Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Auto parts maker Kayaba charged in shock absorber price fixing conspiracy, (Nov 23, 2015)

By Linda O’Brien, J.D., LL.M.

A Japanese automotive parts manufacturer and its domestic subsidiary engaged in a conspiracy to artificially fix the prices, rig bids, and allocate the market for shock absorbers sold in the United States from January 1995 to the present, according to a complaint filed by 55 consumers in the federal district court in Detroit (Adams v. Kayaba Industry Co., Ltd., November 20, 2015).

Japanese automotive company Kayaba Industry Co., Ltd, and its U.S. subsidiary, KYB Americas Corporation, are 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. Shock absorbers are installed by original equipment manufacturers (OEMs) in new vehicles as part of the manufacturing process.

California resident Ifeoma Adams, along with 54 other consumers, indirectly purchased shock absorbers as owners or lessees of motor vehicles.

The complaint states 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 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 Fuji Heavy Industries Ltd., which manufactures Subaru vehicles, Honda Motor Co. Ltd., Kawasaki Heavy Industries Ltd., Nissan Motor Company Ltd., Suzuki Motor Corporation, and Toyota Motor Company. Additionally, a global investigation is ongoing in Europe, Canada, and Japan that is aimed at suppliers of automotive parts.

According to the complaint, 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—such as high barriers to entry and inelastic demand—made it conducive to price fixing and market allocation, the plaintiffs claimed. The defendants own multiple patents related to the manufacture of shock absorbers which place a costly burden on new 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 allegedly did not and could not have discovered the relevant facts giving rise to their claims through reasonable diligence until September 2015, when the DOJ publicly announced Kayaba’s guilty plea. 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 at private residences or remote locations to avoid detection. Thus, the applicable statute of limitations to the plaintiffs’ claims was tolled, the complaint alleges.

The plaintiffs assert claims for unjust enrichment and violations of Section 1 of the Sherman Act, state antitrust laws, and consumer protection statutes. The action seeks declaratory and injunctive relief, treble damages, disgorgement, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:15-cv-14080-RHC-RSW.

Attorneys: E. Powell Miller (The Miller Law Firm, P.C.), Hollis Salzman (Robins Kaplan LLP), Marc Seltzer (Susman Godrey L.L.P.), and Steven N. Williams (Cotchett, Pitre & McCarthy, LLP) for Ifeoma Adams.

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

News: Antitrust MichiganNews