CMC to Appeal $110 Million Verdict in Restraint of Trade Case

California Jury Sides with Pacific Steel in Noncompete Dispute
A jury in California has ruled in favor of Pacific Steel Group in a trade dispute against CMC, a leading Texas-based steelmaker. The case revolves around a noncompete agreement between CMC and Italian EAF (Electric Arc Furnace) vendor Danieli, which Pacific Steel claims was used to block its entry into the Southern California rebar market. The jury awarded Pacific Steel $110 million, a sum that will be tripled under California law, plus attorney fees. CMC has announced its intention to appeal the verdict, citing the strength of its business practices and intentions to defend its position.

Background: Trump’s Tariffs and the Impact on Steel Supply
The lawsuit was filed in 2021 and stems from the 2018 Section 232 tariffs imposed by the Trump administration, which restricted steel imports into the U.S. Pacific Steel claims it faced challenges in securing a steady supply of steel from CMC, particularly after CMC expanded its operations and acquired new rebar fabrication plants. Additionally, the rebar manufacturer sought an exemption to the tariffs but was unable to secure one, which led to the legal dispute.

Pacific Steel’s Attempt to Build a Micromill and Legal Block
Pacific Steel had plans to build a state-of-the-art micromill in California, utilizing renewable energy sources like wind and solar power. This project aimed to produce 380,000 metric tons of rebar annually. However, Pacific Steel alleges that Danieli, which was contracted to provide the necessary equipment for the mill, informed the company that the proposed location was within the restricted area covered by CMC’s noncompete agreement. This move, according to Pacific Steel, effectively blocked the project and prevented them from entering the market with a competitive edge.

Legal Allegations: Restraint of Trade and Market Monopolization
Pacific Steel’s lawsuit argues that CMC’s exclusivity agreement with Danieli constitutes an illegal restraint of trade, which the company claims is specifically designed to maintain CMC’s dominance in the Southern California rebar market and prevent competition. The suit asserts that the agreement has no legitimate market justification and only serves to block Pacific Steel’s entry into a potentially lucrative market with a more efficient and sustainable production method.

CMC’s Response: Plans for Appeal and Industry Implications
CMC, the largest producer and fabricator of steel rebar in the U.S., has expressed disappointment with the jury’s decision and plans to appeal. The company defends its business practices, stating that its agreements with suppliers like Danieli are within the bounds of standard industry operations. While CMC intends to challenge the ruling, the case has raised questions about the legality of noncompete clauses and their potential impact on market competition in the U.S. steel industry.

Looking Ahead: Potential Market Shifts and Legal Precedents
This case highlights the ongoing friction in the U.S. steel market, which has been reshaped by the imposition of tariffs and the consolidation of production capacities. The decision could set a precedent for future legal battles related to noncompete agreements and market access. Pacific Steel, which continues to move forward with its plans for the Mojave micromill, is optimistic about overcoming the legal hurdles and challenging CMC’s market dominance.