In re High Fructose Corn Syrup Antitrust Lit.

• Decision Date: 18 June 2002
• Docket Number: No. 01-3565.,01-3565.
• Citation: 295 F.3d 651
• Parties: In re HIGH FRUCTOSE CORN SYRUP ANTITRUST LITIGATION. Appeal of A & W Bottling, Inc., et al.
• Court: U.S. Court of Appeals — Seventh Circuit

295 F.3d 651

In re HIGH FRUCTOSE CORN SYRUP ANTITRUST LITIGATION Appeal of A & W Bottling, Inc., et al.

No. 01-3565.

United States Court of Appeals, Seventh Circuit.

Argued May 17, 2002.

Decided June 18, 2002.

Rehearing and Rehearing En Banc Denied August 5, 2002.^*

COPYRIGHT MATERIAL OMITTED

H. Laddie Montague, Jr., Berger & Montague, Philadelphia, PA, Robert N. Kaplan, Gregory K. Arenson (argued), Kaplan, Fox & Kilsheimer, New York City, Michael J. Freed, Much, Shelist, Freed, Denenberg, Ament & Rubenstein, Chicago, IL, for Plaintiffs-Appellants.

Stephen M. Shapiro (argued), Mayer, Brown, Rowe & Maw, Chicago, IL, Mark W. Ryan, Mayer, Brown, Rowe & Maw, Washington, DC, John P. Carreon, Winston & Strawn, Chicago, IL, Steven R. Kuney, Williams & Connolly, Washington, DC, for Defendants-Appellees.

Before BAUER, POSNER, and KANNE, Circuit Judges.

POSNER, Circuit Judge.

The plaintiffs appeal from the grant of summary judgment for the defendants in an antitrust class action charging price fixing in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. 156 F.Supp.2d 1017 (C.D.Ill.2001). The defendants are the principal manufacturers of high fructose corn syrup (HFCS) — Archer Daniels Midland (ADM), A.E. Staley, Cargill, American Maize-Products, and CPC International (which has settled with the plaintiffs, however, and thus is no longer a party). The plaintiffs represent a certified class consisting of direct purchasers from the defendants.

HFCS is a sweetener manufactured from corn and used in soft drinks and other food products. There are two grades, HFCS 42 and HFCS 55, the numbers referring to the percentage of fructose. HFCS 55, which constitutes about 60 percent of total sales of HFCS, is bought mostly by producers of soft drinks, with Coca-Cola and Pepsi-Cola between them accounting for about half the purchases. But many purchasers, of both grades of HFCS, are small. Industry sales exceeded $1 billion a year during the relevant period.

The plaintiffs claim that in 1988 the defendants secretly agreed to raise the prices of HFCS, that the conspiracy was implemented the following year, and that it continued until mid-1995 when the FBI raided ADM in search of evidence of another price-fixing conspiracy. Billions of dollars in treble damages are sought; we do not know whether the plaintiffs are also seeking injunctive relief, whether against renewal of the conspiracy, specific practices left in its wake (such as the 90 percent rule, of which more shortly), or both. The suit was brought in 1995 and though an enormous amount of evidence was amassed in pretrial discovery, the district judge concluded that "no reasonable jury could find in [the plaintiffs'] favor on the record presented in this case without resorting to pure speculation or conjecture." The soundness of this conclusion is the basic issue presented by the appeal.

Section 1 of the Sherman Act forbids contracts, combinations, and conspiracies in restraint of trade. This statutory language is broad enough, as we noted in JTC Petroleum Co. v. Piasa Motor Fuels, Inc., 190 F.3d 775, 780 (7th Cir.1999), to encompass a purely tacit agreement to fix prices, that is, an agreement made without any actual communication among the parties to the agreement. If a firm raises price in the expectation that its competitors will do likewise, and they do, the firm's behavior can be conceptualized as the offer of a unilateral contract that the offerees accept by raising their prices. Or as the creation of a contract implied in fact. "Suppose a person walks into a store and takes a newspaper that is for sale there, intending to pay for it. The circumstances would create a contract implied in fact" even though there was no communication between the parties. A.E.I. Music Network, Inc. v. Business Computers, Inc., 290 F.3d 952, 956 (7th Cir.2002). Nevertheless it is generally believed, and the plaintiffs implicitly accept, that an express, manifested agreement, and thus an agreement involving actual, verbalized communication, must be proved in order for a price-fixing conspiracy to be actionable under the Sherman Act. See, e.g., Reserve Supply Corp. v. Owens-Corning Fiberglas Corp., 971 F.2d 37, 50-51 (7th Cir.1992); Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 1443 (9th Cir.1995); Clamp-All Corp. v. Cast Iron Soil Pipe Institute, 851 F.2d 478, 484 (1st Cir.1988); E.I. Du Pont de Nemours & Co. v. FTC, 729 F.2d 128, 139 (2d Cir.1984); John E. Lopatka, "Solving the Oligopoly Problem: Turner's Try," 41 Antitrust Bull. 843, 896-903 (1996).

Because price fixing is a per se violation of the Sherman Act, an admission by the defendants that they agreed to fix their prices is all the proof a plaintiff needs. In the absence of such an admission, the plaintiff must present evidence from which the existence of such an agreement can be inferred — and remember that the plaintiffs in this case concede that it must be an explicit, manifested agreement rather than a purely tacit meeting of the minds. The evidence upon which a plaintiff will rely will usually be and in this case is of two types — economic evidence suggesting that the defendants were not in fact competing, and noneconomic evidence suggesting that they were not competing because they had agreed not to compete. The economic evidence will in turn generally be of two types, and is in this case: evidence that the structure of the market was such as to make secret price fixing feasible (almost any market can be cartelized if the law permits sellers to establish formal, overt mechanisms for colluding, such as exclusive sales agencies); and evidence that the market behaved in a noncompetitive manner. Neither form of economic evidence is strictly necessary, see United States v. Andreas, 216 F.3d 645, 666 (7th Cir.2000), since price-fixing agreements are illegal even if the parties were completely unrealistic in supposing they could influence the market price. But economic evidence is important in a case such as this in which, although there is noneconomic evidence, that evidence is suggestive rather than conclusive.

In deciding whether there is enough evidence of price fixing to create a jury issue, a court asked to dismiss a price-fixing suit on summary judgment must be careful to avoid three traps that the defendants in this case have cleverly laid in their brief. The first is to weigh conflicting evidence (the job of the jury), and is illustrated by a dispute between the parties over testimony by an executive of A.E. Staley that Coca-Cola, a major customer, suggested that the prices of HFCS 42 and HFCS 55 be fixed in a ratio of 9 to 10. The fact that the defendants all adopted this ratio is part of the plaintiffs' evidence of conspiracy, and the inference of conspiracy would be weakened if the initiative for the adoption had come from a customer. The defendants treat the Staley testimony as uncontradicted because Coca-Cola's witness did not deny having suggested the 9:10 ratio but instead testified that he didn't recall having suggested it and was not aware of his company's ever having such a preference. The absence of a flat denial by Coca-Cola's witness of the Staley testimony would not as the defendants contend require a reasonable jury to accept that testimony, which is self-serving, uncorroborated, implausible (because the defendants achieved the ratio by raising the price of HFCS 42 rather than by lowering the price of HFCS 55, so Coca-Cola could not have benefited unless it just bought 55 and a competitor 42, which is not suggested), and inconsistent with the overall evidence of conspiracy, which as we shall see was abundant although not conclusive. A plaintiff cannot make his case just by asking the jury to disbelieve the defendant's witnesses, but there is much more here. The defendants' handling of the 90 percent issue illustrates how the statement of facts in the defendants' brief combines a recital of the facts favorable to the defendants with an interpretation favorable to them of the remaining evidence; and that is the character of a trial brief rather than of a brief defending a grant of summary judgment.

The second trap to be avoided in evaluating evidence of an antitrust conspiracy for purposes of ruling on the defendants' motion for summary judgment is to suppose that if no single item of evidence presented by the plaintiff points unequivocally to conspiracy, the evidence as a whole cannot defeat summary judgment. It is true that zero plus zero equals zero. But evidence can be susceptible of different interpretations, only one of which supports the party sponsoring it, without being wholly devoid of probative value for that party. Otherwise what need would there ever be for a trial? The question for the jury in a case such as this would simply be whether, when the evidence was considered as a whole, it was more likely that the defendants had conspired to fix prices than that they had not conspired to fix prices. E.g., In re Brand Name Prescription Drugs Antitrust Litigation, 186 F.3d 781, 787 (7th Cir.1999).

The third trap is failing to distinguish between the existence of a conspiracy and its efficacy. The defendants point out that many of the actual sales of HFCS during the period of the alleged conspiracy were made at prices below the defendants' list prices, and they intimate, without quite saying outright, that therefore even a bald-faced agreement to fix list prices would not be illegal in this industry. (Their brief states, for example, that "list prices are irrelevant here because the vast majority of HFCS sales were not made at list price" (emphasis in original).) That is wrong. An agreement to fix list prices is, as the defendants' able counsel reluctantly conceded at the argument of the appeal, a per se violation of the Sherman Act even if most or for that matter all transactions occur at lower prices. Anyway sellers would not bother to fix list prices if they thought there...