US buyers sue more PU foam makers in price-fixing suit

10 March 2011 20:00  [Source: ICIS news]

Foam buyers sue more producersHOUSTON (ICIS)--US buyers have sued five more polyurethane (PU) flexible-foam producers, alleging that they conspired to fix prices and allocate the market, a development on which the companies had no immediate comment on Thursday.

In the lawsuit, the foam buyers allege that the producers have been fixing prices since at least 1 January 1999. As a result, the buyers said they paid too much for foam, since the market was no longer competitive.

The alleged price fixing came to light in February 2010, when producer Vitafoam approached the anti-trust division of the US Department of Justice, saying it and others had illegally fixed prices.

Vitafoam has since been cooperating with investigators.

According to the buyers, about two to three times a year, the producers would allegedly discuss how they would allocate the market and raise prices.

These price hikes were often prompted by increases in the raw materials used to make foam, such as toluene di-isocyanate (TDI) and polyether polyols, the buyers said.

The producers viewed price fixing as a necessity because, the buyers allege, if the producers did not increase prices by the same percentage and at the same time, their initiatives would fail.

The producers even policed themselves to ensure that they all raised their foam prices, the buyers said. For example, the producers would share draft letters of proposals before announcing price increases.

Not only did the producers enforce price initiatives, they also made sure that they did not encroach on each other's markets, the buyers said.

In one telephone call, an executive called his peer to complain about a salesman who was "knocking on doors they've never knocked on before", according to a transcript of the conversation.

The transcript continued: "If he wants a battle, I'll give him a battle. We will start going after his accounts and it won't be pretty. We'll both end up hurting.... I'll let the dogs loose or I don't let the dogs loose. Want to mill it over and give me a shout back?"

To hide the alleged price fixing, the producers took advantage of trade-group meetings, disguising their attendance as information gathering, the buyers said.

Other times, the producers would visit each others plants, ostensibly to share technological and operational advances, the buyers said. Instead, they talked about coordinating price hikes.

To avoid detection, the producers would use facsimile machines at office-supply stores to send letters, the buyers said.

In the lawsuit, the buyers are requesting treble damages, but did not specify the amount.

Initially, the buyers filed individual lawsuits in US district courts in several states.

For pre-trial purposes, those cases are being sent to the US District Court in the northern district of Ohio. However, the cases have not been consolidated, nor has the litigation received class-action status.

As the litigation proceeded, the buyers sued more foam producers, including Mohawk Industries, Otto Bock Polyurethane Technologies, Plastomer, Inoac and Leggett & Platt.

Mohawk, Plastomer and Inoac did not immediately respond to requests for comment. 

Leggett's chief litigation counsel, Gordon Billheimer, said, "That complaint contains not a single allegation that anyone at Leggett did anything wrong."

The company plans to vigorously defend itself. "We will immediately seek dismissal of Leggett from the case," Billheimer said.

Likewise, Otto Bock denied the allegations and said it intends to vigorously defend itself.

The foam producers already named in the initial lawsuit include Carpenter; Flexible Foam Products; FXI - Foamex Innovations; Future Foam; Hickory Springs Manufacturing; Scottdel; Valle Foam; Vitafoam; and the Woodbridge Group.

Scottdel and Vitafoam had no comment. The other companies did not immediately respond to calls or emails seeking comment.

The foam producers named in the lawsuit are among the largest in the world.

Carpenter is the world's largest producer of flexible-foam products for comfort cushioning, the buyers said. Hickory Springs is one of the largest producers of flexible polyurethane foam in the US.

The foam is used in furniture, bedding, packaging, flooring and automobiles.

Many of the foam producers being sued have filed their own price-fixing lawsuits against producers of polyether polyols, TDI and methyl di-p-phenylene isocyanate (MDI).

The lawsuits have become a tangle of litigation, filed against BASF, Dow Chemical, Huntsman and LyondellBasell.

Bayer MaterialScience, initially named in the suit, agreed in 2006 to pay $18m (€13m) to settle the claims in the litigation.

The litigation is still pending in the US District Court of Kentucky.

Meanwhile, European and US regulators are pursuing their own investigations into alleged price fixing among foam producers.

European regulators would only say that the case was still open. US regulators did not immediately respond to a request for comment.

Canadian regulators were also investigating possible anti-trust violations, the lawsuit said. They did not immediately respond to requests for comment.

($1 = €0.72)

For more on TDI or MDI visit ICIS chemical intelligence

By: Al Greenwood
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