In Re High Fructose Corn Syrup: A New Form of Chicago School Education

Introduction

Labels are not always a good tool for handicapping litigation. The Chicago School is a major school of thought in contemporary antitrust law. Its central premise is that antitrust laws serve only to facilitate market efficiency. Under this theory, judicial intervention is inappropriate (and likely to be counterproductive) where the goal is not efficiency or the conduct being challenged is (at least theoretically) uneconomic. And, as this approach often leads to arguments against pursuing antitrust claims, there is tendency to assume that the theory is "pro-defendant," or "pro-big business."

A decision this year by the sitting judge perhaps most closely identified with the Chicago School is a useful illustration to both practitioners and theoreticians that labels like these are oversimplified. In In re High Fructose Corn Syrup, 295 F.3d 651 (7th Cir. 2002) ("HFCS"), Judge Richard Posner wrote for a unanimous court reversing the grant of summary judgment in a case alleging price fixing in violation of Section 1 of the Sherman Act. In the course of this decision, Judge Posner not only rejected a detailed district court opinion that purportedly used economic analysis to find for defendants, he reaffirmed the per se nature of price fixing violations and articulated some of what he called "traps" to which judges who are not themselves economists can fall prey in ruling on such motions. In short, Judge Posner's decision employs a supposedly "pro-defendant" reasoning to achieve a decidedly "pro-plaintiff" result.

This article begins with a brief introduction into the theory of the Chicago School on antitrust law and its stated goals. We then review the recent HFCS decision and Judge Posner's rationale behind it. Finally, we review the interesting lessons to be learned about what is required and what is not required to survive summary judgment in an antitrust case presided over by a law and economics judge.

1. A BRIEF SYNOPSIS OF THE CHICAGO SCHOOL OF THOUGHT ON ANTITRUST LAW[1]
2. 1. The Chicago School

Sometime in the early 1950's, Aaron Director, then recently appointed resident economist for the University of Chicago Law School, attended one of Professor Edward Levi's antitrust lectures.[2] Much to his dismay, Director learned that courts attempting to navigate the uncharted waters of antitrust jurisprudence premised many of their opinions on what he considered to be patently inaccurate views of rational business behavior.

Starting with Director and Levi, an entourage of impressive economic and legal minds, including the likes of George Sigler, Milton Friedman, Ronald Coase, Robert Bork and Richard Posner, helped to form the "Chicago School" of thought on antitrust issues. At the center of the Chicago approach is a firm belief (if not an unwavering faith), that the capitalist market, not the government, is best suited to prevent and to correct anticompetitive conduct. This belief led to the development of two primary antitrust tenets. First, when presented with conduct that potentially violates the antitrust laws, the Chicago School applies economics principles to the complained of behavior in an attempt to square that business practice with economic theory.[3] In other words, it looks for a legitimate business explanation, based on economics, for the conduct. This methodology stems from the notion that antitrust law deals with what are essentially economic problems.[4] And second, scholars subscribing to this methodology insist that the exclusive goal of antitrust law must be to maximize consumer welfare – defined to be efficiency.[5] Any other "non-economic" goal, whether it be to protect small business ("Jeffersonian" view), disperse economic power ("Madisonian" view) or redistribute wealth, is not an acceptable ambition.[6]

Professor (and former Judge) Robert Bork, a major proponent of the Chicago School, offered five reasons why the single aim of efficiency, in contrast to the multiple goals of traditional antitrust doctrine, was superior (and possibly necessary).[7] The first justification for a single goal is that it provides greater warning of what conduct is and is not acceptable to those who must abide by antitrust doctrine. As Professor Bork explained, a business actor "can know what the law is when the goal of the law is consumer welfare, because the major distinctions of such a system run along the same lines in which the businessman thinks, making lawful his attempts to be more efficient and making unlawful his attempts to remove rivalry through such improper means as cartelization, monopolistic merger, and deliberate predation."[8] This, coupled with the fact that a single goal will make changes in the law more predictable and less unfair, lends credence to the single goal theory.

The second and third rationales that support a single goal agenda involve the roles of the judiciary and legislature, as well as the integrity of the processes of the latter. As an initial matter, Professor Bork notes that the legislature, not the courts, should determine what the goal of the Sherman Act and its progeny ought to be.[9] And because in his view the legislature gave no indication that consumer welfare in the form of efficiency should be in any way sacrificed by the enforcement of these laws, it follows that "[t]he admission by a court of goals in conflict with consumer welfare into the adjudicative process [would] involve[] a serious usurpation of the legislative function by the judicial arm."[10] Further, if courts refrain from interjecting independent views of what the goals of antitrust should be, but rather subscribe to the view Congress intended (if not explicitly, then at least by omission), the legislature will be forced to address the issue if they disagree with that assertion.[11] So it follows that, by the bench showing restraint and accepting this single objective, the legislative process will be allowed to run its course and make appropriate changes to the policy if it so chooses, following the true design of our system of checks and balances.

The fourth reason Professor Bork gives in support of a lone antitrust aspiration is that "[t]he policy of consumer welfare provides courts with the principles of basic price theory as their criteria for decision."[12] Accepting this criterion would, in theory, keep courts from making ad hoc decisions about what the antitrust laws should and should not be trying to address.[13] With one goal in mind, that of "consumer welfare" in the form of efficiency, the courts would necessarily approach every factual situation by asking what effect this conduct has on economic efficiency as it relates to consumers, rather than asking what effect it has on less efficient businesses or other concerns besides efficiency.

Finally, Professor Bork takes the position that promoting a single antitrust agenda will avoid arbitrary or, even worse, inefficient rules from taking effect. The fear is that courts, rather than addressing each scenario on a case-by-case basis, will instead "arrive at rigid rules" that ultimately work to the detriment of consumers.[14] As an example of what can happen when courts are confronted with inconsistent goals, Professor Bork cites to Brown Shoe Co. v. United States,[15] which accepted the notion that small-business welfare should be considered in the context of merger decisions.[16] In Professor Bork's view, the Brown Shoe decision, while not actually espousing a "rigid rule" to be followed, had the effect of championing a trend of hostility towards all mergers – even efficient ones.[17] Had the only goal sought to be advanced in Brown Shoe been that of consumer welfare, the Court would have viewed the proposed merger from a purely economic efficiency perspective and allowed the merger if it made economic sense. Such a result would have made it unnecessary for the Court to discuss the non-economic concerns which led to the oversimplified, and indeed patently incorrect notion that all mergers (even efficient ones) have anticompetitive undertones to them.[18]

As applied to antitrust law, standard economic analysis involves a comparison of prices and outputs in a competitive industry with prices and outputs in the same industry operating under anticompetitive conditions. Applying this economic model to a number of different industries and fact patterns, the Chicago School reached certain conclusions that it advocated should apply generally to all antitrust cases. Most notable are the following three pronouncements that form the core of the Chicago movement.[19]

First, the members of the Chicago School were unconvinced that a rational actor concerned with profit maximization would ever tie one product over which it enjoys a monopoly with another product in the hopes of obtaining a second source of monopoly profits.[20] Intuitively, it would seem that a party enjoying a monopoly in one arena would want to utilize its power in that market, when and where it was feasible to do so, to obtain a similar advantage over another product line. However, the Chicago School argues it would be irrational to engage in such a tying arrangement because as the price increases for the tied product, the price that can be charged for the tying product will necessarily decrease, resulting in no net gain for the monopolist. Therefore, the assumption is that businesses would not generally engage in tying and more harm than good is done by having courts intervene to prevent or to penalize it.[21]

Second, proponents of the Chicago School do not believe that manufacturers who implement a resale price maintenance system in order to expand the number of pre-sale services being offered by dealers should be subject to antitrust scrutiny.[22] Manufacturers would implement such a system, according to Chicago scholars, because "by preventing price competition among dealers, resale price maintenance encourages dealers to offer consumers pre-sale services (such as point of sale advertising, inventory, showroom display, and knowledgeable sales personnel) up to the point at which the cost of these services at the margin just equals the price fixed by the manufacturer."[23] The Chicago theory says that these services, which enhance the value of the product to consumers, might not be provided absent the restrictive pricing system because many dealers would attempt to catch a "free-ride" on the backs of other dealers who do offer the pro-consumer services. Doing so would allow the "free-rider" to decrease the price it charges for the product to reflect the savings it realized as a result of not participating in the pre-sale activity. This will lead to other dealers cutting the services they offer so that they can compete with the lower price charged by the "free-rider," causing both the consumers and manufacturers to lose out on benefits they would have received as a consequence of the maintenance system.[24] Although such a system might seem to be overly advantageous to one striving to be a monopolist, the economic reality (according to Chicago School) is that imposing such restrictions will not give the manufacturer a monopoly at all because a consumer who does not want the pre-sale services can buy a substitute product that does not carry with it the services at a lower price.[25]

Third, according to the Chicago School, no rational business would ever sell its products below cost in an attempt to drive out its competitors.[26] Indeed, from an economic standpoint, such conduct would always be unprofitable. This is the case because as soon as the manufacturer raises its prices to recoup that which it lost through predatory pricing, competitors would enter the market and sell at the optimal level, i.e., the level maintained before the predatory conduct (assuming no other significant barriers to entry). In response, the original manufacturer would have to lower its prices back down to a competitive level (or risk losing business to new entrants), never fully recovering what it had lost.

These theories formed the foundation for the conclusion reached by Judge Posner that "firms cannot in general obtain or enhance monopoly power by unilateral action – unless, of course, they are irrationally willing to trade profits for position."[27] Consequently, Judge Posner surmised that the Chicago School should focus antitrust enforcement efforts on: "(1) cartels and (2) horizontal mergers large enough either to create monopoly directly, as in the classic trust cases, or to facilitate cartelization by drastically reducing the number of significant sellers in the market."[28] By comparison, Professor Bork and other more traditional Chicago theory scholars opine that "only explicit price fixing and very large horizontal mergers (mergers to monopoly) were worthy of serious concern."[29] And while this distinction (between "cartels," in general, and "explicit price fixing") might at first blush seem little more than a minor difference in word choice, it can be quite substantive in application.

As stated above, horizontal agreements to fix prices are per se violations of § 1. What constitutes an "agreement" to fix prices, however, is subject to debate even among the most adamant subscribers to the Chicago theory. Admittedly, Judge Posner "parts company" with many of his fellow members of the Chicago School by accepting the notion that purely "tacit" agreements to collude warrant punishment under § 1 of the Sherman Act.[30] Indeed, Judge Posner argues that viewing collusion from a purely economic perspective mandates that both express and tacit agreements to restrain trade be penalized.[31] Thus, where a particular market is susceptible to price fixing and economic evidence demonstrates that prices in that market are in fact substantially above competitive levels, antitrust scrutiny is warranted, regardless of whether or not the injured party can show that an express meeting of the minds to fix prices took place.[32] Accordingly, Judge Posner rejects the more traditional Chicago view that antitrust doctrine need not be concerned with tacit agreements to collude because such agreements will rarely be successful because the costs of preventing parties to the agreement from cheating will generally outweigh the profits that can be realized from such an arrangement.[33]

Although it is easy, and perhaps popular, to think of the Chicago theory as a pro-defense postulation of near laissez-faire economics when it comes to antitrust concerns, it is not as rigidly anti-plaintiff as it might seem. After being approached by both Microsoft and Netscape, the company that was arguably most affected by Microsoft's inclusion of its Internet Explorer software into the Windows Operating System, Professor Bork opted (to the surprise of many) to assist Netscape in persuading the government to intervene to help curtail Microsoft's allegedly abusive practices.[34] Facing criticism by those who felt that he had abandoned the "conservative cause" by aiding the government's case against Microsoft, Professor Bork explained that Microsoft's alleged conduct of maintaining its monopoly prowess at the expense of innovation was the exact type of conduct that hinders consumer efficiency and thus the exact conduct that should be addressed by antitrust jurisprudence.[35]

In HFCS, Judge Posner took his turn at applying a Chicago School analysis to a decision in favor of the defendants in a price-fixing case, and he reversed it. Judge Posner's decision and the reasoning he employed is discussed below.

1. THE HFCS DECISION

In HFCS,[36] a class of direct purchasers of high fructose corn syrup in the United States brought suit against the five largest manufacturers. These five Defendants controlled 90% of the United States market for the two types of high fructose corn syrup, HFCS 42 and HFCS 55.[37] High fructose corn syrup is derived from corn and used as a sweetener in a number of foods such as canned goods, baked goods, condiments, dairy products, alcoholic beverages and principally soft drinks. In fact, Coca Cola and Pepsi alone account for about half the purchases of HFCS 55, which constitutes 60% of all HFCS sales.[38]

Plaintiffs alleged a price fixing conspiracy among Defendants in violation of the Sherman Act, Section 1. The alleged conspiracy lasted from 1988 until 1995 when the FBI raided one of the Defendants, Archer Daniels Midland ("ADM"), in an investigation unrelated to HFCS.[39]

The United States District Court for the Central District of Illinois granted Defendants' motions for summary judgment, concluding that Plaintiffs presented insufficient evidence for a reasonable jury to conclude that a price-fixing conspiracy existed.[40] The Court ruled that Plaintiffs' case depended on assumptions that were not supported by the evidence, fell short of establishing an inference of conspiracy and, instead, presented evidence that was just as consistent with legitimate business practices as with an illegal conspiracy. Citing the standard enunciated in Matsushita Electric Industrial Co. v. Zenith Radio Corp.,[41] the Court found that Defendants were entitled to summary judgment.

The Court specifically took issue with the inferences Plaintiffs drew from six pieces of evidence. The first was referred to as the "90% Rule," where Defendants uniformly raised the price of HFCS 42 to 90% of the price of HFCS 55 on the basis that the former was 90% as sweet as the latter. Plaintiffs argued that this increased price could not have been sustained unless all the Defendants conspired to do it together because, as one defendant admitted, "if one of the HFCS producers had refused to adopt this pricing mechanism, then the rule could not have been implemented."[42] The District Court rejected that argument because Plaintiffs presented "no evidence suggesting anything other than follow the leader pricing, let alone evidence tending to exclude the possibility that the Defendants were pursuing their legitimate, independent interests by raising the price of HFCS 42 . . ."[43] The court saw no anticompetitive violation from mere follow the leader conduct.

The second piece of evidence from which Plaintiffs inferred anticompetitive conduct was Defendants' switch from yearly-based purchase contracts to quarterly-based contracts. Plaintiffs pointed out that customers opposed the switch, and that all the Defendants had to make the shift for it to be successful, thus leading to the conclusion that there was collusion.[44] The Court disagreed with the Plaintiffs' analysis on the basis that Plaintiffs did not offer "one iota of evidence" that an illegal agreement was reached concerning the switch.[45] The Court also noted that the switch among all Defendants was mere anticipation of the other's move to quarterly contracts, the Defendants provided alternative legitimate reasons for the switch, and many of the purchasers had annual purchase contracts anyway.[46]

The Court then discounted the anticompetitive implication of the Defendants' similar (and sometimes identical) price lists for high fructose corn syrup and the fact that they were routinely circulated among Defendants. In an oligopoly market for a standardized product like high fructose corn syrup, the Court reasoned, the use of a standard formula for pricing does not indicate a conspiracy.[47] Citing Supreme Court and Seventh Circuit precedent, and an article by Judge Posner, himself, the Court also held that circulation of price lists does not necessarily lead to an inference of a price fixing agreement.[48] In fact, the pricing practices of Defendants were expected. "[W]here a market is dominated by a few major players [oligopoly], parallel pricing is not uncommon and is generally insufficient to prove an antitrust conspiracy."[49]

A fifth category of evidence the Plaintiffs asserted as support for a price-fixing conspiracy were numerous statements made by Defendants' executives. These statements include some that were obtained by the Department of Justice during its raid of one defendant, ADM, in an investigation of the lysine and citric acid price fixing conspiracies.[50] A Staley plant manager who was heard to say "we have an understanding within the industry not to undercut each other's prices." [51] A handwritten Cargill document read "entry of new entrants (barriers) and will they play by the rules (discipline)."[52] An ADM executive said that "the buyer is not his friend, his competitors are his friends";[53] and another wrote, "[w]hat are you gonna tell [the recently retired president of Coca-Cola], that we gotta deal with . . . our two biggest competitors to fuck ya over[?]"[54] The Court decided those statements were not direct evidence of a conspiracy because each one required an inference as to the existence of a conspiracy.[55] Nor did the Court find these statements to be sufficient circumstantial evidence to support a Section 1 violation. To the extent they were obtained by the government in its investigation of ADM in the lysine and citric acid markets, the Court held that they concerned those markets, and not the high fructose corn syrup market.[56]

Finally, Plaintiffs argued that Defendants frequently bought and sold high fructose corn syrup among themselves in an effort to balance and to preserve the status quo regarding market shares. This occurred whenever a defendant gained market share at another conspirator's expense. This was not, however, sufficient evidence of a conspiracy according to the Court. The Court noted the "glaring omission" of any such transactions by two Defendants, CPC and American Maize, even though they gained market share during the class period. Because this fact did not fit into Plaintiffs' theory, the Court rejected high fructose corn syrup sales to competitors as evidence of a price-fixing conspiracy.[57]

On appeal, Judge Richard Posner, writing for a panel of the United States Court of Appeals for the Seventh Circuit, reversed. He started by identifying the "traps" set by Defendants that misled the District Court into granting summary judgment even where there was a genuine issue of material fact. The three "traps" of which all courts should be wary were, first, Defendants' invitation, implicit or explicit, to weigh conflicting evidence.[58] That is the job of the jury, not the judge.[59]

The second "trap" is Defendants' invitation to suppose that unless a single item of evidence (rather than the evidence as a whole) establishes a conspiracy, Defendants are entitled to summary judgment.[60] The evidence supporting the allegation that Defendants conspired to fix prices must be considered as a whole.

The third trap is the failure to distinguish between the existence of a conspiracy and its efficacy.[61] An agreement to fix prices is "a per se violation of the Sherman Act, even if most or for that matter all transactions occur at lower prices."[62] "Anyway sellers would not bother to fix prices if they thought there would be no effect on transaction prices."[63]

While kindly admonishing the District Court, Judge Posner explained Plaintiffs' burden to withstand summary judgment in a Section 1 case. To show a Section 1 violation, plaintiff must show an agreement to fix prices. Unless the Defendants admit to the agreement (rare), Plaintiffs must introduce evidence that at least gives rise to an inference of an agreement. Echoing his own writings, Judge Posner noted that the wording of the Sherman Act and logic suggest that evidence of a mere tacit agreement would be sufficient to establish a violation of Section 1. The Court noted that a person who takes a newspaper that is for sale from a store intending to pay for it could create an implied-in-fact agreement without speaking a word.[64] Accordingly, "[i]f a firm raises prices 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."[65] This conception would mean that a conspiracy to fix prices could be shown without direct communication among the Defendants. Nevertheless, Judge Posner acknowledged the general belief, and what he considered to be Plaintiffs' concession in this case, that an expressly manifested agreement with verbalized communication must be shown to establish a price-fixing conspiracy under Section 1.[66]

In the process of identifying these three traps, the Court divided the evidence into two categories. According to the Court, the evidence on which Plaintiffs rely to show an agreement is either economic (suggesting Defendants were not, in fact, competing because the market made price-fixing possible or the market behaved in a noncompetitive manner) or non-economic (suggesting Defendants were not competing because there was an agreement not to compete).[67] Judge Posner found that "[n]either form of non-economic evidence is strictly necessary . . . since price fixing agreements are illegal even if the parties were completely unrealistic in supposing they could influence the market price."[68] Moreover, whatever economic evidence there is should be viewed through a form of balancing test: if the non-economic evidence is conclusive, there need be no economic evidence. "But economic evidence is important in a case such as this in which, although there is non-economic evidence, this evidence is suggestive rather than conclusive."[69] In other words, if there is stronger economic evidence of incentive to engage in anti-competitive behavior and market behaviors in line with those incentives, the non-economic evidence of actual collusion can be weaker.

The Seventh Circuit then turned to the six categories of evidence (from which the Plaintiffs inferred an anticompetitive conspiracy) and reached almost diametrically contrary conclusions to those reached by the District Court. With respect to the "90% Rule" that the District Court had called nothing but "follow-the-leader pricing," Posner wrote "in a competitive market, price is based on cost rather than on value."[70] In the high fructose corn syrup market, where consumers were willing to pay more for sweeter product, a monopolist or cartel could, and did, charge more for HFCS 55 even if it cost no more or very little more to manufacture than HFCS 42. If the market were competitive, Defendants should have bid the price of HFCS 55 down to cost, but that did not happen. The evidence actually showed that HFCS 42 cost 65% as much to make as HFCS 55, implying that a competitive price for HFCS 42 would have been 65% of the sweeter variety, rather than 90%.

The Court also rejected the District Court's conclusion that the Defendants' switch from annual to quarterly purchase contracts was not only another example of follow-the-leader pricing, but an economically logical move to hedge against changes in corn prices.[71] Instead, Judge Posner noted that the effect of the switch was to shift the risk of a fluctuating corn market to the purchasers – at the worst time.[72] The Defendants shifted this risk at the same time that they "were raising their prices net of cost, rather than lowering them to compensate the customers for assuming additional risk. That is not competitive behavior."[73]

The District Court had found no significance in the use of same or similar price lists and had even (ironically) cited an article by Judge Posner for the proposition that "in a highly oligopolistic industry, the issuance of identical price lists is not sufficient to establish collusion."[74] But Judge Posner found that the existence of an oligopoly market made the use of similar or identical price lists more likely to be successful. Because only five sellers controlled 90% of the market "elaborate communications, quick to be detected, would not have been necessary to enable pricing to be coordinated. And if one seller broke ranks, the others would quickly discover the fact, and so the seller would have gained little from cheating on his coconspirators."[75]

Perhaps the facts the Seventh Circuit found most compelling, however, were the anticompetitive statements that the District Court found largely irrelevant. Where the District Court dismissed them almost entirely on the basis that they likely concerned the lysine and citric acid markets, not high fructose corn syrup, Judge Posner found them to be sufficient evidence to establish not just evidence of a tacit agreement, but evidence of an actual agreement sufficient to get to a jury.[76] As Judge Posner commented, the view of ADM's president that, "our competitors are our friends. . . [o]ur customers are the enemy," is a sentiment that "will win no friends for capitalism."[77]

Judge Posner finally concluded his opinion by suggesting that the District Court utilize its discretion under Federal Rule of Evidence 706 to appoint its own neutral expert witness.[78] Judge Posner suggested directing the parties' designated experts, rather than the parties themselves, to nominate a neutral in order to help the judge and jury navigate the complicated expert testimony in this antitrust case.

1. Lessons from the HFCS decision

The HFCS decision provides a number of important specific lessons and at least one broad general lesson:

The HFCS case suggests that it may be possible for a plaintiff to survive summary judgment in the Seventh Circuit even in the absence of evidence of an explicit agreement. Judge Posner acknowledged the "general belief" that an express manifested agreement with "actual verbalized communication" must be shown. But he did not seem to agree with it. He stated on prior occasions that the Sherman Act is broad enough to encompass a purely tacit anticompetitive conspiracy.[79] The importance Judge Posner placed on his conclusion that Plaintiffs' had conceded for purposes of this case that an they needed to show an explicit, manifested agreement in order to survive summary judgment suggests that Plaintiffs' ostensible concession (and the fact that they had evidence of express collusion, albeit insufficient to sway the District Court judge) is what kept Judge Posner from actually deciding the issue.

In fact, one of Defendants' defenses in response to the evidence presented by Plaintiffs that the high fructose corn syrup market was conducive to price-fixing, and that Defendants avoided or at least limited price competition, was that the evidence was only "consistent with the hypothesis that they had a merely tacit agreement, which for purposes of this appeal, the Plaintiffs concede is not actionable under Section 1 of the Sherman Act."[80] Judge Posner's apparent message is that all the evidence Plaintiffs really needed to present to survive summary judgment was that from which a jury could infer the existence of a tacit agreement among Defendants.[81]

This is easier said than done. Tacit agreements to fix prices are difficult to prove. The cases rejecting tacit agreements as a basis for Section 1 liability without any evidence of actual verbalized communication do so because there was not sufficient evidence of the agreement.[82] It is difficult to get to a point where there is sufficient evidence to prove a tacit agreement without it actually being, in essence, an explicit agreement. But when the question is what a jury might conclude, the possibility that it would be enough to find that the defendants' agreement was implied in fact, could be a significant objection to a motion for summary judgment.

Following Matsushita, the HFCS decision tells us that the evidence as a whole, not any single piece of evidence, must be evaluated to determine whether a reasonable fact-finder could conclude that a conspiracy was more probable than not. In HFCS the Plaintiffs tried, but were unsuccessful, in convincing the District Court that the entire collection of circumstantial evidence created a genuine issue of material fact. Plaintiffs' effort failed there for two primary reasons: First, once the District Court focused on the possibility that pricing was "follow the leader" all facts seemed to be explainable from the same theory, without regard to whether the theory became increasingly strained. Second, the District Court focused on the (apparently logic) desire of defendants to maximize profit, rather than the ultimate effect that a competitive market has – of restraining profits, by forcing prices down to marginal cost. The bottom line is that, in the absence of a cartel, competitors cannot be expected not to compete.

It seems that one of the biggest challenges for the court in these complicated antitrust cases is making sure it is not confused by the parties about the issues. Judge Posner was not the first to recognize this challenge.[83] But Defendants certainly suffered some in oral argument because of it. As Judge Posner wrote, "[a]n agreement to fix list prices is, as the Defendants' able counsel reluctantly conceded [on significant questioning from at least one member of the panel] 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."[84] Contrary to Defendants' implication that they did not conspire because they would have lost money by selling at such low prices, the effect of the conspiracy is not the proper inquiry, nor is its unlikelihood of success dispositive. The wrong, as Judge Posner pointed out, comes in agreeing.

The difficult part of judicial involvement in antitrust cases is the successful use of economic analysis to show an anticompetitive agreement. As Judge Posner noted, economic evidence becomes important when the non economic evidence is suggestive rather than conclusive.[85] The complication here is making the trial judge understand the economics when judges are not economists. "Resolving this dispute [between the parties' experts] requires a knowledge of statistical inference that judges do not possess."[86] When a trial court judge cannot get it "right" even by quoting the appellate judge, the test may be too difficult.

The Court's suggestion in HFCS that the lower court appoint its own expert under Fed. R. Evid. 706 may start a new trend among judges in antitrust cases. Expert witnesses have long been an integral part of antitrust cases, and will continue to be as Plaintiffs generally rely on economic evidence (even if it is not "strictly necessary"[87]) to show conspiracies by Defendants who take care to conceal them. Consequently, antitrust cases can turn into a battle of the experts with each parties' experts delivering conflicting opinions about the effects of oligopoly, the logic for pricing decisions, the incentives to collude and to cheat, the expected reaction to changes in supply or demand, the availability of substitute products, the uniformity of the product, the difficulties of new entry into the market, and excess capacity, among other things. These conflicting opinions often obfuscate the issues and thus interfere with, rather than help the fact-finder. Especially at the summary judgment stage, there is a genuine risk that even an otherwise gifted trial judge will be swayed by the wrong set of economists.

Judge Posner suggests directing the party-designated experts to agree upon a neutral expert for appointment by the court.[88] This process theoretically avoids the contentious process set forth in Fed. R. Evid. 706 of having the parties get together and designate a "neutral" for the judge.

In practice, it is unclear how this approach will work. If the issue is one of competing views of economics, will the "neutral" expert be expected to choose between them. Or is that a jury's job? Will the job of the "neutral" be to recognize the competing considerations? If so, then what case sufficient to be tried to the point of having a serious expert appointed will not have competing considerations sufficient to survive summary judgment? Is economics truly like a hard science, subject to such self-evident and immutable laws that there is a "right" answer to be found? And, if economic analysis is subject to judgment, what expert will then judge the expert?

The more general message of HFCS, however, may be one that Judge Posner only indirectly states. To a judge who starts from the premise that the exclusive goal of antitrust law must be to maximize the "economic efficiency" of the free market,[89] the agreement really is the wrong. An agreement by competitors not to compete is not a free market. Even if the agreement is for ostensible good, or is incapable of being enforced, agreement substitutes a non-market system for the market, and is, therefore, inefficient. If the invisible hand is to solve the problem, it must work by parties actually competing, not actually agreeing, perhaps even tacitly.

Conclusion

On July 2, 2002, some of the Defendants petitioned the Seventh Circuit to rehear the HFCS decision, with a suggestion for rehearing en banc. One urged that the decision was incompatible with Supreme Court precedent because "[t]he panel's opinion here, like Judge Posner's academic writings, makes the case for imposing price fixing liability solely on ambiguous evidence[.]"[90] On August 5, 2002, the Seventh Circuit denied the rehearing petition.

Time will tell whether all of the precepts of HFCS become general law. But the message to practitioners is clear – knowing an audience requires examining the true bases for their viewpoint and not merely finding superficially attractive arguments for why the competitors chose not to compete.