Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Direct purchasers allege price fixing conspiracy among optical disk drive manufacturers, (Aug 19, 2014)

By Linda O’Brien, J.D., LL.M.

Digital electronics manufacturer Pioneer Corporation and its subsidiaries colluded with other manufacturers to fix prices and rig bids for optical disk drives sold in the United States, according to a complaint filed in the federal district court of San Francisco by a group of direct purchasers of optical disk drives (JLK Systems Group, Inc. v. Pioneer Corporation, August 18, 2014).

An optical disk drive (ODD) uses laser light to read and/or write data to or from an optical disc and are utilized in compact discs (CDs), digital versatile discs (DVDs), and Blu-ray products. ODDs serve as the primary means of recording and reading music, movies, and other digital data. Japanese-based Pioneer Corporation and its subsidiaries manufactured, sold, and distributed ODDS throughout the United States. JLK Systems Group, Meijer, Inc., Seneca Data Distributors, and consumers Jeff Kozik, Paul Nordine, Gregory Starrett, and Ashley Tremblay have purchased ODDs directly from the defendants.

The complaint states that, after introduction into the market, consumer electronics products and their component parts are typically characterized by downward pricing trends. In 2004, the prices of ODDs began to decrease. To stabilize those prices and avoid decreased profit margins, the defendants and their co-conspirators allegedly engaged in cooperation agreements that resulted in the setting of prices or the allocation of customers. In furtherance of the conspiracy, the conspirators exchanged confidential business information concerning ODDs, including pricing, rebates, production capacity, business plans, product quality, and inventory, according to the complaint.

In 2009, the U.S. Department of Justice launched an investigation into anticompetitive conduct with respect to ODDs, which was initiated by an amnesty application by one group of co-conspirators. Many of the co-conspirators have a long history of engaging in anticompetitive conduct, including price fixing for a variety of products sold in the United States, such as dynamic random access memory (DRAM), thin film transistor liquid crystal display (TFT-LCD), and cathode ray tubes (CRTs), the complaint alleges.

According to the plaintiffs, the market structure for ODDs exhibited factors that contributed to the ability of the defendants and their co-conspirators to carry out their conspiracy, including (1) market concentration; (2) industry consolidation; (3) significant barriers to entry; (4) common trade associations and business organizations; (5) use of auctions for supply contracts; and (6) the standardization of ODDs. Moreover, the fact that the defendants and their co-conspirators uniformly held off significant price reductions regardless of market share demonstrates that they were acting in concert.

JLK Systems Group asserts claims for restraint of trade and violations of Section 1 of the Sherman Act and Section 4 of the Clayton Act. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 3:14-cv-03748.

Attorneys: Guido Saveri (Saveri & Saveri), Joseph M. Alioto (Alioto Law Firm), Joseph J. Tabacco, Jr. (Berman DeValerio), Joseph W. Cotchett (Cotchett, Pitre & McCarthy), Michael P. Lehmann (Hausfeld LLP), Robert N. Kaplan (Kaplan Fox & Kilsheimer, LLP), Eric B. Fastiff (Lieff Cabraser Heimann & Berstein, LLP), Bruce L. Simon (Pearson Simon Warshaw & Penny LLP), David Paul Germaine (Vanek, Vickers & Masini P.C.), Jonathan Shub (Seeger Weiss LLP), Simon Paris (Saltz, Mongeluzzi, Barrett & Bendesky, P.C.), and Gregory A. Frank (Frank & Bianco LLP).

Companies: JLK Systems Group, Inc.; Meijer, Inc.; Seneca Data Distributors, Inc.; Pioneer Corporation.

News: Antitrust CaliforniaNews