Valspar Corp. v. E.I. Du Pont De Nemours & Co.

873 F.3d 185, 2017 U.S. App. LEXIS 19015
CourtCourt of Appeals for the Third Circuit
DecidedSeptember 14, 2017
Docket16-1345
StatusPublished
Cited by33 cases

This text of 873 F.3d 185 (Valspar Corp. v. E.I. Du Pont De Nemours & Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Third Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Valspar Corp. v. E.I. Du Pont De Nemours & Co., 873 F.3d 185, 2017 U.S. App. LEXIS 19015 (3d Cir. 2017).

Opinions

OPINION OF THE COURT

HARDIMAN, Circuit Judge

This appeal involves an alleged conspiracy to fix prices in the titanium dioxide industry in violation of Section 1 of the Sherman Act. Appellant Valspar, a purchaser of titanium dioxide, claimed Appel-lee DuPont conspired with other titanium dioxide suppliers to fix prices. Valspar argued that the price-fixing agreement was made manifest primarily by thirty-one parallel price increase announcements issued by the suppliers. DuPont countered that the parallel pricing was not the product of an agreement, but rather the natural consequence of the marketplace. Specifically, DuPont posited that because the market for titanium dioxide is an oligopoly, the price movement was caused by “conscious parallelism”—an economic theory that explains oligopolists will naturally follow a competitor’s price increase in the hopes that each firm’s profits will increase. The District Court agreed with. DuPont and granted its motion for summary judgment. We will affirm.

I

The facts of this case were essentially undisputed in the District Court. The parties agree that the market for titanium dioxide is an oligopoly. Titanium dioxide is a commodity-like product with no substitutes, the market is dominated by a handful of firms, and there are substantial barriers to entry.

Valspar, a large-scale purchaser of titanium dioxide, alleges that a group of titanium dioxide suppliers conspired to increase prices. It claims that the conspiracy began when DuPont—the largest American supplier—joined the Titanium Dioxide Manufacturers Association (TDMA) in 2002, when the association opened participation to non-European companies; Shortly after joining the TDMA, DuPont announced a price increase. Within two weeks, DuPont’s price - increase was matched by Millennium, Kronos, and Huntsman (other TDMA members and members of the alleged conspiracy). This' began what Valspar alleged to be the “Conspiracy Period”—twelve years during which the alleged conspirators announced price increases 81 times.

Valspar claims the conspiracy ended in late 2013 when DuPont exited the TDMA. According to Valspar’s ‘ calculations, the conspirators inflated the cost of titanium dioxide by an average of 16%. Because Valspar purchased $1.27 billion of titanium dioxide from DuPont during the relevant period, it claims it was overcharged to the tune of $176 million.

II

In 2010, a class of titanium dioxide purchasers filed a price-fixing action against the suppliers in the United States District Court for the District of Maryland. Vals-par opted out of that class and the remaining defendant suppliers' settled the case after they were denied summary judgment. See In re Titanium Dioxide Antitrust Litig., 959 F,Supp.2d 799, 832 (D. Md. 2013). Valspar then filed its' own claim in the United States District Court for the District of Minnesota, which was subsequently severed. Valspar settled all claims except this one against DuPont, which was transferred to the United States District Court for the District of Delaware, where DuPont moved for summary judgment. Although presented with “substantially the same record ... as in the Maryland Class Action,” the District Court reached a “different conclusion.” Valspar Corp. v. E.I. Du Pont De Nemours, 152 F.Supp.3d 234, 252 (D. Del. 2016). Reviewing the record and our Court’s precedents, the District Court found that “evidence of an actual agreement to fix prices” was “lacking.” Id. at 253. Reasoning that such evidence is necessary for a plaintiff to survive summary judgment, the District Court granted DuPont’s motion. Id.

III

The District Court had jurisdiction under 28 U.S.C. § 1331. We have appellate jurisdiction under 28 U.S.C. § 1291. Our standard of review is intertwined with substantive antitrust law and the parties dispute its contours. We therefore begin by reviewing the applicable law.

A

Section' 1 of the Sherman Act prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade.” 15 U.S.C. § 1. Unlike § 2- of the Sherman Act, which addresses monopolization and other illegal unilateral conduct, § 1 applies only when there is an agreement to restrain trade; so a single firm’s independent action, no matter how anticompetitive its aim, does not implicate § 1. Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984). While some offenses under § 1 are reviewed’for reasonableness, Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 885-86, 127 S.Ct. 2705, 168 L.Ed.2d 623 (2007), others have no possible competitive virtue and are therefore per se illegal; Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 19-20, 99 S.Ct. 1551 (1979). Horizontal price fixing (ie., price fixing among competitors) is one such per se violation because it is a “threat to the central nervous system of the economy.” United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 224 n.59, 60 S.Ct. 811, 84 L.Ed. 1129 (1940).

Oligopolies pose a special problem under § 1 because rational, independent actions taken by oligopolists can be nearly indistinguishable from horizontal price fixing. This problem is the result of “interdependence,” which occurs because “any rational decision [in an oligopoly] must take into account the anticipated reaction of the other firms.” In re Flat Glass Antitrust Litig., 385 F.3d 350, 359 (3d Cir. 2004) (alteration omitted) (quoting Philip E. Areeda & Herbert Hovenkamp, Antitrust Law 207 (2d. ed. 2000)). In a market with many firms, “the effects of any .single firm’s price ánd output decisions ‘would be so diffused among its numerous competitors that they would not be aware of any change.’” Id. (quoting Areeda & Hovenkamp, supra, at 206). The opposite is true in an oligopoly, where any price movement “will have a noticeable impact on the market and on its rivals.” Id. (quoting Areeda & Hovenkamp, supra, at 206); see also In re Text Messaging Antitrust Litig., 782 F.3d 867, 875 (7th Cir. 2015) (oligopolists “watch each other like hawks”).

This “oligopolistic rationality” can cause supracompetitive prices because it discourages price reductions while encouraging price increases. A firm is unlikely to lower its price in an effort to win market share because its competitors will quickly learn of that reduction and match it, causing the first mover’s profits to decline and a subsequent decline in the overall profits of the industry. Flat Glass, 385 F.3d at 359. Similarly, if a firm announces a price increase, other market participants will know that “if they do not.

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873 F.3d 185, 2017 U.S. App. LEXIS 19015, Counsel Stack Legal Research, https://law.counselstack.com/opinion/valspar-corp-v-ei-du-pont-de-nemours-co-ca3-2017.