Antitrust Law Daily Remaining aluminum price manipulation claims scrapped
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Thursday, December 1, 2016

Remaining aluminum price manipulation claims scrapped

By Greg Hammond, J.D.

Alleged purchasers of physical aluminum lacked antitrust standing to pursue claims that aluminum futures traders and warehouse operators conspired to restrain aluminum traded by way of London Metal Exchange (LME) warrants, because none of the plaintiffs competed in the aluminum warehouse servicing or warrant trading markets. Alleged purchases of physical aluminum, even at inflated prices, did not change the fact that the anticompetitive conduct occurred in a different market that was not the same as, or "inextricably intertwined" with, the physical aluminum market in which they operated. The plaintiffs were therefore not participants in the very market that was directly restrained and could not demonstrate antitrust injury. The complaints were consequently dismissed by the federal district court in New York, and the plaintiffs’ motions for leave to amend were denied as futile (AGFA Corp. v. The Goldman Sachs Group, Inc., November 30, 2016, Forrest, K.).

Alleged purchasers of physical aluminum filed three complaints against aluminum futures traders and warehouse operators, alleging that the defendants conspired to restrain aluminum traded by way of LME warrants. In particular the plaintiffs claimed that the defendants ignored LME information barriers; agreed not to compete with each other’s warehousing operations; agreed to treat the LME’s minimum daily load-out rule as a maximum; worked together to shift aluminum among their warehouses in order to concentrate stock at key locations; offered financial incentives to aluminum owners to store aluminum at key warehouse locations; evaded the LME’s minimum daily load-out rule by shuttling aluminum between warehouses; and worked together to cancel warrants for aluminum stored at key warehouse locations.

The U.S. Court of Appeals in New York previously affirmed a prior district court decision dismissing claims by certain indirect purchasers who had been a part of the coordinated multi-district litigation. The case was before the court on a motion to dismiss the remaining three complaints and motions to amend.

No antitrust injury. The court dismissed the complaints and denied the motions to amend as futile, finding a lack of antitrust injury. To show antitrust injury, according to the Second Circuit’s decision, the plaintiffs needed to be injured in the warehouse services or warrant trading markets that were allegedly being directly manipulated. Although each of the complaints and the proposed amended complaint focused on anticompetitive conduct occurring in the aluminum warehouse servicing and warrant trading markets, no plaintiff competed in either of those markets. In particular, none of the plaintiffs stored aluminum in the defendants’ warehouses; they did not trade aluminum futures contracts with the defendants; and they did not allege that any of the aluminum they purchased was ever stored in any of the defendants’ warehouses, or was the underlying asset for any of the defendants’ futures trades.

Further, the plaintiffs’ alleged purchases of physical aluminum, even at inflated prices, did not change the fact that the anticompetitive conduct occurred in a different market that was not the same as, or "inextricably intertwined" with, the physical aluminum market in which they operated. The plaintiffs were therefore not participants in the very market that was directly restrained and could not establish antitrust injury.

The cases are Nos. 14-cv-0211 (KBF), 14-cv-0217 (KBF), 14-cv-6849 (KBF), 15-cv-8307 (KBF), and 16-cv-5955 (KBF).

Attorneys: Derek Y. Brandt (Simmons Browder Gianaris Angelides & Bardnerd LLC) and Andrea B. Bierstein (Hanly Conroy Bierstein Sheridan Fisher & Hayes, LLP) for AGFA Corp., AGFA Graphics, NV, and Eastman Kodak Co. Allan Steyer (Steyer Lowenthal Boodrookas Alvarez & Smith LLP) and Christopher M. Burke (Scott + Scott, LLP) for Mag Instrument Inc. and Fujifilm Manufacturing USA, Inc. Richard C. Pepperman, II (Sullivan and Cromwell, LLP) for Goldman Sachs & Co.

Companies: AGFA Corp.; AGFA Graphics, NV; Eastman Kodak Co.; Mag Instrument Inc.; Fujifilm Manufacturing USA, Inc.; Goldman Sachs & Co.

MainStory: TopStory Antitrust NewYorkNews

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