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‘McWane’: Tacit Coordination Versus Illegal Agreement

Shepard Goldfein and James Keyte, New York Law Journal, Vol 251, No. 46, March 2014

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For the first time in nearly two decades, Federal Trade Commission staff “lost” an administrative complaint as the commission dismissed price-fixing allegations against McWane Inc. In the case, McWane Inc. Ltd., the commission affirmed the exclusive dealing claim against the company, but it dead-locked 2-2 (along party lines) on the price-fixing claims. Unfortunately, the lack of a fifth commissioner to break the tie left observers without a clear statement on how—at least within the FTC—to dissect price-fixing allegations and proof, and immediate reactions to the decision expressed disappointment at the lack of guidance. Nevertheless, there are at least a few lessons to draw from McWane. First, the ALJ’s underlying finding in favor of defendants shows how the analytical framework of Twombly—a pleading case—and Matsushita—decided on summary judgment—also impact the assessment of evidence on a full trial. In oligopoly markets, proof of tacit coordination (i.e., expected interdependent behavior) will not be enough; there needs to be a preponderance of evidence demonstrating the parties’ conscious commitment to a common plan or scheme to fix prices. Second, actually engaging in lawful, tacit coordination in an oligopolistic market still remains a very dangerous thing to do. The Democratic commissioners, in particular, are increasingly placing emphasis on centralization of pricing authority as a “super plus factor,” which could become dispositive if incoming commissioner Terrell McSweeny sees eye to eye with her Democratic colleagues. We explore these issues below.

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