Pricing Issues

• Pages: 195-219

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CHAPTER VII

PRICING ISSUES

Section 1 of the Sherman Act prohibits “any contract, combination in

the form or a trust or otherwise, or conspiracy, in restraint of trade or

commerce.”1 To state a claim under Section 1, the plaintiffs must plead

facts that plausibly suggest: (1) an agreement or conspiracy among two

or more persons or distinct business entities, (2) by which the persons or

entities intend to harm or restrain competitions, and (3) which actually

injures competition.2

Section 1 cases are evaluated under either a per se rule or the rule of

reason depending on the type of agreement at issue.3 Certain agreements

between competitors, such as price fixing, market allocation, and bid

rigging, are presumed to cause harm to consumers, and courts have

deemed such agreements to be per se illegal—meaning that a court is not

required to assess whether such agreements create procompetitive

benefits.4 In contrast, some agreements have the potential to create

procompetitive benefits and will be analyzed under the rule of reason.5

These agreements can include certain properly organized information

1. 15 U.S.C. § 1.

2. Lee Shockley Racing v. Nat’l Hot Rod Ass’n, 884 F.2d 504, 507 (9th Cir.

1989).

3. See Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984).

4. See National Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 692

(1978) (“There are, thus, two categories of antitrust analysis. In the first

category are agreements whose nature and necessary effect are so plainly

anti-competitive that no elaborate study of the industry is needed to

establish their illegality—they are ‘illegal per se.’”) .

5. See id. (“In the second category, are agreements whose competitive effect

can only be evaluated by analyzing facts peculiar to the business, the

history of the restraint, and the reasons why it was imposed.”); see also

NCAA v. Bd. of Regents, 468 U.S. 85, 117 (1984); Broadcast Music v.

CBS, 441 U.S. 1, 19 (1979) (in both cases, output limitations were shown

to be potentially procompetitive and, therefore, the cases merited rule-of-

reason analysis).

196 Agriculture and Food Handbook

exchanges6 and agreements that are ancillary to an otherwise legitimate

agreement.7

A. Agreements among Competitors regarding Price

In many cases, it is illegal for competitors to agree on price.8 Illegal

agreements and arrangements among competitors regarding price take

many forms, although they generally occur in the form of (1) price

fixing, (2) market division and allocation, and (3) bid rigging.

Price Fixing

Price fixing is an agreement between participants at the same level of

a market to raise, fix, or otherwise maintain the price at which their

goods or services are sold.9 Price fixing can take many forms, and any

agreement that solely restricts price competition violates the law.10

6. See Todd v. Exxon Corp., 275 F.3d 191 (2d Cir. 2001); United States v.

Utah Soc’y for Healthcare & Human Res. Admin., 1994 U.S. Dist.

LEXIS 17531 (D. Utah 1994); U.S. DEP’T OF JUSTICE & FED. TRADE

COMM’N, STATEMENTS OF ANTITRUST ENFORCEMENT POLICY IN HEALTH

CARE 49-52 (Aug. 1996), available at http://www.justice.gov/atr/

statements-antitrust-enforcement-policy-health-care. But see 7 U.S.C. §

455 (dissemination of crop and market information by cooperative

marketing associations).

7. See FED. TRADE COMM’N & U.S. DEP’T OF JUSTIC E, ANTITRUST

GUIDELINES FOR COLLABORATIONS AMONG COMPETITORS (2000),

available at https://www.ftc.gov/sites/default/files/documents/public_

events/joint-ventur e-hearings-antitrust-guidelines-collaboratio n-among-

competitors/ftcdojguidelines-2.pdf.

8. See Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984)

(citing Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373,

404-09 (1911)).

9. U.S. DEP’T OF JUST ICE, PRICE FIXING, BID RIGGING, AND MARKET

ALLOCATIONS SCHEMES: WHAT THEY ARE AND WHAT TO LOOK FOR; A

PRIMER, at 2 (June 25, 2015) [hereinafter DOJ PRICE FIX ING

GUIDELINES], available at www.justice.gov/atr/public/guidelines/211578.

pdf.

10. Id.