__________________________________________ 

 

 

 

 

 

 

 

 

 

UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSION 

OFFICE OF ADMINISTRATIVE LAW JUDGES
 

12 19 2012 

)
 

In the Matter of ) 

)
 

McWANE, INC., ) 

Respondent. )
 

__________________________________________) 

PUBLIC 

DOCKET NO. 9351 

COMPLAINT COUNSEL’S POST-TRIAL BRIEF
 

Richard A. Feinstein 

Director 

Pete Levitas 

Deputy Director 

Melanie Sabo 

Assistant Director 

Geoffrey M. Green 

Deputy Assistant Director 

Michael J. Bloom 

Assistant Director for Policy & Coordination 

Jeanine Balbach 

Attorney, Office of Policy & Coordination 

Dated: December 19, 2012 

Edward D. Hassi, Esq. 

Linda M. Holleran, Esq. 

J. Alexander Ansaldo, Esq. 

Joseph R. Baker, Esq. 

Thomas H. Brock, Esq. 

Monica M. Castillo, Esq. 

Mika Ikeda, Esq. 

Andrew K. Mann, Esq. 

Federal Trade Commission 

Bureau of Competition 

600 Pennsylvania Ave., N.W. 

Washington, DC 20580 

Telephone: (202) 326-2470 

Facsimile: (202) 326-3496 

Electronic Mail: ehassi@ftc.gov 
TABLE OF CONTENTS
 

PUBLIC RECORD

I.	 INTRODUCTION................................................................................................................. 1
 

II.	 STATEMENT OF FACTS................................................................................................... 9
 

A. Background..........................................................................................................................9 

1. Fittings ...........................................................................................................................9 

2. Market Participants ......................................................................................................10
 

a) Suppliers ................................................................................................................... 10 

b) End Users .................................................................................................................. 13 

c) Distributors ................................................................................................................. 13 

3. Bidding Process ...........................................................................................................15 

4. Domestic-Only Specifications .....................................................................................15 

5. Fittings Pricing .............................................................................................................16 

B. McWane Conspired With Sigma and Star to Stabilize and Raise Fittings 

Prices..................................................................................................................................19 

1. Late 2007 Market Environment ...................................................................................19 

2. The Tatman Plan to Bring Stability and Transparency to the Fittings 

Market..........................................................................................................................21 

3. Phase One of the Tatman Plan: Partial Multiplier Increases in 

Exchange for Reduction in Project Pricing..................................................................23 

4. Phase Two of the Tatman Plan: Additional Multiplier Increases 

Conditioned on Participation in the DIFRA Information Exchange ...........................29 

5. Trust Between the Conspirators Broke Down in Late 2008 ........................................35 

6. The Agreement Was Effective During 2008 ...............................................................36 

7. McWane, Sigma and Star Have Continued Their Inappropriate Price 

Communications ..........................................................................................................39 

a) April 2009 ................................................................................................................. 39 

b) June 2010 .................................................................................................................. 41 

C. McWane Monopolized the Domestic Fittings Market by Implementing an 

Unlawful Exclusive Dealing Policy...................................................................................42 

1. ARRA Increased the Importance of the Domestic Fittings Market and 

Threatened Sigma and Star ..........................................................................................42 

2. McWane Implemented an Exclusive Dealing Policy to “Block Star” .........................45 

3. McWane Conspired with SIGMA to Monopolize the Domestic Fittings 

Market by Entering into the MDA ...............................................................................49 

4. Domestic Fittings Prices Rose as a Result of the Exclusive Dealing 

Policy and the MDA ....................................................................................................53 

III. JURISDICTION ................................................................................................................. 54
 

IV. STANDARD OF REVIEW ................................................................................................ 54
 

V.	 LEGAL ANALYSIS ........................................................................................................... 58
 

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A. Fittings and Domestic Fittings Represent Two Relevant Markets That 

Each Have High Barriers to Entry .....................................................................................58 

1. General Principles of Market Definition......................................................................59 

2. The Supply of Fittings For Waterworks Projects With Open 

Specifications in the United States is a Relevant Market ............................................62 

a) Fittings Sold For Use on Waterworks Projects With Open Specifications Are A 

Relevant Product Market .................................................................................................. 62 

(1) There are No Widely Used Substitutes That Constrain the Price of Fittings ....... 63 

(2) It is Appropriate to Group All Fittings 24” in Diameter and Below Into A Single 

“Cluster” Market........................................................................................................... 66 

b) The Relevant Geographic Market for Fittings is the United States .......................... 70 

3. The Supply of Domestic Fittings For Waterworks Projects With 

Domestic-Only Specifications in the United States is a Relevant 

Market..........................................................................................................................72 

a) Domestic Fittings Sold Into Domestic-Only Specifications Are a Relevant Price 

Discrimination Market Because There Are No Reasonable Substitutes .......................... 72 

b) The Relevant Geographic Market is the United States ............................................. 80 

4. The Relevant Fittings and Domestic Fittings Markets Have High 

Barriers to Entry ...........................................................................................................81
 

B. The Fittings Market Is Highly Susceptible to Collusion ...................................................83 

1. High Concentration of Suppliers .................................................................................84 

2. Product Homogeneity ..................................................................................................85 

3. High Barriers to Entry and Few Product Substitutes ...................................................85 

4. Inelastic Demand .........................................................................................................86
 

5. Price Transparency .......................................................................................................87
 

6. Trade Association Membership ...................................................................................88 

7. Social Structure ............................................................................................................89 

C. McWane Unlawfully Invited Its Competitors to Collude in Violation of
 

Section 5 of the FTC Act (Count Three) ...........................................................................90 

1. McWane=s January 11, 2008 Letter Unlawfully Invited Its Competitors 

to Curtail Project Pricing .............................................................................................93 

2. McWane’s May 7, 2008 Letter Unlawfully Offered to Raise 

McWane’s Fittings Prices in Return For Its Competitors Submitting 

Proprietary Sales Information to DIFRA ...................................................................100 

D. McWane, Sigma and Star Conspired to Stabilize and Increase Fittings 

Prices By Curtailing Project Pricing and Increasing Price Transparency 

(Count One) .....................................................................................................................105 

1. Episode One: Beginning in or around January 2008, McWane, Sigma 

and Star Agreed to Curtail Project Pricing ................................................................108 

a) Parallel Pricing Conduct: McWane, Sigma and Star Each Curtailed Project Pricing 

b) Plus Factor: The Conspiracy Is Plausible Because It Occurred in the Context of a 

In or Around January 2008 ............................................................................................. 111 

Market Conducive to Collusion and the Suppliers Had a Motive to Conspire ............... 114 

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c) Plus Factor: The Parallel Conduct of all Suppliers Curtailing Project Pricing 

Conformed to McWane’s Written Strategy To “[D]rive [S]tability and [R]ational 

[P]ricing”......................................................................................................................... 116 

d) Plus Factor: Curtailing Project Pricing Was Against the Conspirators’ Unilateral 

Business Interest Absent Assurances That Their Competitors Would Also Curtail Project 

e) Plus Factor: Membership In DIFRA and Taking Actions That Facilitate Collusion

Pricing............................................................................................................................. 122 

126 

f)	 Plus Factor: Internal Documents Tracking “Cheating” Constitute Co-Conspirator 

Admissions ...................................................................................................................... 127 

g) Plus Factor: Complaints to a Competitor About Low Prices or Cheating ................ 129 

h) Plus Factor: Inter-Firm Communications .............................................................. 132 

(1) Admission that Star Convinced Sigma to Take a List Price increase ................. 133 

(2) Admissions that Sigma Sought Star’s Agreement to Stay Within One or Two 

Multiplier Points of McWane’s Prices ........................................................................ 134 

(3) Admission that Sigma Tried to Influence McWane and Star’s Price Lists in April 

2009............................................................................................................................. 135 

(4) Discussion to Sell Domestic Fittings .................................................................. 138 

(5) Pais- Page Discussions on Competitively Sensitive Information ....................... 140 

(6) Other Communications ....................................................................................... 141 

i) Instances of McWane, Sigma and Star Project Pricing During 2008 Does Not Defeat 

a Claim of Parallel Pricing Conduct to Support a Price Fixing Claim ........................... 144 

2. Episode Two: On or Around May 2008, McWane Agreed to Lead 

Another Price Increase in Fittings Once Pricing Transparency was 

Established Through DIFRA .....................................................................................148 

3. Episode Three: McWane and Star Conspired in April 2009 to Increase 

Prices for Fittings.......................................................................................................157 

4. McWane Has Not Offered Evidence to Rebut the Inference That It 

Conspired with Sigma and Star..................................................................................163 

E. McWane Violated Section 5 by Participating In an Anticompetitive 

Information Exchange (Count Two) ................................................................................164 

1. The DIFRA Information Exchange Represents Concerted Action ............................166 

2. The DIFRA Information Exchange Unreasonably Restrained Trade ........................168 

a) DIFRA Members Collectively Have Market Power ............................................... 168 

b) The DIFRA Information Exchange Likely Harms Competition ............................ 169 

(1)	 The Domestic Fittings Market is Highly Susceptible to Coordinated Interaction

 170 

(2) The Information Exchanged Has the Nature and Tendency to Facilitate 

Coordination ............................................................................................................... 170 

(i) Economic Theory Shows How the DIFRA Information Exchange Is Likely to 

Harm Competition .................................................................................................. 171 

(ii) The Record Evidence Shows That the DIFRA Information Exchange Likely 

Harmed Competition............................................................................................... 173 

c) There is No Pro-Competitive Justification For the Challenged Restraint ................ 177 

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F. McWane’s Master Distribution Agreement with Sigma Unreasonably 

Restrained Competition in the Domestic Fittings Market (Count Four) .........................180 

1. Sigma was a Potential Competitor in the Domestic Fittings Market .........................182 

a) Sigma Intended to Enter the Domestic Fittings Market .......................................... 184 

b) Sigma had the Capability to Enter the Domestic Fittings Market .......................... 189 

c) McWane Anticipated and Feared Sigma’s Entry ...................................................... 193 

2. The MDA Eliminated Sigma as an Independent Competitive Force ........................195 

3. An Agreement that Eliminates Competition Between Actual or 

Potential Competitors Harms Competition and Is Per Se Unlawful..........................198 

4. In the Alternative, the MDA Can Be Condemned Under An 

Abbreviated or Plenary Rule of Reason Analysis ......................................................201 

G. McWane Monopolized, and/or Attempted to Monopolize, the Market for 

Domestic Fittings (Counts Six and Seven) .....................................................................206 

1. McWane Possesses Monopoly Power or the Dangerous Probability of 

Achieving Monopoly Power in the Domestic Fittings Market ..................................207 

a) McWane Has High Market Shares in a Market Characterized by High Entry Barriers

 208 

b) Direct Evidence of McWane’s Ability to Control Prices and to Exclude Competitors 

Confirms McWane’s Monopoly Power or Dangerous Probability of Achieving Monopoly 

Power .............................................................................................................................. 209 

2. McWane Adopted and Implemented an Exclusive Dealing Policy ...........................210 

a) The Policy’s Formation Documents Described a “Hard Approach – Full Line or No 

Line” ............................................................................................................................... 211 

b) McWane Communicated the “Hard Approach” to the Industry ............................. 213 

c) McWane Terminates A Distributor That Violates Exclusive Dealing Policy .......... 216 

d) McWane Acted With the Specific Intent to Monopolize the Domestic Fittings 

Market............................................................................................................................. 218 

3. McWane’s Exclusive Dealing Policy is Exclusionary Conduct That 

Likely Harms Competition ........................................................................................223 

a) McWane’s Exclusive Dealing Policy Foreclosed Star From a Significant Portion of 

b) McWane’s Exclusive Dealing Policy Impaired Star’s Ability to Compete Effectively 

the Domestic Fittings Market.......................................................................................... 225 

Against McWane ............................................................................................................ 234
 

4. McWane’s Free-Riding Defense is Invalid ................................................................240 

a) McWane’s Lobbying Campaign Does Not Justify Exclusive Dealing ................... 242 

b) McWane’s Full-Line Strategy Does Not Justify Exclusive Dealing ...................... 243 

H. McWane and Sigma Unlawfully Conspired to Monopolize the Domestic 

Fittings Market (Count Five) ...........................................................................................246 

1. The Executed MDA Constitutes Concerted Action ...................................................249 

2. McWane and Sigma Had the Specific Intent to Monopolize the 

Domestic Fittings Market ..........................................................................................250 

a) Contemporaneous Documents and Statements Establish Direct Evidence of 

McWane and Sigma’s Specific Intent to Monopolize the Domestic Fittings Market .... 251 

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b) McWane and Sigma’s Specific Intent to Monopolize Can Also Be Inferred From the 

Lack of a Valid Efficiency Justification and Its Competitive Effects ............................ 255 

3. McWane and Sigma Took Overt Acts in Furtherance of Their 

Conspiracy .................................................................................................................256
 

VI. REMEDY ........................................................................................................................... 258
 

VII. CONCLUSION ................................................................................................................. 263
 

VIII. PROPOSED ORDER ...........................................................................291 

vi 
TABLE OF AUTHORITIES
 

PUBLIC RECORD

Cases

AD/SAT v. Associated Press, 181 F.3d 216 (2d Cir. 1999) ........................................................ 207 

Alexander v. Phoenix Bond & Indemnity Co., 149 F. Supp. 2d 989 (N.D. Ill. 2001) ................. 144 

Am. Motor Inns, Inc. v. Holiday Inns, Inc., 521 F.2d 1230 (3d Cir. 1975)................................. 233 

Am. Tobacco Co. v. United States, 328 U.S. 781 (1946) .................................................... 248, 250 

Apani Southwest, Inc. v. Coca-Cola Enters, Inc., 300 F.3d 620 (5th Cir. 2002) .......................... 76 

Arthur S. Langenderfer, Inc. v. S.E. Johnson Co., 917 F.2d 1413 (6th Cir. 1990) ..................... 209 

Ass’n for Intercollegiate Athletics for Women v. NCAA, 735 F.2d 577 (D.C. Cir. 1984) .......... 250 

Barr Labs., Inc. v. Abbott Labs, 978 F.2d 98 (3d Cir. 1992) ...................................................... 233 

Baxley-Delamar Monuments, Inc. v. Am. Cemetery Ass’n, 843 F.2d 1154 

(8th Cir. 1988) ................................................................................................................ 248, 249 

Bd. of Trade of the City of Chicago v. United States, 246 U.S. 231 (1918) ............................... 223 

Beatrice Foods v. FTC, 540 F.2d 303 (7th Cir. 1976) .................................................................. 64 

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ....................................................... 110, 113, 114 

Blue Cross & Blue Shield United v. Marshfield Clinic, 65 F.3d 1406 (7th Cir. 1995) .............. 181 

Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297 (3d Cir. 2007) ............................................. 256 

Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) .................... 161 

Brown Shoe Co., Inc. v. United States, 370 U.S. 294 (1962) ................................................ passim 

Business Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717 (1988) ............................................ 161 

Cal. Dental Ass’n v. FTC, 478 U.S. 756 (1999) ................................................................... 56, 201 

Calahan v. A.E.V, 182 F.3d 237 (3d. Cir. 1999) ......................................................................... 228 

Cason-Merenda v. Detroit Med. Ctr., 862 F. Supp. 2d 603 (E.D. Mich. 2012) ................. 172, 177 

Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980) .................................................. 105, 158 

City of Tuscaloosa v. Harcros Chems., Inc., 158 F.3d 548 (11th Cir. 1998) ............................. 109 

Coastal Fuels Inc. v. Caribbean Petroleum Corp., 79 F.3d 182 (1st Cir. 1996), cert. denied, 519 

U.S. 927 (1996) ......................................................................................................................... 59 

Consul, Ltd. v. Transco Energy Co., 805 F.2d 490 (4th Cir. 1986) .............................................. 58 

Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690 (1962)................. 109, 230 

Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984) ...................................... 106 

Costco Wholesale Corp. v. Maleng, 522 F.3d 874 (9th Cir. 2008) ............................................ 158 

Costner v. Blount National Bank, 578 F.2d 1192 (6th Cir. 1978) .............................................. 230 

Defiance Hosp. v. Fauster-Cameron, Inc., 344 F. Supp. 2d 1097 (N.D. Ohio 2004) ................ 209 

Dickson v. Microsoft Corp., 309 F.3d 193 (4th Cir. 2002) ................................................. 247, 248 

Discover Fin. Servs. v. Visa U.S.A. Inc., 2008 U.S. Dist. LEXIS 80801 (S.D.N.Y. 2008) ........ 228 

E.I. du Pont de Nemours & Co. v. Kolon Indus., 637 F.3d 435 (4th Cir. 2011) ........................... 81 

Eastman Kodak Co. v. Image Tech. Servs., 504 U.S. 451 (1992) .............................................. 209 

Eli Lilly & Co. v. Zenith Goldline Pharm., Inc., 172 F. Supp. 2d 1060 

(S.D. Ind. 2001) .............................................................................................. 181, 189, 200, 201 

Emigra Group v. Fragomen, 612 F. Supp. 2d 330 (S.D.N.Y. 2009) ............................................ 67 

Energex Lighting Industries, Inc. v. North American Philips Lighting Corp., 765 F. Supp. 93 

(S.D.N.Y. 1991) ...................................................................................................................... 158 

Engine Specialties, Inc. v. Bombardier, Ltd., 605 F.2d 1 (1st Cir. 1979) .............................. passim 

ESCO Corp. v. United States, 340 F.2d 1000 (9th Cir. 1965) .................................... 106, 108, 160 

Fleer Corp. v. Topps Chewing Gum, Inc., 658 F.2d 139 (3d Cir. 1981) .................................... 255 

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Flegel v. Christian Hosp., 4 F.3d 682 (8th Cir. 1993) .................................................................. 56 

Fleischman v. Albany Med. Ctr., 728 F. Supp. 2d 130 (N.D.N.Y. 2010) ................................... 166 

Fraser v. Major League Soccer, L.L.C., 284 F.3d 47 (1st Cir. 2002) ................ 247, 249, 257, 258 

Freeman v. San Diego Ass’n of Realtors, 322 F.3d 1133 (9th Cir. 2003) .................................. 244 

Frito-Lay, Inc. v. The Bachman Co., 659 F. Supp. 1129 (S.D.N.Y. 1986) .................................. 71 

FTC v. CCC Holdings, Inc., 605 F. Supp. 2d 26 (D.D.C. 2009) ........................................... 65, 80 

FTC v. Whole Foods Mkt., Inc., 548 F.3d 1028 (D.C. Cir. 2008) ......................................... 61, 66 

FTC v. Alliant Techsystems, 808 F. Supp. 9 (D.D.C. 1992) ......................................................... 80 

FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109 (D.D.C. 2004) (quoting Brown Shoe, 370 U.S. at 

325) ........................................................................................................................................... 60 

FTC v. Cardinal Health, Inc., 12 F. Supp. 2d 34 (D.D.C. 1998) ........................................... 70, 71 

FTC v. Indiana Fed’n of Dentists, 476 U.S. 447 (1986) ........................................................ 78, 91 

FTC v. Ruberoid Co., 343 U.S. 470 (1952) ................................................................................ 259 

FTC v. Staples, 970 F. Supp. 1066 (D.D.C. 1997) ................................................................ passim 

FTC v. Swedish Match N. Am., Inc., 131 F. Supp. 2d 151 (D.D.C. 2000) ................................... 60 

Full Draw Prods. v. Easton Sports, Inc., 182 F.3d 745 (10th Cir. 1999) ................................... 250 

Futurevision Cable Sys. of Wiggins, Inc. v. Multivision Cable TV Corp., 789 F. Supp. 760 (S.D. 

Miss. 1992) ............................................................................................................................. 249 

Garot Anderson Agencies, Inc. v. Blue Cross & Blue Shield United, 1993-1 Trade Cas. (CCH) ¶ 

70,235 (N.D. Ill. 1993) ............................................................................................................ 199 

Gen. Indus. Corp. v. Hartz Mountain Corp., 810 F.2d 795 (8th Cir. 1987) ................................. 59 

Geneva Pharms. Tech. Corp. v. Barr Labs., Inc. 386 F.3d 485 (2d Cir. 2004) ...................... 74, 79 

Graphic Prods. Distribs. v. Itek Corp., 717 F.2d 1560 (11th Cir. 1983) .................................... 169 

GTE New Media Servs., Inc. v. Ameritech Corp., 21 F. Supp. 2d 27 (D.D.C. 1998) ................. 250 

United States v. United States Gypsum Co., 438 U.S. 422 (1978) ............................. 169, 171, 172 

Hahn v. Ore. Physicians’ Serv., 868 F.2d 1022 (9th Cir. 1988) ................................................... 55 

City of Tuscaloosa v. Harcros Chems., 158 F.3d 548 (11th Cir. 1998) ..................................... 122 

Howard Hess Dental Labs. Inc. v. Dentsply Int’l, Inc., 602 F.3d 237 (3d Cir. 2010) ........ 249, 255 

Image Tech. Servs. v. Eastman Kodak Co., 125 F.3d 1195 (9th Cir. 1997) ................. 59, 179, 204 

In re Adventist Health Sys./West, 117 F.T.C. 224 (1994) ............................................................. 54 

In re B.A.T. Indus., Ltd., 104 F.T.C. 852 (1984)......................................................................... 185 

In re Blood Reagents Antitrust Litig., 756 F. Supp. 2d 623 (E.D. Pa. 2010) ......................... passim 

In re Chocolate Confectionary Antitrust Litig., 602 F. Supp. 2d 538 (M.D. Pa. 2009) ............... 85 

In re Currency Conversion Fee Antitrust Litig., 2012 U.S. Dist. LEXIS 19760 (S.D.N.Y. 2012)
 

................................................................................................................................................. 126 

In re Delta/AirTran Baggage Fee Antitrust Litig., 733 F. Supp.2d 1348 (N.D. Ga. 2010) .......... 94 

In re Evanston Northwestern Healthcare Corp., 2007 F.T.C. LEXIS 210 (2007) ....................... 63 

In re Flat Glass Litig., 385 F.3d 350 (3d Cir. 2004)............................................. 83, 114, 123, 148 

In re High Pressure Laminates Antitrust Litig., 2006-1 Trade Cas. CCH ¶ 75,298 (S.D.N.Y. 

2006) ....................................................................................................................................... 126 

In re High-Tech Emp. Antitrust Litig., 856 F. Supp. 2d 1103 (N.D. Cal. 2012) ........................ 109 

In re Indiana Fed. of Dentists, 101 F.T.C. 57 (1983) ......................................................... 177, 204 

In re Linerboard Antitrust Litig., 504 F. Supp. 2d 38 (E.D. Pa. 2007) ............................... 117, 121 

In re N.C. Bd. of Dental Examiners, FTC Docket No. 9343, 2011 FTC LEXIS 290 (Dec. 7, 

2011) ............................................................................................................................... 168, 204 

In re McWane, Inc, 2012 FTC LEXIS 155, ............................................................................... 224 

viii 
203 

PUBLIC RECORD

In re Polygram Holding, Inc., 136 F.T.C. 310 (2003) .......................................... 57, 198, 204, 205 

In re Polypore, FTC Docket No. 9327 ............................................................................. 61, 68, 69 

In re ProMedica Health Sys., Inc., FTC Docket No. 9346, 2012 FTC LEXIS 58 (2012) ..... 68, 69 

In re Quality Trailer Prods., 115 F.T.C. 944 (1992) .................................................................... 91 

In re Realcomp II, Ltd., FTC Docket No. 9320, 2007 WL 6936319 (Oct. 30, 2009) ... 56, 57, 177, 

In re R.R. Donnelley & Sons Co., 120 F.T.C. 36 (1995) .............................................................. 60 

In re Scrap Metal Litig., 2006 U.S. Dist. LEXIS 75873 (N.D. Ohio 2006) ............................... 130 

In re SKF Industries, Inc., 94 F.T.C. 6 (1979) ............................................................ 189, 199, 200 

In re Sulfuric Acid Antitrust Litig., 743 F. Supp. 2d 827 (N.D. Ill. 2010) .......................... 116, 121 

In re Terazosin Hydrochloride Antitrust Litig., 352 F. Supp. 2d 1279 (S.D. Fla. 2005) ............ 182 

In re Text Messaging, 630 F.3d at 628........................................................................................ 113 

In re TFT-LCD (Flat Panel) Antitrust Litig., 267 F.R.D. 583 (N.D. Cal. 2010) .......................... 90 

In re Travel Agency Comm=n Antitrust Litig., 898 F. Supp. 685 (D. Minn. 1995) ....................... 94 

In re Travel Agent Comm’n Antitrust Litig., 583 F.3d 896 (6th Cir. 2009) ................................ 107 

In re U-Haul, Int’l Inc., FTC File No. 081 0157 (2010)......................................................... 91, 94 

In re Urethane Antitrust Litig., 237 F.R.D. 440 (D. Kan. 2006) .................................................. 89 

In re Valassis Commc=ns, Inc., 2006 FTC LEXIS 25 (April 19, 2006) ........................................ 94 

In re Washington Crab Ass’n, 66 F.T.C. 45 (1964) ...................................................................... 54 

Indiana Fed’n of Dentists, 476 U.S. at 460-461 ................................................................... 57, 178 

Int’l Distrib. Ctrs., Inc. v. Walsh Trucking Co., 812 F.2d 786 (2d Cir. 1987) ................... 248, 251 

Interstate Circuit, Inc. v. United States, 306 U.S. 208 (1939) .................................................... 149 

Isaksen v. Vt. Castings, Inc., 825 F.2d 1158 (7th Cir. 1987) ...................................... 107, 148, 149 

Jacob Siegal Co. v. FTC, 327 U.S. 608 (1946) .......................................................................... 259 

Jacobs v. Tempur-Pedic Int'l, Inc., 626 F.3d 1327 (11th Cir. 2010) .......................................... 169 

Law v. NCAA, 134 F.3d 1010 (10th Cir. 1998) ................................................................... 166, 182 

Levine v. Cent. Fla. Med. Affiliates, 72 F.3d 1538 (11th Cir. 1996) .................................. 247, 256 

Liu v. Amerco, 677 F.3d 489 (1st Cir. 2012) ................................................................................ 91 

Lorain Journal Co. v. United States, 342 U.S. 143 (1951)......................................................... 207 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986).................................. 109 

McGahee v. Northern Propane Gas Co., 858 F.2d 1487 (11th Cir. 1988) ................................. 209 

McWane, slip op. at 19 ........................................................................................................... passim 

Merck-Medco Managed Care, LLC v. Rite Aid Corp., 1992-2 Trade Cas. ¶ 72,640, 1999 U.S. 

App. LEXIS 21487 (4th Cir. 1999) ........................................................................................ 123 

Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (1984) .......................................... 106, 107 

Morgenstern v. Wilson, 29 F.3d 1291 (8th Cir. 1994) .................................................................. 61 

Mun. Revenue Serv., Inc. v. Xspand, Inc., 700 F.Supp.2d 692 (M.D. Pa. 2010) ........................ 228 

N. Pac. Ry. Co. v. United States, 356 U.S. 1 (1958) ..................................................................... 55 

N. Tex. Specialty Physicians v. FTC, 528 F.3d 346 (5th Cir. 2008) ............................................. 56 

Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679 (1978) ................................... 106, 245 

NCAA v. Board of Regents, 468 U.S. 85 (1984) ................................................................. 244, 245 

New York Citizen Comm. on Cable TV v. Manhattan Cable TV, Inc., 651 F. Supp. 802 (S.D.N.Y. 

1986) ......................................................................................................................................... 78 

Northeastern Tel. Co. v. AT&T Co., 651 F.2d 76 (2d Cir. 1981) ....................................... 247, 250 

Nynex Corp. v. Discon, Inc., 525 U.S. 128 (1998) ..................................................................... 199 

Omega Envtl., Inc. v. Gilbarco Inc., 127 F.3d 1157 (9th Cir. 1997) .......................................... 233 

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Palmer v. BRG of Georgia, Inc., 498 U.S. 46 (1990) ......................................................... 199, 200 

Perington Wholesale, Inc. v. Burger King Corp., 631 F.2d 1369 (10th Cir. 1979) .................... 248 

Plymouth Dealers’ Ass’n of N. Cal. v. United States, 279 F.2d 128 (9th Cir. 1960) ................. 157 

Polygram Holding, Inc. v. FTC, 416 F.3d 29 (D.C. Cir. 2005) ........................................ 55, 56, 58 

Promedica Health Sys., Inc., 2012 FTC LEXIS 58 ...................................................................... 67 

Realcomp II, Ltd. v. FTC, 635 F.3d 815 (6th Cir. 2011) ....................................................... passim 

Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421 (9th Cir. 1995) ....................... 60, 73, 76, 78 

Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421 (9th Cir. 1995) ......................................... 72 

Robert’s Waikiki U-Drive, Inc. v. Budget Rent-A-Car Systems, 491 F. Supp. 1199 (D. Haw. 

1980) ....................................................................................................................................... 250 

Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210 (D.C. Cir. 1986) ................. 62 

Salco Corp. v. Gen. Motors Corp., Buick Motor Div., 517 F.2d 567 (10th Cir. 1975) .............. 248 

Schering-Plough Corp. v. FTC, 402 F.3d 1056 .......................................................................... 181 

Spectrum Sports v. McQuillan, 506 U.S. 447 (1993) ......................................................... 207, 218 

Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346 (1922) ..................................... 226 

Standard Iron Works v. ArcelorMittal USA, Inc., 639 F. Supp. 2d 877 (N.D. Ill. 2009) ..... 94, 125 

Standard Oil Co. v. United States, 283 U.S. 163 (1931) .............................................................. 55 

Steadman v. SEC, 450 U.S. 91 (1981) .......................................................................................... 54 

Stitt Spark Plug Co. v. Champion Spark Plug Co., 840 F.2d 1253 (5th Cir. 1988) ................... 233 

Sugar Inst. v. United States, 297 U.S. 553 (1936) ...................................................... 107, 157, 158 

Tampa Elec. v. Nashville Coal Co., 365 U.S. 320 (1961) .............................................. 61, 70, 233 

TFWS, Inc. v. Franchot, 572 F.3d 186 (4th Cir. 2009) ............................................................... 158 

Thompson v. Metro. Multi-List, Inc., 934 F.2d 1566 (11th Cir. 1991) ....................................... 247 

Times-Picayune Publ’g Co. v. United States, 345 U.S. 594 (1953) ........................................... 218 

Todd v. Exxon Corp., 275 F.3d 191 (2d Cir. 2001) ............................................................... passim 

Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp., 959 F.2d 468 (3d Cir. 1992) ...... 198 

Turner v. United States, 396 U.S. 398 (1970) ............................................................................ 108 

U.S. Anchor Mfg., Inc. v. Rule Indus., Inc., 7 F.3d 986 (11th Cir. 1993) ............................. 75, 249 

Union Leader Corp. v. Newspapers of New England, Inc., 284 F.2d 582 (1st Cir. 1960) ......... 244 

United States v. Alcoa, Inc., No. 2000-954, 2001 WL 1335698 (D.D.C. June 21, 2001) ...... 85, 86 

United States v. Aluminum Co. of Am., 148 F.2d 416 (2nd Cir. 1945) .................................. passim 

United States v. Archer-Daniels-Midland Co., 866 F.2d 242 (8th Cir. 1988) ........................ 74, 79 

United States v. Ashley Transfer & Storage Co., 858 F.2d 221 (4th Cir. 1988)........................... 80 

United States v. Bausch & Lomb Optical Co., 321 U.S. 707 (1944) .......................................... 149 

United States v. Brown Univ., 5 F.3d 658 (3d Cir. 1993) ............................................................. 56 

United States v. Consol. Laundries Corp., 291 F.2d 563 (2d Cir. 1961).................................... 250 

United States v. Consol. Packaging Corp., 575 F.2d 117 (7th Cir. 1978) ............................ 92, 107 

United States v. Container Corp. of America, 393 U.S. 333 (1969) .................................. 158, 165 

United States v. Dentsply Int’l, Inc., 399 F.3d 181 (3d Cir. 2005) ........................................ passim 

United States v. El Pas Natural Gas Co., 376 U.S. 651 (1964) ................................................. 202 

United States v. Gen. Elec. Co., No. CV 96-121-M-CCL, 1997 WL 269491 ............................ 200 

United States v. Gen. Motors Corp., 384 U.S. 127 (1966) ................................. 105, 107, 148, 199 

United States v. Gen. Dynamics Corp., 415 U.S. 486 (1974) ..................................................... 260 

United States v. Giordano, 261 F.3d 1134 (11th Cir. 2001) ................................................. 96, 129 

United States v. Grinnell Corp., 384 U.S. 563 (1966) .................................................. 59, 206, 208 

United States v. Heffernan, 43 F.3d 1144 (7th Cir. 1994) .......................................................... 172 

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United States v. Hickok, 77 F.3d 992 1005 (7th Cir. 1996) ................................................ 257, 258 

United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) .................................................. 81 

United States v. Parke, Davis & Co., 362 U.S. 29 (1960) .......................................................... 149 

United States v. Philadelphia Nat’l Bank, 374 U.S. 321 (1963) .................................................. 61 

United States v. Rockford Memorial Corp., 717 F. Supp. 1251 (N.D. Ill. 1989) ................... 62, 75 

United States v. Sealy, Inc., 388 U.S. 350 (1967) ....................................................................... 199 

United States v. Siemens Corp., 621 F.2d 499 (2d Cir. 1980) .................................................... 183 

United States v. SKW Metals & Alloys, Inc., 195 F.3d 83 (2d Cir. 1999) .................................. 144 

United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940) ................................. 105, 106, 144 

United States v. Southwest Bus Sales, Inc.,20 F.3d 1449 (8th Cir. 1994) .................................... 80 

United States v. Syufy Enterprises, 903 F.2d 659 (9th Cir. 1990) ................................................ 76 

United States v. Topco Assocs., 405 U.S. 596 (1972) ................................................................. 200 

United States. v. Delta Dental, 943 F. Supp. 172 (D.R.I. 1996) ................................................. 182 

Valuepest.com of Charlotte, Inc. v. Bayer Corp., 561 F.3d 282 (4th Cir. 2009) ........................ 166 

W. Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85 (3d Cir. 2010).............................. 106 

Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S. 312 (2007) .................. 251 

Williams v. 5300 Columbia Pike Corp., 891 F. Supp. 1169 (E.D. Va. 1995) ............................ 247 

Yamaha Motor Co. v. FTC, 657 F.2d 971 (8th Cir. 1981) ................................................. 183, 189 

ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254 (3d Cir. 2012) .......................................... 224, 226 

Statutes

15 U.S.C. § 44 ............................................................................................................................... 54 

15 U.S.C. § 45(a)(2) ...................................................................................................................... 54 

18 U.S.C. § 371 ........................................................................................................................... 257 

Clayton Act ................................................................................................................................... 59 

Federal Rule of Evidence 803(3) ................................................................................................ 228 

Sherman Act.......................................................................................................................... 91, 144 

Other Authorities

1992 Horizontal Merger Guidelines ............................................................................................. 61 

2010 Horizontal Merger Guidelines at § 4.1.1 ...................................................................... passim 

Black’s Law Dictionary (9th ed. 2009) ....................................................................................... 257 

Jonathan B. Baker, Two Sherman Act Section 1 Dilemmas: Parallel Pricing, The Oligopoly 

Problem, and Contemporary Economic Theory, 38 Antitrust Bull. 143 (1993) .... 157, 162, 163 

Jonathan B. Baker, The Antitrust Analysis of Hospital Mergers and the Transformation of the 

Hospital Industry, 51 L. & Contemp. Probs., at 93, 138 (Spring 1998) ................................... 67 

Stephen Calkins, Counterpoint: The Legal Foundation of the Commission=s Use of Section 5 to 

Challenge Invitations to Collude is Secure, ANTITRUST Spring 2000 .................................. 90 

Dennis W. Carlton and Jeffrey M. Perloff, Modern Industrial Organization (4th ed. 2005) ..... 211 

Commentary on the Horizontal Merger Guidelines (2006) ......................................................... 68 

DOJ/FTC Guidelines .................................................................................................. 164, 166, 172 

FTC & DOJ, Antitrust Guidelines for Collaboration Among Competitors § 3 (2000) ...... 183, 189 

Andrew I. Gavil, Moving Beyond Caricature and Characterization: The Modern Rule of Reason 

in Practice, 85 S. CAL. L. REV. 733 (2012) ............................................................................ 178 

George A. Hay & Daniel Kelley, An Empirical Survey of Price Fixing Conspiracies, 17 J.L. &
 

ECON. 13, 15 (1974) .................................................................................................................. 86
 

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George A. Hay, Oligopoly, Shared Monopoly, and Antitrust Law, 67 CORNELL L. REV. 439, 454 

(1982) ...................................................................................................................................... 171 

Joseph Kattan, Facilitating Practices and Section 5: The Evidence of Life After Ethyl, ABA 

Section of Antitrust Law, Annual Symposium (1992) ....................................................... 91, 92 

William E. Kovacic, The Identification and Proof of Horizontal Agreements Under the Antitrust 

Laws, 38 ANTITRUST BULL. 5 (1993) ...................................................................................... 148 

Massimo Motta, Competition Policy: Theory and Practice 151 (2004) ............................. 165, 171 

William H. Page, Communication and Concerted Action, 38 LOY. U. CHI. L.J. (2007) ............ 130 

Lawrence A. Sullivan, Handbook of the Law of Antitrust 41 (1990) ........................................... 59 

Treatises

Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law (Supp. 2012) ................................ passim
 

Richard A. Posner, ANTITRUST LAW 229 (2d ed. 2001) ..................................................... 226, 245 

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I. INTRODUCTION 

McWane, Inc. violated Section 5 of the FTC Act when it engaged in a series of illegal 

efforts to protect and increase the profitability of its Tyler/Union division, which sells Fittings. 

Fittings are a commodity product and all three major Fittings suppliers offer largely identical 

published prices. Project Pricing, or individually negotiated discounts on Fittings for specific 

waterworks projects, is the main form of price competition among Fittings suppliers. As the 

economy declined in 2007 and the demand for Fittings dropped, Project Pricing predictably 

prevailed and profits fell. McWane hatched a Plan whereby Star, Sigma and McWane would 

stem this decline by agreeing to stabilize Fittings prices. They agreed to curtail Project Pricing 

and increase price transparency. 

When a government program designed to resurrect the economy in early 2009 offered 

McWane a windfall in the Domestic Fittings market, where it was the only manufacturer, 

McWane sought to protect its monopoly from potential competitors, Sigma and Star. McWane 

first entered into an agreement with Sigma, the “MDA,” whereby Sigma agreed to cede the 

Domestic Fittings market to McWane in exchange for distributing McWane-branded Domestic 

Fittings. McWane then implemented an “all or nothing” exclusive dealing policy that threatened 

to cut off all access to McWane’s Domestic Fittings if Distributors purchased any Domestic 

Fittings from Star. As a result of McWane’s anticompetitive conduct, municipalities and public 

water districts – the ultimate end users of Fittings – paid supracompetitive prices for Fittings and 

Domestic Fittings. 

McWane, which had been the dominant Fittings supplier, did not like Project Pricing and 

was ill-equipped to compete with the upstart importers. McWane’s sales force was smaller, less 

nimble, and by McWane’s own estimation, simply less effective than Star or Sigma at 

identifying and responding to Project Pricing. When the housing market began to fall in 2007 

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and Project Pricing grew, McWane lost share and its profits plummeted. By December 2007, 

however, Mr. Tatman, McWane’s new Fittings Division Vice President and General Manager, 

recognized that his competitors were “desperate” for a price increase due to recent rises in import 

costs. Mr. Tatman knew that Sigma and Star could bring prices down on their own, but they 

needed McWane’s support to bring prices up. Mr. Tatman seized on this “unique” opportunity, 

and implemented a plan to bring “stability and rational pricing” to the Fittings market. He laid 

out his Plan in a presentation to his superiors. Central to the Tatman Plan was McWane’s 

“Desired Message to the Market & Competitors:” McWane would drive price stability and 

transparency; and McWane would support net price increases only in stepped and staged 

increments, provided that the prior price was “stable,” i.e., Sigma and Star curtailed discounting. 

A key to the Plan’s success would be Sigma and Star pulling pricing authority away from their 

front line sales teams “to add discipline to the process.” 

Mr. Tatman initially described his Plan as mere “brainstorming,” but he later admitted at 

trial that McWane executed one part of the Plan by sending a January 11, 2008 letter. Mr. 

Tatman also admitted that the letter, although ostensibly addressed to McWane’s Distributor 

customers, was a message to his competitors. McWane’s January 11, 2008 letter announced that 

McWane was raising prices and would no longer offer Project Pricing, and that McWane would 

consider additional price increases later in the year only “as conditions require.” Consistent with 

the Tatman Plan’s call to compress or minimize Star and Sigma’s ability to cheat by Project 

Pricing, McWane rejected Sigma’s planned double-digit price increase and announced an eight 

percent price increase. 

Sigma and Star quickly followed McWane’s price increase and began acting in accord 

with the Tatman Plan. Sigma and Star took steps to curtail Project Pricing, and they wanted to 

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send a message to McWane that they “are capable of being a part of a stable and profitability 

conscious industry.” 

Absent an agreement that its competitors would also curtail Project Pricing, McWane’s 

January 11, 2008 announcement that it would forgo competing on such a major price element 

would be irrational and akin to unilateral disarmament in the midst of a competitive firestorm. 

And, consistent with an agreement, Sigma and Star – in an abrupt change of their prior business 

practices – followed McWane with their own announcements that they too would stop Project 

Pricing. Before long, Mr. Tatman was able to report that Project Pricing was down and that Star 

and Sigma had complied with the Tatman Plan by centralizing pricing authority away from their 

sales representatives in the field. 

While price fixing agreements are per se unlawful even if unsuccessful, the evidence here 

shows that McWane’s agreement with its primary competitors to curtail Project Pricing was 

largely effective. In contemporaneous documents, Mr. Tatman reported to his superiors that 

Project Pricing, while not eliminated entirely, had “died down significantly” in the first and 

second quarters of 2008. McWane’s and Star’s price protection logs confirm his observation. 

There were fewer instances of Project Pricing in response to competition in 2008 as compared to 

2007 or 2009. And McWane’s financial documents show that McWane was able to maintain 

higher prices in 2008 notwithstanding a precipitous drop in demand. Mr. Tatman attributed this 

increased profitability to “pricing discipline.” 

The conspirators’ blanket denials of a conspiracy to curtail Project Pricing are simply not 

credible. Telephone records show numerous communications between McWane, Sigma and 

Star’s senior executives with pricing authority in late December and early January, when the 

Tatman Plan was first developed and implemented. Those phone records also show 

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communications between those same key executives over the next several months at times and 

dates that coincide with internal documents complaining about “cheating,” i.e., pricing below 

published prices. The conspirators offered no explanation for these phone calls. To the contrary, 

Star’s former National Sales Manager, Mr. Minamyer, testified that his boss at Star (Dan 

McCutcheon) admitted that he had convinced Sigma’s head of sales (Larry Rybacki) to 

implement a Fittings list price increase. Likewise, McWane and Sigma had no explanation for email records reflecting Mr. Tatman’s phone conversations with Sigma’s Mr. Rona wherein Mr. 

Tatman complained about Sigma’s (and Star’s) Project Pricing. Although Mr. Tatman 

emphatically denied participating in a conspiracy, he did not deny that these conversations took 

place; he simply claims to have no recollection of them. Mr. Tatman’s complaints had no 

legitimate purpose; complaints about ‘cheating’ and a competitor’s low pricing is hallmark 

evidence of a price fixing conspiracy. 

Finally, Star, the smallest of the three major Fittings suppliers, had long used Project 

Pricing as its primary strategy to successfully grow its market share. Star’s announcement that it 

was ending its long-standing practice of Project Pricing is inexplicable absent an agreement. 

Star’s now-President, Dan McCutcheon, could not explain how ending Project Pricing was in 

Star’s unilateral business interest, and instead described Star’s decision as “unusual,” 

“irrational,” and “bizarre.” Indeed, contemporaneous Sigma and Star documents talk about the 

decision to curtail Project Pricing as being good for the “industry,” not for their own companies. 

The co-conspirators had a history of mistrust, and this did not change overnight. 

Obtaining greater pricing transparency was necessary to the success of the cartel, and the coconspirators began in early February to create an information exchange through the newly 

formed Ductile Iron Pipe Fittings Association (“DIFRA”). DIFRA’s only activity was to operate 

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an information exchange that reported the co-conspirators’ aggregated monthly Fittings sales in 

tons shipped (together with the insignificant shipments of one sham participant, U.S. Pipe). The 

DIFRA information exchange facilitated price coordination by allowing the co-conspirators to 

monitor their market shares and to identify cheating. As contemporaneously explained by the 

then-President of Sigma, Mr. Pais: “the market data produced by DIFRA... helps maintain the 

pricing discipline... It has helped all of us not to allow the sharp market decline to be mistaken 

as a ‘loss of market share,’ which mostly causes price reaction.” 

Participation in DIFRA was an extension of the Tatman Plan and a quid pro quo for 

McWane issuing a second price increase in the Spring of 2008. Within days of setting up the 

DIFRA information exchange, Sigma and Star announced double-digit Fittings price increases. 

McWane, however, refused to support any increase until it received the actual DIFRA report. So 

McWane circulated a May 7, 2008 letter to clarify the “misperceptions” in the market, and make 

clear that McWane would not increase prices until it had more information, i.e., the DIFRA 

report. Star had been a reluctant participant in DIFRA because it had misgivings that McWane 

would use the data to disadvantage Star in the market. But Star understood McWane’s message 

loud and clear. Immediately upon receiving a copy of McWane’s May 7, 2008 letter, Star 

committed to producing its data to DIFRA. Recognizing the quid pro quo offered in McWane’s 

May 2008 letter, Star quoted McWane’s letter verbatim when it held up its end of the bargain 

and produced its data to DIFRA. 

McWane decided not to issue a second price increase until it had received the DIFRA 

sales report -- even though it was “somewhat painful to the bottom [line] in the short term” --

because it would “re-enforce the message [McWane had] been trying to drill in which when 

successful will pay long term dividends.” That message was that McWane was “not going to 

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lose visibility of where the competitive level in the marketplace is.” Within hours of receiving 

the first DIFRA report, McWane rewarded its co-conspirators by announcing an 8% price 

increase. Like McWane’s January price increase, this increase was not as large as the announced 

increase by Sigma, and instead was consistent with the Tatman Plan to only raise prices 

incrementally. Once again, Sigma and Star followed McWane’s price increase. 

Like many cartels, the temptation to cheat and gain market share proved to be too great. 

While there is no evidence that any party ever actually renounced the price fixing conspiracy, the 

terms of coordination appear to have broken down in the Fall of 2008 as Sigma and Star began to 

“cheat” by offering Project pricing more readily. For example, in a November email from Mr. 

Minamyer to Star’s Regional Managers he announced Star would “take the gloves off” and 

resume competing: 

We have all been extremely diligent in protecting the stability of 

our market pricing... However, some of our competition has not 

performed as admirably... We have many instances where we have 

documented the competition being irresponsible (Mostly Sigma)... 

We will take every order we can after exhausting all avenues to 

document the competitors pricing... Do it with a combination of 

buy plans, short term buys, and project pricing. Do this quietly 

and selectively and as much under the radar as you can but, if it 

is necessary, be sure to do it. Go get every order!!!!!1 

Coordination broke down further with the passage of the Buy American provision of the 

American Recovery and Reinvestment Act (“ARRA”) in February 2009, although improper 

price communications and actions among the co-conspirators continued into 2009 and 2010. 

The ARRA allocated $6 billion in funds for waterworks projects built with products 

made in the United States, including Domestic Fittings. This gave Star and Sigma a strong 

incentive to enter the Domestic Fittings market – not only to compete for ARRA-funded 

1

 CX 0831 (emphasis in original). 

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projects, but also to protect their sales from erosion by an expected increase in nationalist 

sentiment that threatened to expand the Domestic Fittings market. In June 2009, Star announced 

that it would begin selling Domestic Fittings in Fall 2009, while Sigma pursued a two-pronged 

approach for entering the Domestic Fittings market – independent entry, similar to Star; or in the 

alternative, purchasing Domestic Fittings from McWane for resale. 

Faced with this competition, McWane was concerned that Domestic Fittings prices would 

“get creamed” as they had when the importers (Star and Sigma) had originally entered the 

Fittings market. Rather than offering better prices and services than its competitors, McWane 

protected its Domestic Fittings monopoly by implementing an Exclusive Dealing Policy aimed 

against Star and by co-opting Sigma’s entry through a “Master Distribution Agreement” 

(“MDA”). 

McWane implemented its Exclusive Dealing Policy with the specific intent to “block” 

Star’s entry and to protect its monopoly prices on Domestic Fittings. On September 22, 2009, 

McWane announced that any Distributor that purchased Domestic Fittings from any other 

supplier, i.e. Star, would be barred from purchasing Domestic Fittings from McWane, and would 

lose any accrued rebates previously earned on their purchases of McWane’s Domestic Fittings. 

In response to McWane’s announced policy, distributors withdrew requests for quotes, 

canceled previously placed orders, and the two largest national distributors, HD Supply and 

Ferguson, instructed their combined 400+ branches that they could not purchase Domestic 

Fittings from Star. Distributors repeatedly testified that they were less willing to purchase 

Domestic Fittings from Star because of McWane’s Exclusive Dealing Policy. 

Star, which had expedited its initial entry into the Domestic Fittings market by 

contracting with existing domestic foundries, needed a minimum volume of sales to purchase a 

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dedicated Domestic Fittings foundry. Producing Domestic Fittings in its own foundry, rather 

than by contracting with existing foundries, is more cost efficient and would have allowed Star to 

lower its prices to compete with McWane. McWane’s Exclusive Dealing Policy denied Star the 

minimum efficient scale necessary to make purchasing a domestic foundry an economically 

viable option. By raising its rival’s costs and impairing its ability to constrain McWane’s 

monopoly prices, McWane’s Exclusive Dealing Policy unlawfully extended McWane’s 

Domestic Fittings monopoly. 

McWane’s position at trial that its Exclusive Dealing Policy is a mere rebate policy is 

contradicted by overwhelming evidence that the policy, as enforced, was an “all or nothing” 

Exclusive Dealing Policy that cut off a Distributor’s access to McWane’s Domestic Fittings line 

if even one branch purchased a competing Domestic Fitting. This evidence of the Policy’s 

formation, how it was communicated to Distributors and the industry, and how McWane 

terminated a Distributor for purchasing Domestic Fittings from Star, all disprove McWane’s 

rebate claim. 

McWane adopted a different, but related, approach to eliminate the competitive threat 

from Sigma’s entry. Sigma was a potential competitor in the Domestic Fittings market: it was 

very motivated to enter that market and it had the capability to do so. Recognizing that more 

suppliers would not expand the domestic market, McWane was only willing to share its 

monopoly margins with Sigma as an “insurance policy” against Sigma’s probable entry. 

Through the MDA agreement, McWane offered to supply Sigma with Domestic Fittings in 

exchange for its promise to, among other things, abstain from its own independent entry and to 

enforce its Exclusive Dealing Policy. Thus, McWane used the MDA to turn Sigma from a 

competitor to a mere distributor. Because the MDA eliminated competition between potential 

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competitors, it is analogous to a horizontal market allocation agreement, where one firm cedes 

the entire market to another. 

But the MDA did more than co-opt Sigma, it also permitted Sigma and McWane to “put 

pressure on Star” and “hopefully to drive Star out of business” because McWane would “rather 

have competition other than Star.” By helping McWane enforce its unlawful monopolization 

scheme, i.e., its Exclusive Dealing Policy, the MDA also represents an unlawful conspiracy 

between McWane and Sigma to monopolize the Domestic Fittings market.in the Fittings market 

II. STATEMENT OF FACTS 

A. Background 

1. Fittings 

Ductile iron pipe fittings connect the pipes, valves, and hydrants that make up pressurized 

municipal waterworks systems, and change or direct the flow of drinking and waste water.2 The 

sizes of fittings at issue in this case – 24” or less in diameter (“Fittings”) – are commonly used in 

underground water distribution networks, whereas larger diameter fittings are more commonly 

used in treatment plants or large transmission lines.3

 Fittings come in thousands of 

configurations of shape, size, and coating, but about 100 commonly used configurations (“A” 

and “B” items) account for approximately 80% of all Fittings sales.4 

2

 CCPF 371. The term “Fittings,” except where otherwise indicated, refers to Fittings that are 

24” or less in diameter. 

3

 CCPF 379-385, 608-609.
 

4

 CCPF 378, 399. 

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Fittings are homogeneous commodity products produced to American Water Works 

Association (“AWWA”) standards and specifications.5 Any Fitting that meets an AWWA 

specification is functionally interchangeable with any other Fitting that meets the same 

specification.6 There is no meaningful physical difference between Fittings produced by 

different manufacturers, or between imported Fittings and those manufactured in the United 

States.7

 Fittings are a small sub-segment of the overall waterworks market, comprising 5% or 

less of the total cost of a typical waterworks project, and demand for Fittings is inelastic – i.e., an 

increase in price leads to only a very small reduction in demand.8 

2. Market Participants 

a) Suppliers 

The market for the supply of Fittings in the United States is a highly concentrated 

oligopoly. There are three main Fittings suppliers: Respondent, McWane, Inc. (“McWane”), 

Sigma Corporation (“Sigma”), and Star Pipe Products, Ltd. (“Star”).9 Together, McWane, Star, 

and Sigma accounted for over { }% of U.S. Fittings sales in 2008 and 2009.10 

McWane manufactures, markets and sells products for the waterworks industry, including 

Fittings.11 Its Tyler/Union division manufactures Fittings at foundries located in Anniston, 

5

 CCPF 415. 

6

 CCPF 416. 

7

 CCPF 417. 

8

 CCPF 419-424. 

9

 CCPF 455. 

10 CCPF 456-457. 

11 CCPF 6. 

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Alabama and Hebei, China.12 McWane had a { }% share of the United States Fittings market 

in 2008, and a { }% share in 2009.13 From April 2006 until Star’s entry in 2009, McWane 

was the only significant supplier of Fittings manufactured in the United States, i.e., “Domestic 

Fittings.”14 

Sigma imports and sells Fittings and other waterworks products that are made in China, 

India, and Mexico.15 Sigma engages in “virtual manufacturing” whereby it provides significant 

engineering support to foundries that make its Fittings.16 Sigma had a { }% share of the 

United States Fittings market in 2008, and a { % share in 2009.17 

Like Sigma, Star also imports Fittings from China for sale in the United States.18 Star 

had a { }% share of the United States Fittings market in 2008, and a { }% share in 2009.19 

In 2009, Star began contracting with foundries in the United States to manufacture Fittings 

domestically.20 

12 CCPF 10. 

13 CCPF 457. 

14 CCPF 224, 1659. 

15 CCPF 55, 59. 

16 CCPF 60. 

17 CCPF 457. 

18 CCPF 124, 132. 

19 CCPF 457. 

20 CCPF 1713-1725. 

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In addition to McWane, Sigma, and Star, there is a fringe of small suppliers of Fittings, 

including Serampore Industries (“SIP”), NAPAC, Inc., North American Cast Iron Products 

(“NACIP”), Metalfit, Backman Foundry, and, starting in 2009, Electrosteel.21 Combined, the 

fringe sellers represented approximately { }% of the U.S. Fittings market in 2008 and 2009.22 

Any potential new entrant to the Fittings supply business faces high barriers to entry. It 

must establish a supply chain, stocking yards, and a marketing force throughout the United 

States, develop or recruit relevant expertise in design engineering, build relationships with 

Distributors, and have its products tested and approved by End Users.23 

The three main Fittings suppliers know each other well, and have a history of close 

relationships and extensive communications.24 Sigma’s CEO Victor Pais and McWane’s CEO 

Ruffner Page have developed “a very trusting relationship” over the years, and often discuss 

competitive dynamics and pricing practices in the Fittings market.25 Telephone records reveal 

numerous calls between high level executives of the three companies,26 and Fittings market 

competitive dynamics – including pricing – are regular topics of discussion in conversations 

between the suppliers.27 

21 CCPF 459. 

22 CCPF 457 (showing { }% combined market share by volume of McWane, Sigma, and Star). 

23 CCPF 642-650. 

24 CCPF 699-841. 

25 CCPF 828-841. 

26 CCPF 715, 723-786. 

27 E.g., CCPF 701-712. 

12 
 

b) End Users 

PUBLIC RECORD

Fittings end users – the entities that ultimately paid the supracompetitive prices that are at 

issue in this case – are typically municipalities, regional water authorities, and the contractors 

they hire to construct waterworks projects (collectively, “End Users”).28 

c) Distributors 

McWane, Sigma, and Star sell “all or virtually all” of their Fittings to a relatively 

unconcentrated group of wholesale waterworks distributors (“Distributors”), which then re-sell 

the Fittings to End Users.29 There are two large national Distributors, HD Supply and Ferguson, 

which have 235 and 167 locations nationwide, respectively.30 Together, they account for 

approximately 50% of all Fittings sales in the United States.31 The remaining direct purchasers 

of Fittings consist of a number of regional waterworks distributors with multiple branches that 

service specific regional areas, and hundreds of small, local companies with just one or a few 

distribution yards.32 

Direct sales from suppliers to End Users are virtually non-existent, because Distributors 

provide important services to both Fittings suppliers and End Users.33 Indeed, McWane views 

28 CCPF 466. 

29 CCPF 475-479. 

30 CCPF 266, 275, 481. 

31 CCPF 482-483. 

32 CCPF 480-484. 

33 CCPF 475-479. 

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Distributors as being “critical to [its] success.”34 The benefits to Fittings suppliers of selling 

through Distributors rather than directly to End Users include the following: 

•	 Distributors provide End Users with one-stop shopping for the full spectrum of 

waterworks products required for a particular project (pipe, valves, Fittings, restraints, 

castings, etc.), and Fittings suppliers can compete for sales to Distributors without 

entering all of the adjacent waterworks product markets.35 

•	 Distributors carry Fittings inventory, freeing up suppliers’ working capital and 

allowing for much faster delivery from the Distributors’ local branches to End Users 

than a Fittings supplier could achieve by selling directly to End Users.36 

•	 Contractors often purchase on credit, and Distributors carry the credit risk of dealing 

with thousands of End Users. Suppliers avoid these credit costs by dealing through 

Distributors.37 

•	 Distributors provide a local market presence for suppliers, and employ sales 

personnel dedicated to identifying business opportunities and servicing End Users, 

saving suppliers from having to employ their own large, nationwide sales forces.38 

Suppliers obtain additional benefits from selling to the major national Distributors such as HD 

Supply and Ferguson, due to the large number of branch locations operated by these Distributors 

and the resulting scale efficiencies.39 Sales to large Distributors also can provide a supplier 

seeking to enter the market with an important measure of “commercial validation”– i.e., a signal 

that the supplier’s products are technically sound and commercially viable.40 

34 CCPF 512. 

35 CCPF 513. 

36 CCPF 514-517. 

37 CCPF 518. 

38 CCPF 519-524. 

39 CCPF 525. 

40 CCPF 527-528, 2099. 

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3. Bidding Process 

When a municipality or regional water authority undertakes a waterworks project, it will 

generally issue specifications for all of the pipes, valves, hydrants, Fittings and related 

waterworks equipment needed for the project, and seek bids from contractors for its 

completion.41 These specifications may identify which brands can be used for the project, as 

well as whether domestically manufactured Fittings are required.42 Once contractors receive the 

specifications, contractors will solicit bids and other assistance from Distributors that supply the 

various components for that project.43 

4. Domestic-Only Specifications 

Waterworks project specifications that require domestically manufactured Fittings are 

sometimes referred to as “Domestic-only Specifications,” while those that do not specify the 

country of origin are referred to as “Open Specifications.”44 A project may have a Domesticonly Specification either because of End User preference or because municipal, state, or federal 

law imposes a “Buy American” requirement.45 Domestic Fittings can be used in Open 

Specification projects, but imported Fittings cannot be used in Domestic-only Specifications.46 

Domestic Fittings sold for use in Domestic-only Specifications are sold at substantially higher 

41 CCPF 427-428. 

42 CCPF 427-435, 447. 

43 CCPF 434-439. 

44 CCPF 448, 450. Except where otherwise noted or where the context otherwise requires, the 

term “Domestic Fittings” will refer herein to Domestic Fittings sold into Domestic-only 

Specifications. 

45 CCPF 448-449. 

46 CCPF 451. 

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prices than Fittings (whether imported or domestically manufactured) that are sold into Open 

Specification jobs.47 

5. Fittings Pricing 

For all three of the major Fittings suppliers, published Fittings prices have two 

components: a nationwide list (or catalog) price, and a state or regional “multiplier.”48 The 

published price for a given Fittings item in a given state is the list price multiplied by the thenapplicable multiplier for that state.49 For example, if a Fitting has a $1,000 list price, and the 

Texas Open Specification multiplier is .28, the “published price” for that individual Fitting in 

Texas will be $1,000 x .28, or $280.50 During the relevant period, McWane used a separate map 

with higher multipliers for Domestic Fittings; so if the Domestic multiplier for Texas were .42, 

the same Fitting would cost $420 if Domestic-only was specified.51 

Published prices for Fittings are highly transparent. Each major supplier publishes list 

prices for thousands of individual Fittings items in price books and on its website, and announces 

regional multiplier changes through customer letters disseminated to Distributors.52 Suppliers 

quickly receive copies of their competitors’ price letters, sometimes directly.53 They know that 

47 CCPF 628-633. 

48 CCPF 543. 

49 CCPF 543. 

50 CCPF 543, 545. 

51 CCPF 628-633. 

52 CCPF 670-671. 

53 CCPF 672-673. 

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their pricing letters end up in their competitors’ hands.54 When McWane announces an increase 

in its list prices or published multipliers, Sigma and Star nearly always follow the increase with 

identical published price increases of their own.55 Suppliers cannot sustain a published price 

increase unless the other suppliers follow suit and also increase their prices.56 

When they are competing for a sale, Fittings suppliers may offer Distributors with 

discounts from their published prices on a transaction-by-transaction basis, a practice known in 

the industry as “Project Pricing” (or “Job Pricing” or “Special Pricing”).57 Because it is 

individually negotiated, not published, Project Pricing is less transparent than published prices. 

Project Pricing is a significant form of competition for business between Fittings suppliers.58 

Greater Project Pricing frequency leads to price “instability” and can cause the prevailing 

transaction price in a given area to deteriorate.59 When one supplier competes aggressively with 

Project Pricing, the others must meet that supplier’s price or risk losing business.60 A single 

reduced price offer can snowball quickly: as other Distributors in the region learn of the new 

54 CCPF 674. 

55 CCPF 667. 

56 CCPF 668. 

57 CCPF 550. 

58 CCPF 553-554. 

59 CCPF 555-558. 

60 CCPF 669. 

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price, they will demand the same discount in order to be competitive on bids for the same job.61 

Conversely, reducing the incidence of Project Pricing tends to lead to stable, higher prices.62 

Suppliers, especially McWane and Sigma, view Project Pricing as a drag on their 

profitability, and would prefer not to use it at all.63 Star has traditionally taken a different 

approach and made Project Pricing a cornerstone of its pricing strategy. Despite typically 

following the industry’s published prices, Star has been considered the most aggressive of the 

big three Fittings suppliers when it comes to Project Pricing.64 Star’s competitive use of Project 

Pricing has been described at various times by Sigma and McWane as “aggressive,” 

“disruptive,” “confusing,” “irrational,” “undisciplined,” “unpredictable,” “unhealthy,” 

“reckless,” and “irresponsible.”65 

Although Project Pricing is the principal means of price competition between Fittings 

suppliers, there are other price terms involved in the sale of Fittings. Suppliers may offer volume 

rebates to a Distributor on an annual or other periodic basis.66 Rebates may be calculated and 

paid at the branch level or the corporate level, and in some cases rebate programs encompass 

other products in addition to Fittings.67 Functionally, Distributors view rebates as different from 

61 CCPF 555. 

62 CCPF 559. 

63 CCPF 560-561. 

64 CCPF 860-869. 

65 CCPF 860-869. 

66 CCPF 563. 

67 CCPF 564 in camera, 568. 

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Project Pricing, because rebates do not apply to a specific job that a Distributor is bidding.68 

Each supplier has standard freight terms pursuant to which it may pay for shipping of Fittings to 

Distributors, and offer discounts to customers by providing free shipping for under-sized 

orders.69 Suppliers also offer certain standard payment terms that incentivize prompt payment by 

providing a discount for payment within a certain time period, and those payment terms may be 

modified to extend the payment period or increase the discount (though not typically on a 

project-by-project basis).70 

B.	 McWane Conspired With Sigma and Star to Stabilize and Raise Fittings 

Prices 

1. Late 2007 Market Environment 

In 2007, McWane, historically the dominant Fittings supplier in the United States, was 

losing share to Sigma and Star. The two importers had taken advantage of their lower overseas 

cost bases and larger, more nimble sales forces to steal market share from McWane through 

aggressive Project Pricing.71 When the economic downturn began and Fittings market growth 

slowed in 2007, Star continued to compete vigorously with Project Pricing.72 David Green, who 

was then in charge of McWane’s Fittings division, decided “to respond aggressively with equally 

low pricing.”73 McWane’s Fittings profits declined as it chased prices down, carried idle 

68 CCPF 567. 

69 CCPF 570-571. 

70 CCPF 572-576, 554. 

71 CCPF 843-844, 853-859. 

72 CCPF 843-844, 854. 

73 CCPF 855. 

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capacity, and developed excess inventory.74 The company’s CEO, Ruffner Page, fired Mr. 

Green and restructured the Fittings business, tasking Rick Tatman with turning it around.75 As 

the newly installed General Manager of McWane’s Tyler/Union Fittings division, Mr. Tatman 

reported to Thomas Walton and Leon McCullough, and was responsible for McWane’s Fittings 

pricing strategy.76 

Market conditions changed in late 2007, and Mr. Tatman saw an opportunity to re-take 

control of the Fittings market. Sigma’s and Star’s margins were coming under pressure because 

raw material prices and other costs were increasing in China relative to the U.S., and they both 

sought to increase Fittings list prices in late 2007.77 Recognizing that McWane’s U.S. 

manufacturing base had become a cost advantage,78 McWane refused to follow its competitors’ 

list price changes, despite direct and indirect entreaties from Sigma to do so.79 Instead, Mr. 

Tatman developed a plan to use McWane’s newfound leverage to forge cooperation among the 

suppliers – McWane would only agree to higher published prices if Sigma and Star would curtail 

74 CCPF 846-857. 

75 CCPF 21-22, 45. In a September 2007 meeting, Mr. Page described this restructuring to Mr. 

Pais of Sigma, who later wrote that he “was surprised to hear from [Mr. Page] directly, several 

major changes that he has initiated to respond to the weak market conditions.” CCPF 837 (CX 

2118 at 001). 

76 CCPF 21-23. 

77 CCPF 871-887. 

78 CCPF 874-877. As Mr. Page wrote in January 2008, “The Chinese importers in water works 

fittings are seeking price increases [and] we are now in a position to resist.” CCPF 876 (CX 

1183 at 001). 

79 CCPF 878-906. 

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the Project Pricing wars that had been eroding McWane’s share and profitability – that is, only if 

its competitors committed to stable and transparent pricing at published levels.

80 

2.	 The Tatman Plan to Bring Stability and Transparency to the Fittings 

Market 

Mr. Tatman developed and implemented a multi-stage plan to communicate these 

conditions to Sigma and Star, and thus to establish a pricing agreement among the suppliers.81 In 

a December 22, 2007, email to his boss Leon McCullough, Mr. Tatman previewed his plan: 

Given both the change in the Tyler/Union leadership structure and 

the accelerated inflation in China compared to Domestic cost, I 

believe we’re in a unique position to help drive stability and 

rational pricing with the proper communication and actions.

82 

Mr. Tatman described his full plan as part of a January 6, 2008 slide presentation (the 

“Tatman Plan”). In a slide titled “Desired Message for the Market & Competitors,” he 

proposed that, rather than accepting the large price increases proposed by Sigma and Star, 

McWane would only agree to smaller price increases, “in stepped or staged increments,” 

requiring “stability and transparency” at published pricing levels as a “prerequisite” for any 

further increases.83 To achieve transparency, McWane would initially seek to curtail the level of 

Project Pricing engaged in by all suppliers – McWane would inform its competitors that it would 

only sell at published prices, and that it would discipline the other suppliers by lowering its 

80 CCPF 907-913. 

81 CCPF 907-913. 

82 CCPF 909 (emphasis added). 

83 CCPF 913-916. 

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published multipliers to match any consistent Project Pricing it detected in the market.84 Mr. 

Tatman recognized that the plan would be more likely to succeed if McWane’s competitors 

removed pricing authority “away from line sales and customer service personnel to add 

discipline to the process.”85 

McWane delivered its “message for competitors” to Sigma and Star through meetings, 

telephone calls, and indirectly through pricing communications to customers. In meetings in 

September and December of 2007, Mr. Page had already made Mr. Pais aware of McWane’s 

general dissatisfaction with market trends and pricing practices in the Fittings market.86 As Mr. 

Tatman formulated his plan between December 22, 2007, and January 11, 2008, he spoke with 

Mr. Rybacki of Sigma at least four times.87 Mr. Rybacki, in turn, spoke with Mr. McCutcheon 

of Star at length on January 9, 2008.88 Finally, McWane’s “message for competitors” was driven 

home through a carefully drafted January 11, 2008 pricing letter. 

84 CCPF 913, 916; CX 0627 at 004 (“T/U will adjust multipliers as required to remain 

competitive within any given market area. (Consistent Job Pricing will be met with general 

market actions).”). In parallel with its effort to curtail Project Pricing, McWane also pursued 

establishment of the DIFRA information exchange as a means of increasing market transparency. 

See infra Part B.4 (describing “phase two” of the Tatman Plan involving DIFRA). 

85 CCPF 913, 918. 

86 CCPF 837-838; CX 2119 at 001 (at their September 2007 meeting, Mr. Page expressed to Mr. 

Pais that he was “disappointed at our failure to get a better landscape”); CCPF 953 (Mr. Pais told 

Mr. Rybacki that McWane was upset because of the “overcompetitiveness of the marketplace” 

and the “downward spiral of pricing in the marketplace.”). 

87 CCPF 923. 

88 CCPF 743-744. 

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3.	 Phase One of the Tatman Plan: Partial Multiplier Increases in Exchange 

for Reduction in Project Pricing 

In a January 11, 2008, letter to Distributors, McWane announced that it would be 

retaining its current list prices (i.e., declining to follow Sigma’s announced list price increase), 

increasing multipliers by 10-12% (much less than the 25% increase sought by Sigma), and 

cutting back on Project Pricing (“it is our intention going forward to sell all products only off the 

newly published multipliers”).89 By announcing its intention to sell “only off the newly 

published multipliers,” McWane was communicating its intention not to offer Project Pricing.90 

In the letter, McWane offered to “announce another multiplier increase within the next six 

months,” but stated that it would “only do so as conditions require” – i.e., depending upon 

whether Sigma and Star also curtailed Project Pricing, resulting in pricing stability and 

transparency in the Fittings market.91 

Although nominally addressed to customers, McWane’s January 11, 2008 letter did not 

announce McWane’s new multiplier prices. Those were communicated in letters sent out a week 

later. The January 11 letter was actually an invitation to collude directed at Sigma and Star, and 

an integral part of the “Message to Competitors” envisioned by the Tatman Plan. Drafts of the 

letter were attached to Mr. Tatman’s January 6, 2008 presentation,92 and Mr. Tatman conceded at 

trial that the final letter – and particularly the message about curtailing Project Pricing – was 

89 CCPF 932 (emphasis added). 

90 CCPF 938. 

91 CCPF 932, 937. 

92 CCPF 936-937. 

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intended for Sigma and Star (claiming – not that it makes a difference – that the communication 

was intended as a “head fake” to these competitors).93 

As a further measure to encourage Sigma and Star to go along with its plan for collusion, 

McWane provided its competitors with evidence of its then-current cost advantage.94 Mr. 

Tatman understood that “our ability to stabilize the market is tied to our competitor’s perception 

of our cost structure and our ability to sustain aggressive pricing if our share position is 

threatened.”95 To convey McWane’s cost advantage, Mr. Page sent an email directly to Mr. Pais 

on January 4, 2008, offering to sell to Sigma Fittings that McWane produced in the United 

States.96 The price McWane offered to Sigma was below McWane’s total cost of production, 

and calculated to be below what McWane understood Sigma’s landed cost of production to be.97 

Through this offer, McWane successfully communicated that now it was the low cost Fittings 

producer, had excess capacity, and would be a dangerous rival if Sigma and Star did not 

cooperate with the Tatman Plan.98 Sigma later passed this information on to Mr. McCutcheon of 

Star, who understood the message, writing to a colleague, “During the negotiation, [McWane] 

93 CCPF 939. 

94 CCPF 1072-1088. 

95 CCPF 1075. 

96 CCPF 1076; CX 1113 at 001 (“It has occurred to me that with China costs rising . . . we could 

supply you with small compact fittings at a competitive price.”).
 

97 CCPF 1081. 

98 CCPF 1085; CX 1142 at 002 (Pais describing McWane quote as an “interesting and revealing 

price”). 

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stated that they are now the low cost producer and said they could prove it. I think there is some 

exaggeration in this statement, but I believe the core point.”99 

In late January and early February 2008, and after a series of telephone calls between 

Star’s vice president of sales (Mr. McCutcheon) and Sigma’s vice president of sales (Mr. 

Rybacki),100 Sigma and Star accepted McWane’s proposal for a Project Pricing ceasefire.101 

Both companies rescinded their previously announced list price changes and followed 

McWane’s new price multipliers,102 told their customers there would be no more Project 

Pricing,103 and instructed their sales teams to curtail Project Pricing.104 Sigma’s documents show 

that the company had a complete understanding of its role and responsibilities in the Tatman 

Plan. Specifically, Sigma recognized McWane’s invitation to collude as “an opportunity for 

SIGMA and Star to . . . demonstrate to [McWane] that we are capable of being part of a stable 

and profitab[ility] conscious industry.”105 Mr. Pais embraced the pursuit of increased 

transparency and stability, and, on January 24, 2008, urged Mr. Rybacki to “normalize” all 

pricing for Sigma Fittings “TO ELIMINATE THE CONFUSION WE ARE CREATING WITH 

99 CCPF 1087. 

100 CCPF 952-953. 

101 CCPF 951-1028. 

102 CCPF 965-966, 1008. 

103 CCPF 965-967, 997-1007. 

104 CCPF 953-958, 972-990. 

105 CCPF 956. 

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CUSTOMERS AND COMPETITORS.”106 In a draft customer letter that Mr. Pais considered 

sending to earn McWane’s “TRUST and CONFIDENCE in our plan to improve the industry,” he 

confirmed that Sigma had decided to “cease to use any varying ‘special’ pricing.”107 

On January 22, 2008, Star’s National Sales Manager, Matt Minamyer, directed the Star 

sales force to “stop project pricing.”108 Star also adhered to the Tatman Plan’s dictate to take 

“price authority away from line sales and customer service personnel to add discipline to the 

process.”109 Star centralized pricing authority with Mr. Minamyer, and limited the ability of its 

sales force to offer discounts.110 On January 31, 2008, Star informed its largest customer, HD 

Supply, that it would be following McWane’s announced multiplier increases, and that there 

would be “NO UTILITY PROJECT PRICING NATIONWIDE.”111 A similar message was 

communicated to all of Star’s customers.112 

When any of the three suppliers detected a competitor Project Pricing, it complained 

about the cheating. In addition to repeatedly communicating by telephone at key pricing 

106 CCPF 956. 

107 CCPF 1159. 

108 CCPF 971; CX 0752 at 001 (Minamyer, January 22, 2008: “Our goal is to take a price 

increase and to stop project pricing.”). 

109 CCPF 913, 918. 

110 CCPF 993; CX 0752 at 001 (Minamyer, January 22, 2008: “[A]ll project pricing has to go 

through me . . . . This is an effort to do the right thing for the industry.”). McWane also 

centralized pricing authority in January 2008, creating a new “pricing coordinator” position for 

Vincent Napoli and removing pricing authority from McWane’s field sales team. CCPF 924­

929. 

111 CCPF 999-1000. 

112 CCPF 1005. 

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 For example, on March 8, 2008, Mr. Tatman 

decision points, Sigma, McWane and Star (and in particular Mr. Rybacki, Mr. McCutcheon and 

Mr. Tatman) periodically spoke by telephone to complain about perceived “cheating.”113 Each 

of the suppliers set March 1, 2008, as the last day for Project Pricing, and as that date passed they 

closely monitored each other’s pricing conduct.114

complained to Sigma about continued Project Pricing in the market. Mitchell Rona, Vice 

President of Operations for Sigma, relayed Mr. Tatman’s message to Mr. Pais and Mr. Rybacki, 

Sigma’s vice president of sales: “[Tatman] says he hears that some of the new prices in the 

market are being compromised with deals. He hopes the market will improve and hopes [we] do 

our part.”115 On March 6, 2008, a Sigma regional sales manager reported an incident of 

McWane Project Pricing, and asked his superiors: “Can Larry [Rybacki] make a call and see if 

this can be stopped.”116 A Sigma manager responded (reflecting consciousness of guilt) that 

“Jim should not write that last sentence!;” but no one admonished him that such a call was not 

possible or inappropriate.117 On April 2, 2008, Star’s Mr. McCutcheon received a report of 

Project Pricing by Sigma on a project in Tulsa.118 He requested more information from the 

responsible sales manager, and { 

113 CCPF 1030-1040, 1451-1455. 

114 CCPF 1051-1052. 

115 CCPF 1035. 

116 CCPF 1031. 

117 CCPF 1032. 

118 CCPF 1038. 

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}.

119 On August 22, Mr. Tatman again voiced his displeasure with Sigma’s and Star’s 

Project Pricing to Mr. Rona. Mr. Rona reported the complaint about cheating to Sigma’s 

management team: “Guys, Rick [Tatman] was upset by the numbers in Florida and California 

based on what he has seen from us and Star. He said the .26 and .30 were available from us both 

without any second thought.”120 

Absent concerted action, Project Pricing would not be viewed by the suppliers as a form 

of illegitimate behavior, or as “cheating” on a deal.121 And absent agreement, the curtailment of 

Project Pricing engaged in by all three major Fittings suppliers in the spring of 2008 would have 

made no economic sense for any one of the suppliers acting unilaterally.122 A supplier pursuing 

such a strategy on its own would have lost business to its competitors’ Project Pricing. The 

suppliers acknowledged this in contemporaneous documents and testimony. For example, Mr. 

Tatman stated from the outset that his plan would only work “with the proper communication 

and actions.”123 Mr. Pais of Sigma later echoed this, explaining with respect to the elimination 

of Project Pricing that Sigma “will NOT – and can NOT – do this unilaterally,”124 and Star’s 

National Sales Manager testified that Star knew that it needed its competitors to participate in 

119 CCPF 1039-1040. 

120 CCPF 1452. 

121 CCPF 943, 1019-1021, 1440-1445. 

122 CCPF 1055-1071. 

123 CCPF 1059. 

124 CCPF 1060. 

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any effort to stabilize prices.125 Star, in particular, had relied on a strategy of undercutting its 

larger rivals through Project Pricing.126 Star executives acknowledge that the company’s change 

of course was “unusual,” “irrational,” “bizarre,” and contrary to its traditional practice of using 

Project Pricing.127 In trying to explain to his sales force why Star was abandoning what had been 

a cornerstone of its competitive strategy, Star’s national sales manager Mr. Minamyer betrayed 

the collusive nature of the suppliers’ curtailment of Project Pricing: “What we are doing is what 

is right for the industry.”128 

4.	 Phase Two of the Tatman Plan: Additional Multiplier Increases 

Conditioned on Participation in the DIFRA Information Exchange 

The suppliers monitored compliance with the agreement to curtail Project Pricing through 

their ordinary competitive intelligence channels, but they also wanted to establish a formal 

information exchange, both to foster increased “trust and respect” among the suppliers and to 

better enable them to monitor market shares and detect cheating under their price fixing 

agreement.129 This added measure of transparency was especially important because of the 

declining Fittings market in 2008 – each supplier would be able track its market shares and 

125 CCPF 1061; CX 2526 (Minamyer, Dep. at 141-142 (“Q. In other words, you would need your 

competitors to participate in an effort to stabilize prices? A. We believe that to be true.”)). 

126 CCPF 860-869, 1062; McCutcheon, Tr. 2387 (Project Pricing was “a significant part of Star’s 

competitive strategy”). 

127 CCPF 1063. 

128 CCPF 1067; see also CCPF 993 (Minamyer describing centralization of pricing authority as 

“an effort to do the right thing for the industry”). 

129 CCPF 1279(a) (Pais describing the benefits of DIFRA in June 2008: “Though most of the 

initial benefit is intangible such as increased trust and respect between members, it is also the 

first step fro [sic] more substantial economic benefits in the future.”). 

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ascertain whether a loss in volume was attributable to a loss in market share (i.e., cheating by 

other suppliers) or to a general market decline.130 

For several years, McWane, Sigma, and Star had discussed forming a “trade association” 

called the Ductile Iron Fittings Research Association (“DIFRA”),131 and in February 2008, Mr. 

Tatman and Mr. Rybacki agreed to restart these efforts.132 Notwithstanding the many potentially 

procompetitive purposes set forth in DIFRA’s bylaws (such as standard setting, education, 

outreach, advocacy, and research),133 the association’s actual objective from its conception – and 

ultimately the only activity it engaged in – was to operate an information exchange aimed at 

reducing competition and stabilizing prices in the Fittings market.134 Advised by counsel that 

DIFRA’s information exchange would need at least four members to mitigate antitrust 

concerns,135 McWane, Sigma, and Star brought on a sham fourth member, U.S. Pipe, which was 

not even a Fittings producer.136 

130 E.g., CCPF 1304 (Tatman using DIFRA data to evaluate the success of the Tatman Plan); 

CCPF 1279(e) (Pais writing in February 2009 that DIFRA “helps maintain the pricing discipline, 

as the market and market share data point to a relatively consistent and stable market pattern. It 

has helped us not to allow the sharp market decline to be mistaken as a ‘loss of market share’, 

which mostly causes price reaction.”). 

131 CCPF 1090-1106. 

132 CCPF 1111-1113. 

133 CCPF 1262. 

134 CCPF 1261-1274 (stated purposes of DIFRA were not pursued); CCPF 1275-1296 (actual 

purpose of DIFRA was to facilitate information exchange and stabilize the Fittings market); 

CCPF 1297-1337 (McWane, Sigma and Star used DIFRA to monitor their market shares, detect 

cheating and inform their pricing decisions). 

135 CCPF 1122; CX 2272 (counsel advising “With four, you can just barely justify it.”); CX 0048 

at 001 (counsel “noted the significant anti-trust issues when an association consists of only two 

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By April 25, 2008, McWane, Sigma, and Star had agreed (at a meeting that DIFRA’s 

sham fourth member, U.S. Pipe, did not even attend), to proceed with the DIFRA information 

exchange, with May 15, 2008, set as the deadline for the members’ submission of Fittings sales 

data.137 Each member would report to DIFRA its own volume, in tons, of Fittings shipped 

within the United States in six categories divided by size (2”-12”, 14”-24”, and greater than 24”) 

and type (flanged and non-flanged).138 Members’ initial submissions were to include annual data 

for 2006, monthly data for 2007, and monthly data for 2008; going forward, they would report 

each months’ data by the 15th day of the following month.139 DIFRA engaged an accounting 

firm (“SRHW”) to collect the member data and return reports reflecting aggregate U.S. Fittings 

shipments in various categories.140 

Star was a reluctant participant in the DIFRA information exchange, so in May and June 

of 2008 McWane again withheld its assent to a price increase in order to gain leverage – this 

time to procure Star’s agreement to proceed with the anticompetitive information exchange.141 

or three competitors, whereas an association with five, six, or more competitors is less 

problematic.”). 

136CCPF 1117-1130; U.S. Pipe had stopped manufacturing Fittings years before, and the small 

number of Fittings that it sold were supplied to it largely by Sigma, were not sold through 

Distributors (a requirement of the DIFRA’s own bylaws), and were below the minimum volume 

required for DIFRA membership. McWane, Sigma, and Star nevertheless permitted U.S. Pipe to 

participate as a member of DIFRA. CCPF 1125-1129. 

137 CCPF 1139-1140, 1145. 

138 CCPF 1141. 

139 CCPF 1140-1141. 

140 CCPF 1105, 1140. 

141 CCPF 1155-1259. 

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Sigma was eager for a further price increase,142 and in late April, just as the parties reached 

agreement on the DIFRA procedures, Sigma released a new letter announcing a multiplier price 

increase effective May 19, 2008.143 On May 7, 2008, Star announced multiplier price increases 

that matched Sigma’s.144 McWane refused to support a price increase until itactually received 

the DIFRA data,145 so Mr. Tatman drafted a letter to address Star and Sigma’s 

“misperceptions.”146 McWane’s May 7, 2008 customer letter that, like its January 11, 2008 

letter, was actually directed to McWane’s competitors. The May 7 letter did something McWane 

had never done before in a pricing letter: It announced that McWane was not yet changing its 

price.147 Instead, it was a message for Sigma and Star: 

Before announcing any price actions, we carefully analyze all 

factors including: domestic and global inflation, market and 

competitive conditions within each region, as well as our 

performance against our own internal metrics. We anticipate 

being able to complete our analysis by the end of May. At that 

point, we will send out letters to each specific region detailing 

changes, if any, to our current pricing policy.148 

142 CCPF 1156-1167. 

143 CCPF 1168-1172. 

144 CCPF 1173. 

145 CCPF 1177-1178; CX 0137 at 001 (describing McWane’s “approach of waiting until the 

DIFRA data is available before announcing any price actions”). 

146 CCPF 1179. 

147 CCPF 1182, 1187. 

148 CCPF 1182. 

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This language was unusual, and was of no use to its nominal recipients, McWane’s customers.149 

The real intended audience for this coded language was Sigma and Star, and the message was 

unmistakable in the context of the DIFRA members’ recent agreement on timing of their data 

submissions: McWane would support higher Fittings prices only after it began receiving DIFRA 

reports.150 

Star understood McWane’s message. Within hours of receiving McWane’s coded letter, 

Mr. McCutcheon confirmed to the other DIFRA members, including Mr. Tatman, that Star 

intended to submit its DIFRA data.151 But Star missed the May 15 deadline and Mr. Tatman 

repeatedly hounded DIFRA’s accounting firm, its lawyers, and Mr. Rybacki and Mr. Brakefield 

at Sigma.152 { 

}

153 

McWane’s May 7, 2008, letter had told the market to expect a price increase effective 

June 16, 2088, but when Star continued to drag its feet, McWane executives remained steadfast 

in their resolve to “stand pat until market share info is available” before announcing a price 

149 CCPF 1186-1191. 

150 CCPF 1179-1191. 

151 CCPF 1201-1207. 

152 CCPF 1212-1215. 

153 CCPF 1206, in camera {( 

}; CCPF 1216, in camera {( 

}; CCPF 1221, in camera {( 

}. 

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increase.154 This decision was designed to actively reinforce the quid pro quo message: 

McWane concluded that the withholding of a price increase, “[a]lthough somewhat painful to the 

bottom line in the short term, . . . would re-inforce the message we’ve been trying to drill in 

which when successful will pay long term dividends.”155 

Indeed, when Star finally did submit its data to SRHW on June 5, 2008,156 it notified 

Sigma by email that it had done so, and openly acknowledged the quid pro quo agreement by 

repeating back the language in McWane’s May 7, 2008 invitation to collude.157 

On June 17, 2008, SRHW issued the first DIFRA report,158 and that same day McWane 

upheld its end of the bargain by announcing an eight percent price increase for Fittings, effective 

July 14, 2008.159 { 

} quickly followed the 

McWane price increase.162 

154 CCPF 1229. 

155 CCPF 1230. 

156 CCPF 1223. 

157 CCPF 1224-1225. 

158 CCPF 1238-1239. 

159 CCPF 1242. 

160 CCPF 1246, in camera.
 

161 CCPF 1192-1200. 

162 CCPF 1247-1250. 

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Absent McWane’s agreement to raise Fittings prices, it would not have been in Sigma’s 

or Star’s unilateral interest to participate in DIFRA, because the DIFRA market share data would 

(and in fact did) show McWane that it had lost market share to them, inviting reprisals.163 

Indeed, Star was openly reluctant to participate.164 The understanding that had been established 

among the competitors, however, transformed what would have been a senseless and dangerous 

unilateral action into a calculated, profitable, and concerted one. 

5. Trust Between the Conspirators Broke Down in Late 2008 

McWane, Sigma, and Star continued to monitor each other for signs of “cheating” 

through the Summer and early Fall of 2008,165 and complained to each other when they detected 

such misconduct.166 In August 2008, the housing market declined precipitously,167 creating 

additional pressure to discount.168 Complaints about cheating – especially by Sigma – increased 

through September and October,169 until in late November, Star finally gave up on the conspiracy 

163 E.g., CCPF 1241; CX 2068 (McWane learned from DIFRA data that Star and Sigma had 

taken more of McWane’s share than previously thought). 

164 CCPF 1151-1154. 

165 CCFP 1439-1450; e.g., CCPF 1441; CX 1695 at 001 (Star district manager Shaun Smith 

telling his sales force: “We need to stay on the high road . . . It doesn’t help that the market is 

soft, but let’s be as diligent as we can gathering the proper data needed if the other suspects are 

cheating.”); CCPF 1442; CX 0814 (Minamyer August 25, 2008 email) (“I know we have been 

very careful on special pricing and it seems to be working pretty good. But the competitors are 

starting to get weak and we can’t sit back and let them play games and lose our market share.”). 

166 CCPF 1451-1455. 

167 CCPF 1437; CX 1651 at 026, in camera {( 

)}. 

168 CCPF 1437. 

169 CCPF 1444-1446. By late October, Mr. Minamyer wrote that “Sigma is silently bringing 

markets down and acting as if they are being good stewards.” CCPF 1446; CX 0827. 

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and decided to quietly resume Project Pricing to gain share. On November 25, 2008, Mr. 

Minamyer told his sales team to “take the gloves off”: although “[w]e have all been extremely 

diligent in protecting the stability of our market pricing,” Star was nevertheless losing revenues, 

and would henceforth “take every order we can” to recapture the lost share.170 

When the price fixing agreement dissolved, the information exchange lost its purpose. 

DIFRA broke down at the beginning of 2009.171 Sigma and Star stopped submitting data, and 

the last DIFRA report was the January 2009 report, reflecting data through December 2008.172 

Sigma tried unsuccessfully to revive DIFRA in May 2009 in an effort to “restore the badly 

dented competitive confidence” and to demonstrate that Sigma’s “efforts to commit to a new 

pricing discipline would succeed.”173 Although Sigma submitted its data, it failed to breathe new 

life into DIFRA.174 

6. The Agreement Was Effective During 2008 

Although compliance with the Tatman Plan was not perfect, and Project Pricing was not 

entirely curtailed, the agreement was largely effective – the suppliers centralized pricing 

authority, and reduced Project Pricing industry-wide, resulting in higher prices and improved 

financial performance { 

170 CCPF 1457-1458. 

171 CCPF 1473-1483. 

172 CCPF 1474. 

173 CCPF 1484-1489. 

174 CCPF 1490. 

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} 

In his quarterly reports for the first quarter of 2008, Mr. Tatman reported observing a 

reduced level of Project Pricing: “[T]he level of multiplier discounting by both Star and Sigma 

appears to have died down significantly.”176 Over the next three months, according to Mr. 

Tatman’s next quarterly report, the level of Project Pricing continued to slow.177 { 

178} 

Star also observed that McWane and Sigma were following through with the reduction in 

Project Pricing, with a Division Manager reporting to Mr. Minamyer on March 11, 2008 that 

“they have been pretty discipline[d] in my Division” and “everyone seems to be playing fair.”179 

On August 25, 2008, Mr. Minamyer noted the success of the initiative to reduce Project Pricing: 

175 CCPF 1041-1047, in camera, CCPF 1048-1054; CCPF 1338-1355; CCPF 1356-1358, in 

camera; CCPF 1359-1360; CCPF 1361-1369, in camera; CCPF 1370-1372; CCPF 1373-1383, 

in camera; CCPF 1410-1423. 

176 CCPF 1054. 

177 CCPF 1339; CX 1562 at 004 (“The level of [Project Pricing] activity appears to have slowed 

over the past several months . . . ”). 

178 CCPF 1047, in camera (documenting McWane pricing actions in response to competition an 

average of 3.7 times per month in the second and third quarters of 2008, an average of 27 times 

per month in the fourth quarter of 2008, and an average of 55 times per month in the first quarter 

of 2009); see also CCPF 1410-1423 (similar Star reports showing less Project Pricing activity in 

2008 than in 2007). 

179 CCPF 1018. 

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“I know we have been very careful on special pricing and it seems to be working pretty good.”180 

Sigma as well observed that the Fittings market had stabilized in 2008, with Mr. Pais noting that 

the three suppliers had maintained relatively steady market shares through October 2008, which 

“should bode well for a more mature and responsible pricing strategy for 09, which focuses on 

realizing higher prices.”181 

The success of the conspiracy impacted McWane’s bottom line, resulting in a 2008 

financial performance that – inexplicably, but for the conspiracy – surpassed the performance of 

both 2007 and 2009. Despite falling demand, Fittings prices rose over the course of 2008.182 

McWane budget variance analyses throughout 2008 show substantial pricing gains contributing 

to increased gross profits, even as volumes fell.183 In fact, the gross profitability of McWane’s 

Fittings business on a percentage basis for the first nine months of 2008 was higher than that for 

every full year from 1999 through 2007.184 And in 2009, McWane’s Fittings profits fell back to 

earth. McWane’s year-to-date Fittings’ profits through October 2009 were down $7.36 million 

compared to the same period in 2008, with approximately $1.18 million of the drop being 

attributable to Fittings being sold at lower prices in 2009 than in 2008.185 In a 2009 presentation 

to his sales team, Mr. Tatman attributed McWane’s increased 2008 profits to increased pricing 

180 CCPF 1340. 

181 CCPF 1341. 

182 CCPF 1345, 1356-1357, in camera. 

183 CCPF 1346-1349. 

184 CCPF 1350. 

185 CCPF 1355. 

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discipline (“more discipline”) – the same discipline that had been the subject of the conspiracy 

among McWane, Sigma, and Star.186 

7.	 McWane, Sigma and Star Have Continued Their Inappropriate Price 

Communications 

The suppliers’ improper pricing communications did not cease with the conclusion of 

their 2008 agreement and information exchange. On at least two more occasions they sought to 

coordinate industry-wide pricing actions.187 

a)	 April 2009 

On April 15, 2009, McWane announced that, on May 1, 2009, it would begin using a 

new, restructured price list, with higher prices for small diameter fittings (where McWane’s 

share was highest) and lower prices for medium and large diameter Fittings (where McWane had 

little or no share and Sigma and Star were stronger).188 A week later, Star announced it would 

also change its price list, effective May 19, 2009, but did not specify whether it would match 

McWane.189 

Sigma vehemently objected to the list price restructuring, which had the potential to 

negatively impact Sigma’s bottom line by $5 million,190 and lobbied strenuously on multiple 

186 CCPF 1359. 

187 CCPF 1491-1553 (April 2009 McWane price restructuring and exchange of pricing 

assurances); CCPF 1554-1571 (June 2010 coordinated price increase). 

188 CCPF 1492-1498. 

189 CCPF 1499-1500. 

190 CCPF 1503; Pais, Tr. 2171 (Sigma price restructuring was “potentially a knockout punch” for 

Sigma).
 

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fronts among the suppliers.191 { 192} and Mr. Pais 

sought and obtained in-person meetings with Mr. McCullough and Mr. Page at which, among 

other things, he sought their intervention on the price list change – or at least a “stay of 

execution.”193 Mr. Rybacki and Mr. Pais also intensively lobbied Star and SIP, seeking their 

support in resisting the price restructuring announced by McWane.194 Telephone records show 

four calls from Mr. Rybacki to Mr. McCutcheon in this time period, and Mr. McCutcheon 

testified that Mr. Pais also called him directly.195 

After Sigma issued an April 27, 2009 customer letter declining to follow McWane’s 

restructuring,196 McWane and Star were uncertain about each other’s intentions: McWane 

wondered whether Star would follow, as Mr. Tatman acknowledged in an email to his bosses, 

sent the morning of April 28, 2009, in which he described Star as “The Wild card.”197 Star 

wondered whether McWane would retract the new list prices in the face of Sigma’s opposition 

191 CCPF 1505; Rybacki, Tr. 3580-3581 (Mr. Rybacki “tried to let the whole world know that we 

weren’t happy”). 

192 CCPF 1504, in camera. 

193 CCPF 1509-1510; 1520-1524. 

194 CCPF 1525-1532. 

195 CCPF 1532, 1529-1531; CX 2539 (McCutcheon, Dep. at 230-231) (“Mr. Pais told me that he 

was very confident that he was going to change McWane’s mind, and he told me that he had -- I 

believe in that phone conversation he told me he had spoken to SIP-Serampore, and that I think 

he had insinuated he had already spoken to McWane and that he felt that they weren’t going to 

make that change. And he was encouraging me to join them to give strength to there not being a 

change in the price list to McWane.”). 

196 CCPF 1512. 

197 CCPF 1537; CX 1180 at 002 (“The Wild card right now is Star . . . there is now some 

probability that Star may change direction and retract their list price change.”). 

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(as Sigma and Star had been forced to do in the face of McWane’s opposition in early in 

2008).198 To eliminate this uncertainty, Mr. McCutcheon called Mr. Tatman directly to ask him 

whether McWane would follow through with its announcement or stay with the old price list.199 

Mr. Tatman assured him that McWane was “absolutely” going to proceed with the new price 

list.200 

On the afternoon of April 28, just six hours after describing Star as a “Wild card” with 

“some probability” of “chang[ing] their direction and retract[ing] their list price change,” Mr. 

Tatman emailed Mr. McCullough to report that he was “now highly confident that Star will 

follow our List Price.”201 Mr. Tatman claims to have no recollection of his telephone call with 

Mr. McCutcheon, but does not deny that it took place, and he has no plausible alternate 

explanation for how he became “highly confident” about Star’s plans.202 

b) June 2010 

In June 2010, after having already received FTC subpoenas in this matter, McWane, 

Sigma, and Star nevertheless continued to engage in improper signaling practices in an effort to 

coordinate their Fittings pricing. On June 8, 2010, in response to a Star communication, Sigma 

circulated a customer pricing letter that it described as “largely a ‘heads up’ to the customers and 

198 CCPF 1538-1539. 

199 CCPF 1539; CX 2539 (McCutcheon, Dep. at 230-231 (“I did have a doubt in the back of my 

mind – I wanted to make sure before we moved ahead and printed all these price lists, so I called 

Rick just to make sure.”)). 

200 CCPF 1540. 

201 CCPF 1543. 

202 CCPF 1542-1547. 

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the market about our intention to follow suit when Star or others take a definitive action on price 

increases” in Fittings.203 

By June 11, 2010, McWane had received a copy of Sigma’s “heads up” and analyzed it 

carefully for messages about Sigma’s pricing intentions.204 McWane correctly understood that 

Sigma and Star had communicated their willingness to follow a McWane price increase, and so 

announced a multiplier increase a few days later.205 Star did as expected and announced its 

increase on June 18, 2010.206 Sigma, as promised, sent its price increase letter by the end of the 

following week.207 This was exactly what Sigma had hoped for, and a Sigma regional manager 

described the result as “a huge victory in [the] war we have been fighting.”208 

C.	 McWane Monopolized the Domestic Fittings Market by Implementing an 

Unlawful Exclusive Dealing Policy 

1.	 ARRA Increased the Importance of the Domestic Fittings Market and 

Threatened Sigma and Star 

In February 2009, the President signed into law the American Recovery and 

Reinvestment Act of 2009 (“ARRA”), which allocated more than $6 billion to water 

infrastructure projects.209 Waterworks projects receiving ARRA funding were required to use 

203 CCPF 1556. 

204 CCPF 1564-1565; CX 2442-A at 001 (Tatman: “I believe Sigma is waiting for either a 

supporting communication from us or an announcement on specific price actions”). 

205 CCPF 1566. 

206 CCPF 1567. 

207 CCPF 1568-1569. 

208 CCPF 1570-1571. 

209 CCPF 1572-1573. 

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domestically produced materials, including Fittings (the “Buy American” requirement).210 

ARRA significantly altered the competitive dynamics of the Fittings industry. Prior to ARRA, 

about 15% to 20% of United States Fittings sales were sold into projects with Domestic-only 

specifications.211 McWane was the only domestic producer of Fittings, and charged significantly 

higher prices on Domestic Fittings sales.212 

ARRA posed a serious threat to Sigma and Star’s import-based U.S. Fittings business. 

First, both companies projected that the Domestic Fittings market would increase under ARRA, 

and that they would lose that entire segment of the industry to McWane.213 Second, Sigma and 

Star feared that ARRA was part of a larger groundswell of Buy-American sentiment that would 

spread beyond just ARRA-funded projects and outlast the stimulus bill.214 Third, McWane 

might leverage its position in Domestic Fittings to get Distributors to shift their non-Domestic 

Fittings business to McWane.215 Sigma and Star unsuccessfully lobbied against the application 

of the Buy American provision to Fittings, and investigated, but ruled out, various potential 

210 CCPF 1575-1577. 

211 CCPF 1619. 

212 CCPF 628-630, 1659.. 

213 CCPF 1618-1627. 

214 CCPF 1628-1638; CX 1997 at 007 (Pais, June 5, 2009: “[Buy American] sentiment is gaining 

traction and may just become a regular and growing part of our industry.”). 

215 CCPF 1639-1646; CX 1998 at 003 (minutes of April 14, 2009 Sigma board meeting: 

“SIGMA has to be watchful that McWane is not able to leverage its domestic product into an 

unfair gain in market share.”).
 

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waivers and loopholes that might allow them to sell imported Fittings for use on ARRA 

projects.216 

Accordingly, in the first half of 2009, Sigma and Star each decided to pursue entry into 

the Domestic Fittings market. Star considered various business models by which it might 

produce Domestic Fittings in the United States.217 Sigma took a dual track approach, pursuing 

domestic production while also seeking to enter into a Domestic Fittings sourcing agreement 

with McWane.218 

Successful entry by Sigma or Star would challenge McWane’s comfortable monopoly 

position in Domestic Fittings, and deprive it of an ARRA-fueled windfall. Star was of particular 

concern because of its history of aggressive pricing tactics – McWane’s “chief concern” upon 

hearing of Star’s intended entry into the Domestic Market was “that the domestic market gets 

creamed from a pricing standpoint just like the non-domestic market has been driven down in the 

past.”219 

216 CCPF 1578-1615. 

217 CCPF 1720-1725. 

218 CCPF 2171-2176. 

219 CCPF 1790; CX 0074 at 001; see also CX 0076 at 006, 009(expressing concern that Star 

would “drive profitability out of our business,” and that “Star would not be a responsible 

competitor [in the domestic market] as long as incremental sales generate incremental margins 

for their business.”); CX 0105 at 001 (“Star has historically shown that they will just continue 

incremental discounting down to the point where they’re selling near breakeven.”); CX 2483 

(Tatman, IHT at 183-184) (Star “would normally be very, very, very aggressive with pricing”); 

CX 2483 (Tatman, IHT at 232-234). 

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McWane developed and pursued a two-pronged strategy to protect its monopoly in the 

Domestic Fittings market from entry by Star and Sigma.220 First, it would freeze out Star by 

threatening to punish any Distributor that did business with Star;221 and second, it would co-opt 

Sigma’s entry, and further hobble Star’s entry efforts, by supplying Sigma – on terms dictated by 

McWane – with the Fittings it needed to compete in the Domestic market.222 

2. McWane Implemented an Exclusive Dealing Policy to “Block Star” 

At the June 2009 AWWA industry conference, Star publicly announced that it would 

offer Domestic Fittings starting in September 2009.223 Star had decided to start producing 

Domestic Fittings by contracting with existing independent foundries in the United States.224 

{ 

225} Star also planned to begin by selling the “A” items 

that make up the vast majority of sales, and expand its product offerings over time.226 This 

piecemeal approach to entry is the same approach that Star and others had taken when entering 

the import Fittings market.227 As an established importer of Fittings, Star did not face the most 

significant barriers to entry into the Domestic Fittings market – it had engineering expertise, a 

220 CCPF 1805, 2189-2191. 

221 CCPF 1712-2166. 

222 CCPF 2167-2465. 

223 CCPF 1713-1715. 

224 CCPF 1720-1725. 

225 CCPF 1729-1732, in camera. 

226 CCPF 1726-1727. 

227 CCPF 1728. 

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nationwide distribution network, a sales force, and established relationships with the major 

Distributors that would purchase Domestic Fittings.228 

Mr. Tatman proposed that McWane implement an exclusive dealing policy to “block 

Star” from entering the Domestic Fittings market.229 He proposed that McWane – while it still 

had leverage as the sole Domestic supplier, could force Distributors to “Pick their Horse” among 

Domestic Fittings suppliers.230 Under what he described as the “Hard Approach” version of this 

tactic, McWane would not sell any Domestic Fittings to Distributors that did not source 

Domestic Fittings exclusively from McWane.231 Mr. Tatman observed that this would literally 

avoid competition (“Avoids the job-by-job auction scenario”), and that if the strategy were 

successful it would deter independent entry by both Sigma and Star.232 

McWane formally announced its Domestic Fittings exclusivity policy (the “Exclusive 

Dealing Policy”) in a September 22, 2009 letter to Distributors. The letter stated that, with 

limited exceptions (such as where McWane did not have product available), any Distributor that 

did not “elect to fully support McWane branded products” for Domestic Fittings” (i.e., purchased 

Domestic Fittings from a supplier other than McWane) “may forgo participation in any unpaid 

228 CCPF 1665-1668. 

229 CCPF 1804-1813; CCPF 1814, in camera; CCPF 1815. 

230 CCPF 1808. 

231 CCPF 1809-1812. 

232 CCPF 1808(c), 1811; CX 0076 at 008 (“[T]he only reason for [Sigma] not to pursue 

[Domestic entry] is if they feel McWane’s response will make Star’s or their programs unsuccessful which may cause them to hold off making any heavy investments.”). 

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rebates for domestic fittings and accessories or shipment of their domestic fitting and accessory 

orders . . . for up to 12 weeks.”233 

Notwithstanding the soft “may/or” language of the Exclusive Dealing policy, McWane’s 

sales team consistently conveyed to Distributors a harder penalty for disloyalty: Distributors that 

purchased Domestic Fittings from Star would certainly, not possibly, be punished by McWane, 

and they would both lose their rebates and lose access to Domestic Fittings, not “either/or.”234 

McWane’s managers instructed sales representatives to tell Distributors that if they bought from 

Star, “We are not going to sell them our domestic . . . . Once they use Star, they can’t EVER buy 

domestic from us.”235 McWane’s own documents reflect that the market understood McWane’s 

Exclusive Dealing policy to mean that McWane “will” – not “may” – cut them off,236 and 

McWane followed through on this threat.237 McWane also made it clear to Distributors with 

multiple branches that “if one branch uses Star, every branch is cut off.”238 

233 CCPF 1826. The same letter announced McWane’s master distribution agreement with 

Sigma, discussed infra Part II.C.3. 

234 CCPF 1829-1849. 

235 CCPF 1832. 

236 CCPF 1845; CX 0119 at 002 (“Although the words “may” and “or” were specifically used [in 

the September 2009 announcement], the market has interpreted the communication in the more 

hard line “will” sense.” (emphasis added)); CCPF 1835; CX 0172 (McWane territory sales 

manager writing to national sales manager Jerry Jansen in February 2010: “I know the fax stated 

that we could and or cut people off but we were told to tell them more than one time that if you 

support Star then we will not sell to you.” (emphasis added)). 

237 CCPF 1850-1892 (describing McWane cutting off Hajoca). 

238 CCPF 1832. 

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McWane’s Exclusive Dealing policy was effective.239 Distributors, including the two 

largest Distributors, HD Supply and Ferguson, believed that penalties for disloyalty would be 

severe, and acted accordingly, instructing branches not to purchase Domestic Fittings from 

Star.240 Distributor testimony,241 Star testimony,242 and Star’s quote logs for Domestic Fittings243 

all indicate that, but for McWane’s Exclusive Dealing policy, Distributors would have purchased 

more Domestic Fittings from Star. As McWane recognized, if Star had been free to win business 

from the major national Distributors, these accounts would have offered Star a quick and 

efficient way to win large volumes of business as well as a measure of commercial validation.244 

{ 

245} Star has not been able to reach – and knows it could not reach and 

sustain in the presence of McWane’s Exclusive Dealing Policy – sales levels that would justify 

investment in its own foundry and thereby enable the realization of the attendant cost 

239 CCPF 1893-2031. 

240 CCPF 1903-1935; CCPF 1936, in camera (McWane got HD Supply to issue an internal 

“mandate letter” instructing its branches to “adhere to this mandate and purchase all of our 

American made fittings through [McWane] or Sigma.” (CCPF 1910)); CCPF 1937-1949; CCPF 

1950-1951, in camera; CCPF 1952 (Ferguson instructed its branches to support McWane’s 

policy. (CCPF 1942)). 

241 E.g., CCPF 1917, 1940, 1987, 2010, 2018, 2096, 2098. 

242 E.g., CCPF 1927, 1990, 2011, 2021. 

243 CCPF 1935 (“HD will not buy from Star”); CCPF 1949 (“All Ferguson are lost-they only get 

quotes from us for reference.”). 

244 CCPF 2099. 

245 CCPF 2101-2108, in camera. 

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efficiencies.246 McWane’s Exclusive Dealing Policy has thus achieved its goal of effectively 

“blocking” Star’s entry, keeping it from being in a position to drive down prices in the Domestic 

Fittings market.247 

3.	 McWane Conspired with SIGMA to Monopolize the Domestic Fittings 

Market by Entering into the MDA 

After ARRA was enacted, Sigma considered Domestic Fittings sourcing to be its “#1a 

priority,”248 and it pursued two potential avenues for Domestic entry: (1) obtaining Domestic 

Fittings from McWane, and (2) entering the domestic market using the same “virtual 

manufacturing” model that it used for imported Fittings.249 Prior to Star’s announcement of its 

planned entry in June 2009, Sigma made little progress in its efforts to source through 

McWane,250 and by early June it was prepared to “{ 

}”

251 

Sigma formed an “SDP” team,252 and the team developed and carried out a plan,253 

visiting foundries, securing offers to produce Domestic Fittings, and conducting a series of 

246 CCPF 2109-2159. 

247 CCPF 2160-2166. 

248 CCPF 2176. 

249 CCPF 2172-2173. 

250 CCPF 2177-2181; CX 0908 (McWane informing Mr. Pais that McWane’s Fittings team had 

“decided not to sell Sigma private label product from its domestic foundries”); CCPF 2203-2207; 

CCPF 2208-2209, in camera; CX 1993 at 003 (Pais referring to a subsequent McWane offer at a 

5% discount as “little more than a patronizing accommodation”). 

251 CCPF 2209, in camera. 

252 CCPF 2211-2220. 

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production trials.254 Sigma had the expertise and resources necessary to develop and 

manufacture a competitive range of Domestic Fittings,255 and absent an agreement with 

McWane, Sigma would have entered the domestic market.256 

McWane believed that Sigma planned to enter the Domestic market – an action made far 

more likely once Star announced its entry into the Domestic Fittings market at the June 2009 

AWWA conference.257 Once McWane executives realized that Star and Sigma intended to enter 

the Domestic market, McWane negotiated a Master Distribution Agreement (MDA) with Sigma 

in earnest.258 Although McWane would have to give up some of its margin on any Domestic 

Fittings it sold through Sigma,259 and despite some uncertainty regarding Sigma’s ability to 

succeed if it entered the Domestic Fittings market on its own,260 Mr. Tatman and Mr. 

McCullough agreed that an “insurance policy” against another Domestic Fittings entrant was 

253 CCPF 2221-2228. 

254 CCPF 2229-2248. 

255 CCPF 2267; CX 0803 at 001 (Sigma customer letter: “SIGMA has adequate engineering and 

production expertise and the needed resources to develop and manufacture a competitive range 

of AWWA Fittings using a few quality foundries in USA.”). 

256 CCPF 2266; CX 2527 (Pais, IHT at 179-180) (“[I]f [McWane] had stuck with that initial offer 

[of a 5% discount] . . . then we certainly would have gone another – to Plan B, which is our 

[domestic] production.”). 

257 CCPF 2316-2335; CCPF 2335; CX 0074 at 001; CX 1179 at 002 (McWane customer letter: 

“[T]he reality of [the] situation is that in the absence of the MDA with [McWane], Sigma was 

going to develop their own domestic sourcing options to the extent they could.”). 

258 CCPF 2336-2366. 

259 CCPF 2367-2371. 

260 CCPF 2334. 

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best, and that it would be better financially for McWane to collaborate with Sigma rather than 

compete with it.261 Moreover, both McWane and Sigma recognized and intended that a supply 

agreement between Sigma and McWane would make it even harder for Star to successfully 

enter.262 McWane also recognized that entering an agreement with Sigma would not increase the 

size of the Domestic Fittings market served by the two companies.263 

McWane eventually offered to sell Domestic Fittings to Sigma at a 20% discount, but 

conditioned its offer on Sigma’s agreement to join McWane in blocking Star’s entry through the 

Exclusive Dealing Policy.264 In September 2009, McWane and Sigma signed an OEM 

Distribution Agreement (referred to as the Master Distribution Agreement, or “MDA”) for the 

supply of Domestic Fittings.265 McWane announced the MDA to the market on September 22, 

261 CCPF 2332, 2349, 2458 (referring to MDA as “insurance policy” against Sigma entry); CCPF 

2200; CX 0070 at 001 (describing loss of margin as a potential drawback); CCPF 2326; CX 0076 

at 008 (“If they are truly committed to make the investment level required to be a viable 

competitor regardless of our actions, then producing for [Sigma] is probably of greater financial 

benefit to our business then having them source elsewhere.”). 

262 CCPF 2454-2465; CX 0465 at 010 (Tatman: having Sigma sell McWane branded product 

should “reduce Star's ability to grow share”); CCPF 2461, in camera; CX 1022 at 004 (Pais: 

agreement with McWane was “likely to have the intended effect of marginalizing Star”); CX 

0997 at 003 (Pais September voicemail: “[I]f we do our job right, it might isolate Star and make 

them suffer with their investment even more, because they may not be able to gain credibility.”); 

CX 2353 at 004 (describing McCullough view that selling Domestic Fittings to Sigma would 

“continue to put pressure on Star.”). 

263 CCPF 2341; CX 0729 (Tatman: “This is certainly a choice of evils as having more Domestic 

suppliers doesn’t really increase the size of the pie.”). 

264 CCPF 2345. 

265 CCPF 2168. 

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2009, in the very same letter that contained the new Exclusive Dealing policy against Star.266 

The MDA impaired competition in the Domestic Fittings market in a number of ways, including: 

	 Policing Exclusive Dealing. The MDA required Sigma to enforce (and Sigma did 

enforce) McWane’s Exclusive Dealing policy by refusing to sell Domestic 

Fittings to any distributor that purchased Domestic Fittings from Star.267 

	 Restrictions on Independent Entry. The MDA expressly precluded independent 

entry by Sigma in competition with McWane, requiring that, with few exceptions, 

“McWane shall be Sigma’s sole and exclusive source for Domestic Fittings.”268 

The MDA thus brought Sigma’s Domestic “SDP” efforts to a halt.269 

	 Restrictions on Prices. Under the MDA, Sigma was required to sell Domestic 

Fittings at a weighted average of no less than 98% of McWane’s published 

prices,270 and the parties understood that McWane had also committed to maintain 

the same pricing levels.271 

These provisions, and the parties’ conduct in implementing them, reveal the true purpose 

and effect of the MDA as an anticompetitive, output restricting mechanism, rather than an armslength buy-sell agreement between McWane and Sigma. 

266 CCPF 2374. 

267 CCPF 2394-2409; see CCPF 2403; CX 0803 002 (Sigma announcing to its customers that it 

was enforcing the McWane Exclusive Dealing policy). 

268 CCPF 2379-2385. 

269 CCPF 2386-2393. 

270 CCPF 2411-2417. 

271 CCPF 2418-2434; CX 0347 at 001 (Tatman: under the MDA, “Sigma (and in theory 

[McWane]) is supposed to sell within 98% of the published levels.”); CCPF 2431; CX 0106 at 

002 (Jansen: “[W]e need to make sure all domestic is right down the line since Sigma is 

involved”). 

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4.	 Domestic Fittings Prices Rose as a Result of the Exclusive Dealing Policy 

and the MDA 

McWane has successfully used the Exclusive Dealing Policy and the MDA to insulate the 

Domestic Fittings market from competition.272 Having co-opted Sigma as a competitor and 

impeded Star’s growth, depriving it of the scale necessary to invest further, lower its costs, and 

become a more effective competitor,273 McWane did not need to take competition into account 

when setting prices on Domestic Fittings.274 McWane (and therefore Sigma) raised Domestic 

Fittings published prices in December 2009.275 Distributor testimony and McWane’s financial 

records show that Domestic Fittings prices (and McWane’s margins) increased in both 2009 and 

2010.276 McWane successfully avoided what Mr. Tatman had identified as the “biggest risk” to 

its 2010 profitability, the “erosion of domestic pricing if Star emerges as a legitimate 

competitor.”277 

272 CCPF 2466-2491. 

273 CCPF 2109-2166. As Tatman put it, a purpose of the Exclusive Dealing Policy was “to make 

sure that they [Star] don’t reach any critical market mass that will allow them to continue to 

invest and receive a profitable return.” CCPF 1791. 

274 CCPF 2160-2166, 2475-2484; CX 2480 (Napoli, Dep. at 71-72) (explaining that he is not 

concerned about Star driving down the prices of Domestic Fittings); CCPF 2476; CX 0108 at 

001 (Jansen instruction to McWane sales team regarding Domestic Fittings: “[W]hen you have 

someone say that we need to match pricing due to the other guys we need to take a firm stance 

and ask who is going to use them.”). 

275 CCPF 2422-2425, 2481-2482. 

276 CCPF 2481; CCPF 2483, in camera. 

277 CCPF 1796. 

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III. JURISDICTION 

The FTC has jurisdiction over McWane’s acts and practices, including the acts and 

practices alleged in the Complaint. Under Section 5 of the FTC Act, the FTC may exercise 

jurisdiction over “persons, partnerships, or corporations,” with certain exceptions not relevant 

here. 15 U.S.C. § 45(a)(2). At all times relevant herein, McWane has been, and is now, a 

“corporation” as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. § 44.278 

The FTC is “empowered and directed to prevent” the use of “unfair methods of competition in or 

affecting commerce.” 15 U.S.C. § 45(a)(2). McWane’s acts and practices with respect to 

Fittings, as alleged in the Complaint, are in or affect commerce in the United States, as 

“commerce” is defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. § 44.279 

IV. STANDARD OF REVIEW 

Complaint Counsel must prove that Respondent unreasonably restrained trade by 

establishing each element of the seven counts of the Complaint by a preponderance of the 

evidence. See In re Adventist Health Sys./West, 117 F.T.C. 224, 297 (1994) (“Each element of 

the case must be established by a preponderance of the evidence . . . .”); Steadman v. SEC, 450 

U.S. 91, 101-102 (1981) (requirement under Section 556(d) of the Administrative Procedure Act 

that agency orders be “supported by and in accordance with the reliable, probative and 

substantial evidence” are satisfied by the preponderance-of-the-evidence standard). The 

preponderance of the evidence standard can be met through the use of direct or circumstantial 

evidence. See In re Washington Crab Ass’n, 66 F.T.C. 45, 55 (1964) (violation of Sherman Act, 

Section 2, and thus FTC Act, “established by a preponderance of the reliable, probative and 

278 CCPF 2; Joint Stipulations of Law, JX0001 ¶ 1. 

279 CCPF 3; Answer at ¶ 10 (admitting that sales of Fittings are interstate commerce).
 

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substantial evidence and the fair and reasonable inferences drawn therefrom”) (Initial Decision, 

aff’d by Commission). 

Conduct unreasonably restrains trade when it has or is likely to have a substantial 

anticompetitive effect in the relevant market, such as by increasing prices, reducing output, 

reducing quality, or reducing consumer choice. See, e.g., Standard Oil Co. v. United States, 283 

U.S. 163, 175 (1931); Realcomp II, Ltd. v. FTC, 635 F.3d 815, 825 (6th Cir. 2011); Hahn v. Ore. 

Physicians’ Serv., 868 F.2d 1022, 1026 (9th Cir. 1988). Courts consider one or more of three 

factors in making this determination: the nature of the restraint; market power; and evidence of 

actual effects. 

Determining whether a restraint is likely to harm competition is judged along an 

analytical continuum from conduct that is judged to be per se unlawful without any market 

analysis, to an abbreviated market analysis under an “inherently suspect” or “abbreviated rule of 

reason” analysis, to a more plenary market analysis under a full blown rule of reason analysis. In 

many cases, the likely harm to competition is apparent from the nature of the restraint. For 

example, restraints such as naked price fixing and market allocation agreements, are known to 

have a “pernicious effect on competition and lack any redeeming virtue,” and are thus deemed to 

be per se unlawful. N. Pac. Ry. Co. v. United States, 356 U.S. 1, 5 (1958); see also Realcomp, 

635 F.3d at 825. Conduct that is per se unlawful is condemned without any further market 

inquiry once the conduct itself has been proven. Id. 

Restraints that bear a “close family resemblance” to “another practice that already stands 

convicted in the court of consumer welfare” are presumed to harm competition without proof of 

market power or actual effects, unless the defendant proffers a competitive justification for the 

practice. Polygram Holding, Inc. v. FTC, 416 F.3d 29, 37 (D.C. Cir. 2005); see also Realcomp, 

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635 F.3d at 826 n.4. This “inherently suspect” analysis is appropriate if “an observer with even a 

rudimentary understanding of economics could conclude that the arrangements in question 

would have an anticompetitive effect on customers and markets.” Realcomp, 635 F.3d at 825 

(quoting Cal. Dental Ass’n v. FTC, 478 U.S. 756, 770 (1999)); Polygram, 416 F.3d at 35-36; N. 

Tex. Specialty Physicians v. FTC, 528 F.3d 346, 362 (5th Cir. 2008) (physician group’s 

collective negotiations of fee for service contracts “bear a very close resemblance to horizontal 

price fixing” such that inherently suspect analysis was appropriate). 

Even where the anticompetitive nature of a restraint is less obvious, courts need not 

engage in a full rule of reason or “plenary market examination.” Cal. Dental Ass’n, 526 U.S. at 

779 (1999) (the need for a “[m]ore extended examination of the possible factual underpinnings... 

[does] not, of course, necessarily [] call for the full market analysis”). The essential inquiry is 

“whether or not the challenged restraint enhances competition.” Id. at 780. Thus, the court need 

only conduct a sufficient analysis to arrive at a “confident conclusion about the principal 

tendency of a restriction . . . .” Id. at 781. 

Under a full-blown rule of reason analysis, evidence of the anticompetitive nature of the 

restraint and market power presumptively establish anticompetitive effects, even in the absence 

of direct proof of actual anticompetitive effects, such as higher prices. E.g., In re Realcomp II, 

Ltd., FTC Docket No. 9320, 2007 WL 6936319, at *19 (Oct. 30, 2009) (reasoning that because 

market power is a “surrogate for detrimental effects,” that “if a tribunal finds that the defendants 

had market power and that their conduct tended to reduce competition, it is unnecessary to 

demonstrate directly that their practices had adverse effects on competition.”); see also United 

States v. Brown Univ., 5 F.3d 658, 668 (3d Cir. 1993); Flegel v. Christian Hosp., 4 F.3d 682, 688 

(8th Cir. 1993). Thus, plaintiffs may prove that a restraint violated the FTC Act under a plenary 

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rule of reason analysis by showing either that the defendants had market power and the nature of 

the restraint or direct evidence of actual effects. In re Realcomp II, 2007 WL 6936319, at *19. 

Notably, direct proof of adverse effects can be established in numerous ways, and does not 

necessarily need to involve elaborate econometric proof that the conduct resulted in higher 

prices. See Indiana Fed’n of Dentists, 476 U.S. at 460-461 (actual anticompetitive effects 

proven by evidence that insurers in two localities over a period of years were “actually unable to 

obtain compliance with their requests for submission of x-rays”); In re Realcomp II, 2007 WL 

6936319, at *19. 

If it is shown that conduct is likely to harm competition under an abbreviated or plenary 

rule of reason analysis, then the burden shifts to respondent to show that the challenged conduct 

has a “plausible” and “cognizable” procompetitive justification. See In re Polygram Holding, 

Inc., 136 F.T.C. 310, 345-347 (2003). A justification is cognizable if it is compatible with the 

goal of the antitrust laws to further competition. Id. at 345. It is plausible if it will “plausibly 

create or improve competition,” such as by increasing output or improving product quality, 

service, or innovation, and “cannot be rejected without extensive factual inquiry.” Id. at 347. 

The respondent must show evidence that supports the proposed justification, and that the 

challenged conduct is reasonably necessary – and no broader than necessary – to achieve the 

alleged procompetitive effects. See, e.g., Realcomp, 635 F.3d at 835 (finding procompetitive 

justification – the prevention of free-riding – insufficient where the petitioner “has not 

demonstrated a connection between the [restraint] and the prevention of free-riding”). If a 

respondent is able to make that showing, then Complaint Counsel bears the burden of proving 

that the anticompetitive effects outweigh the procompetitive efficiencies. Polygram Holding, 

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Inc. v. FTC, 416 F.3d 29, 36 (D.C. Cir. 2005). Absent such a showing, the conduct is 

condemned. 

V.	 LEGAL ANALYSIS 

McWane engaged in a long series of anticompetitive acts in the Fittings and Domestic 

Fittings markets. In Sections A and B below, we discuss the two relevant product markets at 

issue and how the Fittings market is conducive to collusion. Section C discusses how McWane 

violated Section 5 of the FTC Act by unlawfully inviting its competitors to collude in an per se 

illegal price fixing agreement. Section D details how McWane conspired with Sigma and Star to 

stabilize and increase Fittings prices by curtailing Project Pricing and increasing price 

transparency. Section E discusses how McWane’s participation in the DIFRA information 

exchange, independent of the price-fixing claim, violates Section 1 of the Sherman Act because 

DIFRA’s exchange of Fittings sales volume is likely to lead to price coordination. Acting to 

protect its monopoly in the Domestic Fittings market, Section F discusses how McWane’s 

Master Distribution Agreement with Sigma violates Section 1 because it eliminated Sigma as a 

potential competitor in the Domestic Fittings market. Sections G and H then discuss how 

McWane monopolized, attempted to monopolize, and conspired to monopolize the Domestic 

Fittings market by implementing its Exclusive Dealing Policy, which had the purpose and effect 

of excluding rivals and maintaining supracompetitive prices. 

A.	 Fittings and Domestic Fittings Represent Two Relevant Markets That Each 

Have High Barriers to Entry 

Market definition is an important tool for antitrust analysis because it assists the Court in 

its assessment of whether one firm has, or several firms acting together have, the ability to raise 

prices above the levels that would exist in a competitive market. See, e.g., Consul, Ltd. v. 

Transco Energy Co., 805 F.2d 490, 495 (4th Cir. 1986). In other words, market definition is an 

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“an aid in determining whether power exists.” Gen. Indus. Corp. v. Hartz Mountain Corp., 810 

F.2d 795, 805 (8th Cir. 1987) (quoting Lawrence A. Sullivan, Handbook of the Law of Antitrust 

41 (1990)). 

Here, the record evidence establishes that there are two relevant markets: (1) the supply 

of Fittings, i.e., ductile iron pipe fittings of 24” and smaller in diameter, that are sold for use on 

Open Specification jobs (the “Fittings market”); and (2) the supply of Domestic Fittings, i.e., 

ductile iron pipe fittings of 24” and smaller in diameter that are made in the United States, that 

are sold for use on jobs with Domestic-only Specifications (the “Domestic Fittings market”). 

The relevant geographic market for both product markets is the United States. Both of these 

markets have high entry barriers. 

1. General Principles of Market Definition 

The standards for defining a relevant antitrust market under the Sherman Act are the 

same as those developed for the analysis of mergers under the Clayton Act. See, e.g., United 

States v. Grinnell Corp., 384 U.S. 563, 572-573 (1966) (noting that there is “no reason to 

differentiate between ‘line’ of commerce in the context of the Clayton Act and ‘part’ of 

commerce for purposes of the Sherman Act”); Image Tech. Servs. v. Eastman Kodak Co., 125 

F.3d 1195, 1204 n.3 (9th Cir. 1997) (same). A well-defined antitrust market consists of “any 

grouping of sales whose sellers, if unified by a hypothetical cartel or merger, could profitably 

raise prices significantly above the competitive level.” Coastal Fuels Inc. v. Caribbean 

Petroleum Corp., 79 F.3d 182, 197 (1st Cir. 1996), cert. denied, 519 U.S. 927 (1996); see also 

Brown Shoe Co., Inc. v. United States, 370 U.S. 294, 325-326 (1962) (emphasizing analysis of 

“lessen[ed] competition” in relevant market definition); 2010 Horizontal Merger Guidelines at 

§ 4.1.1 (describing the hypothetical monopolist test as a measure of a combined firm’s ability to 

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raise prices, or market power). A relevant market is comprised of a relevant product market and 

a relevant geographic market. Brown Shoe, 370 U.S. at 325-326 (1962). 

A relevant product market includes all products or services that are reasonable substitutes 

for the same purpose or use from a buyer’s point of view. United States v. E.I. du Pont de 

Nemours & Co., 351 U.S. 377, 394-395 (1956); Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 

1421, 1435 (9th Cir. 1995) (hereinafter “ARCO”); see also In re: R.R. Donnelley & Sons Co., 

120 F.T.C. 36, 153 (1995) (defining a relevant market as “the smallest grouping of products 

whose sellers, if unified by a hypothetical cartel or merger, could profitably increase prices 

significantly above the competitive level”). In determining the relevant product market, courts 

have traditionally emphasized two factors: “(1) the reasonable interchangeability of use [by 

consumers] and (2) the cross-elasticity of demand between the product itself and substitutes for 

it.” FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109, 119 (D.D.C. 2004) (quoting Brown Shoe, 370 

U.S. at 325). 

“Interchangeability of use and cross-elasticity of demand look to the availability of 

products that are similar in character or use to the product in question and the degree to which 

buyers are willing to substitute those similar products for the product.” FTC v. Swedish Match, 

131 F. Supp. 2d 151, 157 (D.D.C. 2000) (citations omitted). Thus, two products are reasonably 

interchangeable if they can be used for the same purpose. FTC v. Staples, 970 F. Supp. 1066, 

1074 (D.D.C. 1997). Cross-elasticity of demand refers to the “responsiveness of the sales of one 

product to price changes of the other.” E.I. du Pont de Nemours & Co., 351 U.S. at 400 (1956). 

The Horizontal Merger Guidelines analyze cross-elasticity of demand by determining 

whether a hypothetical monopolist (or cartel) could profitably impose a small but significant and 

non-transitory increase in price (a “SSNIP”). 2010 Horizontal Merger Guidelines at § 4.1.1. If a 

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SSNIP of the hypothetically-monopolized products is profitable, then the market is properly 

defined to include only those products. Id.; see also FTC v. Whole Foods Mkt., Inc., 548 F.3d 

1028, 1038 (D.C. Cir. 2008) (applying the Merger Guidelines SSNIP test to defining a relevant 

product market); FTC v. Swedish Match N. Am., Inc., 131 F. Supp. 2d 151, 160-66 (D.D.C. 

2000) (same). On the other hand, “[i]f a small price increase would drive consumers to an 

alternative product, then that [alternative] product must be reasonably substitutable for those in 

the proposed market and must therefore be part of the market, properly defined.” Whole Foods, 

548 F.3d at 1038 (citing the 1992 Horizontal Merger Guidelines). 

A relevant geographic market is defined as “the ‘area of effective competition . . . in 

which the seller operates, and to which the purchaser can practicably turn for supplies.’” United 

States v. Philadelphia Nat’l Bank, 374 U.S. 321, 359 (1963) (quoting Tampa Elec. v. Nashville 

Coal Co., 365 U.S. 320, 327 (1961); see also Morgenstern v. Wilson, 29 F.3d 1291, 1296 (8th 

Cir. 1994) (defining the relevant geographic market as the “area to which consumers can 

practicably turn for alternative sources of the product and in which the antitrust defendants face 

competition.”); 2010 Horizontal Merger Guidelines at § 4.2.2 (describing geographic market 

definitions based on the location of customers). In In re Polypore, this Court further explained 

that: 

The boundaries of [the relevant geographic market] are shaped by 

the geographic structure of supplier-customer relations. Those 

boundaries must both correspond to the commercial realities of the 

industry and be economically significant, because Congress 

prescribed a pragmatic, factual approach to the definition of the 

relevant market and not a formal, legalistic one. 

2010 FTC LEXIS 17, at *492 (internal citation omitted). This Court also considered whether 

there are any “producers who can provide substitutes, and constrain any such exercise of market 

power” in the relevant geographic market. Id.; see also Rothery Storage & Van Co. v. Atlas Van 

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Lines, Inc., 792 F.2d 210, 218 (D.C. Cir. 1986); United States v. Rockford Memorial Corp., 717 

F. Supp. 1251, 1261 (N.D. Ill. 1989), aff’d, 898 F.2d 1278 (7th Cir. 1990); Phillip E. Areeda & 

Herbert Hovenkamp, Antitrust Law ¶ 551 (Supp. 2012) (hereinafter “Areeda & Hovenkamp, 

Antitrust Law”). 

2.	 The Supply of Fittings For Waterworks Projects With Open Specifications 

in the United States is a Relevant Market 

a)	 Fittings Sold For Use on Waterworks Projects With Open 

Specifications Are A Relevant Product Market 

Fittings are a small but essential part of any waterworks project that involves pressurized 

water distribution and treatment systems, such as potable water lines that connect water supply 

facilities to neighborhoods and certain sewer lines.280 Fittings attach to the ends of pipes in order 

to: change the direction of water flow; connect pipes of different sizes; merge two pipelines to 

one, or branch one pipeline off into two; and attach pipes to valves, fire hydrants, or water 

meters.281 There are thousands of different types and sizes of Fittings that each serve a different 

purpose, such as connecting to different sized pipes or providing various degrees of “bend.”282 

Fittings sold into Open Specifications, i.e., those specifications that do not specify a 

country of origin, are a relevant product market because there are no widely used substitutes that 

constrain their price, and because analytical convenience dictates that the thousands of different 

types and sizes of Fittings may be grouped together into one relevant market of 24” and below. 

See Brown Shoe, 370 U.S. at 325 (identifying “reasonable interchangeability of use” between 

products as determinative of product market parameters); Swedish Match, 131 F. Supp. 2d at 157 

280 CCPF 371-372 (uses); CCPF 420 (small sub-segment of waterworks projects). 

281 CCPF 371; see 596 (illustrating various Fittings uses). 

282 CCPF 378 (number of fittings); CCPF 596 (describing different purposes of fittings).
 

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(considering both the “similar character or use to the product in question” and whether “buyers 

are willing to substitute those similar products” when analyzing substitution); In re: Evanston 

Northwestern Healthcare Corp., 2007 F.T.C. LEXIS 210 (2007) (adopting Swedish Match’s 

substitutability standard). 

(1)	 There are No Widely Used Substitutes That Constrain the 

Price of Fittings 

Fittings sold into Open Specifications are a relevant product market because there are no 

widely used substitutes that constrain their price. See Swedish Match, 131 F. Supp. 2d. at 157. 

McWane admits that there are no “widely used substitutes” for Fittings.283 According to 

McWane’s economic expert, Dr. Normann, the closest substitute for Fittings are fittings made 

from a type of plastic: polyvinyl chloride (“PVC fittings”).284 PVC fittings, however, do not 

generally compete against Fittings and are not a sufficiently close substitute as to be included in 

the relevant market. 

PVC fittings are not reasonably interchangeable with Fittings. In the view of consumers, 

PVC fittings are more expensive, have lower pressure ratings, are more difficult to restrain and 

install, and are viewed as more susceptible to fracture than Fittings.285 Moreover, some 

jurisdictions simply do not allow plastic fittings.286 These conclusions are echoed by McWane’s 

Price Coordinator and Quality Manager, Mr. Napoli, who has over 20 years of industry 

283 Answer at ¶ 23; see also CCPF 578-594. 

284 RX-712A (Normann Rep. at 24). 

285 CCPF 581 (PVC fittings are more expensive); CCPF 582 (PVC fittings have lower pressure 

ratings); CCPF 586 (PVC fittings are more difficult to restrain and install); CCPF 583 (PVC 

fittings are more susceptible to fracture).
 

286 CCPF 585. 

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experience and was formerly responsible for interpreting product specifications and suitable 

product applications at McWane. Mr. Napoli testified at his deposition that, “[n]o one, to my 

knowledge, has come up with a good plastic substitute for the strength of ductile iron.”287 Mr. 

Napoli further explained that, in connection with high-pressure applications, “I don’t recall ever 

seeing a PVC fitting even attempt to be used by an engineer [End User].”288 Consistent with this 

testimony, there is no record evidence indicating that End Users would switch from Fittings to 

another product in response to a small, but significant, price increase.289 

Indeed, Fittings suppliers do not track the price of PVC fittings, and do not take the price 

of PVC fittings into account when setting Fittings prices.290 This is powerful evidence that 

Fittings and PVC fittings are not sensitive to each other’s price changes, and therefore are in 

separate markets. See Beatrice Foods v. FTC, 540 F.2d 303, 309 (7th Cir. 1976) (finding 

separate market when manufacturers of one product did not consider price of other product in 

setting prices); Staples, 970 F. Supp. at 1075-1079 (failure to track or react to prices of other 

products is evidence of separate markets); see also Brown Shoe, 370 U.S. at 325 (identifying 

“sensitivity to price changes” of other products as a factor for market definition). 

287 CCPF 583; see also CCPF 580-582, 584-588 (other reasons why PVC fittings are not Fittings 

substitutes); CCPF 1276 (DIFRA’s inaction regarding a “PVC threat”); CCPF 589-91 (brass, 

steel, cast iron, or gray iron fittings are not Fittings substitutes). 

288 CCPF 587 (statements from Fittings supplier executives, Messrs. Tatman, Jansen, Minamyer, 

McCutcheon, Saha, and Napoli). 

289 See CCPF 592 (distributors do not leverage PVC prices in negotiations with Fittings 

suppliers). 

290 CCPF 592-593. 

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Industry participants’ contemporaneous business documents also help to define the 

relevant product market as Fittings because they indicate that Fittings suppliers do not consider 

PVC fittings (or other products) to constitute a competitive threat. See FTC v. CCC Holdings, 

Inc., 605 F. Supp. 2d 26, 43 (D.D.C. 2009) (finding relevant product market of total loss 

software based on industry documents grouping software together while excluding other means 

of calculating total loss); Staples, 970 F. Supp. at 1076 (defendant’s internal documents 

comparing its prices to some companies’ prices, but not to other companies, indicate the 

boundaries of the product market). Here, McWane, Sigma and Star’s planning and strategy 

documents confirm they are meaningfully constrained only by competition from each other, and 

that they are not concerned about losing sales to alternative products. 

For example, in a January 2008 presentation discussing McWane’s reaction to recent 

developments in the Fittings market, Mr. Tatman stated that a Fittings price increase would be 

successful if supported by “the Big 3” Fittings suppliers, i.e., McWane, Sigma and Star.291 The 

only other company mentioned in the presentation is Serampore, a much smaller Fittings 

seller.292 Likewise, in a January 2008 memo to Sigma’s top managers, Sigma’s President, Mr. 

Pais, wrote that curtailing discounting on Fittings would be profitable if McWane, Sigma, and 

Star acted with “discipline;” he did not express any concern about losing sales to alternative 

291 CCPF 913; see also CCPF 1054 (Tatman Plan successful thanks to Big 3 curbing 

discounting); CCPF 460 (McWane budget planning document describes Sigma and Star as 

“primary” competitors); CCPF 962, 1341 (Sigma emails describing McWane, Sigma and Star as 

primary Fittings suppliers). 

292 CCPF 219, 459-460. 

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products or other suppliers.293 In fact, the pricing strategy discussed by Mr. Tatman and Mr. Pais 

largely collapsed in the Fall 2008 because of cheating, i.e., discounting by other suppliers of 

Fittings, not because of lost sales to alternative products.294 

Finally, the finding that Fittings are a distinct relevant product market is confirmed by the 

acknowledgement of McWane’s economic expert, Dr. Normann, that “industry demand for 

[Fittings] is likely inelastic,” i.e., that demand does not decline significantly as price increases.295 

This acknowledgment that consumers cannot substitute an alternative product when faced with a 

price increase for Fittings indicates that the Fittings market satisfies the SSNIP test, and therefore 

constitutes a relevant antitrust market. See Whole Foods Mkt., Inc., 548 F.3d at 1038; 2010 

Horizontal Merger Guidelines at § 4.1.1. 

(2)	 It is Appropriate to Group All Fittings 24” in Diameter and 

Below Into A Single “Cluster” Market 

While there are thousands of different Fittings, it is appropriate to group all Fittings (24” 

and smaller in diameter) into a single product market. The thousands of different types and sizes 

of Fittings generally are not a substitute for each other. For example, a four inch diameter Fitting 

cannot substitute for an eight inch Fitting because it would not fit on an eight inch pipe; and a 

Fitting with a ninety degree “bend” cannot substitute for a Fitting with a forty-five degree bend 

293 CCPF 956; see also CCPF 1161 (boosting price would be a result of actions by Star, Sigma, 

and McWane). 

294 CCPF 1439-1450 (Fittings suppliers monitoring and detecting cheating starting in August 

2008); CCPF 1451-1455 (Fittings suppliers complaining to one another about cheating); CCPF 

1456-1466 (Fittings suppliers resume Project Pricing); see also CCPF 579-594 (no substitutes for 

Fittings). 

295 RX-712-A (Normann Rep. at 24). 

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(or for a straight Fitting).296 Accordingly, each discrete size and type of Fitting could properly be 

viewed as a distinct product market. However, different types and sizes of Fittings may also be 

grouped together into a single cluster market for analytical convenience. See In re: Promedica 

Health Sys., Inc., 2012 FTC LEXIS 58, at *48-49 (“cluster markets are based on analytical 

convenience [and are] both useful and appropriate for evaluating competitive effects” under 

appropriate circumstances); Emigra Group v. Fragomen, 612 F. Supp. 2d 330, 353 (S.D.N.Y. 

2009) (no need to analyze complements in separate markets when the market shares are the 

same); Jonathan B. Baker, The Antitrust Analysis of Hospital Mergers and the Transformation of 

the Hospital Industry, 51 L. & Contemp. Probs., at 93, 138 (Spring 1998) (stating that smaller 

markets may be analyzed as a collection when geographic markets are the same and market 

shares are also similar). 

Using cluster markets is appropriate when the applicable competitive conditions are 

identical or nearly so for the entire class of products. For example, in Brown Shoe, the defendant 

appealed the district court’s finding that children’s shoes represented one relevant product 

market, arguing that such a market includes products that are not reasonably interchangeable for 

one another: “Brown argues, for example, that ‘a little boy does not wear a little girl’s black 

patent leather pump’ and that ‘[a] male baby cannot wear a growing boy’s shoes.’” 370 U.S. at 

327. The Court reached the pragmatic conclusion that to subdivide the children’s shoe market on 

the basis of size, age, and sex would not advance the antitrust analysis, and therefore was 

unnecessary: 

Further division does not aid us in analyzing the effects of this 

merger. . . . Appellant can point to no advantage it would enjoy 

296 CCPF 596. 

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were finer divisions than those chosen by the District Court 

employed. Brown manufactures significant, comparable quantities 

of virtually every type of nonrubber men’s, women’s and 

children’s shoes. Thus, whether considered separately or together, 

the picture of this merger is the same. 

Id. 

Likewise, in In re ProMedica Health Sys., Inc., the Commission grouped into a single 

relevant product market a collection of individual hospital services that were not substitutes for 

one another. In re ProMedica Health Sys., Inc., FTC Docket No. 9346, 2012 FTC LEXIS 58, at 

*48-51 (2012). For example, hospital obstetrical services generally may not be substituted for 

general surgery services. The Commission explained that all hospital services should 

nevertheless be “clustered” in a single market for analytical convenience because it would 

facilitate the analysis of the competitive effects of a merger of the two hospitals. Id.; see also 

Commentary on the Horizontal Merger Guidelines (2006) at 8-9 (“when the analysis is identical 

across products or geographic areas that could each be defined as separate relevant markets using 

the smallest market principle, the Agencies may elect to employ a broader market definition that 

encompasses many products or geographic areas to avoid redundancy in presentation”); 

Polypore, 2010 FTC LEXIS 17, at *485-86 (citing Brown Shoe and refusing to further subdivide 

a product market just because some customers require unique battery separators of unusual 

widths, because doing so is “impractical” and unwarranted where the market participants and 

entry conditions are the same). 

In the present case, for ease of analysis, the Court may aggregate all Fittings (sized 24” 

and smaller) into one product market. This is an efficient way of assessing the competitive 

effects of McWane’s conduct on numerous narrower markets sharing the same relevant 

competitive conditions. For each Fitting (sized 24” and smaller), the suppliers, customers, 

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distribution channels, and inputs are substantially the same.297 McWane, Sigma and Star provide 

the same Fittings to the same network of wholesale waterworks Distributors, for resale to the 

same End Users, for use in the same applications. As Dr. Schumann testified, given the identity 

of these market facts, determining whether McWane’s conduct is anticompetitive in the 

aggregate market is analytically identical to a competitive analysis of each size and type of 

Fitting within the cluster.298 See ProMedica, 2012 F.T.C. LEXIS 58, at *58; Polypore, 2010 

FTC LEXIS 17, at *485-86. In other words, no information is lost or changed; the evidence is 

simply processed more efficiently. 

Notably, the rationale supporting the Fittings cluster market (24” in diameter and smaller) 

does not support the inclusion of large ductile iron pipe fittings in the same market. Large 

diameter fittings are subject to market conditions that vary too greatly from those affecting small 

and medium Fittings. Foremost among these is the fact that there is a fourth substantial supplier 

of ductile iron pipe fittings of 30” and larger, ACIPCO.299 ACIPCO has an approximate market 

share of 40-45 percent in ductile iron pipe fittings of 30” and larger in diameter.300 Thus, any 

analysis of conduct relating to large diameter fittings must account for the actions of ACIPCO; 

whereas no similar accounting is required with respect to any or all of 24” and smaller diameter 

Fittings because ACIPCO does not sell those items. Accordingly, “Fittings,” i.e., ductile iron 

297 CCPF 599; see also CCPF 603 (suppliers); CCPF 601-602 (inputs); CCPF 605-606 

(distribution channels); CCPF 607 (customers); see generally CCPF 595-616 (Fittings may be 

treated as a cluster market). 

298 CCPF 596. 

299 CCPF 610-614. 

300 CCPF 613. 

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pipe fittings with 24” and smaller diameter, sold into Open Specifications is the properly defined 

relevant product market. 

b) The Relevant Geographic Market for Fittings is the United States 

“The geographic market need not be identified with ‘scientific precision,’ or ‘by metes 

and bounds as a surveyor would lay off a plot of ground.’ Nonetheless, the relevant geographic 

market must be sufficiently defined so that the court understands in which part of the country 

competition is threatened.” FTC v. Cardinal Health, Inc., 12 F. Supp. 2d 34, 49 (D.D.C. 1998) 

(citations omitted). Complaint Counsel and McWane agree that one relevant geographic market 

is the United States.301 

The “market area in which the [Fittings suppliers] operate and to which the purchasers 

can practicably turn for supply,” is the United States. See Tampa Electric, 365 U.S. at 327. For 

example, McWane, Sigma and Star use warehouses and distribution centers located throughout 

the United States to supply Fittings to waterworks distributors across the United States.302 

Specifically, McWane has distribution centers that enable one to two-day delivery to 95 percent 

of the United States.303 Sigma has five main warehouses, some satellite warehouses, and 

distribution centers in Florida, California, Washington, and Arizona.304 Star has thirteen 

301 CX 2260-A (Schumann Rep. at 17); RX-712A (Normann Rep. at 31) (for some customers the 

market is national in scope). 

302 CCPF 636. 

303 Id. 

304 Id. 

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distribution centers in the United States, in order to “stock product closer to [customers] for 

better delivery times.”305 

Defining the relevant geographic market as the United States is common where, as here, 

firms use competing distribution networks supplying the entire nation. E.g., FTC v. Cardinal 

Health, Inc., 12 F. Supp. 2d 34, 50 (D.D.C. 1998) (“the wholesale [drug] industry is largely 

driven by the competition that takes place on a national level”); Frito-Lay, Inc. v. The Bachman 

Co., 659 F. Supp. 1129, 1138 (S.D.N.Y. 1986) (“Defendant’s contention that the entire United 

States constitutes the relevant geographic market is a logical one since Frito-Lay distributes 

[salted snack foods] throughout the United States”). No witness, including McWane’s 

economist, has ever suggested the geographic market is larger than the United States. 

Dr. Normann suggests that, in theory, the geographic market may be smaller than the 

United States (e.g., particular states) if the suppliers are able to engage in price discrimination.306 

However, Dr. Normann does not indicate whether or how the competitive analysis is altered if 

these distinct submarkets were identified. Indeed, the market characteristics that make the 

Fittings market conducive to collusion apply to all markets throughout the United States. See 

infra Part V.B (discussing the Fittings market characteristics as conducive to collusion). Thus, it 

is convenient and appropriate for the Court to focus its analysis upon the broader U.S. market. 

Cf. Brown Shoe, 370 U.S. at 338-339 (upholding a more narrow relevant geographic market 

definition encompassing cities with populations exceeding 10,000 based on evidence that 

competitive dynamics are different in these cities as compared to smaller communities). 

305 Id. 

306 RX-712A (Normann Rep. at 30-31). 

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3.	 The Supply of Domestic Fittings For Waterworks Projects With 

Domestic-Only Specifications in the United States is a Relevant Market 

There is also a separate and distinct relevant product market for Domestic Fittings, i.e., 

ductile iron pipe fittings of 24” and smaller in diameter that are made in the United States, for 

use in waterworks projects with Domestic-only Specification (i.e., those specifications with a 

Buy American requirement). Domestic Fittings are properly grouped into Fittings sized 24” and 

smaller in diameter for the same reasons as Fittings sold into Open Specifications. See supra 

Part V.A.2.a(2). The market includes Domestic Fittings sold into all Domestic-only 

Specifications, including Domestic-only Specifications required by law and those based upon 

End User preference. The geographic market is limited to the United States. 

a)	 Domestic Fittings Sold Into Domestic-Only Specifications Are a 

Relevant Price Discrimination Market Because There Are No 

Reasonable Substitutes 

Domestic Fittings sold into waterworks projects with Domestic-only Specifications are a 

relevant price discrimination market because there are no reasonable substitutes for Domestic 

Fittings. See E.I. du Pont de Nemours & Co., 351 U.S. at 394-395 (defining relevant product 

market to include all products that are reasonable substitutes for the same purpose for a buyer); 

Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, at 1435 (9th Cir. 1995) (same). Domestic 

Fittings and imported Fittings are admittedly functionally interchangeable, and are substitutes for 

waterworks projects with Open Specifications: they are manufactured with the same general 

materials; meet the same AWWA standards; and provide the same functionality and role in 

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waterworks projects.307 And indeed, McWane sometimes sells bundles of domestic and 

imported Fittings for use on waterworks projects with Open Specifications.308 

By definition, however, only Domestic Fittings – and not imported Fittings – satisfy the 

Buy American requirements for Domestic-only Specifications.309 Thus, for a buyer, i.e., the 

Distributor having to supply Fittings for the waterworks specification as written, imported 

Fittings are not interchangeable or a reasonable substitute for Domestic Fittings on Domesticonly Specifications. See E.I. du Pont de Nemours & Co, 351 U.S. at 394-395; ARCO, 51 F.3d at 

1435. 

Reflecting the lack of substitutability from imported Fittings, there is a significantly 

higher price for Domestic Fittings sold into Domestic-only Specifications compared to Fittings 

sold into Open Specifications. McWane, the sole supplier of Domestic Fittings from 2006 until 

Star entered in late 2009, generally charges a 20% to 50% price premium on the sale of Domestic 

Fittings sold into Domestic-only Specifications.310 For any of its Domestic Fittings that are sold 

307 CCPF 415-416, 418. 

308 CCPF 452 (McWane refers to the mix of imported and domestically manufactured Fittings 

that it supplies to Open Specification projects as “blended”); CCPF 628-630 (discussing the 

pricing of blended fittings sold by McWane). 

309 CCPF 621, 1576 (Domestic Fittings required for ARRA-funded projects); CCPF 625 (other 

government entities have Domestic-only Specifications unrelated to ARRA); see also CCPF 621 

(generally no exceptions to ARRA Domestic-only specification); CCPF 1596-1599 (only three 

public interest waivers to ARRA’s Domestic-only specification granted); CCPF 1600-1615 (de 

minimis waiver to ARRA’s Domestic-only specification had limited, if any, application to 

Domestic Fittings); CCPF 1583-1588 (Mexico, South Korea and NAFTA countries did not 

satisfy ARRA’s Domestic-only specification). 

310 CCPF 628-630. 

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into Open Specifications, McWane lowers the price of its Domestic Fittings to be competitive 

with its importing rivals.311 

The fact that McWane charges different prices for Fittings sold into Open and Domesticonly Specifications is strong evidence that they are in separate markets. When, as here, suppliers 

can profitably charge different prices (net of costs) to different customers depending on known 

customer preferences, the relevant market is defined by the purchasing requirements of those 

customers that are vulnerable to the price increase. United States v. Archer-Daniels-Midland 

Co., 866 F.2d 242, 248 (8th Cir. 1988) (holding that significant price differential between high 

fructose corn syrup and sugar (functionally interchangeable products) evidenced low crosselasticity of demand, leading the court to conclude that the products are in two different product 

markets); see also Geneva Pharms. Tech. Corp. v. Barr Labs., Inc. 386 F.3d 485, 496-97 (2d Cir. 

2004) (finding that generic and branded drugs were not in the same market despite therapeutic 

equivalence because sustained price differential showed that neither product constrained the 

other’s pricing). 

A separate price discrimination market is appropriate because a dominant supplier can 

exercise monopoly power over the vulnerable customers and charge higher prices even if the 

supplier lacked such power with respect to other customers. As the Horizontal Merger 

Guidelines explain: 

If a hypothetical monopolist could profitably target a subset of 

customers for price increases, the Agencies may identify relevant 

markets defined around those targeted customers, to whom a 

311 CCPF 631-632 (discussing the pricing of blended fittings sold by McWane); cf. CCPF 848 

(selling Domestic Fittings into Open Specification jobs reduced McWane’s profits in 2007; less 

substitution has increased McWane’s present Fittings gross margins); CCPF 631 (McWane does 

not provide quotes for Domestic Fittings to be used in Open Specifications). 

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hypothetical monopolist would profitably and separately impose at 

least a SSNIP. Markets to serve targeted customers are also known 

as price discrimination markets. 

2010 Horizontal Merger Guidelines at §4.1.4.; see also U.S. Anchor Mfg., Inc. v. Rule Indus., 

Inc., 7 F.3d 986, 997-98 (11th Cir. 1993) (noting “that the ability to discriminate against a 

distinct group of customers by charging higher prices for otherwise similar products 

demonstrates the existence of market power with respect to that group,” and concluding that a 

high-priced line of anchors “may have constituted its own market” because of evidence of “price 

discrimination against a distinct group of customers”); cf. United States v. Rockford Mem’l 

Corp., 717 F. Supp. 1251, 1267 n. 12 (N.D. Ill. 1989), aff’d, 898 F.2d 1278 (7th Cir. 1990) 

(recognizing that price discrimination makes it possible to exercise market power over certain 

customers with fewer alternatives and not others with more potential alternatives); Areeda & 

Hovenkamp, Antitrust Law ¶ 534d (“the seller who can segregate a substantial group of buyers 

and charge them monopoly prices for a significant period has market power over the group of 

buyers who pay these prices”). 

McWane disputes the existence of a separate Domestic Fittings market by arguing that 

the price of Domestic Fittings for use in Domestic-only Specifications is constrained by the 

customers’ theoretical ability to “flip” specifications from Domestic-only to Open. See 

Respondent’s Pre-Trial Brief at 58; RX-712A (Normann Rep. at 27). This argument fails for 

several reasons. 

As a preliminary matter, with the exception of the ARRA period where the number of 

waterworks projects with Domestic-only Specifications increased,

312 the number of Domestic312 CCPF 1647-1649, 1652-1654. 

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only Specifications as a percentage of the overall Fittings market has remained fairly constant 

over time. In 2003, the International Trade Commission issued a report, relying largely on a 

representation from McWane, finding that Domestic-only Specifications were approximately 

10%-20% of the overall Fittings market; and present-day estimates suggest that Domestic-only 

Specifications currently represent approximately 20%-25% of the overall Fittings market.313 

This evidence suggests that such ‘flipping’ does not occur, or at least not to any great extent. 

Additionally, there is no reasonable ability to flip Domestic-only Specifications that are 

based on specific federal, state and local laws and regulations that require End Users to use 

Domestic-only Specifications for their public waterworks projects. These laws represent a 

regulatory barrier to entry that definitively excludes all import competition. See ARCO, 51 F.3d 

at 1439 (noting that one of the “main barriers to entry” in the retail sale of gasoline is “legal 

license requirements”); United States v. Syufy Enterprises, 903 F.2d 659, 673 (9th Cir. 1990) (“It 

is well known that some of the most insuperable barriers in the great race of competition are the 

result of government regulation.”); Apani Southwest, Inc. v. Coca-Cola Enters, Inc., 300 F.3d 

620, 626 (5th Cir. 2002) (considering government regulations in defining relevant market); 

United States v. Aluminum Co. of Am., 148 F.2d 416, 426 (2nd Cir. 1945) (same). Jurisdictions 

that legally require Buy American specifications include the State of Pennsylvania,314 the State 

313 CCPF 1700 (ITC report), 1654 (present day estimates). 

314 The Pennsylvania Steel Products Procurement Act, 73 Pa. Stat. §§ 1881-1887 (requiring that 

only iron and steel products made in America be used in all construction, repair, and 

maintenance contracts let by public bodies, including the Commonwealth, its political 

subdivisions, and authorities); see also CCPF 625-626, 449; CX 2523 (Bhattacharji, Dep. at 127) 

(acknowledging Pennsylvania Buy American limitation on Fittings); CX 2531 (Rybacki, Dep. at 

270-272) (same); RX-637 (Jansen, Dep. at 99-100) (same). 

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of New Jersey,315 the United States Air Force,316 and various municipalities located across the 

United States.317 Additionally, waterworks projects funded by ARRA were also required by 

federal law to use Domestic Fittings.318 

For these Domestic-only Specifications required by law, there is no prospect of flipping 

the specifications except by changing the applicable law or regulation. McWane – who as the 

sole domestic supplier was in the unique position to observe, and who had every incentive to 

introduce at trial – did not introduce any evidence that buyers in Buy American jurisdictions ever 

lobbied (successfully or not), or were even likely to lobby, their legislature to repeal their Buy 

American requirements for future projects in response to a small but significant and nontransitory increase in the price of Domestic Fittings.319 McWane’s contention is contrary to 

common sense; it is contrary to antitrust precedent that presumes that government regulations 

that impede market entry will persist; and it was even rejected by McWane’s own economic 

expert who opined that, “It is unlikely that state laws could be easily changed based on short315 N.J. Stat. § 52:33-3 (requiring that “every contract for the construction, alteration or repair of 

any public work in this state shall contain a provision that in the performance of the work the 

contractor and all subcontractors shall use only domestic materials in the performance of the 

work”); see also CCPF 1701; CX 2523 (Bhattacharji, Dep. at 127-128 (“New Jersey is another 

state which is Buy America”). 

316 CCPF 449, 625 (federal government projects and Air Force bases require Domestic Fittings). 

317 CCPF 449, 625, 626 (some municipalities have strong preference for domestic). 

318 CCPF 621, 1576. While there some was limited ability to obtain certain waivers to the Buy 

American requirement under ARRA, the evidence introduced at trial demonstrated that the use of 

such waivers was insignificant. CCPF 1589-1615. 

319 But see CCPF 1699 (McWane and Star admit they were unable to “flip” domestic 

specifications). 

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term fluctuations in relative prices.”320 See ARCO, 51 F.3d at 1439 (noting that one of the main 

barriers to entry in market was government regulations); Syufy, 903 F.2d at 673 (same); see also 

FTC v. Indiana Fed’n of Dentists, 476 U.S. 447, 456 (1986) (in assessing an argument, the 

Commission may rely on common sense). 

Thus, McWane’s argument about ‘flipping’ specifications is really about the size of the 

Domestic Fittings market and whether it includes Domestic-only Specifications based on End 

User preference, and not whether such a market exists at all. At a bare minimum, a monopolist 

supplier of Domestic Fittings would find it profitable to charge supracompetitive prices for 

projects governed by legally required Buy American provisions. This is sufficient to establish 

the existence of a discrete product market for Domestic Fittings sold into Domestic-only 

Specifications. See Areeda & Hovenkamp, Antitrust Law ¶ 572b (“To the extent that regulation 

limits substitution, it may define the extent of the market.”); accord New York Citizen Comm. on 

Cable TV v. Manhattan Cable TV, Inc., 651 F. Supp. 802, 807-808 (S.D.N.Y. 1986) (lower 

Manhattan is a relevant cable television market because franchise issued by the city excludes 

entry). 

McWane’s argument about the potential “flipping” of Domestic-only Specifications as 

the reason for there being one large Fittings market is also contradicted by the available pricing 

data, which supports a separate market for Domestic Fittings sold into all Domestic-only 

Specifications. As previously discussed, McWane charges significantly higher prices for 

Domestic Fittings sold into all Domestic-only Specifications than it does for Fittings sold into 

320 RX-712A (Normann Rep. at 28). 

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Open Specifications.321 This is strong evidence that Fittings sold into Open Specifications and 

all Domestic-only Specifications are in separate markets. See Archer-Daniels-Midland Co., 866 

F.2d at 248; Geneva Pharms. Tech., 386 F.3d at 497. 

Moreover, if there were a single market, the prices for Fittings sold into Open and 

Domestic-only Specifications – to the extent that they differed – would move in parallel. As 

antitrust scholars Areeda and Hovenkamp have explained: 

Without correlation in their price changes, two products are 

probably in separate markets. Uncorrelated price movements 

mean that the respective producers of each product either do not 

need to or, because of cost constraints, cannot react to changes in 

the prices charged by the producers of the other product. 

Areeda & Hovenkamp, Antitrust Law ¶ 562a. Here, the price of Fittings sold into Open 

Specifications and the price of Domestic Fittings sold into all Domestic-only Specifications do 

not move in parallel.322 This indicates that they respond to separate demand curves, and provides 

strong support for the conclusion that Domestic Fittings sold into Domestic-only Specifications 

is a distinct market from Fittings sold into Open Specifications. See United States v. Aluminum 

Co. of Am. (Rome Cable), 377 U.S. 271, 276 (1964) (despite functional interchangeability 

between products, court held that copper conductors and aluminum conductors used in power 

lines were in different markets because their prices did not respond to one another). 

Finally, McWane’s own conduct is inconsistent with the claim that the company is 

constrained from charging supracompetitive prices for Domestic Fittings sold into Domesticonly Specifications. By its own admission, McWane adopted an Exclusive Dealing Policy in 

321 CCPF 628-630, 1694-1697 (higher prices for Domestic Fittings than for blended Fittings). 

322 CCPF 632. 

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order to impede Star from competing for Domestic-only projects. 323 McWane feared that Star’s 

entry into Domestic Fittings market would cause the price of Domestic Fittings to get “creamed” 

as prices had in the import market. 324 Contemporaneous business documents of industry 

participants recognizing separate markets is strong evidence of separate markets. See FTC v. 

CCC Holdings, Inc., 605 F. Supp. 2d at 43 (finding relevant product market of total loss software 

based on industry documents grouping software together while excluding other means of 

calculating total loss); Staples, 970 F. Supp. at 1076 (defendant’s internal documents comparing 

its prices to some companies’ prices, but not to other companies, indicate the boundaries of the 

product market). Thus, Domestic Fittings sold into Domestic-only Specifications is a properly 

defined product market.325 

b) The Relevant Geographic Market is the United States 

“The relevant geographic market inquiry focuses on that geographic area within which 

the defendant’s customers who are affected by the challenged practice can practicably turn to 

323 CCPF 1804-1814; see also CCPF 1782-1786. 

324 CCPF 1790; CX 0074 (“Whether we end up with Star as a complete or incomplete domestic 

supplier my chief concern is that the domestic market gets creamed from a pricing standpoint”); 

see also CCPF 1787-1797. 

325 McWane also has suggested that the Domestic Fittings market is too small to merit antitrust 

concern. This argument has no merit. Here, the evidence suggests that Domestic Fittings market 

comprises approximately 15-20 percent of the overall Fittings market in jurisdictions around the 

country. Anticompetitive conduct directed at markets as small as a single customer are 

actionable. FTC v. Alliant Techsystems, 808 F. Supp. 9, 20 (D.D.C. 1992) (finding a relevant 

market where the sole purchaser was the Department of Defense); cf. United States v. Southwest 

Bus Sales, Inc.,20 F.3d 1449 (8th Cir. 1994) (party injured by anticompetitive conduct was a 

governmental entity); United States v. Ashley Transfer & Storage Co., 858 F.2d 221, 222 (4th 

Cir. 1988) (same); Horizontal Merger Guidelines at § 4.1.4 (“If prices are negotiated individually 

with customers, the hypothetical monopolist test may suggest relevant markets that are as narrow 

as individual customers.”). 

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alternative supplies if the defendant were to raise its prices or restrict its output.” E.I. du Pont de 

Nemours & Co. v. Kolon Indus., 637 F.3d 435, 441 (4th Cir. 2011). 

It is axiomatic that a foreign manufacturer cannot compete in the Domestic Fittings 

market. From 2006 until late 2009, there was one and only one manufacturer of Domestic 

Fittings:326 McWane, which sold Domestic Fittings throughout the United States that were made 

from its foundry in Anniston, Alabama.327 When Star entered the Domestic Fittings market in 

2009, it likewise used foundries in Texas and elsewhere in the United States to produce Fittings 

that it then finished and sold for use in Domestic-only Specifications.328 It follows that in 

connection with the supply of Domestic Fittings, the relevant geographic market is the United 

States. Further, as Dr. Schumann testified, the anticompetitive effects of McWane’s conduct 

would be the same irrespective of whether the relevant geographic market was deemed the entire 

U.S. and/or smaller parts thereof.329 Accordingly, the United States is the properly defined 

geographic market. 

4.	 The Relevant Fittings and Domestic Fittings Markets Have High Barriers 

to Entry 

Barriers to entry are factors that prevent new entrants from timely responding to 

supracompetitive pricing. See United States v. Microsoft Corp., 253 F.3d 34, 51 (D.C. Cir. 

2001). There are high barriers to entry in the Fittings and Domestic Fittings market. 

326 CCPF 1659. 

327 McWane’s foundry in Tyler, Texas, closed in November 2008. (CCPF 10). 

328 CCPF 128, 1725, 1733-1735, 1738, 1740. 

329 CCPF 639. Indeed, because the attainment of scale efficiencies would depend on Star’s 

overall sales, its exclusion from local markets or submarkets might have anticompetitive 

ramifications nationwide irrespective of how geographic market is formally defined. 

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A de novo entrant must make a significant capital investment to enter the Fittings market. 

For example, a new entrant must build its own foundry or develop a supply chain of foundries 

that can produce its Fittings, and develop or purchase the hundreds of patterns or moldings 

necessary for making a full line of Fittings covering thousands of items.330 A new entrant would 

then have to have its products tested and certified to conform to AWWA standards and get on 

“approved” lists for engineers and municipalities.331 An entrant must also develop expertise in 

design engineering, and develop a marketing force and relationships with Distributors that will 

carry its products.332 All of these factors make entry into the supply of Fittings expensive, 

difficult, and time consuming, and thus prevent “new rivals from timely responding to an 

increase in price above the competitive level.” Microsoft, 253 F.3d at 51. 

Generally speaking, there are fewer barriers to entry for an existing imported Fittings 

supplier that wishes to enter the Domestic Fittings market. As exemplified by Star’s Domestic 

Fittings market entry , the new entrant would have the expertise necessary from its import 

business to operate its own fittings foundry,333 and it would have well-established relationships 

330 CCPF 648 (new entrant needs to develop hundreds of patterns and moldings); CCPF 646 

(new entrant must build foundry or develop supply chain of foundries); see also CCPF 1721 (for 

its domestic entry, Star considered building a foundry, purchasing a foundry, or contracting with 

independent foundries in the United States); CCPF 1738, CCPF 1755-1757 (Star expanded a 

finishing facility for its Domestic Fittings); CCPF 644 (Sigma identified “the high cost of 

tooling” as a “prohibitive barrier to entry”); CCPF 649 (SIP took 3 years to develop a full line of 

3500 Fittings up to 48 inches in diameter); CCPF 2277 (Sigma estimated that the tooling for a 

full line of Domestic Fittings would number 700 items and cost $3 to $5 million); CCPF 1749 

(Star invested $3.5 million in patterns for Domestic Fittings). 

331 CCPF 647. 

332 CCPF 646, 1682 (entrant needs to develop expertise in design engineering); CCPF 645 

(developing relationships with Distributors is important). 

333 CCPF 1666, in camera. 

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with the major Distributors to purchase and distribute its products.334 Like Star, the entrant could 

leverage its existing sales team, regional distribution centers, and back office support.335 

However, a significant barrier to entry for the Domestic Fittings market is McWane’s Exclusive 

Dealing Policy, which restricts Distributors’ ability to purchase Domestic Fittings from any 

supplier other than McWane.336 Courts recognize exclusionary conduct as a barrier to entry. See 

United States v. Dentsply Int’l, Inc., 399 F.3d 181, 189 (3d Cir. 2005). Thus, with McWane’s 

Exclusive Dealing Policy in place, there are high barriers to entry in the Domestic Fittings 

market, even for experienced suppliers of imported Fittings. 

B. The Fittings Market Is Highly Susceptible to Collusion 

The Fittings market is conducive to collusion. Courts look to the market’s characteristics 

to help evaluate the plausibility of conspiracy allegations. See In re Flat Glass Antitrust Litig., 

385 F.3d 350, 360 (3d Cir. 2004) (identifying market characteristics as a “plus factor” to be used 

in determining whether an illegal agreement has occurred). In this case, several of the Fittings 

market’s “salient features” increase the likelihood of price fixing by providing Respondent with 

the motive and opportunity to restrain Fittings price competition. In re Blood Reagents Antitrust 

Litig., 756 F. Supp. 2d 623, 631 (E.D. Pa. 2010). Those features include: (1) a highly 

concentrated market with few rivals; (2) product homogeneity; (3) barriers to entry; (4) inelastic 

demand; (5) price transparency; (6) common membership in a trade association; and (7) industry 

social structure.337 Not all of these characteristics are necessary for successful coordination to 

334 CCPF 1667. 

335 CCPF 1668. 

336 CCPF 1669-1670. 

337 Blood Reagents, 756 F. Supp. 2d at 631-632; CCPF 663. 

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occur.338 But the Fittings market exhibits most – if not all – of the characteristics that promote 

successful coordination, thus making coordinated interaction, and collusion, more likely.339 

1. High Concentration of Suppliers 

“[T]he possibility of anticompetitive collusive practices is most realistic in concentrated 

industries.” Todd v. Exxon Corp., 275 F.3d 191, 208 (2d Cir. 2001); see also Blood Reagents, 

756 F. Supp. 2d at 631 (same). A concentrated market with few rivals facilitates collusion 

because there are fewer firms to coordinate, and cheating can be quickly detected. In re High 

Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 656 (7th Cir. 2002). It also allows each firm 

to recognize that its profit-maximizing price and output decisions depend on the price, output, 

and strategic behavior of each of the other firms in the market, thereby increasing the incentive 

to conspire.340 

Here, the Fittings market is a highly concentrated oligopoly with three dominant firms.341 

Together, McWane, Sigma, and Star account for more than 95 percent of the Fittings (including 

both domestic and imported) sold in the United States, with a small number of fringe suppliers 

constituting the balance of the market.342 For each year in the period 2007 to 2011, the 

Herfindahl-Hirschman Index (“HHI”) for the Fittings market exceeded 3400.343 An HHI above 

338 CCPF 663; see also George J. Stigler, A Theory of Oligopoly, 72 J. POLITICAL ECON. 44-61 

(1964); George A. Hay & Daniel Kelly, An Empirical Survey of Price Fixing Conspiracies, 17 

J.L. & ECON. 13-38 (1974); Blood Reagents, 756 F. Supp. 2d at 631-632. 

339 CCPF 664. 

340 CCPF 652. 

341 CCPF 651. 

342 CCPF 456-457. 

343 Id. 

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2,500 is classified by federal antitrust enforcement agencies as reflecting a highly concentrated 

market.344 Moreover, consistent with oligopoly theory, McWane, Sigma, and Star recognized 

that their price interdependence required all three suppliers to participate for any price increase to 

be effective.345 Thus, the highly concentrated nature of the Fittings market heightened 

McWane’s ability and incentive to collude on prices with its co-conspirators. 

2. Product Homogeneity 

Product homogeneity is an additional characteristic conducive to anticompetitive 

coordination. Blood Reagents, 756 F. Supp. 2d at 632; United States v. Alcoa, Inc., No. 2000­

954, 2001 WL 1335698, at *12 (D.D.C. June 21, 2001). A highly standardized product permits 

colluding sellers to detect cheating more easily than if the product required individualized 

pricing or specific “quality, design, post-sale services, and the like.” High Fructose Corn Syrup, 

295 F.3d at 657. Here, Fittings are commodity products made to AWWA standards; any 

individual Fitting is interchangeable with any other Fitting that meets the same AWWA 

standards and specifications.346 

3. High Barriers to Entry and Few Product Substitutes 

High barriers to entry also facilitate collusion. Blood Reagents, 756 F. Supp. 2d at 632 ; 

In re Chocolate Confectionary Antitrust Litig., 602 F. Supp. 2d 538, 551 (M.D. Pa. 2009) 

(describing high barriers to entry as “material” to Sherman Act Section 1 claim). The existence 

of significant barriers to entry “mitigates the risk that defendant’s illegal conduct would cause 

new companies to enter the market with lower prices[.]” Blood Reagents, 756 F. Supp. 2d at 

344 Id.; see also 2010 Horizontal Merger Guidelines at 19. 

345 Cf. CCPF 652, 655. 

346 CCPF 415-417. 

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629. As discussed more fully, supra Part V.A.4, the Fittings market has high barriers to entry 

and there are “no widely used substitutes” for Fittings.347 

4. Inelastic Demand 

Demand inelasticity also makes anticompetitive coordination more likely. Todd v. Exxon 

Corp., 275 F.3d at 211 (finding market susceptible to tacit coordination where supply had 

“inherently inelastic quality”); Blood Reagents, 756 F. Supp. 2d at 631-632 (describing inelastic 

demand as a characteristic conducive to anticompetitive coordination); Alcoa, 2001 WL 

1335698, at *12 (D.D.C. June 21, 2001) (same). Inelastic demand increases the likelihood of 

collusion because price increases do not decrease demand. Blood Reagents, 756 F. Supp. 2d at 

629. 

Fittings demand is highly inelastic over the range of Fittings prices for several reasons: (i) 

there are no economically relevant or practical substitutes for Fittings; (ii) Fittings costs 

represent a very small portion (about 5 percent) of the overall cost of constructing a waterworks 

system or plant; and, (iii) the decision to build or repair waterworks systems or treatment plants 

depends on many factors unrelated to the Fittings cost.348 Inelastic Fittings demand indicates 

that the rewards for price cutting are likely to be small and the rewards from collusion are likely 

to be large.349 

347 CCPF 579-591. 

348 CCPF 578-594 (no economically relevant or practical substitutes); CCPF 419-424 (describing 

inelastic nature of Fittings market); CCPF 664(d). 

349 CCPF 650; see also George A. Hay & Daniel Kelley, An Empirical Survey of Price Fixing 

Conspiracies, 17 J.L. & ECON. 13, 15 (1974). 

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5. Price Transparency 

Price transparency can also facilitate coordination and collusion. See In re Rail Freight 

Fuel Surcharge Antitrust Litig., MDL No. 1869, 2012 WL 2870207, at *64, *65 (D.D.C. June 

21, 2012) (adopting expert’s assessment that transparent pricing is a characteristic of the rail 

freight industry “that make[s] it conducive to price fixing”). Price transparency mitigates the 

costs of implementing and maintaining a conspiracy by allowing rivals to easily detect cheating, 

thereby increasing the risk of punishment and creating a disincentive for participating firms to 

cheat.350 Rail Freight Fuel Surcharge, 2012 WL 2870207, at *64. 

At some levels, Fittings market prices are highly transparent: list prices and multipliers 

are published and readily available.351 However, Project Pricing offered on specific waterworks 

jobs, and the actual transactional price paid by distributors, often differ from the published price 

and lack transparency.352 Here, the conspirators curtailed the incidence of Project Pricing in 

order to gain “visibility” in the marketplace.353 While cartel participants could monitor their 

competitors’ Project Pricing through competitive feedback from their sales force and tracking 

their own sales,354 the formation of the DIFRA information exchange was designed to further 

350 CCPF 659. 

351 CCPF 670-678. 

352 CCPF 679-683. 

353 CCPF 681; see also CCPF 956-961, 963-964 (Sigma curtailed its Project Pricing); CCPF 977­

987 (Star curtailed its Project Pricing). 

354 CCPF 683; CCPF 682 (recognizing that the companies use their sales forces to monitor 

Project Pricing offered by competitors).
 

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increase price transparency.355 As discussed more fully, infra Part V.E, the DIFRA information 

exchange of monthly sales reports allowed the Fittings suppliers to determine monthly changes 

in their market share, and, if the Fittings volume fell, each supplier could determine whether its 

shipment volume was falling because of decreased demand (indicated by a stable market share), 

or because its rivals were cutting prices (indicated by a declining market share).356 

6. Trade Association Membership 

Common trade association membership may also promote collusion.357 See In re Blood 

Reagents Antitrust Litig., 756 F. Supp. 2d at 632. A trade association can facilitate the exchange 

of competitively sensitive information and communication among rival firms’ executives, thus 

increasing opportunities to conspire.358 Here, the evidence shows that top executives with 

pricing authority from McWane, Sigma, and Star met and spoke with each other formally at 

DIFRA meetings as well as in private dinners and lunches in conjunction with DIFRA 

meetings.359 And those same executives called and emailed each other directly, ostensibly to 

discuss DIFRA issues.360 Accordingly, participation in DIFRA, including its information 

exchange, was a key element of the price fixing agreement among McWane, Sigma, and Star. 

355 CCPF 664(f); CCPF 1275; CCPF 1279; CCPF 1284; CCPF 1288-1289; CCPF 1273 (the only 

thing DIFRA did was to report aggregated Fittings sales data of its members). 

356 CCPF 1297-1299; CCPF 1300-1333 (describing how the companies used the DIFRA data); 

see also CCPF 659 and CCPF 661. 

357 CCPF 661. 

358 Id. 

359 CCPF 794; CCPF 796; CCPF 1036; CCPF 1131-1150. 

360 CCPF 1131-1150. 

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7. Social Structure 

An industry’s social structure can also facilitate collusion among market players by 

increasing opportunities to interact, coordinate, and thus conspire with competitors. See In re 

Urethane Antitrust Litig., 237 F.R.D. 440, 450-451 (D. Kan. 2006) (evidence was sufficient to 

show class-wide antitrust injury where expert testified that the “industry social structure . . . 

lends itself to opportunities for direct contacts with counterparts at competitors”). 

Here, the evidence shows familiarity as well as regular interaction and communication 

among senior executives from McWane, Sigma, and Star. Certain senior executives at McWane, 

Sigma, and Star have known each other for many years.361 Mr. Pais worked for Star before 

founding Sigma in 1985.362 Mr. Pais also has a “mutually trusting and mutually respectful” 

relationship with Ruffner Page, the CEO of McWane.363 Mr. Pais and Page met numerous times 

in 2007 and 2008 to discuss business opportunities and challenges.364 McWane, Sigma, and Star 

executives met for dinners and lunches. For example, Mr. Tatman had dinner with Mr. 

McCutcheon in March 2008,365 and Mr. Pais met for lunch with Mr. McCutcheon on Feb. 19, 

2008.366 There are also over { 

} Sigma, McWane and Star executives.367 Many of those { } 

361 CCPF 701-712. 

362 CCPF 68. 

363 CCPF 828-841. 

364 Id. 

365 CCPF 795. 

366 CCPF 792. 

367 CCPF 713-786. 

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coincided with key events in the price fixing conspiracy. Thus, the Fittings market’s social 

structure enabled McWane, Sigma, and Star’s senior executives to meet and communicate often 

enough to coordinate and fix Fittings prices. See In re TFT-LCD (Flat Panel) Antitrust Litig., 

267 F.R.D. 583, 601, 606 (N.D. Cal. 2010) (concluding that plaintiffs’ expert presented plausible 

methodologies to show class-wide antitrust injury, where market characteristics, including 

“regular meetings and interactions that allowed defendants to exchange information, come to 

agreements, and police cheating,” indicated that industry was “highly susceptible to cartelization 

and price fixing”), amended in part on other grounds, No. M 07-1827 SI, 2011 WL 3268649 

(N.D. Cal. July 28, 2011). 

* * * 

Thus, numerous market characteristics – including high supplier concentration, product 

homogeneity, inelastic demand, common trade association membership, high barriers to entry, 

and the industry social structure — indicate that the stage was set for a conspiracy in the Fittings 

market. 

C.	 McWane Unlawfully Invited Its Competitors to Collude in Violation of 

Section 5 of the FTC Act (Count Three) 

Count Three of the Complaint charges McWane with violating Section 5 of the FTC Act 

by unlawfully inviting Sigma and Star to participate in a per se illegal price fixing conspiracy. 

An invitation to collude constitutes an unfair method of competition in violation of Section 5 of 

the FTC Act. McWane, slip op. at 20-22.368 An unlawful invitation to collude occurs when a 

368 This conclusion has been affirmed by leading antitrust scholars and by the First Circuit 

interpreting the Massachusetts baby FTC Act. Areeda & Hovenkamp, Antitrust Law & 1419; 

Stephen Calkins, Counterpoint: The Legal Foundation of the Commission=s Use of Section 5 to 

Challenge Invitations to Collude is Secure, ANTITRUST Spring 2000, at 69 (“As a matter 

simply of the English language, intercepting attempted price fixing would seem the 

quintessential example of restraining a practice that otherwise would ripen into a Sherman Act 

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respondent explicitly or implicitly proposes to a competitor terms of coordination that, if 

accepted by the competitor, would constitute a per se violation of the Sherman Act. See Areeda 

& Hovenkamp, Antitrust Law & 1419e4. An attempt to secure a price fixing agreement, even if 

unsuccessful, “is pernicious conduct with a clear potential for harm and no redeeming value 

whatever.” McWane, slip op. at 21 (quoting Liu, 677 F.3d at 494). Invitations to collude are 

therefore per se unlawful. See Analysis of Agreement Containing Consent Order to Aid Public 

Comment, In re U-Haul, Int’l Inc., FTC File No. 081 0157, at 4 (2010) (“It is not essential that 

the Commission find repeated misconduct attributable to senior executives, or define a market, 

or show market power, or establish substantial competitive harm, or even find that the terms of 

the desired agreement have been communicated with precision.”), available at 

http://www.ftc.gov/os/caselist/0810157/index.shtm; see also In re Quality Trailer Prods., 115 

F.T.C. 944, 949 (1992) (concurring statement) (showing of market power not necessary for 

Section 5 invitation to collude cases). 

To determine whether a communication constitutes an actionable invitation to collude, 

the solicitation should be evaluated within the business context in which it arises. See Joseph 

Kattan, Facilitating Practices and Section 5: The Evidence of Life After Ethyl, ABA Section of 

Antitrust Law, Annual Symposium, at 20 (1992). The solicitation does not need to be devoid of 

all ambiguity to be actionable; rather, courts should rely upon common sense. FTC v. Indiana 

Fed’n of Dentists, 476 U.S. 447, 456 (1986) (FTC may rely on common sense when 

appropriate); Areeda & Hovenkamp, Antitrust Law & 1419e4 (describing common sense 

approach as using “practical judgment”). 

violation, and of banning a practice that conflicts with the Sherman Act’s basic policies.”); Liu v. 

Amerco, 677 F.3d 489 (1st Cir. 2012). 

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Demanding utter clarity before finding a solicitation unlawful “would unrealistically 

ignore the diverse and often veiled language of would-be conspirators.” Areeda & Hovenkamp, 

Antitrust Law & 1419e4. As the Seventh Circuit noted when assessing conspiratorial 

communications, the law “has some obligation to keep up with the ingenuity and subtlety of 

sophisticated businessmen....” United States v. Consol. Packaging Corp., 575 F.2d 117, 126 

(7th Cir. 1978). As one antitrust scholar explained, 

In evaluating communications to competitors, both the content and the context of 

each communication must be scrutinized closely to ensure that the communication 

is no more than a naked invitation to fix prices or divide markets. It should be 

understood that to be actionable a solicitation need not take place in a smokefilled room or be couched in the express terms of an offer. The content of the 

communication, not the specific words used, will be decisive. And 

communications that invite conspiracy should be actionable even when made 

through the media or third parties, rather than directly to a competitor, although 

public speech may be less likely to contain explicit solicitations to collude 

because of greater susceptibility to detection. 

See Joseph Kattan, Facilitating Practices and Section 5: The Evidence of Life After Ethyl, 

ABA Section of Antitrust Law, Annual Symposium, at 20-21 (1992). 

Here, the trial record establishes that McWane unlawfully invited Sigma and Star 

to collude on two separate occasions: McWane’s January 11, 2008 letter; and McWane’s 

May 7, 2008 letter. Both letters unlawfully invited McWane’s primary competitors in the 

Fittings market to participate in a per se illegal price fixing agreement. And, although a 

showing of market power is unnecessary, the evidence shows that McWane, Sigma, and 

Star collectively had the power to raise prices in the Fittings market, and any such price 

fixing agreement likely would have raised Fittings prices. Accordingly, McWane’s 

invitations to collude with competitors should be summarily condemned. 

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1.	 McWane=s January 11, 2008 Letter Unlawfully Invited Its Competitors to 

Curtail Project Pricing 

On or about January 11, 2008, McWane publicly issued a letter ostensibly addressed to 

its Distributor customers that announced McWane’s intent to increase prices and to stop Project 

Pricing.369 In this letter, McWane also offered to support a second price increase later in the year 

(quid) B but only if pricing had stabilized, i.e., Sigma and Star also curtailed Project Pricing 

(quo).370 This letter was the product of a management presentation prepared by Rick Tatman on 

January 6, 2008 for his superiors, which memorialized the Tatman Plan’s “concept” for 

stabilizing and increasing Fittings prices.371 The proposed terms of coordination in McWane’s 

January 11, 2008 letter, if accepted, would constitute a per se unlawful price fixing agreement. 

See infra Part V.D. 

The fact that McWane’s January 11, 2008 letter is nominally directed to McWane’s 

Distributor customers does not exempt the communication from Section 5 scrutiny. Courts 

369 CCPF 932; CX 1178 (January 11, 2008 letter stating that “[t]he increase will be 10% to 12% 

above the current prevailing multiplier levels” and that it is McWane’s “intention going forward 

to sell all products only off the newly published multipliers”); see also CCPF 933-938 (letter was 

the “message to competitors” envisioned by the Tatman Plan); CCPF 939 (letter directed at 

competitors, not customers); CCPF 951 (Sigma and Star executives received the letter); cf. CCPF 

940-949 (letter proposed a modest increase designed to decrease Project Pricing). 

370 CCPF 944 (letter offered to “announce another multiplier increase within the next six 

months...only...as conditions require”; condition required was “stability in pricing”); see also 

CCPF 940-945 (modest price increase designed to decrease Project Pricing and improve price 

visibility). 

371 See CCPF 907-923 (discussing Tatman Plan); CX 0627 at 004 (Tatman presentation explains 

“I believe that Sigma and Star will mimic and follow any program we publish....keys to actual 

success are...Sigma & Star[] mgt pulling price authority away from front line sales and customer 

service personnel to add discipline to the process”); CX 1702 (email about Tatman Plan 

“concept” describes McWane as “in a unique position to help drive stability and rational pricing 

with the proper communication and actions”); see also CCPF 934; Tatman, Tr. 371 (admitting 

that letter was a result of Tatman’s “brainstorming session” with McCullough and Walton for 

which he prepared the Tatman Plan); CX 1178 (January 11, 2008 letter). 

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repeatedly have recognized that communications supporting an illegal conspiracy “can occur in 

speeches at industry conferences, announcements of future prices, statements on earnings calls, 

and in other public ways.” In re Delta/AirTran Baggage Fee Antitrust Litig., 733 F. Supp.2d 

1348, 1360 (N.D. Ga. 2010) (citing complaint in In re Valassis Commc=ns, Inc., 2006 FTC 

LEXIS 25 (April 19, 2006)); see also In re Petroleum Prods. Antitrust Litig., 906 F.2d 432, 445­

447 (9th Cir. 1990); Standard Iron Works v. ArcelorMittal USA, Inc., 639 F. Supp. 2d 877, 892­

95 (N.D. Ill. 2009); In re Travel Agency Comm=n Antitrust Litig., 898 F. Supp. 685, 690 (D. 

Minn. 1995). The Commission has likewise challenged public invitations to collude in In re 

Valassis Commc=ns, Inc., 2006 FTC LEXIS 25 (April 19, 2006), and most recently, in In re UHaul Int’l Inc., FTC File No. 081 0157 (2010). 

Indeed, pricing letters are an effective way for Fittings suppliers to communicate with 

one another. McWane, Sigma and Star routinely obtain and read copies of price letters for 

messages directed to them, and consider the content of those letters when devising their own 

pricing strategy.372 

Although McWane originally told this Court that the January 11, 2008 letter was directed 

to distributors alone, and contained only “ordinary and commonplace language,” Respondent’s 

372 CCPF 672-675. The clearest evidence of McWane Sigma and Star communicating through 

nominal price letters comes from a June 2010 price increase. At that time, Sigma drafted a letter 

that included a “heads-up” to McWane that it would follow a Fittings price increase. (CCPF 

696, 1554). Mr. Tatman received a copy of Sigma’s letter, considered it a “communication,” and 

considered what “communication” (in the form of its own price letter) McWane would send back 

to Sigma and Star. (CCPF 697-698). Mr. Tatman saw two options “In regards to recent 

communications from Star and Sigma....1. Send out an ‘it’s coming’ communication prior to any 

further announcements from either Sigma or Star...[or] 2. Send out communication supporting 

the need for a price increase, wait for Sigma or Star.” (CCPF 1565). McWane chose to lead the 

requested price increase. (CCPF 1566). Sigma and Star followed the increase, which Sigma 

considered a “big victory:” “We had a game plan. We stuck to it. It has worked. And now it 

has turned into a big victory.” (CCPF 1567-1571). 

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Pretrial Brief at 42, 45, Mr. Tatman admitted at trial that the January 2008 letter was actually a 

message directed to McWane’s competitors.373 Consistent with the “Desired Message to Market 

and Competitors” featured in the slides describing his Plan, Mr. Tatman admitted that the goal of 

his letter was to induce his competitors to curtail Project Pricing.374 The letter did so by not only 

announcing McWane’s intention to stop Project Pricing, but also by dangling the prospect that 

McWane would support another price increase if Sigma and Star cooperated by similarly 

curtailing Project Pricing.375 

At trial, Mr. Tatman referred to his strategy as a “head fake” – meaning that McWane did 

not necessarily intend to implement the announced program even if Sigma and Star proceeded 

down this path.376 While this claim strains credulity,377 it is nevertheless irrelevant – a firm that 

deliberately invites its rivals to collude does not escape liability by claiming that it secretly 

harbored an intention not to follow through with the plan. VI Antitrust Law & 1404 

373 CCPF 939; Tatman, Tr. 894-895, 1065-1067 (letter directed at competitors, not customers); 

CCPF 951 (Sigma and Star executives received the letter); see also CCPF 686-698 (Fittings 

suppliers routinely use pricing letters to communicate with one another); CCPF 684-685 (Fitting 

suppliers regularly receive each other’s pricing letters). 

374 CCPF 940-949 (letter proposed a modest increase designed to decrease Project Pricing). 

375 CCPF 944 (offered another price increase for less Project Pricing); CX 1178 (“If the current 

inflationary trends continue as forecasted, we anticipate the need to announce another multiplier 

increase within the next six months. However, we will only do so as conditions require.”). 

376 CCPF 934 (letter was a head fake to competitors). 

377 This claim strains credulity given McWane’s admitted poor performance in identifying and 

responding to Project Pricing, its desired goal (as repeatedly stated at trial) to compress the gap 

between published and transactional prices by minimizing Project Pricing, and its admitted 

preference to compete in a market without Project Pricing. See CCPF 853-859 (McWane 

struggled to compete with Star and Sigma because of Project Pricing); CCPF 861-869 (McWane 

believed Star’s Project Pricing was detrimental). 

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(“[O]bjective manifestations of assent form an ordinary contract notwithstanding any private 

reservation or intention to perform incompletely or not at all. The same would be true of an 

agreement for antitrust purposes.”); see also United States v. Giordano, 261 F.3d 1134 (11th Cir. 

2001) (affirming criminal price fixing conviction notwithstanding defendant’s claim that he 

intended only to “play along” and to take advantage of pricing information collected from 

rivals). 

McWane’s communication to its competitors proposed an unlawful price fixing 

agreement. A proposed quid pro quo is often communicated by the respondent to the rival in 

language that is not perfectly clear to an outsider. Here, the quid pro quo becomes apparent 

when the paper trail is followed from the original unvarnished message in Mr. Tatman’s 

management presentation, to the first drafts of the January 11, 2008 letter, to the ultimate letter 

that was publicly published. 

The original, unvarnished message to competitors is set forth in Mr. Tatman’s January 6, 

2008 slides outlinng his Plan. In a slide entitled “Desired Message to Market and Competitors,” 

Mr. Tatman stated that McWane will “encourage/drive both price stability and transparency,” 

and that for 2008, a prerequisite for McWane supporting any future price increases would be 

“reasonable stability and transparency at the prior level”: 378 

378 CX 0627 at 004; see also CCPF 907-923 (discussion of Tatman Plan). 

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For Mr. Tatman, price stability means that transaction prices are kept close to published prices 

(i.e., there is little Project Pricing).379 

Included in Mr. tAtman’s January 6, 2008 slides were two “Rough Drafts” of a letter that 

communicated Mr. Tatman’s “Desired Message to the Market & Competitors” by means of a 

letter ostensibly addressed to McWane=s Distributor customers.380 In the first “Rough Draft’ of a 

Stronger Language Letter,” Mr. Tatman wrote: 

Dear Valued Customer, 

Due to continued rising costs . . . we find it necessary to increase prices on Utility Fittings 

and Accessories.
 

. . . 

379 CCPF 908; Tatman, Tr. 283-285, 338-339 (defining price stability as within 10% of published 

multipliers); cf. CCPF 557 (pricing instability is when regional discounting below published 

pricing exceeds 10 percent); CCPF 859; Tatman, Tr. 338-339 (increasing price stability meant 

compressing the gap beween published prices and actual invoice prices). 

380 CX 0627 at 006; see also CCPF 936 (discussion of drafts). 

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[W]e don=t believe the industry’s your best interests are served by publishing [price] 

increases at levels that are not supported, leading to instability and ultimately erosion of 

market level pricing. 

. . . 

If the current inflationary trends continue as forecasted, we may need to announce 

another multiplier increase within the next 3 to 6 months. However, we will do so if 

both conditions require and the increase can be supported within stability market 

conditions.

381 

The second attached “‘Rough Draft’ of a Softer Language Letter” omitted the paragraph blaming 

steep price increases for leading to instability and price erosion (see second paragraph above), 

but maintained the key solicitation that McWane may support price increases again in 3 to 6 

months if stable market conditions persist.382 

On January 8, 2008, Mr. Tatman circulated another draft of the January 11, 2008 letter, 

which explicitly stated McWane’s intention not to offer Project Pricing and retained the key 

solicitation that McWane would support another price increase if there are “stable market 

conditions”: 

Dear Valued Customer, 

Due to continued rising costs, especially within our off shore operations, we find it 

necessary to increase pricing on Utility Fittings and Accessories. 

... 

It is not our intention to provide job pricing. In an effort to support Distribution and 

stable market conditions, we will continue to monitor the competitive environment and 

will adjust regional multipliers as required. 

... 

If the current inflationary trends continue as forecasted, we anticipate the need to 

announce another multiplier increase within the next 6 months. However, we will only 

do so if conditions require and the increase can be supported by stable market 

conditions. ...383 

381 CX 0627 at 006 (emphasis added); see also CCPF 936 (discussion of drafts). 

382 CX 627 at 007; see also CCPF 936 (discussion of drafts). 

383 CX 0375 at 001 (emphasis added); see also CCPF 938 (discussion of draft). 

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The final letter reflects Mr. Tatman’s apparent attempt to balance McWane’s desire for 

clarity of communication with a concomitant desire to maintain some deniability. The 

“stronger” language from the original “Rough Draft” blaming price instability upon unsupported 

price increases was not included in the final letter. Mr. Tatman informed his competitors that 

McWane will bring its multipliers down in areas where it observed Project Pricing.384 The 

operative quid pro quo message is still present and apparent to competitors: 

Dear Valued Customer, 

Due to continued rising costs . . . we find it necessary to increase prices on Utility Fittings 

and Accessories.

 . . . . 

... it is our intention going forward to sell all products only off the newly published 

multipliers. We will continue to monitor the competitive environment and adjust 

regional multipliers as required to provide you with competitive pricing.

 . . . . 

If the current inflationary trends continue as forecasted, we anticipate the need to 

announce another multiplier increase within the next six months. However, we will do 

so only as conditions require....385 

This invitation to competitors to curtail Project Pricing, if accepted, becomes a per se 

illegal price fixing agreement.386 But even if Sigma and Star did not accept the proposal, the 

invitation to collude is a violation of Section 5. 

384 CX 2538 (McCutcheon, IHT (Vol. 2) at 413-414 (a reasonable interpretation fo McWane’s 

letter by someone with experience in the industry would be that McWane was saying, “I’m done 

job pricing, if I see my rivals job pricing, I’m going to bring multipliers down in the areas where 

I observed job pricing.”)); see also CCPF 938 (discussion of draft). 

385 CX 1178 (emphasis added). 

386 See infra Part V.D. 

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2.	 McWane’s May 7, 2008 Letter Unlawfully Offered to Raise McWane’s 

Fittings Prices in Return For Its Competitors Submitting Proprietary Sales 

Information to DIFRA 

The next stage of the Tatman Plan was for the Fittings competitors to launch an exchange 

of Fittings sales data (by tons shipped) under the auspices of the new trade association, 

DIFRA.387 DIFRA’s purpose was to increase market transparency, engender inter-firm trust, and 

discourage cheating on the parties’ price fixing agreement.388 Star had long resisted entreaties to 

share its sales information, but had finally relented in early 2008 under significant pressure from 

its competitors.389 

In an April 25, 2008 conference call, McWane, Sigma, and Star negotiated the terms of 

the information exchange, and tentatively agreed that each company would submit its sales data 

(by tons shipped) by May 15, 2008 to the accounting firm (SRHW) that would aggregate the 

members’ sales data on behalf of DIFRA.390 With this understanding in place, on April 25, 

387 See, infra, Part V.E. 

388 See CCPF 1277 (Mr. Pais indicating that DIFRA was to increase transparency, and to help 

suppliers optimize their production); see also CCPF 1278 (Mr. Pais described the purpose of 

DIFRA as stabilizing markets and supplier shares); CCPF 1279 (Mr. Pais’s documents describe 

the purpose of DIFRA as overcoming cultural differences); CCPF 1280 (Mr. Pais indicates 

describes fewer misunderstandings among firms about the reasons for market share decline). See 

generally CCPF 1276-1296 (actual purpose of DIFRA). 

389 See CCPF 1107 (Mr. McCutcheon felt pushed to join DIFRA by Mr. Rybacki); CCPF 1152 

(Mr. McCutcheon pressured by Mr. Pais, Mr. Rybacki, and Mr. Brakefield); see also CCPF 

1151-1154 (Star was reluctant to join DIFRA). 

390 CCPF 1139-1145 (agreement regarding DIFRA data). 

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2008, Sigma released a letter announcing an increase in its Fittings multipliers.391 Star followed 

suit not long thereafter.392 

McWane was not satisfied with only its rivals’ verbal commitment to share sales 

information in the future. McWane resolved to wait “until the DIFRA data is available before 

announcing any price actions,”393 and elected to communicate this requirement to Sigma and 

Star. So once again, McWane drafted a letter ostensibly addressed to its distributor customers 

that invited its competitors to collude, striving to balance the company’s desire for clarity of 

communication with a desire to maintain deniability. 

On May 7, 2008, McWane issued to its distributors a “pricing letter” that did not actually 

communicate any change in McWane’s prices, and that had no meaning to or value to them. The 

operative language of the May 7, 2008 letter intentionally but implicitly communicates to 

McWane’s rivals that they must submit their sales data to DIFRA in order to induce McWane to 

raise its prices: 

Before announcing any price actions, we carefully evaluate all 

factors including: domestic and global inflation, market and 

competitive conditions within each region, as well as our 

performance against our own internal metrics. We anticipate being 

able to complete our analysis by the end of May. At that point, we 

will send out letters to each specific region detailing changes, if 

any, to our current pricing policy.394 

391 CCPF 1168; see CCPF 1168-1173 (describing Sigma multiplier announcement). 

392 See CCPF 1174-1185; CCPF 1208-1221 (Tatman testimony admits he was waiting for the 

DIFRA data to take pricing actions). 

393 CCPF 1177; CX 2484 (Tatman, Dep. at 132); CX 0137 at 001 (draft letter “would align with 

the approach of waiting until the DIFRA data is available before announcing any price 

actions”). 

394 CX 0138; see also CX 0137 at 002 (draft of May 7, 2008 letter identifying purpose of letter: 

“Since several misperceptions are starting to circulate, we wanted to send out this general 

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The business context in which this letter was issued makes the actual and intended 

meaning of the May 7, 2008 letter apparent. “By the end of May” refers to the time that 

McWane expected to receive the DIFRA data, and evaluating McWane’s “performance against 

our own internal metrics” referred to McWane’s ability to calculate its market share by using the 

DIFRA data.395 In short, senior executives at McWane intended to delay any price move until 

after the DIFRA data became available.396 

Sigma and Star B but not Distributors B were aware that McWane anticipated the receipt 

of DIFRA data “by the end of May,” and that McWane could use this data to evaluate company 

“performance” against “internal metrics.”397 Sigma and Star also knew that DIFRA could not 

compile and distribute its report until each company submitted their raw data to the accounting 

firm working for DIFRA. 

Additionally, the factors McWane claimed it would “analyze” before issuing a price 

increase were never before, and never after, included in pricing letters.398 Nor did McWane 

communication to clearly define our intention in regards to any future pricing actions.”). See 

generally CCPF 1174-1274 (discussion of May 2008 letter). 

395 See CCPF 1182; CX 0138 (“We anticipate being able to complete our analysis by the end of 

May”); see also CCPF 1176-1179 (discussing Mr. Tatman’s timing expectations); CX 0139 at 

001 (Tatman email calculating market share within hours of receiving DIFRA data); CCPF 

1240-1244 (McWane issues pricing letter within hours of receiving DIFRA data). 

396 See CCPF 1230 (McWane decides to “stand pat”); see also CCPF 1229 (Messrs. 

McCullough, Tatman, and Walton agreed McWane should stand pat on prices until DIFRA data 

was available). 

397 See 1193 (only DIFRA members knew when McWane would receive DIFRA data); CCPF 

1192-1207 (Sigma and Star understood McWane’s message); CCPF 1186-1189 (Distributors did 

not understand meaning of McWane’s reasons for delay). 

398 CCPF 1187; see also CCPF 1186-1189 (Distributors did not understand meaning of 

McWane’s reasons for delay). 

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actually analyze those factors before eventually announcing its price increase. The “pricing” 

letter was “odd” because the letter did not actually announce a price increase. When a supplier 

chooses to take a price increase, “he just announces we’re taking an increase.”399 For the 

distributors, the ostensible target of this letter, this language was meaningless “fluff.”400 

At trial, Mr. Tatman suggested that the “misperceptions” in the marketplace that this 

letter was designed to resolve began when Sigma announced a large price increase and there was 

confusion as to what McWane intended to do.401 However, Sigma had announced a similarly 

large double-digit price increase in October 2007, and McWane did not see the need to issue any 

misperception-correcting communication to the market.402 Mr. Tatman could not explain this 

apparent discrepancy, or why McWane needed to issue the May 7, 2008 letter when it was 

expecting to announce the actual price increase just a few weeks later (once the DIFRA report 

became available).403 

399 CCPF 1190 (Mr. Rybacki calls the May 2008 letter “quirky”); CCPF 1191 (Mr. McCutcheon 

calls the May 2008 letter “odd,” “arrogant,” and “humorous”); CX 2539 (McCutcheon, Dep. at 

179) (In other instances in which a supplier chooses to take a price increase “he [just] announces 

we’re taking an increase.”). 

400 CX 2516 (Sheley, Dep. at 153); CCPF 1186-1189 (language had no meaning to Distributors). 

401 CCPF 1180; Tatman, Tr. 491-493 (Mr. Tatman drafted the customer letter to dispel 

“misperceptions”); CCPF 1179; CX0137 at 002 (draft letter explains: “[s]ince several 

misperceptions are starting to circulate, we wanted to send out this general communication to 

clearly define our intention in regards to any future pricing actions”). 

402 See CCPF 878-906 (Sigma and Star sought price increases in late 2007); CCPF 881; CX 

2457; ; CCPF 882; RX-406 (proposing Star’s increase); CX 1178 (McWane’s January 11, 2008 

letter announcing a smaller price increase); CCPF 940 (clarifying to HD that the increase was 

smaller than Sigma’s proposed increase). 

403 CCPF 1187. 

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As McWane had expected, Sigma and Star quickly obtained the May 7, 2008 letter.404 

The fact that the May 7, 2008 letter solicits specific activity by McWane=s competitors is best 

confirmed by the fact that Star understood this message and proceeded to comply. Within hours 

of receiving McWane=s coded message, Star’s Mr. McCutcheon informed the other DIFRA 

members, including Mr. Tatman, that Star would submit its data.405 Further, when Star 

submitted the data to SRHW on June 5, 2008, it notified Sigma by email that it had done so, and 

acknowledged the quid pro quo arrangement by quoting verbatim the precise language 

constituting McWane=s May 7, 2008 invitation to collude: 

Good morning Mr. President. I just sent our info in. Sorry it took so long, but we 

were “carefully analyzing all factors including: domestic and global inflation, 

market and competitive conditions within each region, as well as performance 

against our own internal metrics.” (Does that look familiar?).406 

McWane upheld its end of the bargain. Within hours of receiving the first DIFRA report, 

McWane announced an eight percent Fittings price increase.407 Sigma and Star quickly followed 

McWane’s price increase.408 

404 CCPF 1195 (Sigma’s Mr. Rybacki received the May 2008 letter); CCPF 1198 (Star’s Mr. 

Prado forwarded May 2008 letter); see also CCPF 1192-1200 (Star and Sigma understood 

message of May 2008 letter). 

405 CX 0863 at 001 (Star receives McWane=s letter at 1:06 p.m.); RX-580 at 001 (Star confirms 

that it will submit DIFRA data at 4:12 p.m. Eastern); see also CCPF 1201-1207 (Star 

understood meaning of McWane’s May 2008 letter). 

406 CX 1091; CX 2538 (McCutcheon, IHT (Vol. 2) at 311-313); see also CCPF 1222-1226 (Star 

submits its data invoking May 2008 letter’s language). 

407 CCPF 1242 (average increase “approximately 8%” to distibutors within 4 hours of receiving 

data); see generally CCPF 1240-1245 (McWane’s analysis and price increase took little time 

after receiving first DIFRA report). 

408 CCPF 1246-1250 (Star and Sigma price increases announced 10 and 20 days, respectively, 

after McWane’s increase). 

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The proposal that McWane will raise prices (quid) in return for Sigma and Star=s 

submission of shipment data to the information exchange (quo) B if accepted B is a restraint on 

price competition and per se unlawful.409 McWane=s invitation to collude B whether or not 

accepted B is a violation Section 5. 

D.	 McWane, Sigma and Star Conspired to Stabilize and Increase Fittings Prices 

By Curtailing Project Pricing and Increasing Price Transparency (Count 

One) 

Count One of the Complaint charges McWane with conspiring with its primary 

competitors, Sigma and Star, to raise and stabilize prices in the Fittings market. Agreements 

among horizontal competitors to raise, lower, stabilize, or otherwise restrain price competition 

strike an “actual or potential threat to the central nervous system of the economy,” and are 

summarily condemned as per se illegal under Section 1 of the Sherman Act. United States v. 

Socony-Vacuum Oil Co., 310 U.S. 150, 224, n.59 (1940); see also Catalano, Inc. v. Target Sales, 

Inc., 446 U.S. 643, 648 n.10 (1980) (per curiam) (Section 1 of the FTC Act and Section 5 of the 

FTC Act apply same per se standard to price fixing agreements); Gen. Motors Corp., 384 U.S. at 

148 (“[P]rotection of price competition from conspiratorial restraint is an object of special 

solicitude under the antitrust laws.”). 

Accordingly, Complaint Counsel need not establish that McWane and its co-conspirators 

had the ability to achieve their unlawful ends, took any overt acts in furtherance of the 

conspiracy, or were successful in their conspiracy. The only question for this Court is whether 

McWane entered into such an agreement. McWane, slip op. at 7 (“[T]o establish a horizontal 

price fixing scheme, a plaintiff need only demonstrate the existence of an agreement, 

combination or conspiracy among actual competitors with the purpose or effect of ‘raising, 

409 See infra Part V.D.2. 

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depressing, fixing, pegging or stabilizing the price of a commodity.’”) (citations omitted); see 

also Nat’l Soc’y of Prof’l Eng’rs, 435 U.S. at 692 (same); Socony-Vacuum, 310 U.S. at 224-25, 

n.59 (“a conspiracy to fix prices violates [Section One] ... though it is not established that the 

conspirators had the means available for accomplishment of their objective”). 

An agreement is established when two or more firms share “a unity of purpose or a 

common design and understanding, or a meeting of the minds,” Copperweld Corp. v. 

Independence Tube Corp., 467 U.S. 752, 771 (1984), or in other words, shared a “conscious 

commitment to a common scheme designed to achieve an unlawful object.” Monsanto Co. v. 

Spray-Rite Serv. Corp., 465 U.S. 752, 768 (1984). Agreements may be shown through “direct or 

circumstantial evidence, or a combination of the two.” W. Penn Allegheny Health Sys., Inc. v. 

UPMC, 627 F.3d 85, 99 (3d Cir. 2010). 

Courts have long recognized that most price fixing agreements will be proven through 

circumstantial evidence: 

[It is unlikely] that a formal signed-and-sealed contract or written 

resolution would conceivably be adopted at a meeting of pricefixing conspirators in this day and age . . . it is well recognized law 

that any conspiracy can ordinarily only be proved by inferences 

drawn from relevant and competent circumstantial evidence. 

ESCO Corp. v. United States, 340 F.2d 1000, 1006-1007 (9th Cir. 1965); see also W. Penn 

Allegheny Health Sys., Inc., 627 F.3d at 99. As the Seventh Circuit explained in In re High 

Fructose Corn Syrup Antitrust Litigation, most conspiracy cases “are constructed out of a tissue 

of such [ambiguous] statements and other circumstantial evidence, since an outright confession 

will ordinarily obviate the need for a trial.” 295 F.3d 651, 662 (7th Cir. 2002); see also McWane, 

slip op. at 7 (citing Areeda & Hovenkamp, Antitrust Law ¶ 1410c (an agreement “can exist 

without any documentary trail and without any admission by the participants”)); see also Consol. 

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Packaging Corp., 575 F.2d 117, 126 (7th Cir. 1978) (agreement can still be found unlawful even 

when conspirators “leave few tracks or fingerprints” behind). 

The most common method for proving a price fixing agreement is through evidence of 

the conspirators’ parallel pricing conduct along with evidence of various “plus” factors that tend 

to exclude the possibility that the alleged conspirators acted independently. See In re Travel 

Agent Comm’n Antitrust Litig., 583 F.3d 896, 907 (6th Cir. 2009); Cason-Merenda v. Detroit 

Med. Ctr., 2012-1 Trade Cas. (CCH) ¶ 77,893 (E.D. Mich. Mar. 22, 2012). Alternatively, price 

fixing agreements may be proven through evidence of a quid pro quo arrangement related to 

price or mutual assurances to adhere to previously published prices. Sugar Inst. v. United States, 

297 U.S. 553, 601 (1936) (condemning agreement to adhere to previously published prices, even 

when those prices were unilaterally set); United States v. Gen. Motors Corp., 384 U.S. 127, 142­

43 (1966) (finding “that each party acted in its own lawful interest” to be “of no consequence” 

where “joint and collaborative action was pervasive in the initiation, execution, and fulfillment 

of the plan”); see Isaksen v. Vt. Castings, Inc., 825 F.2d 1158, 1164 (7th Cir. 1987) (establishing 

that a conspiracy had been formed “by conduct in lieu of promissory language”); Areeda & 

Hovenkamp, Antitrust Law ¶¶ 1404, 1410c (noting that “an addressee of a proposal for common 

action who behaves in accordance with the proposal may find it difficult . . . to persuade us that it 

acted unilaterally and without regard to the proposal” and that “reciprocal assurances can be 

communicated by conduct rather than by words”). 

Here, McWane, Sigma and Star shared a “conscious commitment to a common scheme” 

to stabilize and increase Fittings prices by curtailing Project Pricing and increasing price 

transparency. See Monsanto, 465 U.S. at 768. This price fixing agreement manifested itself in 

three distinct episodes. First, in or around January 2008, McWane and its co-conspirators 

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abruptly changed their prior business practices and began to reduce their Project Pricing, a key 

form of discounting and price competition in the Fittings market. This parallel conduct reflects 

an agreement – and not independent action – because, among other “plus” factors to be 

discussed, it was against the unilateral economic interest of the conspirators absent an agreement. 

Second, in or around May 2008, in an effort to further increase the transparency of 

Fittings prices, the conspirators unlawfully exchanged assurances related to the formation of 

DIFRA and the exchange of the Fittings suppliers’ sales data. Specifically, McWane unlawfully 

promised to increase prices (quid) if Sigma and Star submitted competitively sensitive sales data 

to DIFRA (quo). This invitation to collude was accepted – and therefore became an unlawful 

price fixing agreement – when Sigma and Star submitted their sales data to DIFRA and McWane 

promptly announced a price increase. Third, in or around April 2009, McWane and Star 

exchanged mutual assurances to adhere to McWane’s newly announced price list. 

Each of the three distinct episodes of the overall conspiracy to stabilize and increase 

Fittings prices is discussed more fully below. Once proven, each episode is sufficient to 

independently establish liability. See Turner v. United States, 396 U.S. 398, 420 (1970) 

(“[W]hen a jury returns a guilty verdict charging several acts in the conjunctive, . . . the verdict 

stands if the evidence is sufficient with respect to any one of the acts charged.”); ESCO Corp. v. 

United States, 340 F.2d 1000, 1005-06 (9th Cir. 1965) (explaining that “where several acts or 

transactions are alleged to constitute a single general conspiracy” it is not required that “each 

defendant or all defendants must have participated in each act or transaction”). 

1.	 Episode One: Beginning in or around January 2008, McWane, Sigma and 

Star Agreed to Curtail Project Pricing 

Parallel conduct, by itself, generally does not establish an agreement because it may 

reflect oligopoly interdependence rather than an unlawful price fixing agreement. See 

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Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986); see also McWane, 

slip op. at 8 (parallel pricing conduct insufficient to alone establish liability); In re Baby Food 

Antitrust Litig., 166 F.3d 122, 122 (3d Cir. 1999) (same). 410 Accordingly, to find liability, 

additional circumstances or “plus factors” must support the inference of conspiracy – i.e., tend to 

exclude the possibility that the conspirators were acting independently. Matsushita Elec, 475 

U.S. at 588 (“[C]onduct as consistent with permissible competition as with illegal conspiracy 

does not, standing alone, support an inference of antitrust conspiracy . . . [A] a plaintiff . . . must 

present evidence that ‘tends to exclude the possibility’ that the alleged conspirators acted 

independently.”); City of Tuscaloosa v. Harcros Chems., Inc., 158 F.3d 548, 571 & n.35 (11th 

Cir. 1998); In re High-Tech Emp. Antitrust Litig., 856 F. Supp. 2d 1103, 1118 (N.D. Cal. 2012). 

The existence of plus factors makes it more likely than not that the parallel pricing 

behavior was a result of an unlawful price fixing agreement rather than unilateral action. These 

“plus” factors must be considered as a whole, and not individually dissected: 

In antitrust conspiracy cases, plaintiffs should be given the full 

benefit of their proof without tightly compartmentalizing the 

various factual components and wiping the slate clean after 

scrutiny of each. The character and effect of a conspiracy are not 

to be judged by dismembering it and viewing its separate parts, but 

only by looking at it as a whole. 

In re High-Tech Emp. Antitrust Litig., 856 F. Supp. 2d at 1118 (internal quotation marks omitted) 

(quoting Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699 (1962)); see 

also High Fructose Corn Syrup, 295 F.3d at 655 (“The second trap to be avoided in evaluating 

410 The theory of interdependence (sometimes referred to as oligopoly price leadership) posits 

that in a highly concentrated market, any single firm’s price and output decisions will have a 

noticeable impact on the market and on its rivals. Competing firms may be able to raise prices to 

supra-competitive levels by observing and reacting to the price and output decisions of a market 

leader. See In re Petroleum Products Antitrust Litig., 906 F.2d 432, 443 (9th Cir. 1990); Areeda 

& Hovenkamp, Antitrust Law ¶ 1429. 

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evidence of an antitrust conspiracy for purposes of ruling on the defendants’ motion for summary 

judgment is to suppose that if no single item of evidence presented by the plaintiff points 

unequivocally to conspiracy, the evidence as a whole cannot defeat summary judgment.”). 

Here, McWane, Sigma, and Star agreed to curtail Project Pricing in early 2008. This is 

an “historically unprecedented change[] in pricing structure made at the very same time by 

multiple competitors, and made for no other discernible reason,” Bell Atl. Corp. v. Twombly, 550 

U.S. 544, 556 n.4 (2007), and itself constitutes a “plus” factor, see In re Text Messaging Antitrust 

Litig., 630 F.3d 622, 628 (7th Cir. 2010). Further, there are numerous other “plus” factors that 

support the inference that the Fittings suppliers’ parallel curtailment of Project Pricing in January 

2008 was pursuant to an unlawful conspiracy and not the result of independent action. First, the 

Fittings market is an oligopoly market conducive to collusion, and by late 2007, all of the 

Fittings suppliers had a motive to conspire. Second, the curtailment of Project Pricing was in 

accord with a written strategy authored by McWane (the Tatman Plan). Third, abandoning 

Project Pricing was against the conspirators’ unilateral business interests absent assurances that 

the others would act similarly. Fourth, the parties formed DIFRA and instituted an information 

exchange to facilitate their collusion. Fifth, the conspirators complained to each other about 

cheating. And finally, there is a high volume of communications among top executives from 

each company with pricing authority during the conspiracy period, including at least some 

discussions on price or other competitively sensitive information. 

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a)	 Parallel Pricing Conduct: McWane, Sigma and Star Each 

Curtailed Project Pricing In or Around January 2008 

In the years prior to 2008, Fittings suppliers generally offered at least some level of 

Project Pricing to their customers.411 In 2007, as the economy declined and Fittings demand 

dropped, Fittings suppliers began offering more Project Pricing as they competed for fewer 

jobs.412 In January 2008, however, even as demand continued to drop, all three Fittings suppliers 

abruptly changed their prior business practice by curtailing their use of Project Pricing. See Baby 

Food, 166 F.3d 112, 132 (3d Cir. 1999) (recognizing that parallel pricing need not be uniform); 

In re Blood Reagents Antitrust Litig., 756 F. Supp. 2d 623, 630 (E.D. Pa. 2010) (“Plaintiffs are 

not required to plead simultaneous price increases—or that the price increases were identical—in 

order to demonstrate parallel conduct.”). 

Specifically, on or about January 11, 2008, McWane issued a letter publicly announcing 

to the “Market & Competitors” that it would increase prices and no longer offer Project Pricing, 

effective March 1, 2008.413 On January 24, 2008, Sigma’s then-President emailed his regional 

managers that they should initiate a “new” effort to minimize Project Pricing: 

I HAVE URGED LARRY [RYBACKI] TO INITIATE A NEW 

COMMITTED AND SERIOUS EFFORT TO NORMALIZE 

ALL PRICING FOR FITTINGS – AT SAME LEVELS – PW AS 

WELL AS OTHER ORDERS, TO ELIMINATE THE 

CONFUSION WE ARE CREATING WITH CUSTOMERS AND 

COMPETITORS, LEADING TO LOWER OVERALL PRICING 

LEVELS! 

Though Tyler’s NEW multipliers are discouraging, this is both a 

lesson and an opportunity [for] SIGMA and Star to develop a 

411 CCPF 549-554. 

412 CCPF 843, 871-875. 

413 CCPF 932-939. 

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patient and disciplined Marketing approach and demonstrate to 

[McWane] that we are capable of being part of a stable and 

profitability conscious industry. This is the ‘leadership capital’ we 

created when we acquired PCI and reduced the supply base to just 

3 – but so far, we have NOT been astute enough to derive any 

returns from this capital!414 

On or about January 28, 2008, Sigma announced a price increase mimicking McWane’s price 

increase in a letter that also made a commitment to curtail Project Pricing and to adhere to 

published pricing levels.415 

On January 22, 2008, Star’s National Sales Manager, Mr. Minamyer likewise instructed 

his division sales managers that Star was going to increase its prices and “stop project 

pricing.”416 Shortly thereafter, Star began informing its major customers that it would follow 

McWane’s price increase and that it would not offer Project Pricing: “NO UTILITY PROJECT 

PRICING NATION WIDE.”417 For example, Mr. Minamyer informed the TDG Distributor 

Group that Star would offer “no more project pricing after March 1st,” as part of Star’s effort to 

create an “even playing field on up front pricing with our competitors” and to “bring stability to 

the fitting market.”418 Mr. Minamyer repeated his instruction that “we can no longer project 

price” to Star’s sales force on June 19, 2008.419 

414 CCPF 956-963; CX 1145 at 002 (emphasis added); Pais, Tr. 1920-1925 (“eliminating [Project 

Pricing] is wishful thinking. I was just trying to have them minimize it.”); Rybacki, Tr. 1129 

(understood Mr. Pais’s message was to pull back on Project Pricing). 

415 CCPF 965-966. 

416 CCPF 977; CX 0752 at 001; Minamyer, Tr. 3160 (email was a plan to react to information 

from McWane). 

417 CCPF 998-1008; CX 1566 at 001; McCutcheon, Tr. 2409-2410; Minamyer, Tr. 3185-3186. 

418 CCPF 1002; CX 2300; Minamyer, Tr. 3188-3191. 

419 CCPF 985; CX 2254 at 001, 003. 

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As discussed more fully, infra at Part V.D.1.a, the Fittings suppliers were largely 

successful in reducing Project Pricing through at least the Fall of 2008. By January 2009, 

however, all three Fittings suppliers had once again renewed their efforts to compete vigorously 

through Project Pricing.420 Throughout this time period – 2007, 2008 and 2009 – the economy 

continued to decline, Fittings demand had continued to drop, and costs generally had continued 

to rise.421 

Notably, the parallel curtailment Project Pricing may be more aptly described as a “kind 

of ‘parallel plus’ behavior” because it represents a significant change in the pricing structure of 

the Fittings market. See In re Text Messaging, 630 F.3d at 628 (“[C]hanges in pricing structure 

made at the very same time by multiple competitors, and made for no other discernible reason” is 

the “kind of ‘parallel plus’ behavior” that “enables parallel conduct to be interpreted as 

collusive.”) (quoting Twombly). In Twombly, the Supreme Court identified a “plus” factor when 

it noted that an agreement can be inferred from “complex and historically unprecedented changes 

in pricing structure made at the very same time by multiple competitors, and made for no other 

discernible reason[.]” 550 U.S. at 556 n.4. Here, Project Pricing represented the primary form 

of price competition in the Fittings market, and all three Fittings suppliers taking steps to curtail 

it represent a significant change in the market’s pricing structure. This parallel pricing action is 

therefore particularly probative evidence of a price fixing conspiracy. See Twombly, 550 U.S. at 

556 n.4. 

420 CCPF 1456-1464. 

421 CCPF 843-844, 870-877, 1437-1438. 

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The parallel conduct by all three major Fittings suppliers to curtail Project Pricing in 

2008 (and only 2008) is best explained by an unlawful price fixing agreement, whose terms of 

coordination began in January 2008 and largely fell apart in the Fall of 2008. See Twombly, 550 

U.S. at 556 n.4; see also In re Text Messaging, 630 F.3d at 628. The following discussion of 

“plus” factors supports this inference of conspiracy. 

b) Plus Factor: The Conspiracy Is Plausible Because It Occurred 

in the Context of a Market Conducive to Collusion and the 

Suppliers Had a Motive to Conspire 

McWane, Sigma and Star’s parallel curtailment of Project Pricing occurred in the context 

of a Fittings market that is conducive to collusion and where all the primary Fittings suppliers 

had a motive to conspire.422 These are plus factors that tend to exclude the possibility of 

independent action because in such an environment “it would not be difficult for a small group to 

agree on prices and to be able to detect ‘cheating’ (underselling the agreed price by a member of 

the group) without having to create elaborate mechanisms, such as an exclusive sales agency, 

that could not escape discovery by the antitrust authorities.” In re Text Messaging, 630 F.3d at 

627-28 (evidence of “an industry structure that facilitates collusion constitutes supporting 

evidence of collusion”); see also In re Flat Glass Antitrust Litig., 385 F.3d 350, 360 (“evidence 

that the defendant had a motive to enter into a price fixing conspiracy” is a plus factor). 

As discussed more fully in Part V.B, supra, the Fittings market is an oligopoly with many 

salient features that make it highly susceptible to coordination. Briefly, the evidence shows that 

the Fittings market: is highly concentrated with few rivals and high entry barriers; has a social 

structure where top executives with pricing authority have frequent contacts with each other; is 

comprised of homogeneous products with few substitutes and inelastic demand; and there was 

422 CCPF 651-665; CCPF 842-877. 

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somewhat transparent pricing, which transparency was improved upon by the parties setting up 

an information exchange of sales data through DIFRA. See infra Part V.E. These market 

features make conspiracy allegations more plausible because they facilitate coordination between 

suppliers and allow easier detection of any cheating. See supra Part V.B. 

The Fittings suppliers also had a motive to conspire. During 2007, the increase in Project 

Pricing drove Fittings prices down.423 As Mr. Rybacki of Sigma explained at trial, Star in 

particular had been “overly aggressive” in its Project Pricing for most of 2007, and took prices to 

a “new depressed level, and it was hard to compete with.”424 At the same time, costs for 

producing Fittings were increasing.425 Sigma and Star were particularly “desperate” for a price 

increase because inflationary costs for producing Fittings in China were outpacing domestic 

manufacturing costs.426 By the end of 2007, all the suppliers had declining profits and wanted a 

price increase.427 Declining profits provides a strong motive for parties to enter into an 

agreement to raise prices. Cf. In re Blood Reagents, 756 F. Supp. 2d at 631 (“[L]osing so much 

money before the conspiracy . . . provide[s] the motive for a conspiracy to raise prices.”). 

In addition to the general economic motive to conspire, McWane had motives of its own. 

In 2007, McWane had followed Star’s low prices, but as the sole manufacturer, it also had a 

problem of excess capacity and inventory, and was incurring “idle plant” charges that were 

423 CCPF 555-561. 

424 CCPF 854; Rybacki, Tr. 1136-1137. 

425 CCPF 843. 

426 CCPF 870-877. 

427 CCPF 879-883, 917. 

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eroding its profitability.428 Moreover, throughout 2007, McWane was losing volume and market 

share because McWane’s sales force was smaller, less nimble and, per Mr. Tatman’s own 

estimation, less effective at identifying and responding to Project Pricing.429 Accordingly, Mr. 

Tatman, who had recently been put in charge of McWane’s Fittings division through a 

restructuring, felt that McWane was “shooting in the dark” when trying to ascertain the 

prevailing transaction prices in the market.430 As Mr. Tatman repeatedly admitted at trial, 

McWane wanted to compress the difference between published prices and actual transaction 

prices, i.e., reduce Project Pricing.431 

c) Plus Factor: The Parallel Conduct of all Suppliers Curtailing 

Project Pricing Conformed to McWane’s Written Strategy To 

“[D]rive [S]tability and [R]ational [P]ricing” 

One of the most powerful pieces of evidence supporting the inference of conspiracy in 

this matter is the fact that Sigma, Star and McWane’s actions comport with a written strategy 

authored by Mr. Tatman in late December 2007/early January 2008.432 Evidence that 

conspirators are acting pursuant to a written plan is a significant “plus” factor tending to exclude 

independent action because it provides context for understanding the parallel pricing behavior 

and is suggestive of an agreement. In re Sulfuric Acid Antitrust Litig., 743 F. Supp. 2d 827, 858. 

(N.D. Ill. 2010) (defendants’ written plan for inducing its competitors to reduce output was the 

“most damaging” evidence “tending to exclude the possibility of independent action”); In re
 

428 CCPF 846-850; 854-858. 

429 CCPF 857. 

430 CCPF 679. 

431 CCPF 859; 919. 

432 CCPF 907-922. 

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Linerboard Antitrust Litig., 504 F. Supp. 2d 38, 59 (E.D. Pa. 2007) (noting that other “evidence 

is contextualized” when defendant’s internal documents reflect the “search for ‘a strategy to help 

this highly rational behavior [reducing inventory] become contagious in this industry’”). 

Here, Mr. Tatman prepared a written blueprint for the conspiracy, which he first 

conceptualized in late December 2007 and began to implement in January 2008.433 Mr. Tatman 

knew that Sigma and Star were “desperate” for a price increase, and that their production costs 

from China were increasing more rapidly than McWane’s costs.434 Mr. Tatman saw these 

market facts as providing McWane with a “unique” opportunity to bring price stability to the 

Fittings market. Thus, on December 22, 2007, Mr. Tatman emailed his superiors that he had a 

“concept” to drive “stability and rational pricing with the proper communication and actions” in 

the Fittings market: 

Given both the change in the Tyler/Union leadership structure and 

the accelerated inflation in China compared to Domestic cost, I 

believe we’re in a unique position to help drive stability and 

rational pricing with the proper communication and actions. I 

have a concept that I believe will work if properly executed. . . .435 

Mr. Tatman’s recognition that his plan needed the “proper communication” to work 

demonstrates that McWane needed (and was seeking) the active cooperation of its competitors, 

Sigma and Star, to successfully drive “stability and rational pricing” in the Fittings market. 

Three days later, Mr. Tatman emailed Messrs. McCullough, Jansen, and Walton a draft 

First Quarter Review for McWane’s Fittings division, where he restated the same point of 

McWane having a “unique opportunity” to drive “stable pricing:” 

433 CCPF 907-922. 

434 CCPF 917. 

435 CCPF 909; CX 1702. 

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Our past attempts to drive stable pricing haven’t been too 

successful. However, our new leadership structure coupled with 

China inflation out pacing domestic costs may provide a unique 

opportunity for success provided our strategy and execution is 

correct. 436 

Mr. Tatman has defined pricing as “stable” when the gap between published prices and actual 

transactional prices, i.e., the discount associated with Project Pricing, is less than 10%.437 

On January 6, 2008, Mr. Tatman outlined his multi-prong “Tatman Plan” to improve the 

profitability of McWane’s Fitting business in a presentation that he sent to and discussed with his 

superiors.438 In a slide detailing McWane’s “Desired Message to the Market & 

Competitors,”

439 Mr. Tatman explained that McWane would support a series of small increases 

in multiplier prices if Sigma and Star curtailed their use of Project Pricing and moved toward 

greater transparency in their pricing actions. Specifically: 

 Tyler/Union [McWane] will be consistent and follow through 

with what we’ve formally communicated. 

 T/U will encourage/drive both price stability and 

transparency. 

 T/U will adjust multipliers as required to remain competitive 

within any given market area. (Consistent Job Pricing will be 

met with general market actions). 

 For 2008, we will support net price increases but will do so in 

stepped or staged increments. A prerequisite for supporting 

436 CCPF 910; CX 2327 at 001. 

437 CCPF 908. 

438 CCPF 911-913; CX 0627 at 004. 

439 CCPF 913; CX 0627 at 004 (emphasis added). 

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the next increment of price is reasonable stability and 

transparency at the prior level.

440 

Mr. Tatman then explained that one of the keys to the success of his plan was for “Sigma and 

Star’s mgt [management] pulling price authority away from front line sales and customer service 

personnel to add discipline to the process.”441 

McWane’s January 11, 2008 customer letter was one of the early steps McWane took to 

implement the Tatman Plan.442 In it, McWane communicated to the “Market & Competitors” 

that McWane was increasing its prices, that it did not intend to offer Project Pricing, and that it 

would support future increases in prices only if pricing had stabilized, i.e., only if Sigma and Star 

also curtailed Project Pricing.443 Notably, the January 11, 2008 letter announced a smaller price 

increase than what Sigma had announced (but never implemented) in late 2007. This more 

measured price increase was consistent with the Tatman Plan’s support for increasing prices only 

in “stepped or staged increments.”444 Mr. Tatman’s boss, Mr. Walton, further commented that 

he “like[d] [Mr. Tatman’s] strategy of only giving them half of what they want to try to prevent 

cheating and fire sales.”445 

440 Id. 

441 Id. 

442 CCPF 920, 922. 

443 CCPF 932. 

444 CCPF 913. 

445 CCPF 942-943; CX 2327 (email from Walton to Tatman); see also Tatman, Tr. 882 

(McWane moderated the amount of its price increase so as not to “lose visibility on where the 

true competitive level was.”). 

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Suppliers, including McWane, frequently use customer letters to communicate with their 

competitors, and they read competitor’s letters, nominally addressed to customers, for messages 

directed to them.446 Mr. Tatman admitted at trial that his January 11, 2008 letter was specifically 

directed to his competitors, and that he intended to induce his competitors to curtail Project 

Pricing.447 This is similar to In re Delta/AirTran Baggage Fee Antitrust Litig., 733 F. Supp. 2d 

1348, 1360 (N.D. Ga. 2010), where the court recognized public communications such as 

“speeches at industry conferences, announcements of future prices, statements on earnings calls, 

and [] other public ways” as part of an unlawful price fixing conspiracy. This letter likely was 

not the only communication among the competitors. For example, from late December 2007 to 

mid-January 2008, { 

}

448 

Regardless of the mode of its communication, Sigma and Star received and understood 

McWane’s message, and acted upon it.449 As previously noted, Sigma and Star announced they 

would curtail Project Pricing shortly after receiving McWane’s January 11, 2008 letter. Part 

V.C.1.a. Even more importantly, Sigma admitted that it did so in order to please McWane. As 

Mr. Rybacki explained at his deposition, Sigma’s then-current President, Mr. Pais, wanted to pull 

back on Project Pricing because it was “upsetting the gorilla in the room,” McWane.450 

446 CCPF Section 6.3.5. 

447 CCPF 934. 

448 CCPF 923, in camera. 

449 CCPF 951. 

450 CCPF 964; CX 2531 (Rybacki, Dep. at 229). 

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Sigma’s contemporaneous business documents also show that it curtailed Project Pricing 

to demonstrate to McWane that it was capable of being a disciplined and reliable coconspirator. 

Days after receiving McWane’s January 11 pricing letter, Mr. Pais wrote: 

Though Tyler’s NEW multipliers are discouraging, this is both a 

lesson and an opportunity [for] Sigma and Star to develop a patient 

and disciplined Marketing approach and demonstrate to 

[McWane] that we are capable of being part of a stable and 

profitab[ility] conscious industry.

451 

Thus, Sigma understood the Tatman Plan’s central message: that if Sigma and Star followed 

McWane’s initial, small price lead, and eschewed excessive discounting, then further McWane 

price increases would follow. Sigma was willing to play its assigned role in the Tatman Plan. 

Star likewise took steps to ensure that McWane knew that it was curtailing Project 

Pricing. For example, on January 23, 2008, Star’s National Sales Manager, Mr. Minamyer, 

informed his sales force that they needed their customers to accept shipment of products that had 

received earlier Project Pricing by March 1, 2008, the effective date through which Star was 

honoring prior Project Pricing.452 Mr. Minamyer gave this directive because he feared that if 

these special pricing projects lingered, McWane would not be able to “figure it out” and think 

that Star had not taken the price increase.453 Evidence of “compliance” with the written plan is 

further evidence supporting the inference of conspiracy. See In re Sulfuric Acid, 743 F. Supp. 2d 

at 858; see also In re Linerboard, 504 F. Supp. 2d at 59. 

451 CCPF 956; CX 1145 (emphasis added). 

452 CCPF 1010-1013; CX 0847 at 001; Minamyer, Tr. 3180-3181. 

453 CCPF 1013; CX 0847 at 001; Minamyer, Tr. 3180-3181. 

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The suppliers also complied with one of the Tatman Plan’s “keys to actual success:” 

centralizing their pricing authority away from the front lines of their sales force.454 In January 

2008, Mr. Tatman followed his Plan by creating a brand new Pricing Coordinator position; a 

central person who was responsible for approving all requests for Project Pricing from 

McWane’s sales force.455 Previously, McWane’s sales force had some limited authority to offer 

customers Project Pricing. At or about the same time in January 2008, Star too removed pricing 

authority from its sales force, requiring them to get the National Sales Manager’s approval 

before they could offer Project Pricing.456 Sigma had always used its regional sales managers to 

approve requests for Project Pricing from its lower level sales agents, but Mr. Tatman reported in 

his First Quarter Report that Sigma, too, appeared to have added more discipline to the process 

of offering Project Pricing.457 

Finally, as discussed infra Part V.D.1.h.(2), Sigma and Star had considerable insight into 

the details of the Tatman Plan when they discussed adhering to certain aspects of it with each 

other. The level of detail known to Sigma and Star is best explained by agreement among the 

three suppliers to follow the Tatman Plan. 

d) Plus Factor: Curtailing Project Pricing Was Against the 

Conspirators’ Unilateral Business Interest Absent Assurances 

That Their Competitors Would Also Curtail Project Pricing 

Actions contrary to a co-conspirator’s independent self-interest is another significant plus 

factor from which the finder of fact may infer a conspiracy. Harcros Chems., 158 F.3d at 572 

454 CCPF 1054; CX 0627 at 004. 

455 CCPF 924-929. 

456 CCPF 991-996. 

457 CCPF 1054. 

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(actions against interest are “prominent” plus factor); Merck-Medco Managed Care, LLC v. Rite 

Aid Corp., 1992-2 Trade Cas. ¶ 72,640, 1999 U.S. App. LEXIS 21487, at *26 (4th Cir. 1999) 

(“Evidence of acts contrary to an alleged conspirator’s economic interest is perhaps the strongest 

plus factor indicative of a conspiracy.”). Acting contrary to one’s own interests absent an 

agreement is powerful evidence of a conspiracy because it “excludes the likelihood of 

independent conduct.” Re/Max Int’l, Inc. v. Realty One, Inc., 173 F.3d 995, 1009 (6th Cir. 1999) 

(“Ordinarily, an affirmative answer to the first of these factors [actions against interest] will 

consistently tend to exclude the likelihood of independent conduct.”). 

In evaluating this ‘plus’ factor, it is important to assess the conspirators’ actions against a 

competitive market – as a price fixing conspiracy that increases prices and profits would be in 

the individual firm’s economic interests. See, e.g., Flat Glass Litig., 385 F.3d at 360-61 

(“Evidence that the defendant acted contrary to its interests means evidence of conduct that 

would be irrational assuming that the defendant operated in a competitive market. In a 

competitive industry, for example, a firm would cut its price with the hope of increasing its 

market share if its competitors were setting prices above marginal costs.”). 

Here, McWane, Sigma, and Star all acknowledge that if they unilaterally stopped Project 

Pricing, they would lose business to their competitors.458 Despite this reality, McWane 

announced in its January 2008 letter that it would no longer Project Price.459 McWane has failed 

to explain how telegraphing to its competitors that it would stop competing on price could be in 

458 CCPF 668-699 

459 CCPF 932-939. 

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McWane’s unilateral business interest. In fact, Mr. Tatman knew that the only way for this plan 

to be successful was for Sigma and Star to join McWane in stopping Project Pricing.460 

Star also acted contrary to its unilateral interests by altering its historic business model, 

which had been to gain market share by aggressively discounting. Star is the smallest of the 

three Fitting suppliers and its core strategy involved undercutting its larger rivals’ prices to gain 

market share. Star believed that unless its Fittings prices were the lowest of the three, it would 

not win sales.461 Yet, beginning in January 2008, after receiving McWane’s January 2008 price 

increase letter, Star pulled back on its strategy of aggressive discounting. Mr. Minamyer 

explained that Star was not pursuing this change in strategy because it needed to, but because it 

would be better “for the industry”: 

You need to know that we are strong in revenue and profit. We 

will have no problems weathering any price wars, even if they are 

prolonged. What we are doing is what is right for the industry. 

So, don’t think we need the price increases, as that is not the case. 

A price increase will be good for us on the short and long term 

profit situation but are not vital to our strength. The truth is that we 

would come out of a price war stronger than ever and with a bigger 

market share, but we don’t think the industry needs that right 

462 now.

Mr. Minamyer never tried to justify Star’s change in strategy as being good for Star’s unilateral 

interest. Further, Star’s President, Mr. McCutcheon, acknowledges that this change of course 

was “irrational” and “bizarre,” and ordinarily would threaten his company’s competitive 

viability.463 

460 CCPF 918. 

461 CCPF 444. 

462 CCPF 1067. 

463 CCPF 1063. 

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Star’s “irrational” and “bizarre” actions are similar to the actions of the defendants in 

Standard Iron Works v. ArcelorMittal, 639 F. Supp. 2d 877 (N.D. Ill. 2009), and as the court 

found there “plausibly suggest[] agreement.” Id. at 897. In Standard Iron Works, the defendants 

(steel mill operators) “coordinated supply cuts,” which was “an abrupt departure from each 

firm’s prior behavior” and contrary to each producer’s self-interest. Id. at 893, 896. Plaintiffs 

argued that, “had the producers behaved independently, they would have operated their mills at a 

profit while competing with each other for market share. Giving up a part of that share, and the 

concomitant profit, at least plausibly infers that Defendants agreed to do so.” Id. at 896. The 

court agreed: “[A]bsent coordination and agreement by each producer to give its ‘pint of blood,’ 

no Defendant would have sacrificed profitable production. But all eight Defendants made that 

sacrifice, and did so on multiple occasions. This, I find plausibly suggests agreement.” Id. at 

897. Here, Star’s decision to give its “pint of blood” by foregoing its strategy of discounting 

represents “an abrupt departure from [its] prior behavior” and was contrary to its own 

competitive interest. Id. at 893, 896-897. Absent coordination and agreement with McWane and 

Sigma, Star would have continued to compete aggressively on price in order to gain market 

share. These facts are highly indicative of a price fixing agreement. 

Star’s decision to join DIFRA was also against its economic self-interest, but in accord 

with the Tatman Plan. McWane and Sigma had long pressured Star to participate in an 

information exchange program.464 When Star was competing aggressively, the company resisted 

these petitions out of fear that the information they would be required to submit would be used 

464 CCPF 1151-1154. 

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by McWane to injure Star.465 Nevertheless, in 2008, Star succumbed to McWane and Sigma’s 

requests and decided to make its pricing more transparent by participating in DIFRA.466 Because 

Star viewed its sharing of confidential business information as contrary to its interest, the fact 

that Star did so is probative of the alleged conspiracy. In re High Pressure Laminates Antitrust 

Litig., No. MDL 1368, 2006 WL 1317023, at *2 (S.D.N.Y. 2006) (defendant’s sharing of 

confidential information with competitors was against its individual economic self-interest, and 

therefore probative of conspiracy); Petroleum Prods., 906 F.2d at 450 (the disclosure of 

“sensitive price information might be considered contrary to a firm’s self-interest,” and thus 

could support a jury’s finding of a “common understanding” among the companies sharing this 

information); In re Currency Conversion Fee Antitrust Litig., No. 05 Civ. 7116, 2012 U.S. Dist. 

LEXIS 19760, at *17-18 (S.D.N.Y. 2012) (providing competitors with sensitive business 

information is against unilateral interest and may be viewed as a tacit invitation to collude). 

e)	 Plus Factor: Membership In DIFRA and Taking Actions That 

Facilitate Collusion 

Actions that facilitate interdependent pricing are recognized as plus factors because, 

although not illegal on their own, these practices can facilitate coordination and make it more 

difficult to detect price fixing activity. Text Messaging, 630 F.3d at 627-28; see also Areeda & 

Hovenkamp, Antitrust Law ¶ 1434a. As discussed, infra Part V.E, McWane, Sigma, and Star’s 

participation in the DIFRA information exchange facilitated collusion by allowing the Fittings 

suppliers to monitor their market shares and detect cheating on the collusive scheme. See Todd 

v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 2001) (competitors’ use of facilitating practice, 

465 CCPF 1154. 

466 CCPF 1284. 

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including an information exchange, is a plus factor that supports an inference of a price fixing 

agreement); Petroleum Prods., 906 F.2d at 461-462 (same). Indeed, merely participating in a 

trade association is a plus factor. See, e.g., Blood Reagents, 756 F. Supp. 2d at 632 (identifying 

“common membership in trade associations” as “yet another feature of the factual background” 

that raises suspicion of collusive agreement). 

f)	 Plus Factor: Internal Documents Tracking “Cheating” 

Constitute Co-Conspirator Admissions 

Acknowledgments of a conspiracy, explicit and implicit, are also evidence of an 

agreement. High Fructose Corn Syrup, 295 F.3d at 661-662; Re/Max Int’l, 173 F.3d at 1009­

1010. One Star document refers specifically to the industry agreement to fix prices, but bemoans 

the failure of all (Sigma) to adhere. In an email to Mr. Minamyer, a Star regional sales manager 

wrote: “I think we are doing better since figuring out that Sigma was cheating on the fitting 

deal.”467 Furthermore, all three Fitting conspirators keep track of their co-conspirator’s 

“cheating on the fitting deal” internally. 

Throughout 2008, Star monitored the level of Project Pricing offered by McWane and 

Sigma and limited its own Project Pricing offerings to instances where there was “real” proof 

that McWane and Sigma were “cheating.”468 By August, however, Star “noticed that recently 

we have been seeing more pricing pressure.”469 After multiple instances of McWane’s Project 

Pricing were reported to Star’s executives, Star’s sales force was reminded in an email to “stay 

on the high road” and to “be as diligent as we can gathering the proper data needed if the other 

467 CCPF 1444. 

468 CCPF 1016-1021, CCPF 1439-1448. 

469 CCPF 1439. 

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suspects are cheating” before offering Project Pricing.470 Also in August, Mr. Minamyer asked 

his sales team to compile evidence of “Sigma’s Antics” because “we can’t sit back and let them 

play games and lose our market share.”471 Throughout September, October and November, Star 

identified more and more instances of Sigma and McWane “cheating on the fittings deal”: 

 In an October 22, 2008 email to Mr. Minamyer and Mr. McCutcheon, a Star division 

sales manager reported “catching Sigma cheating more and more.”472 

 Mr. Minamyer wrote on October 22, 2008, that “Sigma is silently bringing markets down 

and acting as if they are being good stewards.”473 

 In an October 28, 2008 email to Mr. Minamyer, a Star division sales manager reported 

“we are seeing cheating all over from Sigma.”474 

 On November 20, 2008, a Star regional sales manager emailed Mr. McCutcheon realtime pricing Sigma was offering in Florida: “Sigma pricing fittings and joint restraint at 

a .25 multiplier as of this afternoon” to which Mr. McCutcheon responded by writing 

“Too bad they keep doing this.”475 

Internally, Sigma and McWane also monitored Project Pricing and cheating. Sigma used 

the DIFRA reports to ensure that it was not losing market share to Star and McWane.476 In an 

email from Mr. Pais to Sigma’s executive management team, Mr. Pais explained that Sigma 

“kept up our DIFRA membership thru 08 and had used the monthly data in an useful manner to 

keep track of both the total market size and our SMS (Sigma Market Share),” and as overall 

470 CCPF 1441. 

471 CCPF 1442. 

472 CCPF 1445. 

473 CCPF 1446. 

474 CCPF 1445. 

475 CCPF 1448. 

476 CCPF 1449. 

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volume continued to decline in 2008, Sigma was “able to stay reassured that we were holding on 

to our [market share] . . . or close to it!”477 McWane tasked its sales representatives with logging 

instances of Project Pricing in its “price protection log” and reporting instances of cheating in its 

“competitive feedback log,” which Mr. Tatman used to conclude in a Quarterly Executive Report 

to McWane management that “the level of multiplier discounting [cheating] by both Star and 

Sigma appears to have died down significantly.”478 

All of this “cheating on the fitting deal” presupposes a deal or commitment to forbear 

from competing, and is “highly suggestive” of an agreement. See High Fructose Corn Syrup, 

295 F.3d at 661-663 (finding similar statements referring to a possible conspiracy were “highly 

suggestive of the existence of an explicit” albeit covert agreement among the manufacturers); 

Re/Max Int’l, 173 F.3d at 1009-1010. 

g)	 Plus Factor: Complaints to a Competitor About Low Prices or 

Cheating 

Complaints to a competitor about their low prices or “cheating” is a “plus” factor because 

“the ‘objective’ meaning of such a statement to the reasonable observer seems clear: the only 

business rationale for complaining is to induce a higher price.” Areeda & Hovenkamp, Antitrust 

Law ¶ 1419(a); see McWane, slip op. at 17 (“These references to ‘cheating’ and ‘agreements’ 

clearly support the possibility of a conspiracy.”); United States v. Giordano, 261 F.3d 1134, 

1139 (11th Cir. 2001) (sustaining price fixing conviction based on testimony that defendant had 

contacted his competitor “on at least one occasion to complain that [the competitor] was 

cheating” on the agreement); United States v. Beaver, 515 F.3d 730, 738 (7th Cir. 2008) 

477 CCPF 1449. 

478 CCPF 1450. 

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(rejecting appeal from criminal price fixing conviction based on evidence that defendant 

“confronted others about cheating on the cartel”); In re Scrap Metal Litig., 2006 U.S. Dist. 

LEXIS 75873, at *41 (N.D. Ohio 2006) (sustaining price fixing verdict based on evidence of 

inter-company complaints when one scrap dealer bid on an account that “belonged” to a 

competitor), aff’d, 527 F.3d 517 (6th Cir. 2008).479 Complaints about cheating suggest the 

breach of an agreement, not independent action. McWane, slip op. at 17. 

There are at least four instances of complaints between the Fittings conspirators about 

low prices or cheating. First, in March 2008, Mr. Tatman complained to Mr. Rona, Sigma’s 

OEM Business Manager and a member of Sigma’s executive management team, that Sigma’s 

Project Pricing in the Fittings market was compromising the newly established multipliers. Mr. 

Rona relayed Mr. Tatman’s message to Mr. Pais: “He said he hears that some of the new prices 

in the market are being compromised with deals. He hopes that market will improve and hopes 

[we] do our part.”480 

Second, on April 2, 2008, Mr. Minamyer reported to Mr. McCutcheon that Star had lost a 

bid for a project with WinWholesale, because Sigma had offered Project Pricing and Star had 

not.481 Mr. Minamyer wrote: “They [Sigma] should be very careful if they want to hold this 

price increase as we will not lose our partners or any more orders because they are not 

479 When competitors supplement their own observations and responses to their rivals’ pricing or 

other decisions in the market with market communications that facilitate, stabilize, or strengthen 

this natural market coordination, they cross the line into concerted action. See William H. Page, 

Communication and Concerted Action, 38 LOY. U. CHI. L.J. 405, 434, 446 (2007) (concerted 

action is distinguished from interdependence by the presence of a communication that conveys 

the intention to act to achieve a common goal and reliance on one’s rivals to do the same). 

480 CCPF 1035. 

481 CCPF 1038. 

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responsible in the market.”482 At trial, Mr. Minamyer explained that his comment calling Sigma 

“not responsible” referred to the fact that Sigma was pricing below its published multiplier 

letters.483 Mr. McCutcheon asked for additional information about the project: “Please give me 

more info. Bid date, value, selling price, etc...”484 A Star employee told Mr. McCutcheon that 

he would provide all the requested information the next day.485 { 

} Sigma’s Project Pricing (i.e., 

cheating), however, was surely discussed at some point during these conversations. 

In August 2008, Mr. Tatman complained of cheating to Sigma when he communicated to 

Mr. Rona that Sigma and Star had been offering Project Prices in California and Florida.489 Mr. 

Rona forwarded Mr. Tatman’s complaint in an email to Sigma’s highest executives (Mr. Pais, 

Mr. Rybacki, Mr. Brakefield, and Mr. Bhattacharji): 

482 CCPF 1038. 

483 CCPF 1038. 

484 CCPF 1039. 

485 CCPF 1039. 

486 CCPF 1040, in camera. 

487 CCPF 1040, in camera. 

488 CCPF 1040, in camera. 

489 CCPF 1452. 

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Guys, Rick [Tatman] was upset by the numbers in Florida and 

California based on what he has seen from us and Star. He said the 

.26 and .30 were available from us both without any second 

thought.490 

At trial, Mr. Rybacki explained that he “already knew that” Mr. Tatman was upset about 

the pricing. Mr. Rybacki also testified at trial that he told Mr. Rona, after receiving this email, 

that “Mr. Tatman needs to look in the mirror because pricing from McWane was a little 

inconsistent as well.”491 Mr. Rona testified at his deposition that he did not recall the purpose of 

his phone conversation with Mr. Tatman.492 Finally, in late November 2008, Mr. Pais circulated 

an email captioned “URGENT” and requested that Sigma act to “stabilize market pricing” in the 

Southeast, where Sigma had been viewed as pulling down prices: 

With the severe contraction in market volume over the recent few 

weeks, the equally quick and sharp erosion in market pricing is an 

alarming ‘double whammy’! What’s even more disturbing is our 

two main competitors in Fittings seem to see SIGMA as ‘leading’ 

this recent price decline . . . .493 

Mr. Pais’s statement about the state of mind of “our two main competitors” can only be the result 

of complaints from McWane and Star to Sigma about its discounting practices. 

h) Plus Factor: Inter-Firm Communications 

In addition to inter-firm complaints about cheating, a high volume of communications 

among top level executives are a “plus” factor tending to exclude the possibility of independent 

action because this type of evidence provides “proof that the defendants got together and 

490 CCPF 1452. 

491 CCPF 1453. 

492 CCPF 1454. 

493 CCPF 1455; RX-116 at 0001. 

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exchanged assurances of common action or otherwise adopted a common plan[.]” Flat Glass, 

385 F.3d at 361. Here the record is overflowing with evidence that McWane, Sigma, and Star 

executives were communicating frequently with each other. Examples include, but are not 

limited to: (1) Star convincing Sigma to take a List Price increase in 2007; (2) Sigma seeking 

Star’s agreement to stay within a couple multiplier points of McWane’s prices in early 2008; (3) 

Sigma trying to influence McWane and Star to not issue a new list price in April 2009; (4) 

McWane communicating its competitive advantage in late 2007 and early 2008 by offering to 

sell Fittings to Sigma; (5) meetings between Mr. Pais and Mr. Page in late 2007: and (6) 

hundreds of phone calls between McWane, Sigma, and Star executives at competitively 

significant times. 

(1)	 Admission that Star Convinced Sigma to Take a List Price 

increase 

On multiple occasions, Mr. McCutcheon (Star) communicated with Mr. Rybacki (Sigma) 

on the subject of “mostly list price changes, timing on list price changes, and things like that.”494 

While Mr. Minamyer was the National Sales Manager at Star, Mr. McCutcheon convinced Mr. 

Rybacki to announce a list price increase.495 Mr. Minamyer testified that he did not remember 

when this episode took place. 

Conversely, Sigma announced a list price increase on or about October 23, 2007, and on 

November 30, 2007 Star announced it would also issue a new price list.496 In the time between 

Sigma’s announcement and Star’s announcement, { 

494 CCPF 708-709. 

495 CCPF 709-710. 

496 CCPF 882-883. 

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} 

There is no evidence of a legitimate business purpose for these communications, and Mr. 

Rybacki admitted he had none. When provided with the opportunity to explain the purpose of 

these (and other) communications, the witnesses repeatedly testified that they did not remember 

them, or did not know why the communications took place. { 

}

497 

(2)	 Admissions that Sigma Sought Star’s Agreement to Stay 

Within One or Two Multiplier Points of McWane’s Prices 

In early 2008, Mr. Pais, Sigma’s CEO, met with Mr. McCutcheon, Star’s Vice President 

of Sales, and expressly reiterated the essential terms of the Tatman Plan.498 Mr. Pais told Mr. 

McCutcheon that Sigma planned to keep its prices close to McWane’s published prices, and that 

if Star did the same then McWane would lead another price increase: 

[W]e should agree to stay within to two to three points, discount 

points, of McWane, and if we did, he felt that they would behave 

differently and not be so overbearing towards us. That if we were 

good, then they would be good -- they would treat us better and 

we could live happily ever after. . . . [H]e just said that they would 

497 CCPF 884, in camera (Rybacki, Tr. 3606-3614, in camera (“I have no idea what I talked to 

him about”; “I have no idea what the subject could have been”; “I have no idea”; “no idea”; “Not 

a clue”; “Not a clue”; “I don’t know”)). 

498 CCPF 1036-1037. 

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treat us differently and it would firm up the market and that there 

was a lot of benefit to it.499 

Mr. McCutcheon further admits to numerous additional calls on which Mr. Pais told him Sigma 

and Star “need[ed] to stay within two to three [multiplier] points of McWane.”500 In return, 

McWane would “stop being as aggressive,” and then McWane would treat Sigma and Star 

“better” and “firm up the market.”501 Mr. Pais and Mr. McCutcheon admit to participating in 

these discussions about price.502 

In early 2008, Sigma knew and understood that McWane would support a price increase 

only if Sigma and Star reduced discounting. This precise insight into McWane’s strategy could 

have come only through conversations. That is, McWane told Sigma the terms of the Tatman 

Plan. Sigma agreed and convinced Star to join the Plan as well.503 

(3)	 Admission that Sigma Tried to Influence McWane and 

Star’s Price Lists in April 2009 

After McWane announced in April 2009 that it would implement a new price list,504 

Sigma contacted McWane and Star, hoping to influence their respective plans for pricing. Sigma 

was upset with McWane for restructuring the price list and “took affront” because Sigma had 

499 CCPF 1037. 

500 CCPF 1036. 

501 CCPF 1036-1037. 

502 CCPF 1037; Pais, Tr. 1958-1959 (Mr. Pais’s version of events is that it was actually Mr. 

McCutcheon who was “berating” Sigma and “accusing [Sigma] of dropping price.”); CCPF 706; 

Pais, Tr. 1961-1963(explaining that Star would complain that Sigma was “spoiling the market,” 

“not being responsible,” and “using aggressive tactics”). 

503 CCPF 952; CCPF 1029-1040. 

504 CCPF 1492 

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been trying to stop Project Pricing and instead be “consistent in [its] pricing.”505 Mr. Pais and 

Mr. Rybacki contacted McWane in the hopes that McWane would not follow through with its 

announcement. They also sought Star’s assistance resisting the change, telling Star that Sigma 

would not follow McWane’s announcement and seeking assurances that Star would do the same. 

Sigma was upset by McWane’s price list, “took affront,” and “tried to let the whole world 

know [they] weren’t happy.”506 On April 16, 2009, the day after Mr. Rybacki found out about 

the new price list, { 

}

508 Sigma 

decided to persuade McWane to withdraw the price list, which was not yet in effect. On April 

23, 2009, Mr. Pais laid out his strategy for discussing the price list with McWane: 

I meet [Leon McCullough] 4/28 and I will go all out to get the 

MOST from this rare mtg. Pvt Label is just 1 part. He needs to 

hear our version of a grand strategy and 1 may layout the P2 

potential to grab his interest and that there is an end game in 

helping us with the PL [Price List].

509 

In a subsequent email, Mr. Pais elaborated: 

I have a full plate with [Leon McCullough] . . . Pvt Label is one 

issue and their new Pricing move is even bigger!... 

[Sigma] decided to try Option 3 ...being somehow seek a one 

mth’s hold to implement our new pricing discipline -- Old PL + 

FIRM MULT ! You may have seen letr draft. I hv coached LR to 

505 CCPF 1505-1508. 

506 CCPF 1505-1506. 

507 CCPF 1504, in camera. 

508 CCPF 1504, in camera. 

509 CCPF 1509. 

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blitz the G3 to support our move by NOT pandering/pressuring for 

LOWER prices etc...510 

Mr. Pais then traveled to Iowa to meet with Mr. McCullough, and two days later on May 

1, 2009, Mr. Pais traveled to Birmingham for a meeting with Mr. Page to “have a frank and open 

talk” and “review a host of issues all related.”511 After the meeting, Mr. Pais reported to the 

Sigma Board of Directors that he met with Mr. Page to address the “Major Price Restructuring” 

which presented “another major challenge from Tyler”: 

As [Sigma] also faced another major challenge from Tyler, as 

addressed below [“Major Price Restructuring”], Larry and I sought 

and met Ruffner Page, CEO of the McWane Inc. last week, for a 

major review of industry trends.512 

Although Mr. Page denies discussing prices, Mr. Rybacki believes Mr. Pais communicated that 

“Sigma was not happy.”513 

Mr. Pais and Mr. Rybacki also admit to discussing McWane’s prices with Star, including 

whether Sigma and Star could do anything to resist the change or to convince McWane to 

withdraw its new list prices.514 As Mr. Pais lobbied McWane to withdraw its revised price list, 

he worked to convince Star to join the effort and comply with his plan for a new commitment to 

disciplined pricing: 

I will then seek [from McWane] a special ‘stay of execution’ of 1 

month... HTN [Star] promises to comply -- I am prepared to then 

510 CCPF 1510. 

511 CCPF 1520-1522. 

512 CCPF 1523. 

513 CCPF 1522. 

514 CCPF 1505. 

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visit HTN [Star] to ensure they do ... You have already seen my 

‘personal olive branch’ to [Ramesh Bhutada]515 

Mr. McCutcheon acknowledges that he “definitely talked to Victor” about Sigma’s efforts to 

resist the price change.516 When Star ultimately decided to follow McWane’s price list, Mr. 

McCutcheon gave Mr. Pais advanced notice of Star’s plans.517 

This example is powerful evidence of inappropriate inter-firm communications regarding 

price that excludes the possibility McWane, Sigma and Star were acting independently. 

(4) Discussion to Sell Domestic Fittings 

In late 2007 and early 2008, McWane communicated its competitive position – costs and 

capacity – to Sigma through an offer to sell fittings to Sigma. Mr. Tatman had explained to his 

superiors at McWane that “[t]here is a theory that our ability to stabilize the market is tied to our 

competitor’s perception of our cost structure and our ability to sustain aggressive pricing if our 

share position is threatened.”518 Mr. Page did not expect Sigma to accept this offer, but he 

believed that, “supplying that quote should reinforce the point that with the DISA and our TXX 

facility we’re in a very different competitive cost game then what they’ve been used to with 

us.”519 To this end, McWane told Sigma that McWane’s Domestic Fittings costs were 

515 CCPF 1527-1528 (At trial Mr. Pais admitted that “HTN” sometimes refers to Star, but denied 

that it did in this context). 

516 CCPF 1526. 

517 CCPF 1529. Mr. McCutcheon also contacted Mr. Tatman at McWane to discuss their plans 

for the price list. Those communications are described infra Part V.D.3. 

518 CCPF 1075. 

519 CCPF 1083. 

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competitive, if not lower, than Sigma’s and Star’s cost of importing from China, and offered to 

sell Sigma some of those Fittings. 

Mr. Tatman conveyed this information by offering to sell certain Domestic Fittings to 

Sigma at exceptionally low prices.520 This offer, however, was sent to Sigma’s CEO, Mr. Pais, 

rather than through the traditional buy-sell channels between the two companies, and after 

making one shipment, McWane refused to sell any further Fittings to Sigma under the 

arrangement.521 Mr. Pais got the message: he noted McWane’s “interesting and revealing price” 

and that McWane was “perhaps the most competitive source” for Fittings.522 

Later in 2008, { 

}

523 Mr. McCutcheon emailed Mr. Bhargava and Mr. Bhutada informing them of 

Sigma’s Fittings purchase from McWane, and pointed out that McWane had highlighted the fact 

that McWane was now the low cost producer and they could prove it. 

Sigma recently bought 8 t/l’s [truck loads] from tyler because 

sigma said “they could buy them for 15% cheaper from tyler than 

they could get them from china”. After the 8 t/l’s, tyler would not 

take any more orders. My guess is tyler took these orders to try to 

make a point. During the negotiation, tyler stated that they are 

now the low cost producer and said they could prove it. I think 

there is some exaggeration in this statement, but I believe the core 

point.524 

520 CCPF 1076-1081. 

521 CCPF 1076-1077, 1087; CX 0534 at 001(“[T]yler would not take any more orders.”). 

522 CCPF 1085. 

523 CCPF 1088, in camera. 

524 CCPF 1087; CX 0534 at 001. 

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This incident shows the consistent nature and frequency of inappropriate communications 

between executives at McWane, Sigma and Star, which chips away at the possibility that the 

coconspirators were acting independently, absent an agreement. 

(5)	 Pais- Page Discussions on Competitively Sensitive 

Information 

In late 2007, Mr. Pais of Sigma and Mr. Page of McWane met privately and 

communicated repeatedly. Among the topics of conversation: McWane was dissatisfied with the 

prevalence of aggressive Project Pricing and competition in the Fittings industry. In September 

of 2007, Mr. Pais and Mr. Page had a long meeting at which Mr. Page shared McWane’s market 

analysis, competitive pricing strategy, and its plans for structural and managerial changes in 

McWane’s Fittings business.525 McWane had fired Mr. Green, McWane’s former General 

Manager of its Fittings business, and Mr. Tatman was coming in to change the game. Mr. Page 

told Mr. Pais that he was disappointed in the “failure to get a better landscape” in the Fittings 

industry.526 In December 2007, Mr. Page and Mr. Pais met again in Birmingham. After this 

meeting, Mr. Page threatened to “clos[e] down the direct access,” and would only accept Mr. 

Pais’s further requests for meetings if there was a legitimate business purpose to serve as 

pretext.527 

These meetings and communications between Mr. Page and Mr. Pais were not isolated 

incidents. The two had at least eight in-person meetings between August 2007 and May 2009.528 

525 CCPF 2118. 

526 CCPF 838. 

527 CCPF 887. 

528 CCPF 788-804. 

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Overall, they had a “very trusting relationship” dating back to 2003, when Sigma helped 

McWane establish a manufacturing plant in China in a manner that “discouraged the creation of 

new capacity” for Fittings.529 Over time, this “trusting” relationship between Sigma and 

McWane “generated an all round goodwill, which in turn led to tangible benefits such as higher 

market pricing and profits for all including Sigma.”530 

These illustrations of executive communications between competitors supports a finding 

of agreement and should be condemned. 

(6) Other Communications 

Evidence of direct competitor contacts permits the inference that the competitors had 

other similar contacts. See Petroleum Prods., 906 F.2d at 454 n.18. This inference seems 

particularly appropriate in this case because the evidence shows that top executives at Sigma, 

McWane and Star exchanged over { } telephone calls from January 2007 through May 

2012.531 Many of these phone calls were placed at competitively significant times. For example: 

 { 

} in late 2007 when Sigma and Star 

were trying to implement a list price increase;532 

529 CCPF 831. 

530 CCPF 841. 

531 CCPF 713-786. A complete listing of these phone calls is attached as Exhibit A. 

532 CCPF 884, in camera. 

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 { 

} late in December 2007 and early January 

2008 when Mr. Tatman was developing the Tatman Plan;533 

 { 

} shortly after McWane released its January 11, 2008 price letter announcing a 

multiplier increase and no more Project Pricing;534 

 { 

} the same day Mr. 

McCutcheon received details regarding a project where Sigma was cheating;535 

 { 

};

536 

 { 

};537 

 { 

} after McWane released 

its coded letter to the market;538 

533 CCPF 923, in camera. 

534 CCPF 952, in camera. 

535 CCPF 1040, in camera. 

536 CCPF 1162, in camera, 1164. 

537 CCPF 1163, in camera. 

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 On May 16, 2008, the day after the date McWane, Sigma, and Star had agreed to 

submit their data to DIFRA, { }; 

 Between May 30, 2008 and June 5, 2008 (the day Star finally submitted its sales data 

to DIFRA), calls were placed between { 

539 } 

 Later in June 2008, right before McWane led a second multiplier increase, { 

}

540 

Before they were confronted with their phone records, the witnesses testified that they 

had very infrequent telephone conversations with each other during the relevant time period.541 

Other than Mr. Rybacki suggesting that one call in December 2007 to Mr. Tatman may have 

been a happy holidays or welcome to the industry message, no executive provided a single 

innocent explanation for these phone calls, and Mr. Rybacki admitted that he had no business 

purpose for speaking with his competitors.542 Instead, the witnesses uniformly testified that they 

did not know what was discussed or did not recall the phone calls.543 

538 CCPF 1206, in camera. 

539 CCPF 1221, in camera. 

540 CCPF 1246, in camera. 

541 CCPF 717; CX 2531 (Rybacki, Dep. at 191) (Mr. Rybacki testifying that he has talked to Mr. 

Tatman “maybe once, once or twice maximum my whole career.”); CCPF 721; (CX 2531 

(Rybacki Dep. at 192-193) (Mr. Rybacki testifying that the frequency of his past contacts with 

Mr. McCutcheon has been “relatively infrequent, but, you know, once in a great while.”)). 

542 CCPF 716-719. 

543 CCPF 884, 894, 923, 952, 1040, 1088, 1110, 1164, 1221, 1449, 1532. 

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i)	 Instances of McWane, Sigma and Star Project Pricing During 

2008 Does Not Defeat a Claim of Parallel Pricing Conduct to 

Support a Price Fixing Claim 

McWane denies that there was parallel conduct supporting an inference of an illegal price 

fixing agreement by pointing to evidence that Fittings suppliers continued to offer at least some 

Project Pricing in 2008. This argument is flawed for three reasons. 

First, in assessing the existence of an agreement, it is important to distinguish “between 

the existence of a conspiracy and its efficacy.” High Fructose, 295 F.3d at 656. It is 

unnecessary to prove that a price fixing agreement was effective in order to establish that the 

agreement existed. United States v. Socony-Vacuum, 310 U.S. 150, 218-219 (1940). Moreover, 

evidence that suppliers cheated on their agreement by occasionally continuing to offer Project 

Pricing does not mean there was no agreement in the first place. McWane, slip. op. at 18 (“The 

fact that not all of the claimed conspirators complied fully with the conspiracy does not mean 

that there is no conspiracy.”); see also United States v. Andreas, 216 F.3d 645, 669, 679 (7th Cir. 

2000) (cheating by cartel members did not disprove conspiracy claim); United States v. SKW 

Metals & Alloys, Inc., 195 F.3d 83, 86 (2d Cir. 1999) (same); High Fructose, 295 F.3d at 656 

(same); Alexander v. Phoenix Bond & Indemnity Co., 149 F. Supp. 2d 989, 1008 (N.D. Ill. 2001) 

(same). The Seventh Circuit cautioned against falling into this “trap” because cheating is 

endemic to all cartels: 

[Defendant asserts that] the concrete producers’ occasional 

cheating on the discount limit shows that no agreement was ever 

reached. But this argument is illogical; certainly [defendant] 

would agree that a breach of contract does not mean that the parties 

never entered into a contract in the first place. And the argument is 

also beside the point because § 1 of the Sherman Act does not 

outlaw only perfect conspiracies to restrain trade. It is not 

uncommon for members of a price-fixing conspiracy to cheat on 

one another occasionally, and evidence of cheating certainly does 

not, by itself, prevent the government from proving a conspiracy. 

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Beaver, 515 F.3d at 739. 

Second, the continued existence of some Project Pricing is not inconsistent with the 

alleged conspiracy, which was to curtail – not eliminate – Project Pricing. As Mr. Pais admitted, 

the goal was not to end Project Pricing entirely because that was “wishful thinking,” but merely 

to minimize it.544 

And finally, the evidence here reflects that the Fittings suppliers were largely successful 

in reducing the amount of Project Pricing in 2008.545 For example, McWane tracked its 

instances of Project Pricing in a “Price Protection Log” that included an entry with the reason for 

the offered discount. According to McWane’s Price Protection Log, there were far fewer 

instances of Project Pricing to meet competition from Sigma and Star in 2008 than there were in 

2009. For example, in the Second and Third Quarters of 2008 (or the height of the conspiracy 

period), the Price Protect Log reflects an average of 3.7 instances of McWane offering Project 

Pricing to match Star or Sigma, compared to an average of 27 instances of Project Pricing to 

match Sigma or Star in the Fourth Quarter 2008 and an average of 55 instances in the First 

Quarter 2009 (when the conspiracy largely collapsed).546 Mr. Tatman acknowledged the low 

incidence of Project Pricing to meet competition from Star and Sigma in early 2008 with 2009, 

but he could not explain it.547 

544 CCPF 957. 

545 Dr. Normann’s conclusion to the contrary ignores all of the evidence cited herein, and relies 

solely on his analysis of unreliable sales data that is rife with errors and a flawed methodology. 

See Rebuttal Report; Findings. 

546 CCPF 1047. 

547 CCPF 1046. McWane did not institute its price protection program until 2008 and therefore 

its Price Protection Log did not contain data for 2007. 

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Star kept a similar log of Project Pricing, which showed that Star offered substantially 

less Project Pricing in 2008 from the prior year, 2007.548 Assuming the accuracy of Star’s 

Project Pricing log,549 Star generally offered 15 to 48 percent less Project Pricing from March to 

November 2008 than the prior periods in 2007 – notwithstanding the fact that Star implemented 

two price increases in 2008, which typically cause a spike of Project Pricing (as the old pricing is 

extended for a period of time after the new price increase’s effective date).550 In December 

2008, however, when Star returned to its aggressive pricing, Star’s Project Pricing increased 70% 

from December 2007. These before-and-after comparisons from McWane and Star support the 

existence of a price fixing agreement. In re Graphics Processing Units Antitrust Litig., 527 F. 

Supp. 2d 1011, 1024 (N.D. Cal. 2007) (using a “before-and-after comparison of pricing 

behavior” to show that the changes in pricing were unprecedented). 

Additionally, in April 2008, Mr. Tatman admitted in his First Quarter Executive Report 

that Project Pricing had “died down significantly:” 

Based on our competitive feedback log, the level of multiplier 

discounting by both Star and Sigma appears to have died down 

significantly. As we understand it, both have removed pricing 

authority from the front line sales team and pushed it up higher 

within their organizations. Discounting is still available, but it now 

requires a more structured decision process...551 

548 CCPF 1411. 

549 Star’s report of Project Pricing contains numerous errors, thereby limiting its reliability as a 

reliable source for the amount of Project Pricing offered by Star. However, notwithstanding 

these errors that overstate the incidence of Project Pricing, the log still shows that Project Pricing 

declined in 2008 from 2007. See CCPF Section 7.7.5. 

550 See CCPF Section 7.7.5. 

551 CCPF 1054; CX 1564 at 004; Tatman, Tr. 423-424. 

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This conclusion is consistent with Mr. Minamyer’s admission that Star had “work[ed] extremely 

hard to bring [price] stability to the fitting market.”552 

Finally, this reduction in Project Pricing appears to have met the conspirators’ goals of 

increasing Fittings prices during 2008 and, therefore, the suppliers’ financial performance 

notwithstanding the down market. For example, Star’s { 

. 

553} Sigma’s { 

}

554 At McWane, { 

”}.556 

552 CCPF 1002-1004; Minamyer, Tr. 3192-3193. See also supra Part II.B.5, discussing efforts to 

resume Project Pricing in late 2008, which supports inference that Star and McWane had 

curtailed Project Pricing. 

553 CCPF Section 7.7.3, in camera. 

554 CCPF Section 7.7.4, in camera. 

555 See CCPF 629 (describing McWane’s price per ton had increased in 2008). 

556 CCPF 1358, in camera -1359; CX 0622 at 005. 

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2.	 Episode Two: On or Around May 2008, McWane Agreed to Lead 

Another Price Increase in Fittings Once Pricing Transparency was 

Established Through DIFRA 

The conspiracy’s second episode began in or around May 2008 and related to the 

formation of the DIFRA information exchange. As previously discussed, supra Part V.C., 

McWane’s May 7, 2008 letter was an unlawful invitation to collude that offered to raise Fittings 

prices in exchange for Star and Sigma submitting their sales data (in tons shipped) to DIFRA. 

This invitation to collude became an unlawful price fixing agreement when Star and Sigma 

accepted the invitation by submitting their sales data. 

Concerted action occurs when two or more firms exchange mutual assurances to adhere 

to a common course of action. In re Flat Glass Litig., 385 F.3d 350, 361 (3d Cir. 2004) (“The 

most important evidence will generally be non-economic evidence that there was an actual, 

manifest agreement not to compete. That evidence may involve customary indications of 

traditional conspiracy, or proof that the defendants got together and exchanged assurances of 

common action or otherwise adopted a common plan even though no meetings, conversations, or 

exchanged documents are shown.”) (internal quotations omitted) (quoting Areeda & 

Hovenkamp, Antitrust Law ¶ 1434b); see also William E. Kovacic, The Identification and Proof 

of Horizontal Agreements Under the Antitrust Laws, 38 ANTITRUST BULL. 5, 7-8 (1993). 

The exchange of assurances proscribed by the antitrust laws need not be explicit, as in “I 

promise to do X provided that you promise to do Y.” Reciprocal assurances may be 

communicated by vague words or by conduct. United States v. Gen. Motors Corp., 384 U.S. 

127, 142-43 (1966) (“[I]t has long been settled that explicit agreement is not a necessary part of a 

Sherman Act conspiracy.”); see Isaksen v. Vt. Castings, Inc., 825 F.2d 1158, 1164 (7th Cir. 

1987); Areeda & Hovenkamp, Antitrust Law ¶¶ 1404, 1410c (noting that “an addressee of a 

proposal for common action who behaves in accordance with the proposal may find it difficult . . 

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. to persuade us that it acted unilaterally and without regard to the proposal” and that “reciprocal 

assurances can be communicated by conduct rather than by words”). Consistent with contracts 

law, acceptance by performance can form the basis for an illegal Section 1 conspiracy. Isaksen 

v. Vt. Castings, Inc., 825 F.2d 1158, 1164 (7th Cir. 1987) (establishing that a conspiracy had 

been formed “by conduct in lieu of promissory language”). 

For example, the plaintiff dealer in Isaksen v. Vermont Castings, Inc. alleged an (at the 

time) per se illegal vertical price fixing agreement between himself and his supplier. Isaksen, 

825 F.2d at 1161-62. The defendant supplier denied that there was a conspiracy because the 

dealer had never voiced his assent to the supplier’s alleged coercion to raise prices. Isaksen, 825 

F.2d at 1164. The Seventh Circuit rejected this argument, holding that if a would-be price fixer 

proposes a conspiracy and the co-conspirator “merely grunts, but complies,” a conspiracy has 

been formed because the agreement to a common course of action may “be implicit, or signified 

by conduct in lieu of promissory language.” Isaksen, 825 F.2d at 1164; see also United States v. 

Parke, Davis & Co., 362 U.S. 29, 43 (1960) (“Wholesalers ‘accepted Soft-Lite’s proffer of a 

plan of distribution by cooperating in prices, limitation of sales to and approval of retail 

licensees. That is sufficient . . . . Whether this conspiracy and combination was achieved by 

agreement or by acquiescence of the wholesalers coupled with assistance in effectuating its 

purpose is immaterial.’”) (quoting United States v. Bausch & Lomb Optical Co., 321 U.S. 707, 

723 (1944)); Interstate Circuit, Inc. v. United States, 306 U.S. 208, 227 (1939) (“It is elementary 

that an unlawful conspiracy may be and often is formed without simultaneous action or 

agreement on the part of the conspirators. Acceptance by competitors, without previous 

agreement, of an invitation to participate in a plan, the necessary consequence of which, if 

carried out, is restraint of interstate commerce, is sufficient to establish an unlawful conspiracy 

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under the Sherman Act.”) (internal citations omitted)); see also United States v. MMR Corp., 

907 F.2d 489, 498 (5th Cir. 1990) (finding that defendant had manifested it agreement to join a 

bid-rigging conspiracy by not submitting a bid). 

One of the Tatman Plan’s key elements to stabilizing and increasing Fittings prices was 

that McWane would only increase prices “in stepped or staged increments” and there was a 

“prerequisite for supporting the next increment of price.”557 McWane had succeeded in bringing 

at least “reasonable stability” to the market by the parallel curtailment of Project Pricing by the 

three primary Fittings suppliers, but it still needed greater price transparency in order to 

determine if it would support the next “stepped or staged increment[]”, or in other words a quid 

pro quo.

558 DIFRA reports would provide the transparency McWane required. 

In February 2008, McWane and Sigma agreed to restart efforts to form the DIFRA 

information exchange.559 On February 7, 2008, Mr. Tatman reported to his superiors that Mr. 

Rybacki called him that day to express Sigma’s willingness to participate in a Fittings trade 

association.560 Later that same day, Mr. Tatman emailed Mr. Brakefield (of Sigma) regarding 

“next steps” toward restarting DIFRA, including suggesting meeting dates for face-to-face 

meetings and membership requirements.561 In order to mask antitrust concerns, U.S. Pipe and 

557 CCPF 913; CX 0627 at 004. 

558 CCPF 913; CX 0627 at 004. 

559 CCPF 1107-1116. McWane, Sigma, Star and others had discussed forming DIFRA since at 

least as early as 2005. In 2005, the DIFRA members engaged Thad G. Long of the law firm 

Bradley Arant Rose & White to assist in setting up DIFRA. CCPF 1094. The first official 

DIFRA meeting occurred in March 2005. CCPF 1096. 

560 CCPF 1111. 

561 CCPF 1113-1115. 

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ACIPCO were invited to join, although they did not meet the membership requirements.562 

ACIPCO passed on the invitation, but U.S. Pipe joined.563 On March 28, 2008, representatives 

from all four DIFRA members held a meeting. One of the main agenda items was the format 

and frequency of the DIFRA reports: 

Status of Reporting of production and/or sales data to independent 

CPA, including (1) reporting form, (2) reporting frequency, (3) 

identification of CPA, (4) dissemination and form of reports to 

membership (if any) based on reports input, and (5) proper and 

improper utilization of the data. To the extent one or more of the 

four remaining interested members opt out of the Association or 

out of the reporting aspect, there should be a discussion as to 

whether a continuation of the reporting program can be legally 

justified.564 

Indeed, the only item of interest Mr. Tatman reported to Mr. McCullough was regarding the 

DIFRA reports: 

The DIFRA session was interesting. It would appear the 

association is a go with a tentative target to report 2006, 2007 and 

2008 (Jan-Mar) data around mid April. McWane, Sigma, Star and 

U.S. Pipe will be the reporting members.565 

To ensure that the DIFRA reports provided the exact level of price “transparency” 

McWane needed to support the next price increase, within days of the March 28 DIFRA 

meeting, Mr. Tatman emailed Mr. Long and Mr. Herren of Bradley Arant Rose & White 

(DIFRA’s law firm) suggesting input and output formats for the DIFRA reports and proposing an 

562 CCPF 1122-1123. 

563 CCPF 1124-1129. 

564 CCPF 1133. 

565 CCPF 1136. 

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April 14, 2008 target date for all members to submit their initial data.566 On April 4, 2008, Mr. 

Long sent an email to the four DIFRA members, noting that he had received proposed reporting 

forms but he still had some antitrust concerns: 

I find that they [DIFRA report formats] are consistent in approach 

and seem to minimize antitrust concerns. (This does not mean all 

antitrust concerns are definitely gone, as you always have some 

concern with information aggregations when there are relatively 

few participants, but the suggested approach is designed to 

minimize possible antitrust exposure down to a level which is 

acceptable.)567 

Mr. Long also relayed Mr. Tatman’s suggested target date of April 14 for the submission of 

data.568 

Sigma put in motion a plan to announce a ‘BIG BOLD” price increase on the same day 

Mr. Tatman originally proposed the DIFRA data should be submitted: April 14, 2008.569 In an 

April 11, 2008 email to Sigma’s management team, Mr. Pais described this “BIG BOLD 

MOVE” and pointed out that a key component to its success was that Sigma “earn their 

[McWane’s] TRUST and CONFIDENCE.”570 Attached to the email was a draft pricing letter to 

customers that Mr. Pais wanted to out on April 14, 2008, however, Mr. Tatman’s proposed 

DIFRA data submission date did not hold, and the new pricing announcement was also 

delayed.571 

566 CCPF 1137. 

567 CCPF 1138. 

568 CCPF 1138. 

569 CCPF 1158. 

570 CCPF 1158; CX 1138 at 001. 

571 CCPF 1159. 

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On the morning of April 25, 2008, Messrs. Tatman, Pais, Brakefield, and McCutcheon 

held a conference call on which they finalized and agreed upon the information exchange 

reporting format.572 U.S. Pipe did not join the call. The three suppliers agreed that each member 

would submit data regarding its Fittings sales by tons shipped to DIFRA’s accounting firm 

(SRHW), which would then aggregate the data and provide reports to the DIFRA members 

reflecting industry-wide sales by the 20th of the month.573 The three suppliers agreed that they 

would submit their data by “no later than” May 15, 2008. Going forward, members would 

report, by the 15th of each month, their prior months’ data.574 

Later that same day, Sigma pulled the trigger on its “BIG BOLD” price increase plan and 

issued the letter to its customers announcing a multiplier increase of up to ten multiplier points, 

with an effective date of May 19, 2008, the approximate date the first DIFRA report was 

expected.575 Not long after Sigma’s announcement, Star announced a multiplier increase to 

match Sigma’s in amount and effective date.576 Star and Sigma, however, misread the quid pro 

quo. They thought agreeing to form the DIFRA information exchange was enough to secure 

McWane’s support for a price increase. But McWane wanted to review the actual DIFRA data 

report before supporting any price increase. 

572 CCPF 1139-1140. 

573 CCPF 1140. 

574 CCPF 1140. 

575 CCPF 1168-1169. 

576 CCPF 1173. 

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Recognizing that Sigma and Star did not understand the quo (i.e., the actual DIFRA 

report) for McWane’s quid (i.e., support for another price increase), on May 5, 2008, Mr. Tatman 

sent Mr. McCullough an email emphasizing that McWane would wait for the DIFRA data before 

issueing a price increase, and pointing out that McWane would not “follow that lead [Sigma’s 

price increase amount] regardless of the DIFRA data” because he believed “it would lead to 

instability,” or in other words, increase Project Pricing.577 Attached to the email was a draft 

letter that would correct Star and Sigma’s misperceptions. The letter stated that McWane would 

wait before announcing any price increases until it had “updates” on several unnamed “factors” 

that would become available at the same time McWane expected to receive the first DIFRA 

report: 

Since several misperceptions are starting to circulate, we wanted to 

send out this general communication to clearly define our intention 

in regards to any future pricing actions. 

Before announcing any price actions we carefully analyze all 

factors including: Domestic and Global inflation, market & 

competitive conditions within each region as well as performance 

against our own internal metrics. We are currently waiting on 

updates for several factors but anticipate being able to complete 

our analysis towards the middle of the month. At that point we 

will be sending out specific letters to each region detailing 

changes, if any, to our current pricing policy.578 

On May 7, 2008, McWane issued a letter to the market that did not communicate any 

specific change in McWane’s prices, but communicated in veiled terms that McWane would not 

yet follow Sigma’s price increase until after it received the DIFRA report: 

577 CCPF 1175-1177. 

578 CCPF 1179; CX 0137 at 002 (emphasis added). 

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We are sending this general communication to our waterworks 

distribution customers to more clearly define our intention in 

regards to future pricing actions. 

Before announcing any price actions, we carefully analyze all 

factors including: domestic and global inflation, market and 

competitive conditions within each region, as well as our 

performance against our own internal metrics. We anticipate 

being able to complete our analysis by the end of May. At that 

point, we will send out letters to each specific region detailing 

changes, if any, to our current pricing policy.579 

Mr. Tatman conceded at trial that McWane was waiting for the first DIFRA report before issuing 

the price increase.580 Distributors testified that the coded language in this letter did not help 

them run their business as distributors and was meaningless “fluff.”581 

McWane’s decision to not issue a second price increase until it had received the DIFRA 

sales report was “somewhat painful to the bottom [line] in the short term,” but McWane wanted 

to “re-enforce the message we’ve been trying to drill in which when successful will pay long 

term dividends.”582 Mr. Tatman admitted at trial that the message McWane had been “trying to 

drill in” to his competitors was that McWane was “not going to lose visibility of where the 

competitive level in the marketplace is.”583 

Star had been a reluctant member of DIFRA and had not yet submitted its data, but it 

understood McWane’s message loud and clear.584 Almost immediately upon receiving a copy of 

579 CCPF 1182; CX 0138 (emphasis added). 

580 CCPF 1185. 

581 CCPF 1186-1188. 

582 CCPF 1230-1231. 

583 CCPF 1232. 

584 CCPF 1204. 

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McWane’s May 7, 2008 letter, Star committed to producing its data to DIFRA.585 { 

}

586 When Star produced its DIFRA data several weeks later, Mr. 

McCutcheon immediately informed Messrs. Rybacki and Brakefield at Sigma in an email that 

quoted the letter verbatim: 

Good morning Mr. President. I just sent our info in. Sorry it took 

so long, but we were “carefully analyzing all factors including: 

domestic and global inflation, market and competitive conditions 

within each region, as well as performance against our own 

internal metrics.” (Does that look familiar?).587 

McWane was anxious to get the DIFRA reports and on June 10, 2008, Mr. Tatman 

“harass[ed]” DIFRA’s accounting firm (SRHW )for the aggregated DIFRA report.588 On June 

17, 2008, McWane, Sigma, and Star received the first DIFRA report, which contained annual 

data for 2006, monthly data for 2007, and monthly data for the first four months of 2008.589 

Now McWane had the requisite pricing transparency for the next price increase, within hours of 

receiving the first DIFRA report, and based on a quick analysis of the DIFRA data, not the more 

involved analyses described in its May 7, 2008 letter, McWane rewarded its co-conspirators by 

585 CCPF 1204. 

586 CCPF 1206, in camera. 

587 CCPF 1224; CX 1091 at 001. 

588 CCPF 1235. 

589 CCPF 1238-1239. 

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issuing a letter it had previously prepared announcing an 8% price increase.590 Sigma and Star 

followed.591 

McWane made an offer to raise prices (quid) that was conditioned on Star and Sigma 

submitting their sales data to DIFRA (quo). As soon as McWane received and reviewed the 

DIFRA data, McWane upheld its part by issuing the next “stepped and staged” price increase; all 

in accordance with the Tatman Plan. Acceptance by performance, as seen here, constitutes 

agreement. 

3.	 Episode Three: McWane and Star Conspired in April 2009 to Increase 

Prices for Fittings 

McWane’s April 2009 exchange of assurances on price with Star is on its face per se 

unlawful. See generally Jonathan B. Baker, Two Sherman Act Section 1 Dilemmas: Parallel 

Pricing, The Oligopoly Problem, and Contemporary Economic Theory, 38 ANTITRUST BULL. 

143, 179 & n.73 (1993) (explaining how the private exchange of “mere assurances . . . may 

nevertheless facilitate coordination by helping firms establish an equilibrium outcome as focal”). 

Agreements on list prices are per se unlawful even if list prices are only the starting point in 

negotiations with customers. High Fructose Corn Syrup, 295 F.3d at 656 (Posner, J.); Plymouth 

Dealers’ Ass’n of N. Cal. v. United States, 279 F.2d 128, 132 (9th Cir. 1960). Agreements to 

adhere to published price levels are also per se unlawful, even when those price levels are set 

unilaterally. Sugar Inst. v. United States, 297 U.S. 553, 580-81, 601 (1936). 

The Supreme Court’s decision in Sugar Institute, established the longstanding rule that an 

agreement to adhere to previously announced prices and terms of sale is per se unlawful under 

590 CCPF 1242. 

591 CCPF 1247-1249. 

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the Sherman Act, “even though advance price announcements are perfectly lawful and even 

though the particular prices and terms were not themselves fixed by private agreement.” 

Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 647 (1980) (per curiam) (discussing Sugar 

Institute, 297 U.S. at 601-602); TFWS, Inc. v. Franchot, 572 F.3d 186, 191-193 (4th Cir. 2009); 

Costco Wholesale Corp. v. Maleng, 522 F.3d 874, 895-96 (9th Cir. 2008) (“an agreement to 

adhere to posted prices is a per se violation[,]” explaining that “agreements to adhere to posted 

prices are anticompetitive because they are highly likely to facilitate horizontal collusion”); 

Energex Lighting Industries, Inc. v. North American Philips Lighting Corp., 765 F. Supp. 93, 

106 (S.D.N.Y. 1991) (“An agreement that a published price list will be adhered to is a violation 

of the Sherman Act because it interferes with the setting of prices by free market forces.”) (citing 

United States v. Container Corp. of America, 393 U.S. 333, 337 (1969)). 

Here, McWane and Star unlawfully exchanged assurances to adhere to McWane’s newly 

announced, but not yet effective, price list. Specifically, in April 2009, McWane had issued a 

new list price that significantly altered its pricing structure, by increasing list prices in the 

smaller diameter Fittings where McWane was strongest and decreasing list prices in larger 

diameter fittings where Sigma and Star had a stronger market share.592 Due to its product mix, 

the net impact of McWane’s new price list was about zero, but McWane recognized that it could 

have a different, and more negative, impact on Sigma and Star.593 McWane designed its new 

price list to accomplish three goals: (1) realign its prices among different fittings size ranges in 

order to better align McWane’s prices with its production costs; (2) squeeze margins and give 

592 CCPF 1492. 

593 CCPF 1493. 

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less room for Project Pricing on larger diameter Fittings, where Star and Sigma had significantly 

larger shares; and (3) attempt to achieve greater price transparency.594 

As previously discussed, Sigma did not want to follow McWane’s new list prices and 

communicated with McWane and Star to try to dissuade them from implementing the announced 

price list. See supra Part V.D.1.h. This created uncertainty in the marketplace.595 To eliminate 

the uncertainty, Mr. McCutcheon called Mr. Tatman to ask whether McWane would follow 

through with its announcement or stay with the old price list.596 Mr. Tatman told Mr. 

McCutcheon on the phone call that McWane was “absolutely” going to follow through and that 

he was so sure of it he offered to “pay the $25,000 [for printing a new price list] if we don’t.” 

Mr. McCutcheon described the conversation as follows: 

It cost[s] us about $25,000 to print a new price list. So, I picked up 

the phone and I called Rick Tatman. And I said, I’m only going to 

ask you one question, are you guys going to come out with a new 

price list, because I’m getting ready to approve it and spend 

$25,000 to do it. And he said, we absolutely are, and he says, I’m 

so sure that I’ll pay the $25,000 if we don’t. And I said, I 

appreciate that, nice talking to you, and hung up the phone.597 

Prior to Mr. Tatman’s phone conversation with Mr. McCutcheon, Mr. Tatman was 

uncertain whether or not Star would follow McWane with the new list price or follow Sigma’s 

plan to stick to its old price list. In an email to Mr. Walton on April 28, 2009, Mr. Tatman 

expressed his uncertainty: “The Wild card right now is Star . . . [T]here is now some probability 

594 CCPF 1493. 

595 CCPF 1534. 

596 CCPF 1539. 

597 CCPF 1540. 

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that Star may change their direction and retract their list price change.”598 Six hours later, 

however, Mr. Tatman was no longer uncertain. In an email to Mr. McCullough, Mr. Tatman 

reported that he was “now highly confident that Star will follow our List Price.”599 Only the 

phone call explains how Mr. Tatman’s confidence changed so quickly. 

When McWane provided the requested assurance to Star that it would adhere to its 

previously announced price list, this express exchange of assurances created an unlawful price 

fixing agreement under Section 1. See, e.g., ESCO Corp. v. United States, 340 F.2d 1000, 1007­

08 (9th Cir. 1965) (finding such an express exchange of oral assurances unnecessary to establish 

an agreement); see also Areeda & Hovenkamp, Antitrust Law ¶1405 (“Clearly sufficient 

[evidence of agreement] would be explicit, personally expressed reciprocal assurances of 

common action”). 

The Supreme Court’s decision in Sugar Institute, 297 U.S. 553, is controlling here. In 

Sugar Institute, the Court examined the rule of the Sugar Institute, a combination of competing 

sugar refiners that required sugar refiners to implement any announced price increase for a 

period of time. Sugar Institute, 297 U.S. at 582 (describing “a requirement of adherence, without 

deviation, to the prices and terms previously announced”). The rules did not require that the 

price increases had to be reported or had to be agreed among competitors before being 

announced; there was also no guarantee that rivals would follow announced increases, and in 

fact, the evidence showed that price changes taken by one firm were often not followed by its 

rivals. Sugar Institute, 297 at 579-580. The Supreme Court found no problem in pricing 

598 CCPF 1537; CX 1180 at 002. 

599 CCPF 1543; CX 1180 at 001. 

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announcements made in advance, but condemned the “steps taken to secure adherence, without 

deviation, to prices and terms thus announced. It was that concerted undertaking which cut off 

opportunities for variation in the course of competition[.]” Sugar Institute, 297 at 601. The 

Court reasoned that “[i]f the requirement that there must be adherence to prices and terms openly 

announced in advance is abrogated and the restraints which followed that requirement are 

removed, the just interests of competition will be safeguarded and the trade will still be left with 

whatever advantage may be incidental to its established practice.” Sugar Institute, 297 at 602. 

The Court’s decision in Sugar Institute is soundly grounded in fundamental cartel theory. 

Firms seeking to fix prices must: (i) reach consensus on the prices to be charged; (ii) monitor 

adherence to those prices; and (iii) have the ability to punish defection. See generally George J. 

Stigler, A Theory of Oligopoly, 72 J. POL. ECON. 44 (1964). Agreements to adhere to alreadyannounced prices facilitate the process of reaching consensus by eliminating uncertainty among 

rivals as to future prices. See Business Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 727 

(1988) (“Cartels are neither easy to form nor easy to maintain. Uncertainty over the terms of the 

cartel, particularly the prices to be charged in the future, obstructs both formation and adherence 

by making cheating easier.”); Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 

U.S. 209, 238 (1993) (“Uncertainty is an oligopoly’s greatest enemy.”); see also Areeda & 

Hovenkamp, Antitrust Law ¶ 1407e (“Uncertainty is the most general of the impediments to 

cartel-like results in oligopoly. It follows that collective practices to reduce such uncertainty . . . 

are dangerous to competition”). 

The McWane/Star communication should be condemned under Sugar Institute. As in 

Sugar Institute, McWane announced a price increase and then privately provided its rival with 

assurances of its firm and settled intent to implement its announced price list. As in Sugar 

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Institute, the exchange of assurances facilitated price coordination and “cut off opportunities for 

variation in the course of competition.” Id., 297 U.S. at 601. In fact, this case is stronger than 

Sugar Institute: in that case there was no pre-announcement discussion of pending price changes, 

and list prices sometimes varied, while here McWane offered its “guarantee” knowing that Star 

proposed to match McWane’s announced prices once it understood what prices McWane 

proposed to charge. Thus, even assuming that McWane had unilaterally decided to announce a 

new price list in April 2009, and that Star had unilaterally decided to follow that price list by 

adopting a substantially similar or identical price list, the exchange of assurances around 

McWane’s intent to implement its previously announced price increase was a per se illegal price 

fixing agreement. Star solicited an agreement unlawful under Sugar Institute when it requested 

McWane’s assurance, and McWane consummated the agreement by providing it. 

The evidence illustrates how communications can facilitate collusion by providing 

conspirators with a “focal point” on which to coordinate their prices. See Jonathan B. Baker, 

Two Sherman Act Section 1 Dilemmas: Parallel Pricing, The Oligopoly Problem, and 

Contemporary Economic Theory, 38 ANTITRUST BULL. 143, 179 & n. 73 (1993) (explaining how 

the private exchange of “mere assurances ... may nevertheless facilitate coordination by helping 

firms establish an equilibrium outcome as focal”). Before the McWane/Star communication, 

both McWane and Sigma had announced their intentions with respect to future prices: McWane 

preferred its new price list and Sigma preferred the old price list. As a result, Star was uncertain 

as to what price to set to coordinate prices with its rivals. To eliminate this uncertainty, and to 

increase the chances of successful coordination, Star called McWane and requested an assurance 

that McWane would follow through with its new price list. This negotiated elimination of 

uncertainty as to future prices is precisely the process forbidden per se by Section 1 of the 

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Sherman Act. See Sugar Institute, 297 U.S. at 601 (agreement to adhere to published prices “cut 

off opportunities for variation in the course of competition”); Baker, Two Sherman Act Section 1 

Dilemmas, 38 ANTITRUST BULL. at 179 (“[b]y raising the costs of reaching such complex 

bargains, antitrust law hopes to reduce the prevalence of such bargains”). 

Accordingly, McWane’s assurance to Star that it would adhere to published price levels, 

even when those price levels are set unilaterally, constitute an agreement and are per se 

unlawful. 

4.	 McWane Has Not Offered Evidence to Rebut the Inference That It 

Conspired with Sigma and Star 

All this varied evidence of McWane’s conspiracy to raise and stabilize Fittings Prices 

shifts the burden to McWane to prove that “drawing an inference of unlawful behavior is 

unreasonable.” Petruzzi’s, 998 F.2d at 1230. McWane is unable to do so. Complaint Counsel 

repeatedly confronted executives from McWane, Sigma and Star with the above evidence, and 

no witness ever provided a single alternate explanation for any of the evidence that would 

support a finding that the Fittings suppliers acted independently. 

Star executives testified that they “don’t know” or “don’t recall” over 500 times at trial in 

Instead, McWane, Sigma and 

response to questions such as, what they meant when they wrote certain documents, why they 

did certain things, or what they spoke about in their discussions with their competitors.600 And, 

600 See, e.g., CCPF 717 (Tatman Tr. 364 (“I’ve talked to Mr. Rybacki two, three, a couple of 

times. I don’t know when and I don’t know what the topics were.”)); CCPF 884 (Rybacki, Tr. 

3606-3614, in camera { 

}); CCPF 923 (Tatman, Tr. 367-370 (“Q. But you don’t know what you and Mr. 

Rybacki might have talked about on December 27? A. I don’t know if he said, ‘Merry Christmas. 

Welcome to the rat race.’ I have no clue.”)); CCPF 1221 (Rybacki, Tr. 3564 (Q. Did you 

contact Mr. McCutcheon in late May, early June to encourage him to get his DIFRA data in? A. 

Again, I’m -- I don’t know specifically. Maybe. I don’t know.”)); CCPF 1452 (Tatman, Tr. 364 

(“I do not remember the call.”)). 

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in fact, there is no possible alternate explanation. The evidence all points to one conclusion: that 

McWane conspired with Sigma and Star to stabilize and increase Fittings prices by curtailing 

Project Pricing and increasing price transparency. 

E.	 McWane Violated Section 5 by Participating In an Anticompetitive 

Information Exchange (Count Two) 

Count Two of the Complaint charges McWane with violating Section 1 of the Sherman 

Act by exchanging competitively sensitive information with its primary competitors through the 

information exchange operated by DIFRA. Specifically, McWane, Sigma and Star (and a fourth 

sham participant, U.S. Pipe) shared competitively sensitive sales data through DIFRA with the 

purpose and effect of facilitating collusive pricing. In addition to condemning the DIFRA 

information exchange as part of the per se illegal price fixing conspiracy (Count Three), see 

supra Part V.D.2, the DIFRA information exchange independently violates the antitrust laws as 

an agreement that facilitates price coordination (Count Two). 

An information exchange, although not inherently anticompetitive, is well-recognized as 

a potential tool for facilitating coordinated behavior. See, e.g., DOJ & FTC, Statements of 

Antitrust Enforcement Policy in Health Care, Statement 6 (1996) (“DOJ/FTC Guidelines”) 

(noting that absent “appropriate safeguards . . . information exchanges among competing 

providers may facilitate collusion or otherwise reduce competition on prices or compensation, 

resulting in increased prices, or reduced quality and availability of health care services”). As the 

Commission has explained, facilitating practices are condemned because they increase the 

likelihood of supracompetitive prices and other anticompetitive behavior: 

A facilitating practice is one that “makes it easier for parties to 

coordinate price or other anticompetitive behavior in an 

anticompetitive way. It increases the likelihood of a consequence 

that is offensive to antitrust policy.” AREEDA ¶ 1407b, at 29-30; 

see also In re Brand Name Prescription Drugs Antitrust Litig., 288 

F.3d 1028, 1033 (7th Cir. 2002) (recognizing that “there is 

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authority for prohibiting as a violation of the Sherman Act or of 

Section 5 of the Federal Trade Commission Act an agreement that 

facilitates collusive activity”). 

McWane, slip op. at 19; see also Areeda & Hovenkamp, Antitrust Law ¶ 1407b (an arrangement 

facilitates collusion when it makes it easier for parties to coordinate price or other behavior in an 

anticompetitive way). 

An exchange of sales volume data, for example, can facilitate coordinated behavior and 

increase the likelihood of supracompetitive prices in two ways. First, it can reduce the incentive 

for participating firms to compete for sales because their rivals can more easily detect lost sales 

and therefore invite a competitive response. Second, it can help participating members 

determine whether a decline in their own sales is due to a general decline in market demand or 

due to sales lost to rivals. The former implies that it is safe to continue charging high prices 

(stabilizing prices); the latter implies a need to lower prices or otherwise compete more 

aggressively. See Massimo Motta, Competition Policy: Theory and Practice 151 (2004).; see 

also In re Coordinated Pretrial Proceedings in Petroleum Prods. Antitrust Litig., 906 F.2d 432, 

461-462 (9th Cir. 1990) (holding that the exchange of non-price sales information can facilitate 

collusion). 

An information exchange, therefore, may harm competition by facilitating coordination 

alone. It is not necessary to establish an illegal price fixing conspiracy before the information 

exchange can be condemned. See United States v. Container Corp. of Am., 393 U.S. 333, 334 

(1969) (upholding the sufficiency of a complaint charging “an exchange of price information but 

no agreement to adhere to a price schedule”); Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 

2001) (“the violation lies in the information exchange itself – as opposed to merely using the 

information exchange as evidence upon which to infer a price fixing agreement”); Petroleum 

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Prods., 906 F.2d at 448 (“One may reluctantly tolerate interdependent pricing behavior as such 

and still condemn [those agreements involving] practices which unjustifiably facilitate 

interdependent pricing and which can be readily identified and enjoined.”) (internal quotations 

omitted); Fleischman v. Albany Med. Ctr., 728 F. Supp. 2d 130, 162 (N.D.N.Y. 2010); DOJ/FTC 

Guidelines, at Statement 6 (information exchange may raise antitrust concerns where it facilitates 

collusion or otherwise reduces competition). 

In order to establish that McWane’s participation in the DIFRA information exchange 

violated Section 1 of the Sherman Act, the evidence must show (1) the existence of a contract, 

combination or conspiracy between two or more separate entities (concerted action), that (2) 

unreasonably restrains competition. E.g., Valuepest.com of Charlotte, Inc. v. Bayer Corp., 561 

F.3d 282, 286 (4th Cir. 2009); Law v. NCAA, 134 F.3d 1010, 1016 (10th Cir. 1998). 

Participation in an information exchange is assessed under the Rule of Reason. See Todd v. 

Exxon, 275 F.3d at 198. 

Here, the DIFRA information exchange represents concerted activity among rivals, and it 

is anticompetitive because the likely effect of exchanging sales volume data in the Fittings 

market, which is highly conducive to collusion, is to facilitate non-competitive or collusive 

pricing. 

1. The DIFRA Information Exchange Represents Concerted Action 

The reciprocal exchange of information among competitors “is of course sufficient to 

establish the combination or conspiracy, the initial ingredient of a violation of [Section 1] of the 

Sherman Act.” Container Corp., 393 U.S. at 335; see also Todd v. Exxon, 275 F.3d at 196 

(information exchange that used third-party consultant that “compiled the information, then 

analyzed, refined, and distributed it to the defendants” constituted agreement); Antitrust Law ¶ 

1409a (“[W]hen two competitors exchange information about their past or future prices, we can 

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see a conspiracy to make the exchange. . . . The agreement to make the exchange is obviously 

present . . . .”) see also In re N. Tex. Specialty Physicians, 140 F.T.C. 715, 738 (2005) (“The 

Commission has also held that when an organization is controlled by a group of competitors, the 

organization is viewed as a combination of its members, and their concerted actions will violate 

the antitrust laws if an unreasonable restraint of trade.”). 

Here, DIFRA was incorporated in 2007, with four members: McWane, Sigma, Star and 

U.S. Pipe.601 McWane, Sigma and Star are competing Fittings suppliers, but by 2007, U.S. Pipe 

no longer produced Fittings.602 In February 2008, McWane, Sigma and Star began actively 

working to create DIFRA’s information exchange.603 The DIFRA members reached agreement 

as to the reporting format and timing of the Information Exchange on April, 25, 2008, and each 

subsequently confirmed the agreement via email.604 From June 2008 through January 2009, each 

DIFRA member submitted its monthly sales data (in tons shipped) to an accounting firm that, 

acting on behalf of DIFRA, aggregated each member’s sales data.605 DIFRA then issued to each 

of its members a summary report showing the prior month’s total volume (in tons) of Fittings 

601 CCPF 363-364. 

602 CCPF 224-225; CCPF 454-455. 

603 CCPF 1107-1116; see also CCPF 1090-1106 (describing DIFRA organizational efforts, 

which began as early as 2005); CCPF 1104-1106 (after incorporating in January 2007, DIFRA 

was dormant for the remainder of the year); CCPF 1131-1150, 1201-1221 (describing DIFRA 

meetings, calls, and other communications between February 2008 and April 2008). 

604 CCPF 1139-1141, 1147-1149, 1201-1205. 

605 CCPF 1139-1142; CCPF 1238-1239 (The first DIFRA report contained catch up data for 

2006 and 2007.); CCPF 1473-1483. 

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shipped in the United States by Fittings category.606 These activities satisfy the concerted action 

element of a Sherman Act Section 1 claim. 

2. The DIFRA Information Exchange Unreasonably Restrained Trade 

The DIFRA information exchange was likely to unreasonably restrain competition in the 

Fittings market because its members collectively possess market power, the Fittings market is 

conducive to collusion, and the nature of the sales volume data exchanged has the potential or 

tendency to facilitate coordination. See McWane, slip op. at 19; see also In re N.C. Bd. of Dental 

Examiners, FTC Docket No. 9343, 2011 FTC LEXIS 290 (Dec. 7, 2011), slip op. at 29-30 

(under rule of reason, competitive harm can be established by showing that conspirators possess 

market power, and the anticompetitive nature of the challenged agreement). There are no 

procompetitive justifications that outweigh its anticompetitive effects. 

a) DIFRA Members Collectively Have Market Power 

McWane, Sigma and Star collectively possess market power in the Fittings market. See 

supra Part V.A.1 (defining relevant Fittings market). In 2007, 2008, and 2009, McWane, Sigma 

and Star’s collective market shares were { }, respectively.607 The 

remaining portion of the market is spread among a small group of fringe suppliers that do not 

impact market prices.608 Market power can properly be inferred from collective market shares in 

excess of 90% when, as here, the market is characterized by high barriers to entry. See supra 

606 CCPF 1238-1239; CCPF 1473-1483. 

607 CCPF 456-457; see also McWane Response to RFA at ¶ 40, in camera (admitting that 

McWane {
 

}). 

608 CCPF 459-461. 

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Part V.A.4 (describing high entry barriers in Fittings market); see also Jacobs v. Tempur-Pedic 

Int'l, Inc., 626 F.3d 1327, 1339-1340 (11th Cir. 2010) (“Market share is frequently used in 

litigation as a surrogate for market power.”) (internal quotation marks and citation omitted); 

United States v. Microsoft Corp., 253 F.3d 34, 54-56 (D.C. Cir. 2001); Graphic Prods. Distribs. 

v. Itek Corp., 717 F.2d 1560, 1570 (11th Cir. 1983) (market share between 70 and 75 percent 

supports “significant market power.”); FTC v. Staples, 970 F. Supp. 1066, 1081-82, 1086 

(D.D.C. 1997) (evidence of market share and entry barriers have commonly been central to 

market power analysis). 

This finding of market power is supported by the parties’ contemporaneous documents 

recognizing McWane, Sigma and Star as the three primary suppliers in the Fittings market,609 

and by Star’s admission that the small, fringe Fittings suppliers do not impact the ability of the 

big three suppliers to implement a price increase.610 See FTC v. Staples, 970 F. Supp. at 1075­

1079 (firms’ identification of competitive threats significant for determining ability to exercise 

market power). 

b) The DIFRA Information Exchange Likely Harms Competition 

Complaint Counsel establishes a prima facie case of competitive harm by showing that 

the structure of the market is susceptible to coordination, and that the nature of the information 

exchanged has the potential or tendency to facilitate coordination. See McWane, slip op. at 19 

(“[T]he susceptibility of the industry to collusion and the nature of the information exchanged 

are the most important factors in determining likely effects.”); Gypsum, 438 U.S. at 441 n.16; 

609 CCPF 455; CCPF 460; CCPF 1279e; CCPF 1279d. 

610 CCPF 461. 

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Todd v. Exxon, 275 F.3d at 207-08. Here, the evidence establishes that the Fittings market is 

highly conducive to collusion, and that exchanging sales volume data facilitates coordination. 

(1)	 The Domestic Fittings Market is Highly Susceptible to 

Coordinated Interaction 

As previously discussed, the Fittings market is susceptible to coordination. See supra 

Part V.B; see also McWane, slip op. at 19. Briefly, the evidence shows that the Fittings market: 

i) is highly concentrated with few rivals and high barriers to entry; ii) has a social structure 

where top executives with pricing authority have common contacts with each other; iii) is 

comprised of homogeneous products with few substitutes and an inelastic demand; and iv) has 

somewhat transparent pricing, which transparency was improved upon by the parties setting up 

an information exchange of sales data through DIFRA. See supra Part V.B. Notably, 

McWane’s economic expert, Dr. Normann, does not dispute (nor even address in his report) any 

of these market factors or the conclusion that the Fittings market is highly susceptible to 

coordination.611 

(2)	 The Information Exchanged Has the Nature and Tendency 

to Facilitate Coordination 

While exchanging price information is the most suspect, exchanging sales volume can be 

a proxy for price and may therefore also harm competition. See Petroleum Prods., 906 F.2d at 

462 (exchange of production and supply data can be used to police a cartel or to facilitate 

interdependent action); see also George A. Hay, Oligopoly, Shared Monopoly, and Antitrust 

611 CX 2265-A (Schumann Rebuttal Rep. at 4-5) (describing Dr. Normann’s failure to 

acknowledge the tight-knit oligopoly structure of the Fittings market and Dr. Normann’s failure 

to discuss oligopoly theory or oligopolistic interdependence versus price fixing, and apply these 

economic theories to the Fittings market); cf. RX-712A (Normann Rep. at 5, 24) (acknowledging 

Fittings are a commodity product that can be cast by virtually any foundry given the correct 

patterns, and industry demand for Fittings is likely inelastic). 

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Law, 67 CORNELL L. REV. 439, 454 (1982) (“[F]irms can use information about sales volume, 

which would indicate an unusual increase in one firm’s sales (presumably associated with secret 

discounts), to monitor adherence to consensus prices.”).612 Here, economic theory and the 

parties’ contemporaneous documents establish that the sales volume data exchanged through 

DIFRA had the potential and tendency to facilitate coordination. See Gypsum, 438 U.S. at 457­

458. 

(i)	 Economic Theory Shows How the DIFRA 

Information Exchange Is Likely to Harm 

Competition 

As previously discussed, economic theory explains that sales volume can facilitate 

coordination by allowing suppliers to determine their market shares and whether their volume 

loss is due to a general decline in demand or due to “cheating,” i.e., discounting from published 

prices. See Massimo Motta, Competition Policy: Theory and Practice 151; see also In re High 

Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 656 (2d Cir. 2002) (recognizing that the 

ability to detect cheating “tends to shore up a cartel”); Petroleum Prods., 906 F.2d at 462 

(exchange of production and supply data can be used to police a cartel or to facilitate 

interdependent action); George A. Hay, Oligopoly, Shared Monopoly, and Antitrust Law, 67 

CORNELL L. REV. 439, 454 (1982) (same). 

Additionally, exchanging sales volume data can facilitate coordination by providing more 

price transparency because the lack of price transparency can drive price instability or 

discounting. As sellers in an oligopoly succeed in raising market prices to supracompetitive 

levels, it creates an incentive for a seller to secretly discount and take business (and profits) from 

612 The Commission’s summary judgment decision rejected McWane’s contention that the 

exchange of tons-shipped data cannot facilitate price collusion. McWane, slip op. at 19. 

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its rivals. See United States v. Heffernan, 43 F.3d 1144, 1149 (7th Cir. 1994) (“The temptation 

of a member of a price fixing conspiracy to cheat his fellows by shading the agreed price is very 

great, and is the bane of price fixers . . . .”). As firms in the oligopoly engage in secret price 

cutting, market prices fall.613 

On the other hand, if prices are transparent (visible to rivals), then the opportunity to 

engage in secret price cutting is lessened, and a seller’s fear that rivals may be engaging in secret 

price cutting is likewise diminished. Consequently, inter-firm trust is enhanced and 

supracompetitive pricing is rendered more stable. See Gypsum Co., 438 U.S. at 457 (when “each 

seller would know that his price concession could not be kept from his competitors” the 

consequence is that “no seller participating in the information-exchange agreement would . . . 

have any incentive for deviating from the prevailing price level in the industry”).614 By 

increasing price transparency, an information exchange of sales volume data can therefore 

facilitate price coordination. See Cason-Merenda v. Detroit Med. Ctr., 862 F. Supp. 2d 603, 

643-647 (E.D. Mich. 2012) (describing causal link between increased transparency and 

decreased competition); DOJ/FTC Guidelines, at Statement 6 (“information exchanges among 

competing providers may facilitate collusion or otherwise reduce competition on prices or 

compensation, resulting in increased prices . . . .”).615 

613 CCPF 659. 

614 CCPF 659 (transparency of pricing is conducive to coordination; transparency of pricing is 

one way of providing a means for rivals to detect cheating on any consensus price, which 

increases the risk of punishment and thereby creates a disincentive for such cheating in the first 

instance). 

615 CCPF 661. 

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(ii)	 The Record Evidence Shows That the DIFRA 

Information Exchange Likely Harmed 

Competition 

McWane, Sigma and Star’s contemporaneous documents confirm that the purpose and 

effect of DIFRA was to stabilize collusive pricing in precisely the manner predicted by economic 

theory. The evidence establishes that each supplier used the DIFRA reports to calculate their 

market shares, to evaluate the level of discounting in the market, and to make pricing decisions. 

From the beginning, McWane intended to use the DIFRA reports to track market share 

and make pricing decisions.616 For example, after receiving the first DIFRA report, Mr. 

McCullough emailed McWane’s market share findings to McWane’s CEO, Mr. Page, explaining 

how McWane could use the DIFRA data to enforce pricing discipline on Sigma and Star: 

I believe that until they feel prolonged profit margin pressures they 

will continue their historical practice of undisciplined market 

pricing. Until we see at least minor market share improvement I 

am in favor of no price increase support in the utility fittings 

market.617 

Mr. Page concluded from that first DIFRA report that McWane had lost market share due to 

discounting by its competitors.618 McWane was hopeful that, “DIFRA will eventually add some 

increased stability.”619 In McWane parlance, “stability” means reduced Project Pricing so that 

overall prices are within 10% of published multipliers.620 

616 CCPF 1288 (CX 2047 at 020 (reporting that DIFRA reporting was about to commence and 

McWane would be able to monitor its market shares)); see also CCPF 1289-1296; CCPF 1300­

1314. 

617 CCPF 1301. 

618 CCPF 1302. 

619 CCPF 1305. 

620 E.g. CCPF 557; CCPF 561; CCPF 859; CCPF 908. 

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Throughout the course of DIFRA, McWane used the information exchange to draw 

conclusions regarding the level of its competitors’ Project Pricing, and to plan McWane’s future 

pricing. For example, in his January 21, 2009 email forwarding the most recent DIFRA Market 

Share Analysis, Mr. Tatman concluded: 

As we’ve historically seen, as the market volume tightens up our 

import competitors tend to be less and less disciplined with pricing 

and more and more creative with making and hiding deals.621 

Mr. McCullough also viewed the DIFRA data as a way to measure price stability and market 

share when making pricing decisions. In response to Mr. Tatman’s email, he wrote: 

My inclination is to “not” send a revised multiplier notice and 

“not” send a letter of explanation but simply let our customers 

know that price instability has led to Tyler/Union market erosion 

and that we cannot support higher pricing until there is pricing 

stability and market share maintenance.622 

Although McWane has argued that DIFRA data had nothing to do with price, the 

evidence demonstrates that McWane used DIFRA reports to reach conclusions about its 

competitors’ pricing, and to make its own pricing decisions. This use of the DIFRA data to 

monitor market prices is consistent with McWane’s early desire for reports to include sales 

dollars in addition to shipment tons, which would have allowed DIFRA members to compare 

their average price per ton – a key industry metric – and confirm whether and to what extent 

competitors were stabilizing prices.623 Indeed, once McWane received the DIFRA reports, it 

621 CCPF 1308; CCPF 1304 (RX-616 at 0005 (observing that, based on DIFRA data, “Leading 

price stability has been detrimental to share”)).
 

622 CCPF 1312. 

623 CCPF 1290-1296. 

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never pursued the other purported purposes of DIFRA: “as soon as [McWane] got what they 

wanted to get, there was never another conversation about having a meeting.”624 

Star also used the DIFRA reports to track its market share and to make determinations 

about price strategy decisions.625 Star’s sole motivation for joining DIFRA was to obtain market 

share data, and Star never believed DIFRA had any other purpose for the group.626 Indeed, Star 

was initially hesitant to join DIFRA because it was afraid that McWane or Sigma would use 

Star’s market share data to compete against Star.627 

Specifically, Star used the DIFRA reports to assess whether any decline in Star’s Fittings 

sales was due to the economic decline or due to sales lost to McWane or Sigma.628 { 

630} 

Sigma’s admissions about the use and competitive effect of DIFRA data are particularly 

telling.631 For example, Sigma’s President, Mr. Pais, reported in December 2008 how the 

624 CCPF 1287. 

625 CCPF 1284-1287; CCPF 1315-1323. 

626 CCPF 1284-1287. 

627 CCPF 1151-1154. 

628 CCPF 1321. 

629 CCPF 1317 in camera. 

630 CCPF 1318 in camera -1319 in camera. 

631 CCPF 1276-1283; CCPF 1324-1333. 

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DIFRA reports had assured members that lost sales were due to the declining market, and that 

they did not need to respond to competition from each other: 

[A]ll competitors are shaken by the severe decline in the market 

volume and thanks to DIFRA data, the 3 are somewhat reassured 

that it’s the market weakness that’s costing them the volume and 

they are not losing to the competition.632 

In a letter responding to questions from one of Sigma’s lenders, Mr. Pais again explained that the 

DIFRA information exchange helped to stabilize Fittings prices and reduce discounting: 

In Fittings, there are effectively 3 – McWane, Sigma, and Star – 

and all suffer from the same challenges and there seems to be a 

great desire to improve the pricing and each one has demonstrated 

thru a reasonable amount of discipline, even being protective of 

our respective market share. This is where the monthly market 

size data produced by DIFRA, an association that Sigma helped to 

form, with 4 member suppliers fro [sic] Fittings (one, U.S. Pipe, 

actually is not a producer anymore, but a small player buying 

almost all their needs from SIGMA), helps maintain the pricing 

discipline, as the market share data point to a relatively 

consistent and stable market pattern. It has helped us not to 

allow the sharp market decline to be mistaken as a ‘loss of 

market share’, which mostly causes price reaction. Our [gross 

margins] have continued to be strong, throughout the year, even as 

the volumes have been weak.633 

According to Sigma, the DIFRA information exchange enabled McWane, Sigma, and Star to not 

only monitor competitor discounting, but to avoid lowering their own prices.634 

At trial and at his deposition, Mr. Pais explained how the DIFRA reports influenced 

Sigma’s pricing and discounting strategy. Specifically, Mr. Pais admitted to using the DIFRA 

data to help set Sigma’s prices: 

632 CCPF 1279d. 

633CCPF 1279e. 

634 CCPF 1279. 

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Q. At this point, in December of 2008, are you – you’re planning 

pricing strategy for 2009? 

A. Certainly. As it is the norm in every December. 

Q. When Sigma was doing that pricing strategy planning, were you 

using the DIFRA data? 

A. Certainly.635 

Mr. Pais also acknowledged that “[i]f the DIFRA data pointed to that we were really losing 

market share, then we would have used price to get it back”.636 

This evidence conclusively disproves McWane’s contention that the DIFRA shipment 

data afforded each Fittings seller no insight into competitors’ pricing.637 

c)	 There is No Pro-Competitive Justification For the Challenged 

Restraint 

Once it is established that the DIFRA information exchange served to facilitate price 

coordination, the burden shifts to McWane to demonstrate a countervailing efficiency 

justification for this concerted activity. See In re Indiana Fed. of Dentists, 101 F.T.C. 57, 175 

(1983); Realcomp, FTC Docket No. 9320, 2009 F.T.C. LEXIS 250, at *48, *74 (2009). Because 

the information exchange is implemented by sellers in a tightly-knit oligopoly, the potential for 

635 CCPF 1324. 

636 CCPF 1333 (quoting CX 2527 (Pais, IHT at 85-86) (emphasis added)). 

637 In addition, it is instructive to compare the DIFRA information exchange to the standards set 

forth in the Agency Guidelines for structuring an information exchange that will not trigger 

concerns of anticompetitive effects. Cf. Cason-Merenda v. Detroit Medical Center, 862 F. Supp. 

2d 603, 629-631 (E.D. Mich. 2012) (measuring challenged information exchange against Agency 

Guidelines). Statement 6 of the Agency Guidelines advises that firms operate within a “safety 

zone” when (1) the information exchange is managed by a third party, (2) the data exchanged is 

more than three months old, (3) there are at least five participants reporting data, with no single 

participant’s data representing more than 25% of the total, and (4) the data is sufficiently 

aggregated so as to mask the individual data of every participant. DOJ/FTC Guidelines, at 

Statement 6. The DIFRA exchange did not satisfy the “safety zone” criteria: the number of 

reporting companies (three, or four if one includes U.S. Pipe) is too small; each company’s data 

representation in the total report is too high, and the data is too recent (as recent as 15 days old 

when reported to DIFRA). 

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supracompetitive pricing is acute; the Court’s efficiency analysis should therefore be rigorous. 

See Andrew I. Gavil, Moving Beyond Caricature and Characterization: The Modern Rule of 

Reason in Practice, 85 S. CAL. L. REV. 733, 782 (2012) (“[C]ourts should be demanding of 

defendants who proffer economically implausible or noncognizable defenses, or defenses that are 

not supported by substantial evidence, in cases where the case for anticompetitive effects is 

comparatively strong.”). 

At trial, the DIFRA members raised one efficiency defense: that the industry shipment 

information assembled by DIFRA could be used by a Fittings seller to determine its appropriate 

inventory level.638 This naked efficiency claim is insufficient for a number of reasons. 

First and foremost, there are no contemporaneous documents showing that any supplier 

actually used DIFRA data to set its inventory level.639 The lack of record evidence means that 

this efficiency justification is without substance, and should be viewed as a post hoc 

rationalization deserving no weight. See In re Indiana Fed. of Dentists, 101 F.T.C. at 175 (“Such 

justifications cannot be speculation alone but must be established by record evidence in order to 

be considered an adequate justification for otherwise anticompetitive behavior.”); see also 

United States v. Dentsply Int’l, Inc., 399 F.3d 181, 197 (3d Cir. 2005) (alleged justification was 

638 E.g. CCPF 1279(b). Notably, McWane’s economist, Dr. Normann, did not identify inventory 

the exchange of Fittings sales volume data through the DIFRA information exchange had any 

procompetitive efficiencies. 

639 E.g., CCPF 1328 (Sigma Executive VP responsible for inventory levels rarely looked at 

monthly DIFRA reports); CCPF 1323 in camera ({ 

}). 

management as a procompetitive efficiency of the DIFRA information exchange. In his expert 

report, Dr. Normann only stated that, “trade associations are generally considered to have 

significant potential pro-competitive effects in their ability to create standards and promote 

industry products.” RX-712A (Normann Rep. at 8, n.33). Dr. Normann offered no opinions that 

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pretextual and did not excuse exclusionary practices); Image Tech. Servs. v. Eastman Kodak Co., 

125 F.3d 1195, 1219 (9th Cir. 1997) (allowing court to disregard justification for challenged 

conduct when “evidence suggests that the proffered business justification played no part in the 

decision to act”). In fact, McWane’s initial desire to also include sales dollar figures, which 

would have had nothing to do with inventory management, further demonstrates the post-hoc 

nature of this justification.640 

Second, McWane has not shown that fixing inventory levels on the basis of industry-wide 

shipments is superior to or more efficient than fixing inventory levels based on the supplier’s 

own sales history or other information available to the company. Absent this showing, the 

argument is not moored to greater efficiency, and can be dismissed. 

Finally, even assuming the validity of this efficiency justification, McWane has not 

proven that the benefit was non-trivial or outweighed the consumer harm. Cf. McWane, slip op. 

at 19 (Under the rule of reason, “the question is whether the anticompetitive effect of the 

agreement [to exchange competitive information] outweighs its beneficial effects.”). Decisively, 

the Fittings suppliers themselves have not considered this alleged efficiency benefit to be worth 

the cost of operating the program. The DIFRA information exchange was launched in order to 

facilitate collusion in early 2008, and was abandoned when the conspirators ‘ agreement 

dissolved into a cheating free-for-all (by January 2009) – the Fittings sellers have not since 

continued the information exchange in order to “assist with inventory management.” See 

McWane, slip op. at 20 (“Additionally, the fact that the data exchange began during the alleged 

conspiracy period, and stopped shortly after Complaint Counsel alleges that Star ceased 

640 CCPF 1290-1296. 

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participating in from the conspiracy, raises doubt about whether the exchange of data served any 

procompetitive objective.”) (internal citations omitted). When Sigma attempted to revive 

DIFRA reporting in May 2009, it did not provide a reason relating to inventory management, but 

rather because its purpose was “to restore the badly dented competitive confidence” and to 

demonstrate that Sigma’s “efforts to commit to a new pricing discipline would succeed.”641 

In sum, the DIFRA information exchange likely facilitated price coordination by 

allowing the three Fittings rivals to monitor changes in their respective market shares and to 

detect cheating on consensus prices. The DIFRA information conferred no offsetting efficiency 

benefit. This concerted action should therefore be condemned. 

F.	 McWane’s Master Distribution Agreement with Sigma Unreasonably 

Restrained Competition in the Domestic Fittings Market (Count Four) 

Count Four of the Complaint charges that McWane violated Section 1 of the Sherman 

Act by entering into its “Master Distribution Agreement” with Sigma. Specifically, through the 

MDA, McWane and Sigma agreed that Sigma would abandon its efforts to enter the Domestic 

Fittings market independent of McWane, and instead distribute McWane’s Domestic Fittings 

under restrictive terms. 

For decades, McWane had sold Domestic Fittings directly to Distributors that then resold the Fittings to End Users. In 2009, however, Sigma became motivated to enter the 

Domestic Fittings market by ARRA’s allocation of $6 billion in funds for waterworks projects 

built with American-made products.642 Recognizing Sigma’s incentive to enter, and Sigma’s 

capability to enter, McWane entered into the MDA as an “insurance policy” against Sigma’s 

641 CCPF 1486; CX 0319 at 003. 

642 CCPF 1622-1624; CCPF 1573. 

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independent entry.643 Because Sigma was a potential entrant in the Domestic Fittings market, the 

MDA is properly characterized as a horizontal agreement among potential competitors, and not a 

simple vertical distribution agreement. See Areeda & Hovenkamp, Antitrust Law ¶ 1901b (“An 

arrangement is said to be ‘horizontal’ when its participants are (1) either actual or potential rivals 

at the time the agreement is made; and (2) the agreement eliminates some avenue of rivalry 

among them.”). 

The MDA, by its terms and by the parties’ understanding, barred Sigma from 

independently entering the Domestic Fittings market in competition with McWane.644 Thus, the 

MDA is best understood as a naked agreement among potential competitors not to compete, or a 

horizontal market allocation agreement. See, e.g., Engine Specialties, Inc. v. Bombardier, Ltd., 

605 F.2d 1, 11 (1st Cir. 1979); Eli Lilly & Co. v. Zenith Goldline Pharm., Inc., 172 F. Supp. 2d 

1060, 1074 (S.D. Ind. 2001). Horizontal market allocation agreements are presumptively 

harmful to competition because they deny consumers the benefits of competition and they have 

no redeeming efficiencies. See United States v. Topco Assocs., Inc., 405 U.S. 596, 608, 612 

(1972) (condemning agreements among competitors to allocate markets or customers as per se 

illegal). As Judge Posner explains: 

The analogy between price-fixing and division of markets is 

compelling. It would be a strange interpretation of antitrust law 

that forbade competitors to agree on what price to charge, thus 

eliminating price competition among them, but allowed them to 

divide markets, thus eliminating all competition among them. 

Blue Cross & Blue Shield United v. Marshfield Clinic, 65 F.3d 1406, 1415 (7th Cir. 1995); see 

also Schering-Plough Corp. v. FTC, 402 F.3d 1056, 1064 (“[A]n agreement to allocate markets 

643 CCPF 2332; CCPF 2349; CCPF 2354. 

644 CCPF 2379-2382; CCPF 2336-2366. 

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is ‘clearly anticompetitive,’ resulting in reduced competition, increased prices, and a diminished 

output . . . .”); In re Terazosin Hydrochloride Antitrust Litig., 352 F. Supp. 2d 1279, 1313 (S.D. 

Fla. 2005) (“[A]greements between competitors to allocate markets have the obvious tendency to 

diminish output and raise prices.”). 

Here, the signed MDA agreement between McWane and Sigma meets the concerted 

action prong of a Section 1 violation.645 See, e.g., United States. v. Delta Dental, 943 F. Supp. 

172, 175 (D.R.I. 1996) (“[C]oncerted action may be amply demonstrated by an express 

agreement.”). Thus, the only question for this Court is whether the MDA unreasonably 

restrained trade. See, e.g., Law v. NCAA, 134 F.3d 1010, 1016 (10th Cir. 1998) (elements of 

Section 1 violation are (1) the existence of a contract, combination, or conspiracy among two or 

more separate entities (i.e., concerted action), that (2) unreasonably restrains trade). 

As discussed below, the MDA unreasonably restrains trade because the evidence 

establishes that Sigma was a potential competitor in the Domestic Fittings market, and that the 

MDA eliminated Sigma as an independent entrant. These findings establish that the true nature 

of the MDA is a naked market allocation agreement among potential competitors not to compete 

with each other. Such agreements are summarily condemned as per se illegal. Alternatively, 

because the parties have market power and there are no procompetitive efficiencies, the MDA 

can also be condemned under a more plenary market analysis. 

1. Sigma was a Potential Competitor in the Domestic Fittings Market 

For purposes of a Section 1 analysis, a firm is considered a potential competitor if there is 

evidence that entry by the firm is reasonably probable in the absence of the relevant agreement. 

McWane, slip op. at 22 n.18 (citing Yamaha Motor Co. v. FTC, 657 F.2d 971, 977-979 (8th Cir. 

645 CCPF 2168. 

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1981); United States v. Siemens Corp., 621 F.2d 499, 506-507 (2d Cir. 1980); FTC & DOJ, 

Antitrust Guidelines for Collaborations Among Competitors, at § 1.1, n.6 (2000) (“A firm is 

treated as a potential competitor if there is evidence that entry by that firm is reasonably probable 

in the absence of the relevant agreement, or that competitively significant decisions by actual 

competitors are constrained by concerns that anticompetitive conduct likely would induce the 

firm to enter.”); Areeda & Hovenkamp, Antitrust Law ¶ 1121b. 

To determine whether a firm is a potential competitor, courts commonly consider the 

firm’s intent and its ability to enter the market. 646 Bombardier, 605 F.2d at 9; Yamaha, 657 F.2d 

at 978. It is not necessary that entry be easy or certain. When a firm invests time and resources 

toward market entry, and the incumbent firm anticipates that the entry by the would-be rival is 

likely to occur, courts find that the potential competitor standard has been satisfied. E.g., 

Bombardier, 605 F.2d at 9; Yamaha, 657 F.2d at 977-979. 

For example, in Bombardier, the First Circuit evaluated a challenge to an agreement 

between Agrati, a minicycle manufacturer, and Bombardier, a snowmobile manufacturer that 

wished to expand into the minicycle market but ultimately agreed to be an exclusive distributor 

of Agrati’s minicycles. 605 F.2d at 5. As a threshold question, the court considered whether 

Bombardier was a potential competitor in the minicycle market: if not, then the agreement 

would be analyzed as a vertical restraint under the Rule of Reason; but if so, then the agreement 

would be condemned as a per se illegal horizontal market allocation agreement. Id. at 8-9. 

646 McWane proposes a somewhat different standard for identifying a potential competitor: that 

the firm has taken affirmative steps to enter the business and has an intention and preparedness to 

do so. McWane Summary Judgment Brief at 33. This language is derived from Section 2 cases 

alleging exclusion of a potential entrant. This Count alleges a Section 1 violation because 

Sigma’s independent entry was eliminated by an agreement with McWane. The evidence 

establishes that Sigma was a potential competitor under either test. 

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The First Circuit found there was sufficient evidence to support the jury’s conclusion 

that, but for the challenged agreement, Bombardier was a potential competitor in the minicycle 

market, i.e., that “Bombardier had the necessary desire, intent, and capability to enter the 

market” in competition with Agrati. Id. at 9. The court based its conclusion on evidence that: (i) 

Bombardier was interested in developing a summertime product for its distributors, and had 

focused on the minicycle to fulfill this purpose; (ii) Bombardier had developed, manufactured, 

and tested prototypes of its own minicycle, and could produce all of the necessary parts; (iii) 

Bombardier’s president testified that the agreement with Agrati replaced Bombardier’s plans to 

make its own minicycles; and that (iv) “at various junctures Bombardier had intimidated Agrati 

with the threat of entering the market immediately with its own minicycle if an agreement could 

not be worked out between them.” Id. at 9-10. The court reached this conclusion 

notwithstanding evidence that Bombardier still had challenges to overcome before it could enter 

the minicycle market. Id. at 5, 10, n.13 (noting evidence that Bombardier had become 

“increasingly dissatisfied” with its prototype, did not have the required tooling or production 

experience, and “a great deal of work needed to be done in terms of production orientation”). 

The court then upheld the jury’s verdict that the agreement was a per se illegal horizontal market 

allocation because, by its terms, the agreement prevented Bombardier from selling its own 

minicycles. Id. at 11. 

Here, consistent with Bombardier, the record evidence amply establishes that Sigma 

intended to enter the Domestic Fittings market, that Sigma had the capacity to enter, and that 

McWane viewed Sigma as likely to enter the Domestic Fittings market. 

a) Sigma Intended to Enter the Domestic Fittings Market 

Contemporaneous documents and testimony establish that Sigma intended to enter the 

Domestic Fittings market up until the moment that it signed the MDA, when all entry efforts 

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stopped. Contemporaneous documents and testimony from company executives acknowledging 

the firm’s subjective intent to enter are “the best evidence that a firm is an actual potential 

entrant.” See In re B.A.T. Indus., Ltd., 104 F.T.C. 852, 922 (1984). 

Sigma was first motivated to enter the Domestic Fittings market after Congress passed 

ARRA.647 Sigma found “the conditions were just so urgent” to enter the Domestic Fittings 

market because Sigma expected the ARRA’s Buy American requirement to increase the size of 

the Domestic Fittings market by up to 30 percent of all Fittings sales.648 Sigma also expected 

that the Buy American sentiment would extend beyond the ARRA period,649 and feared that 

Distributors buying Domestic Fittings from McWane would also shift their import purchases to 

McWane.650 

For these reasons, Mr. Rona, Sigma’s OEM manager, believed that ARRA presented “a 

very real threat” to Sigma, and that it was “quite clear now that we need a credible plan” to 

supply Domestic Fittings.651 On May 4, 2009, Mr. Pais echoed these sentiments in an update to 

Sigma’s Board of Directors, where he stressed the importance of Sigma entering the Domestic 

Fittings market: 

647 CCPF 1622-1624. 

648 CCPF 1622-1624; CCPF 2171-2173. 

649 CCPF 1629-1633; CX 0219 (“we are also seeing much more domestic requests and 

specifications that we expect will stay with our industry for several years if not for the next 3-5 

years or even longer.”); CX 1997 at 007, in camera ({ 

}). 

650 CCPF 1639-1646. 

651 CCPF 2171. 

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Sigma’s intent to enter the Domestic Fittings market independent of McWane increased 

in June 2009. When Sigma’s request that McWane supply it with Domestic Fittings reached an 

impasse in early June, Sigma “went back to speeding up [its] review” of domestic production, 

and Mr. Bhattacharji exclaimed: “I am glad the uncertainty is over and we can hit the untraveled 

[I]t behooves Sigma to review the feasibility of producing a line of 

‘domestic’ Fittings, to meet this growing need, in order to reassure 

our customer base and retain their loyalty and their business at the 

current levels.652 

By the end of May 2009, Mr. Florence (a member of the board from Sigma’s majority 

shareholder, Frontenac) declared that entering the Domestic Fittings market was Sigma’s “#1a 

priority.” 

road - once again!”653 After Star announced it too was entering the Domestic Fittings market at 

the June 2009 AWWA show, Mr. Rona admitted that he “was fixated on [the fact] that Sigma 

had to have an answer because I felt there was some percentage of longevity and damage that 

could go to our existing business.”654 Mr. Pais likewise reiterated the urgency of Sigma’s 

intention to enter the Domestic Fittings market in his June 2009 update to Sigma’s Board: 

{ 

} 

652 CCPF 2175. 

653 CCPF 2255. 

654 CCPF 2254 (emphasis added). 

655 CCPF 2209, in camera.
 

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Sigma never wavered from its intent to enter the Domestic Fittings market. Sigma 

witnesses have admitted that Sigma abandoned its efforts toward domestic entry only because 

McWane agreed to the MDA: 

	 Mr. Pais admitted that if Sigma had not agreed to the MDA, then the company 

would have entered the Domestic Fittings market without McWane: “then we 

certainly would have gone another - to Plan B, which is our [domestic] 

production;”656 

	 Mr. Bhattacharji likewise testified that Sigma abandoned independent entry 

because it understood that McWane would supply Domestic Fittings only if 

Sigma provided assurances that the company would not source from anywhere 

else;657 and 

	 Mr. Rona testified that Sigma continued to pursue its own independent entry into 

the Domestic Fittings market until the terms of the MDA required Sigma to cease 

its own domestic entry efforts.658 

Sigma’s intent to enter the Domestic Fittings market is further demonstrated by the 

considerable resources it devoted to the project. As discussed more fully below, Sigma formed a 

task force of high-level executives and engineers – the Sigma Domestic Production team (“SDP 

team”), who visited foundries, developed plans for production, and identified costs of 

656 CCPF 2266. 

657 CCPF 2381. 

658 CCPF 2385. 

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production.659 By June 15, 2009, Sigma had also secured the tooling and patterns necessary to 

produce two or three sample Domestic Fittings that it ultimately sold (and are likely installed 

underground today).660 

Sigma’s intent to enter the Domestic Fittings market is established by the same factors as 

those relied upon by the court in Bombardier: both Sigma and Bombardier had a strong financial 

motive to enter the new market; both companies’ executives testified that entry was important for 

their company; both companies created sample or prototype products; and in both cases, the 

company continued to pursue independent entry until entering into the respective challenged 

agreements. See Bombardier, 605 F.2d at 9. 

McWane nevertheless disputes that Sigma had the requisite intent to enter the Domestic 

Fittings market because Sigma preferred to source Domestic Fittings from McWane through the 

MDA rather than independently as a virtual manufacturer. Regardless of the preference Sigma 

now expresses, its expected profits from independent market entry were sufficient to motivate its 

entry. A party’s preference for an anticompetitive agreement over its other realistic and 

profitable options does not save the agreement from antitrust scrutiny. See Bombardier, 605 

F.2d at 9-11 (condemning collaboration pursued in lieu of independent entry even though 

potential entrant preferred collaboration to the rigors and risks of independent entry); Yamaha, 

657 F.2d at 978-979 (same). To rule otherwise would allow potential entrants to regularly enter 

into agreements eliminating competition between them – a result condemned by the antitrust 

laws. See,e.g., Eli Lilly & Co. v. Zenith Goldline Pharm., Inc., 172 F. Supp. 2d 1060, 1075 (S.D. 

659 CCPF 2211-2220; see also 2230-2248 (further detailing Sigma resources devoted to Domestic 

entry). 

660 CCPF 2249-2252. 

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Ind. 2001); Bombardier, 605 F.2d at 9-11; Yamaha, 657 F.2d at 978-980; In re SKF Industries, 

Inc., 94 F.T.C. 6, 36 (1979); FTC & DOJ, Antitrust Guidelines for Collaboration Among 

Competitors § 3 (2000). 

b) Sigma had the Capability to Enter the Domestic Fittings Market 

The evidence establishes that Sigma was logistically and financially capable of entering 

the Domestic Fittings market in this manner. The high-level executives on Sigma’s SDP team 

had the experience and skill-set to plan, implement, and oversee Sigma’s entry into the Domestic 

Fittings market.661 Sigma had years of experience employing its virtual manufacturing model for 

imported Fittings, whereby it provides all engineering, design, quality control, and logistical 

support to the contract foundries that manufacture Sigma’s Fittings.662 Sigma used this 

experience and took concrete steps toward domestic entry. After engaging in strategic planning 

for domestic entry from February 2009 to May 2009:663 

 Sigma identified the “critical mass” of roughly 700 configurations of Domestic 

Fittings it would need to produce, which could be produced with 400 different 

patterns;664 

 Sigma created a detailed cost analysis for producing these Fittings; 665 

661 CCPF 2212-2216. 

662 CCPF 2217. 

663 CCPF 2218. 

664 CCPF 2227. 

665 CCPF 2277. 

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 Sigma identified, visited, and received price quotes from foundries capable of 

producing castings for Domestic Fittings for Sigma;666 

 Sigma possessed the facilities and expertise for finishing the castings into 

Domestic Fittings;667 

 Sigma produced sample or prototype Domestic Fittings;668 and 

 Sigma received the support of its OEM customers, U.S. Pipe and ACIPCO, 

including the potential use of one of their affiliated foundries for producing 

Domestic Fittings.669 

In the words of Sigma’s President, Mr. Bhattacharji, Sigma was ready to begin production of 

Domestic Fittings “once the switch was flipped.”670 

McWane argues that Sigma’s “shaky” financial position would have impeded its entry. 

Respondent’s Pretrial Brief, at 60-61. Not a single contemporaneous document, however, 

supports this claim. Instead, the evidence conclusively establishes that Sigma was aware of the 

cost, and was prepared and capable of financing domestic entry. 

666 CCPF 2235-2236. 

667 CCPF 2217 (Sigma planned to do the finishing and painting itself.); CCPF 2231 (Sigma 

looked at all aspects of the processing from beginning to end steps); CCPF 2212 (Sigma had key 

personnel who could supervise domestic manufacturing). 

668 CCPF 2249 (Sigma had produced two or three sample Domestic Fittings at the Eureka 

Foundry in Tennessee); CCPF 2252 (three of the Domestice Fittings Sigma made as part of its 

plans for Domestic Production were sold). 

669 CCPF 2240-2245; CCPF 2271-2274. 

670 CCPF 2265. 

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From the beginning, Sigma was aware of the challenges and costs associated with 

domestic production, as well as its financial situation, including its debt covenants, but Sigma 

did not waiver on the path towards entering the Domestic Fittings market.671 Sigma kept its 

board of directors, lenders, and majority shareholder updated about the challenges and costs 

involved in entry;672 and they never discouraged Sigma’s efforts or told Sigma’s management to 

cease those efforts or even to limit their expenditures towards entry.673 To the contrary, 

following a July 15, 2009 Board meeting discussing Sigma’s recent progress towards domestic 

market entry, Mr. Florence informed Sigma’s management that Sigma’s investors were prepared 

to invest up to $7.5 million to fund domestic entry and other strategic initiatives: 

Investors and rollover shareholders are prepared to invest up to 

$7.5m in equity but not to pay down debt and add to liquidity but 

rather to fund domestic sourcing initiative and to fund the strategic 

Business additions which will enhance credit quality and help 

Sigma grow and build equity value.674 

Sigma’s financial activity during 2009 and early 2010 further disproves McWane’s 

contention that Sigma could not finance domestic entry. During 2009 and early 2010, Sigma: 

{ }; 

considered acquiring one foundry;675 acquired { } which 

671 CCPF 2299. 

672 CCPF 2283; CCPF 2309. 

673 CCPF 2306-2307, 2310. 

674 CCPF 2295 (emphasis added). 

675 CCPF 2289. 

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was the same approximate cost of domestic entry; 676 and elevated discussions about acquiring 

Star, which would have been significantly more expensive than domestic entry.677 

McWane has also argued that Sigma could not have entered the Domestic Fittings market 

until after the ARRA period ended. Here, McWane is confusing market entry with having a full 

line of Fittings. Sigma planned to enter the Domestic Fittings market incrementally,678 shipping 

Domestic Fittings “as they came off the line.”679 Sigma estimated that it could begin selling any 

particular Domestic Fitting within four to five months of first commissioning the tooling for that 

Fitting.680 Thus, even if Sigma did not begin ordering patterns for any Domestic Fittings until 

September 2009, when it instead signed the MDA, Sigma could have begun shipping completed 

Fittings by February 2010.681 McWane’s contention that Sigma could not have entered the 

Domestic Fittings market during the ARRA period is also disproven by Star’s actual entry during 

that same time.682 

These facts are more than sufficient to establish that Sigma was capable of entering the 

Domestic Fittings market. For example, in Yamaha Motor Co. v. FTC, the Eighth Circuit upheld 

the Commission’s holding that a joint venture between Brunswick and Yamaha was 

676 CCPF 2292, in camera; CCPF 2305, in camera.
 

677 CCPF 2293. 

678 CCPF 2222-2223. 

679 CCPF 2228. Even piecemeal entry can have a significant pro-competitive effect upon a 

monopolized market. See Richard A. Posner, Antitrust Law 251-53 (2d ed. 2001). 

680 CCPF 2225. 

681 CCPF 2226. 

682 CCPF 1712-1781. 

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anticompetitive because it eliminated Yamaha as a potential competitor in the United States 

outboard motor market. 657 F.2d 971, 978-980 (8th Cir. 1981) (applying Section 7 of the 

Clayton Act). The parties – each with “an incentive to minimize the probability of Yamaha’s 

independent entry” – denied that Yamaha was a potential entrant because Yamaha could not be a 

substantial factor in the market for several years and because Yamaha lacked a network of 

dealers to sell and service its motors. Id. at 978-979, & n.9. But the court found that Yamaha 

had the capacity to enter the market, reasoning that Yamaha had the requisite product line, 

technology, and production and marketing experience, and that the company’s lack of a dealer 

network appeared to be an obstacle that Yamaha could surmount. Id. at 978-979. Like Yamaha, 

Sigma also had the necessary expertise and facilities for domestic entry. Additionally, Sigma – 

unlike Yamaha – already had an established network of Distributors to sell its product. Thus, the 

evidence here is more than sufficient to establish that Sigma was a potential Domestic Fittings 

market entrant. 

c) McWane Anticipated and Feared Sigma’s Entry 

McWane has admitted that it “believed [that] Sigma wished to obtain access to 

domestically-manufactured fittings after ARRA’s enactment, either by manufacturing, through 

sourcing, or pursuant to a purchasing arrangement with McWane.”683 McWane also has 

admitted that they believed that Sigma had the capability to enter. Since ARRA was passed, 

McWane viewed Sigma as being in a “much better position” to enter the Domestic Fittings 

market than Star because of its existing OEM relationships and its access to financial backing.684 

Mr. McCullough, McWane’s executive vice president and the person who ultimately approved 

683 CCPF 2320 (McWane Response to RFA at ¶ 34). 

684 CCPF 2317. 

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the decision to enter into the MDA, testified at his deposition that he believed that Sigma “did 

have access to the needed capital, but they also had the contacts and the talent and they’ve been 

importing for a very long time.”685 Even in August 2009, when Mr. Tatman had some 

reservations about the likelihood of Sigma independently entering the Domestic Fittings market, 

Mr. McCullough still believed that “what Star is able to do, Sigma is able to do, also.”686 

The evidence also establishes that it was this threat of independent entry that motivated 

McWane to enter into the MDA with Sigma.687 As Mr. Tatman explained in a July 27, 2009, 

presentation discussing the decision of whether or not to enter into the MDA: 

The correct decision really depends on whether on their own 

Sigma truly does have the resolve and financial backing to make a 

long term strategic commitment to being a supplier of domestic 

products.688 

Mr. Tatman concluded that it was a “greater financial benefit” for McWane to sell Domestic 

Fittings to Sigma than to allow Sigma to independently enter the Domestic Fittings market: 

[if Sigma is] truly committed to make the investment level required 

to be a viable competitor regardless of our actions, then producing 

for [Sigma] is probably a greater financial benefit to our business 

than having them source elsewhere.689 

685 CCPF 2313. 

686 CCPF 2334. 

687 CCPF 2321-2335. 

688 CCPF 2327. 

689 CCPF 2326. 

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McWane then calibrated the terms of the MDA based on its view of the likelihood of 

Sigma entering.690 For example, in June 2009, when McWane was less fearful Sigma would 

enter, it made Sigma an offer it knew was not economically feasible and offered to sell Domestic 

Fittings to Sigma at only a 5 percent discount.; But when Star’s announced entry made Sigma’s 

entry also more likely, McWane upped its offer to a 20 percent discount. 691 Evidence that the 

threat that Sigma would enter impacted the terms of the agreement with McWane is strong 

evidence that Sigma was a potential competitor. See Bombardier, 605 F.2d at 10 (basing 

decision that Bombadier was potential competitor in part on evidence that it used the threat of its 

entry to obtain better agreement terms). 

McWane admits its belief that Sigma would have entered the Domestic Fittings market 

absent the MDA in its internal documents. Specifically, in a September 2009 message to 

McWane’s sales force explaining the MDA, Mr. Tatman stated: 

[T]he reality of the situation is that in the absence of the MDA 

with [McWane], Sigma was going to develop their own domestic 

sourcing options to the extent they could.”692 

Thus, in 2009, McWane understood that Sigma was a potential Domestic Fittings market entrant. 

2. The MDA Eliminated Sigma as an Independent Competitive Force 

The MDA converted Sigma from a potential competitor in the Domestic Fittings market, 

to a company that would not challenge or threaten McWane’s exercise of monopoly power. This 

690 CCPF 2315 (CX 0568 at 003 (based on information he received from Sigma’s Mr. Rona, Mr. 

Tatman reported that “Sigma’s preference is to work something out with McWane but [Sigma is] 

committed and [has] the financial backing to move forward either way.”)). 

691 CCPF 2318-2320; CCPF 2344-2345. 

692 CCPF 2320; CCPF 2335. 

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was the raison d’etre for the transaction: McWane executives repeatedly referred to the potential 

MDA as an “insurance policy” against Sigma’s likely entry into the Domestic Fittings market.693 

The MDA was not a simple buy/sell agreement between competitors.694 Sigma knew that 

McWane would not enter into the MDA unless Sigma provided assurances that it would cease its 

own Domestic Production, and Sigma provided those assurances.695 Sigma’s agreement to 

abstain from its own domestic entry is memorialized in Section 1(B) of the MDA: “McWane 

shall be Sigma’s sole and exclusive source for Domestic Fittings.”696 

The history of the MDA negotiations between McWane and Sigma eliminate any 

ambiguity as to the meaning of this exclusivity provision. McWane first demanded exclusivity 

in early July 2009. According to Mr. Tatman’s report of his conversation with Sigma’s Mr. 

Rona, Mr. Tatman told Mr. Rona that Sigma should “come back to us with a counter proposal 

under the conditions that we would be their exclusive supplier of [D]omestic [F]ittings...”697 

Sigma complied, and sent McWane a counterproposal that “Sigma in turn will not seek any other 

sources either directly or through 3rd party for the production or distribution of [D]omestic 

[F]ittings....”698 In an August 18, 2009 update on the MDA negotiations, Mr. Tatman reported 

693 CCPF 2332, CCPF 2349, CCPF 2354. 

694 CCPF 2378. 

695 CCPF 2381. 

696 CCPF 2382. 

697 CCPF 2338. 

698 CCPF 2340. 

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that Sigma had “agreed to be exclusive to [McWane] for all sales to Distributors....”699 And 

finally, in an August 24, 2009, letter of intent for the MDA that McWane sent to Sigma, 

McWane identified the term “McWane shall be Sigma’s exclusive source of supply” as a “core 

agreement element,” and further elaborated that Sigma was expected “Not [to] introduce your 

own domestic product while the Master Distributorship is active.”700 

Consistent with the history of the MDA’s negotiations, and the explicit terms of the 

MDA, Sigma witnesses consistently testified that the MDA did not merely replace independent 

entry, but prohibited it – Sigma would be “in breach of contract.”701 Thus, by preventing Sigma 

from entering independently, McWane was assured that there would be no capacity added to the 

market, and that consumers would not receive the benefits of competition in the form of lower 

prices, increased supply, or improved quality of Domestic Fittings. 

The MDA also ensured that there would be no meaningful intra-brand competition for 

McWane’s Domestic Fittings. Under Section 1(D) of the MDA, Sigma was required to sell 

Domestic Fittings at a weighted average price of no less than 98% of McWane’s published 

prices.702 Every time that McWane raised its prices, the MDA required Sigma to immediately 

follow suit – and Sigma did.703 Informally, the parties agreed that McWane would also sell 

699 CCPF 2352. 

700 CCPF 2356-2357. 

701 CCPF 2385; see also CCPF 2379-2384. 

702 CCPF 2427; CCPF 2412. 

703 Also per the MDA, Sigma could not offer its normal volume rebates on its sales of Domestic 

Fittings and was instead obliged to offer an eight percent volume rebate. CCPF 2420; CX 0089 

at 003 (Pais noting that Sigma was “obliged to offer the same VR [volume rebate] incentive of 

8% [as McWane] for all customers who would purchase over $200,000/per year of domestic 

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Domestic Fittings at a weighted average price of no less than 98% of the company’s published 

prices.704 Under Section 1(C) of the MDA, Sigma also agreed that it would not sell Domestic 

Fittings to U.S. Pipe or to any Distributor that violated McWane’s Exclusive Dealing Policy.705 

See infra Part V.H. Thus, under the MDA, Sigma could not offer significantly lower-priced 

Domestic Fittings or expand the customer base of Distributors that could purchase McWanebranded Domestic Fittings. 

In effect, Sigma operated as an extension of McWane, as an ally rather than a competitor. 

See Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp., 959 F.2d 468, 480 (3d Cir. 

1992) (competitors strive to take business away from each other); Weinharther v. Source 

Services Corp. Employees Profit Sharing Plan & Trust, 759 F. Supp. 599, 605 (N.D. Cal. 1991) 

(“[E]ach [firm] tried to take business away from the other. That is the essence of competition.”); 

cf. In re PolyGram Holding, Inc., FTC Docket No. 9298, 2003 WL 21770765, at *24 (July 24, 

2003) (competition for sales “drives a market economy to benefit consumers”). 

3.	 An Agreement that Eliminates Competition Between Actual or Potential 

Competitors Harms Competition and Is Per Se Unlawful 

At its core, the challenged conduct is an agreement between McWane and Sigma not to 

compete; McWane induced Sigma to cede the Domestic Fittings market to McWane. The 

Commission, courts, and antitrust scholars have characterized agreements that eliminate 

competition between potential competitors as “unilateral” horizontal market allocation 

Fittings.”); CX 0953 (“Please be very careful in NOT offering any VR plans for 2010 for DOM 

Fittings as Tyler may reduce the VR% for 2010. As you know, they have been trying to improve 

this area of the market pricing for a while....”). 

704 CCPF 2427. 

705 CCPF 2394-2399, 2441-2448. 

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agreements, i.e., one firm ceding the entire market to another. As Professor Hovenkamp 

explained: 

While the “classic” market division agreement such as those 

contained in Sealy or Topco is multilateral, many noncompetition 

covenants are “unilateral” in the sense that only one party promises 

to stay out of the other party’s market, but not vice versa . . . . To 

be sure, the contract has some consideration going in the opposite 

direction as well, but that consideration is the payment of a higher 

price or something other than a promise not to compete. 

Areeda & Hovenkamp, Antitrust Law ¶ 2134d; see also In re SKF Industries, Inc., 94 F.T.C. 6 

(1979) (condemning agreement between competitors FM and SKF that SKF would exit the ball 

bearing distribution market as an unlawful market allocation agreement in which FM gets 100 

percent of the market, and SKF gets 0 percent of the market); United States v. Gen. Elec. Co., 

No. CV 96-121-M-CCL, 1997 WL 269491 (D. Mont. 1997) (condemning unilateral market 

allocation agreement as per se illegal); Garot Anderson Agencies, Inc. v. Blue Cross & Blue 

Shield United, 1993-1 Trade Cas. (CCH) ¶ 70,235 (N.D. Ill. 1993) (same); United States v. Am. 

Smelting & Refining Co., 182 F. Supp. 834 (S.D.N.Y. 1960) (same). 

The Commission employed the same framework in In re SKF Industries, Inc., 94 F.T.C. 

6 (1979). In SKF, The Commission evaluated an agreement between competitors FM and SKF 

that required SKF to exit the ball bearing distribution market. The Commission concluded that 

this was a per se unlawful market allocation agreement in which FM gets 100 percent of the 

market, and SKF gets 0 percent of the market. Id. at 99. 

Market allocation agreements between actual or potential competitors are consistently 

treated by the courts as per se unlawful. E.g., Nynex Corp. v. Discon, Inc., 525 U.S. 128, 134 

(1998) (horizontal market division is unlawful per se); United States v. Sealy, Inc., 388 U.S. 350, 

357-358 (1967) (same); Palmer v. BRG of Georgia, Inc., 498 U.S. 46 (1990) (per curiam) 

(condemning market allocation agreement between potential competitors); United States v. 

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Topco Assocs., 405 U.S. 596 (1972) (same); Engine Specialties, Inc. v. Bombardier, Ltd., 605 

F.2d 1 (1st Cir. 1979) (same); Eli Lilly & Co. v. Zenith Goldline Pharmaceuticals, Inc., 172 F. 

Supp. 2d 1060 (S.D. Ind. 2001) (same). 

Courts recognize that this analysis does not change – and the agreement’s anticompetitive 

effects are not lessened – merely because a potential competitor remained in the marketplace in 

another capacity, such as a distributor, licensee or supplier. For example, in Palmer v. BRG of 

Georgia, Inc., the Supreme Court condemned a per se illegal market allocation scheme even 

though the excluded party remained in the marketplace as a licensor to its co-conspirator. 498 

U.S. 46, 49-50 (1990); Eli Lilly, 172 F. Supp. 2d at 1074-1076 (by agreement, potential 

competitor converted to supplier); United States v. Gen. Elec. Co., No. CV 96-121-M-CCL, 1997 

WL 269491, at *2 (by agreement, potential competitor converted to a licensee); In re SKF 

Indus., Inc., 94 F.T.C. at 99 (by agreement, competitor converted to a supplier). 

An arrangement very similar to the MDA was considered to be per se illegal in Eli Lilly 

& Co. v. Zenith Goldline Pharmaceuticals, Inc., 172 F. Supp. 2d 1060 (S.D. Ind. 2001). In Eli 

Lilly, Dobfar was a potential entrant, capable of producing a non-infringing product that 

competed with Lilly’s pharmaceutical drug, cefaclor. The companies agreed that Dobfar would 

serve as a supplier of bulk product to Lilly, and would not undertake its own sales. Id. at 1065. 

The court concluded that this agreement, if proven at trial, would be per se unlawful market 

allocation agreement. Id. at 1074-1076. The court expressly rejected Lilly’s claim that this was 

a vertical restraint subject to rule of reason review, explaining that an arrangement is horizontal 

when its participants are potential competitors. Id. at 1075 (“Potential competitors cannot stifle 

nascent competition by entering into an agreement restraining trade.”). The court reasoned that 

without a rule condemning agreements whereby a potential competitor abandons entry, 

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“potential antitrust violators would have an incentive simply to identify probable competitors 

earlier in the product development process.” Id. at 1075. 

Likewise here, Sigma was a potential competitor and agreed with McWane that it would 

not enter the Domestic Fittings market. This Court should therefore condemn the MDA as a per 

se illegal horizontal market allocation agreement. 

4.	 In the Alternative, the MDA Can Be Condemned Under An Abbreviated 

or Plenary Rule of Reason Analysis 

Should this Court determine that the MDA is not a naked market allocation agreement 

among potential competitors, it should still condemn the agreement under an abbreviated or full 

Rule of Reason analysis.706 The aim of a Rule of Reason analysis is to reach “a confident 

conclusion about the principal tendency of a restriction....” Cal. Dental Ass’n v. FTC, 526 U.S. 

756, 781 (1999). 

When viewed in the context of the power that McWane possess in the market for 

Domestic Fittings, the MDA should still be deemed prima facie anticompetitive. This is the 

“traditional” mode of rule of reason analysis: “Market power and the anticompetitive nature of 

the restraint are sufficient to show the potential for anticompetitive effects under a rule of reason 

analysis, and once this showing has been made, [the respondent] must offer procompetitive 

justifications.” Realcomp II Ltd. v. FTC, 635 F.3d 815, 827 (6th Cir. 2011). 

706 For example, courts have ruled that agreements among competitors not to compete that are 

part of a legitimate joint venture or marketing agreement should be examined under an inherently 

suspect analysis, which affords the defendant an opportunity to offer a procompetitive 

justification for the restraint. See In re Polypore Int’l Inc., Docket No. 9327, 2010 WL 866178, 

at *240 (2010) (initial decision), adopted as modified, 2010 WL 5132519 (2010); In re Polygram 

Holding, Inc., 136 F.T.C. 310 , 345 (2003). Because there is no corresponding efficient joint 

venture or marketing agreement here, Complaint Counsel respectfully contends that a per se 

analysis is the appropriate level of analysis. 

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The anticompetitive nature of the MDA has been discussed at length above: McWane, a 

firm that already held monopoly power, reinforced that power by eliminating what it perceived 

to be its most likely rival, Sigma. Antitrust law generally prohibits a monopolist from acquiring 

a potential rival or excluding a potential rival – absent a compelling efficiency justification. See 

Areeda & Hovenkamp, Antitrust Law ¶ 710d (“As a general matter, a monopolist’s acquisition of 

a ‘likely’ entrant into the market in which monopoly power is held is presumptively 

anticompetitive.”); see also United States v. El Paso Natural Gas Co., 376 U.S. 651 (1964) 

(monopolist’s acquisition of potential competitor in the natural gas market judged 

anticompetitive). In such circumstances, the court should infer the likelihood of genuine adverse 

effects.707 

Under either an “inherently suspect” or a full Rule of Reason analysis, the 

anticompetitive nature of the MDA, combined with McWane and Sigma’s market power in the 

Domestic Fittings market, see infra Part V.H (explaining that McWane’s monopoly position in 

the Domestic Fittings market was reinforced by its MDA agreement with Sigma), leaves only 

one remaining question: whether the MDA had any plausible and cognizable efficiencies to 

offset the MDA’s harm to competition. See Realcomp II, 635 F.3d at 826-827 (describing 

inherently suspect and rule of reason analysis, and stating that conduct is prima facie 

anticompetitive if the parties have market power and the nature of the agreement is 

anticompetitive). 

707 This is consistent with basic economic theory. See CX 2260-A (Schumann Rep. at 82-83) 

(“Had Sigma entered the [Domestic] Fittings market prices would likely have fallen substantially 

below the prices McWane had commanded as the sole producer of [Domestic] Fittings.”). 

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Because the MDA is not a simple buy-sell agreement, McWane must demonstrate – 

plausibly and with supporting evidence – that a market in which McWane and Sigma distribute 

the same Fittings at prices determined by McWane is superior to a market in which Sigma 

distributes its own Fittings in competition with McWane at prices set by competitive forces. See 

generally In re Realcomp II, FTC Docket No. 9320, 2007 WL 6936319, at *27-28. McWane has 

not established any such justification. 

McWane has advanced two efficiency defenses. First, McWane claims that the company 

had excess capacity at its U.S. foundry, and that the MDA was a method for securing additional 

sales. This is not a cognizable antitrust defense and the contemporaneous evidence reflects that 

McWane did not expect the MDA to lead to more sales. 

A cognizable justification is one that advances the goals of antitrust by promoting 

competition, reducing costs, or increasing marketwide output or quality. In re Polygram 

Holding, 136 F.T.C. at 345-346. Shifting Fittings sales from a foundry operated by Sigma (or its 

designee) to a foundry operated by McWane may be profitable for McWane, but it presents no 

benefit for consumers or competition. (Or, in any event, no benefit has been articulated by 

McWane.) A similar argument was rejected in Microsoft. 

In Microsoft, the monopolist seller of the Windows operating system argued that its 

exclusive agreements with other internet access providers (“IAPs”) that precluded the IAPs from 

distributing a competing operating system was justified by its desire to keep software developers 

“focused” on writing programs for Windows rather than rival platforms. Microsoft, 253 F.3d at 

71. The Court of Appeals rejected this defense, explaining that the desire to maintain favor with 

developers (and to sell Windows) “is not an unlawful end, but neither is it a procompetitive 

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justification.” Id., see also id. at 72 (characterizing the objective as “a competitively neutral 

goal”). 

Here, as in Microsoft, the relevant issue is not whether a monopolist is permitted to seek 

additional sales (it may), but whether the strategy employed by the defendant for increasing its 

sales is procompetitive or anticompetitive. In nearly every case of anticompetitive exclusion, the 

defendant can claim that it has additional production capacity and wishes to capture additional 

sales at the expense of a supplier that (absent the restraint) would be preferred by consumers. 

E.g., PolyGram, 136 F.T.C. 310 (2003) (music companies co-producing the newest Three Tenors 

album wished to capture sales from catalog recordings); In re N.C. Bd. of Dental Examiners, 

FTC Docket No. 9343, slip op (Dec. 7, 2011) (dentists wished to capture sales from non-dentist 

providers of teeth whitening). The defendant’s heartfelt desire to capture sales by pre-empting 

the workings of the market is not a procompetitive justification. See Polygram, 136 F.T.C. at 

347 (“[T]he Supreme Court has recognized that a defendant cannot justify curbing access to a 

more-desired product to induce consumers to purchase larger amounts of a less-desired 

product.”). 

Additionally, McWane’s argument that the MDA would provide additional volume to its 

foundry is unsupported by evidence, is a post hoc justification, and deserves no weight. See In re 

Indiana Fed. of Dentists, 101 F.T.C. at 175 (“Such justifications cannot be speculation alone but 

must be established by record evidence in order to be considered an adequate justification for 

otherwise anticompetitive behavior.”); see also United States v. Dentsply Int’l, Inc., 399 F.3d 

181, 197 (3d Cir. 2005) (alleged justification was pretextual and did not excuse exclusionary 

practices); Image Tech. Servs. v. Eastman Kodak Co., 125 F.3d 1195, 1219 (9th Cir. 1997) 

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(allowing court to disregard justification for challenged conduct when “evidence suggests that 

the proffered business justification played no part in the decision to act”). 

The evidence shows that McWane did not expect the MDA to increase market wide 

output. McWane viewed the MDA as a “choice of evils” between having Sigma enter 

independently versus sharing margin with Sigma on sales that McWane would have otherwise 

made.708 Contrary to McWane’s contention, it was “fairly obvious” that “having more Domestic 

suppliers doesn’t really increase the size of the pie.”709 McWane calculated that the MDA would 

transfer margin to Sigma and also cause McWane to lose sales of Fittings sold to Open 

Specification jobs.710 This defense should therefore be dismissed. 

Second, McWane asserts that the MDA provided distributors with a choice of suppliers 

(either McWane or Sigma), and that some Distributors dislike McWane and prefer to deal with 

Sigma. This is not a cognizable efficiency because it fails to show the procompetitive benefits 

from the challenged restraint relative to the marketplace that would exist but-for that restraint. 

See Polygram, 136 F.T.C. at 347 (as part of efficiency defense, defendant must articulate the 

specific link between the challenged restraint and the benefit to consumers). Here, the but-for 

world is independent entry by Sigma as a virtual manufacturer. Even absent the MDA, 

Distributors would have had the option of buying Domestic Fittings from either McWane or 

Sigma. The MDA offers no advantage that offsets the loss of competition.711 

708 CCPF 2341. 

709 CCPF 2341. 

710 CCPF 2368-2371. 

711 McWane’s admission that having two suppliers of McWane Fittings does not increase total 

output (CCPF 2450-2452), indicates that the claimed efficiency is trivial at best. 

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Because McWane has not advanced a legitimate efficiency justification for the MDA, 

this Court should condemn it under an abbreviated (i.e., inherently suspect) or full Rule of 

Reason analysis. 

G.	 McWane Monopolized, and/or Attempted to Monopolize, the Market for 

Domestic Fittings (Counts Six and Seven) 

Counts Six (Monopolization) and Seven (Attempted Monopolization) of the Complaint 

charge McWane with monopolizing and attempting to monopolize the Domestic Fittings market 

in violation of Section 2 of the Sherman Act. Responding to ARRA’s allocation of $6 billion in 

funds for waterworks projects built with products made in the United States, Star announced at a 

June 2009 AWWA show that it would begin selling Domestic Fittings by the Fall. Threatened 

by this new entry, McWane implemented an Exclusive Dealing Policy designed to deter 

Distributors from dealing with Star and other rivals in the Domestic Fittings market. By denying 

its competitors a sufficient network of Distributors to sell their Domestic Fittings, McWane 

effectively prevented its rivals from reaching an efficient scale and, consequently, from 

constraining McWane’s monopoly prices. McWane specifically adopted this policy to exclude 

competitors and to protect Domestic Fittings prices – where McWane enjoys a { } greater 

margin on sales than it does for comparable imported Fittings sales. 

The offense of monopolization has two elements: “(1) the possession of monopoly power 

in the relevant market and (2) the willful acquisition or maintenance of that power as 

distinguished from growth or development as a consequence of a superior product, business 

acumen or historic accident.” United States v. Grinnell Corp., 384 U.S. 563, 570-571 (1966). 

Attempted monopolization requires proof “(1) that the defendant has engaged in predatory or 

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anticompetitive conduct with a (2) specific intent to monopolize and (3) a dangerous probability 

of achieving monopoly power.” Spectrum Sports v. McQuillan, 506 U.S. 447, 456 (1993); 

Lorain Journal Co. v. United States, 342 U.S. 143, 152-153 (1951). 

Here, McWane has monopoly power or the dangerous probability of achieving monopoly 

power in the Domestic Fittings market, and it exercised this power by implementing an 

Exclusive Dealing Policy with the specific intent of excluding competitors and maintaining 

supracompetitive prices. McWane’s Exclusive Dealing Policy harmed competition by 

foreclosing its competitors from a key distribution channel and from obtaining a sufficient scale 

to be able to constrain McWane’s monopoly prices. No procompetitive efficiencies that 

outweigh that harm. 

1.	 McWane Possesses Monopoly Power or the Dangerous Probability of 

Achieving Monopoly Power in the Domestic Fittings Market 

The Supreme Court defines monopoly power as “the power to control prices or exclude 

competition.” United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956); 

AD/SAT v. Associated Press, 181 F.3d 216, 227 (2d Cir. 1999) (citing Areeda & Hovenkamp, 

Antitrust Law ¶ 501) (defining monopoly power as “the ability (1) to price substantially above 

the competitive level and (2) to persist in doing so for a significant period without erosion by 

new entry or expansion.”). Monopoly power can be established by direct evidence of a firm’s 

ability to control prices or exclude competitors, or through indirect proof of high market shares 

in a market protected by barriers to entry. Microsoft, 253 F.3d 34, at 51 (D.C. Cir. 2001). 

From 2009 to 2011, McWane had monopoly power, or the dangerous probability of 

achieving monopoly power, in the Domestic Fittings market, i.e., the market of Domestic 

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Fittings for use in waterworks projects with Domestic-Only Specifications.712 See supra Part 

V.A.2 (defining relevant Domestic Fittings market). McWane’s power can be inferred from its 

high Domestic Fittings market shares and the existence of high entry barriers in that market. 

Direct evidence of McWane’s ability to control prices and exclude competitors confirms that 

McWane has monopoly power, or the dangerous probability of achieving monopoly power, in 

the Domestic Fittings market. 

a)	 McWane Has High Market Shares in a Market Characterized by 

High Entry Barriers 

Since at least 2006 and until Star entered the Domestic Fittings market in late 2009, 

McWane admits that it was the only manufacturer of Domestic Fittings.713 After Star entered the 

Domestic Fittings market, McWane’s share of the Domestic Fittings market in 2010 continued to 

be over { }; with Star’s share of the Domestic Fittings market approximately { }.

714 In 

2011, McWane’s share of the Domestic Fittings market continued to be over { } Star’s 

approximate share was { }.

715 McWane’s market shares of more than { } are more than 

sufficient to meet the legal standards for monopoly power, given the high barriers to entry into 

the Domestic Fittings market. See supra Part V.A.3 (discussing high entry barriers in Domestic 

Fittings market); see also see also du Pont., 351 U.S. at 379, 391 (finding 75% of a relevant 

market sufficient to constitute monopoly power); Grinnell Corp., 384 U.S. at 571 (inferring 

712 CCPF 1655. 

713 CCPF 1659 (Answer at ¶ 40 (“McWane admits, on information and belief, that is was the 

only remaining domestic manufacturer of DIPF in sizes below 30” in 2009 until Star expanded 

its DIPF product offerings and sales to include domestic DIPF in 2009”)). 

714 CCPF 1662. 

715 CCPF 1663. 

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monopoly power from the “predominant share” (87%) of the market); Eastman Kodak Co. v. 

Image Tech. Servs., 504 U.S. 451, 481 (1992) (holding that a fact finder could infer monopoly 

power from an 80% market share). 

Market shares sufficient to support a monopolization claim are also sufficient to support 

attempted monopolization. See, e.g., Defiance Hosp. v. Fauster-Cameron, Inc., 344 F. Supp. 2d 

1097, 1117 (N.D. Ohio 2004) (“Because a lesser degree of market power is sufficient to establish 

an attempted monopolization claim, [the court] must find that defendants possessed a dangerous 

probability of achieving monopoly power.”); see also McGahee v. Northern Propane Gas Co., 

858 F.2d 1487, 1506 (11th Cir. 1988) (“a sixty or sixty-five percent market share is a sufficiently 

large platform from which such a scheme could be launched to create a genuine issue of material 

fact as to whether there was a dangerous probability that Northern Propane would succeed in 

achieving a monopoly”); Arthur S. Langenderfer, Inc. v. S.E. Johnson Co., 917 F.2d 1413, 1443 

(6th Cir. 1990) (58% share sufficient). 

b) Direct Evidence of McWane’s Ability to Control Prices and to 

Exclude Competitors Confirms McWane’s Monopoly Power or 

Dangerous Probability of Achieving Monopoly Power 

Direct evidence of McWane’s ability to control prices and to exclude Star confirms 

McWane’s power in the Domestic Fittings market.716 See United States v. Dentsply Int’l, 399 

F.3d 181, at 188-190 (3d Cir. 2005) (ability to exclude is direct evidence of power); Re/Max Int'l 

v. Realty One, 173 F.3d 995, 1016, 1018-1019 (6th Cir. 1999) (same). For example, when 

McWane sells Domestic Fittings into Domestic-Only Specifications, it charges prices that are 

716 CCPF 1657 (Dr. Schumann noted that McWane could not have implemented its “full 

support” policy without exercising its monopoly power). 

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significantly higher than for identical Fittings sold into Open Specification jobs.717 McWane’s 

margins are approximately { } greater on the sale of its Domestic Fittings (sold into 

Domestic-only Specifications) than for comparable import Fittings.718 Finally, McWane imposed 

a price increase on its Domestic Fittings during the ARRA period.719 As discussed below, 

McWane’s ability to exclude Star through its Exclusive Dealing Policy is also direct evidence of 

McWane’s monopoly power. See Dentsply, 399 F3d at 188-190; see also infra Part V.G.3. 

2. McWane Adopted and Implemented an Exclusive Dealing Policy 

After Star announced its intention to begin selling Domestic Fittings in the Fall of 2009, 

McWane launched a deliberate effort to maintain its monopoly power by impeding Star’s 

entry.720 The centerpiece of McWane’s strategy was an “all or nothing” Exclusive Dealing 

Policy, i.e., McWane warned Distributors that they would lose access to McWane’s Domestic 

Fittings if they purchased Domestic Fittings from Star.721 McWane also threatened that they 

would forfeit their accrued Domestic Fittings rebates and lose their eligibility for future rebates if 

they purchased Domestic Fittings from Star.722 

McWane announced its Exclusive Dealing Policy in private meetings with customers and 

through a public letter to the industry, dated September 22, 2009, that stated: 

717 CCPF 628-629; CCPF 1695. 

718 CCPF 1702. 

719 CCPF 2481-2482. 

720 CCPF 1824-1849. 

721 CCPF 1841-1842. 

722 CCPF 1843. 

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[E]ffective October 1, 2009, McWane will adopt a program 

whereby our domestic fittings and accessories will be available to 

customers who elect to fully support McWane branded products 

for their domestic fitting and accessory requirements. . . . 

Exceptions are where Tyler Union or Clow Water products are not 

readily available within normal lead times or where domestic 

fittings and accessories are purchased from another domestic pipe 

and fitting manufacturer along with that manufacture’s [sic] ductile 

iron pipe. 

Customers who elect not to support this program may forgo 

participation in any unpaid rebates for domestic fittings and 

accessories or shipment of their domestic fitting and accessory 

orders of Tyler Union or Clow Water products for up to 12 

weeks.723 

Pointing to the “may” and ”or” language in the September 22, 2009 letter, McWane 

denies that it adopted an exclusive dealing policy and instead characterizes it as a mere rebate 

policy.724 As described below, the evidence of how the policy originated, how the policy was 

communicated to the industry, and how McWAne terminated a distributor for violating the 

Policy overwhelmingly establishes that McWane implemented an “all-or-nothing” exclusive 

dealing policy, and additionally threatened Distributors’ accrued Domestic Fittings rebates. See 

Dennis W. Carlton and Jeffrey M. Perloff, Modern Industrial Organization at 46-27 (4th ed. 

2005) (Exclusive dealing is a vertical restraint in which a supplier “prevents its distributors from 

selling competing brands.”). 

a)	 The Policy’s Formation Documents Described a “Hard 

Approach – Full Line or No Line” 

Shortly before Star announced its entry, McWane strategized that “any competitor” 

seeking to enter the Domestic Fittings market could face “significant blocking issues” if it was 

723 CCPF 1826; CX 0010 at 001 (emphasis added). 

724 CCPF 1830-1831. 

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not a “full line” supplier.725 Soon after Star announced that it would enter, McWane considered 

how to use that strategy to “block Star” from entering the Domestic Fittings market.726 

McWane evaluated three options: (i) a “Wait and See approach,” which had the 

disadvantage of giving Star “time to continue building their business model;”727 (ii) “Handle on a 

Job by Job basis,” which had the disadvantage of allowing Star to “drive profitability out of the 

business;”728 or (iii) “Force Distribution to Pick their Horse.” 729 McWane detailed several 

advantages of “Forc[ing] Distribution to Pick their Horse:” 

 It “[a]voids the job by job auction scenario within a 

particular distributor;” 

 It “[p]otentially raises the level of supply concern among 

contractors;” and 

 It “[f]orces Star/Sigma to absorb the costs associated with 

having a more full line before they can secure major 

distribution.”730 

Under the “Pick their Horse” option, McWane considered two alternatives: a “Soft 

Approach,” whereby a Domestic rebate would command exclusivity; and a “Hard Approach – 

Full Line or No Line,” which “require[d] exclusivity” for access to “Domestic fitting items we 

manufacture.”731 McWane’s penalty under both alternatives would apply to Distributors on a 

725 CCPF 1806. 

726 CCPF 1806. 

727 CCPF 1808a. 

728 CCPF 1808b; CX 0076 at 009. 

729 CCPF 1808. 

730 CCPF 1808c. 

731 CCPF 1809. 

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corporate-wide basis, i.e., across all branches of the Distributor, rather than “branch by 

branch.”732 

McWane determined that “the appropriate response to distribution is probably fairly hard 

line approach like a full line or no line approach.”733 And, in fact, Mr. Tatman, author of the 

September 22, 2009 letter, admitted that the letter “more closely align[s] with [] option 3”— 

“Force Distribution to Pick their Horse.”734 

b) McWane Communicated the “Hard Approach” to the Industry 

Consistent with the “Hard Approach” i.e., that McWane would not supply Domestic 

Fittings to any customer that also purchased Domestic Fittings from Star or others, McWane 

executives instructed their sales force to tell Distributors that McWane would never again sell 

Domestic Fittings to any Distributor that purchased Domestic Fittings from Star or another 

competitor.735 McWane’s National Sales Manager, Mr. Jansen, led a conference call with his 

sales force on August 28, 2009, where he explained the “new policy on Star Domestic” that they 

should communicate to Distributors “every day:” 

• What are we going to do if a customer buys Star domestic? 

We are not going to sell them our domestic . . . . 

o This means the customer will no longer have access 

to our domestic. They can still buy [non-Domestic] from 

us. 

o Once they use Star, they can’t EVER buy domestic 

from us. . . . 

732 CCPF 1810. 

733 CCPF 1807. 

734 CCPF 1827. 

735 CCPF 1832. 

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o For companies with multiple branches (HD, 

Ferguson, Winwater, Hajoca, etc) - if one branch uses Star, 

every branch is cut off. 

. . . 

• Make sure you are discussing our stance with all customers, 

every day.736 

To ensure that McWane’s sales force adequately conveyed this message, Mr. Jansen tasked his 

territory managers with documenting their communications with Distributors about McWane’s 

new policy.737 

Mr. Jansen reiterated this same “Hard Approach” message to his sales force on 

November 3, 2009, noting that McWane had “made it very clear in the market regarding our 

stance on supporting the McWane domestic brand of fittings . . . . If one branch buys from 

someone other than [McWane or Sigma], then the whole company will be affected, not just that 

branch.”738 Mr. Jansen’s message was received loud and clear, as indicated in a McWane 

territory manager’s February 13, 2010, email to Mr. Jansen: “we were told to tell them 

[Distributors] more than one time that if you support Star then we will not sell to you.”739 

McWane executives also personally met with certain customers to make them aware of 

its “Hard Approach.” For example, Mr. Tatman met with Mr. Morton from U.S. Pipe on 

736 CCPF 1832 (CX 0710 at 001, 002 (emphasis added) (notes summarizing sales conference 

call); (CX 2477 (Jansen, Dep. at 164-169) (confirming that CX 710 accurately reflected Mr. 

Jansen’s statements during conference call)). 

737 CCPF 1839. 

738 CCPF 1837. 

739 CCPF 1835. 

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October 13, 2009,740 to warn him that if U.S. Pipe purchased any Domestic Fittings from Star, 

U.S. Pipe would lose access to McWane’s Domestic Fittings.741 McWane does not have a rebate 

program with U.S. Pipe; therefore, Mr. Tatman’s communication was not related to a rebate 

policy.742 

Mr. Sheley, President and Owner of Illinois Meter, similarly testified that the Exclusive 

Dealing Policy as written in the September 22, 2009, letter did not accurately reflect the policy 

communicated to him by McWane.743 Instead, Mr. Tatman and Mr. Jansen told Mr. Sheley that 

if Illinois Meter purchased Domestic Fittings from anyone but McWane, that it “would lose the 

right to buy [McWane’s Domestic Fittings] completely.”744 There was “no doubt” in Mr. 

Sheley’s mind that McWane was “serious.”745 

In a presentation to his superiors, Mr. Tatman acknowledged that the market had 

understood McWane’s Exclusive Dealing Policy to mean that McWane “will” – not “may” – cut 

off Distributors if they purchased any Domestic Fittings from Star: 

Although the words “may” and “or” were specifically used [in 

the September 22, 2009 announcement], the market has 

interpreted the communication in the more hard line “will” 

sense. 

. . . 

740 CCPF 2050-2056. 

741 CCPF 2050-2056. 

742 CCPF 2039. 

743 CCPF 1830-1843. 

744 CCPF 2003-2005. 

745 CCPF 2003-2005. 

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Access to McWane domestic product either through McWane or 

Sigma requires distributors to exclusively support McWane where 

products are available within normal lead times. Violation will 

result in: Loss of access, loss of accrued rebates. 

746 

c)	 McWane Terminates A Distributor That Violates Exclusive 

Dealing Policy 

Hajoca Corporation’s (“Hajoca”) experience under McWane’s Exclusive Dealing Policy 

conclusively establishes that the Policy was not a mere rebate policy. It also illustrates the costs, 

uncertainty, and risk imposed upon a Distributor that violated McWane’s policy. 

Hajoca is a national waterworks distributor, but only two of its waterworks locations, 

Lansdale, Pennsylvania, and Tulsa, Oklahoma, purchase Domestic Fittings regularly.747 

McWane informed Mr. Pitts, Hajoca’s Director of Vendor Relations, that McWane would be 

taking a “hard stance” against Star’s entry into the Domestic Fitting market, and that if any 

Hajoca location purchased Star Domestic Fittings, all Hajoca branches “would” (not “may”) lose 

access to McWane Domestic Fittings: 

I had heard from Jerry Jansen last week that [McWane] would be 

taking a hard stance regarding domestic fittings manufactured for 

McWane. . . . Jerry had told me last week that if any [profit center 

or branch] in the US purchases domestic fittings from Star, all PCs 

would lose access to McWane’s fittings and possibly lose 

rebates.748 

746 CCPF 1844-1845. 

747 CCPF 290, 1859. 

748 CCPF 1853; CX 0021-A at 001 (Mr. Pitts’s September 22, 2009, email attaching the McWane 

Exclusive Dealing Policy). 

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Mr. Pitts had multiple conversations with Messrs. Jansen and Tatman where they 

reiterated and explained McWane’s “hard stance.” 749 These conversations were confirmed in a 

November 3, 2009, email from McWane to Hajoca: 

[I]f any Hajoca location chooses to buy another domestic fittings 

supplier[‘s] product Hajoca will not have direct access to the 

McWane ductile iron water main fittings for a period of time as 

well as loss of any accrued rebate to date.750 

Ultimately, Hajoca, whose vast majority of branches were unaffected by the policy, 

decided to “stand by [their business] model” and permit its individual branches to choose their 

Domestic Fittings supplier.751 Hajoca’s Tulsa, Oklahmoa branch decided to purchase Domestic 

Fittings from Star.752 McWane then informed Hajoca that McWane would “discontinue selling 

Hajoca domestic fittings since they are supporting Star’s domestic line”753 and that the penalty 

applied to the entire Hajoca company.754 When Hajoca’s Lansdale, Pennsylvania branch asked 

McWane if it could continue purchasing its Domestic Fittings, but at a higher price, McWane 

749 CCPF 1854-1855. 

750 CCPF 1857; CX 0024 at 001 (emphasis added). 

751 CCPF 1863-1864. 

752 CCPF 1860, 1865. 

753 CCPF 1866-1879. 

754 CCPF 1866-1879, 1889-1892. 

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told them that this “was not an option.”755 McWane also withheld Hajoca’s accrued fourth 

quarter 2009 Domestic Fittings rebate.756 

In March 2010, after McWane internally evaluated “[h]ow our potential FTC action 

might effect [sic] how we do business with them [Hajoca],” executives from both companies met 

to discuss the Domestic Fittings dispute.757 As a result of that meeting, McWane agreed to allow 

Hajoca’s Pennsylvania branch to resume ordering Domestic Fittings, starting in April 2010.758 

But Hajoca’s Tulsa, Oklahoma branch was still barred from purchasing Domestic Fittings from 

McWane because it continued to buy from Star.759 

d)	 McWane Acted With the Specific Intent to Monopolize the 

Domestic Fittings Market 

Whereas for monopolization “the mere intent to do the act” is sufficient, United States v. 

Aluminum Co. of Am., 148 F.2d 416, 431-32 (2d Cir. 1945), attempted monopolization requires 

proof that the defendant had a “specific intent to destroy competition or build monopoly.” 

Times-Picayune Publ’g Co. v. United States, 345 U.S. 594, 626 (1953); accord Spectrum Sports, 

506 U.S. at 456. Specific intent may be proven by direct evidence, or inferred from conduct 

alone where the defendant’s conduct is sufficiently egregious. E.g., Spectrum Sports, 506 U.S. at 

459 (“Unfair or predatory tactics. . . . may be sufficient to prove the necessary intent to 

monopolize.”); Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 602, 603 n.28 

755 CCPF 1868 (CX 1800; CX 2479 (McCullough, Dep. at 142 (CX 1800 accurately describes 

Mr. McCullough’s conversation with Sean Kelly of Hajoca)). 

756 CCPF 1866-1879, 1889-1892. 

757 CCPF 1881-1883. 

758 CCPF 1884-1886. 

759 CCPF 1887-1888. 

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(1985) (“[N]o monopolist monopolizes unconscious of what he is doing.”) (quoting Alcoa, 148 

F.2d at 432); Confederated Tribes of Silenz Indians of Or. v. Weyerhaeuser Co., 411 F.3d 1030, 

1042 (9th Cir. 2005). 

Here, as discussed above, McWane drafted and implemented its Exclusive Dealing 

Policy in direct response to competitive entry and because it wanted to “block” Star from 

entering the Domestic Fittings market. McWane’s free-riding defense also confirms its intent to 

exclude competitors. McWane asserts that its Exclusive Dealing Policy was designed to prevent 

Star from free-riding on (i) McWane’s lobbying investment to assure that ARRA’s Buy-America 

provision would require the use of Domestic Fittings; and (ii) McWane’s investment in a full 

range of tooling and patterns. By advancing these arguments as the intent behind the Exclusive 

Dealing Policy, McWane necessarily acknowledges that the policy was intended to exclude Star 

– that is the nature of avoiding free-riders. See generally Areeda & Hovenkamp, Antitrust Law 

¶ 1812a (noting that “exclusive dealing eliminates all opportunity for interbrand free-riding by 

eliminating the dealer’s right to sell product B at all.”). McWane cannot simultaneously assert 

that the intent of the Exclusive Dealing Policy was to prevent free-riding and deny that it 

intended to exclude Star. 

Direct evidence also proves that McWane implemented its Exclusive Dealing Policy with 

the specific intent to prevent Star from lowering prices in the Domestic Fittings market.760 On the 

import side of the Fittings market, Star had a reputation for aggressive discounting, which caused 

760 CCPF 1787. 

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McWane to also lower its prices to win business.761 Thus, upon hearing that Star might sell 

Domestic Fittings, Mr. McCullough expressed fear that Star would bring the same discounting 

practices to that market as well: “Star is a determined competitor that just keeps making a bad 

industry worse.”762 

McWane Executive, Mr. Walton (Mr. Tatman’s immediate boss), shared the same 

concerns: 

Whether we end up with Star as a complete or incomplete 

domestic supplier my chief concern is that the domestic market 

gets creamed from a pricing standpoint just like the non-domestic 

market has been driven down in the past. That would dramatically 

effect [sic] our profit potential.763 

Mr. Tatman agreed with Messrs. McCullough and Walton’s assessment that there was a “slim 

chance for “profitable cohabitation” with Star, and that McWane should “make sure” that Star 

didn’t achieve enough “critical mass” in the Domestic Fittings market to become profitable: 

I agree that at this stage the chance for profitable cohabitation with 

Star owning a pc of the Domestic market is slim. Their actions in 

soil pipe are a good indication. If their claims are ahead of their 

actual capabilities we need to make sure that they don’t reach any 

critical market mass that will allow them to continue to invest 

and receive a profitable return . . . . I don’t sense that Sigma is 

yet fully committed and they will be watching our response very 

closely to assess their strategy and probability of financial 

764 success.

761 E.g. CCPF 854-856 (Star Project Pricing in 2007 takes business from McWane and drives 

down market prices); CCPF 1793-1795 (“Star has historically shown that they will just continue 

incremental discounting down to the point when they’re selling breakeven.”). 

762 CCPF 1788. 

763 CCPF 1790 (emphasis added). 

764 CCPF 1791. 

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Mr. Tatman feared that Star would not be a “responsible competitor” in the Domestic 

Fittings market as long as it was able to generate incremental margins for their business, i.e., Star 

would not be content to price at supracompetitive levels.765 As such, the biggest risk factor 

identified in McWane’s 2010 Budget was the “[e]rosion of domestic pricing if Star emerges as a 

legitimate competitor.”766 

McWane also knew that the mere threat of low prices from Star could bring prices 

down.767 If Star gained a toehold with Distributors, it would put price pressure on McWane in 

two ways; not only would Distributors play McWane and Star off one another to gain lower 

prices, but even loyal McWane Distributors would pressure McWane for a lower price when 

they faced the prospect of losing downstream sales to competing Distributors bidding with Star’s 

Domestic Fittings.768 McWane’s Mr. Napoli recounted this dynamic, which McWane hoped to 

avoid: 

We may not be losing business now but I am concerned about the 

future. Those [Distributors] not aligned with us or Sigma will be 

aggressive with Star backing them against our people... When that 

happens our distributors will continually pressure us to ‘do 

something’ (lower prices). If [Star] stay[s] in business, we will 

always see downward pressure in the future.769 

A Star toehold would also afford it a chance to prove itself a reliable Domestic Fittings 

supplier and grow its business. As Mr. Napoli explained: 

765 CCPF 1792. 

766 CCPF 1796. 

767 CCPF 1797. 

768 CCPF 1799. 

769 CCPF 1799. 

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Like any - any competitive situation in any industry, I mean, 

they’ll start with the small ones. They won’t go after the big fish 

first. They’ll go to the small ones and build their - build their 

reputation. You know, a competitor is not going to go to - a new 

competitor in something is not going to go to Walmart from day 

one. They’ll go to somebody smaller. Maybe that’s not a good 

analogy, but they’ll go to somebody smaller and build reputation 

and build a - you know, a base and then go from there to bigger 

ones, makes them a little more legitimate, let’s say, if they have a 

history or a track record.770 

Mr. Jansen agreed, and stated that McWane needed to block Star from as many Distributors as it 

could: 

We need to make sure we are getting into the smaller [Distributor] 

players up there and keep them from Star. That’s how a cancer 

starts, is by letting them get in with one, two, then three, and it 

crumbles from there.771 

McWane intended to fight the cancer from spreading to its Domestic Fittings market. McWane 

knew that it could maintain its high prices if nobody was willing to buy Domestic Fittings from 

Star; Star’s price would then be “moot” or not “real.”772 

McWane’s goal to maintain high profit margins and high prices by preventing Star from 

becoming a legitimate competitor is not a procompetitive reaction like pursuing greater sales by 

increasing quality and service or lowering price. McWane did not fear lost sales volume, but 

rather the overall effect that competition would have on the Domestic Fittings market. This is 

what distinguishes McWane’s intent (to avoid competition) from the laudable intent to win the 

competition and take business from one’s rival. 

770 CCPF 1803. 

771 CCPF 1802 (emphasis added). 

772 CCPF 1800; see also CCPF 1801 (“We don’t want the market tumbling and if we keep 

everyone on board we shouldn’t have to drop prices.”). 

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3.	 McWane’s Exclusive Dealing Policy is Exclusionary Conduct That Likely 

Harms Competition 

“A firm violates Section 2 only when it acquires or maintains, or attempts to acquire or 

maintain, a monopoly by engaging in exclusionary conduct....” Microsoft, 253 F.3d at 58. 

Conduct is exclusionary when it tends to exclude competitors “on some basis other than 

efficiency,” i.e., when it “tends to impair the opportunities of rivals” but “either does not further 

competition on the merits or does so in an unnecessarily restrictive way.” Aspen Skiing Co., 472 

U.S. at 605 & n.32 (citations omitted). 

As a preliminary matter, McWane’s anticompetitive intent in adopting its Exclusive 

Dealing Policy is relevant to understanding that Policy’s likely effects. Bd. of Trade of the City 

of Chicago v. United States, 246 U.S. 231, 238 (1918) (“knowledge of intent may help the court 

to interpret facts and to predict consequences”); see also Aspen Skiing Co., 472 U.S. at 603; 

Microsoft, 253 F.3d at 59. As explained in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 

“evidence of intent is ... relevant to the question whether the challenged conduct is fairly 

characterized as ‘exclusionary’ or anticompetitive.” Aspen Skiing Co., 472 U.S. at 602; see also 

Microsoft, 253 F.3d at 59 (finding evidence of intent relevant when it “helps us understand the 

likely effect of the monopolist’s conduct”). 

In Aspen Skiing Co., the Supreme Court determined that the defendant’s exclusionary 

policy “was not motivated by efficiency concerns and that [the defendant] was willing to 

sacrifice short-run benefits and consumer goodwill in exchange for a perceived long-run impact 

on its smaller rival.” 477 U.S. at 610-611. This finding therefore supported the conclusion that 

the defendant’s conduct was exclusionary and anticompetitive. Id. Here, the evidence shows 

that McWane’s Exclusive Dealing policy involved a similar sacrifice of its customers’ goodwill ­

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- Distributors resented the Exclusive Dealing Policy.773 This, coupled with McWane’s 

unambiguous intent to impede Star’s entry, supports the conclusion that the Exclusive Dealing 

policy was anticompetitive in both its intent and in its effect. 

Although there is no set formula for establishing the likely competitive effects of an 

exclusive dealing policy by a monopolist, a prima facie case of competitive harm under Section 

2 is usually established by demonstrating that: (1) there is a significant degree of market 

foreclosure; and (2) the ability of one or more significant rivals to compete is thereby impaired. 

ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 271 (3d Cir. 2012) (“no set formula” for the rule 

of reason analysis of exclusive dealing by a monopolist, no single way of establishing liability); 

Dentsply, 399 F.3d at 188-190, 194-96 (considering foreclosure and impairment on rivals’ ability 

to compete); Microsoft, 253 F.3d at 69 (same); In re: McWane, Inc. 2012 FTC LEXIS 155, at 

*63 (“the question here is whether McWane’s conduct foreclosed a substantial portion of the 

effective channels of distribution, and whether the conduct had a significant effect in preserving 

McWane’s monopoly.”). 

Two government cases illustrate the required analysis. In United States v. Dentsply, the 

defendant was the largest manufacturer of artificial teeth in the United States, accounting for 

approximately 75 percent of sales. Dentsply, 399 F.3d at 184. Dentsply prohibited its network 

of authorized dealers, 23 in total, from also marketing the teeth of competing sellers. Id. at 184­

185. The Government established a prima facie case of competitive harm by showing that 

Dentsply had blocked rival manufacturers from access to these “key dealers,” which impeded the 

773 CCPF 1841-1843, 1878, 1889-1902, 1909. 

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rivals from expanding to where they could pose a “real threat” to Dentsply’s monopoly power. 

Id. at 188-191. 

Likewise, in United States v. Microsoft, the government challenged Microsoft’s exclusive 

dealing agreements with the top Internet Access Providers (IAPs) in North America, accounting 

for a majority of all IAP subscribers. Microsoft, 253 F.3d at 69. IAPs were one of the most 

efficient channels for distributing browsing software. Id. at 70-71. The excluded rival, 

Netscape, was compelled to use more costly means for reaching consumers, such as by offering 

free downloads on the Internet. Id. The court ruled that Microsoft’s exclusive dealing 

arrangements diminished Netscape’s ability to obtain the critical mass of users needed to 

constrain Microsoft’s operating system monopoly, and that this was sufficient to establish a 

prima facie case of competitive harm. Id. at 60, 70-71. (“Microsoft’s deals with the IAPs 

clearly have a significant effect in preserving its monopoly; they help keep usage of [Netscape’s] 

Navigator below the critical level necessary for Navigator or any other rival to pose a real threat 

to Microsoft’s monopoly.”). 

The evidence shows that McWane’s Exclusive Dealing Policy substantially foreclosed 

Star from access to Distributors, a “key” distribution channel for Domestic Fittings, and Star was 

precluded from reaching a “critical mass” of sales. As a result, McWane impaired Star’s ability 

to compete effectively. 

a)	 McWane’s Exclusive Dealing Policy Foreclosed Star From a 

Significant Portion of the Domestic Fittings Market 

Exclusive dealing by a monopolist alters the dynamics of competition. Instead of 

competing transaction by transaction, the entrant is forced to compete on an all-or-nothing basis. 

This all-or-nothing policy increases the risk to Distributors of dealing with a new, untested 

entrant like Star: a Distributor may need to purchase an oddball Domestic Fitting that is 

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unavailable from Star, but it would be barred from purchasing the Domestic Fitting from 

McWane;774 its resulting effect on the Distributor’s own ability to service its customer could be 

disastrous.775 To avoid this risk, Distributors purchase all of their Domestic Fittings from 

McWane even though they would have preferred to purchase at least some from Star.776 See ZF 

Meritor, 696 F.3d at 283 (“due to [defendant] Eaton’s position as the dominant supplier, no 

OEM could satisfy customer demand without at least some Eaton products, and therefore no 

OEM could afford to lose Eaton as a supplier”).777 

For a Fittings supplier (whether domestic or imported), Distributors are an important link 

in the supply chain and access to Distributors is essential for effectively reaching the End 

User.778 All or virtually all of Fittings are sold through Distributors because they offer numerous 

advantages. For example, Distributors maintain inventories of Fittings, which reduces the need 

774 CCPF 2092, 2095. 

775 CCPF 1901; CCPF 2092. 

776 CCPF 2093. 

777 See generally RICHARD A. POSNER, ANTITRUST LAW 229, 251-54 (2d ed. 2001). Richard 

Posner, circuit court judge and eminent antitrust scholar, identifies Standard Fashion Co. v. 

Magrane-Houston Co., 258 U.S. 346 (1922), as the paradigm example of anticompetitive 

exclusion through exclusive dealing. Defendant Standard Fashion was a monopolist 

manufacturer of dress patterns that women could use to make their own dresses. For the 

convenience of customers, stores needed a full line, consisting of hundreds of patterns. Standard 

Fashion required the stores to carry its line of patterns on an exclusive basis. Stores were 

required to choose a supplier on an all-or-nothing basis. As a result, any firm entering the dress 

patterns business would have to create not a single successful product, but a line as long and as 

popular as Standard Fashion’s line. In this setting, exclusive dealing increases the time 

necessary for new entry (the duration of monopoly pricing), and thus injures competition. Id. 

McWane’s Exclusive Dealing policy precisely mirrors the anticompetitive strategy condemned 

in Standard Fashion. 

778 CCPF 475, 510-512. 

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for Fittings suppliers to have local warehouses and distribution facilities across the United 

States.779 Distributors lower Fitting suppliers’ costs by handling billing and invoicing to End 

Users, and by assuming the credit risk from dealing with End Users.780 Distributors also provide 

one-stop shopping for End Users to purchase the entire bundle of waterworks products (pipe, 

valves, Fittings, hydrants, and accessories), which allows Fitting Suppliers to specialize in one or 

more product lines and not be at a competitive disadvantage relative to a supplier who may have 

a broader waterworks products line.781 For these and other reasons, McWane admits that 

Distributors are “critical to [its] success” as a Fittings supplier.782 Distributors are likewise 

critical to Star’s success.783 

McWane’s Exclusive Dealing Policy substantially foreclosed Star from this key 

distribution channel. For example, Ramesh Bhutada of Star testified that before McWane’s 

September 22, 2009 announcement, Star had received Distributor requests for quotes for 

Domestic Fittings worth approximately $10 million. Those requests were from the two largest 

waterworks distributors in the country, HD Supply and Ferguson, important regional distributors, 

and a variety of independent waterworks distributors.784 Almost immediately after McWane 

announced its Exclusive Dealing Policy, those Distributors withdrew their quotes from Star and 

779 CCPF 492-495; CCPF 514-517; CX 2260-A (Schumann Rep. at 63). 

780 CCPF 518. 

781 CCPF 487; CCPF 513; CX 2260-A (Schumann Rep. at 64). 

782 CCPF 510-512. 

783 CCPF 510. 

784 CCPF 2103. 

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told Star that they were no longer interested in purchasing Domestic Fittings from it.785 Other 

Distributors had intended to purchase some of their Domestic Fittings from Star, but decided not 

to submit requests for quotes to Star after McWane’s announcement.786 

Thus, Distributors that were otherwise willing to purchase Domestic Fittings from Star 

were deterred from doing so (or purchased less) because of McWane’s Exclusive Dealing Policy. 

For example, HD Supply is the largest waterworks distributor in the United States, and accounts 

for approximately 25 percent of Fittings sales.787 HD Supply purchases imported Fittings from 

785 CCPF 2089-2090. 

786 CCPF 2093-2095. Note: Hearsay introduced to prove a buyer’s reason or motivation for 

refusing to do business with a seller, as well as other out of court statements of statements of 

motive, intent, or plan, is admissible under the “state of mind” exception to the hearsay rule set 

forth in Federal Rule of Evidence 803(3). See Calahan v. A.E.V, 182 F.3d 237, 251 (3d. Cir. 

1999); Mun. Revenue Serv., Inc. v. Xspand, Inc., 700 F.Supp.2d 692, 705 (M.D. Pa. 2010) 

(hearsay regarding the buyer’s motives are admissible to establish that seller’s marketing strategy 

caused buyers not to do business with competitor); Discover Fin. Servs. v. Visa U.S.A. Inc., 2008 

U.S. Dist. LEXIS 80801 at 4 (S.D.N.Y. 2008) (“testimony concerning the motivation of 

customers for ceasing to deal with a business is admissible under the ‘state of mind’ exception to 

the hearsay rule”). Therefore, in evaluating whether the Distributors stopped dealing with Star 

because of McWane’s Exclusive Dealing Policy, the Court should consider the investigational 

hearing and deposition testimony of Star’s witnesses and their business records such as CX 0012 

recounting the Distributors’ statements, along with the Distributors’ testimony and business 

records introduced by Complaint Counsel. E.g., CCPF ¶¶ 1902, 1931, 1932, 1933, 1946, 1986, 

1990, 1991, 2021, 2023, 2024 (deposition testimony of Mr. Berry); ¶ 2090 (testimony of Mr. 

Bhutada); ¶¶ 1930, 1962, 2021, 2025, 2060, 1962 (Mr. McCutcheon’s deposition or 

investigational hearing testimony and business records). This testimony is admissible even in 

instances in which the witness did not identify the declarant/customer who made the statement. 

Calahan, 182 F.3d at 252 n.1 (“[W]e do not think the fact that the declarants are not specifically 

identified is relevant for determining whether their statements fall within the Rule 803(3) hearsay 

exception.”); see, e.g., Complaint Counsel’s Proposed Finding of Fact ¶ 1902 (Mr. Berry 

testified that “Every distributor -- every customer distributor that we talked to or that I talked to 

after this letter came out, wanted to talk about it. . . . They don’t want to take the chance of the 

what-if.”). 

787 CCPF 265-266, 481-482. 

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Star, and its branch offices had requested quotes from Star for Domestic Fittings.788 But 

McWane’s Exclusive Dealing policy significantly raised the risk of doing business with Star: if 

Star was unable to deliver a necessary Domestic Fitting of any size or configuration, then HD 

Supply might not be able to service its own customers.789 Consequently, Jerry Webb, CEO and 

President of HD Supply, directed his district and branch managers to adhere to McWane’s 

“mandate.” 790 It was unusual and “perhaps the first time” that Mr. Webb had issued such a 

“mandate” for the entire HD Supply Waterworks Division.791 Upon receiving Mr. Webb’s 

directive, the branch offices canceled their requests to Star.792 

Ferguson Enterprises, Inc., (“Ferguson”), the second largest waterworks distributor in the 

nation accounting for approximately 25 percent of industry sales,793 also testified that McWane’s 

Exclusive Dealing Policy was one “component” of the reason why Ferguson did not purchase 

Domestic Fittings from Star.794 Ferguson’s vice president of waterworks, William Thees, 

disfavored Star for various reasons, but ordinarily permitted the company’s district managers to 

make sourcing decisions, and Ferguson branches regularly purchased imported Fittings from 

788 CCPF 1921-1922. 

789 CCPF 1908, 1910-1917. 

790 CCPF 1910-1912. 

791 CCPF 1918-1919. 

792 CCPF 1921-1936. 

793 CCPF 274-275, 481, 483. 

794 CCPF 1940. 

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Star.795 Upon learning of McWane’s Exclusive Dealing policy, Mr. Thees directed his district 

managers not to purchase Domestic Fittings from Star. While other factors contributed to this 

decision, McWane’s Exclusive Dealing policy was the triggering “catalyst.”796 According to Mr. 

Thees, there were Ferguson branch managers who had strong relationships with Star that likely 

would have purchased Domestic Fittings from Star had McWane’s policy not been in place.797 

Indeed, Star’s Domestic Fitting tracking log shows that Ferguson rejected numerous Star quotes 

because of the policy.798 

Other Distributors testified that they too were deterred from purchasing Domestic Fittings 

from Star because of McWane’s Exclusive Dealing Policy: 

 WinWholesale, the third largest Distributor in the United States,799 purchases import 

Fittings from Star,800 and was also open to purchasing Domestic Fittings from Star.801 

795 CCPF 1950-1952, 1941. 

796 CCPF 1939-1940, 1942. 

797 CCPF 1941. 

798 CCPF 1948-1949. That there were multiple reasons for Ferguson’s decision does not preclude 

a finding that the Exclusive Dealing policy foreclosed Ferguson from dealing with Star. An 

antitrust plaintiff is required to show only that the challenged conduct “materially contributed” to 

the plaintiff’s injury. Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 702 

(1962); see also Costner v. Blount National Bank, 578 F.2d 1192, 1195 (6th Cir. 1978) 

(upholding a jury finding of causation since, even though “[t]here was evidence that general 

economic conditions and poor management caused a decline in plaintiff’s business,” there also 

was “evidence that the illegal tying arrangements contributed to the decline”). 

799 CCPF 284. 

800 CCPF 1964. 

801 CCPF 1954-1955. 

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The day after McWane announced its Exclusive Dealing Policy, WinWholesale placed 

Star on its “Not Approved” vendor list for Domestic Fittings.802 

	 Groeniger & Co. (“Groeniger”), a leading distributor in northern California,803 purchases 

import Fittings from Star804 and had begun purchasing Domestic Fittings from Star before 

McWane adopted its Exclusive Dealing Policy.805 Groeniger had hoped to nurture a rival 

to McWane in the Domestic Fittings market to secure better pricing and service.806 

McWane retaliated against Groeniger in various ways, including by raising Groeniger’s 

price for a previously ordered product.807 Fearful of being cut off by McWane entirely, 

and chastened by the price penalty, Groeniger stopped purchasing Domestic Fittings 

directly from Star (although they continued to make limited purchases through Griffin 

Pipe as part of a pipe-Fitting bundled purchase, which was an exception to the McWane 

Exclusive Dealing Policy).808 

	 Illinois Meter Company, a leading distributor serving southern Illinois,809 purchases 

import Fittings from Star.810 At trial, the President of Illinois Meter testified that but-for 

802 CCPF 1956-1963. 

803 CCPF 317, 321, 323. 

804 CCPF 320. 

805 CCPF 1966. 

806 CCPF 1967-1970. 

807 CCPF 1971-1977. 

808 CCPF 1978-1992. 

809 CCPF 329-339. 

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McWane’s exclusive dealing policy, Illinois Meter would have purchased Domestic 

Fittings from Star.811 He also testified that he continues not to purchase Domestic 

Fittings from Star because McWane has never told him that they have retracted their 

Exclusive Dealing Policy.812 

	 C.I. Thornburg Company, the leading Distributor serving West Virginia,813 purchases 

import Fittings from Star,814 but declined to purchase Domestic Fittings from Star only 

because of the penalties embodied in McWane’s Exclusive Dealing Policy.815 

	 E.J. Prescott, the leading Distributor serving the New England states,816 purchases import 

Fittings from Star,817 but declined to purchase Domestic Fittings from Star because it 

feared that McWane would cut off its access to Domestic Fittings.818 

By any relevant measure, McWane’s conduct caused substantial foreclosure. If 

foreclosure is based on the percentage of McWane’s market share sold through the company’s 

exclusive distributors, as suggested in Omega Envtl., Inc. v. Gilbarco Inc., 127 F.3d 1157, 1162 

810 CCPF 327. 

811 CCPF 2009-2011. 

812 CCPF 2011-2012. 

813 CCPF 345-346. 

814 CCPF 348. 

815 CCPF 2018-2019. 

816 CCPF 308, 314. 

817 CCPF 310. 

818 CCPF 1896; CX 2502 (Prescott, Dep. at 114) (explaining that E.J. Prescott did not want to 

“turn up any apple carts” by purchasing Domestic Fittings from Star). 

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(9th Cir. 1997), then the foreclosure rate is in excess of 90 percent.819 A more conservative 

measure of foreclosure is the percentage of the market represented by distributors that were 

affirmatively deterred from buying from Star due to McWane’s conduct. Cf. Stitt Spark Plug Co. 

v. Champion Spark Plug Co., 840 F.2d 1253, 1258 (5th Cir. 1988). Under this measure, the 

foreclosure rate is in excess of 50 percent. (HD Supply and Ferguson, alone, account for 50 

percent of the market.) 

The degree of foreclosure present here is far above what is required to establish injury to 

competition. Exclusive dealing can violate the antitrust laws if the exclusive agreements 

foreclose “a substantial share of the line of commerce affected.” Tampa Elec. Co. v. Nashville 

Coal Co., 365 U.S. 320, 327 (1961); Barr Labs., Inc. v. Abbott Labs, 978 F.2d 98, 110 (3d Cir. 

1992); Am. Motor Inns, Inc. v. Holiday Inns, Inc., 521 F.2d 1230, 1252 (3d Cir. 1975). Even 

absent monopoly power, courts have found exclusive dealing arrangements anticompetitive 

where they foreclose 40-50 percent of the market. Microsoft, 253 F. 3d at 70; Areeda & 

Hovenkamp, Antitrust Law ¶ 1821 (foreclosure above 50 percent is “routinely condemned”). 

The threshold for substantial foreclosure is lower where, as here, the respondent has monopoly 

power. “[A] monopolist’s use of exclusive contracts, in certain circumstances, may give rise to a 

[Section] 2 violation even though the contracts foreclose less than the roughly 40% to 50% share 

usually required in order to establish a [Section] 1 violation.” Microsoft, 253 F.3d at 70. 

McWane has argued that not all Distributors nationwide were deterred from dealing with 

Star, and that Star has made sales to over one hundred customers by the end of 2011. McWane 

819 McWane sold 95 percent of the Domestic Fittings in the United States in 2010, and roughly 

99 percent of those sales were through its exclusive distributors, (CX 2483 (Tatman, IHT at 72), 

resulting in a foreclosure percentage of 94 percent. 

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argued that such evidence showed that McWane’s Exclusive Dealing Policy was not sufficiently 

exclusionary. The Commission rejected this argument: 

[Under Sherman Act Section 2] a plaintiff is not required to show 

that the claimed monopolist excluded all entry by rivals. As 

explained in United States v. Dentsply International, “[t]he test is 

not total foreclosure, but whether the challenged practices bar a 

substantial number of rivals or severely restrict the market’s 

ambit.” 399 F.3d 181, 191 (3d Cir. 2005). Accordingly, the 

question here is whether McWane’s conduct foreclosed a 

substantial portion of the effective channels of distribution, and 

whether the conduct had a significant effect in preserving 

McWane’s monopoly. 

Summary Judgment Decision at 25. As discussed below, by substantially foreclosing Star from 

this “key” Distributor channel, McWane preserved its monopoly power in the Domestic Fittings 

market. 

b)	 McWane’s Exclusive Dealing Policy Impaired Star’s Ability to 

Compete Effectively Against McWane 

Exclusive dealing is anticompetitive when it impairs the ability of rivals to compete 

effectively and “gives the defendant the ability (or greater ability) to raise prices over the 

competitive level.” Jonathan M. Jacobson, Exclusive Dealing, “Foreclosure,” and Consumer 

Harm, 70 Antitrust L. J. 311, 313 (2002); cf. ZF Meritor, 696 F.3d at 271 (“In some cases a 

dominant firm may be able to foreclose rival suppliers from a large enough portion of the market 

to deprive such rivals of the opportunity to achieve the minimum economies of scale necessary 

to compete.”). Exclusive dealing can impair the ability of rivals to compete by denying them 

sufficient scale to be able to lower their costs (and their prices): 

Customer foreclosure refers to using exclusive contracts and other 

strategies that exclude rivals from access to a sufficient customer 

base. If the monopolist can reduce the sales of a competitor 

through the use of exclusive contracts, bundling, or other means, 

the rival may suffer higher costs that make it a less formidable 

competitor in selling to other customers. 

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Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal 

Standards, and Microsoft, 7 Geo. Mason L. Rev. 617, 627 (1999). 

By substantially foreclosing Star’s access to Distributors, McWane’s Exclusive Dealing 

Policy thwarted Star’s strategy to purchase its own domestic foundry for producing Domestic 

Fittings. Doing so would have lowered Star’s costs, allowed it to be a more efficient and 

effective competitor, and lowered its prices in competition with McWane. 

{ 

}

820 { 

}

821 { 

822 

By the end of 2009, Star had more than 325 patterns, which enabled Star to meet { }% 

of the Domestic Fittings demand.823 Star’s entry into the Domestic Fittings market was 

accelerated because Star had the expertise, the distribution network, the sales team, and the 

existing long-term business relationships with Distributors that it had developed during its two 

820 CCPF 1722, in camera. 

821 CCPF 1722-1725, in camera; CCPF 1726-1728. 

822 CCPF 1725, in camera. 

823 CCPF 1751, in camera; CCPF 1750. 

} CCPF 

1752, in camera. { 

} CCPF 1753, in camera. 

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decades selling imported Fittings.824 Star’s main barrier to entry was McWane’s Exclusive 

Dealing Policy. 

{ 

}

825 { 

}

826 { 

}

828 

{ 

}

829
 

{
 

}

830 Star concluded that its major customers – e.g., { 

} – would not 

824 CCPF 1758-1765; CCPF 125. 

825 CCPF 1729, in camera; CCPF 1732, in camera. 

826 CCPF 2130, in camera. 

827 CCPF 2132, in camera. 

828 CCPF 2135, in camera
 

829 CCPF 2138, in camera; CCPF 2136, in camera. 

830 CCPF 2144, in camera; CCPF 2146. 

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buy Domestic Fittings from Star because of McWane’s Exclusive Dealing Policy.831 In 

particular, Star concluded that McWane’s Exclusive Dealing Policy foreclosed Star from selling 

Domestic Fittings to both HD Supply and to Ferguson – which, combined, account for 

approximately 50 percent of all Distributors’ sales832 – and would cut its potential Domestic 

Fittings sales in half.833 Based on these withdrawn orders, Star { 

}

834 As such, Star terminated its negotiations for the purchase { 

}

835
 

{
 

}

836 { 

}

837 { 

831 CCPF 2147-2155, in camera. 

832 CCPF 482; CCPF 483. 

833 CCPF 2156. 

834 CCPF 2142, in camera. 

835 CCPF 2156, in camera; CCPF 2157, in camera. 

836 CCPF 2104-2108; CCPS 2140, in camera. 

837 CCPF 2139, in camera. {
 

}
 

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}

838 

By thwarting Star’s plans to acquire a domestic foundry, McWane’s Exclusive Dealing 

Policy has increased Star’s costs of production by { } percent (when comparing the costs 

of Domestic Fittings production at independent foundries to the costs of production at its own 

foundry).839 { 

}

840 { 

}

841 { 

838 CCPF 2158; CCPF 2159, in camera. 

839 CCPF 1730, in camera. 

840 CCPF 2112, in camera. 

841 CCPF 2112-2114, in camera. 

238 
 

 

 

 

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}

842 { 

}

843
 

{
 

}

844 Thus, McWane need 

not respond to Star’s limited presence in the market.845 { 

}

846 

When, as here, a monopolist prevents its rival from lowering costs, consumers suffer 

because the rivals are unable to engage in meaningful price competition. Salop & Romaine, 

Preserving Monopoly- Economic Analysis, Legal Standards, and Microsoft, 7 Geo. Mason L. 

Rev. 617, 627 (1999) (“If the monopolist can reduce the sales of a competitor through the use of 

exclusive contracts, bundling, or other means, the rival may suffer higher costs that make it a less 

formidable competitor in selling to other customers.”). 

Raising rivals’ costs is a recognized mechanism for harming competition in 

monopolization cases. See, e.g. Thomas G. Krattenmaker & Steven C. Salop, Raising Rivals’ 

842 CCPF 2117, 2121, 2129; CCPF 2128, in camera. 

843 CCPF 2116. 

844 CCPF 2141. 

845 CCPF 2164; CCPF 2165. 

846 CCPF 2125, in camera; CCPF 2161, in camera. 

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Costs To Achieve Power over Price, 96 Yale L.J. 209, 225 n.60 (1986); Salop & Romaine, 

Preserving Monopoly- Economic Analysis, Legal Standards, and Microsoft, 7 Geo. Mason L. 

Rev. 617, 627 (1999) (describing use of exclusives to keep WEOL below “minimum viable 

scale” in Lorain Journal, 342 U.S. 209 (1951)); Elizabeth Granitz & Benjamin Klein, 

Monopolization by “Raising Rivals’ Costs”: The Standard Oil Case, 39 J. Law & Econ. 1 (1996) 

(forcing high transportation costs on entrants); cf. Herbert J. Hovenkamp, Quasi Exclusive 

Dealing p. 2-3 (September 2011), available at at SSRN: http://ssrn.com/abstract=1793126 or 

http://dx.doi.org/10.2139/ssrn.1793126 (describing Microsoft’s all or nothing license as 

imposing incremental costs for use of rival software). 

Here, McWane’s Exclusive Dealing Policy is a textbook example of the reasons 

exclusive dealing arrangements are condemned. 

4. McWane’s Free-Riding Defense is Invalid 

Because the evidence establishes a prima facie case of competitive injury, the burden shifts to 

McWane to proffer a procompetitive justification for its Exclusive Dealing Policy. Eastman Kodak, 504 

U.S. at 483; Microsoft, 253 F.3d at 59 (defendant must show that “its conduct is indeed a form of 

competition on the merits because it involves, for example, greater efficiency or enhanced consumer 

appeal.”). The analysis must focus upon the benefits, if any, that consumers receive from exclusive 

dealing, and not on those advantages that inure to McWane alone. Microsoft, 253 F.3d at 71. If 

McWane advances a plausible and cognizable efficiency justification, “then the burden shifts back to 

[Complaint Counsel] to rebut that claim.” Id. at 59. 

McWane and its economic expert Dr. Parker Normann advance two efficiency 

arguments, each denominated as a “free-riding defense.” Both of McWane’s free-riding 

arguments are fundamentally flawed. 

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Before addressing McWane’s contentions, we offer three preliminary points. First, the 

Court must be careful to distinguish between an effort to control free-riding, and an attempt to 

eliminate a legitimate form of competition. See Eastman Kodak, 504 U.S. at 485 (rejecting freeriding defense); Polygram Holding, Inc. v. Fed. Trade Comm’n, 416 F.3d 29, 37-38 (D.C. Cir. 

2005) (same); United States v. Dentsply, 399 F.3d at 185, 197 (same). 

Second, Complaint Counsel acknowledges that situations exist in which exclusive 

dealing may remedy a bona fide free-riding problem. See Ryko Mfg. Co. v. Eden Servs., 823 

F.2d 1215, 1234 n. 17 (8th Cir. 1987); Richard M. Steuer, Exclusive Dealing in Distribution, 69 

Cornell L. Rev. 101, 127 et seq. (1983).847 For example, when a supplier invests in 

strengthening or improving its independent distributors, and the distributor represents several 

competing brands, then the benefits of one supplier’s investment may be appropriated by a rival 

supplier. This diminishes the supplier’s incentive to make such investments. Exclusive dealing 

may incentivize the supplier to assist distributors in their marketing efforts because rival brands 

are prevented from taking a free-ride on the supplier’s investment. Richard M. Steuer, Exclusive 

Dealing in Distribution, 69 Cornell L. Rev. 101, 127-28 (1983). 

Third, exclusive dealing is not the norm in the waterworks industry. Waterworks 

suppliers ordinarily do not make significant investments in particular distributors, and 

distributors purchase and re-sell imported Fittings from multiple suppliers. The industry 

apparently finds this arrangement to be efficient and investment in exclusive distributors 

unnecessary. 

847 See also CX 2260-A (Schumann Rep. at 126). 

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a)	 McWane’s Lobbying Campaign Does Not Justify Exclusive 

Dealing 

McWane first claims that Star should not be allowed to free-ride on McWane’s 

investments in lobbying Congress to pass the Buy American requirement for ARRA-funded 

waterworks projects.848 According to McWane, when Star sells Domestic Fittings for ARRAfunded projects, it is indirectly benefitting from McWane’s lobbying expenditures; McWane’s 

Exclusive Dealing Policy therefore shifts sales from Star (the alleged free-rider) to McWane (the 

worthy investor). 

This argument distorts the free-riding concept in antitrust law. McWane did not invest in 

strengthening the capabilities of its waterworks distributors – particular distributors that it now 

claims as its own. Instead, McWane’s political investment arguably expanded the demand for 

Domestic Fittings.849 As a matter of law, this expenditure does not secure for McWane the right 

to exclude from distribution all competing sellers of this product. The Commission rejected a 

very similar free-riding claim in the In re Polygram Holding case: 

The sort of behavior that Respondents disparage as “free-riding” – 

i.e., taking advantage of the interest in competing products that 

promotional efforts for one product may induce – is an essential 

part of the process of competition that occurs daily throughout the 

economy. For example, when General Motors (“GM”) creates a 

new sport utility vehicle (“SUV”) and promotes it, through price 

discounts, advertising, or both, other SUVs can “free ride” on the 

fact that GM’s promotion inevitably stimulates consumer interest, 

not just in GM’s SUV, but in the SUV category itself. Our 

antitrust laws exist to protect this response, because it is in reality 

the competition that drives a market economy to benefit 

consumers. 136 F.T.C. 310, at *361-62. 

848 RX-712A (Normann Rep. at 54). 

849 Of course, McWane could have instructed its lobbyists to seek legislation designating 

McWane as the sole lawful vendor of Domestic Fittings. ARRA requires that contractors Buy 

American, and does not require that contractors buy from McWane. 

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McWane’s lobbying campaign is functionally identical to GM’s effort to promote consumer 

demand for SUVs through advertising. In neither case is the firm entitled to an exclusive right to 

sell within the category: GM must compete with rival automobile manufacturers, and McWane 

must compete on the merits with Star and others. 

In sum, Star’s efforts to secure sales from Distributors to serve ARRA-funded projects is 

legitimate competition favored by the antitrust laws, not a form of free-riding. 

b)	 McWane’s Full-Line Strategy Does Not Justify Exclusive 

Dealing 

McWane’s second free-riding argument is also flawed. McWane claims that it is a fullline manufacturer, producing thousands of different Domestic Fittings. Star, when it first entered 

the Domestic Fittings market, produced only the common Domestic Fittings that allegedly had 

lower manufacturing costs. According to McWane: “If customers were able to source from 

multiple manufacturers, they would buy the common fittings from the limited supplier [Star] and 

only turn to the full-line supplier for the less common products. This practice could lead to the 

collapse of the full-line seller.”850 Thus, McWane’s claim is that its Exclusive Dealing Policy is 

necessary and appropriate in order to ensure the survival of McWane’s domestic foundry and the 

company’s strategy of manufacturing a broad range of Domestic Fittings. 

There are multiple flaws in McWane’s argument. First, there is no evidence that 

competition from Star would force McWane to close its domestic foundry. This alone mandates 

rejection of McWane’s proffered defense. See United States v. Dentsply Int’l, Inc., 399 F.3d at 

185, 197 (rejecting efficiency defense where there was no evidence to support defendant’s freeriding argument). Second, antitrust law affords McWane and its chosen strategy no inherent 

850 RX-712A (Normann Rep. at 54). 

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right to competitive success. If McWane is an inefficient, high-cost producer of most Domestic 

Fittings (and this is McWane’s contention),851 then McWane’s decline and even its exit may 

represent the competitive market outcome. See Union Leader Corp. v. Newspapers of New 

England, Inc., 284 F.2d 582, 584 n. 4 (1st Cir. 1960) (the public benefits from free competition 

“even though that competition be an elimination bout”). 

McWane further argues that the exit of the only full-line producer, McWane, may mean 

that there is (for a time) no domestic manufacturer of rare or “oddball” Fittings. Even if true, this 

does not justify McWane’s efforts to exclude Star. If the value to consumers of domesticallymade oddball Fittings exceeds the cost of production, then McWane, Star, or another firm in the 

free market economy will produce them. See Freeman v. San Diego Ass’n of Realtors, 322 F.3d 

1133, 1152 (9th Cir. 2003) (“Antitrust law presumes that competitive markets offer sufficient 

incentives and resources for innovation....”). 

If, on the other hand, the cost of producing certain oddball Fittings exceeds what 

consumers are willing to pay, then the product may disappear from the market.852 Again, this is 

the competitive process that the Sherman Act is designed to promote. If a product can succeed in 

the marketplace only if it is shielded from competitive forces “then it is likely no loss to 

consumers if it is not introduced.” In re: Polygram Holding, 136 F.T.C. 310, at *364; accord 

NCAA v. Board of Regents, 468 U.S. 85, 116-117 (1984) (rejecting cartel’s justification for 

restrictions on television broadcasts of college football games as necessary to protect live 

851 See RX-712A (Normann Rep. at 54). 

852 The ARRA provides that contractors may use an imported Fitting if a particular size 

Domestic Fitting is unavailable. CCPF 1589-1593. 

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attendance at games).853 McWane’s contention that its full-line strategy should be insulated from 

competition is “nothing less than a frontal assault on the basic policy of the Sherman Act.” Nat’l 

Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 695 (1978). 

Most importantly, Star’s efforts to compete with McWane by selling a limited line of 

Domestic Fittings is a legitimate form of competition, and is not a form of free-riding that has 

been recognized by any antitrust court. As Judge Richard Posner explains, “[p]iecemeal entry is 

the norm in most industries” because entering with a full line of products is often more risky, 

more difficult, and more time-consuming. Richard A. Posner, Antitrust Law 251-53 (2d ed. 

2001). 

Piecemeal entry is a quicker route to eliminating monopoly pricing. Thus, it follows that 

strategies employed by monopolists “that forestall new entry by compelling prospective entrants 

to enter on a full-line basis” are appropriately condemned under the Sherman Act, absent some 

offsetting efficiency benefit. Id. at 252 (“The point is not that the new entrant would have to 

invest more capital but that it would have to embark on a riskier enterprise, that of creating not a 

single successful product but a whole line of such products. It’s as if one couldn’t make 

commercial aircraft without making military aircraft as well.”). Put simply, labeling piecemeal 

entry as an illegitimate form of free-riding – as McWane does here -- turns antitrust policy on its 

head. 

853 In the present case, McWane posits that oddball Domestic Fittings cannot survive in a free 

market. McWane proposes to keep the product alive by excluding competition in the sale of 

common Fittings, charging a supracompetitive price for common Fittings, and using these profits 

to sell oddball Fittings at below cost. As in NCAA, this artificial manipulation of the market 

(here, by a monopolist rather than a cartel) is inconsistent with the basic policy of the Sherman 

Act. 

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For example, in Eastman Kodak Co., the Supreme Court rejected the argument that a firm 

that elects to sell a more limited line of products than its rival is somehow engaged in unlawful 

free-riding. 504 U.S. at 485. Plaintiffs charged that Kodak violated Section 2 by forcing 

consumers of Kodak photocopying equipment and replacement parts to purchase repair services 

from Kodak as well. Id. at 464. Kodak defended by claiming that the ISOs – by offering service 

without equipment or parts – were engaged in free-riding. Id. at 483. The Court rejected this 

free-riding defense, explaining: 

This understanding of free-riding has no support in our case law. 

To the contrary, as the Court of Appeals noted, one of the evils 

proscribed by the antitrust laws is the creation of entry barriers to 

potential competitors by requiring them to enter two markets 

simultaneously.” Id. at485. 

Like the rivals in the Eastman Kodak case, Star is not free-rider. It simply has a different 

business strategy, suitable for a new entrant. Star does not benefit in any fashion from 

McWane’s investment in manufacturing oddball Domestic Fittings. McWane benefits from 

exclusive dealing only to the extent that it prevents Star from making sales in any manner 

(through shared distributors and otherwise). 

For all of these reasons, McWane’s Exclusive Dealing Policy does not remedy a bona 

fide free-riding problem and is not procompetitive. Because there is no efficiency to offset its 

likely anticompetitive effects, McWane’s Exclusive Dealing Policy should be condemned as an 

unlawful act of monopolization and attempted monopolization of the Domestic Fittings market in 

violation of Section 2 of the Sherman Act. 

H.	 McWane and Sigma Unlawfully Conspired to Monopolize the Domestic 

Fittings Market (Count Five) 

Count Five of the Complaint charges that McWane violated Section 2 of the Sherman Act 

by conspiring with Sigma to monopolize the Domestic Fittings market. Specifically, McWane 

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and Sigma agreed through the MDA to implement and enforce McWane’s Exclusive Dealing 

Policy with the specific intent to exclude competitors and to maintain supracompetitive prices in 

the Domestic Fittings market.854 McWane and Sigma together together have monopoly power, 

and the agreement between McWane (monopolist) and Sigma (potential rival) enhances that 

power. 

The “essence” of a conspiracy to monopolize claim is “an agreement entered into with 

the specific intent of achieving monopoly[.]” Northeastern Tel. Co. v. AT&T Co., 651 F.2d 76, 

85 (2d Cir. 1981); Williams v. 5300 Columbia Pike Corp., 891 F. Supp. 1169, 1175 (E.D. Va. 

1995) (“A ‘conspiracy to monopolize’ means a conspiracy to acquire or maintain the power to 

exclude competitors from some portion of commerce.”). The specific elements of a conspiracy 

to monopolize claim are (1) concerted action, with (2) the specific intent to monopolize, and (3) 

an overt act in furtherance of the conspiracy. See Levine v. Cent. Fla. Med. Affiliates, 72 F.3d 

1538, 1556 (11th Cir. 1996); Thompson v. Metro. Multi-List, Inc., 934 F.2d 1566, 1582 (11th 

Cir. 1991). 

In addition to these elements, the Courts of Appeals are divided as to whether a plaintiff 

is required to prove market definition and market power. 855 Complaint Counsel has met the 

854 For this claim, it is not necessary for the Court to determine whether Sigma was a potential 

entrant into the Domestic Fittings market because “traders oriented vertically to each other can 

be found in violation of section 2 by conspiring to monopolize one horizontal market intersecting 

the vertical arrangement.” Perington Wholesale, Inc. v. Burger King Corp., 631 F.2d 1369, 1377 

(10th Cir. 1979) (“The fact that [the defendant’s] coconspirators competed in markets different 

from [the defendant’s] market does not preclude finding a conspiracy to monopolize [the 

defendant’s] market.”). 

855 Compare Fraser v. Major League Soccer, L.L.C., 284 F.3d 47, 68 (1st Cir. 2002) (market 

definition and market power required for conspiracy to monopolize claim), and Dickson v. 

Microsoft Corp., 309 F.3d 193, 211 (4th Cir. 2002) (same), with Levine, 72 F.3d at 1156 (“A 

claim for conspiracy to monopolize . . . does not require a showing of monopoly power.”); 

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higher standard. As previously discussed, McWane has monopoly power in a properly defined 

Domestic Fittings market. See supra Part V.A.3 (defining Domestic Fittings market); Part V.G.1 

(McWane has monopoly power in the Domestic Fittings market). One monopolist is enough; it 

is not necessary that the conspirators share in the resultant monopoly. See, e.g., Dickson v. 

Microsoft Corp., 309 F.3d 193 (4th Cir. 2002) (one alleged monopolist); Int’l Distrib. Ctrs., Inc. 

v. Walsh Trucking Co., 812 F.2d 786 (2d Cir. 1987) (same); Perington Wholesale, Inc. v. Burger 

King Corp., 631 F.2d 1369 (10th Cir. 1979) (same). 

Finally, unlike other Section 2 claims, there is no requirement to make a separate 

showing of competitive injury where, as here, there is no efficiency justification. As the Second 

Circuit has explained, “Congress outlawed the conspiracy itself,” not only successful 

conspiracies. Int’l Distrib. Ctrs., 812 F.2d at 796 n.8 (explaining rationale of conspiracy to 

monopolize offense and noting that “proof of success or impending success is irrelevant”); see 

also Am. Tobacco Co. v. United States, 328 U.S. 781, 789 (1946) (“It long has been settled, 

however, that a conspiracy to commit a crime is a different offense from the crime that is the 

object of the conspiracy. Petitioners, for example, might have been convicted here of a 

conspiracy to monopolize without ever having acquired the power to carry out the object of the 

conspiracy....”) (internal quotation marks and citation omitted); Perington Wholesale, 631 F.2d 

at 1377 (“Conspiring to monopolize is a separate offense under section 2, requiring less in the 

way of proof than the other section 2 offenses.”). 

Baxley-Delamar Monuments, Inc. v. Am. Cemetery Ass’n, 843 F.2d 1154, 1157 (8th Cir. 1988) 

(conspiracy to monopolize claim did not require allegations of market power); Salco Corp. v. 

Gen. Motors Corp., Buick Motor Div., 517 F.2d 567, 576 (10th Cir. 1975) (for conspiracy to 

monopolize claim, “a plaintiff is not required to prove what is the ‘relevant market’”). 

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Here, McWane and Sigma agreed to the MDA with the specific intent to exclude 

competitors and to maintain supracompetitive prices, and took overt acts in furtherance of that 

conspiracy. 

1. The Executed MDA Constitutes Concerted Action 

The MDA satisfies the concerted action element for a conspiracy to monopolize claim, 

which has the same standard for proving an agreement as Section 1. See, e.g., Howard Hess 

Dental Labs. Inc. v. Dentsply Int’l, Inc., 602 F.3d 237, 254 n.7 (3d Cir. 2010) (agreement 

standard same for Section 1 and Section 2); U.S. Anchor Mfg., Inc. v. Rule Indus., Inc., 7 F.3d 

986, 1001-1002 (11th Cir. 1993) (same); see also supra Part V.D (discussing standard for 

proving agreement under Section 1). 

On or about September 17, 2009, executives of McWane and Sigma signed the MDA 

agreement, in which Sigma agreed, inter alia, to enforce McWane’s Exclusive Dealing Policy. 

Specifically, Section 1(c) of the MDA provides: 

McWane shall from time to time provide Sigma with a list of 

customers who have not agreed to source their Domestic Fittings 

solely from McWane. Sigma agrees not to sell McWane 

Domestic Fittings to any customer so listed by McWane, or to 

any other customer who Sigma actually knows has purchased 

Domestic Fittings from a source other than McWane at any time 

during the previous 60 days.856 

Thus, similar to exclusive dealing or other anticompetitive agreements, this fully executed, 

written agreement satisfies the concerted action prong of a conspiracy to monopolize claim. See, 

e.g., Fraser v. Major League Soccer, 284 F.3d at 68 (exclusive contracts support agreement 

element); Futurevision Cable Sys. of Wiggins, Inc. v. Multivision Cable TV Corp., 789 F. Supp. 

760, 766 (S.D. Miss. 1992) (same); see also Baxley-Delamar Monuments, 843 F.2d at 1156 

856 CCPF 2396; CX 1194 at 001-002 § 1(c) (emphasis added). 

249 
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(tying arrangement satisfies agreement element); Full Draw Prods. v. Easton Sports, Inc., 182 

F.3d 745, 756 (10th Cir. 1999) (group boycott satisfies agreement element for conspiracy to 

monopolize claim). 

2.	 McWane and Sigma Had the Specific Intent to Monopolize the Domestic 

Fittings Market 

McWane and Sigma entered into the MDA with the specific intent to monopolize the 

Domestic Fittings market. The standard for proving specific intent is the same under a 

conspiracy to monopolize claim as it is for attempted monopolization: the intent to exclude 

competition or control prices. Am. Tobacco Co., 328 U.S. at 788-789 (evidence of intent to 

exclude competitors supported conclusion that defendants had specific intent to monopolize); 

United States v. Consol. Laundries Corp., 291 F.2d 563, 573 (2d Cir. 1961) (same); Robert’s 

Waikiki U-Drive, Inc. v. Budget Rent-A-Car Systems, 491 F. Supp. 1199, 1223 (D. Haw. 1980) 

(standard same for attempted monopolization and conspiracy claims). 

The “crucial” question, therefore, in evaluating this element, is whether McWane and 

Sigma “specifically intended to vanquish their opposition by unfair or unreasonable means.” 

Northeastern Tel. Co., 651 F.2d at 85. Specific intent may be established by direct evidence or 

inferred from “conduct that has no legitimate business justification but to destroy or damage 

competition.” GTE New Media Servs., Inc. v. Ameritech Corp., 21 F. Supp. 2d 27, 45 (D.D.C. 

1998) (citing Ass’n for Intercollegiate Athletics for Women v. NCAA, 735 F.2d 577, 585 (D.C. 

Cir. 1984)). 

Here, McWane and Sigma had the specific intent to exercise market power and the power 

to exclude – not simply to win the competitive game against Star and others, but to forestall that 

competition. Their specific intent is established by direct evidence from the parties’ 

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contemporaneous documents and statements, and can be inferred from the Exclusive Dealing 

Policy’s harm to competition and lack of an efficiency justification. 

a) Contemporaneous Documents and Statements Establish Direct 

Evidence of McWane and Sigma’s Specific Intent to Monopolize 

the Domestic Fittings Market 

There is abundant evidence that directly shows McWane and Sigma’s intent to 

monopolize the Domestic Fittings market. Specifically, contemporaneous statements, documents 

and business plans show that McWane and Sigma had the specific intent when they entered the 

MDA, that it would: (1) prevent Star from becoming a viable competitor in the Domestic Fittings 

market; and (2) enable McWane and Sigma to charge supracompetitive prices for Domestic 

Fittings. See generally Int’l Distrib. Ctrs., 812 F.2d at 794 (contemporaneous documents and 

statements are direct evidence of specific intent); Confederated Tribes of Siletz Indians of Or. v. 

Weyerhaeuser Co., 411 F.3d 1030, 1042 (9th Cir. 2005) (same), rev’d on other grounds, sub 

nom. Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S. 312 (2007). 

As previously discussed, McWane implemented its Exclusive Dealing Policy because it 

feared that Star’s entry into the Domestic Fittings market would cause the prices of Domestic 

Fittings to get “creamed.”857 See also supra Part V.G.2.d (discussing McWane’s specific intent 

for implementing its Exclusive Dealing Policy). The exclusive dealing section of the MDA 

(Section 1(c)) was an extension of McWane’s Exclusive Dealing Policy; and it was intended to 

apply further financial pressure on Star and to prevent it from gaining credibility with 

customers.858 

857 CCPF 1790; CX 0074 at 001 (“Whether we end up with Star as a complete or incomplete 

domestic supplier my chief concern is that the domestic market gets creamed from a pricing 

standpoint” (emphasis added)). 

858 CCPF 2398-2399; CCPF 2454-2465. 

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For example, as early as June 29, 2009, Mr. Tatman considered the potential MDA 

agreement to be a tool for blocking Star.859 Specifically, in the context of discussing McWane’s 

possible selling price to Sigma under a potential MDA agreement, Mr. Tatman noted that he did 

not think that Sigma would be “willing to generate little to no incremental margin $ just to help 

us block Star.”860 Later, in a July 27, 2009 presentation titled “Sigma – Domestic Review 

Session,” Mr. Tatman discussed “What’s in it for McWane,” and explained that the MDA would 

benefit McWane by reducing Star’s ability to grow and by adding additional price stability: 

Although not accurately quantifiable, having Sigma sell McWane branded product 

 Should reduce Star’s ability to grow share 

 Keeps additional overcapacity from being added to the industry 

.... [and] 

 Should help drive some additional level of price stability.861 

Finally, and perhaps most persuasively, notes from an August 20, 2009 internal meeting 

among McWane executives reflect McWane’s specific intent shortly before entering into the 

MDA. Specifically, Mr. McCullough, who made the ultimate decision to enter into the MDA,862 

is noted as stating that he hoped that the MDA would “drive Star out of business:” 

 LM [Mr. McCullough] want to sell SIGMA to put pressure on Star. LM 

hopefully to drive Star out of business. Would rather have competition 

other than Star. 

LM thinks that we should sell SIGMA as an insurance policy and 

to continue to put pressure on Star... LM approved Rick’s 

859 CCPF 2459; CX 0076. 

860 CCPF 2459. 

861 CCPF 2460; CX 0465 at 010. 

862 CCPF 2366. 

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recommendation page of his PowerPoint presentation on selling 

SIGMA.863 

Thus, even though McWane calculated that it would lose margin on every ton of Domestic 

Fittings that it sold to Sigma (and that it may also lose sales of imported Fittings),864 McWane 

concluded that it should enter into the MDA as an “insurance policy” against SIGMA’s 

independent entry and to put “pressure on Star.”865 

Sigma also entered into the MDA with the specific intent to exclude competitors. For 

example, in February 2009, Sigma saw a benefit of a potential Domestic Fittings supply 

agreement with McWane because it could be a means to “marginalize Star.”866 Additionally, in 

a September 9, 2009, report to Sigma’s Board, Mr. Pais described the { 

}

867 And finally, Sigma’s 

intent is perhaps most explicitly explained in a message dictated by Mr. Pais on September 22, 

2009, the date Sigma announced the MDA to the market. In his message, Mr. Pais explained 

that the MDA, if Sigma does its “job right,” it could make Star “suffer”: 

If we do our job right, it might isolate Star and make them suffer 

with their investment even more, because they may not be able to 

gain credibility... We need to develop an exclusive agreement 

863 CCPF 2458. 

864 CCPF 2368-2369; CX 0111 at 002 (“if we assume that for every 1000 domestic tons they sell 

they will sell an additional 500 tons of non-domestic that would have been” McWane’s). 

865 CCPF 2458. 

866 CCPF 2456. 

867 CCPF 2461, in camera. 

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arrangement with each customer ... or we will end up 

strengthening Star.868 

Thus, while McWane initiated the Exclusive Dealing Policy, including its insertion into the 

MDA, Sigma entered into the MDA with the specific intent to use the MDA as a means to 

“marginalize” Star. 

McWane and Sigma’s intent is distinct from the typical (and laudable) motive of firms in 

the competitive marketplace that want to beat their rivals. Here, McWane did not intend to offer 

a better product or a better price, but rather to “block[]” or to “marginalize” Star from competing. 

In addition to the Exclusive Dealing Policy, the MDA promoted McWane and Sigma’s 

specific intent to raise or stabilize prices. For example, Mr. Tatman wrote that a benefit of the 

MDA would be to “help drive some additional level of price stability.”869 This sentiment was 

shared by Sigma, which thought that the MDA could lead to “an increase in the price in the 

market, [and] then the market would come to a better price” for all Fittings, not just Domestic 

Fittings.870 The MDA accomplished this by “marginalizing” Star, a historically aggressive 

competitor, and by essentially eliminating price competition between McWane and Sigma. 

Under the MDA, Sigma agreed not to engage in price competition with McWane, but rather to 

868 CCPF 2462 (emphasis added). At trial, McWane suggested that because Mr. Pais’s dictated 

message may have been a draft, it was therefore meaningless. While in certain situations a final 

document, such as an executed contract, may have greater relevance than drafts of that 

document, here the message Mr. Pais dictated on the day Sigma announced the MDA to its 

employees and customers provides a direct window into Sigma’s CEO’s strategic intent in 

entering into the agreement with McWane. 

869 CCPF 2460; CX 0465 at 010. 

870 CCPF 2465. 

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sell at 98% of McWane’s published prices.871 These efforts appear successful; the evidence 

shows that after McWane and Sigma entered into the MDA, McWane and Sigma increased the 

price for Domestic Fittings.872 See also supra Part V.F. 

b) McWane and Sigma’s Specific Intent to Monopolize Can Also Be 

Inferred From the Lack of a Valid Efficiency Justification and 

Its Competitive Effects 

In addition to this extensive direct specific intent evidence, McWane and Sigma’s 

specific intent to monopolize the Domestic Fittings market can also be inferred from the 

competitive effects of the Exclusive Dealing Policy, including the absence of any efficiency 

justification. 

“Specific intent in the antitrust context may be inferred from a defendant’s unlawful 

conduct.” Howard Hess Dental Labs., 602 F.3d at 257; see also Aspen Skiing Co. v. Aspen 

Highlands Skiing Corp., 472 U.S. 585, 603 & n.28 (“[N]o monopolist monopolizes unconscious 

of what he is doing.”) (quoting United States v. Aluminum Co. of America, 148 F.2d 416, 432 (2d 

Cir. 1945)); Fleer Corp. v. Topps Chewing Gum, Inc., 658 F.2d 139, 153-154 (3d Cir. 1981) 

(“Specific intent to monopolize the relevant market is a necessary element of conspiracy to 

monopolize. Such intent may be inferred, however, from the proof of actual monopoly power.”) 

(internal citation omitted). Here, as discussed more fully in Part V.G.3, McWane’s Exclusive 

Dealing Policy effectively forestalled Star’s meaningful entry into the market, thus preventing 

871 CCPF 2412; CCPF 2196; CX 0070 at 001 (McWane’s “core assumptions” regarding the 

MDA were that “Tyler/Union would remain the only truly viable source for domestically 

produced [Fittings]...” and neither Sigma nor McWane “would be significantly underselling the 

other.”). 

872 CCPF 2422-2425; CCPF 2481-2483. 

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Star from lowering the prices of Deomstic Fittings and allowing McWane and Sigma to continue 

charging monopoly prices for Domestic Fittings. 

“Evidence that business conduct is ‘not related to any apparent efficiency’ may [also] 

constitute proof of specific intent to monopolize.” Broadcom Corp. v. Qualcomm Inc., 501 F.3d 

297, 318 (3d Cir. 2007); Aspen Skiing, 472 U.S. at 608 n.39 (observing that the absence of an 

efficiency justification is probative of respondent’s specific intent to monopolize). Here, the 

MDA itself does not lower prices, increase output, or otherwise improve quality. See supra Part 

V.F. The MDA’s Exclusive Dealing Provision also does not have an efficiency justification. As 

discussed more fully in Part V.G.4, McWane’s attempted justification of the Exclusive Dealing 

Policy as being necessary to generate volume for its foundry873 is not a cognizable or plausible 

justification. There is no evidence that competition from Star would fource McWane to close its 

domestic foundry, and antitrust law affords McWane and its chosen strategy, under which it 

prices “oddball” or rare Fittings, no inherent right to competitive success. 

The Exclusive Dealing Policy’s successful exclusionary effect as agreed to and 

implemented by McWane and Sigma, as well as the lack of an efficient justification for the 

MDA or for the Exclusive Dealing Policy, support the specific intent element of conspiracy to 

monopolize offense. See Broadcom, 501 F.3d at 318; Aspen Skiing, 472 U.S. at 608 n.39. 

3. McWane and Sigma Took Overt Acts in Furtherance of Their Conspiracy 

The final element of a conspiracy to monopolize claim is that the conspirators take overt 

acts in furtherance of their conspiracy. See Levine, 72 F.3d at 1556. The transactions that take 

place pursuant to an exclusive dealing policy are sufficient to establish the overt act requirement 

873 RX-712A (Normann Rep. at 3, 53-54); Normann, Tr. 4902-4906; Respondent Pre-trial Brief 

at 60. 

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of a conspiracy to monopolize. Fraser v. Major League Soccer, 284 F.3d at 68; see also United 

States v. Hickok, 77 F.3d 992, 1005-1006 (7th Cir. 1996) (“Under the general conspiracy statute 

[18 U.S.C. § 371], an overt act is defined as ‘any act to effect the object of the conspiracy.’”) 

(emphasis added in original); Black’s Law Dictionary (9th ed. 2009) (defining “overt act” as 

“[a]n outward act, however innocent in itself, done in furtherance of a conspiracy, treason, or 

criminal attempt.”). Here, McWane and Sigma worked in concert and took overt acts in 

furtherance of their agreement to control prices and exclude rivals, including Star. 

First, McWane and Sigma collaborated to make distributors aware of the MDA and that 

Sigma would be enforcing the Exclusive Dealing Policy.874 Specifically, in a September 22, 

2009, letter to distributors approved by McWane, Sigma announced: 

As per this MDA, we are now Master Distributors of [McWane] 

domestic Fittings. As such, we will follow [McWane’s] 

distribution and pricing policies as they are announced from time 

to time. As mentioned in their own letter from [McWane] to their 

customers, which you too may have received, we wish to supply 

the [McWane] domestic Fittings to any customers who elect to 

commit to fully support [McWane] branded Fittings for their 

requirements of domestic Fittings, purchased thru [McWane] or 

SIGMA. We appeal to you to accept this requirement of exclusive 

choice, as a fair and reasonable one, in light of the considerable 

investment by [McWane] to provide this range of domestic 

production, which is now being expanded to offer domestic 

Fittings up to 48”. Please note that customers who elect not to 

fully support this program may forgo any unpaid volume 

incentive rebates applicable to only the domestic Fittings and 

delivery of domestic Fittings up to 12 weeks.

875 

Sigma also actively enforced McWane’s Exclusive Dealing Policy on at least one 

occasion. On or about December 14, 2009, after the Tulsa branch of Hajoca purchased Domestic 

874 CCPF 2373-2376. 

875 CCPF 2403. 

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Fittings from Star, Mr. Tatman notified Mr. Rona of Sigma that Sigma could no longer sell 

Domestic Fittings to any Hajoca branch “per the terms of our MDA.”876 To ensure that there 

was no confusion, Mr. Tatman required Sigma to provide a written confirmation “to 

acknowledge that Sigma will also not supply any Hajoca branch with Domestic fittings or 

accessories until further notice.”877 After forwarding this instruction to the relevant personnel 

within Sigma, Mr. Rona responded to Mr. Tatman: “Sigma confirms we are clear about 

Hajoca.”878 Even after the formal termination of the MDA, Sigma continued to source Domestic 

Fittings from McWane, and a Sigma Regional Manager instructed his salesman that “if 

customers are buying from Star...we cannot sell them domestic any more [sic].”879 

These actions constitute overt acts in support of McWane and Sigma’s conspiracy to 

monopolize the Domestic Fittings market. See Fraser v. Major League Soccer, 284 F.3d at 68; 

United States v. Hickok, 77 F.3d at 1005-1006. Thus, McWane engaged in an unlawful 

conspiracy to monopolize the Domestic Fittings market. 

VI. REMEDY 

Upon finding a violation of Section 5 of the FTC Act, the Court can develop a remedy 

necessary to prevent the Respondent from again engaging in the prohibited conduct. “[A]ll 

doubts as to the remedy are to be resolved in [Complaint Counsel’s] favor.” See United States v. 

E.I. du Pont de Nemours & Co., 366 U.S. 316, 334 (1961). The Court has “wide discretion” in 

876 CCPF 2407-2408; CX 1801 at 001. 

877CCPF 2407-2408. 

878 CCPF 2409. Mr. Rona forwarded to Sigma’s distribution group the instruction not to sell 

McWane-produced domestic fittings to any Hajoca branch. (CX 0940; Rona, Tr. 1606, 1608). 

879 CX 1746 (ellipses in original).
 

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its choice of a remedy so long as the remedy has “a reasonable relation to the unlawful practices 

found to exist.” Jacob Siegal Co. v. FTC, 327 U.S. 608, 611-613 (1946). Further, the Court is 

not limited to prohibiting the illegal practices in the precise form in which it finds they existed in 

the past. Instead, the Court “must be allowed effectively to close all roads to the prohibited goal, 

so that its order may not be by-passed with impunity.” In re Polygram Holding, Inc., 136 F.T.C. 

310, 379 (2003) (quoting FTC v. Ruberoid Co., 343 U.S. 470, 473 (1952)). 

In developing a remedy, special consideration should be given to two aspects of 

McWane’s conduct during the past five years. First, McWane participated in a price fixing 

conspiracy from at least January 2008 through to at least April 2009, and continues to sell 

Fittings in a market that is highly conducive to collusion. See supra Parts V.B & D. These 

market conditions would allow McWane to repeat its anticompetitive conduct in the future. 

Indeed, McWane continued to have improper pricing communications with its competitors in 

June 2010, six months after McWane learned of the Commission’s investigation into its 

activities.880 This evidence demonstrates that there is a high likelihood that McWane will again 

engage in future unlawful combinations in the Fittings market, and that there is a special need for 

an order that closes all roads to McWane’s prohibited goal. 

Second, in developing a remedy for the monopolization claims, little weight, if any, 

should be given to any evidence introduced by McWane to show that its Exclusive Dealing 

Policy and other conduct was somehow ineffective. Once McWane became aware of the 

Commission’s investigation in January 2010 -- only four months after McWane had announced 

its Exclusive Dealing Policy -- McWane could easily “manipulate[e]” its administration of its 

880 See Attachment B (Letter dated January 22, 2010, from Christopher G. Renner, Attorney, 

Federal Trade Commission, to G. Ruffner Page, Jr., President, McWane, Inc.). 

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Exclusive Dealing Policy and other conduct so as to “improve [its] litigating position.” Hosp. 

Corp. of Am. v. Fed. Trade Comm’n., 807 F.2d 1381, 1384 (7th Cir. 1986). Indeed, less than one 

month after learning of the Commission’s investigation, and only six months into its initial one 

year term, McWane gave Sigma notice of termination of the MDA.881 

Evidence that “is subject to manipulation by the party seeking to use it is entitled to little 

or no weight” in an antitrust case. Hosp. Corp. of Am., 807 F.2d at 1384. In particular, the 

probative value of a defendant’s evidence is “extremely limited” when the defendant itself can 

controls events; otherwise, violators could “stave off” the government’s enforcement efforts 

“merely by refraining from aggressive or anticompetitive behavior when such a suit was 

threatened or pending.” United States v. Gen. Dynamics Corp., 415 U.S. 486, 504-505 (1974). 

Here, McWane had complete discretion to selectively impose penalties on Distributors that 

purchased Domestic Fittings from Star – or to temporarily abandon its Exclusive Dealing Policy 

altogether. Indeed, while McWane has argued to this Court that it no longer enforces its original 

Exclusive Dealing Policy, it has never publicly announced to the industry that it has retracted its 

policy.882 Therefore, the Court should not permit McWane to stave off an effective remedy on 

881 CCPF 2494 (Mr. Pais received a notice of termination of the MDA on February 17, 2010); 

see also CX 1435 at 002 (notice of termination); CCPF 2495 (Attachment B (January 22, 2010 

letter from the Federal Trade Commission notifying McWane about its antitrust concerns)); 

Rona, Tr. 1704 (MDA agreement began around September 2009); Pais, Tr. 1826 (same). 

882 CCPF 2064 (McWane has never sent a letter to customers indicating that “[t]he [Exclusive 

Dealing] policy we announced on September 22, 2009 is no longer in effect”); CCPF 2065 (other 

market participants are not aware that the Exclusive Dealing Policy is no longer in effect); CCPF 

2066 (McWane was still enforcing the exclusive dealing policy in July 2010); CCPF 2067 

(McWane still has a type of Exclusive Dealing Policy related to Domestic Fittings in effect with 

HD supply). 

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the theory that its efforts did not prevent Star, at least until now, from competing in the Domestic 

Fittings market. 

With these factors in mind, an appropriate order should establish the pragmatic but 

effective restrictions on McWane that are necessitated by its illegal conduct. 

First, an order must stop McWane from engaging or attempting to engage in 

combinations in restraint of trade, including conspiring to fix prices, exchanging competitively 

sensitive information with competitors, inviting competitors to collude, and entering into 

agreements, such as the Master Distribution Agreement, to allocate or divide markets, customers, 

transactions, lines of commerce, or business opportunities. Specifically, Complaint Counsel 

respectfully requests an order that, together with the standard provisions of a final order, 

prohibits McWane from engaging in, or attempting thereto, the following conduct: 

(1) Price fixing, or participating or facilitating any combination between or among any 

competitors (i) to raise, fix, maintain, or stabilize prices or price levels, or (ii) to 

allocate or divide markets or customers; 

(2) Communicating or attempting to communicate to competitors or other third parties 

that McWane is ready or willing to (i) raise, fix, maintain, or stabilize prices or price 

levels conditional upon any other competitor also raising, fixing, maintaining, or 

stabilizing prices or price levels; or (ii) forbear from competing for any customer or 

business opportunity on the condition that any other competitor also forbear from 

competing for any customer or business opportunity, except under certain conditions 

outlined in the order; 

(3) Communicating or attempting to communicate competitively sensitive information to 

any competitor, except under certain conditions outlined in the order; and 

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(4) Participating in any information exchanges with its competitors that facilitate price 

fixing, except under certain conditions outlined in the order. 

Second, an order must preclude McWane from directly or indirectly monopolizing, or 

attempting or conspiring to monopolize the market for Domestic Fittings. The order should also 

ensure that McWane does not financially induce its customers to deal exclusively with McWane 

even in the absence of a formally-announced Exclusive Dealing Policy. Accordingly, Complaint 

Counsel respectfully requests an order that, together with the standard provisions of a final order, 

prohibits McWane from engaging in, or attempting thereto, the following conduct: 

(1) Imposing, either directly or indirectly, a requirement that a customer purchase 

Domestic Fittings exclusively from McWane as a condition of McWane’s sale of any 

product, including Domestic Fittings, or conditioning the price it charges or the 

services it offers based on the customer’s purchase or sale of Domestic Fittings from 

McWane; 

(2) Instituting, for a period of 10 years, a rebate program in which the rebate a customer 

receives for a Domestic Fitting in a completed sale is increased retroactively if the 

customer’s total purchases in a designated period meet a specified threshold, except 

under certain conditions outlined in the order; and 

(3) Discriminating or retaliating against a customer that purchases or sells a competitor’s 

Domestic Fittings, except under certain conditions outlined in the order. Prohibited 

types of retaliation should include (i) terminating or threatening to terminate the sale 

to a customer of any product marketed by McWane; (ii) auditing the customer’s 

Domestic Fittings to determine its purchase of competing Domestic Fittings; (iii) 

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changing the price or services McWane furnishes to the customer; or (iv) refusing to 

deal with the customer on terms generally available to other customers. 

Finally, an order should also prohibit McWane from enforcing any condition, 

requirement, policy, agreement, contract or understanding that is inconsistent with the terms of 

the order. A proposed order is attached. 

VII. CONCLUSION 

Because the evidence overwhelming establishes McWane’s liability on all Seven Counts 

of the Complaint, this Court should enter the proposed Order to ensure that McWane cannot 

continue to engage in anticompetitive conduct in the Fittings and Domestic Fittings markets. 

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VIII. PROPOSED ORDER 

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__________________________________________ 

 

 

 

 

 

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UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSION 

OFFICE OF ADMINISTRATIVE LAW JUDGES
 

) 

In the Matter of ) 

) 

McWANE, INC., ) DOCKET NO. 9351 

Respondent. ) 

__________________________________________ ) 

(Proposed) ORDER 

I. 

IT IS ORDERED that, as used in this Order, the following definitions shall apply: 

A.	 “Commission” means the Federal Trade Commission. 

B.	 “Respondent” means McWane, Inc., its officers, directors, employees, agents, 

representatives, successors, and assigns; and the U.S.-based subsidiaries, divisions, 

groups, and affiliates controlled by it, and the respective officers, directors, employees, 

agents, representatives, successors, and assigns of each. 

C.	 “Communicate” means to transfer or disseminate any information, regardless of the 

means by which it is accomplished, including without limitation orally, by letter, e-mail, 

notice, or memorandum. This definition applies to all tenses and forms of the word 

“communicate,” including, but not limited to, “communicating,” “communicated” and 

“communication.” 

D. “Competitively Sensitive Information” means any information regarding the cost, Price, 

output, or Customers of or for DIPF marketed by any Competitor, regardless of whether 

the information is prospective, current or historical, or aggregated or disaggregated. 

Provided, however, that “Competitively Sensitive Information” shall not include: 

1.	 information that is a list of Prices or other pricing terms that has been widely 

Communicated by a Competitor to its Customers through a letter, electronic 

mailing, sales catalog, Web site, or other widely accessible method of posting; 

2.	 information that relates to the terms on which a Competitor will buy DIPF from, 

or sell DIPF to, the Person to whom the Competitively Sensitive Information is 

Communicated; 

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3.	 information that relates to transactions that occurred at least three (3) years prior 

to the date of the Communication of such information; or 

4.	 information that must be disclosed pursuant to the Federal Securities Laws. 

E.	 “Competitor” means Respondent and any Person that, for the purpose of sale or resale 

within the United States: (1) manufactures DIPF or Domestic DIPF; (2) causes DIPF or 

Domestic DIPF to be manufactured; or (3) imports DIPF. 

F.	 “Customer” means any Person that purchases any DIPF from Respondent 

G.	 “Designated Manager” means the Executive Vice President, General Manager, National 

Sales Manager, Pricing Coordinator, Regional Manager, or the OEM Manager for sales 

of DIPF in and into the United States, and any employee performing any job function 

relating to the setting of Prices (including offering any discounts) for DIPF sold in or into 

the United States. 

H.	 “Domestic DIPF” means DIPF that is manufactured in the United States of America. 

I.	 “Ductile Iron Pipe Fittings” or “DIPF” means any iron casting produced in conformity 

with the C153/A21 or C110/A21 standards promulgated by the American Water Works 

Association, including all revisions and amendments to those standards and any successor 

standards incorporating the C153/A21 or C110/A21 standards by reference. 

J.	 “Exclusivity” or “Exclusive” means any requirement, whether formal or informal, or 

direct or indirect, by the Respondent that a Customer purchase all of their Domestic DIPF 

from Respondent, or any other requirement that a Customer restrain, refrain from, or limit 

its future purchases of Domestic DIPF from any Competitor. 

Provided, however, that the terms “Exclusivity” or “Exclusive” do not: 

1.	 apply to Respondent’s sales of non-Domestic DIPF or any product other than 

Domestic DIPF; and 

2.	 apply to individual bids of Domestic DIPF for specific jobs or refer to the sale by 

Respondent to a Customer of any specified number of units during any term, 

without more. For the avoidance of doubt, the fact that a Customer purchases its 

full requirements of Domestic DIPF from Respondent does not establish that 

Respondent has engaged in Exclusivity and is not prohibited by this Order unless 

the Customer does so because Respondent imposes a requirement of Exclusivity. 

K.	 “Federal Securities Laws” means the securities laws as that term is defined in § 3(a)(47) 

of the Securities Exchange Act of 1934, 15 U.S.C. § 78c(a)(47), and any regulation or 

order of the Securities and Exchange Commission issued under such laws. 

L.	 “Industry Statistics” means statistics derived from Input Data and Communicated by the 

Third Party Manager. 

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M.	 “Input Data” means the Competitively Sensitive Information Communicated by 

Competitors to the Third Party Manager. 

N.	 “Information Exchange” means the entity Managed by A Third Party Manager that: (1) 

Communicates Industry Statistics; and (2) includes Respondent and at least one other 

Competitor. 

O.	 “Insider” means a consultant, officer, director, employee, agent, or attorney of 

Respondent. Provided, however, that no other Competitor shall be considered to be an 

“Insider.” 

P.	 “Managed by A Third Party Manager” means that a Third Party Manager is solely and 

exclusively responsible for all activities relating to Communicating, organizing, 

compiling, aggregating, processing, and analyzing any Competitively Sensitive 

Information. 

Q. “Participate” in an entity or an arrangement means (1) to be a partner, joint venturer, 

shareholder, owner, member, or employee of such entity or arrangement, or (2) to 

provide services, agree to provide services, or offer to provide services through such 

entity or arrangement. This definition applies to all tenses and forms of the word 

“participate,” including, but not limited to, “participating,” “participated,” and 

“participation.” 

R.	 “Person” means any natural person or artificial person, including, but not limited to, any 

corporation, unincorporated entity, or government. For the purpose of this Order, any 

corporation includes the subsidiaries, divisions, groups, and affiliates controlled by it. 

S.	 “Price” means the retail or wholesale price, resale price, purchase price, list price, 

multiplier price, job price, credit term, freight term, delivery term, service term, or any 

other monetary term defining, setting forth, or relating to the money, compensation, or 

service paid by a Customer to Respondent, or received by a Customer in connection with 

the purchase or sale of DIPF or Domestic DIPF. 

T.	 “Retroactive Incentive” means any flat or lump-sum payment of monies or any other 

item(s) of pecuniary value based upon a Customer’s sales or purchases of Respondent’s 

Domestic DIPF reaching a specified threshold (in units, revenues, or any other measure), 

or otherwise reducing the Price of one unit of Respondent’s Domestic DIPF because of 

the purchase or sale of an additional unit of that product; provided, however, that 

Respondent may offer a discount or other item of pecuniary value based upon sales or 

purchases of Domestic DIPF beyond a specified threshold. 

By way of example, Respondent may offer or provide a discount of X% on all purchases 

of Domestic DIPF in excess of Y units, but it may not offer or provide a discount of X% 

on all units of Domestic DIPF, including those below Y units, if sales exceed Y units. 

U.	 “Service” means any service, assistance or other support provided by Respondent to a 

Customer, including without limitation, responsiveness to requests for bids, 

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responsiveness in filling purchase orders, product availability, handling of warranty 

claims, and handling of returns. 

V.	 “Third Party Manager” means a Person that (1) is not a Competitor, and (2) is responsible 

for all activities relating to Communicating, organizing, compiling, aggregating, 

processing, and analyzing any Competitively Sensitive Information Communicated or to 

be Communicated between or among Respondent and any other Competitor. 

II. 

IT IS FURTHER ORDERED that in connection with the business of manufacturing, 

marketing or selling DIPF in or affecting commerce, as “commerce” is defined in Section 4 of 

the Federal Trade Commission Act, 15 U.S.C. § 44, Respondent shall cease and desist from, 

either directly or indirectly, or through any corporate or other device: 

A.	 Entering into, adhering to, Participating in, maintaining, organizing, implementing, 

enforcing, or otherwise facilitating any combination, conspiracy, agreement, or 

understanding between or among any Competitors: 

1.	 To raise, fix, maintain, or stabilize Prices or Price levels, or engage in any other 

Price-related action; or 

2.	 To allocate or divide markets, Customers, contracts, transactions, business 

opportunities, lines of commerce, or territories. 

Provided, however, that nothing in Paragraph II.A of this Order prohibits Respondent 

from entering into an agreement with another Competitor regarding the Price of DIPF if, 

and only if, that agreement relates exclusively to the terms under which Respondent will 

buy DIPF from, or sell DIPF to, that other Competitor. 

B.	 Communicating to any Person who is not an Insider, that Respondent is ready or willing: 

1.	 To raise, fix, maintain, or stabilize Price or Price levels conditional upon any 

other Competitor also raising, fixing, maintaining, or stabilizing Price or Price 

levels; or 

2.	 To forbear from competing for any Customer, contract, transaction, or business 

opportunity conditional upon any other Competitor also forbearing from 

competing for any Customer, contract, transaction, or business opportunity. 

C.	 Entering into, adhering to, Participating in, maintaining, organizing, implementing, 

enforcing, or otherwise facilitating any combination, conspiracy, agreement, or 

understanding between or among any Competitors to Communicate or exchange 

Competitively Sensitive Information. 

D.	 Communicating Competitively Sensitive Information to any other Competitor. 

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E.	 Attempting to engage in any of the activities prohibited by Paragraphs II.A, II.B, II.C, or 

II.D. 

PROVIDED, HOWEVER, that it shall not of itself constitute a violation of Paragraph 

II.B, II.C, or II.D of this Order for Respondent to Communicate: 

1.	 Competitively Sensitive Information to a Competitor where such Communication 

is reasonably related to a lawful joint venture, license, or potential acquisition, 

and is reasonably necessary to achieve the procompetitive benefits of such a 

relationship; 

2.	 To any Person reasonably believed to be an actual or prospective purchaser of 

DIPF, the Price and terms of a sale of DIPF; or 

3.	 To any Person reasonably believed to be an actual or prospective purchaser of 

DIPF that Respondent is ready and willing to adjust the terms of a sale of DIPF in 

response to a Competitor’s offer. 

PROVIDED FURTHER, that it shall not of itself constitute a violation of Paragraphs 

II.B, II.C, II.D or II.E of this Order for Respondent to Communicate with or Participate in an 

Information Exchange that is limited exclusively to the Communication of Input Data or Industry 

Statistics when: 

1.	 Any Input Data relates solely to transactions that are at least six (6) months old; 

2.	 Any Industry Statistic relates solely to transactions that are at least six (6) months 

old; 

3.	 Industry Statistics are Communicated no more than one time during any six (6) 

month period; 

4.	 Any Industry Statistic represents an aggregation or average of Input Data for 

transactions covering a period of at least six (6) months; 

5.	 Any Industry Statistic represents an aggregation or average of Input Data received 

from no fewer than five (5) Competitors; 

6.	 Relating to Price, output, or total unit cost, no individual Competitor’s Input Data 

to any Industry Statistic represents more than twenty-five (25) percent of the total 

reported sales (whether measured on a dollar or unit basis) of the DIPF product 

from which the Industry Statistic is derived; 

7.	 Relating to Price, output, or total unit cost, the sum of no three Competitors’ Input 

Data to any Industry Statistic represents more than sixty (60) percent of the total 

reported sales (whether measured on a dollar or unit basis) of the DIPF product 

from which the Industry Statistic is derived; 

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8.	 Any Industry Statistic is sufficiently aggregated or anonymous such that no 

Competitor that receives that Industry Statistic can, directly or indirectly, identify 

the Input Data submitted by any other particular Competitor; 

9.	 Respondent does not Communicate with any other Competitor relating to the 

Information Exchange, other than those Communications (i) occurring at official 

meetings of the Information Exchange; (ii) relating to topics identified on a 

written agenda prepared in advance of such meetings; and (iii) occurring in the 

presence of antitrust counsel; 

10.	 Respondent retains, for submission to a duly authorized representative of the 

Commission upon reasonable notice, a copy of all Input Data Communicated to 

the Third Party Manager and all Industry Statistics Communicated by the Third 

Party Manager to Respondent; and 

11.	 All Industry Statistics are, at the same time they are Communicated to any 

Competitor, made publicly available. 

III. 

IT IS FURTHER ORDERED that in connection with the business of manufacturing, 

marketing or selling Domestic DIPF in or affecting commerce, as “commerce” is defined in 

Section 4 of the Federal Trade Commission Act, 15 U.S.C. § 44, Respondent shall cease and 

desist from, either directly or indirectly, or through any corporate or other device: 

A.	 Inviting, entering into, adhering to, maintaining, implementing, enforcing, or attempting 

thereto any condition, policy, practice, agreement, contract, or understanding that 

requires Exclusivity with a Customer, including but not limited to: 

1.	 Conditioning the sale or purchase of any product, including Respondent’s 

Domestic DIPF, on a Customer’s Exclusivity; 

2.	 Conditioning any term of Price or Service offered or provided by Respondent to a 

Customer relating to any product, including Respondent’s Domestic DIPF, on a 

Customer’s Exclusivity; 

3.	 Conditioning any term of Price or Service offered or provided to a Customer 

based upon a requirement that the Customer purchase 50% or more of its 

purchases (in units, revenues, or any other measure) of Domestic DIPF from 

Respondent over any period of time; and 

4.	 Conditioning any term of Price or Service offered or provided to a Customer 

relating to any product marketed by Respondent upon that Customer’s purchases 

or sales of Respondent’s Domestic DIPF. 

B.	 For ten (10) years from the date this Order becomes final, inviting, entering into, 

adhering to, maintaining, implementing, enforcing, or attempting thereto any condition, 

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policy, practice, agreement, contract, or understanding that offers or provides any 

Retroactive Incentive. 

C.	 Discriminating against, penalizing, or otherwise retaliating against any Customer, for the 

reason, in whole or in part, that the Customer engages in, or intends to engage in, the 

distribution, purchase or sale of a Competitor’s Domestic DIPF, or otherwise refuses to 

enter into or continue any condition, agreement, contract, or understanding that requires 

Exclusivity. Examples of prohibited discrimination or retaliation against a Customer 

shall include, but not be limited to: 

1.	 Terminating, suspending, or threatening or proposing thereto, sales of any product 

marketed by the Respondent to the Customer; 

2.	 Auditing the Customer’s purchases or sales of Domestic DIPF to determine the 

extent of purchases or sales of competing Domestic DIPF; 

3.	 Withdrawing or modifying, or threatening or proposing thereto, any terms of 

Price or Service offered or provided by Respondent to a Customer relating to any 

product marketed by Respondent; and 

4.	 Refusing to deal with the Customer on terms and conditions generally available to 

other Customers. 

D. After ninety (90) days from the date this Order becomes final, from enforcing any 

condition, requirement, policy, agreement, contract or understanding that is inconsistent 

with the terms of the Order. 

PROVIDED, HOWEVER, that nothing in paragraphs III A-D of this Order prohibits 

Respondent from providing discounts, rebates, or other Price or non-Price incentives to purchase 

Domestic DIPF that are (i) volume-based, above average variable cost, and not Retroactive 

Incentives as defined herein; or (ii) designed to meet competition, if Respondent determines in 

good faith that one or more Competitors are offering terms of sale for their Domestic DIPF for 

which Respondent needs to match in order to win contested business. 

PROVIDED, FURTHER, that nothing in Paragraph III.D of this Order prohibits Respondent 

from honoring or providing discounts, rebates, or other Price or non-Price incentives to purchase 

its Domestic DIPF that a Customer contracted for prior to the date this Order becomes final even 

if paid or provided by Respondent subsequent to that date. 

IV. 

IT IS FURTHER ORDERED that Respondent shall: 

A.	 Within sixty (60) days from the date this Order becomes final distribute by first-class 

mail, return receipt requested, or by electronic mail with return confirmation, a copy of 

this Order with the Complaint, to each of its officers, directors, and Designated 

Managers; 

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B.	 Within sixty (60) days from the date this Order becomes final, distribute by first-class 

mail, return receipt requested, or by electronic mail with return confirmation, a copy of 

this Order with the Complaint, to each Customer of Respondent that has purchased DIPF 

or Domestic DIPF at any time since September 1, 2012; 

C.	 For ten (10 years) from the date this Order becomes final distribute by first-class mail, 

return receipt requested, or by electronic mail with return confirmation, a copy of this 

Order with the Complaint, within sixty (60) days, to each Person who becomes its officer, 

director, or Designated Manager and who did not previously receive a copy of this Order 

and Complaint; and 

D.	 Require each Person to whom a copy of this Order is furnished pursuant to Paragraphs 

III.A and III.C of this Order to sign and submit to Respondent within sixty (60) days of 

the receipt thereof a statement that: (1) represents that the undersigned has read and 

understands the Order; and (2) acknowledges that the undersigned has been advised and 

understands that non-compliance with the Order may subject Respondent to penalties for 

violation of the Order. 

V. 

IT IS FURTHER ORDERED that Respondent shall file verified written reports within 

ninety (90) days from the date this Order becomes final, annually thereafter for ten (10) years on 

the anniversary of the date this Order becomes final, and at such other times as the Commission 

may by written notice require. Each report shall include, among other information that may be 

necessary: 

A.	 A description of any Information Exchange, including a description of (i) the identity of 

any Competitors participating in such exchange; (ii) the Competitively Sensitive 

Information being exchanged; (iii) the identity of the Third Party Manager and a 

description of how the Competitively Sensitive Information has been and is expected to 

be Managed by the Third Party Manager; and (iv) the identity of each employee of the 

Respondent who received information, directly or indirectly, from the Third Party 

Manager; 

B.	 Copies of the signed return receipts or electronic mail with return confirmations required 

by Paragraphs IV.A - D of this Order; 

C.	 One copy of each Communication during the relevant reporting period that relates to 

changes in Respondent’s published list price or multiplier discounts for sales of DIPF 

made in or into the United States when that Communication is to two (2) or more 

Customers and those changes are simultaneously applicable to two (2) or more 

Customers; and 

D.	 A detailed description of the manner and form in which Respondent has complied and is 

complying with this Order. 

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VI. 

IT IS FURTHER ORDERED that Respondent shall notify the Commission: 

A.	 Of any change in its principal address within twenty (20) days of such change in address; 

and 

B.	 At least thirty (30) days prior to any proposed: (1) dissolution of Respondent; (2) 

acquisition, merger, or consolidation of Respondent; or (3) any other change in 

Respondent including, but not limited to, assignment and the creation or dissolution of 

subsidiaries, if such change might affect compliance obligations arising out of this Order. 

VII. 

IT IS FURTHER ORDERED that, for the purpose of determining or securing 

compliance with this Order, Respondent shall permit any duly authorized representative of the 

Commission: 

A.	 Access, during office hours of Respondent, and in the presence of counsel, to all facilities 

and access to inspect and copy all books, ledgers, accounts, correspondence, memoranda, 

and all other records and documents in the possession, or under the control, of 

Respondent relating to compliance with this Order, which copying services shall be 

provided by Respondent at its expense; and 

B.	 Upon fifteen (15) days notice, and in the presence of counsel, and without restraint or 

interference from it, to interview officers, directors, or employees of Respondent. 

VIII. 

IT IS FURTHER ORDERED that this Order shall terminate twenty (20) years from the 

date it becomes final. 

ORDERED: _____________________________+ 

D. Michael Chappell 

Administrative Law Judge 

Dated: 

9 
 

 

Dated: December 19, 2012 Respectfully submitted, 

PUBLIC RECORD

s/ Linda M. Holleran 

Edward D. Hassi, Esq. 

Linda M. Holleran, Esq. 

J. Alexander Ansaldo, Esq. 

Joseph R. Baker, Esq. 

Thomas H. Brock, Esq. 

Monica M. Castillo, Esq. 

Mika Ikeda, Esq. 

Andrew K. Mann, Esq. 

Federal Trade Commission 

Bureau of Competition
 

600 Pennsylvania Ave., N.W.
 

Washington, DC 20580 

Telephone: (202) 326-2470 

Facsimile: (202) 326-3496 

Electronic Mail: ehassi@ftc.gov
 
 

 

 

 

PUBLIC RECORD

CERTIFICATE OF SERVICE 

I hereby certify that on December 19, 2012, I filed the foregoing document 

electronically using the FTC’s E-Filing System, which will send notification of such 

filing to: 

Donald S. Clark 

Secretary 

 Federal Trade Commission 

600 Pennsylvania Ave., NW 

 Washington, DC 20580 

 I also certify that I delivered via electronic mail a copy of the foregoing document 

to: 

The Honorable D. Michael Chappell 

 Administrative Law Judge 

 Federal Trade Commission 

 600 Pennsylvania Ave., NW, Rm. H-110 

 Washington, DC 20580 

 I further certify that I delivered via electronic mail a copy of the foregoing 

document to: 

Joseph A. Ostoyich 

William C. Lavery 

Baker Botts L.L.P. 

The Warner 

1299 Pennsylvania Ave., NW 

Washington, DC 20004 

(202) 639-7700 

joseph.ostoyich@bakerbotts.com 

william.lavery@bakerbotts.com 

J. Alan Truitt 

Thomas W. Thagard III 

Maynard Cooper and Gale PC 

1901 Sixth Avenue North 

2400 Regions Harbert Plaza 

Birmingham, AL 35203 

(205) 254-1000 

atruitt@maynardcooper.com 

tthagard@maynardcooper.com 

Counsel for Respondent McWane, Inc. 
 

 

PUBLIC RECORD

CERTIFICATE FOR ELECTRONIC FILING 

 I certify that the electronic copy sent to the Secretary of the Commission is a true 

and correct copy of the paper original and that I possess a paper original of the signed 

document that is available for review by the parties and the adjudicator. 

December 19, 2012 By: s/ Thomas H. Brock 

Attorney