Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Indiana alleges price fixing by foreign automotive wire harness manufacturers, (Jun 26, 2015)

By Linda O’Brien, J.D., LL.M.

A group of foreign manufacturers of automotive wire harness products and their subsidiaries engaged in a conspiracy to fix the prices for automotive parts, including wire harness systems, sold in the United States, according to a complaint filed by the Indiana Attorney General in the federal district court in Detroit (State of Indiana v. American Furukawa, Inc., June 25, 2015).

Automotive wire harness systems are automotive electrical distribution systems used to direct and control electronic components, including wiring and circuit boards in an automobile. Delphi Automotive LLP, Denso Corporation, Fujikura Ltd., Furukawa Electric Company, Ltd., Lear Corporation, Leoni AG, Sumitomo Electric Industries, Ltd., Yazaki Corporation, Tokai Rika Co., Ltd., and G.S. Electech, Inc. manufacture, market, and sell automotive parts, including wire harness systems, throughout the United States. The State of Indiana has purchased numerous vehicles with automotive parts, including wire harness systems, indirectly from one or more of the manufacturers.

According to the complaint, the global market for automotive wire harness systems was approximately $32 billion in 2012 and is dominated and controlled by large manufacturers. Six of the defendants control almost 90 percent of the global market. Automotive wire harness systems are installed by automobile original equipment manufacturers (OEMs) in new vehicles as part of the manufacturing process. When purchasing wire harness systems, OEMs issue requests for quotation to automotive parts suppliers that submit bids in response to these requests. The defendants comprise the majority of automotive parts suppliers who manufacture wire harness systems for sale to OEMs.

The complaint states that the defendants and their co-conspirators formed an international cartel to restrict competition in the market for automotive parts by agreeing to fix prices and rig bids for wire harness products. The defendants allegedly had opportunities to conspire under the guise of legitimate business contacts by attending industry events. They are charged with participating in meetings and exchanging communications discussing bids and price quotations for wire harness products to be submitted to U.S. automobile manufacturers and coordinating price adjustments requested by those manufacturers.

There are substantial barriers to entry to the wire harness products market due to high start-up costs, including costs associated with manufacturing plants and equipment, energy, transportation, distribution infrastructure, skilled labor, and establishing customer relationships. OEMs cannot change automotive parts suppliers after they have chosen a supplier, since they design features of their vehicles so the wire harness systems are integrated with the electronics, mechanics, and thermal distribution of a particular vehicle model. Moreover, there is an inelasticity of demand for automotive parts, with no close substitutes for these products, such that an increase in price of the product results in only a small decline in sales, the complaint alleged.

In 2010, regulatory authorities in the United States, European Union, and Japan began investigations into a suspected conspiracy in the sector of automotive parts. In 2011, the U.S. Department of Justice Antitrust Division announced that Japanese company Furukawa Electric Company and several executives pleaded guilty to criminal price fixing and bid-rigging in connection with the sale of wire harness products and were ordered to pay a fine of $200 million. In 2012, four other Japanese companies and several executives pleaded guilty to and pay fines for antitrust violations arising from their participation in a conspiracy to fix prices of wire harness products.

The complaint claims that the defendants and their co-conspirators wrongfully concealed their anticompetitive conduct and that the plaintiffs did not discover the relevant facts, despite due diligence, until September 2011, when the Department of Justice announced the guilty plea of Furukawa Electric Company for its role in the price fixing conspiracy. Thus, any applicable statute of limitations to the plaintiffs’ claims was tolled through at least September 2011, the complaint stated.

The plaintiff asserts claims for conspiracy in restraint of trade in violation of Section 1 of the Sherman Act and Indiana antitrust law. The action seeks declaratory and injunctive relief, treble damages, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 2:15-cv-12309-SFC-RSW.

Attorneys: Kevin Abraham Rynbrandt (Rynbrandt & Associates, PLLC) for the State of Indiana.

Companies: Delphi Automotive LLP; Denso Corporation; Fujikura Ltd.; Furukawa Electric Company, Ltd.; Lear Corporation; Leoni AG; Sumitomo Electric Industries, Ltd.; Yazaki Corporation; Tokai Rika Co., Ltd.; G.S. Electech, Inc.

News: Antitrust MichiganNews