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EU Authority Fines Foam Cartel $156M

Monday, February 3, 2014

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Four major global producers of flexible polyurethane foam rigged sales prices of various foams for nearly five years as part of an international cartel, European authorities report.

The European Commission announced Wednesday (Jan. 29) that Carpenter, Vita, Recticel, and Eurofoam participated in a cartel aimed at passing on raw-material price increases of bulk chemicals to their customers, thereby avoiding aggressive price competition between the companies.

Three of the companies will pay a total of €114 million ($156 million) in fines to settle the antitrust case.

Joaquin Almunia
Fábio Rodrigues Pozzebom / Agência Brasil

"Cartels harm our entire economy and cannot be tolerated," said Joaquin Almunia, the Commission vice president in charge of competition policy.

U.K.-based Vita escaped a fine because it revealed the existence of the cartel to the regulators.  

Carpenter, the world’s No. 1 foam producer, received the largest fine: €75 million ($102 million).

How the Operation Worked

The Commission said the cartel operated from October 2005 to July 2010 in 10 EU Member States: Austria; Belgium; Estonia; France; Germany; Hungary; the Netherlands; Poland; Romania; and the U.K.

The companies organized price coordination meetings at all levels of European management, the Commission said. Also, the parties reportedly met on the margins of European and national associations and had numerous telephone and other bilateral contacts.

Greiner
Greiner Holding AG

The antitrust investigation was launched in 2010 and included office raids.

The probe began July 27, 2010, and included office raids.

"Cartels harm our entire economy and cannot be tolerated,” Joaquin Almunia, the Commission vice president in charge of competition policy, said in a statement.  

“This case illustrates how essential it is to keep fighting and sanctioning such illegal behavior.”

Polyurethane foam is a key component in a range of products, including household furniture, automotive seating, insulation and footwear. The pricing conspiracy involved a variety of foam products, authorities said.

Fines Imposed

Carpenter, based in Richmond, VA, U.S., was fined $102 million for its role in the cartel. The authorities report that the company’s European subsidiaries were involved and the U.S. firm was held liable only on the basis of being the parent company.

furniture
RanjithSiji / Wikimedia Commons / CC-by-SA-3.0

Flexible polyurethane foam is mainly used in household furniture such as sofas or mattresses.

Eurofoam, a joint venture between Recticel and Griener Holding AG, will pay more than $43 million in the case. Belgium-based Recticel was fined $10.1 million for its involvement. Greiner, based in Austria, will pay $33 million.

Eurofoam, Recticel and Greiner received a 50 percent fine reduction for their cooperation during the investigation, the Commission said.

Their fines were reduced by an additional 10 percent since all the companies agreed to settle the case.

The companies have 90 days to pay the fines, the Commission said.

In setting the fines, the Commission said it took into account the companies' sales of the products concerned in the relevant EU Member States, the serious nature of the infringement, its geographic scope, and its duration.

Companies Respond

In an e-mailed statement, Carpenter Chairman and CEO S.F. Pauley said, "I am very disappointed in what happened in Europe. The fines will be paid by the European subsidiaries. It was in the best interest of our company to settle this matter expeditiously and put it behind us."

The company added that the anticompetitive conduct was limited to its subsidiaries and did not involve any U.S. employees.

"Recticel and Eurofoam decided to cooperate with the Commission under the Commission's Leniency Program, which they have continued to do through the present day," Recticel said in a statement.

The company said it would apply to the Commission to be allowed to pay the fine in several annual installments.

In a statement, Greiner said it had agreed to assume responsibility for the breach and had cooperated with the Commission. 

"Greiner Holding AG and Eurofoam GmbH believe that the company's actions did not result in any detriment to their customers," the statement said.

However, the company said it introduced a "comprehensive compliance system" immediately after the proceedings were initiated.

   

Tagged categories: Business matters; Business operations; Coating chemistry; Enforcement; Ethics; Polyurethane; Pricing

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