Opinion ID: 2936316
Heading Depth: 3
Heading Rank: 5

Heading: Pretextual explanations for price

Text: increases Finally, we address the Plaintiffs’ argument that the Chocolate Manufacturers’ pretextual explanations for their price increases support a reasonable inference of a conspiracy. See Fragale & Sons Beverage Co. v. Dill, 760 F.2d 469, 474 (3d Cir. 1985) (recognizing that pretextual explanations for disputed conduct “would disprove the likelihood of independent action”). The Chocolate Manufacturers publicly explained their price increases by citing rising costs. The Plaintiffs contend these cost-based explanations were cover for the real reason—to advance a price-fixing conspiracy. The same evidence that we credited earlier as showing that cost increases did not justify the price increases does not necessarily show pretext, i.e., that the Chocolate Manufacturers lied when they gave their cost-based explanations for their price increases. The Plaintiffs acknowledge that raw materials costs went up during this period; they simply dispute whether the increases were enough to justify the price increases. See J.A. 13892 (Tollison Report) (acknowledging that “cocoa prices did rise during the class period”); J.A. 6273–74 (same). Nor do the Plaintiffs dispute that other input costs, such as labor and energy costs, increased during this period. 49 Moreover, contemporaneous internal documents show that some who worked for the Chocolate Manufacturers were concerned about cost increases during the conspiracy period. See, e.g., J.A. 1031 (Nestlé USA 2002 internal document suggesting budget revisions “due to increased cocoa prices”); J.A. 1261 (Mars 2002 internal document proposing price increase in December 2002 in part because of “emerging material cost pressures” and because of belief that “all” the Chocolate Manufacturers “will likely face significant cost pressures in 2003”); J.A. 7649 (September 2002 email from Hershey’s David West noting “organizational momentum around pricing behind commodity prices,” but expressing disagreement with that organizational view); J.A. 1114 (citing March 2003 Hershey annual report that expressed concern about cocoa costs going up in 2004). But see, e.g., J.A. 4619 (October 2002 report from Hershey CEO Lenny to the Hershey board explaining cost coverage on cocoa through 2004); J.A. 7906 (December 2004 email from Hershey CEO Lenny discussing how to publicly explain the 2004 price increase given Hershey’s “outspoken[ness] about [Hershey’s] ‘coverage’ on cocoa and to a lesser extent on all input costs”). Therefore, to the extent the Plaintiffs’ pretext argument is that costs were going up but not enough to justify a price increase, their showing of pretext is weak. But even if the evidence of pretext were stronger, it would still be insufficient to survive summary judgment because pretext alone does not create a reasonable inference of a conspiracy. See Miles Distribs., Inc. v. Specialty Constr. Brands, Inc., 476 F.3d 442, 452 (7th Cir. 2007) (“[W]e hold that [pretextual reasons] are insufficient to create a genuine issue of fact without other evidence pointing to a price-fixing agreement.”); DeLong Equip. Co. v. Washington Mills Abrasive Co., 887 F.2d 1499, 1514 (11th Cir. 1989) (citing 50 Fragale, 760 F.2d at 474) (same); H. L. Moore Drug Exch. v. Eli Lilly & Co., 662 F.2d 935, 941 (2d Cir. 1981) (“[T]he mere fact that a business reason advanced by a defendant for its [action] is undermined does not, by itself, justify the inference that the conduct was therefore the result of a conspiracy.”). Requiring something more than pretext to survive summary judgment makes particular sense in cases like this one. In their pretext argument, the Plaintiffs rely on the same evidence they did in arguing that the Chocolate Manufacturers acted contrary to their interests—evidence which we have already said is insufficient to defeat summary judgment. That evidence is also insufficient here. That rising costs may not have been the full or even real reason for increasing prices does not show whether the real reason was interdependence or a conspiracy. Therefore, allegations of pretext must be accompanied by other traditional conspiracy evidence or economic evidence to create a reasonable inference of a conspiracy. Because such other evidence is lacking here, any evidence of pretext is insufficient to preclude summary judgment.