September 28, 2015

Third Circuit Wraps Up Chocolate Price-Fixing Case

By Paul Saint-Antoine, Todd N. Hutchison, and Brynne S. Madway

On September 15, 2015, the United States Court of Appeals for the Third Circuit affirmed the district court’s summary judgment decision in In re Chocolate Confectionary Antitrust Litigation, which we reported on last year. The Third Circuit’s opinion provides defendants in price-fixing cases, particularly those involving oligopolistic markets, with an important precedent limiting the circumstances in which an antitrust conspiracy can be inferred from parallel conduct.

In February 2014, Chief Judge Christopher C. Conner of the United States District Court for the Middle District of Pennsylvania granted summary judgment to the defendant chocolate manufacturers. The conspiracy claim in In re Chocolate Confectionary Antitrust Litigation arose from three allegedly parallel price increases between 2002 and 2007. The plaintiffs had attempted to avoid summary judgment by arguing that the defendants had engaged in coordinated communications, by alleging that defendants could have had access to a competitor’s sensitive business information, and by pointing to the existence of a price-fixing conspiracy involving chocolate sales in Canada.

The Third Circuit upheld the district court’s summary judgment decision. First, relying on InterVest v. Bloomberg, L.P., the Third Circuit panel noted that plaintiffs in a conspiracy case needed to offer evidence that the defendants had a common design or plan. Also, like the district court, the panel relied on the U.S. Supreme Court’s Matsushita decision to limit the adverse inferences of a conspiracy that may be drawn from ambiguous evidence. In particular, the Third Circuit reaffirmed the antitrust principle that conscious parallel pricing is lawful, and that evidence of parallel pricing in an oligopoly is not sufficient by itself to permit an inference of an antitrust conspiracy.

Plaintiffs must also point to evidence supporting the existence of “plus factors.” Citing the Third Circuit’s prior decision in Flat Glass, the panel examined the plaintiffs’ evidence relative to the plus factors: motive, evidence that the defendants acted contrary to their own interests, and evidence of a traditional conspiracy. According to the panel, the first two factors did not answer the question because, as in many cases, they “largely restate the phenomenon of interdependence.” Indeed, although the panel agreed with the plaintiffs that the district court failed to properly credit their evidence on the “action contrary to self-interests” plus factor, the panel held that the plaintiffs had not offered evidence to suggest the increases were the result of anticompetitive conduct as opposed to oligopolistic market forces.

The Third Circuit opinion also examined the non-economic evidence of a conspiracy proffered by the plaintiffs. First, the panel determined that the plaintiffs’ evidence related to a prior Canadian conspiracy involving chocolate sales consisted of little more than that illegal conduct in Canada that could be repeated in the United States. It observed that different individuals participated in the Canadian conspiracy than those alleged to have participated in the alleged U.S. conspiracy. In addition, the panel explained that there was little evidence that anyone in the United States was aware of the Canadian conspiracy, aside from defendant Hershey.

The remainder of the plaintiffs’ evidence—opportunity and “improper” communications, departure from pre-conspiracy conduct, and pre-textual explanations for price increases—did not support a reasonable inference of a conspiracy. On those issues, the panel observed that under prior Third Circuit decisions in Baby Food and Flat Glass, the possession of a competitor’s information is not sufficient to show concerted action. Notably, the Third Circuit also held that evidence of pretext alone is not sufficient to withstand summary judgment. Even considering the non-economic evidence as a whole rather than piecemeal, the panel concluded that the plaintiffs’ summary judgment record simply did not support a reasonable inference of a conspiracy.

The Third Circuit’s opinion in In re Chocolate Confectionary Antitrust Litigation reaffirms well-established principles on summary judgment in an antitrust conspiracy case, particularly when applied in an oligopolistic market with parallel conduct. The opinion also underscores the critical need to develop a comprehensive record in these price-fixing cases, as many aspects of the Third Circuit opinion turned on fact-specific issues.

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