Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Contractor alleges price-fixing conspiracy in ductile iron pipe fittings market, (Jun 5, 2014)

By Linda O’Brien, J.D., LL.M.

A proposed class action by a general contracting company alleges a price-fixing conspiracy and other anticompetitive conduct against three manufacturers of ductile iron pipe fittings (DIPF), according to a complaint filed in the federal district court of Trenton (TC Construction Co. Inc. v. McWane, Inc., May 30, 2014).

Ductile iron pipe fittings (DIPF) are used in pipeline systems that transport drinking water and waste water under pressurized conditions in municipal distribution systems and treatment plants. McWane, Inc., Star Pipe Products, and Sigma Corp. are manufacturers of DIPF. Independent wholesale distributors are the primary channel of distribution of DIPF. TC Construction is a general contracting business that has purchased DIPFs from distributors for use in the construction of water conveyance and storage systems.

The complaint alleged that—from January 2008 until June 2011—McWane, Star, and Sigma conspired to fix the prices of DIPF. In 2008, McWane formulated a plan to trade its support for increased prices in exchange for specific changes to business methods of Star and Sigma. Executives of the three companies frequently communicated regarding DIPF prices and output, and allegedly agreed on a plan to accomplish price increases though the use of unilaterally announced pricing. McWane notified its distributor customers that it was increasing its DIPF pricing and eliminating discounted pricing on a project basis. On the same date, Star and Sigma adopted McWane’s price increases and curtailed their respective project pricing. The curtailment of project pricing made no economic sense for any manufacturer acting unilaterally.

In June 2008, the companies exchanged information regarding the volume of their monthly sales of DIPF, which enabled them to monitor their own market share and the output levels of their competitors. The information exchange also facilitated price coordination among the companies on the pricing of DIPF. After the FTC initiated an investigation in January 2012 into a conspiracy to set and maintain prices for pipe fittings, the companies continued to send communications coordinating and fixing prices at elevated levels, according to the complaint.

The contractor claimed that McWane controls over 90 percent of the market for domestic DIPF sales. McWane allegedly was able to maintain its monopoly power by implementing exclusive dealing and rebate policies that prevented and impeded other competitors from entering the domestic DIPF market. Also, there are significant barriers to effective entry and expansion to new entrants in the industry due to the costs of developing a network for distribution of DIPF products.

There were no legitimate procompetitive efficiencies that justified the conduct of the three companies or outweighed the anticompetitive effects of their conduct, the complaint charged. The conspiracy between the manufacturers had a significant effect on DIPA prices and caused prices to climb steeply over the course of the conspiracy despite a decrease in demand. TC Construction had no knowledge of the conspiracy due to the companies’ active concealment until the FTC filed it complaint against McWane, Star, and Sigma, following its investigation into price-fixing of DIPF.

TC Construction asserts claims for unjust enrichment, and violations of Sections 1 and 2 of the Sherman Act, the Cartwright Act, and California’s Unfair Competition Law. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 3:14-cv-03454-MAS-DEA.

Attorneys: Lisa J. Rodriguez (Schnader Harrison Segal & Lewis LLP) and Brian P. Murray (Glancy Binkow & Goldberg LLP) for TC Construction Co. Inc.

Companies: TC Construction Co. Inc.; McWane, Inc.; Star Pipe Products Ltd.; Sigma Corporation

News: Antitrust NewJerseyNews