Friday, February 27, 2009 | Modified: Saturday, February 28, 2009, 6:20am
Lawsuit: Home insulation giant fixed prices
Atlanta Business Chronicle - by Urvaksh Karkaria Staff writer
An Atlanta federal judge has green-lighted a national class-action lawsuit that accuses one of the country’s largest home insulation installers of price fixing.
The suit, filed in U.S. District Court downtown, contends Michigan-based fiberglass insulation contractor Masco Corp. violated antitrust laws by conspiring with fiberglass insulation manufacturers to fix prices from 1999 through 2003, hurting competing independent contractors.
On Feb. 9, Judge Julie E. Carnes granted the lawsuit “class certification,” meaning it will represent 377 independent insulation installers who are suing Masco. No trial date has been set.
Masco allegedly conspired with manufacturers to maintain prices for independent insulation contractors above prices charged to Masco. Evidence suggests a difference in prices of least 12 percent to 15 percent, according to court documents.
I have been looking into into this matter, and it appears that its complexity (including numbers of plaintiffs and defendants (the alleged injured parties - independent insulation contractors) and defendants (Masco and affiliates) and side issues from the serious to the trivial are allowing or causing the matter to be dealt with in a piecemeal manner that is going to take a lot of time to sort out (postponements, substitutions of attorneys, etc, etc).
So far in 2010, 30 separate filings have been made; in 2009 - 72. An "Expedited MOTION for Order Revised Scheduling Order with Brief In Support" by Masco Corporation and affiliates filed on 3-9-09 consisted of 94 pages.
Any and all delays, it seems safe to say, benefit Masco inasmuch as it is the defendant. If it is found guilty, the costs could be so substantial that they might be unbearable by a company whose actual financial condition is dangerously weak.
rvalueman - good to hear from you. You and cooperchair have been missing for a long time and I, for one, am pleased to see you back. I hope that soon I will be able to say the same for cooperchair.
I went back to the original case involving Wilson, and looked at what a number of us were discussing following its filing. As I recall, the board had been alerted to the subject of unfair practices, predatory pricing, and monopolization by Masco by an independent contractor in NJ who had been forced to compete against Masco's tactics - and later sold out to Masco presumably for what he expected would be a windfall.
I think the following paragraphs from the article you posted yesterday from the Atlanta Business Chronicle are worth adding:
"The class action was filed in Atlanta based on allegations of a nationwide price-fixing conspiracy from an earlier case filed by Wilson Insulation Co., which was located in Atlanta. [see my next post]
“We have estimated damages from overcharges ... from 1999 to 2003 in the hundreds of millions of dollars,” said Jeffrey Berhold of Jeffrey L. Berhold P.C., a lead attorney for the plaintiffs.
"Under the Sherman Act, damages are trebled in anti-trust cases.
"Because of the size of its purchases, Masco has been able to negotiate deals to buy insulation from manufacturers at a lower cost than most other contractors, court documents say.
"The lawsuit claims that between the beginning of 1999 and the end of 2003, Masco went beyond simply negotiating the lowest price it could obtain and instead enlisted manufacturers in a conspiracy to maintain and increase Masco’s price advantage to the detriment of competing independent contractors.
"The manufacturers agreed to this arrangement, the plaintiffs claim, in exchange for Masco’s support for across-the-board price increases on insulation products during a time of decreased demand and excess supply. That arrangement, the plaintiffs contend, violated antitrust laws.
"The case is unusual, because it accuses the buyer — rather than the seller — of price-fixing.
“A large buyer is exerting its market power against the sellers and saying you need to charge me X-dollars and you need to charge my rivals X-dollars plus 10 percent,” said Bryan Harrison, partner at Atlanta’s Morris, Manning & Martin LLP and a former Justice Department anti-trust attorney. “That is a somewhat unusual case and is called a monopsony.”
"The case is also unusual because class actions aren’t typically brought in an antitrust, price-fixing case.
"Class actions are effective weapons, however, because they are easier to prosecute since damage has to be proven to just one of the plaintiffs.
“You are able to bring in significantly greater exposure [damages] at a substantially reduced costs to each of the individual class members,” Harrison said. “You have to prove damage to a [single plaintiff company] as opposed to 377 separate plaintiff firms.”
rvalueman and cooperchair - and kenny420s
I went back to the original case involving Wilson, and looked at what a number of us were discussing following its filing (3-5-03).
As I recall, the board had been alerted to the subject of unfair practices, predatory pricing, and monopolization by Masco by an independent contractor in NJ who had been forced to compete against Masco's tactics - and later SOLD TO MASCO presumably for what he expected would be a windfall.
Do either of you have copies of the early posts by that contractor - who claimed later that he got a high price (as he had hoped and predicted would happen to get him out of the way), and who then became a zealot preaching what a great company Masco was? His zeal apparently didn't last long as he stopped posting. Too busy spending his loot?
I copied one of the posts in which he claimed quite clearly that Masco was acting in a predatory manner, and I reprinted it here on the message board.
You guys had a couple of chances to read what the seller of that company to Masco had to say. By the way, how do you like the new Masco publicity barrage - the "insulation is green" pitches and the new companies and new names for the same old junk?
It must be reassuring to the 246 House members who voted for it to know that "WellHome [Masco] Applauds House for Passage of Home Star Bill". I suppose the 161 who voted against it did so because they won't be able to grab much of the "Cash for Calkers" because their homes already are insulated.
Wilson Insulation Alleges Monopolization in Antitrust Lawsuit Against Masco
Wednesday March 5, 9:55 am ET
Justice Department Said to be Investigating
ATLANTA, March 5, 2003 (PRIMEZONE) -- The Wilson Insulation Group, Inc. filed a lawsuit today against Masco Corporation (NYSE:MAS - News) for predatory pricing and monopolization.
Wilson, which is based in the Atlanta area, and an affiliated company alleged in the lawsuit that Masco engaged in a concerted campaign to take control of a local market for insulation contracting.
According to the allegations in the complaint, a senior executive from Masco stated that Masco intended to drive Wilson out of the Augusta, Georgia market and send a message to the industry.
The suit was filed in United States District Court in Atlanta and asks for treble damages and costs under the federal claims and punitive damages under the state claims.
The complaint alleges that Masco sought to oust Wilson, its only significant rival in the Augusta market, by cutting off sources of supply and charging prices below its own costs.
Masco allegedly threatened one major manufacturer that Masco would pull all of its business in one large state if the manufacturer continued to deal with Wilson in Augusta.
Less than one year after entering the market, Wilson had to close operations in Augusta. In the subsequent two years, Masco has allegedly raised prices in Augusta by 80% to 100%.
Wilson declined to comment and referred all questions to its attorney, Jeffrey L. Berhold.
Mr. Berhold said that the company suspected that Masco had taken similar actions in various markets around the country. He added that the company looked forward to presenting its evidence and making its case in the courtroom.
The U.S. Department of Justice has informed the company that it is separately investigating the allegations as well.