CHICAGO (CN) - Drywall manufacturers conspired to raise prices by 35 percent this year and stopped offering discounts for big jobs to monitor any "defection" from the conspiracy, which involves practically all the drywall sold in North America, a buyer claims in an antitrust class action.
Sierra Drywall Systems sued the eight companies that "manufacture and sell almost all of the gypsum board sold in the United States," according to the federal complaint.
The market for drywall, also known as gypsum board, is enormous: The average new home in the United States contains more than 7 tons of it, Sierra says.
Named as defendants are USG Corp., United States Gypsum Co., New NGC Inc., LaFarge North America, CertainTeed Corp., Georgia-Pacific, American Gypsum Co.,
TIN Inc. dba Temple-Inland, and PABCO Building Products.
Sierra claims that five of the defendant companies announced 35 percent price hikes in rapid succession this year.
"Gypsum board - also known as drywall, wallboard, sheetrock or plasterboard - is used in over 90 percent of all new residential and commercial construction projects in the United States. On average, a new home built in the United States contains more than 7.31 metric tons of gypsum," Sierra says in its complaint.
Arizona-based Sierra Drywall claims that "from at least September 2011 through the present, the defendants, manufacturers of gypsum board, combined and conspired to fix and raise the prices at which they sold gypsum board in the United States beginning with large and coordinated price increases that all became effective on or about January 1 or 2, 2012. In advance of these coordinated increases, during late September through mid-October 2011, five of the eight defendant manufacturers announced that they were raising gypsum board prices in January 2012 by an unprecedented 35 percent to their customers and indicated those prices increases would remain in place throughout 2012."
The remaining defendants sent letters to their customers indicating they would impose similar price increases, the complaint states.
Sierra claims the price increase was led by American Gypsum, which has a relatively small market share. "Absent assurances and agreement that its 'competitors' would follow, such 'leadership' by a small player would have been contrary to American Gypsum's self interest," Sierra says in the complaint.
Despite a soft construction market, "Defendants also maintained substantially higher prices in the face of significant industry overcapacity that would have made it virtually impossible for any defendant independently to impose and maintain a substantial price increases on its customers in the absence of collusion," according to the 37-page complaint.
Sierra claims that "at virtually the same time, each of the defendants also abruptly abolished its use of a decades-old competitive pricing practice known as job quotes. ... Job quotes permitted customers to lock in the price of gypsum board for the entire course of a construction project. Notwithstanding the pivotal role this pricing model had historically played in the industry for more than four decades, each defendant abruptly eliminated the practice in late 2011, at the same time that they put in place the industry-wide price increases described above."
Sierra claims that the elimination of job quotes allowed the defendants to monitor each others' pricing to ensure no co-conspirator undercut the others.
"Prior to the elimination of job quotes, as much as 70 percent of all gypsum board was sold pursuant to a job quote. If job quotes had remained in place, a defendant's failure to implement collusive price increases would not necessarily mean defection from a conspiracy, but could simply be pricing consistent with the job quote practice. With the practice eliminated, however, any failure to impose price increases on customers would be more readily recognized by co-conspirators as cheating. Thus, by collusively eliminating the job quote policy, defendants not only ensured more immediate and consistent implementation of their conspiratorial 2012 price increase, but facilitated the monitoring of the conspiracy," according to the complaint.
The defendants "collectively account for over 99 percent of the gypsum board sold in the United States and Canada," the complaint states. "The three largest defendants account for more than 60 percent of the U.S. sales of gypsum board."
USG controls 25 percent of the North American market, National Gypsum 23 percent, Saint Gobain/CertainTeed 13 percent, and Georgia-Pacific and American Gypsum 10 percent each, according to the complaint.
Sierra seeks treble damages for conspiracy and antitrust violations.
It is represented by Elizabeth Fegan with Hagens, Berman, Sobol, Shapiro, of Oak Park.
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