Plus Factors and Agreement in Antitrust Law
William E. Kovacic
George Washington University - Law School; King's College London – The Dickson Poon School of Law
Robert C. Marshall
Pennsylvania State University, College of the Liberal Arts - Department of Economic
Leslie M. Marx
Duke University - Fuqua School of Business, Economics Group
Halbert L. White, Jr.
University of California, San Diego (UCSD) - Department of Economics
December 1, 2011
Michigan Law Review, Vol. 110, No. 3, p. 393-436, 2011
GWU Legal Studies Research Paper No. 2012-1
GWU Law School Public Law Research Paper No. 2012-1
Despite the crucial role of concerted action to collusion among rival firms, few elements are more perplexing than the design of evidentiary standards to determine whether parallel conduct stems from collective or from unilateral decision making. Courts allow a collusive agreement to be established by circumstantial evidence, but the evidence must show additional evidence — “plus factors” — beyond parallel movement in price. Chief plus factors identified by courts have included actions contrary to each defendant’s self-interest unless pursued as part of a collective plan, phenomena that can be explained rationally only as a result of concerted action, evidence that defendants created the opportunity for regulation communication, industry performance data that suggests successful coordination, and the absence of a plausible legitimate business rational for suspicious conduct.
The frailties of the existing analytical tests for assessing plus factors impede the economically sensible resolution of many high-stakes antitrust cases where decisions made on the issue of conspiracy are decisive and such inadequacies may be magnified in the future. No cases have offered useful operational means for determining when the defendants have engaged in something more than consciously parallel conduct. It is possible to improve on existing approaches by focusing more precisely on the forms of behavior that firms use to communicate their intentions and to execute the tasks needed to achieve coordination on pricing, output, and other dimensions of effective collusion. Case law addressing plus factors has not established a methodology for ranking plus factors according to their probative value. The authors believe that the actions of an explicit cartel, and the outcomes of those actions, should illuminate the path to identifying plus factors and that any of those actions that surely do not result from unilateral conduct should be given special attention. Further, courts and enforcement agencies cannot address the agreement in question without awareness of remedial issues that stand in the background. Courts are left with a conundrum because they cannot meaningfully instruct firms not to react to their rivals’ pricing. When firms in an industry are players in a repeated game with substantially incomplete and asymmetric information, courts can examine buyer actions to attempt to distinguish between conduct that is an agreement in violation of the Sherman Act and conduct that is not.
This Article offers a way to increase understanding of plus factors and to improve the manner in which enforcement agencies and courts interpret them in individual cases by advocating the use of basic probability theory to rank plus factors in terms of their probative value. It proposes a formal definition of plus factors, a taxonomy of plus factors, and a coherent methodology for ranking them in terms of their probative values. It also proposes that plus factors should be considered in constellations whenever such groups are present because the probative value of the group can be far greater than the individual plus factors in the group.
Number of Pages in PDF File: 45
Keywords: Horizontal price restraints, Horizontal output restraints, Cartels, Collusion, Concerted Action, Sherman Act, Plus Factors, Buyer Actions
JEL Classification: K21, L13, L41, D10, D42, D43
Date posted: January 6, 2012 ; Last revised: November 3, 2014