What Constitutes a Conspiracy?
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CHAPTER II
W H AT CONSTITUTES A CONSPIRACY?
At the core of all antitrust conspiracy cases is the concept of
agreement, or, as the statutory language says, a contract, combination, or
conspiracy. To determine how to prove the existence of an agreement one
must first understand what constitutes an agreement under Section 1 of the
Sherman Act. This chapter examines how the Supreme Court has defined
the type of agreement that triggers the application of Section 1. It also
details how courts have dealt with the critical issue of intent, both in the
civil context and in criminal cases. The chapter also analyzes issues
concerning how one joins or withdraws from an agreement governed by
Section 1.
A. What Is an Agreement?
To establish liability under Section 1, a plaintiff must prove a
“contract, combination . . . or conspiracy in restraint of trade.”1 The
touchstone of all Section 1 cases is an agreement between two or more
separate entities. Concerted action is required. Unilateral action may fall
within the ambit of Section 2 of the Sherman Act, but not Section 1.2
While the antitrust concept of agreement is similar to that under
common law contract principles—a meeting of the minds—Section 1
reaches a broader array of agreements. An antitrust agreement need not be
formal, written, or even express.3 A tacit agreement—that is, “one in
1. 15 U.S.C. §1.
meaning of the term ‘contract, combination . . . or conspiracy’ is informed
by the basic distinction in the Sherman Act between concerted and
independent action that distinguishes § 1 of the Sherman Act from § 2 ”)
(internal quotations omitted).
3. American Tobacco Co. v. United States, 328 U.S. 781, 789 (1946) (The
conspiracy’s “existe nce was establishe d, not through the pr esentation of a
formal written agree ment, but throug h the evidence of widespread and
effective conduct on the part of petitioners in rela tion to their existing or
potential competitors.”); Computer Identics Corp. v. S. Pac. Co., 756 F.2d
20 Proof of Conspiracy Under Federal Antitrust Laws
which only the conspirators’ actions, and not any express
communications, indicate the existence of an agreement”—can constitute
an agreement under Section 1.4 The actions of the coconspirators need not
be identical.5 And, courts have long since abandoned a strict reading of the
statutory text of Section 1 to det ermine whether ther e is a “contract,”
“combination,” or “conspiracy” as those terms were used at the time of the
passage of the Sherman Act.6
Modern case law examines whether there is a “conscious commitment
to a common scheme.”7 The substance of schemes can vary widely—
200, 204 (1st Cir. 1985) (approving jury instruction stating that “an
agreement need not be in writing,” “need not be expressed verbally,” but
“indeed may be implied from conduct”); In re Ethylene Propylene Diene
Monomer (EPDM) Antitrust Litig., 681 F. Supp. 2d 146, 176, 178 (D.
Conn. 2009); see also William E. Kovacic, The Identification and Proof of
Horizontal Agreements Under Antitrust Law, 38 ANTITRUST BULL. 5, 17-
18 (1993) (Early §1 prosecutions involving “written and spoken price-
fixing arrangement s altered firm behavio r,” driving cartels “underground
. . . to avoid detection” and inducing “firms to devise more subtle, less
direct means for communicating intentions and exchanging assurances
about future behavior.”).
United States v. Paramount Pictures, 334 U.S. 131, 142 (1948) (inferring
agreement “from the pattern of price-fixing disclosed in the record”).
5. Interstate Circuit, Inc. v. United States, 306 U.S. 208, 227 (1939) (“It is
elementary that an unlawful conspir acy may be and often is formed without
simultaneous action or agreement on the part of the conspirators.”);
Amereican Tobacco, 328 U.S. at 792 (“[M]uch of the evidence relating to
the purchase[s] . . . does not apply in precisely equal degree to each
[defendant].”); Masters v. Wilhel mina Model Agency, 2 003 WL 145556,
at *5 (S.D.N.Y. 2003) (“It is well settled . . . that the law does not require
every defendant to participate in the conspirac y by identical means
throughout the entire class period.”).
abrogated on other grounds by Twombly, 550 U.S. 544 (2007) (noting that
the cases have interpreted § 1 as “presenting a single concept about
common action, not three separate ones: ‘contract . . . combination or
conspiracy’ becomes an alliterative compound noun, roughly translated to
mean ‘concerted action’” and that courts use the terms interchangeably).
See Chapter I for a discussion of the Supreme Court’s early decisions in
which distinctions among the statutory terms were recognize d.
What Constitutes A Conspiracy? 21
ranging from hard-core criminal price-fixing agreements to potentially
procompetitive distribution restraints. The purpose of this chapter is not to
examine types of agreements but to explore the requirements for proving
the existence of an agreement in the first place.
1. Early Supreme Court Cases Defining Antitrust Agreements
Case law has evolved on how an agreement is defined for antitrust
purposes. Before considering the Supreme Court’s recent decisions on
proof of an agreement under Section 1, it will be helpful to look at its
earlier decisions.
In 1914, in Eastern States Retail Lumber Dealers Ass’n v. United
States,8 the Court addressed a group boycott by members of retail lumber
dealer associations against lumber wholesalers who sought to intrude into
the retail space. The retail dealer associations distributed reports to their
members naming such wholesalers with the goal of blacklisting them.
While there was no direct evidence of an agreement between the retailers,
the Court held that a restraint of trade was the natural consequence of these
reports and that a conspiracy to accomplish that consequence could be
readily inferred.9
In 1921 the Court held in American Column and Lumber Co. v. United
States,10 that a so-called “open competition plan” involving cooperation
among the members of a hardwood manufacturers association, including
the exchange of detailed sales, price and production information for the
avowed purpose of substituting “co-operative competition” for “cut-throat
competition,” and keeping “prices at reasonably stable and normal levels,”
violated Section 1.11 The Court found that even without evidence of a
specific agreement among the members, an agreement could be inferred.
The Court stated:
To pronounce such abnormal conduct . . . “a new form of competition”
and not an old form of combination in restraint of trade, as it so plainly
is, would be for this court to confess itself blinded by words and forms
to realities which men in general ver y plainly see and u nderstand and
condemn, as an old evil in a new dress and with a new name. 12
9. Id. at 612.
10. 257 U.S. 377 (1921).
11. Id. at 394.
12. Id. at 410-11.
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