United States: Fifth Circuit Upholds Verdict Against Steel Manufacturer In Steel Distributors' Per Se Illegal Group Boycott

Last Updated: December 20 2015
Article by J. Bruce McDonald and Joshua L. Fuchs

The Fifth Circuit Court of Appeals upheld a $156 million jury verdict against a U.S. Gulf Coast steel manufacturer accused of conspiring with distributors to "boycott" a new distributor by denying it access to steel. Even though the steel manufacturer was responding to pressure from distributors, this was sufficient to support the verdict of refusing to sell to the new entrant. This is a reminder for any company to exercise caution when its conduct might be seen as coordinated with other market participants.


The defendant manufacturer, for simplicity here called "Manufacturer 1," refused to sell to a newly-formed distributor, "NewCo," after other distributors threatened not to buy from Manufacturer 1 if it did business with the new competitor. The court found substantial evidence that Manufacturer 1 knowingly joined a "group boycott" conspiracy among those competing steel distributors to cut off NewCo's access to steel product. However, the court reversed a verdict against a second steel manufacturer because there was not substantial evidence that Manufacturer 2 had joined the conspiracy.

The jury found Manufacturer 1's conduct unlawful under Sherman Act § 1, using the "per se" rule that applies to those types of agreements that always or almost always are anticompetitive. The court also affirmed the NewCo's $52 million in damages for lost profits, automatically trebled to $156 million under the antitrust laws.

NewCo was founded in 2011 by two employees of rival steel distributors. NewCo and Manufacturer 1 signed a supply agreement and line of credit. Responding to the new competition, NewCo's distributor competitors discussed how to counter NewCo:

  • Distributor A: We should "do all we can to help [Distributor B] in going after [NewCo]"
  • Distributor B's president to salesman: "If you don't have any steel, you can't sell any steel."
  • In a meeting with Distributor B, Distributor A's president: "Don't worry, we're going to get [NewCo]."
  • Distributor B's CEO: We will take "all available courses of action, legally and otherwise, including notifying any mill that is selling [to NewCo], that they can no longer expect any future business from [us]."
  • The distributors each had separate discussions with Manufacturer 1. Distributor A to Manufacturer 1: "The choice was to do business with [us] or to do business with NewCo." Distributor B gave both manufacturers a similar choice.


Both manufacturers declined to sell to NewCo, which closed in 2013. NewCo then sued both the manufacturers and the distributors, alleging a per se illegal group boycott in violation of the Sherman Act. The distributor defendants settled, and at trial the jury found that both manufacturers had knowingly participated in the distributors' conspiracy to exclude NewCo.

The Fifth Circuit affirmed the jury's finding against Manufacturer 1. But the court concluded there was not enough evidence to show Manufacturer 2 had coordinated with the distributors rather than independently had decided to refuse to sell to NewCo.


The small-but-critical difference between the facts against the two manufacturers highlights the antitrust risks in responding to complaints from customers:

First, even though they were responding to pressure from distributors, the manufacturers faced antitrust risk when they decided not to sell to the new entrant. The distributors had formed a conspiracy to "boycott" NewCo by trying to cut off its supply. A manufacturer can be liable if it agrees to participate in a customer boycott (that is, joins the conspiracy), as opposed to acting independent of the conspiracy.

Second, the appeals court upheld the jury finding against Manufacturer 1 because there was "substantial evidence for the jury to conclude" that it had joined the conspiracy. The facts showed that Manufacturer 1 had agreed to supply NewCo but then reversed that decision after being pressured by the incumbent distributors. Manufacturer 1 did not just respond to complaints from the distributors, but was aware of the conspiracy and acted in response to the distributors' threats against Manufacturer 1. Having joined the conspiracy, even though not a leader of the conspiracy, Manufacturer 1 was jointly and severally liable for any harm caused by the boycott.

Third, in contrast, the court rejected the finding against Manufacturer 2, which had declined to sell to NewCo before it could have known of the other distributors' agreement to exclude NewCo. Manufacturer 2 asserted it had an "incumbency practice" to support established distributor customers. Although Manufacturer 2 had acted in a way that was consistent with the purposes of the group boycott, the evidence against it was as consistent with its acting independently.

Finally, the court rejected the argument that the boycott claim required proof of actual competitive harm under the "rule of reason." It upheld use of the per se rule, which also covers price fixing and other conduct is inherently anticompetitive. The court held that the per se rule applies to horizontal conspiracies (like this one between the incumbent distributors) to cause "suppliers or customers to deny relationships the competitors [like NewCo] need in the competitive struggle."

This case highlights how a supplier can be put at antitrust risk by customers using it for their own anticompetitive purposes. Manufacturer 1's choice not to sell to NewCo may seem rational, rejecting new business in response to complaints by existing customers. But the fact that this manufacturer responded to threats from more than one distributor, within weeks of each other, was sufficient for the jury to conclude that the manufacturer was aware of and had become a willing participant in a conspiracy among the distributors to exclude the new distributor. Company personnel given reason to suspect there may be an anticompetitive agreement among other market participants should immediately and unambiguously reject any suggestion they will cooperate and inform their legal counsel of the situation as soon as possible.

As so often is the case, this lawsuit also should remind companies of the need for caution and restraint in what they say and write in documents. "Hot" documents and communications, like those quoted above, were central to proving the existence of the boycott agreement between the distributors.

The Fifth Circuit's November 25, 2015, opinion in MM Steel v. JSW Steel and Nucor can be found here.

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.

J. Bruce McDonald
Joshua L. Fuchs
In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.