In re Text Messaging Antitrust Litigation
782 F.3d 867 (2015)
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Rule of Law:
Parallel business behavior (conscious parallelism or tacit collusion) in a concentrated market is not, by itself, a violation of Section 1 of the Sherman Act. To survive summary judgment, a plaintiff must present evidence that tends to exclude the possibility that the alleged conspirators acted independently and instead points to an actual agreement (express collusion).
Facts:
- Four wireless network providers—AT&T, Verizon, Sprint, and T-Mobile—controlled approximately 90% of the U.S. text messaging market.
- The companies were all members of a trade association, The Wireless Association, which had an elite 'leadership council' that urged members to substitute 'coopetition' for competition.
- Between 2005 and 2008, despite a steep decline in the costs of providing text messaging, all four defendant companies, in a series of steps, raised their prices for pay-per-use (PPU) text messages, with all eventually charging 20 cents per message.
- During this period, the PPU market was shrinking as heavy users switched to volume-discounted or unlimited bundled plans, leaving a customer base of infrequent users who were less sensitive to price changes.
- An executive at T-Mobile, Adrian Hurditch, sent an internal email to a colleague stating that a price increase was 'colusive [sic] and opportunistic' and asked the colleague to delete some emails in the chain which criticized T-Mobile's senior management.
Procedural Posture:
- Plaintiffs, a class of text messaging customers, filed a class action antitrust suit in federal district court (trial court) against four wireless carriers and their trade association.
- The defendants' initial motion to dismiss for failure to state a claim was denied by the district court.
- The U.S. Court of Appeals for the Seventh Circuit (intermediate appellate court) affirmed the district court's denial of the motion to dismiss in a prior interlocutory appeal.
- The case returned to the district court, where the parties engaged in three years of discovery.
- Following discovery, the defendants filed a motion for summary judgment.
- The district court granted the defendants' motion for summary judgment and entered a final judgment dismissing the suit.
- The plaintiffs (appellants) appealed the grant of summary judgment to the U.S. Court of Appeals for the Seventh Circuit.
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Issue:
Does circumstantial evidence of parallel price increases in a concentrated market, combined with an employee's internal email describing the price move as 'collusive', create a genuine issue of material fact of an express price-fixing agreement sufficient to survive a motion for summary judgment?
Opinions:
Majority - Posner
No. Evidence of parallel pricing, even when coupled with an ambiguous internal email, is insufficient to create a triable issue of fact for an illegal price-fixing agreement where the evidence is equally consistent with legal, independent parallel behavior. The court reasoned that the Sherman Act prohibits express collusion (an actual agreement) but not tacit collusion (conscious parallelism). An employee's use of the word 'collusive' in an email is not a 'smoking gun' for an express agreement, as it could just as easily refer to the legal, though perhaps unethical, practice of tacitly following a competitor's price increases. The court further explained that Hurditch's other statements, such as 'that doesn't mean we have to follow,' actually undermine the existence of a binding agreement. The remaining circumstantial evidence—a concentrated market, parallel price hikes, and price increases despite falling costs—is fully consistent with independent, rational business decisions in an oligopolistic market where firms watch each other closely and find it profitable to follow a price leader. Therefore, the plaintiffs failed to present evidence that tended to exclude the possibility of independent action, which is required to survive summary judgment.
Analysis:
This decision reinforces the high evidentiary bar for plaintiffs in antitrust conspiracy cases at the summary judgment stage. The court draws a sharp, practical distinction between illegal express collusion, which requires proof of an actual agreement, and legal tacit collusion or conscious parallelism. It establishes that circumstantial evidence must do more than just be 'consistent with' a conspiracy; it must 'tend to exclude the possibility' of independent action. This makes it significantly harder for plaintiffs to get to a jury without direct evidence of an agreement, such as testimony from a co-conspirator or documents explicitly detailing the conspiracy.
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