Antitrust Law Daily Wrap Up, ANTITRUST—EDMich: Refrigerant Compressor Bid Rigging Claims Against under State Antitrust and Consumer Protection Laws Claims Survive, (Apr 10, 2013)

By Jody Coultas, J.D.

Freezer and refrigerator indirect purchasers had standing to assert antitrust claims under North Carolina and Minnesota law against refrigerant compressor manufacturers that allegedly conspired to rig bids and artificially inflate prices, but the indirect purchasers lacked standing under the antitrust laws of several other states, according to the federal district court in Detroit (In re Refrigerant Compressors Antitrust Litigation, April, 9, 2013, Cox, S.). The indirect purchasers also stated California, Massachusetts, New Mexico, and Rhode Island consumer protection claims against the manufacturers, but failed to state consumer protection claims under Florida, New Hampshire, North Carolina, Wisconsin, and the District of Columbia law.

Hermetic compressors are the critical engine in refrigeration products. The compressors were sold through a yearly bidding process by which refrigerator and freezer manufacturers compete. Prices for the compressors are determined in the course of a few days at the bidding meetings. The compressor manufacturers allegedly created a sham bidding system by secretly meeting before the bidding process, sharing bids, and agreeing on prices.

The purchasers alleged that the manufacturers engaged in a long-running, world-wide conspiracy to fix, raise, maintain, and/or stabilize the prices of, and to allocate customers and markets for, hermetic compressors. Prices were allegedly artificially inflated for compressors, and the overcharge was allegedly passed on to end payors in the form of inflated prices for the compressors and products containing them, such as refrigerators and freezers.

Antitrust claims. The manufacturers argued that the purchasers lacked antitrust standing as "end payors" of products containing compressors, under Associated General Contractors of California v. California State Council of Carpenters, 459 U.S. 519 (1983) (AGC). The purchasers contended that jurisdictions that repealed Illinois Brick Co. v. Illinois, 431 U.S. 720, 746 (1977) allow all indirect purchaser plaintiff actions to go forward. The court had to consider whether the states at issue have adopted the AGC test and then apply the AGC test for those states that have adopted it. Under the AGC test, court consider: 1) the causal connection between the antitrust violation and harm to the plaintiff and whether that harm was intended to be caused; 2) the nature of the plaintiff’s alleged injury including the status of the plaintiff as consumer or competitor in the relevant market; 3) the directness or indirectness of the injury; 4) the potential for duplicative recovery or complex apportionment of damages; and 5) the existence of more direct victims of the alleged antitrust violation.

Arizona, California, District of Columbia, Kansas, Maine, Michigan, Nebraska, New York, and Wisconsin apply the AGC test and, therefore, the purchasers lacked standing to assert claims under the antitrust statutes of those states, according to the court. The purchasers were not direct participants in the hermetic compressor market, and their injury was a result of the injury to actual participants in the market, rather than a cause of or means to the injury. The causal nexus between the alleged conspiracy and the alleged injury was too remote and attenuated to support antitrust standing. Because the injury was indirect, the apportionment of damages would be too speculative and would be too complex. There were also more direct victims of the alleged antitrust conspiracy.

The court also found that the purchasers did not sufficiently allege a substantial effect on intrastate commerce in Tennessee. Therefore, they lacked standing to assert Tennessee antitrust claims.

Consumer protection law claims. The manufacturers argued that Rhode Island and New Mexico consumer protection acts enumerate specific actions that are prohibited, but price-fixing is not among them. Also, the manufacturers directed the court to a decision from outside of Rhode Island that dismissed a Rhode Island consumer protection law claim based on allegations of price-fixing. However, Rhode Island and New Mexico courts have allowed similar consumer protection law claims to proceed, according to the court. Therefore, the claims survived the motion to dismiss.

The court dismissed the New Hampshire and North Carolina claims because the purchasers did not allege that any unfair method of competition or unfair or deceptive act or practice took place in those states. None of the alleged conspirators engaged in business in the states. That the purchasers bought refrigerators containing the compressors in those states did not alter the court’s conclusion.

Because the manufacturers failed to meet their burden of proof under the Massachusetts law, the court declined to dismiss the claim. The statute required the manufacturers to at least discuss where the defendant committed the deceptive or unfair acts; (2) where the plaintiff was deceived and acted upon the defendant’s unfair acts; and (3) where the plaintiff suffered losses caused by the defendant’s unfair acts. The manufacturers did not discuss the above factors or explain why they believe an application of those factors supports dismissal.

The court dismissed the consumer protection claim under Florida law for failure to plead the claim with particularity.

Except with respect to limited circumstances that were not alleged, there is no private right of action under the section of the Wisconsin law at issue, according to the court.

The court dismissed the District of Columbia claims because the sole named purchaser that resided in D.C. could not assert that the purchase was primarily for personal, household, or family uses, as required by the act.

In light of the manufacturers’ limited challenge to the California consumer law claims, the court only dismissed those claims brought under the law by non-California residents. The manufacturers only challenged the claims based on the prohibition against California claims being brought by non-residents. The claims brought by California residents survived the motion to dismiss.

The case is No. 2:09-md-02042.

Attorneys: Darryl Bressack (Fink + Associates Law) for Gateway KGMP Development, Incorporated. Fred K. Herrmann (Kerr, Russell and Weber, PL) for Whirlpool, SA.

Cases: Antitrust StateUnfairTradePractices MichiganNews