Hub-and-Spoke Conspiracies

Abstract

In antitrust law, a hub-and-spoke conspiracy is a cartel in which a firm (the “hub”) organizes collusion (the “rim of the wheel” or the “rim”) among upstream or downstream firms (the “spokes”) through vertical restraints. Such a conspiracy may be illegal per se under antitrust law where the horizontal agreement among the spokes (the rim) is per se unlawful.

Hub-and-spoke cartels have drawn considerable attention since the 1930s, long before the conspiracy gained its name. Their architecture reduces the need for coordination among the spokes by centralizing at least some of the cartel functions at the hub. As a result, evidence of agreement among the spokes is often found in vertical coordination between the hub and the spokes, not in horizontal coordination. Yet the question of how to use vertical relationships to infer horizontal conspiracy has proved confusing and deserves clarification. This article, explains the analysis of hub-and-spoke cartels under antitrust law, clarifies the meaning of the “rim requirement” (proof of an agreement among the spokes), and advocates that courts clearly state why and how they use vertical coordination to infer a horizontal conspiracy.

Keywords: antitrust, Section 1, Vertical Restraints, Hub-and-Spoke Cartels