^{Democracy & Technology Blog} Twombly’s conspiracy theory

Imagine if you ran a business and independently came to the same conclusion as your competitor about the products you would offer and the customers to whom you would offer them? That would be called “conscious parallelism,” a result of legitimate shared economic interests. That’s always been perfectly legal. Well, there are some trial lawyers who believe that parallel business behavior is or could be proof of conspiracy, which would be a violation of the Sherman Antitrust Act.
The Court of Appeals for the Second Circuit agreed in a case called Twombly v. Bell Atlantic. The Supreme Court is now considering a petition for certiorari. The case alleges that the Bell operating companies “conspired” not to compete against one another for local telephone service, but there is no proof.
The absence of proof is entirely understandable. The explanation for the Bells’ conduct is simple: Pervasive regulation skewed the benefits and risks of investment. The Bells eagerly pursued the opportunity to enter the long distance market, because for years regulation allowed fat profit margins despite declining costs. The Bells avoided local competition in each others’ markets because regulation kept prices below cost or because the UNE-P fiasco rendered significant facilities investment uneconomical.