Tuesday, April 19, 2011

Supply Restrictions, Price Increases Might Demonstrate Illegal Price Fixing

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

Manufacturers of containerboard, the principal raw material used to make linerboard and corrugated boxes, could have engaged in price fixing in violation of Sec. 1 of the Sherman Act by allegedly undertaking a course of conduct that included contemporaneous supply restrictions and price increases, the federal district court in Chicago has ruled. A motion to dismiss the claims was denied.

The complaining putative consumer class provided specific allegations of more than “mere modest capacity reductions,” the court found.

Conscious Parallelism

While there may have been some variation in the amount and timing of reduction, that variation was not substantial enough to overcome the otherwise strong suggestion of conscious parallelism.

Likewise, the plaintiffs’ allegations of consistent parallel price increases were enough to make a threshold showing of conscious parallelism, in the court’s view.

Additional contextual factors offered by the plaintiffs further supported a plausible inference of an unlawful agreement among the defending manufacturers, the court added.

Among these were:

(1) Specific capacity and pricing decisions made by the defendants that were contrary to their self-interest;

(2) The close temporal proximity of price increases and capacity reductions to trade association and industry events; and

(3) The susceptibility of the containerboard industry to collusion, owing to its consolidated nature, barriers to entry, inelasticity of demand, cost structures, and commodity-like products.

The April 8 decision is Kleen Products, LLC v. Packaging Corp. of America, 2011-1 Trade Cases ¶ 77,414.

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