Wednesday, March 20, 2019
Barak Orbach, University of Arizona addresses Interstate Circuit and (Other) Antitrust Myths. Highly recommended
ABSTRACT: Interstate Circuit v. United States, 306 U.S. 208 (1939), one of the most known Supreme Court’s antitrust opinions, introduced an evidentiary framework for conspiracy inference under Section 1 of the Sherman Act: in the absence of direct evidence, proof of conspiracy requires evidence of conscious parallelism supplemented with “plus factors,” which are circumstantial evidence that is consistent with concerted action but largely inconsistent with independent conduct. Hundreds of judicial opinions, books, monographs, and articles summarize and interpret Interstate Circuit. With some minor variations, the summaries of the case are similar in their details, yet materially incomplete and erroneous. As commonly described in judicial opinions and the literature, Interstate Circuit is a myth.
This Article examines the Interstate Circuit myth. First, the Article presents the core elements of the myth and explains why courts and scholars should have been aware of its flaws. The Article then summarizes antitrust standards and concepts for which courts and scholars cite Interstate Circuit as a precedent and, in certain contexts, the leading and even paradigmatic precedent. Second, the Article studies the development of the contractual arrangements that Interstate Circuit found to be a conspiracy in violation of Section 1 of the Sherman Act. The Article shows that the challenged contractual arrangements were products of extensive coordination and negotiations among the defendants. More precisely, the Article shows that the alleged conspiracy concerned parallel compliance with a plan that resolved failed coordination efforts among competitors and that the company that developed the plan was a partially-owned subsidiary of one of the competitors. Third, the Article offers several doctrinal refinements for conspiracy inference standards arising from the study of the Interstate Circuit’s alleged conspiracy. The study illustrates that evidence of intricate relationships among competitors could and should serve as circumstantial evidence that may support the inference of antitrust conspiracy, although standing alone such evidence does not prove the existence of conspiracy.