Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Distributor alleges price-fixing conspiracy in cast iron soil pipe market, (Jan 17, 2014)

By Linda O’Brien, J.D., LL.M.

A proposed class action by an independent wholesale distributor alleges a price-fixing conspiracy and other anticompetitive conduct against five manufacturers of cast iron soil pipe (CISP) in violation of the Sherman Act. The complaint was filed in federal district court in San Francisco (Hi Line Supply Company, Ltd. v. AB&I Foundry, January 14, 2014).

CISP products are components of pipeline systems manufactured primarily from cast iron for use in commercial, industrial, and residential buildings and sold to companies in construction projects or independent wholesale distributors, such as Hi Line. The defendants, McWane, Inc. and its affiliates—AB&I Foundry and Tyler Pipe Company—and Charlotte Pipe and Foundry Company and its subsidiary, Randolph Holding Company, are manufacturers of CISP.

Hi Line alleged that there are in fact only three producers of CISP in the U.S.—AB&I and Tyler, which are two divisions of McWane, and Charlotte. Together, the three companies control over 90 percent of the CISP market. There are significant barriers to entry and expansion to new entrants in the industry due to the costs of building a foundry, purchasing specialty manufacturing tools and developing a network for distribution of CISP products. Also, all CISP products are standardized so CISP manufacturers compete primarily on price.

The complaint alleged that the two McWane divisions and Charlotte, as the primary suppliers in the market, were involved in a conspiracy to fix prices of CISP since at least 2006. The manufacturers have maintained identical prices and rebates with each other. Due to the conspiracy, they have been able to increase prices without regard to market demand, according to the complaint. Charlotte’s acquisition and liquidation of four competitors from 2002 to 2010 substantially decreased competition in the CISP market and allowed the McWane companies and Charlotte to continue to fix prices, Hi Line Supply claimed.

McWane, Charlotte, and its affiliated companies are the only members of CISPI, the trade association of U.S. CISP manufacturers and had opportunities to communicate and coordinate the price-fixing, maintaining market share and eliminating competition, according to the complaint. Hi Line Supply claimed that it had no knowledge of the conspiracy due to the defendants’ active concealment until the U.S. Federal Trade Commission filed its complaint against Charlotte in 2013, investigating its acquisition of a CISP competitor.

Hi Line asserts claims for unreasonable restraint of trade, active concealment, and violations of Section 1 of the Sherman Act and Section 7 of the Clayton Act. 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-00265-JCS.

Attorneys: Bruce L. Simon (Pearson, Simon & Warshaw, LLP) and James B. Sloan (James B. Sloan Ltd.) for Hi Line Supply Company, Ltd.

Companies: Hi Line Supply Company, Ltd.; AB&I Foundry; Tyler Pipe Company; McWane, Inc.; Charlotte Pipe and Foundry Company; Randolph Holding Company

News: Antitrust CaliforniaNews