New charges, court filings signal more supplier price-fixing prosecutions
DETROIT -- Federal officials who eased up the pace of prosecuting automotive supplier price-fixing for eight months could be ready to punch the accelerator again, if recent U.S. courthouse activity is any indicator.
U.S. District Judge Marianne Battani could decide in Detroit by next week whether to grant the U.S. Department of Justice Antitrust Division's request for a one-year stay on portions of the expansive civil lawsuit alleging price-fixing over the past decade -- in order to protect its ongoing criminal investigation.
A stay might not sound like things are heating up, but attorneys said the timing suggests the government's case will be much further along by this time in 2014, with several more companies and executives taking fines and prison terms like those who have already made deals.
Last week, Japan's Panasonic Corp. entered guilty pleas before U.S. Judge George Steeh in Detroit on three counts of conspiracy to restrain trade in violation of the Sherman Antitrust Act. Panasonic is the first company to do so in Detroit since Tokai Rika Co. did in mid-December.
Diamond Electric Manufacturing Co. of Japan, with its U.S. headquarters in Dundee, Mich., has agreed to enter a guilty plea on a similar charge brought July 16, as will the former vice president of its Toyota Global Business Unit, Takayoshi Matsunaga. But no date is set in court for either case.
Diamond has agreed to $19 million in criminal fines and Panasonic another $45.8 million for their role in the collusion, bringing the total fines to about $874 million against 11 supplier companies since the fall of 2011.
In the United States, Panasonic admits to conspiring with other suppliers to fix the prices of steering wheel and turn signal switches, headlamp regulators, door courtesy switches and wiper controls sold to Toyota Motor Corp., Honda Motor Co. and Mazda Motor Corp. between 1998 and February 2010.
According to the U.S. government, Diamond will admit to rigging bids for ignition coils sold to Ford, Toyota and Fuji Heavy Industries Ltd. and some subsidiaries between 2003 and 2010.
The two companies are the first new charges in eight months other than a pair of individual charges in May against former Denso Corp. executives Yuji Suzuki and Hiroshi Watanabe. Suzuki and Watanabe also entered their pleas and were sentenced last week before Steeh. Previously the federal government had charged and sentenced nine supplier companies in just over one year, culminating last December.
The new charges, coupled with the new stay that the Department of Justice is seeking on the related civil cases in Battani's court, suggest much is to come in the next few months in terms of federal prosecutions, attorneys said.
"That's the reward for coming clean, as a conspirator your company has its portion of the case resolved early, when the government is still doing some fact-finding, and it comes with a legal requirement to cooperate with the rest of its investigation," said E. Powell Miller, president of The Miller Law Firm PC in Rochester, Mich., and liaison counsel for a prospective class of auto customers affected by price-fixing in the Battani lawsuit.
"But then as the cooperation builds, the strength of the government's case builds. And after that first wave of actions, another one can be expected to follow based on that cooperation. That's usually how these cases progress."
Until now, Justice has mostly gone along with civil attorneys requesting discovery or depositions from segments of the auto supply chain where the government considers its own investigation largely over -- like among wire harness suppliers, where it has landed convictions of Furukawa Electric Co. Ltd. (U.S. subsidiary in Plymouth, Mich.) and Yazaki Corp. (U.S. headquarters in Canton, Mich.), or among suppliers of heat control panels.
But the new request, to put a stay on discovery and depositions on what the government is calling "subsequent product cases" (or the industry segments where Justice's investigation isn't done yet), may be more telling. Miller and Mark Aiello of Foley & Lardner LLP in Detroit both said it's possible that this request means the government expects its second wave of cases soon, but wouldn't speculate on a timetable or scale for that.
Justice attorneys have also said that some plaintiff attorneys in the Battani civil case have said the stay should be six months instead of a year, but Miller said he is not making that objection.
"We want to build our case as much as possible, but our case is mainly parallel with the government's, and we certainly don't want to get in the way of that," he said.
William Kohler, co-chair of the automotive and manufacturing practice group at Clark Hill PLC in Detroit, said other variables are likely in play as well, like the time it takes to convince certain auto executives of the need to take a plea versus facing a worse outcome from going to court.
The government also could try to time a wave of cases together for media exposure that helps convince other suppliers that Justice is taking collusion very seriously, he said.
"The Justice Department wants its settlements to have impact, and they will hold out for a resolution or set of resolutions that are sure to get noticed," he said. "It's sort of a Martha Stewart effect, where the defendant does have an interest in an offender who had a specific transaction, but also in an outcome that is high-profile, it encourages cooperation in the same field."
In the meantime, local suppliers have been putting a lot of effort into new or expanded internal compliance programs to monitor their sales staff and prevent future collusion, said Aiello, who co-chairs the auto industry team at Foley.
"It's very company-specific. But almost all companies we've been dealing with have done at least something by now, whether it's establishing new internal controls, or employee education policy," he said.
"And it absolutely takes some commitment, in terms of personnel and expense. There's a time value in the portion of the employee's own work that now gets devoted to compliance, whether it's making new reports or attending training sessions to follow an HR policy."
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