By: Alexandra Cain
In Stanislaus Food Prods. Co. v. USS-POSCO Indus., the US Court of Appeals for the Ninth Circuit affirmed the summary judgment in favor of the defendants, USS-POSCO based on the plaintiff’s, Stanislaus, failure to provide specific evidence of a conspiracy between the defendants in violation of state and federal anti-trust laws.
Stanislaus, a tomato cannery, initially brought suit in California state court against its tin can supplier, Silgan and Silgan’s tin supplier UPI which is owned along with POSCO, as part of a joint venture by United States Steel Corporation (“U.S. Steel”).[i] Stanislaus alleged that U.S. Steel and UPI had formed an illegal conspiracy to fix their tin product prices. Stanislaus advanced two antitrust theories in support of this allegation; the “exit theory”, based on U.S. Steel strategically exiting the Western tin market and the “partial allocation theory” which claimed that U.S. Steel had not effectively challenged UPI on price and therefore “allocated” a superior market position to UPI. In Stanislaus’s third amended federal complaint, the defendants moved for summary judgment pursuant to Fed. R. Civ. P. 56(a). The district court concluded that there was no rational economic basis for either of Stanislaus’s theories and that the circumstantial evidence failed to support an inference of conspiracy.
On appeal, the Ninth Circuit reiterated that in order to survive summary judgment, Stanislaus needed to establish a “genuine factual dispute” by showing that “the inference of conspiracy is reasonable in light of the competing inferences of independent action or collusive action that could not have harmed [Stanislaus].”[ii] If Stanislaus’s claims didn’t make economic sense in light of the surrounding factual context, then it would have to provide “more persuasive evidence” than would be typically necessary as fact finders are prohibited from inferring conspiracies when the surrounding facts would make them implausible.[iii]
The Court first analyzed whether there was a rational, economic basis for the defendants to conspire. The Court found that while UPI would have benefited from the lack of meaningful competition in the Western markets, there was no corresponding benefit for U.S. Steel. This is because U.S. Steel’s business is based on nationwide sales contracts, with shipping locations determined by the customer. With U.S. Steel geographically neutral, in order to allocate the western market to UPI they would need to stop competing on price nationwide, a move that would have a sever negative impact on their bottom line. The Court therefore concluded that the alleged conspiracy was economically implausible as U.S. Steel would lose more than it would gain from abandoning its position in the western market.
The Court then addressed whether Stanislaus had provided enough “specific evidence”[iv] to prove that the defendants were engaged in impermissible competitive behavior. Stanislaus presented evidence of the defendants’ pricing patterns, communications between high level executives of both companies, a single spot market sale to one of Silgan’s competitors and an expert report. The Court found that while some of Stanislaus’s evidence could be interpreted negatively, in light of all the circumstances, it was overly broad. The Court stated that evidence that merely “tended” to show the market allocation agreement was not sufficient. Stanislaus had failed to meet its burden of “specific evidence” which would “exclude the possibility of permissible independent behavior”. [v] The Court affirmed the lower court’s summary judgment.
This decision reinforces the rule that a company desiring to prove the existence of anti-trust violation must provide “specific evidence” of a conspiracy between firms. This specific evidence is necessary to demonstrate that there is no other plausible, innocent explanation for the defendant firms’ behavior. The decision recognizes that in the course of everyday business, companies may take actions that are detrimental to other firms,. However, those actions do not rise to the level of an anti-trust violation unless they are accompanied by a deliberate intent to engage in unlawful market activity.
[i] Silgan was eventually dropped from the suit.
[ii] Stanislaus Food Prods. Co. v. USS-POSCO Indus., No. 13-15475, 2015 BL 33599 at *1, *3 (9th Cir. Oct.13, 2015)
(Citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986)).
[iii] Id. At *4.
[iv] Id. At *6.