Agreement and summary procedures

Standards of proof: in general, mere allegation of parallel conduct and assertion of conspiracy will not suffice - need evidence of Type 1 and Type 2 plus factors

Trial (Monsanto): need Type 1 plus factor evidence to survive a motion for judgment as a matter of law: "there must be evidence that tends to exclude the possibility of independent action by the parties" (preponderance standard)

Summary judgment (Matsushita): Monsanto standard applies at summary judgment. Moving party must show evidence of Type 1 plus factors that tend to "exclude the possibility of independent action" to survive motion for summary judgment (preponderance standard)

• Lower courts are divided about whether to also require Type 2 plus factors at this stage
• Preponderance standard: if parallel conduct is just as likely as collusion, then P should not survive a motion for summary judgment
• Need to have some strength to Type 1 factors: must tell a story about an industry prone to collusion that could only come about through express communication (rule out parallel conduct)

Complaint (Twombly): need to allege at least Type 2 and some evidence that is suggestive of Type 1 plus factors to survive a motion to dismiss at the pleading stage (plausibility standard)

• Plausibility standard per Posner: the complaint must establish a "nonnegligible probability" that the claim is valid, but the probability need not be as great as "preponderance of the evidence" connotes.
• Need Type 2 plus factors and evidence suggestive of a Type 1 plus factor

Why procedure matters: if an agreement is found, many cases will be per se illegal, so the procedural standards are the main barrier to finding liability

Algorithmic price fixing (Real Page):

• Algorithmic price fixing: can facilitate collusion in markets that aren't conducive to coordination (e.g., rental market, usually comprised of independently owned properties)
• There is an agreement between a platform and a firm, but not between firms (which is required for a violation of Section 1 - compensate by proving plus factors)
  • Key distinction: there are vertical agreements here between competitors (which would be per se illegal)
• Note that the scheme works even without an agreement between the firms, presents a problem for antitrust law (although recall the Interstate Circuit dicta that says you don't have to prove agreement for action to be illegal)

Caselaw:

Monsanto v. Spray-Rite (1984) (trial)

• Holding: to survive a motion for judgment as a matter of law (Rule 50(a)), you need at least a Type 1 plus factor
  • Standard of proof at trial is that "there must be evidence that tends to exclude the possibility of independent action by the parties" (otherwise lose as a judgment as a matter of law)

Matsushita v. Zenith (1986) (summary judgment)

• Holding: must meet the Monsanto standard to survive a motion for summary judgment (Rule 56(a))
  • Type 1 plus factor requirement: P must have some evidence that tends to exclude the possibility of independent action
• Note: most courts extend standard broadly to all Section 1 cases, require Type 1 and Type 2 plus factors to move forward (great case for defendants)

Bell Atlantic v. Twombly (2007)

• Holding: allegations of parallel conduct are insufficient to survive Rule 12(b)(6) motion, must meet Monsanto standard
  • It is just as likely that this is independent action as collusion: D's story is equally plausible as P's story, doesn't meet the preponderance standard
  • Parallel conduct is not dispositive of agreement or collusion:
    • Resisting entry is individually rational: ILECs don't want competition from CLECs
    • History of not competing made collusive parallel conduct less likely (CEO quote)
  • Judicial resources and case management: discovery is expensive, move to plausibility standard (reasonable expectation), raise bar from the Conley "no set of facts" standard
• Facts: AT&T split up into Incumbent Local Exchange Carriers (ILECs) in 1984, regulated by the Telecom Act of 1996
  • Under the Act, ILECs required to allow Competitive Local Exchange Carriers (CLECs) to use certain parts of infrastructure
  • ILECs were basically regional monopolies, tried to prevent entry of CLECs by providing inferior network connection and overbilling
  • CEO quote: competing in territory of another ILEC is wrong
• Note: did the Court follow their own standard? Many Type 2 plus factors, which would likely be enough for most courts
  • Type 2 plus factors: this improbably uniform behavior was not what Congress intended (really strong point); history of collusion; industry communication; industry background; cooperation raises antitrust risk
  • P just alleged public facts: basic idea is that if we let complaints like this go forward, we would allow burdensome cases to go forward

In re Text Messaging 1 (2010) (application of Twombly standard at pleadings)

• Holding: sufficient plus factors plead to survive motion to dismiss
  • Type 1 plus factors:
    • History of coordination through leadership counsel, "cooptition" instead of "competition," plans consolidated following meetings
    • Rising prices as costs are falling
    • As pricing had been varied, there had been an increase in price
  • Type 2: concentrated industry with four competitors
• Facts: fixed pricing in "price per use" text messaging plans

In re Text Messaging 2 (2015) (application of Matsushita standard at summary judgment)

• Holding: insufficient evidence to survive a motion for summary judgment
  • Parallel conduct is just as likely as collusion, so D wins at summary judgment
    • Type 2 plus factor: few firms
    • Rising prices as costs fell: people were moving away from per-use plans, only users left were low volume users, they were particularly insensitive to price
    • Email evidence: saying that a firm will raise price if another does first isn't collusive in an antitrust sense (even though they used the word "collusive") - this is rational behavior in a market
    • Price change after meetings: doesn't look that bad
• Facts: fixed pricing in "price per use" text messaging plans

In re Real Page, Inc. Rental Software Antitrust Litigation (2023)

• Holding: sufficient facts pled to avoid motion to dismiss the complaint for multifamily home plaintiffs (complaint of student-housing plaintiffs dismissed for other reasons)
  • Plus factors:
    • Strong factor: it doesn't make sense to give up proprietary information and pricing independence unless you think other properties are doing the same
    • Uniformity of D's actions and parallel conduct: Ds are signing up for Real Page, prices are rising in areas where Real Page use is increasing
    • Real Page is coordinating in ways that facilitate communication (algorithm encodes price information from rivals into a single price, notifies firms who has signed up for Real Page in their market)
    • There is a common motive to conspire: landlords want to make more money
    • Real Page requires justification for Ds not following price recommendations
    • High barriers to entry for competition: hard to build an apartment building
    • Inelastic demand: it is costly to move, so renters are likely to stay despite rising prices
  • Student-housing complaint didn't provide as much proof of harm as multifamily housing complaint
• Facts: renters file case against Real Page alleging property owners and managers use Real Page algorithm price recommendations to set prices above competitive levels.
  • Real Page requires property owners/managers to follow their price recommendations 70-80% of the time