U.S. steelmakers have recently found themselves paying huge sums totalling over USD 160 million to steel purchasers in order to ward off even larger damages claims. These come in the wake of a vast class action lawsuit alleging that the largest steelmakers in the U.S. conspired to implement coordinated cutbacks in steel production from early 2005, with the intention of artificially inflating steel prices.

These sorts of allegations are not new. However, what is unique in this case is that the main allegations relate to statements made by company executives in public at industry conferences, including those organised by trade associations and industry magazines or analysts.

Historically, conference participants and organisers have regarded such statements with little concern. However, the case serves as a stark reminder that public statements on forward-looking strategy, in particular regarding supply and pricing, pose competition law risk even though they are not the classic price-fixing “discussion in a smoke-filled room”.

Statements made at industry conferences

Executives of the defendant steelmakers are alleged to have attended numerous industry conferences between 2005 and 2007, where public statements concerning the need to slow down furnace production across the industry to achieve “price stability” were made, either by speakers to the whole conference or in the context of panel discussions (e.g. committee meetings).

Examples of public statements allegedly made at these events and later used by plaintiffs as evidence in the lawsuit included:

• “…squeeze the cycle a little bit and cut your production... Control supply.”
• “…what is needed from the industry is a disciplined approach to bringing on supply and managing capacity. A better collective understanding of the microeconomics of our industry, meaning… aspects of the supply side, the likely scenarios for demand growth and what these imply for fair, long run prices will help ensure that we achieve a better match of supply with demand, more stable price levels and a financially healthier industry overall.”
• “…[the consolidation of capacity in the industry in previous years means that] the industry no longer has to deal with the desperate acts of dying men.” 
• “…consolidation [has brought] newfound discipline to what traditionally has been an unruly market.”
• “… steel’s resurgence in demand and profitability during the past 18 months can be sustained- but only if capability and production are brought under control now.”
• “We have demonstrated the advantages of market discipline, accelerated supply responsiveness, [etc.]… I think all these will improve the stability of our industry. We can take advantage of the education we have received and learn from it, and will find that fewer players and tighter metallics will be beneficial for the overall industry.”
• “… [the] “softening of the market” [is not due] to a “sudden drop in demand” [but rather] “to an inventory overhang situation created in the market… [this can be dealt with though] management of the industry’s supply chain.”
• “…[collective action] will lead to companies adjusting production levels to ensure that the inventory corrects itself and the state of equilibrium is reestablished. Thus if we as an industry can understand this phenomena we will be able to build more sustainability in our operations.”
• “…urge production restraint…”
• “…hold the line on capacity…”
• “…take a moment to enjoy. We have successfully made considerable progress in consolidation. We have successfully demonstrated the benefits that a more consolidated industry creates. We have successfully demonstrated our ability to better manage supply and demand.”
• “supply reductions” will “cause a sharp recovery” [in steel prices, particularly considering] “broad-based underlying demand strength.”
• “…maintain focus on SUPPLY DISCIPLINE.”
• “[I urge you] to adjust [your] production rates so the price of steel doesn’t drop.” 
• “[We all] need to work together to keep the prices high regardless of the flexibility in the marketplace.”
• “…whenever the steel makers are tempted by the market and therefore fluctuate their prices, the growth of the industry will quickly decline.”

Coordinated conduct following industry conferences

The defendant steelmakers are accused of all implementing coordinated and unprecedented production cutbacks on at least three separate occasions, within days or weeks following industry conferences where statements of the above nature were made or discussed. These cuts were followed by almost immediate price increases.

The cutbacks were implemented despite the defendants’ public projections (made shortly before the cutbacks) that demand for steel products was expected to remain strong.

The defendants’ behaviour increasingly became the subject of various complaints, leading among other consequences to the current class action lawsuit filed in the U.S. courts.

Lessons for conference organisers and participants

Conference hosts and attendees have generally always regarded public statements made by company executives at industry events, in particular commercially organised conferences, as not raising competition law concerns.

However, this case is a clear “wake-up call” for all industries that public statements on forward-looking strategy, such as supply plans or pricing, may give rise to competition law liability for conference participants (and potentially even organisers) if they result in coordinated market activity. This is the case even if statements are of a general nature.

Competition authorities worldwide have increasingly begun to crack down on such statements because they may reduce uncertainties in the market and thus facilitate the coordination of competing companies’ behaviour. Other examples of “public signalling” of future conduct which have recently been found to violate competition law are considered in this earlier alert.

In view of the above, it is of critical importance that all conference organisers, speakers and participants be educated on the competition law risks they face, and put in place the necessary protocols to limit their exposure. Absent such safeguards, companies may find themselves facing huge fines and lawsuits for behaviour they always regarded as standard industry practice.