U.S. Antitrust Case Alleges Banks Manipulated Mexican Government Bond Market

What happened?

On 30 March 2018, two U.S. pension funds filed the first U.S. class action alleging illegal coordinated conduct by and among authorized dealers of Mexican government bonds (MGBs). The plaintiff pension funds, on behalf of a purported class, allege that a group of bank defendants and their affiliates abused their position as the exclusive Mexican-Government approved market makers for MGBs by conspiring to unlawfully increase the profitability of MGBs in violation of U.S. federal antitrust law and state unjust enrichment laws. The complaint provides a synopsis of the plaintiffs’ own comparative analysis of data that purportedly demonstrates the defendant banks:

• Rigged the MGB auction process by colluding on bids;
• Thereby controlled the supply of MGBs in the secondary market, and sold MGBs post-auction at supra-competitive prices; as well as
• Agreed, more generally, to widen bid-offer spreads on MGB quotes.

The plaintiff pension funds seek injunctive relief and treble damages under the Clayton Act. Named defendant groups include: Banco Bilbao Vizcaya Argentaria SA, Banco Santander SA, Bank of America, Barclays, BBVA Securities Inc., Citigroup, Deutsche Bank, HSBC Bank, Merrill Lynch Pierce Fenner & Smith Inc. and JPMorgan.

The putative class complaint cites ongoing investigations by Mexico’s antitrust regulator, the Comisión Federal de Competencia Económica (COFECE), and securities regulator, Comisión Nacional Bancaria y de Valores (known as CNBV). The plaintiffs claim that at least one entity has accepted leniency in exchange for admitting to a conspiracy to fix MGB prices. 

Why does this matter?

There is no allegation of a DOJ Antitrust or other U.S. agency investigation into MGB manipulation, which may factor into litigation strategy for the defending banks. 

In the consolidated putative class case alleging dealer collusion in U.S. dollar-denominated supranational, sovereign, and agency bonds (SSA Bonds) that has been proceeding for nearly two years in the same federal court in New York, most defendants have motions to dismiss pending that include jurisdictional arguments. Bank of America and Deutsche Bank agreed to settle and cooperate with the SSA Bonds plaintiffs in August 2017. Unlike the MGB complaint, the SSA Bonds case does allege a U.S.-based government investigation. 

What happens next? 

As noted, jurisdictional defenses and related arguments as to the nature and sufficiency of the alleged conspiracy’s U.S. nexus will feature in pleadings challenges. Anticipating those arguments, plaintiffs attempt to plead that the defendant banks marketed MGBs to U.S. investors. According to the complaint, the banks’ U.S.-based dealer-subsidiaries sold MGBs in the U.S. as agents for their corporate parents.  

How can Cadwalader help? 

Cadwalader’s antitrust team is one of only a few to focus on the financial services sector. Located in key jurisdictions in the United States (New York, Washington DC) and Europe (London, Brussels), we are specialists in offering ‘end-to-end’ advice on compliance, investigations and related litigation in this sector.

If you would like to discuss the issues arising in this alert, or how we can help you more generally, please contact Amy Ray or Brian Wallach.

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