PUBLIC 


UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSION ORIGINAL 

) PUBLIC 

In the Matter of ) 

) 

MCWANE, INC., ) 

a corporation ) DOCKET NO. 9351 

) 

------------------------) 

RESPONDENT MCWANE, INC.'S 

PROPOSED CONCLUSIONS OF LAW 

J. Alan Truitt Joseph A. Ostoyich 

Thomas W. Thagard III Erik T. Koons 

Maynard Cooper and Gale PC William C. Lavery 

1901 Sixth Avenue North Heather Souder Choi 

2400 Regions Harbert Plaza Baker Botts L.L.P. 

Birmingham, AL 35203 TheWamer 

1299 Pennsylvania Ave., N.W. 

Washington, D.C. 20004-2420 

Attorneys/or Respondent McWane, Inc. 

Dated: December 14,2012 

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02450334.13 
I. BURDEN OF PROOF 


1. Complaint Counsel must prove its case under FTC Act Section 5 by "substantial 

evidence." FTC v. Cement Institute, 333 U.S. 683, 705 (1948); California Dental Ass 'n v. FTC, 

224 F.3d 942, 957 (9th Cir. 2000); Cinderella Career & Finishing Schools, Inc. v. FTC, 425 

F.2d 583,592 fn.2 (D.C. Cir. 1970); Rayex Corp. v. FTC, 317 F.2d 290,292 (2d Cir. 1963). 

2. "Substantial evidence is more than a scintilla, and must do more than create a 

suspicion of the existence" of the fact to be established." Rayex Corp. v. FTC, 317 F.2d 290, 

292 (2d Cir. 1963). 

3. To prove a violation under FTC Act Section 5 Complaint Counsel must proffer 

"substantial evidence" of: (1) an unfair method of competition, (2) that causes substantial 

injury, (3) to consumers, (4) is not reasonably avoidable by the consumers, and (5) is not 

outweighed by countervailing benefits to consumers or competition. (15 U.S.C. § 45(n).) 

4. Sherman Act Sections 1 and 2 case law is a guide in evaluating whether 

Complaint Counsel has met its "substantial evidence" burden under Section 5. See., e.g. 

California Dental Ass 'n v. FTC, 526 U.S. 756, 762 n.3 (1999); Cement Institute, 333 U.S. at 

691-92 (1948). 

II. 	 McWane Did Not Constrain Price Competition, Exchange Competitively Sensitive 

Sales Information, or Invite its Competitors to Collude (Counts 1-3) 

A. 	 The Government Must Establish the Existence of an Agreement. 

5. Section 1 of the Sherman Act prohibits contracts, combinations, and conspiracies 

that unreasonably restrain trade. 15 U.S.C. § 1. 

6. To establish a horizontal price-fixing claim, a plaintiff must demonstrate the 

existence of an agreement, combination, or conspiracy among actual competitors with the 

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02450334.13 
purpose or effect of "raising, depressing, fixing, peggmg or stabilizing" the pnce of a 

commodity product. United States v. Socony-Vacuum Oil Co., 310 U.S. 150,223-24 (1940). 

7. Section 1 does not prohibit independent decisions, "even if they lead to the same 

anticompetitive result as an actual agreement among market actors." White v. R.M Packer Co., 

Inc., 635 F.3d 571,575 (1st Cir. 2011) ("White"). 

8. Because the existence of an agreement is the "very essence" of a Section 1 pricefixing claim, the plaintiff must prove that the conduct at issue resulted from an agreement, rather 

than the defendant's independent decisions. In re Flat Glass Antitrust Litig., 385 F.3d 350, 356 

(3rd Cir. 2004) (citations omitted) ("Flat Glass"); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 553 

(2007) ("Twombly"). At a minimum, this element requires "a 'unity of purpose or a common 

design and understanding or meeting of minds' or 'conscious commitment to a common 

scheme." Flat Glass, 385 F.3d at 357 (citations omitted). 

9. "Unilateral action, regardless of the motivation, is not a violation of Section I." 

Burtch v. Milberg Factors, Inc., 662 F.3d 212, 221 (3rd. Cir. 2011) ("Burtch"). 

B. The Government Lacks Direct Evidence of an Agreement. 

1. The Nature of Direct Evidence. 

10. Direct evidence of an agreement to fix prices is "the most compelling means" of 

establishing a Section 1 claim. See Rossi v. Standard Roofing, Inc., 156 F.3d 452,465 (3rd Cir. 

1998) ("Rossi"). 

11. "Direct evidence in a Section 1 conspiracy must be evidence that is explicit and 

requires no inferences to establish the proposition or conclusion being asserted." In re Baby 

Food Antitrust Litigation, 166 F.3d 112, 118 (3rd Cir. 1999) ("Baby Food"). See also In re 

Citric Acid Lit., 191 F.3d 1090, 1093-94 (9th Cir. 1999) ("Citric Acid"). 

3 

02450334.13 
'1 

I 

12. Evidence demonstrating opportunities to conspire or consciously parallel pricing 

behavior does not constitute direct evidence of conspiracy, but is, at most, circumstantial See 

Cosmetic Gallery, Inc. v. Schoeneman Corp., 495 F.3d 46, 52-53 (3rd Cir. 2007) ("Cosmetic 

Gallery")); See also, Superior Offshore International, Inc. v. Bristow Group, Inc., 2012 WL 

3055849, *5 (3rd Cir. July 27, 2012) ("Superior Offshore") (vague statements, such as 

admonitions to competitors to "play by the rules," do not constitute direct evidence). 

2. 	 The Government Concedes it Has No Direct Evidence Of An Illicit 

Agreement. 

13. Complaint Counsel and its expert conceded that it lacks evidence "that McWane 

directly communicated its prices to any other DIWF manufacturer or supplier in advance of 

communicating them to its customers or potential customers." 

14. There is no direct evidence of an agreement to fix prices or to eliminate or reduce 

job pricing. 

c. 	 Circumstantial Evidence Does Not Establish McWane Had An Agreement to 

Fix Prices or Reduce Job Pricing. 

15. To prove a case with circumstantial evidence, the Supreme Court has held that a 

plaintiff must not only produce evidence that reasonably tends to prove parallel conduct, it must 

also prove that this conduct was contrary to self interest. Matsushita, 475 U.S. at 588; In re Beef 

Industry Antitrust Litig., 907 F.2d 510, 514 (5th Cir. 1990). 

16. "When an antitrust plaintiff relies on circumstantial evidence of conscious 

parallelism to prove a § 1 claim, he must first demonstrate that the defendants' actions were 

parallel. .... The cattlemen have not done this."). 

17. Courts are cautious about inferring antitrust conSpIraCIeS from circumstantial 

evidence, because such an inference could "chill the very conduct the antitrust laws are designed 

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02450334.l3 
to protect," Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 594 (1986) 

("Matsushita"). 

18. According to the well-established "theory of interdependence," any rational firm 

in a oligopolistic market, such as DIWF, must take into account the anticipated reaction of its 

competitors when making its own pricing decisions. Flat Glass, 385 F.3d at 359. 

19. In a concentrated market like DIWF, parallel pricing by competitors "can be a 

necessary fact of life but be the result of independent pricing decisions" rather than illicit 

agreement. Baby Food, 166 F.3d at 121-22. 

20. Even if Complaint Counsel was able show parallel behavior - - which they did not 

"follow-the-leader" pricing is normal oligopoly behavior and is perfectly lawful. Blomkest 

Fertilizer, 203 F.3d at 1032-33 (affirming summary judgment because "[e]vidence that a 

business consciously met the pricing of its competitors does not prove a violation of the antitrust 

laws"); Reserve Supply Corp. v. Owens-Corning Fiberglas Corp., 971 F.2d 37, 50 (7th Cir. 

1992) ("the mere existence of an oligopolistic market structure in which a small group of 

manufacturers engage in consciously parallel pricing of an identical product does not violate the 

antitrust laws"); Clamp-All Corp. v. Cast Iron Soil Pipe Inst., 851 F.2d 478, 484 (1st Cir. 1988) 

("One does not need an agreement to bring about this kind of follow-the-leader effect in a 

concentrated industry"); In re Citric Acid Litigation, 191 F.3d 1090, 1102 (9th Cir. 1999) ("A 

section 1 violation cannot, however, be inferred from parallel pricing alone, nor from an 

industry'S follow-the-leader pricing strategy") (internal citations omitted). 

21. Because interdependent pricing behavior is not an "agreement" as defined by the 

Sherman Act, such conscious parallelism is not prohibited under the antitrust laws, despite its 

"noncompetitive nature." Id. at 359-60 (citations omitted). See also Citric Acid, 191 F.3d at 

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02450334.13 
1102-03; Burtch, 662 F.3d at 226-27; In re Travel Agent Commission Antitrust Litg., 583 F.3d 

896,903 (6th Cir. 2009) ("Travel Agent"). See also Brooke Group Ltd. v. Brown & Williamson 

Tobacco Corp., 509 U.S. 209, 227 (1993) ("Brooke Group"); Twombly, 550 U.S. at 553-54, 

556-57. 

22. Such conscious parallelism, while possibly indicative of a conspiracy, is "just as 

much in line with a wide swath of rational and competitive business strategy unilaterally 

prompted by common perceptions of the market." Burtch, 662 F.3d at 227 (quoting Twombly, 

550 U.S. at 554). 

23. As a result of the inherent economic realities of oligopolistic markets, courts 

require a plaintiff relying on evidence of conscious parallelism to establish that certain "plus 

factors" also exist. Flat Glass, 385 F.3d at 360. 

24. Requiring plaintiffs to meet this heightened standard of proof "tends to ensure that 

courts punish 'concerted action' - an actual agreement - instead of the 'unilateral, independent 

conduct of competitors. '" Id. (citing Baby Food, 166 F .3d at 122); see also Intervest, 340 F .3d 

at 159-60 (plaintiff relying on circumstantial evidence must meet heightened burden of proof). 

25. Thus, to distinguish between legitimate parallel conduct and an illegal pricefixing scheme, an antitrust plaintiff must present "plus factor" evidence that "tends to exclude 

the possibility" that the defendant acted independently of its competitors. Matsushita, 475 U.S. 

at 588; Flat Glass, 385 F.3d at 360 

26. Plus factors include: (i) a motive to conspIre; (ii) noncompetitive behavior 

contrary to the defendant's own economic self-interest; and (iii) hallmarks of traditional 

conspiracy. Baby Food, 166 F.3d at 121-22. 

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02450334.13 
27. The overwhelming evidence is that McWane, lacking any motive to conspire with 

Star and Sigma, acted independently and in its own economic self-interest. 

28. 	 The government has failed to establish the existence of any plus factors. 

1. 	 McWane lacked motive or incentive to collude, no conspiracy 

can be inferred. 

29. The government has failed to adduce any evidence to establish the plus factor of 

motive in this case. 

30. "An inference of conspiracy is impermissible if the defendants 'had no rational 

economic motive to conspire, and if their conduct is consistent with other, equally plausible 

explanations." Cohlmia v. St. John Medical Center, 693 F.3d 1269, 1284 (lOth Cir. 2012) 

(citing Matsushita, 475 U.S. at 596). See also In re Ins. Brokerage Antitrust Lit., 618 F.3d 300, 

322 n. 20 (3rd Cir. 2010); Southway Theatres v, Georgia Theatre Co., 672 F.2d 485, 494 (5th 

Cir. Unit B 1982). 

31. McWane stood to gain the most by charting its own independent course to lower 

prices in order to gain share from its competitors, move volume, and significantly reduce its 

inventory. McWane stood to gain nothing by colluding with Star and Sigma, because such 

collusion would only have "locked in" McWane's severely eroded and unsustainably low share 

of the Fittings market, which led to the idling and ultimate closure of one of McWane's two 

domestic manufacturing facilities and the layoff of hundreds of workers. McWane's legitimate 

business justifications are the more plausible explanation for its pricing actions than the alleged 

conspiracy posited by the government. 

32. Because McWane lacked a rational business motive to enter an unlawful 

conspiracy, an inference of conspiracy is unwarranted. See Matsushita, 475 U.S. at 596-97 (if 

defendant had no rational economic motive to conspire, or if colluding would offend the 

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02450334.13 
defendant's self interest, then conspiracy should not be inferred from ambiguous evidence or 

mere parallelism). See also Abraham v. Intermountain Health Care, Inc., 461 F.3d 1249, 1257­

58 (lOth Cir. 2006) ("the antitrust defendants' economic motive is highly relevant;" if the 

defendant has no economic motive to conspire, an inference of conspiracy is not proper); 

Burtch, 662 F.3d at 228. 

2. 	 Because McWane refused to act contrary to its own economic 

self-interest, a conspiracy cannot be inferred. 

33. Complaint Counsel has failed to establish the "plus factor" of noncompetitive 

behavior, because McWane's pricing actions were completely consistent with its own 

legitimate, economic self-interest: namely, to increase sales volume, reduce excess inventory, 

keep its foundries operational, and ultimately increase profits. See Burtch, 662 F.3d at 229 

(citing Baby Food, 166 F.3d at 137) (all businesses have a "legitimate understandable motive to 

increase profits" and such motive is not evidence of a "plus factor"). 

34. The alleged conspiracy would have been directly contrary to McWane's 

legitimate, economic self-interest. As stated, a conspiracy would have locked McWane into an 

unsustainable share of the Fittings market, whereas undercutting competition to drive sales and 

therefore volumes, and reduce inventory, was in McWane's economic self-interest. 

35. The conspiracy inference Complaint Counsel has asked this Court to draw is not 

only not the most likely inference to be drawn from the evidence, it is actually the least likely 

inference to be drawn from the evidence and, as a result, the requested conspiracy inference 

should be rejected. See In re Ins. Brokerage Antitrust Lit., 618 F.3d at 322 n. 20, 330 (evidence 

equally consistent with unconcerted action does not support an inference of conspiracy). 

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02450334. I3 
3. 	 The Government has Failed to Establish Hallmarks of Traditional 

Conspiracy involving McWane. 

36. Ordinarily in an oligopolistic market, motive and noncompetitive behavior are 

present. See Flat Glass, 385 F.3d at 360. 

37. Even when the first two plus factors are present, a plaintiff also must present 

substantial evidence of "customary indications of traditional conspiracy," which "tends to 

exclude the possibility" that the defendant acted independently of its competitors. Matsushita, 

475 U.S. at 588; Flat Glass, 385 F.3d at 360 

38. Customary indications of traditional conspiracy can include ambiguous 

participant admissions, solicitations of agreement, pricing or output communications between 

parties, and parallelism that is difficult to explain absent an agreement. VI Phillip E. Areeda & 

Herbert Hovenkamp, Antitrust Law ~ 1434b, at 243 (2d ed. 2003); See Matsushita, 475 U.S. at 

588; Flat Glass, 385 F.3d at 360. 

39. Where a defendant's actions are equally consistent with a plausible, non-collusive 

explanation, as with a conspiracy, the defendant is entitled to judgment in its favor. See Burtch, 

662 F.3d at 228; In re Ins. Brokerage Antitrust Lit., 618 F.3d at 330. In this case, McWane's 

actions are much more consistent with a plausible, non-collusive explanation than with the 

conspiracy alleged by the government. 

40. Because courts recognize that it is perfectly legitimate for a firm to receive its 

competitors' pricing information from customers, Citric Acid, 191 F.3d at 1103, the fact that 

McWane, Sigma, and Star each came to possess copies of each other's customer pricing letters 

does not support an inference of a conspiracy. See Baby Food, 166 F.3d at 126. 

41. In an oligopolistic market like fittings, a competitor's decision to follow an 

industry leader's price increase is legitimate, Baby Food, 166 F.3d at 128, and it is well 

9 

02450334.13 
established that such "bare 'conscious parallelism' is 'not in itself unlawful. '" White, 635 F.3d 

at 575 (quoting Brooke Group Ltd., 509 U.S. at 27)). 

42. To distinguish a tacit price-fixing agreement from legitimate conSCIOUS 

parallelism, Complaint Counsel must proffer evidence of "uniform behavior among competitors, 

preceded by conversations implying that later uniformity might prove desirable or accompanied 

by other conduct that in context suggests that each competitor failed to make an independent 

decision." White, 635 F.3d at 576. 

43. Courts have held that evidence of "opportunity to conspire" is insufficient to infer 

.] an antitrust conspiracy. Travel Agent, 583 F.3d at 905; Cosmetic Gallery, 495 F.3d at 53. 

44. It is well-established that competitor communications alone are insufficient 

evidence of a price-fixing conspiracy. White, 635 F.3d at 583-84. See also Baby Food, 166 

F.3d at 133 (competitors' "chit chat" and "chance meetings" do not constitute plus factors); 

Appendix of Horizontal Cases. 

45. On the record before this Court, as Complaint Counsel is "[fJacing the sworn 

denial of the existence of conspiracy, it [is] up to plaintiff to produce significant probative 

evidence" that a conspiracy existed, even to avoid summary judgment, let alone judgment after a 

full-blown trial. City ofMoundridge v. Exxon Mobil Corp., 429 F. Supp. 2d 117, 130 (D.D.C. 

2006) (emphasis added) (citation omitted). 

46. A "few scattered communications" and other evidence "falls far short" of 

overcoming defendants' sworn denials. City of Moundridge v. Exxon Mobil Corp., 409 

Fed.Appx. 362, 364 (D.C. Cir. 2011); see also Superior Offshore, 2012 WL 3055849, *7 

(statement that "everyone more or less agreed to the necessity of a more or less equal rate hike 

for everyone" insufficient). 

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47. Complaint Counsel must prove that any alleged exchange of pricing information 

actually made an impact on pricing decisions. Id. at 369; Baby Food, 166 F.3d at 125. 

Complaint Counsel has failed to do so. Complaint Counsel established no evidence if an 

exchange of price information beyond normal pricing letters to customers. 

48. Complaint Counsel has thus failed to meet its burden of presenting evidence 

which tends to exclude the possibility that insert legal cite/quote. 

D. The Short-Lived Trade Association the Ductile Iron Fittings Research 

Association (DIFRA) Did Not Facilitate Price Coordination 

49. It is well established that legitimate trade associations are perfectly legal. Citric 

Acid, 191 F.3d at 1097-98. Courts have also rejected any antitrust liability premised upon the 

theory that a company's decision to participate in a trade association that gathers and 

disseminates aggregated tons-shipped data somehow "facilitated" price collusion. Williamson 

Oil, 346 F .3d at 1313 ("exchange [of] information relating to sales ... does not tend to exclude 

the possibility of independent action or to establish anticompetitive collusion"). Even if DIFRA 

had gathered pricing information (which it did not), it is well-settled that "[g]athering 

information about pricing and competition in the industry is standard fare for trade associations. 

If we allowed conspiracy to be inferred from such activities alone, we would have to allow an 

inference of conspiracy whenever a trade association took almost any action." Citric Acid, 191 

F.3d at 1097-98. 

50. As DIFRA did not disseminate pricing data of its members but rather, only 

historic, aggregated tons-shipped data, McWane's participation therein is entirely lawful. 

Williamson Oil, 346 F.3d at 1313. 

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02450334.13 
E. 	 Complaint Counsel Has No Evidence of Price-Signaling. 

51. Count Three of the Complaint alleges that McWane, through "price signaling" 

and other unilateral actions, invited its competitors to collude to restrain price competition. 

52. Because the existence of an actual agreement is the essence of a Sherman Act § 1 

claim, one firm's "price signal" or "invitation to collude" is not actionable under the antitrust 

laws. See Twombly, 550 U.S. at 553. 

53. Absent proof that such unilateral actions actually harmed competition, neither are 

they actionable under Section 5 of the FTC Act. See Boise Cascade Corp. v. FTC, 637 F.2d 

573,581-82 (9th Cir. 1980). 

54. In an oligopolistic industry, even proof that a firm's conduct reduced competition 

is not sufficient to establish a violation of Section 5. E.I DuPont de Nemours & Co. v. FTC, 

729 F.2d 128, 137-40 (2nd Cir. 1984). 

55. Labeling an oligopolist's pricing changes as "price signals" does not convert them 

into "unfair competition." Id at 139. 

56. Instead, Complaint Counsel must prove that indicia of oppressiveness existed, 

such as (i) evidence of the defendant's anti competitive intent; or (ii) the absence of legitimate 

business justifications for the defendant's actions. Id at 139. 

57. Complaint Counsel failed to meet its burden regarding McWane's alleged intent 

and lack of legitimate business justification. Moreover, the overwhelming evidence establishes 

that McWane lacked anti competitive intent and had legitimate business justifications for its 

actions. 

II. 	 McWane Did not Monopolize, Attempt to Monopolize, or Conspire to Monopolize 

the Alleged Domestic Fittings Market (Counts 5-7) 

A. 	 Standard of Proof 

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02450334.13 
58. Complaint Counsel's Section 5 claims alleging that McWane monopolized, 

attempted to monopolize, or conspired to monopolize the so-called domestic fittings market 

must meet the same burden of proof as Sherman Act Section 2 claims. See, e.g. FTC v. Cement 

Institute, 333 U.S. 683,691-92 (1948). 

59. Section 2 of the Sherman Act prohibits a firm from monopolizing, attempting to 

monopolize, or conspiring to monopolize the relevant market. 15 U.S.C. § 2. 

60. "The purpose of the Act is not to protect businesses from the workings of the 

market; it is to protect the public from the failure of the market. The law directs itself not 

against conduct which is competitive, even severely so, but against conduct which unfairly tends 

to destroy competition itself." Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993) 

(emphasis supplied). 

61. Because "[i]t is sometimes difficult to distinguish robust competition from 

conduct with long-term anti competitive effects," federal courts have been careful to avoid 

construing Section 2 in a way that would chill, rather than foster, competition. Spectrum Sports, 

506 U.S. at 458-59. 

62. The Supreme Court has made clear that: "[t]he mere possession of monopoly 

power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an 

important element of the free-market system. The opportunity to charge monopoly prices - at 

least for a short period - is what attracts 'business acumen' in the first place; it induces risk 

taking that produces innovation and economic growth. To safeguard the incentive to innovate, 

the possession of monopoly power will not be found unlawful unless it is accompanied by an 

element of anti competitive conduct." Verizon Communications, Inc. v. Law Offices ofCurtis V 

Trinko, LLP, 540 U.S. 398,407 (2004) ("Verizon"). See also United States v. Microsoft Corp., 

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253 F.3d 34, 51 (D.C. Cir. 2001) ("merely possessing monopoly power is not itself an antitrust 

violation"). 

63. Acquiring or maintaining monopoly power through "growth or development as a 

consequence of a superior product, business acumen, or historic accident" is not a violation of 

Section 2. Verizon, 540 U.S. at 407 (quoting United States v. Grinnell Corp., 384 U.S. 563, 

570-71 (1966)). 

64. McWane's share of the Fittings market is not the result of willful misconduct, but 

of its own business acumen and even historic accident - i.e. the exit of other domestic DIWF 

manufacturers from an unprofitable industry in the wake of a flood of cheap imports. Thus, 

Complaint Counsel must establish not only that McWane possessed monopoly power in the 

relevant market, but also that it willfully acquired or maintained that power through 

anticompetititve conduct. See Verizon, 540 U.S. at 407. 

65. Because Complaint Counsel cannot meet this burden, McWane is entitled to 

judgment in its favor on Counts Five through Seven of the Complaint, and Count Four to the 

extent it is based on monopoly. 

B. McWane Lacked Market Power. 

66. McWane's market share does not rise to the level of "monopoly power." See 

Barr Laboratories, Inc. v. Abbott Laboratories, 978 F.2d 98, 112-13 (3rd Cir. 1992) (market 

share of 50% did not establish monopoly power). As numerous witnesses confirmed at trial, 

both before ARRA and after ARRA, domestic fittings comprise only about 15-20% of the 

fittings market. 

67. "Monopoly power" is "the ability to (1) price substantially above the competitive 

level and (2) to persist in doing so for a significant period without erosion by new entry or 

14 

02450334.13 
expansion." AD/SAT v. Associated Press, 181 F.3d 216, 226-27 (2nd Cir. 1999) (italics in 

original, bold supplied). 

68. Large market share does not conclusively establish monopoly power. See, e.g., 

Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d 90, 99 (2nd Cir. 1998) (70% share); 

Epicenter Recognition, Inc. v. Jostens, Inc., 81 Fed.App. 910, 911-12 (9th Cir. 2003) (80% 

share). 

69. If a defendant with large market share is unable to control prices or exclude 

competitors, then it is not a monopoly. Tops Markets, 142 F.3d at 99; see also Metro Mobile 

CTS, Inc. v. NewVector Comms., Inc., 892 F.2d 62, 63 (9th Cir. 1989) ("Metro Mobile") (a 

defendant's possession of even 100% market share does not necessarily establish defendant has 

power to charge monopoly prices or control output); Oahu Gas Serv., Inc. v. Pacific Resources, 

Inc., 838 F.2d 360, 366 (9th Cir. 1988) ("Oahu Gas")(a high market share will not raise an 

inference of monopoly power in a market with low entry barriers or other evidence of a 

defendant's inability to control prices or exclude competitors). 

70. The ability to maintain prices above a competitive level "for an extended period" 

is a key element of monopoly power. Rebel Oil Co., Inc. v. Atlantic Richfield Co., 51 F.3d 

1421, 1434 (9th Cir. 1995) ("Rebel Oil"). 

71. Where barriers to entryl into a market are low, a defendant's market power is 

often much less than its market share would seem to indicate. Moeckler v. Honeywell 

International, Inc., 144 F.Supp.2d 1291, 1308 (M.D.Fla. 2001). 

1 Barriers to entry are additional long-run costs that must be incurred by new entrants but not by incumbent 

competitors, or "factors in the market that deter entry while permitting incumbent firms to earn monopoly returns." 

Rebel Oil, 51 F.3d at 1439. Entry barriers are typically legal licensing requirements, control of an essential or 

superior resource, entrenched buyer preferences for established brands, capital market evaluations which impose 

higher capital costs on new entrants, and economies of scale. Id. To support a finding of monopoly power, entry 

barriers must be high enough to constrain the normal operation of the market to the extent that natural market forces 

cannot self-correct the market. Id. 

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• 1 

72. "Market share reflects current sales, but today's sales do not always indicate 

power over sales and price tomorrow." Ball Memorial Hospital v. Mut. Hospital Ins., Inc., 784 

F.2d 1325, 1336 (7th Cir. 1986); see also Oahu Gas, 838 F.2d at 366 (a firm with a high market 

share may be able to exert market power in the short run, but substantial market power can 

persist only if there are significant and continuing barriers to entry). 

73. 	 The evidence demonstrates that McWane lacks such power. 

C. 	 McWane's September 2009 Rebate Policy Did Not Exclude Star and is Procompetitive. 

74. Even if Complaint Counsel could establish that domestic DIWF is a separate 

relevant market in which McWane has monopoly power (which it cannot), McWane is 

nevertheless entitled to judgment in its favor because there is no evidence that McWane engaged 

in anticompetitive conduct to acquire or maintain monopoly power. See Verizon, 540 U.S. at 

407. 

75. Complaint Counsel alleges two instances of supposed anticompetitive conduct: 

McWane's September 2009 Rebate Policy ("Rebate Policy") and McWane's Master 

Distributorship Agreement with Sigma ("MDA"). both are pro-competitive. 

1. The Rebate Policy is Presumptively Legal 

76. "As a general rule, businesses are free to choose the parties with whom they will 

deal, as well as the prices, terms, and conditions of that dealing." Pacific Bell Tel. Co. v. 

Linkline Comm., Inc., 555 U.S. 438,448 (2009). 

77. The rebates referenced in the Rebate Policy are customer discounts. Because 

discounts are beneficial to consumers, "price cutting is a practice the antitrust laws aim to 

promote." Cascade Health Solutions v. Peacehealth, 515 F.3d 883, 896 (9th Cir. 2008); see 

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02450334.13 
. 

Nicsand, Inc. v. 3M Co., 507 F.3d 442,452 (6th Cir. 2007) ("[c]utting prices in order to increase 

business often is the very essence of competition"). 

78. Discounted prices that remain above a firm's average variable cost are 

presumptively legal, because a firm's ability to offer above cost discounts represents ! 

; 

competition on the merits. Concord Boat v. Brunswick Boat Corp., 207 F.3d 1039, 1061 (8th 

Cir. 2000) ("Concord Boat"). 

79. Too much judicial oversight of discounting creates "intolerable risks of chilling 

legitimate price cutting." Id at 1061 (quoting Brooke Group Ltd v. Brown & Williamson 

Tobacco Corp., 509 U.S. 209, 223 (1993)). See also Southeast Missouri Hosp. v. CR. Bard, 

Inc., 642 F. 3d 608, 623 (8th Cir. 2011) (plaintiff must overcome a strong presumption of 

legality where defendant's discounted prices are above its average variable cost). 

80. There is no evidence that the customer discounts McWane offered under its 

Rebate Policy were below its average variable cost. See Safeway, Inc. v. Abbott Laboratories, 

761 F.Supp.2d 874, 898 (N.D.Cal. 2011) (granting summary judgment for defendant on 

predatory pricing monopoly and attempted monopoly claims, where plaintiff failed to present 

evidence that defendant priced below cost). 

81. A defendant's above-cost customer discounts are presumed legal even if those 

discounts are offered under an exclusive agreement. See, e.g., Cascade Health Solutions v. 

Peacehealth, 515 F.3d 883, 903 (9th Cir. 2008); Concord Boat, 207 F3d at 1061; Nicsand, 507 

F.3d at 451-52, 457. 

82. This presumption of legality even applies where the defendant has a supermajority share of the relevant market, provided the exclusive agreement is terminable at will and 

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on short notice. Epicenter Recognition, Inc. v. Jostens, Inc., 81 Fed.App. 910, 911-12 (9th Cir. 

2003). 

83. McWane's Rebate Policy is not only terminable at will and on short notice, it is 

terminable at any time, because it is not a legally enforceable contract or agreement. 

84. The possibility that the Rebate Policy increased Star's costs is of no consequence, 

because the antitrust laws are designed to protect competition, not competitors. Bacchus Inds., 

Inc. v. Arvin Inds., Inc., 939 F.2d 887, 894 (lOth Cir. 1991) (citing Brunswick Corp. v. Pueblo 

Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (l977)) ("Whether or 

not a practice violates the antitrust laws is determined by its effect on competition and not its 

effect on an individual competitor.") 

85. Although conduct that eliminates rivals reduces competition, "reduction of 

competition does not invoke the Sherman Act until it harms consumer welfare." Rebel Oil, 51 

F.3d at 1433. 

86. As one circuit court put it: "cutthroat competition is a term of praise rather than 

condemnation... consumers gain when firms try to 'kill' the competition and take as much 

business as they can." RJ Reynolds Tobacco Co. v. Cigarettes Cheaper, 462 F.3d 690, 696 (ih 

Cir. 2006) (citations omitted). 

2. 	 Star's Successful Entry as a Domestic Fittings Supplier Refutes any 

Inference of Monopoly Power. 

87. The trial evidence proves that Star quickly became a supplier of domestic fittings 

within months of ARRA's passage and dramatically increased its domestic fittings sales. 

88. These facts establish that the Rebate Policy is not anti competitive. See, e.g., 

Omega Environmental, 127 F.3d at 1164 ("actual entry and expansion" of competitor 

demonstrated that the defendant's policy did not deter entry into the relevant market); Sterling 

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Merchandising, 656 F.3d at 126 (attempted monopolization claim "presumptively implausible 

where the challenged conduct has been in place for at least two years and the market remains 

competitive, as evidenced by ongoing entry, profitability of rivals, and stability of their 

aggregate market share.") 

89. The allegation that Star did not increase its domestic fittings sales as much or as 

quickly as it would have preferred does not support a monopoly claims or prove that the Rebate 

Policy is anticompetitive. See, e.g., Roland Machinery, 749 F.2d at 394-95; Sterling 

Merchandising, 656 F.3d at 123 n.5. 

90. First, the antitrust laws are designed to protect competition, not competitors. 

Brunswick Corp., 429 U.S. at 488. 

91. Second, factors other than McWane's Policy explain why Star may not have 

increased domestic fittings sales as much as it would have liked, including Star's own 

reputation, distributors' lack of confidence in Star, and Star's own delivery and inventory issues. 

92. It is well recognized that "it is sometimes difficult to distinguish robust 

competition from competition with long-run anti competitive effects." Arther S. Langenderfer, 

Inc. v. s.E. Johnson Co., 917 F.2d 1413, 1433 (Sixth Cir. 1990). 

93. Ultimately, by pushing Star to develop a full line of domestic fittings - rather than 

merely the most commonly used fittings - in order to compete most effectively with McWane, 

the Rebate Policy had a pro-competitive purpose. 

3. The Rebate Policy did Not Cause Anticompetitive Effects. 

94. Because the Rebate Policy is not a contract, it is less restrictive than most of the 

exclusive agreements and arrangements found to be perfectly legal by the courts. 

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95. Even if the Rebate Policy were a legally enforceable contract, it is well settled 

that exclusive contracts can have legitimate economic benefits, and must therefore be evaluated 

in accordance with the rule of reason. Stop & Shop" 373 F .3d at 65-66; Omega Environmental, 

127 F.3d at 1162; Roland Machinery, 749 F.2d at 395. 

I 	 96. Under the rule of reason, Complaint Counsel must prove that the Rebate Policy 

I 

I 

caused anti-competitive consequences that outweigh its pro-competitive benefits. Stop & Shop, 

373 F.3d at 65-66. 

97. Anti-competitive consequences would be a reduction in domestic DIWF output or 

a supracompetitive rise in domestic DIWF prices. See CDC Technologies, 186 F.3d at 80-81. 

Evidence that a competitor such as Star may have been harmed is insufficient. See Dentsply, 

399 F.3d at 187; Stop & Shop, 373 F.3d at 65-66. 

98. Complaint Counsel presented no evidence that the Rebate Policy caused domestic 

DIWF output to fall. 

99. 	 To the contrary, the evidence is that domestic DIWF output increased. 

100. Complaint Counsel presented no evidence that the Rebate Policy caused the price 

of domestic DIWF to rise to supracompetitive levels. 

101. To the contrary, the evidence is that domestic DIWF prices did not keep place 

with inflation in 2009-2010. 

D. 	 The MDA Did Not Foreclose Sigma as a Competitor and Was Procompetitive. 

102. To succeed on its claims relating to the MDA, Complaint Counsel must prove that 

- as of September 2009 when the MDA was executed - Sigma was prepared and intended to 

enter the domestic fittings market. See Gas Utilities Co. ofAlabama, Inc. v. Southern Natural 

Gas Co., 99 6 F.2d 282, 283 (l1th Cir. 1993) ("Inquiry into procedures is insufficient to 

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L 
establish preparedness ... party must take some affirmative step to enter"). To meet this 

burden, Complaint Counsel must prove that Sigma had secured financing and consummated 

contracts to supply domestic Fittings. See id Evidence that Sigma may have had access to 

financing in the abstract is not sufficient. !d.; see also Case Cable Holdings of Ga., Inc. v. 

Home Video, Inc., 825 F.2d 1559, 1562 (11 th Cir. 1987) (requiring "an intention to enter the 

business" and a "showing of preparedness"); Sunbeam Television Corp., v. Nielsen Media 

Research, Inc., 136 F.Supp.2d 1341, 1354 (S.D. Fla. 2011) ("a would-be purchaser suing an 

incumbent monopolist for excluding a potential competitor . . . must prove the excluded firm 

was willing and able to supply it but for the incumbent firm's exclusionary conduct"). 

103. As Complaint Counsel failed to offer any proof that Sigma was prepared to and 

intended to enter domestic production and, in fact the evidence unequivocally established that 

Sigma had taken no concrete steps to produce domestic fittings, liability cannot be founded on 

theMDA. 

E. McWane Is Entitled to Judgment in Its Favor on the Attempted 

Monopolization and Conspiracy to Monopolize Claims. 

104. For all of the reasons Complaint Counsel's monopoly claims fail, as set forth 

above, its attempted monopoly and conspiracy to monopolize claims also fail. These two claims 

also fail for the independent reasons set forth below. 

1. Attempted Monopolization 

105. To establish an attempted monopoly claim, a plaintiff must prove that the 

defendant possessed the specific intent to achieve monopoly power by predatory or exclusionary 

conduct; that the defendant in fact engaged in such anticompetitive conduct; and that a 

dangerous probability existed that the defendant might have succeeded in its attempt to achieve 

monopoly power. Us. Anchor Mfg. Inc. v. Rule Inds., Inc., 7 F.3d 986,993 (11 th Cir. 1993). 

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106. With regard to the specific intent element, the desire to maintain or increase one's 

market share is not in itself an antitrust violation. Oahu Gas, 838 F.2d at 368. 

107. For a claim of attempted monopolization, even "[d]irect evidence of intent to 

vanquish a rival in an honest competitive struggle cannot help to establish an antitrust violation. 

It must also be shown that the defendant sought victory through unfair or predatory means." 

William Inglis & Sons Baking Co. v. ITT Continental Baking Co., Inc., 668 F.2d 1014,1028 (9th 

Cir. 1982). 

108. Because Complaint Counsel has failed to establish that McWane engaged in 

unfair or predatory conduct. McWane is entitled to judgment in its favor on Count Seven of the 

Complaint. 

2. Conspiracy to Monopolize 

109. To establish conspiracy to monopolize, a plaintiff must prove: (i) the existence of 

a conspiracy to monopolize; (ii) overt acts done in furtherance of the conspiracy; (3) an effect 

upon an appreciable amount of interstate commerce; and (4) a specific intent to monopolize. 

Lantec, Inc. v. Novell, Inc., 306 F.3d 1003, 1028 (lOth Or. 2002). 

110. Conduct as consistent with permissible competition as with illegal conspiracy 

does not support an inference of antitrust conspiracy. Id. at 1030. 

111. Thus, Complaint Counsel must prove that both Mc Wane and Sigma had a specific 

intent to endow McWane with monopoly power. ID Security Sys. Canada, Inc. v. Checkpoint 

Sys., Inc., 249 F.Supp.2d 622, 660-61 (E.D.Pa. 2003). 

112. Proof that McWane and Sigma shared an intent to prevail over rivals or to 

improve market position is insufficient; the shared intent must have been to make McWane a 

monopolist. Id. 

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113. Further, even if Complaint Counsel could establish that McWane had an intent to 

achieve a monopoly (which it cannot), Complaint Counsel has no evidence that Sigma shared 

the same intent. 

.1 

114. To the contrary, Sigma's focus in signing the MDA was on keeping its own 

customers happy and providing domestic DIWF to those customers when needed, not on Star. 

i 

115. Sigma perceived that if it was unable to supply domestic DIWF to its customers, 

it might also lose some portion of its non-domestic business with those customers. 

116. Thus, McWane is entitled to judgment in its favor on Count Five of the Complaint 

See Belfiore v. The New York Times Co., 826 F.2d 177,183 (2nd Cir. 1987) (no conspiracy where 

plaintiff failed to prove that alleged co-conspirator shared intent to make primary conspirator a 

monopoly). 

III. The MDA Was Not a Restraint of Trade in Violation of Section 5 (Count 4) 

117. Count Four of the Complaint consists of a bare, conclusory allegation that the 

MDA unreasonably restrains trade and constitutes an unfair method of competition in violation 

of Section 5. 

118. As established in Section above, the MDA did not violate Section 2 of the 

Sherman Act, and was actually procompetitive. 

119. Complaint Counsel has not presented any other evidence of any other manner in 

which the MDA has allegedly restrained trade. 

120. Moreover, it is well established that vertical agreements such as the MDA can be 

procompetitive. See Brantley, 675 F.3d at 1198, 1202. 

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121. Without more, even evidence that such an agreement increases consumer prices or 

reduces consumer choice is not sufficient to establish an antitrust violation. Id at 1202. 

Therefore, McWane is entitled to judgment in its favor on Count Four. 

IV. 	 DR. SCHUMANN'S OPINIONS ARE LEGALLY FLAWED AND SHOULD BE 

IGNORED 

122. Dr. Schumann did not quantify or otherwise provide any economic analyses 

demonstrating that imported Fittings prices would have been lower but-for the alleged conduct 

in 2008, nor that domestic Fittings prices would have been lower but-for the rebate letter or the 

MDA. St. Francis Medical Center v. C.R. Bard, Inc., 657 F.Supp.2d 1069, 1102-03 (E.D. Mo. 

2009) (a manufacturer's rebate policy was not anticompetitive where there was no evidence that 

it led to higher prices or that customers who bought products in various categories under the 

policy did so unwillingly). His opinion was nothing more than assumption and speculation. 

That is not enough. Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 579-80 (1993) 

(untestable say-so is not reliable evidence at trial); General Elec. Co. v. Joiner, 522 U.S. 136, 

146 (1977) ("Nothing ... requires a district court to admit opinion evidence which is connected 

to existing data only by the ipse dixit ofthe expert"); Brooke Group Ltd v. Brown & Williamson 

Tobacco Corp., 509 U.S. 209, 242 (1993) ("when indisputable record facts contradict or 

otherwise render the opinion unreasonable, it cannot support a jury's verdict."). As such, the 

Court should not consider any of Dr. Schumann's opinions. 

V. 	 THE GOVERNMENT IS NOT ENTITLED TO ANY REMEDY 

123. The proposed remedy should be denied because there was no proof at trial of any 

ongoing actual or threatened injury to competition or consumers. 

124. Federal judicial power is limited by Article III of the Constitution to live "Cases" or 

"Controversies. " 

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125. Courts cannot grant injunctions unless a plaintiff shows ongoing or imminent harm. 

The Supreme Court has repeatedly denied injunctive relief to plaintiffs, like Complaint Counsel 

here, who cannot meet that proof. 

126. The plaintiff "must show that he is under threat of suffering 'injury in fact' that is 

concrete and particularized' and "the threat must be actual and imminent, not conjectural or 

hypothetical[.]" Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009). 

127. A plaintiff, like Complaint Counsel here, that fails to meet these requirements is not 

entitled to injunctive relief. Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2559-60 (2011) 

("plaintiffs no longer employed [by Wal-Mart] lack standing to seek injunctive and declaratory 

relief against its employment practices"); City ofL.A. v. Lyons, 461 U.S. 95, 105 (1983) (past 

injury at hands of police did not entitle plaintiff to enjoin future police practices). 

128. The mere possibility that past conduct might occur again is insufficient. Winter v. 

Natural Res. De! Council, Inc., 555 U.S. 7,22 (2008); eBay Inc. v. MercExchange, L.L.c., 547 

U.S. 388, 391 (2006) 

129. It is undisputed that the conduct that is alleged to be unlawful in the Complaint has 

long since ended. Complaint Counsel's own expert testified that the alleged conspiracy ended 

over four years ago in late 2008, and has suggested no conspiratorial conduct beyond June 2010. 

Likewise, it is undisputed that McWane's 2009 Rebate Policy is terminated in early 2010 and is 

no longer in effect. Finally, the undisputed evidence also establishes that the MDA executed by 

McWane and Sigma was terminated in 2010. Thus, there is no possibility that the challenged 

conduct could reoccur. 

25 

02450334.13 

1... 
OF COUNSEL: 


Joseph A. Ostoyich 


Erik T. Koons 


William C. Lavery 


Heather Souder Choi 


Baker Botts L.L.P. 

The Warner 

1299 Pennsylvania Ave., N.W. 

Washington, D.C. 20004-2420 

Phone: 202.639.7700 

Fax: 202.639.7890 

joseph.ostoyich@bakerbotts.com 

erik.koons@bakerbotts.com 

william.lavery@bakerbotts.com 

heather.choi@bakerbotts.com 

J. Alan Truitt 

Thomas W. Thagard, III 

Julie S. Elmer 

Maynard, Cooper & Gale, P.C. 

1901 Sixth Avenue North 

2400 AmSouthiHarbert Plaza 

Birmingham, AL 35203-2608 

(205) 254-1000 

(205) 254-1999 (facsimile) 

atruitt@maynardcooper.com 

tthagard@maynardcooper.com 

jelmer@maynardcooper.com 

1 

02450334.13 

r-_ . 

lsi Joseph A. Ostoyich 

Joseph A. Ostoyich 

Counsel for McWane, Inc. 
CERTIFICATE OF SERVICE 

I hereby certify that on December 14,2012, I served a copy on the following by hand 

delivery and email: 

The Honorable D. Michael Chappell 

Administrative Law Judge 

Federal Trade Commission 

600 Pennsylvania Ave., NW, Rm. H-l 06 

Washington, DC 20580 

Donald S. Clark 

Secretary 

Federal Trade Commission 

600 Pennsylvania Ave., NW, Rm. H-I13 

Washington, DC 20580 

DCLARK@ftc.gov 

Thomas Brock 

Federal Trade Commission 

601 New Jersey Ave., NW 

Rm. NJ-6249 

Washington, DC 20001 

TBROCK@ftc.gov 

By: 	 lsi William C. Lavery 

William C. Lavery 

Counsel for McWane, Inc. 

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