Tuesday, 31 July 2001 10:00

Justice Department looks at allegations of price-fixing

On the heels of a federal antitrust investigation into price-fixing by paint manufacturers in the automotive refinish industry, at least four lawsuits have been filed around the country by paint distributors and body shops accusing the world's five largest paint makers of price-fixing. 

Filed in two Federal District Courts, Eastern Pennsylvania (Philadelphia) and New Jersey, the suits all seek class action status and claim that the various paint companies conspired to charge artificially inflated prices for refinishing products. The lawsuits ask monetary damages as well as a court injunction barring collusion.

Prominent California shop sues

Autobody by Caldwell Inc., of Laguna Hills, California is the plaintiff in one of the suits, filed in U.S. District Court for New Jersey, a state in which the five defendants, PPG, Sherwin-Williams, DuPont, BASF and Akzo Nobel all have offices. These paint makers have all acknowledged the Justice Department investigation and all have denied any wrongdoing.

The suit filed on behalf of Autobody by Caldwell has drawn the most media attention because the business is owned by Jack and Kevin Caldwell, father and son, both industry leaders and former chairmen of NACE as well as directors of the Automotive Service Association (ASA). Kevin Caldwell is also very active in the Collision Industry Conference and in CIECA, the electronic commerce group.

Filed by San Francisco attorney Soloman B. Cera of Gold Bennett Cera & Sidener, the suit cites an article published in the collision industry magazine Hammer & Dolly that claimed the paint companies met secretly in Europe five years ago where they conspired to fix wholesale prices in the United States.
According to Kevin Caldwell, attorney Cera approached him and his father about the suit and, after considering how their paint prices have continually escalated "more than you would expect," agreed to be a plaintiff in the suit. Jack Caldwell told industry newsletter Crash Network that, "I didn't know I was going to the lead dog," and that he had anticipated there would be 50 or more other shops also named as plaintiffs.
Kevin Caldwell said that he has used Sikkens (Akzo Nobel) for more than 15 years, which he called "excellent paint." He noted that when the price of paint went up and he looked at other brands, he realized that all of the top brands were priced about the same. "The escalating price of paint should concern everyone in the industry, and we all have to work together to fix it. That's why we decided to get involved."

Caldwell noted that he has bought paint both direct and through a paint jobber, and that he would prefer to deal through a local jobber because he receives a higher level of service, "but the direct price is usually lower and we have to compete with consolidators and other large operations that buy direct."

The paint market in the United States, which various sources estimate at $1.8 - $2.5 billion in annual sales, breaks down roughly as follows: DuPont Performance Coatings (DuPont, Spies Hecker and Standox brands), 32%; PPG, including ICI AutoColor, 29%; Sherwin-Williams, 18%; BASF, 12%; Akzo Nobel 7%; others, 2%.

All of the attorneys filed their suits in a "feeding frenzy" according to trade journal editor Sheila Loftus of Crash Network not long after an article in the Wall Street Journal disclosed the Justice Department anti-trust investigation, based in Philadelphia, on June 4.
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The complaint in the Caldwell lawsuit notes that one of the targets, Dutch company Akzo Nobel, made an accounting allowance of $150m Eurodollars to cover any possible fine, this according to a Dutch newspaper which also reported that the Justice Department investigation started in January of this year. Akzo has denied that any of the alleged price-fixing ever took place. An SEC attorney told Autobody News that a large public company such as Akzo often sets aside funds to cover possible fines once any public investigation has been opened and that such action should not be taken as an admission of wrongdoing by the company.

More shops sue paint makers, one withdraws

When Sheila Loftus, editor of Hammer & Dolly in Washington, D.C. wrote last March that "a source told Hammer and Dolly that allegedly the paint companies agreed to fix prices during a meeting in Europe five years ago" she had no idea that the Justice Department would end up looking into the matter or that it would lead to over 30 lawsuits for price-fixing being filed against the major paint manufacturers by body shops and paint distributors. Loftus said that she never spoke directly to anyone with actual knowledge of the alleged 1993 meeting and that while her source was reliable the information was, in fact, hearsay (second hand). She therefore finds it incredible that some attorneys are citing her article in their lawsuits.

One high-visibility plaintiff, Jack and Kevin Caldwell of Autobody by Caldwell in Laguna Hills, California has instructed its attorney to withdraw the complaint. "Dad and I decided on the plane after I-CAR in Baltimore that this was getting out of hand and that we would decline to be part of it," Kevin Caldwell said.