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US: 3 Flat-Screen Makers Plead Guilty to Trying to Keep Prices High


by STEVE LOHRThe New York Times
November 12th, 2008

Prices for the flat screens in televisions, personal computers and cellphones have plummeted in recent years — but the decline would have been even faster if it hadn’t been for an international price-fixing cartel, the Justice Department said on Wednesday.

Three leading flat-screen producers — LG Display of South Korea, Sharp of Japan and Chunghwa Picture Tubes of Taiwan — pleaded guilty and agreed to pay a total of $585 million in criminal fines for their role in fixing the price of liquid-crystal display panels.

LG is paying the most: a $400 million fine, the second-highest criminal fine ever imposed by the Justice Department’s antitrust division. The largest was the $500 million paid in 1999 by F. Hoffmann-La Roche, a Swiss pharmaceutical giant, for leading a price-fixing cartel in vitamin supplements.

The settlement, legal experts say, is unlikely to be the end of the flat-panel case. Under the settlement, the three companies have agreed to cooperate with the Justice Department’s continuing investigation. Thomas O. Barnett, assistant attorney general in charge of the department’s antitrust division, pointed out at a news conference on Wednesday that the American investigation involved the coordinated efforts of enforcement officials in Europe and Asia, as well as the United States.

Government investigations, legal specialists said, are under way in Europe, Japan and South Korea. In the United States, private class-action suits have already been filed seeking damages for companies that purchased flat-panel screens, and for consumers who bought flat-panel-equipped products. Some of the private suits, if successful, could provide a way for consumers to benefit, though the compensation for any individual would probably be slight.

The Justice Department, in a statement, noted that the price-fixing conspiracy affected screens sold to American companies, and cited three by name: Dell, Apple and Motorola. Those companies, and others, could have the basis for private suits.

The LCD business is a $100-billion-a-year market and growing, but prices are falling relentlessly. Recently, panel prices have often been cut in half each year, a downward trajectory even steeper than in other technology markets known for steady price pressure, like those for computer chips and hard drives.

In the last six months alone, the price of a 15.4-inch panel for a notebook PC has dropped to $63, from $97, and a 32-inch LCD for a television has gone to $223, from $321, according to iSuppli, a market research firm.

The price-fixing conspiracy, industry analysts said, was an effort to slow the speed of price declines. “These companies were trying to get a toehold to protect profits in a very difficult market,” said Richard Doherty, director of research at Envisioneering, a technology consulting firm.

Without the price-fixing scheme, liquid-crystal panels would have been even cheaper, and they are important parts in a wide range of products. For example, the screen represents 10 to 20 percent of the total cost of a notebook PC, said Rob Enderle, an independent analyst in San Jose, Calif.

The effect was somewhat higher prices. “These price-fixing conspiracies affected millions of American consumers who use computers, cellphones and numerous other household electronics every day,” Mr. Barnett said in a statement.

The settlement, legal specialists say, does not precisely indicate the extent of the consumer harm. Under antitrust law, a company can be fined up to twice the gain it derived from its misconduct.

But in a settlement, the fine amounts could represent negotiated levels, or less than the total harm to consumers, said C. Scott Hemphill, an antitrust expert at the Columbia University law school.

“And this settlement only deals with the harm in the United States,” he said. “The global totals may be many times larger.”

During the Bush administration, antitrust enforcement has been selective and often guided by a hands-off, pro-business philosophy, legal experts say. But price-fixing cartels are an area of antitrust in which there is no debate about enforcement. In a 2004 Supreme Court decision, which was unanimous, cartels were called “the supreme evil of antitrust.”

“Cartels are regarded as the most dangerous form of anticompetitive conduct,” said Andrew I. Gavil, a law professor at Howard University. “The reason is that the potential impact on consumers is so great, and there is no plausible justification for it.”

With the settlement, Mr. Barnett, who will leave the Justice Department next week, has provided “an answer to critics who doubted he would take on big cases of this kind,” Mr. Gavil said.



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