Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Mich.: Predatory pricing claims against Chinese solar panel makers fail, (Nov 3, 2014)

By Linda O’Brien, J.D., LL.M.

A bankrupt domestic solar panel manufacturer failed to sufficiently allege an antitrust injury in its action against Chinese solar panel manufacturers for engaging in a conspiracy to fix prices at unreasonably low or predatory levels in restraint of trade, the federal district court in Detroit has ruled (Energy Conversion Devices Liquidation Trust v. Trina Solar Limited, October 31, 2014, Cleland, R.).

Background. Energy Conversion Devices produced flexible, thin-film photovoltaic solar panels from 2003 to 2012. After its revenues dropped in 2010 and 2011, Energy filed for bankruptcy. Energy filed suit against Chinese solar panel manufacturers, Trina Solar Limited, Yingli Green Energy, and Suntech Power Holdings Company and their U.S. subsidiaries, alleging violations of Section 1 of the Sherman Act and the Michigan Antitrust Reform Act (MARA). Specifically, Energy alleged that the defendants, through a leading trade association for alternative energy, agreed to sell solar panels at artificially low and/or below cost prices and simultaneously reduced prices at rates in tandem by approximately 75 percent. As a result, 20 U.S. companies were forced out of the market and the defendants’ collective market share exceeded 80 percent, the plaintiff charged. The defendants moved for dismissal for failure to state a claim.

Below-cost pricing. The court found that the complaint adequately alleged that the defendant manufacturers engaged in below-cost pricing. The plaintiff asserted that a former executive of Suntech admitted that the company sold solar panels in the U.S. at less than the cost of materials, assembly, and shipping in order to build market share. Additionally, the plaintiff stated that the International Trade Commission investigated the defendants’ pricing scheme and determined that the solar manufacturing industry in the U.S. had been materially injured by subsidized Chinese solar panels that were sold at less than fair value in the U.S.

Antitrust injury. However, Energy failed to adequately allege antitrust injury caused by predatory pricing because the complaint did not allege that the competitors had a “dangerous probability of recouping its investment in below-cost prices.” The court noted that, although the plaintiff alleged that the defendants sold solar panels at below cost prices to build market share, evidence of below cost pricing alone was not sufficient to allow an inference of probable recoupment and injury to competition.

Moreover, the complaint did not allege that the defendants intended to raise prices to supracompetitive levels sufficient to recoup the losses sustained by the below cost pricing or that there was a “dangerous probability of recoupment.” The plaintiff alleged that there were substantial barriers to entry into the production of rooftop solar systems, but also stated that many solar companies had recently entered the solar panel industry. Accepting the plaintiff’s allegations of barriers to entry as true, the court concluded that it was implausible that the defendants would have been able to recoup their alleged losses.

Michigan antitust law. MARA prohibits “a contract, combination, or conspiracy between two or more persons in restraint of, or to monopolize, trade or commerce in the relevant market.” The statute adopted language from, and is consistent with, the Sherman Act. Since MARA and the Sherman Act mirror each other, the same analysis applied to both federal and state antitrust claims. Thus, Energy’s MARA claim should be dismissed as well, the court concluded.

The case is No. 2:13-cv-14241.

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

Companies: Energy Conversion Devices Liquidation Trust; Trina Solar Ltd.; Trina Solar U.S., Inc.; Yingli Green Energy Holding Company Ltd.; Yingli Green Energy Americas, Inc.; Suntech America, Inc.

Cases: Antitrust MichiganNews