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25 Million Americans Screwed In Conspiracy: Nine Japanese Companies Inflated And Fixed Auto Parts Prices
Price-fixing conspiracies by auto parts manufacturers may have inflated the cost of your new car. In announcing guilty pleas by nine Japan-based auto parts makers and two executives, the Justice Department laid out details of brazen collusion schemes to rig the prices of more than 30 kinds of car parts—like seat belts, radiators, and windshield wipers—sold to U.S. car makers.
The conspiracies—some lasting a decade or more—affected more than $5 billion in automotive parts and more than 25 million cars purchased by U.S. consumers.
“The scheme directly impacted your bank account,” said FBI Criminal Investigative Division Assistant Director Ronald Hosko at a press conference, where he was joined by Attorney General Eric Holder and Scott Hammond, head of the Criminal Enforcement Program in the Justice Department's Antitrust Division. “These individuals and companies drove up costs for both vehicle makers and buyers, which caused you to spend more.”
Automakers affected include Ford, General Motors, and Chrysler, as well as the U.S. subsidiaries of Honda, Mazda, Mitsubishi, Nissan, Subaru, and Toyota. Auto plants in Detroit and 13 other states were victims. FBI agents in 11 field offices investigated the cases.
Charges filed in Detroit, Cincinnati, and Toledo reveal the lengths conspirators went to gain unfair advantage. In phone calls and secretive meetings—sometimes using code names—the companies agreed to rig bids, set prices, and manipulate the supply of parts to U.S. car makers.
Hammond said car makers—which already operate on tight margins—were victimized along with consumers. When car makers put out requests for bids, he said, “What they didn’t realize is that in back rooms and secret meetings in the United States and Japan, their suppliers were getting together and allocating business and fixing the prices.”
The guilty pleas announced Thursday bring to 20 the number of companies charged in the Justice Department’s ongoing multi-year investigation of the auto industry. Seventeen of 21 executives have also been charged, with most of them facing or already serving prison time. Additionally, heavy fines have been imposed—more than $740 million since the investigation began in 2011. With the recent charges, criminal fines could reach $1.6 billion.
In one case, Gary Walker, an American executive with a Japanese company operating in Auburn Hills, Michigan, rigged bids between 2003 and 2010 to fix the prices of seat belts sold to Toyota, Nissan, Honda, and Mazda manufacturers, according to the federal charges. Other defendants—including Hitachi Automotive Systems Ltd., Mitsubishi Electric Corporation, and Jtekt Corporation—rigged bids on starter motors, alternators, ignition coils, bearings, and other essential vehicle components.
The FBI and Antitrust Division worked closely on the case with counterparts overseas, including the Japan Fair Trade Commission. Search warrants in the U.S. were coordinated with searches overseas.
Hosko said companies trying to game the system should note the stiff penalties meted out as a result of the investigation and prosecutions. Recent "events and the last few years of investigation should send a clear message to companies that suffer from the notion that they don’t need to follow the rules,” he said. “If you violate the laws of this country, the FBI and the Justice Department will investigate and stop the threat you pose to our economy and to hardworking Americans.”
Each of the companies and executives charged has agreed to cooperate with the department’s ongoing antitrust investigation. The plea agreements are subject to court approval. The companies’ and executives’ agreed-upon fines and sentences are:
Hitachi Automotive Systems Ltd. to pay a $195 million criminal fine
Jtekt Corporation to pay a $103.27 million criminal fine
Mitsuba Corporation to pay a $135 million criminal fine
Mitsubishi Electric Corporation (MELCO) to pay a $190 million criminal fine
Mitsubishi Heavy Industries Ltd. to pay a $14.5 million criminal fine
NSK Ltd. to pay a $68.2 million criminal fine
T.RAD Co. Ltd. to pay a $13.75 criminal fine
Valeo Japan Co. Ltd. to pay a $13.6 million criminal fine
Yamashita Rubber Co. Ltd. to pay a $11 million criminal fine
Tetsuya Kunida, a Japanese citizen and former executive of a U.S. subsidiary of a Japan-based automotive anti-vibration rubber products supplier, to serve 12 months and one day in a U.S. prison and to pay a $20,000 criminal fine
Gary Walker, a U.S. citizen and former executive of a U.S. subsidiary of a Japan-based automotive products supplier, to serve 14 months in a U.S. prison and to pay a $20,000 criminal fine.
MELCO and Hitachi conspired with each other and other co-conspirator firms not charged on sales of certain auto parts, including starter motors, alternators, and ignition coils, the department said. Mitsuba and Mitsubishi Electric conspired together and with other co-conspirators not charged on certain sales of starter motors. Each of the other companies charged colluded with other unnamed co-conspirators.
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Generally, the companies, executives, and co-conspirators engaged in the various price-fixing schemes by attending meetings and communicating by telephone in the United States and Japan to reach collusive agreements to rig bids, set prices, and allocate the supply of auto parts sold to the car manufacturers. They took measures to keep their conduct secret by using code names and meeting in remote locations. Those charged also had further communications to monitor and enforce the collusive agreements.
The multiple conspiracies also harmed U.S. automobile plants in 14 states: Alabama; California; Georgia; Illinois; Indiana; Kansas; Kentucky; Michigan; Mississippi; Missouri; Ohio; Tennessee; Texas; and Wisconsin, the department said.
The department has coordinated its investigation with the Japanese Fair Trade Commission, the European Commission, Canadian Competition Bureau, Korean Fair Trade Commission, Mexican Federal Economic Competition Commission, and Australian Competition and Consumer Commission.
The following charges were filed in U.S. District Court for the Eastern District of Michigan in Detroit:
Hitachi Automotive Systems Ltd.
According to a one-count felony charge, Hitachi and co-conspirators engaged in a conspiracy by agreeing during meetings and conversations to rig bids for and to fix, stabilize, and maintain the prices of auto parts it sold to Ford, General Motors, Honda, Nissan, and Toyota in the United States and elsewhere. The affected auto parts include starter motors, alternators, air flow meters, valve timing control devices, fuel injection systems, electronic throttle bodies, ignition coils, inverters, and motor generators. According to the charge, Hitachi and its co-conspirators carried out the conspiracy from at least as early as January 2000 until at least February 2010.
Hitachi manufactures and sells auto parts to automobile manufacturers throughout the world. The affected auto parts perform an array of functions in automobile engines, from regulating air and fuel flow to starting the engine to controlling the timing of engine valves.
Mitsuba Corporation
According to a two-count felony charge, Mitsuba and co-conspirators engaged in a conspiracy by agreeing during meetings and conversations to rig bids for and to fix, stabilize, and maintain the prices of windshield washer systems and components, windshield wiper systems and components, starter motors, power window motors, and fan motors it sold to Chrysler, Honda, Subaru, Nissan, and Toyota in the United States and elsewhere. According to the charge, Mitsuba and its co-conspirators carried out the conspiracy from January 2000 until February 2010. Mitsuba also agreed to plead guilty to one count of obstruction of justice, because of the company’s efforts to destroy evidence ordered by a high-level U.S.-based executive after learning of the U.S. investigation of collusion in the auto parts industry.
Mitsuba manufactures and sells numerous automotive parts to automobile manufacturers throughout the world. The affected auto parts perform an array of functions in automobiles. Windshield washer and wiper systems include a number of components and are designed to clear water or snow from vehicle windows. Starter motors are small electric motors used in starting internal combustion engines. Power window motors are small electric motors used to raise and lower vehicle windows. Fan motors are small electric motors used to turn radiator cooling fans.
Mitsubishi Electric Corporation (MELCO)
According to a one-count felony charge, MELCO and co-conspirators engaged in a conspiracy by agreeing during meetings and conversations to rig bids for and to fix, stabilize, and maintain the prices of automotive parts, including starter motors, alternators, and ignition coils, it sold to Chrysler, Ford, General Motors, Honda, Fuji Heavy Industries Ltd. (Subaru), Nissan, and certain of their subsidiaries in the United States and elsewhere. According to the charge, MELCO and its co-conspirators carried out the conspiracy from at least as early as January 2000 until at least February 2010.
MELCO manufactures and sells automotive parts, including starter motors, alternators, and ignition coils. Starter motors are small electric motors used in starting internal combustion engines. Alternators generate an electric current while the engine is in operation. Ignition coils are part of the fuel ignition system and release electric energy suddenly to ignite a fuel mixture.
Mitsubishi Heavy Industries Ltd.
According to a one-count felony charge, Mitsubishi Heavy Industries Ltd. (MHI) and co-conspirators engaged in a conspiracy by agreeing during meetings and conversations to rig bids for and to fix, stabilize, and maintain the prices of compressors and condensers it sold to General Motors and Mitsubishi Motors North America in the United States and elsewhere. According to the charge, MHI and its co-conspirators carried out the conspiracy from at least as early as January 2001 until at least February 2010.
MHI manufactures and sells compressors and condensers. A compressor produces and circulates highly pressurized refrigerant gas throughout the car air conditioning system. A condenser cools the engine by condensing the refrigerant gas into liquid and releasing heat.
T.RAD Co. Ltd.
According to a one-count felony charge, T.RAD Co. Ltd. and co-conspirators engaged in a conspiracy by agreeing during meetings and conversations to rig bids for and to fix, stabilize, and maintain the prices of radiators it sold to Toyota and Honda and the prices of automatic transmission fluid warmers (ATF warmers) sold to Toyota in the United States and elsewhere. According to the charge, T.RAD and its co-conspirators carried out the conspiracy from November 2002 until February 2010.
T.RAD manufactures and sells heat exchangers, including radiators and ATF Warmers. Radiators are devices located in the engine compartment of a vehicle that cool the engine. ATF warmers are devices located in the engine compartment of a vehicle that warm the automatic transmission fluid.
Valeo Japan Co. Ltd.
According to a one-count felony charge, Valeo Japan Co. Ltd. and co-conspirators engaged in a conspiracy by agreeing during meetings and conversations to allocate the supply of, rig bids for, and to fix, stabilize, and maintain the prices of air conditioning systems it sold to Nissan North America Inc., Suzuki Motor Corporation, and Subaru in the United States and elsewhere. According to the charge, Valeo and its co-conspirators carried out the conspiracy from April 2006 until February 2010.
Valeo was engaged in the manufacture and sale of automotive air conditioning systems, which are systems that cool the interior environment of a vehicle. Air conditioning systems, whether sold together or separately, are defined as automotive compressors, condensers, HVAC units (typically consisting of a blower motor, actuators, flaps, evaporator, heater core, and filter embedded in a plastic housing), control panels, sensors, and associated hoses and pipes.
Gary Walker
According to a one-count felony charge, Gary Walker, a U.S. citizen and former executive of a U.S. subsidiary of a Japan-based automotive products supplier, engaged in a conspiracy to rig bids for and to fix, stabilize, and maintain the prices of seatbelts sold to Honda, Mazda, Nissan, Subaru, and Toyota in the United States and elsewhere. According to the charge, Walker and his co-conspirators carried out the conspiracy from at least January 1, 2003 until at least February 2010.
The following charges were filed last week in U.S. District Court for the Southern District of Ohio in Cincinnati:
Jtekt Corporation
According to a two-count felony charge, Jtekt and co-conspirators engaged in a conspiracy by agreeing during meetings and conversations to allocate markets, to rig bids for, and to fix, stabilize, and maintain the prices of bearings it sold to Toyota and electric powered steering assemblies it sold to Nissan in the United States and elsewhere. According to the charge, Jtekt and its co-conspirators carried out the bearings conspiracy from 2000 until July 2011 and the steering assemblies conspiracy from 2005 until October 2011.
Jtekt manufactures and sells bearings and steering assemblies. Bearings are widely used in industry in numerous applications for many products. Bearings reduce friction and help components to roll smoothly past on another. Electric powered steering assemblies provide electric power to help the driver more easily steer the automobile. Electric powered steering assemblies link the steering wheel to the tires, and include the column, intermediate shaft, and electronic control unit, among other parts, but do not include the steering wheel or tires.
NSK Ltd.
According to a one-count felony charge, NSK and co-conspirators engaged in a conspiracy by agreeing during meetings and conversations to allocate markets, to rig bids for, and to fix, stabilize, and maintain the prices of bearings it sold to Toyota in the United States and elsewhere. NSK manufactures and sells bearings. According to the charge, NSK and its co-conspirators carried out the conspiracy from 2000 until July 2011.
The following charges were filed last week in U.S. District Court for the Northern District of Ohio in Toledo:
Yamashita Rubber Co. Ltd.
According to a one-count felony charge, Yamashita Rubber Co. Ltd. and co-conspirators engaged in a conspiracy by agreeing during meetings and conversations to rig bids for and to fix, raise, and maintain the prices of automotive anti-vibration rubber products it sold in the United States and elsewhere to Honda Motor Co. Ltd., American Honda Motor Company Inc. and Suzuki Motor Corporation. According to the charge, Yamashita Rubber Co. and its co-conspirators carried out the conspiracy from at least April 2003 until May 2012.
Automotive anti-vibration rubber products are composed primarily of rubber and metal and are installed in automobiles to reduce engine and road vibration.
Tetsuya Kunida
According to a one-count felony charge, Tetsuya Kunida, a former executive of a U.S. subsidiary of a Japan-based automotive anti-vibration rubber products supplier, engaged in a conspiracy by agreeing during meetings and conversations to rig bids for and to fix, raise, and maintain the prices of automotive anti-vibration rubber products. The conspiracy affected sales of automotive anti-vibration rubber products to Toyota Motor Corporation and other automakers in the United States and elsewhere. ccording to the charge, Kunida and his co-conspirators carried out the conspiracy from at least November 2001 until May 2012.
DENSO Corporation, Nippon Seiki Ltd., Tokai Rika Co. Ltd., Furukawa Electric Co. Ltd, Yazaki Corp., G.S. Electech Inc., Fujikura Ltd., Autoliv Inc., TRW Deutschland Holding GmbH, Diamond Electric Mfg. Co. Ltd., and Panasonic Corporation have already pleaded guilty. Fifteen individuals have been sentenced to pay criminal fines and to serve prison sentences ranging from a year and a day to two years each.
The companies and individuals are charged with price fixing in violation of the Sherman Act, which carries maximum penalties of a $100 million criminal fine for corporations and a $1 million criminal fine and 10 years in prison for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine. Additionally, Mitsuba was also charged with obstruction of justice, which carries a maximum penalty of a $500,000 criminal fine.
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