Resco Products, Inc., individually and as a class representative, brought a claim against two Chinese bauxite producers: Bosai Minerals Group and CMP Tianjin Co. Plaintiffs alleged a conspiracy to fix the price and limit the supply of refractory grade bauxite in violation of the Sherman Act, 15 U.S.C. § 1. The Court granted the defendants’ motion for summary judgment finding (1) that the Chinese government set the quotas for bauxite export; and (2) that the plaintiffs proved only parallel pricing–not an agreement to fix the price of bauxite.
Since at least the mid-1980s, a substantial percentage of the “refractory grade” bauxite consumed throughout the world has been exported from China. Defendants are two of China’s largest refractory grade bauxite exporters. Plaintiff’s § 1 claim was based on its assertion that “[d]efendants and their co- conspirators colluded to fix export prices and quotas for bauxite from 2003 to 2009.”
The evidence showed that there were discussions of and agreements reached on bauxite quotas at Bauxite Branch [trade association] meetings in China. The evidence appeared to indicate explicit member participation in a conspiracy to limit output. The Court found, however, that the Bauxite Branch lacked authority with respect to quotas, so the agreements were merely advisory opinions to the Chinese government of what the quotas should be. The Court found that since at least 2001, MOFCOM (Ministry of Commerce) has been “responsible for deciding and announcing the types and the total quota quantity of commodities subject to bidding,” not the trade association or its members. The Chinese government, not the defendants, set the quotas. These facts established a successful “sovereign compulsion” defense.
Plaintiff’s also alleged that the defendants fixed the export price of bauxite, but the Court found that plaintiffs only proved parallel pricing. Plaintiffs failed to establish sufficient “plus” factors from which a jury could infer an agreement. The Court’s opinion has a thorough discussion of the plus factors needed in the Third Circuit to permit an inference of agreement/conspiracy from parallel pricing.
[Note: If I recall the lesson Terry Wilson gave his co-conspirators (on the secretly recorded FBI video tapes) in the ADM/lysine conspiracy, once you fix the quota of exports (as the Chinese government did) you don’t need to fix prices. The reduced output will drive the price to the supra-compeptive level. If any conspirator cuts his price, it will only benefit the other conspirator(s) who will gain by selling the remaining volume at a higher price.]
The case is: RESCO PRODUCTS, INC. v. BOSAI MINERALS GROUP CO., LTD., and CMP TIANJIN CO., LTD., Civil Case 2:06-cv-00235 (W.D. Pa. filed 01/25/16) (Judge Joy Flowers Conti).