Southern District Of New York Dismisses Claims In Mexican Government Bonds Antitrust Suit
10/08/2019On September 30, 2019, Judge Paul Oetken of the United States District Court for the Southern District of New York dismissed claims that defendants, a group of ten financial institutions and related entities, had conspired to manipulate the market for certain debt securities issued by the Mexican government. In re Mexican Government Bonds Antitrust Litigation, 18-CV-2830 (S.D.N.Y. Sept. 30, 2019). Plaintiffs, a group of pension funds, alleged that defendants rigged the auction process used by the Mexican government to issue bonds and conspired to manipulate the pricing of the bonds on the secondary market, in violation of Section 1 of the Sherman Act. According to plaintiffs, the conspiracy artificially depressed auction prices, artificially inflated secondary market prices, and fixed bid-ask spreads, resulting in harm to the pension funds in the United States.
Plaintiffs’ complaint made three principal allegations. First, plaintiffs relied on an alleged investigation by the Mexican antitrust regulator, the Comisión Federal de Competencia Económica (“COFECE”), and alleged that COFECE’s findings of price fixing and collusion corroborated the complaint. Plaintiffs also cited media reports indicating that COFECE granted leniency to at least one defendant. Plaintiffs argued that this provided further evidence of an antitrust violation because leniency would only be granted if a defendant could substantiate cartel conduct. Second, plaintiffs provided market-wide statistical data comparing pre- and post-investigation announcement conditions. Third, plaintiffs cited “plus factors” such as motive, opportunity to collude, and past alleged antitrust violations by the same defendants.
The court dismissed the complaint because plaintiffs failed to “articulate a link between their allegations and the specific [d]efendants named in the complaint.” Id. at 15. The court found that: (1) the alleged “unnamed entity” in the leniency program with COFECE was not identified with particularity and the evidence would only suggest “that defendant’s culpability” but could not implicate the other defendants; (2) the statistical data was market-wide and aggregated, so it failed to account for non-defendant actions in the auction process and market; and (3) the “plus factors” failed to identify any particular defendant’s motives, opportunities to collude, or alleged past violations.
The court also rejected plaintiffs’ argument that they need only make broad conspiracy claims and need not allege specific conspiratorial or anticompetitive conduct for each defendant. The court held that plaintiffs could not survive a motion to dismiss by treating the defendants as a single undifferentiated bloc and failing to offer a specific and individualized showing of anticompetitive conduct on a defendant-by-defendant basis. The court noted that the complaint contained almost no individualized allegations and provided no allegations to suggest that each defendant was part of the claimed conspiracy. Thus, plaintiffs’ group pleading was a fatal flaw in their complaint, along with other deficiencies.