But even though “efficiency defenses” cannot justify per se violations, courts do consider efficiency evidence in price-fixing (and other per se) cases for different reasons. Defendants might argue, for example, that the efficiencies of their agreement are so obvious they place it outside the per se category, even if the agreement literally fixes prices. In this article, however, I examine a more fundamental (and frequent) use of efficiency evidence in per se cases: to support defendants’ denials that they ever formed the “agreement, tacit or express” that Section 1 requires. Rivals form an express agreement by communicating their mutual assurances; they form a tacit agreement by communicating their competitive intentions in ways that guide their subsequent actions. Both forms of agreement have very different legal consequences from permissible independent or interdependent conduct.
The line between unlawful agreement on the one hand and lawful interdependent or independent action on the other drives parties’ litigation strategies in per se cases. Under Matsushita, courts must grant summary judgment if the inference of agreement from the plaintiffs’ evidence is not “reasonable” compared to the “competing inference” from defendants’ evidence of independent action. If the record on summary judgment includes circumstantial evidence, such as interfirm communications, suggesting the defendants agreed, defendants can point to efficiency evidence supporting the contrary inference that their communications were welfare-enhancing and part of the process of “permissible competition.” I show in this article that efficiency evidence defendants offer to buttress their denials of agreement can raise competing inferences sufficient to justify summary judgment.
In some per se cases, efficiency evidence plays little or no role at the summary judgment stage. If, for example, the plaintiff’s evidence of agreement after discovery is so thin that it fails to meet its burden of production, the defendants might win on a motion for summary judgment just by “pointing out . . . that there is an absence of evidence to support the nonmoving party’s case.” At the opposite extreme, if the plaintiff produces direct or strong circumstantial evidence, such as documents detailing the agreement, then no evidence of efficiencies can justify summary judgment. But in cases where the plaintiffs offer more ambiguous circumstantial evidence of agreement, as they do in most litigated cases, efficiency evidence can justify summary judgment by raising competing inferences that the defendants’ actions were competitive.
This kind of efficiency evidence, unlike the “efficiencies defense” in merger cases or “procompetitive justifications” in a rule of reason case under Section 1, does not attempt to justify the consequences of defendants’ conduct. Instead, it offers an efficiency counternarrative to undermine the inference that the defendants ever entered into an anticompetitive agreement. As one court said, “Defendants are entitled to submit evidence and argument, not to show that the alleged price fixing agreement was justified, but to show that the alleged information exchanges are not necessarily indicative of a price fixing agreement.” The defendant, in other words, cannot offer evidence to show the alleged per se illegal agreement reduced costs; it can only offer evidence showing their actions reduced costs to contradict the inference their actions formed an agreement.
I am using the term “efficiency evidence” expansively in this article to encompass episodes of competition, cost-saving justifications for output restrictions, common stimuli for parallel conduct, and arms-length or other justifiable interactions among rivals, such as participation in association meetings or negotiation of welfare-enhancing transactions. Any such evidence can make it less reasonable to infer that communications or parallel conduct derive from a conspiratorial agreement to restrain trade.
As I explain in a later Part, evidence showing only lawful interdependent conduct by oligopolists can also challenge plaintiffs’ evidence of prior agreement, even if that conduct raises prices above marginal cost. So, for example, evidence oligopolists deliberated individually over whether to follow a price increase can undermine an inference of collusion in much the same way as evidence of cost-saving or overtly competitive behavior. This kind of conduct is inefficient by comparison to hypothetical vigorous competition because it raises prices above marginal cost, but is relatively efficient by comparison to plaintiffs’ allegations of an express cartel. Of course, the mere fact that prices are above marginal cost is not itself efficiency evidence, because it is consistent with both agreement and interdependence.
My account begins in the next Part with an analysis of the role of efficiency evidence in Matsushita’s summary judgment standard. (As I will explain, the issues are different on motions to dismiss.) Under Matsushita, strong efficiency evidence—such as “cutting prices in order to increase business”— can raise inferences of independent conduct sufficiently plausible to make it unreasonable for a jury to infer agreement from plaintiff’s circumstantial evidence of agreement. In cases where defendants can produce that kind of strong efficiency evidence, plaintiffs must produce stronger evidence of agreement because false positive findings of liability deter efficient conduct that antitrust law promotes. Courts determine what kinds of conduct are worthy of this greater deference using what John Lopatka and I have called economic authority—a set of accepted economic models and empirical generalizations courts view as part of antitrust law. In doing so, courts have expressed a special hesitancy to infer agreement from conduct whose substance31 or settings32 they view as beneficial.
In Part II, I analyze what generally determines the strength of the competing inferences either of agreement or efficiency. In Part III, I show that, if plaintiffs produce direct or strong circumstantial evidence that the defendants privately communicated assurances about future pricing, then no defenses are going to justify summary judgment. Fewer intrinsic ambiguities in the evidence of agreement leave fewer avenues for efficiency evidence to raise the necessary competing inferences. In Part IV, however, I show that weaker evidence of agreement invites competing evidence that the defendants’ communications advanced efficiency goals, or that defendants’ other conduct was inconsistent with the existence of an agreement.
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