Star Pipe Products, Ltd., a leading supplier of ductile iron pipe fittings, which are used in municipal water systems around the United States, has agreed to settle Federal Trade Commission charges that it conspired with the two other largest manufacturers to increase the prices at which pipe fittings were sold nationwide. Under a proposed order settling the FTC’s charges, Star will be barred from similar anticompetitive conduct in the future.
The FTC’s settlement with Star resolves charges that beginning in 2008 Star participated in an illegal conspiracy with McWane Inc. and Sigma Corporation to fix the price at which imported ductile iron pipe fittings are sold in the United States. The case is part of the FTC’s ongoing efforts to promote competition, benefitting U.S. consumers by keeping prices low and the quality and choice of goods and services high.
In January 2012, the FTC charged that the three companies illegally conspired to set and maintain prices for pipe fittings, and that McWane illegally maintained its monopoly power in the market for U.S.-made pipe fittings. At the same time as the complaint was filed, Sigma settled the FTC’s charges, and has agreed not to engage in similar anticompetitive tactics. With Star’s agreement to settle, only the FTC’s case against McWane remains ongoing.
Ductile iron pipe fittings, known as DIPF, are used by municipal water systems to change the diameter and direction of pipelines carrying drinking and wastewater, and are sold by McWane, Star, and Sigma through specialty wholesale distributors. McWane and its largest competitors in the DIPF market, Sigma and Star, all sell imported DIPF. In addition, McWane was the only domestic producer of a full line of small and medium-sized DIPF until Star entered the market for U.S.-made DIPF in 2009.
In its complaint, the FTC charged that Star and Sigma were invited by McWane to collude with it beginning in early 2008, when it communicated to them a plan to raise and fix prices for imported DIPF. Star, along with Sigma, accepted McWane’s invitation to collude, the FTC alleges, and to further the conspiracy, Star and Sigma each raised its prices for imported DIPF in January 2008 and again in June 2008. Between June 2008 and January 2009, according to the FTC, the three firms exchanged information documenting the volume of their monthly sales through a trade association called the Ductile Iron Fittings Research Association (DIFRA), and each company used this information to monitor whether the other co-conspirators were adhering to the terms of their collusive arrangement.
The proposed settlement order against Star is designed to prevent a recurrence of its anticompetitive tactics. It contains provisions similar to the January 2012 order against Sigma, and would prohibit Star from:
- participating in or maintaining any conspiracy to fix, raise, or stabilize the prices at which DIPF are sold in the United States, or to allocate or divide markets, customers, or business opportunities for DIPF;
- soliciting or inviting any competitor to participate in any such anticompetitive conduct; and
- participating in or facilitating any agreement between competitors to exchange competitively sensitive information, such as the sales information exchanged through DIFRA, and from otherwise disclosing such information to competitors, except in certain circumstances.
Under the proposed order, the prohibitions on Star’s communication of competitively sensitive information with competitors contains one exception. Star may participate in an information exchange with competitors in the DIPF market if the information is structured in such a way that it will minimize the risk that it will facilitate collusion among competitors. For example, Star may participate in an information exchange if: 1) the submitted data and related industry statistics being exchanged relate solely to transactions that are least six months old; 2) the industry statistics being exchanged are sufficiently aggregated or anonymous so that no competitor receiving such statistics can, directly or indirectly, identify the data submitted by any other competitor; and 3) other conditions are met, as described in the order.
The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 4-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, through April 20, 2012, after which the Commission will decide whether to make the proposed consent order final.
Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section. Comments can be submitted electronically. Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.
The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook and follow us on Twitter.
(FTC Docket No. 9351)
(Star Consent.final)