Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Furniture company alleges price fixing conspiracy among polyurethane foam manufacturers, (Feb 6, 2015)

By Linda O’Brien, J.D., LL.M.

A group of domestic, Canadian, and Japanese manufacturers and suppliers of polyurethane foam, from as early as January 1999, entered into a conspiracy in restraint of trade to fix the prices of flexible polyurethane foam products used in furniture and other products at artificially high and supra-competitive levels, according to a complaint filed in the federal district court in Toledo, Ohio (Ashley Furniture Industries, Inc. v. Hickory Springs Manufacturing Company, February 4, 2015).

Hickory Springs Manufacturing Company, Flexible Foam Products, Inc., Ohio Decorative Products, Inc., Mohawk Industries, Inc., Woodbridge Foam Corporation, and their subsidiaries manufacture and supply flexible polyurethane foam components for the furniture, bedding, and other industries. Ashley Furniture Industries is a leading manufacturer of furniture.

The complaint states that, in February 2010, Canadian polyurethane foam manufacturer Vitafoam voluntarily contacted the U.S. Department of Justice (DOJ) to self-report evidence of illegal antitrust activities among itself and other companies in the flexible polyurethane foam industry and to seek acceptance into the DOJ’s corporate leniency program. Subsequently, Vitafoam cooperated with the DOJ’s criminal investigation as well with a pending investigation by Canadian regulatory authorities into illegal anticompetitive conduct in the flexible polyurethane foam market.

Vitafoam and its employees provided evidence that the defendants and their co-conspirators established a practice where they would communicate and agree on the percentage amount and timing of price increases and market allocation in the sale of polyurethane foam. Price increase discussions occurred two to three times per year and often coincided with bi-annual meetings held by the trade association, Polyurethane Foam Association. The general pretext used to explain the conspiratorial price increases was the increase in raw material costs, the complaint states.

According to the complaint, the price increases for flexible polyurethane foam beginning in 1999 until 2010 were the result of conspiratorial discussions on pricing among the defendants. Various factors made the market for flexible polyurethane foam susceptible to anticompetitive practices and unlawful collusion: limited competition; inelastic demand due to lack of substitutes; foam is a commodity product with a high degree of interchangeability; and the defendants as trade association members had opportunities to conspire. As a result of the conspiracy, prices for flexible polyurethane foam were maintained at artificially high and supra-competitive levels and the plaintiff was required to pay more for flexible polyurethane foam that it would have in a competitive market.

The plaintiff did not and could not discover through the exercise of reasonable diligence the existence of the conspiracy prior to disclosure in 2010 of the raids by government agencies of the defendants’ facilities. The defendants fraudulently concealed their unlawful conduct by holding secret meetings and disguising price-fixing communications as technical or operational meetings, the complaint charges.

The plaintiff asserts claims for violations of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 15-cv-58.

Attorneys: Patrick J. Ahern (Ahern and Associates, P.C.) for Ashley Furniture Industries, Inc.

Companies: Ashley Furniture Industries, Inc.; Hickory Springs Manufacturing Company; Flexible Foam Products, Inc.; Ohio Decorative Products, Inc.; Mohawk Industries, Inc.; Woodbridge Foam Corporation;

News: Antitrust OhioNews