Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Auto dealers allege auto part manufacturer engaged in price-fixing conspiracy, (Jun 13, 2014)

By Linda O’Brien, J.D., LL.M.

Automotive parts manufacturer Hitachi Automotive Systems engaged in a conspiracy with other manufacturers and suppliers to unlawfully fix the prices and allocate the market in the United States for automobile motor generators, according to a complaint filed in the federal district court of Detroit (Martens Cars of Washington, Inc. v. Hitachi Automotive Systems, Ltd., June 12, 2014).

Hitachi Automotive Systems, Ltd. and its subsidiary, Hitachi Automotive Systems Americas, Inc., manufacture electronic automotive parts, including motor generators that are used to power electric drive systems. Martens Cars of Washington and group of automobile dealers purchased vehicles that contained one or more motor generators as a component part.

The complaint alleges that Hitachi participated in a conspiracy to unlawfully fix and artificially raise prices of automotive motor generators sold to automotive manufacturers in the United States. Hitachi participated in meetings and discussions with other automotive parts manufacturers. During those meetings, Hitachi and the other manufacturers allegedly (1) agreed on the bids and price quotations to be submitted to automobile manufacturers, (2) agreed to allocate the supply of motor generators to be sold, (3) coordinated price adjustments requested by automobile manufacturers, (4) sold motor generators to automobile manufacturers at collusive and noncompetitive prices, (5) agreed to enforce adherence to the price-fixing scheme, and (6) employed measures to keep their conduct secret.

There are substantial barriers to the entry into the automotive motor generators market. Motor generators are installed by original equipment manufacturers (OEMs) in new vehicles as part of the manufacturing process. A new entrant would face costly and lengthy start-up, including costs associated with manufacturing plants and equipment, energy, transportation, distribution infrastructure, and long-standing customer relationships, according to the plaintiffs. Moreover, OEMs cannot change motor generator suppliers randomly after a supplier is selected because OEMs design the features of their vehicles so the motor generators are integrated with other components of the ignition system of a particular vehicle, the complaint alleges.

The complaint states that the demand for motor generators is highly inelastic, since there are no close substitutes for the products. Additionally, customers must purchase the products as an essential part of a vehicle even if the prices are kept at a supra-competitive level.

Regulatory agencies in the United States, Europe, and Japan have conducted antitrust investigations into illegal price-fixing in the automotive parts industry. In September 2013, Hitachi agreed to plead guilty and pay a criminal fine for its role in a conspiracy to fix prices of automotive motor generators and other automotive parts as part of the U.S. Department of Justice Antitrust Division criminal investigation. From September 2011 to April 2014, there have been 27 automotive parts manufacturers and 35 executives that have pleaded guilty and paid criminal fines in related automotive parts antitrust cases as part of the Department of Justice’s ongoing investigation into the industry.

The complaint states that the plaintiffs’ claims are not barred by the statute of limitations because they have no knowledge and could not have discovered the defendants’ conspiracy until September 2013 when Hitachi pleaded guilty to charges of a price-fixing conspiracy as part of the Department of Justice investigation. The plaintiffs had no direct contact with the defendants and could not have discovered the conspiracy until the Department of Justice publicly announced the defendants’ guilty plea. The defendants conducted the conspiracy in secret and the plaintiffs could not discover through reasonable diligence of the existence of the conspiracy.

The plaintiffs assert claims for unjust enrichment, unfair competition, and violations of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, restitution, damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:14-cv-12309-MFL-MJH.

Attorneys: Gerard V. Mantese (Mantese Honigman Rossman and Williamson, P.C.), Don Barrett (Barrett Law Group, P.A.), Shawn M. Raiter (Larson King, LLP), Phillip Duncan (Duncan Firm, P.A.), Dewitt Lovelace (Lovelace & Associates, P.A.), Gregory Johnson (G. Johnson Law, PLLC), Jonathan W. Cuneo (Cuneo Gilbert & LaDuca, LLP), Michael J. Flannery (Cuneo Gilbert & LaDuca, LLP), Thomas P. Thrash (Thrash Law Firm, P.A.), and Charles Barrett (Charles Barrett, P.C.) for Martens Cars of Washington, Inc., Pontiac-Oldsmobile-GMC Truck, Inc., McGrath Automotive Group, Inc., Table Rock Automotive, Inc., Archer-Perdue, Inc., Bonneville and Son, Inc., Patsy Lou Chevrolet, Inc., Herb Hallman Chevrolet, Inc., Charles Daher’s Commonwealth Motors, Inc., Ramey Motors, Inc., Thornhill Superstore, Inc., Beck Motors, Inc., John O’Neil Johnson Toyota, LLC, Lee Oldsmobile-Cadillac, Inc., Lee Auto Malls-Topsham, Inc., and Hodges Imported Cars, Inc.

Companies: Hitachi Automotive Systems, Ltd.; Hitachi Automotive Systems Americas, Inc.

News: Antitrust MichiganNews