$30 Million Dollar Lawsuit Filed Against Weyerhaeuser.

Business Editors/Legal Writers

PORTLAND, Ore.--(BUSINESS WIRE)--Dec. 19, 2000

Suit alleges "illegal monopoly" forced closure of 2 mills,

More mills threatened

The owners and operators of two Northwest sawmills filed a detailed lawsuit in U.S. District Court this morning against Weyerhaeuser Company for illegally violating federal anti-trust laws.

According to the complaint, Weyerhaeuser's efforts over the past decade have illegally monopolized the alder wood lumber industry in the Northwest. The sawmills challenging Weyerhaeuser in the legal effort are Smokey Point Hardwoods, Inc., and the Confederated Tribes of the Siletz Indians of Oregon.

The suit also alleges that if Weyerhaeuser's takeover of Willamette Industries proceeds next month, many of the last remaining suppliers of alder lumber could fall into Weyerhaeuser's monopolistic grip, according to Attorney Michael Haglund. To restore free competition to the region's alder industry, the suit is seeking divestiture of Weyerhaeuser's seven alder sawmills.

The complaint states that in 1980, there were 35 alder wood mills operating in Oregon and Southwest Washington. Today there are 14. Six of the 14, including the five largest mills, are currently owned and operated by Weyerhaeuser.

Only in the western edges of the Pacific Northwest (including Oregon, Washington and British Columbia) does alder grow large enough to be harvested commercially. Sawmills were built close to the supply, as it is expensive to transport the heavy logs for more than relatively short distances according to the complaint.

According to court documents, Weyerhaeuser entered the alder lumber market in 1980 by acquiring Northwest Hardwoods, which operated sawmills in Arlington and Centralia, Washington. Over the next 15 years, Weyerhaeuser successfully implemented a new grading system, which increased the number of alder wood grades from 4 to more than 15. The complaint also alleges that the new system dramatically raised the cost of milling the wood, as producing the new array of grades required larger production facilities. By 1995, over a dozen alder sawmills had closed, and Weyerhaeuser had "gobbled-up enough of its competition to account for nearly two-thirds the total alder lumber market," according to Haglund.

Next, Weyerhaeuser allegedly negotiated exclusive contracts with some of the region's largest landowners, cutting off the supply to non-Weyerhaeuser sawmills. According to the complaint, Weyerhaeuser allegedly used its monopoly position and financial resources to push up the price of alder logs to unprecedented heights. Still more independent mill owners found themselves unable to compete, and were forced out of business.

With this year's acquisition of British Columbia's only major alder sawmill and most of the alder timber resource in British Columbia, Weyerhaeuser now controls over 75% of the Northwest alder market, according to Haglund.

The Confederated Tribes of Siletz Indians once owned 30% of the lands along the Oregon coast. In the late 1800's, the Tribes lost most of their aboriginal lands. It wasn't until 1977 that they regained their recognized tribal status, and in 1980, they were awarded 3600 acres of timberlands. The acreage provided logging jobs and an economy for the tribal community.

Eventually, the Tribe moved beyond logging and log sales into finished lumber and other value-added wood products. They purchased a sawmill in Toledo, Oregon in 1995, and converted it to an alder sawmill. They then entered into a joint operating agreement with the Ross-Simmons Company to operate it. According to the legal complaint, an extensive analysis was performed before entering into the joint venture to ensure that there was (quoting from the filed complaint) "more than an adequate supply" of logs available within a 100 mile radius to supply the mill. Just as the sawmill opened, Weyerhaeuser entered into more of the aforementioned exclusive relationships that either cut-off the Tribe's mill's supply, or raised raw log prices astronomically. After losing money for two and a half years, the mill closed in mid-1998.

The Siletz Tribe has maintained its Toledo, Oregon mill in the hopes of reentering the market, but according to a Tribe spokesperson, Weyerhaeuser's grip on the alder supply has made that impossible. "Our closed mill shows the dark side of too much consolidation in any one segment of the wood products industry. We are asking the court to break-up Weyerhaeuser's monopoly on the alder market in the Pacific Northwest so that we can successfully reopen our sawmill," said Delores Pigsley, chair of the Siletz Tribal Council.

According to Portland attorney Michael Haglund, "The tactics used by Weyerhaeuser to deliberately destroy competitors are not legal in this country. The jobs lost, the families devastated, the economic impact on our rural communities, are all casualties of Weyerhaeuser's illegal, monopolistic practices." Attorney LeRoy Wilder concurred on behalf of the Siletz Tribe: "The Tribe lost their investment, and lost the opportunity for financial independence they are working so hard to achieve. We are asking the Court to hold Weyerhaeuser accountable for their illegal business practices."

The legal document filed in federal court also details the following acts:

-- threatening one longtime customer with losing Weyerhaeuser's business if it
proceeded with plans to open an alder sawmill in Coos Bay

-- threatening a log-towing services provider with the loss of substantial
business if they did business with Weyerhaeuser's competitors

-- threatening independent loggers of cutting-off business if they accepted
proposals from Weyerhaeuser's competition and delivered alder logs to
non-Weyerhaeuser owned mills.