Antitrust Law Daily Wrap Up, ANTITRUST NEWS: City of Denver sues water treatment chemical manufacturer over price fixing conspiracy, (Nov 12, 2015)

By Linda O’Brien, J.D., LL.M.

The Board of Water Commissioners for the City and County of Denver, Colorado has filed a class action complaint in the federal district court in Newark, New Jersey, against water treatment chemical manufacturer General Chemical Corporation for engaging in a conspiracy to fix prices and rig bids for liquid aluminum sulfate, a coagulant used by municipal water treatment facilities to treat drinking and waste water (City and County of Denver v. General Chemical Performance Products, LLC, November 10, 2015).

General Chemical, owned by Chemtrade Logistics Income Fund, is the largest producer of liquid aluminum sulfate (LAS) in North America.

The complaint states that LAS is primarily purchased by municipalities for use in purifying drinking and waste water, pulp and paper manufacturers, and chemical distributors. To procure LAS, municipalities typically engage in a publically-advertised bidding process. Because water treatment is a vital public service and water treatment facilities cannot easily switch to other chemicals, the demand for LAS is inelastic and not significantly impacted by changes in price.

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 13-year long conspiracy (from 1997 to July 2010) 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 not solicit the co-conspirators’ historical customers; (3) using bid and pricing histories to determinate which accounts were historical; (4) intentionally submitting losing bids to historical LAS customers; (5) discussing bid quotes; and (6) withdrawing inadvertent winning bids from historical customers.

The plaintiff did not 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 defendants actively concealed their conspiracy and agreed not to publicly discuss or reveal the nature and substance of their acts and communications in furtherance of their illegal conspiracy. The defendants also gave false and pretextual reasons for their artificially inflated LAS prices, the complaint alleges.

According to the complaint, the acts in furtherance of the conspiracy substantially reduced competition in the LAS market and caused the City and County of Denver to pay higher prices for LAS than they would have paid in a competitive market.

The plaintiff asserts claims for unreasonable restraint of trade in violation of Section 1 of the Sherman Act and Section 4 of the Clayton Act. The action seeks declaratory relief, treble damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:15-cv-07996-SRC-CLW.

Attorneys: Peter S. Pearlman (Cohn Lifland Pearlman Herrmann & Knopf LLP), Gregory B. Kanan (Lewis Roca Rothgerber LLP), and H. Laddie Montague, Jr. (Berger & Montague, PC) for the City and County of Denver.

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

News: Antitrust NewJerseyNews