Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Michigan county alleges water treatment chemicals price fixing conspiracy, (Nov 24, 2015)

By Linda O’Brien, J.D., LL.M.

Water treatment chemical manufacturer General Chemical Corporation and its former executive Frank Reichl engaged in a conspiracy to fix prices and rig bids for aluminum sulfate sold to government and private water district authorities, and to pulp and paper companies, according to a complaint filed in the federal district court in Newark, New Jersey (Oakland County, Michigan v. Reichl, November 20, 2015).

General Chemical, owned by Chemtrade Logistics Income Fund, is the largest producer of aluminum sulfate in North America. Frank Reichl was employed by General Chemical and held various positions in which he was responsible for the sale and marketing of water treatment chemicals, including liquid aluminum sulfate.

The complaint states that aluminum sulfate is primarily purchased by municipalities for use in purifying drinking and waste water and by pulp and paper manufacturers. Water treatment facilities typically acquire aluminum sulfate in a publically-advertised bidding process. Pulp and paper manufacturers typically acquire aluminum sulfate through requests for proposals sent to suppliers.

In October 2015, the U.S. Department of Justice announced that Reichl pleaded guilty for his role in a 13-year conspiracy (from 1997 to July 2010) to eliminate competition in the liquid aluminum sulfate (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 claimed that it 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 municipal water bid requests contained anti-collusion statements to which each bidder had to subscribe and the defendants falsely swore that they were complying with those clauses. Moreover, the defendants falsely asserted that higher raw material and energy costs were the cause of aluminum sulfate price increases, without disclosing their conspiracy to fix prices, the complaint alleges.

According to the complaint, as a result of the conspiracy, the prices paid the plaintiff were fixed at artificially high levels, the plaintiff was deprived of free and open competition in the purchase of aluminum sulfate, and the plaintiff was required to pay more for aluminum sulfate than it would have in a competitive marketplace.

The plaintiff asserts claims for restraint of trade in violation of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:15-cv-08198-SRC-CLW.

Attorneys: Bruce D. Greenberg and Steven J. Greenfogel (Lite DePalma Greenberg, LLC), Lesley E. Weaver (Block & Leviton, LLP), Michael P. Lehmann (Hausfeld LLP), Jaye Quadrozzi (Young & Associates), Warren T. Burns (Burns Charest LLP), and Keith Lerminiaux for Oakland County, Michigan.

Companies: General Chemical Corporation; Chemtrade Logistics Income Fund

News: Antitrust NewJerseyNews