Rarely do antitrust decisions from the United States Supreme Court during a single term promise to have such a wide-ranging impact on businesses, both inside and outside of litigation. 2006 was one of those years. During the 2006 Term, the Court decided four cases arising under the antitrust laws: Weyerhaeuser v. Ross Simmons Hardwood Co., Bell Atlantic Corp. v. Twombly et al., Credit Suisse Securities LLC v. Billing and Leegin Creative Leather Products v. PSKS, Inc. Each decision is noteworthy in its own right; collectively, they signal a major shift in federal antitrust jurisprudence.

Weyerhaeuser limited claims of predatory buying; Twombly made new law on the requirements of pleading an antitrust conspiracy; Credit Suisse took up the antitrust immunity issue in the context of securities regulation; and Leegin overruled a nearly century-old precedent that banned as unlawful per se minimum resale price maintenance. Signifi cantly, each of these four antitrust decisions was in favor of the defendant.

In this Antitrust Update, we analyze the Supreme Court’s antitrust decisions of its 2006 term and their potentially profound impacts on businesses, both in the ordinary course of commercial dealings and in the context of antitrust litigation. We begin with the most recent antitrust decision issued by the Court, Leegin, which may ultimately prove to have the greatest impact on businesses from a day-to-day standpoint.

The Implications of Leegin for Businesses in their Ordinary Course

The Supreme Court’s June 28, 2007 ruling in Leegin Creative Leather Products v. PSKS, Inc. signaled the end of an era. Specifi cally, the ruling ended the 97-year era during which resale price maintenance, whereby suppliers enter agreements with resellers dictating resale prices, was per se illegal under Section 1 of the Sherman Act. But the ruling raises new questions about what this means for businesses with an interest in preventing or managing resellers’ discounting of their products.

One common refrain echoes in the wake of Leegin: the Supreme Court’s ruling does not mean that resale price maintenance is per se legal. Instead, the Court shifted the framework under which vertical price restraints should be analyzed from per se illegality to the so-called “rule of reason.” Under a rule of reason analysis, an agreement between a supplier and one or more of its resellers will be found in violation of the Sherman Act only if a party challenging the agreement can demonstrate that its anticompetitive effects are likely to outweigh its procompetitive effects. As such, the Court’s decision does not immunize suppliers that impose resale pricing policies from antitrust liability altogether, but it does allow them substantially more leeway in fashioning policies of this kind.

Suppliers with minimum resale price maintenance policies – or those interested in implementing such a policy – should consider Leegin from a forward-looking perspective. The supplier should consider, for example, whether it holds a dominant position in the affected market. The Leegin opinion suggests there will be little concern that the policy in question violates the Sherman Act unless the supplier has “market power,” which is defi ned in terms of the power to control prices or exclude competition in a market. Another important consideration is the impetus for the policy. A policy arising from a supplier’s independent decision will be more defensible under the Sherman Act than one adopted by a supplier in response to pressure from its resellers. The supplier should also consider whether competing suppliers have minimum resale price maintenance policies similar to its own. The Court warned in Leegin that resale price maintenance “should be subject to more careful scrutiny… if many competing manufacturers adopt the practice” as it may then facilitate collusion.

Suppliers would be well served by careful documentation of the procompetitive reasons for their minimum resale price maintenance policies – such as encouraging pre-sale services or promotional efforts and avoiding free-riding to enhance interbrand competition. Such documentation is likely to assist a supplier in defeating a challenge that the policy is anticompetitive or that the procompetitive reasons asserted by the supplier are merely a pretext for otherwise anticompetitive behavior.

Another question raised in the aftermath of Leegin is how the decision may affect the enforcement of state antitrust laws. Many state antitrust laws either contain specifi c provisions or have been interpreted to mean that courts should be guided by federal antitrust law in their application and interpretation of state antitrust laws. In Leegin, however, 37 state attorneys general submitted an amicus brief urging the Court to retain the longstanding rule of per se illegality for vertical price restraints. It is likely that at least some of those attorneys general will want to test whether a supplier’s resale price maintenance policy violates their respective state antitrust laws, even in the wake of Leegin.

How Twombly affects Antitrust Pleading Standards

The Supreme Court’s decision in Bell Atlantic Corp. v. Twombly has raised the bar for plaintiffs wishing to bring a claim of an antitrust conspiracy. In particular, in Twombly, the Court addressed the question of what facts a plaintiff claiming an antitrust conspiracy must allege in order to survive a motion to dismiss.

Before Twombly, some courts allowed claims based merely on allegations that defendants engaged in similar or “parallel” conduct to proceed to discovery. Those courts required few, if any, allegations describing how the alleged unlawful agreement was reached. For example, before Twombly, an allegation that a number of defendants raised prices at the same time may have suffi ced in establishing a claim that defendants had agreed to fi x or raise prices. Plaintiffs could proceed to discovery without alleging in the complaint how the defendants had agreed to fi x prices, where the agreement was made or who attended the meetings when the agreement was formed.

In Twombly, the Court altered the pleading requirements, holding that “an allegation of parallel conduct and a bare assertion of conspiracy will not suffi ce. Without more, parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some undefi ned point does not supply facts adequate to show illegality.” The plaintiffs in Twombly failed to meet that standard, taking into account the fi rms had previously been prohibited from competing by regulation. The plaintiffs merely alleged that the regional telephone companies – the so-called “Baby Bells” – acted in a parallel manner by, among other things, attempting to exclude non-Baby Bell competitors. The Court noted that the plaintiffs did not describe how the conspiracy was formed, such as by alleging the time, place or persons involved in meetings leading to the conspiracy. As the Court observed, if such vague allegations of efforts to resist competition were “enough to imply an antitrust conspiracy, pleading a [Sherman Act] Section 1 violation against almost any group of competing businesses would be a sure thing.”

In Twombly, the Court held that “without more,” these allegations of parallel conduct were insuffi cient to survive a motion to dismiss. In so doing, the Court overruled its 1957 decision in Conley v. Gibson to the extent it stated famously that dismissal is only appropriate if “no set of facts” would entitle the plaintiff to relief. The Court maintained, however, that its decision in Twombly did not impose a “heightened pleading standard.”

The Twombly decision should be helpful to antitrust defendants for at least several reasons. For example, it is likely to make it easier for defendants to obtain a dismissal of antitrust conspiracy claims before discovery, saving defendants signifi cant pretrial litigation costs. More generally, the Court’s stated concerns about “potentially enormous” discovery costs involved with groundless civil actions should prove helpful in other litigation contexts as well. Nevertheless, defendants should be careful about overestimating the signifi cance of Twombly for the following reasons:

  • Twombly explicitly applies only to claims based on an agreement among competitors, or claims brought under Section 1 of the Sherman Act. It is not clear that Twombly will apply to other antitrust claims, such as a monopolization claim under Section 2 of the Sherman Act, or outside the antitrust context. For example, in a recent case, Iqbal v. Hasty, the Second Circuit questioned the relevance of Twombly outside the antitrust arena.
  • The Court’s “without more” language suggests there are some circumstances in which allegations of parallel conduct may be suffi cient or at least nearly so. Although the scope and meaning of the phrase will likely be hotly contested over the months ahead, it can be argued that Twombly implies that these circumstances should be rare and that courts should determine whether the defendants’ behavior was not consistent with competitive behavior.

Few doubt that the effects of Twombly on litigation going forward will be signifi cant. Indeed, the decision has already been cited in well over 100 federal decisions. In some ways, however, the impact of the decision will be hard to measure. This is because the ruling is likely to infl uence plaintiffs’ decisions to raise conspiracy claims. The ultimate question will be the extent to which plaintiffs can avoid dismissal by adding allegations of more than parallel conduct to their complaints.

Weyerhaeuser and the Analysis of Predatory Buying Claims

In Weyerhaeuser v. Ross Simmons Hardwood Co., the Supreme Court held that an antitrust claim rooted in allegations that a party engaged in “predatory buying” should be analyzed under the same framework as claims that a party engaged in “predatory pricing” on the selling side. In a 1993 decision, Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., the Court established two prerequisites for a predatory pricing claim: (1) the defendant sold its product at a price level too low to cover its costs; and (2) the defendant has “a dangerous probability of recouping its investment in below-cost pricing.” A plaintiff’s claim of predatory pricing fails if it cannot meet the standards imposed by Brooke Group. It came as little surprise when the Court decided in Weyerhaeuser that the same standards would apply to a predatory buying claim.

As a result of the Court’s decision in Brooke Group, the chances of a plaintiff successfully bringing a Sherman Act Section 2 claim based solely on a theory of predatory pricing diminished greatly. A similar result can now be expected for claims based on a predatory buying theory in the aftermath of Weyerhaeuser.

Antitrust Immunity in Light of Credit Suisse

In Credit Suisse v. Billing, the Supreme Court revisited for the fi rst time since the early 1980s the so-called doctrine of “implied antitrust immunity.” That doctrine examines the extent to which conduct that is governed by a regulatory regime is immune from antitrust challenge because its application would confl ict with or otherwise undermine the purpose of that regulatory regime.

In Credit Suisse, class actions were brought against investment banks alleging that certain practices regulated by the Securities and Exchange Commission relating to syndication and marketing in the initial public offerings of securities violated the antitrust laws. The Court held that the investment banks’ conduct was impliedly immune from the antitrust laws, fi nding there was a “clear incompatibility” between the securities and antitrust laws, such that the securities laws “implicitly preclud[e] the application of the antitrust laws” to the alleged conduct given the SEC’s expertise and extensive regulation of underwriters and IPOs. Credit Suisse has important implications for antitrust practice and enforcement, including the following:

  • An increase in antitrust immunity arguments in industries with active regulatory oversight can be expected. Defendants that operate in heavily regulated industries will want to apply the Court’s rationales and assert implied immunity arguments in defense of antitrust claims. Credit Suisse strengthens implied immunity arguments, and lower courts will be forced to grapple with just how far the Supreme Court intended immunity to extend in regulated industries. The mere presence of a regulatory regime, however, remains insuffi cient for implied immunity to attach. Careful scrutiny and fact-specifi c analysis of the regulatory regimes at issue will be required in order to determine whether implied immunity arguments have merit.
  • The focus of the implied antitrust immunity standard has now shifted from “plain repugnancy” to “clearly incompatible.” Before Credit Suisse, the Court found implied immunity when there was a “plain repugnancy” between antitrust law and the regulatory regime. The Court in Credit Suisse seems to have lessened the burden for application of the doctrine with invocation of a “clearly incompatible” standard. Under this standard, there does not need to be an actual confl ict; it seems now that antitrust immunity may apply if the two regulatory areas merely coincide or overlap in ways that are not compatible.
  • Together with the Court’s 2004 Trinko decision, Credit Suisse encourages courts to perform a costbenefi t analysis before applying the antitrust laws to regulated conduct. The Court in Trinko cautioned that “antitrust analysis must always be attuned to the particular structure and circumstances of the industry at issue,” including the “signifi cance of regulation.”

There, the Court upheld the dismissal of antitrust claims based on conduct in the telecommunications industry given the high potential for costs (i.e., false positives) and unlikely benefi ts of antitrust enforcement.

The Court engaged in a similar cost-benefi t evaluation in Credit Suisse in fi nding antitrust immunity applied, focusing on the minimal benefi ts of antitrust enforcement given the SEC’s expertise and regulatory oversight, as well as the limitations of juries and risk of inconsistent outcomes. Credit Suisse reinforces the Court’s direction in Trinko to consider the relative value of applying antitrust law to conduct that is subject to regulation elsewhere.


These four recent decisions by the Supreme Court represent important developments in antitrust jurisprudence. They do not, however – either individually or collectively – amount to a license for companies to operate free of antitrust restraint. To be sure, antitrust challenges, whether by government antitrust enforcers or private plaintiffs, will continue, and likely at the same pace. What remains to be seen is whether antitrust plaintiffs will be able to sustain such challenges with the same frequency past the pleading stage, given the new arguments for dismissal that the Court has afforded some antitrust defendants.