Judge Dickinson R. Debevoise of the U.S. District Court for the District of New Jersey has dismissed class action claims of price fixing brought by indirect purchasers against several magnesium oxide companies in the case of In re Magnesium Oxide Antitrust Litigation.

The court also ruled, however, that the price fixing claims brought by the direct purchaser plaintiffs, Orangeburg Milling Company, Inc., Bar Ale, Inc., and Air Krete, Inc., could move forward. 

Both indirect and direct purchasers alleged that the defendants, Premier Chemicals, LLC, Sumitomo Corporation of America and YAS, Inc., engaged in a conspiracy to fix prices and allocate shares of the domestic magnesium oxide market from January 2002 to the present.  Magnesium oxide is used to manufacture many products including fertilizer, animal feed and pharmaceuticals. 

The direct purchasers filed their initial class action complaint in October 2010 alleging antitrust violations under both the Clayton and Sherman Acts.  The indirect purchaser consumers filed a similar suit a month later.

Judge Debevoise dismissed both the indirect and direct purchasers’ claims on the grounds they were not timely under the four-year statute of limitations, but ruled that the plaintiffs could toll the statute with evidence that the defendants fraudulently concealed the alleged conspiracy.   Both classes filed amended complaints.

The court was satisfied with the direct purchasers’ amended complaint, which alleged that misrepresentations by the defendants caused the plaintiffs to believe that price increases were due to normal competitive market forces. 

The court dismissed the indirect purchasers’ amended complaint because they bought their products at local mills and never dealt directly with defendants.  The amended complaint failed to show that the indirect purchasers were aware of the price increase.  In addition, the products purchased contained too small an amount of magnesium oxide for any alleged price fixing to have a foreseeable effect on the price.

The United States Court of Appeals for the Sixth Circuit has revived the antitrust claims of Carrier Corporation, the world’s largest manufacturer of air conditioners, which is suing producers of copper tubing for allegedly participating in an international customer and market allocation scheme.

The Sixth Circuit reversed the U.S. District Court for the Western District of Tennessee, which had dismissed the complaint in Carrier Corporation et al. v. Outokumpu Oyj et al., which alleges violations of the Sherman Act and the Tennessee Trade Practices Act. 

In 2006, Defendants-Appellees Outokumpu Oyj, Outokumpu Copper Products Oy, Outokumpu Copper, Inc., and Outokumpu Copper Franklin, Inc. (collectively “Outokumpu”) filed their motion to dismiss, which the district court granted for lack of subject matter jurisdiction and failure to state a claim.  Plaintiffs-Appellants Carrier Corporation, Carrier SA, and Carrier Italia S.p.A. (collectively “Carrier”) appealed the district court’s dismissal of the complaint.

Carrier, along with its affiliates, is the world’s largest manufacturer of air conditioning and commercial refrigeration equipment, and consequently one of the world’s largest purchasers of air conditioning and refrigeration copper tubing.  Carrier alleges that between 1988 and 2001, the Defendants conspired to raise the price for copper tubing by developing a “customer and market allocation scheme” under which “Carrier’s business in the United States was allocated to the Outokumpu defendants.”  According to the complaint, the other conspirators agreed not to pursue Carrier’s business, resulting in “artificially inflated and supra-competitive prices for ACR Copper Tubing in the United States, Europe, and elsewhere.”

Carrier supported these allegations by citing to European Commission (“EC”) decisions which found that Outokumpu and other European companies participated in a conspiracy to coordinate the prices of ACR copper tubing and plumbing tubes sold in the European market.  Carrier also cited the complaint’s allegations of circumstantial evidence that the market allocation scheme reached beyond the European markets and into the United States.  In granting Outokumpu’s motion to dismiss, the district court observed that the complaint merely cut-and-pasted facts from the EC decisions in a manner that was “wholly insubstantial.”

However, the Court of Appeals ruled that the district court erred in granting the motion to dismiss, stating that Carrier’s suit presented valid arguments despite its heavy reliance on the EC decisions.  The appellate court noted that “[t]he mere fact that the complaint borrows its substance from the EC decision[s] and then builds on the EC’s findings does not render its allegations any less valid.  Furthermore, even if all of the facts taken from the EC decisions were stripped from the complaint, Carrier’s complaint still offers additional allegations.”

The United Kingdom’s Department for Business, Innovation and Skills (BIS), has announced that the Government plans to introduce legislation that would lower the threshold for criminal prosecution in cartel cases.

Under the proposed law, the prosecution would no longer have to prove an individual’s dishonesty in entering into a cartel agreement.    

The cartel offense was introduced by the Enterprise Act of 2002.  Under the Act, a person is guilty of the cartel offense “if he dishonestly agrees with one more other persons” to engage in price-fixing, limitation of supply or production, market-sharing, and/or bid-rigging.  The Act does not define the term “dishonestly.”  However, the traditional test for dishonesty in English law is that an individual acts dishonestly if his conduct is “dishonest by the standards of reasonable honest people, and the defendant knew what he did was dishonest by those standards.”

Critics of the proposed removal of the dishonesty requirement argue that criminal liability and imprisonment should be reserved for persons that brazenly and actively engage in hardcore cartel activity.  They fear that this change could extend criminal enforcement to peripheral participants in a scheme whose conduct may have been more naive than it was cunning and calculated.

Supporters of the amendment reject this argument and counter that persons do not accidentally participate in a hardcore cartel.  They regard doing away with the dishonesty requirement as a necessity in order to achieve the deterrent effect of the cartel offense.  Indeed, many lament that the criminal enforcement of competition in the United Kingdom has failed to deliver in that respect.  Since its adoption in 2003, the only convictions under this law resulted from plea agreements in the United States, not any proactive enforcement by the Office of Fair Trading (OFT).  The Government expressly stated that one of its goals in proposing this change to the cartel offense is to obtain more convictions that would serve as cautionary tales for individuals.

In what may seem like a paradox, the reform proposed by BIS also contemplates that the cartel offense could be avoided if the parties agree to publish key details of their arrangements in an official newspaper of record such as the London Gazette before they are implemented.  Some have commented that this “publication exception” to the cartel offense could be exploited by cartel participants, who might publish only an innocuous description of their arrangements while concealing their nefarious aspects.  Some critics argue that while the Government is seeking to expand the scope of criminal liability in one aspect, it may also be giving a way out to the most sophisticated – and dishonest – violators of competition law.

The proposed amendments to the cartel offense are but one element of a wider reform of the United Kingdom’s competition law regime proposed by the Government, which includes the merger of the OFT and the Competition Commission, Britain’s two competition authorities.  The British Parliament will ultimately decide the fate of the reform. If adopted, the reforms are expected to come into effect in 2014.

Autorite de la Concurrence, the French competition authority, has fined French endive growers and trade organizations nearly 4 million euro ($5.2 million) for engaging in a 14-year price-fixing conspiracy that began in 1998.      

Endive (which is also known as chicory) is a bitter leaf vegetable that can be cooked or eaten raw.  While endive is not very common in the United States, it is the fourth most consumed vegetable in France.  France is the largest exporter of endive, producing nearly half of the world’s 450,000 tons. 

The conspiracy was carried out through regular minimum price instructions, management of sales and special offers, and mandated destruction of produce.  Growers also exchanged current prices through a computer system, which enabled the conspiracy to identify and punish rogues.        

The Autorite notes that growers knew their conduct was illegal.  In particular, the Autorite points to an email from a farmers’ union representative advising his colleagues that the government’s “instructions” were “clear” that they could have no written communication about prices.  However, the rep advised that to get around that problem, “[v]erbal communication between producers and shippers must therefore be organized.” 

The cartel apparently inflated wholesale endive prices, which rose 32% from 2000 to 2010, compared to 21.8% for vegetables overall.  However, its impact on consumer prices was limited, thanks largely to the retail grocers.  With 75% of France’s endive sales, retailers’ bargaining power was too strong for the conspiracy, and consumer prices remained relatively low.

The conspiracy’s limited ability to affect prices was a major factor in the Autorite’s imposition of a moderate fine on the growers and their trade organizations.

Class representatives and their counsel in the Vitamin C Antitrust Litigation have won another initial round in their suit alleging that Chinese vitamin C manufacturers conspired to fix prices and to limit the output of vitamin C exported to the United States.

Federal Judge Brian Cogan of the Eastern District of New York has rejected all but one of defendants’ arguments seeking disqualification of class representatives and class counsel in Animal Science Products, Inc., et al. v. Hebei Welcome Pharmaceutical Co., Ltd. et al., 2012 WL 251909 (E.D.N.Y. 2012).  Judge Cogan had previously denied defendants’ motions to dismiss on foreign sovereign compulsion and related comity grounds.

The four main defendants are Hebei Welcome Pharmaceutical Co. Ltd.; Jiangsu Jiangshan Pharmaceutical Co. Ltd.; Northeast Pharmaceutical Co. Ltd.; and Weisheng Pharmaceutical Co. Ltd.  Plaintiffs The Ranis Company and Magno–Humphries Laboratories, Inc. (“MHL”) moved for class certification on behalf of a group of direct purchasers seeking treble damages against all defendants except Northeast Pharmaceutical Co. Ltd.  Plaintiff Animal Science Products, Inc. moved separately for certification of a class of direct and indirect purchasers seeking injunctive relief against all defendants, including Northeast.

Judge Cogan granted class certification on behalf of a damages class represented by Ranis, but concluded that MHL could not serve as class representative because it is not a member of the class it seeks to represent.  The court also granted certification of an injunction class represented by Animal Science.

In certifying representatives for a damage class under Federal Rule of Civil Procedure 23(b)(3) and an injunctive relief class under Rule 23(b)(2), Judge Cogan made three key rulings:  (1) the “own and control” exemption to the ban on indirect-purchaser damage claims under the rule of Illinois Brick v. Illinois, 431 U.S. 720 (1977), does not permit a plaintiff to sue a defendant based on purchases from a subsidiary; (2) a plaintiff whose claim was assigned and had no actual purchases from a defendant could serve as a class representative; and (3) a wholesale direct purchaser had no conflict of interest in representing a class containing retail direct purchasers, even though a wholesale purchaser might favor higher retail prices.

While Judge Cogan rejected most of defendants’ challenges to the plaintiffs’ representative status, the court did deny class representative status to MHL, a purchaser from a defendant’s subsidiary.  Judge Cogan held that under Illinois Brick, MHL could not represent the direct purchaser class since MHL had only purchased from a subsidiary of a defendant.

Judge Cogan rejected defendants’ argument that plaintiff Ranis could not be a class representative because it only had an assigned claim from a direct purchaser and had not itself purchased any vitamin C from defendants.  Defendants had claimed that there is a “rule” prohibiting assignment of a class membership.  Judge Cogan held that no such rule existed.

Similarly, Judge Cogan rejected defendants’ argument that Ranis, as an assignee of a wholesale purchaser, had a conflict of interest with many class members who were retail purchasers, and thus should be disqualified as a class representative.  The court disagreed that there was any conflict, holding that “Ranis and the rest of the class, including the end-users, have precisely the same goal in this case: to demonstrate that the defendants’ alleged antitrust violations caused each plaintiff to purchase vitamin C at an artificially inflated price.”

Judge Cogan also held that that inclusion of indirect purchasers in the injunctive class did not create a conflict of interest between direct and indirect purchasers.  Moreover, inclusion of indirect purchasers in the Rule 23(b)(2) injunctive class did not demonstrate that class counsel had prejudiced the state law claims of the indirect purchasers – making them inappropriate as counsel to the class – because inclusion of indirect purchasers in a Rule 23(b)(2) settlement should not extinguish their subsequent state-law claims, if any, on res judicata grounds.