Antitrust Law Daily Wrap Up, ANTITRUST—EDMich: Direct Purchasers’ Price Fixing Claims Proceed Against Automotive Wire Harness Manufacturers, (Jun 10, 2013)

By Tobias J. Gillett, J.D., LL.M.

Direct purchasers of wire harness products for motor vehicles can maintain class action antitrust claims against manufacturers of the products, and may seek both damages and injunctive relief, the federal district court in Detroit has ruled. The direct purchasers also sufficiently alleged that the manufacturers fraudulently concealed their conduct to toll the statute of limitations (In re Automotive Parts Antitrust Litigation (Wire Harness Cases), June 6, 2013, Battani, M.).

The direct purchaser plaintiffs (DPPs) brought class action claims alleging a conspiracy to fix the prices for “wire harness products,” defined as “wire harnesses as well as the following related products: automotive electrical wiring, lead wire assemblies, cable bond, automotive wiring connectors, automotive wiring terminals, high voltage wiring, electronic control units, fuse boxes, relay boxes, junction blocks, and power distributors used in motor vehicles.”

According to the complaint, the DPPs purchased wire harness products directly from defending manufacturers at prices negotiated by motor vehicle original equipment manufacturers (OEMs). It describes recent antitrust investigations by American, European, and Japanese competition authorities, and states that four of the defendants companies had entered guilty pleas.

Plausibility of claim. The DPPs stated a plausible claim under the standard established by the Supreme Court in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), the court concluded. The court explained that Twombly requires “’enough factual matter (taken as true) to suggest’ the existence of an agreement, and that “a ‘heightened fact pleading of specifics’ is not needed to state an antitrust conspiracy claim.” “[A]ssessing the sufficiency of the [complaint] boil[ed] down to consideration as to whether the [complaint] includes allegations that inform Collective Defendants what wrongdoing they are alleged to have committed and whether the allegations in the [complaint] enable Collective Defendants to respond,” the court noted.

Here, the complaint satisfied that standard, the court found. Although the DPPs never stated in their complaint that they were among the suppliers alleged to have been required to purchase wire harness products “at prices established by the OEMs and Defendants in the bidding process,” and did not identify any OEMs that they supplied, they sufficiently alleged that they had purchased directly from the defendants. Although the complaint did not specify which wire harness products the defendants’ actions had a price impact on, and conceded that the price fixing was directed at the OEMs, it specified which products were purchased, included admissions contained in the guilty pleas, alleged methods of communication between the defendants, and alleged details about the government investigations, which “articulat[d] a plausible antitrust claim.”

Moreover, the complaint did not rely on allegations of parallel conduct. The defendants had notice of the guilty pleas, the details of the bid rigging of certain defendants, and which defendants were the targets of government investigations. The complaint alleged the time frame of the conspiracy through incorporation of the plea agreements. It also identified the 70 percent market share held by the defendants, the heavy concentration in the market, and the high barriers to entry.

The DPPs also did not overreach by alleging a global conspiracy, the court found. Although the guilty pleas only covered certain defendants, pertained to different products, and involved different time frames and OEMs, it was not “necessary to confine the admissions regarding products or time frames to those Defendants that have pleaded guilty.” The DPPs allegations regarding the guilty pleas and their details, combined with their allegations regarding the “methods used to implement the conspiracy,” the defendants’ communications, the structure of the industry, the parties to the conspiracy, the products involved, the geographic market, and the time frame were sufficient even without an admission by the defendants “that the conduct involved an overarching conspiracy.”

Furthermore, the DPPs’ failure “to allege an overt act against each individual defendant” did not doom their complaint. It was enough that “[m]ultiple Defendants have pleaded guilty and admitted to meeting and agreeing to allocate supply, rig bids, and fix prices,” that “[t]he structure of the wire harness industry renders it susceptible to collusion,” and that the complaint contained “allegations demonstrating Defendants’ opportunity to meet and collude.”

Damages. The DPPs were eligible to recover damages, even though they paid prices negotiated by the OEMs in separate transactions, the court found. The facts that the DPPs were not automobile manufacturers, and that the conspiracy was directed at automobile manufacturers, did not “change the fact that they purchased directly from Defendants.” Moreover, the DPPs did not pay a portion of the alleged overcharge through another party that directly paid an overcharge; rather, the DPPs paid “the entire overcharge.” The issue was “no whether DPPs controlled the price paid, merely whether they purchased directly,” according to the court.

Fraudulent concealment. The DPPs also sufficiently alleged that the doctrine of fraudulent concealment tolled the four-year statute of limitations until February 2010—around the time that the alleged conspiracy ended. Therefore, the statute did not bar claims for recovery on purchases of wire harness products prior to November 23, 2007. The court explained that a fraudulent concealment claim required the DPPs to show “(1) the defendants wrongfully concealed their actions; (2) the plaintiffs could not discover the operative facts within the limitations period because of the defendants’ conduct; and (3) the plaintiffs diligently tried to discover the facts.”

The DPPs met the first element because they alleged that the defendants used active measures such as “code names and meeting at private residences or remote locations,” and “communications to ‘monitor’ the conspiracy.”

They satisfied the second element by alleging that the defendants had claimed that “the pricing and bidding were unilateral,” when they were in fact collusive. Moreover, the DPPs alleged that the defendants “concealed their price collusion by submitting rigged bids to their best customers, the OEMs, and by falsely asserting that the prices were competitively derived, and by selling products to other direct purchasers at prices affected by the rigged bids and price-fixing.” Since certain defendants had pleaded guilty to a conspiracy beginning in 2000 that was not revealed until the government investigations, the DPPs’ allegations that they could not have discovered the conspiracy earlier were plausible.

Finally, the DPPs demonstrated that they had conducted due diligence, in the court’s view. There was “no basis for finding that DPPs conducted absolutely no investigation,” and no argument was advanced “that DPPs ignored available information that would have aroused suspicion and prompted as investigation.”

Injunctive relief. The DPPs could also maintain a claim for injunctive relief at the motion to dismiss stage, even though the OEMs were the target of the conduct and certain of the defendants had entered guilty pleas, according to the court. The “speculation” that the OEMs, now that they knew of the alleged violations, would protect themselves, “failed to demonstrate the threat of future injury is implausible.” Further, the same market conditions persisted, and not all defendants had pled guilty. The pleas did not “obviate the threat that a conspiracy will persist or resume in the future,” according to the court.

The case is No. 2:12-cv-00101, Master File No. 12-md-02311.

Attorneys: Darryl Bressack (Fink + Associates Law) for Martinez Manufacturing, Inc. Craig D. Bachman (Lane Powell PC) for Furukawa Electric Co., Ltd. Andrew Marovitz (Mayer Brown LLP) for Lear Corp. Andrea M. Price (Barrasso Usdin Kupperman Freeman & Sarer) for Sumitomo Electric Industries, Ltd. John V. Biernacki (Jones Day) for Yazaki Corp. Brian C. Smith (Wilmer Cutler Pickering Hale and Door LLP) for Denso Corp. David F. DuMouchel (Butzel Long) for Tokai Rika Co., Ltd. Randall E. Kahnke (Faegre Baker Daniels) for TRAM, Inc. James L. Cooper (Arnold & Porter LLP) for Fujikura Ltd. Jeffrey G. Heuer (Jaffe Raitt Heuer & Weiss, PC) for Kyungshin-Lear Sales and Engineering, LLC. Donald M. Barnes (Porter Wright Morris & Arthur LLP) for G.S. Electech, Inc. David A. Ettinger (Honigman, Miller, Schwartz and Cohn LLP) for NSK, Ltd. A. Paul Victor (Winston & Strawn LLP) for NTN Corp. Alison R. Welcher (Shearman & Sterling LLP) for JTEKT Corporation. Eric J. Mahr (Wilmer Cutler Pickering Hale and Dorr LLP) for Schaeffler AG. Michael L. Brown (Alston & Bird LLP) for Autoliv, Inc. Robert J. Wierenga (Schiff Hardin LLP) for TK Holdings, Inc. Benjamin W. Jeffers (Dykema Gossett) for TRW Automobile Holdings Corporation. Brian M. Moore (Dykema Gossett) for AB SKF. Jennifer M. Stewart (Winson & Strawn LLP) for Nippon Seiki Co., Ltd. Danielle Garten (Arnold & Porter LLP) for Yamashita Rubber Co., Ltd. Brent W. Johnson (Cohen Milstein Sellers & Toll PLLC) for McGuire Bearing Co.

Companies: Furukawa Electric Co., Ltd.; Lear Corp.; Sumitomo Electric Industries, Ltd.; Denso Corp.; Tokai Rika Co., Ltd.; TRAM, Inc.; Fujikura Ltd.; Kyungshin-Lear Sales and Engineering, LLC.; G.S. Electech, Inc.; NSK, Ltd.; NTN Corp.; Schaeffler AG.; Autoliv, Inc.; TK Holdings, Inc.; AB SKF.; Nippon Seiki Co., Ltd.; McGuire Bearing Co.

Cases: Antitrust MichiganNews