Antitrust Law Daily Wrap Up, ANTITRUST NEWS: City of Creston sues water treatment chemical manufacturer for price fixing conspiracy, (Jul 6, 2016)

By Linda O’Brien, J.D., LL.M.

Water treatment chemical manufacturer General Chemical Corporation engaged in a conspiracy to fix prices, rig bids, and allocate customers for liquid aluminum sulfate, a chemical used by municipal water treatment facilities to treat drinking and waste water, according to a complaint filed in the federal district court in Newark, New Jersey (City of Creston Water Works Department v. General Chemical Corporation, July 5, 2016).

General Chemical Corporation, owned by Chemtrade Logistics Income Fund, produces a line of organic and inorganic chemicals for industries and other applications, including liquid aluminum sulfate (LAS) for water treatment. The City of Creston Water Works Department is a municipal utility in Union County, Iowa.

The complaint states that LAS is primarily purchased by municipalities for use in purifying drinking and waste water. The market for LAS has characterized by factors that increase its susceptibility to collusion. Those factors include: (1) LAS is a commodity product where market participants compete principally on the basis of price; (2) the defendant and its co-conspirators announced nearly simultaneous price increases in spite of steady or declining costs; (3) the presence of high barriers to market entry; and (4) the high level of market concentration.

In October 2015, the U.S. Department of Justice announced that former General Chemical executive Frank A. Reichl pleaded guilty for his role in a conspiracy to eliminate competition in the LAS market by fixing prices, rigging bids, agreeing not to compete for contracts, and allocating customers. The Justice Department charged Reichl with the following actions to facilitate the conspiracy: (1) participating in meetings and conversations to discuss the LAS business; (2) agreeing to fix the price of LAS sold in the United States; (3) agreeing to not solicit the co-conspirators’ historical customers; (4) using bid and pricing histories to determinate which accounts were historical; (5) intentionally submitting losing bids to historical LAS customers; (6) discussing bid quotes; (7) withdrawing inadvertent winning bids from historical customers; and (8) instructing new employees on how to bid or quote a price for the business of LAS customers to compete with the conspiracy.

The complaint alleges that the conspiracy had the following effects: (1) price competition was restrained or eliminated with respect to LAS; (2) the prices of LAS were fixed at artificially inflated and supra-competitive levels; and (3) the plaintiff was deprived of the benefits of free and unrestricted competition in the market for LAS.

The plaintiff did not discover and could not have discovered, through the exercise of reasonable diligence, the existence of the conspiracy until the Justice Department disclosed in October 2015 that Reichl agreed to plead guilty to price fixing for LAS. The conspiracy was conducted in secret and any application statute of limitations has been tolled, the complaint also alleges.

The plaintiff asserts claims for unjust enrichment and disgorgement of profits, unreasonable restraint of trade in violation of Section 1 of the Sherman Act, and violations of state antitrust and consumer protection statutes. The action seeks declaratory and injunctive relief, restitution, damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 1:16-cv-04037.

Attorneys: Benjamin D. Elga, Jonathan W. Cuneo, Joel Davidow, and Blaine Finley (Cuneo Gilbert & LaDuca, LLP) and J. Barton Gopelrud (Hudson, Mallaney, Shindler & Anderson, P.C.) for the City of Creston Water Works Department.

Companies: General Chemical Corporation; General Chemical Performance Products LLC; Chemtrade Logistics Income Fund

News: Antitrust NewJerseyNews