Antitrust Law Daily Wrap Up, ANTITRUST—EDCal: U.S. Steel, Related Entities Did Not Engage in Unlawful Allocation of Tin Mill Products Market, (Feb 19, 2013)

By E. Darius Sturmer, J.D.

Several manufacturers of tin mill products in the western United States—including U.S. Steel Corp., a joint venture that U.S. Steel formed with South Korean steel manufacturer Pohang Iron & Steel Co., Ltd. (POSCO), and subsidiaries of both U.S. Steel and POSCO—did not engage in market allocation that violated federal or California antitrust law, the federal district court in Fresno, California, has ruled (Stanislaus Food Products Co. v. USS-POSCO Industries, February 15, 2013, O’Neill, L.). There was no evidence of an agreement to allocate the market, the court held. The manufacturers’ motion for judgment in their favor against the claims of a California-based tomato cannery was therefore granted.

The complaining cannery, Stanislaus Food Products Co., asserted in its third amended complaint that U.S. Steel agreed to exit the market for tin mill products in the western United States completely. Once it left the market, the complaint added, joint venture USS-POSCO Industries (UPI) used its monopoly power to raise its prices for tin mill products in the Western United States substantially, thereby securing record profits for UPI and its owners.

The court initially determined that Stanislaus could proceed under one additional theory of liability that arose in its opposition to summary judgment—a partial allocation theory—but not another, implied theory claiming a free-standing price fixing agreement. The partial allocation theory accused U.S. Steel of not aggressively competing against UPI on price to gain market share in the western United States despite the fact that UPI was charging supra-competitive prices. The price fixing theory contended that U.S. Steel directed UPI to raise its prices for tin mill products in the relevant market and then colluded with UPI to maintain those high prices. Neither theory was adequately asserted in the third amended complaint (TAC), the court noted.

While undue delay in Stanislaus’ assertion of the partial allocation theory was apparent, addition of the theory would not have been prejudicial to the defendants. The court rejected an argument by the complaining cannery that the theory “has always been the one it sought to proceed on.” It should have been apparent to Stanislaus that the court and the defendants viewed the case under the prism of the “exit theory,” the court noted, given that the linchpin of its claims appeared to be whether U.S. Steel actually left the western United States and that the defendants moved for summary judgment on the ground that it had not. Stanislaus “should have known at that point that amendment was prudent,” the court reasoned.

However, the theory appeared to be more of a refinement of the exit theory, as opposed to an entirely new theory of liability. The defendants made no showing that this refinement caused any actual prejudice in their ability to defend against Stanislaus’ claims.

Amendment of the pleadings to include the pure price fixing theory, on the other hand, would have been inappropriate. The court observed that Stanislaus had already specifically argued, in a discovery matter, that the TAC alleged a price fixing agreement between U.S. Steel and UPI, and that the magistrate judge hearing that argument had disagreed. Not only was the magistrate’s conclusion correct, the court said, but it put Stanislaus on notice that the court did not view the TAC as alleging any separate, free-standing price fixing claim. The plaintiff’s waiting until the filing of dispositive motions to sneak in allegations of price fixing in its opposition not only constituted undue delay, but “also appear[ed] to be an act of gamesmanship.” Moreover, if Stanislaus were given leave to amend on this theory, discovery would need to be reopened so that the defendants could prepare a defense, which was prejudicial.

The sum of the evidence on the record did not support a reasonable inference that there was an allocation of the market, let alone that U.S. Steel and UPI colluded to allocate that market, the court decided. It was unclear that such an agreement made economic sense for U.S. Steel. Further, alleged parallel behavior among the defendants, including contract prices for the year 2009, a particular spot market sale, and certain information exchanges, were either irrelevant or actually belied the plaintiff’s claims of market allocation. Expert and other witness testimony offered by the cannery amounted not to dispositive evidence, but to circumstantial evidence that further detracted from any inference of conspiracy.

Particularly problematic for Stanislaus was the fact that U.S. Steel had no clear motive to allocate the market to UPI and the fact that the complaining cannery “produced less than a scintilla of evidence showing that U.S. Steel priced itself out of the market for the sole benefit of UPI,” the court found. The record also did not support a reasonable inference that POSCO and its subsidiaries were part of any agreement to allocate the market, the court concluded.

The case is No. 1:09-cv-00560-LJO-BAM.

Companies: Stanislaus Food Products Co.; USS-POSCO Industries; POSCO America Steel Corp.; POSCO-California Corp.; Pitcal, Inc.; United States Steel Corp.

Attorneys: Dean M. Harvey (Lieff, Cabraser, Heimann & Bernstein, LLP) for Stanislaus Food Products Co.; Allan Steyer (Steyer Lowenthal Boodrookas Alvarez & Smith LLP) for USS-POSCO Industries; Alexander Y. Thomas (Reed Smith LLP) for Pitcal, Inc.; Nicholas C. Adams (Akin Gump Strauss Hauer and Field LLP) for POSCO-California Corp.

Cases: Antitrust CaliforniaNews