Washington, DC, June 22--A two-year-old price-fixing probe that began in an obscure corner of the chemical industry has snowballed into a series of international investigations involving industry giants such as Dow Chemical, DuPont Co. and Bayer AG.
The widening web of cases arose from aggressive use by prosecutors of amnesty grants for whistle-blowers, which has rivals competing to be first to report wrongdoing and avoid criminal penalties. U.S. and European investigators currently are looking into alleged conspiracies to fix prices in a half-dozen chemicals used in plastics, rubber and synthetic materials in the U.S., Canada, Europe and Japan. The commodities are used in industries from automobiles to furniture and flooring.
At least four grand-jury investigations stemming from the investigations currently are under way in San Francisco. Among the latest markets under scrutiny are a widely used plastic, urethane, and a synthetic rubber known as neoprene, lawyers close to the case said.
In pursuing the alleged conspiracies, U.S. and European prosecutors are showing that granting amnesty from criminal charges to the first company to blow the whistle on a conspiracy can be a potent weapon against cartels. Companies granted amnesty can escape huge fines and sometimes avoid jail time for executives.
So far, the inquiry has resulted in one guilty plea and a $50 million fine for UniRoyal and its parent, Crompton Corp., of Middlebury, Conn., in the case that initially spurred the investigations. In a plea agreement announced in April, Crompton acknowledged conspiring with others to artificially boost prices of chemicals used to make rubber, a $1 billion annual market, between 1995 and 2001. It had been fingered for illegal conduct by a rival that had gone to the Justice Department.
Those initial charges, though, are now viewed as "just the tip of the iceberg" as U.S. and European investigators turn their attention to other companies and new markets, a defense lawyer close to the investigations said last week. Crompton brought other allegations of price-fixing to the attention of U.S. and European investigators, gaining criminal immunity in those markets, lawyers close to these cases said. Other companies followed suit, racing to be first to report more alleged price-fixing in exchange for lenient treatment or amnesty.
Consequently, the original rubber-chemicals investigation that began two years ago has led to new federal investigations in the markets for widely used plastics, plastic additives and synthetic rubbers, with broad industrial uses and combined sales of billions of dollars a year. Civil suits alleging overcharges are pending in U.S. courts in San Francisco, Pittsburgh, New York and Hartford, Conn., naming most major chemical makers.
Crompton and Bayer have applied for amnesty and are cooperating with investigators. Dow and DuPont have disclosed that they are also cooperating with federal officials, and have filed settlement papers in the neoprene case. Other companies that have been named in some civil lawsuits, including Exxon Mobil Corp., apparently aren't a focus of the U.S. inquiry, lawyers close to the case said.
Justice Department officials wouldn't give details of their continuing chemical-industry investigations. But Hewitt Pate, the antitrust chief, said in an interview that the Crompton plea "is the first of more to come," due in large part to the amnesty program. "It encourages violators to turn on each other," he said.
Such ripple effects have been seen in other industries as well. In an amnesty deal in January, a company based in Norway that was targeted for possible price-fixing in adhesive labels told U.S. and European prosecutors of an alleged conspiracy in the larger market for magazine paper.
