The Urethane Blog

European Cartel Update

Foam Co. Looks To Spread Risk In UK Cartel Damages Suit

Law360, New York (June 17, 2016, 8:56 PM ET) — The company that blew the whistle on a polyurethane foam cartel has said that its alleged co-conspirators should shoulder at least part of any damages that purchasers win in a U.K. lawsuit prompted by the European Commission’s enforcement action.
Vita Industrial (UK) Ltd. and affiliate Vita Cellular Foams (UK) Ltd. filed a claim alleging that Carpenter Co., Recticel Ltd. and affiliates of those companies must provide a contribution or indemnity in case the private damages claimants, led by Breasley Pillows Ltd., manage to prove any losses that they can pin on the cartel, according to a notice published Thursday by the U.K. Competition Appeal Tribunal.

Vita denies that Breasley and the other damages claimants suffered the losses they have claimed, the notice said.

The proceeding stems from a January 2014 enforcement decision by the EC, the European Union body in charge of competition matters.

The EC said at the time that Vita Group, Carpenter, Recticel SA and Eurofoam Group — a joint venture between Recticel and Austria-based Greiner Holding AG — were involved in a cartel that fixed the prices of flexible polyurethane foam, a material used as padding in car seats, sofas and mattresses.

The cartel fixed the prices of foam used by the makers of upholstered furniture and mattresses as well as certain types of flexible foam that manufacturers in the automotive and other industries use in “technical foam” applications, according to the commission. The use of the material by automakers in car seats accounts for roughly a quarter of the total flexible polyurethane foam market, the commission said.

The conspiracy allegedly operated across Austria, Belgium, Estonia, France, Germany, Hungary, the Netherlands, Poland, Romania and the U.K. Executives at all levels of European management within the accused companies held price coordination meetings, the EC said.

The commission’s findings came out of an investigation that stretched back to summer 2010, when the competition authorities raided the premises of polyurethane foam companies.

The commission imposed a total of €114.1 million ($128.7 million) in fines over the cartel. U.S.-based Carpenter received the largest fine at €75 million for the alleged involvement of its European subsidiaries in the cartel, while Recticel, Greiner and Eurofoam got smaller fines.

Vita received full immunity after alerting the commission to the cartel’s activities, ducking what would have been a fine of €61.7 million, the EC said at the time.

In April, Breasley and five other purchasers of flexible polyurethane foam sued Vita for damages in the Competition Appeal Tribunal. The claimants said they used the foam for purposes including manufacturing mattresses and pressure care products, according to an April notice published by the tribunal.

“The claimants allege that the infringement had the effect of raising the prices that the defendants and others charged for the products they sold to the claimants causing the claimants loss and damage,” the April notice said.

Breasley and the other claimants tried to have the damages case placed in fast-track proceedings, but Justice Peter Roth denied that request and ordered the claimants to pay Vita’s costs in opposing the fast-track proposal.

Representatives of the claimants, Vita, Carpenter and Recticel did not immediately respond to requests for comment Friday.

The claimants are represented by Mark Molyneux and Fiona Walker of Addleshaw Goddard LLP.

Vita is represented by Jon Lawrence, Bea Tormey, Deba Das and Ricky Versteeg of Freshfields Bruckhaus Deringer LLP.

The case is Breasley Pillows Ltd. et al. v. Vita Cellular Foams (UK) Ltd. et al., case number 1250/5/7/16, before the U.K. Competition Appeal Tribunal.

–Editing by Kelly Duncan.