Tacit Agreement Under Section 1 of the Sherman Act

Posted by Social Science Research Network

Tacit Agreement Under Section 1 of the Sherman Act William H. Page (University of Florida)

Abstract: In cases alleging per se violations of Section 1 of the Sherman Act, a central issue is whether the defendants acted pursuant to an agreement and not independently or merely interdependently. A major source of uncertainty in these cases is the meaning of “tacit agreement,” a category that the Supreme Court (most recently in Twombly) has continued to include within Section 1, even as it has insisted that “mere interdependence” or tacit collusion is per se lawful. In this article, I try to clarify the meaning and practical significance of the category of tacit agreement. After showing how Twombly and earlier cases used the term, I try to explain its place in the hierarchy of means of coordination, distinguishing it especially from mere interdependence on the one hand and express agreement on the other. Then I argue for a definition of tacit agreement — interdependent conduct coordinated by prior conversations that limit strategic uncertainty — and suggest what sorts of communications fit that definition. I rely in that discussion to identify cases that illustrate tacit agreement, identifying what I call paradigm and hybrid examples. Finally, I describe four categories of communications among rivals, depending upon whether the communications are public or private, and whether they relate to present or future conduct. Both the clarified definition and the categories of communications can, I suggest, help courts resolve, at every state of litigation, whether the parties have alleged or sufficiently proven that coordination amounts to a tacit agreement.