Credit: Shutterstock photoPer a Reuters report, on Thursday, a U.S. District Judge - Katherine Forrest dismissed the antitrust lawsuit against Wall Street Biggies - The Goldman Sachs Group, Inc.GS and JPMorgan Chase & Co.JPM and Switzerland-based Glencore plc. The firms were accused by zinc purchasers for hoarding zinc and the artificial rise in the metal's price.
However, the judge concluded, the purchasers did not succeed in proving that rise in zinc prices was due to "plausible antitrust violation" under the Sherman Act, a federal antitrust law. Therefore, the suit was dismissed.
Background
Back in 2014, Goldman, JPMorgan, Glencore along with The London Metal Exchange (LME) - a subsidiary of Hong Kong Exchanges and Clearing Limited were sued by Duncan Galvanizing Corp. The lawsuit, which took class action status, was filed in the U.S. District Court in the Southern District of New York (Manhattan). The plaintiffs imputed the above-mentioned companies for indulging in anti-competitive and monopolistic actions in the warehousing business.
Duncan alleged that in 2010, Goldman, JPMorgan and Glencore each purchased one of the largest metals warehouse operators to get control over the London Metals Exchange. Notably, 90% of zinc futures are traded on the LME. The suit accused these companies of conspiring to hoard zinc at warehouses in order to take advantage of inflating prices. Further, the lawsuit alleged that warehouse owners artificially increased the waiting time to facilitate lease payment and raise metal prices.
Among others, Barclays PLC BCS , Deutsche Bank AG DB , Bank of America Corp. BAC and Morgan Stanley MS are some banks that are streamlining the metal business owing to increased regulatory scrutiny and mass criticism.
Conclusion
Lawmakers are concerned about the risks from banks' ownership of warehouses and plants. They believe that banks' holdings of these assets tend to concentrate market power and increase bank profits, consequently adversely affecting consumers. Therefore, regulators across the globe are investigating banks' role in the commodity trading business more closely.
Both Goldman and JPMorgan currently carry a Zacks Rank #3 (Hold).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
