Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Price fixing of commercial parking heaters alleged, (Jul 8, 2015)
Law Firms Mentioned:Steyer Lowenthal Boodrookas Alvarez & Smith LLP
Organizations Mentioned:Espar Inc. | Espar Products Inc. | Myers Equipment Corp. | Steyer Lowenthal Boodrookas Alvarez & Smith, LLP | Webasto Products North America, Inc. | Webasto Thermo & Comfort North America, Inc.
By Linda O’Brien, J.D., LL.M.
Two manufacturers of commercial climate control systems participated in a conspiracy to fix the prices of air and water 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 (Myers Equipment Corporation v. Espar Inc., July 2, 2015).
Espar Inc. and Webasto Products North America manufacture independent and compact fuel operated air and water (or coolant) heater products for use in commercial vehicles. Espar 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. Myers Equipment Corp. is a commercial truck and bus dealership that offers new and used parts as well as repair services.
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. Espar and Webasto had the opportunity to collaborate with competitors through their participation at industry trade shows. The commodity nature of parking heaters, high barriers to entry, and high market concentration made the parking heater market susceptible to anticompetitive conduct, the complaint alleges.
In January 2015, the Department of Justice (DOJ) 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. According to the charge, from October 2007 to December 2012, Espar and its co-conspirators agreed to set a price floor for parking heaters, and coordinated the timing and amount of price increases, 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 $14.97 million.
The DOJ has stated that its investigation into the conspiracy is ongoing. As part of its plea agreement, Espar agreed to cooperate with the ongoing investigation. Webasto has been identified as an applicant under the DOJ corporate leniency program regarding the parking heater price fixing case.
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 March 2015, when a government investigation into the defendants’ misconduct was publicly revealed. The unlawful activity of Espar and its co-conspirators was self-concealing. Their internal communications were not public information, rendering impossible any ascertainment of misconduct. Further, the defendants employed acts and techniques that were calculated to conceal the existence of the unlawful conduct. Due to the defendants’ fraudulent concealment, any applicable statute of limitations has been tolled.
The plaintiff asserts claims for unlawful restraint of trade in violation of the Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, treble damages, costs of suit, attorney fees, and any other just and proper relief.
The case is No. 1:15-cv-03872.
Attorneys: Allan Steyer and D. Scott Macrae (Steyer Lowenthal Boodrookas Alvarez & Smith LLP) for Myers Equipment Corp.
Companies: Myers Equipment Corp.; Espar Inc.; Espar Products Inc.; Webasto Products North America, Inc.; Webasto Thermo & Comfort North America, Inc.
News: Antitrust NewYorkNews