September Antitrust Bulletin

September 25, 2013

D.C. Circuit Reverses Certification of Class Following SCOTUS Decision

On Aug. 9, in In re Rail Freight Fuel Surcharge Antitrust Litigation, MDL No. 1869, No. 12-7085, 2013 U.S. App. LEXIS 16500 (D.C. Cir. Aug. 9, 2013), the U.S. Court of Appeals for the District of Columbia applied the U.S. Supreme Court’s decision in Comcast v. Behrend to reverse a district court decision certifying a class of 30,000 direct purchasers of rail shipping services, holding that proof of injury on a classwide basis was a prerequisite to certification. Plaintiffs alleged that several major railroad freight companies conspired to fix, raise, maintain or stabilize fuel surcharges on shipping from mid-2003 until 2008.

While both the 6th and 7th Circuits have downplayed the significance of Comcast and have upheld class certifications on the basis that the Supreme Court’s decision “breaks no new ground,” the D.C. Circuit appeared to breathe new life into the Supreme Court’s decision by overturning certification on the basis that plaintiffs failed to “show that they can prove, through common evidence, that all class members were in fact injured ….” Indeed, In re Rail Freight falls in line with the Supreme Court’s apparent recent disfavor of class actions and suggests a higher standard for plaintiffs seeking to pursue a class action after Comcast.

Major Airlines Hit Back at DOJ, Claim Challenge to Merger Ignores “Economic Realities”

AMR Corp., bankrupt parent company of American Airlines, and US Airways Group Inc. responded to the Department of Justice’s challenge of the merger of the two airlines, claiming that the DOJ fails to offer any “coherent rationale” supporting its lawsuit filed to block the merger. 

The lawsuit, filed on Aug. 13 by DOJ, six state attorneys general and the District of Columbia, claims that the merger, if permitted, would reduce competition and increase airfares for consumers. American and US Airways, however, claim that the challenge ignores that the combined network of the two major carriers will increase competition against other major carriers, while opening up new routes for travelers and generally meeting the increased demand of consumers.

One of DOJ’s arguments against the merger is that competition on connecting service would be reduced. The airlines argue, however, that DOJ’s focus on “more than 1,000” overlapping routes is misleading. Of the 623 domestic nonstop routes operated by American and US Airways, there is competition between the two carriers on 17 nonstops, with most of those overlaps being served by other carriers. The remaining 994 are one-stop connecting routes that American claims represent a mere fraction of the 13,000 operated by it and US Airways. American also points out that on almost half the routes cited by DOJ in its challenge, the airlines carry less than 10 percent of the passengers in those respective markets, and once the merger is complete, “almost 90% of the passengers on these routes will continue to be served by at least three airlines.”

Trial is set for November 2013.

DOJ’s Auto Parts Industry Investigation Yields Grand Jury Indictment

An executive for a Japanese auto parts manufacturer recently was indicted by a federal grand jury in Kentucky for violating U.S. antitrust laws by colluding with competitors to sell speed sensor wire assemblies for antilock braking systems. The indictment stemmed from several alleged meetings with unnamed competitors to coordinate bidding and fix prices of the speed sensors sold into the United States. Former G.S. Electech Executive Director of Sales Shingo Okuda, a Japanese citizen, was charged after G.S. Electech pleaded guilty in May 2012. The company was required to pay $2.75 million in criminal fines for its role in the conspiracy. The charges represent the 16th indictment of an executive in the DOJ’s ongoing investigation of price-fixing in the auto parts industry. Eleven companies have been charged, and over $874 million in criminal fines have been imposed, according to DOJ.

UBS Japan Fined $100 Million for LIBOR Rate Manipulation

On Sept. 18, a U.S. federal judge in Connecticut approved a $100 million fine payable by UBS Securities Japan, the latest development in the global LIBOR rate manipulation investigation. Authorities have been investigating more than a dozen banks that they believe falsified reports to influence benchmark interest (LIBOR) rates. Prosecutors largely have focused on Japanese units because email traffic exposed how traders there had routinely manipulated rates to increase profits.

The fine imposed on UBS Japan (jointly proposed by prosecutors and UBS Japan) follows the foreign subsidiary’s guilty plea to felony wire transfer in December 2012, the first global bank subsidiary to plead guilty in more than two decades. The fine is in addition to almost $1 billion in regulatory penalties and disgorgement already imposed.

The guilty pleas secured by regulation authorities may be indicative of a larger strategy by the DOJ to prosecute big banks and the financial industry in general following criticism for not pursuing Wall Street more vigorously after the 2008 financial crisis.

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