Shearman & Sterling achieved a victory for client Suntech America when Judge Robert H. Cleland of the United States District Court for the Eastern District of Michigan dismissed, with prejudice, a more than $1 billion action alleging that Suntech America and its parent company, Suntech Power Holdings, colluded with other Chinese solar panel manufacturers to dump solar panels in the US at below cost for the purpose of destroying the plaintiff’s business as well as the US solar panel manufacturing industry.
In the complaint, the plaintiff, Energy Conversion Devices (ECD), alleged that the defendants met periodically in China, agreed on prices, dropped prices below cost to gain market share in the US, and consequently ran US manufacturers out of business. The plaintiff explained that the defendants pursued this strategy in order to comply with Chinese government directives and were more interested in maximizing employment in China than in making a profit. ECD also alleged that Chinese banks and polysilicon manufacturers, which manufacture a key component in the panels, were also part of the conspiracy. ECD, however, failed to allege that the defendants ever planned to recoup losses by raising prices after the US manufacturers went out of business. Although the Supreme Court has held that recoupment is an essential element to a predatory pricing claim under Section 2 of the Sherman Act, the plaintiff attempted to evade it by arguing that the scheme was a simple per se price-fixing violation of Section 1 of the Sherman Act, and required nothing more than an agreement to set prices. The court, however, disagreed with ECD and found that ECD’s failure to allege recoupment was a fatal flaw in its legal theory that warranted dismissal with prejudice.