Prosecutors investigate 'ice fixing'
Wholesale ice is a nearly $2 billion market in the U.S. and it's controlled by just three companies. Now federal prosecutors think they may be working together to control prices. Amy Scott reports.
Bags of ice in a freezer (Stephen Chernin/Getty Images)
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TEXT OF STORY
Kai Ryssdal: There is nothing like grabbing a nice cold beer out of a tub of ice on a hot summer afternoon, but there is a chance you've been paying too much to cool your suds.
Believe it or not, those bags you buy at the convenience store are worth close to $2 billion a year and there are new details coming to light in a federal ice price-fixing investigation.
Marketplace's Amy Scott reports.
Amy Scott: When you buy a bag of ice at your local supermarket, it likely came from one of three companies: Arctic Glacier, Home City Ice or Reddy Ice.
Here I am at the Food Emporium, a Manhattan grocery store, and here we are, sure enough: Arctic Glacier from Manitoba, Canada.
Dozens of lawsuits accuse all three companies of agreeing to divvy up the ice market and stay out of each other's territories. Only one has been charged with criminal wrongdoing. Home City Ice of Cincinnati pleaded guilty to conspiracy charges.
Attorney Barry Barnett represents stores that want their money back.
Barry Barnett: The purpose of an agreement like that is to make more money because it limits the output that's available for people. The demand stays the same, so the price goes up.
One man helping authorities investigate is now speaking out. Former Arctic Glacier employee Martin McNulty says when he objected to the conspiracy, he was essentially blackballed.
Martin McNulty: I was told pretty quickly that there was an allocation relationship between Arctic Glacier as well as Home City and Reddy Ice and that if I didn't want to be a part of it, that there was really nowhere else to go, that I would not be hired by those other ice companies.
McNulty is now suing Arctic Glacier for backpay and other damages. The company didn't return calls today, but has said it's cooperating with authorities. The Justice Department would only say its investigation is ongoing.
In New York, I'm Amy Scott for Marketplace.
Comments
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From Stockbridge, MI, 11/19/2008
I recently worked under Martin Mcnulty at a propane supplier as a driver and sales person. It would seem he has a double standard on this issue as he instructed me on several occasions to not call on customers currently serviced by certain other suppliers and if I found myself in one these situations to not undercut thier price. Double standard?
From Atlanta, GA, 08/07/2008
While anyone can buy an ice machine and fill bags in the back room during slow times (plenty of mom & pop stores do), starting a food grade ice wholesaler is expensive. The plant is big, uses expensive commercial equipment, and sucks up more electricity than all the air conditioners in your highrise combined. It has to have a big cold storage area. Water is heavy, so the delivery trucks have to be heavy too, expensive to buy and run, and use CDL drivers. Often, the wholesaler owns that big white enamel cooler out front too. In most places, the season runs from May to September and is almost entirely dependent on weather. It's a tough business to make money in, and has a high barrier to entry at anything above a one man operation level.
Reddy and Arctic Glacier revenue $339m and US$236m respectively (Home City is closely held and doesn't report). This amount is what would be termed a "calculation error" at any of the Fortune 50. The only person potentially harmed here is the independently owned competitor to Artic, Reddy or Home City who, if the companies were holding prices artificially high, should have had a distinct advantage. Yet that entity isn't complaining. The complaint is coming from within Canada, which may have different laws than the U.S. regarding fair and unfair competition.
I'm surprised the story made Marketplace, let's see if anyone else notices it.
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