Polyurethane foam

Backgrounder

January 6, 2012


The investigation into the cartel

The Bureau began investigating this cartel in February 2010 after being approached by a company through the Bureau's Immunity Program. Another competitor cooperated with the investigation by way of the Bureau's Leniency Program.

The Bureau obtained wiretap authorizations and executed search warrants in coordination with its international partners. Bureau officers searched five sites, seized thousands of documents and interviewed numerous witnesses.

The Bureau found that members of the cartel agreed to use the same or similar effective dates and the same or similar price increase ranges in the sale and supply of polyurethane foam and polyurethane foam products in Canada.

The products

Polyurethane foam is a versatile product. It is used in a variety of industries and applications, including:

  • furniture manufacturing, in products such as cushions, upholstered furniture and office chairs;
  • carpet cushion (also known as underlay); and
  • bedding products, such as mattresses and pillows.

The plea

Domfoam and its affiliate, Valle Foam, were charged with, and pleaded guilty to, four counts of conspiracy under the Competition Act: two charges under the new conspiracy provision of the Act for price-fixing from March to July 2010, for which the companies were fined a total of $2.5 million, while the remaining charges were under the former conspiracy provision for price-fixing from January 1999 to March 2010, for which companies were fined a total of $10 million.

The conspiracy provision of the Competition Act

Conspiracies are, by their secret nature, very difficult to detect and prove. Identical prices are not enough to prove an offence.

In March 2010, amended provisions of the Competition Act relating to cartels and collaborations between competitors came into effect. These changes to the Act allow the Bureau to enforce Canada's anti-cartel law more effectively against serious offenders, including those that agree to fix prices, allocate markets or restrict output.

One of the changes to the law is a reduced burden of proof that will lead to more effective investigations and improved international coordination, as our laws are now in line with those of the international competition community.

The new provision also increased penalties: those convicted of conspiracy now face jail terms of up to 14 years (increased from five years), fines of up to $25 million (increased from $10 million), or a combination of both. The amendments also removed the requirement to prove that the alleged conspiracy would result in an undue lessening of competition.

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