Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Automobile dealers allege fuel tank device bid-rigging conspiracy, (Aug 20, 2013)

By Tobias J. Gillett, J.D., LL.M.

Automobile dealers have filed a complaint in the federal district court in Detroit, alleging that suppliers of automobile fuel tank devices engaged in a conspiracy to rig bids and fix prices for the parts (Dale Martens Nissan Subaru, Inc. v. Yazaki Corporation, filed August 16, 2013).

Yazaki Corp. and Denso Corp. are manufacturers and suppliers of “fuel senders,” defined in the complaint as “devices that reside inside the fuel tank of an automobile and measure the amount of fuel in the tank.” The automobile dealers allege that Yazaki and Denso engaged in a conspiracy with unnamed co-conspirators to fix prices and rig bids for the fuel senders.

According to the complaint, automobile original equipment manufacturers (OEMs) send out requests for quotation (RFQs) when seeking to purchase fuel senders for new automobile models. After fuel sender suppliers submit their bids, the OEMs award contracts to supply the parts for four to six years. The suppliers provide parts to the OEMs for use in new vehicles and for replacement purposes. In turn, the automobile dealers indirectly purchase fuel senders when buying new vehicles or replacement parts for making repairs.

The dealers describe the fuel sender market as “conducive to a price-fixing agreement.” A new entrant would face high barriers to entry from the costs associated with manufacturing plants and equipment, energy, transportation, distribution infrastructure, skilled labor, long-standing customer relationships, and patents on certain components held by Yazaki. Demand is “highly inelastic” because the parts are essential to vehicles and have no close substitutes, and because the fuel senders are designed to fit specific vehicle models. Only a small number of manufacturers supply fuel senders, and the defendants allegedly had “ample opportunities to conspire” at industry events.

The complaint outlines a series of government investigations into the automotive parts industry and the defendant companies in particular. The United States, Europe, and Japan are currently conducting an antitrust investigation of automotive parts suppliers, with raids by competition authorities at suppliers’ offices in all three regions. On January 30, 2012, Yazaki agreed to pay a $470 million fine and plead guilty to Department of Justice charges that it participated in conspiracies to rig bids and fix prices for automotive wire harnesses and related products, instrument panel clusters, and fuel senders. Denso also pled guilty and was sentenced to pay $78 million in criminal fines to resolve Department of Justice charges that it participated in conspiracies to rig bids and fix prices for electronic control units and heater control panels. A number of other automotive parts manufacturers have also pled guilty or agreed to plead guilty to bid rigging and price fixing in the automotive parts industry.

The dealers allegedly suffered antitrust injuries from the defendants’ conduct by paying increased prices for new vehicles and replacement fuel senders. The dealers allege that their claims are not barred by the statute of limitations because they could not have discovered by existence of the conspiracy until January 30, 2012, and because the defendants’ fraudulent concealment tolled the statute of limitations.

The complaint asserts claims for restraint of trade in violation of Section 1 of the Sherman Act; violation of the antitrust statutes of Arizona, California, the District of Columbia, Hawaii, Illinois, Iowa, Kansas, Maine, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, South Dakota, Tennessee, Utah, Vermont, West Virginia, and Wisconsin; violation of the consumer protection statutes of Arkansas, California, the District of Columbia, Florida, Massachusetts, Missouri, New Mexico, New York, North Carolina, South Carolina, and Vermont; and unjust enrichment.

The complaint seeks a judgment that the defendants’ conduct constituted an unreasonable restraint of trade in violation of Section 1 of the Sherman Act, a per se violation of Section 1 of the Sherman Act, a violation of each of the state antitrust and consumer protection statutes, and acts of unjust enrichment; treble damages; restitution and disgorgement of profits; an injunction against continuing or renewing the alleged conduct; pre- and post-judgment interest; costs of suit; attorneys’ fees; and any other just and proper relief.

The case is No. 4:13-cv-13556-TGB-MAR.

Attorneys: Gerard V. Mantese (Mantese Honigman Rossman and Williamson, P.C.) for Dale Martens Nissan Subaru, Inc.

Companies: Dale Martens Nissan Subaru, Inc.; Yazaki Corp.; Denso Corp.

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