The U.S. Third Circuit Court of Appeals (Third Circuit) recently held that evidence of parallel price increases and other circumstantial evidence was insufficient to show a price-fixing conspiracy, but rather indicated legal “conscious parallelism” by competitors. In Valspar Corp. v. E. I. Du Pont De Nemours & Co., No. 16-1345, the court ruled that evidence of parallel price increases in oligopolistic markets is insufficient on its own to establish a price-fixing conspiracy.
Key takeaways from the case:
- Price-fixing plaintiffs relying on circumstantial evidence in oligopolistic markets face a high standard in the Third Circuit.
- Antitrust price-fixing cases are highly fact-dependent, and civil plaintiffs may still bring cases based solely on circumstantial evidence, including private correspondence and public announcements.
- The success of ambiguous evidence in a price-fixing case involving an oligopolistic market may depend upon where the case is located. In a related case in another circuit on the same set of facts the court denied defendants’ motion for summary judgment.
The market for titanium dioxide—a pigment used in paint and other coatings—is characterized by high barriers to entry and dominated by a handful of firms. Valspar, a large-scale purchaser of titanium dioxide, alleged that a group of titanium dioxide suppliers, including DuPont, conspired to increase prices between 2002 and 2013, resulting in unlawful overcharges.
To support its theory, Valspar pointed to 31 announced parallel price increases among the alleged conspirators over the 12-year period. In the absence of direct evidence of a conspiracy, Valspar alleged circumstantial evidence, including that
1. The suppliers participated in meetings and data sharing through an industry association.
2. The suppliers used industry consultants to funnel information among each other; and
3. There were various internal emails among the suppliers discussing discipline, price increases and market share.
The District Court for the District of Delaware granted summary judgment in favor of DuPont in 2016, finding that there was no evidence of an actual agreement to fix prices. Valspar Corp. v. E.I. du Pont de Nemours, 152 F. Supp. 3d 234 (D. Del. 2016).
The Third Circuit’s Opinion: “Conscious Parallelism,” Not Conspiratorial Conduct
The appellate court agreed that the 31 parallel price increase announcements were not indicative of a conspiracy. Instead, the price increases were consistent with “conscious parallelism,” which holds that competitors in an oligopolistic market will raise prices in response to rivals’ price increases, if they believe it will maximize industry profits. Since these parallel price increases did not show anything beyond the “mere interdependence” among suppliers typical to an oligopolistic market, the court found that this evidence was insufficient to create a reasonable inference of a conspiracy.
To establish a conspiracy, Valspar needed to present sufficient evidence to show that the suppliers exchanged assurances of common action or adopted a common plan. The court found that the circumstantial evidence presented by Valspar was weaker than similar evidence in cases where summary judgment had been granted, and ultimately failed to raise an inference of conspiracy.
First, the participation by DuPont and other competitors in a data-sharing program where anonymized data was shared and redistributed by a trade association was insufficient to show a conspiracy because there was no evidence that price information was collected and the data did not allow suppliers to calculate competitors’ market shares. Relatedly, Valspar’s claim that the alleged conspirators used meetings to communicate pricing plans was insufficient because it only showed opportunity to conspire but not proof of an actual agreement.
Nor was Valspar’s claim that the conspirators used industry consultants to funnel information among each other probative of conspiracy. Instead these actions were found to be consistent with rational behavior in an oligopoly because suppliers would want to obtain as much information as possible about their competitors. Further, although certain emails among competitors that discussed price and market share raised “some suspicion” of anticompetitive conduct in the court’s mind, the court ultimately found that those emails simply showed that suppliers were implementing expected pricing strategies in response to conscious parallelism. Last, certain below-market inter-competitor sales did not support a theory of profit redistribution, as many sales were made in emergency situations or in connection with cross-licensing agreements.
In total, the court found that the evidence was not “close to showing” that a conspiracy had occurred and affirmed the district court’s verdict.
Dissent: “An Unworkable Burden”
In a strongly worded dissent, Judge Stengel (Chief U.S. District Judge for the Eastern District of Pennsylvania, sitting by designation) found that the majority had imposed an “unworkable burden” for plaintiffs seeking to prove an antitrust price-fixing case with circumstantial evidence. The dissent analyzed the circumstantial evidence and found that there were sufficient factual issues to send the case to a jury. In particular, the “sheer number” of parallel price increases and inflammatory language in emails among competitors relating to pricing indicated that there was sufficient evidence of conspiracy to survive summary judgment.
Valspar has filed a petition for rehearing en banc before the Third Circuit.
Opposite Result Reached In Titanium Dioxide Litigation in Maryland
The import given to circumstantial evidence in a price-fixing case involving an oligopolistic market may depend on the forum in which the case is brought.
Prior to filing suit in the case against DuPont, Valspar opted out of a class action suit in the U.S. District Court for the District of Maryland by a class of titanium dioxide purchasers against DuPont and other suppliers. Although faced with essentially the same record as the Delaware District Court in Valspar, the Maryland District Court denied the suppliers’ summary judgment motion in that case, finding–similar to the dissent in Valspar–that the “sheer number of price increases” and the various inter-competitor communications regarding pricing raised “ample evidence” of conspiracy, such that a jury could conclude that the suppliers agreed to raise prices. In re Titanium Dioxide Antitrust Litig., 959 F. Supp. 2d 799 (D. Md. 2013). The parties settled the class action suit before trial.
The Third Circuit’s ruling in Valspar holds that evidence of mere parallel conduct in oligopolistic markets is insufficient to establish a price-fixing conspiracy. In light of the Valspar opinion, it will become relatively more difficult for a plaintiff in the Third Circuit to successfully establish an antitrust price-fixing claim through purely circumstantial evidence in an oligopolistic market.
The Third Circuit’s opinion also appears to hold plaintiffs to a higher standard in that circuit to come forward with clear, compelling circumstantial evidence when alleging price fixing in an oligopolistic market.
By their nature antitrust price-fixing cases are highly fact-dependent and antitrust suits may still be brought by plaintiffs based solely on circumstantial evidence. Such evidence may not only include private communications between competitors, but may also include public statements or announcements made by one competitor that lead to action by others. The impact of such emails and public statements will depend on a variety of fact-specific issues, including the specific subjects of the communication and the timing of the communication in relation to the allegedly collusive actions. Depending on the facts, however, circumstantial evidence alone may be sufficient to survive summary judgment and proceed to trial.
Further, it is clear that courts in different circuits may reach different results in assessing whether circumstantial evidence is sufficient, even when faced with the same set of facts, as evidenced by the competing judgments in the Valspar and Titanium Dioxide cases.