TAKATA TO PLEAD GUILTY IN US JUSTICE DEPARTMENT INVESTIGATION

Takata Corporation, the Tokyo-based supplier of seat belts to Toyota, Honda, Nissan, Mazda and Fuji (the parent company of Subaru) will pay a US$71.3 million fine to settle conspiracy to restrain trade charges brought by the US Department of Justice Antitrust Division.

Takata is accused of conspiring with other companies between January 2003 and February 2011 to “suppress and eliminate competition in the automotive parts industry by agreeing to rig bids for, and to fix, stabilize and maintain the prices of certain seatbelts,” according to the criminal information sheet detailing charges against Takata, filed with the Detroit Court.

Reports indicate that Chairman and CEO Shigehisa Takada will take a 30 per cent cut in executive compensation while other directors take a 15 per cent cut. Gary Walker, a sales director at the company’s US subsidiary, TK Holdings, will reportedly serve a 14-month prison sentence and pay a US$20,000 fine.

Takata has pledged to continue to co-operate with ongoing Department of Justice investigations. The company stated that it “takes this matter seriously and has taken steps to strengthen its compliance programs to comply with all applicable laws and regulations. Takata has also strengthened its internal control systems to prevent a recurrence and is committed to regaining the trust of our stakeholders.”

The car industry investigation is the largest ever conducted in the United States. Settlement agreements with US antitrust authorities have been reached by several companies, including Tokai Rika, TRW Deutschland, Furukawa Electric, Fujikura and Nippon Seiki.

From the Department of Justice, Scott Hammond, of the Antitrust Division’s criminal enforcement program, said “Every time we discover a conspiracy involving the automotive industry, we seem to find another one.”

FURTHER GUILTY PLEAS MAKE US CAR PARTS CARTEL INVESTIGATION THE LARGEST EVER

us flagThe US Justice Department announced on 26 September 2013 that nine Japanese companies and two executives have agreed to plead guilty and pay more than USD 740 million in criminal fines for their roles in a number of conspiracies to fix prices in the car manufacturing sector.

The companies and executives engaged in various price-fixing schemes in relation to more than 30 different car components which affected more than USD 5 billion in auto parts used in more than 25 million cars sold in the US market. The companies and executives have admitted to attending meetings and making telephone calls in the US and Japan to rig bids, set prices and allocate the supply of parts sold to car manufacturers. Those involved took measures to keep their cartel conduct secret by using code names and meeting in remote locations.

The largest fines have been imposed on Hitachi Automotive Systems Ltd., Jtekt Corporation, Mitsuba Corporation and Mitsubishi Electric Corporation (MELCO) who have all agreed to pay in excess of USD 100 million. The two executives, US citizen Gary Walker and Japanese citizen Tetsuya Kunida, will serve 14 and 12 month prison sentences respectively and will each pay a USD 20,000 fine. All parties have admitted to violations of the Sherman Act and agreed to cooperate with the ongoing investigation

The fines are the latest in the Department of Justice’s ongoing investigation into the automotive sector (see previous blog post). The investigation has so far seen 20 companies and 17 executives plead guilty and has cost the auto industry more than USD 1.6 billion in fines and resulted in prison sentences of between a year and a day and two years.

What is now the largest cartel investigation in US history in terms of criminal fines and number of companies and executives under investigation looks set to continue. Eric Holder, the US Attorney General said at a press conference to announce the plea deals “The Department of Justice will continue to crack down on cartel behviour that causes American consumers and businesses to pay higher prices for the products and services they rely upon in their everyday lives

TWO MORE JAPANESE EXECUTIVES CHARGED IN US INVESTIGATION INTO AUTOMOTIVE INDUSTRY

carsThe US Justice Department announced on 19 September 2013 that a federal grand jury had returned indictments against two executives at Fujikura Ltd, for their role in a conspiracy to fix prices in the car manufacturing sector.

Ryoji Fukudome and Toshihiko Nagashima, both Japanese citizens, are accused of attending meetings to agree to rig bids and allocate the supply of automotive wire harnesses sold to Fuji Heavy Industries for use in electrical systems in its Subaru cars sold in the US, in violation of the Sherman Act. It is alleged that these meetings were followed up with further communications to monitor and enforce the collusive agreements. Fujikara pleaded guilty to its role in the conspiracy in June 2012 and paid a USD20 million criminal fine.

The charges are the latest in the Department of Justice’s ongoing investigation into the automotive sector and follow the indictment entered against G. S Electech executive Shingo Okuda earlier in September 2013 (see previous blog post). The investigation has so far seen 12 companies and 15 executives plead guilty and has cost the auto industry more than USD874 million in fines and resulted in prison sentences of between a year and a day and two years. Substantial fines have also been imposed in parallel investigations in Europe, Australia, Korea, Japan and Canada. An investigation in China is expected to be opened in the coming months.

Scott Hammond, the deputy assistant attorney general of the antitrust division’s criminal enforcement programme, pledged that the Department of Justice would continue to protect US businesses and consumers by “working closely with competition enforcers abroad to ensure that there are no safe harbors for executives who engage in international cartel crimes.”

US CARTEL PROBE EXTENDS TO BATTERY CELLS AS FURTHER FINES ARE IMPOSED ON AUTO INDUSTRY

DoJThe US Justice Department announced on 19 July 2013 that Panasonic and its subsidiary Sanyo Electric have agreed to plead guilty and pay USD56.5 million in fines for two separate conspiracies to fix the prices of auto parts and battery cells. Battery maker LG Chem Ltd. has also agreed to plead guilty to price fixing of battery cells and to pay a fine of USD1.1 million. The announcement follows the guilty pleas entered by Diamond Electric and an executive with Swedish company Autoliv on 16 July 2013. Panasonic will pay USD45.8 million and Sanyo USD10.731 million. All three companies have agreed to cooperate in the on-going investigations and charges have been filed for violations of the Sherman Act.

Panasonic was charged with three counts of cartel activity going as far back as 1998. Two of these involved bid-rigging and price fixing of steering wheel switches, turn switches, ballasts and other parts sold to Toyota in two separate conspiracies. The third count involved fixing the prices of ballasts used for lamps sold to Honda, Mazda and Nissan. All of the affected parts were installed in cars sold in the United States and elsewhere. Panasonic was said to have agreed with its competitors to suppress and eliminate competition in the automotive parts industry by agreeing to rig bids and fix, stabilise and maintain part prices. The company has issued a statement saying that it has taken steps to strengthen its compliance programmes.

Sanyo Electric and LG Chem were charged in a separate conspiracy of fixing the prices of cylindrical lithium ion battery cells used in laptops sold worldwide between 2007 and 2008. These are the first guilty pleas in the on-going investigation into price fixing in the cylindrical lithium ion battery cell industry. The companies agreed to price the battery cells at pre-determined levels and then took steps to monitor the agreements and conceal the conspiracy.

This is the latest penalty to result from the on-going investigation into the auto parts industry which has so far seen 12 companies and 15 executives plead guilty and has cost the auto industry more than USD874 million in fines and resulted in prison sentences of between a year and a day and two years. Substantial fines have also been imposed in parallel investigations in Europe, Australia, Korea, Japan and Canada.

FURTHER FINES IN US JUSTICE DEPARTMENT PROBE INTO AUTO INDUSTRY

The US Justice DepartDoJment announced on 16 July 2013 that Japanese company Diamond Electric Manufacturing (Diamond Electric) has agreed to plead guilty and pay a USD19 million fine for fixing the prices of ignition coils in cars sold in the United States. Takayoshi Matsunaga, an executive from the Swedish company Autoliv, has also agreed to plead guilty in relation to price fixing of seat belts sold to Toyota for installation in cars made and sold in the United States.

Diamond Electric, which has agreed to cooperate with the ongoing investigation, is the tenth auto-parts maker to plead guilty in the Justice Department’s long-running investigation into price fixing, bid-rigging and other anticompetitive conduct in the automotive parts industry. The cartel ran from July 2003 to February 2010 and this is the first case in the investigation involving parts sold directly to a company headquartered in the United States – Ford. Parts were also sold to Toyota and Fuji Heavy Industries, the parent company of Subaru.

Diamond Electric has apologised for its conduct and has stated that it has created a compliance programme and introduced strict new policies relating to pricing activities to ensure that there is no repeat of the anticompetitive behaviour.

Matsunaga, a Japanese national, has been handed a prison sentence of one year and day and a USD20,000 fine. He is the fifteenth executive to plead guilty during the probe. Autoliv itself agreed to plead guilty in June 2012 and was fined USD14.5 million. Felony counts have now been filed in relation to price fixing in violation of the Sherman Antitrust Act, and both agreements are subject to court approval.

To date the investigation has cost the ten companies and fifteen executives USD828 million in criminal fines. Investigations into price fixing of parts in the automotive industry are also underway in Europe, Australia, Korea, Japan and Canada. On 10 July 2013, the EU Competition Commission fined four wire harness suppliers a total of EU141.8 million for taking part in cartels that covered the whole European Economic Area.

TAIWANESE EXECUTIVE SENTENCED TO JAIL IN US

AU Optronics Corp executive Shiu Lung Leung was sentenced yesterday in California to two years imprisonment and a fine of $50,000 for his involvement in a criminal conspiracy to fix the prices of liquid crystal displays used in computer screens and televisions.

This sentence followed Leung’s conviction by a federal jury in December 2012 and brings to 13 the number of executives from various companies found guilty of this price-fixing conspiracy.

Leung faced a potential sentence of 10 years imprisonment yet following a contested trial his sentence is less than that agreed by corporate executives in other cartels that have pleaded guilty. This may set a new benchmark for such plea negotiations in the US in future.

To date eight companies involved in this cartel have been sentenced to pay criminal fines totalling more than $US1.39 billion.