Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Manufacturer charged with conspiracy to fix prices in parking heater market, (Apr 3, 2015)

By Linda O’Brien, J.D., LL.M.

A manufacturer of commercial climate control systems participated in a conspiracy to fix the prices of air parking heaters and related accessories sold in the aftermarket for use in commercial vehicles, according to a complaint filed in the federal district court in Brooklyn, New York (Regional International Corp. v. Espar, Inc., April 2, 2015).

Espar manufactures independent and compact fuel operated air and coolant heater products for use in commercial vehicles and is one of the largest suppliers of parking heaters in North America. Parking heaters provide heat to the cabin of a commercial vehicle without the need for the driver to remain idle in the vehicle for rest breaks or other purposes. Parking heaters are sold by manufacturers through distributors, dealers and to original equipment manufacturers.

Regional International Corp. is a commercial truck and trailer dealership that offers parts and repair services as well as the sales of new and used vehicles and trailers.

The complaint states that there are three companies that dominate the market for heating systems: Espar, Webasto Products North America, and Marine Canada Acquisition Inc. The global market for parking heaters is highly concentrated, with Webasto alone accounting for 75 percent of the global parking heater market. The companies sell parking heaters in the aftermarket through distributors, dealers, and original equipment manufacturers. Parking heaters have few substitutes since alternative technologies cost substantially more and are more complex to install. There are also high barriers to entry to the parking heater industry in the form of technology, manufacturing expertise, and access to distribution channels.

In January 2015, the Department of Justice Antitrust Division began investigating unlawful and anticompetitive conduct in the parking heater industry. As a result of the investigation, a criminal case was brought in the Eastern District of New York. In March 2015, Espar pleaded guilty to a one count felony charge for its participation in a conspiracy to fix parking heater prices for commercial vehicles in violation of the Sherman Act, the complaint alleges.

According to the complaint, Espar entered into a plea agreement in which the company stated that it (1) participated in communications, discussions, and meetings to discuss aftermarket prices for parking heaters for commercial vehicles; (2) agreed during those conversations and meetings to set a price floor for parking heater kits sold to aftermarket customers in the United States; (3) agreed to coordinate the timing and amount of price increases for parking heaters; and (4) exchanged information for the purpose of monitoring and enforcing adherence to the agreements. Espar also agreed to pay a criminal fine of $14,970,000 and sentencing is scheduled for June 5.

The complaint also states that the plaintiff did not discover and could not have discovered through reasonable diligence that Espar conspired with other parking heater manufacturers to fix prices until February 2015, when a government investigation into the defendants’ misconduct was publicly revealed. Espar and its co-conspirators allegedly employed acts and techniques that were calculated to conceal the existence of the unlawful conduct. Due to Espar’s fraudulent concealment, any applicable statute of limitations has been tolled, it was alleged.

The plaintiff asserts claims for unfair competition and unlawful restraint of trade in violation of the Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, disgorgement, treble damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 1:15-cv-01798.

Attorneys: Lawrence H. Schoenbach (Law Offices of Lawrence H. Schoenbach, PLLC), Josef D. Cooper (Cooper & Kirkham, P.C.), Francis O. Scarpulla (Law Offices of Francis O. Scarpulla), and Philip A. Cala for Regional International Corp.

Companies: Regional International Corp.; Espar Inc.; Espar Products Inc.

News: Antitrust NewYorkNews