Antitrust and Unfair Competition Law

Competition: Spring 2014, Vol. 23, No. 1

Content

THE MISAPPLICATION OF MATSUSHITA’S HEIGHTENED SUMMARY JUDGMENT STANDARD

By Ara Jabagchourian*

I. Introduction

The courts have long recognized that horizontal collusion in the marketplace creates a significant risk of harm to competition. Anticompetitive conduct in the form of price collusion, market division, bid-rigging, or output restriction is treated under the per se rule because of the likelihood such conduct will result in higher prices or diminished product quality. Despite these harmful consequences on the economy and consumer welfare, proof of collusion under antitrust law faces a number of hurdles. Some of those hurdles have been created by appellate decisions that have wrongly interpreted Matsushita as raising the standard to prove that an economically sensible and anticompetitive conspiracy took place.

Courts have held that direct evidence alone, such as admissions by a defendant or a document, may establish an agreement.1 Without either a confession or a Federal Bureau of Investigation hidden camera videotaping a meeting where the rivals agree to set prices or divide the market, however, plaintiffs must rely on circumstantial evidence to prove an agreement.2 Courts have recognized that "[o]nly rarely will there be direct evidence of an express agreement" in a conspiracy case,3 and have found that circumstantial evidence of informal and even tacit understandings may suffice to establish a violation of Section 1.4 A reliance on circumstantial evidence complicates the question of how much circumstantial evidence and of what nature is necessary to overcome a defendant’s motion for summary judgment.

The core tension that arises in attempting to answer that question exists between the economic theory of interdependence or conscious parallelism in an oligopolistic market and the standards set forth under federal procedural law. For instance, does Rule 56 of the Federal Rules of Civil Procedure allow a judge to grant summary judgment when the antitrust theory is implausible, even though it is supported by circumstantial facts, or does Rule 56 merely require raising a genuine issue of material fact through circumstantial evidence and thus the plausibility issue is reserved for argument before the jury? Or is this a false dichotomy, requiring a third alternative?

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Courts have addressed these questions by developing rules for the types of evidence required to prove collusion. Under these rules, circumstantial evidence of parallel conduct, such as closely timed price increases, cannot alone prove an agreement.5

"’Conscious parallelism’ describes ‘the process, not in itself unlawful, by which firms in a concentrated market might in effect share monopoly power, setting their prices at a profit-maximizing supracompetitive level by recognizing their shared economic interests and their interdependence with respect to price and output decisions.’"6 As Areeda and Hovenkamp explain, when "[e]ach firm’s pricing decision is interdependent with that of its rivals[,] each knows that its choice will affect the others, who are likely to respond, and that their responses will affect the profitability of each actor’s initial choice."7 Thus, "because of their mutual awareness, oligopolists’ decisions may be interdependent although arrived at independently."8

Therefore, "a plaintiff must prove more than that the defendants acted in parallel; it must prove that they did so pursuant to an agreement."9 To prove an agreement, "a plaintiff must show additional circumstances—often referred to as ‘plus factors’ — which, when viewed in conjunction with the parallel conduct, would permit a fact-finder to infer a conspiracy."10 "Evidence of [] plus factors tends to ensure that courts punish ‘concerted action’—an actual agreement—instead of the ‘unilateral, independent conduct of competitors.’"11

Those "plus factors" must "tend[] to exclude the possibility of independent action by the [parties]."12 "That is, there must be . . . circumstantial evidence that reasonably tends to prove that [the parties] had a conscious commitment to a common scheme."13 Courts and commentators agree "[t]here is no finite set of [plus factors]; no exhaustive list exists."14 Nonetheless, Areeda and Hovenkamp assert, the Supreme Court’s decision in Bell Atlantic Corp. v. Twombly15 "made clear that if proof of agreement rests on the existence of plus factors, at least a sufficient number of them must be pled to raise an inference of conspiracy."16

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Thus, when determining whether to grant a defendant’s motion for summary judgment, courts evaluate plaintiff’s alleged "plus factors" to determine whether they "tend to exclude" the possibility of independent action by the alleged conspirator. This test already inserts a judge into the typical province of the jury: evaluating the inferences that should be drawn from circumstantial evidence.

In Matsushita, the Supreme Court added another task for the district court judge: evaluating whether plaintiff’s collusion claim is plausible. The Court framed the issue this way: "if the factual context renders respondents’ claim implausible — if the claim is one that simply makes no economic sense — respondents must come forward with more persuasive evidence to support their claim than would otherwise be necessary."17

This article seeks to explore how courts have applied — or misapplied — Matsushita’s mandate. Two circuits in particular — the third and the eighth — have misapplied Matsushita’s standard to limit the inferences that can be drawn when an economically sensible and manifestly anticompetitive conspiracy is alleged. A proper understanding of Matsushita has become even more important now that the Supreme Court has required that for an antitrust claim to survive a motion to dismiss, a plaintiff must present "only enough facts to state a claim to relief that is plausible on its face (emphasis supplied)" in order to survive a motion to dismiss.18 This article will discuss how other courts and a leading antitrust commentator have criticized the misuse of Matsushita. Secondarily, the article will touch upon the "tend to exclude" analysis and how such an analysis may be too stringently applied in the summary judgment phase, especially when courts apply Matsushita’s heightened standard to economically sensible conspiracies. Finally, the article will assess the ramifications associated with imposing a heightened standard to prove economically sensible and anticompetitive conspiracies.

II. Rule 56, Matsushita and the Implausible Conspiracy

Under Federal Rules of Civil Procedure 56 ("Rule 56"), courts may grant summary judgment only if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."19 There is a genuine dispute about a material fact "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party."20 In the context of an antitrust claim, a genuine dispute as to a material fact may be about the plausibility of allegedly anticompetitive behavior,21 whether that conduct had an anticompetitive effect,22 or whether there is a causal relation between the behavior and injury.23 For the most part, prior to 1986, antitrust cases were treated no differently in regards to analysis under Rule 56 than any other case.24

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Matsushita Electric Ind. Co., Ltd. v. Zenith Radio Corp. laid the groundwork for a heightened standard for a particular type of antitrust case in the summary judgment context.25 The core issue in the case was centered on the proper summary judgment analysis regarding a predatory pricing conspiracy. The case was brought by two American consumer electronics (primarily televisions) companies against 21 Japanese based consumer electronics manufacturers.26 The plaintiffs brought forth several conspiracy claims under Section 1 of the Sherman Act as well as monopolization claims under Section 2 of the Sherman Act and Section 2 under the Robinson-Patman Act.27 The plaintiffs’ key allegation was that the defendants had entered into a conspiracy for over 20 years to cut prices on electronics in the United States to drive out the American manufacturers.28 The District Court granted summary judgment for defendants, reasoning that the evidence of "the alleged price-cutting conspiracy did not rebut the more plausible inference that petitioners were cutting prices to compete in the American market and not to monopolize it."29

The Court of Appeals for the Third Circuit reversed.30 Based on the oligopolistic market structure, coordinated agreements through Japan’s Ministry of International Trade and Industry, as well as other factors, the "Court of Appeal concluded that a reasonable factfinder could find a conspiracy to depress prices in the American market . . ."31

The Supreme Court took up a limited review on the issue of whether the Court of Appeal applied the proper standards in evaluating the District Court’s decision on summary judgment.32 The Court framed the issue this way: "if the factual context renders respondents’ claim implausible—if the claim is one that simply makes no economic sense—respondents must come forward with more persuasive evidence to support their claim than would otherwise be necessary."33

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In taking on the issue, the Matsushita Court acknowledged that on summary judgment, the inferences should be drawn in favor of the non-moving party.34 However, the Court pointed out that "antitrust law limits the range of permissible inferences from ambiguous evidence in a § 1 case."35 The basis of the statement is two-fold. First, as referenced above, the theory must make economic sense.36 If it does not, then the respondents must put forth more persuasive evidence than normally required in a Section 1 case that makes economic sense. Second, under Section 1 of the Sherman Act, an agreement to conspire can arise explicitly or tacitly. Likewise, proving that an agreement exists can be shown through either direct or circumstantial evidence. In most situations, the evidence is purely circumstantial. Where conduct is as consistent with permissible competition as with an illegal conspiracy, the conduct "standing alone," will not support an inference of antitrust conspiracy.37 Thus, in a circumstantial case, the plaintiff must present evidence "that tends to exclude the possibility" that the alleged conspirators acted independently.38 This is to increase the likelihood that the conduct was actually pursuant to an agreement rather than merely conscious parallelism.

The Court then turned to the allegation in the case, a "predatory pricing conspiracy."39 The Court explored the academic literature regarding predatory pricing by a single firm. It delved into then-Professor Robert Bork’s analysis of predatory pricing.40 As discussed in his book, The Antitrust Paradox, Bork maintained that for a rational business to enter into a predatory pricing scheme, it must believe that the losses it incurs in selling below cost will be exceeded by monopoly profits to be gained in the future.41 As a consequence of the nature of a predatory pricing scheme, "the success of such schemes is inherently uncertain."42 This is because the short-run loss is definite, but the long-term gain depends on the ability to keep out competitors.43 To supplement Bork’s thoughts, the Court relied on then-Professor Easterbrook’s observation that ‘[t]he success of any predatory scheme depends on maintaining monopoly power for long enough both to recoup the predator’s losses and to harvest some additional gain."44 Citing Easterbrook, the Court pointed out that "[a]bsent some assurance that the hoped-for monopoly will materialize, and that it can be sustained for a significant period of time, ‘[t]he predator must make a substantial investment with no assurance that it will pay off.’"45

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Based on these observations, the Court concluded there is a consensus "that predatory pricing schemes are rarely tried, and even more rarely successful."46 The Court then explained that plaintiff’s allegations in Matsushita were even more unlikely than predatory pricing by a single firm, because having a large number of firms conspiring to charge below-cost pricing "is incalculably more difficult to execute than an analogous plan undertaken by a single predator."47 If done jointly, conspirators must allocate losses to be sustained and must allocate any gains "realized from its success."48 All of this must be done under the risk that any of the co-conspirators and the plaintiffs could cheat— the classic "prisoner’s dilemma." If the supply of all of the consumer electronics sold at the predatory price does not satisfy the market demand for those products, then the petitioners and the cheating co-conspirators can continue to sell at the "real" market price.49

The Court went further in supporting its holding that the predatory pricing conspiracy was unlikely to occur. It noted that although the conspiracy was allegedly operating over two decades, the petitioners were far from their goal of monopolizing the relevant markets.50 Rather, the two American companies held the two largest shares of the retail television market.51 In addition, the combined market share of these two companies in the relevant market was 40%, which did not appreciably decline during the 1970s.52 Finally, despite the fact that petitioners’ market share rose rapidly from under 20% to 50% of the relevant market, the Court believed that this was insufficient to constitute monopoly power.53

The Court concluded that based on its holding in Monsanto, factfinders should not be permitted "to infer conspiracies when such inferences are implausible, because the effect of such practices is often to deter procompetitive conduct."54 Since cutting prices in order to increase business is the essence of competition, mistaken inferences can be "especially costly, because they chill the very conduct the antitrust laws are designed to protect."55 Furthermore, "predatory pricing conspiracies [are] self-deterring: unlike most other conduct that violates the antitrust laws, failed predatory pricing schemes are costly to the conspirators."56 The Court therefore held that "there is little reason to be concerned that by granting summary judgment in cases where the evidence of conspiracy is speculative or ambiguous, courts will encourage such conspiracies."57

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III. The Application of Matsushita to Plausible Conspiracies

Commentators almost universally have deemed the predatory pricing conspiracy alleged in Matsushita improbable, and the Court noted that the potential for price cutting to be procompetitive, not anticompetitive, conduct provided an additional justification for requiring greater evidence than usual to survive a defendant’s summary judgment motion. Nonetheless, some circuits have applied the Matsushita standard in matters where the alleged conspiracy was economically sensible and, if implemented, would be clearly anticompetitive.58 A careful look will be taken at two cases that have followed this path.

A. Blomkest and Conscious Parallelism

The Eighth Circuit Court of Appeals explicitly stated that it applied the standards set forth in Matsushita "broadly" in Blomkest Fertilizer, Inc. v. Potash of Saskatchewan.59 Blomkest was an en banc review of a grant of summary judgment to defendant related to an alleged price fixing conspiracy in the potash market.60 An agreement to form an antitrust conspiracy under Section 1 can be established either by direct evidence or by inference.61 The claim brought forth by the plaintiffs was based on a theory of conscious parallelism, supported by circumstantial, rather than direct, evidence of a conspiracy.62

In order to establish an agreement under Section 1 from conscious parallelism, that is requiring an inference that an illegal agreement to conspire exists, the plaintiff must establish the existence of "plus factors."63 A plus factor means "the additional facts or factors required to be proved as a prerequisite to finding that parallel [price] action amounts to a conspiracy."64 Examples of "plus factors" include: high level of communications by competitors,65 actions against economic self-interest,66 motivation to enter into a price fixing conspiracy,67 a pattern of uniform conduct,68 and no economic justification for the conduct.69 There is no finite set of plus factors.70 "Although our caselaw has identified some specific plus factors . . . any showing by [a plaintiff] that tend[s] to exclude the possibility of independent action can qualify as a plus factor."71 Furthermore, such plus factors should be not be viewed in a vacuum, but rather in toto against the entire backdrop in which the conduct took place.72 Ultimately, the plus factor requirement exists to assist courts in distinguishing between independent conduct and an agreement.

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The Blomkest court began its analysis on the wrong foot. First of all, a conspiracy to raise price in an industry that has had historically low prices is economically sensible. Second, if such a conspiracy to raise prices was implemented, then there would be anticompetitive impact on consumers in the form of higher prices. The application of Matsushita’s heightened standard requires the factual context of the claim to be implausible.73 If, and only if, the claim is economically implausible, then more persuasive evidence to support the claim is necessary.74 As a result of the Blomkest court mistakenly asserting Matsushita’s heightened standard to an economically sensible conspiracy, it also was overly skeptical of the "plus factor" evidence put forth by the claimant.

The Blomkest court delved into an analysis of the alleged plus factors.75 The first plus factor reviewed was the alleged interfirm communications. The court began by stating that plaintiffs’ evidence was "far too ambiguous to support" an inference of conspiracy76 Plaintiffs put forth evidence of three dozen price verifications between the competitors’ employees, "including high-level sales employees of different companies" over a seven year period.77 These communications involved the verification of prices the companies had already charged.78 The plaintiffs’ class argued that "large and parallel price increases" combined with "simultaneous price verifications" created a conspiracy inference sufficient to survive summary judgment."79 Plaintiffs also pointed out that, when the alleged conspiracy began, the price was at historic lows and the producers were losing millions of dollars.80 Then, one producer of potash had a sudden and dramatic increase in the price of potash in one day.81 A week later, the remaining potash producers all increased their prices accordingly.82

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The Blomkest court held that these facts were not sufficient to overcome defendant’s summary judgment motion.83 The court concluded that, because the price verifications only dealt with past prices, not future prices, such communications had no "impact on price increases."84 "'[T]o survive summary judgment, there must be evidence that the exchanges of information had an impact on pricing decisions.’"85 The court concluded that there "is no evidence here that price increases resulted from any price verification" and therefore could not support a conspiracy for the setting of a broad market price.86

The court went further in its analysis by assuming that the price verification evidence was relevant in establishing a tacit agreement between the competitors.87 In this case, the United States potash companies complained to the United States Department of Commerce that the Canadian producers were dumping potash well-below market value.88 The Department of Commerce made a preliminary determination that they were in fact dumping and required expensive bonds for all imports.89 The Canadian industry leader hired new management and began the process of privatization from the Canadian government.90 Once privatized, the industry leader significantly reduced production output.91 Further, the potash producers reached a Suspension Agreement with the Department of Commerce that set price floors for potash.92 With these facts, the court posited that "it would have been ridiculous for the remaining companies not to also raise their prices in parallel fashion."93 The court deemed any evidence that exchanges of information had an impact on pricing decisions to be purely speculative.94

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The second "plus factor" the Blomkest court assessed was action taken against self-interest. Plaintiffs argued that the uniform participation of the Suspension Agreement was against some of the participants’ self-interest.95 This is because those producers with low dumping margins could have undercut other producers’ prices and gained market share while still maintaining prices at profitable levels.96 The court however found that the Department of Commerce’s investigation was unpredictable and participation in the Suspension Agreement reduced uncertainty.97 The low tariff producers would also have to "post substantial bonds which would have caused considerable capital drain."98 The Suspension Agreement provided certainty and a higher price in the United States potash market, all of which benefited the defendants.99 The court ultimately concluded that plaintiffs failed to raise a genuine issue of material fact to overcome the summary judgment motion.

Since the Blomkest court believed it was required to apply Matsushita’s heightened standard, it required more evidence to support the claim of a conspiracy. By being overly skeptical about the evidence put forth by the claimant, the court made judgments about the alleged conspirators’ business justifications. By doing so, the court necessarily weighed the evidence of the parties to determine liability as a matter of law. Additionally, the practical impact such a heightened standard places on the antitrust practitioner is also daunting. As Judge John R. Gibson stated in his dissent in Blomkest:

Because conspirators cannot be relied upon either to confess or to preserve signed agreements memorializing their conspiracies, the court’s requirement for direct evidence will substantially eliminate antitrust conspiracy as a ground for recovery in our circuit.100

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This was just the type of case that the Poller court warned about in making such assessments at the summary judgment stage and the usurpation of the role of the jury.101 At the end, the jury may have believed the alleged conspirators’ justifications for the behavior, but those decisions are to be left to the jury.

B. In re Baby Food and Information Exchange

In Baby Food, the Third Circuit Court of Appeals dealt with an allegation of price fixing in the baby food market.102 The core allegation was that the three defendants, in a highly concentrated market, exchanged information with each other regarding future price increases before announcing such increases to the public.103 As in Blomkest, the Baby Food court set forth the law related to both direct evidence and circumstantial evidence related to agreements in Section 1 cases.104 Additionally, the court noted that it is well established that price-fixing cases are deemed to be a per se violation of Section 1.105 "However, when the evidence consists of mere exchanges of information the presumption vanishes."106 Information exchanges are not deemed illegal per se because there are some instances where information exchanges "increase economic efficiency," causing markets to be more competitive.107 Given this, the court held that a "rule of reason" analysis was warranted in this case.108

The court apparently did not take into account that information exchanges may be circumstantial evidence from which a conspiracy may be inferred. Contacts that involve the sharing of competitively sensitive information are evidence of an agreement to share that information. That agreement may be challenged as a stand-alone unreasonable restraint of trade, subject to analysis under the rule of reason.109 In addition, however, the exchange of competitively sensitive information may be circumstantial evidence that, in combination with other evidence, supports an inference of an agreement to fix prices.110

In this case, the court first rejected plaintiff’s claim that there was direct evidence of a price-fixing conspiracy.111 The basis for this denial was that "the evidence evinces only an exchange of information among the defendants."112 This statement is astounding in the context of the direct evidence that was presented to the court. The direct evidence cited by the plaintiffs in the case was multi-faceted. They relied on deposition testimony of a former Heinz salesman and a former Heinz district manager. These two individuals testified that they shared future price information with Beech-Nut and Gerber before any public announcements were made, that they learned about when their competitors were going to make price changes before it was announced to the public, and that these exchanges occurred between sales representatives on a regular basis.113 Two Presidents of Beech-Nut testified at their respective depositions that it was company policy for sales representatives to obtain and report pricing information of their competitors.114

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There was also a "competitive price change and activity report" sent to Gerber’s Regional Manager from Gerber’s New York Division Manager with an attached unsigned report from Beech-Nut regarding an upcoming price increase.115 Gerber admitted having the document nearly a month before Beech-Nut’s announcement.116 Beech-Nut obtained advance notice of Gerber’s price and had that information in a memorandum labeled "HIGHLY CONFIDENTIAL" at least one week before Gerber announced the price increase.117 An internal Beech-Nut email set forth a detailed discussion between Beech-Nut’s District manager and an employee of Gerber which stated that Beech-Nut would not be taking "a price increase at this time."118 A handwritten note on the Gerber e-mail printout stated "Keep me advised on any price increases by competition! We will be in a world of hurt if Heinz/BeechNut does not increase.’"119

In addition, there was evidence of an internal Heinz communication discussing how the retailers only wanted to stock Gerber and only one other baby food brand and this two-tier stocking structure in retail was becoming the trend. In that same communication, it was noted that the Heinz area manager told a retailer that it would "make every effort to secure a majority base of distribution."120 But the Heinz area manager, in his correspondence to his superior also said that "[h]owever, with our ‘truce’ in effect, I knew our hands were tied."121

The court then turned to the circumstantial evidence in weighing the conspiracy claim supported by circumstantial evidence. First, the court pointed out that if the plaintiffs establish conscious parallel pricing and supplemented the evidence with "plus factors," a rebuttable presumption of conspiracy arises.122 Plaintiffs’ evidence consisted of statistical analysis by an expert, much of the evidence supported their direct evidence case, and a statement in Beech-Nut’s Long Term Plan stated "Gerber will accept the price leadership of Beech-Nut and will accept price increases as a means of improving profitability."123

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Second, the court set forth the Rule 56 standard for summary judgment. It explained that summary judgment is granted when "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."124 The court notes that "in the context of an antitrust case, the nonmoving party’s burden ‘is no different than any other case.’"125 Summary judgment should be granted only when "’after drawing all reasonable inferences from the underlying facts in the light most favorable to the nonmoving party, the court concludes that there is no genuine issue of material fact to be resolved at trial.’"126 However, the court stated that "reasonable inferences in the context of an antitrust case . . . [are] somewhat different from cases in other branches of the law."127 "The acceptable inferences which we can draw from circumstantial evidence vary with the plausibility of the plaintiffs’ theory and the danger associated with such inferences."128

With that framework, the court began to discount each piece of evidence brought forth by the plaintiffs. It should be first noted that the court never decided the issue of plausibility of the plaintiff’s theory. The court held that the information exchanges between the companies were with lower level employees, which was not sufficient to support a claim because the employees had no pricing authority.129 Furthermore, despite setting forth a document indicating that there was a "truce" amongst the competitors, the court believed that competition was still fierce between the market participants and the term was ambiguous.130 The court also noted that the plaintiffs were not able to show parallel pricing behavior, but rather only demonstrated that Gerber, Heinz and BeechNut made similar pricing decisions 15.5% of the time during the period of the alleged conspiracy.131 The court ultimately held that the evidence established that defendants acted independently of one another in their marketing activities.132

Just as in Blomkest, the Baby Food court started its analysis incorrectly. The theory brought forth by plaintiffs was an economically sensible price fixing conspiracy in a highly concentrated market. By assuming that Matsushita’s heightened standard applied, the court overly scrutinized evidence brought forth by the plaintiff. This required the court to interpret what "truce" meant and whether the information exchanges actually correlated with actual price moves in the market. Again, at the end of the day, the jury may have sided with the baby food manufacturers, but that decision is to be made by a jury, and not through summary judgment.

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IV. Recognizing the Limits Of Matsushita

Despite application of the heightened standard to traditional horizontal conspiracy cases such as Blomkest, Baby Food and others,133 many circuit courts have limited its application to only cases where the underlying theory is implausible. In fact, several cases have recognized the misapplication of Matsushita to typical horizontal collusion cases such as price-fixing.

A. Judge Posner and Economically Sensible Conspiracies

One such case was In re High Fructose Corn Syrup Antitrust Litigation.134 In reviewing the grant of summary judgment in an alleged price-fixing case between manufacturers of high fructose corn syrup, Chief Judge Richard Posner looked at the law related to proving a Section 1 case based on circumstantial evidence.135 The court stated that in order to provide sufficient evidence in order to overcome summary judgment on a Section 1 case, the plaintiff "must present evidence that would enable a reasonable jury to reject the hypothesis that the defendants foreswore price competition without actually agreeing to do so."136

The court then indicated that "[m]ore evidence is required the less plausible the charge of collusive conduct."137 The court acknowledged that the basis for this proposition is that in Matsushita, the underlying claim of conspiratorial predatory pricing "was implausible for a variety of reasons."138 However, the court distinguished the case before it from Matsushita.

But the charge in this case involves no implausibility. The charge is of a garden-variety price-fixing conspiracy orchestrated by a firm, ADM, conceded to have fixed process on related products (lysine and citric acid) during a period overlapping the period of the alleged conspiracy to fix the prices of HFCS.139

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The court then stated that the proper analysis is whether the evidence before it, taken as a whole, is sufficient to defeat summary judgment.140

Furthermore, the court explored the distinction made between a direct evidence case and a circumstantial case. The court indicated that such distinctions, as set out in Baby Food was not only confusing, but also "entirely superfluous."141 As explained by the court, direct evidence is "tantamount to an acknowledgment of guilt" where circumstantial evidence "is everything else including ambiguous statements."142 Circumstantial cases are "not to be disregarded because of their ambiguity; most cases are constructed out of a tissue of such statements and other circumstantial evidence, since an outright confession will ordinarily obviate the need for trial."143 Ultimately, the grant of summary judgment was reversed and the matter was remanded so it could be heard before a jury for trial.144

In an earlier matter, Chief Judge Posner looked at a horizontal action by both manufacturers and wholesalers to deny retailers discounts on brand named drugs.145 In reviewing a judgment as a matter of law at the close of plaintiff’s case-in-chief on liability, the court of appeal looked to the economic evidence brought forth to support their theory. Citing Matsushita, the court noted that the standard required of the plaintiff is that economic evidence be presented to demonstrate "that the hypothesis of collusive action was more plausible than that of individual action."146 What was key here, in contrast to Blomkest and Baby Food, was that this standard did not require plaintiff to "exclude all possibility that the manufacturers’ price discrimination was unilateral rather than collusive."147 The court held that requiring the plaintiff to meet such a burden would mandate that it exceed the burden of preponderance of the evidence and even reasonable doubt for criminal matters. The burden to have to eliminate every possibility of unilateral conduct would require plaintiff to meet the burden of "100 percent certainty, since any lesser degree of certitude would leave a possibility that the defendant was innocent."148 Based on the appellate court’s analysis, the matter was vacated and remanded in part, sending the matter back to the trial court.149

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B. In re Flat Glass and The Varying Inference

Another case that was critical of the use of Matsushita’s heightened standard in economically sensible Section 1 cases was In re Flat Glass Antitrust Litigation.150 This case involved an action brought by purchasers of flat and automotive replacement glass alleging price-fixing in these products.151 The court framed the issue of the case right from the start.

This case addresses the recurring question of what quantity and quality of evidence suffices to create a genuine issue of material fact as to one particular element of a claim under Section 1 of the Sherman Act: whether a defendant entered into an unlawful agreement.152

The court launched into a discussion regarding restraints of trade that are deemed per se unreasonable. The court indicated that a per se case is one that is "’manifestly anticompetitive’ or ‘would always or almost always tend to restrict competition.’"153 Given that effects of certain conduct lack any legitimate business justification, per se restraints are "’conclusively presumed to be unreasonable restraint[s] [on] competition.’"154 If the conduct is per se illegal, plaintiff only has to show the existence of a conspiracy and that the conduct was a proximate cause of the injury.155

The court then indicated that the same summary judgment principles apply when faced with whether a plaintiff has offered sufficient proof of an agreement as it would in other contexts. This includes the principle that "the court must ‘view the facts and any reasonable inferences drawn therefrom in the light most favorable to the party opposing summary judgment.’"156 However, as set out by the Supreme Court in Monsanto, the court acknowledged that there are certain limits regarding permissible inferences from ambiguous evidence in antitrust cases.157

In the Petruzzi case, the Third Circuit explored "’exactly what inferences are circumscribed in a section 1 case.’"158 There, the court identified "’two important circumstances underlying the reme Court’s decision in Matsushita.’"159 The two factors were (1) the conspiracy was implausible; and (2) if held illegal, it "would have the effect of deterring significant procompetitive conduct."160 Thus, the court held that acceptable inferences to be drawn from a circumstantial evidence "’vary with the plausibility of the plaintiffs’ theory and the dangers associated with such an inference.’"161

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The In re Flat Glass court then conducted a quick review of a couple of cases. As it regarded Matsushita, the court noted that courts and commentators regard predatory pricing as a "relatively speculative phenomenon, particularly when its success requires collusion among multiple firms."162 Furthermore, the court noted that inferences arising from firms engaged in predatory pricing scheme are generally weak because the conduct "largely mirrors how firms in a competitive market act: by cutting prices."163

In contrast, the court noted that the conspiracy alleged in Petruzzi’s was "’not implausible,’" but "rather it made ‘perfect economic sense.’"164 Given this, "’more liberal inferences from the evidence should be permitted than in Matsushita because the attendant dangers from drawing inferences recognized in Matsushita are not present.’"165

The In re Flat Glass court then turned its attention to not only other circuit decisions, but also decisions rendered in its very own, the Third Circuit. The court noted that "despite the absence of the Matsushita Court’s concerns, this Court and others have been cautious in accepting inferences from circumstantial evidence in cases involving allegations of horizontal price-fixing among oligopolists."166 The court believed that the reason why the courts were so circumspect in those cases was because of the theory of "interdependence."167

The court explained the theory of interdependence in terms of comparing a concentrated market to what economists have called a "perfect market." In a perfect market, defined as having numerous firms in the market, one’s price and output decisions would be "’so diffuse’" that competitors would not take notice of the change.168 On the other hand, in a highly concentrated market, a single firm’s price or output decisions "’will have a noticeable impact on the market and its rivals.’"169 Given that an oligopolist’s behavior will be noticed by its rivals, "’any rational decision must take into account the anticipated reaction of the other [] firms.’"170 Under the theory of interdependence, rivals in a concentrated market can maintain supracompetitive price levels "without engaging in any overt concerted action."171

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Given that oligopolists may maintain prices of their goods at supracompetitive levels in a "conscious parallel" fashion, the Sherman Act does not prohibit it.172 The reason for this is two-fold and arises out of the line of scholarship in the field.173 First interdependent behavior is not an "agreement" under the Sherman Act.174 Second, "judicial remedies are incapable of addressing the anticompetitive effects of conscious parallel pricing."175

Based on this, where there is a claim of collusion based on conscious parallel behavior, certain "plus factors" must be shown.176 The purpose of having such plus factors is to punish concerted action which is based on an actual agreement rather than unilateral conduct of rivals.177 Ultimately, the court went through an analysis and upheld the district court’s grant of summary judgment as it related to automotive replacement glass, but reversed the grant of summary judgment as it related to price-fixing of flat glass.178

C. In re Publication Paper and the "Tends To Exclude" Standard

In a recent case out of the Second Circuit, the court was faced with a review of summary judgment granted to several manufacturers of various grades of paper used in publications.179 In this matter, a certified class of direct purchasers of publication paper claimed that two foreign based manufacturers had conspired to fix prices on three occasions and reduce supply of publication paper.180 The district court granted summary judgment to the defendants, holding that there was no direct evidence of an agreement and that plaintiffs’ evidence did not "’exclude the possibility’" of independent action.181

The court began its analysis setting forth the rules and function of summary judgment. First the court noted that summary judgment is to be "affirm[ed] only" when construing the evidence in the light most favorable to the non-moving party "’there is no genuine dispute as to any material fact.’"182 "’By avoiding wasteful trials and preventing lengthy litigation that may have a chilling effect on pro-competitive market forces, summary judgment serves a vital function in the area of antitrust law.’"183 However, "summary judgment is not a substitute for trial."184 Where the evidence allows for competing permissible inferences regarding whether plaintiff is entitled to relief, "’the question of what weight should be assigned to [those] inferences remains within the province of the fact-finder at a trial."185

[Page 195]

The reviewing court next turned its attention to the district court’s application of Matsushita in granting summary judgment. While citing extensively to Matsushita, the district court acknowledged that while "’the evidence as a whole arguably could support an inference of illegal collusive behavior,’ [it concluded] that plaintiffs ‘failed to offer sufficient evidence to dispel the possibility’ that [an alleged conspirator] acted independently."186

The reviewing court turned its attention to the Matsushita’s requirement that the moving party demonstrate evidence that "tends to exclude the possibility" that the alleged coconspirators acted independently.187 The Court noted that although Matsushita limits the range of permissible inferences that can be drawn from ambiguous evidence, "the range of inferences that may be draw[n] from such evidence depends on the plausibility of the plaintiff’s theory."188 "[W]hen the conspiracy is economically sensible for the alleged conspirators to undertake" and the conduct cannot be deemed procompetitive, "broader inferences are permitted, and the ‘tends to exclude’ standard is more easily satisfied."189

The appellate court questioned the district court’s requirement that plaintiffs "exclude" or "dispel" the possibility that the defendants acted independently. "Requiring a plaintiff to ‘exclude’ or ‘dispel’ the possibility of independent action places too heavy a burden on the plaintiff."190 Quoting Professors Areeda and Hovenkamp, the court noted that:

It is important not to be misled by Matsushita’s statement . . . that the plaintiff’s evidence, if it is to prevail, must "tend . . .to exclude the possibility that the alleged conspirators acted independently." The Court surely did not mean that the plaintiff must disprove all nonconspiratorial explanations for the defendants’ conduct. Not only did the court use the word "tend" but the context made clear that the Court was simply requiring sufficient evidence to allow a reasonable fact finder to infer that the conspiratorial explanation is more likely than not.191

[Page 196]

The court further held that "the standards established in Matsushita do not apply at all when a plaintiff has produced unambiguous evidence of an agreement to fix prices."192 The court noted that the Third, Ninth and Eleventh Circuits have also held that summary judgment is generally not appropriate where a plaintiff has produced direct evidence of an agreement to fix prices.193

Based on the evidence, the court vacated and remanded in part and affirmed in part the ruling on summary judgment. As it related to the one defendant that was remanded back to the district court, the appellate court held that "[i]n sum, unlike Matsushita, the record in this case presents strong, if not irrefutable, evidence of a conspiracy in a context where the conspiracy’s goals were aligned with the conspirators’ economic interests."194

D. Hovenkamp and The Unfortunate Misinterpretation

Herbert Hovenkamp, one of the preeminent scholars in the field of antitrust law, has stated that the application of a heightened standard "is the result of an unfortunate misinterpretation of Matsushita."195 In his article reviewing Judge Richard Posner’s book, Antitrust Law, Hovenkamp looks to the approach and application the judge has taken in regards to Matsushita.196 He pointed out that despite the work done by Phillip Areeda in the mid-1980s regarding a more behavioral approach to the problem of non-explicit collusive behavior, the courts have "not moved far from the traditional position requiring a . . . common law ‘agreement.’"197

Hovenkamp believes that this continued trend requiring a showing of more traditional common law agreement in establishing an unlawful agreement under Section 1 has arisen out of a misinterpretation of Matsushita.198 Even though Matsushita was a case regarding the "quantum and quality of evidence of collusion" in relation to summary judgment, some courts have interpreted this case as "requiring a certain quantum of evidence of verbal agreement before summary judgment can be avoided."199 However, Matsushita only required that the evidence be of such type to support collusion as a likely explanation of the conduct.200 Just as the cases discussed above, Hovenkamp believes that Matsushita’s heightened standard should not be applied to horizontal collusion cases such as price-fixing and market division.

[Page 197]

V. Ramifications Resulting From The Heightened Standard

Herbert Hovenkamp euphemistically stated that the heightened standard arose out of an "unfortunate misinterpretation." By shining a light on this understatement, it can be said that the application of the heightened standard to traditional horizontal collusion cases is an injustice on many levels. From a legal interpretative standpoint, to read Matsushita "broadly," as done in Blomkest, is to divorce the basis of the heightened standard from its application. Matsushita clearly set out that the heightened test is to be applied only (1) where the theory is implausible and (2) where prohibiting the conduct may stifle procompetitive behavior.

Applying a heightened standard to traditional economically sensible horizontal cases further undermines the division between the role of the judge and the role of the jury in antitrust matters. By improperly applying Matsushita to what the Supreme Court has identified as "the supreme evil of antitrust,"201 the judge now places herself in the shoes of the jury. Application of the heightened standard in alleged economically sensible conspiracies requires a judge to assess the qualitative weight (and possibly the credibility) of the evidence, where such judgments are to be reserved for jury of the parties’ peers. The application of a heightened standard in economically sensible conspiracies not only undermines and circumvents Rule 56 of the Federal Rules of Civil Procedure, it also circumvents the Seventh Amendment of the United States Constitution.

On an evidentiary level, the burden shifting that has been applied in some cases at the summary judgment level required the judge to improperly weigh credibility. The "plus factors" test is used to establish a prima facie case when there is parallel pricing, which helps prove a likelihood that the parallel pricing was as a result of a conspiracy.202 Part of this burden is to provide evidence "’that tends to exclude the possibility’ that the alleged conspirators acted independently."203 A significant problem arises when the courts entertain the alleged conspirators’ reasons or rationalizations for the conduct as being procompetitive or innocuous. For instance, in Blomkest, the court relied on the defendants "point[ing] out" evidence.204 Based on this the Blomkest court held that the "class has thus failed to carry its burden to rebut the producers’s (sic) independent business justification for their actions."205 Although defendants are clearly entitled to put forth evidence of procompetitive justifications for their conduct, summary judgment requires that the court look to the evidence in the light most favorable to the non-moving party, drawing all reasonable inferences in its favor.

Where Matsushita is misapplied by requiring greater scrutiny on the "tends to exclude" standard, much more credence is provided to moving party’s business justifications for the conduct at the summary judgment stage. Alleged conspirators can be counted on to raise all sorts of business justifications to explain their conduct, some real and some imagined. These may include the "belief" that costs would rise or the anticipation that competitors were going to raise their prices. Obviously, contemporaneous documents immediately preceding such conduct would have more weight to a fact finder than an after-the-fact statement made at a deposition. However, both pieces of evidence, under a summary judgment analysis would need to be evaluated equally—meaning without weighing its credibility. By requiring a heightened standard related to the "tends to exclude" standard and by allowing an evaluation at summary judgment of the alleged conspirators’ business justification, plaintiff has lost the ability it would have at trial to challenge the veracity of such evidence. Therefore, under a summary judgment analysis, allowing the business justification to shift the burden back to the plaintiff will result in an unduly large number of summary judgments being granted.

[Page 198]

The fact of the matter is that most cases regarding antitrust conspiracies are based on circumstantial evidence. Although there are some cases that arise out of an entity that seeks leniency or amnesty through the Department of Justice’s Corporate Leniency Policy, absent a confession and cooperation of one of the competitors, the government, competitor or the consumer must look to piece together evidence of an unlawful agreement on top of the conspirators’ conduct.206 Such is the case in many traditional fraud cases that are based on a conspiracy.

Since the issue of conscious parallelism by definition arises in oligopolistic markets, it is likely that the companies in these markets are well counseled in the laws of direct evidence. Rather than creating a smoking gun email or written memorandum, conspirators hold meetings where people only communicate verbally. Leaving no trail is the marching order, and given the high penalties and possible jail time, destruction of evidence is not implausible.

From an impact level, requiring a heightened standard may have reduced the minimal deterrent effect the antitrust laws have in the business world.207 Treble damages and criminal penalties208 are available in antitrust cases not only to punish anyone violating the Sherman Act, but to serve as a deterrent to prospective conduct.209 If the hurdle to the application of such penalties is heightened, the limited deterrent force of such punishments is further diminished.

[Page 199]

VI. Conclusion

The heightened standard in Matsushita was established as a method to cull out an implausible predatory pricing conspiracy prior to trial. This heightened standard unfortunately bled into the analysis applied to more traditional antitrust conspiracies, such as price-fixing or bid-rigging. These economically sensible antitrust conspiracies have long been recognized as conduct that is: (1) detrimental to competition, (2) not implausible, and (3) not a deterrent to pro-competitive conduct when enforced under the law. Going forward, the hope is that courts will recognize the distinction between an implausible Section 1 theory which requires a heightened standard, from the economically sensible conspiracy cases. By making this distinction from the onset, the courts will better serve the parties by clearly setting forth the standards and burdens they face in having to establish or defend a Section 1 case. Furthermore, by separating the type of Section 1 case and its associated standard, courts will be more apt to follow the strictures of Rule 56 in not having to entertain evidence that may be less than credible at the summary judgment stage, allowing the parties to have their evidence evaluated by a jury when warranted under the law.

[Page 200]

——–

Notes:

*. Ara Jabagchourian is a partner at Cotchett, Pitre & McCarthy LLP’s Burlingame, California office. The author wants to sincerely thank Susan DeSanti for her insightful comments and owes her a tremendous debt of gratitude.

1. Courts have reasoned that, because direct evidence typically does not require inferences, it may suffice to prove an agreement. See, e.g., In re High Fructose Corn Syrup Antitrust Litigation, 295 F.3d 651, 654 (7th Cir. 2002)(Posner, J.) [hereinafter In re High Fructose Corn Syrup]; In re Baby Food Antitrust Litigation, 166 F.3d 112, 118 (3d Cir. 1999) [hereafter Baby Food].

2. In re Text Messaging Antitrust Litigation, 630 F.3d 622, 628 (7th Cir. 2010) (Posner, J.) (citing numerous cases), cert. denied, 131 S. Ct. 2165 (2011)[hereinafter In re Text Messaging].

3. Local Union No. 189, Amalgamated Meat Cutters v. Jewel Tea Co., 381 U.S. 676, 720 (1965); see also ABA Section Of Antitrust Law, Antitrust Law Developments (7th ed. 2012) at 6 & n. 36 [hereinafter Antitrust Law Developments (7th ed.)].

4. American Tobacco Co. v. United States, 328 U.S. 781, 810 (1946). See also Antitrust Law Development (7th ed.) at 3-4.

5. Theatre Enterprises v. Paramount Film Distributing Corp., 346 U.S. 537, 541 (1954).

6. In re Publication Paper Antitrust Litigation, 690 F. 3d 51, 62 (2d Cir. 2012)[hereinafter In re Publication Paper], quoting Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 227 (1993).

7. Phillip Areeda and Herbert Hovenkamp, Antitrust Law §1410b (2012) (emphasis in original).

8. Id. § 1429 (emphasis supplied). For example, then-Judge Breyer explained that individual decisions to follow a price leader do not constitute an unlawful agreement on price, "even when each firm rests its own decision on its belief that its competitors will do the same." Clamp-All Corp. v. Cast Iron Soil Pipe Institute, 851 F.2d 478, 483 (1st Cir. 1988). He pointed out this "is not because such pricing is desirable (it is not), but because it is close to impossible to devise a judicially enforceable remedy for "interdependent" pricing. How does one order a firm to set its prices without regard to the likely reactions of its competitors?" Id.

9. Antitrust Law Development (7th ed.) at 9, citing Theatre Enterprises v. Paramount Film Distributing Corp., 346 U.S. 537 (1954).

10. In re Publication Paper, 690 F.3d at 62.

11. In re Flat Glass Antitrust Litigation, 385 F.3d 350, 360 (3d Cir. 2004) [hereinafter In re Flat Glass].

12. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 768 (1984) [hereinafter Monsanto]. See also American Tobacco, 328 U.S. at 810 (defining agreement as "a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement").

13. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 768 (1984) [hereinafter Monsanto]. See also American Tobacco, 328 U.S. at 810 (defining agreement as "a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement").

14. In re Flat Glass, 385 F. 3d at 360. See also Areeda & Hovenkamp, Antitrust Law § 1434a, n. 1 (2012).

15. 550 U.S. 544 (2007).

16. Areeda & Hovenkamp, Antitrust Law § 1434a.

17. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

18. Bell Atlantic Corp. v Twombly, 550 U.S. 544, 570 (2007). Commentators have construed Twombly as "extend[ing] Matsushita’s plausibility screen backwards to the pleading stage." Gavil, et al., Antitrust Law In Perspective at 280.

19. Fed.R.Civ.Proc. 56.

20. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

21. Norfolk Monument Co. v. Woodlawn Memorial Gardens, Inc., 394 U.S. 700 (1969).

22. White Motor Co. v. United States, 372 U.S. 253, 83 S. Ct. 696 (1963).

23. 54 Am. Jur. 2d Monopolies and Restraints of Trade § 488.

24. Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473 (1962)(hereinafter Poller) (in reversing a grant of summary judgment, the Supreme Court held that "summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot. It is only when witnesses are present and subject to cross-examination that their credibility and the weight to be given their testimony can be appraised.")

25. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 (1986).

26. Id. at 577.

27. Id. at 578.

28. Ibid.

29. Id. at 579.

30. Id. at 580.

31. Id. at 581.

32. Id. at 582.

33. Id. at 583.

34. Id. at 587-588.

35. Id. at 588.

36. Id. at 587.

37. Ibid.; citing Monsanto Co. v. Spray-Rite Services Corp., 465 U.S. 752, 764 (1984).

38. Ibid.; citing Monsanto, 465 U.S. at 764.

39. Matsushita Elect. Industrial Co., 475 U.S. at 588-595.

40. Id. at 589.

41. Id. at 589, citing Robert Bork, The Antitrust Paradox, p.145 (1978). The Court also cited to John S. McGee, Predatory Pricing Revisited, 23 J. Law & Econ. 289, 295-297 (1980).

42. Id. at 589. See also Brooke Group, Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 226 (1993)

43. Ibid.

44. Matsushita, 475 U.S. at 588.

45. Ibid., quoting Frank Easterbrook, Predatory Strategies and Counterstrategies, 48 U. Chi. L. Rev. 263, 268 (1981).

46. Matsushita, 475 U.S. at 589. The Court cites other commentators, including Phillip Areeda, Donald Turner, Roland H. Koller, and John S. McGee.

47. Id. at 590.

48. Ibid.

49. Ibid.

50. Id. at 591.

51. Ibid.

52. Ibid.

53. Ibid.

54. Ibid. at 593; citing Monsanto, 465 U.S. at 762-764.

55. Id. at 594. "[W]e must be concerned lest a rule or precedent that authorizes a search for a particular type of undesirable pricing behavior end up by discouraging legitimate price competition." Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 234 (1st Cir. 1983).

56. Id. at 595; citing Easterbrook, The Limits of Antitrust, 63 Texas L. Rev. 1, 26 (1984).

57. Ibid.

58. Herbert Hovenkamp argues that this trend exists in the Supreme Court, citing to both Matsushita and Bell Atl. Corp. v Twombly, 550 U.S. 544 (2007). Hovenkamp, The Federal Trade Commission and the Sherman Act, Fla. L. Rev., Vol. 62. 1, 10 (2010).

59. Blomkest Fertilizer, Inc. v. Potash of Saskatchewan, 203 F.3d 1028, 1032 (8th Cir. 2000).

60. Id. at 1031.

61. American Tobacco, 328 U.S. at 809-810.

62. "Conscious parallelism" is the process "’not in itself unlawful, by which firms in a concentrated market might in effect share monopoly power, setting their prices at a profit-maximizing, supracompetitive level by recognizing their shared economic interests.’" Blomkest, 203 F.3d at 1032; quoting Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 227 (1993).

63. Blomkest, 203 F.3d at 1033; citing Baby Food, 166 F.3d at 122.

64. Ibid., quoting Baby Food, 166 F.3d at 122.

65. In re Plywood Antitrust Litigation, 655 F.2d 627, 633-34 (5th Cir. 1981).

66. Petruzzi’s IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224, 1243-45 (3d. Cir. 1993).

67. Id. at 1242; Baby Food, 166 F.3d at 122.

68. Interstate Circuit, Inc. v. United States, 306 U.S. 208 (1939).

69. American Tobacco, 328 U.S. 781.

70. In re Flat Glass, 385 F.3d 350, 360 (3rd Cir. 2004)

71. Williamson Oil Co. v. Phillip Morris USA, 346 F.3d 1287, 1301 (11th Cir. 2003).

72. Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699 (1962).

73. Matsushita, 475 U.S. at 587.

74. Ibid.

75. Blomkest, 203 F.3d at 1033-1038.

76. Ibid.

77. Ibid.

78. Ibid.

79. Id. at 1034.

80. Id. at 1033-1034.

81. Id. at 1034.

82. Ibid.

83. Ibid.

84. Ibid.

85. Ibid; quoting Baby Food, 166 F.3d at 125.

86. Ibid.

87. Ibid.

88. Ibid.

89. Ibid.

90. Ibid.

91. Ibid.

92. Ibid.

93. Ibid. The author notes that it would have been quite rational to not raise prices in parallel fashion of a fungible commodity such as potash in order to garner the competitive advantage associated with lower prices which would have driven up the price-cutter’s (or non-price-follower’s) market share. This is especially true if the underlying costs associated with the production of potash had not changed. The court’s analysis did take a serious look to see if the market participants met the minimum market price set by agreement with the Department of Commerce, or whether they exceeded it. Such a fact would also have been relevant in determining whether there was in fact a horizontal agreement to raise prices. This argument was raised and rejected by the court. Blomkest, 203 F.3d at 1037. See also Blomkest, 203 F.3d at 1039 (J. Gibson dissenting) (citing to evidence of an internal memorandum from one of the potash companies’ president of sales which indicated that the industry would not be able to end the price war without "joint action").

94. Id. at 1035.

95. Id. at 1037.

96. Ibid.

97. Ibid.

98. Ibid.

99. Ibid.

100. Blomkest, 203 F.3d at 1039 (J. Gibson dissenting).

101. Poller, 368 U.S. at 473.

102. Baby Food, 166 F.3d 112 (3rd Cir. 1999).

103. Baby Food, 166 F.3d at 117.

104. Id. at 117-118, 121.

105. Id. at 118. Per se violation are the type of restraints that are themselves considered unreasonable because of "their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable." Northern Pacific Railway v. United States, 356 U.S. 1, 5 (1958).

106. Baby Food, 166 F.3d at 118; citing United States v. United States Gypsum Co., 438 U.S. 422, 441 n. 16 (1978).

107. Ibid.; quoting Gypsum, at 441 n. 16.

108. Ibid.

109. Gavil et al., Antitrust Law In Perspective, at 297.

110. Gavil et al., Antitrust Law In Perspective, at 297 (two categories of information exchange include "cases in which the agreement to share information is itself challenged as a stand-alone unreasonable restraint of trade," and "cases in which the express information sharing agreement provides a basis for inferring an illicit agreement to fix prices").

111. Id. at 119-121.

112. Ibid.

113. Id. at 118-119.

114. Id. at 119.

115. Ibid.

116. Ibid.

117. Ibid.

118. Id. at 120.

119. Ibid.

120. Ibid.

121. Ibid.

122. Id. at 122; citing Todorov v. DCH Healthcare Authority, 921 F.2d 1438, 1456 n. 30 (11th Cir. 1991).

123. Id. at 123.

124. Fed.R.Civ.P. 56(c).

125. Id. at 124; quoting Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1363 (3d. Cir. 1992).

126. Ibid.; quoting Petruzzi’s, 998 F.2d at 1232.

127. Ibid.

128. Ibid.; citing Petruzzi’s, 998 F.2d at 1232.

129. Id. at 125.

130. Id. at 126-127.

131. Id. at 128.

132. Id. at 135-136, 137-138.

133. See also Williamson Oil Co. v. Philip Morris USA, R.J., 346 F.3d 1287, 1300-1301 (11th Cir., 2003) (wholesalers alleging price-fixing by tobacco companies scrutinized under heightened summary judgment standard); Clamp-All Corp. v. Cast Iron Soil Pipe Institute, 851 F.2d 478, 484 (1st Cir. 1988) (upholding summary judgment based on alleged restraint of trade related to standard-setting activities); Apex Oil Co. v. DiMauro, 822 F.2d 246; 253-54 (2d. Cir. 1987) (finding insufficient evidence to support conspiracy claim related to heating oil futures).

134. In re High Fructose Corn Syrup Antitrust Litigation, 295 F.3d 651 (7th Cir. 2002).

135. Id. at 661-666.

136. Id. at 661; citing Matsushita, 475 U.S. at 588.

137. Ibid.

138. Ibid.

139. Ibid.

140. Ibid

141. Id. at 661-662.

142. Id. at 662.

143. Ibid.

144. Id. at 666.

145. In re Brand Name Prescription Drugs Antitrust Litigation, 186 F.3d 781 (7th Cir. 1999).

146. Id. at 787; citing Matsushita, 475 U.S. at 587-588; City of Tuscaloosa v. Harcros Chemicals, Inc., 158 F.3d 548, 571-72 (11th Cir. 1998).

147. Ibid.

148. Ibid.

149. Id. at 790.

150. In re Flat Glass Antitrust Litigation, 385 F.3d 350 (3d Cir. 2004).

151. Id. at 353.

152. Id. at 352.

153. Id. at 356; quoting Rossi v. Standard Roofing, Inc., 156 F.3d 452, 461 (3d Cir. 1998).

154. Ibid.; quoting Rossi, 156 F.3d at 461.

155. Ibid.; citing InterVest Inc. v. Bloomberg L.P., 340 F.3d 144, 159 (3d Cir. 2003)

156. Id. at 357; quoting InterVest, 340 F.3d at 160.

157. Ibid.

158. Ibid., citing Petruzzi’s, 998 F.2d 1224 (3d. Cir. 1993)

159. Ibid.; Petruzzi’s, 998 F.2d at 1232.

160. Petruzzi’s, 998 F.2d at 1232; quoting In re Petroleum Prods. Antitrust Litig., 906 F.2d 432, 439 (9th Cir. 1990).

161. Flat Glass, 385 F.3d at 357; quoting Petruzzi’s, 998 F.2d at 1232.

162. Id. at 358, citing Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 226-27 (1993).

163. Ibid.; citing Matsushita, 475 U.S. at 594.

164. Ibid.; quoting Petruzzi’s; 998 F.2d at 1232.

165. Ibid.; quoting Petruzzi’s, 998 F.2d at 1232.

166. Ibid.; citing Williamson Oil Co. v. Philip Morris USA, R.J., 346 F.3d 1287, 1300-01 (11th Cir. 2003); Blomkest, 203 F.3d at 1042-43; Baby Food Antitrust, 166 F.3d at 121-22; Clamp-all Corp. v. Cast Iron Soil Pipe Institute, 851 F.2d 478, 484 (1st Cir. 1988); Apex Oil Co. v. DiMauro, 822 F.2d 246, 253-54 (2d Cir. 1987).

167. Id. at 359.

168. Ibid.; quoting Philip Areeda & Herbert Hovenkamp, Antitrust Law, ¶ 1429, at 206 (2nd ed. 2000).

169. Ibid.; quoting Areeda & Hovenkamp, Antitrust Law, ¶ 1429 at 206.

170. Ibid.; quoting Areeda & Hovenkamp, Antitrust Law, ¶ 1429 at 207.

171. Ibid.

172. Id. at 359-360.

173. Id. at 360.

174. Ibid.; citing Donald F. Turner, The Definition of Agreement Under the Sherman Act: Conscious Parallelism and Refusals to Deal, 75 Harv.L.Rev. 655, 663-65 (1962).

175. Ibid.; citing Turner, The Definition of Agreement Under the Sherman Act: Conscious Parallelism and Refusals to Deal, 75 Harv.L.Rev. at 669-71, Areeda, Antitrust Law, supra, ¶¶ 1432d5-1432f, at 232-36.

176. Ibid.

177. Ibid.

178. Id. at 378.

179. In re Publication Paper, 690 F.3d at 55.

180. Ibid.

181. Id. at 60.

182. Id. at 61, quoting Fed.R.Civ.P. 56(a).

183. Ibid.; quoting Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d 90, 95 (2d Cir. 1998).

184. Ibid.; citing Apex Oil Co. v. DiMauro, 822 F.2d 246, 252 (2d Cir. 1987).

185. Ibid.; quoting Apex Oil, 822 F.2d at 253.

186. Id. at 62; quoting Publication Paper, 2010 WL 5253364, at *9, *13.

187. Id. at 62-64.

188. Id. at 63, citing Matsushita, 475 U.S. at 588; Monsanto, 465 U.S. at 764; Apex Oil, 822 F.2d at 253.

189. Ibid.; citing Flat Glass, 385 F.3d at 358.

190. Ibid.

191. Ibid.; quoting Phillip E. Areeda & Herbert Hovenkamp, Fundamentals of Antitrust Law, §14.03(b) at 14-25 (4th ed. 2011)

192. Ibid. (emphasis in the original).

193. Id. at 63-64; citing Williamson Oil Co., Inc. v. Philip Morris USA, 346 F.3d 1287, 1300 (11th Cir. 2003); Petruzzi’s, 998 F.2d at 1233; In re Coordinated Pretrial Proceedings in Petroleum Prods Antitrust Litig., 906 F.2d 432, 441 (9th Cir. 1990).

194. Id. at 65.

195. Herbert Hovenkamp, The Rationalization of Antitrust, 116 Harv. L. Rev. 917, 925 (2003).

196. Id. at 925-926.

197. Id. at 925.

198. Ibid.

199. Ibid.

200. Ibid.; citing, Matsushita, 475 U.S. at 587-88.

201. Verizon Communs. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 408 (2004).

202. Blomkest, 203. F.3d at 1043.

203. Matsushita, 475 U.S. at 588, quoting Monsanto, 465 U.S. at 764.

204. Blomkest, 203 F.3d at 1037.

205. Ibid.; citing Laurel Sand & Gravel, Inc. v. CSX Transp. Inc., 924 F.2d 539, 543 (4th Cir. 1991).

206. U.S. DEP’T OF JUSTICE, CORPROATE LENIENCY POLICY, 4 Trade Reg. Rep. (CCH) ¶ 13, 113, ¶ A (August 10, 1993).

207. See John S. Thompson and David L. Kaserman, After the Fall: Stock Price Movements and the Deterrent Effect of Antitrust Enforcement, Review of Industrial Organization, Vol. 19, 329-334 (2001); see also Alla Golub, Joshua Detre, and John M. Connor, The Profitability of Price Fixing: Have Stronger Antitrust Sanctions Deterred?, International Industrial Organization Conference 3, Atlanta, Georgia, April 8-9, 2005, also found at http://ssrn.com/abstract=1188515.

208. 15 U.S.C.§1 ("any combination or conspiracy hereby declared illegal shall be deemed guilty of a felony, and on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or if any other person, $1,000,000, or by imprisonment not exceeding 10 years.")

209. Joseph C. Gallo, Kenneth G. Dau-Schmidt, Joseph L. Craycraft and Charles J. Parker, Criminal Penalties Under the Sherman Act: A Study of Law and Economics, Research in Law and Economics, Vol. 16, 25, 59 (1994) (concluding that "to date the level of criminal penalties imposed has not, by itself, provided adequate deterrence against antitrust offenses.")

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