Antitrust Law Daily Wrap Up, ANTITRUST—D. N.J.: Refractory products supplier lacked standing to maintain magnesite price fixing suit, (Jul 25, 2014)

By Linda O’Brien, J.D., LL.M.

A refractory products supplier failed to demonstrate direct purchaser standing to pursue antitrust claims against several Chinese metal trading companies for conspiring to fix the prices of magnesite and magnesite products exported to the United States, the federal district court in Newark has held. Thus, the defendants’ motion to dismiss was granted (Animal Science Products, Inc. v. China Minmetals Corp., July 24, 2014, McNulty, K.).

Resco Products, Inc. is a supplier of refractory products, and Animal Science Products, Inc. manufactures poultry feed additives. Resco and Animal Science, direct and indirect purchasers, respectively, of magnesite or magnesite products, filed a class action suit against 16 Chinese corporations, alleging that the companies conspired to fix prices and control the supply of magnesite and magnesite products exported to the United States. The plaintiffs alleged that magnesite prices have remained at above market levels since at least April 2000 and that the defendants’ cartel constitutes a per se violation of Section 1 of the Sherman Act. Defendants China Minmetals Corp. and Sinosteel Corporation moved for dismissal of the direct purchasers’ claims.

Standing. The court found that Resco did not plausibly plead facts sufficient to establish its antitrust standing as a direct purchaser. To assert a claim under Section 1, a plaintiff must allege (1) a concerted action by the defendants; (2) that produced anticompetitive effects with the relevant product and geographic market; (3) the concerted action was illegal; and (4) the plaintiff was injured as a proximate result of the concerted action. In this case, the complaint sufficiently alleged meetings among the defendants during which the export price of magnesite was agreed upon which plausibly set forth the existence of horizontal price-fixing agreements.

Regarding its standing to bring its claims, Resco argued that it was a direct purchaser through its acquisition of another refractory company that had previously purchased magnesite from a co-conspirator. Resco also contended that it purchased magnesite from China principally through brokers and that one such broker, who was not a party to the class action, assigned its rights to all causes of action relating to magnesite products to Resco.

According to the court, Resco, as a putative class representative, could not rely on the direct purchases of other class members to establish its own standing. Resco failed to allege plausibly and factually that the acquired company had been a direct purchaser in its own right. Although the broker’s assignment of claims to Resco was valid, the broker could not assign its antitrust claim, since it had no direct purchaser standing of its own. The complaint failed to allege a single specific purchase by the broker from any of the defendants. Thus, the court concluded that the complaint and the assignment were too speculative to raise a right to relief.

The case is No. 2:05-cv-04376.

Attorneys: Amy Walker Wagner (Stone & Magnanini LLP) for Animal Science Products, Inc., and Resco Products, Inc. Robert J. Del Tufo (Skadden, Arps, Slate, Meagher & Flom LLP) for China National Metals & Minerals Import & Export Corp. and Xiyang Group. Leda Dunn Wettre (Robinson, Wettre & Miller LLC) for Sinosteel Corp., Liaoning Jinding Magnesite Group, Dalian Golden Sum Import & Export Group, and Haicheng Houying Corp. Ltd.

Companies: Animal Science Products, Inc.; Resco Products, Inc.; China National Metals & Minerals Import & Export Corp.; Xiyang Group; Sinosteel Corp.; Liaoning Jinding Magnesite Group; Dalian Golden Sum Import & Export Group; Haicheng Houying Corp. Ltd.

Cases: Antitrust NewJerseyNews