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

Distinguishing a Series of Independent Vertical and Horizontal Agreements From a Hub-and-Spoke Conspiracy

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, July 12, 2017
Recorded event now available


This CLE webinar will examine hub-and-spoke agreements in antitrust, and the fact scenarios that can give rise to hub-and-spoke claims. The panel will discuss when a "rim" – that is, a horizontal agreement among competitors – can be inferred from a series of what appear to be vertical agreements or communications from a group of customers to a single supplier or from a group of suppliers to a single customers. The panel will also provide advice on how to avoid such categorization.

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.

Outline

  1. Hub-and-spoke theory of horizontal agreement
  2. Establishment of a “rim”:
    1. By combination of a series of vertical agreements
    2. By communication or conduct among the parties
  3. Significant hub-and-spoke cases
  4. Practical steps to avoid hub-and-spoke categorization

Benefits

The panel will review these and other key issues:

  • When might a combination of vertical and communications between the “hub” and individual “spokes” be deemed to be a hub-and-spoke conspiracy?
  • What kinds of facts and circumstances are considered evidence of a “rim” connecting horizontal players?
  • What steps can be taken to avoid a hub-and-spoke categorization?
  • What kinds of conduct and communication should be avoided?

Faculty

Robert B. Bell, Partner
Hughes Hubbard & Reed, Washington, D.C.

Mr. Bell has wide experience securing antitrust clearance for mergers and acquisitions from both the DOJ and the FTC and in representing companies and individuals in criminal and civil antitrust matters. He also regularly counsels clients on matters involving antitrust litigation and provides antitrust counseling on issues ranging from competitor collaborations to vertical distribution arrangements.

William L. Monts, III, Partner
Hogan Lovells US, Washington, D.C.

Mr. Monts focuses his practice on antitrust and competition litigation, abuse of dominance and restrictive practices, competition compliance, class action and group litigation, and commercial litigation. He has handled virtually every kind of antitrust dispute — price fixing, market allocation, boycott, tying, price discrimination, and monopolization — for major international companies and domestic clients and associations in industries as diverse as automobiles, energy, healthcare, software, insurance, and the professions.


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