Dive Brief:
- Containerboard producers are being hit with a class-action antitrust lawsuit accusing them of creating a “cartel” and engaging in price collusion to boost profits at the expense of customers, as first reported by Bloomberg Law.
- On Tuesday, Artuso Pastry Foods Corp. filed the complaint in federal court in Illinois against entities including Cascades, Georgia-Pacific, Graphic Packaging International, Greif, International Paper, Packaging Corporation of America, Pratt Industries and Smurfit Westrock over a series of seven price increases from November 2020 to the present.
- Artuso Pastry is requesting that plaintiffs receive treble damages, an amount three times the damages eventually awarded by the court. It also seeks injunctive relief, in which a court orders violating parties to stop taking a particular action, and attorneys’ fees.
Dive Insight:
This is not the first time major containerboard producers have faced a price collusion class action lawsuit. In one example, Minnesota-based cleaning products company Kleen Products in 2010 brought a suit against nearly 10 containerboard producers, also in the United States District Court for the Northern District of Illinois, on accusations of conspiring to increase prices and reduce output from 2004 to 2010.
That case resulted in multiple containerboard companies, including Packaging Corporation of America and International Paper, settling via multimillion-dollar payments, although Georgia-Pacific and WestRock went to court. Many of the defendants in the Kleen Products case are also named in the new lawsuit.
In this week’s nearly 50-page filing, Artuso Pastry said current containerboard producers and their predecessors have engaged in anticompetitive behavior and price fixing for more than 85 years. It says in the last five years, defendants engaged in “numerous unprecedented and unjustified price increases, often implemented at the exact same time and for the exact same increase.” This “conspiracy” resulted in customers paying higher prices for containerboard than would have existed in a competitive market, according to the filing.
This lawsuit stems from Mount Vernon, New York-based Artuso Pastry purchasing containerboard products from WestRock, now Smurfit Westrock, and paying “an artificially high price,” according to the complaint.
Smurfit Westrock does not comment on pending litigation, but it is aware of the lawsuit and reviewing it, a company spokesperson told Packaging Dive on Wednesday. Georgia-Pacific also emailed a statement: “These claims against Georgia-Pacific are without merit, and we intend to vigorously defend the company.” The other companies Packaging Dive contacted Wednesday did not respond by publication time.
The plaintiff claims that containerboard prices were relatively stable throughout the 2010s, but have jumped dramatically over the last five years — 33% from November 2020 to September 2022. The lawsuit alleges that no changes occurred to economic conditions such as input costs or demand “that could plausibly account for the magnitude of the price increases” that the producers implemented.
Reasons that producers have cited for the hikes include increased input costs for raw materials, transportation, energy and labor. Some industry observers have questioned the timing of containerboard price hikes during the last two years, citing weak demand and a global oversupply.
Part of the problem is the amount of industry consolidation that has occurred over the last few decades, the lawsuit says, citing that just a handful of companies now control the vast majority of market share, 85%, for containerboard products. It notes numerous major M&A deals in the industry over the last 25 years, including last year’s combination of Smurfit Kappa and WestRock, IP’s acquisition of DS Smith in January, and the early July announcement that PCA would buy Greif’s containerboard business. This type of concentration makes the market more susceptible to collusion, according to the plaintiff.
Defendants took a two-year pause on major price increases but resumed in December 2023, the suit says. At that time, numerous manufacturers announced nearly identical price increases for various board grades, set to take effect in January and February. That spring, a cluster of companies announced they would again raise prices in June 2024, with analysts pointing to a leading index only partially recognizing the first increase. More announcements started late in 2024 for price bumps taking effect this year, with more than a dozen manufacturers ultimately becoming part of that movement.
Although subtle differences existed in the different companies’ price hikes, “the lockstep movements further reinforced a repeated pattern of parallel pricing,” the lawsuit says. The plaintiff says containerboard producers’ collusion defies economic logic and goes against their individual self interests.
The plaintiff further argues that containerboard producers engaged in capacity restrictions, specifically that they used “value over volume” strategies and facility closures to restrict volumes. It cites numerous closures by WestRock, International Paper and Greif, along with executives’ repeated public references to “value over volume” in recent years.
The court docket shows Artuso Pastry’s attorneys appeared in court Wednesday. Another document indicates involved parties must jointly provide the judge with a status update by Dec. 17.
