In a decision released today, a panel of the Third Circuit Court of Appeals upheld summary judgment for the defendant and raised the burden on plaintiffs relying on circumstantial evidence to prove a price-fixing conspiracy. A dissenting judge agreed with, and cited to, an amicus brief submitted by the American Antitrust Institute (AAI) that supported a less restrictive approach to evaluating circumstantial evidence of price fixing in oligopoly markets.
The case involves allegations by a Valspar, a direct purchaser, that titanium dioxide suppliers fixed prices over an 11-year period when they uniformly raised prices some 31 times, well over any increase in costs, despite declining demand and excess capacity. Although the district court found the titanium dioxide industry was a “text book example” of an industry conducive to price fixing, it granted summary judgment to the defendant DuPont because the evidence of coordinated conduct was susceptible to a non-collusive interpretation.
A different federal district court judge overseeing the related class action in the district of Maryland denied summary judgment on largely the same record.
In the appeal to the Third Circuit, AAI filed an amicus brief explaining that that the district court had stretched to the point of incoherence the rule that merely interdependent oligopoly pricing is not illegal. AAI contended that the district court’s misguided approach essentially requires plaintiffs, in order to get a case to a jury, to have “smoking gun” evidence or internal documents referring to an explicit agreement.
This is not only bad law and inconsistent with the Supreme Court’s decisions in Matsushita and Kodak, the brief argued, but it is also bad policy. AAI maintained that the harmfulness of supracompetitive oligopoly pricing should inform the standards for inferring a price-fixing agreement. With supracompetitive oligopoly pricing becoming increasingly problematic as markets become increasingly concentrated, the “extra ingredient” beyond interdependent, noncompetitive pricing that is required to prove concerted action should not be unduly limited.
The panel majority agreed with the district court and adopted a more defendant-friendly summary judgment rule than the Third Circuit’s 2015 In re Chocolate Confectionary Antitrust Litigation decision, which itself had raised the burden on plaintiffs to defeat summary judgment in oligopoly price-fixing cases.
Emphasizing that that “oligopolistic conscious parallelism is by nature anticompetitive and also legal,” the majority held that “evidence that might prove a ‘tacit’ conspiracy . . . in the context of oligopolies can be unhelpfully equivocal,” and therefore, the court must “focus on evidence generally required to show an explicit, manifest agreement.” At the same time, the majority dismissed plaintiffs’ evidence of facilitating practices (like information exchanges and price signaling), which can shore up coordinated pricing, as inconsistent with express conspiracy because such practices would not be necessary if there were a prior agreement.
Like AAI’s critique, the dissent criticized the majority opinion for “all but explicitly stat[ing] that, now, the so-called smoking gun is required,” which is contrary to prior Third Circuit law. Citing AAI’s amicus brief, the dissenting judge said he “share[d] the concern of the amicus . . . that it would be an absurd result if, in situations in which the danger of parallel pricing is most serious, liability would actually be less likely.”
The dissent added, “this Court never intended to ramp up a price-fixing plaintiff’s burden of proof, especially when the plaintiff’s economic theory makes perfect economic sense.”
Yet the majority adopted a stringent requirement that “a plaintiff in an oligopoly case must provide inferences that show that the alleged conspiracy is more likely than not.” And by this the majority meant not that the evidence must allow a reasonable jury or fact finder to infer that the conspiratorial explanation is more likely than not, which is the traditional summary judgment rule under Matsushita and Kodak. Rather, as the dissented pointed out, the majority made its own factual determination and ignored Matsushita’s dictate that liberal inferences are permissible when the plaintiff’s theory makes economic sense.
The majority recognized that its more-likely-than-not standard “may be a high bar,” that the Fourth Circuit had not adopted this rule (which explained the different result reached by the Maryland district court), and that “the dissent’s interpretation of Matsushita is reasonable.”
But the majority concluded that Third Circuit jurisprudence, particularly the Chocolate case, is to the contrary, while the dissent emphasized that even Chocolate acknowledged that the inferences that may be drawn from circumstantial evidence depend upon “the plausibility of the plaintiffs’ theory and the dangers associated with such inferences.”
The court’s order upholding summary judgment was issued on September 14, but the release of its opinion was delayed pending potential redactions. AAI also recently filed an amicus brief in the Eleventh Circuit criticizing another district court’s overly restrictive approach to proving a tacit price-fixing conspiracy.