Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Valspar alleges titanium dioxide price fixing conspiracy, (Nov 25, 2013)

By Tobias J. Gillett, J.D., LL.M.

Coatings manufacturer The Valspar Corporation has filed a complaint in the federal district court in Minneapolis, alleging that manufacturers of titanium dioxide conspired to fix the price of the chemical (The Valspar Corporation v. E.I. DuPont de Nemours and Co., November 22, 2013).

Valspar alleges that it opted out of the class actions Haley Paint Co. v. E.I. DuPont de Nemours and Co., et al., Case No. 1:10-cv-00318-RDB, filed on February 9, 2010, and Los Gatos Mercantile, Inc. d/b/a Los Gatos Ace Hardware, et al. v. E.I. DuPont de Nemours and Co., et al., Case No. 3:13-cv-01180-SI, filed on March 15, 2013. On September 11, 2013, the federal district court in Baltimore granted preliminary approval to a $163.5 million settlement of the claims in Haley Paint.

According to Valspar’s complaint, the defendants—E.I. DuPont de Nemours and Company, Huntsman International, LLC, Kronos Worldwide, Inc., and Millennium Inorganic Chemicals, Inc.—and their co-conspirators colluded to raise the price of titanium dioxide, a chemical primarily used as a white pigment in paints and coatings. The conspiracy allegedly harmed Valspar by causing it to pay higher prices for titanium dioxide it used to produce its coatings.

The complaint alleges that the titanium dioxide industry is conducive to collusion because buyers make purchasing decisions “largely, if not entirely, on price”; the defendants and their co-conspirators control the entire United States titanium dioxide capacity and more than 70 percent of the worldwide capacity; the industry has high barriers to entry from the cost and time required to build a new plant and the defendants’ cost advantages and proprietary technologies; the similar costs incurred by titanium dioxide producers, which caused their pricing preferences to be aligned; and the”essential” nature of titanium dioxide, which caused demand for the chemical to be inelastic.

During the 1990s, according to the complaint, titanium dioxide producers faced declining demand, global overcapacity, and increased purchasing power from consolidating customers, resulting in low prices for titanium dioxide. The producers also engaged in mutually beneficial business relations, including the sale of raw materials and titanium dioxide to each other, a titanium dioxide manufacturing joint venture between Huntsman and Kronos, and patent cross-licensing between Kronos and DuPont, that gave them an incentive to conspire. These challenges and preexisting relationships allegedly led the producers to agree to stabilize and increase the price for titanium dioxide.

The complaint describes a history of price increases in the industry from March 2002 through November 2011, despite declines in demand and increases in capacity. The conspirators were allegedly able to monitor each other’s compliance with these price increases through conversations with consultants, customers, and others; public sources; and each other’s websites. The complaint alleges that the defendants furthered their conspiracy through discussions occurring at industry trade association meetings. The complaint also details a series of interfirm communications between the defendants and their co-conspirators in which they “signaled to each other their intent to increase price” and shared “firm-specific titanium dioxide information with competitors and industry consultants.”

Valspar asserts claims for violation of Section 1 of the Sherman Act, violation of the Minnesota Antitrust Law, and unjust enrichment, and alleges that the defendants’ fraudulent concealment of their conduct tolled any applicable statutes of limitations.

The action seeks a judgment that the defendants violated the relevant laws and were unjustly enriched, damages and treble damages, a permanent injunction against continuance of the alleged conspiracy, pre- and post-judgment interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 13-cv-03214-RHK-LIB.

Attorneys: James M. Lockhart (Lindquist & Vennum LLP) for The Valspar Corporation.

Companies: The Valspar Corporation; E.I. DuPont de Nemours and Co.; Huntsman International LLC; Kronos Worldwide, Inc.; Millennium Inorganic Chemicals, Inc.

News: Antitrust MinnesotaNews