May 23, 2018
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. 10 C 5711 - Harry
D. Leinenweber, Judge.
Wood, Chief Judge, and Bauer and Rovner, Circuit Judges.
have always posed problems for conventional antitrust law:
without something that can be called an agreement, they elude
scrutiny under section 1 of the Sherman Act, 15 U.S.C. §
1, and yet no individual firm has enough market power to be
subject to Sherman Act section 2, 15 U.S.C. § 2. Tacit
collusion is easy in those markets, see In re Text
Messaging Antitrust Litigation, 782 F.3d 867 (7th Cir.
2015), and firms have little incentive to compete on the
basis of price, "preferring to share the profits
[rather] than to fight with each other." Joe
Sanfelippo Cabs, Inc. v. City of Milwaukee, 839 F.3d
613, 615 (7th Cir. 2016).
appeal concerns the fine line between agreement and tacit
collusion, or, put another way, conscious parallelism. Direct
purchasers of containerboard ("the Purchasers")
charged multiple manufacturers with conspiring to increase
prices and reduce output between 2004 and 2010. We affirmed
the district court's decision to certify a nationwide
class of buyers. Kleen Prods. LLC v. Int'l Paper
Co., 831 F.3d 919 (7th Cir. 2016). Before and after that
ruling, most of the defendants settled with the Purchasers.
But two companies-Georgia-Pacific LLC and WestRock CP,
LLC-decided to fight. They persuaded the district court that
there was not enough evidence of a conspiracy to proceed to
trial. We agree with that assessment and affirm the judgment
dismissing the case.
is the name of the material used in countless boxes: it
consists of a corrugated layer of heavy paper sandwiched
between two smooth pieces of linerboard. Demand is relatively
inelastic, meaning that customers will not defect to other
products even if the price goes up, because the available
substitutes are inferior. Containerboard is manufactured at
large, costly mills, which are hard to duplicate, given both
the high cost of construction and the myriad of environmental
laws that must be satisfied. A handful of major players
dominate the industry. Those players include the original
defendants in this suit: International Paper
("IP"), Georgia-Pacific, Temple-Inland, Inc.,
WestRock,  Weyerhaeuser Co., Norampac Holdings U.S.
Inc., and Packaging Corporation of America ("PCA").
the early 2000s, prices for containerboard were low. But from
February 2004 to November 2010, they rose dramatically. The
original defendants attempted to institute price increases on
15 different occasions. The pattern was a common one. After
one company announced that it would raise its prices for
containerboard, the rest followed suit with identical or
comparable increases in the ensuing hours, days, or weeks.
(The one exception was a failed attempt in which there were
three hold-outs.) Such efforts took place from time to time.
For example, in March 2003, the defendants attempted an
ultimately unsuccessful increase. Of the proposed hikes from
2004 to 2010, Georgia-Pacific, WestRock, and a non-defendant
each led the effort twice. The price increases were sustained
nine times, a 60% success rate.
containerboard prices rose, containerboard production
capacity fell in North America (despite the inelasticity of
demand and growth throughout the rest of the globe). The
initial defendants were not immune from this decline. The
Purchasers' expert concluded that the defendant companies
reduced their production capacity by an amount almost double
that of non-defendants, though they used different strategies
to accomplish this goal. They closed a significant number of
mills during the class period-WestRock alone was responsible
for more than a third of those closures. WestRock also took
care, through measures such as buyer selection and machinery
sales, to avoid adding containerboard supply into the market.
Georgia-Pacific kept all its mills running, but it slowed the
rate of production. It would periodically "slow
back" production by idling or shutting down machines and
taking extra downtime. While these practices diminished
supply to the point that it sometimes pinched, in the end
Georgia-Pacific never missed an order. And the company
actually increased its overall capacity by acquiring a new
mill in 2007.
this period, the defendants were in regular communication.
Company executives and other employees spoke by phone and at
trade association meetings every few days. The record does
not reveal the contents of all these conversations, but at
least some dealt with the timing and pricing of interfirm
trading of containerboard -a common practice.
and public-facing statements made by the defendants'
employees shed light on these economic developments. Some
email exchanges may be read to imply that the defendants had
foreknowledge of other companies' proposed increases
before they were announced. For example, just before three
price hikes, a PCA employee offered an opinion about how high
prices would need to go over the next year and a half in
order to recover the cost of capital. A Georgia-Pacific
staffer wrote "the party begins" when discussing an
increase attempt. A WestRock vice president emailed that the
company "always follow[s] IP," even though in fact
"always" was an overstatement. And a Weyerhaeuser
employee discussed a specific increase two days before
WestRock first made its new price public. Other statements
support the inference that a coordinated plan was in place.
For instance, a Weyerhaeuser employee wrote that he
"made up a bunch" of information in a report about
what was learned from customers about competition, asking
others to "be more specific" to stay "out of
anti-trust legal issues." A Norampac executive,
discussing problems with the industry, said "you have to
be ready to let go business if you want to keep the price
up," and "everybody needs to do the same
and WestRock made their own incriminating remarks. Because
some details remain under seal in this court, some of our
examples are a bit vague, but we have reviewed the sealed
materials and they are consistent with the remainder of the
evidence. A WestRock vice-president made remarks in an email
that could easily be construed as an undertaking to
follow-the-leader. A different vice-president complained that
the company "ha[d] no choice but to support [a price
increase] initiative" and that WestRock "ha[d] done
[its] part." At one point, a company employee wrote that
the "only way to get paid is to have a 1994-95 situation
where the tide rises for all boats," perhaps referring
to the container-board industry's earlier run-ins with
antitrust law. See, e.g., In re Linerboard Antitrust
Litig., 305 F.3d 145 (3d Cir. 2002). Publicly,
WestRock's CEO was reported to have said that the company
had a restructuring plan to "cut supply enough at
[WestRock] to force price increases throughout the
industry." Georgia-Pacific's president gave a speech
during the period in question urging the industry to resist
customer requests for price breaks.
September 2010, the Purchasers filed a putative class action
alleging violations of section 1 of the Sherman Act. 15
U.S.C. § 1. The district court consolidated the suit
with similar actions and denied several motions to dismiss.
Discovery followed. Then in March 2015, the district court
granted the Purchasers' motion for class certification
under Federal Rule of Civil Procedure 23. It defined the
class as follows:
All persons that purchased Containerboard Products directly
from any of the Defendants or their subsidiaries or
affiliates for use or delivery in the United States from at
least as early as February 15, 2004 through November 8, 2010.
Kleen Prods., 831 F.3d at 922. We affirmed the
certification decision while making clear that we were not
addressing the merits. E.g., id. at 928.
the district court, the litigation rolled onward. The court
largely denied the parties' cross-motions to exclude each
other's experts. Both sides moved for summary judgment.
Before the court acted on those motions, some of the
defendants settled with the Purchasers. The district court
granted the remaining defendants, Georgia-Pacific and
WestRock, summary judgment. In a lengthy opinion that delved
deeply into the Purchasers' evidence, the court concluded
that the record, viewed holistically in the light most
favorable to the Purchasers, did not tend to rule out that
the defendants had acted independently. With only the final
approval of settlement agreements pending, the district court
entered partial final judgment for the remaining defendants
under Rule 54(b). The Purchasers ask us to revisit that
1 of the Sherman Act prohibits every "contract,
combination, ... or conspiracy in restraint of trade ...
." Courts have understood for more than a century that
this language does not ban all contracts, but
instead reaches only agreements that restrict competition.
Copperweld Corp. v. Indep. Tube Corp.,467 U.S. 752,
768 (1984); see also Broadcast Music, Inc. v. Columbia
Broadcasting Sys., Inc.,441 U.S. 1 (1979); United
States v. Socony-Vacuum Oil Co. (1940). In the absence
of an agreement, the antitrust laws forbid only
monopolization or attempts to monopolize, see 15 U.S.C.
§ 2, as well as a few other arrangements including
anticompetitive mergers and acquisitions, see 15 U.S.C.
§ 18. But this case concerns only section 1; the
plaintiffs make no claim that any of the defendants has even
attempted to monopolize, much less succeeded in such an
effort. See Spectrum Sports, Inc. v. McQuillan, 506
U.S. 447 (1993). We can therefore disregard all other
antitrust theories and focus on the question whether the
district court correctly decided that the Purchasers did not
present enough evidence to permit a trier of fact to find the
agreement necessary for section 1 liability. As the Supreme
Court put it in Bell Atlantic ...