Heads-up to price fixing conspirators: Taiwanese company fined $US 500 million, executives get three years’ jail
A court in the US has fined Taiwanese LCD manufacturer AU Optronics (“AUO”) $US 500 million for its involvement in a price fixing cartel.
Two former company executives, Vice-Chairman Hsuan Bin Cheng and Executive Vice President Hui Hsiung, have also been sentenced to three years’ imprisonment (and charged personal fines of $US 200,000 each) for their roles in the arrangements.
This is the biggest US price-fixing fine since the $US 500 million levied against Hoffmann-Laroche Ltd in the Vitamins cartel in 1999. However, both the fine and the prison sentences in this case fall well short of what the Department of Justice asked for in its sentencing memorandum. It recommended a fine of US$ 1 billion and 10 years’ imprisonment, unprecedented figures it considered to be “necessary, appropriate, and equitable […] in this case.”
Seven other companies were involved in the LCD cartel, which concerned the display screens used for computers, mobile phones and other electronic devices. Other participants included LG, Sharp, Chunghwa and Samsung. However, unlike AUO, these companies entered into plea agreements or non-prosecution agreements with the DOJ, providing immunity or conditional leniency and resulting in lower fines.
By contrast, AUO contested the DOJ’s case, an unusual and risky move, given the potential size of the criminal fines and exposure of senior executives to prison sentences.
The eight week trial was heard before a jury in the US District Court in Northern California. At the trial, the DOJ alleged that in 2001 AUO and other Taiwanese LCD manufacturers secretly met in a hotel room in Taipei and conspired to set the prices of LCDs. The parties then met every month at hotels, cafes and restaurants, in what became known as “crystal meetings”, to ensure the cartel was working according to plan.
At these meetings, participants exchanged internal reports concerning production, shipping, supply, demand and pricing. However, after hearing reports of investigations in related sectors by competition agencies in the USA, Korea and Japan, the parties stopped group meetings and instead met and exchanged information on a one-to-one basis in a series of “round-robin” meetings. These continued until late 2006.
AUO contested the DOJ’s case on several grounds, including that the indictment did not allege the “intent” or mens rea element required by US law, and that extraterritorial elements were not properly pleaded by the DOJ. AUO also tried to suppress evidence found at the office of its US subsidiary following execution of a search warrant by the FBI. These arguments were rejected and the jury found beyond reasonable doubt that the cartel resulted in a gross gain to members of $US 500 million.
The fact that AUO refused to settle is seen as a key factor that contributed to the DOJ seeking the maximum penalties available, and while the fines are lower than the eye-watering penalties sought, they certainly aren’t “low” by any measure.
The case is a clear win for the DOJ and it seems very likely the agency will adopt the same tough approach in future cases of non-cooperation. AUO clearly highlights the weight the DOJ places on cooperation as a mitigating factor.
The court has granted AUO three years to pay the fine – the same time its former executives will spend in a US prison.