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Makers of MDI and TDI Foam Ingredients Antitrust Class Action

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Covestro Plant

The complaint for this class action alleges that an anticompetitive conspiracy has existed in the US to raise the price of MDIs and TDIs, which are precursor ingredients for foam and related products, since at least January 1, 2016.

The class for this action is all entities in the US, its territories, and the District of Columbia who directly purchased MDI or TDI products from any of the defendants in this case or their subsidiaries or affiliates, between January 1, 2016 and the present.

Named as defendants and conspirators in this complaint are Bayer A.G.; Bayer Corporation; Covestro LLC (formerly known as Bayer MaterialScience LLC); BASF SE; BASF Corporation; Dow Chemical Company; Huntsman International LLC; Huntsman Corporation; Wanhua Chemical Group Co., Ltd.; Wanhua Chemical America Co., Ltd.; Mitsui Chemicals, Inc.; Mitsui Chemicals America, Inc.; MCNS (a.k.a. Mitsui Chemicals & SKC Polyurethanes, Inc.); and MCNS Polyurethanes USA Inc.

The above companies are makers and sellers of the products at issue, methylene diphenyl diisocyanate (MDI) and toluene diisocyanate (TDI).

The products are precursor ingredients for polyurethane foams and thermoplastic polyurethanes, which in turn are used in making products such as mattresses, upholstered furniture, and car seats. They are also used for rigid polyurethane foam, an insulating material used in buildings and refrigeration appliances. Thermoplastic polyurethanes have wide uses, in clothing, mobile devices, and sports equipment.

Before the conspiracy began, the complaint claims, the prices of MDIs and TDIs were low and relatively stable. Beginning in 2014, however, the complaint points out, there was a market oversupply, leading to a price decline. In 2015, prices continued to decline due to lower prices for the raw materials that go into them, such as benzene and oil.

The complaint claims that in 2016, the defendants aimed to reverse the oversupply by permanently closing or temporarily suspending the operations of some of their plants, and by reducing the output of other plants. During the years 2012-2015, only eight plant-related issues were reported, but the complaint claims that in 2016 alone, at least nine closures or production limitations were reported by the defendants, and in 2017, fifteen.

The complaint claims that this led to a global shortage of MDIs and TDIs, which led to price hikes. The hikes were not caused by any increase in the price of raw materials.

In February 2018, the Antitrust Division of the US Department of Justice had subpoenas issued to certain makers of MDI products, in connection with a criminal investigation of price-fixing of MDI products. Among the defendants in this case, both BASF and Covestro admitted to receiving subpoenas.

The complaint claims that price increases in the industry “have occurred in a coordinated and lockstep manner” and that the increases have been drastic. This makes no sense, the complaint says, considering both the excess capacity and the lower costs of raw materials.

The fifty-page complaint lays out its allegations in much more detail, but its point is that the companies colluded in violation of the Sherman Antitrust Act.

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