They are used on televisions, billboards, computers and phones. The average American can’t go an hour without looking at an LCD screen. They are arguably more ubiquitous than automobiles.
So is it any surprise LCD screens are at the center of one, if not the, largest antitrust litigation ever pursued on the criminal and civil side? Now as the antitrust snowball grows bigger, two Florida attorneys await their clients’ turn to take a bite at millions of dollars at stake from manufacturers who fixed prices.
“The conspiracy is alleged to have begun in 1998 and have continued through 2006,” said attorney Robert Turken, a partner at Bilzin, Sumberg, Baena Price & Axelrod who is representing the interests of two Florida companies in the matter. He is working with fellow partner Scott Wagner.
“It is alleged that the conspiracy affected every LCD screen and every product containing a LCD screen contained that was sold in the U.S. during that time period.”
The U.S. Justice Department struck again last week on the issue when a California judge handed down a $500 million fine against A.U. Optronics Corp. — a Taiwan-based company that is the largest manufacturer of LCD screens. It was one of the largest ever penalties to be handed down for price-fixing. Two of the company’s executives were also sentenced to three years in prison.
The last six years has seen the federal government pursue some of the world’s largest names in electronics, such as Samsung C&T Corp., LG Display Ltd., Toshiba Corp., Hitachi Ltd., NEC Corp., Chungway Picture Tubes Ltd. and others. They were accused of conspiring to fix prices of LCD screens, passing the cost to companies and eventually to the consumer in a $74 billion scheme perpetrated between 2001 and 2006.
The antitrust action is a further example of the Obama Administration’s intention to hold not just companies, but executives accountable for corporate malfeasance. While Wall Street executives remain largely untouched for the 2008 financial fiasco, those charged with violations of the Sherman Antitrust Act, the Foreign Corrupt Practice Act and tax fraud have found themselves in the cross hairs of Attorney General Eric Holder — especially if the targets work for foreign companies.
Besides the two Taiwanese sentenced last week, several other foreign executives with LCD manufacturers have pleaded guilty and gone to prison. The LCD screen antitrust action follows investigations into some of the same players for memory chips such DRAM and SRAM.
“It’s huge,” said Miami attorney Andrew Hall of Hall, Lamb & Hall. “It reflects the move by the Justice Department into the antitrust area and many major civil antitrust cases will very often follow a criminal antitrust case.”
Wagner said a sea change occurred in the antitrust arena in the late 1990s when the Justice Department formalized policy that said if a participant in a price-fixing scam came forward first, that company would receive no penalty and its executives would not face prosecution.
“That really started incentivizing people,” he said.
The problem was that when companies came forward, they were admitting to ripping off their customers and opening themselves up to treble damages under the Clayton Antitrust Act. So in 2004, the U.S. Congress protected such businesses on the civil side of antitrust law, as well, Wagner said.
There is a class-action multi-district litigation in San Francisco for both direct purchasers, such as Dell Computer Corp, and indirect purchasers, including retailers and consumers.
“Consumers have actually done very well; the indirect class for LCDs solely sold to consumers settled for $1.5 billion,” Wagner said.
The websitelcdclass.com explains how consumers can make a claim.
The direct class of companies, which include Dell and other top computer manufacturers, settled with 10 companies for about $1.1 billion. Fines running into the millions have been paid to settle charges on the criminal side.
And then there are those who opted out of the direct class, which is where the Florida cases come in.
The two Florida cases handled by Bilzin Sumberg are even more complicated as one is part of an adversary action of a bankruptcy case in Miami, while the other is in Tampa federal court.
The cases are expected to go to trial in 2014. Both pose interesting scenarios. Usually, larger companies decide to opt out of the class, but in the Florida cases, it was the opposite.
“There is a variety of reasons we would chose to opt out,” Wagner said. “We thought it gave us the maximize flexibility in pursuing our claims.”
Wagner said about 20 companies have opted out of the class settlement and brought suit.
The case in U.S. District Court in Miami was brought on behalf of the estate of Miami-based All American Semiconductor Inc. The Tampa lawsuit was brought on behalf of Tech-Data Corp.
Attorney Stuart Singer, the managing partner of Boies, Schiller & Flexner in Fort Lauderdale, signed the Nov. 2 complaint for All American. It has been assigned to U.S. District Judge Donald Graham.
Prosecutors said executives would meet at quarterly meetings between 2001 and 2006 to set production levels and prices they would charge to Dell and other companies like Apple Inc.
U.S. District Judge Susan Illston in San Francisco last week said that even though executives acted illegally, they did so to aid a troubled industry plagued by over-production and plummeting prices.
“There were a lot of business pressures they responded to,” the judge said. “There was relatively little personal motivation.”
If the opt-out lawsuits are successful, under the Clayton Act, plaintiffs can seek treble damages. So if a case goes to trial, the damage award can be sizable.
The complaints state many of the defendants have already pleaded guilty to participating in the conspiracy to settle criminal antitrust charges. And the sentencing of AU Optronics last week means plaintiffs can move right into proving damages.
Hall said the criminal charges and the litigation sends a message to companies that collusion will not be tolerated in the world marketplace.
“When you talk about setting the prices of LCD screens that go into every piece of technology, that finds it’s way into the business community, that finds its way into the consumer community, that artificially props up the price,” Hall said. “It has a terrible effect on the economy.”