In addition to reforming substantive antitrust doctrine, the Supreme Court in recent decades succeeded in curbing the unwarranted costs of antitrust litigation by erecting new procedural barriers to highly questionable antitrust suits. It did this principally through three key “gatekeeper” decisions, Monsanto (1984), Matsushita (1986), and Twombly (2007).
Prior to those holdings, bare allegations in a complaint typically were sufficient to avoid dismissal. Furthermore, summary judgment was very hard to obtain, given the Supreme Court’s pronouncement in Poller v. CBS (1962) that “summary procedures should be used sparingly in complex antitrust litigation.” Thus, plaintiffs had a strong incentive to file dubious (if not meritless) antitrust suits, in the hope of coercing unwarranted settlements from defendants faced with the prospect of burdensome, extended antitrust litigation – litigation that could impose serious business reputational costs over time, in addition to direct and indirect litigation costs.
This all changed starting in 1984. Monsanto required that a plaintiff show a “conscious commitment to a common scheme designed to achieve an unlawful objective” to support a Sherman Act Section 1 (Section 1) antitrust conspiracy allegation. Building on Monsanto, Matsushita held that “conduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy.” In Twombly, the Supreme Court made it easier to succeed on a motion to dismiss a Section 1 complaint, holding that mere evidence of parallel conduct does not establish a conspiracy. Rather, under Twombly, a plaintiff seeking relief under Section 1 must allege, at a minimum, the general contours of when an agreement was made and must support those allegations with a context that tends to make such an agreement plausible. (The Twombly Court’s approval of motions to dismiss as a tool to rein in excessive antitrust litigation costs was implicit in its admonition not to “forget that proceeding to antitrust discovery can be expensive.”)
In sum, as Professor Herbert Hovenkamp has put it, “[t]he effects of Twombly and Matsushita has [sic] been a far-reaching shift in the way antitrust cases proceed, and today a likely majority are dismissed on the pleadings or summary judgment before going to trial.”
Visa v. Osborn
So far, so good. Trial lawyers never rest, however, and old lessons sometimes need to be relearned, as demonstrated by the D.C. Circuit’s strange opinion in Visa v. Osborn (2015).
Visa v. Osborn involves a putative class action filed against Visa, MasterCard, and three banks, essentially involving a bare bones complaint alleging that similar automatic teller machine pricing rules imposed by Visa and MasterCard were part of a price-fixing conspiracy among the banks and the credit card companies. As I explained in my recent Competition Policy International article discussing this case, plaintiffs neither alleged any facts indicating any communications among defendants, nor did they suggest anything to undermine the very real possibility that the credit card firms separately adopted the rules as being in their independent self-interest. In short, there is nothing in the complaint indicating that allegations of an anticompetitive agreement are plausible, and, as such, Twombly dictates that the complaint must be dismissed. Amazingly, however, a D.C. Circuit panel held that the mere allegation “that the member banks used the bankcard associations to adopt and enforce” the purportedly anticompetitive access fee rule was “enough to satisfy the plausibility standard” required to survive a motion to dismiss.
Fortunately, the D.C. Circuit’s Osborn holding (which, in addition to being ill-reasoned, is inconsistent with Third, Fourth, and Ninth Circuit precedents) attracted the eye of the Supreme Court, which granted certiorari on June 28. Specifically, the Supreme Court agreed to resolve the question “[w]hether allegations that members of a business association agreed to adhere to the association’s rules and possess governance rights in the association, without more, are sufficient to plead the element of conspiracy in violation of Section 1 of the Sherman Act, . . . or are insufficient, as the Third, Fourth, and Ninth Circuits have held.”
As I concluded in my Competition Policy International article:
Business associations bestow economic benefits on society through association rules that enable efficient cooperative activities. Subjecting association members to potential antitrust liability merely for signing on to such rules and participating in association governance would substantially chill participation in associations and undermine the development of new and efficient forms of collaboration among businesses. Such a development would reduce economic dynamism and harm both producers and consumers. By decisively overruling the D.C. Circuit’s flawed decision in Osborn, the Supreme Court would preclude a harmful form of antitrust risk and establish an environment in which fruitful business association decision-making is granted greater freedom, to the benefit of the business community, consumers, and the overall economy.
In addition, and more generally, the Court may wish to remind litigants that the antitrust litigation gatekeeper function laid out in Monsanto, Matsushita, and Twombly remains as strong and as vital as ever. In so doing, the Court would reaffirm that motions to dismiss and summary judgment motions remain critically important tools needed to curb socially costly abusive antitrust litigation.