Inductor cartel case pulls on common threads from capacitor, resistor cases

23 January 2018 2:07pm
Map of USA

18 January 2018. By Joshua Sisco.

A new cartel case is keeping federal prosecutors and civil litigants focused on familiar territory: Japanese companies manufacturing small but critical components of myriad electronic products.

Inductors — electrical circuit parts that use magnetic fields to store and regulate the flow of electricity — are among the latest products to be investigated by US antitrust prosecutors, with manufacturers in Japan receiving subpoenas last November.

Price-fixing probes were previously initiated regarding capacitors and resistors, similar products known as passive electronic components because they are incapable of controlling electrical currents on their own.

So far, no company has confirmed receipt of inductor subpoenas, and the investigation is still in its early stages. But in civil litigation over inductors that followed an earlier MLex story, defendants include TDK, Sumida, Taiyo Yuden, Murata and Panasonic.

Panasonic produces all three products. The company’s leniency application with federal prosecutors spawned the capacitor investigation, which has to-date yielded charges against eight companies. It is also understood to be the leniency applicant in a separate investigation of resistors, though that case was closed with no charges. Panasonic denied any involvement in the inductor case, saying it hadn't received a subpoena or sought leniency from the DOJ.

The other four companies make capacitors or resistors, or both, but have avoided criminal charges. Murata makes resistors, while according to their websites, Sumida and Taiyo Yuden make ceramic capacitors, a product that was specifically carved out of the DOJ’s subpoenas on capacitors. TDK makes ceramic and film capacitors through its 2009 acquisition of EPCOS. Film capacitors were the subject of a separate investigation closed without charges.

The overlap in companies is not the only commonality between the investigations, according to civil litigation by inductor purchasers. All five defendants in that case are members of the Japan Electronics and Information Technology Industries Association, or JEITA, which was used as cover for price-fixing meetings, the inductor plaintiffs charge. JEITA itself is not implicated.

The capacitor case has yielded a number of charges that have been made almost entirely through plea deals, so the government’s evidence remains out of view.

To date, the publicly available evidence has been amassed by plaintiffs through discovery in the private damages lawsuits over capacitors and resistors, both of which point to JEITA as having a central role. Prosecutors, though, will show their hand in a trial later this year against Nippon Chemi-con over capacitor price-fixing.

Purchasers of inductors filed their lawsuit after an MLex story reporting the existence of a criminal case. But the lawsuit was being prepared well before that, it is understood. In the course of discovery in both the private capacitor and resistor litigation, information was uncovered suggesting a price-fixing conspiracy involving other passive electronic components, including inductors, it is understood.

The inductor plaintiff — Dependable Component Supply — is also a named class representative in civil damages cases over capacitors.

According to the inductor plaintiffs, after 29 countries signed the Information Technology Agreement, a 1996 multilateral trade agreement, Japanese passive component makers began facing pressure from companies in Taiwan and South Korea. Japanese passive component exports fell by more than 30 percent from 2000 to 2002, while North American sales fell 35 percent from 2001 to 2002. When China signed the ITA in 2003, Japanese sales fell even further, the inductor plaintiffs say.

JEITA served as cover for a cartel designed to boost prices in the face of stiff competition, the inductor plaintiffs contend.

JEITA’s passive component working group was specifically named by the civil capacitor litigants. The inductor plaintiff says the defendants were members of JEITA's electronic parts subcommittee, which executives from Murata and TDK currently head.

It remains unclear whether the US inductor investigation will result in charges, as the capacitor case did, or whether it will ultimately be dropped. It also remains to be seen whether other components will come under scrutiny.