McWane, Inc. Applauds FTC Judge's Rejection of Collusion Accusations
BIRMINGHAM, Ala., May 8, 2013 /PRNewswire/ -- In a ruling released publicly on May 8, 2013, Administrative Law Judge D. Michael Chappell firmly rejected the Federal Trade Commission's accusations that McWane, Inc. colluded or conspired with its competitors to fix prices in the water works fittings markets. Judge Chappell found that McWane priced independently at all times and routinely priced below rival suppliers "in order to beat prices being offered by its competitors, which is a pro-competitive purpose." Noting that "Complaint Counsel's daisy chain of assumptions fails to support or justify an evidentiary inference of any unlawful agreement involving McWane," he rejected the FTC's claim that McWane was involved in a conspiracy.
Judge Chappell also rejected the FTC's claim that McWane engaged in any price signaling or "invitations to collude." Finally, the Judge ruled that the Ductile Iron Fittings Research Association ("DIFRA") acted in a pro-competitive fashion by gathering aggregated, non-price data through a third party accounting firm, and did not act unlawfully.
"Judge Chappell's conclusions that we did not collude or conspire to fix prices confirms what we have said all along," said McWane, Inc. President G. Ruffner Page, Jr. "We are very pleased that Judge Chappell dismissed these unwarranted and speculative allegations and that he recognized that McWane's conduct was pro-competitive and legal."
Three years ago the Commission began an examination of McWane's marketing programs in its water works fitting business as a result of complaints from a foreign competitor. This importer of products from China, Korea and India claimed that a modest and routine rebate that McWane provided to its loyal customers was somehow anti-competitive. The Commission also raised questions about the fact that, like almost all other trade associations, the short-lived association for the fittings industry gathered limited, stale, and perfectly proper statistics about the tons of fittings sales in the U.S. Later, the FTC also accused McWane of engaging in price fixing and collusion in the fittings market, claims that Judge Chappell rejected. These proceedings involve an industry that remains highly competitive, and remains under assault from foreign importers who continue to flood the market and push the domestic industry and hundreds of American jobs closer to extinction.
Although this ruling confirmed that McWane did not conspire to fix prices, the court did recommend a finding that McWane's modest, brief and voluntary rebate program limited the ability of an importer of foreign fittings to fully participate in domestic fittings jobs funded by the American Relief and Recovery Act (The Stimulus Act). However, and as acknowledged by one of the FTC's own Commissioners, this conclusion conflicts with established legal precedent. As a result, McWane will appeal this finding.
Specifically, on two occasions former Commissioner Rosch dissented from the FTC's pursuit of this claim, concluding that there was nothing illegal or unfair about McWane's rebate program. When the complaint was filed by the FTC he expressed his view that: "I do not think that the Complaint against McWane adequately alleges exclusive dealing as a matter of law. In particular, there is case law ... blessing the conduct that the complaints charge as exclusive dealing." Later he again rejected the FTC's theory, stating that "Evaluated under any objective standard, and viewing all inferences in a light most favorable to Complaint Counsel (as we must), the undisputed facts demonstrate that Star's entry was not de minimis or trivial. ... Thus, the fact that Star attained a 10 percent share of the domestic-only DIPF market - - from zero share - - in less than three years undermines Complaint Counsel's basic theory" and "would not lead a rational trier of fact to find for Complaint Counsel."
"Our modest, short term rebate was a price cut designed to benefit and reward our customers for helping us save the jobs of our employees during a difficult economic time," said Page. "To characterize that as unfair competition under Section 5 flies in the face of the overwhelming evidence at trial and established judicial precedent."
The FTC's theory rests upon speculation that the foreign competitor might have bought or built its own foundry to manufacture fittings in the absence of McWane's rebate. This suggestion ignores the realities and history of the fittings market, including the fact that domestic manufacturing of waterworks fittings has been in severe decline for over a generation. In the 1980s, almost 100 percent of waterworks fittings were domestic and manufactured in multiple foundries around the country. By 2008, the percentage of domestically manufactured fittings had declined to less than 25 percent. In the face of this dramatic decline in sales, all of the other manufacturers of domestic fittings closed their foundries and moved their production overseas. McWane alone continued to fight for American jobs as the only remaining US manufacturer of a full range of small, medium, and large waterworks fittings. The claim that a foreign importer would have invested millions of dollars of scarce capital in this declining industry to take advantage of the one-year ARRA program lacks support and is completely illogical.
This case is yet another example of a regulatory agency unreasonably stretching the boundaries of its enforcement powers in a way that discourages companies from investing in the US and creating jobs. "It is unfortunate that with our economy and the livelihoods of so many Americans in danger, our own government would choose to attack the very people trying to fix these problems," said Page.
About McWane Inc.
McWane is the leading American manufacturer of ductile iron pipe, valves, hydrants, and fittings, and its products make up the backbone of vital water distribution and wastewater treatment systems throughout North America, dependably providing the U.S. with clean drinking water. McWane is a family-owned business based in Birmingham, Alabama, and recognized as an innovator in protecting the environment as well as the health and safety of our company's 4,200 U.S. team members. The company operates 25 manufacturing plants including 13 iron foundries across the United States, Canada, Australia, and China.
McWane remains committed to American manufacturing. Many other companies in the industry have moved their manufacturing operations overseas at the expense of American jobs and to avoid U.S. environmental and workplace health and safety standards. McWane, however, has invested hundreds of millions of dollars to modernize its U.S. plants and make them safe, efficient, and compliant, preserving thousands of well-paying American jobs and the futures of many communities in the process.
SOURCE McWane, Inc.