Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Consumers charge auto exhaust system manufacturers in price fixing suit, (Mar 25, 2016)

By Linda O’Brien, J.D., LL.M.

Domestic and foreign automotive parts manufacturers engaged in a conspiracy with other manufacturers and suppliers to fix prices and allocate the market for the production of automotive exhaust systems in the United States, according to a complaint filed by a group of consumers in the federal district court in Detroit (Ascher v. Tenneco Inc., March 24, 2016).

Tenneco Inc., Bosal Benelux NV, Eberspächer Exhaust Technology Gmbh & Co. KG, Faurecia SA, Meritor, Inc., and their subsidiaries, develop, manufacture, and supply a variety of automotive parts, including exhaust systems, for automobile manufacturers. Halley Ascher, along with 53 other consumers, purchased and/or leased vehicles that contained exhaust systems manufactured by the defendant manufacturers.

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.

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 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 complaint states that 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, consumers paid artificially inflated prices for automotive hoses incorporated into vehicles they purchased or leased.

The structure of the exhaust system hoses 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 allegedly had no knowledge of the conspiracy until March 2014, when Tenneco publically 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. By its very nature, the defendants’ anticompetitive conspiracy was inherently self-concealing and a reasonable person under the circumstances would not have been alerted to begin to investigate the legitimacy of the defendants exhaust systems prices before March 2014, the complaint alleges. Therefore, the complaint asserts 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 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-11082-DML-SDD.

Attorneys: Hollis Salzman (Robins Kaplan LLP), Marc M. Seltzer, Terrell W. Oxford, and Chanler A. Langham (Susman Godrey, L.L.P.), and Steven N. Williams (Cotchett, Pitre & McCarthy, LLP) for Halley Ascher.

Companies: Tenneco Inc.; Bosal Benelux NV; Eberspächer Exhaust Technology Gmbh & Co. KG; Faurecia SA; Meritor, Inc.

News: Antitrust MichiganNews