United States: Fifth Circuit Considers Independent Conduct On Vertical Agreements To Facilitate Horizontal Conspiracy

Last Updated: December 9 2015
Article by Deirdre A. McEvoy and Amy N. Vegari

On November 25, 2015, the Court of Appeals for the Fifth Circuit affirmed the $156 million antitrust judgment in MM Steel, L.P. v. JSW Steel (USA) Incorporated; Nucor Corporation, upholding a jury verdict that found one defendant steel manufacturer (JSW Steel) liable for participation in an illegal conspiracy to block distributor MM Steel from entering the market. The Court of Appeals reversed the jury verdict as to defendant Nucor, another steel manufacturer. In so doing, the Fifth Circuit identified evidence that does—and does not—tend to exclude the possibility of independent conduct for purposes of finding a violation of § 1 of the Sherman Act. The court also underscored that per se liability (and not the rule of reason) attaches to horizontal conspirators' use of vertical agreements to shut competitors out of the market.

MM Steel is a steel distributor created in 2011 by two salesmen who had previously worked for other distributors. JSW and Nucor are steel manufacturers with a history of business with MM's competitors. After JSW and Nucor refused to sell steel to MM, MM sued those manufacturers and its competitor distributors in the Southern District of Texas. MM alleged that the competitor steel distributors had formed an illegal horizontal conspiracy to prevent MM from entering the market, and that manufacturers JSW and Nucor joined the conspiracy by agreeing to refuse business with MM—all in contravention of § 1 of the Sherman Act.

After a trial that lasted over a month, and deliberations that lasted only half a day, the jury agreed. It awarded $52 million in damages, which the District Court trebled. Only JSW and Nucor appealed; the other defendants settled.

On appeal, the Fifth Circuit held that the record showed substantial evidence that JSW entered into a conspiracy with MM's competitor distributors to refuse to deal with MM. Of course, the court explained, quoting the Supreme Court's decision in Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (1984), a manufacturer "generally has a right to deal, or refuse to deal, with whomever it likes." However, as Monsanto made clear, a company's refusal to deal must be independent conduct. Without direct evidence of JSW's participation in the conspiracy, MM had to prove that JSW's refusal to deal was a result of anticompetitive conduct by offering evidence "that tends to exclude the possibility of independent conduct."

The appeals court highlighted several facts that tended to exclude the possibility that JSW acted independently in refusing to deal with MM:

  • JSW met with executives from MM's competitors, who threatened to terminate their business with JSW if it dealt with MM;
  • JSW contacted a competitor about increasing its business with them before ending business with MM; and
  • JSW had actually agreed in writing to do business with MM and had even extended MM a line of credit.

Importantly, the Fifth Circuit stressed that the timing of events leading up to JSW's terminating its relationship with MM was evidence that JSW's conduct was not independent. Specifically, JSW received threats from MM's competitors within several weeks of each other, and JSW tried to increase its business with an MM competitor just one day before terminating business with MM. Moreover, the court called JSW's termination of business "abrupt."

On the other hand, the Fifth Circuit held, there was no such substantial evidence when it came to Nucor. In particular, what was missing in the case against Nucor was timing that tended to exclude the possibility of independent conduct—in fact, in Nucor's case the timing of events supported a finding of independent conduct. Record evidence showed that the agreement between MM's competitor distributors took place on September 8, 2012. However, Nucor had made its decision not to deal with MM earlier, on September 2, 2012. And indeed MM presented no evidence that Nucor was aware of the distributors' horizontal agreement. At most, the court explained, Nucor's refusal to deal with MM was "consistent with a vertical agreement with . . . a longstanding customer."

The Fifth Circuit also addressed the argument that the trial court erred in instructing the jury that, if JSW and Nucor joined the competitor distributors' conspiracy, JSW and Nucor would be per se liable under § 1 of the Sherman Act. JSW cited Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007) for the proposition that the rule of reason should have applied instead. Acknowledging Leegin's statement (in dicta) that there is no per se rule for vertical agreements that facilitate horizontal conspiracies to increase prices, the Fifth Circuit stressed that Leegin applies to cases of price regulation. Underscoring that per se liability has always applied where horizontal competitors use vertical agreements to keep a competitor out of the market, the Fifth Circuit doubted that "the Supreme Court silently overruled this line of cases." The court acknowledged a Circuit Court opinion (Toledo Mack Sales & Serv., Inc. v. Mack Trucks, Inc., 530 F.3d 204 (3d Cir. 2008)) that applied the Leegin dicta in a case not involving price fixing, but noted that Toledo Mack Sales was distinguishable in an important way: in that case, there was no finding that the manufacturers joined a horizontal group boycott.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions