Lawsuit: Polyurethane foam prices fixed
Antitrust conspiracy by major suppliers alleged
David Perry -- Furniture Today, November 3, 2010
STATESVILLE, N.C. - Several lawsuits filed in recent weeks allege that major North American foam producers engaged in an antitrust conspiracy to fix foam prices and to allocate customers.
The suits were filed here in U.S. District Court for the Western District of North Carolina and in at least two other states. The North Carolina action lists Hickory Springs, Valle Foam Inds., Domfoam International, Carpenter Co., the Woodbridge Group, Flexible Foam Products, Scottdel, Foamex Innovations, Future Foam, Vitafoam Products Canada and Vitafoam as defendants.
The lawsuit charges that the defendants engaged in a conspiracy from 1999 to the present to charge inflated prices for polyurethane foam.
"Every price increase known during the class period was the result of conspiratorial discussions among defendants to fix prices," the suit says. "Defendants also agreed to allocate customers in specific communications between each other."
The complaints, filed by various foam buyers, seek class-action status on behalf of all purchasers who bought polyurethane foam from the companies from Jan. 1, 1999, to the present.
The suit says that defendant Vitafoam approached the U.S. Department of Justice's Antitrust Division in February "to self-report evidence of illegal antitrust activities amongst itself and other companies and individuals in the industry ... and to seek acceptance into the Antitrust Division's Corporate Leniency Program. Since that time, Vitafoam and its employees have been cooperating with this investigation." The suits don't say whether the Department of Justice has taken any action, or whether the defendants face criminal prosecution.
Vitafoam has received a conditional leniency letter, the suit says. According to Department of Justice policy, through the leniency program, a corporation can avoid criminal conviction and fines, and individuals can avoid criminal conviction, prison terms and fines, by being the first to confess participation in an antitrust violation, cooperating with the division, and meeting other specified conditions.
The North Carolina suit says that a former president of Vitafoam and others at the company participated in the long-running price fixing and customer allocation conspiracy.
When the defendants' raw material suppliers announced price increases for chemical ingredients of foam, the foam companies contacted each other, the suit says. It alleges that during those communications, the defendants discussed supporting specific price increases and the timing of announcements regarding an effective date of such increases.
It also says representatives of the defendants regularly met at industry meetings and used them as an opportunity "to fix prices and divvy up their customers in person." The representatives of the defendants disguised their attendance at those events as information-gathering in nature, the suit says.
Carpenter Co. was the only one of the defendants contacted by Furniture/Today that had any immediate comment. Carpenter cited a statement it made to Furniture/ Today in connection with an FBI raid earlier this year at Carpenter's Richmond, Va., offices, which said: "In connection with a multi-jurisdiction investigation of the pricing practices related to polyurethane foam products, the U.S. government has required that manufacturers of polyurethane foam, including Carpenter Co., produce information and documents. Carpenter Co. is being fully responsive and cooperative with the government to facilitate their review."
Officials at Hickory Springs, Valle Foam, Domfoam, Woodbridge Group, Flexible Foam, Scottdel, Foamex Innovations, Future Foam and Vitafoam did not respond to requests for comment.
Several complaints have been filed in U.S. District Court for the Western District of North Carolina and a judge has ruled that those cases should be consolidated, according to Larry McDevitt, an attorney with the Asheville, N.C.-based Van Winkle Law Firm, one of the firms filing the claims.
He said similar complaints have been filed in Ohio and California.
McDevitt said the polyurethane foam industry generates billions of dollars in revenues and estimated that damages in this case could run into the millions.
A hearing will be held in Charlotte, N.C., in October on motions raised in connection with the North Carolina claims, McDevitt said.
Asked how long it could take to resolve this case, he said that he has seen similar cases resolved in less than six months while others have taken years.
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