Concerted Actions

• Pages: 51-69

51

CHAPTER 3

CONCERTED ACTIONS

An agreement or conspiracy between or among co mpetitors with the

sole or principal effect of limiting competition among them along any

parameter—on price, terms, output, or product quality, either generally

or with respect to a specific customer—is subject to antitrust liability

under Section 1 of the Sherman Act.

1

Conspiracies among competitors to

fix prices, bids, output, or markets are considered “the supreme evil of

antitrust” and subject to both civil and criminal prosecution under

Section 1 of the Sherman Act.

2

This chapter provides an overview of

antitrust treatment of these types of agreements among competitors.

A. Agreements among Competitors Affecting Price

Section 1 of the Sherman Act

3

prohibits “[e]very contract,

combination in t he 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. Section 5 of the Federal T rade Commission Act

4

al so

prohibits these agreements as “unfair methods of competition.”

The Sherman Act prohibits not only explicit agreements, but also

informal agreements among competitors. However, mere parallel

conduct does not constitute an unlawful conspiracy.

5

“[T]here must be

direct or circumstantial evidence that reasonably tends to prove that [the

1

. 15 U.S.C. § 1.

2

. Verizon Comm. v. Law Offices of Curtis V. Trinko, LLP , 540 U.S. 398,

408 (2004); T homas O. Barnett, Ass’t Att’y Gen., Criminal Enforcement

of Antitrust Laws: The U.S. Model, Presented at the Fordham

Competition Law Institute’s Annual Conference on International

Antitrust Law & Policy (Sept. 14, 2006), available at

http://www.justice.gov/atr/public/speeches/218336.pdf.

3

. 15 U.S.C. § 1.

4

. 15 U.S.C. § 45.

5

. 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)).

52 Energy Antitrust Handbook

parties] had a conscious commitment to a common scheme designed to

achieve an unlawful objective.”

6

1.

Illegality Assessed under the Per Se Rule

Although some agreements require a detailed economic analysis to

determine their competitive consequences, naked 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

nervous system of the economy.”

7

Therefore, agreements among

competitors to raise, lower, stabilize, or otherwise set or determine prices

are per se unlawful.

8

Under this per se rule, agreements between

competitors to fix prices are conclusively presumed to be unlawful

without any inquiry into their competitive effects, the agreeing parties’

intent (except in criminal cases), or whether the prices agreed to were

“reasonable” or otherwise set at allegedly appropriate levels.

In its most blatant and obvious form, price fixing is an agreement

setting the price of a product t hat two or more independent companies

otherwise would sell in competition with each other. Price fixing has

long been broadly defined, however, to include any agreement that has

the effect of “raising, depressing, fixing, pegging, or stabilizing the

price.”

9

With deregulation of the energy industry, price fixing and other

forms of collusion can occur: “[w]hile firms under regulation may be

used to coordinated pricing and tactics that restrict entry, such practices

may be illegal under competition. Firms in recently deregulated

industries may be especially susceptible to relapses into problematic

6

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

also Borough of Lansdale v. PP&L, Inc., 426 F. Supp. 2d 264, 276 (E.D.

Pa. 2 006) (hold ing 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).

7

. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 224-26 n.59

(1940).

8

. Id.

9

. Id. at 223.