A pair of Capital Region businesses are shedding light on an alleged nationwide price-fixing scheme in the $1.8 billion packaged ice industry.
As the U.S. Department of Justice expands an investigation into possible antitrust violations in the industry, McGeary’s Pub in Albany and Bill’s Beverage Center in Amsterdam have joined several other businesses in lining up for a class action lawsuit in Detroit.
Wholesalers, retailers and restaurants are accusing three ice manufacturers of conspiring to keep prices high and not encroach on each others’ territories. Together, the three control 70 percent of the packaged ice industry’s market share.
Federal prosecutors became interested in the allegations of collusion after a small Canadian packaged ice manufacturer in 2003 accused ice maker Arctic Glacier of using strong-arm tactics in the Edmonton, Alberta, region. In the United States, Arctic Glacier dominates East Coast cities, and it has a new operation in Colonie.
In November, U.S. prosecutors filed conspiracy charges against the Home City Ice Co. in Cincinnati. Both Reddy Ice Holdings in Dallas and Arctic Glacier in Winnipeg, Manitoba, reported in March that they are under investigation by the Justice Department’s Antitrust Division.
“There’s only one company. It’s like an oligopoly,” said Bill’s Beverage owner William Petrosino. He would not say which manufacturer supplies his beer and soda wholesale company with packaged ice, but he noted he continues to buy from it.
The McGeary’s lawsuit relies heavily on information from a former salesman at Arctic Glacier and its Party Time Ice subsidiary in Port Huron, Mich. It details how executives at Home City and Party Time allegedly agreed to allocate customers and pricing.
According to the suit, Arctic Glacier and Home City officials allegedly met in 2004 to discuss customer and territorial issues. A year later, an Arctic Glacier official told the Party Time salesman that both Reddy Ice and Arctic Glacier were trying to keep prices high in their respective territories.
The allegations, if true, would mean businesses and consumers could have overpaid for the ice they used to keep their drinks and food cool.
Andrew Crounse two years ago stopped buying packaged ice for his Glenville Beverage from Arctic Glacier, but he resumed in March. He said its prices are consistent with area competitors, such as the Maplewood Ice Co. in Whitehall and Capinello Ice Co. in Rensselaer.
“I never thought we were being overcharged,” Crouse said.
During the summer, Crounse buys about $1,000 worth of ice weekly. At his Glenville store, a 25-pound bag of Arctic Glacier was selling for $3.99 and a seven-pound bag was selling for $1.39.
Stewart’s Shops does not expect to be directly impacted by the claims of price fixing. The Saratoga Springs convenience store chain buys its ice from Maplewood, and it sells over 1 million bags annually, said Stewart’s spokesman Tom Mailey.
After the Wall Street Journal published a story Thursday detailing the McGeary’s lawsuit’s allegations, Arctic Glacier posted a statement on its Web site saying it will not comment on the Justice Department investigation. The company said it will not respond to the allegations of the former employee, who “is seeking money in a lawsuit, and his statements and resulting media attention should be viewed in that light.”
“Arctic Glacier has been cooperating with the authorities since we first learned of the investigation, and we intend to continue doing so,” Arctic Glacier President and Chief Executive Officer Keith McMahon said in a statement.
In June, Home City President and CEO Thomas Sedler waived his company’s right to be prosecuted by indictment, instead opting to be prosecuted by criminal information filed in November. He pleaded guilty to conspiracy to restrain trade, a violation of the U.S. Sherman Act. Home City makes 4,400 tons of ice daily, which it sells in 10 states, including New York, according to court documents.
In the suit, McGeary’s and Bill’s Beverage requested their case be part of a class action. The businesses are seeking three times the amount of damages they and other class members sustained through the alleged antitrust violations.
Neither McGeary’s attorney Philip Iovieno nor owner Kevin McGeary immediately returned calls Friday seeking comment.