AAI Asks Third Circuit to Reconsider Misguided Collusion Opinion (Valspar Corp. v. DuPont)

In an amicus brief filed in the Third Circuit Court of Appeals, the American Antitrust Institute (AAI) has asked the full court to overturn a panel decision. The decision raises the burden on plaintiffs to defeat summary judgment when they rely on circumstantial evidence to prove a price-fixing conspiracy. AAI previously filed an amicus brief with the panel urging a less restrictive approach.

The case involves allegations by a paint manufacturer (Valspar) that titanium dioxide suppliers fixed prices over an 11-year period when they uniformly raised prices well over any increase in costs, some 31 times, 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 being interpreted as non-collusive.

A different federal district court judge overseeing the related class action in the district of Maryland denied summary judgment on largely the same record.

AAI’s initial amicus brief explained 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.

The panel majority agreed with the district court and adopted an even more defendant-friendly summary judgment rule than the Third Circuit’s 2015 In re Chocolate Confectionary Antitrust Litigation decision. The rule set forth in Chocolate itself had raised the burden on plaintiffs to defeat summary judgment in oligopoly price-fixing cases.  The dissenting Chief District Judge, sitting by designation, agreed with AAI’s position.

Among other things, 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,” which it recognized was a “high bar.”  It also held that the Third Circuit’s “sliding scale” approach to summary judgment—under which the acceptable inferences which can be drawn from circumstantial evidence vary with the plausibility of the plaintiff’s theory and the dangers associated with such inferences—did not apply to oligopoly price-fixing cases.  And the majority rejected the concept of an unlawful “tacit agreement” by requiring plaintiffs to provide evidence of an “explicit, manifest agreement.”

In its brief in support of rehearing, AAI argued that each of these panel holdings is inconsistent with Third Circuit and Supreme Court precedent.  The brief also explained that the standard of proof on summary judgment in oligopoly price-fixing cases is a question of exceptional importance for the deterrence of cartels and of anticompetitive practices that facilitate oligopoly pricing and harm victims of overcharges.