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From Antitrust Law Daily, January 28, 2016

Pool products purchasers’ horizontal conspiracy claim sinks

By Greg Hammond, J.D.

Allegations that pool products manufacturers engaged in a horizontal price fixing conspiracy among themselves and with a distributor were dismissed by the federal district court in New Orleans. The court reasoned that although individuals and companies that directly purchased pool products from the distributor adequately alleged parallel pricing, the direct purchasers’ circumstantial evidence did not tend to exclude the possibility that the manufacturer defendants independently raised their free freight minimums (In Re Pool Products Distribution Market Antitrust Litigation, January 27, 2016, Vance, S.).

The direct purchasers claimed that Pool Corp.—the largest distributor of pool products in the United States—and pool products manufacturers Pentair Water Pool and Spa, Inc., Hayward Industries, Inc., and Zodiac Pool Systems, Inc. unlawfully conspired to increase the minimum purchase amount necessary for customers to qualify for free freight on their pool products purchases from $10,000 to $20,000. Pool Corp. moved for summary judgment on the per sehorizontal conspiracy claim.

No direct evidence of conspiracy. The court first determined that there was no direct evidence that the manufacturer defendants agreed among themselves to the increase in free freight minimums. An email by Pool Corp.’s CEO, which stated that “Pentair, Hayward, and Jandy [now owned by Zodiac] have all agreed to the $20K freight minimum with NO exceptions” and that “I need to know if anyone does not comply,” did not constitute direct evidence of a horizontal agreement. The court noted that the $20,000 free freight minimums applied equally to distributors and to other customers, and that the email could be read to mean that each manufacturer defendant agreed separately with Pool that its new free freight minimum was $20,000 and that the manufacturers would not make exceptions for other customers. In addition, the one-time use of the word “agree” could not be unambiguously read to mean that the manufacturer defendants agreed with each other, as well as with Pool, to fix prices, the court determined.

Parallel pricing. Evidence demonstrating that the manufacturer defendants announced their free freight minimum increases within a four-month period and that the increases all took effect within four months of each other was sufficient to demonstrate parallel pricing. In order to state a valid claim for per se horizontal price fixing, however, the direct purchasers were also required to provide sufficient evidence of certain “plus factors.”

Evidence does not support plus factors. The direct purchasers claimed that four plus factors supported their horizontal price fixing conspiracy claim, including: (1) the manufacturer defendants acted contrary to their individual interest; (2) the manufacturer defendants’ purported business justifications were pretextual; (3) the manufacturer defendants were motivated to conspire; and (4) the structure of the pool products industry was conducive to collusion. None of the circumstantial evidence, however, supported the plus factors.

First, the court determined that increasing free freight minimums made good business sense for the manufacturer defendants because higher free freight minimums encouraged all customers to make larger, less frequent orders, which could potentially decrease shipping costs and increase profits. Second, despite claims that none of the manufacturer defendants’ formal announcements cited fuel costs or efficiency as the reason for the free freight increase, the plaintiffs failed to offer any specific evidence to refute those proffered business justifications. Lastly, the direct purchasers failed to present sufficient evidence that the manufacturer defendants acted irrationally by increasing their free freight minimums.

The case is No. 2:12-md-02328-SSV.

Attorneys: Russ M. Herman (Herman, Herman, Katz & Cotlar, LLP) for Direct Purchaser Plaintiffs. David H. Bamberger (DLA Piper, LLP) for Defendants’ Lead Counsel. Wayne J. Lee (Stone, Pigman, Walther, Wittmann, LLC) for Manufacturer Defendants’ Liaison Counsel.

Companies: Pool Corp.; Pentair Water Pool and Spa, Inc.; Hayward Industries, Inc.; Zodiac Pool Systems, Inc.

MainStory: TopStory Antitrust LouisianaNews

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