Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Foreign lithium ion battery manufacturers allegedly engaged in price fixing conspiracy, (Jun 29, 2015)

By Linda O’Brien, J.D., LL.M.

Japanese and Korean manufacturers and their U.S. subsidiaries engaged in a multi-year global conspiracy to fix the prices of lithium ion battery cells, according to a complaint filed in the federal district court in Oakland, California (Dell Inc. v. LG Chem, Ltd., June 26, 2015).

LG Chem., Ltd., Panasonic Corp., Sanyo Electric Co. Ltd., GS Yuasa Corp., Toshiba Corporation, Sony Corp., and Samsung SDI Co. Ltd. are Japanese or Korean manufacturers that—along with their domestic subsidiaries—manufacture, distribute, and sell lithium ion batteries throughout the United States. Lithium ion battery cells are the chemical cores of rechargeable batteries that are found in consumer electronics.

Dell Inc. is a multinational computer technology company based in Texas that offers products and services, such as mobility devices, laptops, notebooks, desktop computers, and software. Since 2000, Dell and its subsidiary, Dell Products L.P., purchased more than $3.1 billion worth of lithium ion batteries.

The complaint states that, in 1999, the defendant manufacturers began to meet with the common goal of cooperating to avoid price competition. At the meetings, the defendants discussed confidential and competitive sensitive information regarding supply and demand, market trends, capacity, sales forecasts, and pricing for lithium ion batteries. The defendant manufacturers also participated in other meetings, telephone calls, and email exchanges in which they reached agreements on pricing and market allocations.

In June 2011, the U.S. Department of Justice began investigating four the defendants for price fixing with respect to the sale of rechargeable batteries. As a result of this investigation, in September 2013 and October 2013, Sanyo Electric and LG Chem, respectively, pleaded guilty to conspiring to fix prices of lithium ion battery cells. Dell did not have knowledge of the conspiracy until disclosures on the Justice Department investigations became public in June 2011, the complaint claimed. The defendants allegedly concealed the conspiracy by making pretextual justifications for the coordinated price increases, avoiding the creation of paper documentation of collusive activity, and directing employees to destroy incriminating documents.

The structure and characteristics of the lithium ion battery market render the conspiracy economically plausible, Dell charged. There are high barriers to entry, including significant start-up costs associated with research and development, manufacturing plants and equipment, energy, transportation distribution infrastructure, skilled labor, establishing customer relationships, safety and quality assurance, and reduction of high failure rates. Moreover, the market for lithium ion batteries is highly concentrated since the defendants together have maintained high market shares, according to the complaint.

The lawsuit also alleges that the defendants’ conspiracy created anticompetitive effects and caused unreasonable restraints in the market for lithium ion batteries. As a result of this conspiracy, Dell was harmed by paying inflated, supra-competitive prices for the lithium ion batteries.

Dell asserts claims for breach of contract and violations of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, compensatory and treble damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 4:15-cv-02987-KAW.

Attorneys: Michael P. Kenny, Debra D. Bernstein, and Rodney J. Ganske (Alston & Bird LLP) and Douglas R. Young (Farella Braun & Martel LLP) for Dell Inc. and Dell Products L.P.

Companies: Dell Inc.; Dell Products L.P.; LG Chem., Ltd.; Panasonic Corp.; Sanyo Electric Co. Ltd.; GS Yuasa Corp.; Toshiba Corporation; Sony Corp.; Samsung SDI Co. Ltd.

News: Antitrust CaliforniaNews