Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Auto exhaust system manufacturers charged with price fixing, market allocation, (Mar 29, 2016)

By Linda O’Brien, J.D., LL.M.

A group of automobile dealers claim that domestic and foreign automotive parts manufacturers have engaged in a conspiracy to fix prices and allocate the market and customers for automotive exhaust systems in the United States, according to a complaint filed in the federal district court in Detroit (Landers Auto Group No. 1, Inc. v. Tenneco Inc., March 24, 2016). The suit follows a similar action filed by consumers against the manufacturers.

Tenneco Inc., Bosal Benelux NV, Eberspächer Exhaust Technology Gmbh & Co. KG, Faurecia SA, Meritor, Inc.—and their subsidiaries—manufacture, market, and sell automotive parts, including exhaust systems, for automobile manufacturers. Landers Auto Group, along with 39 other automobile dealers, purchased vehicles that contained exhaust systems manufactured by the defendant manufacturers as a component part.

An exhaust system is a system of piping and other parts that conveys exhaust gases away from the passenger compartment of a vehicle and reduces the level of pollutants and engine exhaust noise emitted. Exhaust systems are installed by original equipment manufacturers (OEMs) in new cars as part of the automotive manufacturing process.

According to the dealers’ complaint, the U.S. Department of Justice (DOJ) is currently conducting a broad criminal investigation into illegal price fixing and bid rigging in the automotive parts industry. In March 2014, Tenneco publicly disclosed in its 8-K report that it received a subpoena from the Justice Department Antitrust Division related to the global antitrust investigation of automotive parts suppliers. In November 2014, Tenneco publicly disclosed in its 10-Q quarterly report that the company reached an agreement with the Justice Department to self-report antitrust violations regarding an unspecified product in return for a conditional grant of leniency.

The defendant manufacturers and their co–conspirators participated in a conspiracy to fix prices, rig bids, and allocate the market and customers in the United States for exhaust systems. As a direct result of their anticompetitive conduct, auto dealers paid artificially inflated prices for exhaust systems incorporated into the vehicles they purchased, the complaint alleges.

The structure of the exhaust system market in the United States is conducive to collusion, the complaint also alleges. First, there are high barriers to entry, including start-up costs associated with manufacturing plants, equipment, energy, transportation, distribution, skilled labor, and establishing customer relationships. Second, there is inelasticity of demand for exhaust systems since there are no close substitutes for these products. Third, the market is highly concentrated. In 2014, Tenneco reported $2.84 billion in sales in North America for its Clean Air division, which includes sales of exhaust systems, and its 2014 annual report identified Faurecia, Eberspächer, Bosal, and Boysen as its primary competitors in the exhaust systems market.

The plaintiffs claim that they had no knowledge of the conspiracy until March 2014, when Tenneco publicly disclosed that it received the subpoena from the Justice Department Antitrust Division. No information in the public domain was purportedly available to the plaintiffs prior to that date, and the plaintiffs had no means of obtaining any facts concerning aspects of the defendants’ dealings with OEMs or other purchasers, or that they engaged in a conspiracy. Therefore, the complaint contended that the statute of limitations applicable to the plaintiffs’ claims was tolled and did not begin to run until March 2014.

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

The case is No. 2:16-cv-11087-GCS-DRG.

Attorneys: Gerard Mantese (Mantese Honigman, P.C.), Jonathan W. Cuneo and Michael J. Flannery (Cuneo Gilbert & LaDuca, LLP), 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), Thomas P. Thrash (Thrash Law Firm, P.A.), and Charles F. Barrett (Neal and Barrett, PLC) for Landers Auto Group No. 1, Inc.

Companies: Landers Auto Group No. 1, Inc.; Tenneco Inc.; Bosal Benelux NV; Eberspächer Exhaust Technology Gmbh & Co. KG; Faurecia SA; Meritor, Inc.

News: Antitrust MichiganNews