Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Auto parts maker Kayaba allegedly engaged in shock absorber price fixing conspiracy, (Apr 7, 2016)

By Linda O’Brien, J.D., LL.M.

A Japanese automotive parts manufacturer and its domestic subsidiary engaged in a conspiracy to artificially fix prices, rig bids, and allocate the market and customers for shock absorbers sold in the United States, according to a complaint filed by auto dealers in the federal district court in Detroit (Landers Auto Group No. 1, Inc. v. Kayaba Industry Co., Ltd., April 6, 2016).

Japanese automotive company Kayaba Industry Co., Ltd. and its U.S. subsidiary, KYB Americas Corporation, are the world’s leading manufacturers of shock absorbers. Shock absorbers are hydraulic or mechanical parts of automobile suspension systems that are installed between the body frame of an automobile and the tires to dissipate vibration generated during a drive. Shock absorbers are installed by original equipment manufacturers (OEMs) in new vehicles as part of the manufacturing process.

Landers Auto Group is an authorized Toyota and Scion dealer in Little Rock, Arkansas. Landers Auto Group, along with 38 other automobile dealers, purchased vehicles which contained automotive parts manufactured by Kayaba Industry Co., Ltd. and KYB Americas Corporation.

The complaint alleges that 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 September 2015, the DOJ announced that Kayaba agreed to plead guilty to a one-count information and to pay a $62 million fine for its role in a conspiracy to suppress competition and fix prices for shock absorbers sold to vehicle manufacturers. Those vehicle manufacturers included Subaru manufacturer Fuji Heavy Industries Ltd., Honda Motor Co. Ltd., Kawasaki Heavy Industries Ltd., Nissan Motor Company Ltd., Suzuki Motor Corporation, and Toyota Motor Company.

According to the information, Kayaba and its co-conspirators carried out the shock absorber conspiracy by (1) participating in meetings and communications to discuss bids and price quotations submitted to vehicle manufacturers; (2) agreeing to allocate the supply of shock absorbers sold to vehicle manufacturers on a model-by-model basis; (3) agreeing to coordinate price adjustments; (4) selling shock absorbers at collusive and noncompetitive prices; (5) monitoring and enforcing adherence to the agreed-up price fixing, bid rigging, and market allocation scheme, and (6) employing measures to keep their conduct secret.

The structure and characteristics of the shock absorbers market allegedly made it conducive to price fixing, such as high barriers to entry and inelastic demand. The defendants own multiple patents related to the manufacture of shock absorbers which place a costly burden on potential new market entrants. Additionally, OEMs cannot change shock absorbers suppliers randomly once a supplier has been selected, since they design the features of their vehicles so that shock absorbers are integrated with other components of a particular vehicle. Furthermore, there are no close substitutes for shock absorbers as they are an essential part of a vehicle, even if prices are maintained at a supracompetitive level, according to the complaint.

The plaintiffs claimed that they had no knowledge of the conspiracy or the relevant facts giving rise to their claims until September 2015, when the DOJ publicly announced Kayaba’s guilty plea. They contended that the affirmative acts of the defendants were wrongfully concealed and carried out in a manner to avoid detection. Furthermore, the defendants used code names in communications and met in remote locations to avoid detection. Thus, the applicable statute of limitations to the plaintiffs’ claims was tolled.

The plaintiffs assert claims for 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, treble damages, restitution, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:16-cv-11256-GCS-APP.

Attorneys: Gerard V. 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.), Thomas P. Thrash (Thrash Law Firm, P.A.), Dewitt Lovelace (Lovelace & Associates, P.A.), Gregory Johnson (G. Johnson Law, PLLC), and Charles F. Barrett (Neal and Harwell, PLC) for Landers Auto Group No. 1, Inc.

Companies: Kayaba Industry Co., Ltd.; KYB Americas Corporation

News: Antitrust MichiganNews