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Thursday, February 12, 2004 - Page updated at 12:00 A.M.

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Weyerhaeuser on defense in antitrust trials

By Bradley Meacham and Hal Bernton
Seattle Times business reporters

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PORTLAND — Weyerhaeuser faces a busy spring in U.S. District Court here as it fends off allegations in three separate trials that it illegally monopolized wood markets across the Northwest.

The plaintiffs are small sawmills and lumber companies that claim Weyerhaeuser violated federal law by squeezing them out of the market for alder, a hardwood used for expensive furniture, cabinets and Fender guitars. They want the court to force the company to sell some assets and pay damages totaling more than $300 million, an amount surpassing Weyerhaeuser's 2003 profit.

The high-stakes trials — two next month involving five plaintiffs and a third in May with another plaintiff — are the latest in the Federal Way company's struggle to defend its role in the alder market, where it controls most of the production in the Northwest.

Weyerhaeuser sought to postpone the trials until fall and extend the timetable for several months. But U.S. District Court Judge Owen Panner refused and said each trial could likely be completed in nine days or less.

"The complaint alleges that, in recent years, dozens of hardwood mills in the Pacific Northwest have closed their doors forever in the face of Weyerhaeuser's anti-competitive tactics," Panner wrote. "If that is true, then further delay is not in the public interest. Conversely, if these allegations are unfounded, then the cloud hanging over Weyerhaeuser should be dispelled as quickly as possible."

Weyerhaeuser declined to comment on the proceedings, citing Panner's request that parties not discuss the matter. Officials argue that the company, through efficiency and innovative technology, helped transform alder from a weed tree into a profitable niche product.

Though alder represents a small fraction of Weyerhaeuser's business, the trials have potentially broad implications for the company, which acquired smaller rivals to strengthen its position in a rapidly consolidating global industry. The world's largest lumber company controls about 75 percent of the $400 million Northwest alder industry, which employs about 6,000 people in Washington and Oregon.

The trials are scheduled to begin less than a year after a Portland jury found that Weyerhaeuser violated federal law by using monopoly power to manipulate the alder market. It ordered damages — trebled under antitrust law — of $79 million to Ross-Simmons Hardwood, the owner of a Longview sawmill that closed in May 2001.

The jury agreed Weyerhaeuser deliberately bid up the price of alder logs to force rivals out of business, tied up log supplies through long-term, exclusive contracts and bought logs it didn't need to deprive rivals of wood supply.

Weyerhaeuser is appealing the Ross-Simmons verdict; in briefs submitted to Panner, it argued that the verdict was defective.

It also contends that introducing findings from that case into the first of the new trials would be "highly improper and unfairly prejudicial."
 
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Weyerhaeuser, whose officials originally characterized the antitrust case as an attempt at extortion, has annual revenue of $20 billion.

Elsewhere, Weyerhaeuser has a win on the antitrust front. In December, the state of Oregon denied a request by a group of sawmills to bar the timber giant from buying alder logged in state-owned forests. The group had contended Weyerhaeuser could kill off small mills by paying high prices for alder, and eventually underbid the rest of the market, lowering the state's proceeds from its wood sales.

Oregon agreed with Weyerhaeuser's contention that it generates revenue and jobs for the state and said that allowing the company to buy state wood doesn't hinder competition.

But Panner is the one who sets the ground rules for the upcoming trials. He gave the plaintiffs a boost by ruling that results of last year's jury verdict against Weyerhaeuser were relevant for the first trial, set for March 9.

In the upcoming trial, Weyerhaeuser cannot contest the existence of a monopoly — at least through 2001 — which it maintained through anti-competitive conduct, Panner wrote. The plaintiffs, however, must prove antitrust injury and that Weyerhaeuser maintained a monopoly through 2002, he wrote.

The trial results from a lawsuit filed by four mills: Cascade Hardwoods of Chehalis; Alexander Lumber Mill of Onalaska, Lewis County; and Oregon's Westwood Lumber and Morton Alder Mills.

A second lawsuit was filed by Coast Mountain Hardwoods, which operated a sawmill in Delta, B.C., until Weyerhaeuser acquired it in September 2000. The suit alleges Weyerhaeuser illegally kept Coast Mountain in a weak financial position so that it could be acquired. That trial is to begin around March 23.

Another trial including Washington Alder of Mount Vernon is scheduled for May.

Bradley Meacham: 206-515-5066 or at bmeacham@seattletimes.com

Hal Bernton: 206-464-2581 or hbernton@seattletimes.com

Copyright © 2004 The Seattle Times Company

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