Antitrust Law Daily Wrap Up, STRATEGIC PERSPECTIVES: Antitrust injury central to coming appeal in LIBOR antitrust case, with implications for multiple financial markets, (Jan 27, 2015)

By Richard Wolfram, Esq.

Last week, the U.S. Supreme Court removed procedural roadblocks delaying prompt appeal of a nearly two-year-old ruling by a federal district court in New York in In re LIBOR-Based Financial Instruments Antitrust Litigation. As the appeal proceeds, the implications are significant both in the law and for a number of financial markets dependent on benchmark mechanisms.

The district court ruled in March 2013 that alleged collusion by banks in setting a global interest rate benchmark–the London Interbank Offered Rate, or LIBOR–may have violated antitrust law but did not cause antitrust injury. It therefore dismissed antitrust claims filed by various investors, who claimed injury from the alleged concerted suppression of LIBOR, on the grounds that they lacked standing. The Second Circuit then dismissed the antitrust appeal for lack of jurisdiction.

On January 21, 2015, in a lightning-fast decision issued barely six weeks after oral argument, the Supreme Court reversed the Second Circuit. The district court’s decision, so long on the vine (before appeal) that it appeared to be taken as accepted wisdom in some quarters, will now be put to the test and is already attracting heightened, critical attention.

The district court’s rationale rests on two main findings: first, that the LIBOR-setting process is collaborative, not competitive, so any collusion by the banks in setting the rate did not displace competition, and any resulting harm therefore cannot result from a suppression of competition – hence, there was no antitrust injury; and second, that the injury alleged by the plaintiffs could have occurred even in the absence of the alleged collusion, that is, in normal competitive conditions – hence, the plaintiffs may have been injured but it was not antitrust injury.

In an in-depth article, entitled “In re LIBOR: More Light, Please! – Questions and Observations As the Decision Dismissing Antitrust Claims for Lack of Antitrust Injury Now Faces Appellate Review,” Richard Wolfram, an independent antitrust practitioner based in New York, examines both of these legs of the court’s antitrust ruling with a view to upcoming appeal. He explains the doctrine of antitrust injury, an elusive and notoriously difficult principle to pinpoint and correctly apply (Part II); sets forth the facts of the case (III) and the court’s rationale (IV); and dissects the court’s reasoning (V).

The article spotlights, among other points, the consequences of confusing antitrust injury with either antitrust causation or harm to competition. Ultimately, the issues under discussion resolve to whether the court correctly invoked an absence of antitrust injury in dismissing the antitrust claims, which thereby precludes plaintiffs even from obtaining discovery on questions of fact going to the very question of antitrust injury itself, let alone other substantive elements of their claims. The analysis, including discussion of related case law on antitrust injury, suggests that the court’s dismissal of the antitrust claims calls for a critical re-examination of the two principal legs of the rationale and, ultimately, reversal by the Second Circuit.

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