WHO ARE THE ALLEGED CONSPIRATORS IN THIS PRICE-FIXING DISPUTE, AND HOW DID THEY ALLEGEDLY FIX PRICES?

Justice Chavez BACKGROUND The following facts are undisputed. Plaintiffs are “[p]ersons in the State of New Mexico . . . who purchased cigarettes indirectly from Defendants, or any parent, subsidiary or affiliate thereof, at any time from November 1, 1993 to the date of the filing of this action [April 10, 2000].” The original Defendants were Philip Morris, R.J. Reynolds (“RJR”), Brown & Williamson (“B&W”), Lorillard, and Liggett. The events leading up to this lawsuit were set in motion in response to a Philip Morris strategy beginning with an event known as “Marlboro Friday.” Prior to Marlboro Friday, Philip Morris, the market leader, had been steadily losing market share to discount and deep discount cigarettes since 1980, when Liggett pioneered the development of generic cigarettes. In an attempt to regain market share, Philip Morris announced Marlboro Friday on April 2, 1993, “a nationwide promotion on Marlboro that reduced prices at retail by approximately 20 percent, an average of 40[cents] per pack.” In response, RJR and B&W instituted similar promotions. As part of its strategy, Philip Morris announced on July 20, 1993, that there would be a similar reduction on all premium brands, discount brands, and deep discount brands starting on August 9, 1993. Defendants RJR and B&W also followed these price reductions. After these decreases, Defendants began to increase their wholesale list prices on premium and discount cigarettes in near lock-step fashion. Some increases were due to settlements with the 50 states, some because of increases in federal excise taxes, and others were simply planned. Even with these increases, wholesale list prices did not exceed pre-Marlboro Friday levels until August 3, 1998, or when adjusted for inflation, ongoing settlement costs, and federal excise taxes, the list prices did not surpass pre-Marlboro Friday amounts until August 1999. During the time period of the alleged agreement to fix prices, 1993 to 2000, Defendants were engaged in competition with one another regarding promotions at the retail level, resulting in a direct reduction of the retail prices of cigarettes. Plaintiffs filed this class action lawsuit on April 10, 2000, alleging violations of New Mexico antitrust and consumer protection laws. Defendants filed motions for summary judgment. In granting the motion for summary judgment, the district court held that Plaintiffs had met their initial burden of showing a pattern of parallel behavior, but failed to meet their second burden of showing the existence of plus factors that would tend to exclude the possibility that the alleged conspirators acted independently. * * * * * On appeal, the Court of Appeals acknowledged that “Marlboro Friday and the industry-wide price reductions that occurred afterward represented the triumph of competition over oligopolistic price coordination.” Although the Court affirmed summary judgment in favor of Lorillard and Liggett because the evidence showed that they had merely acted “consistent with conscious parallelism,” the Court reversed summary judgment in favor of Philip Morris, RJR, and B&W because “we think that a reasonable factfinder could view conscious parallelism as a relatively implausible explanation for the anticompetitive scenario that played out following Marlboro Friday.” FEDERAL SUBSTANTIVE ANTITRUST LAW: PROVING THE CONSPIRACY There is no doubt that the tobacco industry, in which five companies manufacture more than 97% of the cigarettes sold in the United States, is a classic oligopoly.

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