Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 1 of 18 Page ID #:2062 1 MAKAN DELRAHIM Assistant Attorney General 2 MICHAEL F. MURRAY 3 Deputy Assistant Attorney General DANIEL E. HAAR 4 (daniel.haar@usdoj.gov) MARY HELEN WIMBERLY 5 (maryhelen.wimberly@usdoj.gov) Attorneys 6 U.S. Department of Justice 7 Antitrust Division Appellate Section 8 950 Pennsylvania Avenue, N.W. Room 3224 9 Washington, D.C. 20530-0001 Telephone: (202) 514-4510 10 Facsimile: (202) 514-0536 11 Counsel for the United States of America 12 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION 13 14 GLOBAL MUSIC RIGHTS, LLC, 15 16 17 18 19 20 21 22 23 24 vs. Plaintiff, RADIO MUSIC LICENSE COMMITTEE, INC. et al., Defendants. No. 2:16-cv-9051-TJH(ASx) STATEMENT OF INTEREST OF THE UNITED STATES The Honorable Terry J. Hatter, Jr. Under Submission September 9, 2019 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 2 of 18 Page ID #:2063 1 TABLE OF CONTENTS Page 2 3 Interest of the United States ...........................................................................................1 4 Statement ........................................................................................................................1 5 Argument........................................................................................................................2 6 7 8 9 10 11 12 13 14 15 I. Agreements Among Buyers To Violate The Antitrust Laws Are Just As Pernicious As Agreements Among Sellers..........................................................2 II. Certain of RMLC’s Arguments Misstate The Law On Buyers’ Price-Fixing Agreements And Should Be Rejected .................................................................5 A. Intent ..........................................................................................................6 B. Price Fixing ...............................................................................................7 1. Categorization of Alleged Restraint ...............................................8 2. Agreement as to Third-Party Price Setting ...................................11 C. Success of Conspiracy .............................................................................12 Conclusion ...................................................................................................................14 16 17 18 19 20 21 22 23 24 i Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 3 of 18 Page ID #:2064 1 TABLE OF AUTHORITIES Page(s) 2 3 CASES: Adaptive Power Sols., LLC v. Hughes Missile Sys. Co., 4 141 F.3d 947 (9th Cir. 1998) ................................................................................10 5 6 Arizona v. Maricopa Cty. Med. Soc’y, 457 U.S. 332 (1982) ...........................................................................................2, 5 7 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ...............................................................................................6 8 Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980) ...............................................................................................3 9 Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752 (1984) ...............................................................................................6 10 11 Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105 (3d Cir. 1980) ...................................................................................6 12 FTC v. Superior Court Trial Lawyers Ass’n, 493 U.S. 411 (1990) .................................................................................... 8, 9, 10 13 In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d 1186 (9th Cir. 2015) ............................................................................6, 7 14 15 Kendall v. VISA U.S.A., Inc., 518 F.3d 1042 (9th Cir. 2008) ................................................................................7 16 Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979 (9th Cir. 2000) ............................................................................5, 11 17 Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007) ...........................................................................................3, 6 18 19 Les Shockley Racing, Inc. v. Nat’l Hot Rod Ass’n, 884 F.2d 504 (9th Cir. 1989) ..................................................................................7 20 Liu v. Amerco, 677 F.3d 489 (1st Cir. 2012) ................................................................................12 21 Mandeville Island Farms v. Am. Crystal Sugar Co., 334 U.S. 219 (1948) ...............................................................................................4 22 Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (1984) ...............................................................................................6 23 24 N. Pac. Ry. v. United States, 356 U.S. 1 (1958) ...........................................................................................2, 3, 7 ii Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 4 of 18 Page ID #:2065 1 2 3 Nash v. United States, 229 U.S. 373 (1913) .............................................................................................13 Palmer v. BRG of Ga., Inc., 498 U.S. 46 (1990) .................................................................................................3 4 Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210 (D.C. Cir. 1986) ...............................................................................3 5 The Fair v. Kohler Die & Specialty Co., 228 U.S. 22 (1913) ...............................................................................................10 6 7 United States v. Addyston Pipe & Steel Co., 85 F. 271 (6th Cir. 1898) ........................................................................................3 8 United States v. Alston, 974 F.2d 1206 (9th Cir. 1992) ................................................................................7 9 United States v. Brown, 936 F.2d 1042 (9th Cir. 1991) ................................................................................4 10 11 United States v. Hayter Oil Co., 51 F.3d 1265 (6th Cir. 1995) ................................................................................13 12 United States v. Joyce, 895 F.3d 673 (9th Cir. 2018) ..........................................................................3, 4, 7 13 United States v. Mfrs.’ Ass’n of Relocatable Bldg. Indus., 462 F.2d 49 (9th Cir. 1972) ....................................................................................3 14 15 United States v. SKW Metals & Alloys, Inc., 195 F.3d 83 (2d Cir. 1999) ...................................................................................13 16 United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940) .......................................................................... 5, 7, 8, 12, 13 17 United States v. Trenton Potteries Co., 273 U.S. 392 (1927) ...............................................................................................8 18 Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S. 312 (2007) ...............................................................................................4 19 STATUTES: 20 21 22 23 15 U.S.C. § 1 .................................................................................................... 1, 2, 13 28 U.S.C. § 517 ...........................................................................................................1 OTHER AUTHORITY: George J. Stigler, A Theory of Oligopoly, 72 J. Pol. Econ. 44 (1964) ......................................................................................9 24 iii Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 5 of 18 Page ID #:2066 1 2 INTEREST OF THE UNITED STATES The United States submits this Statement pursuant to 28 U.S.C. § 517, which 3 permits the Attorney General to direct any officer of the Department of Justice to 4 attend to the interests of the United States in any case pending in a federal court. 5 The United States enforces the federal antitrust laws and has a strong interest in 6 their correct application. Competitors’ naked agreements to fix prices are one of the 7 most pernicious forms of anticompetitive restraints that violate Section 1 of the 8 Sherman Act, 15 U.S.C. § 1. Private, civil enforcement is an important supplement to 9 the United States’ efforts to eliminate these unlawful practices, so long as that 10 enforcement is consistent with the law. 11 The present case involves an alleged buyers’ cartel—a form of cartel that can be 12 equally destructive of competition as a sellers’ cartel, even though it is discussed less 13 frequently in the case law. Because of this disparity, the United States offers this 14 Statement to describe the legal standards governing whether an alleged agreement 15 among buyers constitutes a per se illegal restraint of trade in violation of Section 1. 16 This Statement assumes the truth of the allegations of the complaint in its analysis, as 17 is required on a motion for judgment on the pleadings. The United States takes no 18 position on the truth of the facts alleged. 19 STATEMENT 20 This case concerns music licensing. According to the operative complaint, 21 Global Music Rights, LLC (GMR) is a performing rights organization (PRO) that 22 aggregates the public-performance rights of its affiliated songwriters and sells licenses 23 bundling together those rights. 1st Am. Compl. ¶ 4 (Dkt. No. 23). GMR offers 24 licenses to a wide variety of buyers, including owners of commercial terrestrial (AM 1 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 6 of 18 Page ID #:2067 1 or FM) radio stations. Id. ¶¶ 4-5. Radio Music Licensing Committee, Inc. (RMLC) is 2 an entity that negotiates with PROs for public-performance licenses on behalf of radio 3 stations representing 90% of the country’s terrestrial radio revenue. Id. ¶¶ 1-2. 4 GMR and RMLC have sued each other, with each alleging the other is, among 5 other things, an illegal cartel in violation of Section 1 of the Sherman Act, 15 U.S.C. 6 § 1. See 1st Am. Compl. (Dkt. No. 23); 2d Am. Compl., RMLC v. GMR, No. 2:19-cv7 3957 (C.D. Cal. June 20, 2019) (Dkt. No. 163). Currently pending before the court 8 are RMLC’s motion for judgment on the pleadings (Dkt. No. 95) and GMR’s motion 9 to dismiss, RMLC v. GMR, No. 2:19-cv-3957 (C.D. Cal. July 11, 2019) (Dkt. 10 No. 167). This Statement addresses the legal requirements for a buyers’ cartel and 11 therefore focuses solely on the briefing related to RMLC’s pending motion. 12 ARGUMENT 13 I. Agreements Among Buyers To Violate The Antitrust Laws Are Just As 14 15 Pernicious As Agreements Among Sellers. Section 1 of the Sherman Act bars “[e]very contract, combination in the form of 16 trust or otherwise, or conspiracy, in restraint of trade or commerce among the several 17 States.” 15 U.S.C. § 1. Courts have long interpreted the Act to prohibit only 18 “unreasonable” restraints of trade. E.g., Arizona v. Maricopa Cty. Med. Soc’y, 457 19 U.S. 332, 343 (1982); N. Pac. Ry. v. United States, 356 U.S. 1, 5 (1958). The 20 reasonableness of most restraints is assessed under the “rule of reason.” Maricopa 21 Cty., 457 U.S. at 343. “As its name suggests, the rule of reason requires the factfinder 22 to decide whether under all the circumstances of the case the restrictive practice 23 imposes an unreasonable restraint on competition.” Id. 24 2 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 7 of 18 Page ID #:2068 1 Not all restraints of trade are governed by the rule of reason. N. Pac. Ry., 356 2 U.S. at 5. Some categories of restraints are so inherently destructive of competition 3 that they are subject to the per se rule, under which they are “deemed to be unlawful in 4 and of themselves.” Id. By “treating categories of restraints as necessarily illegal,” 5 the per se rule “eliminates the need to study the reasonableness of an individual 6 restraint.” Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 886 7 (2007); see United States v. Mfrs.’ Ass’n of Relocatable Bldg. Indus., 462 F.2d 49, 518 52 (9th Cir. 1972) (discussing per se rule). Examples of per se illegal restraints 9 include agreements among competitors to fix prices, e.g., Catalano, Inc. v. Target 10 Sales, Inc., 446 U.S. 643, 647 (1980), rig bids, e.g., United States v. Joyce, 895 F.3d 11 673, 677 (9th Cir. 2018), or divide markets, e.g., Palmer v. BRG of Ga., Inc., 498 U.S. 12 46, 49-50 (1990). See also United States v. Addyston Pipe & Steel Co., 85 F. 271, 293 13 (6th Cir. 1898) (in case involving horizontal price fixing, bid rigging, and market 14 allocation, rejecting a reasonable-prices defense because “we do not think that at 15 common law there is any question of reasonableness open to the courts with reference 16 to such a contract”), aff’d as modified in other part, 175 U.S. 211 (1899). Such 17 restraints are referred to as “naked” restraints because they are not the product of 18 legitimate collaboration and thus “can have no purpose other than restricting output 19 and raising prices.” Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 20 210, 229 (D.C. Cir. 1986) (Bork, J.). 21 When competitors agree to a restraint that is per se illegal, it does not matter 22 whether they are buyers or sellers of goods or services. Per se rules apply to 23 agreements among competing buyers in the same way that they apply to competing 24 sellers because the Sherman Act protects competition not only in output markets 3 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 8 of 18 Page ID #:2069 1 where sellers compete to sell goods or services, but also in input markets where 2 businesses compete to purchase various inputs. See Weyerhaeuser Co. v. Ross3 Simmons Hardwood Lumber Co., 549 U.S. 312, 323 (2007) (explaining, in a Section 2 4 case, that “[j]ust as sellers use output prices to compete for purchasers, buyers use bid 5 prices to compete for scarce inputs”). The Sherman Act “does not confine its 6 protection to consumers, or to purchasers, or to competitors, or to sellers. Nor does it 7 immunize the outlawed acts because they are done by any of these.” Mandeville 8 Island Farms v. Am. Crystal Sugar Co., 334 U.S. 219, 236 (1948). Rather, the Act “is 9 comprehensive in its terms and coverage, protecting all who are made victims of the 10 forbidden practices by whomever they may be perpetrated.” Id. 11 In Mandeville Island Farms, for example, the Supreme Court concluded that it 12 was “clear” that an agreement among sugar refiners to pay a uniform price to sugar 13 beet growers “is the sort of combination condemned by the Act, even though the 14 price-fixing was by purchasers, and the persons specially injured under the treble 15 damages claim are sellers, not customers or consumers.” 334 U.S. at 235 (footnotes 16 omitted; emphasis added). In Joyce, 895 F.3d at 676, 677, similarly, the Ninth Circuit 17 described an agreement among potential buyers of foreclosed real property “to 18 suppress competition by refraining from bidding against each other at public auctions” 19 as “classic bid rigging.” Because such “bid rigging is a form of horizontal price 20 fixing,” it is “a per se violation of the Sherman Act.” Id. at 677. Finally, in United 21 States v. Brown, 936 F.2d 1042, 1044, 1045 (9th Cir. 1991), the Ninth Circuit 22 determined that an agreement among billboard advertising companies to “refrain from 23 bidding on each other’s former [billboard] leaseholds for a period of one year after the 24 space was lost or abandoned” “clearly allocated markets between the two billboard 4 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 9 of 18 Page ID #:2070 1 companies.” It did not matter that the agreement concerned an input market (billboard 2 leaseholds) for which the defendants were competing buyers because “[a] market 3 allocation agreement between competitors at the same market level is a classic per se 4 antitrust violation.” Id. at 1045. 5 For per se illegal restraints, “no showing of so-called competitive abuses or 6 evils which those agreements were designed to eliminate or alleviate may be 7 interposed as a defense.” United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 218 8 (1940). In the price-fixing context, for example, “the reasonableness of the prices” 9 fixed is irrelevant. Id. at 229. The Supreme Court has explained: “Whatever 10 economic justification particular price-fixing agreements may be thought to have, the 11 law does not permit an inquiry into their reasonableness. They are all banned because 12 of their actual or potential threat to the central nervous system of the economy.” Id. at 13 224 n.59; see also, e.g., Maricopa Cty., 457 U.S. at 348 (stating, in case concerning a 14 sellers’ price-fixing agreement, that “[o]ur decisions foreclose the argument that the 15 agreements at issue escape per se condemnation because they . . . fix maximum prices” 16 (emphasis added)). Accordingly, in a buyer-cartel case, it is no defense that the 17 agreement lowered the prices consumers pay. See Knevelbaard Dairies v. Kraft 18 Foods, Inc., 232 F.3d 979, 988 (9th Cir. 2000) (rejecting, as a mater of law, the 19 defense that “a conspiracy to depress prices would not harm consumers but benefit 20 them”). 21 II. Certain of RMLC’s Arguments Misstate The Law On Buyers’ Price-Fixing 22 23 Agreements And Should Be Rejected. In its briefing in support of its motion for judgment on the pleadings, RMLC 24 makes several statements about the law governing price-fixing agreements generally, 5 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 10 of 18 Page ID #:2071 1 and buyers’ price-fixing agreements specifically, that are inconsistent with the case 2 law. These misstatements concern the intent required to join a price-fixing 3 conspiracy, the nature of the agreement required to constitute price fixing, and the 4 extent to which the success of a price-fixing conspiracy is a necessary element of a 5 Section 1 claim. The United States addresses each below. 6 7 A. Intent Section 1 “does not prohibit all unreasonable restraints of trade . . . but only 8 restraints effected by a contract, combination, or conspiracy.” Bell Atl. Corp. v. 9 Twombly, 550 U.S. 544, 553 (2007) (brackets omitted; quoting Copperweld Corp. v. 10 Indep. Tube Corp., 467 U.S. 752, 775 (1984)). A plaintiff alleging a Section 1 11 violation must plead factual allegations plausibly showing that the defendant and its 12 co-conspirator(s) “had a conscious commitment to a common scheme designed to 13 achieve an unlawful objective.” Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 14 752, 764 (1984) (quoting Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 15 105, 111 (3d Cir. 1980)). When a plaintiff alleges the existence of a per se illegal 16 restraint, that “necessarily illegal” restraint is itself the unlawful objective. Leegin, 17 551 U.S. at 886. For that reason, “[o]nce the agreement’s existence is established, no 18 further inquiry into the practice’s actual effect on the market or the parties’ intentions 19 is necessary to establish a § 1 violation.” In re Musical Instruments & Equip. 20 Antitrust Litig., 798 F.3d 1186, 1191 (9th Cir. 2015). 21 In its motion for judgment on the pleadings, RMLC suggests that GMR was 22 required to plead an additional fact to state a per se claim under Section 1: that 23 “RMLC’s members actually agreed with each other to do something that they 24 intended would harm competition.” RMLC Mot. 10 (emphasis added). That 6 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 11 of 18 Page ID #:2072 1 suggestion is contrary to established law. In civil cases in which a plaintiff has 2 pleaded horizontal price fixing, bid rigging, or market allocation, just like in criminal 3 cases in which those offenses are charged, a plaintiff “is not required to ‘prove 4 specific intent to produce anticompetitive effects.’” Joyce, 895 F.3d at 679 (criminal 5 case; quoting United States v. Alston, 974 F.2d 1206, 1213 (9th Cir. 1992)); see also 6 In re Musical Instruments, 798 F.3d at 1191 (explaining principle in a civil case). 7 RMLC never acknowledges this authority, but instead incorrectly argues that a 8 Section 1 plaintiff must plead plausibly that the defendant “intended to harm or 9 restrain trade or commerce.” RMLC Mot. 10 (quoting Kendall v. VISA U.S.A., Inc., 10 518 F.3d 1042, 1047 (9th Cir. 2008)). The precedent that RMLC quotes, however, is 11 the Ninth Circuit’s description of what a rule-of-reason claim requires. See Kendall, 12 518 F.3d at 1047 (citing Les Shockley Racing, Inc. v. Nat’l Hot Rod Ass’n, 884 F.2d 13 504, 507 (9th Cir. 1989), which in turn described what “[t]he rule of reason requires 14 [of] a claimant”). There is no similar requirement for a per se claim. In re Musical 15 Instruments, 798 F.3d at 1191. Contrary to RMLC’s suggestion, therefore, whether 16 GMR has plausibly pleaded that RMLC intended to harm commerce is irrelevant to 17 the question whether GMR has stated a per se claim. 18 19 B. Price Fixing To plead a per se violation of the Sherman Act, a plaintiff must allege that the 20 defendant and its co-conspirator(s) agreed to a course of conduct that falls within a 21 category of restraints “deemed to be unlawful in and of themselves.” N. Pac. Ry., 356 22 U.S. at 5. When, as here, a plaintiff claims that a defendant was part of a conspiracy 23 among competitors to fix prices, the plaintiff must plausibly plead that two or more 24 competitors “agreed upon” pricing or a component of pricing. Socony-Vacuum, 310 7 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 12 of 18 Page ID #:2073 1 U.S. at 223. An agreement would constitute price fixing, for example, “if the range 2 within which purchases or sales will be made is agreed upon, if the prices paid or 3 charged are to be at a certain level or on ascending or descending scales, if they are to 4 be uniform, or if by various formulae they are related to the market prices.” Id. at 5 222. Additional examples include agreements that involve “an artificial stimulus 6 applied to (or at times a brake on) market prices, a force which distorts those prices, 7 [or] a factor which prevents the determination of those prices by free competition 8 alone.” Id. at 223. For all price-fixing agreements, “the machinery employed by a 9 combination for price-fixing is immaterial,” id., because “[t]he aim and result of every 10 price-fixing agreement, if effective, is the elimination of one form of competition,” id. 11 at 213 (quoting United States v. Trenton Potteries Co., 273 U.S. 392, 397 (1927)). 12 1. Categorization of Alleged Restraint 13 RMLC wrongly argues that GMR’s complaint does not plead price fixing but 14 rather, at most, describes a group-boycott claim. See RMLC Mot. 19; RMLC 15 Reply 3-8, 18-19. The two categories of restraints—price fixing and group boycott— 16 are not, however, mutually exclusive. Parties can reach an agreement that “involves 17 not only a boycott but also a horizontal price-fixing arrangement.” FTC v. Superior 18 Court Trial Lawyers Ass’n, 493 U.S. 411, 436 n.19 (1990). 19 Superior Court Trial Lawyers is an example of a case in which an agreement 20 qualified as both types of restraints. In that case, “a group of lawyers agreed not to 21 represent indigent criminal defendants in the District of Columbia Superior Court until 22 the District of Columbia government increased the lawyers’ compensation.” 493 U.S. 23 at 414. “Prior to the boycott CJA [Criminal Justice Act] lawyers were in competition 24 with one another, each deciding independently whether and how often to offer to 8 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 13 of 18 Page ID #:2074 1 provide services to the District at CJA rates.” Id. at 422. “The agreement among the 2 CJA lawyers was designed to obtain higher prices for their services and was 3 implemented by a concerted refusal to serve an important customer in the market for 4 legal services and, indeed, the only customer in the market for the particular services 5 that CJA regulars offered.” Id. at 422-23. The Supreme Court held that “[t]his 6 constriction of supply is the essence of ‘price-fixing,’ whether it be accomplished by 7 agreeing upon a price, which will decrease the quantity demanded, or by agreeing 8 upon an output, which will increase the price offered.” Id. at 423 (quoting court of 9 appeals). Without deciding whether the agreement was best characterized as a group 10 boycott or price fixing, the Court ruled that “[t]he horizontal arrangement among these 11 competitors was unquestionably a ‘naked restraint’ on price and output” governed by 12 the per se rule. Id. at 423, 436 & n.19. 13 Superior Court Trial Lawyers thus exemplifies the general principle that 14 implicit (or on occasion explicit) in many price-fixing agreements (that is, agreements 15 to sell at a particular price or according to a particular price structure) is a 16 commitment that also shares the characteristics of a boycott: that is, a commitment not 17 to sell at other prices or according to other price structures. This general principle has 18 long been recognized in antitrust law. See generally George J. Stigler, A Theory of 19 Oligopoly, 72 J. Pol. Econ. 44, 46 (1964) (discussing how cartels try to prevent 20 “significant deviations from the agreed-upon prices”). It is equally applicable to the 21 sell-side and, as relevant here, the buy-side. For instance, an analogous restraint to 22 Superior Court Trial Lawyers on the buy-side is a restraint in which a group of 23 competing buyers agreed among themselves not to purchase from a seller unless that 24 seller agreed to sell below a particular price. Just as in Superior Court Trial Lawyers, 9 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 14 of 18 Page ID #:2075 1 such an agreement among competitors would include both a refusal-to-deal 2 component and a price-fixing component. Accordingly, and contrary to RMLC’s 3 suggestion otherwise, the agreement would be per se illegal because it would 4 constitute a naked restraint among the competing buyers on price or quantity 5 purchased. Cf. Superior Court Trial Lawyers, 493 U.S. at 436 & n.19. 6 Superior Court Trial Lawyers also makes clear that RMLC misstates the law 7 when it argues that “the Ninth Circuit has made clear [in Adaptive Power Sols., LLC v. 8 Hughes Missile Sys. Co., 141 F.3d 947, 948 (9th Cir. 1998)] that the type of group 9 boycott claim alleged here is not a price fixing claim as a matter of law.” RMLC 10 Mot. 19. Adaptive simply does not support RMLC’s broad categorical rule (nor could 11 it in light of Superior Court Trial Lawyers). Adaptive stands for the much more 12 modest proposition that a refusal to deal, without an agreement as to pricing, is not 13 price-fixing. See 141 F.3d at 950 (distinguishing a “refus[al] to deal with a high14 priced supplier” at all from “a price-fixing conspiracy among competitors who agree 15 among themselves to fix their prices”). Adaptive did not involve a situation in which 16 competitors allegedly both agreed on pricing and agreed not to deal with a seller, as 17 GMR argues it has pleaded here. 18 In any event, GMR defends its complaint on the ground that it sufficiently 19 pleads “naked price-fixing among horizontal competitors” by alleging that “radio 20 companies that normally compete against each other for access to musical content 21 agreed with one another to fix the maximum price any of them would pay for that 22 content.” GMR Opp’n 1 (emphasis removed). Because “the party who brings a suit is 23 master to decide what law he will rely upon,” The Fair v. Kohler Die & Specialty Co., 24 228 U.S. 22, 25 (1913), this Court should decide whether GMR has plausibly pleaded 10 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 15 of 18 Page ID #:2076 1 price fixing, regardless of whether its allegations could also, or should instead, be 2 categorized as describing a group boycott. 3 2. Agreement as to Third-Party Price Setting 4 RMLC peddles a similarly simplistic argument when it wrongly claims that 5 GMR has failed to state a price-fixing claim because it alleges merely an agreement 6 among buyers to insist that the sales price be determined by a third party (here, an 7 arbitrator), not an agreement on price itself. RMLC Mot. 19; RMLC Reply 4-8, 19. 8 The mere fact, however, that a third party decides the price on which competitors will 9 agree does not, standing on its own, remove the restraint from the price-fixing 10 category. That restraint is still an agreement to charge the same prices and thus still 11 eliminates competition on price. 12 The Ninth Circuit’s conclusion in Knevelbaard Dairies that competitors can 13 engage in price fixing by manipulating inputs for a benchmark rate that is set by an 14 independent third party illustrates this point. 232 F.3d at 979. There, the Ninth 15 Circuit held that the milk-producer plaintiffs’ allegations—that purchasers of bulk 16 milk and cheese unlawfully suppressed the state’s minimum price for milk produced 17 in the state—stated a claim of per se illegal buy-side price fixing. Id. at 986-87 18 (Cartwright Act case relying on Sherman Act decisions concerning the per se rule). 19 Specifically, the plaintiffs had alleged that the purchasers coordinated their purchases 20 of bulk cheese at auction in order to manipulate the market bulk-cheese price, which 21 in turn was used by a third party—a state agency—to set the minimum milk price. Id. 22 at 982. 23 RMLC is therefore wrong to argue that a third party’s determination of the price 24 at which competitors agree to buy or sell a good or service is enough to remove the 11 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 16 of 18 Page ID #:2077 1 agreement from the price-fixing category. The agreement not to compete on price is 2 the per se illegal restraint, and the “machinery employed” to decide the agreed-upon 3 price—whether it is the manipulation of a benchmark as in Knevelbaard Dairies or, as 4 here, use of an arbitrator—is immaterial. Socony-Vacuum Oil Co., 310 U.S. at 223. 5 6 C. Success of Conspiracy Finally, it is “well settled that conspiracies under the Sherman Act are not 7 dependent on any overt act other than the act of conspiring.” Socony-Vacuum, 310 8 U.S. at 224 n.59. As the Supreme Court has explained, “[i]t is the ‘contract, 9 combination * * * or conspiracy, in restraint of trade or commerce’ which § 1 of the 10 Act strikes down, whether the concerted activity be wholly nascent or abortive on the 11 one hand, or successful on the other.” Id. (ellipsis in original). Accordingly, “a 12 conspiracy to fix prices violates § 1 of the Act though no overt act is shown, though it 13 is not established that the conspirators had the means available for accomplishment of 14 their objective, and though the conspiracy embraced but a part of the interstate or 15 foreign commerce in the commodity.” Id. 16 RMLC’s reply brief incorrectly argues that a buyers’ price-fixing agreement 17 must be successful to violate Section 1. According to RMLC, if the seller does not 18 accept the buyers’ agreed-upon price, the buyers’ agreement is merely an “attempt to 19 fix prices,” and therefore lawful. See RMLC Reply 6 & n.4 (quoting Liu v. Amerco, 20 677 F.3d 489, 493 (1st Cir. 2012)). RMLC conflates the requirement that there be an 21 agreement to fix prices with the successful execution of that agreement. 22 In the Liu case that RMLC quotes, the defendant allegedly made “express 23 proposals to a competitor to raise prices” that were “spurned.” 677 F.3d at 494-95. 24 There was, accordingly, no “contract, combination . . . or conspiracy” between the 12 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 17 of 18 Page ID #:2078 1 competitors that could violate Section 1. If there had been such an agreement, 2 whether the conspiring competitors were successful in convincing customers to make 3 purchases at their agreed price would be irrelevant to the question whether there had 4 been a Section 1 violation (although it might affect what if any recovery would be 5 available to a private plaintiff). For as the Supreme Court has long held, “a 6 conspiracy to fix prices violates § 1 of the Act,” and no matter “whether the concerted 7 activity be wholly nascent or abortive on the one hand, or successful on the other.” 8 Socony-Vacuum, 310 U.S. at 224 n.59; see also Nash v. United States, 229 U.S. 373, 9 378 (1913) (explaining that Section 1 “does not make the doing of any act other than 10 the act of conspiring a condition of liability”); United States v. SKW Metals & Alloys, 11 Inc., 195 F.3d 83, 92 (2d Cir. 1999) (“Entry into an agreement to fix prices—even if 12 the implementation of such an agreement is unsuccessful—is the illegal conduct under 13 the Sherman Act, 15 U.S.C. § 1.”); United States v. Hayter Oil Co., 51 F.3d 1265, 14 1273 (6th Cir. 1995) (“the success of a price-fixing agreement is irrelevant for 15 establishing a violation of § 1 of the Sherman Act”). This Court should therefore 16 reject RMLC’s argument that GMR cannot state a price-fixing claim because, 17 according to the operative complaint, GMR did not accept RMLC’s alleged price 18 demand. 19 20 21 22 23 24 13 Case 2:16-cv-09051-TJH-AS Document 111 Filed 12/05/19 Page 18 of 18 Page ID #:2079 1 2 CONCLUSION For the foregoing reasons, the United States respectfully recommends that the 3 Court apply the above-discussed law when it evaluates whether GMR has stated a per 4 se price-fixing claim against RMLC. 5 Dated: December 5, 2019. Respectfully submitted. 6 MAKAN DELRAHIM Assistant Attorney General MICHAEL F. MURRAY Deputy Assistant Attorney General 7 8 9 /s/ Mary Helen Wimberly DANIEL E. HAAR (daniel.haar@usdoj.gov) MARY HELEN WIMBERLY (maryhelen.wimberly@usdoj.gov) Attorneys 10 11 12 13 17 U.S. Department of Justice Antitrust Division Appellate Section 950 Pennsylvania Avenue, N.W. Room 3224 Washington, D.C. 20530-0001 Telephone: (202) 514-4510 Facsimile: (202) 514-0536 18 Counsel for the United States of America 14 15 16 19 20 21 22 23 24 14