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Stock Strategist Industry Reports

Law and Order: Containerboard Makers Fight Antitrust Suits

Investors should pay attention to courtroom proceedings.

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In September 2010, North America's containerboard makers were slapped with a class action lawsuit under the Sherman Act alleging price fixing from 2005 to 2009. During the last several months the case has slogged its way through Judge Shadur's courtroom in the Northern District of Illinois division of the United States District Court system. We have been regular attendees of the status hearings held on the case.

While we are not legal experts, we want to frame a range of possible outcomes for this most recent bout of antitrust lawsuits using the containerboard industry's previous battle with price-fixing allegations. Should history repeat itself, legal costs and settlement payments could have a slight negative impact on the valuations of firms like  Packaging Corporation of America (PKG),  Temple Inland (TIN), and Smurfit Stone, which have significant exposure to the North American containerboard market. We believe investors should keep these risks in mind when considering the containerboard companies.

Thomas Mullarkey does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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