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DuPont Settles ‘Cartel’ Suit for $72M

Monday, August 19, 2013

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DuPont, the top global producer of titanium dioxide, will pay $72 million in cash to settle a class-action lawsuit accusing the chemical giant of colluding with other makers to fix prices for the common paint pigment for nearly 10 years.

Court documents liken the TiO2 producers' actions to "cartel behavior." DuPont denies any wrongdoing.

The landmark agreement, filed Monday (Aug. 12) in U.S. District Court in Maryland, settles DuPont's role in the long-running class-action litigation initiated by Haley Paint Co., Isaac Industries Inc., and East Coast Colorants LLC. (doing business as Breen Color Concentrates), three small purchasers of the pigment.

The class includes all persons and entities who bought titanium dioxide in the U.S. directly from one or more of the defendants or their affiliates between Feb. 1, 2003, through Jan. 11, 2013 (the so-called "Class Period").

titanium dioxide

The judge cited evidence of "cartel behavior" by the titanium dioxide producers.

Co-defendant Huntsman International settled its role in the case last month for what a Huntsman spokesman called a "relatively small sum" that was undisclosed, reported.

Kronos Worldwide Inc. and Cristal USA Inc. (formerly known as Millennium Inorganic Chemicals Inc.) remain as defendants in the case. Together, the defendants and former defendants control about 70 percent of the world global market for titanium dioxide, the world's most widely used pigment for providing whiteness, brightness and opacity, court documents said.

(A fifth defendant, the National Titanium Dioxide Company Limited, based in Saudi Arabia, was dismissed from the case in 2011 on jurisdictional grounds.)

News of the settlement was announced July 26, just days after DuPont revealed that it was seeking a buyer for its struggling Performance Chemicals unit, which includes Titanium Technologies. Details of the settlement, however, were not unveiled until Monday.

DuPont Statement

DuPont released this statement Thursday (Aug. 15):

“DuPont is pleased to reach a settlement with plaintiffs to resolve a pending civil antitrust litigation matter related to titanium dioxide (TiO2).  We believe that our conduct has at all times been entirely appropriate, and we continue to deny any wrongdoing.  We have resolved this litigation to avoid the distraction and expense of litigation. The terms of the settlement have been submitted to the Court for its preliminary approval at a later date.”

A spokesman for Huntsman could not be immediately reached for comment.

No Smoking Gun

In a lengthy Memorandum Opinion on the litigation filed Monday, U.S. District Judge Richard D. Bennett acknowledged that the case against the pigment makers was largely circumstantial, saying, "[T]here is no 'smoking gun' that explicitly reveals an agreement to conspire."

On the other hand, the judge writes, "a reasonable jury could conclude that the Defendants
fraudulently concealed evidence of collusion."

Ellen Kuhlman

DuPont is "evaluating options" for its struggling Performance Chemicals business, which includes Titanium Technologies, CEO Ellen Kullman says.

That evidence includes, according to the opinion:

  • A crisis in the titanium dioxide industry before Feb. 1, 2003;
  • DuPont's entrance in 2002 into the Titanium Dioxide Manufacturers Association (TDMA), allowing "greater opportunities" for the world's biggest pigment producers to interact;
  • The introduction of a TDMA statistical program that allowed producers to collect and share global industry information;
  • The "routine communication of confidential, commercially sensitive information to other firms and industry consultants during the Class Period";
  • Repeated "price increase announcements allegedly executed in lockstep by the defendants"; and
  • "[I]nterfirm sales of titanium dioxide."

Sinking Market

The opinion notes that the titanium dioxide industry tanked in the 1990s. The per-ton price of the pigment plummeted from $3,200 in 1991 to $1,900 in 2000, according to a Huntsman marketing report cited by the judge.

A Millennium "Corporate Strategy" report also noted "overcapacity and a decline in real prices" in TiO2 throughout the decade, the opinion said.

The year 2001 was considered "disastrous" for the pigment, and producers were "bloodied badly" by falling prices and reduced profits, forcing the closure of several TiO2 plants, the opinion said.

Parallel Pricing

In 2002, DuPont joined the TDMA—the trade association's first non-European member, the judge writes.

Although the Delaware-based chemical giant had long dominated North American pigment production, Kronos, Millennium, Huntsman and Kerr-McGee dominated the European market through the TDMA, which was part of a larger trade association for the chemical industry. The TDMA members shared production information through a statistics program.

The organization specifically amended its rules at a meeting on Jan. 24, 2002, to admit DuPont as an Associate Member, clearing the way for the world's largest producers to share data, the judge noted.

DuPont Industrial Coatings Breen Colorants
Haley Paint (left); Breen Color Concentrates (right)

The named plaintiffs in the class-action suit include Haley Paint Co., a distributor of DuPont Industrial Coatings (left); and East Coast Colorants LLC (right), doing business as Breen Color Concentrates.

The group also admitted Japanese TiO2 producer ISK but did not open the group to other companies.

Days after DuPont joined the trade group, all of the pigment producers raised their global prices: DuPont on Jan. 28; Millennium on Jan. 30; Kronos on Feb. 1; and Huntsman on Feb. 12.

Meanwhile, under the new statistical program developed during 2002, producers agreed to share monthly sales production and inventory figures. Members were warned that the statistics were confidential and had to remain in the group, the opinion said.

The data would reflect "75 to 80 percent" of global TiO2 production, one member said.

Price Hikes 'Too Fun to Ignore'

The opinion also cites "a long pattern of seemingly coordinated price increase announcements" by the defendants. Two to four times a year, when one company announced a price increase, others typically matched it to the penny within days or even hours.

From 2005 to 2010, the defendants issued 17 parallel or nearly parallel price increases, usually initiated by DuPont, the judge said.

One Millennium official emailed a colleague that the price increase announcements were "too much fun to ignore."

Most of the price announcements came within 30 days of a TDMA General Committee meeting, suggesting that the meetings may have been used to share pricing plans, the judge wrote.

Moreover, the price hikes occurred during a time when titanium dioxide was in plentiful supply.

'Cartel Behavior'

The judge noted "a mass of evidence" indicating increased communications and "signaling" by competitors on pricing and other issues.

The judge agreed with the plaintiffs that:

  • The producers' statements about "greater discipline" and shared information "are suggestive of cartel behavior";
  • The pricing patterns during a time of abundant supply suggest "a goal of stabilizing relative market share"; and
  • Statements made by the defendants indicate "their awareness that their behavior might appear collusive."

'Don't Steal Dup Tonnes'

Those statements include numerous emails and phone calls within companies and between executives of competitors.

In one email, for example, a Millennium executive makes a case for his company to increase its market share, writing: "[w]e should have this extra share. ... Competitors will let us have this."

Later that year, the executive made a handwritten notation: "Don't steal Dup tonnes."

The following year, a Huntsman official emailed a colleague to say: "Remember, we can't lead a price increase but we sure can kill it; and we won't be left behind if others push the pricing up."

Then there was this, from a Kronos executive bemoaning declining sales of TiO2. The "good news," the executive said, was that producers had been able to raise prices substantially.

"[I]t appears," he wrote, "that we and our competitors are prepared to reduce production rather than chase phantom volume."


Tagged categories: Coatings raw materials manufacturers; Coatings Technology; Colorants; DuPont; Europe; Huntsman; Laws and litigation; North America; Pigments; Pricing; Renewable raw materials; Titanium dioxide

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