The U.S. Court of Appeals for the 7th Circuit, sitting in Chicago, in an 8-0 decision, has sent a potash antitrust case against major global producers back to the U.S. District Court for the Northern District of Illinois, Eastern Division. The defendants – Potash Corp. of Saskatchewan Inc., The Mosaic Co., Agrium Inc., Uralkali, Belaruskali, Silvinit, and IPC – are accused of price-fixing. The plaintiffs in the class action suit, Minn-Chem Inc. v. Agrium Inc., are U.S. potash buyers, who alleged that the defendants, which produce 71 percent of the world’s potash, initiated a cartel that beginning in mid-2003 drove prices up some 600 percent by 2008.
The suit was a merger of earlier cases filed in 2008. Plaintiffs included Minn-Chem Inc., Gage’s Fertilizer and Grain Inc., Kraft Chemical Co., Shannon D. Flinn, Westside Forestry Services, Thomasville Feed & Seed Inc., Kevin Gilliespie, Gordon Tillman, Feyh Farms Co., William H. Coaker Jr., and David Baier.
The Court of Appeals reversed its own two-judge panel, which last fall had decided that the complaint failed to meet the requirements of the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA) (GM Oct. 3, 2011, p. 14). However, the Court of Appeals agreed to rehear the case, with eight of its eleven judges weighing in. In the meantime, the U.S. Department of Justice and the Federal Trade Commission filed an Amici Curiae brief in support of neither party, though the brief did argue for a broader interpretation of the FTAIA. This time the Court found that the district court correctly ruled that the complaint does state a claim under federal antitrust laws, including the FTAIA. While ruling that the case could proceed, the lower court had allowed the appeal, prior to discovery or a trial. Now the case will go back for discovery, as a prelude to a trial, assuming no other motions and/or rulings derail it in the meantime.
“The company has a policy of strict compliance with antitrust and competition laws wherever it does business,” a PotashCorp spokesman told Green Markets. “PotashCorp intends to vigorously defend itself against these claims, which it considers to be without foundation.”
“We respectfully disagree with the court’s ruling and intend to vigorously defend our interests in front of the federal district court,” said Rich Mack, Mosaic executive vice president, general counsel.
Agrium said it was still awaiting word from its attorneys. Other defendants have yet to respond.
The North American potash industry is no stranger to antitrust cases, having won some and lost some in the past.
In language in stark contrast to its decision last fall, the Court said, “The inference from these allegations is not just plausible but compelling that the cartel meant to, and did in fact, keep prices artificially high in the United States.” It also said it was satisfied that the allegations suffice at this stage to support a plausible story of concerted effort.
“It is objectively foreseeable that an international cartel with a grip on 71 percent of the world’s supply of a homogeneous commodity will charge supracompetitive prices, and in the absence of any evidence showing that arbitrage is impossible (and there is none here), those prices (net of shipping costs) will be uniform throughout the world.
Higher prices cannot be divorced from reductions in supply, and so the effects here are a rationally expected outcome of the conduct stated in the complaint.
“The total world market for potash, in which the United States is an important consumer, is allegedly under the thumb of a global cartel consisting primarily of the companies listed above,” said the Court. “This cartel restrained global output of potash in order to inflate prices. The cartel members used a rolling strategy: