By Larry P. Vellequette, Crain staff (AN)
A mushrooming investigation into alleged price fixing by auto-parts suppliers on four continents already is the most sweeping in U.S. history, says John Terzaken, director of criminal enforcement in the antitrust division of the U.S. Department of Justice.
The investigation has now spread to include six automotive component segments. The parts involved were sold both to automakers and in the aftermarket, and the probe continues to expand, he said.
"This is a very broad investigation. There is much more to come," Terzaken told Automotive News. "In terms of the breadth of the investigation and the scope of the commerce involved, there's certainly nothing on the record that parallels this."
Terzaken said officials from "Australia and other jurisdictions" have joined the investigation, along with previously disclosed participation of the European Union, Japan and the United States.
The investigation has cast a broad shadow over the industry, but its limited public disclosures have left supplier executives struggling to answer questions from colleagues and industry acquaintances about whether their companies are suspected of wrongdoing.
In response to the expanding case, U.S. suppliers are reviewing their own exposure and will gather in Detroit within the next two months to discuss the case, said officials of the Original Equipment Suppliers Association, an industry trade group.
Terzaken declined to identify the number of investigators pursuing allegations against suppliers, or to say where, when, or why the investigation began. But he said the resources being expended were significant.
"We have had one corporate conviction so far, with three individual cases," Terzaken said.
On Sept. 29, the Justice Department announced a plea deal with Furukawa Electric Co. of Japan that included a $200 million fine plus incarceration for three U.S.-based company executives. The three await sentencing.
"It would be wrong to focus on that particular case," Terzaken said. "I can't define the specific number of parts we're looking at, but it is broad. We focus on where there are allegations or evidence of anti-competitive behavior."
No other companies have been charged.
In February 2010, the Japan Fair Trade Commission raided Furukawa's Tokyo offices, along with those of wire harness makers Sumitomo Electric Industries Ltd. and Yazaki Corp.
With subpoenas and further raids by officials on at least four continents, the investigation has broadened to include at least 19 suppliers in six auto supply sectors.
As the investigation expands, suppliers have powerful incentives to turn themselves in and report others. Antitrust laws in the United States and dozens of other countries provide for sentencing leniency for those who cooperate -- and amnesty for those who are the first to provide evidence of previously unknown antitrust activity.
Neil De Koker, CEO of the Original Equipment Suppliers Association, which represents more than 400 automotive suppliers that do business in North America, said: "One of the concerns is: Where's it going next? These are criminal investigations, so there's no public report of what they're looking for."
He said the Detroit conference for its members in late January or early February is meant to discuss the case and review antitrust laws and procedures.
"The cooperation among the governments working together -- to have it expand globally like that -- I think [suppliers] are definitely looking" at their own activities to make sure they are in the clear, De Koker said.
Most of the approximately 20 automotive suppliers that have so far been identified as being part of the investigation are publicly held companies with legal requirements to inform shareholders when such an event occurs. Privately held companies don't have those notification requirements, and investigators haven't provided a comprehensive list of the suppliers under scrutiny.
But the fact that a supplier has received a subpoena or search warrant does not mean it is a target, antitrust experts said. Investigators could be seeking evidence linked to a competitor.
Steve Bolerjack, who worked as an antitrust lawyer for Ford Motor Co. for 26 years, said: "If you're an automotive supplier, I don't think you can take great comfort that you're not in the industries that have already been identified. This has gotten a number of very big companies, and Lord knows how many small companies that don't have the obligation to publicly disclose."
Bolerjack, who now works for Dykema Gossett, a Detroit law firm, said suppliers should be reviewing their own antitrust compliance procedures and making sure they could respond to an expansive subpoena.
Companies need to make sure that documents -- including those employees may keep on personal computers or thumb drives -- are accounted for and not destroyed. "You need to look your IT people right in the eye and say, 'How capable are you of doing this on three or four hours' notice?'" he said.
While the global investigations may be expanding, convictions in such cases can be hard to come by, said Valerie Suslow, an expert in antitrust law and a business professor at the University of Michigan.
"You need evidence that the companies communicated to fix prices or allocate customers or market shares or geographic areas," Suslow said. "Often it means that they met face to face. They may investigate all of the major firms in the industry, but they will only then proceed if they have evidence that someone was involved."
Spokesmen for U.S. automakers have indicated that they are monitoring the investigation. Lawyers have so far filed more than two dozen class-action lawsuits on behalf of consumers and auto dealers seeking potential damages.
Terzaken, of the Justice Department, said: "This is a very high-priority investigation for us, and it's because of its significance to the economy. It will remain a very significant interest of the division until the end and all of its just conclusions have been reached."
From Automotive News (A Crain publication)