United States: Ninth Circuit Affirms Dismissal Of Challenge To Alleged Horizontal Adoption Of Minimum Advertised Prices

In what has been described as the latest opinion on the use of hub and spoke theories to allege conspiracies in violation of Section 1 of the Sherman Act, the plaintiffs took the position that the viability of their claims depended exclusively on whether they had adequately alleged a horizontal conspiracy. In re: Musical Instruments and Equipment Antitrust Litigation, No. 12-56674, 2015 U.S. App. Lexis 14960, slip op. at 13-14 (9th Cir. August 25, 2015) ("Plaintiffs made it clear both before the district court and on appeal that their theory of the case depends on establishing . . . horizontal agreements"). Plaintiffs did not claim that the "hub's" conduct constituted part of the alleged antitrust violations. Id. at 22 n.9 ("nor do plaintiffs allege that the MAP policies themselves are illegal vertical agreements"); id. at 14 n.4. Plaintiffs pleaded a number of asserted "plus factors" to support their horizontal theories, all of which were rejected by the district court and the Ninth Circuit majority, which relied extensively on Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

Plaintiffs filed a number of putative class actions following an FTC investigation of possible violations by a trade association of Section 5 of the Federal Trade Commission Act. The trade association was the National Association of Music Merchants Inc. ("NAMM"). The FTC did not allege a violation of Section 1 of the Sherman Act. The FTC and NAMM resolved the dispute with a consent decree forbidding NAMM from "facilitating in any manner the exchange of information between or among Musical Product Manufacturers or Musical Product Dealers relating to . . . pricing policies, including but not limited to Minimum Advertised Price Policies." Musical Instruments, slip op. at 6-7. "MAP policies" set the minimum prices at which a retailer could advertise the manufacturers' guitars and amplifiers. "NAMM neither admitted nor denied the FTC's allegations, and the FTC did not levy any monetary fine." Id. at 7.

The members of the putative class purchased guitars and amplifiers from defendant Guitar Center, Inc., the largest retailer of musical instruments in the United States. Guitar Center allegedly controlled nearly one-third of all guitar and amplifier sales in the United States. Musical Instruments, slip op. at 4 n.1. The guitars and amplifiers were manufactured by five major manufacturers—Fender, Gibson, Yamaha, Hoshino and Kaman. The defendant manufacturers, along with defendant NAMM, allegedly conspired from 2004 through 2009 under pressure from Guitar Center to implement and enforce the MAP policies. The complaints stated that the MAP policies tended to raise prices and restrain competition. Id. at 4-5. The manufacturers allegedly agreed with Guitar Center to implement the policies, and additionally the "manufacturers agreed among themselves to adopt the MAP policies proposed by Guitar Center." Id. at 5. Plaintiffs alleged that at NAMM-sponsored events, the manufacturers extensively discussed the adoption and implementation of MAP policies. Musical Instruments, dissent at 33-34.

After limited discovery, the defendants gained a dismissal with prejudice of the complaint for failure to state a claim under Rule 12(b)(6). Slip op. at 7-8. One statement of the test applied by the court of appeals for determining whether a conspiracy had been adequately pleaded was,

Allegations of facts that could just as easily suggest rational, legal business behavior by defendants as they could suggest an illegal conspiracy are insufficient to plead a Section 1 violation.

Musical Instruments, slip op. at 16, citing, inter alia, Twombly, 550 U.S. at 553-58 & n. 5 [internal quotation marks omitted]; Iqbal v. Ashcroft, 556 U.S. 662, 668 (2009).

The court held that Plaintiffs' claims were defeated by their allegations that Guitar Center's pressure on the manufacturers resulted in their implementation of MAP policies. That pressure provided each of the manufacturers with an independent, noncollusive reason to implement MAP policies. The court held that "the complaint itself . . . provides ample independent business reasons why each of the manufacturers adopted and enforced MAP policies even absent an agreement among the defendant manufacturers. . . . Manufacturers' decisions to heed similar demands by a common, important customer do not suggest conspiracy or collusion." Musical Instruments, slip op. at 21.

Plaintiffs attempted to plead "plus factors" to support the inference that a conspiracy had taken place. Viable plus factors are nonconclusory allegations of fact that plausibly suggest the existence of horizontal agreements to the exclusion of rational, independent business conduct. Musical Instruments, slip op. at 14, 17. Plaintiffs alleged the following six plus factors: "(1) [D]efendants shared a common motive to conspire; (2) the manufacturer defendants acted against their self-interest; (3) the manufacturer defendants simultaneously adopted substantially similar MAP policies; (4) the FTC's investigation and consent decree; (5) the defendants' participation in NAMM; and (6) retail prices for guitars and guitar amplifiers rose during the class period as the number of units sold fell." Musical Instruments, slip op. at 18.

  1. Common motive to conspire. Majority: "[A]llegations of parallel conduct—though recast as common motive—is insufficient to plead a Section 1 violation." Id. at 19 & n. 8 ("common motive for increased profits always exists"). Dissent: Did not assert that common motive in and of itself was sufficient to allege a conspiracy. Id. at 30-31.
  2. Action against self-interest. Majority: "[P]laintiffs fail to account for conscious parallelism and the pressures of an interdependent market." Musical Instruments, slip op. at 20. This was not a case "where individual action would be so perilous in the absence of advance agreement that no firm would make the challenged move without such an agreement." Id. Further, here it was in the self-interest of each manufacturer to accommodate a major customer's demand for MAP policies. Id. at 21. Dissent: This suggests illegal agreements when considered with additional factors. Id. at 31.
  3. Simultaneous adoption of MAP policies. Majority: This was not an example of "[c]omplex and historically unprecedented changes in pricing structure made at the same time by multiple competitors . . ." Musical Instruments, slip op. at 21-22. The manufacturers "adopted the policies over a period of several years, not simultaneously." Id. at 22. The manufacturers' response to Guitar Center's pressure was "a hallmark of independent parallel conduct—not collusion." Id. Dissent: A three-year period is short enough to suggest collusion Plaintiffs should have had discovery about the MAP policies' exact terms. Id. at 32.
  4. The FTC's investigation of NAMM. Majority: The FTC asserted only a violation of Section 5, which does not require the allegation or proof of a combination or conspiracy Neither the FTC complaint nor the consent decree alleged any actual conspiracy among the manufacturers. Musical Instruments, slip op. at 23. Dissent: The FTC alleged that certain trade association meetings "had the purpose, tendency, and capacity to facilitate collusion," which supported an inference of collusion here. Id. at 32-33.
  5. Defendants' attendance at NAMM trade association meetings. Majority: Participation in trade association meetings where information is exchanged and strategies are advocated is not enough by itself to allege the existence of a conspiracy. Trade association meetings have legitimate functions, such as providing information to industry members and conducting research to further the legitimate goals of the participants. Musical Instruments, slip op. at 24 Dissent: Specific MAP pricing structures were discussed and promoted at the meetings, which suggests collusion. Id. at 33-34.
  6. Rising prices. Majority: The price of the products rose while the volume sold diminished. This could have had any number of causes, such as an increase in the cost of raw materials. Plaintiffs failed to link it to any conspiracy. Id. at 25-29 Dissent: This shows that it was plausible that collusion, something outside of normal market processes, was at work. Id. at 33-35.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
13 Sep 2018, Other, Los Angeles, United States

Liisa will be giving opening remarks and presenting, "Big Data and Online Behavioral Advertising (OBA): An Advertiser’s Perspective Origins of big data and how to legally acquire data."

26 Sep 2018, Seminar, San Francisco, United States

Please join us for Sheppard Mullin's Labor & Employment Law Update & Happy Hour Seminar Series.

28 Sep 2018, Other, Los Angeles, United States

Leaders today don't just have to worry about nefarious cybercriminals getting "inside" their firewalls; there's an entire ecosystem of SAAS partners, third party vendors and suppliers, and all the hardware from switches to POS terminals that need to be monitored.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions