Antitrust Law Daily Wrap Up, ANTITRUST NEWS: High Court will not consider application of per se rule to “output reduction cartel”, (Oct 7, 2013)

By Jeffrey May, J.D.

The U.S. Supreme Court will not review a decision of the U.S. Court of Appeals in Chicago, rejecting the application of the per se rule of antitrust liability to an alleged “output reduction cartel” in the market for sulfuric acid. The Supreme Court’s denial of the petition for certiorari, filed by complaining chemical companies, brings the case to an end, because, as the appellate court explained, “[t]he plaintiffs have made clear that the case is over if they are not allowed to try it as a per se case” (Ohio Chemical Services v. Falconbridge, Ltd., Dkt. 13-19).

In their petition, the chemical companies described the appellate court’s ruling as an “unfounded assault upon the per se rule of antitrust liability.” They had asked the Supreme Court specifically:

(1) whether an agreement among horizontal competitors to curtail their output of a commodity chemical to facilitate market entry by certain of those competitors so as not to “disrupt prices” in a “balanced market” was a per se violation of the antitrust laws; and

(2) whether a joint venture formed by horizontal competitors which: (a) had no assets; (b) produced no product; (c) was formed to jointly price and market its parents’ output; (d) avoided preclearance by the Department of Justice and FTC under the Hart-Scott-Rodino Act despite being the “largest single marketing entity of sulfuric acid in the world”; and (e) used its market power to convince other horizontal competitors to curtail production facilities, should be judged by the per se rule of antitrust liability.

Left standing is a decision (703 F.3d 1004, 2012-2 Trade Cases ¶78,197), rejecting the application of the per se rule to alleged “shutdown agreements” among Canadian and American producers of sulfuric acid. Pursuant to the challenged agreements, the American companies purchased and distributed the Canadian companies’ excess sulfuric acid in lieu of producing their own. The principal defendants in the case were Noranda, Inc. and Falconbridge Ltd., Canadian mining companies that merged to form a single company named Xstrata Canada after the period of the alleged antitrust violations (1988-2002).

The appellate court rejected the complaining purchasers’ assertions that, because the agreements reduced total sales in the United States and raised the market price, they constituted per se illegal conduct. The rule of reason governed where, as here, the net effect of the challenged practice on economic welfare may well have been positive, the appellate court explained.

Attorneys: Mary Jane Fait (Wolf Haldenstein Adler Freeman & Herz LLC) for Ohio Chemical Services. David C. Gustman (Freeborn & Peters LLP) for Falconbridge, Ltd.

Companies: Ohio Chemical Services; Falconbridge, Ltd.; Noranda, Inc.; Xstrata Canada Corp.

News: Antitrust