Tacit Agreement Under Section 1 of the Sherman Act

In dozens of cases each year alleging horizontal price fixing and other per se violations of Section 1 of the Sherman Act, the central issue is whether the defendants ever formed an agreement. One source of uncertainty in resolving this issue in litigation is the meaning of “tacit agreement,” a term the Supreme Court has continued to include within the reach of Section 1, even as it has emphatically excluded “mere interdependence” or tacit collusion. In this article, I try to clarify the meaning of tacit agreement and show its practical significance in litigation. After examining how the Court used the term in Bell Atlantic Corp. v. Twombly, I situate tacit agreement in the hierarchy of means of coordination, distinguishing it especially from mere interdependence on the one hand and express agreement on the other. Then I argue for a definition of tacit agreement — interdependent conduct coordinated by prior private communications of competitive intentions — and consider what forms of communication and conduct fit that definition. I argue that, so defined, tacit agreement is more effective than simple interdependence as a means of coordinating noncompetitive equilibria, and is easier for courts to penalize or enjoin without doing more harm than good. To show the analytical significance of the concept, I distinguish among four categories of communications based upon whether the communications are public or private on the one hand, and whether they relate to present or future conduct on the other. I then examine cases involving all four kinds of communication to show their relative importance in the identification and inference of tacit agreement. In the process, I consider the proper meaning and significance of “signaling” as communication that might form or implement an agreement. The clarified definition, illustrative cases, and categories of relevant communications will, I argue, help courts resolve, at every stage of litigation, whether rivals restricted competition by agreement