Circumstantial evidence of price fixing. Two circuit court opinions
have refined the principles for using circumstantial evidence to show the
existence of a price fixing conspiracy. The Third and Eighth Circuits have
rebuffed plaintiffs who offered only circumstantial evidence of facts that were
as consistent with innocent conduct as with illegal price fixing. If a
plaintiff, lacking direct evidence of agreement, can show only that competitors
met, or talked with one another on the telephone, or increased prices to
equivalent levels, or even discussed past prices, the plaintiff does not have
enough to demonstrate an agreement as to future prices. It must be shown that
illegal agreement is the only explanation for the conduct shown by
circumstantial evidence. A plaintiff relying on "conscious parallelism" must
show "plus factors," such as conduct against the actor's interest, like
desisting from bidding on a clearly lucrative business, in order to survive
summary judgment. The Third Circuit went so far as to find that systematic
gathering of current price information from competitors was not a plus factor
unless it could be shown that it influenced price.
In re Baby Food Antitrust Litigation, 166 F.3d 112 (3d Cir. 1999);
Blomkest Fertilizer, Inc. v. Potash Corp. of Saskachewan, Inc., 203 F.3d
1028 (8th Cir., 2-25-2000)
* * *
When is it safe to communicate with competitors? Knowing that
competitors in many industries confer with one another, and that these
communications are not necessarily anticompetitive, the Justice Department and
the Federal Trade Commission have issued "guidelines for collaborations among
competitors." The guidelines do not advance understanding of the law of
collusion, but they do illuminate the agency reasoning in decisions about
initiating challenges.
"In order to compete in modern markets, competitors sometimes need to
collaborate. Competitive forces are driving firms toward complex collaborations
to achieve goals such as expanding into foreign markets, funding expensive
innovation efforts, and lowering production and other costs."
However, collaboration among competitors will be attacked on a per se
basis (illegal no matter how reasonable the result) when it constitutes an
agreement "to fix prices or output, rig bids, or share or divide markets by
allocating customers, suppliers, territories, or lines of commerce."
Other types of agreement, judged under the "rule of reason," will be attacked
only if they are "likely [to harm] competition by increasing the ability or
incentive profitably to raise price above or reduce output, quality, service, or
innovation below what likely would prevail in the absence of the relevant
agreement." "[T]he Agencies ask about the business purpose of the agreement and
examine whether the agreement, if already in operation, has caused
anticompetitive harm." If the Agencies see some danger that the agreement might
injure competition, they take a deeper look at the market. "The Agencies
typically define relevant markets and calculate market shares and concentration
as an initial step in assessing whether the agreement may create or increase
market power or facilitate its exercise. The Agencies examine the extent to
which the participants and the collaboration have the ability and incentive to
compete independently. The Agencies also evaluate other market circumstances,
e.g. entry, that may foster or prevent anticompetitive harms." "If investigation
indicates anticompetitive harm, the Agencies examine whether the relevant
agreement is reasonably necessary to achieve procompetitive benefits that likely
would offset anticompetitive harms."
The guidelines are more specific in describing production collaborations,
marketing collaborations, buying collaborations, and research and development
collaborations, goods markets, technology markets, and innovations markets.
At their heart, the guidelines oppose collaboration when it thwarts
competition but permit collaboration when competition remains unharmed while the
collaboration is carried on.
* * *
When can a company use the bankruptcy law to protect itself against
damage payments for price fixing? In SGL Carbon, the Third Circuit
adopted a "good faith" test and rejected a bankruptcy petition filed only
because of the magnitude of anticipated antitrust claims.
"The issue on appeal is whether, on the facts of this case, a Chapter 11
bankruptcy petition filed by a financially healthy company in the face of
potentially significant civil antitrust liability complies with the requirements
of the Bankruptcy Code."
"SGL Carbon faces no immediate financial difficulty. All the evidence shows
that management repeatedly asserted the company was financially healthy at the
time of the filing. Although the District Court believed the litigation might
result in a judgment causing 'financial and operational ruin' we believe that on
the facts here, that assessment was premature."
In re SGL CARBON CORPORATION, Debtor, 1999-2 Trade Cases ¶ 72,739 (3d
Cir., 12.29.1999)
* * *
Merger fees and floors going up? The current merger wave, which never
seems to crest, is straining the enforcement agencies. Signs of strain, as well
as some proposed strain relief, appear in the budget proposed by the
administration to Congress on February 7. The budget seeks increased
appropriations for the Antitrust Division and the Federal Trade Commission. It
also contemplates an increase in fees to accompany merger notifications under
the Hart-Scott-Rodino Act and an increase in the minimum floor for merger
reporting. These steps would make possible an increase in personnel to review
mergers, might discourage some mergers with the higher filing fees, and would
remove smaller mergers from the requirement of review.
The proposed budget would increase the funding of the Antitrust Division by
22 percent and that of the FTC by 30 percent. It would raise the minimum filing
level from $15 million to $35 million, a change that would require amendment of
the Hart-Scott-Rodino Act. It would also establish three tiers of filing fees:
mergers valued at less than $100 million but more than $35 million would require
a fee of $45,000, the present level; mergers valued between $100 million and
$200 million would require a fee of $100,000; mergers valued at more than $200
million would require a fee of $200,000.
Though the administration budget will meet resistance on Capitol Hill, the
fee change proposal has received an initial warm reception. The increases in
fees would hardly discourage the monthly mega-mergers, but they would help to
pay for the staff increases and would give Washington some narrow basis for
saying that it is responding to the merger wave.
