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ArcelorMittal to pay $90 million to settle lawsuit alleging price-fixing conspiracy

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By KEVIN NEVERS

ArcelorMittal has agreed to pay $90 million to settle a class-action lawsuit filed against it and other of the country’s top steelmakers nearly six years ago, accusing them of collusion to keep prices artificially high by reducing production.

That suit was filed in September 2008 by Standard Iron Works of Scranton, Pa., on behalf of the entire class of domestic steel consumers, of which Standard Iron Works said there may be “thousands.”

Among those named as defendants are ArcelorMittal, U.S. Steel Corporation, Nucur Corporation, Steel Dynamics Inc., AK Steel Holding Corporation, Gerdau Ameristeel Corporation, and SSAB Swedish Steel Corporation. AK Steel, Gerdau Ameristeel, and SSAB Swedish Steel previously settled, agreeing earlier this year to pay the plaintiff class $15.9 million.

In a statement released to the Chesterton Tribune on Friday, ArcelorMittal denied any culpability, called the suit’s claims baseless, and said that the company opted to settle to make the distraction go away. “ArcelorMittal continues to strongly deny any liability or wrongdoing and believes the claims are without merit,” the statement said. “In order to avoid further costs and distraction of management resources, as well as to mitigate further risk, ArcelorMittal agreed to a settlement with the plaintiff class.”

Within 10 days of a federal judge’s approving the settlement, ArcelorMittal is obligated to deposit $90 million in cash into a escrow account.

ArcelorMittal also agreed to assist the plaintiff-class counsel in prosecuting the case against the remaining defendants, “including the production of documents relating to the merits and making executive-level witnesses available for interviews and testimony.”

According to the lawsuit, what Standard Iron Works calls a “conspiracy” began in 2005, in the aftermath of the domestic steel industry’s consolidation, following “the series of bankruptcies, mergers, and acquisitions” which befell the industry. Mittal Steel, U.S. Steel, and Nucor emerged from the consolidation period controlling more than 55 percent of the raw-steel capacity in the country, the lawsuit claims.

After mid-2004, strong demand and pricing in the domestic market began to fall off, prompting executives among the defendant companies--particularly those at Mittal Steel USA--to begin discussing the possibility of limiting “total output in an effort to reduce supply and inflate the price of steel,” the lawsuit alleges.

“Throughout the class period . . . defendants met with each other to discuss the need to impose industry production ‘discipline’ and to ‘adjust their production rates to the price of steel doesn’t drop,’” the lawsuit alleges. “These and other calls to arms and pledges by and between defendants were followed with action: massive, coordinated, and unprecedented market downtime, i.e., idling and/or reducing production of steel products. By acting in concert pursuant to their conspiracy, defendants removed substantial amounts of steel products from the market, which caused prices artificially to rise.”

“As a result of ‘being squeezed by the steel mills’ market domination and shortening supply,’ direct purchasers of steel paid substantially more for steel products during the conspiracy period than they would have paid in a competitive market,” the lawsuit alleges.

Thus, for instance, one week after a trade meeting in 2005 at which Mittal CEO Lakshmi Mittal “explicitly called on the industry to ‘adjust operating levels,’” Mittal Steel USA had closed five of its 12 domestic blast furnaces, “was operating other mills at reduced rates,” and “had announced that it would extend its North American production curtailments into the third quarter,” the lawsuit alleges.

U.S. Steel, meanwhile, simultaneously cut its U.S. operating rate from around 90 percent in the first quarter of 2005 to 75 percent in the second quarter, the lawsuit alleges.

A document filed earlier this month with the U.S. District Court of the Northern District of Indiana, pertaining to the settlement, notes that the class-certification discovery took “several years to complete, with the parties producing millions of pages of documents and computerized data for more than 30 million transactions involving steel products.”

 

 

Posted 6/23/2014