FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS DEC 6 2022 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
DREAMSTIME.COM, LLC, No. 20-16472
Plaintiff-Appellant, D.C. No. 3:18-cv-01910-WHA
v. OPINION GOOGLE LLC,
Defendant-Appellee.
Appeal from the United States District Court for the Northern District of California William Alsup, District Judge, Presiding
Argued and Submitted February 16, 2022 San Francisco, California
Before: Ronald M. Gould and Johnnie B. Rawlinson, Circuit Judges, and Jennifer G. Zipps, * District Judge.
Opinion by Judge Gould
* The Honorable Jennifer G. Zipps, United States District Judge for the District of Arizona, sitting by designation. SUMMARY **
Antitrust
The panel affirmed the district court’s dismissal of an antitrust claim brought by Dreamstime.com, LLC, an online supplier of stock images, against Google LLC.
Dreamstime alleged that Google violated § 2 of the Sherman Act by maintaining a monopoly in the online search advertising market. Dreamstime asserted that Google furthered this monopoly by impeding Dreamstime’s use of Google’s paid advertising services as well as harming Dreamstime’s performance on Google’s free search engine. The district court dismissed on the ground that Dreamstime did not sufficiently allege anticompetitive conduct in the relevant market of online search advertising.
A § 2 claim includes two elements: (1) the defendant has monopoly power in the relevant market, and (2) the defendant has willfully acquired or maintained monopoly power in that market. To meet the first element, a plaintiff generally must (1) define the relevant market, (2) establish that the defendant possesses market share in that market sufficient to constitute monopoly power, and (3) show that there are significant barriers to entering that market. The second element requires that the defendant engaged in willful acts to acquire or maintain a monopoly in the relevant market. This element requires a showing that a defendant possessing monopoly power undertook anticompetitive conduct and did so with an intent to control process or exclude competition in the relevant market.
The panel held that the record did not support Dreamstime’s contention that it defined the relevant market to include the online, organic search market (in addition to the online search advertising market). Rather, by its course of conduct before the district court, Dreamstime waived any § 2 claim arising from the online search market.
The panel affirmed the district court’s conclusion that Dreamstime failed to allege anticompetitive conduct in the online search advertising market. The panel
** This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader. held that, as to Dreamstime’s allegations that Google mistreated Dreamstime as a Google customer, Dreamstime did not show that this mistreatment harmed competition in the online search advertising market, and so there was no antitrust injury. Allegations related to Dreamstime’s performance in Google’s unpaid, organic search results did not plausibly state a claim for anticompetitive conduct in the online search advertising market. Dreamstime’s allegation that Google unlawfully captured data from users and advertisers also did not state anticompetitive behavior.
Finally, the panel held that the district court properly dismissed Dreamstime’s § 2 claim with prejudice and without leave to amend.
The panel addressed additional issues in a separate memorandum disposition filed simultaneously with this opinion.
COUNSEL
Jaime W. Marquart (argued), Donald R. Pepperman, and Brian T. Grace, Waymaker LLP, Los Angeles, California; James Bailey, Bailey Duquette PC, New York, New York; Jason A. Fischer, Bryn & Associates PA, Miami, Florida; for Plaintiff- Appellant. Jonathan M. Jacobson (argued) and Brian M. Wilen, Wilson Sonsini Goodrich & Rosati, New York, New York; Lauren Gallo White (argued) and Paul N. Harold, Wilson Sonsini Goodrich & Rosati, San Francisco, California; Kelly M. Knoll and Dylan J. Liddiard, Wilson Sonsini Goodrich & Rosati, Palo Alto, California; for Defendant-Appellee.
Sandeep Vaheesan, Open Markets Institute, Washington, D.C., for Amicus Curiae Open Markets Institute. GOULD, Circuit Judge:
This appeal arises from an antitrust action brought by Dreamstime.com,
LLC (“Dreamstime”), an online supplier of stock images, against Google LLC. In
short, Dreamstime alleged that Google violated Section 2 of the Sherman Act by
maintaining a monopoly in the online search advertising market. Dreamstime
asserted that Google furthered this monopoly by impeding Dreamstime’s use of
Google’s paid advertising services as well as harming Dreamstime’s performance
on Google’s free search engine. The district court dismissed Dreamstime’s Section
2 claim with prejudice. The district court reasoned that Dreamstime had not
sufficiently alleged anticompetitive conduct in the relevant market of online search
advertising. Dreamstime appeals, and we affirm.
FACTUAL BACKGROUND
I
Google operates the most used search engine in the world. Google’s search
engine connects users to websites based on the search query that a user enters into
the search bar on Google. Google uses proprietary algorithms to interpret user
search queries, cross-reference Google’s index of webpages, and display a ranked
list of webpages to users. Google’s algorithms take into account, among other
things, the page’s relevance, usability, and age, as well as the user’s past behavior
and browser settings, to identify and rank relevant webpages. Google also operates
2 a search engine for images (“Google Images”) that shows relevant pictures at the
top of the search results. Google Images has become the largest image repository
in the world. Google does not charge users for its search services.
Instead, Google’s search services are monetized, in part, by advertising
revenues. Google’s online advertising service is called “Google Ads.”1 Google
Ads charges companies to display their ads next to the search results generated by
Google’s search engines as well as on other websites. When displayed next to
Google’s search results, these advertisements are referred to as “sponsored” or
“paid” search results. By contrast, the search results generated by Google’s search
engines—and displayed alongside these advertisements—are referred to as
“organic” or “free” search results.
II
Dreamstime, a supplier of online stock images, is based in Romania.
Dreamstime offers a searchable repository of tens of millions of stock photos for
purchase as well as millions of free images. Dreamstime, for its business model,
relies heavily on user traffic directed to it from search engines like Google. About
two-thirds of Dreamstime’s customers come to its website from search results
generated by such search engines.
1 Google Ads was formerly known as “Google AdWords” and is, at times, referred to as such in the parties’ briefing.
3 Dreamstime began advertising on Google in 2004. In doing so, Dreamstime
agreed to the Google Ads Agreement, which is a prerequisite for companies to
advertise on Google. Among other things, this contract expressly authorized
Google to suspend or remove specific advertisements from its network, cancel
advertising accounts, and otherwise enforce Google’s advertising policies. The
agreement made no guarantees about how Dreamstime’s advertisements would
perform in either sponsored or organic search results. In 2012, Google began
offering Dreamstime a dedicated, European-based advertising support team.
Throughout its first decade as a Google Ads customer, Dreamstime ranked in the
top three organic search results for searches related to stock photography.
III
In 2015, Google revised the algorithm powering its search engine. This
revision altered the “salient terms signal,” a part of Google’s search algorithm that
helps generate terms associated with a webpage so that Google’s search engine can
find and list webpages responsive to a user’s search query. The salient terms
revision gave more weight to “certain words based on how the webpage displayed
them.”
After Google revised its algorithm, Dreamstime’s organic search ranking
began to fall. Dreamstime alleges that this drop in search ranking caused its
number of new customers to fall 30% by April 2016. During this time,
4 Dreamstime raised the issue of its declining organic search rankings to Google’s
advertising support team.
In response, Google’s advertising support team recommended an external
Search Engine Optimization (SEO) expert to help Dreamstime address its search
rankings. The SEO expert concluded, in a free analysis sent to Dreamstime, that
the reason behind Dreamstime’s flagging search ranking was “the weak content of
[its] site.” Dreamstime then invested millions of dollars in an attempt to improve
its search ranking. Despite these efforts, Dreamstime’s organic search ranking on
Google continued to decline. Dreamstime’s organic search ranking on other search
engines did not decline during this time.
The parties dispute whether the revision to Google’s algorithm caused
Dreamstime’s organic search ranking to decline. Dreamstime contends that it did,
but Google has denied this claim. Both sides point to experiments that Google
conducted to test the algorithmic update. One experiment found the proposed
algorithmic revision improved the overall customer experience using Google’s
search engine. A second side-by-side experiment compared salient terms
generated for a sample of 2,300 websites before and after the proposed algorithmic
change. One of the sample webpages in that experiment was a Dreamstime
webpage, and it was rated as a “loss,” meaning that the algorithm was worse at
identifying that webpage’s salient terms because of the change to the algorithm.
5 Dreamstime asserts that this result shows that Google’s changed algorithm
contributed to Dreamstime’s organic search ranking decline.2 Google responds
that the “loss” rating in the experiment only measured salient term recognition and
did not translate to predicting a “loss” in organic search ranking. Google
highlights that many other webpages—including several of its own—received
“loss” ratings. Google points further to notes that accompanied the algorithmic
revision launch stating that there was no “correlation between [the algorithmic
revision] and any effect on ranking.”
PROCEDURAL BACKGROUND
Dreamstime sued Google in March 2018. It asserted four claims: (1)
violation of Section 2 of the Sherman Act, 15 U.S.C. § 2, (2) breach of contract,
(3) breach of the implied covenant of good faith and fair dealing, and (4) violations
of California’s Unfair Competition Law (“UCL”). Google moved to dismiss all
claims. After briefing and a hearing on Google’s motion to dismiss, the district
court permitted Dreamstime to file a First Amended Complaint (“FAC”).
Dreamstime promptly did so.
Google again moved to dismiss. After further briefing, another motion to
dismiss, and an order seeking clarification from both parties, the district court
2 Dreamstime also retained an expert in this litigation who opined that the algorithmic revision was the “most likely cause” for the rankings decline.
6 granted in part and denied in part Google’s motion to dismiss. The district court
dismissed with prejudice Dreamstime’s Section 2 claim. The district court
reasoned that Dreamstime had “not plausibly allege[d] harm to competition in the
relevant market” of online search advertising. However, it initially allowed
Dreamstime’s remaining claims asserting state law violations to proceed. The
district court later dismissed Dreamstime’s remaining state law claims in Rule 12
and summary judgment proceedings.
Dreamstime timely appeals the district court’s dismissal of its Section 2
claim. 3 We have jurisdiction under 28 U.S.C. § 1291, and we affirm.
STANDARD OF REVIEW
We review de novo the district court’s dismissal of a claim under Federal
Rule of Civil Procedure 12(b)(6) for failure to state a claim. Glen Holly Ent., Inc.
v. Tektronix, Inc., 352 F.3d 367, 368 (9th Cir. 2003). To survive a motion to
dismiss, an antitrust complaint “need only allege sufficient facts from which the
court can discern the elements of an injury resulting from an act forbidden by the
antitrust laws.” Cost Mgmt. Servs., Inc. v. Wash. Nat. Gas Co., 99 F.3d 937, 950
(9th Cir. 1996) (citation omitted). At the motion to dismiss stage, we must accept
3 Dreamstime also appeals the district court’s grant of summary judgment in favor of Google on its implied covenant and UCL claim. We affirm that decision in a separate memorandum disposition filed simultaneously with this opinion.
7 all facts in Dreamstime’s complaint as true. See Wojciechowski v. Kohlberg
Ventures, LLC, 923 F.3d 685, 688 n.2 (9th Cir. 2019).
DISCUSSION
Dreamstime argues on appeal that the district court erred in dismissing with
prejudice its claim under Section 2 of the Sherman Act. Dreamstime asserts that
the district court mischaracterized the relevant market for this claim as only the
online search advertising market. Dreamstime insists that its Section 2 claim
“defined the relevant market as both [the] search and search advertising” markets.
Dreamstime contends further that the district court also erred in concluding that
Dreamstime failed to allege anticompetitive conduct. Finally, and in any event,
Dreamstime argues that the district erred in dismissing its Section 2 claim with
prejudice and without leave to amend. For the reasons provided below, we
disagree on all three points, and we affirm.
Section 2 of the Sherman Act prohibits concerted and independent action
that “monopolize[s] or attempt[s] to monopolize.” 15 U.S.C. § 2. A Section 2
claim includes two elements: (1) the defendant has monopoly power in the relevant
market, and (2) the defendant has willfully acquired or maintained monopoly
8 power in that market.4 United States v. Grinnell Corp., 384 U.S. 563, 570–71
(1966). Both elements are required. “The mere possession of monopoly power,
and the concomitant charging of monopoly prices, is not only not unlawful; it is an
important element of the free-market system.” Verizon Commc’ns Inc. v. L. Offs.
of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004).
In the context of a Section 2 claim, monopoly power means the power to
“control prices or exclude competition.” Grinell, 384 U.S. at 571 (citation
omitted). We have recognized that market share is perhaps the “most important
factor to consider” when determining whether a defendant has monopoly power.
Movie 1 & 2 v. United Artists Commc’ns, 909 F.2d 1245, 1254 (9th Cir. 1990). To
meet the first element of a Section 2 claim, a plaintiff generally must (1) define the
relevant market, (2) establish that the defendant possesses market share in that
market sufficient to constitute monopoly power, 5 and (3) show that there are
significant barriers to entering that market. See Image Tech., 125 F.3d at 1202.
The second element of a Section 2 claim requires that the defendant engaged
in “willful” acts to acquire or maintain a monopoly in the relevant market.
4 Section 2 plaintiffs must also establish standing. We need not address this issue because Google does not challenge Dreamstime’s standing to bring its Section 2 claim. 5 Generally, 65% market share is sufficient to establish that a defendant has monopoly power. See Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1206 (9th Cir. 1997).
9 Grinnell, 384 U.S. at 570–71. This element is referred to as the “‘conduct’
element.” Image Tech., 125 F.3d at 1208. This element requires a showing that a
defendant possessing monopoly power undertook “anticompetitive conduct,”
Trinko, 540 U.S. at 407, and that the defendant did so with an “intent to control
prices or exclude competition in the relevant market,” Cal. Comput. Prods., Inc. v.
Int’l Bus. Machs. Corp., 613 F.2d 727, 736 (9th Cir. 1979). Anticompetitive
conduct consists of acts that “tend[] to impair the opportunities of rivals” and “do[]
not further competition on the merits or do[] so in an unnecessarily restrictive
way.” Cascade Health Sols. v. PeaceHealth, 515 F.3d 883, 894 (9th Cir. 2008).
The focus of this element is on conduct that harms “the competitive process”
as a whole; it is “not on the success or failure of individual competitors.” Id. at
902. We must “ensur[e] that [enforcing] the antitrust laws do[es] not punish
economic behavior that benefits consumers and will not cause long-run injury to
the competitive process.” Id. at 903. Indeed, anticompetitive conduct does not
include “growth or development” that occurs “as a consequence of a superior
product, business acumen, or historic accident.” Grinnell, 384 U.S. at 571.
Likewise, Section 2 generally does not require firms that “acquire monopoly power
by establishing an infrastructure that renders them uniquely suited to serve their
customers . . . to share the source of their advantage.” Trinko, 540 U.S. at 407.
10 Section 2 permits different theories of unlawful monopolization. For
example, a “maintenance theory” alleges that the defendant by improper conduct
maintained a monopoly in one market. Image Tech, 125 F.3d at 1208. By
contrast, a “leveraging theory” alleges that the defendant used its monopoly in one
market to gain (or attempt to gain) a monopoly in a second, downstream market,
id., as that is also willful anti-competitive conduct.6
One important question on appeal lies at the threshold: Did Dreamstime
define the relevant market for its Section 2 claim to include the online, organic
search market (in addition to the online search advertising market)? Dreamstime
maintains that it did, and that the district court erroneously focused solely on the
online search advertising market as the sole relevant market. This issue is critical
to evaluating Dreamstime’s claim that the district court erred in concluding that
Dreamstime did not allege anticompetitive conduct in the relevant market.
We hold that the record does not support Dreamstime’s current contention
that it included online search in its definition of the relevant market. To the
contrary, the district court repeatedly offered Dreamstime the opportunity to define
the relevant market as including the online search market, and, at every turn,
6 We do not suggest that these two examples exhaust the categories of conduct that may support a monopolization claim.
11 Dreamstime expressly disavowed any intent to do so. By such a course of conduct,
Dreamstime waived any Section 2 claim arising from the online search market.
A
Questions and confusion surrounded the relevant market for Dreamstime’s
Section 2 claim from the outset of this action. In the first paragraph of its original
complaint, Dreamstime defined the relevant market as the “online search
advertising” market and alleged that Google was carrying out a strategy that
“further entrench[ed] Google’s monopoly of the relevant online search advertising
market.” Later, the complaint repeated that “the online search advertising market”
was “the relevant antitrust market for purposes of this case.”
This would seem clear enough. However, other sections of Dreamstime’s
original complaint muddied the waters. Other language in Dreamstime’s original
complaint appeared to hint at a second market—the online search market—for its
Section 2 claim. Specifically, Dreamstime alleged as follows:
Though the online search market and online search advertising markets are described separately for the sake of precision, and though the online search advertising market is the relevant antitrust market for purposes of this case, they are essentially one and the same, and Google’s monopoly power exists in both. In essence, Google is monetizing a monopoly position in online search by selling advertising on top of search results. The confusion was not lost on the district court, which endeavored to nail
down the relevant market for Dreamstime’s Section 2 claim. At the hearing on
12 Google’s motion to dismiss the original complaint, the district court asked whether
Dreamstime was asserting a one-market (i.e., maintenance) theory arising out of
the online search advertising market, or a two-market (i.e., leveraging) claim
arising out of markets beyond the online search advertising market (e.g., the online
search or stock image markets). Dreamstime responded expressly that it was “not
alleging a two-market monopoly leveraging theory.” Dreamstime further
explained that its claim arose from its position as “a consumer of Google’s
AdWords services in the search advertising market.” Dreamstime specified that it
was “not claiming there is a downstream stock photo market that Google is trying
to monopolize.” Instead, Dreamstime assured the district court that it was
asserting a “straightforward monopoly maintenance”—i.e., one-market—claim.
When the district court suggested that Dreamstime’s best strategy could be to
pursue a two-market leveraging claim that included the market for searching online
images, Dreamstime expressly disavowed that it was pursuing such a theory.
After this hearing, the district court granted Dreamstime leave to amend its
original complaint in response to the arguments raised in Google’s original motion
to dismiss and discussed at the hearing, which Dreamstime elected to do. In its
FAC, Dreamstime again asserted that the relevant market for its Section 2 claim
was the “online search advertising market.” But, as in the original complaint, the
FAC mentioned both the online search and the online stock photo markets in
13 detail. The question then remained whether Dreamstime was pursuing a single-
market claim based on the online search advertising market alone, or whether it
was now pursuing a two-market claim that included the online search market.
As a result, at the hearing on Google’s motion to dismiss the FAC, the
district court once again asked Dreamstime to clarify the relevant market for its
Section 2 claim. Dreamstime responded, “[t]he relevant market we have defined in
the complaint has always been the online search advertising market.” The district
court would again ask Dreamstime what the relevant market was for its Section 2
claim. Dreamstime responded that “the restraint is taking place on Google’s search
-- online search advertising website. That’s the market.” This answer prompted
the district court again to ask whether the relevant market included the online
search market “for images.” Dreamstime responded again that the market was
only “online search advertising.” The district court ended the hearing by seeking
to eliminate any doubt whatsoever on the relevant market, asking Dreamstime as
follows: “Tell me again – I have to bring it to a close . . . Tell me very specifically
what is the market that you allege.” Dreamstime responded, “[t]he online search
advertising market.”
The district court gave Dreamstime ample opportunity to clarify the relevant
market for its Section 2 claim. The district court issued a “Request to Plaintiff for
Clarification” after the hearing. Among other things, the district court explained in
14 this request that it understood Dreamstime to have “forsworn any reliance” on two
theories: (1) that “Google leveraged its position in the market for online search
advertising to reduce competition in the market of online stock photography,” and
(2) that “Google engaged in predatory acts to monopolize the online search
advertising market in a specific attempt to destroy Dreamstime as a future potential
competitor in that market.” In addition, the district court asked Dreamstime’s
counsel to explain if it thought “online search advertising” meant anything other
than “sponsored ads featured on search engines.”
Dreamstime responded “yes” to the district court’s first request and clarified
that “Dreamstime [was] not asserting a separate” two-market leveraging claim. As
to whether it had forsworn the second theory, Dreamstime said it was alleging that
Google monopolized the “online search advertising relevant market” but
Dreamstime clarified that it foreswore the theory that Dreamstime was “a future
potential or actual direct competitor” to Google in that market. Finally,
Dreamstime affirmed that it “defined the relevant market (or submarket) in this
case for antitrust purposes as online search advertising” which included sponsored
ads that appear within search results as well as photo ads.
B
The record is clear: Dreamstime refused expressly and repeatedly to include
the online search market within its definition of the relevant market for its Section
15 2 claim before the district court. It is not our role to resuscitate claims that the
parties expressly disavowed below. The responsibility for framing the case lies
with the parties. United States v. Sineneng-Smith, 140 S. Ct. 1575, 1579 (2020)
(“[I]n both civil and criminal cases, in the first instance and on appeal ..., we rely
on the parties to frame the issues for decision and assign to courts the role of
neutral arbiter of matters the parties present.”). We will not consider
Dreamstime’s claim on appeal that the district court erred by not considering the
online search market. In re Mortg. Elec. Registration Sys., Inc. v. Amer. Home
Mortgage, 754 F.3d 772, 780 (9th Cir. 2014) (“[A]rguments not raised in the
district court will not be considered for the first time on appeal.”); see also USA
Petroleum Co. v. Atl. Richfield Co., 13 F.3d 1276, 1286 (9th Cir. 1994)
(considering an antitrust theory waived that plaintiff “recognized was available but
expressly chose not to pursue” because that would impermissibly allow a “second
bite at the apple”). We review this case on the basis that Dreamstime litigated it.
We proceed on the understanding that the relevant market for Dreamstime’s
Section 2 claim is the online search advertising market.
We now consider whether the district court properly concluded that
Dreamstime failed to allege anticompetitive conduct in the online search
advertising market. Dreamstime expressly disclaimed any intent to compete with
16 Google in the online search advertising market. Instead, Dreamstime’s theory is
that Google undertook anticompetitive conduct to damage Dreamstime’s online
image business to maintain Google’s monopoly in the online search advertising
market, which thereby harmed Dreamstime as an online search advertising
consumer. In its FAC, Dreamstime alleged that Google committed eight acts that
(individually and taken as a whole) harmed competition in the online search
advertising market. Those acts are as follows: (1) rigging the Google Ads bidding
process; (2) demoting Dreamstime’s organic search results on Google; (3) favoring
Google’s stock photo contractual partners, Shutterstock and Getty Images; (4)
selectively enforcing the Google Ads rules and terms; (5) elevating inferior stock
photo websites above Dreamstime in search results; (6) suspending Dreamstime’s
mobile application; (7) misappropriating Dreamstime’s licensed photos and
showing them on Google Images; and (8) unlawfully capturing data from users and
advertisers. For the reasons set forth below, we hold that the district court did not
err in concluding that the alleged actions (individually and taken together) did not
harm competition in the online search advertising market.
Four of the anticompetitive behaviors alleged by Dreamstime relate to
purported mistreatment of Dreamstime as a Google customer: (1) rigging the
advertisement auction bidding, (2) selectively enforcing its terms and rules, (3)
17 removing Dreamstime’s mobile application, and (4) favoring contractual stock
photo partners over Dreamstime and smaller stock photo websites. These
allegations fall short of alleging anticompetitive conduct in the online search
advertising market. Google harming one of its own online search advertising
customers does not exclude its competitors in the online search advertising market,
i.e., Yahoo! and Bing. Harm to a single customer does not, by itself, constitute
“harm [to] the competitive process” that “thereby harm[s] consumers” as a whole.
Fed. Trade Comm’n v. Qualcomm Inc., 969 F.3d 974, 987 (9th Cir. 2020)
(emphasis added). Indeed, Google’s alleged mistreatment of customers may lead
harmed customers, such as Dreamstime, to spend more on paid search
opportunities with Google’s competitors. These allegations do not constitute
anticompetitive conduct.
Dreamstime counters that Google’s “rigged” policies and “selective
enforcement” of policies on Google Ads “spawns monopoly pricing.” This
allegation also misses the mark. Merely possessing monopoly power and charging
monopoly prices—without accompanying anticompetitive conduct—is not enough
to state a claim under Section 2. Trinko, 540 U.S. at 407. This is because the
“opportunity to charge monopoly prices” is a feature, not a bug, of the free market
system, according to the Supreme Court. Id.
18 Likewise, the fact that Google entered into partnerships with Dreamstime’s
competitors in the online stock photo market, or that it allegedly favored those
contractual partners, is not anticompetitive conduct under Section 2.7 The
Sherman Act aims to “preserve the right of freedom to trade,” and it does not
infringe upon a company’s right “freely to exercise [its] own independent
discretion as to parties with whom [it] will deal.” United States v. Colgate & Co.,
250 U.S. 300, 307 (1919). Section 2 does not require Google to enter into a
partnership with Dreamstime like the one it has with Shutterstock and Getty
Images.
In sum, these allegations have, at most, alleged that Google mistreated
Dreamstime as a Google customer. They have not shown, as they must to sustain a
Section 2 claim, that this mistreatment harmed competition in the online search
advertising market. There was no antitrust injury. See Brunswick Corp. v. Pueblo
Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).
Next, three of the alleged anticompetitive behaviors relate to Dreamstime’s
performance in Google’s unpaid, organic search results: (1) demoting
Dreamstime’s organic search results on Google; (2) elevating inferior stock photo
7 Such agreements could potentially be considered unlawful “restraint[s] of trade,” under Section 1 of the Sherman Act, see generally 15 U.S.C. § 1, but Dreamstime did not assert a Section 1 claim.
19 websites above Dreamstime in search results; and (3) misappropriating
Dreamstime’s licensed photos and showing them on Google Images. Dreamstime
has similarly asserted, in its briefing before us, that Google “self-preferenced”
Google Images in its search results by giving Google Images a unique, static
placement at the top of all searches on its website (which includes organic search
results and paid search results). Accepting these allegations as true, as we must for
purposes of a motion under Rule 12(b)(6), these allegations could be taken to show
harm to Dreamstime in the online search market for images. However,
Dreamstime disavowed any reliance on the theory that Google is harming
competition in the online search market for images.
Focusing instead on the online search advertising market, these allegations
do not plausibly state a claim for anticompetitive conduct. Dreamstime contends
that Google prevented online search advertising companies from accessing
Dreamstime’s stock images for use in advertisements in two different ways. First,
by preferencing in Google search results the suppliers of stock images with which
Google has a partnership, and second, by thwarting Google users’ ability to access
Dreamstime’s stock images. But Dreamstime has not plausibly alleged that its
diminished performance in Google’s search results has inhibited other online
search advertisers from accessing stock images from anyone other than
Dreamstime. Nor, as the district court noted, has Dreamstime alleged that Google
20 bars its stock image partners from contracting with other online search advertisers.
We agree with the district court that none of these alleged anticompetitive acts
plausibly suggests that Google harmed competition in the online search advertising
market.
C
Dreamstime also contends that Google “unlawfully captur[ed] data from
users and advertisers.” This allegation also does not state anticompetitive
behavior. Collecting user data, on its own, is not unlawful under the Sherman Act.
That is because, standing alone, it is an example of a company using a competitive
advantage gained from “establishing an infrastructure that renders them uniquely
suited to serve [its] customers,” Trinko, 540 U.S. at 407, or from “a consequence of
a superior product,” Grinnell, 384 U.S. at 571, neither of which is anticompetitive.
We agree with the district court that Dreamstime did not plausibly allege how
Google’s data collection techniques are improper or unlawful, and its conclusory
statements to this effect in its pleadings are inadequate to state a claim. Ashcroft v.
Iqbal, 556 U.S. 662, 678–80 (2009).
D
Dreamstime’s final argument is that the district court erred by not assessing
the anticompetitive effect of Google’s predatory acts taken together as an overall
scheme. The Supreme Court has instructed courts to give plaintiffs in antitrust
21 actions “the full benefit of their proof without tightly compartmentalizing” each
individual allegation, because the character and effect of an antitrust injury should
not “be judged by dismembering it and viewing its separate parts, but only by
looking at it as a whole.” Cont. Ore Co. v. Union Carbide & Carbon Corp., 370
U.S. 690, 699 (1962). Giving Dreamstime “the full benefit of [its] proof,”
however, does not save its Section 2 claim here. As we have reasoned, “there can
be no synergistic result” from “a number of acts none of which show causal
antitrust injury” to the plaintiff. Cal. Computer Prods., 613 F.2d at 746. That
principle is dispositive here. Because each individual action alleged by
Dreamstime does not rise to anticompetitive conduct in the relevant market, their
collective sum likewise does not.
Dreamstime’s theory under the “inextricably intertwined” doctrine falls
short for a similar reason. This doctrine stems from the Supreme Court’s decision
in Blue Shield v. McCready, 457 U.S. 465 (1982). In McCready, the Court
recognized that an antitrust plaintiff that does not compete with a defendant can
still recover for injuries that are “inextricably intertwined” with the “injury the
conspirators sought to inflict” on competitors in the relevant market. Id. at 484.
Here, Dreamstime insists that the injuries it has suffered are “inextricably
intertwined” with Google’s maintenance of its online search advertising monopoly.
But Dreamstime’s issue is not its failure to properly allege that its business
22 suffered; the fatal flaw is that it has not carried its burden of plausibly alleging
anticompetitive conduct in the online search advertising market. Whatever injuries
Dreamstime may have itself suffered, Dreamstime is missing the necessary harm to
competition in the relevant market with which Dreamstime’s injuries are
“inextricably intertwined.” Lacking that critical element, Dreamstime’s Section 2
claim was properly dismissed.
E
Dreamstime expressly tied its Section 2 claim to the online search
advertising market. It did not identify any actions by Google that tended to harm
competition in that market. We conclude that the district court properly dismissed
its Section 2 claim.
IV
Finally, we address whether the district court erred in dismissing
Dreamstime’s Section 2 claim with prejudice. Dreamstime argues that it did and
asks that we remand with instructions to permit amendment.
We review a district court’s decision to dismiss a claim with prejudice for
abuse of discretion. Coal. to Defend Affirmative Action v. Brown, 674 F.3d 1128,
1133 (9th Cir. 2012). “[W]here the plaintiff has previously been granted leave to
amend and has subsequently failed to add the requisite particularity to its claims,
23 the district court’s discretion to deny leave to amend is particularly broad.”
Nguyen v. Endologix, Inc., 962 F.3d 405, 420 (9th Cir. 2020).
We hold that the district court did not abuse its discretion. The district court
repeatedly raised the issue of Dreamstime’s definition of the relevant market from
the outset. The district court gave Dreamstime several opportunities to address that
issue, including leave to file an amended complaint. In filing its FAC and in its
motion to dismiss briefing, Dreamstime expressly chose to maintain its theory of
the case and pursue a one-market, monopoly maintenance claim centered on the
online search advertising market, foregoing any reliance on the online search or
stock image markets. In light of this record, we cannot conclude that the district
court abused its “particularly broad” discretion in refusing Dreamstime yet another
opportunity to do what it repeatedly had declined to do.
CONCLUSION
For the foregoing reasons, we conclude that the district court did not err in
dismissing Dreamtime’s antitrust claim with prejudice.
AFFIRMED.