Goldman Sachs Group Inc. has been named in a United States class action lawsuit brought over allegations tied to the price inflation of aluminium (aluminum in the U.S.).
The price hikes might be the beginning of the aluminium buyers’ legal fight against Goldman Sachs and other warehouse owners, according to anti-trust attorneys, wrote The Huffington Post. The class action names the London Metal Exchange (LME), Goldman Sachs, and other warehouse owners as defendants in the recently filed lawsuit that alleges anti-competitive behavior. LME owner HKEx and Goldman Sachs said the lawsuit had no merit and are fighting the claims.
The lawsuit filing follows what occurs in the U.S. after the Department of Justice or another government entity is involved in an investigations, attorneys involved in the matter told The Huffington Post. “Antitrust exposure is not limited merely to government enforcement but also to private enforcement,” Daniel Sokol, who writes about competition and antitrust law at the University of Florida, told The Huffington Post. Should a defendant in the matter be found liable, explained Sokol, the exposure could be significant given that price-fixing damages are tripled under U.S. law.
The defendants have been accused of artificially inflating the wait times to increase rents for warehouse owners while also increasing metal prices, according to The Huffington Post. Banks have been the focus of controversy for owning commodity assets and trading raw materials—such as aluminium—which increased following an initial U.S. Department of Justice probe into the metals warehousing industry.
Filing a class action so soon after the implementation of a government probe could be done to either obtain a lead among other attorneys considering filing lawsuits or to benefit from any leaked information on the probes, legal experts toldThe Huffington Post. “The Justice Department has a way of shaking the tree and getting information that otherwise wouldn’t be available,” Daniel Crane, a law professor at the University of Michigan, clarified.
For example, one of the plaintiffs—aluminium buyer, Superior Extrusion Inc.—will not have full access to emerging information until its lawsuit has progressed significantly; however, the Justice Department would only likely launch an official probe if evidence of collusion or so-called “monopolistic” behavior was found, according to The Huffington Post. Superior Extrusion filed the lawsuit on August 1 in U.S. District Court in Detroit; the action also names “John Does,” representing other warehouse owners that may be involved in the alleged price-fixing conspiracy.
According to lawsuit allegations, warehouse owners realized “extraordinary revenues from inefficiencies and deadweight restraints on the economy,” reflecting their “extreme monopoly pricing power and abusive agreements in very unreasonable restraint of trade.” Britain’s financial watchdog is also investigating LME’s warehousing system, the Huffington Post reported.
Creating a price for a product or service, and not permitting that price to be determined through free market activities, represents price fixing. Anti-trust laws make price fixing illegal under certain situations.