Justice Dept. Probing Polyester Price-Fixing

NEW YORK — As part of an ongoing investigation into price-fixing in the polyester staple industry by the U.S. Department of Justice, a federal grand jury in Charlotte, N.C., Friday indicted a former official of Nan Ya Plastics Corp. for...

NEW YORK — As part of an ongoing investigation into price-fixing in the polyester staple industry by the U.S. Department of Justice, a federal grand jury in Charlotte, N.C., Friday indicted a former official of Nan Ya Plastics Corp. for conspiring to fix prices and allocate customers.

This story first appeared in the September 17, 2002 issue of WWD.  Subscribe Today.

Representatives of Nan Ya, as well as three other companies that have been major players in the U.S. polyester staple industry — DuPont, Wellman Inc. and KoSa — said Monday they are cooperating with the investigation into their industry.

The investigation centers on a period from September 1999 through at least January 2001, when rising oil prices had makers of polyester and other synthetic fibers making repeated efforts to raise their selling prices to improve margins that had eroded substantially after the Asian financial crisis of 1997.

The indictment charges that former Nan Ya sales manager Robert Bradley Dutton “and others engaged in a combination and conspiracy to suppress and restrain competition in the sale of polyester staple sold in the U.S.…in unreasonable restraint of interstate trade and commerce.”

Bart Daniel, the South Carolina attorney representing Dutton, said: “We are going to defend.”

He continued, “He is innocent of the charges and we intend to vigorously fight the charges as filed, and we believe he will be exonerated after we have our day in court.”

Jeff Green, a partner in the Washington law firm Sidley, Austin, Brown & Wood, which is representing Lake City, S.C.-based Nan Ya, said: “We’re cooperating in the ongoing investigation and we haven’t been charged.

“We’re disappointed to hear about the charges against Mr. Dutton,” he continued. “We don’t consider them to be well-founded and hope the Department of Justice will ultimately decide to withdraw them or he will be acquitted at trial.”

Assistant Attorney General Charles A. James, who heads the Justice Department’s antitrust division, said in a statement: “This case reflects the antitrust division’s resolve to proceed aggressively against cartels that harm American businesses and consumers.”

Friday’s indictment was the first in this ongoing case, according to a Justice spokeswoman. It also covers unnamed co-conspirators, who, along with Dutton, it claims participated in meetings and conversations where prices and customers were discussed and agreements reached; sold polyester staple at the agreed-upon prices and to the agreed-upon customer, and issued price announcements and quotations in accordance with their agreements.”

The charges, which are in violation of Section 1 of the Sherman Act, carry a maximum penalty of three years in prison and a $350,000 fine.

The polyester price increases came in waves and included staple as well as filament. DuPont kicked off the first 1999 round of polyester price increases with a lift in its polyester filament prices June 28. Wellman, KoSa and Nan Ya followed suit. In August, the four makers raised their prices on staple.

By April 2000, the companies were into their fourth round of attempted price increases on staple. During that period, makers of other fibers including nylon, acrylic and acetate, also tried to raise prices.

While the fiber manufacturers made repeated public statements that they would be raising their prices by set percentages, typically ranging from high-single digits to mid-teens, fiber buyers said the actual increases in selling prices tended to be lower than the fiber makers had sought and came later than they had wished.

Fiber makers justified each round of increases by saying they needed to recoup margins that had been eaten away by years of price erosion.

Officials at other fiber firms acknowledged they, too, had been contacted as part of the investigation, though no makers have been indicted.

In a statement, Wilmington, Del.-based DuPont said: “DuPont is aware that the Department of Justice recently issued an indictment in connection with its investigation of pricing practices for polyester staple fiber. DuPont has not been indicted and has cooperated with the Justice Department from the outside of its investigation.”

The company noted that it divested its polyester staple operations in June 2001. They are now run by DAK Americas.

Shrewsbury, N.J.-based Wellman said in a statement: “Last year, Wellman Inc. received a document subpoena in connection with this investigation. Wellman continues to cooperate with the investigation by producing documents in response to the subpoena it received. Neither Wellman nor any of its employees have been charged with any wrongdoing, and Wellman vehemently denies that it or any of its employees have engaged in price-fixing or customer allocation.”

Mary Wilson, general counsel for the U.S. and Canada region for Arteva Specialties SARL, a subsidiary of Houston-based KoSa, said her firm “is cooperating fully with the Department of Justice in its investigation of the polyester staple industry. Because the investigation is ongoing, we are limited in what we can say, expect that we hope this matter is resolved soon.”

Spokesmen for all three companies declined further comment because of the continuing investigation.