March 30, 2012

Sixth Circuit Saves Air Conditioner Manufacturer’s Claims From The Deep Freeze

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.”

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Categories: Antitrust and Price Fixing, Antitrust Litigation

    March 28, 2012

    British Propose Lowering Bar For Prison In Cartel Cases

    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.

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    Categories: Antitrust and Price Fixing, Antitrust Enforcement, International Competition Issues

      March 26, 2012

      Third Circuit Slashes Tire Company’s Recovery Of E-Discovery Costs

      The U.S. Court of Appeals for the Third Circuit has  vacated a district court award in excess of $367,000 for e-discovery costs to the winning defendants in Race Tires America Inc. v. Hoosier Racing Tire Corp.

      As we reported in an earlier edition of Antitrust Today, Judge Terrence F. McVerry of the U.S. District Court for the Western District of Pennsylvania ordered the plaintiff, Race Tires America Inc., to pay these costs after granting summary judgment in favor of the defendants.

      Race Tires argued that defendants entered into exclusive contracts which allegedly shut it out of the dirt oval track market. Judge McVerry held that Race Tires could not show it sustained an antitrust injury because such contracts are permissible when a sports entity freely decides it wants exclusivity and has precompetitive, good faith or business motives for entering into the agreements.

      After the Third Circuit affirmed the ruling in 2010, the district court clerk taxed almost all of the defendants’ e-discovery costs to the plaintiff under 28 U.S.C. § 1920(4). The statute allows recovery of “(f)ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.”

      At issue on appeal was whether section 1920(4) authorizes the taxation of e-discovery vendor charges for data collection, preservation, searching, culling, conversion and production as either “exemplification” or “making copies” of materials where necessary for use in the case.

      In a decision by Judge Thomas Vanaskie, the Third Circuit sharply reduced the recovery to $30,000. The court held that none of the vendors’ work qualified as “exemplification” and that the only “copying” that was performed was the scanning of hard copy documents, converting native files to the .tif format, and the transfer of videotapes to DVDs.

      The appellate court reasoned that shifting the costs of e-discovery was inconsistent with the “American rule” against shifting the expense of litigation to the losing party and that “[n]either the language of § 1920(4), nor its history, suggests that Congress intended to shift all the expenses of a particular from of discovery – production of ESI – to the losing party.”

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      Categories: Uncategorized

        March 20, 2012

        French Toss Salad Price-Fixing Conspirators With Fines

        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.

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        Categories: Antitrust and Price Fixing, International Competition Issues

          March 16, 2012

          Sour Decision For Plaintiffs In Extra-Sweet Pineapple Litigation

          A California state appellate court has upheld the denial of class certification in a case brought by consumers alleging that Fresh Del Monte Produce Inc. monopolized the extra-sweet pineapple market in violation of California Unfair Competition Law.

          Del Monte was accused in Conroy v. Fresh Del Monte Produce Inc. of attempting to obtain a patent for extra-sweet pineapple – despite knowing that pineapple variety was unpatentable – and then using sham patent litigation to foreclose competition and to charge supracompetitive prices. 

          The California Court of Appeal for the First District held that the indirect purchaser class of plaintiffs failed to show that the trial court improperly denied class certification when it decided that substantial individual questions needed to be resolved to establish injury to class members.  Even if liability could have been established, the trial court held that plaintiffs did not meet their burden of showing how members of the class could be notified to participate in any kind of cost effective claims process. 

          In 2004, a complaint with similar allegations was filed in federal court in the Southern District of New York on behalf of direct and indirect purchasers.  In 2008, the federal court certified a class of direct purchasers but refused to certify an indirect purchaser class because of issues with manageability. 

          In 2009, the plaintiffs in the California action moved for class certification.  The trial court adopted portions of the Southern District’s decision and denied the motion. 

          The California appellate court affirmed the trial court’s decision and held that it had acted within its discretion by finding that plaintiffs’ evidence did not overcome the manageability issued identified by the Southern District.

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          Categories: Antitrust and Intellectual Property Law, Antitrust Law and Monopolies, Antitrust Litigation

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