Chapter IV. Restraints of Trade

Pages195-244
195
CHAPTER IV
RESTRAINTS OF TRADE
A. Introduction
This chapter examines the implications of Section 1 of the Sherman
Act for actors in the telecommunications industry. Section 1 makes
illegal “[e]very contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce.”1 Despite its broad
language, the Act does not prohibit every restraint of trade, but rather
prohibits only unreasonable restraints of trade.2 As the Supreme Court
noted in Chicago Board of Trade v. United States,3 “[e]very agreement
concerning trade, every regulation of trade, restrains. To bind, to restrain,
is of their very essence.”4 Such agreements are not necessarily illegal.
The Sherman Act only proscribes restraints of trade that are
anticompetitive. Furthermore, the object of the Sherman Act is to protect
competition, not competitors.5
1. Requirement of Contract, Combination, or Conspiracy
Unilateral actions are outside the scope of Section 1 and are
generally reserved for analysis under Section 2 of the Act.6 As the
language of Section 1 indicates, a reviewing court must first find
evidence of a contract, combination or conspiracy before finding a
violation.7
1. 15 U.S.C. § 1 (2006).
2. Standard Oil Co. v. United States, 221 U.S. 1 (1911).
3. 246 U.S. 231 (1918).
4. Id. at 238.
5. “The antitrust laws . . . were enacted for ‘the protection of competition,
not competitors.’” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429
U.S. 477, 488 (1977) (quoting Brown Shoe Co. v. United States, 370 U.S.
294, 320 (1962) (emphasis by court).
6. See Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 761 (1984).
7. Courts generally view the terms combination and conspiracy as
synonymous. See 6 PHILLIP AREEDA & HERBERT HOVENKAMP,
ANTITRUST LAW, ¶ 1403 (3d ed. 2010). All three terms are generally
considered synonymous with “agreement,” and require a “meeting of the
196 Telecom Antitrust Handbook
A conspiracy is a “conscious commitment to a common scheme
designed to achieve an unlawful objective.”8 Courts do not necessarily
require direct proof of an agreement to find that two companies have
engaged in a conspiracy or combination in restraint of trade. They can
infer a conspiracy or agreement from the conduct of the defendants.9 “A
§1 agreement may be found when ‘the conspirators had a unity of
purpose or a common design and understanding, or a meeting of minds
in an unlawful arrangement.’”10 If a company does not formally accept a
competitor’s invitation to restrain trade, but nevertheless acts as if a
formal arrangement is in place, a conspiracy may be found.11
2. Pleading Conspiracy
To state a claim under Section 1, plaintiffs must allege “enough
factual matter (taken as true) to suggest that an agreement was made.”12
In Bell Atlantic Corp. v. Twombly, the Supreme Court addressed “the
proper standard for pleading an antitrust conspiracy through allegations
of parallel conduct”13 under Fed. R. Civ. P. Rule 8(a) and held that an
allegation of parallel conduct, without more, cannot state a claim for
conspiracy.14 Instead, to state a Section 1 conspiracy claim, plaintiffs
must allege “some further factual enhancement” sufficient to “nudge[]
their claims across the line from conceivable to plausible.”15 The Court
explained: “Asking for plausible grounds to infer an
agreement . . . simply calls for enough fact to raise a reasonable
minds.” See Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752,
764 (1984).
8. Monsanto, 465 U.S. at 764.
9. See United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940);
Interstate Circuit, Inc. v. United States, 306 U.S. 208, 221 (1939)
(holding that “[i]n order to establish agreement,” the government can
“rely on inferences drawn from the course of conduct of the alleged
conspirators”).
10. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 771
(1984) (quoting American Tobacco Co. v. United States, 328 U.S. 781,
810 (1946)).
11. See Socony-Vacuum Oil, 310 U.S. at 150.
12. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007).
13. Id. at 553.
14. Id. at 556-57 (“Lawful parallel conduct fails to bespeak unlawful
agreement,” and a “conclusory allegation of agreement at some
unidentified point does not supply facts adequate to show illegality.”).
15. Id. at 557, 570.
Restraints of Trade 197
expectation that discovery will reveal evidence of illegal agreement.”16
This “plausibility” standard replaced the rule from Conley v. Gibson,17
which called for courts to dismiss cases only where a “plaintiff can prove
no set of facts in support of his claim which would entitle him to
relief.”18 The standard may permit dismissal of a claim even where the
factual allegations suggest a “possibility” the plaintiff would be entitled
to relief, if that possibility falls short of “plausibility.”19 But complaints
grounded on plausible allegations, “even if it strikes a savvy judge that
actual proof of those facts is improbable,” are not subject to dismissal.20
The Supreme Court clarified its new “plausibility” standard in
Ashcroft v. Iqbal.21 The Court explained that ascertaining whether a
complaint states a plausible claim for relief is a “context-specific task.”22
It invited lower courts to “begin by identifying pleadings that, because
they are no more than conclusions, are not entitled to the assumption of
truth,” and emphasized that “[w]hile legal conclusions can provide the
framework of a complaint, they must be supported by factual
allegations.”23 Properly alleged factual allegations must be accepted as
true by the court; and then, drawing on “judicial experience and common
sense,” the court must determine whether the claim is plausible.24
Twombly itself offered few specifics on exactly what types of
allegations suffice to render allegations of a Section 1 conspiracy
“plausible,” except in a footnote where it cited “several examples”
offered by “[c]ommentators [of] parallel conduct allegations that would
state a § 1 claim under this standard.”25 Those examples consisted of: (1)
“parallel behavior that would probably not result from chance,
coincidence, independent responses to common stimuli, or mere
16. Id. at 556.
17. 355 U.S. 41 (1957).
18. Twombly, 550 U.S. at 561, 563 (citing Conley, 355 U.S. at 45-46, and
finding that “[t]he [no set of facts] phrase is best forgotten as an
incomplete, negative gloss on an accepted pleading standard: once a
claim has been stated adequately, it may be supported by showing any set
of facts consistent with the allegations in the complaint.”).
19. See id. at 557 (distinguishing “between possibility and plausibility of
‘entitle[ment] to relief’”) (brackets in original).
20. Id. at 556.
21. 556 U.S. 662 (2009) (involving a civil claim against U.S. government
officials for prisoner abuse and discrimination).
22. Id. at 679.
23. Id.
24. Id. at 678-79.
25. Twombly, 550 U.S. at 556 n.4.

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