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Cartel Suits Filed Against Capacitor Manufacturers after Reports of Cooperation with Authorities

A pair of putative class actions has been filed in the past two weeks charging Panasonic, Samsung, and other electronics manufacturers with forming a cartel to boost prices in the sagging market for certain electronics capacitors.  The actions follow press reports that officials in the United States and China are investigating the alleged cartel and that at least one manufacturer, who has not yet been identified, has applied for leniency with the Department of Justice.  The lawsuits are Chip-Tech, Ltd. v. Panasonic Corp. and Dependable Component Supply Corp. v. Panasonic Corp., filed in the Northern District of California and assigned to Judges James Donato and Vince Chhabria, respectively.  Each suit pleads a single claim for restraint of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.

The plaintiffs, both U.S.-based capacitor buyers, allege that around 2005, the defendant manufacturers agreed to form a cartel to bolster the prices of aluminum and tantalum electrolytic capacitors, two types of capacitor widely used in consumer and automotive electronics, particularly desktop and laptop computers.  According to the complaints, these capacitors had by the early 2000s become commodity products and represented a shrinking market, eclipsed by the ceramic capacitor, a smaller type of capacitor used in tablets, portable music players, and smartphones.

In response to this market challenge, the defendant manufacturers allegedly agreed by 2005 to coordinate their prices, causing prices to remain fixed or to increase despite the diminishing demand for aluminum and tantalum capacitors.  Plaintiffs allege that the manufacturers shared pricing information through correspondence or in-person meetings, including meetings at trade association gatherings.  The manufacturers also allegedly coordinated their production lead times in order to avoid oversupply, preventing consumers from strategically ordering capacitors at times when supply was high and prices were low.

The Chip-Tech and Dependable Component Supply suits follow recent press reports stating that capacitor manufacturers are under investigation by the DOJ’s Antitrust Division and China’s National Development and Reform Commission, which enforces antitrust law in China.  The investigations were reportedly sparked when one manufacturer blew the whistle on its purported co-conspirators and applied to the two agencies for leniency. These investigations appear to reflect three recent developments in enforcement.  First, they demonstrate the tough stance of the DOJ’s Antitrust Division, which in 2012 obtained a $500 million criminal fine from a Taiwan-based LCD manufacturer and $1.1 billion in total criminal fines.  Second, the investigations suggest a new, and perhaps unprecedented, level of coordination between the DOJ and Chinese authorities.  Third, they indicate the effectiveness of ACPERA, the Antitrust Criminal Penalty Enhancement and Reform Act of 2004, which both increases maximum criminal fines and limits civil damages for whistle-blowing defendants who cooperate with civil plaintiffs.

The non-amnesty corporate defendants in these cases may now face criminal fines of up to $100 million if they are found guilty of violating Section 1 of the Sherman Act (as opposed to $10 million before ACPERA).  The amnesty applicant, by contrast, not only may enjoy leniency from prosecution, but under ACPERA may be entitled to a sharp reduction of its potential damages in civil suits and be held liable only for actual damages based on its own actions, not treble damages or codefendants’ damages under a theory of joint and several liability.

The Chip-Tech and Dependable Component Supply complaints highlight the boost that civil plaintiffs have gained from the DOJ’s Leniency Program and the carrot-and-stick incentives of ACPERA.  Because of ACPERA, the Chip-Tech and Dependable Component Supply plaintiffs will likely now have at least one defendant eager to cooperate with them in order to avoid treble damages and joint and several liability.  To qualify for these benefits, a defendant must “provid[e] a full account” to the plaintiffs “of all facts known ... that are potentially relevant to the civil action” and must “furnish[] all documents or other items potentially relevant” to the suit.  Pub. L. No. 108-237, § 213(a)-(b), 118 Stat. 661, 666-669 (June 22, 2004), as amended by Pub. L. No. 111-190, 124 Stat. 1275 (June 9, 2010).

As a result of ACPERA, a defendant in a civil suit may take a more proactive stance toward cooperation, especially given the ruling last year in In re Aftermarket Automotive Lighting Products Antitrust Litigation, No. 09 MDL 2007-GPW(PJWx), 2013 U.S. Dist. LEXIS 126308 (C.D. Cal. Aug. 26, 2013).  In that case, the court rejected the defendants’ application for limitation of damages under ACPERA because (1) defendants had withheld valuable information from the plaintiffs until late in the discovery process (despite having provided the same materials previously to the government) and (2) defendants’ cooperation consisted of little more than complying with base-line discovery obligations under the federal rules.  As the investigations into the alleged capacitor cartel continue, it will be interesting to see if more defendants cooperate or apply for amnesty and if, as a result, the investigations expand into additional markets and products—potentially triggering additional civil suits.