| Albert A. Foer
Competition Policy, Mergers
MOTION FOR LEAVE TO FILE AMICUS BRIEF AND AMICUS BRIEF OF AMERICAN ANTITRUST INSTITUTE IN SUPPORT OF PLAINTIFFS-APPELLANTS PETITION FOR REHEARING AND SUGGESTION FOR REHEARING EN BANC
| Daniel J. Mogin (No. 95624) THE MOGIN LAW FIRM, P.C. 701 C Street, Suite 200 San Diego, CA 92101-5307 Telephone: (619) 687-6611 |
MOTION FOR LEAVE TO FILE AMICUS BRIEF AND AMICUS BRIEF OF AMERICAN ANTITRUST INSTITUTE IN SUPPORT OF PLAINTIFFS-APPELLANTS PETITION FOR REHEARING AND SUGGESTION FOR REHEARING EN BANC
| Daniel J. Mogin (No. 95624) THE MOGIN LAW FIRM, P.C. 701 C Street, Suite 200 San Diego, CA 92101-5307 Telephone: (619) 687-6611 |
Albert Foer, President AMERICAN ANTITRUST INSTITUTE 2919 Ellicott Street, N.W. Washington, D.C. 20008 Telephone: (202) 244-9800 |
Attorneys for Amicus Curiae
American Antitrust Insitute
TABLE OF CONTENTS
I. INTRODUCTION
II. THE OPINION EMASCULATES THE PER SE RULE BY ALLOWING A RULE OF REASON OR BUSINESS JUSTIFICATION DEFENSE IN A HORIZONTAL PRICE FIXING CASE
III. CONCLUSION
TABLE OF AUTHORITIES
Cases
California Dental Association v. FTC
U.S. , 119 S.Ct. 1604 (1999)
Citric Acid
Slip op. at 10476
Demarest v. Manspeaker
498 U.S. 189 191 (1991)
Eastman Kodak Co. v. Image Technical Servs.
504 U.S. 451 (1992)
In re Brand Name Prescription Drugs Antitrust Litigation
123 F.3d 436 (7th Cir. 1997)
In re Brand Name Prescription Drugs Antitrust Litigation
F.3d , WL 487147 (7th Cir. 1999)
In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation
(9th Cir. 1990) 906 F.2d 432
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.
475 U.S. 574 (1986)
Petruzzi’s IGA v. Darling Delaware
998 F.2d 1224 (3d Cir. 1993)
Poller v. Columbia Broadcasting System
368 U.S. 464 (1962)
State Oil v. Khan
522 U.S. 3 (1997)
U. S. v. Socony-Vacuum Oil Co.
(1940) 310 U.S. 150, 226
United States v. Consolidated Packaging Corp.
575 F.2d 117, 126 (7th Cir. 1978)
United States v. Container Corp. of America
(1968) 393 U.S. 333
Other
Herbert Hovenkamp, Federal Antitrust Policy,
542 (West Group 1994)
Ernest Gellhorn & William Kovacic, Antitrust Law and Economics,
452 (West Group 1994)
MOTION FOR LEAVE TO FILE AMICUS BRIEF
Pursuant to Federal Rules of Appellate Procedure, Rule 29, the American Antitrust Institute hereby respectfully moves for leave of court to file an amicus-curiae brief in support of Plaintiff-Appellants Petition for Rehearing and Suggestion for Rehearing En Banc.
1. Statement of Interest
The American Antitrust Institute (“AAI”), a 501(c)(3) tax-exempt organization, is a national independent nonprofit education, research, and advocacy organization, whose mission is to increase the role of competition and to assure that competition is fair. The AAI is a proponent of the position that competition serves the most vital interests of the American public by assuring competitive prices and consumer choice and protecting opportunities for small and medium-size businesses to compete on the merits. The AAI believes that these goals are enhanced by both governmental and private enforcement of the antitrust laws as Congress intended when it enacted the Sherman and Clayton Acts.
AAI is governed by its president and its Board of Directors. AAI also maintains an Advisory Board of distinguished individuals drawn from the business, legal, government, academic, economics and consumer advocacy communities. AAI’s Advisory Board does not vote on policy positions, including with respect to this Petition. The AAI benefits from counsel with its individual members. A true and correct list of the members of AAI’s Board of Directors and Advisory Board is attached.
2. AAI’s Amicus Brief Will Assist the Court
As antitrust practitioners and policy advocates, AAI and its members have a substantial interest in judicial opinions interpreting the federal antitrust laws. Civil enforcement actions are one of the primary methods by which the antitrust laws are interpreted and developed. The decisions in such matters often have significant impacts on overall policy and enforcement decisions.
The Citric Acid Opinion concerns important issues that frequently arise in civil antitrust actions and may have widespread precedential effects on cases in progress and future civil enforcement actions. AAI submits that the Opinion conflicts with existing law of the Ninth Circuit, its sister Circuit Courts and the Supreme Court and substantially undermines the public’s benefit from private enforcement of the antitrust laws.
For these reasons, AAI respectfully submits that the filing of the appended amicus brief is desirable and the matters asserted are relevant to the case at hand.
THE MOGIN LAW FIRM, P.C.
By:
Daniel J. Mogin
Attorneys for Amicus Curiae
American Antitrust Institute
AMERICAN ANTITRUST INSTITUTE
Directors
Albert A. (“Bert”) Foer, President, American Antitrust Institute
Robert Lande, Professor of Law, University of Baltimore Law School
Jon Cuneo, Attorney
The Advisory Board
Kenneth Adams, Attorney Arthur Amolsch Editor, FTC:Watch Maxwell Blecher, Attorney Lloyd Constantine, Attorney Stephen Calkins, Professor of Law, Wayne State Ellen Cooper, Assistant Attorney General, Maryland Marc Alan Eisner, Professor of Political Science, Wesleyan Harry First, Assistant Attorney General, New York Fred Furth, Attorney Warren Grimes, Professor of Law, Southwestern George Hay, Professor of Economics and Law, Cornell Alfred Kahn, Professor of Economics emeritus, Cornell Joseph Kohn, Attorney William Kovacic, Professor of Law, George Washington John Kwoka, Jr., Professor of Economics, GWU Robert Litan, Brookings Institution James May, Professor of Law, American Sen. Howard Metzenbaum, (Ret) Chair, Consumer Federation of America Monroe Milstein, Burlington Coat Factory Philip Nelson, Economist, Economists, Inc. Roger Noll, Professor of Economics, Stanford Kevin O’Connor, Assistant Attorney General, Wisconsin David Penn,Economist, American Public Power Association Stephen Ross, Professor of Law, Univ. of Illinois Richard S. Shapiro, Government Affairs, Enron Corp. Robert Skitol, Attorney Robert L. Steiner, Economic consultant Mary Lou Steptoe, Attorney Lawrence Sullivan, Professor of Law, Southwestern Stephen Susman, AttorneySpencer Waller, Professor of Law, Brooklyn Lawrence White, Professor of Economics, NYU
AMICUS CURIAE BRIEF
I. INTRODUCTION
AAI respectfully submits that the Opinion conflicts with existing law of the Ninth Circuit, its sister Circuit Courts and the Supreme Court. This case is an outgrowth of one of the most notorious antitrust conspiracies in recent history — the Archer-Daniels Midland scandal — and involves an admitted conspiracy to fix prices and allocate market territories. Even though the existence of the conspiracy was admitted, except by appellee Cargill, the Opinion erroneously required plaintiffs to prove the existence of the conspiracy rather than evidence linking Cargill to participation in the conspiracy. The Opinion then applied an erroneous formulation of Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 (1986) [“Matsushita”] stating:
First, the defendant can ‘rebut an allegation of conspiracy by showing a plausible and justifiable reason for its conduct that is consistent with proper business practice.’… The burden then shifts back to the plaintiff to provide specific evidence tending to show that the defendant was not engaging in permissible competitive behavior.
Citric Acid, slip op. at 10476 (internal citations omitted).1
The Opinion compounds this error by restricting the inferences available to the plaintiff from trade association activities, particularly information interchanges, in contravention of the Supreme Court’s decisions in, inter alia, United States v. Container Corp. of America (1968) 393 U.S. 333 [“Container”] and this Circuits’ opinion in Petroleum Products.
The practical effect of the Opinion, therefore, will be to make enforcement of the federal antitrust laws, particularly civil and private enforcement2, virtually impossible in the absence of a confession or criminal conviction, thus undermining longstanding Congressional intent. Because of its nature and subject matter, the Citric Acid Opinion may have substantial influence on present and future antitrust enforcement lawsuits and policy. Accordingly AAI believes it is important that the Panel or the Circuit, en banc, should reexamine the Opinion.
II. THE OPINION EMASCULATES THE PER SE RULE BY ALLOWING A RULE OF REASON OR BUSINESS JUSTIFICATION DEFENSE IN A HORIZONTAL PRICE FIXING CASE
The Opinion extends the holding of Matsushita so far that it emasculates the per se rule applicable to horizontal price-fixing cases and allows a rule of reason defense to be used to presumptively rebut all circumstantial evidence offered by the plaintiff. This ignores the Ninth Circuit’s holding in Petroleum Products3 and the Supreme Court’s explicit admonitions regarding the limitations of Matsushita stated in Eastman Kodak Co. v. Image Tech. Svcs., 504 U.S. 451 (1992):
The Court’s requirement in Matsushita that the plaintiffs’ claims make economic sense did not introduce a special burden on plaintiffs facing summary judgment in antitrust cases. The Court did not hold that, if the moving party enunciates any economic theory supporting its behavior, regardless of its accuracy in reflecting the actual market, it is entitled to summary judgment. Matsushita demands only that the nonmoving party’s inferences be reasonable in order to reach the jury, a requirement that was not invented, but merely articulated, in that decision. If the plaintiff’s theory is economically senseless, no reasonable jury could find in its favor, and summary judgment should be granted. . . . Plaintiffs in Matsushita attempted to prove the antitrust conspiracy ‘through evidence of rebates and other price-cutting activities. ‘Because cutting prices to increase business is ‘the very essence of competition,’ the Court was concerned that mistaken inferences would be ‘especially costly’ and would ‘chill the very conduct the antitrust laws are designed to protect.’ Ibid. See also Monsanto Co. v. Spray-Rite Service Corp., (1984) (permitting inference of concerted action would “deter or penalize perfectly legitimate conduct”). But the facts in this case are just the opposite. The alleged conduct – higher service prices and market foreclosure – is facially anticompetitive and exactly the harm that antitrust laws aim to prevent. In this situation, Matsushita does not create any presumption in favor of summary judgment for the defendant.
Kodak at 468-469 (emphasis added).
Similarly, in Petroleum Products this Circuit thoroughly considered Matsushita in the specific context of a traditional horizontal price fixing case alleging the cartel’s purposes were to elevate prices to supracompetitive levels. Petroleum Products holds that a district court may not grant summary judgment to antitrust defendants whenever it concludes that inferences of conspiracy and inferences of innocent conduct are equally plausible. The Ninth Circuit reasoned that “[a]llowing the district court to make the decision would lead to dramatic judicial encroachment on the province of the jury,” and that “the correct application of Matsushita was not to all circumstantial evidence, but only to ambiguous circumstantial evidence about conduct having unambiguous and significant procompetitive effects . . .” Id at 438-439 (emphasis added). On the basis of that analysis, Petroleum Products states the summary judgment standard as follows:
[W]e conclude that where an antitrust plaintiff relies entirely upon circumstantial evidence of conspiracy, a defendant will be entitled to summary judgment if it can be shown that (1) the defendant’s conduct is consistent with other plausible explanations, and (2) permitting an inference of conspiracy would pose a significant deterrent to beneficial procompetitive behavior. Once the defendant has made such a showing, the plaintiff must come forward with other evidence that is sufficiently unambiguous and tends to exclude the possibility that the defendant acted lawfully.
Petroleum Products at 440 (emphasis added). 4
The Opinion is contrary to both Kodak and Petroleum Products. It is contrary to Petroleum Products because it dilutes the defendants’ burden under the first prong while increasing the plaintiffs’ burden by requiring it to “provide specific evidence tending to show that the defendant was not engaging in permissible competitive behavior,” or specific evidence to prove a negative, rather than a more realistic burden to come forward with evidence that is sufficiently unambiguous that “it tends to exclude the possibility that the defendant acted lawfully.” The Opinion also fails to require a defendant to show that “permitting an inference of conspiracy would pose a significant deterrent to beneficial procompetitive behavior.” The failure to require a defendant to show that permitting an inference of conspiracy would pose a significant deterrent to beneficial procompetitive behavior is also contrary to Kodak.5
To paraphrase Kodak, the facts in Citric Acid are “just the opposite” of Matsushita. The conduct alleged in Citric Acid is a conspiracy between competitors to fix supracompetitive prices and territorial allocations. This is, indisputably, “facially anticompetitive and exactly the harm that antitrust laws aim to prevent.” Kodak at 468-469. So much so that, as the Opinion recognizes, unlike other types of anticompetitive conduct they are subject to an unwavering per se standard of liability. Under the per se standard, however, no business justification defense is recognized. “Whatever economic justification particular price?fixing agreements may be thought to have, the law does not permit an inquiry into their reasonableness.” U. S. v. Socony?Vacuum Oil Co. (1940) 310 U.S. 150, 226.
Yet the Opinion states that a defendant may rebut an allegation of conspiracy and shift its burden to the plaintiff merely by showing a justifiable reason for its conduct that is consistent with proper business practice; it does not require any showing by the defendant that permitting an inference from such conduct would significantly deter procompetitive behavior. The Opinion thus articulates a new deferential rule of reason evidentiary standard for summary judgment in a per se liability case. This undermines the per se standard.7 Indeed, under this new rule, a plaintiff faces a greater evidentiary hurdle to avoid summary judgment than it would have to meet to sustain a judgment after a full trial.6
Moreover, Matsushita should not have been applied for several reasons. First, Matsushita applies, if at all, only to determine the existence of the conspiracy. Yet here the existence of an unlawful antitrust conspiracy was conceded; the only question was whether defendant Cargill was a participant in the conspiracy. Therefore, summary judgment could only be granted if plaintiffs were unable to produce evidence connecting Cargill to the alleged conspiracy. United States v. Consolidated Packaging Corp., 575 F.2d 117, 126 (7th Cir. 1978). Second, subsequent Supreme Court decisions, including Kodak, demonstrate that Matsushita’s distinction between the treatment accorded direct and circumstantial evidence does not apply where, as here, the allegations concern conduct that is facially anticompetitive and subject to a per se standard. Third, as the Supreme Court has stated where Congress has created a private right of action, such as the Sherman and Clayton Acts, policy considerations cannot override the text and structure of the legislation, except to the extent that they may help to show that adherence to the text and structure would lead to a result “so bizarre” that Congress could not have intended it. Demarest v. Manspeaker 498 U.S. 189 191 (1991). Therefore, while the Court may certainly interpret the acts, it may not impose requirements of proof — such as using harsher standard for circumstantial evidence than for direct evidence — that are inconsistent with the legislation where to do so undermines enforcement “of exactly the harm that antitrust laws aim to prevent.” Imposing such conditions in a per se case that includes allegations of indisputably anticompetitive conduct ignores the essential reality of such cases; as a general rule, an antitrust conspiracy is rarely admitted, is rarely documented by the conspirators and can only be established by circumstantial evidence. Ignoring this reality and imposing unrealistic evidentiary standards is tantamount to judicial repeal of the Sherman and Clayton Acts.
Accordingly, where the alleged conduct is unquestionably anticompetitive, the summary judgment standard is a modification of Poller: “Summary procedures” and restricting inferences from circumstantial evidence “should be used sparingly in complex antitrust litigation” involving allegations of conduct subject to a per se standard or that is facially anticompetitive (the type of harm that antitrust laws aim to prevent) “because motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot. It is only when the witnesses are present and subject to cross-examination that their credibility and the weight to be given their testimony can be appraised. Trial by affidavit is no substitute for trial by jury which so long has been the hallmark of even handed justice.” See Poller at 471.
III. CONCLUSION
For the foregoing reasons, Amicus Curiae AAI, respectfully submits that the matter should be reheard by the Panel or by the Circuit, en banc.
THE MOGIN LAW FIRM, P.C.
By:
Daniel J. Mogin
Attorneys for Amicus Curiae
American Antitrust Institute
1The Ninth Circuit decisions cited in the Opinion predate the Supreme Court’s decision in Eastman Kodak Co. v. Image Technical Servs., 504 U.S. 451 (1992)[“Kodak”]. Kodak explicitly rejected the formulation articulated in Citric Acid. The Opinion also failed to apply the law of the Ninth Circuit as held in In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation (9th Cir. 1990) 906 F.2d 432 [“Petroleum Products”].
2“[T]he private antitrust action continues to be the principal mechanism by which the antitrust laws are enforced. Roughly 90% of antitrust cases are brought by private plaintiffs.” Herbert Hovenkamp, Federal Antitrust Policy, 542 (West Group 1994); see also Ernest Gellhorn & William Kovacic, Antitrust Law and Economics, 452 (4th ed. West Group 1994) (private actions are important antitrust enforcement tool; ratio of private to public case was 10 to 1 in 1980’s).
3Petroleum Products at 437-441 (discussing application of Matsushita, in, inter alia, per se horizontal price fixing cases where alleged purpose id supra-competitive pricing).
4See also In re Brand Name Prescription Drugs Antitrust Litigation 123 F.3d 436 (7th Cir. 1997) and _ F.3d _, 1999 WL 487147; Petruzzi’s IGA v. Darling Delaware 998 F.2d 1224 (3d Cir. 1993).
5Contrary to the Ninth Circuit’s decision in Petroleum Products, long-standing Supreme Court precedent such as Socony- Vacuum and Container, and recent cases such as California Dental Association v. FTC, _U.S._, 119 S.Ct. 1604 (1999) the Opinion erroneously denies plaintiff the benefit of inferences from trade association activities, including information interchange. But for this unsupported deference to trade association activities, the conduct described in the Opinion regarding ECAMA appears sufficient to connect Cargill to the conspiracy, to create an inference of agreement to fix prices or an inference of agreement to interchange information for that purpose. At the very least, it appears to demonstrate the existence of a triable issue of material fact. The standard applicable to such inferences is that information interchange, direct or indirect, for the purpose or with the effect of facilitating conduct that is facially anticompetitive or subject to a per se standard raises an inference of collusion sufficient to defeat summary judgment. The fact that anticompetitive acts may be facilitated by trade association activities does not, in any sense, immunize the from antitrust scrutiny. See, e.g. Petroluem Products at 448.
6Chief Judge Posner of the Seventh Circuit, a noted antitrust authority, harshly criticized such a result in In Re Brand Name Prescription Drugs Antitrust Litigation _ F.3d _, 1999 WL 487147, p.6 (7th Cir. 1999): “[Plaintiffs] did not, however, as the defendant manufacturers rather absurdly argue, have to exclude all possibility that the manufacturers’ price discrimination was unilateral rather than collusive. That would imply that the plaintiff in an antitrust case must prove a violation of the antitrust laws not by a preponderance of the evidence, not even by proof beyond a reasonable doubt (as indeed is required in criminal antitrust cases), but to a 100 percent certainty, since any lesser degree of certitude would leave a possibility that the defendant was innocent.”
7Consideration of Matsushita and Kodak in combination with the Supreme Court’s longstanding decisions in cases such as Socony-Vacuum and Poller v. Columbia Broadcasting System, 368 U.S. 464 (1962) and its recent decisions in cases such as California Dental and State Oil v. Khan _U.S._, 118 S.Ct. 275 (1997) reveals that a reviewing court is required to apply a continuum or sliding scale analysis of the alleged restraint to determine the standard by which it must be judged. Applying this sliding scale, the more facially anticompetitive the alleged conduct, the less evidence about the restraint is required from the plaintiff at summary judgment, the less consideration is given to the defendants’ justifications and explanations of their conduct and less evidence tending to exclude the possibility of lawful conduct is necessary. As a corollary, where the alleged restraint is facially anticompetitive, the court may not restrict the reasonable inferences on the grounds that allowing them might chill procompetitive conduct, because to do so would be impermissible judicial encroachment on the province of the jury, contrary to explicit Congressional intent.
