Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Lithium ion battery cell manufacturers charged in price fixing conspiracy, (Jul 18, 2016)

By Linda O’Brien, J.D., LL.M.

The largest suppliers of lithium ion batteries globally and in the United States engaged in a conspiracy to fix and maintain the prices of lithium ion battery cells from at least January 1, 2000, through at least May 31, 2011, according to a complaint filed in the federal district court in Oakland, California (Flextronics International USA, Inc. v. LG Chem, Ltd., July 15, 2016).

LG Chem., Ltd., Samsung SDI Co. Ltd., Panasonic Corporation, Sanyo Electric Co. Ltd., Sony Corporation, GS Yuasa Corp., Toshiba Corporation, Hitachi Maxwell, Ltd., and NEC Tokin Corporation are Japanese or Korean manufacturers that, along with their domestic subsidiaries, manufacture and sell lithium ion batteries throughout the United States. Lithium ion battery cells are a type of rechargeable batteries used in consumer electronics that are designed to have high power and energy density.

Flextronics International USA, Inc. is a California company that manufactures electronic products sold for consumer, medical, automotive, aerospace, and defense applications. Since 2000, Flextronics has purchased lithium ion batteries for use in manufacturing those products.

The complaint states that in 1999 Korean manufacturers entered the lithium ion battery market and posed a competitive threat to Japanese suppliers. To stem the decline in prices caused by the competition between Japanese and Korean producers, the defendants purportedly conspired to fix and maintain prices. During meetings and communications from 2000 until May 2011, the defendants discussed confidential and competitive sensitive information regarding supply and demand, market trends, capacity, sales forecasts, and pricing for lithium ion batteries, the complaint asserts. The defendant manufacturers allegedly used the confidential information to set prices to their own customers. A common goal of these discussions was that the defendants would never fully meet market demand, thereby ensuring a perennial supply shortage and generating higher prices, Flextronics claims.

Notwithstanding the economic downtown in 2008, the defendants continued their collusive efforts to maintain battery prices at an artificially high level, the complaint charges. To ensure that their price fixing plan would not be revealed, the defendants used secret codes in the emails and telephone calls, and insisted that those with access to the information kept it confidential. Furthermore, the defendants allegedly provided pretextual justifications for their coordinated price increases, such as increases in the price for cobalt.

In August 2012, the U.S. Department of Justice began investigating four of 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, the complaint alleges.

The structure and characteristics of the lithium ion battery market render the conspiracy economically plausible, Flextronics asserts. 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 complaint 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, Flextronics claims that the prices of lithium ion batteries was fixed or maintained at artificially high levels and Flextronics was deprived of free and open competition.

Flextronics asserts claims for conspiracy in restraint of trade in violation 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. 4:16-cv-04018.

Attorneys: Paul J. Ripp and Eric R. Lifvendahl (Williams Montgomery & John, Ltd.) and Benjamin K. Riley, Patrick M. Ryan, and Simon R. Goodfellow (Bartko, Zankel, Bunsel & Miller) for Flextronics International, USA, Inc.

Companies: Flextronics International, USA, Inc.; LG Chem., Ltd.; Samsung SDI Co. Ltd.; Panasonic Corporation; Sanyo Electric Co. Ltd.; Sony Corporation; GS Yuasa Corp.; Toshiba Corporation; Hitachi Maxwell, Ltd.; NEC Tokin Corporation

News: Antitrust CaliforniaNews