[Sasha Volokh] Do firms conspire by having governance rights in an association?

Now that I’m done blogging about the antitrust professors’ amicus brief I wrote for the Fifth Circuit in Teladoc v. Texas Medical Board, let me talk briefly about an antitrust professors’ amicus brief I joined in Visa Inc. v. Osborn.

As is only appropriate for this blog, the issue is conspiracy! The question in Visa Inc. v. Osborn is:

Whether allegations that members of a business association agreed to adhere to the association’s rules and possess governance rights in the association, without more, are sufficient to plead the element of conspiracy in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, as the court of appeals held below, or are insufficient, as the Third, Fourth, and Ninth Circuits have held.

Our amicus brief argues the following:

The D.C. Circuit held in this case that a plaintiff can plausibly plead a horizontal conspiracy among competitors in violation of section 1 of the Sherman Act merely by claiming (in addition to conclusory and unsupported allegations of agreement) that members of a business association have governance rights in the association and agreed to adhere to its rules. Amici submit that this holding is inconsistent with this Court’s precedent requiring plaintiffs, in order to allege an illegal agreement, to plead facts plausibly suggesting collusion among the defendants to achieve a common unlawful objective. The approach approved by the court of appeals would mean that every business that participates in the affairs of a business association can be subjected to expensive discovery concerning an allegedly anticompetitive rule of the association so long as the plaintiff makes a bare assertion of horizontal agreement. That would discourage beneficial business-association activities, to the detriment of businesses and consumers alike.

Here’s the first part of the brief:

I. Business Associations Yield Important Consumer Benefits, and Hence Antitrust Law Should Distinguish Between Concerted Conduct and Mere Participation in Business-Association Activities

A. As both courts and antitrust-enforcement agencies have recognized, collaboration among industry participants in the form of business associations frequently has “decidedly procompetitive effects.” SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412, 435 (4th Cir. 2015), cert. denied, 136 S. Ct. 2485 (2016). These effects include “greater product interoperability” and “incentives to innovate.” Princo Corp. v. ITC, 616 F.3d 1318, 1335 (Fed. Cir. 2010); see also Federal Trade Commission, Spotlight on Trade Associations (“Most trade association activities are procompetitive[.]”). As the leading antitrust treatise puts it, “joint innovation often produces significant social benefits in relation to costs.” 13 Areeda & Hovenkamp, Antitrust Law ¶ 2115a, at 112 (3d ed. 2012). And this Court itself observed long ago that business associations are “beneficial to [] industry and to consumers.” Maple Flooring Mfrs. Ass’n v. United States, 268 U.S. 563, 566 (1925).

That observation makes sense: As Judge Wilkinson has explained, “many minds may be better than one. Joint ventures … and trade association meetings may allow individuals of different specialties to benefit from each other’s expertise,” enabling “efficient and effective product development.” SD3, 801 F.3d at 455 (concurring in part and dissenting in part). “Those efficiencies in turn generate reduced costs of doing business that can then be passed along to the consumer in the form of reduced prices and better products.” Id.

Specific instances of these benefits of collaboration are easy to identify. “To take but one example, industry-wide coordination has been a driving force for technological progress in American semiconductor manufacturing.” SD3, 801 F.3d at 454 (Wilkinson, J., concurring in part and dissenting in part). The ATM networks at issue here provide another example. Absent cooperation among banks, customers wishing to withdraw cash from their accounts would be limited to using an ATM run by their own institutions. An ATM network gives customers the convenience of using an ATM operated by another bank (or other owner), virtually anywhere in the world. See Hayashi et al., A Guide to the ATM and Debit Card Industry 7 (2003) (noting the importance of “national networks,” such as the Visa and MasterCard networks, in linking smaller ATM networks to ensure accessibility). To provide that convenience, ATM networks need rules that govern the interactions both among members of the network and b