Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Electronics manufacturers allegedly engaged in capacitors price fixing conspiracy, (Aug 23, 2016)

By Linda O’Brien, J.D., LL.M.

Foreign electronics manufacturers and their U.S. subsidiaries engaged in a conspiracy to fix prices and allocate customers for aluminum, tantalum, and film capacitors sold in the United States, according to a complaint filed in the federal district court in Phoenix, Arizona (Avnet, Inc. v. Hitachi Chemical Co., Ltd., August 22, 2016).

Hitachi Chemical Company, Elna Co., Matsuo Electric Co., Toskin Kogyo Co., Holy Stone Enterprise Co., Okaya Electric Industries Co., Taitsu Corporation, Shinyei Kaisha, Nitsuko Electronics Corporation, Nissei Electric Co., Shizuki Electric Co., and Soshin Electric Co. and their U.S. subsidiaries manufacture, distribute, and sell tantalum, aluminum, and film capacitors in the United States. Avnet is a major distributor of electronic components in the United States.

Capacitors store electrical energy and regulate the flow of electrical current as it moves through a circuit. They are integral components found in virtually all electronic devices.

The complaint alleges that, as early as September 1997, in the face of declining demand and deteriorating market conditions, the defendants entered into an agreement to fix the prices, constrain supply, and rig bids of capacitors in the United States. In order to maintain the value of their investments, the defendants charged their customers supra-competitive prices determined by oral and written agreements, understandings, and exchanges of competitive information.

To further their conspiracy, Avnet claims that the defendants (1) participated in meetings and conversations to discuss price and supply; (2) allocated customers and market shares; (3) fixed target prices, floor prices, and price ranges; (4) agreed to manipulate prices and supply; (5) coordinated price announcements and price quotations; (6) exchanged competitively sensitive information; (7) set artificial and unjustified production lead times to limit supply; and (8) provided false public statements to explain increased prices and undersupply.

According to the complaint, the capacitor market structure supports the existence of a conspiracy. Capacitors are commoditized products and can be freely substituted for one another. The market is highly concentrated, demand for capacitors is inelastic, and high barriers to entry in the market have allowed the defendants to maintain their dominance. Additionally, there has been a decline in global decline for capacitors since the global economic crisis in 2008, the complaint alleges.

In 2014, competition authorities in the United States and throughout Asia launched investigations regarding price fixing of capacitors by Asian manufacturers. In September 2015, the U.S. Department of Justice announced the first criminal charges, in connection with the conspiracy, against NEC Tokin. In April 2016, the Justice Department announced that Hitachi Chemical agreed to plead guilty to conspiring with competitors to fix the prices of electrolytic capacitors. The Justice Department is also reportedly coordinating its investigation with China’s regulatory authorities, the complaint states.

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

The case is No. 2:16-cv-02808-DKD.

Attorneys: Amy Abdo and Carrie Pixler Ryerson (Fennemore Craig, P.C.) and Robert W. Turken, Scott N. Wagner, Lori P. Lustrin, and Shalia M. Sakona (Blizin Sumberg Baena Price & Axelrod LLP) for Avnet, Inc.

Companies: Avnet, Inc.; Hitachi Chemical Company, Ltd.; Elna Co., Ltd.; Matsuo Electric Co., Ltd.; Toskin Kogyo Co., Ltd.; Holy Stone Enterprise Co., Ltd.; Okaya Electric Industries Co., Ltd.; Taitsu Corporation; Shinyei Kaisha; Nitsuko Electronics Corporation; Nissei Electric Co. Ltd.; Shizuki Electric Co., Ltd.; Soshin Electric Co., Ltd.

News: Antitrust ArizonaNews