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TV Tube Giants Fight Price-Fixing Claims

SAN FRANCISCO (CN) - A group of multinational electronics firms accused of conspiring to fix the prices of TV parts for over a decade fought on Tuesday to stop antitrust claims from going to a jury.

LG, Philips, Toshiba, Hitachi and their subsidiaries - accused of forming a cartel to inflate the prices of cathode ray tubes used in TVs and monitors from 1995 to 2007 - argued five motions for summary judgment before U.S. District Judge Jon Tigar.

The four firms claim they stopped making and selling price-fixed tubes in March 2003, more than four years before buyers sued them for antitrust violations in November 2007, making the claims untimely under the statute of limitations.

But the plaintiffs - including Dell and Sharp Electronics - counter that although the companies ceased manufacturing the tubes in 2003, their roles in the conspiracy did not end there.

Philips and LG, for instance, announced they would stop making tubes in March 2003. But at same time, the two firms also launched a new joint venture - LG.Philips Display or LGP - which continued to make and sell the price-fixed products.

"After the transfer of the assets to LGP, the Philips subsidiaries facilitated and assisted the conspiracy," class attorney Philip Ioveino said. "They did not take affirmative acts to disavow the conspiracy."

LG made a "seamless transition" of its tube manufacturing enterprise to the new joint venture, using the same assets and employees as before, Dell attorney Matthew Kent argued.

Kent told the judge that LG had the power to appoint three members to LGP's board of directors, and it invested significant assets in the new company.

"Arguments that LG had a right to appoint board members or invest income do not support liability under the corporate separateness doctrine," LG attorney Miriam Kim shot back. "There's no allegation that LG was an illicit conspirator itself."

Sharp Electronics attorney Kira Davis made the same argument regarding Toshiba's motion for summary judgment, claiming that when Toshiba stopped making tubes in 2003 it simply transferred its manufacturing assets to a new joint venture with Panasonic called Matsushita Toshiba Picture Display Co., or MTPD.

Davis said Toshiba gained $52 million from the joint venture's formation and maintained a 35.5 percent ownership share of the company, meaning its role in the conspiracy did not end when it shifted tube manufacturing to the joint venture in 2003.

"There's no case in which a company has been held liable simply for having a 35 percent share in a company," Toshiba attorney Christopher Curran replied.

Responding to the judge's question about how much time passed between the joint venture's formation and its taking part in the tube cartel, Curran admitted MTPD began fixing tube prices within the first month of the company's creation.

"Would it be an unfair characterization of the evidence submitted to me today that at a time when Toshiba employees came into a venture for which Toshiba owned 35 percent, this joint venture decided to participate in a conspiracy," Tigar asked.

Curran responded that a reasonable jury could not find Toshiba is on the hook for the actions of another entity.

Turning to Hitachi's motion for partial summary judgment, class attorney Samuel Randall argued Hitachi's exit from the tube manufacturing industry in March 2003 was part of an effort to further the conspiracy.

"The fact that these five Hitachi entities did not continue to manufacture tubes after 2003 was part of the conspiracy," Randall said. "The other members commented that Hitachi's exit made the conspiracy more concentrated and more effective."

Randall cited Hitachi's sale of manufacturing equipment to a co-conspirator, Thompson, as evidence of its continued role and ability to benefit from the scheme.

The class attorney added that Hitachi also profited from its ownership share in the company Hitachi Shenzen Color Display Devices, which manufactured and sold price-fixed tubes after 2003.

Hitachi attorney Cathleen Hartge echoed the arguments of her fellow defense attorneys, saying that ownership share in a company does make one legally responsible for a company's misconduct.

"The Supreme Court has held mere shareholder status cannot make a company liable for the actions of a company," Hartge told the judge. "The withdrawal standard and fundamental concept of corporate separateness make it a matter of law."

Hartge insisted that Hitachi met the standard for withdrawal from the antitrust scheme by taking "affirmative acts inconsistent with the object of the conspiracy" when it stopped selling tubes and divested its manufacturing assets.

The defendant firms also sought to dismiss Dell and Sharp Electronics as plaintiffs from the lawsuit, claiming the companies could not sue for conduct that occurred prior to November 2003 because they knew of the scheme back then and failed to take action.

LG attorney Brad Brian pointed to a deposition in which a Dell vice president admitted twice under oath that he suspected price fixing and collusion in the cathode ray tube industry.

"That is an admission that puts them on notice and obligates them to conduct an investigation," Brian said. "Instead, they negotiate to try to get a better deal."

Dell attorney Michael Kenny replied that after interviewing 10 Dell employees, including senior executives from the company's procurement department for more than 70 hours, the depositions revealed that the witnesses had no knowledge of the price-fixing scheme.

Although a few witnesses said they had suspicions, Kenny said that does not rise to the level of having any facts or knowledge of an illegal conspiracy.

"One must possess facts in order to have inquiry," Sharp Electronics attorney Craig Benson added. "Defendants must irrefutably prove that diligent inquiry would have turned up facts that give rise to the claim."

After more than two hours of debate, Tigar ended the hearing and signaled he would take the arguments under consideration.

The multidistrict antitrust litigation stretches back to November 2007, when direct and indirect buyers sued a cadre of global electronics giants on claims they schemed to fix prices in the $19-billion cathode ray tube industry for a dozen years at the turn of the 21st century.

Last month, Tigar approved an award of $38 million in attorneys' fees - 30 percent of a $127-million settlement - for direct buyers of the cathode ray tubes.

The defendant companies have settled claims against them for varying amounts: Chunghwa and Philips for $10 million and $15 million, respectively; Panasonic for $17.5 million; LG for $25 million; Toshiba for $13.5 million; and Hitachi and Samsung SDI for $13.5 million and $33 million, respectively.

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