Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Technology developer alleges price fixing conspiracy for resistors, (Oct 14, 2015)

By Linda O’Brien, J.D., LL.M.

A group of manufacturers of resistors conspired to fix the prices of resistors sold in the United States, according to a complaint filed in the federal district court in San Jose, California (Linkitz Systems, Inc. v. Panasonic Corp., October 13, 2015).

Panasonic Corporation, KOA Corporation, Murata Manufacturing Co., Ltd., ROHM Co. Ltd., Vishay Intertechnology, Inc., and Yageo Corporation and their subsidiaries, manufacture and distribute resistors to purchasers in the United States. A resistor is a passive two-terminal component that regulates electrical currents and is a common component in all electronic products. Linear resistors represent the largest category of resistors. Linkitz Systems has developed a technology toy that utilizes resistors as a component.

The complaint states that resistors are widely used in a range of industries, including telecommunications, audiovisual, automotive, and computers. A worldwide investigation by competition authorities discovered that the defendants—the largest manufacturers of linear resistors—conspired to fix prices of linear resistors sold in the United States.

The U.S. Department of Justice initiated an investigation of price fixing in the resistors industry in July 2015. The investigation in the resistors industry is related to its price fixing investigation into the capacitors industry. Eight Japanese 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.

In formulating and effectuating their conspiracy, the defendants participated in meetings and conversations to discuss the prices and supply of linear resistors, agreed to manipulate the prices and supply of linear resistors sold in the United States in a manner that deprived purchasers of free and open competition, issued price announcements and price quotations in accordance with their agreements, and provided false statements to the public to explain the price increases for linear resistors, the complaint alleges.

According to the complaint, the characteristics of the resistors market are conducive to a price fixing conspiracy. First, the resistors industry has substantial barriers to entry, including lengthy start-up costs associated with research and development, manufacturing plants and equipment, energy, distribution infrastructure, skilled labor, and long standing customer relationships with existing manufacturers. Second, the demand for resistors is highly inelastic because there are no substitutions for these products. Third, the market for resistors is highly concentrated among a small number of participants. Fourth, resistors are homogenous products because their characteristics and qualities are essentially uniform across different manufacturers. Fifth, trade associations provided the defendants ample opportunities to conspire and exchange sensitive competitive information.

As a result of the defendants’ price fixing conspiracy, competition has been reduced or eliminated, the prices of resistors have been raised and fixed, and purchasers have paid more for resistors than they would have otherwise in absence of the defendants’ unlawful conduct, the complaint charges.

The plaintiff asserts claims for violations of Section 1 of the Sherman Act, New York General Business Law, and California’s Cartwright Act and Unfair Competition Law. The action seeks declaratory and injunctive relief, damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 5:15-cv-04724.

Attorneys: Allan Steyer, D. Scott Macrae, and Jill M. Manning (Steyer Lowenthal Boodrookas Alvarez & Smith LLP) for Linkitz Systems, Inc.

Companies: Linkitz Systems, Inc.; Panasonic Corp.; KOA Corp.; Murata Manufacturing Co., Ltd.; ROHM Co. Ltd.; Vishay Intertechnology, Inc.; Yageo Corp.

News: Antitrust CaliforniaNews