Antitrust Law Blog
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Antitrust Law Blog Antitrust Law Blog
Posted at 2:11 2:11 PM PM on on July July 9, 9, 2009 2009 by by Sheppard Sheppard Mullin Mullin Posted at
Allegations That Domestic Steel Steel Producers Violated Violated Section 1 Of The 1 Of The Allegations That Domestic Producers Section Sherman Through Reciprocal Calls For "Production Discipline" And ShermanAct Act Through Reciprocal Calls For "Production Discipline" And Output Constitute "Plus Factors", And Survive Twombly OutputReduction Reduction Constitute "Plus Factors", And Survive Twombly Attack Attack Standard Iron Works Works v. v. Arcelormittal, Arcelormittal, N.D. Standard Iron N.D. ILL., ILL.,No. No.08 08CC5214, 5214,June June 12, 12, 2009 Plaintiff Standard Plaintiff Standard Iron IronWorks Works("Standard") ("Standard")commenced commencedaaclass class action action against against domestic domestic steel steel producers, as a direct purchaser of steel products. Standard alleged a multi-year antitrust producers, as a direct purchaser of steel products. Standard alleged a multi-year antitrust enhance price price levels levels by by the the coordinated coordinated reduction reduction of of industry industry output conspiracy to enhance output of of steel steel products in the United States. According to the complaint, each defendant implemented, products in the United States. According to the complaint, each defendant implemented, and and prepreannounced, coordinated coordinated production cuts communications at announced, cuts through through express express communications at numerous numerous trade trade association meetings. The The complaint association meetings. complaint alleged alleged that that the the statements statements were were made made for for the the express express purpose of of coordinating production purpose production cuts cuts for for the the purpose of raising the price of of steel steel products. To circumvent the the application application of of Bell Bell Atlantic Atlantic Corp. v. Twombly, (2007), plaintiffs plaintiffs Twombly, 127 127 S.Ct. S.Ct. 1955 (2007), trade association associationstatements statementsofofthe theneed needfor for"discipline" "discipline" constituted constituted "plus "plus factors" alleged that the trade or the "something more" required required as as"facilitating "facilitating practices" to transform “interdependent” within aa concentrated, Sherman 11 violation. violation. behavior within concentrated, fungible product industry industry into into an an actionable Sherman See, e.g., e.g.,Monsanto Monsanto Co. Co. v. v. Spray-Rite Spray-Rite Serv. Corp., 465 U.S. 752, See, 752, 768 768 (1984) and and Matsushita Elec. Indus. Co., Ltd. v. Zenith Zenith Radio Radio Corp., Corp., 475 U.S. 574 (1986).
built upon Monsanto and and Matsushita built upon the the Supreme Supreme Court's decision in Theatre Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 U.S. 537 (1954) that "something more" Paramount Film Distributing Corp., 346 U.S. 537 (1954) that more" than than “conscious parallelism” was parallelism” was required requiredbefore beforean an agreement agreement could could be be found found under under the the Sherman Sherman Act. Thus, Thus, the the analysis focused on the "something more" necessary before conscious parallel activity can be analysis focused on the "something more" necessary before conscious parallel activity can be found to to imply implyactionable actionableconcerted concerted activity. activity.The TheTheatre TheatreEnterprises Enterprises court courtwas was concerned concerned that, that, otherwise, aggressive competition based upon rational economic decisions expected from rivals otherwise, aggressive competition based upon rational economic decisions expected from rivals activity in competitive equilibrium. equilibrium. The would defer innovation and further activity in aa market seeking seeking competitive fine line line of ofwhere where "conscious "conscious parallelism" parallelism"ends ends and and mutates mutates into tacit coordination, coordination, and and thus collusion, has been the grist of horizontal agreement analysis for over 70 years. See generally, collusion, has been the grist of horizontal agreement analysis for over 70 years. See generally, & Irving Parallelism or or Conspiracy? Conspiracy? ABA ABA Section Of Antitrust Darryl Snider & IrvingScher, Scher, Conscious Conscious Parallelism Section Of Law, Issues In Competition Law And Policy 1143 (2008). Issues In Competition Law Policy
In Standard Iron Works the court found the "something more" bright Standard Iron bright line lineto tobe be aa series series of
Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=9623e902-e656-4348-a494-244a19c24b21
at aanumber numberof of trade tradeassociation associationmeetings meetingscalling callingfor for"discipline", "discipline", comments by industry leaders leaders at and thus inviting coordinated pricing and output behavior. In the context of Twombly, and thus inviting behavior. In the context of Twombly, this this was was "plausible". In distinguishing the facts of Twombly Twombly itself, found to be "plausible". itself, the the Standard Standard Iron Works court found that, in addition to a market market structure structure ripe ripe for for collusion, collusion, aa "telling" "telling" plus plus factor factor was was represented an anabrupt abruptdeparture departurefrom from each eachfirm's firm's prior prior behavior. that the coordinated supply cuts cuts represented pricing was This behavior, behavior, the the court court noted, noted, occurred occurred at a time when pricing was well wellabove above cost cost and and when when domestic demand for steel far exceeded domestic supply. Thus, the "disciplined" output domestic demand for steel far exceeded domestic supply. Thus, the "disciplined" output competitive interest reductions were contrary to to the the independent independent competitive interest of of each each of of the the defendants, defendants, in the the Matsushita sense. Matsushita sense. In the specter specter of of Continental Continental Ore Ore Co, Co, v. v. Union Union Carbide In addition, addition, the the court court resurrected resurrected the Carbide and and Carbon Corp., 370 370 U.S. 690, 690, 699 (1962). In In Continental Continental Ore, Ore, the the Supreme Supreme Court Court noted noted that that the the character and effect of a conspiracy are not to be judged by dismembering it and viewing its character and effect of a conspiracy are not to be judged by dismembering it and viewing its separate parts. parts.370 370U.S. U.S. at at 699. 699. To To the the extent extent that that this this restates restatesthe theaxiom axiom usually usually credited to separate Aristotle that "the whole is greater than the sum of its parts", it is arguably contrary to the Aristotle that "the whole is greater sum of analysis of Monsanto and Matsushita. One must ponder how one could determine or analysis of Monsanto and Matsushita. One must ponder how one could determine the the presence presence or absenceof of"plus "plusfactors" factors"or orthe the"something "somethingmore" more"that thatdifferentiates differentiateslawful lawfuloligopolisitic oligopolisitic absence interdependence from tacit collision, without an examination of the constitute interdependence from tacit collision, without an examination of the constitute parts parts of of an an alleged Perhapsthe theteaching teachingofofStandard StandardIron IronWorks Worksmight might be be"while "while lots of people do it, conspiracy. Perhaps not everybody talks about about it." it."
Authored by: Don T. Hibner, Jr. (213) 617-4115 [email protected]
Antitrust Law Blog Antitrust Law Blog
Posted at 2:11 2:11 PM PM on on July July 9, 9, 2009 2009 by by Sheppard Sheppard Mullin Mullin Posted at
Allegations That Domestic Steel Steel Producers Violated Violated Section 1 Of The 1 Of The Allegations That Domestic Producers Section Sherman Through Reciprocal Calls For "Production Discipline" And ShermanAct Act Through Reciprocal Calls For "Production Discipline" And Output Constitute "Plus Factors", And Survive Twombly OutputReduction Reduction Constitute "Plus Factors", And Survive Twombly Attack Attack Standard Iron Works Works v. v. Arcelormittal, Arcelormittal, N.D. Standard Iron N.D. ILL., ILL.,No. No.08 08CC5214, 5214,June June 12, 12, 2009 Plaintiff Standard Plaintiff Standard Iron IronWorks Works("Standard") ("Standard")commenced commencedaaclass class action action against against domestic domestic steel steel producers, as a direct purchaser of steel products. Standard alleged a multi-year antitrust producers, as a direct purchaser of steel products. Standard alleged a multi-year antitrust enhance price price levels levels by by the the coordinated coordinated reduction reduction of of industry industry output conspiracy to enhance output of of steel steel products in the United States. According to the complaint, each defendant implemented, products in the United States. According to the complaint, each defendant implemented, and and prepreannounced, coordinated coordinated production cuts communications at announced, cuts through through express express communications at numerous numerous trade trade association meetings. The The complaint association meetings. complaint alleged alleged that that the the statements statements were were made made for for the the express express purpose of of coordinating production purpose production cuts cuts for for the the purpose of raising the price of of steel steel products. To circumvent the the application application of of Bell Bell Atlantic Atlantic Corp. v. Twombly, (2007), plaintiffs plaintiffs Twombly, 127 127 S.Ct. S.Ct. 1955 (2007), trade association associationstatements statementsofofthe theneed needfor for"discipline" "discipline" constituted constituted "plus "plus factors" alleged that the trade or the "something more" required required as as"facilitating "facilitating practices" to transform “interdependent” within aa concentrated, Sherman 11 violation. violation. behavior within concentrated, fungible product industry industry into into an an actionable Sherman See, e.g., e.g.,Monsanto Monsanto Co. Co. v. v. Spray-Rite Spray-Rite Serv. Corp., 465 U.S. 752, See, 752, 768 768 (1984) and and Matsushita Elec. Indus. Co., Ltd. v. Zenith Zenith Radio Radio Corp., Corp., 475 U.S. 574 (1986).
built upon Monsanto and and Matsushita built upon the the Supreme Supreme Court's decision in Theatre Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 U.S. 537 (1954) that "something more" Paramount Film Distributing Corp., 346 U.S. 537 (1954) that more" than than “conscious parallelism” was parallelism” was required requiredbefore beforean an agreement agreement could could be be found found under under the the Sherman Sherman Act. Thus, Thus, the the analysis focused on the "something more" necessary before conscious parallel activity can be analysis focused on the "something more" necessary before conscious parallel activity can be found to to imply implyactionable actionableconcerted concerted activity. activity.The TheTheatre TheatreEnterprises Enterprises court courtwas was concerned concerned that, that, otherwise, aggressive competition based upon rational economic decisions expected from rivals otherwise, aggressive competition based upon rational economic decisions expected from rivals activity in competitive equilibrium. equilibrium. The would defer innovation and further activity in aa market seeking seeking competitive fine line line of ofwhere where "conscious "conscious parallelism" parallelism"ends ends and and mutates mutates into tacit coordination, coordination, and and thus collusion, has been the grist of horizontal agreement analysis for over 70 years. See generally, collusion, has been the grist of horizontal agreement analysis for over 70 years. See generally, & Irving Parallelism or or Conspiracy? Conspiracy? ABA ABA Section Of Antitrust Darryl Snider & IrvingScher, Scher, Conscious Conscious Parallelism Section Of Law, Issues In Competition Law And Policy 1143 (2008). Issues In Competition Law Policy
In Standard Iron Works the court found the "something more" bright Standard Iron bright line lineto tobe be aa series series of
Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=9623e902-e656-4348-a494-244a19c24b21
at aanumber numberof of trade tradeassociation associationmeetings meetingscalling callingfor for"discipline", "discipline", comments by industry leaders leaders at and thus inviting coordinated pricing and output behavior. In the context of Twombly, and thus inviting behavior. In the context of Twombly, this this was was "plausible". In distinguishing the facts of Twombly Twombly itself, found to be "plausible". itself, the the Standard Standard Iron Works court found that, in addition to a market market structure structure ripe ripe for for collusion, collusion, aa "telling" "telling" plus plus factor factor was was represented an anabrupt abruptdeparture departurefrom from each eachfirm's firm's prior prior behavior. that the coordinated supply cuts cuts represented pricing was This behavior, behavior, the the court court noted, noted, occurred occurred at a time when pricing was well wellabove above cost cost and and when when domestic demand for steel far exceeded domestic supply. Thus, the "disciplined" output domestic demand for steel far exceeded domestic supply. Thus, the "disciplined" output competitive interest reductions were contrary to to the the independent independent competitive interest of of each each of of the the defendants, defendants, in the the Matsushita sense. Matsushita sense. In the specter specter of of Continental Continental Ore Ore Co, Co, v. v. Union Union Carbide In addition, addition, the the court court resurrected resurrected the Carbide and and Carbon Corp., 370 370 U.S. 690, 690, 699 (1962). In In Continental Continental Ore, Ore, the the Supreme Supreme Court Court noted noted that that the the character and effect of a conspiracy are not to be judged by dismembering it and viewing its character and effect of a conspiracy are not to be judged by dismembering it and viewing its separate parts. parts.370 370U.S. U.S. at at 699. 699. To To the the extent extent that that this this restates restatesthe theaxiom axiom usually usually credited to separate Aristotle that "the whole is greater than the sum of its parts", it is arguably contrary to the Aristotle that "the whole is greater sum of analysis of Monsanto and Matsushita. One must ponder how one could determine or analysis of Monsanto and Matsushita. One must ponder how one could determine the the presence presence or absenceof of"plus "plusfactors" factors"or orthe the"something "somethingmore" more"that thatdifferentiates differentiateslawful lawfuloligopolisitic oligopolisitic absence interdependence from tacit collision, without an examination of the constitute interdependence from tacit collision, without an examination of the constitute parts parts of of an an alleged Perhapsthe theteaching teachingofofStandard StandardIron IronWorks Worksmight might be be"while "while lots of people do it, conspiracy. Perhaps not everybody talks about about it." it."
Authored by: Don T. Hibner, Jr. (213) 617-4115 [email protected]
