Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Cal.: Summary judgment in below-cost bidding case denied, (Oct 1, 2025)

By Wendy Biddle, J.D.

Sufficient evidence presented showing defendants’ predatory pricing strategy in the steel rebar market.

The federal district court in San Diego, California denied a motion for summary judgment filed by defendant CMC Steel Fabricators and affiliated entities in a case alleging violations of California's Unfair Practices Act. The court found that plaintiff Pacific Steel Group presented sufficient evidence to create genuine issues of material fact regarding whether the defendants engaged in below-cost bidding with the intent to injure a competitor (Pacific Steel Group v. CMC Steel Fabricators, Inc., No. 3:22-cv-00892-L-JLB (S.D. Cal. Sept. 29, 2025)).

The case centers on allegations that between October 2017 and December 2022, the defendants sold furnishing and installation services for steel rebar below cost as loss leaders in California. Rebar consists of steel bars used to reinforce concrete or masonry structures, which must be cut and shaped according to structural engineer specifications before installation. Companies in this market compete primarily on price through fixed-price bids submitted to general contractors or subcontractors.

Pacific Steel Group alleged violations of California Business and Professions Code Sections 17043 and 17044 (Unfair Practices Act), which prohibit selling products or services below cost for the purpose of injuring competitors or destroying competition. The plaintiff sought both injunctive relief and monetary damages.

The defendants moved for summary judgment, arguing that the plaintiff lacked evidence demonstrating below-cost bidding or resulting harm. They also moved to challenge the reliability of expert testimony offered by the plaintiff's experts under Federal Rule of Evidence 702 and the Daubert standard. The defendants contended that reliance on average costs was insufficiently precise and failed to account for variations in project size, complexity, or cost changes between bidding and execution.

In its analysis, the court emphasized the significant differences between California's Unfair Practices Act and federal antitrust law regarding predatory pricing. The UPA focuses on the mental state of the underlying purpose of the below-cost pricing rather than its ultimate competitive impact. Under Sections 17043 and 17044, a plaintiff can prevail by proving two elements: sales below cost and the purpose of injuring competitors. The court noted that proof of actual anticompetitive impact is not required, and the violation is complete when sales below cost are made with the requisite purpose.

Cost determination. The court rejected the defendants' arguments regarding cost calculation methodology. California law defines cost to include raw materials, labor, and all overhead expenses, embodying a fully allocated cost standard that allocates all fixed and variable costs associated with production. The concept of fully allocated cost equates to average total cost, reflecting the portion of total costs attributable on average to each unit of output. While no specific formula exists for determining appropriate cost, California law permits using average cost of manufacture over a reasonable time period.

For diverse projects rather than uniform products, the court explained that cost determination need only be reasonably related to the burden the service puts on the defendant's overall cost of doing business. Precision is not required under the UPA standard.

The plaintiff relied primarily on the declaration of Steven Davis, a former director who worked for the defendants' corporate parent Commercial Metals Company for 25 years. Davis oversaw the defendants' California furnishing and installation business and supervised bidding operations until 2020. His declaration provided detailed testimony regarding the defendants' bidding strategy and internal cost calculations.

According to Davis, CMC executives expressed their desire to drive Pacific Steel Group from the market by cutting into its profits. The defendants deliberately sought to accomplish this objective by bidding below cost, using what they termed stacked costs to determine whether bids fell below their cost threshold. Stacked costs represented the average cost per weight across all jobs, including material, fabrication, detailing, transportation, placement, and overhead costs. The defendants received monthly financial reporting showing total stacked costs and determined when they were bidding below cost by comparing stacked costs on a per-weight basis to bid prices.

Davis testified that in quarterly meetings with CMC executives, he informed them that the defendants would be bidding below stacked costs and projected losses for California operations in upcoming quarters. Internal communications corroborated that the defendants excluded overhead from some bids during the relevant period, with emails discussing reducing overhead to zero percent on specific projects.

The court found that bids excluding overhead fell short of the fully allocated cost standard required by California law. This evidence alone raised a genuine issue of material fact regarding below-cost bidding sufficient to defeat summary judgment.

The court also rejected the defendants' argument that the stacked cost approach lacked sufficient precision. The court distinguished the California appellate decision in San Francisco Print Media Co. v. The Hearst Corp., 44 Cal. App. 5th 952 (2020), which involved an expert who relied solely on an outdated insider analysis prepared using an unknown methodology. In contrast, the stacked cost approach in this case was actually used by the defendants during the relevant time period to determine whether they were bidding below cost.

Purpose element. The court found sufficient evidence to raise genuine factual issues about the defendants' intent to injure their competitor. Davis testified that the defendants sought to drive Pacific Steel Group from the market and that he personally approved below-cost bids with knowledge of this purpose. The defendants disputed this evidence and argued their purpose was merely to ensure their parent company could sell its steel production, presenting the case as involving nothing more than vigorous competition. However, the court emphasized that it could not weigh competing evidence or make credibility determinations at the summary judgment stage, as these functions are reserved for the jury.

Harm. The court noted that proving a violation of the UPA requires only showing below-cost sales with the requisite purpose. The plaintiff need not prove the defendants succeeded in their anticompetitive objectives. However, to recover damages, the plaintiff must demonstrate it was harmed and that the defendants' conduct was a substantial factor causing that harm, requiring only reasonable probability of some causal connection between the wrongful act and lost revenue. Davis testified that the defendants' below-cost bidding strategy succeeded in outbidding the plaintiff on numerous projects, which the court found sufficient to raise genuine issues regarding harm and causation.

Conclusion. Because the plaintiff produced sufficient evidence to survive summary judgment, the court did not reach the issue of whether the expert testimony would be admissible. The motion to exclude expert opinions was denied as moot, and alternatively denied because the expert reports had been revised following reopened discovery due to the defendants' production of additional bidding documents after the discovery cutoff.

Other case involving same parties. In another recent case between the same two parties, the federal court in Oakland, California recently denied motions for a new trial after a jury awarded the Pacific Steel Group more than $110 million in damages (trebled to more than $330 million) for violations of Section 1 and 2 of the Sherman Act for injuries suffered as a result of collusion between Pacific Steel Group’s competitor Commercial Metals Company (CMC) and its supplier, Danieli Corporation, to block it from the market in California. The court there found that from the evidence presented at trial, a jury could reasonably have reached its verdict.

The Case is No. 3:22-cv-00892-L-JLB.

Judge: Lorenz, M.

Attorneys: Christopher C. Wheeler (Farella Braun & Martel LLP) for Pacific Steel Group. Agnese Whitt (Dechert, LLP) for CMC Steel Fabricators, Inc.

Companies: Pacific Steel Group; CMC Steel Fabricators, Inc.

Cases: Antitrust Advertising StateUnfairTradePractices CaliforniaNews