Pipe producers deny using industry newsletter as conduit for price fixing

Are PVC pipe and conduit manufacturers fixing prices and overcharging customers by coordinating actions via an industry newsletter?

The question is at the heart of an antitrust lawsuit filed by George Bavolak, an electrical contractor who owns Metropolitan Energy Service Inc., which provides residential and commercial electrical services in Minnesota.

The lawsuit, filed Aug. 23 in U.S. District Court in Chicago, names 10 pipe and conduit producers — including many of the largest extruders in North America — as defendants along with the Oil Price Information Service (OPIS), whose PetroChem Wire publishes a PVC & Pipe Weekly report.

The OPIS report includes pipe price data and manufacturer commentary that the 64-page lawsuit says shows specific forward-pricing intentions and apparent invitations to coordinate pricing.

Three of the 11 defendants immediately denied the allegations.

Bavolak filed the proposed class-action lawsuit against OPIS and Atkore Inc., Cantex Inc., Diamond Plastics Corp., Ipex USA LLC, JM Eagle, National Pipe and Plastics Inc., Otter Tail Corp., Prime Conduit Inc., Southern Pipe Inc. and Westlake Corp.

OPIS allegedly conspired with the defendants by facilitating the exchange of confidential, proprietary and competitively sensitive data. The defendants then colluded to exploit the economic crisis during COVID-19 by artificially maintaining the historically high pricing brought by the pandemic, the lawsuit says.

The law firm Lockridge, Grindal, Nauen PLLP is representing Bavolak and any other contractors, home builders or municipalities that become plaintiff parties to the case.

"Prices for PVC municipal water pipe and electrical conduit have been historically high for the last several years. End purchasers such as municipalities and contractors have been shouldering the burden of these high prices, paying more for the PVC pipes they need to complete critical infrastructure and electrical projects," the law firm says in an online overview of the case.

Spokespersons for OPIS, Pineville, N.C.-based Ipex and Fergus Falls, Minn.-based Otter Tail said those companies would investigate or fight the allegations.

"We cannot comment on the court filings but know that Ipex is taking these allegations very seriously," Ipex Communications Director Andrea Arch said in an email. "Ipex has launched an internal investigation to review the matter further. For more than 50 years, Ipex has built a reputation with a customer-first culture that brings transparency, accountability and integrity to all of our projects and customer relationships. We are continuing to focus on providing our customers with excellent service and support."

A year ago, Ipex announced plans to invest $200 million into its Pineville site to boost capacity and create a technological flagship that will be one of the most advanced plastics facilities in the manufacturing industry.

With $1.68 billion in annual sales, Ipex is the fifth largest pipe, profile and tubing extruder in North America, according to Plastics News' latest ranking.

Stephanie Hoff, Otter Tail director of communications, said in an email: "We deny these allegations against Otter Tail. We take seriously our commitment to conducting our business with integrity and in compliance with applicable laws and regulations. We will fight against these claims in court."

Otter Tail is a diversified company with an electric utility, health services, food ingredient processing and more in addition to a plastics segment.

OPIS officials are planning their legal response. The Rockville, Md.-based company is a wholly owned subsidiary of News Corp., which is also the parent company of Dow Jones & Co.

"These complaints target a product that provides newsworthy information to a wide variety of subscribers. We believe these lawsuits are entirely without merit and we will vigorously fight these claims," a Dow Jones spokesperson said in an email.

News Corp. finalized its purchase of OPIS from IHS Markit for $1.15 billion in February 2022.

Spokespersons for Westlake and Cantex said company officials don't comment on pending litigation. The other defendants didn't respond to Plastics News questions.

The lawsuit points to several years of OPIS reporting, including these back-to-back updates:

• On June 21, the lawsuit says OPIS reported that "converters acknowledge they will need to try again to raise prices" and "put out prices letters with an increase of no more than 10 Blocks above the current market and all aim for the same implementation date. Then, if that increase is successful, to do it again."

In the same report, OPIS also stated converters were seeking "a single price increase that would take prices up by about 5 percent over the current market level, with another percent added to account the discount."

• The following week, on June 28, the lawsuit says OPIS reported that "all major converters raised prices with almost identical pricing in every region they served."

Or, as the lawsuit puts it, the defendants "accepted the invitation."

Cantex issued price sheets at $396.75 per 100 feet in the East and South Central regions, $431.25 in the North Central region, $402.50 in the Southwest region, and $425.50 in the Northwest region, the lawsuit says.

Then defendants Prime, National Pipe, Southern Pipe, Ipex and Atkore followed with similar price sheets for the regions they serve, the lawsuit says.

Overall, the defendants raised their prices for PVC municipal water pipes by about 500 percent between late 2019 and mid-2022 and their prices for PVC electrical conduit by about 500 percent from 63 cents per pound in late 2019 to $3.77 per pound in late 2021, the lawsuit says.

With the price increases imposed collectively, many customers wouldn't switch their purchases to another product, the lawsuit alleges.

"These PVC pipe price changes generated historic profits for the converter defendants, which motivated defendants to implement and maintain their conspiracy," the lawsuit adds.

Bavolak contends he indirectly purchased PVC produced by one or more defendants or their co-conspirators and that he suffered injury as a result of the defendants' alleged conduct.

The COVID-19 pandemic provided the defendants with the opportunity to implement their conspiracy, the lawsuit says, after the deadly illness triggered one of the most severe economic crises in modern history. The period was characterized by supply chain disruptions, demand fluctuations and price volatility.

In the wake of persistent price increases, officials with the Antitrust Division of the U.S. Department of Justice were concerned about persons and entities exploiting the supply chain disruptions to engage in unlawful anticompetitive behavior.

This pipe price-fixing lawsuit alleges that the defendants did what the DOJ feared.

"PVC converters exploited the COVID-19 supply chain disruptions to fix prices and overcharge their customers for PVC municipal water and PVC electrical conduit pipes," the lawsuit says.

Contractors, home builders and municipalities paid artificially inflated prices for PVC pipes, the lawsuit also says, even though supply chain issues normalized in 2022 and PVC resin prices normalized in early 2023.

Sales for PVC pipes manufactured to municipal standards were about $3.3 billion in 2023 while sales of electrical conduit produced to UL standards sales were about $657 million, the lawsuit says.

The PVC water pipes at issue carry municipal drinking water from reservoirs, lakes and rivers to treatment facilities and from there to water mains that distribute water throughout the community, the lawsuit says.

Extruded PVC electrical conduit is used to protect bundled wires.

Six of the defendants control about 90 percent of the U.S. wholesale market for PVC municipal water pipe, the lawsuit adds, listing them as JM Eagle, Westlake, Diamond, National Pipe, Otter Tail and Atkore.

Seven defendants control about 95 percent of the U.S. wholesale market for PVC electrical conduit, the lawsuit also says, listing them as Atkore, Prime, Cantex, National Pipe, JM Eagle, Southern Pipe and Ipex.

Los Angeles-based JM Eagle is the No. 1 pipe, profile and tubing extruder in North America with annual sales estimated at $3.9 billion.

Westlake ranks third with estimated related sales of $2.8 billion; Atkore is eighth with estimated sales of $1.02 billion; National Pipe ranks 10th with sales of $650 million; Cantex comes in at 28 with estimated sales of $240 million; Prime ranks 35th with estimated sales of $180 million; and Southern Pipe is 73rd with estimated sales of $48 million.

The civil antitrust lawsuit was filed on behalf of Bavolak and other people and entities who bought PVC municipal water pipes or PVC electrical conduit from a defendant in the U.S. from at least Jan. 1, 2021, to the present.

The lawsuit alleges the defendants exchanged price signaling statements and competitively sensitive information through OPIS to coordinate supra-competitive price — above what can be sustained in a competitive market — for PVC pipes and conduit to generate historic profit margins.

"In the PVC pipe industry, OPIS created the proverbial smoke-filled backroom that enabled the defendants to discuss and signal their pricing activities, gain access to standardized pricing data from their erstwhile competitors, and collectively extract artificially inflated profits from their customers," the lawsuit says.

"OPIS went far beyond just facilitating the private and non-public sharing of information: OPIS served again and again as a sounding board between defendants, allowing them to communicate their intentions on pricing and keep the conspiracy (and the good times) rolling," it added.

OPIS ensured that its detailed and competitively sensitive information was available only to its subscribers, the lawsuit says.

"Thus, purchasers of PVC pipes could not use OPIS' reports to negotiate lower prices. Instead, the converter defendants used it as a way to fix, raise, maintain, and stabilize their prices," the suit says.

The PVC pipe price changes generated historic profits for the defendants, which motivated them to maintain their conspiracy, according to the lawsuit.

The defendants' profit margins remain elevated when compared to historic pricing data, the lawsuit continues.

For example, profit margins for PVC electrical conduit producers around March 2024 were $1.15 per pound, which is more than four times the 2017-2019 average of 26 cents per pound, the lawsuit says.

Profit margins for Otter Tail "exploded" to 61 percent in 2023, the suit adds, up from its 14 percent long-term average (2013-19) due in large part to profit from its PVC municipal water pipe business.

PVC municipal water pipes are sold through a relatively consolidated group of distributors with about 40-50 percent of the market controlled by Core & Main Inc. of St. Louis.; Ferguson Enterprises Inc. in Newport News, Va.; and Fortiline Waterworks in Concord, N.C., according to the lawsuit.

The three companies are "agents and co-conspirators" that sold the pipes, the lawsuit says, pointing to a Feb. 23, 2023, OPIS report that says, "Converters spoke about working in concert with large distributors for months to keep pricing from sliding below Block 440 to prevent devaluing distributor inventories."

Pipe and conduit producers also "expressed some concern about whether distributors would return the favor and help keep prices from dropping," the lawsuit says.

Prices for PVC municipal pipes remained elevated through July 2024, according to the lawsuit.

Conspiracy allegations also include three seemingly separate defendants — Prime, Cantex, and Diamond Plastics — that are owned wholly or in part by Mitsubishi Corp.

"This common ownership gave defendants another means to coordinate their conspiracy," the lawsuit says.

In addition, trade association meetings provide opportunities for defendants to meet with one another. High-level executives from the defendant companies regularly attend some annual conferences, including the Uni-Bell PVC Pipe Association, the lawsuit says.

Bruce Hollands, Uni-Bell executive director, told Plastics News in an email: "Regarding the lawsuit, I have no comments since this has nothing to do with the association or its mandate."

Other communication, like the OPIS reports, also are cited, including a May 3, 2024, comment that "Converters said the price hikes won't work unless everyone is working together to implement them."

The spread between PVC pipe prices and the primary input cost of PVC resin as reported by OPIS began to move abnormally about Jan. 1, 2021, the lawsuit says.

OPIS pricing data shows that PVC resin prices increased from 34 cents per pound in late 2019 to 89 cents per pound in early 2022, before falling back to a more normal level of 51 cents per pound in January 2023, the lawsuit says.

For the same period, OPIS pricing data shows the price of PVC electrical conduit increasing about 500 percent between late 2019 and late 2021 — moving from 63 cents per foot to $3.77 per foot — before coming back down.

"OPIS reports that PVC electrical conduit, as of July 2024, sits at $1.68, which is approximately three times its price pre-May 2020," the lawsuit says.

Also, in July 2024, OPIS reported that prices for PVC municipal water pipes remain 4.7 times than they were pre-May 2020, according to the lawsuit.

The elevated prices for PVC pipes do not correlate to strong demand for the products, the lawsuit says, pointing to corporate financial filings with the Securities Exchange Commission.

For example, Otter Tail reported that its prices for PVC pipes manufactured to municipal standards increased by 198 percent but volume for those pipes decreased by 23 percent from 2019-2023 cumulatively, the lawsuit says.

The profit margins for Otter Tail increased, too, to 61 percent in 2023 — up from its 14 percent long-term average, the suit says.

Similarly, Atkore reported that its prices for PVC pipes manufactured to electrical conduit standards increased by 86 percent but volume for those pipes decreased by 9 percent from 2019-2023 cumulatively, the lawsuit also says.

"In short, despite weak demand, prices went up significantly. This is not consistent with the laws of supply and demand — i.e., when demand goes down, price should go down as well, absent coordination among commodity manufacturers," the lawsuit says.

The defendants and their co-conspirators agreed to unreasonably restrain trade and commerce in violation of the Sherman Act, the lawsuit says, by artificially reducing or eliminating competition for the pricing of PVC pipes and conduit sold to U.S. purchasers.

The defendants are facing one count of restraining trade in violation of the Sherman Act, one count of conspiring to exchange competitive information, also in violation of the Sherman Act, and 45 counts of violating state anti-trust laws.

The lawsuit says the alleged violations of state antitrust laws affected commerce and customers in Alabama, Arizona, California, Colorado, Connecticut, the District of Columbia, Florida, Hawaii, Illinois, Iowa, Kansas, Maine, Maryland, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Dakota, Tennessee, Utah, and Vermont.

The plaintiff is asking for the case to go forward as a class-action lawsuit with a trial by jury to seek monetary damages as allowed by law.