Direct Evidence of a Sherman act Agreement
| Author | William H. Page |
| Position | Marshall M. Criser Eminent Scholar, University of Florida Levin College of Law |
| Pages | 347-391 |
DIRECT EVIDENCE OF A SHERMAN ACT
AGREEMENT
W
ILLIAM
H. P
AGE
*
The Supreme Court once said, “[C]ircumstantial evidence is the lifeblood
of antitrust law.”
1
That was in a merger case, but the observation could also
apply to price-fixing litigation under Section 1 of the Sherman Act.
2
Claims of
price fixing and other per se violations of Section 1 usually turn on whether
circumstantial evidence proves that the defendants formed an agreement—the
“contract, combination . . . or conspiracy” the statute requires.
3
Motions for
summary judgment test the legal sufficiency of the plaintiffs’ evidence of
agreement.
4
Under Matsushita, courts resolving these motions usually rely on
a framework of “plus factors”
5
to evaluate whether the plaintiff’s circumstan-
tial evidence raises a plausible inference of agreement, one that “tends to ex-
clude the possibility”
6
the defendants were simply pricing interdependently, as
oligopolists typically (and lawfully) do.
7
Under Twombly, courts faced with
* Marshall M. Criser Eminent Scholar, University of Florida Levin College of Law. I thank
participants in my law school’s summer workshop for helpful comments on an earlier version of
this article.
1
United States v. Falstaff Brewing Corp., 410 U.S. 526, 534 n.13 (1973) (White, J.).
2
15 U.S.C. § 1. One of the cases Falstaff cited as authority for its “lifeblood” claim was
Interstate Circuit, Inc. v. United States, 306 U.S. 208, 221 (1939), a seminal case on proof of
agreement under Section 1 by circumstantial evidence.
3
See, e.g., Summit Health, Ltd. v. Pinhas, 500 U.S. 322, 330 (1991) (“[T]he essence of any
violation of § 1 is the illegal agreement itself—rather than the overt acts performed in further-
ance of it.”).
4
F
ED
. R. C
IV
. P. 56(a) (“The court shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.”).
5
See, e.g., Williamson Oil Co. v. Philip Morris USA, 346 F.3d 1287, 1301 (11th Cir. 2003)
(“[P]rice fixing plaintiffs must demonstrate the existence of ‘plus factors’ that remove their evi-
dence from the realm of equipoise and render that evidence more probative of conspiracy than of
conscious parallelism.”).
6
Matsushita Elec. Indus. Co. v. Zenith Radio Corp. 475 U.S. 574, 587 (1986) (quoting Mon-
santo Co. v. Spray-Rite Service Corp., 465 U.S. 752, 764 (1984)).
7
2015) (“Although we have not identified an exhaustive list of plus factors, they may include (1)
evidence that the defendant had a motive to enter into a price fixing conspiracy; (2) evidence that
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348
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NTITRUST
L
AW
J
OURNAL
[Vol. 83
motions to dismiss for failure to state a claim, evaluate the plausibility of
inferring agreement from circumstantial evidence the complaint alleges.
8
In these cases, courts usually begin by saying that, as usual in Sec-
tion 1 cases, the plaintiff has no direct evidence of agreement—evidence
like a “recorded phone call”
9
that is “explicit and requires no infer-
ences to establish” that the necessary direct communications occurred.
10
Direct evidence is rare, they explain, because conspirators, fearing detection
and penalties, will try hard not to create any.
11
Even with access to dis-
the defendant acted contrary to its interests; and (3) evidence implying a traditional conspiracy.”)
(citations and internal quotations omitted); ABA A
NTITRUST
L
AW
S
ECTION
, P
ROOF OF
C
ONSPIR-
ACY
U
NDER
F
EDERAL
A
NTITRUST
L
AWS
82–106 (2d ed. 2019) [hereinafter P
ROOF OF
C
ONSPIR-
ACY
] (surveying 9 commonly cited plus factors); William E. Kovacic et al., Plus Factors and
Agreement in Antitrust Law, 110 M
ICH
. L. R
EV
. 393, 414–35 (2011) (arguing for recognition of a
set of “super plus factors” that strongly indicate agreement).
8
See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007) (requiring the complaint to
allege facts sufficient to “state a claim to relief that is plausible on its face”). Twombly inter-
preted F
ED
. R. C
IV
. P. 8(a) (requiring the complaint to contain “a short and plain statement of the
claim showing that the pleader is entitled to relief”); F
ED
. R. C
IV
. P. 12(b)(6) (authorizing mo-
tions for failure of the complaint “to state a claim upon which relief can be granted” under the
standard of Rule 8(a)). See, e.g., In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 323 n.22 (3d
Cir. 2010) (holding Twombly “necessarily rejected the proposition that plaintiffs may plead con-
spiracy on the basis of mere parallelism—and thus necessarily required the pleading of plus
factors . . . although a plaintiff still need not plead specific evidence.”).
9
Mayor & City Council of Baltimore v. Citigroup, Inc., 709 F.3d 129, 136 (2d Cir. 2013).
Other common hypothetical examples include “an admission by an employee of one of the con-
spirators, that officials of the defendants had met and agreed explicitly on the terms of a conspir-
acy to raise price,” In re Text Messaging Antitrust Litig., 630 F.3d 622, 628 (7th Cir. 2010)
(Posner, J.); “a document or conversation explicitly manifesting the existence of the agreement in
question,” In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 324 n.23 (3d Cir. 2010); and
“documents, meetings, and participant testimony . . . that the defendants exchanged commit-
ments or otherwise collaborated by some means other than to make a marketplace decision,”
6 P
HILLIP
E. A
REEDA
& H
ERBERT
H
OVENKAMP
, A
NTITRUST
L
AW
70 (4th ed. 2017).
10
In re Baby Food Antitrust Litig., 166 F.3d 112, 118 (3d Cir. 1999). See also Theatre En-
ters., Inc. v. Paramount Film Dist. Corp., 346 U.S. 537, 539–40 (1954) (“Admittedly, there is no
direct evidence of illegal agreement . . . .”); Superior Offshore Int’l, Inc. v. Bristow Group, Inc.,
490 F. App’x 492, 497 (3d Cir. 2012) (“Given the relatively lighter burden afforded to a plaintiff
putting forth direct evidence of concerted action, the difference between direct and circumstantial
evidence in an antitrust case assumes heightened significance.”).
11
See, e.g.,Citigroup, 709 F.3d at 136 (“[I]n many antitrust cases, this type of ‘smoking gun’
can be hard to come by, especially at the pleading stage.”); Am. Chiropractic Ass’n v. Trigon
Healthcare, Inc., 367 F.3d 212, 226 (4th Cir. 2004) (“Direct evidence is extremely rare in anti-
trust cases and is usually referred to as the ‘smoking gun.’”) (quoting InterVest, Inc. v. Bloom-
berg, L.P., 340 F.3d 144, 159 (3d Cir. 2003)); United States v. Snow, 462 F.3d 55, 68 (2d Cir.
2006) (“[C]onspiracy by its very nature is a secretive operation, and it is a rare case where all
aspects of a conspiracy can be laid bare in court with [ ] precision.”); In re Plywood Antitrust
Litig., 655 F.2d 627, 633 (5th Cir. 1981) (“[S]olemnized covenants to conspire are difficult to
come by in any price fixing case.”); Gen. Chems., Inc. v. Exxon Chem. Co., 625 F.2d 1231, 1233
(5th Cir. 1980) (“Even a successful antitrust plaintiff will seldom be able to offer a direct evi-
dence of a conspiracy and such evidence is not a requirement.”); S. Side Drive-In Co. v. Warner
Bros. Pictures Distrib. Co., 30 F.R.D. 32, 35 (E.D. Pa. 1962) (“It is virtually impossible to prove
a conspiracy of this nature by direct evidence; it must usually be done circumstantially.”).
2020]
D
IRECT
E
VIDENCE OF A
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HERMAN
A
CT
A
GREEMENT
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covery, plaintiffs usually fail to find any direct evidence, despite their best
efforts.
12
When plaintiffs claim to have found direct evidence, the courts usually dis-
agree and treat all of the plaintiff’s evidence as circumstantial.
13
But, as I will
show, courts sometimes do find that plaintiffs have produced (or pleaded)
direct evidence of agreement. A close look at these cases, I argue, helps clar-
ify what courts mean by a Section 1 agreement and how they expect plaintiffs
to prove that one exists.
In the next Part, I consider the relationships among the concepts of direct
evidence, agreement, and sufficiency. In Part II, I show that, in general, courts
place evidence on the spectrum of direct and circumstantial based on how
completely and clearly the evidence represents the alleged agreement. I also
show how that same choice affects the courts’ analysis of the sufficiency of
the evidence (or allegations) on motions for summary judgment and motions
to dismiss. In Part III, I examine decisions in each of the categories of evi-
dence that courts have characterized as direct—documents, recordings, testi-
mony, and admissions. Finally, I argue that, even when direct evidence is not
present, the courts’ applications of the concept of direct evidence can provide
a model for evaluating the sufficiency of circumstantial evidence of communi-
cations as a decisive plus factor in the proof of agreement. Circumstantial
evidence then becomes, as some courts have said, “proxies for direct
evidence.”
14
I. DEFINING AGREEMENT AND PROVING AGREEMENT
The decisive issue in most antitrust cases alleging one of the per se offenses
is the existence of an agreement among the defendants to eliminate competi-
tion among themselves or to exclude a rival. Straightforward as it sounds, this
issue is extraordinarily complex, both legally and factually. If the case sur-
vives a motion to dismiss, the process of discovery and decision (or settle-
ment) can take years, at great expense to the parties and the court. And there
is a lot at stake—some of these cases are bet-the-company affairs, in which
the bets depend on the parties’ estimates of their chances of success on the
issue of agreement at critical stages of the litigation. There are both factual
12
See, e.g., In re Broiler Chicken Antitrust Litig., 290 F. Supp. 3d 772, 804 (N.D. Ill. 2017)
(“Any direct evidence of the agreement will only be uncovered through discovery.”).
13
See, e.g.,In re Text Messaging Antitrust Litig., 782 F.3d 867, 872–79 (7th Cir. 2015)
(finding emails describing a price increase as “col[l]usive” were too ambiguous to be either
direct evidence or even sufficient circumstantial evidence); In re High Fructose Corn Syrup
Antitrust Litig., 295 F.3d 651, 662–63 (7th Cir. 2002) (Posner, J.) (finding evidence of commu-
nication was too ambiguous to be direct, but, viewed with other circumstantial evidence, raised
an inference of agreement) (Posner, J.).
14
See, e.g., In re Flat Glass Antitrust Litig., 385 F.3d 350, 360 (3d Cir. 2004).
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