Antitrust Law Daily Wrap Up, ANTITRUST—2nd Cir.: COMEX silver traders failed to support conspiracy to fix market prices claims, (Mar 27, 2014)

By Jody Coultas, J.D.

Investors in COMEX silver futures and options contracts could not state Sherman Act claims against JP Morgan Chase & Co. for allegedly engaging in a conspiracy to fix market prices, the U.S. Court of Appeals in New York City has decided (In re Commodity Exchange, Inc. Silver Futures and Options Trading Litigation, March 27, 2014, Per Curiam). A district court’s dismissal of the claims was therefore affirmed.

The federal district court in New York City dismissed the class action complaint, holding that the investors had “not alleged any factual allegations or authority to support their conclusion that J.P. Morgan either had monopoly power in the COMEX market or engaged in the willful acquisition of such monopoly power.” The investors also failed to explain how JPMorgan controlled silver prices, how it excluded other silver futures traders, or what made J.P. Morgan’s transactions anticompetitive. There was also insufficient evidence to establish a Commodity Exchange Act (CEA) claim.

The investors’ Sherman Act claim was properly dismissed by the district court, according to the court. Every contract, combination, or conspiracy in restraint of trade or commerce is illegal under the Sherman Act. A showing of parallel business behavior is admissible circumstantial evidence from which the fact finder may infer agreement, but does not conclusively establish an agreement or a Sherman Act violation. The investors failed to allege even a tacit agreement to manipulate prices, but merely alleged that large volume uneconomic trades in a compressed period and price signaled a concerted action by JPMorgan and unidentified floor brokers. There was also no evidence that any of the defendants acted to restrain trade.

The district court also properly dismissed the CEA claim, according to the court. The CEA prohibits manipulation and attempted manipulation of the price of any commodity. A court will find manipulation where (1) the defendants possessed an ability to influence market prices; (2) an artificial price existed; (3) the defendants caused the artificial prices; and (4) the defendants specifically intended to cause the artificial prices. The investors’ allegations regarding JPMorgan’s market power and “uneconomic conduct” were insufficient to plausibly allege intent or causation.

The case is No. 13-1416-cv.

Attorneys: Christopher Lovell (Lovell Stewart Halebian Jacobson LLP) for Alan H. Antin. Daryl A. Libow (Sullivan & Cromwell LLP) for JP Morgan Chase & Co.

Companies: JP Morgan Chase & Co.

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