Chris Lazarini Provides Insight on Antitrust Allegations in Gold Price-Fixing Conspiracy Case

August 23, 2018
Securities Online Litigation Alert

Bass, Berry & Sims attorney Chris Lazarini provided insight on a case in which plaintiffs alleged that UBS AG took part in a global gold price-fixing conspiracy. The court earlier granted UBS’ motion to dismiss the plaintiffs’ Sherman Act and Commodity Exchange Act claims against it, but gave Plaintiffs leave to amend. Following submission of the plaintiffs’ third amended complaint, the court dismissed the claims against UBS with prejudice noting that the plaintiffs did not present direct or sufficient circumstantial evidence to allege an antitrust conspiracy.

Chris provided the analysis for Securities Online Litigation Alert (SOLA). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SOLA, please visit the SOLA website to sign up for the newsletter.

Commodity Exchange Inc., Gold Futures and Options Trading Litigation, In Re, No. 14-MD-2548 (S.D. N.Y., 7/25/18)

A Plaintiff may plausibly allege an antitrust conspiracy through direct evidence, such as an express agreement among competitors to fix prices, or through circumstantial evidence and “plus” factors, such as a common motive to conspire, parallel acts against the economic self-interest of the alleged conspirators or evidence of a high level of inter-firm communications. 

In these consolidated putative class actions, Plaintiffs allege a conspiracy to suppress the benchmark price of physical gold and gold-denominated financial instruments. Defendants are London Gold Market Fixing, Ltd., and some of the largest bullion banks in London, all of which participated in daily conference calls (“PM Fixing Calls”) where the benchmark price for gold was set. Plaintiffs, who are gold sellers, also claimed that UBS AG and its affiliates (“UBS”), none of which participated in the PM Fixing Calls, participated in the alleged conspiracy, using its large gold positions to move the market in tandem with the artificial prices set by the other Defendants. The Court earlier granted UBS’ motion to dismiss Plaintiffs’ Sherman Act and Commodity Exchange Act claims against it, but gave Plaintiffs leave to amend. Here, the Court examines UBS’ motion to dismiss Plaintiffs’ third amended complaint (“TAC”) in the light most favorable to Plaintiffs.

Central to the TAC are sixteen chat messages exchanged between precious metal traders at UBS and Deutsche Bank. While Plaintiffs concede that the chat messages are not direct evidence of UBS’ participation in the alleged conspiracy, Plaintiffs argued that they stated plausible claims for relief under both Acts, because the messages, combined with Plaintiffs’ statistical analyses showing UBS’ below market price quotes close in time to the PM Fixing calls, are “plus factors” or circumstantial evidence supporting a finding that UBS was a co-conspirator.

Examining the messages, the Court disagrees. Some messages from the UBS trader were warnings that it was possible to lose money on the PM Fix, while others discussed how well UBS did against the PM Fix. These concepts, the Court explains, contradict the alleged conspiracy, as neither suggests that UBS had inside information or showed the traders acting in concert. In addition, the messages did not show that UBS was sharing information with the fixing banks at a relevant time. Instead, the messages were exchanged in the middle of the night London time by traders in Singapore having no input into the PM Fixing calls, nor did they evidence sharing of information necessary to the price-fixing scheme.

The Court also finds only a weak connection between Plaintiffs’ statistical analyses and UBS, because most of the analyses did not distinguish between UBS and the fixing banks, referring instead to “defendants” generally, and the UBS-specific information that was available was just as consistent with a legitimate expectation of falling prices as with participation in the alleged price-fixing scheme. Here, it is notable that UBS often underpriced everyone, including the fixing banks, before and after the PM Fixing Calls were publicized. UBS’ consistent inability to accurately predict the fixed price, the Court explains, also contradicts its being a conspirator. Having decided that Plaintiffs fail to state plausible claims, and absent a motion seeking further leave to amend, the Court dismisses the claims against UBS with prejudice.

In an earlier opinion, the Court concluded that Plaintiffs plausibly alleged, “albeit barely,” a conspiracy among the other Defendants. 213 F. Supp. 3d (S.D.N.Y. 2016).