relevant market.
• Narrow exception: Under PSKS, Inc. v. Leegin Creative Leather Prods., Inc. (citing Eastman Kodak Co. v. Image Tech. Servs.), a single-brand market may exist where consumers are structurally “locked in” by the nature of the product (e.g., proprietary parts/service tie dynamics in Kodak).

The court found Endure’s alleged lock-in rested on incentives and pricing (ISP rebates, compliance targets) rather than structural barriers. It emphasized Endure offered no specific evidence that members were prevented from buying outside, joining other GPOs, or leaving. Nor did Endure adduce concrete switching-cost evidence sufficient to convert discount economics into Kodak-style lock-in. The court also noted that Vizient’s 53% GPO share made it “highly likely” other GPOs would constrain Vizient’s pricing to its members—further undermining a Vizient-only market boundary.

D. Summary judgment discipline: courts do not build the market for the plaintiff

Endure attempted to adjust the Vizient market on appeal, suggesting it “includes DMS sales both through Vizient’s GPO network and outside of Vizient’s GPO.” The court rejected this pivot as unsupported by specific record citations and underscored Rule 56 practice: under Skotak v. Tenneco Resins, Inc., courts need not sift the record to locate supporting evidence; under PHH Mortg. Co. v. Old Republic Nat'l Tit. Ins. Co., appellate review generally does not reach issues not decided below.

3.3 Impact

• Channel-only markets face heightened evidentiary scrutiny in the Fifth Circuit. Plaintiffs cannot define a relevant product market as “sales through X channel” (here, GPOs) while ignoring substantial direct/out-of-channel purchasing. The decision operationalizes “commercial realities” as requiring a complete accounting of where customers actually turn for substitutes, not merely how an industry commonly transacts.
• Substantial “outflow” is powerful evidence the market is too narrow. By analogizing to Dr.'s Hospital v. Southeast Medical Alliance, Inc., the court signals that roughly 20–30% purchasing outside the proposed boundary is probative (and potentially dispositive) against narrow market definitions—absent countervailing evidence explaining why those purchases are not true substitutes.
• Rebates and compliance programs rarely establish Kodak-style lock-in. Plaintiffs challenging GPO rebate structures must produce concrete proof of structural barriers (contractual prohibitions, switching frictions, proprietary constraints, information costs, or other non-price mechanisms) rather than relying on “cost-prohibitive” assertions.
• Case-selection consequences: Because market definition is a threshold element for Rule-of-Reason monopolization and restraint claims, defendants can seek early resolution (including summary judgment) by focusing discovery and expert work on substitution evidence (actual purchasing patterns, switching behavior, diversion, and cross-elasticity proxies).

4. Complex Concepts Simplified

• Relevant market (product market): The set of products (and purchasing options) that buyers see as substitutes. If buyers would switch in meaningful numbers when price/terms change, those options generally belong in the same market.
• Reasonable interchangeability / cross-elasticity of demand: A practical question: “If this gets a bit more expensive, can customers realistically switch to something else?” Evidence includes actual switching, purchasing patterns, and economic analyses.
• Brown Shoe factors: Real-world indicators (industry recognition, distinct customers/prices, specialized vendors, etc.) that help infer whether two offerings truly compete. The court treats them as proxies for substitution—not a shortcut that allows market definition by labels alone.
• SSNIP / Hypothetical Monopolist Test: A thought experiment: if a hypothetical monopolist raised price slightly (often 5%), would enough buyers switch away to make the increase unprofitable? If buyers would switch, the market is too narrow.
• Single-brand market / “lock-in”: Normally, one firm’s brand is not a market because buyers can switch to competitors. A single-brand market may exist only where buyers are trapped by structural constraints (as in Eastman Kodak Co. v. Image Tech. Servs.), not merely because discounts make switching unattractive.
• Summary judgment (Rule 56): The plaintiff must point to specific evidence showing a real factual dispute for trial. Courts will not hunt through the record to find support, and appellate courts generally won’t decide issues not ruled on below.

5. Conclusion

Endure Industries v. Vizient reinforces a strict Fifth Circuit approach to market definition as a gatekeeping requirement in Rule-of-Reason antitrust cases. The court held that a plaintiff cannot define a market around a preferred procurement channel (GPO-only) or a defendant’s customer base (Vizient-member-only) while ignoring substantial evidence that customers obtain the same products through other routes. And it reaffirmed that “lock-in” sufficient to justify a single-brand market requires Kodak-type structural constraints, not merely rebate economics. The decision’s practical lesson is that, at summary judgment, market definition lives or dies on concrete substitution evidence—what customers actually do when faced with alternatives.