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Goldman, JPM, Glencore Aluminum Price-Fixing Suit Tossed


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Amid heightened regulatory and political scrutiny on banks' ownership of the physical commodity business, the latest dismissal of an antitrust lawsuit brings relief for The Goldman Sachs Group, Inc. (GS - Analyst Report) , JPMorgan Chase & Co. (JPM - Analyst Report) and mining company – Glencore Plc (GLNCY - Snapshot Report) . The U.S. District Judge, Katherine B. Forrest dismissed the nationwide suit by aluminum purchasers which alleged the defendants of conspiring to hoard aluminum to push up prices, per a Reuters report.

According to Forrest, the core assertion of the case was that Platts Midwest Premium, a component of aluminum prices, rose because of alleged "shenanigans" in aluminum warehouse services.

In Aug 2014, a case based on the same “core assertion” was filed by commercial end-users and consumer end-users of aluminum. However, it was dismissed by Forrest as according to her findings, the complaints did not convincingly indicate that the defendants deliberately schemed on a collective basis to raise the prices.

Further, Forrest restricted the plaintiffs from re-filing the cases by ruling that their antitrust claims lacked legal standing. However, the other group of plaintiffs, including the ‘first-level’ purchasers of aluminum, were granted re-appeal for their cases, which was later allowed to go forward in Mar 2015.

The Issue

Aluminum purchasers have accused banks and commodity companies of colluding from 2009 to 2012, to manipulate prices of the metals by reducing its supply, thereby forcing them to overpay.

The purchasers further claimed that this act caused delays of up to sixteen months in filling their orders, leading to higher storage costs. This in turn inflated the aluminum prices and the cost of producing cabinets, flashlights, soft drink cans, strollers and other goods.


In her latest ruling, Forrest has dismissed the case again saying, “There is no allegation or evidence in the record that defendants engaged in any anticompetitive conduct outside of the aluminum warehouse services market. Profit by defendants or losses by plaintiffs subsequently experienced in physical aluminum is irrelevant to antitrust standing."

Regulatory Woes to Linger?

The Wall Street giants are still under close scrutiny for their metal business from regulators including the U.S. Department of Justice and Commodity Futures Trading Commission. Further, the plaintiffs are expected to re-appeal and if successful, the defendants will have to start again from where they left off, two years ago.

Currently, JPMorgan carries a Zacks Rank #2 (Buy), while Goldman Sachs and Glencore carry a Zacks Rank #3 (Hold).

A better-ranked finance stock is LPL Financial Holdings Inc. (LPLA - Snapshot Report) . Shares of this company have gained nearly 31% over the past six months and it boasts a positive earnings surprise history of 4.1% over the trailing four quarters. Currently, the company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

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