By on September 27, 2013
japanpricefixing

Source: United States Department of Justice

Nine Japanese auto suppliers and two executives have agreed to plead guilty and pay more than $740 million in fines for participating in a price fixing conspiracy, the U.S. Department of Justice said yesterday. The two executives, one an American citizen, the other Japanese, will have to serve prison terms. According to the DoJ, thirty different components were involved and they were sold to all three domestic automakers as well as the U.S. operations of Honda, Mazda, Mitsubishi, Toyota and Fuji Heavy Industries, which owns the Subaru brand. The automakers have cooperated with the investigation. More than 25 million vehicles sold in the U.S. were affected by the conspiracy, raising costs to automakers and consumers alike, U.S. Attorney General Eric holder told a press conference in Washington yesterday.

The guilty pleas were the most significant development yet in a global investigation of price fixing and bid rigging by automotive suppliers. European authorities raided six companies earlier this week and Japanese regulators are involved as well. In a statement, the Japanese embassy in Washington said, “The Japanese Fair Trade Commission has coordinated with the DOJ on its investigation and will continue to coordinate with it.”

The investigation is the largest criminal antitrust probe in the U.S. DoJ’s history, with more than $1.6 billion in fines levied so far, with civil lawsuits for financial losses as well working through the legal system. The nine schemes involved in the guilty pleas raised the prices of $5 billion worth of parts in those 25 million vehicles, about $200 per car, though the DoJ did not indicate how much the conspiracies netted.

The investigation may continue spreading to companies based in the U.S. and Europe. Swedish based Autoliv Inc. and a German company,  TRW Deutschland Holding GmbH, have already been prosecuted. Previously, as part of the ongoing investigation, DENSO Corp., Nippon Seiki Ltd., Tokai Rika Co. Ltd., Furukawa Electric Co. Ltd, Yazaki Corp., G.S. Electech Inc., Fujikura Ltd., Autoliv, TRW Deutschland, Diamond Electric Mfg. Co. Ltd., and Panasonic Corp., have also pleaded guilty, with 15 individuals sentenced with fines and prison sentences.

So far 21 individuals and 20 companies have been charged as part of the larger investigation. All of the companies have either pleaded guilty already or reached agreements with prosecutors to do so. Seventeen of the 21 executives have either been sentenced to or entered into plea agreements that involve significant prison time. It remains to be seen what would happen if any of these cases actually end up in a courtroom in front of a jury. Critics of prosecutorial overreach have been vocal about the tendency for prosecutors to pile up charges specifically to encourage plea bargains with no trials. The guilty pleas by the suppliers obviously mean that the accused would rather not take their chances explaining to juries made up of consumers how their actions didn’t really raise the prices of automobiles. When federal prosecutors do take cases to court, they win well more than 90% of their cases.

The companies’ and executives’ agreed-upon fines and sentences are:

• Hitachi Automotive Systems to pay a $195 million criminal fine.

• Jtekt Corp. to pay a $103.27 million criminal fine.

• Mitsuba Corp. to pay a $135 million criminal fine.

• Mitsubishi Electric Corp. to pay a $190 million criminal fine.

• Mitsubishi Heavy Industries to pay a $14.5 million criminal fine.

• NSK to pay a $68.2 million criminal fine.

• T.RAD Co. to pay a $13.75 million criminal fine.

• Valeo Japan Co. to pay a $13.6 million criminal fine.

• Yamashita Rubber Co. 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.

According to the DoJ, each of the guilty companies had unnamed co-conspirators. There were meetings and phone conversations using code names and remote locations used to rig bids.

The specific charges concerning the parts involved were filed in three different U.S. District Courts. In Detroit, the following companies were charged:

• MELCO and Hitachi conspired with each other and other suppliers on sales of starter motors, alternators, and ignition coils and other parts.

• Mitsuba and Mitsubishi Electric conspired together and with other companies to fix prices of starter motors.

• Hitachi and others conspired for at least a ten years to fix the prices of parts it sold to Ford, GM, Honda, Nissan and Toyota, including starter motors, alternators, air flow meters, valve timing control devices, fuel injection systems, electronic throttle bodies, ignition coils, inverters and motor generators.

• Mitsuba and others conspired for at least a decade to rig bids for 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, investigators said.

• Mitsuba will plead guilty to one count of obstruction of justice. A high ranking U.S. based executive of the company ordered evidence destroyed when he found out about the federal antitrust probe.

• MELCO agreed to plead guilty to charges it conspired to rig bids for starter motors, alternators and ignition coils it sold to Chrysler, Ford, GM, Honda, Fuji Heavy Industries Ltd. (Subaru), Nissan, and others for at least 10 years.

• Mitsubishi Heavy Industries conspired to fix prices of air conditioning compressors and condensers it sold to GM and Mitsubishi Motors North America in the United States and outside the U.S. for a decade.

• T.RAD agreed to plead guilty to a charge that it conspired to fix the prices of radiators it sold to Toyota and Honda and automatic transmission fluid warmers it sold to Toyota since November 2002.

• Valeo Japan conspired with others to rig bids for air conditioning systems it sold to Nissan, Suzuki and Subaru.

The Justice Department also filed charges in U.S. District Court in Cincinnati:

• Jtekt Corp. agreed to plead guilty to charges it conspired to rig bids for bearings it sold to Toyota and electric power assisted steering components that it sold to Nissan.

• NSK was charged with one count of conspiring to fix the prices of bearings it sold to Toyota.

The Justice Department also filed the following charges in U.S. District Court in Toledo:

• Yamashita Rubber was charged with one count of conspiring to rig bids for  anti-vibration rubber products it sold to Honda Motor Co., American Honda Motor Co. and Suzuki Motor Corp.

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25 Comments on “Nine Japanese Companies, Two Execs to Plead Guilty in Ongoing Auto Parts Price-Fixing and Bid-Rigging Investigation...”


  • avatar
    gmichaelj

    Kudos to DOJ for sending white collar criminals to jail: I thought that was passé.

  • avatar

    You people are a disgrace and Seppuku is the only logical answer.

  • avatar
    krayzie

    Next prosecute them for making premature wear and unreliable parts.

    • 0 avatar
      TheAnswerIsPolara

      I quite agree. 2011 Toyota Sienna has broken armrest and seat apron. Door Panel: 600$ from the dealer, 450$ online. seat apron 150$ dealer/ 99$ online.

      You’d think that’s the cost of a starter or something…

  • avatar
    slavuta

    Now it is clear to me why DENSO O2 sensor cost $150

    • 0 avatar
      rolladan

      Denso is like the only part company not mentioned on this list lol

      • 0 avatar
        Sceptic

        Yes, that drew my attention as well, DENSO being a huge supplier to Toyota in particular.

        But on second read of the article:

        Previously, as part of the ongoing investigation, DENSO Corp.,…, have also pleaded guilty, …

      • 0 avatar
        slavuta

        Just because company or an individual are not listed in police report, doesn’t mean they don’t do black business. For example, Grand Sport Autobody considered a “good shop”. But when I went there they were rigged my estimate by $400. Nobody went to jail because estimator said that he needed to prep the bumper cover, same bumper cover that comes from dealer fully prepped. don’t be naive. They caught 15 thieves but 150 still walking free. And besides, these 15 positions will be taken by new 15 thieves

  • avatar
    Sceptic

    It’s disturbing that DOJ has so much pull that these large suppliers preferred to settle. To me it is not obvious that any harm has been done. There is plenty of competition in the auto parts market. Even proprietary parts for Euro cars are available with excellent quality and at good price points from many manufacturers, yes even the Chinese parts I put on my Mercedes have been outstanding so far. Most likely reason is that large auto manufacturers are too conservative and unwilling to procure cheaper/better parts from newcomers and smaller competitors. A lot of inter company alliance politics are in this.

    • 0 avatar
      jpolicke

      Besides covering oneself by qualifying an alternate source to mitigate disruptions from things like tidal waves and earthquakes, the OEMs have little to gain from experimenting with newcomers and smaller competitors. Factor in the cost of extensive testing to qualify a component versus what the potential savings will be, then the complexity of adding this alternate source into your parts stream, assigning a separate part number, editing service manuals to indicate that this part number is an equivalent to that number…the savings potential approaches zero.

      • 0 avatar
        Lorenzo

        Not to mention the auto makers squeeze their suppliers for the lowest possible wholesale price, making only the largest, most efficient suppliers de facto sole suppliers. Those suppliers apparently try to make it up on after-market sales, but in the case of AC compressors and other specialty parts, they even squeeze higher prices out of the manufacturers.

        Then there’s the eternal issue of parts quality, the issue that caused Henry Ford to build the Rouge so he could make all his own parts, controlling both quality and price. It wasn’t long ago that Chrysler had a recall due to brake assemblies that were delivered by a supplier with parts like the brake pads missing.

        The auto makers are partly responsible for the dog-eat-dog system in which they have become both perpetrators and victims. Car owners needing after market parts are just collateral damage.

  • avatar
    Tosh

    So what does this mean to me? Coupon for free oil change? Free Panasonic t-shirt? $200 refund check from Honda? Methinks it’s just business as usual…

    • 0 avatar
      jpolicke

      The DOJ isn’t really looking out for us, if they were they’d have been talking about restitution. Fines go straight into the Treasury, where they’ll fund the gov’t for about 30 hours.

      If these companies had $740 million in ill-gotten gains, then spread over the 85 million cars produced this year, that’s $8.70 per car. You might get a t-shirt for your trouble, but only if it was made in a Bangladesh sweatshop.

      • 0 avatar
        Lorenzo

        Thirty hours, you say? The federal government spends a million dollars every nine seconds. That $740 million in fines will pay for less than two minutes of federal spending.

  • avatar
    LeMansteve

    As I understand it, price fixing is legal in Japan and many other parts of the world. In such a global economy today, where is the line drawn on compliance to local laws? In my mind there must have been specific evidence of, say, all of these Japanese companies fixing prices on parts sold SPECIFICALLY to the US divisions of Toyota, Honda, etc. If a group of Japanese companies fix prices on products sold to Japanese companies, all is OK, but if those same Japanese divisions fix prices sold specifically to a US-based company (American Honda Motor Corp, for example), then that’s the illegal part?

    I guess I don’t really understand the whole situation.

  • avatar
    Big Al from Oz

    Imagine what is going and has gone on undetected.

  • avatar
    Wheeljack

    This can’t be possible. As we all know, Japanese companies (the majority of the defendants here) are benevolent organizations that are in business simply to give people a purpose in life, provide the finest products for their customers and not for silly things like profits.

  • avatar
    Dubbed

    All 22 of the Yakuza syndicates are perfectly legal in Japan. Their just business with that commit extra legal activities from time to time.

  • avatar
    jim brewer

    The United States Department of Justice showing signs of life? In the area of Antitrust yet! I can hardly believe my eyes. Does Eric Holder know about this?

    I completely disagree about the fines. That hits them where it hurts. Its not deductible as a business expense. It can’t be rationalized as a “customer care” expense. The companies really really hate to pay fines for this reason. There is internal finger-pointing and some peripherally involved people have to walk the plank.

    I wonder about this Gary Walker guy and his 14 month sentence. What does it take to do jail time on a price-fixing antitrust case these days? Gary walker must either be public enemy no.1, or really, really unlucky.


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