On Feb. 6, 2014, the Federal Trade Commission dismissed six of the seven unfair competition claims it brought under Section 5 of the Federal Trade Commission Act against McWane, Inc., the leading domestic producer of iron pipe fittings in the United States. In its January 2012 complaint, the FTC alleged that McWane conspired with its two primary competitors to fix prices for certain small- and medium-diameter iron pipe fittings (three counts), and that it unlawfully maintained its monopoly power by trying to keep a competitor out of a narrower market for domestically produced fittings (four counts). FTC Administrative Law Judge D. Michael Chappell initially dismissed the FTC's collusion claims after finding no evidence of price fixing, but ruled in the FTC's favor with respect to its monopolization claims. Both parties appealed the ALJ's decision to the full Commission. Despite harsh criticism from certain commissioners that the ALJ's findings as to price fixing were "incredible" and ignored certain evidence, the Commission ultimately issued an opinion dismissing only six of the seven claims against McWane. With respect to the remaining claim, the Commission held that McWane maintained its monopoly power in the domestic fittings market through an exclusionary distribution policy that violated Section 5 of the FTC Act.
The Commission's opinion reflects the FTC's first loss in a nearly two-decade-long winning streak of administrative complaint actions. Unlike the U.S. Department of Justice, which brings its antitrust cases in federal district court, the FTC brings suit in its own administrative court—effectively making it both prosecutor and judge. Despite a long history of siding with its own agency attorneys, the Commission in McWane effectively ruled against itself by ratcheting back the ALJ's decision to a very narrow FTC victory. The implications of McWane, however, are unknown and may not necessarily reflect a substantial shift in the FTC's enforcement approach. For one, the dismissal of the collusion claims against McWane was the result of 2-2 deadlock along party lines and the absence of a fifth commissioner to cast a deciding vote—a seat that remains open as the result of Senate inaction on the pending Democratic nominee. Moreover, without a majority, the commissioners' strong and competing views leave private actors without clear guidance as to whether certain arrangements will garner attention from antitrust regulators.
The FTC's full opinion can be found here.
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