The U.S. District Court for the Eastern District of Pennsylvania has denied a motion in the In re Fasteners Antitrust Litigation class action to dismiss antitrust claims alleging that YKK and other fastener manufacturers engaged in price fixing.

Defendants sought dismissal of the claims on grounds of statute of limitations and lack of evidence.

The class action was filed in May 2010, by apparel manufacturers who alleged that YKK, Scovill Fasteners, Coats, and the Prym Group conspired to fix prices and allocate customers in the market for fasteners, a category which includes zippers, buttons, snaps, and hooks. From the early 1990’s through 2007, defendants allegedly participated in meetings to discuss prices, divide markets, and share business information.

U.S. apparel manufacturers began alleging illegal activity by the fastener manufacturers after a 2007 announcement by the European Commission fining the defendants for cartelizing the European and worldwide markets.  This finding caused over 35 suits to be filed in U.S. District Courts between 2007 and 2010.  The individual suits were consolidated into the class action.

Plaintiffs allege that the defendants concealed their conspiracy and due diligence would not have led class members to its discovery.  The class contends that there should be an equitable tolling of the statute of limitations until 2007, when they were made aware of the cartel by the European Commission’s announcement.

While the District Court did not grant the motion to dismiss based on the statute of limitations, the claims could still fail on that ground if a determination on the merits results in a denial of equitable tolling.  The District Court also found that the class sufficiently pled the existence of a conspiracy and antitrust injury.

A class action complaint in the U.S. District Court for the Northern District of California alleges that Apple and five major publishers engaged in a price-fixing conspiracy to block competition from Amazon’s e-reader, the Kindle.

The complaint in Petru et al. v. Apple, Inc. et al. alleges that prior to the launch of Apple’s iPad, Apple, HarperCollins, Penguin, Simon & Schuster, Macmillan, and Hachette Book Group violated federal and California state antitrust laws by conspiring to fix the prices of electronic books (e-books).

The plaintiffs contend that Apple was threatened by the popularity of Amazon’s Kindle and the potential that it would edge out Apple products in the market for mobile digital media devices.

According to the complaint, Apple wanted to protect its e-books from the price competition of Amazon, Sony and other e-book distributers that were selling e-books for $9.99.  The complaint claims that Apple sought to engineer an increase in Amazon’s prices in order to allow Apple’s iPad to better compete in the market for e-readers.

Plaintiffs allege that Apple orchestrated an agreement among publishers to sell e-books through an agency model.  This type of arrangement allowed publishers, not distributers, to set prices.  The agency model allegedly eliminated price competition among distributers.  According to the complaint, this model caused prices for e-books to rise by 30 to 50%, while the prices of hardcopy books remained constant in a competitive market.

If the class is certified, it will include purchasers of e-books from the five publisher defendants after the adoption of the agency model.

Plaintiffs alleging a conspiracy among manufacturers of drives that play CDs and other optical discs are going to have to refocus their allegations in order to screen their claims of price-fixing in federal court.

Judge Richard Seeborg of the United States District Court for the Northern District of California has granted the defendants’ motions to dismiss each of the plaintiffs’ consolidated complaints, with leave to amend, in the case of In re Optical Disk Drive Antitrust Litigation.

The complaints in this Multi-District Litigation allege a conspiracy among defendants to fix the prices of Optical Disc Drives (“ODDs”) and Optical Disc Drive Products (“ODD Products”) in violation of the Sherman Act and state antitrust law.  ODDs are disc drives that use laser light to read and write data in optical discs, such as CDs, DVDs and Blu-Ray discs. 

In granting defendants’ motion to dismiss, the court focused on definitional inconsistencies in the complaints of the plaintiffs, who include a putative class of direct purchasers and indirect purchasers of ODDs and ODD Products.  To provide clarity, the court defined ODDs as “optical disc drive mechanisms built to be incorporated into either (1) stand-alone CD, DVD, or Blue-Ray players and records, whether for audiovisual or computer use, (2) computers, (3) game consoles, or (4) camcorders.”  The court defined ODD devices as “all such products (including the stand-alone players and recorders) that include ODDs.” 

The court granted defendants’ motion to dismiss the “direct purchaser” plaintiffs’ complaint under the federal Illinois Brick doctrine, under which only direct purchasers have standing to seek damages for price-fixing violations.  The court stated that “the likelihood is that most, if not all, the plaintiffs only purchased ODD devices,” rather than actual ODDs.  Accordingly, the court found that the direct purchaser plaintiffs were not, in fact, direct purchasers under Illinois Brick, due partially to the complaint’s definitional confusion and partially to the complaint’s lack of factual support.  Moreover, the court found the alleged conspiracy implausible as the number of entities needed to participate in the alleged conspiracy would be vast and the type of entities would be highly differentiated.  Finally, the court found the direct purchaser plaintiffs’ complaint was insufficient under the Twombly pleading standards. 

The court dismissed the indirect purchaser plaintiffs’ complaint on similar grounds, concluding that the complaint did not satisfy the plausibility standard.  The court took particular aim at the implausibility of the allegations of bid-rigging in auctions conducted by HP and Dell, which claimed the two companies were both co-conspirators and victims. 

In dismissing the complaints with leave to amend, the court gave plaintiffs 30 days to remedy the insufficiencies of their allegations.

A combination of a failure to pursue discovery and vague allegations have led  Judge Legrome D. Davis of the U.S. District Court for the District of Delaware to grant summary judgment, dismissing price-fixing claims in Superior Offshore Int’l, Inc. v. Bristow Group Inc.. 

Plaintiff Superior Offshore is a purchaser of helicopter services to offshore oil and gas sites.  Defendants Era Helicopters, LLC, Era Group Inc., Era Aviation, Inc., Bristow Group, Inc., PHI, Inc., and Seacor Holdings Inc., provide the helicopter services.  On behalf of all purchasers of defendants’ helicopter services from 2001 to 2005, Superior alleged that defendants had illegally agreed to fix prices in per se violation of Section 1 of the Sherman Act.

Superior’s original complaint was dismissed last year on the ground that Superior had alleged only parallel pricing that did not “justif[y] an inference of conspiracy or state[] a plausible claim of price-fixing.”  Although Superior had failed to conduct discovery, it sought leave to file an amended complaint based on “newly discovered evidence.”  The court permitted Superior to file an amended complaint based on three new paragraphs that alleged that in early 2001, a Bristow sales manager “believed he overheard” a conversation between a Bristow sales VP and competitor PHI’s sales manager in which the two men agreed to a major price increase and noted that the Era defendants had also agreed to the increase.   

Judge Davis, however, limited discovery to the allegations in the three new paragraphs.  Specifically, he allowed depositions of only the four individuals involved in or the subject of the alleged overheard conversation, and he permitted the parties to request additional discovery relating only to the new allegations.  Superior ultimately deposed only two of the four permitted witnesses  

Judge Davis granted defendants summary judgment because the sales manager’s testimony about the sole disputed fact in the case – the conversation he allegedly overheard – failed to create a genuine issue of fact.  He could not recall what was actually said, who said it, or whether he heard the entire conversation.  He was also “mistaken in his surmise as to who was on the other side of the conversation” and “who purportedly authorized” the VP he overheard to make the alleged statements.  Thus the manager’s “testimony provide[d] only his personal feelings, beliefs and speculation about the content of the conversation,” which was not enough to withstand summary judgment.

Superior’s cross-motion for additional discovery was denied because Judge Davis saw no reason such discovery would be fruitful.  Superior had identified only “hopes” and “beliefs” about what additional discovery might show, which was “insufficient to establish a cognizable need for additional discovery.”  Further, Judge Davis noted that although “[d]efendants’ motion to dismiss . . . did not prevent Plaintiff from proceeding with discovery [and] put Plaintiff on notice of shortcomings in its proof . . . Plaintiff did not initiate discovery to support its allegations with facts.”  In other words, plaintiff’s its discovery was too little too late.

Finally, Judge Davis found Superior’s broad, 11th-hour request to be a desperate fishing expedition: “The discovery net is cast wide because the foundation for the requests is purely speculative.  No facts have been presented that suggest further discovery would remedy [the sales manager's] conjecture and speculation.”

The moral of this story is directed to plaintiffs:  Begin discovery early, and get as much as you can while you can get it.  Unfortunately, Superior Offshore learned this lesson the hard way.

Huntsman International LLC, a subsidiary of the chemical giant Huntsman Corp., has agreed to pay $33 million to settle a class action suit alleging anticompetitive practices.

The direct purchaser plaintiffs claim that five major chemical companies, BASF, Dow Chemical, Bayer, LyondellBasell, and Huntsman, colluded to fix the price of feedstock used to make polyurethane foam.  They point to repeated instances of simultaneous and identical price increases as evidence for their claim that a conspiracy to maintain artificially high prices existed. 

These five players allegedly wield exclusive control of the U.S. polyurethane feedstock market.  Plaintiffs alleged that this, combined with high barriers for market entry and feedstock’s status as an undifferentiated commodity, makes the industry particularly susceptible to price-fixing agreements. 

Huntsman’s settlement acknowledges no wrongdoing.  A spokesman for Huntsman said that the company wanted to avoid the expense of complex, long-term litigation and move forward with business.

The plaintiffs are very satisfied with the $33 million agreement, a figure that represents 1.4% of Huntsman’s sales during the contested period.  LyondellBasell and Bayer have reached similar deals. 

Counsel for the plaintiffs say they will continue to pursue the remaining defendants, BASF and Dow Chemical.

A justice of the British Columbia Supreme Court has ruled that an alleged worldwide diamond cartel led by rough diamond seller De Beers had sufficient anticompetitive impact on Canadian consumers to enable a price-fixing class action to survive a motion to dismiss at the pleading stage.

The plaintiff alleges that De Beers and the other defendants sought to eliminate competition in the sale of gem grade diamonds in British Columbia, Canada, and elsewhere, by fixing the price of gem grade diamonds and allocating the market for gem grade diamonds.

De Beers had argued that the court lacked jurisdiction of the claims in Fairhurst v. Anglo American PLC because only one of the defendants did any business in British Columbia.  And all defendants traded only in rough diamonds, not the gem grade diamonds purchased by consumers like the plaintiff.  De Beers argued that the defendants were far higher in the “diamond pipeline.”  In the words of its expert, “any connection between the Defendant’s sales of rough diamonds on the one hand and the Plaintiff, other Proposed Class Members and any diamond jewelry purchases made in British Columbia on the other hand, is remote in the extreme.”

Madam Justice B.J. Brown, however, concluded that De Beers was not only higher in the “diamond pipeline”– it more or less owned the pipeline.  The court noted that De Beers was long the largest producer of rough diamonds in the world, acted historically as the “diamond industry custodian,” and “possessed a degree of monopoly power in the rough diamond market for over a century.”

Drawing upon jurisdictional authority to hold foreign manufacturers liable for knowingly sending hazardous products into the stream of commerce in Canada, the court ruled that a “tortious conspiracy” such as the alleged worldwide diamond cartel is said to occur wherever damage from the conspiracy is suffered:  “The defendants do not suggest that ‘their’ diamonds were not sold in British Columbia.  The diamonds arrived in British Columbia in the ordinary course of De Beers’ business, and the defendants knew or ought to have known that the product would be sold in British Columbia.”

The court deemed allegations of a diamond cartel whose aim was to “creat[e] an overcharge” that would necessarily harm consumers was sufficient to give the court jurisdiction at this stage in the litigation.

Skyrocketing gas prices may be getting an extra boost from anticompetitive conduct according to some Democratic legislators that are urging the Federal Trade Commission to investigate possible anticompetitive conduct by gasoline refineries.

Last week, Democratic senators, including Senators Claire McCaskill, Charles Schumer, Patty Murray and Senate Majority Leader Harry Reid, asked the FTC to investigate whether gasoline refiners have restrained supply of gasoline in order to increase prices.  In a letter to Jon Leibowitz, the Chairman of the FTC, they questioned whether U.S. inventories may have been kept artificially low in order to maintain high gas prices, citing evidence that “refineries are using only 81.7 percent of their capacity, a decline of 7 percent from the same time last year.” 

D.C. and Maryland attorneys general also recently announced investigations.

D.C.’s Attorney General is investigating Capitol Petroleum Group (“CPG”), D.C.’s largest owner of gas stations, for potential anticompetitive practices.  CPG owns/operates a large number of gasoline stations in D.C.  The investigation will center on whether CPG’s gas station holdings represent an illegal monopoly under D.C.’s antitrust law, and might also look into CPG’s primary owner’s dual role as a gas station owner and gas wholesaler through another company called DAG Petroleum.  Four years ago, the D.C. Council repealed a law prohibiting wholesalers from owning individual service stations based on competition concerns.  It might be revisiting that decision.  CPG’s owner in a statement argued that the gas stations he owns are managed by individual franchisees which independently set the price of gas at the pump.

Maryland’s Attorney General is investigating “sudden and dramatic” increases in gas prices at a number of Maryland stations supplied by Empire Petroleum Holdings.  Empire, a distributor, apparently told its retailers that prices had to be raised about 25 cents a gallon because of the Mississippi River flooding.

Both target companies are contesting allegations of anticompetitive conduct.

Plaintiffs in the case of In re Packaged Ice Antitrust Litigation have convinced the court that tape recordings of conversations from a criminal investigation into alleged price fixing of packaged ice sold in retail stores and gas stations should not remain on ice.

Judge Paul Borman of the U.S. District Court for the Eastern District of Michigan has ordered the Department of Justice (“DOJ”) to produce tape recordings and transcripts in response to the direct purchaser plaintiffs’ motion to compel.  The production will be reviewed in camera by the judge to see whether there is any need for protection. 

The plaintiffs are purchasers of packaged ice from defendants, including Reddy Ice, Arctic Glacier, and Home City Ice, three major players in the packaged ice industry.

The tape recordings and transcripts at issue allegedly involve former employees of the defendant ice manufacturers and allegedly incriminate a number of potential witnesses in the direct purchaser plaintiffs’ civil antitrust case.

The tapes and transcripts were collected during the DOJ’s criminal antitrust investigation of the defendants.  As part of its investigation, the DOJ collected the tapes and documents at issue by recruiting individuals to record conversations with people integral to the alleged conspiracy – a common practice to investigate conspiratorial activities.  The criminal investigation ultimately led to guilty pleas from Arctic Glacier and Home City, as well as three former Arctic Glacier employees.

Two of the three original defendants to the civil action, Arctic Glacier and Home City, have already settled with the direct purchaser plaintiffs or are seeking settlement confirmation.  Reddy Ice remains an active defendant. 

The direct purchaser plaintiffs subpoenaed the DOJ and asked for the tapes and transcripts.  The DOJ objected to the subpoena on the grounds of sovereign immunity and lack of jurisdiction, investigatory files privilege, law enforcement privilege, and work product protection. 

Judge Borman found that the court had proper jurisdiction and that sovereign immunity did not bar the court’s review of the dispute.  On the substance, the court held that the privileges and work product protection invoked by the DOJ did not justify shielding discovery by the direct purchaser plaintiffs.  The judge seemed particularly persuaded by the argument that since the defendants’ counsel had access to the tapes and transcripts during the prior criminal investigation, denying the direct purchaser plaintiffs access would “significantly prejudice” plaintiffs’ discovery efforts.

The European Commission is engaging in a little spring cleaning as it opens the window on how the European Union calculates fines, and cleans up a price-fixing cartel of laundry detergent producers.

The EU’s drive for greater transparency in how it sets fines was announced by Competition Commissioner Joaquin Almunia, who revealed that the Commission will be adding a section on fines in its Statement of Objections, which is sent to companies under investigation.  This new section will “indicate … the elements for the calculation of the fine such as the value of the cartelized sales – which is a critical factor – but also, for example, an indication of the gravity” and whether they have breached rules previously, he said.

The announcement comes in the wake of criticism from businesses that the fines are too high, especially in difficult economic times.  Almunia said the change should “open a channel for dialogue with the parties and will give them a better idea, at an early stage, of the size of the fines” they are facing. 

“In the last few years, we have been refining our fining guidelines to achieve optimal deterrence – which is our ultimate goal – and we will continue do to so,” he said.  Almunia defended the high fines by saying, “Our fines must remain large, because companies need to understand that cartels do not pay.”

The announcement came a day after the Commission fined two household products companies – US-based Procter & Gamble Co. and British-Dutch company Unilever NV – a total of $456 million as part of a settlement for fixing prices of laundry detergent powder in eight European Union countries.

Germany’s Henkel AG, one of the leading producers of laundry detergent in Europe, blew the whistle on the cartel in 2008 when it detected the conduct during an internal audit.  Henkel got immunity and was not fined because it informed regulators of the price fixing. 

In a press conference, Almunia said the cartel began when the companies, through a trade association, began an environmental initiative which focused on methods to reduce the weight of detergent powders and reduce packaging waste.  “They agreed to protect their respective market shares, they agreed also not to decrease prices when decreasing the size of the packages, and afterwards they even agreed on a price increase,” Almunia said.

The cartel operated from January 2002 until March 2005, and affected the price of laundry detergents in supermarkets in Belgium, France, Germany, Greece, Italy, the Netherlands, Portugal and Spain. 

As part of the Settlement, both Unilever and Procter & Gamble admitted that they participated in the cartel in exchange for a 10 percent reduction in fines.  The fines were also reduced as part of the Commission’s leniency program because both companies cooperated with the investigation.

The European Commission, which can fine companies as much as 10 percent of global yearly sales, imposed 12 billion Euros in fines from 2005 to 2010.  In 2010 alone, the Commission imposed fines of 3 billion Euros in the seven cartel decisions it made.  The Commission is currently investigating more than 25 cartel cases.

A consortium of 130 financial institutions operating the leading interbank network in France is offering to lower most interbank fees for card transactions in order to resolve a price-fixing investigation by the French Competition Authority.

Groupement des Cartes Bancaires (“CB Group”), whose network accounts for more than two thirds of all card transactions in France, are offering to lower the fees to settle the Authority’s investigation into allegations that the fees were the result of anticompetitive price-fixing between member banks.  The investigation was triggered by complaints lodged with the French competition agency in 2009 and 2010 by two leading trade associations representing France’s retail industry.

The Authority stated in a press release that it was not necessarily illegal for the CB Group to collectively set interbank fees for card transactions within its network.  However, the level of these fees must be based on objective justifications, such as security or interoperability requirements.  The competition watchdog noted that the Group had not provided sufficient data to justify the fees’ current levels, and that some of the fees had remained unchanged for over two decades, in spite of changes to the competitive landscape and a vast increase in the use of payment cards over that period of time.

Details of the Group’s proposed commitments have been posted on the Competition Authority’s website to allow interested parties to submit comments, pursuant the so-called “market testing” procedure, which will close on May 5, 2011.  Under the plan, interbank fees for card payments would be cut by 25%, while the fees for withholding cards would be reduced by 50%.  ATM withdrawal interbank fees, however, would remain at their current level.  If accepted by the Authority, the commitments will remain in force for a 5-year period.