"Explosives Antitrust Litigation Continues," Crowell & Moring Mining Law Monitor
Co-Authors: Richard McMillan, Kent Gardiner and David M. Schnorrenberg.
Mining industry victims of antitrust violations by the explosives industry have begun to receive compensation from explosive industry defendants in the Commercial Explosives Antitrust Litigation. That case, pending before the United States District Court for the District of Utah, is perhaps the largest current litigation involving the mining industry. At issue are one or more conspiracies by manufacturers and distributors of commercial explosives in violation of the United States antitrust laws. As the largest volume users of explosives in the United States, mining companies were the principal victims of the conspiracy. To date, the publicly reported settlements alone total $75 million.
The Commercial Explosives Antitrust Litigation had its genesis in a United States Department of Justice investigation of the explosives industry that began in 1992. Three years later, in the fall of 1995, two of the largest manufacturers of explosives pled guilty to conspiracies to fix prices, rig bids, and allocate customers, and paid criminal fines of $15 million and $10 million, respectively, which at the time were the largest fines ever collected by DOJ for antitrust violations. Those fines have since been eclipsed by others, but still rank among the largest fines ever collected. Several more guilty pleas by other manufacturers and distributors followed the initial two pleas, resulting in a total of over $30 million in criminal penalties. The DOJ has also pursued criminal convictions of various corporate officers participating in the conspiracy. Three have pled guilty to violations of the antitrust laws and been fined tens of thousands of dollars. In addition, the criminal trial of a fourth high-ranking officer of a company that pled guilty to antitrust violations was recently completed. Although the jury acquitted the officer, the government clearly proved the existence of a conspiracy to fix prices, rig bids, and allocate customers in the coal fields of Kentucky, Indiana, and Illinois.
As often happens after the announcement of significant guilty pleas and fines, several class action lawsuits were filed around the country. In February 1996, they were consolidated in one multi-district litigation ("MDL") proceeding for coordinated pre-trial discovery. Given the large volume of explosives purchases that many mining companies made, our clients and a number of other companies decided to opt out of the consolidated class action and bring their own cases, which have been coordinated with the class in the MDL proceeding in the federal court in Utah. At this report, the class litigation has essentially reached its conclusion, as the class plaintiffs are awaiting approval of their last settlement. The opt-out litigations are currently in the midst of depositions with merits discovery scheduled to end in the middle of next year.
The case is enlightening in several respects. The extensiveness of the government's investigation and the magnitude of the fines levied demonstrate the government's renewed interest in and commitment to antitrust enforcement. Moreover, several of the defendants are now at risk because they failed to make sure that company personnel were well-acquainted with the antitrust laws and failed to put procedures in place that would have helped prevent the antitrust violations from happening in the first place. The serious consequences that can result from violations of the antitrust laws - including multi-million dollar fines, prison terms, and several years of government investigation and civil litigation that drain valuable company resources and distract the company from its business - are all very much in evidence in the Commercial Explosives Antitrust Litigation. Indeed, it is refreshing to be representing the plaintiffs in this litigation, who risk none of the potential adverse consequences antitrust defendants face. Finally, the Commercial Explosives Antitrust Litigation is also remarkable for the longevity and extensiveness of the conspiracies uncovered. Even sophisticated purchasers can be victims when a conspiracy is as pervasive as this one apparently was.