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Thousands of Florida consumers paid more for tires because of a price-fixing scheme by the world’s Big Three rubber chemicals producers, according to a lawsuit filed against the companies in Palm Beach Circuit Court. The deceptive trade practices lawsuit was filed Monday by attorneys in the Boca Raton, Fla., office of class action firm Milberg Weiss Bershad Hynes & Lerach. The suit is a spinoff of a joint international investigation of the global rubber chemicals industry by the U.S. Department of Justice Antitrust Division and its European Union counterpart, the Competition Division. The suit alleges that in 1994 the chemical giants initiated a price-fixing scheme to cope with spiraling costs and a dwindling market for their products. The Big Three of the rubber-processing chemicals industry named in the suit are Connecticut-based Crompton Corp.; Flexsys N.V., a joint venture of St. Louis-based Solutia and Akzo Nobel, a Dutch company; and Bayer A.G., the German industrial giant whose American subsidiary is the Pittsburgh-based Bayer Corp. Representatives of the three companies said they were not aware of the lawsuit and had no comment. The three firms are world leaders in the production of rubber-processing chemicals used chiefly in the manufacture of tires. Flexsys is the largest, with global sales in the area of $600 million in 2001, followed by Bayer with $280 million, and Crompton’s Uniroyal Chemical Co. subsidiary of $206 million. Uniroyal Chemical is not affiliated with the tire maker of the same name. The companies resorted to a price-fixing scheme in response to a squeeze on profits driven by consolidation in the tire industry, the suit claims. The suit describes the alleged collusion in general terms only, saying, “defendants have been parties to an unlawful cartel agreement, contract, combination and or conspiracy … while engaged in the management of defendants’ affairs.” As the number of tire makers shrank due to mergers, the manufacturers gained the upper hand with the chemicals producers, plaintiffs claim, allowing the tire firms to drive chemical prices down. At the same time, the suit claims, pressure for environmental and job safety measures contributed to increased production costs for the chemical companies. The lawsuit claims that consumers paid more for tires as a result of the price fixing, because the cost was passed along to them in the cost of tires. The suit seeks compensatory damages, with interest, lawyers’ costs and fees, and whatever else the court may deem “necessary and proper.” Punitive damages are not allowed under Florida’s Deceptive and Unfair Trade Practices Act, under which the lawsuit is brought. The plaintiffs’ attorneys left open the possibility of adding more defendants. The lawsuit listed “Does 1 through 50″ as defendants, which the attorneys said they intend to name in an amended complaint. The suit was filed in state court on a deceptive trade practices theory rather than in federal court on antitrust claims because of the U.S. Supreme Court’s 1977 decision in Illinois Brick. That ruling held that parties only indirectly damaged by antitrust violations could not sue for damages. The lawsuit was filed by attorneys Abraham Rappaport and Kenneth Vianale of Milberg Weiss’ Boca Raton office. The class representative in the suit is Evelyn B. Myers, a Brevard County resident who purchased tires this year. Bonny Sweeney, plaintiffs’ co-counsel from Milberg Weiss’ San Diego office, said a specific damage figure is not yet known. “It would be a modest percentage of the price of tires to each class member, but there is a huge number of class members,” she said. News of the joint international antitrust investigation of the chemical companies broke in September, when inspectors from the EU’s Competition Division searched the companies’ European offices. In an Oct. 10 press release, EU representatives confirmed that the purpose of the raids was “to ascertain whether there is evidence of a cartel agreement and related illegal practices concerning price fixing for rubber chemicals.” The Justice Department refused to confirm or deny U.S. antitrust investigators’ participation in the EU investigation. But spokesmen for Solutia and Crompton have acknowledged that their companies were contacted by U.S. and European authorities. Solutia describes the inquiry as “an investigation of past commercial practices in the rubber chemicals industry”; Crompton calls it “an investigation into allegations of collusive dealings.” Representatives for all three companies told the Miami Daily Business Review that they are “cooperating fully” with the antitrust investigators.

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