Norwegian farmed salmon price-fixing class-action lawsuit moves forward in US
A class-action lawsuit filed in 2019 against four major Norwegian salmon farming firms has been given the go-ahead to proceed by the judge presiding over the case.
Several separate suits were consolidated into one last year and placed under the oversight of Judge Cecilia Altonaga of the U.S. District Court for the Southern District of Florida. The defendants in the case, which include Mowi, SalMar, Lerøy Seafood, Grieg Seafood, and Cermaq Group, made a motion to dismiss the suit in January 2021, but Altonaga ruled on 23 March that the suit contains enough meritorious claims to allow it to proceed.
“In sum, the [complaint] contains enough factual material to ‘nudge plaintiff’s claims across the line from conceivable to plausible,’” Altonaga wrote in her decision.
With the ruling, Altonaga set a two-week trial date for the case beginning on 23 May, 2023, and ordered representatives for the plaintiffs and defendants to selected a mediator by 23 June, 2021, and file a report of their meeting within seven days of it occurring. If mediation fails to resolve the case, witness summaries are due to the court by 1 December, 2021, and within a year of that date, the court will conduct class certification hearings, exchanges of expert witness testimony, and complete the fact-sharing process on issues germane to the case. Mediation must be completed by 18 December, 2022, and pre-trial motions must be received by the court by 3 January, 2023.
The lawsuit is based primarily on an ongoing investigation by the European Commission into an investigation of potential anti-competitive practices in the farmed Atlantic salmon sector in Europe, first made public in February 2019. The investigation included raids by E.C. officials of the Scottish and Dutch corporate offices of several seafood companies based in Norway, including Mowi, Grieg Seafood, Lerøy Seafood, and SalMar. Subsequently, in November 2019, the U.S. Department of Justice announced it had launched its own investigation and issued subpoenas to selected Norwegian salmon firms.
The civil suit alleges the major players in Norway’s farmed salmon industry exchanged competitively sensitive information among themselves, with the aim of artificially controlling the price of farm-raised salmon bought by U.S. seafood buyers, in violation of the Sherman Antitrust Act.
The original suit alleged manipulation of the spot market for Atlantic salmon in Oslo, Norway’s capital, forcing up prices, as the spot market is frequently used as a baseline for longer-term contract prices. But amendments made to the complaint added concerns that the Norwegian companies in question jointly manipulated the NASDAQ Salmon Index, a weighted average of weekly reported sales prices for head-on gutted Atlantic salmon assembled by a panel of Norwegian salmon exporters and producers. The index was created in 2013 to ensure a more uniform price for salmon on the open market.
“The NASDAQ Salmon Index, formally unveiled in April 2013, provided defendants the direct ability to impact and influence the market through their purchases of salmon on the spot market,” the complaint alleges, pointing to Mowi, SalMar, Cermaq, and Ocean Quality serving as members of the index’s advisory panel and Mowi’s subsidiary, Nova Sea, serving as a reporting member of the advisory panel.
Mowi’s Polish subsidiary, Morpol, played a key role in the conspiracy, according to the suit, as it accounted for around 70 percent of salmon spot-market purchases, effectively pegging the market to “supra-competitive” prices, the suit alleges.
“There is no legitimate pro-competitive justification for the key industry players — the Norwegian defendants here — to sell substantial quantities of salmon to Morpol on the spot market,” the suit says. “Mowi was fully capable of supplying Morpol’s salmon requirements through internal transfers, rather than through spot market purchases (which were then used to set salmon prices worldwide). In fact, Morpol’s salmon needs amounted to only approximately 10 percent of Mowi’s salmon production on an annual basis. Likewise, SalMar and other vertically integrated Defendants had their own ‘value-added’ subsidiaries like Morpol, and instead of directing that salmon to those subsidiaries (or other non-competitor customers), sold the product on the spot market to Morpol. Morpol’s spot market purchases create the appearance of greater consumer demand for these fish than actually is present in the market and that increases and/or stabilizes salmon prices at supra- competitive levels when these spot trades are reported to market participants.”
The lawsuit also alleges the Norwegian salmon companies exchanged internal information – sometimes related to pricing – at meetings of the Norwegian Seafood Council, the North Atlantic Seafood Forum, the Norwegian Seafood Federation, and the Global Salmon Initiative. It notes that, despite Russia’s move in 2014 to ban all Norwegian salmon from entering the country, resulting in the loss of a major market for the Norwegian suppliers, salmon prices rose.
In their motion to dismiss the case, the Norwegian salmon companies pilloried the plaintiffs’ changes to their suit, “abandoning their prior theory that defendants entered into the alleged conspiracy in 2015, in response to a Russian ban on imports of Norwegian salmon.”
“Plaintiffs now contend that defendants began conspiring in 2013 in connection with the adoption of the NASDAQ Salmon Index. Plaintiffs allege that defendants coordinated to manipulate the index to prop up industry prices by engaging in artificial spot market transactions. But … salmon prices trended downward after the index was created. Moreover, the NASDAQ Salmon Index is an industry pricing benchmark developed and overseen by third parties. Two defendants – Lerøy and Grieg – were never members of the NASDAQ panel, and the majority of companies that contribute sales to the index are not defendants,” the motion states. “Under these circumstances, plaintiffs have no plausible explanation as to how defendants supposedly manipulated the index, which plaintiffs admit is based on a lagged weekly average of prices provided by defendants and non-defendants.”
The salmon farmers also attacked the suit’s heavy reliance on the ongoing criminal investigations in the E.U. and U.S.
“Despite receiving defendants’ document productions to governmental agencies and having nearly a year and a half to allege a plausible antitrust violation, [the suit] continues to be based on nothing more than reports of these early-stage inquiries – with no charges and no assertions of wrongdoing by anyone – and the normal workings of a commodity industry,” the motion states. “Notwithstanding their acknowledgment that there are dozens of farm-raised salmon producers in at least 10 different countries, plaintiffs claim that five Norwegian companies accounting for a minority of sales in an alleged global market carried out a years-long conspiracy that inflated salmon prices worldwide. That claim defies logic.”
In her ruling, Altonaga sided with the plaintiffs, agreeing they “plausibly allege defendents reacted to this constriction of the market [caused by the Russian ban] by colluding together to manipulate the NASDAQ Salmon Index in order to protect themselves from the effect of the ban.”
Altonaga also said plaintiffs had adequately shown that the Norwegian salmon farmers had shifted “from competition to cooperation and their pricing conduct constituted a change in behavior” and that their spot market transactions constituted potentially anticompetitive conduct. Altonaga also said the Norwegian companies’ frequent swapping of executives and mutual attendance at trade association meetings “make it more plausible that the alleged conspiracy spawned from meetings at trade shows or conventions.”
“At this stage of the litigation, the court finds the alleged substance and quantity of these communications, and the players involved, support a reasonable inference of conspiracy,” Altonaga wrote.
Altonaga also dismissed the salmon companies’ efforts to have the case thrown out due to the expiration of the statute of limitations, ruling the suit cannot be limited by the statute of limitations if there is evidence of fraudulent concealment of a conspiracy.
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