Antitrust Law Daily Wrap Up, ANTITRUST—DMass: Conspiracy Among Competitors in Mechanical Testing Equipment Market to Block New Standard Not Adequately Alleged, (Feb 27, 2013)

By Jeffrey May, J.D.

A company that developed a technique for measuring the tensile properties of metallic materials failed to allege a conspiracy among its competitors to maintain their dominance in the market for mechanical testing equipment, the federal district court in Boston has ruled. The complaining company failed to plausibly suggest an unlawful agreement between the defendants. The defendants' motion to dismiss the antitrust claim was granted, and the plaintiff's motion to amend the antitrust claim was denied as futile (Advanced Technology Corp. v Instron, Inc., February 26, 2013, Tauro, J.).

The complaining firm, Advanced Technology Corporation (ATC), alleged that Instron Inc., Tinius Olsen International Co., and MTS Systems Corporation engaged in a 15-year conspiracy in which they used their positions on national and international standards organizations to prevent ATC from obtaining a standard for its technique for testing the strength of pipelines and bridges, called Automated Ball Indentation (ABI).

ATC contended that the defendants’ employees occupied positions on both the American Society for Testing and Materials (ASTM) and the International Standards Organization (ISO) and that they used these positions to block an ABI standard. In furtherance of the conspiracy, the defendants allegedly attempted to discredit ABI by falsely claiming that ABI was duplicative of the defendants’ technologies, including Instrumented Indentation Testing.

The defendants manufactured tensile, impact, and hardness testing equipment and commanded a 70% share of the U.S. market for mechanical testing equipment. ATC contended that its testing method had advantages over the defendants’ equipment, which relied on a conventional, destructive test method. The defendants' testing method required shutting off pipe flow and cutting out a sample of pipe to be tested in a laboratory. ABI allowed testing of in-service pipes and was faster, according to ATC.

The court ruled that ATC’s complaint merely described “parallel conduct and routine participation in standard setting organizations.” ATC “did not nudge its conspiracy claim over the line from possible to plausible.”

ATC's conspiracy allegation was based on the defendants' parallel conduct in (1) voting against the proposed ABI standard and (2) making statements to discredit ABI and make ABI appear duplicative of the defendants’ technologies. Generally, plaintiffs relying on parallel conduct to pursue a conspiracy must plead “plus factors.”

These plus factors are circumstances suggesting an agreement rather than mere independent conduct, such as (1) evidence of a motive to conspire; (2) evidence that the defendant acted contrary to its interests; and (3) evidence implying a traditional conspiracy. ATC’s allegations, taken as a whole, did not add up to a plausible conspiracy, in the court’s view.

ATC failed to allege that the defendants had a motive to conspire, according to the court. Because a single negative vote could prevent a proposed standard from moving forward, the defendants had no apparent need to conspire to block an ABI standard. They could effectively accomplish this objective on their own.

Moreover, ATC did not allege that the defendants engaged in any conduct against their own self-interests. The “defendants' resistance to an ABI standard was not only consistent with, but indeed was more likely explained by unchoreographed free-market behavior, the court explained.

ATC also pleaded that the market for mechanical testing equipment was conducive to collusion. However, it did not explain why this would make an inference of a conspiracy to block the ABI standard reasonable.

Lastly, ATC did not allege a conspiratorial meeting between the defendants. It argued that the defendants participated in informal meetings that provided an opportunity to conspire. However, a mere opportunity to conspire, even in the context of parallel conduct, did not plausibly suggest collusion, the court held.

State Unfair Methods of Competition, Deceptive Acts or Practices. The court also rejected ATC's claim that the defendants' efforts to prevent the promulgation of an ABI standard constituted unfair methods of competition and unfair or deceptive trade practices in violation of Massachusetts law. That claim rested on the same conduct alleged in the unsuccessful antitrust conspiracy claim.

This is Civil Action No. 12-10171-JLT.

Attorneys: Timothy M. Cornell (Mueller Law Group, PLLC) for Advanced Technology Corp. Jane E. Willis (Ropes & Gray LLP) for Instron, Inc.

Companies: Advanced Technology Corporation, Inc.; Instron, Inc.; Tinius Olsen International Co.; MTS Systems Corp.

Cases: Antitrust StateUnfairTradePractices MassachusettsNews