Direct Evidence of a Sherman Act Agreement

The Supreme Court once said, “[C]ircumstantial evidence is the lifeblood of antitrust law.” That was in a merger case, but the observation could also apply to price-fixing litigation under Section 1 of the Sherman Act. Claims of price fixing and other per se violations of Section 1 usually turn on whether circumstantial evidence proves that the defendants formed an agreement—the “contract, combination . . . or conspiracy” the statute requires. Motions for summary judgment test the legal sufficiency of the plaintiffs’ evidence of agreement. Under Matsushita, courts resolving these motions usually rely on a framework of “plus factors” to evaluate whether the plaintiff’s circumstantial evidence raises a plausible inference of agreement, one that “tends to exclude the possibility” the defendants were simply pricing interdependently, as oligopolists typically (and lawfully) do. Under Twombly, courts faced with motions to dismiss for failure to state a claim, evaluate the plausibility of inferring agreement from circumstantial evidence the complaint alleges.

In these cases, courts usually begin by saying that, as usual in Section 1 cases, the plaintiff has no direct evidence of agreement—evidence like a “recorded phone call” that is “explicit and requires no inferences to establish” that the necessary direct communications occurred. Direct evidence is rare, they explain, because conspirators, fearing detection and penalties, will try hard not to create any. Even with access to discovery, plaintiffs usually fail to find any direct evidence, despite their best efforts.

When plaintiffs claim to have found direct evidence, the courts usually disagree and treat all of the plaintiff’s evidence as circumstantial. But, as I will show, courts sometimes do find that plaintiffs have produced (or pleaded) direct evidence of agreement. A close look at these cases, I argue, helps clarify what courts mean by a Section 1 agreement and how they expect plaintiffs to prove that one exists.

In the next Part, I consider the relationships among the concepts of direct evidence, agreement, and sufficiency. In Part II, I show that, in general, courts place evidence on the spectrum of direct and circumstantial based on how completely and clearly the evidence represents the alleged agreement. I also show how that same choice affects the courts’ analysis of the sufficiency of the evidence (or allegations) on motions for summary judgment and motions to dismiss. In Part III, I examine decisions in each of the categories of evidence that courts have characterized as direct—documents, recordings, testimony, and admissions. Finally, I argue that, even when direct evidence is not present, the courts’ applications of the concept of direct evidence can provide a model for evaluating the sufficiency of circumstantial evidence of communications as a decisive plus factor in the proof of agreement. Circumstantial evidence then becomes, as some courts have said, “proxies for direct evidence.”

Continue reading the full text of this article and citations in PDF format.