Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Electronic components distributor alleges price fixing conspiracy for resistors, (Aug 25, 2015)

By Linda O’Brien, J.D., LL.M.

A group of manufacturers of resistors conspired to unreasonably restrain trade by artificially eliminating competition and formed a cartel to fix the prices of resistors sold in the United States, according to a complaint filed in the federal district court in San Francisco (Chip Tech, Ltd. v. AVX Corporation, August 24, 2015).

AVX Corporation, KEMET Corporation, KOA Corporation, Panasonic Corporation, ROHM Co. Ltd., Sanyo Electric Co., Ltd., TDK Corporation, and Vishay Intertechnology, Inc., and their subsidiaries, manufacture and distribute resistors to purchasers in the United States. A resistor is a passive two-terminal component that implements electrical resistance as a circuit element and is an essential component of all electronic circuits. Chip Tech, Ltd. is a distributor of electronic components in the commercial, military, aviation, and telecommunication industries.

The complaint states that resistors are fundamental to the operation of practically all electronic devices and there is great demand for resistors by electronic device manufacturers. However, demand for certain types of resistors began to decline in 2000 as devices, such as televisions and computers, became smaller and required fewer resistors. Also, competition was reducing the profit margins on resistors, the per-unit price for resistors declined dramatically in 2001, and the recession occurred in 2008. To bolster profitability of resistor sales, the defendants allegedly formed a cartel and conspired to set prices for resistors and reverse the competitive pressures on prices caused by price competition, reduction in demand, technological changes, and oversupply.

In furtherance of their conspiracy, the defendants made numerous agreements and reached understandings among themselves, during regular meetings, to fix prices for resistors, Chip Tech charged. Because of the common membership and participation in trade associations and interrelated business relationships between executives and employees of the defendants, there allegedly were many opportunities to collude by discussing competitive information. The communications were facilitated by the use of meetings, telephone conversations, email messages, written correspondence, and text messages, the complaint alleges.

According to the complaint, the characteristics of the resistors market facilitated the conspiracy. First, the market for resistors is highly concentrated among a limited number of participants. Second, the resistors industry has substantial barriers to entry, including setting up manufacturing operations and securing raw materials. Third, resistors are interchangeable and can be exchanged for a product of another manufacturer with the same technical and operational specifications. Fourth, the demand for resistors is highly inelastic because there are no substitutions for these products. Fifth, resistors are homogenous and commoditized products. Sixth, there is a weak demand for resistors in a mature market. Seventh, the defendant manufacturers have excess capacity available to meet and exceed demand.

The complaint also states that the U.S. Department of Justice initiated an investigation of price fixing in the resistors industry in the summer of 2015. The investigation in the resistors industry is related to its price fixing investigation into the capacitors industry. Panasonic and Sanyo have acknowledged being contacted by the U.S. antitrust authorities in connection with the capacitors investigation. Additionally, the Korean Fair Trade Commission and Japanese Fair Trade Commission have recently conducted on-site investigations of suspected price fixing in the market for resistors.

As a result of the defendants’ price fixing conspiracy, price competition has been restrained with respect to resistors, the prices of resistors have been raised and maintained at artificially high levels, and direct purchasers have paid supracompetitive prices for resistors, the complaint charges.

The plaintiff asserts claims for unreasonable restraint of trade in violation of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, attorney fees, costs of suit, and any other just and proper relief.

The case is No. 3:15-cv-03868.

Attorneys: Joseph R. Saveri (Joseph Saveri Law Firm, Inc.) and Solomon B. Cera (Cera LLP) for Chip Tech, Ltd.

Companies: Chip Tech, Ltd.; AVX Corporation; KEMET Corporation; KOA Corporation; Panasonic Corporation; ROHM Co. Ltd.; Sanyo Electric Co., Ltd.; TDK Corporation; Vishay Intertechnology, Inc.

News: Antitrust CaliforniaNews