Wednesday, June 24, 2009

Conspiracy Claims Against Steel Producers Survive Motion To Dismiss

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Purchasers of steel products sufficiently alleged a multi-year antitrust conspiracy among domestic steel producers to reduce the production of steel products in the highly concentrated U.S. market, the federal district court in Chicago has ruled.

The complaint adequately stated facts that address the questions of who, what, when, and where to give the defending producers an idea of where to begin their response. Therefore, a joint motion to dismiss for failure to state a claim upon which relief can be granted was denied.

The purchasers contended that, despite increasing demand, the defending producers on three occasions coordinated production cuts for the express purpose of raising the price of steel products. The purchasers alleged that, absent a collusive agreement, these production cuts were against the individual competitive interests of each participating producers.

While alleging no specific evidence of a conspiracy, the claims supported a plausible inference that the producers' success at restricting the production of raw steel was the result of an unlawful agreement, the court decided.

In addition to averments of parallel conduct, the purchasers alleged a number of other facts plausibly suggesting an agreement to curtail production. The purchasers pointed to seven separate facts that suggested a conspiracy:

(1) a market structure ripe for collusion;

(2) coordinated supply cuts representing an abrupt departure from each firm's prior behavior;

(3) the appearance that the cuts were contrary to the independent competitive interest of each producer in light of pricing and domestic demand for steel;

(4) the timing of production cuts in relation to trade meetings where industry executives made statements directly to competing executives calling for industry-wide production restraint;

(5) private trade association meetings;

(6) executive statements suggesting collective action and agreement; and

(7) supracompetitive profits resulting from the alleged coordinated action.

The defending producers contended that the complaint did not meet the plausibility standard for pleadings set forth in Bell Atlantic Corp. v. Twombly (2007-1 Trade Cases ¶75,709). The court rejected the producers' attempt to parse the complaint and argue that none of the allegations—such as quoted public statements, parallel capacity decisions, and trade association meetings—supported a plausible inference of conspiracy.

The June 12 decision is Standard Iron Works v. Arcelormittal, 2009-1 Trade Cases ¶76,650.

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