(Source: Financial Times) The U.S. Department of Justice (DOJ) has launched a federal investigation into potential price-fixing in the PVC pipe industry, a key sector valued at approximately $4 billion. The probe focuses on allegations of collusion among manufacturers of PVC pipes used in municipal water systems and electrical conduits.
The investigation was prompted by a combination of civil lawsuits and a report from a short-selling firm, ManBear, which raised concerns about anti-competitive behavior in the industry. ManBear’s report, released in July, alleged that PVC pipe prices were being artificially inflated, driving profits to unsustainable levels and suggesting potential price manipulation.
As part of the inquiry, Otter Tail Corporation, a manufacturer of PVC pipes through its Northern Pipe subsidiary, disclosed that it had received a grand jury subpoena requesting documents related to its PVC pipe production, sales, and pricing. Otter Tail indicated that it would fully cooperate with the investigation, but cautioned that it was too early to assess the potential business impact of the probe. The company has not yet disclosed any specific financial exposure related to the investigation.
The allegations of price-fixing gained further traction after the release of the ManBear report, which accused PVC pipe manufacturers of inflating prices and benefiting from profits far beyond typical industry margins. ManBear, a short-selling firm known for its focus on antitrust issues, has previously highlighted potential price manipulation in other sectors. In 2016, its report on the poultry industry contributed to a $110.5 million settlement in an antitrust case involving Pilgrims Pride, though some executives were acquitted.
In the PVC pipe industry, ManBear holds short positions in Otter Tail, as well as other major manufacturers, including Westlake Chemical and Atkore, and distributor Core & Main.
Core & Main, while not named as a defendant in the civil lawsuits, has publicly denied any involvement in price-fixing, asserting that “honesty and integrity are part of our core principles.” Westlake Chemical declined to comment on the ongoing litigation, and Atkore has yet to respond to the allegations.
The civil lawsuits allege that PVC pipe manufacturers, including Otter Tail, coordinated price hikes using PVC & Pipe Weekly, a trade publication owned by News Corp’s Opis. Plaintiffs claim the publication acted as a “backchannel” for companies to share pricing strategies and circumvent competitive pricing practices. News Corp, however, defended the publication, stating that it serves to provide industry information and does not facilitate illegal price coordination. The company also argued that the lawsuits lack merit.
Otter Tail warned investors that the investigation could have a “material impact” on its financial health if it is found to have violated antitrust laws. The company has vowed to vigorously defend itself against the accusations, asserting that it has both legal and factual grounds to contest the claims.
The DOJ’s investigation signals increasing scrutiny of industries involved in critical infrastructure, including the PVC pipe market, which supplies essential materials for public works projects. According to industry experts, the probe is part of a broader effort by the DOJ to investigate anti-competitive practices in supply chains, particularly in the wake of price increases and disruptions linked to the COVID-19 pandemic.
As the investigation progresses, the future of the PVC pipe industry’s pricing practices and its broader economic implications remains uncertain.
