Crompton Corp. has pleaded guilty to price fixing in the rubber chemicals market and been fined $57 million by U.S. and Canadian authorities.
The Middlebury, Conn.-based company also announced it is cooperating with authorities in the United States, Canada and Europe about another alleged cartel, this time involving polyurethanes and urethane chemicals.
Crompton accepted fines of $50 million in the United States and $7 million in Canada after admitting to ``participating in a combination and conspiracy to suppress and eliminate competition by maintaining and increasing the price of certain rubber chemicals'' sold in the United States from 1995-2001.
A European Commission probe into Crompton's activities in the market is ongoing, Crompton said. The settlements with U.S. and Canadian authorities remain subject to court approvals.
Crompton took a charge of $45.2 million against its operating results for 2003 as a reserve for payment of the U.S. and Canadian fines. That sum represents the current value of the expected payments, the company said.
The firm claims its rubber chemicals business is the third-largest worldwide.
The agreement covers only Crompton, a Department of Justice spokesman said, and doesn't mention any individuals within the company. Company officials said they either have disciplined or terminated those involved in the scheme. It would not identify any individuals, say how many were involved or give their positions with the supplier.
The $50 million from Crompton in the United States will go into a general crime victim fund operated by the Treasury Department, the spokesman said. Victims of the price fixing ultimately will have access to the funds.
In its statement, the DOJ charged that Crompton and as-yet-unnamed co-conspirators agreed to maintain prices on certain rubber chemicals, issued price announcements and exchanged information on the sale of rubber chemicals.
In Canada, the plea agreement covers one count of conspiring to lessen competition unduly in the sale and marketing of certain rubber chemicals in Canada.
Crompton said it has completed internal investigations into illegal trading practices and has ``strengthened its training and compliance programs and has taken personnel actions, where appropriate.''
The internal probes are ``major steps in putting these issues behind us,'' according to Bob Wood, Crompton's newly appointed president and chief executive officer. ``We continue to work diligently to resolve the pending civil litigation and the EC's rubber chemicals investigation.''
Deutsche Bank Securities Inc. is keeping a ``hold'' recommendation on Crompton stock in place following the announcement. Deutsche Bank analyst David L. Begleiter estimates the company will have litigation expenses through 2006 as it deals with a number of DOJ probes, including those into ethylene propylene diene monomer, nitrile rubber and urethanes.
Of the other major producers of rubber chemicals, Flexsys NV is ``not a target of the DOJ investigation'' and does not expect to face any charges, according to Bill Woodyard, vice president of Flexsys America LP.
Bayer AG, whose rubber chemicals business has been part of the investigation, declined to comment beyond saying it is cooperating fully with authorities.
The U.S., Canadian and European authorities disclosed their joint investigation into rubber chemicals in October 2002.
Crompton has been in the rubber chemicals business since 1996 when it purchased Uniroyal Chemical Co. Inc.
Flexsys, Bayer and Crompton/Uniroyal accounted for more than half the $2.3 billion world market for rubber processing chemicals in 2001, according to a report from market researcher Freedonia Group Inc. of Cleveland. Flexsys was pegged at $600 million in rubber chemical sales, Bayer at $280 million and Uniroyal at $206 million.
Other significant suppliers include Brazil's Bann Quimica Ltda., Duslo AS of the Slovak Republic, R.T. Vanderbilt Co. Inc. in the United States and Japan's Sumitomo Chemical Industries Ltd.
In the urethanes and urethane chemicals investigation, Crompton has been granted conditional amnesty from U.S., Canadian and European Union authorities, as it received previously with regard to EPDM and nitrile rubber. Crompton's Uniroyal urethanes and urethane chemicals business had sales of $286 million in 2003, supplying TPUs, dispersions and polyols.
Rubber & Plastics News reporter Miles Moore contributed to this report.