Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Linear resistor manufacturers charged with price fixing conspiracy, (Aug 21, 2015)

By Linda O’Brien, J.D., LL.M.

A group of manufacturers of linear resistors conspired to fix the prices of linear resistors sold in the United States, according to a complaint filed in the federal district court in San Francisco (Microsystems Development Technologies, Inc. v. Panasonic Corporation, August 20, 2015).

Panasonic Corporation, KOA Corporation, Murata Manufacturing Co., Ltd., ROHM Co. Ltd., Vishay Intertechnology, Inc., and Vageo Corporation, and their subsidiaries, are the world’s leading manufacturers of linear resistors. A resistor is a passive component that implements electrical resistance as a circuit element and is a common element of electrical networks, electronic circuits, and electronic equipment. Microsystems Development Technologies provides custom microprocessor application design and development for consumer, industrial, and medical products and purchases resistors as standalone products from distributors.

The complaint states that the defendant manufacturers colluded to keep the price of linear resistors at artificially high levels. In furtherance of their conspiracy, the defendants (1) coordinated prices for specific customers and products; (2) communicated confidential and proprietary information to eliminate price competition, allocate market share, restrict the supply of resistors, and use input costs for industry-wide pricing formulas; and (3) implemented schemes to nullify competitive sales process to customers.

According to the complaint, the characteristics of the resistors market render collusion plausible. First, the resistors industry has substantial barriers to entry, including multi-million costs associated with research and development, manufacturing plants and equipment, distribution infrastructure, skilled labor, and establishing customer relationships. Second, the demand for resistors is highly inelastic because there are no close substitutions for these products. Third, the resistors industry is highly concentrated and dominated by a few companies that control a majority share of the market. Finally, resistors are homogenous and commoditized products because their characteristics and qualities are essentially uniform across different manufacturers.

The defendant manufacturers had ample opportunity to conspire, Microsystems charged. The companies are members of several trade associations in the United States, Asia, and Europe, which provide opportunities to meet frequently and exchange information to facilitate collusion. The overlapping membership in various trade associations has also provided cartel members an incentive to stay within the illegally agreed upon price framework and they could monitor one another’s activities and compliance. Furthermore, the resistor manufacturers produce other types of components—such as capacitors, optical disk drives, cathode ray tubes, and lithium ion batteries—that have each been the subject of price fixing investigations, the complaint alleges.

The complaint also states that the U.S. Department of Justice has initiated an investigation of price fixing in the resistors industry in June 2015. The probe of the resistors industry is related to the Department’s price fixing investigation into the capacitors industry, which is part of a larger market for passive electronic components. To date, eight companies, including Panasonic, have acknowledged being contacted by the U.S. antitrust authorities in connection with the capacitors investigation. Additionally, the Korean Fair Trade Commission and Japanese Fair Trade Commission have recently conducted on-site investigations of suspected price fixing in the market for resistors.

As a result of the defendants’ price fixing conspiracy, price competition has been restrained with respect to resistors, the prices of resistors have been maintained at artificially high levels, and indirect purchasers have paid supracompetitive prices for resistors, the complaint charges.

The plaintiff asserts claims for unreasonable restraint of trade in violation of Section 1 of the Sherman Act and California’s Cartwright Act and Unfair Competition Law. The action seeks declaratory and injunctive relief, restitution, disgorgement, and treble damages.

The case is No. 5:15-cv-03820.

Attorneys: Joseph W. Cotchett, Steven N. Williams, Demetrius X. Lambrinos, Elizabeth T. Tran, and Joyce Chang (Cotchett, Pitre & McCarthy, LLP) for Microsystems Development Technologies, Inc.

Companies: Panasonic Corporation; KOA Corporation; Murata Manufacturing Co., Ltd.; ROHM Co. Ltd.; Vishay Intertechnology, Inc.; Vageo Corporation

News: Antitrust CaliforniaNews