Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Packaging manufacturers charged with containerboard price fixing conspiracy, (Jul 1, 2016)

By Linda O’Brien, J.D., LL.M.

From 2005 through 2010, a group of corrugated packaging manufacturers engaged in a conspiracy to fix the prices of containerboard products, according to a complaint filed by a furniture maker in the federal district court in Madison, Wisconsin (Ashley Furniture Industries, Inc. v. Packaging Corporation of America, June 30, 2016).

Ashley Furniture Industries is the largest manufacturer and retailer of home furnishings in the United States. Containerboard is the principal raw material used to manufacture corrugated packing products produced by Packaging Corporation of America, International Paper, Norampac Industries, Inc., Cascades, Inc., Domtar Corporation, Weyerhaeuser Company, Georgia Pacific, LLC, Westrock Company, Temple-Inland, Inc., and Tin, Inc.

According to the complaint, beginning in 2003, the containerboard products industry was experiencing decreased profit margins, rising product demand, and a promising economic outlook. After two unsuccessful attempts to raise prices, the defendant manufacturers began to coordinate a capacity reduction in order to fix the prices of containerboard products.

The complaint claims that, from 2005 to 2010, there were an exceptional number of containerboard plant closings, capacity reductions, and price increases that could only be explained by a concerted effort by the defendants. Containerboard product prices increased eight times during that period and production capacity was reduced over 50 percent despite the economic downturn. Additionally, the demand for containerboard products remained relatively stable, yet the defendants cut capacity and raised prices. These actions were contrary to the defendants’ unilateral economic interests since capacity would have been expanded in a competitive market.

The containerboard industry is highly susceptible to horizontal price fixing and output restrictions, the complaint alleges. The consolidation of manufacturers in the containerboard products industry has purportedly led to a significant increase in market concentration. In addition, the complaint asserts that there are high barriers to entry, the demand for containerboard products is very inelastic and no firm has sufficient unilateral market power. Furthermore, the defendant manufacturers had opportunities to communicate about supply and prices as a result of their membership in industry and trade associations, the complaint claims.

The complaint also alleges that the market impact of the defendants’ conspiracy has been substantial. As a result of the defendants’ market domination and coordinated reduction of production capacity, purchasers of containerboard were forced to pay substantially higher prices than they would have paid in a competitive market.

Ashley Furniture asserts claims for conspiracy in restraint of trade in violation of Section 1 of the Sherman Act and the Wisconsin antitrust law. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 3:16-cv-00469.

Attorneys: John Franke and Michael B. Brennan (Gass Weber Mullins LLC) and William D. Beil and Brandon J. B. Boulware (German May PC) for Ashley Furniture Industries, Inc.

Companies: Ashley Furniture Industries, Inc.; Packaging Corporation of America; International Paper; Norampac Industries, Inc.; Cascades, Inc.; Domtar Corporation; Weyerhaeuser Company; Georgia Pacific, LLC; Westrock Company; Temple-Inland, Inc.; Tin, Inc.

News: Antitrust WisconsinNews