- Research Handbooks in Law and Economics series
Edited by Einer R. Elhauge
Chapter 8: The Plausibility of Twombly: Proving Horizontal Agreements After Twombly
8 The plausibility of Twombly: proving horizontal agreements after Twombly 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...
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