Chapter VII. Pricing Issues

• Pages: 163-172

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CHAPTER VII

PRICING ISSUES

A. Agreements Among Competitors Affecting Price

Section 1 of the Sherman Act

1

prohibits “[e]very contract,

combination in the form of trust or otherwise, or conspiracy, in restraint

of trade or commerce among the several States, or with foreign nations.”

In other words, Section 1 prohibits agreements that unreasonably restrain

competition. These agreements also are prohibited under Section 5 of

the FTC Act

2

as “unfair methods of competition.”

The Sherman Act prohibits not only explicit agreements, but also

tacit agreements among competitors. However, mere parallel conduct

does not constitute an unlawful conspiracy.

3

“[T]here must be direct or

circumstantial evidence that reasonably tends to prove that [the parties]

had a conscious commitment to a common scheme designed to achieve

an unlawful objective.”

4

1. Illegality Assessed under the Per Se Rule

While some agreements require a detailed economic analysis to

determine their competitive consequences, agreements among

competitors to restrain price competition have long been illegal per se—

that is, these agreements are deemed illegal without an assessment of the

economic consequences of the agreement.

The Supreme Court has emphasized that restrictions on free and

open price competition pose an “actual or potential threat to the central

1. 15 U.S.C. § 1.

2. 15 U.S.C. § 45.

3. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554 (2007) (citing Theatre

Enters. v. Paramount Film Distrib. Corp., 346 U.S. 537, 540-41 (1954)).

4. Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 768 (1984); see

also Borough of Lansdale v. PP&L, Inc., 4 26 F. Supp. 2d 264, 276 (E.D.

Pa. 2006) (holding that unlawful horizontal agreements require a “unity

of purpose or a common design and understanding or a meeting of minds

or a conscious commitment to a common scheme”) (internal quotation

marks omitted).