Justice Department Probes Alleged Price-Fixing in PVC Pipe Industry

In a recent regulatory filing, Otter Tail Corporation, a PVC pipe manufacturer, disclosed that it had received a grand jury subpoena seeking documentation related to PVC pipe production, sales, and pricing. Otter Tail, which operates Northern Pipe, indicated that it would cooperate fully with the investigation, although the company noted that it was too early to gauge the potential impact on its business, according to Financial Times.

Allegations of price-fixing in the industry gained traction following a report in July from the short-selling firm ManBear, which argued that PVC pipe prices were artificially inflated, pushing profits to unprecedented levels that appeared unsustainable. ManBear, a relatively discreet activist investor, has previously highlighted potential antitrust concerns in other sectors, including the chicken industry. ManBear’s 2016 report on alleged price-fixing in the poultry market led to a $110.5 million settlement between the DoJ and Pilgrims Pride, though some executives in the case were acquitted at trial. In the PVC pipe market, ManBear holds short positions in Otter Tail, as well as manufacturers Westlake and Atkore, and distributor Core & Main.

Core & Main, although not named as a defendant in the civil lawsuits, responded to the accusations, denying any involvement in price-fixing and asserting that “honesty and integrity are part of our core principles.” Similarly, Westlake has declined to comment on the ongoing litigation, while Atkore has yet to respond, per Financial Times.

Civil lawsuits have also implicated Otter Tail and other manufacturers, alleging that they used PVC & Pipe Weekly, a trade publication from News Corp-owned Opis, to coordinate price increases. Plaintiffs contend that the publication acted as a “smoke-filled backroom,” enabling companies to signal their pricing strategies in ways that could circumvent competitive pricing norms. In response, News Corp asserted that the publication merely serves to provide industry information to a diverse group of subscribers and argued that the lawsuits lack merit.

Otter Tail, meanwhile, cautioned investors about the potential financial risks tied to these allegations, noting that an antitrust violation could have a “material impact” on its financial health. The company stated that it intends to defend itself vigorously, asserting that it has both factual and legal grounds to counter the allegations.

The investigation underscores heightened scrutiny of commodity products like PVC pipes, which are sold in standard sizes and widely used in public infrastructure projects. According to Financial Times, the DoJ’s inquiry marks the latest in a series of efforts to examine anti-competitive practices in critical supply chains following disruptions and price surges attributed to the COVID-19 pandemic.

Source: Financial Times