Holiday Wholesale Grocery Co. v. Philip Morris Inc.
(Price-fixing US Dist. Ct. N GA 2000 Def. Verdict) Citation: 231 F.Supp.2d 1253 (11 Jul 2002); 346 F.3d 1287 (22 Sep 2003)This class action was brought by representative plaintiffs Holiday Wholesale Grocery Co., Buffalo Tobacco Products Inc., F&F Vending Service Inc., Amsterdam Tobacco Corp., Boro Park Tobacco, Sunrise Candy & Tobacco Corp., I. Goldshlack Company, Suwanee Swifty Stores Inc., Marcus Distributors, Inc., Hartz Foods, Wichita Tobacco and Candy Co., and ROG-GLO Ltd. (voluntarily dismissed June 20, 2001), against Philip Morris, R.J. Reynolds, Brown & Williamson, and Lorillard on February 18, 2000.
This case was consolidated with five similar cases before the same court. A consolidated class action complaint was filed On June 28, 2000.
The class was defined as all people who purchased cigarettes directly from the defendants between February 8, 1996 and February 8, 2000. The plaintiffs alleged that beginning November 1, 1993, the defendants were involved in a conspiracy to raise and fix the price of domestic cigarettes at high, non-competitive levels. This occurred after an industry-wide reduction in the difference between premium and discount cigarette prices beginning on "Marlboro Friday". They alleged that the defendants agreed to "(1) reduction of price tiers to only two: premium and discount; (2) maintenance of the ‘price gap’ at an absolute constant, which would result in a diminishing percentage gap between premium and discount as prices were raised; (3) limitation of discounting and promotions on non-premium cigarettes; (4) moderate increases of all prices; (5) recognition of PM's price leadership; (6) participation in programs to share and monitor volume, price, and discount information; (7) output restrictions; and (8) ceding some market share to PM." The plaintiffs claimed Clayton and Sherman Act violations, conspiracy, non-price collusion, and fraudulent concealment.
The defendants argued that the plaintiffs' conspiracy theory did not make economic sense in the setting of the 1990s cigarette market. Business decisions in the period were motivated by competitive concerns.
The case was heard in the United States District Court for the Northern District of Georgia, Atlanta Division (MDL Docket No. 1342, Civil Action No. 1:00-CV-0447-JOF), before the Honorable Judge Forrester. On November 29, 2000, the judge dismissed the claim of fraudulent concealment without prejudice, because it failed to satisfy pleading requirements, and non-price collusion prior to the instant conspiracy. On January 23, 2001, the judge certified the class. On June 20, 2001, the judge dismissed those claims in the plaintiffs' second amended complaint prior to February 8, 1996, as barred by the four-year statute of limitations.
On July 11, 2002, the judge (231 F.Supp.2d 1253) granted a motion for summary judgment for the defendants. The judge held that the plaintiffs did not provide direct evidence of illegal price fixing or signaling in price increases. All of the direct evidence was more likely an indication of normal oligopoly competition. There was no evidence that the individual defendants signaled one another as to when prices would go up, or that the defendants relied on any communication between the companies to enact pricing measures. The circumstantial evidence presented lacked any substantial plus factor to tip the scales past "conscious parallelism". The defendants' permanent allocation programs, use of marketing services to collect sales data, or speed of following one another's price increases did not support antitrust conspiracy allegations. The allocation programs were in the defendants' best economical interest, enacted in response to the direct buyers' anticipatory buying techniques. The marketing data the defendants received did not include pricing information and were of the type also received by competing companies. Quick reactions only showed conscious parallelism and reasonable business decisions, not advance notice of the price increases. The judge avoided a determination of conspiracy not to market based on health criteria by saying that the allegations all occurred outside the timeframe of conspiracy the plaintiffs alleged. He found that there was no universal motive towards conspiracy shared by all the defendants. The judge ruled that any plus factor established by the plaintiffs was successfully rebutted by the defendants' showing of uncertainty in the market, shift in market shares, and that such a conspiracy was against economic sense. The plaintiffs appealed.
The United States Court of Appeals, Eleventh Circuit (346 F.3d 1287) affirmed the judgment on September 22, 2003. The court found that there were no plus factors excluding the possibility that the defendants were acting independently. The court held that the plaintiff was required to provide some evidence that tended to exclude lawful synchronous behavior and created a reasonable inference of conspiracy. Much of the court's analysis echoed the findings of the District Court below and need not be repeated. The court ruled that the smoking and health conspiracy did not tend to exclude lawful behavior because in order for it to have affected the current conspiracy, the jury would have had to engage in speculation that the companies that conspired before would do it again. Without some palpable connection between the defendants' actions overseas and in the United States, evidence of foreign conspiracy was inadmissible. There was no evidence that the defendants' credit memos actually delayed the implementation of price increases, so that was not a plus factor. All the allegations together constituted evidence of an oligopoly with conscious parallel behavior.