Polyurethane systems supplier Foam Supplies Inc. is suing Dow Chemical Co., alleging Dow delayed product shipments to FSI, reduced the size of many shipments below contractual amounts, and imposed price increases on FSI more frequently than on its own customers and its own PU systems business.
In addition, FSI, one of North America's few independent PU systems suppliers, alleges Dow told its own customers in late 2004 not to buy chemicals such as methylene diphenyl diisocyanate from systems houses, like Foam Supplies, because they would be the last to be supplied when stocks were low.
Finally, FSI claims Dow has used proprietary FSI technology, after meetings in which the systems supplier shared its trade secrets with Dow.
The allegations are included in a suit that FSI filed Oct. 4 in U.S. District Court in St. Louis.
Pat Dawson, business vice president with Dow's polyurethanes and thermosets business, said, ``To the best of my knowledge, we have not been officially served with any such suit and so cannot respond to the various allegations.
``But, we will comprehensively and thoroughly defend the situation,'' Dawson said in an Oct. 18 interview at the Polyurethanes 2005 conference and trade show in Houston.
Problems began to develop last year when Dow made several public price increase announcements for MDI and polyether polyols, the lawsuit states. FSI said it was faced with Dow's MDI price increases seven times during the year, along with four for polyol.
On Aug. 10, FSI said that Dow representatives told the firm that certain market factors authorized Dow to raise its prices, and to restrict sales volumes to one-twelfth of its usual level. On Aug. 16, FSI said it reaffirmed its contract with Dow, agreeing to buy 10 million pounds of MDI and 2 million pounds of polyols in both 2004 and 2005.
But FSI alleges that, in early September 2004, it became aware that Dow was delaying MDI shipments to FSI. Dow initially said the delays were due to weather conditions in the southeastern United States, where its main plants are located. But on Nov. 17, FSI claims, Dow wrote to say that equipment failure at an MDI plant in Texas would limit availability of the material.
FSI's main complaint is that, while faced with these various difficulties, ``Dow was actively seeking new customers for MDI and polyols produced by Dow [including customers of FSI].''
The firm also claims that ``Dow representatives told potential customers in late 2004 that if they purchased directly from Dow, they would not be affected by the ongoing product shortages.''
FSI said Dow told customers that they ``should not purchase chemicals like MDI from systems houses like FSI ... [because they] ... would be the last to be supplied with product by Dow when stocks were low.''
In a separate interview in Houston, David Keske, an FSI senior manager, emphasized that his company had been a Dow customer for more than 18 years.
``We never canceled a delivery, and always paid our bills on time,'' he said.
Dow stopped supplying FSI on Oct. 13, Keske said.