$1B Dow Penalty Upheld for Chemical Price Fixing

DENVER (CN) – Dow Chemical owes a class of industrial purchasers of polyurethane products more than $1 billion for fixing prices, the 10th Circuit ruled.
     The Midland, Mich.-based Dow had been the only manufacturer not to settle allegations that it conspired with Bayer, BASF Corp., Huntsman International and Lyondell Chemical Co., to fix polyurethane prices from 1999 to 2003.
     Seegott Holdings, Industrial Polymers and Quabaug Corp. were named as plaintiffs. They alleged that executives for these companies took advantage of a January 1999 depression in the polyurethane market to coordinate “lockstep” price-increase announcements and that they then made stick in individual contract negotiations.
     After a federal judge in Kansas certified a plaintiff class, a jury calculated damages at $400 million. The court trebled the damages, deducted the amounts that Dow’s co-conspirators paid in settlements, and arrived at a judgment of $1.06 billion.
     A three-judge panel with the 10th Circuit affirmed Monday, rejecting claims that the court should have required each class member to prove harm from the conspiracy.
     Noting that “price-fixing affects all market participants, creating an inference of class-wide impact even when prices are individually negotiated,” the decision’s author Judge Robert Bacharach said “class-wide proof is not required for all issues.”
     Dow also failed to challenge projections by an expert witness as “unreliable”or to show that evidence of Dow’s liability had been insufficient, the court found.
     In fact the issue of the expert witness’s projections were irrelevant because “the plaintiffs did not seek to prove Dow’s liability through extrapolation,” Bacharach said.
     “Rather, Dow’s liability as to each class member was proven through common evidence; extrapolation was only used to approximate damages,” he added.
     As to Dow’s claim of insufficient liability, Bacharach said “the evidence included admissions by industry insiders, collusive behavior, susceptibility of the industry to collusion, and setting of prices at a supra competitive level.”
     Earlier this month , the 5th Circuit upheld a judgment for the Internal Revenue Service based on Dow’s “sham partnerships” with foreign banks to evade taxes.

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