Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Auto dealers allege part manufacturers’ price-fixing conspiracy, (Jun 23, 2014)

By Linda O’Brien, J.D., LL.M.

Automotive parts manufacturers DENSO International America, Inc. and Hitachi, Ltd. engaged in a conspiracy with other manufacturers and suppliers to unlawfully fix prices and allocate markets in the United States for automotive motor generators, according to a complaint filed in the federal district court of Detroit (In re Automotive Parts Antitrust Litigation, June 20, 2014).

DENSO International America, Inc., Hitachi, Ltd., and its subsidiaries, Hitachi Automotive Systems, Ltd. and Hitachi Automotive Systems Americas, Inc., are manufacturers, marketers, and suppliers of automotive parts, including motor generators. Motor generators are electric motors used to power electric drive systems that can also capture energy from braking a vehicle to generate electricity. Martens Cars of Washington, Inc. is an automobile dealer who purchased vehicles containing one or more motor generators as a component part.

The complaint alleges that the defendants participated in a conspiracy to suppress and eliminate competition in the automotive parts industry by agreeing to fix prices of motor generators sold to automobile manufacturers in the United States. DENSO and Hitachi participated in meetings and discussions with other manufacturers concerning the prices for automotive motor generators and agreed to allocate among the companies certain sales of the products to component manufacturers. As a result of the unlawful conduct, the plaintiffs paid artificially inflated prices for vehicles with motor generators and sustained significant damage.

There are substantial barriers to the entry into the motor generator market. 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. A competitor would need advanced engineering and technology processes to design a motor generator based on the design, selection, and use of power device, capacitors, and cooling technologies for motor generators, according to the complaint.

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

Regulatory agencies in the United States, Europe, and Japan have conducted antitrust investigations into illegal price-fixing in the automotive parts industry. In December 2013, Hitachi agreed to plead guilty and pay a criminal fine for its role in a conspiracy to fix prices of motor generators and other automotive parts from January 2000 until February 2010 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 plead 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 had no knowledge, and could not have discovered the defendants’ conspiracy, until December 2013 when Hitachi plead 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 Hitachi’s guilty plea. Prior to such date, there was no information in the public domain that revealed that the defendants were involved in a criminal conspiracy to fix prices for motor generators. Moreover, the defendants conducted the conspiracy in secret, using code names and met in remote locations with their co-conspirators, and destroying evidence of the criminal activity.

The plaintiffs assert claims for restraint of trade, unfair competition, unjust enrichment, and violations of Section 1 of the Sherman Act and state antitrust and consumer protection statutes. The action seeks declaratory and injunctive relief, restitution, damages, pre- and post-judgment interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 2:13-cv-01502-MOB-MKM.

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 and Michael J. Flannery (Cuneo Gilbert & LaDuca, LLP), Thomas P. Thrash (Thrash Law Firm, P.A.), Charles Barrett (Charles Barrett, P.C.) for dealership Plaintiffs.

Companies: DENSO International America, Inc.; Hitachi, Ltd.

News: Antitrust MichiganNews