The Antitrust Division of the U.S. Department of Justice is investigatingthe automotive oil filter industry on charges of price fixing, bid rigging and allocation of customers. Honeywell International, maker of Fram filters, confirmed that its employees, and others, have received subpoenas.
Honeywell, of Morristown, N.J., disclosed the DOJ investigation in its July 18 Securities and Exchange Commission filing. Honeywell indicated that the investigation is based on allegations raised in a class action suit brought in late March by S&E Quick Lube Distributors of Riverton, Utah, against Honeywell and six other filter manufacturers and their parent companies. After the S&E Quick Lube suit was filed, Honeywell acknowledged, several parallel purported class actions … have been filed by other plaintiffs … in the United States and Canada. These number 44 so far.
I can confirm that the Antitrust Division is investigating the possibility of anticompetitive practices in the automotive oil filter industry, DOJ spokeswoman Gina Talamona told Lube Report yesterday. She declined to comment further about the status of the investigation or the companies involved. Honeywell, in its SEC filing, said it is fully cooperating with the DOJ investigation.
According to S&E Quick Lubes suit, Champion Laboratories, Purolator Filters, Honeywell International, Wix Filtration Products, Cummins Filtration, Donaldson Co., and Baldwin Filters, plus the current and former parent companies of Champion and Purolator, engaged in a massive conspiracy to fix prices, rig bids and allocate customers, from at least Jan. 1, 1999, through the filing of the suit on March 31, 2008.
A confidential informant(a senior sales executive who was employed by two of the defendants) recorded conversations and provided other significant information on which the S&E Quick Lube suit is based, according to the complaint.
The defendants, the suit notes, are the primary manufacturers of aftermarket filters in the United States, where annual revenues for filters are about $3 billion to $5 billion.
In one of many allegations, the suit charges that Champion Laboratories president informed his sales team of price increases at a February 2004 sales meeting, and instructed them to make sure Champions competitors followed suit in terms of timing and amount pursuant to their continuing agreement. The Champion sales representatives followed the directive … Anticompetitive activities allegedly occurred frequently at meetings of the Research Triangle Park, N.C.-based Filter Manufacturers Council. The Filter Council meeting was used as a vehicle to further the anticompetitive purposes of defendants unlawful conspiracy, the suit charges.
Hollis L. Salzman, a partner at Labaton Sucharow LP in New York City, the law firmrepresenting S&E Quick Lube, told Lube Report,Forty-four copy-cat cases have been filed, by both direct and indirect [filter] purchasers. A hearing is scheduled next week in California on where the cases will be heard. I think it will go to Connecticut [where the S&E Quick Lube case was filed], consolidated with class action certification, she said, adding that it will likely take a year and a half to come to trial.
The cases certainly will affect the rights of oil filter distributors, Salzman said. They should keep informed of the case.
We intend to vigorously defend the claims raised in all of these actions, Honeywell said of the S&E Quick Lube and other class action suits.
Richard Wolfson, vice president, general counsel and secretary of Baldwin, said, “We cannot comment as a matter of policy on active litigation, except to say that we will vigorously defendourselves, and there is no merit to these accusations. Baldwin is not the subject of any Department of Justice investigation.”
Keith Zar, general counsel at Champions parent company, United Components, told Lube Report his company has no comment on any litigation.
Wix Filtration, Cummins Filtration andDonaldson did not return Lube Reports calls for comments by press time. Lube Report was unable to reach Mann+Hummel USA, which acquired the Purolator Filter business in 2006.