November 3, 2020
Pacific Steel Group Alleges CMC and Danieli Corporation Schemed to Block It from Entering Market
Steel Reinforcing Bar is a Key Product Used in Commercial Construction Projects
SAN FRANCISCO—On October 30, 2020, Pacific Steel Group, a steel rebar fabricator located in San Diego, California, sued Commercial Metals Company, a multi-national steel conglomerate and the nation’s largest manufacturer and fabricator of steel rebar, in federal court in San Francisco seeking damages and injunctive relief for violations of antitrust and other laws. Pacific Steel Group (PSG) alleges that Commercial Metals Company (CMC) conspired with Danieli Corporation to prevent PSG from building a Danieli micro mill to begin manufacturing its own rebar. PSG further alleges that CMC has priced its fabrication and installation services below cost for the purpose of injuring PSG and destroying competition in violation of two California statutes.
PSG was founded in 2014 as a fabricator and installer of rebar in California. According to the complaint filed on Friday, CMC and Gerdau Reinforcing Steel, both in the rebar fabrication and installation business, responded to PSG’s entry by bidding on construction projects below cost to try to starve PSG of revenues and drive it from the market. As alleged, PSG’s more efficient operations enabled it to nonetheless win bids and establish itself in the marketplace. In 2019, PSG launched a plan to become an even more efficient competitor by building its own steel rebar mill. Such vertical integration had major cost-saving advantages for PSG, but would have created competition for CMC in rebar manufacturing, the complaint alleges. The only commercially viable way for PSG to manufacture rebar was to build a state-of-the-art, environmentally-friendly micro mill in California, according to the complaint. Micro mills are the most efficient rebar manufacturing mills in the world, and Danieli is the only company that has built them. The complaint alleges that when CMC learned of PSG’s plans, it decided to build a Danieli micro mill in Mesa, Arizona, and secured Danieli’s agreement not to build another micro mill for any competitor within a 500-mile radius of Rancho Cucamonga, California for 69 months. This agreement effectively blocks PSG and other potential competitors from manufacturing rebar for years.
“Commercial Metals Company fears competition from Pacific Steel Group and has resorted to blatant anticompetitive measures to maintain its monopoly position and reap inflated profits. The antitrust laws insist that Pacific Steel Group be allowed to engage in competition in a free marketplace for the benefit of the many commercial construction projects in California and neighboring states that use rebar,” said Daniel A. Small, a Partner at Cohen Milstein Sellers & Toll.
“CMC’s and Danieli’s tactics were clear,” said Eric Benson, Chief Executive Officer at Pacific Steel Group, “to prevent PSG from entering the rebar manufacturing market and providing construction customers a high-quality, lower-cost alternative. We look forward to proving our claims in court and ending these monopolistic practices, so that customers can benefit from the resulting competition.”
About Pacific Steel Group
Pacific Steel Group is a leading independent reinforcing steel fabricator and placer with offices throughout the Western United States. Founded in 2014 by industry veterans, PSG brings the expertise and experience of a large fabricator/installer with unparalleled independence, flexibility, and responsiveness. For additional information, visit www.pacificsteelgroup.com or call 858-251-1100.
About Cohen Milstein Sellers & Toll
Cohen Milstein Sellers & Toll PLLC is recognized as one of the premier law firms in the country handling major, complex plaintiff-side litigation. With more than 100 attorneys, Cohen Milstein has offices in Washington, D.C., Chicago, Ill., New York, N.Y., Palm Beach Gardens, Fla., Philadelphia, Pa. and Raleigh, N.C.