A federal judge has certified a class of blood banks and hospitals that are bringing antitrust claims against two major manufacturers of blood reagents.
One manufacturer, Immucor, which had a 55 percent market share, is settling with the dozens of plaintiffs for $22 million. Jeffrey J. Corrigan, who represents the class, said he expects final approval of the settlement early next month.
The remaining defendant, Ortho Clinical Diagnostics, had a slightly smaller share of the market, about 45 percent, from 1999 to 2007, according to the opinion. Part of the settlement requires that Immucor cooperate with the plaintiffs’ counsel — making its employees available for interviews and providing documents — although it “vigorously denies” the allegations, according to the settlement.
Claims started surfacing in 2009, following an investigation of blood reagent pricing by the antitrust division of the Department of Justice. The various suits were consolidated in the U.S. District Court for the Eastern District of Pennsylvania later that year.
After Immucor’s decade-long venture to acquire competing manufacturers in the 1990s, Immucor and Ortho had a duopoly on the traditional blood reagent market and, through collusion from 2000 to 2008, the companies caused the price of their goods to increase as much as 2000 percent, the class alleges.
“Clearly, the fact that prices rose does not, in and of itself, demonstrate antitrust impact — at trial, plaintiffs will need to show that they experienced price increases that resulted from anti-competitive conduct. However, a showing that prices behaved similarly across groups of customers contributes to a finding of predominance at the certification stage,” U.S. District Judge Jan DuBois of the Eastern District of Pennsylvania said in In re Blood Reagents Antitrust Litigation as he certified the class.
The establishment of predominance was the only class certification requirement that was contested by the parties, DuBois said.
The judge was most convinced of the plaintiffs’ argument in that regard by the market structure analysis and damages models developed by their economic expert, Dr. John C. Beyer.
In his analysis of the structure of the market, Beyer cited: “(1) the consolidated market, (2) high barriers to entry, (3) inelastic demand for TBR, (4) the interchangeability of defendants’ TBR products, (5) defendants’ ability to monitor each other’s pricing behavior by obtaining price lists from customers, and (6) defendants’ unwillingness to deviate from their pricing policies for particular customers,” according to the opinion.
In calculating the damages, Beyer distinguished between the price increases that would have been likely during a legal duopoly and those from the alleged price fixing.
“Specifically, Dr. Beyer utilizes a benchmark model to estimate the pricing that would have occurred in a lawful duopoly. He concludes that any differences between those estimated prices and the actual prices charged by defendants resulted from the alleged price-fixing conspiracy,” DuBois said.
Before 2000, when the traditional blood reagent market had more than a dozen competitors, “TBR prices and profitability were low,” according to the opinion. During that time, Immucor came close to bankruptcy and Ortho considered leaving the industry.
When they became the only two companies in the market, they “anticipated that this market consolidation would allow them to raise prices and increase their profitability,” the plaintiffs alleged, according to the opinion.
They each increased their prices around the same time — Ortho raised its prices by 25 percent in April 2000 and Immucor raised its prices by 20 percent in June, the opinion said.
DuBois cited the plaintiffs’ motion that quoted Immucor’s chief executive officer, Edward Gallup, as telling a shareholder through email in October 2000 that “while there is always some risk of losing customers, early indications are that our only competitor in the U.S. (Ortho Clinical Diagnostics division of [Johnson & Johnson]) is doing the same.”
The following month, the two companies began illegally communicating about pricing, the plaintiffs allege. It started at the annual meeting of the American Association of Blood Banks, where executives from the two companies were in attendance.
Following a meeting between an executive from each company that November during which the Ortho executive told the Immucor executive about his company’s planned price increases, Immucor’s vice president of sales sent an email that said: “We are going to increase prices around the first of the year so look out. We are going to piss off a lot of people, but Ortho is going to do the same!!! So maybe we will start getting profitable!” DuBois quoted from the plaintiffs’ motion.
Corrigan, of Spector Roseman Kodroff & Willis in Philadelphia, said he’s happy with the opinion, adding that the “judge thinks our theory is highly plausible.”
Paul H. Saint-Antoine of Drinker Biddle & Reath in Philadelphia, who represented Ortho, could not be reached for comment.
(Copies of the 45-page opinion in In re Blood Reagents Antitrust Litigation, PICS No. 12-1560, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •