Plus Factors in Price-Fixing Litigation

Antitrust plaintiffs typically rely on circumstantial evidence when pursuing price-fixing claims, because price-fixing conspirators usually conceal their collusion through code names, secret meetings, cover stories, and falsified documents. Antitrust law uses a two-step process for proving price-fixing agreements through circumstantial evidence. First, the plaintiff shows that the defendants engaged in similar conduct, referred to as “conscious parallelism.” Second, the plaintiff presents plus factors, which are evidence that suggests the defendants’ parallel conduct is the product of collusion, not independent decisions by the defendant firms. Following the Supreme Court’s mandate in Continental Ore Co. v. Union Carbide & Carbon Corp. that judges and juries should not compartmentalize an antitrust plaintiff’s proffer of proof,[1] lower courts recognize that they should not isolate the plus factors presented by a plaintiff.

Courts have not developed a comprehensive list of plus factors.  Collectively, however, antitrust opinions have recognized well over 20 individual plus factors. But no antitrust opinion explains why each particular plus factor is evidence of illegal collusion or discusses the relationships among plus factors.

Categorizing plus factors can help judges understand how each plus factor plays an important role in a circumstantial case for proving illegal price fixing. In my article, The Probative Synergy of Plus Factors in Price-Fixing Litigation,[2] I create a typology for antitrust plus factors. Some – such as market concentration, barriers to entry, inelastic demand, an absence of substitutes, and product homogeneity – should be treated as demonstrating Cartel Susceptibility because markets with these characteristics facilitate cartel activity. Another category of plus factors, those related to Cartel Formation, includes proof of a defendant inviting its rivals to collude, a motive to collude, an opportunity to conspire, and intercompetitor communications.

Some plus factors – such as intercompetitor exchange of price information, price signaling, and possession of a competitor’s price-related documents – are indicative of Cartel Management because they suggest price coordination. One subset of Cartel Management warrants its own separate category: Cartel Enforcement describes plus factors that reflect firms’ activities to deter and penalize cheating among cartel members. Plus factors in this category represent monitoring devices (such as sharing price or sales data) and punishment methods (such as side payments and other transactions among competitors in which money changes hands).

Other plus factors are best thought of as Cartel Markers because they identify conduct that is commonly done by conspirators but not firms in a truly competitive market. These include the frequency and simultaneity of parallel price increases, price increases during periods of declining costs, maintenance of excess capacity during periods of rising prices, artificial product standardization, major (unexplained) changes in business practices, and the long-term stability of market shares among rivals.

Some plus factors are Suspicious Statements that resemble the garden variety circumstantial evidence that one would find in any litigation where a defendant has made statements or created documents that a reasonable person could interpret as acknowledging collusion. (If the statements were explicit admissions of illegal collusion, they would constitute direct evidence, and the plaintiff would not need to rely on the plus-factor framework at all.) Such statements can include pretextual assertions that are clearly false and seem designed to conceal an underlying conspiracy.

Finally, several plus factors perform double or triple duty because they fall into multiple plus-factor categories. For example, the defendants’ prior cartel participation shows that the particular product market is susceptible to cartelization (Cartel Susceptibility), that firms have a motive and willingness to collude (Cartel Formation), that these putative rivals have figured out how to run a price-fixing conspiracy (Cartel Management), often including ways to detect and penalize cheating (Cartel Enforcement). Similarly, the defendants’ recent or ongoing price-fixing activities in foreign markets also satisfy all of these plus-factor categories, as well as demonstrating that these firms have solved the coordination problems that can hobble efforts to initiate a price-fixing scheme in the United States.[3]

Having a typology of plus factors allows judges and juries to better appreciate why certain facts or actions are probative of price fixing. Presenting plus factors in these categories also illustrates the relationships among the various plus factors. This is important because no single plus factor exists in a vacuum: Each piece of evidence must be evaluated in relation to the surrounding pieces of circumstantial evidence. Each plus factor serves a function or purpose in the price fixers’ scheme to replace competition with collusion. Some combinations of plus factors are especially powerful. Pleading or proffering evidence of plus factors across the different categories in the plus-factor typology can significantly increase the plausibility of a price-fixing claim.

The typology also lays the foundation for the principle of probative synergy. Probative synergy explains why plus-factor analysis in antitrust cases is not arithmetic. Judges should not merely add up how many plus factors an antitrust plaintiff has pled or presented evidence for. Addition is an inappropriate mathematical operation in this analysis because each plus factor can increase the probative value of the surrounding plus factors.

Despite the long-held rule that courts should not compartmentalize an antitrust plaintiff’s evidence of conspiracy, courts often inappropriately isolate individual plus factors and incorrectly suggest that if a plus factor does not by itself prove collusion, then it is not a plus factor at all. This approach completely miscomprehends the entire structure of factor tests in legal analysis. Even when courts are correct to conclude that an individual plus factor is insufficient on its own to prove an agreement, they are wrong to then assert that the plus factor has no legal significance. Because federal courts improperly isolate plus factor evidence, they routinely grant summary judgment to price-fixing defendants even when plaintiffs have proffered more than enough evidence to prove their case. This approach miscomprehends the entire structure of factor tests in legal analysis.

When dismissing price-fixing claims or granting summary judgments for defendants accused of violating Section 1 of the Sherman Act, judges do not discuss how the plus factors presented in the case relate to each other, despite the fact that plus factors provide context for each other and, when viewed in combination, can present a strong circumstantial case for collusion. Yet, in dozens of cases, courts consistently isolated individual plus factors and held that each individual plus factor was insufficient “on its own,” “without more,” or “standing alone” to create a circumstantial case from which a reasonable jury could infer an agreement among the defendants to restrain competition. The judicial failure to appreciate the probative synergy of plus factors has made it effectively impossible to prove collusion through circumstantial evidence in many cases. This undermines deterrence of price fixing and destabilizes this cornerstone of American antitrust law.

ENDNOTES

[1] 370 U.S. 690, 699 (1962) (quoting Am. Tobacco Co. v. United States, 147 F.2d 93, 106 (6th Cir. 1944)).

[2] Christopher R. Leslie, The Probative Synergy of Plus Factors in Price-Fixing Litigation, 115 Nw. U. L. Rev. 1581 (2021).

[3] Christopher R. Leslie, Foreign Price-Fixing Conspiracies, 67 Duke L.J. 557, 580–84 (2017).

This post comes to us from Professor Christopher R. Leslie at the University of California’s Irvine School of Law. It is based on his recent article, “Probative Synergy of Plus Factors in Price-Fixing Litigation,” available here

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