Communication and Concerted Action
56 Pages Posted: 24 Oct 2006 Last revised: 22 Sep 2015
Date Written: October 22, 2006
It is a familiar scenario in U.S. antitrust litigation: The plaintiffs allege that a pattern of identical pricing (or refusals to deal) is "concerted" and therefore per se illegal; the defendant responds that the practice is merely "consciously parallel" or "interdependent" and therefore legal. Under U.S. law, to avoid summary judgment or judgment as a matter of law, a plaintiff must produce a "plus factor," evidence that "tends to exclude the possibility" that the defendants' actions were merely interdependent. Courts have identified various plus factors - for example, evidence that the alleged conduct was against the defendant's interest unless it was pursuant to an agreement - but they have been notably vague about what exactly constitutes concerted action. Obviously, the Sherman Act does not require the plaintiff to prove that the defendants formed a legally enforceable contract - the Sherman Act, after all, makes agreements illegal and therefore unenforceable. But beyond that, the law tells us little. Courts still quote the Supreme Court's sixty-year-old formulation that a Sherman Act agreement requires only "a unity of purpose, a common design and understanding, or a meeting of the minds." Unfortunately, however, this language could easily be interpreted to condemn conscious parallelism.
In this article, I argue that concerted action should be defined to require communication among rivals. I begin by describing the development of the distinction in law and theory between consciously parallel and concerted action. I then show that the received definitions of concerted action leave courts and especially juries with inadequate guidance. Economic expert testimony does not fill the void, because economic theory does not distinguish concerted and interdependent conduct. I propose, building on the recent work of Oliver Black, that the distinguishing characteristic of concerted action is communication among rivals, not only of intentions, but also of the firms' reliance on their rivals' actions in choosing a common course of action. I argue that the proposed definition has implications for U.S. antitrust law. First, it is at least consistent with the older Supreme Court cases. Second, it helps us evaluate whether various public announcements or private communications justify the inference that parallel conduct is concerted. Finally, courts applying the standard plus-factors analysis in recent years have implicitly required something like the sort of communications in the proposed definition, even though they continue nominally to apply the received nebulous definitions.
Including communication in the definition of concerted action would have limited consequences. Communication is itself an ambiguous term that requires clarification. Even if it can be defined with reasonable clarity, courts will still be required to determine whether proven communications satisfy the definition. Moreover, plaintiffs would not necessarily be required to produce direct evidence of communications that meet the definition, so long as they can offer circumstantial evidence that would permit an inference that the requisite communications have occurred. Thus, the problem of inferring an agreement from ambiguous evidence, including communications of various kinds, will remain under the proposal. But at least courts, juries, and litigants will know better what are supposed to be inferring.
Keywords: Sherman Act, agreement, tacit collusion, conspiracy, cartel, conscious parallelism
JEL Classification: D43, K21, K41, L13, L41
Suggested Citation: Suggested Citation