PUBLIC
 

UNITED STATES OF AMRICA 

BEFORE THE FEDERA TRAE COMMSSI 

COMMISSIONERS:	 Edith Ramirez, Chairwoman 

Julie Bril 

Maureen K. Ohlhausen 

Joshua D. Wright 

) 

In the Matter of ) 

)

McWANE, INC., )
 DOCKET NO. 9351

Respondent.
 ) 

) 

COMPLAINT COUNSEL'S APPEAL BRIEF 

Richard A. Feinstein 

Director 

Pete Levitas 

Deputy Director 

Geoffrey M. Green 

Acting Assistant Director 

Christopher Renner 

Acting Deputy Assistant Director 

Michael 1. Bloom 

Assistant Director for Policy & Coordination 

Jeanine Balbach 

Attorney, Office of 
 Policy & Coordination 

Dated: June 4, 2013 

Edward D. Hassi, Esq. 

Linda M. Holleran, Esq. 

J. Alexander Ansaldo, Esq.
 

Joseph R. Baker, Esq.
 

Thomas H. Brock, Esq.
 

Monica M. Castilo, 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: ehassí!êfkgov 
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TABLE OF CONTENTS
 

TABLE OF CONTENTS................................................................................................................. i
 

RECORD REFERENCES ............................................................................................................. iii
 

TABLE OF AUTHORITIES ......................................................................................................... iv
 

i. INTRODUCTION AND SUMY OF THE ARGUMNT ............................................ 1
 

II. STATEMENT OF FACTS .....................................................................................................3
 

A. Fittings ..........................................................................................................................3
 

B. Market Participants ....................................................................................................... 3
 

a) Suppliers ...................................................................................................................3
 

b) Distributors......... ..................... .................... ...... ..... ......... ........ ........ ......... ...... ..... ..... 4
 

c) End Users..................................................................................................................4
 

C. Fittings Pricing..............................................................................................................4
 

D. The Agreement to Restrain Price Competition.............................................................6
 

E. DIFRA...........................................................................................................................7
 

III. QUESTIONS PRESENTED............................................................................................... 8
 

A. Whether the evidence, considered as a whole, proves that it is more likely than 

not that Mc Wane acted in concert with its competitors to curtail price
 

discounting for Fittings? ............................................................................................... 8
 

B. Whether the DIFRA information exchange likely harmed competition without
 

offsetting pro-competitive efficiencies? ....................................................................... 8
 

IV. ARGUMENT ......................................................................................................................8
 

A. Judge Chappell Employed Incorrect Legal Standards ...................... ............................ 9
 

B. Properly Evaluated, the Evidence Establishes that McWane Unlawfully
 

Conspired with Sigma and Star to Restrain Price Competition.................................. 12
 

1. In 2008, the Suppliers Engaged in Parallel Pricing .................................................... 13
 

2. The Overwhelming 'Plus Factor' Evidence Tends to Exclude the Possibility that 

Mc Wane Acted Independently..... ....... ............... ........... ................ ....... ....... ...... .... ..... 17
 

a) Plus Factor One: The Fittings Market is Conducive to Collusion .......................... 18
 

b) Plus Factor Two: McWane Developed a Plan for Collusive Pricing 

(December 2007) ... ...... .................... ...... ..... ............................................................ 18
 

c) Plus Factor Three: Secret and Unexplained Inter-Firm Communications
 

(Late 2007/Early 2008) .... ............... ...... ............. .......... .......... ............ ............. ....... 20
 

d) Plus Factor Four: McWane Invited its Rivals to Collude (January 2008)..............21
 

e) Plus Factor Five: Star Curtailed Project Pricing in Contravention ofIts
 

Unilateral Interest (Late January 2008).................................................................24
 
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f) Plus Factor Six: Sigma Accepted the Tatman Plan by Curtailing Project
 

Pricing (Late January 2008) .................................................................................. 26
 

g) Plus Factor Seven: The Suppliers Centralized Pricing Authority in Parallel
 

(December/January 2008) ...................................................................................... 27
 

h) Plus Factor Eight: Inter-Firm and Internal Complaints About Low Prices and
 

"Cheating" (Beginning March 2008) . ......... ....... ..... ....... .... ............ ....... ....... .... ...... 29
 

i) Plus Factor 
 Nine: Sigma Exhorted Star to Comply with the Tatman Plan
 

(March 2008) ......................................................................................................... 30
 

j) Plus Factor Ten: The Suppliers Facilitated Collusion By Launching the
 

DIFRA Information Exchange; Star Participated Contrary to Its Unilateral 

Interest (Spring 2008)............................................................................................31
 

k) Plus Factor Eleven: McWane's Second Invitation to Collude was
 

Communicated, Accepted, and Implemented (May/June 2008) ............................ 32
 

I) Plus Factor Twelve: Confirmed Price-Related Inter-firm Communications ..........34
 

m) Plus Factor Thirteen: Volume and Timing ofInter-firm Communications
 

(2007-2008) ............................................................................................................ 35
 

C. Judge Chappell Erred by Relying On Defendant's Expert "Economic"
 

Proof 
 That the Conspiracy Was Not Effective and Therefore Did Not Exist............ 38
 

1. Dr. Normann's "Data Analysis" Was Grossly Flawed............................................... 39
 

2. Dr. Normann's "Data Analysis" When Applied to the Correct Period Is
 

Consistent With Collusion .......................................................................................... 42
 

D. Information Sharing Was Unlawful Under the Rule of Reason ................................. 43
 

V. CONCLUSION.....................................................................................................................48
 

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RECORD REFERENCES 

References to the record are made using the following citation forms and abbreviations: 

CX - Complaint Counsel Exhibit 

RX - Respondent Exhibit 

ID - Initial Decision Page 

IDF - Initial Decision Finding 

CCPF - Complaint Counsel's Post-Trial Findings of Fact and Conclusions ofLaw* 

CCRRF - Complaint Counsel's Post-Trial Reply Findings of Fact and Conclusions of 
 Law

Tr. 0000 - Citations to Trial Testimony (Witness, Tr. 1234). 

(CX 0000 (Witness, Dep. at xx)) - Citations to Deposition Testimony 

(CX 0000 (Witness, Dep. at xx), in camera) - Citations to in camera Deposition Testimony 

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TABLE OF AUTHORITIES 

Cases 

American Tobacco Co., v. United States, 328 U.S. 781 (1946) ..................................................... 8
 

Apex Oil Co. v. DiMauro, 822 F.2d 246 (2d Cir. 1987) .................................................................9
 

Bd. of Trade of 
 Chicago v. United States, 246 U.S. 231 (1918)...................................................14
 

Blomkest Fertilzer, Inc., v. Potash Corp. ofSask., 203 F.3d 1028 (8th Cir. 2000).....................11
 

Bolt v. Halifax Hosp. Med. Ctr., 891 F.2d 810 (11th Cir. 1990) .................................................. 25
 

Brooke Group Ltd. v. Brown & Wiliamson Tobacco Corp., 509 U.S. 209 (1993)......................10
 

Brown v. Pro Football, Inc., 518 U.S. 231 (1966) .........................................................................9
 

Clamp-All Corp. v. Cast Iron Soil Pipe Inst., 851 F.2d 478 (1st Cir. 1988) ................................10
 

Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984).......................................... 8
 

Delodderv. AerotekInc., 471 Fed. Appx. 804 (9th Cir. 2012) ....................................................14
 

Flegel v. Christian Hosp. Northeast-Northwest, 4 F.3d 682 (8th Cir. 1993) ............................... 47
 

Graphic Prods. Distribs., Inc. v. Itek Corp., 717 F.2d 1560 (11th Cir. 1983)..............................47
 

Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195 (9th Cir. 1997) ......................... 48
 

In re Currency Conversion Fee Antitrust Litig., 773 F. Supp. 2d 351 (S.D.N.Y. 2011)................ 9
 

In re Delta/Air Tran Baggage Fee Antitrust Litg., 733 F. Supp. 2d 1348 (N.D. Ga. 2010)........ 23
 

In re EPDM Antitrust Litig., 681 F. Supp. 2d 141 (same)............................................................21
 

In re Flat Glass Antitrust Litg., 385 F.3d 350 (3d Cir. 2004)................................................ 11,30
 

In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651 (7th Cir. 2002) .............. 11, 26, 45
 

In re High Pressure Laminates Antitrust Litg., No. 00 MDL 1368, 2006 WL 1317023 (S.D.N.Y.
 

May 15, 2006)...........................................................................................................................21
 

In re LinerboardAntitrust Litig.,504 F. Supp. 2d 38 (E.D. Pa. 2007).........................................19
 

In re McWane, slip opinion (F.T.C. Aug. 9, 2012).....................................................20,29,44,48
 

In re Petroleum Prods. Antitrust Litg., 906 F.2d 432 (9th Cir. 1990) ......................... 9, 29, 31,45
 

In re Publication Paper Antitrust Litig., 690 F.3d 51 (2d Cir. 2012)........................................... 18
 

In re Sulfuric Acid Antitrust Litig., 743 F. Supp. 2d 827 (N.D. IlL. 2010)....................................19
 

In re Text Messaging Antitrust Litig., 630 F.3d 622 (7th Cir. 2010)............................................18
 

In re U-Haul Intl Inc., FTC File No. 0810157 (2010).................................................................23
 

Interstate Circuit v. United States, 306 U.S. 208 (1939)..........................................................9,23
 

Lockhartv. Westinghouse Credit Corp., 879 F.2d 43 (3d Cir. 1989)...........................................14
 

Mayor & City Council of 
 Baltimore v. Citigroup, Inc., 709 F.3d 129 (2d Cir. 2013)......21,35,37
 

Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (1984)......................................................8
 

Petruzzi's IGA Supermarkets v. Darling-Delaware Co., 998 F.2d 1224 (3d Cir. 1993)..............27
 

Realcomp IL Ltd. v. FTC, 635 F.3d 815 (6th Cir. 2011) ........................................................ 44, 47
 

Toddv. Exxon Corp., 275 F.3d 191 (2d Cir. 2001) ......................................................................31
 

United States v. Beaver, 515 F.3d 730 (7th Cir. 2008).................................................................29
 

United States v. Champion Intl Corp., No 74-183, 1975 WL 920 (D. Or. July 16, 1975)..........10
 

United States v. Container Corp. of Am., 393 U.S. 333 (1969)....................................................44
 

United States v. FMC Corp., 306 F. Supp. 1106 (E.D. Pa. 1969) ................................................10
 

United States v. Foley, 598 F.2d 1323 (4th Cir. 1979) .............................................................9,29
 

United States v. Giordano, 261 F.3d 1134 (11th Cir. 2001)................................................... 24, 29
 

United States v. Singer Mfg., Co., 374 U.S. 174 (1963) ...............................................................24
 

United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940).....................................................8
 

United States v. us. Gypsum Co., 438 U.S. 422 (1978).............................................................44
 

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Treatises 

, 

George A. Hay, The Meaning of "Agreement" Under the Sherman Act, 16 REv. INDUS.ORG. 

113 (2000)................................................................................................................................. 10
 

Joseph E. Harrington, How Do Cartels Operate?, FOUNDATIONS AND TRENDS IN
 

MICROECONOMICS VoL. 2, No 1 (2006) ....................................................................................27
 

Kovacic et aI, Plus Factors and Agreements in Antitrust Law, 110 MICH. L. REv. 393 (2011). 2~28 .
 11,


Page, Communication and Concerted Action, 38 Loy. U. CHI. LJ. ............................................. 25
 

Phillp E. Areeda & Herbert Hovenkamp, Antitrust Law il1406 (Supp. 2012) ............................44
 

Philip E. Areeda & Herbert Hovenkamp, Antitrust Law il1416 (Supp. 2012) ......................11, 19
 

Phillp E. Areeda & Herbert Hovenkamp, Antitrust Law il1419a (Supp. 2012)...........................24
 

Philip E. Areeda & Herbert Hovenkamp, Antitrust Law il1425 (Supp. 2012) ............................25
 

Philip E. Areeda & Herbert Hovenkamp, Antitrust Law il1426 (Supp. 2012) ............................25
 

Philip E. Areeda & Herbert Hovenkamp,Antitrust Law il1436a-b (Supp. 2012) .......................10
 

Robert C. Marshall and Leslie M. Marx, The Economics of 
 Collusion at 119 (2012) ................. 27
 

Wiliam H. Page, Communication and Concerted Action, 38 Loy. U. CHI. L.J. 405 (2007) ....... 11
 

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I. INTRODUCTION AND SUMMY OF THE ARGUMENT
 

Complaint Counsel appeals from the Administrative Law Judge's Initial Decision finding 

Respondent McWane, Inc. ("McWane") not liable under Count 1 (price fixing) and Count 2 

(anticompetitive information exchange) of the Complaint. These portions of the decision are 

legally flawed and contrary to the greater weight of the evidence. 

The evidence shows a Fittings market that is dominated by three firms: Mc Wane, Sigma 

Corporation ("Sigma"), and Star Pipe Products, Ltd. ("Star"). In normal times, the Fittings 

market is characterized by aggressive price competition, competition fueled by a maverick firm 

(Star) that has successfully grown its market share by offering secret discounts off 
 published

prices called Project Pricing. 

In 2007, Project Pricing was widespread and the market was highly competitive. But in 

2008, the competitors, acting in parallel, curtailed discounting. Four key documents establish 

this parallel effort at price stabilzation and its subsequent demise. In January 2008, McWane 

announced that it would curtail Project Pricing. IDF645. Almost immediately thereafter, Sigma 

and Star made similar announcements and acted to curtail Project Pricing. IDF664, 686. But 

then in November 2008, Star abandoned its experiment with price discipline. Star told its sales 

staff to re~ume the battle: "Go get every order!!!!!" IDF893. 

The trial centered on this question: Why was there a lessening of price competition in the 

Fittings industry during 2008? Judge Chappell's answer is that price coordination during 2008 

was attibutable to recognized interdependence, the ordinary and unavoidable operation of an
 

oligopoly market. This is not credible for three principal reasons. First, the market structure in 

2008 was no different from 2007 or2009. So oligopoly conditions (without more) cannot 

explain why, in 2008, the competitors altered their pricing strategies in paralleL. Second, there is 

direct evidence of a large volume of inter-competitor communications during 2008, including 

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admitted communications about prices, discounting, and pricing strategy. When competitors 

supplement their recognized interdependence with communications that facilitate, stabilze, or 

strengthen coordination, they cross the line into concerted action. 

Third, in addition to the slew of inter-competitor communications, other strong 

circumstantial evidence tends to exclude independent action and to show a conspiracy. This plus 

factor evidence includes the following: 

in late 2007, McWane developed a written plan for collusive pricing; 

McWane admitted that it intentionally communicated elements of 
 the plan to rivals, 

through a public letter nominally addressed to customers; 

Sigma and Star acted in conformity with the plan; 

McWane and Star centralized pricing authority and curtailed Project Pricing (per the 

plan), contrary to their unilateral interests, especially for Star; 

McWane privately complained to Sigma when it detected instances of 
 "cheating"; 

Sigma privately exhorted Star to comply with the common plan; 

scores of 
 unexplained telephone calls among the Suppliers' top executives at key 

junctures in the conspiracy, and there are no legitimate explanations for these calls; 

internal company documents evidenced an inter-firm comity (doing "what is best for the 

industr") and a congrence of thinking (by curtailing discounting we wil induce 

Mc Wane to support higher published prices) that is only explained by the existence of a 

common plan; and 

the competitors launched an information exchange program in mid-2008 to facilitate 

price coordination, and promptly abandoned the program when price fixing broke down. 

The evidence also establishes that the competitors' exchange of 
 sales information through 

a trade association, viewed separately, is anticompetitive and violates Section 1. 

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II. STATEMENT OF FACTS 

A. Fittings 

Ductile iron pipe-fittings are used in waterworks systems to connect pipes, valves, and 

hydrants, and to change or direct water flow. IDF278. The fittings at issue here - 24" or less in 

diameter ("Fittings") - are commonly used in underground water distribution networks. IDF291. 

Fittings are homogeneous commodities produced to American Water Works Association 

("A WW A") specifications. IDF322. Any Fitting that meets an A WW A specification is 

functionally interchangeable with any other Fitting that meets 
 the same specification. IDF323­

324. Fittings generally comprise 5% or less of 
 the total cost of a waterworks project. IDF326. 

Demand for Fittings is inelastic, i.e., an increase in price does not cause a decrease in demand. 

IDF328. 

B. Market Participants
 

a) Suppliers
 

. The U.S. Fittings market is a highly concentrated oligopoly. IDF362,356. There are 

three main suppliers: McWane, Sigma, and Star (collectively, "Suppliers"). IDF353-355. 

Together, they accounted for over t l% of 
 U.S. Fittings sales in 2008 and 2009. IDF356. A 

fringe of small suppliers collectively represented approximately t l% of 
 the Fittings market in 

2008 and 2009. IDFI61-163, 169-189, 196-199,356,358; ID241.
 

McWane manufactures Fittings at foundries located in the United States and China. 

IDFI5-18. McWane had at l% share of 
 the U.S. Fittings market in 2008, and at l% share 

in 2009. IDF356, in camera. From at least 2006 until Star's entry in 2009, McWane was the 

only significant supplier of 
 Fittings manufactured in the United States. IDFI040. 

Sigma imports and sells Fittings made in China, India, and Mexico. IDF51,56. Sigma 

had a t l% share of 
 the U.S. Fittings market in 2008, and at l% share in 2009. IDF356. 

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Star also sells Fittings imported from China. IDFI08, 113. Star had at l% share of 

the U.S. Fittings market in 2008, and a t l% share in 2009. IDF356. In 2009, Star began 

contracting with U.S. foundries to manufacture Fittings domestically. IDFI12. 

New entrants to the U.S. Fittings market face high barriers to entry. IDF1044-50. 

b) Distributors
 

The Suppliers sell "virtally all" of 
 their Fittings to a relatively unconcentrated group of 

waterworks distributors ("Distributors"), which then re-sell the Fittings to End Users. IDFll, 

367,373-374. There are two large, nationwide Distributors that account for approximately 50% 

of Fittings sales in the United States (HD Supply and Ferguson). The remaining Distributors 

consist of hundreds of small, local companies and a few regional waterworks distributors. 

IDF222-223, 227-228,375-377. 

c) End Users
 

Fittings end users are typically municipalities, regional water authorities, and the 

contractors they hire to construct waterworks projects (collectively, "End Users"). IDFlO. 

C. Fittings Pricing 

Published Fittings prices have two components: a nationwide list (or catalog) price, and a 

regional "multiplier" that reduces the list price. IDF413. The "published price" for a Fitting is 

the list price multiplied by the then-applicable state multiplier for the state in which the Fitting is 

sold. IDF414. For example, if 
 the list price for a Fitting is $1,000, and the Texas multiplier is 

.28, the "published price" for that Fitting in Texas is $1,000 x .28, or $280. IDF414. The 

"published price" is generally the highest price at which a fitting can be sold. IDF425. 

Published prices for Fittings are highly transparent. Each Supplier publishes list prices 

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

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multiplier changes through customer letters to Distributors. IDF560-561. Typically, Suppliers 

quickly receive copies of 
 their competitors' price letters, sometimes directly. IDF558-559,574­

578; CCPF672-q73. When McWane announces an increase in list prices or published 

multipliers, Sigma and Star nearly always follow with substantially matching price increases. 

IDF555-556,679-680. Fittings are a commodity, and price is the single most important factor in 

selecting a Supplier. IDF341-343. One Supplier cannot sustain a published price increase unless 

the other Suppliers also increase their prices. IDF557. 

Suppliers often offer discounts from their published prices on a transaction-bytransaction basis, a practice known as "Project Pricing" (or "Job Pricing" or "Special Pricing"). 

IDF428, 430-431. Because Project Pricing is individually negotiated, not published, it is less 

transparent than published prices. IDF435. Suppliers offer other types of discounts - including 

volume rebates, discounts off standard freight terms, and incentives for prompt payment - but 

Project Pricing is the principal form of 
 price competition among Suppliers. IDF442-456. 

When one Supplier offers Project Pricing, other Suppliers wil seek to match it and/or 

other Distributors wil demand the same discount. IDF457, 668; CCPF669. Thus, Project 

Pricing often leads to price "instability," and can lower the prevailng transaction prices in a 

given area. IDF457-460. Conversely, reducing Project Pricing can lead to stable, transparent, 

and higher 
 transaction prices. IDF461; CCPF559. 

McWane prefers not to offer Project Pricing because its sales force is smaller, less adept, 

and not incented to identify and respond to competitors' discounts. IDF595-596; CCPF857-859. 

Star, however, used Project Pricing as its primary sales strategy for years. Despite typically 

following the industry's published prices, Star is considered the most aggressive in terms of 

Project Pricing. IDF568-570; CCPF860-869. According to Sigma's President, "Star has been 

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singularly unhealthy to our entire industry over the past 20-some years, with their reckless, 

irresponsible, and undisciplined tactics to resort to whatever it takes to grab some business and 

grow." CCPF867.
 

D. The Agreement to Restrain Price Competition
 

In late 2007, McWane Vice President Rick Tatman devised a collusive scheme by which 

McWane, Sigma, and Star, acting together, could lessen competition and secure higher Fittings 

prices (the "Tatman Plan"). IDF617, 620, 626, 638; CCPF907-922. The scheme was 

"collusive" in that McWane did not advance the strategy solely by price leadership and 

recognized interdependence. Instead, McWane communicated the Plan to Sigma and Star in 

private and in "public" customer letters dated January 11,208 and May 7, 2008. See IDF639­

645,809; CCPF740-745. In the January 11 Letter, McWane signaled that it would support 

higher list prices only if 
 Sigma and Star curtailed their Project Pricing. IDF645; CCPF932-949. 

Mr. Tatman admitted at trial that this letter was a message to Sigma and Star, and that McWane 

intended to induce them to change their pricing practices. IDF647; CCPF939. 

During 2008, acting pursuant to the Tatman Plan, the Suppliers twice raised published 

prices, curtailed Project Pricing, centralized pricing authority, and launched an information 

exchange making it easier for each firm to monitor its rivals and better detect "cheating." See 

infra, Part IV.B. These actions were contrary to their unilateral interests, but made sense as part 

of a common plan. The Suppliers communicated frequently; Mc Wane complained to Sigma 

when it identified cheating; and Sigma exhorted Star to comply with the scheme. IDF922, 924; 

CCPF1035-1037,1452-1455. In November 2008, Star became dissatisfied with the arrangement 

and defected from the conspiracy, instrcting its sales staff to again compete aggressively: to "go 

get every order." IDF893; CCPF1456-1461. 

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E. DIFRA
 

In early 2008, in furtherance of 
 the scheme, the Suppliers formed a trade association, the 

Ductile Iron Fittings Research Association ("DIFRA"). IDF723-725.! DIFRA had four 

members: McWane, Sigma, Star, and U.S. Pipe, a company that did not manufacture Fittings. 

IDFI92, 720; CCPFI129. 

DIFRA members agreed to a reporting system whereby each member would submit its 

tons-shipped data for 2006,2007, and January through April of2008 to an accounting firm, 

Sellers, Richardson, Holman & West LLP ("SRHW"), by May 15, 2008. IDF731-734; ID353. 

SRHW would then aggregate the data and issue a report by the 20th of 
 May showing industrwide tons shipped. IDF733. Thereafter, members would report their prior months' shipment 

data by the 15th of each succeeding month. IDF733. The data was organized by Fittings 

categories (2" to 12", 14" to 24", over 24" in diameter, flanged versus non-flanged). IDF734, 

741. The purpose of the information exchange was to enable each Supplier to monitor whether 

its rivals were adhering to the common plan to curb discounting. 

On May 7, 2008, McWane communicated to Sigma and Star that it would announce 

higher list prices for Fittings only after it received the first DIFRA report. IDF809; CCPFI179, 

1181-1182, 1194-1195, 1198. McWane communicated using a letter nominally addressed to 

Distributors, but containing a veiled message intended for Sigma and Star alone. IDF809; 

CCPFI182, 1186-1189. Star understood the message. Star submitted its DIFRA data on June 5, 

2008, and openly acknowledged the quid pro quo agreement by repeating the veiled language in 

the May 7 invitation to collude letter. IDF834-835; CCPFI223-1225. 

! The parties discussed forming DIFRA as early as 2005, but it did not become operational until 

2008. IDF71O, 721; CCPF1090-1106. 

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DIFRA issued its first tons-shipped report on June 17,2008. IDF738. DIFRA continued 

to issue monthly reports until its final report in January 2009, which covered December 2008 

sales data. IDF739. 

III. QUESTIONS PRESENTED
 

A. Whether the evidence, considered as a whole, proves that it is more likely 

than not that McWane acted in concert with its competitors to curtail price 

discounting for Fittings? 

B. Whether the DIFRA information exchange likely harmed competition 

without offsetting pro-competitive effciencies? 

IV. ARGUMENT
 

Agreements among competitors to restrain price competition are per se ilegal under 

Section 1 of 
 the Sherman Act. United States v. Socony-Vacuum Oil Co., 310 U.S. 150,223 

(1940). An agreement is established when two or more firms share "a unity of purpose or a 

common design and understanding," Copperweld Corp. v. Independence Tube Corp., 467 U.S. 

752,771 (1984) (quoting 
 American Tobacco Co., v. United States, 328 U.S. 781,810 (1946)), or 

a "conscious commitment to a common scheme," Monsanto Co. v. Spray-Rite Servo Corp., 465 

U.S. 752, 768 (1984). The evidence shows a conspiracy to effect two unlawful price 

agreements: (i) in early 2008, the Suppliers agreed to curtail Project Pricing; and (ii) in mid2008, McWane agreed to increase its published prices in exchange for Sigma and Star submitting 

competitively-sensitive data to DIFRA. 

The Initial Decision contains several fundamental 
 legal errors, and as a result, fails to 

advance a credible analysis of 
 the concerted action evidence. We start with a discussion of 
 three 

legal problems that pervade the decision. We then offer an in-depth assessment of the evidence 

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supporting McWane's liability for price-fixing and for participating in the DIFRA information 

exchange. 

A. Judge Chappell Employed Incorrect Legal Standards
 

Judge Chappell made at least three important legal errors when evaluating the evidence. 

First, Judge Chappell improperly ignored evidence that Sigma and Star participated in the 

price-fixing conspiracy. E.g., ID314-315 (reasoning that such evidence does "not implicate" 

McWane). This was clear error. Evidence that a defendant's competitors conspired is also 

probative-ofthe defendant's wrong-doing. E.g., Flat Glass, 385 F.3d at 363; In re Currency 

Conversion Fee Antitrust Litig., 773 F. Supp. 2d 351, 370 (S.D.N.Y. 2011). Indeed, it would be 

economically irrational for Sigma and Star to conspire to fix prices without Mc Wane. As 

Sigma's President recognized, "(Sigma) can take the market price down on our own, we need 

THEM (McWane) to take it up." CCPF900 (CX 1439); IDF555-559; ID300-301. 

Second, the record is replete with evidence of communications between the Suppliers 

concerning prices, discounting, and pricing strategy. Judge Chappell erred by concluding that 

these price-related communications are evidence of, or are consistent with, mere recognized 

interdependence. ID258,350. What distinguishes concerted action from simple interdependence 

is the presence (or absence) of inter-competitor communications. When competitors 

intentionally supplement their recognized interdependence with communications that facilitate, 

stabilize, or strengthen coordination, they cross the line into concerted action. See Brown v. Pro 

Football, Inc., 518 U.S. 231, 241-42 (1966); Interstate Circuit v. United States, 306 U.S. 208, 

222-25 (1939); Flat Glass, 385 F.3d at 364,366,369; In re Petroleum Prods. Antitrust Litg., 

906 F.2d 432,446-47 (9th Cir. 1990); Apex Oil Co. v. DiMauro, 822 F.2d 246,257 (2d Cir. 

1987); United States v. Foley, 598 F.2d 1323, 1331-32, 1339 (4th Cir. 1979); United States v. 

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Champion Intl Corp., No 74-183, 1975 WL 920, at *3 (D. Or. July 16, 1975), aff'd 557 F.2d 

1270, 1273 (9th Cir. 1977); United States v. FMC Corp., 306 F. Supp. 1106, 1149-50 (E.D. Pa. 

1969). Such communications are therefore the antithesis of mere interdependence. 

Economic theory teaches that oligopolists may maintain supra-competitive prices by 

observing market prices and output, and anticipating the likely competitive response of rivals. 

Price coordination through recognized interdependence, without more, is lawfuL. "That is not 

because such pricing is desirable (it is not), but because it is close to impossible to devise a 

judicially enforceable remedy for 'interdependent' pricing. How does one order a firm to set its 

prices without regard to the likely reactions of its competitors?" Clamp-All Corp. v. Cast Iron 

Soil Pipe Inst., 851 F.2d 478,484 (1st Cir. 1988) (italics in original). In contrast, intentional 

collusion-facilitating conduct falls outside of the domain of recognized interdependence. See
 

Philip E. Areeda & Herbert Hovenkamp, Antitrust Law ir1436a-b (Supp. 2012) (hereinafter 

"Antitrust Law"); George A. Hay, The Meaning of "Agreement" Under the Sherman Act, 16 

REv. INDUS.ORG. 113, 128 (2000). 

Recognized interdependence alone is often insufficient to achieve noncompetitive 

outcomes. The conscious parallelism of oligopoly: 

must rely on uncertain and ambiguous signals to achieve concerted 

action. The signals are subject to misinterpretation and are a blunt 

and imprecise means of ensuring smooth cooperation, especially in 

the context of changing or unprecedented market circumstances. 

This anti 
 competitive minuet is most difficult to compose and to 

perform, even for a disciplined oligopoly. 

Brooke Group Ltd. v. Brown & Wiliamson Tobacco Corp., 509 U.S. 209, 227-28 (1993). 

Competitive uncertainty "is an oligopoly's greatest enemy." Id. at 238. But supplement 

"ambiguous signals" with actual communication, and uncertainty can be dispelled, mutual trust 

fostered, and the prospects for effective collusion greatly improved. Wiliam H. Page, 

10 
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Communication and Concerted Action, 38 Loy. U. CHI. L.J. 405, 432-435 (2007). As one judge 

explained, "successful price coordination requires accurate predictions about what other 

competitors wil do; it is easier to predict what people mean to do if 
 they tell you." Blomkest 

Fertilzer, Inc., v. Potash Corp. ofSask., 203 F.3d 1028, 1042 (8th Cir. 2000) (Gibson, J., 

dissenting). 

Courts often instruct that the most important evidence of agreement is "evidence 

implying a traditional conspiracy." E.g., In re Flat Glass Antitrust Litg., 385 F.3d 350, 360-61 

(3d Cir. 2004). This means that the fact-finder should look for direct and indirect evidence of 

inter- firm communications related to the alleged conspiracy, including communications 

constituting an offer or acceptance. Antitrust Law il1416 (defining agreement as "an exchange of 

mutual assurances"); Page, Communication and Concerted Action, 38 Loy. U. CHI. L.J. at 434, 

446 (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); id. at 434 ("communication is an economically appropriate basis for distinguishing 

interdependent and concerted action"). Here, Judge Chappell largely accepted the evidence that 

the communications occurred, but disregarded their role in proving collusion. 

Third, Judge Chappell failed to evaluate the plus factor evidence as a whole. He 

dissected each piece of the evidentiary puzzle, asking whether it alone made collusion more 

likely than not. When he believed a piece of evidence did not meet the high bar he set for proof 

of an agreement, he simply discarded it. But a plus factor may be probative even when it is 

insufficient alone to prove a conspiracy. E.g., In re High Fructose Corn Syrup Antitrust Litig., 

295 F.3d 651, 655-56 (7th Cir. 2002). And Judge Chappell failed to consider the entire puzzle. 

He did not recognize interconnections among the documents; he failed to consider how the 

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timing and frequency of the communications (explained and unexplained) filled the gaps 

between the documents; and simply refused to make reasonable inferences from the evidence or 

to evaluate it as a whole. 

B. Properly Evaluated, the Evidence Establishes that McWane Unlawfully
 

Conspired with Sigma and Star to Restrain Price Competition 

In his methodical dissection of the individual pieces of evidence, Judge Chappell found 

no evidence of 
 parallel conduct, and no plus factor evidence. ID321 n. 23. This lacks 

credibility. The Suppliers, who all used the same published pricing, acted in parallel to curtail 

Project Pricing, exchange information in DIFRA, and raise prices once DIFRA was established. 

Documents from the three Suppliers' fies fit together seamlessly to prove a conspiracy to 

stabilize prices. Thirteen separate plus factors show the following: Mc Wane devised a collusive 

plan, communicated the plan to rivals, and secured their participation in the scheme. Sigma 

understood that its assigned role was to appease McWane by curtailing discounting. Star also 

curbed Project Pricing as a part of a collective effort to "help our industr." The Suppliers acted 

contrary to their unilateral interest. In particular, absent an agreement, Star's conduct (curbing 

Project Pricing, centralizing pricing authority, sharing sales information) would have been - in 

Star's own words - irrational and bizarre. Each of these steps was prescribed in the Tatman 

Plan. Along the way, McWane exhorted Sigma to comply, and in turn Sigma (Mr. Pais) 

exhorted Star (Mr. McCutcheon)'to comply. The Suppliers launched an information exchange to 

monitor compliance, McWane rewarded their participation with a price increase, and the 

Suppliers jettisoned the exchange when the price-fixing scheme was abandoned. This evidence 

establishes that McWane conspired with its competitors. 

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1. In 2008, the Suppliers Engaged in Parallel Pricing
 

McWane's collusive scheme envisioned that: (i) McWane would support higher 

published prices, and (ii) Mc Wane, Sigma, and Star woulCl curtail Project Pricing. Their goal 

was (ii) to permit the Suppliers to secure higher transaction prices and profits. The Suppliers' 

actual pricing conduct and financial performance during 2008 was consistent with this strategy. 

(i) The Suppliers All Published Higher Prices. McWane announced higher
 

multipliers on January 18,2008, and again raised multipliers on June 17,2008. IDF645-646, 

840. Sigma and Star quickly followed McWane's published prices, with small exceptions. 

IDF674-675, 707, 843-844. 

(ii) The Suppliers All Curtailed Project Pricing. On January 11, 2008, Mc W ane
 

announced that it would no longer offer Project Pricing. IDF645. Eleven days later, Star's 

National Sales Manager, Matt Minamyer, referred to McWane's decision and instructed his 

division sales managers that the company's new goal was "to take a price increase and to stop 

Project Pricing," except where it had documentary evidence that a competitor had initiated 

Project Pricing for a specific job. IDF686, 697, 690 (Star's internal plan "was to stabilize its 

pricing; that is, to have more consistent pricing at the published multipliers"). Going forward, all 

Project Pricing required Mr. Minamyer's approvaL. IDF686. Star informed its customers that it 

would match McWane's multipliers and would no longer offer Project Pricing. IDF702-709. 

Two days after Star's announcement, Sigma's President Victor Pais directed the 

company's sales team to pull back on Project Pricing. IDF664,669. In a letter to customers 

dated January 29, 2008, Sigma largely matched McWane's published prices, and promised 

greater pricing discipline, i.e., "stick(ing) to published prices." IDF674-675; CCPF966-969. 

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Judge Chappell refers to this evidence as showing only an "intention" to curtil Project 

Pricing that may not have resulted in any "corresponding conduct." ID278. But the Sigma and 

Star communications to their respective sales staff and customers are corporate acts. These acts 

are direct evidence of a change in pricing policy, and powerful circumstantial evidence of the 

companies' participation in a common scheme. Specifically, it is reasonable to infer that Mr. 

Minamyer's sales team abided by the policy that Mr. Minamyer established - a reduction in 

Project Pricing. As for Sigma, it is likewise reasonable to infer that the company's sales staff 

heeded the instructions of the company President. Courts often infer actions and effects from 

intentions. Bd. of Trade of 
 Chicago v. United States, 246 U.S. 231, 238 (1918) ("(K)nowledge 

of intent may help the court to interpret facts and predict consequences.")? 

The Suppliers' contemporaneous business and financial documents confirm that, during 

2008, the Suppliers curtailed Project Pricing. For example, in April 
 2008, Mr. Tatman reported 

in his First Quarter Executive Report that Project Pricing "appears to have 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 stil available, but it now 

requires a more structured decision process. 

IDF868. Mr. Tatman's assessment was based on competitive feedback that he received from 

McWane's sales personnel in the field. IDF869. It is reasonable to infer that McWane's sales 

2 See also Delodder v. Aerotek Inc., 471 Fed. Appx. 804, 806 (9th Cir. 2012) (corporate policies 

are relevant although not dispositive of what employees actually do); Lockhart v. Westinghouse 

Credit Corp., 879 F.2d 43,54 (3d Cir. 1989) ("When a major company executive speaks, 

'everybody listens' in the corporate hierarchy. . . ."). 

14 
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staff, which interacts directly with customers, accurately identified price trends. Indeed, the 

information was suffciently reliable that Mr. Tatman elected to share it with his superiors. 

Additionally, McWane's "price protection log," which began at Mr. Tatman's request in 

January 2008 to track McWane's instances of and reasons for Project Pricing, showed that there 

were far fewer instances of 
 Project Pricing to meet competition from Sigma and Star during the 

conspiracy period as compared to the period after the scheme's collapse. IDF852-860. 

Specifically, McWane offered Project Pricing to match Sigma or Star: 

· In Q2 and Q3 of2008, an average of t l times per month; 

· In Q4 of2008, an average of t l times per month;
 

· In Ql of 2009, an average of t l times per month;
 

IDF863, in camera. Mr. Tatman acknowledged that McWane's log showed less Project Pricing 

to meet competition in early 2008 as compared to 2009, but he could not explain the 

phenomenon.3 CCPF 1 046. 

Star similarly maintained a database to track its price variations, including Project Prices. 

A report prepared by Star showed that Star's Project Pricing declined from 2007 to 2008, even 

though Star increased its multipliers twice during 2008 - an action that ordinarily creates a spike 

in Project Pricing.4 CCPFI413. 

Star's actual reduction of 
 Project Pricing is also confirmed by its November 2008 

decision to reverse course. Mr. Minamyer (Star) launched a new and competitive pricing 

3 McWane's began keeping its Price Protection Log during the conspiracy period, and thus it 

does not contain data for 2007. RX-396, in camera.
 

4 Sigma did not maintain comparable data or reports tracking Project Pricing.
 

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strategy. He informed his sales staff of 
 the "Pricing Strategy Changes" by email dated 

November 25, 2008: 

(Star employees) have been extremely diligent in protecting the 

stabilty of our market pricing .... 

However, some of our competition has not performed as admirably 

We have lost too much revenue to tolerate it any longer. 

Please get with your teams to be sure we are all clear on the 

following plan. 

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

document the competitors pricing .... fWJe wil no longer tolerate 

the competition being irresponsible in the market and being 

undersold as a result .... Do this quietly and selectively and as 

much under the radar as you can but, ¡fit is necessary, be sure to 

do it. Go get every order!!!!!
 

IDF893. Mr. Minamyer testified that, in November 2008, he instructed his sales force to "take 

off the gloves," because although Star had been "attempting to hold our pricing. . . it looks like 

the competition was not, and we're not going to do that anymore. We're going to go out and 

we're going to take that business back by using pricing." IDF893. 

Because Mr. Minamyer was personally responsible for approving Star's Project Pricing 

\ 

during 2008 (IDFI29; CCPFI51), his contemporaneous affrmation that Star throttled back on 

price competition during 2008 is entitled to substantial weight. 

(iii) The Suppliers All Realized Higher Prices and Profits. The Suppliers' financial
 

performance improved during 2008, notwithstanding a deep recession and a fall in demand. This 

is consistent with a decline in Project Pricing, and the successful implementation of the Tatman 

Plan. 

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· Sigma's t
 

l CCPF1371, in camera; see also CCPF1372-1380, in camera (t 

D. 

· McWane's Fittings profits increased from 2007 to 2008, despite a significant decrease in 

demand. CCPF1313-1359. In a presentation to his sales force, Tatman attributed the 

increased 2008 profits to "more discipline." IDF865.5 

· Star's t 

l CCPF1360-1369, in camera. 

Judge Chappell observed, and Complaint Counsel agrees, that Project Pricing did not stop 

entirely. The more relevant point, however, is that acting in parallel during 2008, the Suppliers 

deliberately, consciously curbed Project Pricing. This is affrmed by Messrs. Minamyer, 

Tatman, and Pais in their ordinary course business and financial documents. The lessening of 

competition was sufficient to improve significantly the Suppliers' profits. 

The next question is: Why was there a lessening of price competition during 2008? 

2. The Overwhelming 'Pius Factor' Evidence Tends to Exclude the 

Possibilty that McWane Acted Independently 

An agreement may be shown through direct or circumstantial evidence, or a combination 

of the two. Circumstantial evidence that supports an inference of conspiracy - that tends to 

exclude the possibility of independent action - is referred to by courts as a "plus factor." 

5 Judge Chappell discounted this slide because it "does not indicate what products are included 

or excluded." This concern is misplaced. In 2008, Tatman's division (TylerUnion) primarily
 

sold Fittings under 24 inches, which is the exact market at issue here. IDF290-292. 

17 
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Complaint Counsel presented evidence regarding thirteen discrete, but related, plus factors that 

together prove that Mc Wane and its competitors were acting in concert. 

a) Plus Factor One: The Fittings Market was Conducive to
 

Collusion 

"(A)n industr structure that faciltates collusion constitutes supporting evidence of 

collusion." In re Text Messaging Antitrust Litig., 630 F.3d 622, 627-28 (7th Cir. 2010); accord 

In re Publication Paper Antitrust Litig., 690 F.3d 51, 65 (2d Cir. 2012). Here, the Fittings 

market was characterized by: high concentration; few sellers; high barriers to entry; 

homogeneous products; and inelastic demand. CCPF664. Further, one oligopolist (Sigma) 

boasted of 
 having cultivated a warm, trusting relationship with a second oligopolist (McWane). 

CCPF828. Structurally, the Fittings market was ripe for collusion. 

b) Plus Factor Two: McWane Developed a Plan for Collusive
 

Pricing (December 2007) 

During 2007, aggressive price competition among the Suppliers squeezed their profit 

margins. CCPF842-844. McWane's CEO fired the manager who had followed Star's prices 

down, installed a new management team led by Vice President Rick Tatman, and tasked him 

with improving the Fittings division's 
 financial performance. CCPF9, 19,45,855. 

In December 2007, Mr. Tatman devised a multi-prong plan to restrain Fittings pricecompetition, a strategy that contemplated and required communication with, and the active 

cooperation of, Sigma and Star. Specifically, McWane would support a series of small 

multiplier price increases. ("(W)e wil support net price increases but wil do so in stepped or 

staged increments."). But Mc Wane would support the next price increase only if Sigma and Star 

curtailed their Project Pricing and sold predominantly at published prices, such that prices at the 

prior level remained stable and transparent. ("A prerequisite for supporting the next increment 

18 
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of price is reasonable stability and transparency at the prior leveL"). The Suppliers would 

together move toward greater'price transparency. ("(McWane) wil encourage/drive both price 

stabilty and transparency."). And finally, Sigma and Star would remove pricing authority from 

local sales personnel in order to bring greater discipline to company pricing. ("Sigma's & Star's 

mgt pullng price authority away from front line sales and customer service personnel to add 

discipline to the process."). IDF638; CX0627-004. 

Plainly, the Tatman Plan contemplated a fundamental transformation in the dynamics of 

competition in the Fittings market. How would Sigma and Star learn what was required of 

them? In particular, how would Sigma and Star learn what they must do in order to induce 

McWane to "supportr) the next increment of (increased) price"? Mr. Tatman explicitly 

anticipated communicating the Plan's terms to McWane's competitors. Thus, on December 22, 

Mr. Tatman informed his colleagues at McWane: "I believe we're in a unique position to help 

drive stability and rational pricing with the proper communication and actions." IDF617 

(emphasis added). Mr. Tatman characterized his Plan as McWane's "Desired Message to the 

Market & Competitors." CX0627-004. The written Plan included two alternative draft letters 

calculated to communicate his message. CX0627-006,007. 

Because the Tatman Plan document was not itself shared with Sigma or Star, Judge 

Chappell concluded that it only "outlined unilateral conduct by McWane." ID295-297. This 

ignores the document's plain language and clear import: it contemplated that McWane would 

communicate to competitors its preferred terms of coordination, followed by joint 

implementation. This is a strategy for a "traditional conspiracy." See Antitrust Law il1416. Mr. 

Tatman's written plan is therefore a plus factor. In re Sulfuric Acid Antitrust Litg., 743 F. Supp. 

2d 827, 858 (N.D. IlL. 2010) (the "most damaging piece of evidence" for the defendants was a 

19 
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document laying out a 
 plan to stabilize the market); In re LinerboardAntitrust Litig., 504 F. 

Supp. 2d 38, 59 (E.D. Pa. 2007). 

Further, the Tatman Plan "provides a context for interpreting the events that followed." 

In re McWane, slip op. at 14 (p.T.C. Aug. 9,2012). And, in fact, what followed was that the 

Fittings market in 2008 unfolded according to Mr. Tatman's Plan: inter-company 

communications facilitating coordination, increases in published prices in staged increments, 

reduced discounting, centralization of pricing authority by Star, and efforts to increase price 

visibility through a multi-firm information exchange. CCPF907-1571. This was not a 

coincidence, but instead the concerted implementation of the Tatman Plan. 

c) Plus Factor Three: Secret and Unexplained Inter-Firm
 

Communications (Late 2007/Early 2008) 

In also cannot be dismissed as mere coincidence that at the same time he was finalizing a 

plan that included competitor communications as its foundation, Mr. Tatman and his competitors 

were communicating. Between December 22,2007 and January 11,2008, Mr. Tatman 

(Mc Wane) exchanged four telephone calls with his counterpart at Sigma, Larr Rybacki (Vice 

President of 
 Sales). IDF609, 611; CCPF923. On January 9, 2008, Mr. Rybacki in turn spoke at 

length with his counterpart at Star, Dan McCutcheon (Vice President of Sales). IDF641. 

Judge Chappell refused to give these calls any weight because the participants 

cónveniently forgot what they discussed. ID300. This misses the point. Neither McWane nor 

Sigma provided a legitimate explanation for these communications between price-setting 

executives.6 And the timing is more than suspicious. These calls occurred at a time when 

6 Rybacki testified that his job responsibilities did not require him to speak to anyone at Star or 

Mc Wane, and that he spoke to Tatman "once or twice"; one conversation was to welcome 

Tatman to the waterworks industry. IDF612-613; CCPF716-717. Tatman testified that he 

20
 
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McWane was formulating its "Desired Message to (l Competitors." And soon after the calls, the 

Suppliers shifted from aggressive competition to conformity with the Tatman Plan. Other 

evidence (discussed below) shows that the Suppliers were uninhibited in discussing their 

respective pricing strategies with one another. Thus, these private communications support the 

inference of an ilegal conspiracy. Mayor & City Council of Baltimore v. Citigroup, Inc., 709 

F.3d 129, 136 (2d Cir. 2013) (a "high level of 
 inter-firm communications" may serve as a plus 

factor supporting an inference of 
 conspiracy); In re EPDM Antitrust Litg., 681 F. Supp. 2d 141, 

166-67 (same); In re High Pressure Laminates Antitrust Litig., No. 00 MDL 1368,2006 WL 

1317023, at *3 (S.D.N.Y. May 15,2006) (same). 

d) Plus Factor Four: McWane Invited its Rivals to Collude 

(January 2008)
 

The Tatman Plan included two draft versions of a letter, nominally addressed to 

McWane's Distributors, but intended as a communication with Sigma and Star in furtherance of 

the Plan. CCPF911-923. "McWane knew that its competitors, Sigma and Star, would obtain 

and review McWane's customer letter and make their decisions about what they each would do, 

in part, based on the information contained in McWane's customer letter." ID267. McWane 

revised one version and sent the letter to Distributors on January 11,2008. IDF645. Sigma and 

Star secured copies soon thereafter. IDF659. 

At trial, Mr. Tatman acknowledged that the purpose of 
 the January 11 Letter was to 

communicate McWane's new pricing strategy to Sigma and Star, and to induce them to follow. 

IDF647; CCPF939. This concession is fatal to McWane's claim (and Judge Chappell's 

conclusion) that thé Suppliers were guided by simple interdependence. Recognized 

recalled speaking with Rybacki "two, three, a couple of 
 times." He offered no legitimate 

purpose for the calls. Id. 

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interdependence involves predicting rivals' likely response to competitive moves. Here, likely 

responses were not being predicted, McWane deliberately told its rivals what to expect; McWane 

rigged the competitive game. 

The January 11 Letter was not a price announcement to customers; it did not reveal 

McWane's new prices. Instead, it communicated McWane's new pricing strategy to McWane's 

rivals. Specifically, McWane would: (i) soon notify Distributors of 
 higher published 

multipliers,7 and (ii) cease all Project Pricing.8 Further, McWane dangled the prospect that, later 

in the year, McWane would support a second multiplier increase if "conditions" merited.9 But 

there was a catch: If competitors utilized Project Pricing, then McWane would respond by 

lowering its published multipliers.1o 

Thus, McWane's January 11 Letter proposed a common scheme and invited Sigma and 

Star to participate: Mc Wane would support higher list prices today and perhaps again within six 

months, in exchange for a common campaign to curtail Project Pricing. On the other hand, if 

Sigma and Star did not curtail Project Pricing, then McWane would drop its published prices. 

For Mc Wane, this represented a significant change in strategy. In the past, Mc Wane responded 

7 IDF645 ("Letters stating the new region specific multipliers will be mailed January 18,2008."). 

8 IDF645 ("(I)t is our intention going forward to sell all products only off 
 the newly published 

multipliers.). 

9 IDF645 ("If 
 the current inflationary trends continue as forecast, we anticipate 

the need to announce another multiplier increase within the next six months. 

However, we wil only do so as conditions require."). 

10 IDF645 ("We wil continue to monitor the competitive environment and adjust regional 

multipliers as required to provide you with competitive pricing."). An earlier version of the 

January 11 Letter more explicitly conditioned the second price increase on price stability 

(Tatman's term for a market in which discounting is reduced): "However, we wil only do so if 

both conditions require and the increase can be supported within stability (sic) market 

conditions." CX0627-006. 

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to competitors' Project Pricing with its own Project Pricing.ll And as Mr. Tatman was aware: 

"(McWane's) past attempts to drive price stability haven't been too successfuL." IDF620. The 

January 11 communication - effectively an invitation to collude on price - is a plus factor 

evidencing the alleged conspiracy. See Interstate Circuit v. United States, 306 U.S. 208 (1939) 

(agreement found when the proposed course of conduct was communicated to rivals as well as 

customers). Furthermore, Sigma's and Star's acquiescence and subsequent efforts to curtil 

Project Pricing (described below) are consistent with their understanding McWane's message. 

The fact that Mc Wane's January 11 Letter was nominally addressed to Mc Wane's 

Distributors does not exempt the communication from antitrust scrutiny. 12 The Commission has 

indicated, however, that before treating a "public" communication as collusive activity, it wil 

consider whether there is a legitimate business justification for the conduct. Here, there is no 

such justification. The letter was, McWane admits, targeted at competitors and intended to 

induce a price increase. IDF647; CCPF939. McWane is not claiming a legitimate business 

rationale. Instead, McWane asserts that the letter was a deliberate deception: according to Mr. 

Tatman, his hope was "that by decla~ing a purported intent to stop Project Pricing, McWane 

might lull (or 'head fake,' as Mr. Tatman called it) Star and Sigma into temporarily reducing 

their Project Pricing, leaving McWane to price however it deemed appropriate, and thereby gain 

a competitive advantage." IDF647. 

11 There is no evidence that, prior to 2008, Mc Wane ever responded to Project Pricing by 

reducing its published prices. IDF442.
 

12 Courts recognize that communications supporting an ilegal conspiracy "can occur in speeches
 

at industr conferences, announcements of future prices, statements on earnings calls, and in 

other public ways." In re Delta/Air Tran Baggage Fee Antitrust Litig., 733 F. Supp.2d 1348, 

1360 (N.D. Ga. 2010). The Commission has challenged public invitations to collude, most 

recently in In re U-Haul Intl Inc., FTC File No. 0810157 (2010). 

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The claim that Mc Wane intended immediately to defect from coordinated pricing (a head 

fake) is contrary to the evidenceY More importntly, this claim is irrelevant to McWane's 

liabilty. A firm that deliberately invites its competitors to collude does not escape antitrst 

liabilty by claiming that it secretly harbored an intention not to follow through with the plan. 

Antitrust Law il1404 ("(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 tre of an agreement for antitrust purposes."); see also United States v. Giordano, 

261 F.3d 1134 (11th Cir. 2001) (affrming criminal price fixing conviction notwithstanding 

defendant's claim that he intended only to "play along" and to take advantage of 
 the pricing 

information collected from rivals). 

e) Plus Factor Five: Star Curtailed Project Pricing in
 

Contravention oflts Unilateral Interest (Late January 2008) 

In January 2008, Star reformed its strategy and decided to curtail its Project Pricing. 

IDF686. In a January 22, 2008 email to the company's division managers, Mr. Minamyer 

instructed: "(o)ur goal is to take a price increase and to stop Project Prièing," except where Star 

had documentary evidence that a competitor had initiated Project Pricing for a specific job. 

IDF686. Star's acceptance of 
 McWane's January 11 invitation consummates an ilegal Section 1 

agreement. United States v. Singer Mfg., Co., 374 U.S. 174, 193 (1963) (conspiracy may be 

13 McWane communicated to its largest Distributors its intent to avoid Project Pricing. IDF650. 

Moreover, the Tatman Plan (the progenitor of 
 the January 11 Letter) described a stable, longterm strategy, not a one-day price spike. CX627-004 ("the keys to actual success are: (McWane) 

being consistent with what we say for an extended period (::3 months)"). 

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shown "by acquiescence (in a plan) coupled with assistance in effectuating its purpose"); 

Antitrust Law il1419a (performance of 
 requested act can complete a conspiracy).14 

Star's decision to curtail Project Pricing is a particularly strong plus factor because, in the 

absence of an agreement, Star's unprecedented and risky strategic shift would be contrary to its 

unilateral interests. See Bolt v. Halifax Hosp. Med. Ctr., 891 F.2d 810, 826-27 (l1th Cir. 1990); 

Antitrust Law il1426 ("if rational defendants would not act without mutual assurances of 

common action, then the act proves that such assurances took place"). As the newest and 

smallest Supplier, Star had always relied on Project Pricing to be competitively viable. IDF568, 

871-872. Star's Vice President of 
 Sales, Dan McCutcheon, characterized Mr. Minamyer's 

strategic decision to end Project Pricing as "irrational" and "bizarre"; it threatened the 

company's very existence. IDF698, 703; ID274; CCPF 1 063-1 064. Star knew that it could not 

stop Project Pricing alone and remain competitive. See CCPF975-976, 986, 1065. 

F or Star to abandon Project Pricing requires a high level of trst in Mc Wane and Sigma 

that they too would curb discounting. A wilingness to place one's firm at risk in this way 

implies a level of trst among competitors that is more characteristic of traditional conspiracy 

(involving advance communication and assurances) than of mere interdependence. See Antitrust 

Law il1425; Page, Communication and Concerted Action, 38 Loy. U. CHI. LJ. at 429-435 

(summarizing economic literature and experimental studies supporting the proposition that 

communication increases trust and cooperation). 

14 Star's acquiescence completes the Section 1 agreement. The Commission need not resolve 

whether, assuming no other conspiratorial conduct by Star, Star is potentially liable for damages. 

Antitrust Law il1408c ("unwillng" participant in a conspiracy may be allowed an equitable 

defense in appropriate cases). 

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Mr. Minamyer explicitly described Star's new trusting, friendly, and cooperative attitude 

toward its rivals in his email announcing the company's new pricing strategy. IDF686. He 

explained: "What we are doing is what is right for the industry." "We wil not (be) part of 

damaging the industry due to lack of discipline." "(T)his is what is best for the industr and that 

we need to be a part ofthe effort to help our industry." Id. Plainly, Mr. Minamyer believed that 

the parties to this "effort" included Star and its competitors. These warm sentiments towards 

rivals mirror evidence of a price-fixing conspiracy cited and relied upon by Judge Posner: "The 

president of ADM 
 stated that 'our competitors are our friends. Our customers are the enemy.'" 

High Fructose, 295 F.3d at 662.15
 

f) Plus Factor Six: Sigma Accepted the Tatman Plan by
 

Curtailng Project Pricing (Late January 2008) 

Sigma also consummated the conspiracy by accepting the Tatman Plan. On January 24, 

2008, Victor Pais, then Sigma's President and CEO, directed the company's management team 

to follow Mc Wane's smaller than desired multiplier price increase, and to curtail Project Pricing. 

IDF663-664. Mr. Pais was deliberately signaling to McWane Sigma's commitment to adhere to 

a new and non-competitive pricing strategy. Mr. Pais wrote: 

Though (McWane's) NEW multipliers are discouraging, this is 

both a lesson and an opportnity (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 

profitability conscious industry. 

IDF664 (emphasis added). 

Sigma's decision to follow McWane's price increase (lest it be retracted by McWane) 

could perhaps be explained as the product of oligopoly interdependence. But recognized 

15 Sigma documents from the conspiracy period evidence similar sentiments of goodwil toward 

competitors. E.g., IDF664, 762. 

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interdependence cannot explain why Mr. Pais thought it was incumbent upon both Sigma and 

Star to undertake a long-term ("patient" "disciplined" and "stable") program to curr favor with 

Mc Wane. Star, not Mc Wane, had historically been the maverick firm in need of appeasement. 

The best explanation for Sigma's new strategy of appeasing Mc Wane is that Mc Wane had 

successfully communicated to Sigma the Tatman Plan's essential message: that if 
 Sigma and Star 

curtiled Project Pricing, then McWane would again increase published prices. Indeed, Mr. 

Rybacki testified that the decision to curtail Project Pricing was to appease McWane. CCPF964 

(Project Pricing "was upsetting the gorilla in the room."). Thus, the Pais email is another plus 

factor offering further evidence of the Suppliers' conscious commitment to a common scheme. 

See Petruzzi's IGA Supermarkets v. Darling-Delaware Co., 998 F.2d 1224, 1245 (3d Cir. 1993) 

terms of coordination evidences prior agreement). (competitors' common understanding of 


g) Plus Factor Seven: The Suppliers Centralized Pricing
 

Authority in Parallel (December/January 2008) 

A common problem faced by cartel members is restraining over-zealous sales 

representatives and aligning their incentives with those of 
 the cartel. See Kovacic et aI, Plus 

Factors and Agreements in 
 Antitrust Law, 110 MICH. L. REv. 393,421-22 (2011); Joseph E. 

Harrington, How Do Cartels Operate?, FOUNDATIONS AND TRENDS IN MICROECONOMICS VoL. 2,
 

No 1 at 69-72 (2006), available at http://ww.econ2.jhu.edu/People/Harrington/fnt06.pdf. The 

Suppliers addressed this problem in two ways. Sigma encouraged its sales force to emp~asize 

price over volume. IDF663-673 (internal Sigma email instructing sales managers to minimize 

Project Pricing); see also Robert C. Marshall and Leslie M. Marx, The Economics of Collusion at 

119 (2012) (colluding firms may implement agreement by modifying employees' incentives to 

emphasize price over volume). Mc Wane and Star centralized pricing authority so that the sales 

force could not offer Project Prices without first obtaining clearance from management. IDF35, 

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656-657; CCPF925-929 (McWane centralized its pricing authority in December 2007/January 

2008); IDF686, 690, 696 (Star centralized pricing authority in the hands of 
 Mr. Minamyer on 

January 22,2008); see also Harrington, How Do Cartels Operate at 70-71. 

The Supplier's actions were contrary to their unilateral interests absent a common plan. 

Removing or dampening incentives for sales representatives to offer discounts to win business is 

a costly strategy if 
 pursued unilaterally, and therefore tends to exclude independent action: 

In an industr where the product made by different firms is largely 

homogeneous, this kind of shift in the incentives of a sales force 

could not be justified as a unilateral noncollusive action. If a firm 

unilaterally acted in this manner, it would likely find itself losing 

market share to rivals at a remarkable pace. Buyers who resist 

price increases would shift away from such a firm to other sellers 

who were stil pursuing increases in market share. In an industr 

where the product made by different firms is largely homogeneous, 

a shift in the incentives of sales forces across firms in an industr 

to "price before volume" leads to the strong inference of explicit 

collusion - namely, it is a super plus factor. 

Kovacic et al., Plus Factors, 110 MICH. L. REv. at 422 (emphasis added). Professor Kovacic 

identifies this strategy as a "super plus factor," meaning that it "lead(s) to a strong inference of 

explicit collusion." /d. at 397, 422. 

The inference that the Suppliers were acting pursuant to a common plan is strengthened 

by the fact that the communications outlined in the Tatman Plan (the "Desired Message to the 

Market & Competitors") expressly identified competitors "pullng price authority away from 

front lines sales" representatives as a "keyr) to success." IDF638. Coupled with the evidence of 

telephone calls among McWane, Sigma, and Star before and during this parallel shift in internal 

pricing procedures, the inference that the firms privately discussed and agreed to the elements of 

the Tatman Plan becomes stronger stilL. See IDF620-626, 639-643, 660. 

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h) Plus Factor Eight: Inter-Firm and Internal Complaints About
 

Low Prices and "Cheating" (Beginning March 2008) 

McWane's new prices became effective on February 18,2008 and Project Pricing would 

be honored until March 1. IDF649, 678, 686. On March 10, Mr. Tatman (McWane) complained 

to Mitchell Rona, a member of Sigma's executive management team, about excessive Project 

Pricing. IDF922 (Tatman "said he hears that some of 
 the new prices in the market are being 

compromised with deals. He hopes the market wil improve and hopes (we) do our part."); see 

also CCPF1035-1036. Again in August, Mr. Tatman complained to Mr. Rona that Sigma and 

Star both were offering excessive Project Pricing. IDF924 ("Rick was upset by the numbers in 

Florida and California based on what he has seen from us and Star,,).16 

Mr. Tatman's inter-company complaints about low pricing by Sigma and Star, together 

with his apparent expectation that Sigma would take remedial action, are plus factors evidencing 

the underlying price-fixing agreement. See Foley, 598 F.2d at 1333-34 (inter-company 

complaints imply an earlier agreement and support conviction for price fixing); see also United 

States v. Beaver, 515 F.3d 730, 738 (7th Cir. 2008) (inter-company complaints about "cheating" 

is evidence of conspiracy); United States v. Giordano, 261 F.3d 1134, 1139 (l1th Cir. 2001) 

(same). Mr. Tatman offered no alternative explanation for his complaints to Sigma, and 

although Judge Chappell agreed they could be indicative of a prior agreement, he drew no 

,I 

inference from them. ID313; see also CCPFI452. 

Additionally, Star's internal documents frequently characterize discounting by Mc Wane 

and Sigma as "cheating." IDF908, 911-912, 914-917; CCPFI440-1448. For example, in one 

16 It is reasonable to infer that, separate from these two documented communications, there were 

additional, similar inter-competitor conversations about Project Pricing that were not 

memorialized in writing. See Petroleum Prods., 906 F.2d at 454 n.18. 

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internal email, a Star regional sales manager identified discounting by Sigma as "cheating on the 

fitting deaL." CCPFI444. This mind 
 set presupposes a mutual commitment to curb Project 

Pricing. Thus, the "cheating" documents are also a plus factor. See McWane, slip op. at 17 

("These references to 'cheating' and 'agreements' clearly support the possibility of a 

conspiracy. "). 

i) Plus Factor Nine: Sigma Exhorted Star to Comply with the
 

Tatman Plan (March 2008) 

Star's Vice President of Sales Mr. McCutcheon testified regarding a private dinner 

conversation he had with Sigma's CEO Mr. Pais, which followed a DIFRA meeting on or about 

March 27,2008. ID300-301. This was seventeen days after Mr. Tatman complained to Sigma 

about market prices, urging Sigma to "do (its) part." IDF922. 

Mr. Pais urged Mr. McCutcheon that Sigma and Star should each keep their Fittings 

prices within two or three multiplier points ~fMcWane's published prices. Mr. Pais insisted that 

if Sigma and Star were less aggressive in their discounting, then Mc Wane "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 ...." CCPFI036-1037.17 

Mr. Pais exhibited both (i) a proclivity to communicate/conspire with Sigma's rivals, and (ii) a 

clear understanding of the Tatman Plan: that if Sigma and Star avoided excessive discounting, 

then Mc Wane would reward them. 

Mr. Pais understood well the Tatman Plan. The most reasonable inference is that he 

learned of 
 the Plan in his communications with McWane. The alternative inference, that Mr. 

17 Mr. Pais denied the statements attributed to him by Mr. McCutcheon. CCPF1037; Pais, Tr. 

1957-1959. Mr. McCutcheon's testimony is credible because, inter alia, it is against his interest 

(McCutcheon implicates himselfin.a conspiracy), and the message attributed to Pais is a 

restatement of 
 Pais' January emaiL. See IDF664. 

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Pais spoke directly with Star (McCutcheon) but not with McWane, is less plausible - given Mr. 

Pais' frequent meetings with McWane executives. See IDF606; CCPF828-841. Further, this 

alternative inference would require the ilogical premise that Sigma and Star schemed to raise 

prices without the participation of 
 the market leader, McWane. See Flat Glass, 385 F.3d at 363. 

j) Plus Factor Ten: The Suppliers Faciltated Collusion By
 

Launching the DIFRA Information Exchange; Star 

Participated Contrary to Its Unilateral Interest (Spring 2008) 

In Spring 2008, the parties launched the DIFRA information exchange to make the 

Suppliers' transaction prices more visible to one another (what the Tatman Plan referred to as 

market "transparency"). As discussed in Section IV.D, infra, the purpose and likely effect of the 

DIFRA information exchange was to faciltate collusion among the Suppliers. This conduct 

therefore constitutes an additional plus factor. Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 

2001) (competitors' use of 
 faciltating practice, including an information exchange, supports an 

inference of a price-fixing agreement); Petroleum Prods., 906 F.2d at 461-462 (same). 

Moreover, Star's decision to participate in DIFRA and the information exchange was a 

significant departure from its decision to resist the years of pressure from Mc Wane and Sigma to 

do so. CCPF 11 07 -1108. Star had resisted because it feared that Mc Wane would learn of Star's 

market share gains and retaliate. IDF712; CCPFI151-1154. Thus, Star's decision in 2008 to 

reverse course and participate in the information exchange was contrary to the company's own 

view of its unilateral interest, which supports an inference of conspiracy. 

The link between the conspiracy and DIFRA is also supported by Star's decision to stop 

submitting its data to DIFRA soon after the Suppliers' priCing coordination started to fall apart. 

Star's last data submission was for December 2008. CCPFI478-1480; IDF739-740. This timing 

confirms that, for Star, the utilty ofDIFRA was related to monitoring the Suppliers' collusive 

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agreement. When the agreement broke down, participating in DIFRA was once again 

inconsistent with Star's interests. 

Sigma, in contrast, was an enthusiastic DIFRA member, viewing its participation as a 

means to promote pricing discipline and, importantly, as one more tangible signal to McWane: 

This (DIFRA) is a huge step by SIGMA and Star, in being able to 

demonstrate our wilingness and commitment to strengthen our 

industr and signal our wilingness to grow in a responsible
 

manner. Though most of 
 the initial benefit is intangible such as 

increased trust and respect, it is also the first step :f or) more 

substantial benefits in the future. 

IDF762; CCPFI279. Sigma was wiling to participate in DIFRA and to "grow in a responsible 

manner" in order to curr favor with McWane. IDF762; see also CCPF867-868, 1038. Once 

again, Sigma exhibits perfect insight into Mr. Tatman's strategy, and Sigma's wilingness to 

conform thereto. 

k) Plus Factor Eleven: McWane's Second Invitation to Collude
 

Was Communicated, Accepted, and Implemented (May/June 

2008) 

The commencement of the DIFRA information exchange - and in particular the process 

by which McWane procured Star's participation - is both a discrete price-fixing episode and a 

plus factor in the overall conspiracy. The timing and language ofMcWane's and Star's 

communications in May and June 2008 evidence a quid pro quo offer and acceptance. 

By early May 2008, Star had agreed in principle to participate in the DIFRA exchange, 

but had not yet submitted its data, nor confirmed that it would do so. IDF732-735; CCPFI147­

1150. Sigma had announced a multiplier increase that Star planned to match, but McWane opted 

to withhold its support for a price increase as a way to induce Sigma and Star actually to 

implement the DIFRA exchange. IDF789-801, 805-807; CCPFI168-1185. In an email to his 

boss, Mr. Tatman explained that McWane's delay of a price increase announcement until it 

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received the DIFRA reports would "reinforce the message we've been trying to dril in" to 

Sigma and Star, the message that McWane was not wiling to lose visibility on pricing. IDF829­

830; CCPFI228-1232. 

Once again, Mc Wane communicated to Star and Sigma though a letter nominally 

addressed to Distributors. McWane's May 7, 2008 letter communicated that McWane would 

withhold a price increase until it received the first DIFRA report. CCPB at 100-105; CCPF 1179­

1182; IDF809. The customer letter did not actually communicate new prices. Indeed, it 

contained only unusual 
 language that had no useful meaning to McWane's customers. 

CCPF1186-1191; IDF81O, 817, 814, 820. 'The unusual 
 language, however, sent a message to 

Star and Sigma linking their participation in the DIFRA information exchange to a price 

increase: 

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 performance 

against our own internal metrics. We anticipate being able to 

complete our analysis by the end of 
 May. At that point, we wil 

send out letters to each specific region detailing changes, if any, to 

our current pricing policy. 

IDF809. 

The timing and content of Star's response to McWane's May 7, 2008 letter confirm that 

Star understood and accepted McWane's quid pro quo offer. Within hours of 
 receiving a copy 

ofMcWane's letter, Star confirmed to McWane and the other DIFRA members that it would 

submit its shipment data. IDF816; CCPFI204. And when Star submitted its data to DIFRA 

weeks later, it brazenly quoted McWane's signaling language, thus confirming the linkage 

between the DIFRA submission and McWane's letter: 

Good morning Mr. President. I just sent our info in. Sorr it took 

so long, but we were "carefully analyzing all factors including: 

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domestic and global inflation, market and competitive conditions 

within each region, as well as performance against our own 

internal metrics." (Does that look familiar?). 

IDF835, CCPFI222-1225. 

McWane received the first DIFRA report on June 17,2008, and less than four hours later, 

issued a price increase letter. IDF838-840, CCPFI242. Although McWane's price increase was 

not as large as that previously announced (and withdrawn) by Sigma and Star, the two Suppliers 

quickly matched McWane. IDF843-844; CCPFI246-1250. Judge Chappell erred in failng to 

recognize that the above-described course of conduct constitutes an invitation to collude by 

McWane, acceptance by Star and Sigma, and performance of 
 the agreement by all three. ID323­

331. This is a per se unlawful price restraint. 

I) Plus Factor Twelve: Confirmed Price-Related Inter-firm
 

Communications 

Mr. Pais' (Sigma) plea to Mr. McCutcheon (Star) to curtail discounting and thus keep 

Star's Fittings prices close to McWane's and to keep McWane happy was not an isolated event. 

The record reveals a pattern of improper price communications among the alleged conspirators ­

before, during, and after the conspiracy period. On more than one occasion, Mr. McCutcheon 

(Star) communicated with Mr. Rybacki (Sigma) regarding "mostly list price changes, timing on 

list price changes and things like that" - immediately prior to announcing list price changes. 

CCPF708-709. In one such communication, Mr. McCutcheon convinced Mr. Rybacki to 

announce a list price increase. CCPF709. In documented communications, Mr. Tatman 

complained to Sigma about Sigma and Star's prices. CCPFI035,1452-1454.18 

18 Inter-firm price communications continued even in 2009 when Star returned to its normal 

policy of aggressive Project Pricing. In the spring of 
 2009, Messrs. Pais and Rybacki (Sigma) 

sought to persuade Mc Wane not to implement an announced price restructuring. The two also 

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Thus, the evidence shows that the Fittings Suppliers communicated frequently regarding 

their pricing policies and practices. This pattern supports the inference that the Suppliers' 

parallel pricing conduct in 2008 was coordinated through their numerous documented and 

suspiciously timed communications with one another. (Described immediately below, Part 

IV.B.2.m). 

m) Plus Factor Thirteen: Volume and Timing oflnter-firm 

Communications (2007-2008) 

Senior executives of 
 the Suppliers communicated frequently with each other throughout 

the conspiracy period. IDF609-611, 616, 621-622, 639-641, 660, 790-791, 796,826,831; 

CCPF884, 894-895,923,952, 1162-1164, 1206, 1210-1221, 1246. Judge Chappell failed to give 

appropriate weight to the number and timing of these largely unexplained communications. See 

Citigroup, 709 F.3d at 136 (a "high level of 
 inter-firm communications" may serve as a plus 

factor supporting an inference of conspiracy). 

Sigma, Star, and McWane, and in particular Messrs. Rybacki, McCutcheon, and Tatman, 

spoke by telephone before almost every key pricing decision in 2007 and 2008. Although 

Complaint Counsel was able to obtain only a limited sample of 
 the Suppliers' telephone records, 

this sample shows: 

· t 

sought Star's assistance in resisting the change, telling Star that Sigma would not follow 

McWane's announcement and seeking assurances that Star would do the same. CCPFI508­

1524, 1526-1532; IDF1012-1016 (recounting meetings, but crediting denials of 
 price related 

discussions and omitting Pais email evidence to the contrary). Mr. McCutcheon then called Mr. 

Tatman to resolve the uncertainty as to whether McWane would follow through with its 

announced restructuring or instead stay with the old price list, and to communicate that Star 

would follow McWane. CCPFI539-1540; IDF1017-1018. 

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L (CCPF884, in camera) 

· t 

L (CCPF894-895, in camera) 

· t 

L (CCPF923, in camera) 

· t 

L (CCPF952, in camera) 

· t 

L (CCPFI162-1164, in camera) 

· t 

l 

(CCPFI206, in camera) 

· t 

L (CCPFI21O-1221, in camera) and 

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· t
 

l. (CCPFI246, in camera)
 

McWane had ample opportunity to offer or elicit legitimate explanations for these calls, 

but it failed to do so. With only insignificant exceptions (IDF612, 614, 644), no executive 

provided an innocent explanation for these communications. Instead, the witnesses testified that 

they did not know what was discussed or did not recall the telephone calls. CCPF884, 894, 923, 

952, 1040, 1088, 1110, 1164, 1221, 1449, 1532; IDF612, 623, 644, 790-791. 

Mr. Rybacki testified, and Judge Chappell found, that his legitimate responsibilties for 

Sigma in 2008 and 2009 did not require him to communicate with anyone at Star or McWane. 

IDF613. Yet, the telephone records indicate hundreds of inter-company communications by Mr. 

Rybacki. IDF715. Tellngly, before they were confronted with telephone records showing a 

large numbers of calls, Mr. Rybacki (Sigma) and Mr. McCutcheon (Star) testified inaccurately 

that they had only infrequent telephone contact with one another.19
 

The history of improper price-related communications, the timing of the telephone calls, 

the overall number of calls, the witnesses' inability to explain the calls, and the witnesses' 

attempts to conceal the number of calls among executives all support the inference that the 

Suppliers communicated with each other to coordinate their parallel pricing conduct in 2008. 

See Citgroup, 709 F .3d at 136. By declining to draw such an inference (ID300, 316), Judge 

19 Compare CCPF717 (Rybacki testifying that he talked to Tatman "maybe once, once or twice 

maximum my whole career") with CCPF715, in camera (showing t L calls between Rybacki
 

and Tatman); compare CCPF721 (Rybacki testifying that his past contacts with McCutcheon 

have been "relatively infrequent, but, you know, once in a great while") and CCPF722 

(McCutcheon testifying that he spoke to Rybacki three to four times per year) with CCPF715, in 

camera (showing t L calls between Mr. Rybacki and Mr. McCutcheon between January 2007
 

and May 2012). 

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Chappell allowed the witnesses' self-serving forgetfulness to negate extensive and damning 

telephone record evidence.
 

* * * 

When the evidentiary puzzle pieces are examined together, and not dissected 

individually, the picture is clear. It is not a picture of 
 recognized interdependence, but one of 

collusion. 

C. Judge Chappell Erred by Relying On Defendant's Expert "Economic" Proof
 

That the Conspiracy Was Not Effective and Therefore Did Not Exist 

Complaint Counsel's expert provided an economic framework for distinguishing between 

recognized interdependence and coordination resulting from collusion. Dr. Schumann explained 

that where oligopolists exchange assurances to cooperate in increasing prices, the resulting 

coordination is the product of collusion, not simple interdependence. Dr. Schumann observed 

that a variety of communications among the Sellers - accomplished by word and deed ­

increased the likelihood of coordinated pricing beyond what would result from recognized 

interdependence alone. CCPF654-655,657-665. 

Judge Chappell criticized Dr. Schumann's testimony because Dr. Schumann did not 

analyze price movements directly. ID342. Dr. Schumann testified that he would have done so, 

but the available price data would not permit reliable, probative analysis. Schumann, Tr. 3775­

3779; CX 2265-A (Schumann Rebuttal Rep. at 5-6,9-17); CCPFI424-1435. McWane's expert 

economist exercised no similar restraint. 

Judge Chappell wrongly credited the "data analysis" and associated conclusions offered 

by McWane's economist. First, he improperly excused numerous substantial methodological 

flaws in Dr. Norman's work that preclude any reliable conclusions from being drawn from his 

"analyses." Second, Judge Chappell failed to appreciate that Dr. Normann's "data analysis" 

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pertined to the wrong time period. Third, even setting aside the flaws in Dr. Normann's 

methodology, his "data analysis," when applied to the correct period, yielded results that satisfy 

Dr. Normann's criteria for consistency with collusion. 

1. Dr. Normann's "Data Analysis" Was Grossly Flawed
 

At trial, Dr. Normann agreed with learned treatises describing the basics of sound 

research methodology, yet he did not adhere to these basics in practice. CCPFI433-1434; 

Normann, Tr. 5083-5113; CCRRFI89. Judge Chappell wrongly treated each of Dr. Normann's 

methodological failings as a mere quibble.' However, these errors, summarized below, 

individually and cumulatively undermine the reliability of any conclusions drawn from Dr. 

Normann's analyses?O 

Dr. Normann analyzed the wrong data. The state of competition in the Fittings industry 

at any given time is reflected in the prices being offered at that time, i.e., the price formation 

date. Suppliers often offer special pricing to Distributors to win jobs that might not be invoiced 

until days, weeks, or many months later, causing unsystematic lags (lags of 
 varying duration) 

between the price formation date and the invoice date. Therefore, as Dr. Schumann explained 

and common sense dictates, price as of the invoice date is not a meaningful proxy for price as of 

the price formation date. CCPFI426. Yet, Dr. Normann based his pricing analyses on the 

invoice date, and not the price formation date. Dr. Normann acknowledged the variability of 

lags; that there was no reason to believe the lags were systematic; and that he made no effort to 

correct his findings to account for these lags. CCRRF 189. He simply asserted, and Judge 

Chappell accepted, that his "multi-year time series," "capture 
 ( d) a rollng average," which 

20 See CX 2265-A, and CCRRF21, 24, 25, 189, 190,279,280,470,477,479,497,566,587,
 

and 600, for a fuller discussion of 
 Dr. Normann's analytical errors. 

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effectively "capture(d)" the lags. ID346. A "rollng average" might "wash out" systematic lags, 

but it cannot "wash out" substantial nonsystematic lags. Schumann, Tr. 5804-5805; Normann, 

Tr.5091.21 

Dr. Normann's data were laden with nonsystematic errors. The Mc Wane price data used 

by Dr. Normann contained many obvious errors. These errors repeatedly overstated prices (and 

never understated them). Further, the frequency of these overstated prices peaked in January 

2008 at 21 %, several times the error rate in other months. CCPFI428-1430. As a result, Dr. 

Normann's findings understate price changes calculatedfrom January 2008 (in which prices 

disproportionately are overstated) to any putative end date of collusion. CCRRFI89.22 Dr. 

Normann introduced additional errors into his "data analysis" in several other ways. For 

example, his poor methodology for classifying which sales to include in his analysis made 

misclassification inevitable. This error, which was unquantified, further undermined his 

findings. See Complaint Counsel's critique of 
 Dr. Normann's decision rules for generating 

missing information, CCRRFI89. McWane's invoice data was adequate for McWane's 

ordinary business purposes, but McWane's invoice data was too inappropriate, incomplete, and 

21 Dr. Normann also did not adjust his data for acknowledged nonsystematic customer mix 

variations over time, even though customers in different regions pay different prices for the same 

products. Normann, Tr. 5131. Judge Chappell accepted the excuse that customer mix variations 

wash out in a multi-year time series. ID346. Because the variations are nonsystematic, they do 

not. 

22 Judge Chappell dismissed these errors as an unwarranted "extrapolation" from correspondence 

with McWane's counseL. ID347 n.31. Complaint Counsel had asked McWane's counsel to 

respond on behalf of 
 McWane to explain a seemingly incorrect subpoena response, i.e., data with 

invoice prices exceeding the effective list price. Counsel for McWane - McWane's agentreplied after consulting with McWane that, "there was no commercial reason" for a price 

exceeding list, and that these entries likely reflected order entry errors. CCPFI428. Complaint 

Counsel accepted this explanation. 

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error-laden for the far different analytical purposes to which Dr. Normann put it. For purposes of 

Dr. Normann's analysis, it was garbage in and garbage out. 

Dr. Normann's studies were not appropriately controlled. Dr. Schumann testified, and 

Dr. Normann acknowledged, that many factors substantially affect Fittings prices at any given 

time and place, e.g., new housing starts, funding availabilty, etc. Schumann, Tr. 3839-3841, 

4007; Normann, Tr. 5346-5347. One must assess the impact of 
 these potentially confounding 

variables in order to draw reliable conclusions about the effects of 
 the experimental variable. 

CCPFI433. Here, however, Dr. Normann failed to control for even obvious supply and demand 

shifters,23 thereby rendering his conclusions unscientific and unreliable?4 

Dr. Normann's "hypothesis tests" were inadequate. Except in one instance,25 Dr. 

Normann failed to assess the statistical significance of 
 his findings, which is a critical feature of 

hypothesis testing. Without such testing, Dr. Normann canot empirically conclude that his "no 

price increase" findings are statistically significantly different from "price increase" findings, 

given randomness in the distribution of Fittings sales and prices over time and place. 

CCPFI433-1435; Schumann, Tr. 5794-5795, 5801-5802, 5847-5854; Normann, Tr. 5319-5322. 

Additionally, Dr. Normann's "hypothesis tests" on which Judge Chappell relied were poorly 

23 E.g., Dr. Normann did not control for metal/energy costs (Normann, Tr. 5343, 5346); housing 

starts and macroeconomic conditions (Normann, Tr. 5344-5348); or customer location and mix
 

(Normann, Tr. 5131-5134). See also Normann, Tr. 5359-5361 (Normann's purported "control"
 

was ineffective because it was subject to the same supply/demand shifters that Normann
 

intended to control for).
 

24 SeeNormann, Tr. 5344-5349; CCFF 1433.
 

25 And in that instance, the finding was not statistically significant. RX-712A (Normann Rep. at 

68, n.l58).
 

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conceived or were otherwise inadequate. See Complaint Counsel's critique of Dr. Normann's 

specific "Figures" in CCRRFI89. 26 

Judge Chappell specifically cites Dr. Normann's Figure 4 analysis as demonstrating price 

dispersion trends inconsistent with parallel curtailment of 
 Project Pricing in 2008. IDF847; 

ID285. But Dr. Normann reported - he did not analyze -the dispersion of 
 prices for only three 

Fittings out of hundreds of 
 available Fittings. Normann, Tr. 5368-5375. Dr. Normann's mere 

report of standard deviations over time for only three products cannot support any reasonable 

conclusion as to parallel curtailment of Project Pricing in 2008.27
 

Finally, Dr. Normann acknowledged that he did not explore, and his work is not 

probative of the question, whether prices during a putative conspiracy period were higher than 

they would have been in a "but-for" world. Normann, Tr. 5349-5350. Dr. Normann purported 

to find only that prices did not rise; he did not reach any conclusion as to whether they were 

higher than they would have been expected absent price collusion and the DIFRA agreement. Id. 

2. Dr. Normann's "Data Analysis" When Applied to the Correct Period
 

Is Consistent With Collusion 

Dr. Normann's "data analyses" compared prices for his "basket" of only 24 Fittings 

before, during, and after the period January 1,2008 thru February 28, 2009, which he treats as 

the putative collusion period. Normann, Tr. 4779-4788. He found relative price movements that 

he concluded were inconsistent with collusion. Normann, Tr. 4788-4789, 4796. But the 

26 See also CCRRFI89, discussing methodological flaws relating to Dr. Normann's selection 

and use of a small non-random sample of 24 Fittings when he had equivalent data for the 

hundreds of available Fittings. .
 

27 Judge Chappell mistakenly concluded that Dr. Normann examined "the Suppliers' inventory 

data" and found no evidence of inventory withholding. ID345. Dr. Normann examined only 

McWane inventory data, and could not exclude the possibility that, consistent with collusion, the 

total inventories of imported Fittings held by the Suppliers increased during the relevant time 

period. Norman, Tr. 5382. 

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evidentiary record, Dr. Schumann's report, and Complaint Counsel's often-articulated theory of 

the case reflected a collusive agreement being effected in late January and the breaking down by 

October-Novemb~r 2008. CCPFI456-1459. Collusive effects should have been expected in 

prices for the period February 2008 thr October or November 2008.28 And that is what Dr. 

Normann's data analysis, if 
 it is to be credited at all, shows. 

Dr. Normann's data show that McWane's prices increased during the conspiracy period 

by t l%, Sigma's by t l%, and Star's by t l%. IDF943, in camera. Further, Dr. 

Normann's Figure 2B, shows t 

L RX-712B (Normann Rep. at 13 fig. 2B), in camera. 

t 

L RX-712B (Normann Rep. at 13 fig. 2B), in camera. Accordingly, the pricing 

evidence presented by Dr. Normann for the period of actual relevance meets all of his criteria for 

consistency with collusion. 

D. Information Sharing Was Unlawful Under the Rule of Reason 

The agreement among the Suppliers to exchange Fittings shipment information through 

DIFRA violates Section 1 because it tends unreasonably to facilitate collusion and thereby to 

restrain competition. This restraint is unlawful whether or not the Commission finds an 

agreement among the Suppliers to curtail Project Pricing. 

28 Judge Chappell wrongly describes this as a "cherr-picked time period." ID349. To the 

contrary, it is founded in substantial record evidence, including, for example, Fittings supplier 

documents indicating that there was substantial "cheating" by October/November 2008 and that 

one or more competitors had decided to take off 
 the proverbial gloves. CCPFI456-1459. 

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Direct evidence proves the Suppliers' agreement to exchange information through 

DIFRA. IDF733-735; United States v. Container Corp. of Am., 393 U.S. 333, 334-35 (1969); 

Antitrust Law il1406 (exchange of information is concerted action under the Sherman Act). . 

Under the rule of reason, proof of market power and likely anticompetitive effects establish 

Complaint Counsel's primafacie case. E.g., United States v. US. Gypsum Co., 438 U.S. 422, 

441 & n.16 (1978); Realcomp II, Ltd. v. FTC, 635 F.3d 815,825 (6th Cir. 2011).29 "(T)he 

susceptibility of the industry to collusion and the nature of 
 the information exchanged are the 

most important factors in determining likely effects." McWane, slip op. at 19. Judge Chappell 

erred in requiring direct evidence of actual price effects and ignoring evidence that the principal 

tendency ofDIFRA was to faciltate collusion. 

The Fittings market strcture is conducive to collusion. CCPF651-665. While published 

Fittings prices are generally transparent, Project Pricing is less transparent and introduces a 

degree of 
 uncertainty about prevailing price levels. IDF428-442, 566-567 (Project Pricing leads 

McWane to lose visibility of 
 the competitors' price level). Judge Chappell found that Project 

Pricing destabilzed Fittings prices, and that it reflected a lack of 
 pricing discipline. IDF457-461, 

582-584; CCPF659. Project Pricing also obscured Sellers' actual pricing behavior, increasing 

each Seller's uncertainty as to whether the other oligopolists would cooperate or compete. As 

such, unrestrained Project Pricing impeded tacit collusion. See Antitrust Law ilIA07e 

the impediments to cartel-like results in oligopoly."). 

The DIFRA exchange lessened uncertainty about prevailing price levels, and thereby 

("Uncertainty is the most general of 


facilitated the Suppliers' ability to engage in tacit collusion. CCPFI297-1299. The Suppliers 

29 Judge Chappell found that McWane, Sigma and Star, all participants in DIFRA, collectively 

had market power. ID355. 

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reported to DIFRA the number of 
 tons shipped for a given time period. This data, when 

aggregated, allowed participants indirectly to monitor price levels. See Petroleum Prods., 906 

F .2d at 461-462 (exchange of production and supply data can be used to facilitate interdependent 

action). Specifically, the DIFRA exchange allowed each participant to monitor its own market 

share, and to deduce from monthly changes in that share, its rivals' relative price levels. IDF783 

(McWane detecting rivals' discounting from declining DIFRA share in January 2009), 779 

(same, in September 2008); CCPF1244-1245 (same, in July 2008). 

Improving the ability of oligopoly members to monitor adherence to consensus prices 

tends to make "cheating" less attactive (because rivals discover cheating faster, rendering 

cheating less profitable), and tacit collusion more so. CCPFI299; High Fructose, 295 F.3d at 

656 (the abilty to detect cheating "tends to shore up a cartel"). DIFRA members expected the 

exchange to do exactly this. When Mr. Pais (Sigma) initiated the effort to form DIFRA in or 

around 2004, he explained to another Fittings supplier that DIFRA would aid the suppliers in 

dividing the market, maintaining stable market shares, and stabilizing prices. IDF71O; 

CCPF1278 (citing CX 2519 (Saha, Dep. at 72_75)).30 When the Suppliers actually implemented 

the DIFRA information exchange in 2008, Mr. Pais similarly described DIFRA as a way to 

promote pricing discipline and facilitate coordination. IDF768. 

30 The cited deposition testimony of 
 Mr. Saha was admitted subject to a hearsay objection by 

Respondent, which Judge Chappell did not rule on. See CCPFI277-1278. The testimony is 

admissible under the rationale articulated in Fed. R. Evid. 803(3), as a statement of 
 motive, 

intent, or plan. Similar statements were also admitted at trial for purposes of impeaching 

contrary trial testimony of 
 Mr. Pais. Saha, Tr. 1207 ("The reasons were basically - it's the same 

- he wanted market stability on pricing issues, and he felt that all the sellers of fittings belonging 

to an organization would give the stability on pricing."); Saha, Tr. 1211-1212 (admission for 

impeachment purposes). 

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In February 2009, Mr. Pais again confirmed the role that DIFRA played in faciltating (at 

least) tacit collusion among the Suppliers during the 2008 collapse in market demand: 

In Fittings, there are effectively 3 - McWane, SIGMA and Starand all suffer from the same challenges and there seems to be a 

great desire to improve the pricing and each one has demonstrated 

thr a reasonable amount of discipline, even being protective of 

our respective market share. This is where the monthly market 

size data produced by 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 all of 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 ... even as the volumes have been 

weak. 

CX0313; IDF768. 

Star also used the DIFRA reports to assess whether any decline in Star's Fittings sales 

was due a market-wide decline or was instead due to sales lost to McWane or Sigma. 

CCPF1321. McWane, too, believed that DIFRA tended to promote price stability, and to enable 

the company to coexist with its competitors without lowering its costs or providing better 

service. Mr. Tatman wrote to his superiors, "(o)ur competitors have both a lower average cost 

basis and a better service model which limits options for profitabl( e) share growth," and that 

"DIFRA will eventually add some increased stabilty." CCPF1305 (emphasis added); IDF781, 

618 (for McWane, "stability" means increased confidence about prevailing price levels).31 

Circumstantial evidence also suggests that DIFRA had the likely effect of 
 facilitating 

tacit collusion, including: 

31 Judge Chappell erred in finding the record insuffcient to determine whether the information in 

the DIFRA shipment reports was made public. ID361-62. DIFRA never published any 

"information relating to the ductile iron fitting industry." Brakefield, Tr. 1232-33. Distributors 

were generally unaware of 
 the existence ofDIFRA. E.g., Groeniger, Dep. at 238-39; Prescott, 

Dep. at 130; Brakefield, Dep. (VoL. 1) at 97 (DIFRA never engaged with purchasers). 

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the close temporal fit between the exchange and an (at least) parallel effort to curtail 

Project Pricing among DIFRA members; 

the presence of a sham member (US Pipe), apparently to paper over antitrust concerns 

attendant to a three-firm information exchange (CCPFII17-1130); 

the reluctance of 
 Star (the maverick) to join and to timely submit its data (CCPFI151­

1154); 

McWane's unwilingness to announce any price increase before reviewing the data 

(CCPFI208-1221); and
 

Sigma's attempt to re-establish DIFRA to once again induce McWane to support higher 

prices (CCPFI484-1490). 

This evidence points to a close and organic connection between the "effort to help (the) industr" 

(IDF686) by curtailing secret discounting in 2008 and the short-lived DIFRA exchange. 

The evidence of collective market power and the likely anticompetitive effects of the 

DIFRA collaboration shifts to Mc Wane the burden of demonstrating a countervailing effciency 

. 

justification. Realcomp 11,635 F.3d at 825. McWane must do more than hypothesize a 

justification. It must come forward with evidence that the "restraint in fact is necessary to 

enhance competition and does indeed have a pro-competitive effect." Graphic Prods. Distribs., 

Inc. v. Itek Corp., 717 F.2d 1560, 1576 (lIth Cir. 1983); see also Flegel v. Christian Hosp. 

Northeast-Northwest, 4 F.3d 682,688 & nA (8th Cir. 1993). Judge Chappell posited two such 

efficiencies: McWane's use of the data to choose among a range of 
 price levels on two occasions 

in 2008 and 2009, and the use of 
 the data to better understand market trends and manage 

production and inventory schedules. ID362 n.34. 

The first cited efficiency is not an effciency at.all. McWane was using DIFRA data to 

identify the supra-competitive price that was best for it. In both instances, Mc Wane was using 

the DIFRA information to increase prices, albeit not to the level or in the product segments its 

rivals would have preferred. CCPFI240-1245, 1492-1500. The second cited efficiency should 

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be rejected as pretextual. See Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 

1219 (9th Cir. 1997) (court should disregard 
 justification for challenged conduct when "evidence 

suggests that the proffered business justification played no part in the decision to act"). There 

are no contemporaneous documents showing that McWane or any Supplier actually used DIFRA 

data to manage production or to set its inventory leveL. CCPF1300-1312, 1323, 1328. Finally, 

even assuming the validity of this effciency justification, Mc Wane 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."). 

v. CONCLUSION
 

McWane should be adjudged liable under Count 1 (price fixing) and Count 2 

(anticompetitive information exchange). The Commission should therefore enter the attched 

order enjoining McWane's unlawful activities. 

Dated: June 4, 2013 Respectfully submitted,
 

s/ Edward D. Hassi 

Edward D. Hassi, Esq. 

Linda M. Holleran, Esq. 

J. Alexander Ansaldo, Esq. 

Joseph R. Baker, Esq. 

Thomas H. Brock, Esq. 

Monica M. Castilo, 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 

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UNITED STATES OF AMRICA
 

BEFORE THE FEDERA TRAE COMMSSION
 

COMMISSIONERS:	 Edith Ramirez, Chairwoman
 

Julie Bril
 

Maureen K. Ohlhausen
 

Joshua D. Wright
 

)


In the Matter of
 )
 

)
 

MeW ANE, 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, 

and the respective offcers, directors, employees, 

agents, representatives, successors, and assigns of each. 

groups, and affiiates controlled by it, 


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; 

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2. information that relates to the terms on which a Competitor wil buy DIPF from,
 

or sell DIPF to, the Person to whom the Competitively Sensitive Information is 

Communicated; 

3. information that relates to transactions that occurred at least three (3) years prior
 

to the date of the COllunication of such information; or 

",r , 

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 

ofDIPF 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 CIlO/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 CII0/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. 

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L. "Industry Statistics" means statistics derived from Input Data and Communicated by the
 

Third Part Manager.
 

M. "Input Data" means the Competitively Sensitive Information Communicated by 

Competitors to the Third Part Manager. 

N. "Information Exchange" means the entity Managed by A Third Part 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 Part Manager" means that a Third Part 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 parter, 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," "paricipated," and 

"participation." 

R. "Person" means any natural person or artificial person, including, but not limited to, any 

corporation, unincorporated entity, or governent. For the purpose of 
 this Order, any 

corporation includes the subsidiaries, divisions, groups, and affiiates 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 ofDIPF 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 ofYunits, but it may not offer or provide a discount ofX% 

on all units of Domestic DIPF, including those below Y units, if sales exceed Y units. 

3 
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U. "Service" means any service, assistance or other support provided by Respondent to a 

Customer, including without limitation, responsiveness to requests for bids, 

responsiveness in filling purchase orders, product availability, handling of warranty 

claims, and handling of retus.
 

v. "Third Part 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 sellng 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 ofDIPF if, 

and only if, that agreement relates exclusively to the terms under which Respondent wil 

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 wiling: 

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 opportnity. 

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. 

4 
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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 

ILB, II.C, or ILD 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 ofa sale ofDIPF; or 

3. To any Person reasonably believed to be an actual or prospective purchaser of
 

DIPF that Respondent is ready and willng to adjust the terms of a sale ofDIPF 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 Industr 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; 

5 
PUBLIC 

8. Any Industr Statistic is suffciently 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 Part Manager and all Industry Statistics Communicated by the Third 

Part 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, 

6
 
PUBLIC 

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 offcers, directors, and Designated 

Managers; 

7
 
PUBLIC
 

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 

lILA and ILI.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 fie verified written reports within 

ninety (90) days from the date this Order becomes final, annually thereafter for ten (l0) 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 Part Manager and a 

description of how the Competitively Sensitive Information has been and is expected to 

be Managed by the Third Part Manager; and (iv) the identity of each employee ofthe 

Respondent who received information, directly or indirectly, from the Third Part 

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 discountsfor sales ofDIPF 

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. 

8 
PUBLIC
 

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 thirt (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, assignent 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: 

Donald S. Clark 

Secretary 

Dated: 

'" 

9 
PUBLIC
 

Complaint Counsel's Post-Trial Findings of 
 Fact and 

Conclusions of Law 

CONFIDENTIAL - REDACTED IN ENTIRETY 
PUBLIC
 

CERTIFICATE OF SERVICE 

I hereby certify that on June 4, 2013, I fied the foregoing document electronically using 

the FTC's E-Filng System, which wil send notification of such fiing to: 

Donald S. Clark 

Secretary 

Federal Trade Commission 

600 Pennsylvania Ave., NW 

Washington, DC 20580 

I also certify that I delivered via electronic mail and harid delivery 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 

Wiliam C. Lavery 

Baker Botts L.L.P. 

The Warner 

1299 Pennsylvania Ave., NW 

Washington, DC 20004 

(202) 639-7700 

j oseph.ostovich@bakerbotts.com 

william.lavery(abakerbotts.com 

1. Alan Truitt 

Thomas W. Thagard II
 

Maynard Cooper and Gale PC 

1901 Sixth Avenue North 

2400 Regions Harbert Plaza 

Birmingham, AL 35203 

(205) 254-1000 

atruitt@mavnardcooper.com 

tthagard(amavnardcooper.com 

Counselfor Respondent McWane, Inc. 
PUBLIC 

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. 

June 4, 2013 By: s/ Thomas H. Brock 

Attorney