The Antitrust Division of the Department of Justice (“DOJ”) scored an important victory on September 20, 2012 when AU Optronics Corp. (AUO) of Taiwan was fined $500,000,000 by U.S. District Court Judge Susan Illston in San Francisco for participation in a criminal price fixing conspiracy in the market for thin-film transistor liquid crystal display (LCD) panels. Judge Illston also sentenced two high level executives of AUO to 3-year prison terms each and fined each of them $200,000 for their participation in the criminal conspiracy. See Press Release, U.S. Dep’t of Justice, Taiwan-Based AU Optronics Corporation Sentenced To Pay $500 Million Criminal Fine For Role In LCD Price-Fixing Conspiracy (Sept. 20, 2012) (http://www.justice.gov/atr/public/press_release/2012/287189.htm).
The long running DOJ investigation focused on the world’s leading manufacturers of LCD panels, including AUO, Samsung Electronics Co. Ltd., LG Display Co. Ltd., Sharp Corp., Chunghwa Picture Tubes Ltd., Chi Mai Optoelectronics and Hannstar Display Corp. DOJ filings in the AUO litigation reveal that Samsung’s early approach to DOJ about the ongoing price fixing conspiracy initiated the government’s criminal investigation in 2006. By coming forward first and early, Samsung was granted conditional leniency by DOJ and minimized its exposure in the case.
LCD panels are used in computer monitors and notebooks, televisions and other electronic devices. These finished products are then sold in the United States and around the world. By the time the conspiracy ended in 2006, DOJ estimated that the worldwide market for LCD panels was valued at approximately $70 billion annually. The LCD price fixing conspiracy affected some of the largest computer manufacturers in the world, including Hewlett Packard, Dell and Apple. As key purchasers of LCD panels, these companies were forced to pay the higher fixed prices for LCD panels which in turn increased the retail prices of computers, notebooks, TVs and other consumer products sold in the United States.
The fine imposed by Judge Illston is half of the maximum $1 billion fine DOJ sought in the case. DOJ also sought the maximum 10-year prison terms for each of the former executives, AOU’s President and Vice President. In its Sentencing Memorandum filed with the court on September 19, 2012, the DOJ argued that the maximum fines and prison terms were required and appropriate given the circumstances of the case. The DOJ said:
The defendants were central figures in a massive, five-year global price fixing conspiracy that caused enormous and widespread harm affecting virtually every purchaser of products containing LCD panels. H. B. Chen and Hui Hsiang were top executives at AUO and … [its American subsidiary]… and created a culture of criminal collusion at their companies…. And the defendants, unlike their coconspirators, are remorseless, having refused to accept responsibility or to provide any assistance that would justify a reduction in their sentences. at p.1.
Judge Illston did not agree and said the $1 billion figure was dramatic and substantially excessive, citing the onslaught of future civil actions, including private plaintiff treble damage class actions. The Judge also stopped short of imposing the maximum jail time of 10 years and sentenced each former corporate executive to 36-month jail terms and imposed a criminal fine of $200,000 on each.
AUO, a Taiwanese company, and its American subsidiary, became one to the world’s leading manufacturers of LCD panels. AUO chose to fight the DOJ charges against it rather than settle early as did most of the coconspirators. After an eight-week trial, AUO, its American subsidiary and the two former executives were found guilty by a jury on March 13, 1012. The indictment charged that AUO participated in the worldwide conspiracy form September 14, 2001 to December 1, 2006 and its subsidiary joined the conspiracy as early as spring 2003. The jury found that the convicted companies and the two former executives fixed the prices of LCD panels sold in the United States. The jury also found that the prices were fixed during monthly meetings with their competitors secretly held in hotel conference room, karaoke bars and tea rooms around Taiwan.
To date, DOJ’s ongoing LCD panel price fixing investigation has generated well over $1.3 billion in criminal fines and netted eight companies for criminal price fixing. All together, DOJ reports that 22 LCD executives have been charged. Including the two AUO executives, a total of 12 executives have been sentenced to serve a combined total of 4,871 days behind bars in a federal prison.
Challenging the DOJ as the lone targeted defendant in a massive criminal price fixing conspiracy where other coconspirators have pled or settled, then showing no remorse and little cooperation with DOJ prosecutors may be a risky strategy to pursue. Samsung may be the better example here to follow, if it is possible. When price fixing is discovered on such a massive scale, report it quickly and try to be the first at DOJ’s door. With this win under its belt, including the huge fines and the jail times sought and imposed, expect the DOJ going forward to seek bigger and bigger criminal fines and longer and longer sentences as a deterrent to future global price fixing conspiracies.