Pacific Steel Group vs. Commercial Metals Company et al

Case Background

On October 30, 2020, Plaintiff  Pacific Steel Group filed a Antitrust lawsuit in the United States District Court, California Northern (Case number: 4:20cv7683). This case was assigned to District Judge  Haywood S Gilliam, Jr.  and referred to Magistrate Judge Kandis A. Westmore.

Cause

Pacific Steel Group (PSG), established in San Diego in 2014, encountered systematic anticompetitive practices in the steel reinforcing bar (rebar) manufacturing and fabrication markets. Commercial Metals Company (CMC), a dominant player in rebar manufacturing, orchestrated a series of actions through its subsidiaries, CMC Rebar and CMC Steel US, along with Gerdau Reinforcing Steel (GRS), to prevent PSG’s market expansion. The case centered on the crucial rebar manufacturing and Furnish-and-Install markets across California, Arizona, Nevada, and Utah.

The conflict escalated when PSG planned to construct California’s first state-of-the-art rebar micro mill. In response, CMC formed an exclusionary agreement with Danieli Corporation, the world’s sole experienced manufacturer of continuous-feed reinforcing steel rebar micro mills. This agreement blocked any competitor from acquiring Danieli’s micro mill technology within a 500-mile radius of Rancho Cucamonga, California, for 69 months. This deal disrupted the rebar manufacturing market, effectively stifling new technological advancements and competition in the region.

Injuries

The anticompetitive conduct created significant barriers to entry in the rebar manufacturing sector. PSG lost its opportunity to achieve vertical integration, which would have reduced operational costs and increased market efficiency. CMC’s predatory pricing strategy, executed through CMC Rebar and GRS, specifically targeted PSG’s growth potential. The rebar fabrication industry also suffered as these actions hindered price competition and technological progress.

PSG experienced direct competitive harm when CMC Rebar and GRS implemented their below-cost pricing strategy. This predatory pricing scheme specifically targeted projects where PSG competed, preventing the company from achieving necessary economies of scale. As a result, the rebar manufacturing sector stagnated, with potential innovations and cost reductions blocked by the exclusionary agreement.

Damages

The anticompetitive conduct resulted in measurable financial damages across several areas. PSG lost significant profits from projects diverted through predatory pricing in the rebar Furnish-and-Install market. The company also faced artificially inflated operating costs due to its blocked entry into rebar manufacturing. The steel fabrication industry, in turn, suffered from reduced competition and innovation.

The exclusionary agreement between CMC and Danieli caused long-term structural damages to market competition. PSG’s thwarted vertical integration led to ongoing competitive disadvantages and higher costs in obtaining rebar supply. Additionally, the rebar manufacturing sector lost potential efficiency gains and technological advancements that PSG’s planned micro mill would have introduced.

Key Arguments and Proceedings

Legal representation

  • Plaintiff(s): Pacific Steel Group
    • Counsel for Plaintiff: Christopher C. Wheeler, Esq. | Benjamin Doyle Brown | Daniel McCuaig | Jared Dummitt | Michelle Kao | Nathaniel David Regenold | Nicolas Vernon Siebert | Rachael Lynn Ballard McCracken | Steig David Olson | William Charlie Price | William Anthony Scarfone, Jr.
  • Defendant(s):Commercial Metals Company | CMC SteelL US, LLC | Gerdau Reinforcing Steel | CMC Rebar West
    • Counsel for Defendants: Bonnie Lau | Steven Bizar | Agnese Nadalini | Alexis Lazda | David Costigan | Joseph David Trujillo | Lena Gankin | Michelle Sosa-Acosta | Nathan Richardson | Shari Ross Lahlou

 Claims

The Antitrust lawsuit alleged multiple violations of federal and state antitrust laws. PSG’s claims included violations of Sherman Act Section 1 for conspiracy in restraint of trade and Section 2 for conspiracy to monopolize the rebar manufacturing market. The case also involved violations of California antitrust laws and unfair competition statutes, underscoring the extensive nature of the anticompetitive conduct.

The predatory pricing scheme and exclusionary agreement demonstrated a coordinated strategy to maintain market power in both the rebar manufacturing and fabrication sectors. CMC’s actions illustrated how established players in the steel fabrication industry could employ multiple anticompetitive tactics to prevent new competition. The case represented a significant challenge to anticompetitive practices in the rebar industry, aiming to restore market competition and technological advancement in steel manufacturing

Defense

The defendants denied all of Pacific Steel’s legal claims and allegations in the antitrust lawsuit. They made exceptions for specific admissions regarding basic company facts and operations. The defendants acknowledged that CMC was a Delaware corporation headquartered in Irving, Texas. They also confirmed that CMC operated nine rebar manufacturing mills in the U.S. and was vertically integrated in the steel industry.

The defendants conceded the court’s jurisdiction over the federal antitrust claims but denied causing any competitive or antitrust injury to Pacific Steel. They argued that their actions were lawful, reasonable, justified, and procompetitive, carried out for legitimate business interests. The defendants contended that Pacific Steel failed to define the relevant product or geographic markets and that CMC did not have monopoly power in any properly defined market.

As defenses, the defendants claimed that Pacific Steel’s alleged damages were speculative and impossible to ascertain, that the company failed to mitigate any alleged injuries, and that its claims were barred by doctrines of waiver, estoppel, laches, and unclean hands. They also argued that Pacific Steel had adequate legal remedies, rendering injunctive relief unnecessary. The defendants requested dismissal of the complaint with prejudice, judgment in their favor, and the award of defense costs, including attorney’s fees.

Jury Verdict

On November 5, 2024, the jury awarded total damages of $110,036,803. The damages consisted of $74,050,940 for lost profits on mill operations. Additionally, $12,922,541 was awarded for lost rebar transportation savings. The jury also awarded $10,786,661 for lost fabrication cost savings. Finally, $12,277,361 was granted for increased costs to purchase mill equipment. The jury found that Commercial Metals had attempted to monopolize the relevant market. They also determined that Commercial Metals’ conduct caused material injury to Pacific Steel in the antitrust lawsuit.

Court Documents:

Available Upon Request