We've known at least since Bell Atl. Co. v. Twombly, 550 U.S. 544 (2007), that competitors can engage in parallel conduct — charging the same price, offering the same product features, setting identical contract terms — without running afoul of the Sherman Act. A plaintiff claiming a violation of section 1, which bars conspiracies in restraint of trade, must allege, in addition to parallel behavior, "plus factors" that point to an agreement between competing firms not to compete.
The Second Circuit ruled on March 5 that a section 1 claim failed because the complaint's thrust — that financial institutions agreed to stop propping up "auction rate securities" and all at once exit the ARS market — didn't make sense:
Indeed, Defendants' alleged actions — their en masse flight from a collapsing market in which they had significant downside exposure — made perfect business sense. . . . In their brief on appeal, with its repeated mention of the February 13 auction failures, Plaintiffs seem to be suggesting that the ARS market had been healthy until that day and imploded in a sudden and unexpected collapse. But the allegations in their complaints reveal otherwise. Indeed, according to Plaintiffs themselves, ARS auctions started failing as early as the summer of 2007. Compl. 80. More auctions failed during the fall and winter, putting Defendants on notice that "the market for [ARS] was in danger of failing." Compl. 81. Thus by early 2008, each defendant was faced with the same dilemma. Continuing to prop up the auctions with support bids generated commissions for successful auctions; but if enough auctions failed, ARS would be seen as poor investments, the markets would dry up, and Defendants' support purchased would turn into major liabilities. As the complaints vividly demonstrate, each defendant was well aware of these dynamics — the market as a whole was essentially holding its breath waiting for the inevitable death spiral of ARS auctions. In such an environment, it is unsurprising, and expected, that once failures reached a critical mass, defendants would exit the market very quickly. In fact, at that point abandoning bad investments was not just a rational business decision, but the only rational business decision.
Mayor and City Council of Baltimore v. Citigroup, Inc., No. 10-0722-cv (L), slip op. at 15-16 (2d Cir. Mar. 5, 2013) (emphasis in original).