U.S. District Court Judge Naomi Reice Buchwald has
ruled against a group of plaintiffs seeking to use the Sherman Antitrust Act to punish rate-setting banks for manipulating LIBOR. Although some of the defendant banks on the London Interbank Offered Rate panel have admitted colluding to fix the LIBOR rate, Judge Buchwald held that the harm caused by this collusion was not a result of anti-trust activities prohibited by the Sherman Act.
The plaintiffs did not allege that the LIBOR rate setting process itself was anticompetitive, but that the collusion in setting LIBOR at an artificial level was. Judge Buchwald rejected this argument because:
- the process of setting LIBOR was never intended to be competitive;
- even though they colluded in setting the rate, the defendant banks did not restrain competition in the market for LIBOR-based financial instruments or the underlying market for interbank loans; and
- the plaintiffs could have suffered the same losses they allege under normal circumstances of free competition.
This ruling forecloses a major avenue for plaintiffs seeking redress for the LIBOR fixing scandal. It is expected that these and other LIBOR plaintiffs will change their strategies to focus more on breach of contract claims.