Nine Japan-based companies and two executives will plead guilty and pay more than $740 million in criminal fines for their roles in price fixing on more than 30 different products sold to U.S. automakers, the Department of Justice announced today. DOJ said that the parts were sold to Chrysler, Ford and General Motors, as well as to the U.S. subsidiaries of Honda, Mazda, Mitsubishi, Nissan, Toyota and Subaru.
Including those announced today, 20 companies and 21 executives have been charged in the Antitrust Division’s ongoing price fixing and bid rigging probes in the auto parts industry, as the scandal keeps expanding. This raises serious systemic corruption issues for some of the largest and previously respected Japanese firms and presents a political problem for the Obama Administration as it tries to cut a trade deal with Japan. AutoInformed predicts more indictments are coming.
The multiple conspiracies 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 is coordinating its ongoing investigation with the Japanese Fair Trade Commission, the European Commission, Canadian Competition Bureau, Korean Fair Trade Commission, Mexican Federal Economic Competition Commission and the Australian Competition and Consumer Commission.
“Some of the price-fixing conspiracies lasted for a decade or longer, and many car models were fitted with multiple parts that were fixed by the auto parts suppliers,” said Scott D. Hammond, of the Antitrust Division’s criminal enforcement program.
All 20 companies have pleaded guilty or have agreed to plead guilty and have agreed to pay more than $1.6 billion in criminal fines. Seventeen of the 21 executives have been sentenced to serve time in U.S. prisons or have entered into plea agreements calling for significant prison sentences.
Each of the companies and executives charged today has agreed to cooperate with the department’s ongoing antitrust investigation under plea agreements that are subject to almost certain 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 an $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 today 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 today on certain sales of starter motors. Each of the other companies charged today colluded with other unnamed co-conspirators.
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 following charges were filed today in U.S. District Court for the Eastern District of Michigan in Detroit:
Hitachi Automotive Systems
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 throughout the world. The affected parts perform operations 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.
Mitsubishi Electric Corporation, aka 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, 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.
Mitsubishi Heavy Industries
According to a one-count felony charge, Mitsubishi Heavy Industries Ltd, aka 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.
T.RAD Company
According to a one-count felony charge, T.RAD 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 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.
Valeo Japan
According to a one-count felony charge, Valeo Japan 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, 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.
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 Jan. 1, 2003 until at least February 2010.
The following charges were filed today 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.
NSK
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 today in U.S. District Court for the Northern District of Ohio in Toledo:
Yamashita Rubber Company
According to a one-count felony charge, Yamashita Rubber Company 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 Company, 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.
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. According 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.
The investigation highlights the broader problem of doing business with Japan, especially its auto and auto parts sector. For decades, they have engaged in exclusionary and illegal trade practices that have kept our exports out of their market and flooded our market with their products. Our largest trade deficit in autos and auto parts is with Japan, a number that grows higher year by year. But, what’s really important is not the size of the trade deficit in that sector, but the pain in terms of lost jobs, shattered dreams and shuttered factories all across America.
Today’s announcement may be celebrated by the prosecutors, but it only adds to the concerns of workers who see the Administration embracing Japan’s entry into the Trans-Pacific Partnership Free Trade Agreement negotiations. Japan cheats, it’s that simple. We do not want the trade negotiations to grease the way for Japan’s auto and auto parts companies to capture more of our market and jeopardize more U.S. jobs. In coming days, some will try to promote Justice’s actions as proof that they will be tough on Japan but real action on Japan’s currency manipulation, its predatory and illegal trade practices will have to take place before those arguments will have any resonance.
The fines may penalize the companies and the executives, but they do not compensate their victims. The money the government collects should be used to restore production, rehire those who have suffered and refund the excess prices consumers have had to pay. I expect that the penalties being paid would only cover a fraction of the pain that has been felt.
The proper approach would be to require Japan to clean up its act and earn the right to be a preferred trade partner. The lesson of today’s action should not be to reward them after they have been found to have damaged our producers, their employees and the communities in which they operate and live.