Alleged Anticompetitive Behavior and Follow-on Securities Litigation

Alleged Anticompetitive Behavior and Follow-on Securities Litigation - 4/10/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

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Alleged Anticompetitive Behavior and Follow-on Securities Litigation
Kevin LaCroix

The D & O Diary. April 10, 2009
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EXCERPT: Antitrust regulation and securities enforcement each involve entirely separate areas of the law. However, an increasingly frequent follow-on effect of a regulatory investigation for allegedly anticompetitive conduct is an ensuing class action lawsuit under the securities laws. A lawsuit recently filed in the Southern District of New York, which also has some unique characteristics all of its own, is the latest example of this kind of follow-on securities litigation. These cases may present important D&O insurance considerations, as well. According to their April 9, 2009 press release, plaintiffs’ counsel have filed a securities class action lawsuit against Mechel OAO and certain of its directors and officers. Mechel is a Russian mining and metals company whose American Depositary Receipts trade on the NYSE. The securities complaint follows in the wake of declines in the company’s share price after allegations of "anticompetitive and monopolistic practices." The sequence of events surrounding the allegations involves a remarkably compressed time frame. According to the complaint, on July 24, 2008, then-Russian Prime Minister Vladimir Putin "called for antitrust authorities to investigate Mechel’s raw material pricing policies," amid allegations that Mechel charged Russian customers twice what it charged non-Russian customers. On July 28, 2008, Putin also stated that Mechel had used offshore traders to minimize tax payments, which he characterized as "tax evasion." According to the complaint, on August 14, 2008, barely three weeks after Putin’s initial statement, Mechel was found guilty of breaking competition laws; discriminating against Russian consumers; and maintaining a monopoly in the coal market. Mechel was ordered to take several remedial steps, including cutting prices and signing long term deals with local clients. The company was also ordered to pay a $32 million fine.

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