A May 4, 2021, lawsuit filed by three contractors accuses 10 lumber suppliers of conspiracy to monopolize within the lumber market — further alleging violations of multiple federal antitrust laws.
The lawsuit, filed by contractors David B. Turner Builders, LLC, New England Construction, LLC, and Timber Craft Homes, LLC, specifically lists claims of predatory pricing, price-fixing, conspiracy in price gouging, negligence in fair trading, and “infliction of emotional distress.”
According to the filing, each of the three contractors was “actively engaged” in purchasing lumber for homes and other projects around Jackson, Mississippi, when they noticed on November 15, 2020, that lumber prices had more than tripled what had been the previous market price.
Desiring to find the lowest price for lumber for their respective jobs, the contractors interacted with both local and national suppliers and found that the inflating cost of lumber was both unexpected and still increasing.
The suit lists examples of an OSB wafer board’s price rising from $8 per sheet to $38.50, and a 2 x 4 x 12 pine board rising from $7 to $15 and “still rising in cost.”
The suit claims that these discoveries led to continuing inquiries and complaints on behalf of the contractors, who came to believe that the United States’ top national manufacturers of lumber were conspiring to increase lumber prices — alleging that each manufacturer was using its “dominant position” in the industry and the cover of the COVID-19 pandemic to do so in order to drive profitability.
The allegations further note that the belief in conspiracy is rooted in the idea that “each [manufacturer] likely had to confirm with each other in some capacity” due to the seemingly coordinated timing of the rise in prices.
The manufacturers listed as defendants are Weyerhaeser Company, West Frasser, Canfor, Georgia-Pacific, Sierra Pacific Industries, Interfor, Hampton Affiliates, Idaho Forest Group, Potlatch Deltic, and RSG Forest Products.
In the suit, the contractors note that the rises in price have caused business losses, as they have not been able to afford their promised costs of construction and have not been able to keep up with any construction-connected loan contracts with banks. In turn, they say, they have had to put more of the burden of costs on homeowners.
“It’s a cost that [contractors] can no longer shoulder the burden on,” National Association of the Remodeling Industry CEO David Pekel said as he echoed these difficulties. “They have to pass the cost on to the homeowner.”
In response to the alleged price fixing, the contractors’ suit requests that the lumber manufacturers be charged with violating the Sherman Antitrust Act, Clayon Antitrust Act, and Robinson-Patman Act — core federal antitrust laws that carry severe civil and criminal penalties for any guilty parties.
Struggles in the construction supply industry highlight the importance of fair pricing to contractors
The currently weakened position of the construction supply industry, and of lumber supplies in particular, highlights the difficult nature of this particular suit — as well as its potential impact on contractors.
Though the lawsuit alleges that the market is “not substantially [or] materially depleted of raw products,” that may not necessarily be true.
National Association of Realtors chief economist Lawrence Yun noted how much of a negative impact the pandemic has had on lumber production on May 6, 2021 — sawmills struggled with health restrictions and ramped down production in fear of a market crash, eventually leading to the closure of a number of sawmills around the country.
“There was a great fear among sawmills to prepare for a downturn,” Lawrence said when speaking about the beginning of the pandemic. “When home buying surged, they could not open up capacity quickly enough.”
This impact hasn’t just been limited to the United States, either. Levelset’s Tom Scalisi pointed out in September 2020 that the majority of US lumber comes from Canada, with a significant amount also being imported from China and Germany — all countries that suffered significant setbacks from restrictions around the pandemic.
According to an end-of-2020 report from the United States Chamber of Commerce, 71% of contractors surveyed are facing at least one material shortage — with lumber the most-cited shortage at 31%.
In the midst of this, demand for new home-building has risen significantly during the pandemic, with the highest record new home sales since 2006 being set during July 2020. As Samuel Votaw reported in March 2021, “the current state of record-low mortgage rates and increasing demand for single-family homes means that home starts and remodeling […] are unlikely to slow anytime soon.”
A December 2020 report by the Associated General Contractors of America’s Ken Simonson noted that lumber prices going into 2021 were volatile and subject to sudden sharp increases and decreases. Though the US Department of Commerce announced a reduction in the tariff on Canadian lumber in order to continue reductions in domestic prices, the report added that prices might stay inflated due to “strong demand from homebuilders and remodelers.”
A January 2021 report from the US Bureau of Labor Statistics’ Producer Price Index confirmed this volatility, noting that softwood lumber prices had risen 73% from their January 2020 levels.
Turner Builders, New England Construction, and Timber Craft Homes’ lawsuit could have significant implications on prices if the contained allegations are found to be true. The lawsuit’s defendants were the top 10 lumber manufacturers in the United States in 2020, according to a report by Forisk Consulting.