Wednesday, January 12, 2011

Paper Purchasers' Price Fixing Claims Rejected

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

The federal district court in Bridgeport, Connecticut, has rejected price fixing claims brought by direct purchasers of commercial grade paper used for printing catalogues and magazines against paper company Stora Enso.

The complaining direct purchasers failed to create a genuine issue of material fact that an agreement between Stora Enso and rival UPM-Kymmene Corp. (UPM) affected the prices charged for publication paper in the United States. Summary judgment was granted in favor of Stora Enso.

Justice Department Investigation

The purchasers brought suit shortly after the Department of Justice made public that it was investigating the publication paper industry in 2004. In 2006, a federal grand jury in Connecticut issued a one-count indictment charging Stora Enso North America Corp. and other unnamed co-conspirators with price fixing from August 2002 to June 2003. Charges were not brought against UPM, which had entered into a full immunity agreement with the Justice Department.

The case against Stora Enso proceeded to trial in July 2007. At trial, a UPM executive testified about conversations with a Stora Enso executive. The jury ultimately acquitted Stora Enso (See U.S. No. 4855, ¶45,106).

Private Suit

In the private direct purchaser litigation, Stora Enso moved for summary judgment on the ground that the plaintiffs failed to proffer any evidence, direct or circumstantial, that Stora Enso and UPM, through their executives, agreed to engage in an illegal price fixing conspiracy.

The direct purchasers offered the criminal trial testimony of the UPM executive as direct evidence. However, the testimony could not reasonably be interpreted as direct evidence or proof of an agreement to raise, fix, or stabilize future prices of publication paper.

The testimony could be characterized as an exchange of information that each entity had already independently decided to follow price increase announcements, the court explained.

The court also determined that the circumstantial evidence offered by the purchasers was not enough to overcome Stora Enso's motion for summary judgment.

Parallel Price Increases, Capacity Reduction

Three industry-wide, parallel price increases and a capacity reduction were insufficient to demonstrate a conspiracy, the court held. In order to establish a conspiracy, the complaining purchasers had to come forward with additional facts that tended to exclude the possibility that the paper companies acted independently, in their own self-interest, when engaging in the parallel conduct.

The susceptibility of the market to illegal collusion and suspect communications between paper industry executives did not, without more, exclude the possibility of independent action. The complaining purchasers’ evidence did not tend to exclude the possibility that Stora Enso acted in accordance with independent, permissible business justification when following a rival’s price increase, the court decided.

The decision is In Re: Publication Paper Antitrust Litigation, 2010-2 Trade Cases ¶77,293.

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