© Uros Petrovic | stock.adobe.com
Last week, several prominent packaging companies were named in a new lawsuit in United States federal court accusing them of forming a “cartel” to fix and inflate containerboard prices, a story first reported by Bloomberg Law.
The lawsuit accuses the manufacturers of engaging in a contract, combination or conspiracy to raise prices of containerboard products from Nov. 1, 2020, to present day through at least seven rounds of what it says were parallel price increases on containerboard and linerboard. Those increases, the filing says, boosted containerboard prices by more than 30 percent over that period.
Artuso Pastry Food Corps., based in Mount Vernon, New York, filed the lawsuit July 29 on behalf of what it says are “at least hundreds of thousands of individuals” and, according to a Reuters report, the plaintiffs are seeking more than $5 million in alleged damages and a court order prohibiting any continued violations of antitrust law.
Listed as defendants in the lawsuit are: Packaging Corp. of America (PCA), Lake Forest, Illinois; International Paper, Memphis, Tennessee; Smurfit Westrock, Atlanta; Smurfit Kappa North America; WestRock, Atlanta; Georgia-Pacific, Atlanta; Cascades Inc., Kingsey Falls, Quebec; Pratt Industries, Conyers, Georgia; Graphic Packaging International, Atlanta; and Greif Inc., Delaware, Ohio.
“Defendants adopted a ‘value over volume’ strategy that raised prices of containerboard products while reducing output,” the lawsuit says. “Defendants’ conspiracy was facilitated by a consolidated market structure, vertical integration and ample opportunities to collude.
“Defendants’ conspiracy resulted in higher prices of containerboard products than would have existed in a competitive market, resulting in substantial profits to defendants at the expense of purchasers of containerboard products.”
The filing also says that defendants engaged in numerous “unprecedented and unjustified” price increases, often implemented at the same time and for the same amount, and alleges that the containerboard market is “particularly susceptible to collusion” because of its high concentration, significant barriers to entry, inelastic demand and the fungible nature of containerboard products.
“These market characteristics enabled the defendants to effectuate their conspiracy without fear of losing market share,” the lawsuit says.
The filing also highlights the amount of industry consolidation over the past several years.
According to the lawsuit, the defendants’ collective current market share is up to 85 percent after the mergers of Smurfit Kappa and Westrock and International Paper’s more recent acquisition of DS Smith.
Additionally, PCA entered into an agreement last month to acquire Greif’s containerboard business in a deal worth nearly $1.8 billion.
According to a Fastmarkets report, assuming the PCA-Greif transaction is completed, these three deals will have a combined cost of about $20 billion and would represent the most paid in a year in containerboard merger and acquisition activity.
“This type of market concentration, with a small group of competitors controlling the vast majority of commerce, renders a market more susceptible to collusion,” the lawsuit says. “It is easier to coordinate and agree on prices, ensure the conspiracy remains concealed and to police adherence to the conspiracy by identifying and punishing defectors when there are fewer participants.
“Unsurprisingly, the containerboard products cartel was able to dramatically increase prices in lockstep.”
Court documents indicate involved parties must jointly provide the judge assigned to the case with a status update by Dec. 17.