PU foam maker admits price fixing to US investigators - lawsuit

31 August 2010 21:09  [Source: ICIS news]

HOUSTON (ICIS)--A buyer of polyurethane (PU) foam said in a lawsuit that a producer told the US Department of Justice (DOJ) that it and others had illegally fixed prices.

“Every price increase known during the class period was the result of conspiratorial discussions among defendants to fix prices,” said the buyer, Piazza's Carpet & Tile Shop.

The producer, Vitafoam, was now cooperating with the DOJ, said Piazza's Carpet & Tile Shop. Piazza's made the allegation in a lawsuit filed on 13 August in the US District Court for the western district of North Carolina.

A spokesperson for Vitafoam's owner, UK-headquartered Vita Group, offered no comment other than to say its policy was to comply with requests for information from regulators.

The DOJ refused to comment.

Vitafoam's alleged admissions of price fixing was one of several accusations made by Piazza's and other PU foam buyers in lawsuits filed this month in the same US court, accusing the major foam producers in North America of price fixing.

Another buyer, Thompson Trading, said PU foam producer The Carpenter Co was raided by the Federal Bureau of Investigation (FBI) on 27 July, part of a federal probe into PU foam price practices.

The Carpenter Co, based in Richmond, Virginia, did not immediately respond to a request for comment. The FBI also refused to comment.

The producers had been fixing prices for at least 11 years, Piazza's alleged.

“Virtually every known price increase, going back to at least 1999 has involved conspiratorial discussions among defendants on pricing,” Piazza's said in its lawsuit against the foam producers.

“Defendants and their co-conspirators used deceptive and secret methods to avoid detection and to affirmatively conceal their violations,” Piazza's said.

The companies
used several tactics to allegedly coordinate price increases and control the market.

The producers would divvy up customers among themselves, agreeing not to encroach on each others' markets, Piazza's said.

They shared draft copies of price announcement letters before sending them out to customers, Piazza's said.

To avoid detection, the producers would not use their full names in correspondence, relying instead on initials or listing only first names, Piazza's said.

Some would even send letters through public facsimile machines at office-supply stores, Piazza's said.

The producers even met in person to discuss price fixing during meetings held by trade groups, Piazza's said.

"Representatives of defendants used these trade associations meetings as nothing more than 'meet-and-greet' sessions with their competitors", an opportunity to "fix prices and divvy up their customers in person", Piazza's said in the lawsuit.

In fact, the producers had no intention about learning about the market at the meetings, Piazza's said.

In February 2010 Vitafoam voluntarily approached the antitrust division of the US Department of Justice, giving it evidence of anti-monopoly activities among itself and other foam producers, Piazza's said.

Vitafoam also sought acceptance in the division's corporate leniency programme, Piazza's said in the lawsuit.

As a result of its action, Vitafoam has received a conditional leniency letter, Piazza's said.

"This fact, in and of itself, is significant. It means that Vitafoam has admitted to participation in a conspiracy to violate the antitrust laws," Piazza's said.

The PU foam producers and subsidiaries being sued include Hickory Springs Manufacturing; Valle Foam Industries; The Carpenter Co; The Woodbridge Group; Flexible Foam Products; Scottdel; Foamex Innovations; Future Foam; and Vitafoam.

Hickory Springs said it had no comment.

Calls to Valle Foam, Carpenter, Scottdel, Foamex Innovations, Future Foam and Woodbridge were not immediately returned.

Email messages sent to Flexible Foam Products and Vitafoam were not immediately returned.

The buyers suing the producers include Piazza's Carpet & Tile Shop, Shore-Line Carpet Supplies, Thompson Trading and V&M, which did business as Costa International.

Steven Lackey, Sharyn Lackey and Keith Stokes also sued the producers. They were the sole shareholders of CFC Hiddenite, which was known as Craftmaster Furniture before being liquidated.

Meanwhile, the European Commission is investigating several European polyurethane foam producers on suspicion of breaching European anti-cartel rules.

Carpenter was one of several PU foam producers who were raided by the European Commission, according the shareholders of CFC Hiddenite, who also sued the companies.

Additional reporting by Ben DuBose

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By: Al Greenwood
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