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EC Pulls The Plug On LCD Manufacturers’ Price Fixing Conspiracy

Posted  December 22, 2010

The European Commission has fined five manufacturers of liquid crystal display (“LCD”) panels a total of 649 million euros (approximately US$ 860 million) for participating in a price-fixing conspiracy between October 2001 and February 2006.

LCD panels are the main component of the flat screens used in televisions, laptop computers and desktop computer monitors.

In a press release, the Commission stated that the LCD panel manufacturers operated a cartel which not only agreed on prices but also exchanged information on future production planning, capacity utilization, and commercial conditions.  They were found to have violated Article 101 of the EU treaty, which prohibits price-fixing and other restrictions of competition.

Four of the firms fined by the Commission are Taiwanese corporations: Chimei InnoLux (300 million euros), AU Optronics (117 million euros), Chunghwa Picture Tubes (9 million euros), and HannStar Display (8 million euros).

The South Korean based Samsung Electronics was found to have participated in the conspiracy but escaped being fined.  The company received full immunity under the Commission’s leniency program for having brought the cartel to the Commission’s attention and helping prove the infringement.

LG Display, also of South Korea, was ordered to pay 215 million euros.  However, LG escaped a significantly greater fine.  Its fine for the 2001-2005 period was reduced by 50% because it was “second in the door” in applying to the Commission for leniency.  In addition, it was not fined for 2006 because it was the first to inform the Commission that the cartel had continued after 2005.

The Commission’s decision has been met with dismay in Taiwan.  The Minister of Economic Affairs, Shih Yen-shiang, was quoted by the Taiwanese Central News Agency as saying that Samsung had acted “unethically” by pointing the finger at the Taiwanese firms during the EU investigation.

According to the Associated Press, Terry Gou, the Chairman of Taiwanese electronics giant Foxconn (which holds a large stake in Chimei InnoLux) slammed the European Commission for granting fine reductions and exemptions to Samsung and LG, the world’s first and second largest manufacturers of LCD displays.  Gou questioned the logic of giving favorable treatment to companies without which, he claimed, the cartel could not have been successful.  “If the No. 1 and No. 2 makers did not lead in fixing prices, would Taiwan’s No. 3 and No. 4 carry any weight?” the AP quoted him as saying.

The answer to Gou’s question is that under the European Commission’s leniency regime, a company is only ineligible for immunity from fines if it has taken steps to coerce other companies to participate in a cartel.  The fact that a company was a cartel leader does not disqualify it from being exempted from fines.

Chimei is considering appealing its fine to the EU’s General Court.  LG and AU Optronics have already announced they will appeal.  HannStar and Chunghwa have not stated their intentions.

The “LCD panel cartel” has also come under investigation by antitrust authorities in Japan, Canada, Korea, and the United States.  In the United States, eight LCD panel makers have pled guilty to price-fixing in violation of the Sherman Act, and one corporate defendant and 20 executives have been indicted.  Class action litigation is also pending – In re TFT-LCD (Flat Panel) Antitrust Litigation, M:07-cv-01827 (N.D. Cal.).  In addition, several plaintiffs have opted out of this class action to bring their own suits, including wholesaler Costco, which has filed a complaint in the U.S. District Court for the Western District of Washington on November 30, 2010.

Tagged in: Antitrust Enforcement, International Competition Issues, Price Fixing,