Research Handbook on the Economics of Antitrust Law

Research Handbook on the Economics of Antitrust Law

Research Handbooks in Law and Economics series

Edited by Einer R. Elhauge

One might mistakenly think that the long tradition of economic analysis in antitrust law would mean there is little new to say. Yet the field is surprisingly dynamic and changing. The specially commissioned chapters in this landmark volume offer a rigorous analysis of the field’s most current and contentious issues.

Chapter 8: The Plausibility of Twombly: Proving Horizontal Agreements After Twombly

Alvin K. Klevorick and Issa B. Kohler-Hausmann

Subjects: economics and finance, competition policy, law and economics, law - academic, competition and antitrust law, law and economics


Alvin K. Klevorick and Issa B. Kohler-Hausmann* I INTRODUCTION One of the most settled, and indeed commonly applauded, elements of US antitrust law is the prohibition of horizontal agreements among competing firms with regard to their price and quantity decisions. The seemingly simple language of section 1 of the Sherman Act states, ‘Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce . . . is declared to be illegal’.1 Yet, since the statute’s early days, courts and commentators have struggled to specify exactly what sort of evidence ought to suffice to show the existence of an unlawful agreement. This has been especially troublesome in the context of oligopolistic markets in which it is notoriously difficult to discern whether the appearance of parallel behavior is the product of coordinated conspiracy or simultaneous strategic, yet independent firm decisions.2 Section 1’s broad but vague prohibition of agreements in restraint of trade has spawned a long common law battle over justiciable standards. In particular, is anything more required than interdependent behavior that achieves supracompetitive returns, and if so, what more is needed and how is it to be established? There is even dispute about what constitutes interdependent behavior as opposed to independent behavior. Two important and yet conflicting policy imperatives fuel the debate over standards of proof in section 1 cases. On one hand, courts recognize the difficulty (or, in some cases, the impossibility) of obtaining direct evidence of an explicit unlawful antitrust conspiracy. Accordingly, they seek to...

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