Antitrust enforcement in electronic B2B marketplaces: an application of oligopoly theory and modern evidence law

Antitrust enforcement in electronic B2B marketplaces: an application of oligopoly theory and modern evidence law

Federal Trade Commission held a workshop designed to educate the Commission about the emerging technology


In June 2000, the Federal Trade Commission held a workshop designed to educate the Commission about the emerging technology of business-to-business electronic marketplaces (B2Bs). (1) The workshop provided a forum for industry leaders, Commission staff, antitrust practitioners, and legal scholars to exchange ideas about the role B2Bs will play in changing the landscape of competitive markets. (2)

The FTC summed its position in a report that scrutinized the commercial platforms and their potential threat to competition. (3) The report set forth the guidelines that the Commission will follow in the future when reviewing the competitive behavior of both the B2Bs and those transacting business on them. (4) The FTC concluded that the traditional legal framework is amenable to antitrust issues raised on B2Bs. (5) This Note seeks to expose a weakness in the Commission’s conclusion. It posits that the challenges posed by the architecture of the B2B marketplace, combined with modern evidence rules, render traditional antitrust enforcement mechanisms impotent. Specific regulation will be required where the common law will fail.

The second and third sections of this Note deal with identifying a B2B and discuss its most recognizable virtue: potential for leaner transactions. The fourth section examines market transparency, a potential source of difficulty for antitrust enforcers. The fifth section attempts to show how modern evidence rules, when combined with a transparent marketplace, make a B2B antitrust case extremely difficult to prosecute. The paper concludes with legislative recommendations that, once implemented, will allow courts to return to the common law’s rule of reason/per se analysis. (6)


The electronic marketplace is not a “new” system by today’s dynamic standards. The Nasdaq stock market is based on an electronic platform, eBay has facilitated electronic transactions for over seven years, (7) and every major retailer has the capability to sell its wares online. (8) A platform that allows a buyer and seller to meet and transact over an electronic medium is an electronic marketplace. (9) There are business-to-consumer electronic marketplaces (B2Cs), which procure vertical transactions between a business-seller and consumer-buyer. (10) A common example of a B2C is the airlines’ venture, Orbitz. (11) As consumers, our participation in B2Cs indicates that we appreciate the efficiency of these transactions: we shop from home rather than drive to the mall, we buy our airline tickets with a mouse click rather than a lengthy phone call, and today I actually ordered milk and cereal for delivery by visiting the website of my local grocery store. In the meantime I wrote this paragraph

The same principle applies for commercial transactions. Less time spent finding sellers of inputs or buyers for output means lower transaction costs for businesses. Society is better off because those resources used for the transaction can be reallocated towards production. (12)

The mechanism of the B2B electronic transaction can be demonstrated with a simple hypothetical: American Motors purchases 50,000 brake pads for its winter production line. A month before completion, it realizes it will use only 40,000. The inventory manager posts the surplus for sale on the industry B2B. Enter GermanAmerican Motors, who will fall 10,000 brake pads short. Rather than going to a supplier for a small and therefore costly order or manufacturing the pads in-house, GermanAmerican logs on to the industry B2B. It sees the pads for sale, posts a bid, and makes a purchase.


B2Bs will have the most penetrating impact in the manufacturing sector, where transaction costs are unnecessarily bloated. (13) A survey conducted by the National Association of Manufacturers found that only one percent of manufacturers conduct e-commerce on their web sites and 20 percent lack web presence completely. (14) One FTC workshop participant noted that 80 percent of business to business transactions in the metals industry are performed manually, and added that the 20 percent that were considered automated were probably not bona fide. (15) The manufacturing industries lag behind other industries, such as retail, that have seen immense cost savings from e-commerce transactions. (16)

It may be overbroad to attribute efficiencies to B2Bs as a whole because the types of B2Bs vary with great degree, and “whether … efficiency is realized is highly fact-dependent and can turn on any number of specifics, including … the marketplace in question.” (17) The two main areas where B2Bs will differ are ownership and architecture, and each will pose issues that will affect the range of competitive outcomes.

The ownership possibilities are vast

A. Administrative Costs

Administrative costs, “the costs of effecting the transaction itself,” are comparatively higher in manual transactions than in a B2B transaction. (21) One FTC workshop participant, a pharmaceutical industry member, stated that a “face-to-face sales call [costs] about $575,” and another industry member added that the same transaction would cost $10 on a B2B. (22) Another panelist stated that a $100 small business transaction could be reduced to $10 on a B2B. (23)

Administrative costs include all levels of procedural protocol attending a transaction: inter-firm communication between buyer and seller

The panelists also commented on the labor-intensive costs associated with special orders. (27) These costs are eliminated with a B2B transaction. Every order is “special” in the sense that it is posted exactly as the buyer demands it

International transactions are also performed more efficiently on B2Bs because the platform provides clarity where traditional communication gives rise to significant margins for error. (28) For example, the most significant barriers to efficient international transactions include language, business forms, product descriptions, and methods of negotiation. (29) These barriers are razed on the B2B platform, where bids and inventory can be listed in multiple languages, with user-specific translations and descriptions, and negotiations are standardized. (30) The firms that conduct their international business on a B2B are relieved of the time, labor and costs associated with such cultural differences. (31)

B. Search Costs

A manufacturer faces substantial transaction costs in locating a buyer for its product or a seller of its required inputs. B2B transactions may substantially decrease those costs. On the demand side, buyers have the unique opportunity to “comparison shop” on a B2B where they otherwise would peruse catalogues and gather cost information. On a B2B, a buyer sees quality and price information for many sellers on a single website. (32)

On the supply side, B2Bs potentially expose sellers to a greater number, and more diverse group, of buyers. (33) Indeed, one panelist at the FTC’s workshop, a CFO of a small steel outfit, noted that he was exposed to “50 new customers” in two months of B2B participation, “90% of whom he had never heard of before.” (34) Large suppliers in particular may benefit from access to a broader class of buyers. Small buyers who previously would have evaded the radar of the larger input manufacturers will become visible. Where in traditional markets it was unprofitable for large suppliers to seek out small buyers, B2Bs may make it feasible and efficient to supply the smaller purchasers. (35) The workshop panelist from the small steel outfit supported this proposition by explaining that while he once needed to “make 20 phone calls to get one coil of steel,” he now, by utilization of a B2B, can satisfy his small order from a major supplier that has what his firm needs. (36)

The panelists stressed the potential for lower search costs in highly fragmented industries. The large number of sellers increases search costs substantially. It is in these industries where a B2B would most facilitate efficiency by bringing all parties to one marketplace. (37)

B2Bs also provide opportunity for efficiency in highly concentrated industries by creating a platform for reverse auctions. Reverse auctions exist in demand-dominated industries where competition among sellers is robust. Sellers will bid against each other for a buyer’s business, as in expensive defense contracts. (38) One panel member, a U.S. Navy captain responsible for procuring a contract for an airplane cockpit eject device, posted the order on a B2B. (39) A concentrated industry of only three suppliers, the B2B facilitated a reverse auction where the suppliers bid to perform under the contract. The cost savings to the Navy were an immense 28 percent. (40)

C. Joint Purchasing

Several panelists noted the scale economies gained when a B2B facilitates joint purchasing. The efficiencies arise in two circumstances: where a single business has many multiple chains that purchase on their own, and where small businesses are able to aggregate their purchases on the B2B. With a single business with many branches that each purchase on their own, the B2B is able to collect data of each branch’s purchases and use the information to obtain volume discounting. These savings are attainable in the B2B context because all purchasing is done in one marketplace where information is readily available, whereas there are costs associated with compiling information when each branch transacts on its own. (41)

The second circumstance arises when small buyers are able to leverage their buying power by aggregating their purchases.

Efficiencies are generated on the supply side in the form of decreased transaction costs and small buyers reap volume discounts where they otherwise would have been unable. (42)


Competition policymakers have always been concerned with the sharing of information among competitors. In 1776, Adam Smith recognized that information sharing among rivals can potentially result “in a conspiracy against the public, or in some contrivance to raise prices.” (43) Sherman Act enforcers have consistently targeted trade associations for precisely this reason. (44) Courts will view the exchange of information regarding sales volume, marketing information, and quality with leniency

Transparency of price information on the B2B platform introduces an “unprecedented ability to monitor prices in real time” which allows competitors to learn “each other’s bids and prices on every trade instantly.” (47) This ability, one FTC panelist admitted, “raises a significant collusion concern.” (48)

Transparency is the ability of market players to see, in real time, the market forces that determine price. (49) The concern over collusion stems from sellers’ ability to monitor other sellers’ prices and tacitly coordinate their behavior

Courts have found unlawful coordination when parallel behavior and the plus factor concertedly transgress the Sherman Act’s prohibition of conspiracy to fix prices. (52) The plus factor need not be so dramatic as an express agreement, or even contemplation of an agreement. (53) Plus factors have been as subtle as to include:

a. proof that the rivals had the opportunity for direct communication or that they in fact communicated directly

b. evidence of anticompetitive intent behind the parallel conduct

c. behavior difficult to imagine arising in the absence of detailed communication, because it appears arbitrary or complex

d. behavior so difficult to understand as rational in the absence of an agreement and without legitimate justification for the practice. (55)

Absent price transparency, unnatural parallel pricing among competitors will alert antitrust enforcers. But transparency allows competitors to coordinate pricing without an express agreement to do so. This puts enforcers in the difficult position of asking the court to infer an agreement from circumstantial evidence. (56)

The structure of an industry is recognized in modern economic theory as the central theme in determining probability of price coordination. (57) Courts have incorporated such theory into their analysis of coordination cases: when the probability for collusion is high, certain plus factors, which would be absent in a low probability structure, will be admissible as circumstantial evidence. (58) The transparency of the B2B platform renders it among the high probability market structures and poses significant concern for antitrust regulators.

Coordination among several sellers is not always a likely strategy. (59) Certain conditions, linked to the architecture of the industry, will make coordination more or less plausible. (60) To illustrate, assume oligopoly rivals form an express agreement to fix prices and all reap monopoly profits. Each seller is presented with an ongoing choice: if he cheats on the cartel, he will undercut his competitors and win an increased market share. If he stays with the cartel, one of the other members may cheat and take market share away from him. (61) This decision-making process is then a function of detection and punishment

Likelihood of detection is determined by the amount of market information available to coordination members

Imagine further that the hardware manufacturers operated a B2B. Again they conspire to fix prices and a rogue seller considers cheating on the cartel. Because the other members can monitor his activity, cheating would be detected by the cartel immediately, and the ensuing punishment will render the strategy unprofitable. Cheating is irrational under these circumstances and each conspirator knows that his rivals find it equally undesirable. As it can be seen, the cartel is strong and competition suffers accordingly.

The preceding example illustrates how information sharing can solidify a cartel arrangement. Courts have acknowledged that certain sets of circumstances make collusion more plausible than others, and have established guidelines in accord with that principle. (65) The following plus factors, in addition to those noted above, will serve as circumstantial evidence on which a jury can infer coordination: (66)

a. the market’s architecture is such that coordination is plausible and likely

b. evidence that the cartel attempted to discipline potential cheaters

c. history of express agreement among the rivals. (69)

The B2B architecture does not handle these plus factors well. As illustrated above, the market structure is one extremely conducive toward strong cartel arrangements.

Secondly, evidence of rival disciplining is extremely hard to prove in traditional settings and made even more difficult by the B2B. (70) Showing that a cartel disciplined a potential cheater forces a plaintiff to explain the culpability in pricing behavior where the cartel members lowered prices to meet that of the potential cheater in order to remind the cheater that greater profits can be obtained through compliance. The same behavior, however, can be explained by a legitimate business purpose to compete on price. In real space, competition enforcers can cite the uncanny unity with which the cartel swept down, and a jury could reasonably be skeptical when presented with the disorder under which uncoordinated firms meet competitive prices. (71) On the B2B, however, competitors can uniformly undercut the dissenter very easily with the transparency of prices, and enforcers would be tried to expose a coercion strategy.

Lastly, a history of collusion would be unlikely to exist on a B2B due to the relative novelty of the technology. Parallel pricing on the B2B, combined with evidence of express agreement from pre-B2B transactions, may provide the circumstantial evidence requisite to create a plus factor inference.

The B2B structure not only creates the most cartel facilitative arrangement hypothesized, but also lacks many of the safeguards that could mitigate the possibility of collusion. For example, threat of new competition will discipline a super-competitive price. (72) Circumstances where barriers to entry are low pose a threat to would-be conspirators, in that if they attempt to reap monopoly profits a new firm will enter, charge a competitive price, and capture market share. A B2B that is limited in membership or has high costs of entry would negate this threat to collusion.

Another possible set of circumstances that would negate a potentially coordination-friendly market structure is the potential for long-term contracts. (73) Cheaters, even if detection is likely, can undercut a cartel to secure a long-term contract with a buyer so profitable as to render cheating worthwhile. The B2B does not facilitate such agreements


It was shown above how problematic the B2B format can be with regard to making collusion a feasible strategy. More collusion will likely lead to an increased strain on enforcement resources, but would not necessarily challenge enforcers on new substantive grounds. The challenge in B2B antitrust enforcement will not come solely from the prevalence of the cases but getting the ones actually brought past summary judgment. As noted earlier, getting these suits before a jury will require (at least) two pieces of circumstantial evidence. And as modern evidence law tightens the grip on expert testimony, this may be the most arduous task of all.

The Supreme Court’s ruling in Daubert v. Merrill Dow Pharm., Inc. makes it more difficult for antitrust plaintiffs to prove conspiracy without direct evidence of express agreement. (75) As established above, competition enforcement on the B2B may rely heavily on circumstantial evidence

The Court in Daubert dealt with a medical expert’s testimony regarding an anti-nausea drug and its effects on fetuses when ingested by pregnant women. (76) The Court held that a common standard used to evaluate expert testimony, and one upon which antitrust plaintiffs have relied when collecting evidence, was at odds with Federal Rule of Evidence 702. (77) The Court articulated a more protective standard that has made plaintiffs’ tow a heavier one. (78) Under Daubert, the court applies a two-prong test to determine admissibility: the expert’s testimony (a) must be based on scientific, technical or special knowledge

1. whether a theory or technique … can be (and has been) tested,

2. whether the theory or technique has been subjected to peer review and publication,

3. the known or potential rate of error of a particular technique,

4. the existence and maintenance of standards controlling the technique’s operation, and

5. the extent to which the theory or technique has gained acceptance within the relevant scientific community.

Under the scrutiny of these factors, a practical litigator recognizes that the circumstantial plus factors will often prove difficult to introduce without calling expert economists. (81) Given that oligopoly theory is primarily theoretical, and both empirically demonstrable and controvertible, an economic expert may not rise above the “`evidentiary high jump'” bar required by Daubert. (82)

An example that combines B2B parallel pricing with a plus factor can best demonstrate the Daubert challenge. Assume that oligopoly rivals can be shown to have been pricing closely together over time. Although the transparency of the B2B market causes price differences among rivals to be less than in traditional markets, enforcement officials are nevertheless concerned with some firms’ output restrictions when inventory appears stable and market prices rise. Knowing that this tacitly coordinated behavior will not pass summary judgment without a plus factor, the plaintiff collects evidence that suggests that some pricing behavior manifests a punishment scheme (plus factor noted under letter “f” above). Now the Daubert challenge arises: how to get this evidence admitted at trial.

The plaintiff must make three evidentiary showings in this case. The first is a demonstration of tacit collusion through pricing history of the rivals. The second piece of evidence involves exhibiting the inventory/price relationship and its deviance from traditional supply functions. The last evidentiary showing requires the plaintiff to prove that the theory underlying punishment is relevant and scientifically proven.

These showings are circumstantial in nature

The first piece of evidence presents the court with the following proposition: the B2B rival firms, the defendants, followed each other in prices so closely as to indicate a tacit agreement. The plaintiff then would produce information supporting that effect, in table or chart form, that shows exactly how closely the rivals priced or bid. The defendant would argue, rightfully so, that such evidence is purely circumstantial and is equally indicative of competition as collusion

Imagine that the plaintiff wants this evidence on pricing accorded more weight by the court and asserts that in oligopoly structures like the one defendants are in, vigorous competition is anomalous. “If there are a handful of firms in the market, one cannot expect them to behave as though there were fifty firms.” (88) An economist then is needed to testify that oligopolists need not enter explicit agreements for their tacit behavior to have a noncompetitive character (and therefore impose social costs). This is because, as explained above, oligopolists can charge a supercompetitive price, somewhere between a competitive and monopoly price, without competing. (89) This testimony is subject to two attacks that render it impotent: a Daubert attack that questions the soundness of oligopoly theory, and a summary judgment attack that, in effect, says, “so what?” The Daubert grounds are legitimate: while economists generally agree that oligopoly may or should facilitate collusive behavior, no empirical evidence exists to suggest that it actually does. (90) The summary judgment standard will filter those forms of circumstantial evidence that, although scientifically sound, lead to ambiguous conclusions. (91) Even if the economist passes Daubert screening on this element, the evidence will not by itself create a triable issue of fact to pass summary judgment. Less ambiguous evidence is needed for our plaintiff to be successful.

The second evidentiary showing is that the rivals’ inventories were healthy while output went unchanged as prices rose. Again, two conclusions can be drawn. The first is that each firm unilaterally decided to restrict output, hoping that its rivals would do the same, so as not to depress prices. The alternative is that the firms colluded to restrict output. Our plaintiff’s economist will need to explain to a judge why firms dip into their inventory when prices rise, and how unlikely it is that the rivals failed to do so without expressly conspiring. (92) Again, this strategy theory is economically sound, but scientifically difficult to prove. (93)

If the evidence is deemed admissible under Daubert, the question again arises as to whether its conclusions are ambiguous or “`tend[] to exclude the possibility'” that the firms acted alone. (94) The evidence here suggests that firms declined to take the rational strategy of selling inventory in effort to keep prices buoyant, invoking the `plus factor’ from above, letter “d” (behavior so irrational as to be explained only by conspiracy). But is the behavior so irrational, or can the evidence be refuted? Five defenses that a defendant can assert that would negate the evidence are readily imaginable:

i. failure to increase production is understandable in circumstances where the costs of doing so would outweigh gains, such as if marginal costs of selling one unit from inventory are higher than marginal revenue from selling that unit

ii. the seller reasoned that moving a good from inventory to market would take so long as to miss the boon

iii. sellers argue that they expected prices to rise even higher, and could demonstrate a reason for their belief

iv. sellers decided independently not to deflate the market price by flooding the market with inventory, and hoped that their rivals would do the same

v. sellers believed that their market was so transparent that the moment they increased production, rivals would do the same and the price would be deflated before any seller could take advantage of the strong market. (95)

These examples demonstrate that our second piece of evidence, even when used as a plus factor, may not secure victory at summary judgment even if allowed through by Daubert. Our third piece of evidence is our plus factor: it should, in concert with the other circumstantial evidence, provide enough to get to trial and sway a jury. That plus factor is that the price history reflects classic punishment behavior

Punishment schemes are different from the alleged behavior in the first two elements of circumstantial evidence

The plaintiff will call its economist to testify about punishment schemes. First, pricing history among the rivals will be displayed so as to show that prices were supracompetitive for a period. This demands a showing of what is a competitive price, calling for economic analysis of the firms’ input costs. A reasonably established proposition is that firms price at their marginal cost, that is, the price they charge for their good is the cost of creating the next one. The defense’s economist will argue, rightfully, that even if the market price was supracompetitive, it does nothing to implicate the defendants. Oligopolists can afford to charge a price above competitive levels because, well, they are not competitive. The firms would rather share oligopoly profits among them than compete. This is not illegal–it becomes illegal when the firms communicate their conformity to the scheme. (96) Again, conspiracy is defined under section 1 of the Sherman Act as “a conscious commitment to a common scheme,” and it is that consciousness that must be proven. (97)

The plaintiff’s economist will testify to the effect that prices were maintained at a certain level because of the cartel arrangement. It is imperative to show that that level was supracompetitive, regardless of whether that fact alone is implicating. Once accomplished, the expert will construct the plaintiff’s case by calling attention to a firm that dissented from the group’s relatively stable price. The expert will then show how the rest of the group cut their prices even below that of the dissenter (the punishment), collected the dissenter (who has learned his lesson), and finally the group raised prices in tandem. This is how cartel punishment looks. (98)

This third element of circumstantial evidence, however, must again pass through Daubert screenings and pass the summary judgment ambiguity problem. If a defendant can refute the evidence, assuming it exists the way drawn out above, the plaintiff is left with three pieces of ambiguous evidence, which makes a conviction no more likely that one piece of ambiguous evidence (or fifty). The problem with punishment accusations is that the behavior looks much like that of firms meeting the competition. That is, firms are pricing at a stable level, one firm undercuts his rivals, and the rivals engage in price war. While that situation is a competitive one, the punishment scheme is not. The essential difference, from an evidentiary standpoint, is to convince the judge (or jury, if our plaintiff gets that far) that the firms communicated their intent to collect the dissenting cartel member.


The hypothetical above makes clear that only those plus factors admissible without putting an economist on the stand are immune to Daubert challenges. And the only plus factors that seem relevant to B2B business are those that require an economist to expose them. The syllogism ends with the realization that B2B antitrust enforcement actions will be extremely difficult to bring.

What makes the situation more glaring on the B2B is the lack of safeguards articulated earlier that protect against oligopoly strategies taking an illegal turn. B2Bs do not have to create these difficulties

In conclusion, we pose a checklist, that while by no means proposes to be exhaustive, may mitigate some of the difficulty in collusion enforcement on B2Bs.

1. The most obvious problem is the transparency of prices that discourage cartel members from cheating and dissolving the cartel. The B2B must be structured to facilitate cheating–to make cheating profitable and therefore likely. This can be done by limiting the amount of information available to each member. For example, the B2B can be set up so as to prevent sellers from seeing the bids of other sellers, or seeing them but not identifying the party who made the bid.

2. The B2B must sacrifice some of the efficiency to be gained from spot contracts in exchange for long term contracts. As demonstrated above, long term contracts have the tendency to reduce collusion by encouraging cheaters to undercut and secure an extended, secure, and profitable contract.

3. The B2B must allow for new entrants, the threat of which will discipline current members. Barriers to entry serve to protect the incumbents–especially oligopolists–from new competition. Other things being equal, new firms will continue to enter a market with a supracompetitive price until the market is disciplined and monopoly profits dry up. Whether this means that the Sherman Act enforcers will commandeer the B2B to accept new applicants or prevent sellers from owning B2Bs, this is an area that surely needs regulation.

Antitrust issues arising on B2Bs are amenable to the common law’s bifurcated standard of scrutiny. But the only way to insure, ex ante, that illegal behavior will be detectable and provable is through regulation of the architecture of the B2B platform.


(2.) Id.

(3.) Press Release, FTC Issues Report on Competition Policy in the World of B2B Electronic Marketplaces (Oct.26, 2000) (on file with Federal Trade Commission), available at (last visited Feb. 27, 2002).

(4.) See FTC REPORT, supra note 1.

(5.) Id., Executive Summary at 2.

(6.) Courts have a bifurcated system of scrutinizing antitrust cases. Behavior that is “plainly anticompetitive,” and without “redeeming virtue,” is per se illegal. Activity that lacks such obviously anticompetitive effect is analyzed under a so-called “rule of reason” where a court must undertake extensive analysis of the economic effects. Broadway Music Inc. v. Columbia Broadcating System, Inc., 441 U.S. 1, 8 (1979) (holding that behavior should not be held per se illegal before courts have sufficient opportunity to understand the restraint at issue).

(7.) See Company Overview, eBay homepage, at

(8.) See generally Major R. Ken Pippin, Consumer Privacy on the Internet: It’s “Surfer Beware”, 47 A.F.L. REV. 125, 126 (1999), and sources cited therein.

(9.) See FTC REPORT, supra note 1, pt.1.A at 1.

(10.) Id.

(11.) See Orbitz homepage, at (last visited Mar. 13, 2002).

(12.) See JOSEPH E. STIGLITZ, ECONOMICS, 2nd ed., at 321 (1997) (“For an economy to be Pareto efficient, it must be production efficient. That is, it must not be possible to produce more of some goods without producing less of other goods.”)

(13.) FTC REPORT, supra note 1, pt.2.A at 1.

(14.) Id.

(15.) Id.

(16.) Id. Whether these savings have been passed onto consumers or to shareholders is irrelevant when dealing with macroeconomic goals

(17.) Id.

(18.) See id., Executive Summary at 5. This is not an exhaustive treatment of possibilities, but these equity structures seem ex ante the most likely.

(19.) There is tension in this paradox that the reader must be aware of: the virtue of the platforms is in their transparency, but transparency poses the economic threat. This will be evident by the conclusion of this paper.

(20.) See FTC REPORT, supra note 1, Executive Summary at 1.

(21.) Id., pt.2.B at 2. Manual transactions include those conducted over phone, fax, and face-to-face. Id., pt.2.B at 3.

(22.) Id., pt.2.B at 3.

(23.) Id.

(24.) See id.

(25.) Id.

(26.) Id.

(27.) Id., pt.2.B at 4.

(28.) Id., pt.2.B, at 3-4.

(29.) Id., pt.2.B, at 4.

(30.) Id.

(31.) See id.

(32.) Id., pt.2.C at 5. The term “website” may be too casual

(33.) Id., pt.2.C at 5-6.

(34.) Id.

(35.) Id.

(36.) Id.

(37.) See id.

(38.) While defense contracts represent government purchases, the government effectively acts as a business when it purchases from the private sector. Sometimes called B2G transactions, they are no different from those we have previously discussed. Id., pt.1.A at 1, n.1.

(39.) Id., pt.2.C at 6.

(40.) Id.

(41.) Id., pt.2.F at 9.

(42.) Id.

(43.) Adam Smith, The Wealth of Nations, Bk. 1, CH.X (1776).

(44.) See, e.g., American Column & Lumber Co. v. United States, 257 U.S. 377 (1921). Accord, Milgram v. Leow’s, 192 F.2d 579, 583 (1951) (finding that behavior contrary to self-interest “strengthens considerably the inference of [Sherman Act [section] 1] conspiracy”).

(45.) See American Column & Lumber Co., 257 U.S. 377 (1921).

(46.) Maple Flooring Mfrs. Ass’n v. United States, 268 U.S. 563, 578 (1925). See also HERBERT HOVENCAMP, FEDERAL ANTITRUST POLICY, 2d Ed., at [section] 4.6 (1999) (“publicly announced prices and terms [] are generally believed to suggest that a market is conducive to express or tacit collusion….”).

(47.) FTC REPORT, supra note 1, pt.3.A.1.a, at 10 (citations omitted).

(48.) Id.

(49.) See Jonathan R. Macey and Maureen O’Hara, Regulating Exchanges and Alternative Trading Systems: A Law and Economics Perspective, 28 J. LEGAL STUD. 17, 31 (1999).

(50.) A Section 1 agreement is defined as “a conscious commitment to a common scheme….” Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 768 (1984).

(51.) A court cannot infer coordination from parallel pricing alone because it equally implicates unilateral and coordinated behavior. The plaintiff cannot meet his burden of proof absent some showing to sway the inference toward combination. See HOVENCAMP, supra note 46, at [section] 16.8b.

(52.) Jonathan B. Baker, Two Sherman Act Section 1 Dilemmas: Parallel Pricing, the Oligopoly Problem, and Contemporary Economic Theory, 38 ANTITRUST BULL. 143, 145 (1993).

(53.) Although this would suffice. Obviously, a Section 1 conspiracy can be proven through express agreement alone. Evidence of contemplation of an agreement, combined with consciously parallel behavior, also will get a conspiracy verdict. United States v. Paramount Pictures, 334 U.S. 131, 142 (1948).

(54.) E.g., In re Coordinated Pretrial Proceedings Prods. Antitrust Litig., 906 F.2d 432, 446 (9th Cir. 1990).

(55.) Baker, supra note 52, at 176-77.

(56.) Id. at 146-47.

(57.) See George J. Stigler, A Theory of Oligopoly, 72 J. POL. ECON. 44 (1964).

(58.) Id.

(59.) By referring to several sellers, the author yokes this analysis to that of the oligopoly strategy theory developed by Stigler, supra note 57, and expounded by Baker, supra note 52. This analysis assumes a B2B with an oligopoly supply.

(60.) Baker, supra note 52, at 151. Cf. Arthur M. Kaplan, Antitrust as a Public-Private Partnership: A Case Study of the NASDAQ Litigation, 52 CASE WESTERN RESERVE L. REV. 111, 117 (2001) (“Prominent economists argued that a conspiracy could not possibly succeed given the structure of NASDAQ … which included hundreds of market makers in the aggregate.”)

(61.) See generally Joseph Kattan and William R. Vigdor, Application of Game Theory to Antitrust: Game Theory and the Analysis of Collusion in Conspiracy and Merger Cases, 5 GEO. MASON L. REV. 441 (1997).

(62.) For a more thorough list of factors facilitating collusion, see, e.g., F.M. SHERER & D. ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 235-315 (3d ed. 1990)

(63.) Baker, supra note 52, at 151.

(64.) The feasibility of punishment in cartel arrangements is an issue heavily debated in economic literature. See Kattan & Vigdor, supra note 61, at 454. A relatively uncontroversial form of punishment can be assumed for this paper’s purposes: cartel members will temporarily undercut, in tandem, the rogue member’s cheating price even to below cost.

(65.) Baker, supra note 52, at 180-82.

(66.) Id.

(67.) See Montana v. SuperAmerica, Inc., 559 F. Supp. 298 (D. Mont. 1983)(allowing possibility of agreement to reach jury when gasoline retailers engaged in parallel pricing and price posting).

(68.) E.g., Ambrook Enters. v. Time Inc., 612 F.2d 604, 616 (2d Cir. 1979).

(69.) A showing of express collusion among the defendants in the past, or even of express collusion in similar markets for that matter, support plus factor “a.” of this list by identifying the market as one primed for collusion.

(70.) See Kattan & Vigdor, supra note 61, at 454.

(71.) Cf. note 55, supra (behavior is so complex as to only be explained by coordination).

(72.) Baker, supra note 52, at 181 n.77.

(73.) Id. at 151.

(74.) Spot markets allow one-time purchases, sometimes referred to as “single-shot” contracts.

(75.) Daubert v. Merrill Dow Pharm., Inc., 509 U.S. 579 (1993).

(76.) Id.

(77.) Id.

(78.) Christopher B. Hockett & Frank Hinman, Admissibility of Expert Testimony in Antitrust Cases: Does Daubert Raise a New Barrier to Entry for Economists?, ANTITRUST, Summer 1996, at 44 (“Daubert is already emerging as a significant evidentiary hurdle for expert economic testimony in antitrust cases.”)

(79.) 509 U.S. 579 at 592-593 (1993).

(80.) Roger D. Blair & Jill Boylston Herndon, The Implications of Daubert for Economic Evidence in Antitrust Cases, 57 WASH. & LEE L. REV. 801, 806 (2000).

(81.) Id. at 816 (“Economic experts are often called upon to testify about … circumstantial evidence.”).

(82.) Robert F. Lanzillotti, Coming to Terms with Daubert in Sherman Act Complaints: A Suggested Economic Approach, 77 NEB. L. REV. 83, 84 (1998).

(83.) McCormick on Evidence, John W. Strong, Ed., Hornbook Series at [section] 185 (4th ed. 1992).

(84.) See Blair & Herndon, supra note 80, at 817 (“A distinguishing feature of th[e collusion] area of antitrust is the reliance on circumstantial evidence due to a lack of direct evidence”)

(85.) 586 F.2d 1147 (7th Cir. 1978).

(86.) Id. at 1153.

(87.) Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 578 (1986) (reversing the appellate court because of failure to apply proper standards) (citations omitted).

(88.) See Blair & Herndon, supra note 80, at 823.

(89.) See generally Richard A. Posner, Oligopoly and the Antitrust Laws: a Suggested Approach, 21 Stan. L. Rev. 1562 (1969).

(90.) See Blair & Herndon, supra note 80, at 824.

(91.) Id. at 825.

(92.) Other things being equal (absent conspiracy, for example) sellers will take advantage of high prices by increasing output, whether by selling off inventory or increasing production.

(93.) See id. at 815. A common tool used to prove such phenomena is econometrics, where a regression model explains changes in one variable by changes in others, for example, changes in inventory are explained by changes in price. See generally Elia Kacapyr, ECONOMIC FORECASTING: THE STATE OF THE ART (1992). Such models are readily subject to Daubert scrutiny because their methodology is largely misunderstood by lay judges. See D.H. Kaye, The Dynamics of Daubert: Methodology, Conclusions, and Fit in Statistical and Econometric Studies, 87 Va. L. Rev. 1933, 1965 (2001). Even though the regression may be persuasive, a defendant’s expert might testify that the data is flawed or that change in inventory is explainable on other grounds. The judge may allow a jury to hear both parties’ competing regressions, forcing it to determine the models’ accuracy based on the witness’ credibility. Id. This undoubtedly introduces judgments exclusive of economics, law, or antitrust.

(94.) Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 578 (1986).

(95.) This point, especially relevant to the B2B because of the platform’s transparency, is reminiscent of the point articulated above that suggests B2Bs discourage a conspirator from undercutting the cartel because punishment comes hard and fast.

(96.) Federal appellate judge Richard Posner has suggested that firms can communicate their acceptance without expressly doing so: “one seller communicates his `offer’ by reducing output, and the offer is `accepted’ by the actions of his rivals in restricting output as well.” R.POSNER, ANTITRUST LAW 72 (1976). See also, Esco Corp. v. United States, 340 F.2d 1000, 1007 (9th Cir. 1965) (“a knowing wink can mean more than words.”).

(97.) Monsanto v. Spray-Rite Serv. Corp., 465 U.S. 752, 768 (1984).

(98.) See Kattan & Vigdor, supra note 61, at 454.

Gabriel Hertzberg, J.D. Candidate 2002, Rutgers University School of Law–Newark. The author thanks the editorial staff of the Rutgers Computer and Technology Law Journal for its support.