Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Japanese spark plug maker allegedly engaged in auto parts price fixing, (Aug 18, 2015)

By Linda O’Brien, J.D., LL.M.

Foreign automotive parts manufacturer NGK Spark Plug engaged in an ongoing conspiracy with other manufacturers to fix prices and rig bids for automotive oxygen sensors sold in the United States, according to a complaint filed by two auto parts distributors in the federal district court in Detroit (WAL, Inc. v. NGK Spark Plug Co., Ltd., August 17, 2015).

Japanese companies NGK Spark Plug Co., Ltd. and Denso Corporation, German company Robert Bosch GmbH, and their domestic subsidiaries manufacture, market, and supply a variety of automotive parts, including oxygen sensors. WAL, Inc., doing business as Tri-State Automotive Warehouse, and KMB/CT, Inc., doing business as KMB Warehouse Distributors, distribute automotive replacement parts to retail auto parts stores.

Oxygen sensors are engine components that measure oxygen content of exhaust gas and are located in the exhaust systems of motor vehicles.

The complaint states that the U.S. Department of Justice (DOJ) is conducting a broad criminal investigation into illegal price fixing in the automotive parts industry. In August 2014, the DOJ announced that NGK Spark Plug agreed to pay a $52.1 million fine and plead guilty to a one-count felony charge for its role in conspiracies to fix prices and rig bids for spark plugs, standard oxygen sensors, and air fuel ratio sensors sold to automobile manufacturers from January 2000 to July 2011. The automobile manufacturers included DaimlerChrysler AG, Honda Motor Co. Ltd., and Toyota Motor Corp.

The claims, filed in the federal district court in Detroit, alleged that NGK Spark Plug and its co-conspirators carried out the conspiracy through meetings and conversations in which they discussed and agreed upon bids and price quotations on bids to be submitted to certain automobile manufacturers and to allocate the supply of the products to those manufacturers. NGK Spark Plug allegedly sold spark plugs, standard oxygen sensors, and air fuel ratio sensors at non-competitive prices to auto makers in the United States and elsewhere in furtherance of the agreement.

According to a company statement, NGK has cooperated fully with the Justice Department's investigation since July 2011. The company also noted that, since learning of the investigation, certain executives agreed to voluntarily return a portion of their compensation and apologized to customers.

The complaint alleges that, in May 2015, the DOJ announced that Norio Teranishi and Hisashi Nakanishi, former executives of NGK, have been charged in a one-count indictment with conspiring to fix the prices of spark plugs, standard oxygen sensors, and air fuel ratio sensors, sold to auto makers. According to the indictment, from about January 2000 until July 2011, Teranishi and Nakanishi participated in, and directed, authorized, or consented to the participation of subordinate employees in, meetings with co-conspirators and reached collusive agreements to rig bids, allocate the supply, and fix the price of the relevant auto parts.

In March 2015, the DOJ announced that Robert Bosch GmbH agreed to plead guilty to a one count felony charge and to pay a $57.8 million criminal fine for its role in a bid rigging and price fixing conspiracy. According to the charge, Bosch conspired to allocate the supply of, rig bids for, and to fix, stabilize and maintain the prices of, spark plugs and oxygen sensors sold to automobile and internal combustion engine manufacturers.

The complaint states that the defendant manufacturers and their co-conspirators participated in a global conspiracy to suppress competition by agreeing to rig bids and fix prices of oxygen sensors sold to automobile manufacturers in the U.S. As a direct result of their anticompetitive conduct, auto parts distributors paid artificially inflated prices for oxygen sensors.

The complaint also alleges that the characteristics of the oxygen sensor market in the U.S. are conductive to collusion. First, there are high barriers to entry, including start-up capital expenditures associated with plants, equipment, transportation, electricity, distribution, and labor. Second, there is inelasticity of demand for oxygen sensors, since there are no viable substitutes for these products. Third, the defendants attended industry events, which provided opportunities to meet, conspire, and share information.

The plaintiffs had no knowledge of the conspiracy until August 2014, when the DOJ publicly announced that NGK pleaded guilty for its role in the conspiracy to fix prices of oxygen sensors. There was no information in the public domain concerning the defendants’ dealings or that they had engaged in a conspiracy. Moreover, the defendants concealed and carried out the conspiracy in a manner that precluded detection and represented publicly that their pricing and bidding activities were unilateral. Such fraudulent concealment tolled the statute of limitations applicable to the plaintiffs’ claims, the complaint alleges.

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

The case is No. 2:15-cv-12918-SFC-MKM.

Attorneys: David H. Fink (Fink & Associates Law), Joseph C. Kohn (Kohn, Swift & Graf, P.C.), Gregory P. Hansel (Preti, Flaherty, Beliveau & Pachios, LLP), Steven A. Kanner (Freed Kanner London & Millen LLC), Eugene A. Spector (Spector Roseman Kodroff & Willis, P.C.), M. John Dominguez (Cohen Milstein Sellers & Toll PLLC), Solomon B. Cera (Cera LLP), Linda P. Nussbaum (Nussbaum Law Group, P.C.), Irwin B. Levin (Cohen & Malad, LLP), and Carl E. Person for WAL, Inc. and KMB/CT, Inc.

Companies: WAL, Inc.; KMB/CT, Inc.; NGK Spark Plug Co., Ltd.; Denso Corporation; Robert Bosch GmbH

News: Antitrust MichiganNews