Antitrust claims in LIBOR manipulation cases dismissed for lack of antitrust injury.
The recent LIBOR suppression scandal has given rise to numerous lawsuits, both individual and putative class actions based on several theories of recovery, that have been consolidated in the Southern District of New York. LIBOR is calculated by averaging certain British Banking Association members’ estimates of the rate at which that bank could borrow funds in the inter-bank market. But investigations by domestic and foreign regulatory agencies found that at least some banks consistently reported artificially low rates which, in turn, suppressed LIBOR.
The resulting lawsuits included claims that the banks violated the antitrust laws by engaging in a price fixing conspiracy. Specifically, the plaintiffs claimed that, because defendants conspired to suppress LIBOR—the benchmark “price” for borrowing funds—the plaintiffs paid more for, or earned less from, financial instruments purchased either directly from the defendants or in the secondary market.
Initially, the plaintiffs’ antitrust claims appear viable. It is well-settled that manipulating any aspect of price, such as an interest rate component, violates the Sherman Act, and courts have allowed other cases alleging rate manipulation, such as reporting false data to distort benchmark rates for different commodities, to proceed as antitrust claims. Moreover, regulatory investigations uncovered emails between different member banks asking, and agreeing, to report lower borrowing rates in order to suppress LIBOR. Those emails tend to exclude the possibility that the banks acted independently—a requirement to plead a plausible antitrust conspiracy that is often found lacking by courts—rather than in concert.
Despite their facial appeal, the district court dismissed all of the plaintiffs’ antitrust claims. The district court acknowledged that suppressing LIBOR could be a form of horizontal price fixing, and that at least some plaintiffs would have been injured by that suppression.
The court cautioned, however, that not every loss stemming from anticompetitive activity, even an alleged per se violation, inflicts an antitrust injury, i.e., an injury caused by restricting competition. It did not matter, according to the court, that the banks competed with one another outside the LIBOR-setting process; the process of setting LIBOR itself, which gave rise to plaintiffs’ injuries, was not competitive. Moreover, the banks did not achieve any competitive advantage over other banks, or other sellers of financial products, since those competitors also sold products tied to a suppressed LIBOR. Thus, plaintiffs’ injuries did not arise from defendants’ restriction of competition. Accordingly, the court dismissed all of the plaintiffs’ antitrust claims for failure to allege an antitrust injury.