Friday, May 23, 2008

Revelations of DOJ Antitrust Investigation Lead to Over 70 Civil Lawsuits Against Ice Manufacturers

On March 5, the Department of Justice searched the offices of Reddy Ice as part of an antitrust investigation. Between March 10 and now, over 70 lawsuits have been filed against Reddy Ice and its alleged co-conspirators.

According to the lawsuits, the main packaged ice manufacturers divided the market to avoid price competition. Allegedly, Reddy Ice was allocated the sunbelt states and the northwest, Arctic Glacier controls the central and northeastern states and California, and Home City Ice controls certain Midwestern states. With little overlap between territories and limited competition, the manufacturers were allegedly able to charge artificially high prices.

Their scheme was allegedly aided by the companies' acquisition of competitors. Reddy Ice has acquired over 100 smaller competitors since 1997, and Arctic Glacier has acquired over 60 competitors.

Sales of packaged ice are estimated around $1.8 billion annually, though half of that output is from in-house ice machines, and the other half is from ice manufacturers. The three major manufacturers collectively control about seventy percent of the sales of manufactured ice.

When the Department of Justice is investigating potential antitrust violations, it is common to see a large number of civil class action lawsuits follow if the potential damages are large enough, as was the case with the DOJ's chocolate price fixing investigation. While the plaintiffs in such cases often piggyback off of the DOJ's investigation without substantial investigation of their own, such cases still have the potential to benefit consumers through the direct compensation of class members as well as their deterrent effect on future antitrust violations. Of course, an even greater incremental benefit to a plaintiff class can be realized on the occasions when plaintiffs' attorneys discover wrongdoing themselves (as was the case with the class action complaint my firm filed yesterday on behalf of retailers).

 

The Law Firm of Kotchen & Low LLP - Civil Litigation, Counseling, and Representation Before Government Agencies


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