The Problem:

Price fixing occurs when sellers of the same product or service agree to set actual prices, establish limits on prices or discounts, or fix price-related terms of sale. Usually this means acting together to increase prices on consumers beyond what would be expected under competitive market conditions. The problem is, direct evidence of an actual agreement is hard to find, particularly in the real world, where “agreements” occur informally, but no less obviously, at trade association meetings or on earnings calls.

Price fixing tends to occur in industries that have already seen a lot of consolidation, which makes practical sense because it’s easier for a smaller number of actors to come to agreement.[1] Fewer actors also means more direct accountability among the agreeing parties and therefore less risk that another corporation will undermine the agreement. When consolidation among dominant firms is paired with under-enforcement of laws that prohibit anti-competitive behavior, price fixing occurs in plain sight.

Like other antitrust laws, existing laws against price fixing have been watered down in a manner that has deterred enforcement and allowed for violations to occur with impunity. Key to this development was the Supreme Court’s 2007 decision in Bell Atlantic Corp. v. Twombly.[2] In that case, the Court placed the burden on victims of price fixing to plead exceptionally detailed facts about conspiracies between dominant corporations at the outset of litigation. This standard requires plaintiffs to provide proof before even being able to compel evidence, even when litigation would later prove that the defendants illegally fixed prices. This sets a harmful precedent that has all but barred victims of price fixing from seeking relief. The Supreme Court’s decision aligned with a problematic history of cases, wherein circumstantial evidence makes a strong case that dominant corporations have worked together to fix prices, but courts have nevertheless rejected otherwise meritorious price-fixing cases from advancing beyond the earliest stages of litigation.[3]

In the end, dominant corporations and cartels have been let off the hook while buyers — and regular consumers — pay the unfair price. The uniquely high burden to definitively prove price fixing at the outset of a case has been used to shield large corporations, deter enforcement, and leave victims of price fixing with an unclear path toward relief.

The Solution:

States can make it possible for victims of price fixing to assert illegal price fixing in the early stages of a case, in such a way that the burden is on dominant corporations to prove that they haven’t engaged in illegal price fixing.

Model Legislation:

Model legislation to combat rampant illegal price fixing would:

• Create a presumption that illegal price fixing has occurred, based on parallel pricing and other indicators suggestive that price fixing was the result of an agreement among dominant corporations.
• Allow cases to survive motions to dismiss or motions for summary judgment when plaintiffs allege circumstantial evidence of collusion and communication (i.e., even if that behavior is consistent with “conscious parallelism”).
• Shift the burden of proof to dominant corporations to demonstrate that they did not engage in illegal price fixing.
• Empower courts to bar people who violate price fixing laws from returning to the industries in which they committed illegal acts.
• Give victims of price fixing their day in court, rather than force them to go through arbitration proceedings, which tend to favor dominant corporations.
• Establish a whistleblower bounty program, shielding those who come forward with information of price fixing from retaliation by employers, buyers, or sellers.

Example Law: Economic Liberties Model Legislation to Stop Monopoly Price Hikes (link); Pennsylvania House Bill 2642 (the “Stop Price Fixing Act”; link)

Notes:

[1] As described in the introduction to this toolkit, consolidation has occurred across the vast majority of markets, see White House 2021 Executive Order, supra note 2.

[2] Bell Atl. Corp. v. Twombly, 550 U.S. 544, 553 (2007).

[3] See, e.g., Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984); Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 227 (1993); In re Baby Food Antitrust Litig., 166 F.3d 112 (3d Cir. 1999); In re Chocolate Confectionary Antitrust Litig., 801 F.3d 383 (3d Cir. 2015); Valspar Corp. v. E.I. DuPont De Nemours and Co., 873 F.3d 185 (3d Cir. 2017); Kleen Prods. LLC v. Georgia-Pacific LLC, 910 F.3d 927 (7th Cir. 2018); In re Dynamic Random Access Memory (DRAM) Indirect Purchaser Antitrust Litig., No. 21-15125, 2022 WL 665236 (9th Cir. Mar. 7, 2022).