Antitrust - District Court Holds That Plaintiffs Alleged “Plausible Grounds” To Infer Illegal Horizontal Market Allocation Agreement Between Comcast Corporation and Competitors
The United States District Court for the Eastern District Pennsylvania recently addressed the scope of the Supreme Court’s decision in Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007), finding that Twombly is
not limited to allegations of parallel conduct, but rather applies generally to claims under Section 1 of the Sherman Act based on horizontal market divisions. Nonetheless, in Behrend v. Comcast Corporation, Civil No. 03-6604
(E.D. Pa.) (and consolidated cases), the District Court held that the plaintiffs had met the Twombly standard by adequately pleading “plausible grounds to infer an agreement” to allocate the relevant market
between the defendant (Comcast) and two of its horizontal competitors.
In Twombly, decided late in this last term, the Supreme Court examined the pleading requirements for bringing parallel conduct claims under Section 1 of the Sherman Act. In a 7-2 decision authored by Justice Souter, the
Supreme Court announced a “plausibility” standard for considering whether a complaint adequately pled a contract or conspiracy in restraint of trade in violation of Section 1:
We hold that stating a claim requires a complaint with enough factual matter (taken as true) to suggest an agreement was made. Asking for plausible grounds to infer an agreement does not impose a probability requirement at the pleading stage; it simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of illegal agreement.
127 S. Ct. at 1965.
Shortly after Twombly was handed down, Comcast brought motions to dismiss and for judgment on the pleadings in a series of consolidated class actions in the Eastern District of Pennsylvania: Behrend v. Comcast Corporation,
Civil No. 03-6604 (E.D. Pa.) (and consolidated cases). Those cases allege that Comcast conspired with competitors to divide horizontally the home cable market in Philadelphia, Chicago and Boston. Specifically, the plaintiffs in those
cases allege that Comcast conspired to divide those markets among itself and two main competitors through a series of customer “swap transactions.” The plaintiffs further allege that Comcast’s actions constitute
an illegal restraint of trade under both per se and rule of reason theories (in violation of Section 1 of the Sherman Act) as well as allowed Comcast to gain monopoly power in two of those markets (in violation of Section
2 of the Sherman Act).
The District Court rejected Comcast’s motions by taking an arguably narrow reading of Twombly. Specifically, the Court found that Twombly did not create a heightened pleading standard for claims under Section
1 of the Sherman Act:
The Court went on to find that the plaintiffs’ complaints contained enough factual allegations to suggest Comcast actually engaged in an antitrust agreement with its competitors. Specifically, the Court noted that the plaintiffs’ complaints “have clear allegations of actual agreements between Comcast and its competitors” and that “the allegations of Comcast’s anticompetitive conduct are sufficient to support the characterization of those agreements as horizontal market divisions.”[Twombly’s] plausibility standard requires that an antitrust plaintiff plead “enough factual matter (taken as true) to suggest an agreement was made…” This standard, the [Supreme] Court specified, did not alter the “short and plain” statement requirement specified in Rule 8(a)(2). Twombly only requires that the short and plain statement have “enough heft” to show entitlement for relief.
The District Court also limited Twombly in another way, stating in a footnote that the Supreme Court did not intend Twombly to affect the ability of parties to bring claims for “potential competition” under Section 2 of the Sherman Act (which concerns claims for monopolization). Although not explicit, the District Court’s opinion suggests that Twombly should be limited to claims under Section 1 of the Sherman Act. However, the Court did reject plaintiffs’ claim that Twombly only applies to Section 1 claims based on parallel conduct. Without stating that Twombly applies to all Section 1 claims, the Court found it at least reached claims under Section 1 based on alleged horizontal market divisions.