Caustic Soda Makers Anticompetitive Actions Class Action

How do you raise prices for a substance in a market with low margins, declining prices, and an oversupply—like the one for caustic soda a few years ago? According to the complaint for this antitrust class action, some makers decided to take concerted, anticompetitive measures, from the fourth quarter of 2015 to the present.

The class for this action is all persons and entities who bought caustic soda in the US directly from one or more of the defendants in this case or their co-conspirators (or the co-conspirators’ parent companies, predecessors, subsidiaries, or affiliates), at any time between October 1, 2015 and the present.

Caustic soda, also known as sodium hydroxide, is sold in solid and liquid forms and used in many different industries, including paper and pulp, chemicals, soaps and detergents, aluminum, food processing, textiles, water treatment, mineral oils, pharmaceuticals, and recycling.

Ninety percent of domestic caustic soda is provided by the companies named in this complaint: Olin Corporation, KA Steel Chemicals, Occidental Petroleum Corporation, OxyChem, Westlake Chemical Corporation, Shin-Etsu Chemical Company, Shintech Incorporated, Formosa Plastics Corporation, and Formosa Plastics Corporation USA.

Between 2012 and 2015, the price of caustic soda either declined or remained flat, and an oversupply existed, making industry margins poor. The complaint alleges, “These conditions motivated the Defendants to conspire and combine to restrict domestic supply; to fix, raise, maintain, and stabilize the price at which Caustic Soda was and continues to be sold; and to allocate customers in violation of Section 1 of the Sherman Act…”

The complaint claims that, from the fourth quarter of 2015 on, the companies began raising prices in concert, in spite of low demand, stable or declining costs, and excess capacity. To keep this going, the complaint says, “[t]hey also at times refused to supply customers, put them on allocation, or refused to bid on contracts while falsely claiming supply was tight or scarce.” The companies agreed to increase prices, the complaint says, and not to compete on price to take customers from each other.

How did they do this? The complaint says they had secret supply agreements and manipulated a price index. They also shared information that would have been secret in a competitive market, such as future strategy, supply, capacity, and pricing. The nature of the market also helped: It had high concentration, high barriers to entry, interchangeable products, inelastic and weak demand, many buyers with weak buying power, and easy ways to exchange information.

As evidence, the complaint offers the fact that between the fourth quarter of 2012 and the third quarter of 2015, the price of caustic soda declined by 6%, but from the fourth quarter of 2015 on, the market saw across-the-board increases that raised the price by more than 50%.

Article Type: Lawsuit
Topic: Antitrust
Tags: Antitrust, Collusion and Price Fixing, Price Manipulation, Requiring Consumer to Pay Higher Prices