Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Japanese electronics manufacturers allegedly engaged in electrolytic capacitors price-fixing conspiracy, (Aug 15, 2014)

By Linda O’Brien, J.D., LL.M.

Japanese electronics manufacturers and their domestic affiliates engaged in a conspiracy to unlawfully fix the prices in the United States for aluminum and tantalum electrolytic capacitors, according to a complaint filed in the federal district court of the Northern District of California (Schuten Electronics, Inc. v. Avx Corporation, August 14, 2014).

Panasonic, Sanyo, Samsung, Avx, Hitachi, Kemet, Matsuo, Nec Tokin, Nichicon, Nippon Chemi-Con, Rohm, Rubycon, Taiyo, Toshin, United Chemi-Con, and Vishay are manufacturers of electrolytic capacitors, which are fundamental components of electrical circuits and primarily used to store the electrical charge. Schuten Electronics manufactures electronics parts, primarily diodes, and has purchased aluminum and tantalum electrolytic capacitors.

The complaint alleges that in 2000, when the new types of capacitors entered the market and the demand for aluminum and tantalum electrolytic capacitors declined, the defendant manufacturers mutually agreed not to compete on price for their mutually interchangeable electrolytic capacitors in an effort to protect their profits. The defendants allegedly reached agreement via a series of written, electronic, and oral communications and maintained regular contact regarding prices, sales, and lead times. They regularly exchanged nonpublic and commercially sensitive information including market predictions, to facilitate the conspiracy, according to Schuten.

Despite the declining demand for aluminum and tantalum electrolytic capacitors, the capacitors remained critical to the development of certain types of electric circuits in electronic devices. Purchasers were almost always committed inflexible production or delivery deadlines to their customers and therefore would incur any price increases to avoid the cost of production delays or customer dissatisfaction.

The market for capacitors is particularly conducive to a price fixing agreement, the complaint contended. The market for aluminum and tantalum electrolytic capacitors is highly concentrated and there are substantial barriers to the entry. The demand for capacitors is highly inelastic, since the capacitors are critical to the manufacture of certain types of electric circuits used in electronic devices and there are no close substitutes for those components. Also, the capacitors are standardized and market participants typically compete on price. The defendants possessed sufficient market share to impose price increases and ensure price stabilization. Finally, industry trade associations facilitated collusion as they served as a pretext through which the conspirators could relay and receive sensitive information on product pricing and market allocation, Schuten claimed.

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 plaintiff’s claims are not barred by the statute of limitations because it did not and could not discover through the exercise of reasonable diligence that existence of the conspiracy until March 2014 when the regulatory authorities began investigating the industry. The defendants kept the conspiracy secret and gave justifications for the pricing changes.

As a result of the defendants’ anticompetitive actions, prices for aluminum and tantalum capacitors increased or their decline was slowed. Schuten allegedly paid artificially inflated prices for the capacitors it purchased from the defendants than it would have in a competitive market.

The plaintiff asserts claims for violations of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, 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-03698.

Attorneys: Kit A. Pierson, George Farah, and Manual John Dominguez (Cohen Milstein Sellers & Toll PLLC) for Schuten Electronics, Inc.

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

News: Antitrust CaliforniaNews