Antitrust Law Daily Wrap Up, ANTITRUST—W.D. La.: City of Shreveport alleges water treatment chemical price fixing conspiracy, (Jul 15, 2016)

By Michael Menzhuber, J.D., LL.M.

Water treatment chemical manufacturer General Chemical Corporation engaged in a conspiracy to fix prices and rig bids for liquid aluminum sulfate, a chemical used by municipal water treatment facilities to treat drinking and waste water, according to a complaint filed in the federal district court in Shreveport, Louisiana (City of Shreveport v. Reichl, July 14, 2016).

The City of Shreveport, Louisiana operates and maintains the city’s water supply reservoir, its water treatment plants, its water storage tanks, its water distribution system, its wastewater sewer systems and treatment plants, and its outfall systems. General Chemical Corporation was a leading manufacturer and supplier of water treatment chemicals, including liquid aluminum sulfate (LAS).

The complaint states that LAS is a water treatment chemical that removes impurities and other substances from water. It is important in the treatment of municipal wastewater and helps municipalities comply with environmental regulations concerning total organic carbon, turbidity, and phosphorous effluent discharge levels. Municipalities acquire LAS through a publicly-advertised bidding process and municipal contracts for LAS are typically one year in in duration with options to renew for a certain period of time. Due to the commodity characteristics of LAS, a highly saturated market, and high barriers to market entry, the LAS market is conducive to anti-competitive collusion by competitors.

In October 2015, the U.S. Department of Justice announced that General Chemical executive Frank A Reichl pleaded guilty to participating in a conspiracy to eliminate competition by fixing prices, rigging bids, and allocating customers for LAS. Reichl had been charged with: (1) participating in meeting and conversations to discuss LAS business; (2) agreeing to not solicit the co-conspirators’ historical customers; (3) using bid and pricing histories to determine if a customer was the historical customer of another co-conspirator; (4) intentionally submitting losing bids to each other’s historical LAS customers; (5) discussing bid quotes; (6) withdrawing inadvertently winning bids submitted to co-conspirators’ historical customers; (7) intentionally bidding to lose the business of one of their own historical customers if an inadvertently winning bid to one of its co-conspirator’s historical customers could not be withdrawn; and (8) instructing new employees on how to bid or quote a price for the business of LAS customers in order to comply with the agreement not to compete.

The complaint alleges that General Chemical and the other defendants effectuated the conspiracy by: (1) participating in secret meetings and communications to exchange confidential and highly sensitive information regarding each other’s LAS business; (2) agreeing not to pursue business from each other’s historical customers; (3) tracking bid and pricing histories to determine which accounts were the historical customers of another co-conspirator; (4) intentionally submitting losing bid or price quotations to each other’s historical customers; and (5) selling LAS at collusive and non-competitive prices. As a result of this conspiracy, Shreveport was injured in that they paid more for LAS than they would have in the absence of the defendants’ unlawful conduct.

Because the defendants affirmatively and fraudulently concealed their unlawful conduct, Shreveport could not have discovered the price-fixing and bid-rigging scheme any earlier than the Department of Justice’s October 27, 2015, press release announcing Reichl’s guilty plea.

Shreveport asserts claims for violation of Section 1 of the Sherman Act and violation of Louisiana Monopolies Act. The action seeks a declaratory judgment, damages, treble damages, attorneys’ fees and costs, pre- and post-judgment interest, and any other appropriate and necessary general and equitable relief.

The case is No. 5:16-cv-01038.

Attorneys: Scott J. Chafin, Jr. (Gregorio, Chafin & Johnson, L.L.C.), Joshua K. Williams (Joshua K. Williams Attorney at Law L.L.C.), and Curtis Joseph, Jr. (Curtis Joseph, Jr., Attorney at Law) for the City of Shreveport.

Companies: General Chemical Corp.; Chemtrade Logistics Income Fund; Geo Specialty Chemicals, Inc.

News: Antitrust LouisianaNews