Source: https://www.pbwt.com/antitrust-update-blog/fifth-circuit-considers-independent-conduct-in-vertical-agreements-to-facilitate-horizontal-conspiracy/
Timestamp: 2019-04-22 02:08:55+00:00

Document:
On November 25, 2015, the Court of Appeals for the Fifth Circuit affirmed the $156 million antitrust judgment in MM Steel, L.P. v. JSW Steel (USA) Incorporated; Nucor Corporation, upholding a jury verdict that found one defendant steel manufacturer (JSW Steel) liable for participation in an illegal conspiracy to block distributor MM Steel from entering the market. The Court of Appeals reversed the jury verdict as to defendant Nucor, another steel manufacturer. In so doing, the Fifth Circuit identified evidence that does—and does not—tend to exclude the possibility of independent conduct for purposes of finding a violation of § 1 of the Sherman Act. The court also underscored that per se liability (and not the rule of reason) attaches to horizontal conspirators’ use of vertical agreements to shut competitors out of the market.
MM Steel is a steel distributor created in 2011 by two salesmen who had previously worked for other distributors. JSW and Nucor are steel manufacturers with a history of business with MM’s competitors. After JSW and Nucor refused to sell steel to MM, MM sued those manufacturers and its competitor distributors in the Southern District of Texas. MM alleged that the competitor steel distributors had formed an illegal horizontal conspiracy to prevent MM from entering the market, and that manufacturers JSW and Nucor joined the conspiracy by agreeing to refuse business with MM—all in contravention of § 1 of the Sherman Act.
After a trial that lasted over a month, and deliberations that lasted only half a day, the jury agreed. It awarded $52 million in damages, which the District Court trebled. Only JSW and Nucor appealed; the other defendants settled.
• JSW had actually agreed in writing to do business with MM and had even extended MM a line of credit.
The Fifth Circuit also addressed the argument that the trial court erred in instructing the jury that, if JSW and Nucor joined the competitor distributors’ conspiracy, JSW and Nucor would be per se liable under § 1 of the Sherman Act. JSW cited Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007) for the proposition that the rule of reason should have applied instead. Acknowledging Leegin’s statement (in dicta) that there is no per se rule for vertical agreements that facilitate horizontal conspiracies to increase prices, the Fifth Circuit stressed that Leegin applies to cases of price regulation. Underscoring that per se liability has always applied where horizontal competitors use vertical agreements to keep a competitor out of the market, the Fifth Circuit doubted that “the Supreme Court silently overruled this line of cases.” The court acknowledged a Circuit Court opinion (Toledo Mack Sales & Serv., Inc. v. Mack Trucks, Inc., 530 F.3d 204 (3d Cir. 2008)) that applied the Leegin dicta in a case not involving price fixing, but noted that Toledo Mack Sales was distinguishable in an important way: in that case, there was no finding that the manufacturers joined a horizontal group boycott.

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