Avoiding Hub-and-Spoke Liability: Recent Antitrust Cases and Practical Advice for Vertical and Horizontal Players

Description

Agreements which can give rise to antitrust actions are usually horizontal agreements made between competitors and vertical agreements between firms at different levels of a supply chain. Because of their potential for competitive harm, antitrust law treats horizontal agreements more stringently than vertical arrangements. Companies and their counsel must also be vigilant of "hub-and-spoke" agreements, those in which courts infer horizontal agreements often from what appear to be typical vertical arrangements.

In the typical hub-and-spoke case, a single purchaser or supplier in a relevant market (the “hub”) is often alleged to have entered into what appear to be individual vertical agreements with several distributors or suppliers (the “spokes”). Those agreements often include common distribution restrictions, such as exclusive territories or exclusive supply arrangements for certain products.

When, however, there is evidence that the “spokes” only entered the agreements with the distribution restrictions because others did and the “hub” communicated assurances from one of the “spokes” to others that all would be bound by the same restrictions, courts sometimes infer the existence of a “rim”— for example, an agreement between distributors A, B, C, and D to accede to supplier X’s demand to boycott supplier Y. In such cases, the courts may treat all participants as participating in a horizontal agreement between competitors, even though there is no evidence that the competitors ever communicated directly with one another or entered into any explicit agreement with one another. The horizontal agreement is inferred from circumstantial evidence, and the focus, accordingly, is on the kinds of conduct between the parties that could be deemed sufficient to establish a “rim” in a hub-and-spoke conspiracy.

Listen as our authoritative panel discusses hub-and-spoke arrangements, and notable cases that have found horizontal agreements from some combination of vertical agreements and communication and/or conduct. The panel will also provide suggestions on how to avoid a “rim” scenario that could result in a hub-and-spoke conspiracy claim.