Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-02301/USCOURTS-ca7-14-02301-0/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 

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In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 14-2301

IN RE: TEXT MESSAGING ANTITRUST LITIGATION

AIRCRAFT CHECK SERVICES CO., et al., individually and on

 behalf of all others similarly situated,

Plaintiffs-Appellants,

v.

VERIZON WIRELESS, et al.,

Defendants-Appellees.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 08 C 7082—Matthew F. Kennelly, Judge.

____________________

ARGUED FEBRUARY 10, 2015 — DECIDED APRIL 9, 2015

____________________

Before WOOD, Chief Judge, and POSNER and TINDER, Circuit Judges.

POSNER, Circuit Judge. This class action antitrust suit is before us for the second time. More than four years ago we 

granted the defendants’ petition to take an interlocutory apCase: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22
2 No. 14-2301

peal (see 28 U.S.C. § 1292(b)) from the district judge’s refusal 

to dismiss the complaint for failure to state a claim. But we 

upheld the judge’s ruling. In re Text Messaging Antitrust Litigation, 630 F.3d 622 (7th Cir. 2010). Three years of discovery 

ensued, culminating in the district judge’s grant of the defendants’ motion for summary judgment, followed by entry 

of final judgment dismissing the suit, precipitating this appeal by the plaintiffs.

The suit is on behalf of customers of text messaging—the

sending of brief electronic messages between two or more 

mobile phones or other devices, over telephone systems 

(usually wireless systems), mobile communications systems, 

or the Internet. (The most common method of text messaging today is to type the message into a cellphone, which 

transmits it instantaneously over a telephone or other communications network to a similar device.) Text messaging is 

thus an alternative both to email and to telephone calls. The 

principal defendants are four wireless network providers—

AT&T, Verizon, Sprint, and T-Mobile—and a trade association, The Wireless Association, to which those companies 

belong. The suit claims that the defendants, in violation of 

section 1 of the Sherman Act, 15 U.S.C. §§ 1 et seq., conspired 

with each other to increase one kind of price for text messaging service—price per use (PPU), each “use” being a message, separately priced. This was the original method of pricing text messaging; we’ll see that it has largely given way to 

other methods, but it still has some customers and they are 

the plaintiffs and the members of the plaintiff class.

The defendants’ unsuccessful motion to dismiss the 

complaint—the motion the denial of which we reviewed and 

upheld in the first appeal—invoked Bell Atlantic Corp. v. 

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No. 14-2301 3

Twombly, 550 U.S. 544 (2007), which requires a complaint to 

pass a test of “plausibility” in order to avoid dismissal. The

reason for this requirement is to spare defendants the burden of a costly defense against charges likely to prove in the 

end to have no merit. We decided that the plaintiffs’ second 

amended complaint passed the test; we noted that the complaint

alleges a mixture of parallel behaviors, details of industry 

structure, and industry practices, that facilitate collusion. 

There is nothing incongruous about such a mixture. If parties agree to fix prices, one expects that as a result they will 

not compete in price—that’s the purpose of price fixing. 

Parallel behavior of a sort anomalous in a competitive 

market is thus a symptom of price fixing, though standing 

alone it is not proof of it; and an industry structure that facilitates collusion constitutes supporting evidence of collusion. ... [T]he complaint in this case alleges that the four 

defendants sell 90 percent of U.S. text messaging services, 

and it would not be difficult for such a small group to 

agree on prices and to be able to detect “cheating” (underselling the agreed price by a member of the group) without 

having to create elaborate mechanisms, such as an exclusive sales agency, that could not escape discovery by the 

antitrust authorities.

Of note is the allegation in the complaint that the defendants belonged to a trade association and exchanged 

price information directly at association meetings. This allegation identifies a practice, not illegal in itself, that facilitates price fixing that would be difficult for the authorities 

to detect. The complaint further alleges that the defendants, along with two other large sellers of text messaging 

services, constituted and met with each other in an elite 

“leadership council” within the association—and the leadCase: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22
4 No. 14-2301

ership council’s stated mission was to urge its members to 

substitute “co-opetition” for competition.

The complaint also alleges that in the face of steeply falling costs, the defendants increased their prices. This is 

anomalous behavior because falling costs increase a seller’s 

profit margin at the existing price, motivating him, in the 

absence of agreement, to reduce his price slightly in order 

to take business from his competitors, and certainly not to 

increase his price. And there is more: there is an allegation 

that all at once the defendants changed their pricing structures, which were heterogeneous and complex, to a uniform pricing structure, and then simultaneously jacked up 

their prices by a third. The change in the industry’s pricing 

structure was so rapid, the complaint suggests, that it 

could not have been accomplished without agreement on 

the details of the new structure, the timing of its adoption, 

and the specific, uniform price increase that would ensue 

on its adoption. ...

What is missing, as the defendants point out, is the 

smoking gun in a price-fixing case: direct evidence, which 

would usually take the form of an admission by an employee of one of the conspirators, that officials of the defendants had met and agreed explicitly on the terms of a 

conspiracy to raise price. The second amended complaint 

does allege that the defendants “agreed to uniformly 

charge an unprecedented common per-unit price of ten 

cents for text messaging services,” but does not allege direct evidence of such an agreement; the allegation is an inference from circumstantial evidence. Direct evidence of 

conspiracy is not a sine qua non, however. Circumstantial 

evidence can establish an antitrust conspiracy. ... We need 

not decide whether the circumstantial evidence that we 

have summarized is sufficient to compel an inference of 

conspiracy; the case is just at the complaint stage and the 

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No. 14-2301 5

test for whether to dismiss a case at that stage turns on the 

complaint’s “plausibility.” ...

The plaintiffs have conducted no discovery. Discovery 

may reveal the smoking gun or bring to light additional 

circumstantial evidence that further tilts the balance in favor of liability.

In re Text Messaging Antitrust Litigation, supra, 630 F.3d at 

627–29; see also, for example, White v. R.M. Packer Co., 635 

F.3d 571 (1st Cir. 2011).

In short, we pointed to the small number of leading firms

in the text messaging market, which would facilitate concealment of an agreement to fix prices; to the alleged exchanges of price information, orchestrated by the firms’ 

trade association; to the seeming anomaly of a price increase 

in the face of falling costs; and to the allegation of a sudden 

simplification of pricing structures followed very quickly by 

uniform price increases.

With dismissal of the complaint refused and the suit thus 

alive in the district court, the focus of the lawsuit changed to 

pretrial discovery by the plaintiffs, which in turn focused on 

the alleged price exchange through the trade association and 

the sudden change in pricing structure followed by uniform 

price increases. Other factors mentioned in our first opinion—the small number of firms, and price increases in the 

face of falling costs—were conceded to be present but could 

not be thought dispositive. It is true that if a small number of 

competitors dominates a market, they will find it safer and 

easier to fix prices than if there are many competitors of 

more or less equal size. For the fewer the conspirators, the 

lower the cost of negotiation and the likelihood of defection; 

and provided that the fringe of competitive firms is unable

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6 No. 14-2301

to expand output sufficiently to drive the price back down to 

the competitive level, the leading firms can fix prices without worrying about competition from the fringe. But the 

other side of this coin is that the fewer the firms, the easier it 

is for them to engage in “follow the leader” pricing (“conscious parallelism,” as lawyers call it, “tacit collusion” as 

economists prefer to call it)—which means coordinating 

their pricing without an actual agreement to do so. As for 

the apparent anomaly of competitors’ raising prices in the 

face of falling costs, that is indeed evidence that they are not 

competing in the sense of trying to take sales from each other. However, this may be not because they’ve agreed not to 

compete but because all of them have determined independently that they may be better off with a higher price. 

That higher price, moreover—the consequence of parallel 

but independent decisions to raise prices—may generate 

even greater profits (compared to competitive pricing) if 

costs are falling, provided that consumers do not have attractive alternatives.

Important too is the condition of entry. If few firms can 

or want to enter the relevant market, a higher price generating higher profits will not be undone by the output of new 

entrants. Indeed, prospective entrants may be deterred from 

entering by realization that their entry might lead simply to 

a drastic fall in prices that would deny them the profits from 

having entered. And that drastic fall could well be the result 

of parallel but independent pricing decisions by the incumbent firms, rather than of agreement.

The challenge to the plaintiffs in discovery was thus to 

find evidence that the defendants had colluded expressly—

that is, had explicitly agreed to raise prices—rather than tacCase: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22
No. 14-2301 7

itly (“follow the leader” or “consciously parallel” pricing). 

The focus of the plaintiffs’ discovery was on the information 

exchange orchestrated by the trade association, the change in 

the defendants’ pricing structures and the defendants’ ensuing price hikes, and the possible existence of the smoking 

gun—and let’s begin there, for the plaintiffs think they have 

found it, and they have made it the centerpiece—indeed, virtually the entirety—of their argument.

Their supposed smoking gun is a pair of emails from an 

executive of T-Mobile named Adrian Hurditch to another 

executive of the firm, Lisa Roddy. Hurditch was not a senior 

executive but he was involved in the pricing of T-Mobile’s 

products, including its text messaging service. The first of 

the two emails to Roddy, sent in May 2008, said “Gotta tell 

you but my gut says raising messaging pricing again is nothing more than a price gouge on consumers. I would guess 

that consumer advocates groups are going to come after us 

at some point. It’s not like we’ve had an increase in the cost 

to carry message to justify this or a drop in our subscription 

SOC rates? I know the other guys are doing it but that 

doesn’t mean we have to follow.” (“SOC” is an acronym for 

“system on a chip,” a common component of cellphones.) 

The second email, sent in September 2008 in the wake of a 

congressional investigation of alleged price gouging by the

defendants, said that “at the end of the day we know there is 

no higher cost associated with messaging. The move [the latest price increase by T-Mobile] was colusive [sic] and opportunistic.” The misspelled “collusive” is the heart of the plaintiffs’ case.

It is apparent from the emails that Hurditch disagreed 

with his firm’s policy of raising the price of its text messagCase: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22
8 No. 14-2301

ing service. (The price increase, however, was limited to the 

PPU segment of the service; we’ll see that this is an important qualification.) But that is all that is apparent. In emphasizing the word “col[l]usive”—and in arguing in their 

opening brief that “Hurditch’s statement that the price increases were collusive is thus dispositive. Hurditch’s statement is a party admission and a co-conspirator statement”—

the plaintiffs’ counsel demonstrate a failure to understand

the fundamental distinction between express and tacit collusion. Express collusion violates antitrust law; tacit collusion

does not. There is nothing to suggest that Hurditch was referring to (or accusing his company of) express collusion. In 

fact the first email rather clearly refers to tacit collusion; for 

if Hurditch had thought that his company had agreed with 

its competitors to raise prices he wouldn’t have said “I know 

the other guys are doing it but that doesn’t mean we have to 

follow” (emphasis added). They would have to follow, or at 

least they would be under great pressure to follow, if they 

had agreed to follow.

As for the word “opportunistic” in the second email, this 

is a reference to the remark in the first email that T-Mobile 

and its competitors were seizing an opportunity to gouge 

consumers—and in a highly concentrated market, seizing

such an opportunity need not imply express collusion.

Consider the last sentence in the second, the “colusive,” 

email: “Clearly get why but it doesn’t surprise me why public entities and consumer advocacy groups are starting to 

groan.” This accords with another of Hurditch’s emails, in 

which he predicted that the price increase would cause “bad 

PR [public relations].” Those concerns would be present 

Case: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22
No. 14-2301 9

whether the collusion among the carriers was tacit or express.

Nothing in any of Hurditch’s emails suggests that he believed there was a conspiracy among the carriers. There isn’t 

even evidence that he had ever communicated on any subject with any employee of any of the other defendants. The 

reference to “the other guys” was not to employees of any of 

them but to the defendants themselves—the companies, 

whose PPU prices were public knowledge.

The plaintiffs make much of the fact that Hurditch asked 

Roddy to delete several emails in the chain that culminated 

in the “colusive” email. But that is consistent with his not 

wanting to be detected by his superiors criticizing their 

management of the company. The plaintiffs argue that, no, 

the reason for the deletion was to destroy emails that would 

have shown that T-Mobile was conspiring with the other 

carriers. If this were true, the plaintiffs would be entitled to 

have the jury instructed that it could consider the deletion of 

the emails to be evidence (not conclusive of course) of the 

defendants’ (or at least of T-Mobile’s) guilt. But remember 

that there is no evidence that Hurditch was involved in, or 

had heard about, any conspiracy, and there is as we’ve just 

seen an equally plausible reason for the deletion of the 

emails in question. There’s nothing unusual about sending

an intemperate email, regretting sending it, and asking the 

recipient to delete it. And abusing one’s corporate superiors—readily discernible even in Hurditch’s emails that were 

not deleted—is beyond intemperate; it is careerendangering, often career-ending. Hurditch and Roddy 

acknowledged in their depositions that at least one of the 

deleted emails had criticized T-Mobile’s senior management 

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10 No. 14-2301

in “emotional” terms. Furthermore, if T-Mobile destroyed

emails that would have revealed a conspiracy with its competitors, why didn’t it destroy the “smoking gun” email—

the “colusive” email?

Even if the district judge should have allowed the jury to 

draw an adverse inference from the destruction of the 

emails, this could not have carried the day for the plaintiffs 

or even gotten them a trial. T-Mobile’s Record Retention 

Guidelines indicate that Hurditch and Roddy had no obligation to retain their correspondence, because the guidelines 

state that employees need not retain “routine letters and 

notes that require no acknowledgment or follow-up” as distinct from “letters of general inquiry and replies that complete a cycle of correspondence.” Hurditch’s emails to Roddy were not inquiries; they were gripes and worries. Nor can 

a subordinate employee’s destruction of a document, even if

in violation of company policy, be automatically equated to 

a bad-faith act by the company.

The problems with the plaintiff’s case go beyond the inconclusiveness of the “colusive” email on which their briefs 

dwell at such length. The point that they have particular difficulty accepting is that the Sherman Act imposes no duty on 

firms to compete vigorously, or for that matter at all, in 

price. This troubles some antitrust experts, such as Harvard

Law School Professor Louis Kaplow, whose book Competition Policy and Price Fixing (2013) argues that tacit collusion 

should be deemed a violation of the Sherman Act. That of 

course is not the law, and probably shouldn’t be. A seller 

must decide on a price; and if tacit collusion is forbidden, 

how does a seller in a market in which conditions (such as 

few sellers, many buyers, and a homogeneous product, 

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No. 14-2301 11

which may preclude nonprice competition) favor convergence by the sellers on a joint profit-maximizing price without their actually agreeing to charge that price, decide what 

price to charge? If the seller charges the profit-maximizing

price (and its “competitors” do so as well), and tacit collusion is illegal, it is in trouble. But how is it to avoid getting 

into trouble? Would it have to adopt cost-plus pricing and 

prove that its price just covered its costs (where cost includes 

a “reasonable return” to invested capital)? Such a requirement would convert antitrust law into a scheme resembling 

public utility price regulation, now largely abolished.

And might not entry into concentrated markets be deterred because an entrant who, having successfully entered 

such a market, charged the prevailing market price would be 

a tacit colluder and could be prosecuted as such, if tacit collusion were deemed to violate the Sherman Act? What could 

be more perverse than an antitrust doctrine that discouraged 

new entry into highly concentrated markets? Prices might 

fall if the new entrant’s output increased the market’s total 

output, but then again it might not fall; the existing firms in 

the market might reduce their output in order to prevent the 

output of the new entrant from depressing the market price. 

If as a result the new entrant found itself charging the same 

price as the incumbent firms, it would be tacitly colluding

with them and likewise even if it set its price below that of 

those firms in order to maximize its profit from entry yet 

above the price that would prevail were there no tacit collusion.

Further illustrating the danger of the law’s treating tacit 

collusion as if it were express collusion, suppose that the 

firms in an oligopolistic market don’t try to sell to each othCase: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22
12 No. 14-2301

er’s sleepers, “sleepers” being a term for a seller’s customers 

who out of indolence or ignorance don’t shop but instead 

are loyal to whichever seller they’ve been accustomed to buy 

from. Each firm may be reluctant to “awaken” any of the 

other firms’ sleepers by offering them discounts, fearing retaliation. To avoid punishment under antitrust law for such 

forbearance (which would be a form of tacit collusion, aimed 

at keeping prices high), would firms be required to raid each 

other’s sleepers? It is one thing to prohibit competitors from

agreeing not to compete; it is another to order them to compete. How is a court to decide how vigorously they must 

compete in order to avoid being found to have tacitly colluded in violation of antitrust law? Such liability would, to 

repeat, give antitrust agencies a public-utility style regulatory role.

Or consider the case, of which the present one may be an 

exemplar, in which there are four competitors and one raises 

its price and the others follow suit. Maybe they do that because they think the first firm—the price leader—has insights into market demand that they lack. Maybe they’re

afraid that though their sales will increase if they don’t follow the leader up the price ladder, the increase in their sales 

will induce the leader to reduce his price, resulting in increased sales by him at the expense of any firm that had refused to increase its price. Or the firms might fear that the 

price leader had raised his price in order to finance product 

improvements that would enable him to hold on to his existing customers—and win over customers of the other firms. If 

any of these reflections persuaded the other firms—without 

any communication with the leader—to raise their prices, 

there would be no conspiracy, but merely tacit collusion, 

Case: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22
No. 14-2301 13

which to repeat is not illegal despite the urging of Professor 

Kaplow and others.

Competitors in concentrated markets watch each other 

like hawks. Think of what happens in the airline industry, 

where costs are to a significant degree a function of fuel 

prices, when those prices rise. Suppose one airline thinks of 

and implements a method for raising its profit margin that it 

expects will have a less negative impact on ticket sales than 

an increase in ticket prices—such as a checked-bag fee or a 

reservation-change fee or a reduction in meals or an increase 

in the number of miles one needs in order to earn a free ticket. The airline’s competitors will monitor carefully the effects 

of the airline’s response to the higher fuel prices afflicting 

the industry and may well decide to copy the response

should the responder’s response turn out to have increased 

its profits.

The collusion alleged by the plaintiffs spanned the period 

2005 to 2008 (the year the suit was filed), and we must consider closely the evolution of the text messaging market in 

that period. Text messaging (a descendant of the old telex 

service) started in the 1990s and started slowly. In 2005, 81 

billion text messages were sent in the United States, which 

sounds like a lot; in fact it was peanuts—for by 2008 the 

number had risen to a trillion and by 2011 to 2.3 trillion. One 

reason for the rapid increase was the advent and increasing 

popularity of volume-discounted text messaging plans. 

These plans entitled the buyer to send a large number of 

messages (often an unlimited number) at a fixed monthly 

price that made each message sent very cheap to the sender. 

We’ll call these plans “bundles,” and ignore the fact that often a text messaging bundle includes services in addition to 

Case: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22
14 No. 14-2301

text messaging, such as voice and video messaging. The

pricing of text messaging bundles (for example charging a 

fixed monthly rate for unlimited messaging) largely replaced 

the original method of pricing text messages, which had 

been price per use (PPU), that is, price per individual message, not per month or per some fixed number of messages. 

Once text messaging bundles became popular, the PPU 

market shrunk to the relative handful of people who send

text messages infrequently. The collusion alleged in this case 

is limited to that market.

In 2005 the price per use was very low—as low as 2 cents, 

though more commonly 5 cents. But between then and late 

2008 all four defendant companies, in a series of steps (10 

steps in all for the four companies), raised each of their PPUs 

to 20 cents. The increase attracted congressional concern and 

an investigation by the Justice Department’s antitrust division, but neither legislative nor prosecutorial action resulted—only the series of class actions suits consolidated in 2009 

in the suit before us.

The popularity of text messaging bundles took a big bite 

out of the PPU market. The consumers left in that market 

were as we said those who sent very few messages. The total 

cost to such users was very low. Each defendant company 

made, so far as appears, an independent judgment that PPU 

usage per customer was on average so low that the customer 

would not balk at, if he would even notice, an occasional increase of a few cents per message. Suppose a grandparent 

living in Florida sends one text message a week to his 

grandchild in Illinois at a cost of 5 cents a message. That

adds up to roughly 4 messages a month, for a total of 20 

cents. The text messaging service now doubles the price, to 

Case: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22
No. 14-2301 15

10 cents a message. The monthly charge is now 40 cents. Is 

the customer likely to balk? When in 2006 Sprint raised its 

PPU from 10 cents to 15 cents, it estimated that the average 

result would be an increase of 74 cents a month in the cost of 

the service for the vast majority of its PPU customers. Neither in our hypothetical example nor in Sprint’s real-world 

analysis is a competing carrier likely to spend money advertising that its PPU price is 5 cents lower than what the competition is charging.

Our earlier discussion of “sleepers” is relevant here. As 

heavy users of text messaging switched from PPU to bundles, the PPU market was left with the dwindling band of

consumers whose use of text messaging was too limited to 

motivate them to switch to bundles or to complain about 

small increases in price per message. And they certainly

weren’t going to undergo the hassle of switching companies 

just because they would be paying a few dollars a year more 

for text messaging. This is no more than a plausible interpretation of the motive for and character of the price increases 

of which the plaintiffs complain, but the burden of establishing a prima facie case of explicit collusion was on the plaintiffs, and as the district judge found in his excellent opinion

they failed to carry the burden.

Granted, the defendants overstate their case in some respects. They point out that each company conducted independent evaluations of the profitability of raising their PPUs, 

but one would expect such “independent” evaluations even 

if the firms were expressly colluding, as the “independent” 

evaluations would disguise what they were doing. The firms

contend unnecessarily that the evaluations showed that the 

contemplated price increases would be profitable even if 

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16 No. 14-2301

none of the other three carriers raised its PPU. That is overkill because it is not a violation of antitrust law for a firm to 

raise its price, counting on its competitors to do likewise (but 

without any communication with them on the subject) and 

fearing the consequences if they do not. In fact AT&T held 

back on raising its PPU for several months, fearing that 

Sprint’s increase would have a bad effect on public opinion, 

and raised its own price only when the bad effect did not 

materialize.

The plaintiffs point out that the existence of express collusion can sometimes be inferred from circumstantial evidence, and they claim that they produced such evidence, 

along with Hurditch’s emails, which they term direct evidence of such collusion—which, as we know, they are not.

Circumstantial evidence of such collusion might be a decline 

in the market shares of the leading firms in a market, for

their agreeing among themselves to charge a high fixed price

might have caused fringe firms and new entrants to increase 

output and thus take sales from the leading firms. Circumstantial evidence might be inflexibility of the market leaders’ 

market shares over time, suggesting a possible agreement 

among them not to alter prices, since such an alteration 

would tend to cause market shares to change. Or one might 

see a surge in nonprice competition, a form of competition 

outside the scope of the cartel agreement and therefore a 

possible substitute for price competition. Other evidence of 

express collusion might be a high elasticity of demand

(meaning that a small change in price would cause a substantial change in quantity demanded), for this might indicate that the sellers had agreed not to cut prices even though 

it would be to the advantage of each individual seller to do 

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No. 14-2301 17

so until the market price fell to a level at which the added 

quantity sold did not offset the price decrease.

The problem is that these phenomena are consistent with 

tacit as well as express collusion; their absence would tend 

to negate both, but their presence would not point unerringly to express collusion. And anyway these aren’t the types of 

circumstantial evidence on which the plaintiffs rely. Rather 

they argue that had any one of the four carriers not raised its 

price, the others would have experienced costly consumer 

“churn” (the trade’s term for losing customers to a competitor), and therefore all four dared raise their prices only because they had agreed to act in concert. For that would minimize churn—PPU customers would have no place to turn 

for a lower price. There is, however, a six-fold weakness to

this suggested evidence of express collusion:

First, a rational profit-maximizing seller does not care 

about the number of customers it has but about its total revenues relative to its total costs. If the seller loses a third of its 

customers because it has doubled its price, it’s ahead of the 

game because twice two-thirds is greater than one (4/3 > 3/3).

Second, in any case of tacit collusion the colluders risk 

churn, because no one would have committed to adhere to 

the collusive price. And yet tacit collusion appears to be 

common, each tacit colluder reckoning that in all likelihood

the others will see the advantages of hanging together rather 

than hanging separately.

Third, the four defendants in this case did not move in 

lockstep. For months on end there were price differences in 

their services. For example, during most of the entire period 

at issue (2005 to 2008) T-Mobile’s PPU was 5 cents below 

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18 No. 14-2301

Sprint’s. To eliminate all risk of churn the defendants would 

have had to agree to raise their prices simultaneously, and 

they did not.

Fourth, while there was some churn, this does not imply 

that each defendant had decided to raise its price so high as 

to drive away droves of customers had the other defendants 

not followed suit. T-Mobile, for example, appears not to 

have gained a significant number of customers from charging less for PPU service than Sprint. (As one internal TMobile email puts it, “we should seriously consider raising 

our pay per message rate ... . [F]or having the lowest messaging rates on the planet, we are not necessarily receiving a 

more favorable share of the market. I’m thinking we can 

move to 10c[ents] with little erosive concerns.”) One reason 

is that, as noted earlier, while 5 cents can make a large percentage difference in this market, it is such a small absolute 

amount of money that it may make no difference to most 

consumers, especially when a nickel or a dime or 20 cents is 

multiplied by a very small number of monthly messages. 

More important, as a customer’s monthly messaging increases, and also the price per message (as was happening

during this period), the alternative of a text messaging bundle plan becomes more attractive. A company that stands to 

lose some PPU customers because of a price increase may be 

confident that they will not abandon the company for another but instead sign on to the company’s text messaging bundle plan. Put differently, there is no evidence that PPU pricing is a major determinant of consumers’ choice of carrier.

Fifth, the period during which the carriers were raising 

their prices was also the period in which text messaging 

caught on with the consuming public and surged in volume. 

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No. 14-2301 19

Many PPU customers would have found that they were text 

messaging more, and the more one text messages the more 

attractive the alternative of a bundle plan. The defendants 

wanted their PPU customers to switch to bundles; as an internal T-Mobile email in the plaintiffs’ appendix explains, 

“the average cost to serve an ‘Unlimited SMS’ [i.e., a bundled short-message service at a fixed price regardless of the 

number of messages, “short message” referring to a simple 

text message, rather than a message having voice or video 

content] customer paying $9.99 [per month] is $1.90 per 

month and [we make] a profit of $8.09 per sub[scriber].”

And sixth, if the carriers were going to agree to fix prices,

they wouldn’t have fixed their PPU prices; why risk suit or 

prosecution for fixing such prices when the PPU market was 

generating such a slight—and shrinking—part of the carriers’ overall revenues? The possible gains would be more 

than offset by the inevitable legal risks. Furthermore, since 

an agreement to fix prices in the PPU market would have left 

the carriers free to cut prices on the bulk of their business

(for they are not accused of fixing bundle prices), the slight 

gains from fixing PPU prices would be negated by increased 

competition in the carriers’ other markets.

The plaintiffs argue that many of the price increases were 

forced by senior management on the middle managers who 

would ordinarily be responsible for pricing decisions. The 

claim is that it would be the senior officials, few in number, 

at each company who would have negotiated the actual collusive agreement that the plaintiffs must prove. But what the 

record shows is merely (as in the Hurditch emails) that there 

was disagreement within each company about the optimal

price to charge, obviously a speculative matter since no one 

Case: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22
20 No. 14-2301

could be certain how either competitors or consumers would 

react to any price change. There was plenty of evidence that 

proposals for price increases came from middle management. An economist would say (one of the defendants’ economic experts did say) that as the price-sensitive users 

moved off PPU to bundles, leaving PPU to the sleepers, the 

overall demand for PPU became less elastic, meaning that a 

given percentage increase in the price of PPU service had a

smaller negative effect on the demand for the service. That 

made raising the PPU a revenue winner.

It remains to consider the claim that the trade association 

of which the defendants were members, The Wireless Association (it has a confusing acronym—CTIA, reflecting the 

original name of the association, which was Cellular Telephone Industries Association), and a component of the association called the Wireless Internet Caucus of CTIA, were 

forums in which officers of the defendants met and conspired to raise PPU prices. Officers of some of the defendants attended meetings both of the association and of its 

caucus, but representatives of companies not alleged to be 

part of the conspiracy frequently were present at these meetings, and one of the plaintiffs’ expert witnesses admitted that 

in the presence of non-conspirators “the probability of collusion would go away.” Still, opportunities for senior leaders 

of the defendants to meet privately in these officers’ retreats 

abounded. And an executive of one of the defendants 

(AT&T) told the president of the association that “we all try 

not to surprise each other” and “if any of us are about to do 

something major we all tend to give the group a heads 

up”—“plus we all learn valuable info from each other.” This 

evidence would be more compelling if the immediate sequel

to any of these meetings had been a simultaneous or nearCase: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22
No. 14-2301 21

simultaneous price increase by the defendants. Instead there 

were substantial lags. And as there is no evidence of what 

information was exchanged at these meetings, there is no 

basis for an inference that they were using the meetings to 

plot prices increases.

This and other circumstantial evidence that the plaintiffs 

cite are almost an afterthought. They have staked almost 

their all on Hurditch’s emails—the name “Hurditch” recurs 

more than 160 times in the plaintiffs’ opening and reply 

briefs. It’s a mystery to us that the plaintiffs have placed 

such weight on those emails, thereby wasting space in their 

briefs that might have been better used. The plaintiffs greatly 

exaggerate the significance of the emails, but apart from the 

emails the circumstantial evidence that they cite provides 

insufficient support for the charge of express collusion.

It is of course difficult to prove illegal collusion without 

witnesses to an agreement. And there are no such witnesses 

in this case. We can, moreover, without suspecting illegal

collusion, expect competing firms to keep close track of each 

other’s pricing and other market behavior and often to find 

it in their self-interest to imitate that behavior rather than try 

to undermine it—the latter being a risky strategy, prone to 

invite retaliation. The plaintiffs have presented circumstantial evidence consistent with an inference of collusion, but 

that evidence is equally consistent with independent parallel 

behavior.

We hope this opinion will help lawyers understand the 

risks of invoking “collusion” without being precise about 

what they mean. Tacit collusion, also known as conscious 

parallelism, does not violate section 1 of the Sherman Act. 

Collusion is illegal only when based on agreement. AgreeCase: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22
22 No. 14-2301

ment can be proved by circumstantial evidence, and the

plaintiffs were permitted to conduct and did conduct full 

pretrial discovery of such evidence. Yet their search failed to 

find sufficient evidence of express collusion to make a prima 

facie case. The district court had therefore no alternative to 

granting summary judgment in favor of the defendants.

AFFIRMED.

Case: 14-2301 Document: 84 Filed: 04/09/2015 Pages: 22