A class of cigarette consumers sued five major cigarette manufacturers for conspiracy to fix prices because, for a period of years, the manufacturers matched each other’s price increases. This parallel behavior is normally not considered to constitute a “conspiracy,” since there is no actual agreement between competitors. However, in this case, the New Mexico Court of Appeals, overturning the dismissal of the case below, ruled that one expert’s testimony that “it is highly unlikely that independent behavior explains the price restructuring and price changes” is enough to submit the case to a jury. Its ruling was premised on the notion that “complex, multi-variable, multi-price-tier parallelism” was involved.
The NAM joined with the Association of Commerce and Industry of New Mexico, as well as the U.S. Chamber of Commerce, in an amicus brief arguing that the lower court’s ruling means that “businesses engaged in legitimate, productive, competitive economic activity in New Mexico will be threatened with crippling antitrust liability.” We urged the New Mexico Supreme Court to rule that its standards for summary judgment should be the same as federal standards, which likely would not allow this case to proceed to trial. In addition, the lower court’s ruling against parallel conduct in a “complex, multi-variable industry” makes it much easier for a plaintiff to bring antitrust claims against businesses in oligopolistic industries – and virtually impossible for businesses to predict the circumstances that will give rise to such liability or to conform their conduct to the law.
On June 25, 2010, the Supreme Court of New Mexico overruled the appeals court and affirmed the district court’s ruling. The ruling held that defendants in a class action should have the opportunity to rebut an inference of collusion by presenting evidence that no reasonable fact finder could conclude that a price-fixing conspiracy existed. With the support of the NAM’s brief, the court found that the pricing strategy was not a conspiracy, and that the plaintiff class failed to produce evidence that the defendants’ conduct was not undertaken independently.