Antitrust Law Daily Wrap Up, TOP STORY—6thCir: Ohio County Fails to Adequately Allege Conspiracy to Fix Rock Salt Prices, (Dec 19, 2012)

By Jeffrey May, J.D.

The U.S. Court of Appeals in Cincinnati has upheld dismissal of price fixing claims brought under the Ohio Valentine Act by a northern Ohio county against Morton Salt, Inc. and Cargill, Inc.—the only two companies that operate salt mines in the state. The county failed to offer factual allegations that plausibly raised an inference of unlawful agreement (Erie County, Ohio v. Morton Salt, Inc., December 18, 2012, Gillman, R.).

The county filed the complaint, on behalf of itself and other counties in northern Ohio, two weeks after the Ohio Office of the Inspector General issued a report (OIG report) that was prompted by rock salt price hikes. The report found, among other things, that Morton and Cargill had “engaged in anti-competitive market allocation practices” by “carv[ing] up” the market into two zones, with each company ruling its own zone and failing to mount a competitive challenge in the other’s zone.

The OIG Report relied on “five indicators” to support its market-allocation conclusion:(1) stable market shares; (2) high incumbency; (3) suspicious bidding patterns (failing to bid lower in geographically closer locations); (4) sham bids (submitting high, losing bids in secondary territories); and (5) high prices and profits. The county's complaint was essentially a summary of the OIG report, the court noted.

The appellate court rejected the county's contention that the five “indicators” from the OIG report nudged the case over the line from mere parallel conduct to conspiracy. The first, second, and fifth factors were simply descriptions of the market, not allegations of anything that the defendants did. Standing alone, they indicated only that the market was a duopoly, and did not give rise to an inference of an unlawful agreement, according to the court.

“The third and fourth factors are the nub of the complaint,” the court noted. With respect to the third factor, suspicious bidding, the companies’ independent, self-interested failure to compete merely indicated their desire to avoid a turf war and preserve the profits guaranteed by regional dominance. The fourth factor that the complaint took from the OIG report alleged not only that Morton and Cargill failed to enter each other’s turf, but also that they helped each other rule their respective turf by submitting intentionally losing bids that served to exclude their out-of-state competitors. The allegation of sham bidding was the only thing that could have saved the case from dismissal, in the court’s view. However, the county was not bound by the state’s “Buy Ohio” law, which would have barred out-of-state bidders from consideration if both Morton and Cargill submitted a bid for a particular contract. Without the Buy Ohio law, the incentive to collude evaporated because the sham bidding would not lock out any competitors, the court explained.

The case is No. 11-4153.

Dennis E. Murray, Jr. (Murray & Murray Co., L.P.A.) argued for Appellant Erie County. David Marx, Jr. (McDermott, Will & Emery LLP) argued for Appellees Morton Salt, Inc. and Cargill, Inc.

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