On Thursday, April 9, 2015, the Seventh Circuit affirmed the district court’s grant of summary judgment for AT&T Mobility LLC, Verizon Wireless LLC, T-Mobile USA Inc. and Sprint Corp., in a text messaging price-fixing litigation. In re Text Messaging Antitrust Litigation, case number 14-2301. Plaintiffs alleged that these wireless telephone providers and a trade association to which those companies belong, The Wireless Association, conspired to raise the price of “price per use” text messages from 2005 to 2008 in violation of Section 1 of the Sherman Act. In May 2014, the district granted defendants’ motion for summary judgment, and the plaintiffs appealed. On appeal, the plaintiffs argued that the lower court’s ruling should be reversed because 1) they uncovered “smoking gun” emails showing a defendant employee admitting to collusive behavior, 2) the risk of losing customers made it irrational for the providers to raise the price unless they agreed to all implement increases and 3) The Wireless Association orchestrated the exchange of information between defendants. The Seventh Circuit found these arguments unpersuasive.
In writing the opinion for the Seventh Circuit, Judge Richard Posner explained that “follow-the-leader” pricing, also known as “conscious parallelism” or “tacit collusion,” does not violate the Sherman Act. Instead, to survive summary judgment, plaintiffs must present sufficient evidence of “express collusion.” The plaintiffs failed to do so. First, Posner addressed the plaintiffs’ purported “smoking gun” e-mails from a T-Mobile employee. In one of these e-mails, the employee called a T-Mobile price increase “collusive [sic] and opportunistic.” Upon a review of the language in the smoking gun e-mails as well as other missives from this employee, Posner determined that nothing in the e-mails suggested that the employee was accusing T-Mobile of express collusion; the e-mails were discussing legal, follow-the-leader pricing. In fact, Posner even admonished the plaintiffs for wasting so much of the space in their briefs on these e-mails. Second, Posner explained the weaknesses in the plaintiffs’ argument that, but for an agreement with its competitors, a provider would not risk losing customers to raise the price. Mainly, this argument ignored the fact that a seller cares about total revenues, not the number of customers. Even if a seller loses a third of its customers by doubling its price, then the seller is still earning greater revenues. Third, Posner found the plaintiffs’ argument that defendants colluded at trade association meetings unconvincing. Because the plaintiffs offered no evidence regarding the content of the information exchanged at these meetings, the court had no basis to infer that the gatherings were used for collusive purposes. Overall, the plaintiffs’ evidence was equally consistent with independent behavior as it was with conspiracy and, therefore, insufficient to overturn the lower court’s summary judgment ruling.
