Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Electronic manufacturers charged with electrolytic capacitors price-fixing conspiracy, (Oct 2, 2014)

By Linda O’Brien, J.D., LL.M.

A group of Japanese electronics manufacturers and their domestic affiliates engaged in a conspiracy to unlawfully fix the prices for aluminum and tantalum electrolytic capacitors in the United States, according to a complaint filed in the federal district court in San Francisco by a consumer indirectly purchasing aluminum and tantalum electrolytic capacitors (Bennett v. Panasonic Corporation, September 30, 2014).

Panasonic, Sanyo, Taiyo, Nec Tokin, Kemet, Nippon, United Chemi-Con, Hitachi, Nichicon, Avx, Rubycon, Elna, Matsuo, Toshin, Vishay, Samsung, and Rohm are manufacturers of electrolytic capacitors, which are fundamental components found in electrical circuits and are necessary components for electronic products. David Bennett is a consumer who purchased products containing aluminum and tantalum electrolytic capacitors indirectly from one or more of the defendants.

The complaint alleges that in 2000, as demand for aluminum and tantalum electrolytic capacitors began to wane, the defendant manufacturers agreed that price competition among themselves for their mutually-interchangeable electrolytic capacitors had to cease. For at least nine and a half years, the defendants conspired to control the market prices of electrolytic capacitors sold in the United States. The conspiracy was facilitated by the cartel nature of the industry and the manufacturers’ secret meetings and discussions exchanging nonpublic and commercially sensitive information concerning pricing, production capacity, costs, raw materials, and distribution.

The defendants allegedly were able to maintain the concerted pricing of their aluminum and tantalum electrolytic capacitors through regular communication and interaction. According to Bennett, the conspiracy has gone unnoticed to date for many reasons, including: (1) the sheer number and variety of aluminum and tantalum electrolytic capacitors in the defendants’ respective product portfolios, making it difficult for purchasers to track market-wide movement in pricing; (2) the frequent changes in pricing for the capacitors; and (3) the masking of noncompetitive pricing by high sales volume. Moreover, the defendants regularly provided to purchasers and the public pretextual reasons for the increased production lead times, the complaint stated.

According to the complaint, the multi-billion dollar market for capacitors is susceptible to anticompetitive manipulation. The global market for aluminum and tantalum electrolytic capacitors is highly concentrated and there are high barriers to the entry. Also, the capacitors are interchangeable commodities and price is the most obvious differentiation among these products for purchasers. Furthermore, capacitors are necessary to the function of electric circuits and other types of passive electrical capacitors cannot service as a substitutes for those components. Original equipment manufacturers and third-party distributors are almost always committed to inflexible production schedules or delivery deadlines to their respective customers and would incur any price increases on the capacitors to avoid a greater cost of production delays or customer dissatisfaction.

The U.S. the Department of Justice and competition authorities in China, Japan, Taiwan, South Korea, and Europe have launched investigations into the capacitor industry. The plaintiffs did not have actual or constructive knowledge and could not have discovered the existence of the conspiracy through the exercise of reasonable diligence until March 2014 when the regulatory authorities made their investigations of the industry public, the complaint alleged.

As a result of the defendants’ anticompetitive actions, prices for aluminum and tantalum capacitors sold in the United States increased or their decline was slowed and the plaintiff paid artificially inflated prices for the capacitors he purchased from the defendants.

The plaintiff asserts claims for restraint of trade in violation of the California Cartwright Act and the California Unfair Competition Law. 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-04403.

Attorneys: Alexander M. Schack and Natasha Naraghi (Law Offices of Alexander M. Schack) and Geoffrey J. Spreter (Spreter Legal Services, APC) for David A. Bennett.

Companies: Panasonic Corporation; Sanyo Electric Group, Ltd.; Taiyo Yuden Co., Ltd.; Nec Tokin Corporation; Kemet Corporation; Nippon Chemi-Con Corporation; United Chemi-Con Corporation; Hitachi Chemical Co., Ltd.; Nichicon Corporation; Avx Corporation; Rubycon Corporation; Elna Co., Ltd.; Matsuo Electric Co., Ltd.; Toshin Kogyo Co., Ltd.; Vishay Intertechnology, Inc.; Samsung Electro-Mechanics; Rohm Co., Ltd.

News: Antitrust CaliforniaNews