Antitrust Law, Appellate + Supreme Court, and Litigation
The Supreme Court issued a noteworthy decision today that raises the pleading standards for plaintiffs alleging conspiracies in violation of Section 1 of the Sherman Act. The case, Bell Atlantic Corp. v. Twombly, is important for businesses because it limits plaintiffs’ ability to bring speculative antitrust claims that lead to expensive discovery and set in motion the heavy machinery of antitrust litigation. Plaintiffs must now allege facts to support a “plausible” showing that the challenged conduct is the product of conspiracy rather than independent decision-making; allegations of parallel conduct that are “consistent with” a conspiracy, coupled with a conclusory assertion that a conspiracy existed, are insufficient.
The case involved allegations that the Baby Bells that emerged from the breakup of AT&T (known as ILECs, or incumbent local exchange carriers) had conspired in two respects: first, to deny competitors access to their regional telecommunications networks, and second, to refrain from competing with one another in their respective markets. As evidence of the conspiracy, plaintiffs alleged that the ILECs had thwarted the efforts of CLECs (competitive local exchange carriers) to access their networks, and that each had declined to compete outside of their own home regions. The Supreme Court reasoned that although the defendants’ conduct was parallel, it was consistent with independent decision-making, as each had an interest in avoiding competition from either the CLECs or their fellow ILECs. Accordingly, the Supreme Court, reversing the Second Circuit, held that the district court properly dismissed the complaint.
The key implications of Twombly are:
The Twombly decision underscores that adherence to these principles is particularly important in antitrust cases because of the “enormous expense of discovery,” and the prospect that such costs will lead defendants to settle even “anemic cases” in which the defendants would likely prevail and to refrain from engaging in pro-competitive business activities that may be mischaracterized as anticompetitive. Although the Court denied that it had singled out antitrust cases for heightened pleading standards, the decision plainly instructs the lower courts stringently to apply the standards articulated in Twombly in future antitrust cases.
©1996-2019 Morrison & Foerster LLP. All rights reserved.