The United States Department of Justice demonstrated once again last week that it continues to pursue antitrust convictions of auto parts manufacturers and executives. Nearly two dozen companies and executives have now been charged in the multi-year investigation into the industry, and further action may be on the horizon.
Last Tuesday, Panasonic executive Shinichi Kotani was indicted for allegedly conspiring to fix prices for switches and steering sensors sold to Toyota Motor Corp. Panasonic already had pled guilty and paid $45.8 million in fines for similar conduct.
Just a day after Mr. Kotani’s indictment, the Justice Department announced a massive set of plea bargains involving nine Japan-based companies and two executives. The allegations in that instance involved sales of dozens of different components to Chrysler, Ford, General Motors, and the U.S. subsidiaries of several Japanese manufacturers. The companies included in the plea bargain were Hitachi Automotive Systems Ltd., Jtekt Corp., Mitsuba Corp., Mitsubishi Electric Corp., Mitsubishi Heavy Industries Ltd., NSK Ltd., T.RAD Co. Ltd., and Valeo Japan Co. Ltd. The companies will collectively pay $740 million in criminal fines. The announcement also included Tetsuya Kunida and Gary Walker, former executives of U.S. subsidiaries of Japan-based suppliers, who will each serve a prison sentence and pay a $20,000 criminal fine.
These announcements came on the heels of an indictment from a federal grand jury two weeks earlier against G.S. Electech Inc. executive Shingo Okuda. According to the Justice Department, Mr. Okuda engaged in a conspiracy to rig bids and fix prices of speed-sensor wire assemblies installed in antilock brake systems. The charge alleges that he and his co-conspirators agreed during meetings and discussions between at least 2003 and 2010 to coordinate bids and pricing to Toyota Motor Corp. G.S. Electech pled guilty in May 2012 to similar allegations and paid a $2.75 million criminal fine. If Mr. Okuda is convicted, the court could impose criminal fines between $1 million and twice the unlawful gain or loss, as well as up to a 10-years prison sentence.
Previous indictments in August alleged price-fixing in the markets for windshield wipers, radiator, engine starter, airbags, seat belts, steering wheels, and tooling. In total, the cases have accumulated more than $1.6 billion in fines.
The U.S. government’s investigation has proceeded in parallel to similar efforts by the European Union’s antitrust enforcement body, as well as actions by other governments, including Japan, Germany, and Canada.
Meanwhile, private litigation based on similar allegations continues to proceed in federal court in Detroit against more than a dozen manufacturers. The class action plaintiffs’ attorneys in those cases have indicated they believe the conspiracies extended far beyond the defendants and markets identified to date, perhaps portending a further expansion of the litigation in both the private and public spheres.
In this enforcement environment, parts manufacturers are wise to take great care in any interaction with a competitor—whether in a formal meeting or even a collegial phone call. Meetings among competitors should be reviewed in advance with, and attended by, antitrust counsel. And any questionable communications should immediately be brought to counsel’s attention. Meanwhile, manufacturers that may have engaged in joint conduct with the firms targeted by the Justice Department may consider undertaking a thorough evaluation of their current and past practices.