As we are sure many of you have heard, Lumber Liquidators is currently being accused of having levels of formaldehyde in their laminate flooring products that are imported from China. Formaldehyde is known cancer causing chemical, and it is very concerning if the accusations turn out to be truth. However, Metro would like to shed some more light on the issue and laminate adhesives in general.

First, here is a link to the 60 Minutes piece, if you haven’t seen it already.

To start, it should be mentioned that all laminate ply are pressed with adhesives and all imported laminates are manufactured with very similar, if not the same, adhesives. Almost all industrial adhesives contain trace amounts of chemicals, but the level of which couldn’t harm a lab rat in 100 years and certainly not high enough to effect a larger mammal or human.   This attack has stunned not only Lumber Liquidators, but unfairly put pressure on all importers of laminate flooring.

There are two sides to any story and the 60 minutes piece only shares one side. That is the side of a party that is currently suing Lumber Liquidators and is backed by short sellers who are basically betting against the company (we’ll touch on that shortly). Setting aside all of the persuasive rhetoric, (remember, there is loads of money on the line here), Lumber Liquidators is being accused of falsely branding products that don’t comply with California testing standards.

Keep in mind, that Lumber Liquidators is a huge corporate company and they have far too much at stake to willy-nilly throw false labeling on their products. In a response to the allegations, Lumber Liquidators said that “60 Minutes” used flawed testing in its reporting and that its floors are safe.

Here’s another statement by Lumber Liquidators:
“We comply with applicable regulations regarding our products, including California standards for formaldehyde emissions for composite wood products — the most stringent rules in the country,”

If we were able to hear an elaborated version of Lumber Liquidators’ side of the story, we’re sure that their rigorous testing process would be the focus. We understand that Lumber Liquidators was singled out specifically because of their choice to put the comply with California standards stickers on their line of laminate flooring. It is my belief that they did so because of they felt confident with the amount of testing they do on their products. Then, after Lumber Liquidators received several results that passed those guidelines, they felt confident about placing the sticker on their products.

Here’s a PDF of the testing process used by another laminate importer. The document is mostly in French, however you can still see how extensive the testing is of this particular company. This company is no where near the size of Lumber Liquidators, so it’s rather safe to assume that Lumber Liquidators process is probably even more stringent.

Do you see that seal on all the other importers boxes? The truth is, no you don’t. It’s not that the other importers wouldn’t, or don’t, pass these guidelines, but probably more so a result of not wanting to but heads with those on the other side of the extreme. There are 49 other states  to sell laminates in that don’t have the same extreme level of standards. And its a touchy subject that could generate bad press quickly; similar to what Lumber Liquidators is currently involved with.

We are not debating whether high levels of formaldehyde are bad, of course that is concerning. We also aren’t picking sides and saying that Lumber Liquidators was unfairly accused. However, it is important to understand that there is much to be gained by the party that is making this issue so prominent in the media. Truth is, short sellers of Lumber Liquidators stock are the ones that are pushing this issue the most (Learn what short selling is by clicking on this link. In short, the individual that discovered the high emission levels, the main individuals in the 60 minutes piece, and the group suing are all short sellers betting against Lumber Liquidators. They will make money if the stock price goes down. Financial gain needs to get more focus in the media regarding this issue.

Here’s an article regarding Xuhua Zhou, the short seller that originally had concerns and investigated the issue.

To wrap this up, we just want those who are paying attention to this story to think critically. Understand the motives of each side of this issue. California has significantly higher standards than all other states. Lumber Liquidators goes through extreme lengths to test their products, because of their own self interest. And those attacking Lumber Liquidators have much to gain from the bad press and shorting the stock. Metro Atl. Floors is eager to hear more on the issue and to see what kinds of implications this will have on the wood flooring industry.

Lumber Liquidators Stock, Formaldehyde Emissions, and California Testing Standards