Vanishing act: The impact of ephemeral messaging on civil antitrust conspiracy litigation

Google recently found itself in hot discovery water due to its employees’ habits of using ephemeral messaging apps (i.e., messaging apps that automatically delete messages shortly after sending) for their written communications, even after receiving litigation holds.[1] In that case, the lost messages could potentially have illuminated issues like competitive intent, effects, and market power. But the parties knew the core conduct at issue because, as is typical in Rule of Reason cases, the disputes centered on the competitive effects of known, largely public, conduct, not on proof of clandestine activities. Similarly, in the contract litigation where Twitter Inc. sought to force Elon Musk to follow through with a commitment to acquire the company, Twitter cited testimony that “Musk and his financial adviser Jared Burchall destroyed evidence – automatically disappearing Signal messages – about his reasons for wanting to get out of the deal[.]”[2] Once again, the lost evidence could have illuminated Elon Musk’s intent, but the parties had full visibility into the contract terms and the actions that would constitute or excuse a breach of those terms.

In an antitrust conspiracy case under the per se rule, however, the parties typically dispute what conduct actually occurred: the plaintiffs contend that the defendants participated in a price-fixing cartel or other inherently unlawful conspiracy, and the defendants deny any such behavior. Discovery then focuses on ferreting out the suggestive evidence that may support the plaintiffs’ allegations, understanding the patterns of contacts between competing firms, and placing those contacts in a context that permits a jury to infer conspiracy.

That discovery process, of course, presumes that the parties can identify the pattern of communications. But as the matters noted above illustrate, ephemeral messaging apps like Signal and Telegram can eliminate even the record of a communication having occurred. Google and Musk’s acknowledgment of the deleted communications at least allowed the litigants in those matters to contest the deletions, but a cartel participant facing potential criminal liability may well hesitate to even acknowledge the fact of their messages.

As more and more digital (near) natives occupy managerial roles in businesses, the likelihood of cartelists utilizing ephemeral messaging apps approaches 100%. The U.S. Department of Justice (DOJ) has begun explicitly accounting for the potential use of ephemeral messaging in its evaluation of corporate compliance programs, and the head of criminal enforcement for DOJ’s Antitrust Division has noted that “messaging platforms with encrypted or ephemeral messaging functionality, especially on personal devices,” necessitate “additional diligence for recipients of investigative process to preserve data and communications.”[3] And the DOJ and Federal Trade Commission (FTC) have jointly amended “their standard preservation letters and specifications for all second requests, voluntary access letters, and compulsory legal process, including grand jury subpoenas, to address the increased use of collaboration tools and ephemeral messaging platforms in the modern workplace.”[4]

Inevitably, civil antitrust enforcement in the U.S. will need to grapple with the problem of ephemeral messaging, and this article aims to help identify ways that courts and litigants can account for us of ephemeral messaging apps in resolving antitrust conspiracy cases. Part II will discuss the requirements for proof of conspiracy in U.S. civil antitrust litigation and how ephemeral messaging may interfere with meeting those requirements. Part III discusses the approach taken regarding evidence by regulators and courts in the U.K. and the E.U., where it has long been acknowledged that lack of evidence is commonplace in civil price-fixing matters. Part IV surveys potential solutions for the problem in the U.S., ranging from presumptions based on the use of ephemeral messaging to expanding the role of the U.S. antitrust agencies. Part V briefly concludes.

Ephemeral messaging and proof of antitrust conspiracies

Under U.S. law, civil litigants can prove antitrust conspiracies one of two ways: through direct evidence or circumstantial evidence.[5] Direct evidence cases involve such evidence as cooperating witness testimony detailing the conspiracy, guilty pleas of co-conspirators, clandestine law-enforcement recordings, written documentation of the conspiracy, and other evidence that “is explicit and requires no inferences to establish the proposition or conclusion being asserted.”[6] Where the Federal Bureau of Investigation uses hidden surveillance cameras to obtain video-recordings of the cartelists organizing their conspiracy, proving the conspiracy becomes fairly straightforward.[7]

But most civil antitrust conspiracy cases do not feature such clear evidence. In those cases, plaintiffs must rely on circumstantial evidence. Circumstantial evidence comprises 1) proof of parallel conduct in a concentrated industry (like nearly simultaneous price increases), 2) proof of each defendant’s awareness of the other firms’ conduct, and 3) proof of “plus factors” making conspiracy a reasonable inference from the first two elements.[8] The relevant plus factors may include evidence that the alleged conspirators engaged in actions contrary to their unilateral interests, evidence that the alleged conspirators had a motivation to conspire, evidence regarding frequent communications between firms, and other traditional conspiracy evidence.[9] Ultimately, because consciously parallel conduct without an agreement does not violate the Sherman Act,[10] “a plaintiff seeking damages for a violation of § 1 must present evidence ‘that tends to exclude the possibility’ that the alleged conspirators acted independently.”[11]

Increasing use of ephemeral messaging products could obviously deprive plaintiffs of direct evidence (i.e., the content of written messages), and it could also impact plaintiffs’ ability to show plus factors involving “interfirm communications.”[12] While cartelists may use telephone communications or face-to-face meetings to coordinate their activities without creating a written record, or may delete their SMS text messages to avoid production of the message contents, phone carrier records, hotel receipts, documentation of trade association conferences, and other evidence can at least show the fact that the alleged conspirators had the opportunity to and did communicate, as well as the frequency of those communications. Likewise, while employees can delete their emails, businesses can act to retain emails created on their servers, and other forensic evidence may still show that the deletion of email communications occurred. But as the Google Play Store litigation illustrates, ephemeral messaging applications—especially those using encryption technology—can automatically delete such messages so that no record of the communications remains at all.

These technologies will create substantial opportunities for cartel participants to engage in the communications necessary to coordinate their conspiracies without creating any record of having communicated. Not only would auto-deletion deprive plaintiffs of the content of the communications, but it will deprive them of the ability to prove that the communications occurred in the first place. Ephemeral messaging apps could therefore limit the ability of civil plaintiffs to collect crucial early evidence of interfirm communications and thus prevent them from even targeting the right individuals for discovery in building their cases.

Missing evidence of party communications also could deprive civil litigants of the important benefits of government enforcement actions, where government agencies can use subpoena power to thoroughly develop the evidentiary record before they proceed with a civil complaint or criminal charge.[13] The DOJ has historically insisted on criminal prosecution of price-fixing agreements, meaning that cases where the evidence does not rise to the level of proof beyond a reasonable doubt typically fall to private litigants without public enforcement. While certain civil matters like the Apple/e-books conspiracy (where the hub-and-spoke theory and the new technology made the applicability of the per se rule against price-fixing debatable)[14] or the recent litigation over alleged price-fixing on generic pharmaceuticals (where the size and importance of the impacted commerce drew suits from the vast majority of U.S. state attorneys general)[15] may involve government enforcers, agencies following current policy will likely focus on price-fixing matters with the sort of direct evidence that could support a criminal conviction. If ephemeral messaging apps make it impossible for the DOJ to prove beyond a reasonable doubt that price-fixing occurred, then there may be no governmental enforcement for private litigants to rely on in developing their cases.

Both the direct loss of evidence and the indirect loss of governmental enforcement could significantly undermine private enforcement of the Sherman Act’s prohibition on price-fixing and other per se unlawful conduct. Congress has provided for private remedies to further “the high purpose of enforcing the antitrust laws,”[16] and ephemeral messaging apps have the potential to thwart that high purpose by both facilitating cartel behavior and destroying its proof.

U.K. and E.U. perspective

In the U.K and E.U., courts and regulators acknowledged that cartel cases may suffer from lack of evidence long before the rise of ephemeral messaging. In this regard, the U.K.’s specialist competition court, the Competition Appeal Tribunal, stated in 2004 that “cartels are by their nature hidden and secret; little or nothing may be committed to writing. In our view even a single item of evidence, or wholly circumstantial evidence, depending on the particular context and the particular circumstances, may be sufficient to meet the required standard.”[17]

The E.U. Court of Justice has also commented on this issue, stating:

Since the prohibition on participating in anti-competitive agreements and the penalties which offenders may incur are well known, it is normal for the activities which those practices and those agreements entail to take place in a clandestine fashion, for meetings to be held in secret, most frequently in a non-member country, and for the associated documentation to be reduced to a minimum. Even if the Commission discovers evidence explicitly showing unlawful conduct between traders, such as the minutes of a meeting, it will normally be only fragmentary and sparse, so that it is often necessary to reconstitute certain details by deduction. In most cases, the existence of an anti-competitive practice or agreement must be inferred from a number of coincidences and indicia which, taken together, may, in the absence of another plausible explanation, constitute evidence of an infringement of the competition rules.[18]

In practice, the competition regulators who are tasked with uncovering and investigating potential cartels, the U.K.’s Competition and Markets Authority (CMA) and the European Commission (EC), have the power to collect, examine, and use various types of relevant evidence to prove a breach of competition law. Such evidence includes witness interviews, contemporaneous documents like extracts of notebooks, and responses to requests for information, as well as emails or other electronic messages (irrespective of whether they appear to be unread or have been deleted).[19] While competition regulators may uncover cartels through dawn raids and other methods, leniency regimes are an important tool in the regulators’ toolbox in the fight against cartels. Where a cartelist submits a leniency application, they agree to cease the anticompetitive conduct and cooperate with the regulator in exchange for being given total immunity from fines (to the first undertaking to submit evidence and fulfil other conditions) or reductions to fines. When considering whether to grant a cartelist total immunity or leniency, the regulator will consider, among other things, the quality of the evidence provided, including contemporaneous and incriminating evidence.[20] In some circumstances, evidence given in support that was prepared specifically for the leniency application and is not contemporaneous has limited probative value, and immunity may not be granted.[21] Ephemeral messaging could therefore put a cartelist that wishes to apply for leniency at a potential disadvantage,[22] though, as noted above, contemporaneous evidence which can be provided is not limited to electronic messages.

Once the CMA (or EC, subject to an assessment of whether the EC’s decision is binding on the English courts in light of “Brexit”) has issued a decision finding the existence of a cartel, victims that have suffered harm due to anticompetitive conduct can rely on that decision as establishing liability in follow-on private litigation. For cartel damages claims that are strictly follow-on, there is no requirement to gather additional evidence beyond that already gathered by the relevant competition authority in respect of the cartel itself, although it is necessary for claimants to make out their case, and therefore provide evidence, on causation (between the infringement and the damage) and quantification of the loss suffered. While this contrasts with ‘standalone’ litigation, in which there are no regulatory decisions finding antitrust infringement (and therefore where the claimant needs to obtain evidence to prove the existence of an infringement in addition to establishing causation and quantum – although such cases are rare in respect of cartel infringements), and hybrid claims which combine both follow-on and standalone elements (e.g., where a claimant wishes to go broader than the findings in the regulatory decision), it is clear from previous commentary from U.K and E.U. courts and regulators that challenges posed by ephemeral messaging can be overcome in those jurisdictions by other evidence of price fixing, including the results of economic analyses.

Solutions for U.S. litigation

Resolving the challenge posed by ephemeral messaging in U.S. civil antitrust conspiracy litigation will require a significant shift in approaches to conspiracy cases given the high risk that auto-deletion features will purge even the evidence that cartel communications took place. Most importantly, courts can craft rules for evaluating evidence that corporate employees used ephemeral messaging as part of the “plus factor” analysis. The Sherman Act operates as a “common-law statute,” and courts have power to fashion antitrust rules in light of changing social and economic conditions.[23] Courts have likewise repeatedly emphasized that “[t]here is no finite set of such criteria; no exhaustive list exists” of plus factors.[24] This flexibility opens up several possibilities for accounting for ephemeral messaging apps in a plus factor analysis.

One option would be for courts to treat demonstrated use of ephemeral messaging itself as a plus factor in favor of inferring conspiracy. While some employees may have legitimate reasons for using such functionality when discussing sensitive personal matters like health issues, regular and systematic resort to auto-deletion functionality seems unnecessary to normal business activities. Where evidence shows that key participants in pricing and output decisions at different companies had ephemeral messaging apps like Signal or Telegram on devices they used for professional activities, shifting the burden to the defense to show that the employees had legitimate reasons for using such applications makes good sense. Courts could even adopt presumptions that parties using ephemeral messaging apps intended to conceal their communications and instruct juries that they may make inferences from that intent.[25]

Another approach would have courts “soften” their analysis of other plus factors—consistent with the U.K. and E.U. approach summarized above—in light of the lower probability that plaintiffs will detect patterns of conspiratorial communications. Without any alteration to existing case law, courts could more readily infer conspiracy from actions contrary to economic interest such as failures to take opportunities to undercut competitors and market conditions like stagnant or declining demand that would create a greater motive to collude where relevant employees had ephemeral messaging apps on devices they used professionally.

Finally, DOJ and other agencies could expand their enforcement activities in cases involving per se unlawful conduct to include more civil enforcement, including sharing evidence with private litigants once the agency has filed suit. While the DOJ has understandable institutional interests in punishing cartels criminally and in maintaining its status as the primary enforcer against criminal antitrust conduct,[26] and agencies would need to take care not to conflate any civil and criminal investigations,[27] the DOJ and the FTC have broad statutory authority to investigate and file suit against anticompetitive behavior.[28] In circumstances where proof beyond a reasonable doubt may be unlikely, having a separate civil team pursue the matter could both police cartel conduct more effectively and open the door to more effective follow-on litigation given that the federal agencies will have had the benefit of reviewing subpoenaed materials before filing suit and conducting broader investigations of industries and third-parties than private litigants. This could help the agencies overcome some of the problems of proof created by the use of ephemeral messaging and further improve anti-cartel enforcement. And since the agencies generally seek injunctive relief to restrain anticompetitive activity rather than damages recoveries for private parties that overpaid due to cartel activity, more active sharing of civil discovery materials between government enforcers and private litigants could make private recoveries more efficient and effective.

Conclusion

Ephemeral messaging apps may predictably create significant problems of proof in antitrust conspiracy cases going forward. To counteract the potential diminution of U.S. private enforcement that may result, courts will likely need to adapt the plus factor analysis to appropriately account for the use of such apps, and the federal agencies may need to leverage their civil subpoena authority. Otherwise, these increasingly popular messaging technologies could dramatically impede enforcement of the antitrust laws.

*Daniel P. Weick is Of Counsel in New York and Jamie Nicolaides is an Associate in London

Footnotes

[1] See In re Google Play Store Antitrust Litig., No. 21-MD-02981-JD, --- F.Supp.3d ----, 2023 WL 2673109 (N.D. Cal. Mar. 28, 2023) (imposing sanctions for Google’s failure to take steps to ensure relevant employees turned off the auto-delete feature for an internal messaging system).
[2] Raquel Maria Dillon, “Texts released ahead of Twitter trial show Elon Musk assembling the deal,” NPR, Sept. 30, 2022, available at https://www.npr.org/2022/09/30/1126084000/texts-released-ahead-of-twitter-trial-show-elon-musk-assembling-the-deal.
[3] U.S. Dep’t of Justice Office of Public Affairs, Press Release, “Deputy Assistant Attorney General Manish Kumar Delivers Remarks at the Second Annual Spring Enforcers Summit” (Mar. 27, 2023), available at https://www.justice.gov/opa/speech/deputy-assistant-attorney-general-manish-kumar-delivers-remarks-second-annual-spring; U.S. Department of Justice Criminal Division, Evaluation of Corporate Compliance Programs 17 (2023) (“In evaluating a corporation’s policies and mechanisms for identifying, reporting, investigating, and remediating potential misconduct and violations of law, prosecutors should consider a corporation’s policies and procedures governing the use of personal devices, communications platforms, and messaging applications, including ephemeral messaging applications.”), available at https://www.justice.gov/opa/speech/ file/1571911/download.
[4] Fed. Trade Comm’n, Press Release, “FTC and DOJ Update Guidance That Reinforces Parties’ Preservation Obligations for Collaboration Tools and Ephemeral Messaging” (Jan. 26, 2024), available at https://www.ftc.gov/news-events/news/press-releases/2024/01/ftc-doj-update-guidance-reinforces-parties-preservation-obligations-collaboration-tools-ephemeral.
[5] See Mayor and City Council of Baltimore v. Citigroup, Inc., 709 F.3d 129, 136 (2d Cir. 2013); In re Insurance Brokerage Antitrust Litig., 618 F.3d 300, 324 (3d Cir. 2010); In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 661-62 (7th Cir. 2002).
[6] In re Baby Food Antitrust Litig., 166 F.3d 112, 118 (3d Cir. 1999).
[7] See U.S. Dep’t of Justice Antitrust Division, Deputy Assistant Attorney General Scott D. Hammond, Speech, “Caught In The Act: Inside An International Cartel” (Oct. 18, 2005) (discussing lysine cartel recordings), available at https://www.justice.gov/atr/speech/caught-act-inside-international-cartel.
[8] See Petruzzi’s IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224, 1242-43 (3d Cir. 1993).
[9] See, e.g., Mayor and City Council of Baltimore, 709 F.3d at 136 (“These ‘plus factors’ may include: a common motive to conspire, evidence that shows that the parallel acts were against the apparent individual economic self-interest of the alleged conspirators, and evidence of a high level of interfirm communications.”) (citation omitted); In re Flat Glass Antitrust Litig., 385 F.3d 350, 360 (3d Cir. 2004) (“We have identified . . . at least three such plus factors: (1) evidence that the defendant had a motive to enter into a price fixing conspiracy; (2) evidence that the defendant acted contrary to its interests; and (3) ‘evidence implying a traditional conspiracy.’”) (quoting Petruzzi’s, 998 F.2d at 1244).
[10] Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 US 537, 541 (1954). See also U.S. Dep’t of Justice & Fed. Trade Comm’n, Merger Guidelines § 2.3 (2023) (“Because tacit coordination often cannot be addressed under Section 1 of the Sherman Act, the Agencies vigorously enforce Section 7 of the Clayton Act to prevent market structures conducive to such coordination.”).
[11] Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986) (quoting Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 764 (1984)).
[12] Mayor and City Council of Baltimore, 709 F.3d at 136.
[13] U.S. Department of Justice Antitrust Division, Assistant Attorney General Bill Baer, Speech, “Public and Private Antitrust Enforcement in the United States,” at 4 (Feb. 11, 2014) (“[T]he Justice Department’s cartel prosecutions facilitate success in follow-on private damages actions.”), available at https://www.justice.gov/atr/file/517756/download.
[14] See United States v. Apple, Inc., 791 F.3d 290, 321-29 (2d Cir. 2015) (resolving applicability of per se rule against price fixing).
[15] See In re Generic Pharms. Pricing Antitrust Litig., 605 F. Supp. 3d 672, 675 (E.D. Pa. 2022) (noting claims by 49 states and territories).
[16] Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 131 (1969).
[17] JJB Sports plc and Allsports Limited v Office of Fair Trading [2004] CAT 17, paragraph 206.
[18] Aalborg Portland v Commission, Case 204/00P, paragraphs 55 to 57.
[19] See the CMA’s recent decision of 12 June 2023 in Case 50697 – Competition Act 1998 Supply of demolition and related services.
[20] Paragraph 9(b), C 298/17 Commission Notice on Immunity from fines and reduction of fines in cartel cases
[21] Case C‑510/11 P - Kone Oyj, Kone GmbH and Kone BV v European Commission, judgment of 24 October 2013.
[22] Interestingly, the number of leniency applications has been declining. In Europe, the number of leniency applications was 70.5% lower in 2020 than it was in 2015 (5.2, OECD Competition Trends 2022).
[23] See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 899 (2007).
[24] Flat Glass, 385 F.3d at 360. Accord Mayor and City Council of Baltimore, 709 F.3d at 136 n.6 (“As our use of the broad term ‘may include’ suggests, these plus factors are neither exhaustive nor exclusive, but rather illustrative of the type of circumstances which, when combined with parallel behavior, might permit a jury to infer the existence of an agreement.”).
[25] Cf. In re: RealPage, Rental Software Antitrust Litig. (No. II), Case No. 3:23-MD-3071, Dkt. No. 628 at 12-14 (M.D. Tenn. Nov. 15, 2023) (brief from DOJ arguing that court could infer conspiracy from landlords accepting invitation to provide data to rent-management software platform and delegating rental management functions to the platform).
[26] See Baer, supra n.12, at 2 (“Having a single agency take the lead is particularly advantageous in uncovering and prosecuting price fixing and bid rigging. The lead agency has always been the U.S. Department of Justice, and that has been all the more important since 1974, when cartel activity became a felony under U.S. federal competition law.”).
[27] Id. at 4 (“Access to grand jury material is tightly controlled, and ‘particularized need’ must be demonstrated before grand jury material can be obtained in civil discovery, and even then the interest in grand jury secrecy is balanced against the need for discovery”) (citing In re Air Cargo Shipping Antitrust Litig., 931 F. Supp. 2d 458, 463 (E.D.N.Y. 2013)).
[28] See 15 U.S.C. § 1312(a) (DOJ authority to issue civil investigative demands (CIDs)); 15 U.S.C. § 57b–1(c)(1) (FTC authority to issue CIDs); 15 U.S.C. § 4 (DOJ authority to pursue equitable relief); 15 U.S.C. § 4 (DOJ authority to pursue civil damages for injury to the federal government); 15 U.S.C. § 45 (FTC authority to prohibit and restrain “unfair methods of competition”).