Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Electronics manufacturers allegedly engaged in electrolytic capacitors price-fixing conspiracy, (Oct 23, 2014)

By Linda O’Brien, J.D., LL.M.

Japanese electronics manufacturers and their domestic affiliates engaged in a conspiracy to fix prices for aluminum and tantalum electrolytic capacitors sold in the United States, according to a complaint filed in the federal district court in San Francisco (Quathimatine Holdings, Inc. v. Elna Co., Ltd., October 22, 2014).

Japanese companies Avx Corporation, Elna Co., Hitachi Chemical Company, Ltd., Kemet Corporation, Matsuo Electric Co., NEC Tokin Corporation, Nichicon Corporation, Nippon Chemi-Con Corporation, United Chemi-Con, Panasonic Corporation, Sanyo Electric Co., Ltd., and their domestic affiliates manufacture, distribute, and sell tantalum and aluminum electrolytic capacitors in the United States. Capacitors are passive two-terminal electronic components that are used to store energy electrostatically in an electric field between their plates. They are incorporated into almost every electronic device, including consumer products, telecommunications, automotive, computer, and industrial equipment. Quathimatine Holdings is a terminal and pipeline equipment company and purchases capacitor products directly from the manufacturers.

The complaint alleges that, as early as January 2009, the defendants entered into an agreement to fix the prices of capacitors in the United States. The defendants had experienced (1) a decline in demand due to the global economic recession, (2) an increase in raw material costs, (3) technological innovations that rendered certain products containing capacitors redundant, and (4) increased competition from cheaper forms of capacitors.

According to the complaint, the capacitor market structure supports the existence of a conspiracy. Entry into the capacitor market involves high barriers, such as significant start-up costs and the establishment of supply lines for necessary raw materials. The pricing for capacitors is highly inelastic because there are no adequate substitutes and capacitors are homogeneous, fungible products. There has been a decline in global decline for capacitors since the global economic crisis in 2008. The market is highly concentrated and the prices for raw materials have increased significantly. Additionally, the defendants had ample opportunities to collude since every defendant is a member of numerous trade associations.

Competition authorities in the United States, China, South Korea, Japan, Taiwan, Singapore, and Europe launched investigations regarding price fixing of capacitors by Japanese manufacturers. In May 2014, the U.S. Department of Justice issued a report that confirmed the China’s regulatory authorities had finished its cartel investigation into the electronic capacitor industry.

The plaintiff claimed that it did not and could not have discovered, through the exercise of reasonable diligence, the existence of the conspiracy, until raids by Chinese officials on defendants’ offices were made for their roles in the conspiracy were announced publicly in the media in April 2014. The defendants actively concealed their conspiracy, and the plaintiff did not know it was paying artificially high prices for capacitors, the complaint alleged.

The plaintiff asserts claims for violations of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, treble damages, costs of suit, attorneys’ fees, and any other just and proper relief.

In a related action, a business consulting and design company has filed a complaint in the federal district court in San Francisco, alleging that the leading manufacturers of capacitors engaged in a conspiracy to fix prices of aluminum and tantalum electrolytic capacitors and targeted various industries in the United States (Toy-Knowlogy, Inc. v. Elna Co., Ltd., October 17, 2014). The plaintiff, Toy-Knowlogy, Inc. provides consulting and design services to manufacturers of toys, housewares, novelties, computer accessories, and other items, and purchased capacitors from distributors.

The cases are No. 3:14-cv-04704 and 3:13-cv-04657.

Attorneys: Joseph J. Tabacco, Jr. and Todd A. Seaver (Berman DeValerio), Gregory S. Asciolla, Eric J. Belfi, and Matthew J. Perez (Labaton Sucharow LLP), and Damon J. Chargois and Kamran Mashayekh (Mashyekh & Chargois, LLP) for Quathimatine Holdings, Inc. Joseph W. Cotchett, Steven N. Williams, and Elizabeth Tran (Cotchett, Pitre & McCarthy, LLP) and Richard M. Heimann, Eric B. Fastiff, Brendan P. Glackin, Dean M. Harvey, and Lin Y. Chan (Lieff Cabraser Heimann & Bernstein, LLP) for Toy-Knowlogy, Inc.

Companies: Quathimatine Holdings, Inc.; Toy-Knowlogy, Inc.; Avx Corporation; Elna Co.; Hitachi Chemical Company, Ltd.; Kemet Corporation; Matsuo Electric Co.; NEC Tokin Corporation; Nichicon Corporation; Nippon Chemi-Con Corporation; United Chemi-Con; Panasonic Corporation; Sanyo Electric Co., Ltd.

News: Antitrust CaliforniaNews