WASHINGTON (July 20, 2000)—The U.S. Justice Department´s recently closed, multi-year price fixing investigation of the tire industry may have been sparked by a Michelin Americas Small Tires executive´s remarks to a newspaper eight years ago, according to agency documents.
"We all know the tire industry is going through another round of price increases," David Schaub, then chief operating officer of MAST, told Akron Beacon-Journal reporter Robert Fernandez in an article published May 28, 1992. "Will they stick? They have to."
The article also stated that Michelin "had racked up about $1 billion in losses over the past two years from a price war in both Europe and the United States," with prices stabilizing only in late 1991.
Edmund Round, an attorney with the Cleveland office of the Justice Department, sent a memo to his superiors June 11, 1992 with the ABJ article attached.
"This seems like an appropriate matter to investigate," Mr. Round told Joseph H. Widmar, director of DOJ´s Office of Operations in Washington, and John A. Weedon, chief of the agency´s Cleveland office. Most of the text of Mr. Round´s memo was blacked out for public issuance, under the Justice Department´s stringent secrecy regulations.
The DOJ´s latest price fixing probe of the tire industry—one of several it has undertaken over several decades—generated somewhere between 750,000 and 1 million pages of documents during its approximately eight years in existence, according to officials of the agency´s Antitrust Division. Under the Freedom of Information Act, Tire Business and its sister publication, Rubber & Plastics News, specifically requested the agency´s interoffice memos relating to the investigation, as well as all correspondence between the Justice Department and the tire companies involved.
The agency turned over a total of 133 pages, most of them heavily censored because they contained confidential business information, confidential Justice Department information or information "which could reasonably be expected to constitute an unwarranted invasion of personal privacy," a DOJ official wrote July 7 in a letter transmitting the documents.
For the same reason, 215 documents totaling 2,255 pages were withheld entirely from public release, she said.
The released documents cover the years 1992 to 1998, with most of them concerning the first year or so of the investigation. In one of the most complete documents, dated July 14, 1992, Mr. Round describes his meeting with several tire industry officials on July 8. The agency blacked out the names and company affiliations of the executives.
One official, according to Mr. Round, "said that prices, on a per-mile basis, are lower now than they were 20 years ago." Another said that mass merchandisers such as Sears and Tire America were using their buying power to force manufacturers´ prices down.
"Because they sell more tires through independent dealers than through mass merchandisers, the manufacturers lowered their prices to the independents as well," Mr. Round quoted him as saying.
Yet another executive said all tire makers except Cooper Tire & Rubber Co. were losing money at that time. This official discounted the ABJ quotes from David Schaub, according to Mr. Round: "He said that, every time (Mr.) Schaub speaks, he says the same thing: Tires are engineered products, not commodities," he said.
Messrs. Round and Weedon no longer work in the Cleveland office of the Justice Department, and Mr. Widmar retired from the agency in 1995, according to agency spokespersons. Pete Selleck is now chief operating officer of MAST. A Michelin spokesman declined comment on when Mr. Schaub left MAST or where he went after leaving, saying that the company keeps information on former employees confidential.