Antitrust Law Daily Wrap Up, ANTITRUST—6th Cir.: Solar panel predatory pricing claims failed without recoupment pleading, (Aug 19, 2016)

By Edward L. Puzzo, J.D.

The district court did not err in dismissing an American solar-panel company’s predatory pricing claim against Chinese competitors, because they failed to plead that the competitors had a reasonable prospect of recouping their costs after using below-cost pricing to drive out competition, the U.S. Court of Appeals in Cincinnati has ruled (Energy Conversion Devices Liquidation Trust v. Trina Solar Limited, August 18, 2016, Sutton, J.).

American solar panel producer Energy Conversion Devices (ECD), now in bankruptcy, filed a lawsuit alleging that various Chinese solar panel competitors used their alternative energy trade association to illegally conspire to fix prices and dump their solar panels in the United States at "irrationally low or below-cost prices," for the purpose of driving American producers such as ECD out of business, in violation of the Sherman Act and the Michigan Antitrust Reform Act. The federal district court dismissed ECD's claim, and an appeal followed.

Section 2 claims. The appellate court acknowledged that the Chinese producers, with the help of their government, sold their solar panels in the United States below cost, and thereby had a great deal to do with bankrupting a number of American solar firms. However, a predatory-pricing claim, if brought under Section 2 of the Sherman Act, would require the plaintiff to plead and prove both (1) that the defendants charged below-cost prices, and (2) that they had a reasonable prospect of recouping their investment in below-cost prices. ECD's complaint only alleged that the defendants charged below-cost prices, not that they had a fair prospect of recouping their investment by later charging non-competitive prices. Therefore, the complaint would fail to state a claim under Section 2.

Section 1 claims. ECD contended, however, that Section 1 of the Sherman Act contains only the below-cost price requirement, not the recoupment requirement, and therefore the lower court erred in dismissing their Section 1 claim. The appellate court disagreed.

Both Section 1 and Section 2 claims require both the below-cost price requirement and the recoupment requirement, the court stated. When a competitor lowers its prices hoping to drive its competitors out of business, this can be viewed as robust competition benefiting consumers, which the antitrust laws were intended to promote. The means of competition are only barred to the extent that they harm consumers and competition itself, not competitors. The recoupment requirement is necessary, the court stated, because, unless low prices today come with high prices tomorrow, the consumer benefits from the lowered prices. It is only when the lowered prices result in a monopoly giving the monopolist the opportunity to raise its prices, recoup its loses and harvest additional gain, that antitrust concerns arise. The court also noted that no Supreme Court decisions supported ECD's position and many decisions strongly suggested that both the below-cost price requirement and the recoupment requirement apply to both Section 1 and Section 2 claims.

ECD also contended that, in lieu of the recoupment requirement, they could plead antitrust injury, by arguing that the defendants' pricing actions hurt the American solar panel industry by forcing technologically superior solar panels off the market, leading to reduced consumer choice and loss of innovation. But the court stated that these concerns were not substitute for the recoupment requirement, because innovation need not solely be about better technology it can also be about cost reduction.

Because ECD never alleged that the defendants had a reasonable prospect of recouping their losses, their Section 1 claim had to fail, the court ruled. The court therefore affirmed the lower court's dismissal of ECD's claim.

The case is No. 15-2130.

Attorneys: W. Gordon Dobie (Winston & Strawn LLP) for Energy Conversion Devices Liquidation Trust. Daniel E. Laytin (Kirkland & Ellis LLP) for Trina Solar Ltd. and Trina Solar U.S., Inc. Matthew J. Reilly (Simpson Thacher & Bartlett LLP) for Yingli Green Energy Holding Co Ltd. and Yingli Green Energy Americas, Inc. Jonathan C. Sanders (Simpson Thacher & Bartlett LLP) for Yingli Green Energy Holding Co. Ltd. and Yingli Green Energy Americas, Inc. Catherine T. Dobrowitsky (Rivenoak Law Group, P.C.) for Suntech America, Inc.

Companies: Trina Solar Limited; Trina Solar (U.S.), Inc.; Yingli Green Energy Holding Company Limited.; Yingli Green Energy Americas, Inc.; SunTech Power Holdings Co., Ltd; SunTech America, Inc.

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