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<img class="alignright wp-image-1600 size-medium" src="https://antitrustadvocate.bakerhostetlerblogs.com/wp-content/uploads/sites/14/2015/06/Cell-phones-200x300.jpg" alt="Cell phones" width="200" height="300">Discovery in antitrust cases often involves a search for smoking-gun documents. Those documents can consist of emails proving that competitors conspired to raise prices, removing the difficulties faced by prosecutors or civil plaintiffs in proving actual injury to competition. Such precious nuggets lead inexorably to near-automatic liability for the defendants. But what if the nugget turns out to be fool’s gold?

Such a not-so-hot document underpinned the recent affirmance of summary judgment for the defendants by the United States Court of Appeals for the Seventh Circuit, in a class action alleging price-fixing by the major providers of mobile telephone text messaging services.[1]

A T-Mobile middle manager emailed a colleague that a T-Mobile price increase for a particular type of text messaging service was “nothing more than a price gouge on consumers” and then added in a second email that “at the end of the day we know there is no higher cost associated with messaging. The move [his own company’s price increase] was colusive [sic] and opportunistic.” The court noted: “The misspelled ‘collusive’ is the heart of the plaintiffs’ case.”

The plaintiffs contended that the “colusive” reference in the email was direct evidence of a price-fixing conspiracy. The court disagreed, observing that there was nothing about the email that suggested that its author believed there was a conspiracy among the text message carriers. Rather, the court said, the email referred to lawful tacit collusion, in which “[c]ompetitors in concentrated markets watch each other like hawks” and follow each other’s price changes without any agreement to do so, a lawful phenomenon sometimes referred to as conscious parallelism, interdependent behavior, or simply follow-the-leader.

The court contrasted this with express collusion, in which competitors communicate with each other and reach an agreement to eliminate or restrict competition. The reference to “opportunistic” conduct and to “a price gouge” proved nothing additional, the court said, because the email described “seizing an opportunity to gouge consumers—and in a highly concentrated market, seizing such an opportunity need not imply express collusion.” “Express collusion violates antitrust law,” the court said. “[T]acit collusion does not.”

The unfortunate email dramatizes the difficulty in managing an effective corporate antitrust compliance program. The emails’ author used a loaded term—“collusion”—evidently with no understanding of the distinction between tacit and express collusion. The plaintiffs pounced on those emails—the court noted that their briefs’ cited the author’s name no fewer than 160 times—and the companies escaped only after years of expensive litigation. The resulting lesson is easy to say but hard to achieve: don’t put anything in an email that you wouldn’t want your mother or father to read.

[1] In re: Text Messaging Antitrust Litig., 782 F.3d 867 (7th Cir. 2015).

Collusion Course: The Limits of Hot Documents