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A federal judge in Pennsylvania has certified three separate classes of purchasers to pursue antitrust claims against two of the world’s top manufacturers of microcrystalline cellulose, or MCC, a binding agent used in pills and vitamins and as a food additive. In a significant victory for the plaintiffs in the case, In re Microcrystalline Cellulose Antitrust Litigation, the judge applied the “Bogosian short-cut” — named for a 1977 decision by the 3rd U.S. Circuit Court of Appeals — in which the court presumes that all buyers of that product have suffered an antitrust injury where the anti-competitive behavior artificially raised the price of a product. In the suit, purchasers allege that Chicago-based FMC Corp. set out to neutralize competition in the MCC market and to secure monopoly power for itself in North America by conspiring with a Japanese firm, Asahi Kasei Co., to divide the world MCC market into two territories. The alleged conspiracy came to light in December 2000 when the Federal Trade Commission filed a complaint that said FMC had agreed not to sell any MCC product to customers in Japan or East Asia without Asahi’s consent, while Asahi promised not to sell in North America or Europe without the consent of FMC. The FTC suit also accused FMC of trying to secure agreements with three smaller Asian manufacturers of MCC in order to maintain its monopoly position. FMC and Asahi settled the suit with a consent decree in which both companies offered no admission of wrongdoing but nonetheless pledged to end the practice. Under the terms of the settlement, FMC and Asahi were prohibited from agreeing with competitors to divide or allocate markets; agreeing with competitors to refrain from producing, selling or marketing MCC; and inviting or soliciting other companies to enter into agreements not to compete. The settlement sparked a flurry of lawsuits brought by purchasers of MCC — pharmaceutical companies, vitamin producers and food manufacturers — that said the illegal practice had inflated MCC prices since 1984. Now Senior U.S. District Judge Thomas N. O’Neill Jr. has certified the suit as a class action on behalf of three classes of FMC’s customers — vitamin producers, pharmaceutical companies, and companies that purchased MCC to be used as a food additive. MCC, which is derived from wood pulp, revolutionized the manufacture of drugs and vitamins because it creates tablets that are extremely hard and stable yet disintegrate rapidly. In the early 1960s, FMC purchased the company that had developed MCC and obtained a patent for the product. Soon after, FMC chose Asahi as the exclusive distributor of Avicel, its brand name of MCC, in Asia. FMC also licensed Asahi to manufacture some of its MCC products. The two companies continued to cooperate in marketing Avicel as well as some unbranded MCC products during the 1970s and 1980s. Besides Asahi, FMC’s only early competition came from several small Taiwanese and Indian companies. But after FMC’s patents expired, about 10 more firms entered the MCC market, including several Chinese firms. Although several firms exited the market quickly, FMC had lost some of its market share by the late 1980s and early 1990s. Competition increased in the mid-1990s as competitors improved the quality of their MCC products and production neared market capacity. The suit alleges that FMC set out to thwart the competition by agreeing with Asahi to divide the world into two markets. Co-lead plaintiffs’ attorneys H. Laddie Montague Jr. of Berger & Montague in Philadelphia and Linda P. Nussbaum of Cohen Milstein Hausfeld & Toll in New York moved for certification of three separate classes. Montague and Nussbaum also serve as lead counsel for the class of pharmaceutical purchasers. Attorney Joseph Bruckner of Lockridge Grindal Nauen in Minneapolis serves as lead counsel for the vitamin producer plaintiffs. And attorney Frederick P. Furth of the Furth Law Firm in San Francisco serves as lead counsel for the food additive purchasers. O’Neill found that all of the class members shared the question of whether FMC and Asahi conspired to allocate the MCC market and, if so, whether that conduct constitutes a per se violation. Likewise, O’Neill found that if the plaintiffs assert a “rule of reason” claim, they will share the common question of whether defendants produced “anti-competitive effects” in the relevant MCC market, which focuses on defendants’ conduct rather than its effect on individual MCC consumers. But O’Neill found that class certification might not be appropriate if each of the plaintiffs were required to prove antitrust injury and damages. “If the circumstances require plaintiffs to prove injury to each MCC buyer separately, class certification under Rule 23(b)(3) may be inappropriate because such individual questions might overwhelm the common question of liability,” O’Neill wrote. Plaintiffs’ lawyers urged O’Neill to apply the Bogosian short-cut, which allows a court to accept common proof of injury to every class member. The short-cut takes its name from the 3rd Circuit’s 1977 decision in Bogosian v. Gulf Oil Corp. in which the court held that “when an antitrust violation impacts upon a class of persons who do have standing, there is no reason in doctrine why proof of the impact cannot be made on a common basis so long as the common proof adequately demonstrates some damage to each individual.” O’Neill found that the 3rd Circuit recently reaffirmed Bogosian in its 2002 decision in In Re: Linerboard Antitrust Litigation, in which the defendants allegedly conspired to deplete the nationwide inventory for linerboard — an element of cardboard — in order to implement coordinated price increases on cardboard products. After U.S. District Judge Jan E. DuBois certified the case as a class action, the defendants appealed, arguing that DuBois erred by taking the Bogosian short-cut. But the 3rd Circuit disagreed, finding that on the facts of the case, DuBois had correctly applied the concept of presumed impact under Bogosian. Likewise, O’Neill found that the main dispute in the certification of the MCC case turned on whether the court should apply the Bogosian short-cut. O’Neill found that before he could accept the common proof of injury, the plaintiffs would have to establish that if FMC and Asahi did divide the market, all class members would have been injured “to at least some degree.” The plaintiffs qualified for the short-cut, O’Neill found, because they had the necessary evidence. “I am satisfied that the effects of exclusion of Asahi from the United States market would be predictable enough to accept the common proof of injury within each class. Asahi may not have manufactured all the products that FMC marketed in this country, but it produced high-quality MCC products that corresponded to many of FMC’s top-sellers,” O’Neill wrote. “The alleged market allocation agreement would have provided FMC with at least the opportunity to raise prices for most of its products and defendants have not presented any conclusive evidence why this would not have occurred.”

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