The class-action antitrust lawsuit that a customer brought against eight of the largest containerboard producers in the United States is progressing. Industry observers and analysts are keeping tabs on whether the companies in question try for another price increase this year despite the lawsuit.

In July, Artuso Pastry Foods Corp. filed a complaint in a federal court in Illinois accusing containerboard manufacturers of creating a "cartel" and colluding in a price-fixing scheme during a series of seven price increases from November 2020 to the present. The defendants include Cascades, Georgia-Pacific, Graphic Packaging International, Greif, International Paper, Packaging Corporation of America, Pratt Industries and Smurfit Westrock.

Court documents show that summonses were issued to all the defendants last week. Additional documents show that this month Pratt and Packaging Corporation of America formally retained counsel, with the latest related activity occurring Aug. 19.

The case immediately drew industry attention, although some observers questioned whether this might be the type of frivolous complaint that corporations frequently face. That doesn't appear to be the case, in the view of an attorney with antitrust defense expertise who reviewed the complaint but is not involved in the case.

"In the antitrust space, it's actually pretty rare for a lawsuit to be frivolous," said Emmanuel Hurtado, an associate at Stubbs Alderton & Markiles. "It's really difficult to know whether the defendants are going to be liable, or if they're guilty here, but it's definitely not frivolous. It's something that probably is going to have to come out in discovery, but they seem to have pretty solid basis for bringing the action."

Hurtado said there are "some very strong facts for the plaintiff that I think are really going to help them in this case." For one, the lawsuit accuses the companies of being recidivist antitrust violators, or repeat offenders.

"The complaint points to at least 10 instances where a lot of the same players have been found liable for antitrust violations and have paid out sums of more than $300 million," Hurtado said. "Lots of money has been spent on this type of litigation."

A well-known example was the 2010 price-fixing case Minnesota-based cleaning products company Kleen Products brought against multiple containerboard producers. Packaging Corporation of America and International Paper were among the companies that settled via multimillion-dollar payments, but Georgia-Pacific and WestRock went to court. A judge ultimately dismissed the case seven years later, and that decision was upheld during an appeal in 2018.

Artuso's complaint also cites significant industry consolidation that it says has resulted in just a few companies now controlling 85% of market share for containerboard products. It highlights 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.

"It seems like the market is getting more and more consolidated, which I've seen in other industries as well. Those circumstances are really prime for collusion," Hurtado said. "It just makes it a lot easier for the people at the top to engage in these agreements to fix prices, or to otherwise suppress the market."

Most of the defendants told Packaging Dive on Monday that they do not comment on pending litigation, or they did not respond to requests for comment. Georgia-Pacific this week reiterated its previous comment about the case: "These claims against Georgia-Pacific are without merit, and we intend to vigorously defend the company."

Balancing concerns and risks
Plaintiffs must weigh numerous factors when deciding whether to wage an antitrust lawsuit, Hurtado said, and the price tag is a major one. The "discovery" process can take years, which drives up costs. Expenses are also a consideration for defendants when determining whether to settle or litigate.

"Litigation is very expensive," he said. "Usually, there's extremely expensive discovery, because you have to basically prove that the entire industry is colluding."

Another thing that comes into play in the containerboard lawsuit is the plaintiff's request for "treble damages," an amount three times the damages eventually awarded by the court. When treble damages are introduced, "the risk is really increased. So there is a lot of incentive for defendants to try to settle these cases," Hurtado said.

On the flip side, "a lot of antitrust law is very defendant friendly," Hurtado explained. "There are very technical arguments that can allow a company to kind of get out of antitrust liability."

A sticking point in many antitrust cases is the requirement for the plaintiff to adequately prove the defendants collaborated on some sort of an agreement. The proof could be something like "a 'smoking gun' email where they're agreeing to do something," Hurtado said. But absent that, collusion is difficult to prove.

In the Kleen Products case, for instance, plaintiffs presented emailed remarks from WestRock vice presidents that supported a price-increase initiative. But in the end, the judge didn't find strong enough evidence of companies colluding instead of acting independently with similar timing to raise prices. The judge concluded that the plaintiff overstated the containerboard producers' coordination during price hikes.

What's next
The Artuso case is in its very early stages and will likely take a while to advance, Hurtado suggested.

A standard next step would be for the court to review the proposed class in the complaint and whether changes are needed, he said. After the court decides who can be included in a potential class, there's typically a period when a plaintiff puts out a call for other parties to join the class-action lawsuit.

"The second thing is, more likely than not, is that the defendants [would] file a motion to dismiss and make legal arguments about why there's no basis for this lawsuit," Hurtado said. "They are probably going to claim that this is frivolous."

Motions to dismiss usually are submitted within a couple months of the initial lawsuit filing, he explained, and judges then often take months to rule on a potential dismissal. Although antitrust cases sometimes get thrown out during this phase, "judges generally allow these kind of cases to move forward to see if there is evidence that the companies were working together behind the scenes," Hurtado said.

In antitrust cases, the defendants have the option to file individual motions to dismiss. But the more common route is for one party to take the lead on the motion to dismiss and the others join that effort, according to Hurtado.

"In my experience, antitrust cases are kind of on a slower schedule. ... But those are probably the things that are most likely to be addressed in the near future," he said.

Meanwhile, eyes are on containerboard producers to see if they try to raise prices again despite the lawsuit. The major producers already nearly simultaneously implemented one hike earlier this year, following two last year.

"While some investors have currently expressed concerns around the ability of producers to implement price increases amid an ongoing lawsuit, we believe that any such announcements will be predicated on market conditions," said Michael Roxland, senior paper and packaging analyst at Truist Securities, in an Aug. 13 note to investors.

Conditions include costs, inventories and supply and demand dynamics. The 6% reduction in North American containerboard production capacity so far this year should be supportive of pricing, Roxland said, but "we believe further closures, an uptick in demand, and resolution to tariff-related uncertainty in the market may be necessary for another price increase in 2025." To be successful, a price increase likely would need to be announced within the next month and occur by October to get ahead of the typical seasonal demand slowdown, Roxland explained.

He also pointed out that producers managed to implement four price increases, for a total of approximately $190 per ton, during the years the Kleen Products lawsuit was ongoing.