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Denso, Yazaki Plead Guilty in Massive Bid-Rigging Case

Fines top $500 million.

by on Jan.31, 2012

Japan's Denso and Yazaki will pay almost $550 million in fines for bid-rigging, while key executives will serve jail time.

Two of Japan’s largest suppliers of automotive electrical components–Yazaki Corp and DENSO Corp. –have agreed to plead guilty and to pay more than a half billion dollars in criminal fines for their involvement in bid-rigging conspiracies in the sale of parts to automobile manufacturers in the United States, the U.S. Department of Justice (DOJ) announced.

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Four executives from Yazaki Corp. North American operations in Detroit, all Japanese nationals, have also agreed to plead guilty and to serve prison time in the United States. The conspiracy targeted companies such as Honda, Toyota and Subaru which have manufacturing operations in the US, according to document filed by the DOJ.

By itself, Yazaki has agreed to pay a $470 million criminal fine–the second largest criminal fine obtained for a Sherman Act antitrust violation–and DENSO has agreed to pay a $78 million criminal fine.

Yazaki engaged in three separate conspiracies: to rig bids for and fix, stabilize and maintain the prices of automotive wire harnesses and related products from 2000 through 2010; to rig bids for and fix, stabilize and maintain the prices of instrument panel clusters from 2002 through 2010; and to fix, stabilize and maintain the prices of fuel senders from 2004 through 2010, the documents said.

The four executives from Yazaki – Tsuneaki Hanamura, Ryoji Kawai, Shigeru Ogawa and Hisamitsu Takada – will serve prison time ranging from 15 months to two years. The two-year sentences would be the longest term of imprisonment imposed on a foreign national voluntarily submitting to U.S. jurisdiction for a Sherman Act antitrust violation. The fine amount and prison sentences are subject to court approval.

All four Yazaki executives also have agreed to assist the DOJ’s continuing investigation into price fixing in the automotive components business.

“As a result of the Antitrust Division’s ongoing criminal investigation of price fixing and bid rigging in the auto parts industry, more than $748 million in fines have been obtained–which already surpasses the total amount in criminal fines obtained by the division for all of last fiscal year,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.

The Justice Department said the investigation was conducted by the FBI’s Detroit Field Office and the Department of Justice Antitrust Division.

“This team has devoted countless hours to the investigation and I appreciate their devotion to the mission. The companies involved in this case conspired to the price fixing and bid rigging of automotive parts. This criminal activity has a significant impact on the automotive manufacturers in the United States, Canada, Japan and Europe and had been occurring at least a decade. The conduct had also affected commerce on a global scale in almost every market where automobiles are manufactured and/or sold,” said FBI’s Special Agent in Charge Andrew G. Arena.

Yazaki, DENSO, Hanamura, Kawai, Ogawa, Takada and their co-conspirators carried out the conspiracies by agreeing, during meetings and conversations, to allocate the supply of the named products on a model-by-model basis and to coordinate price adjustments requested by automobile manufacturers in the United States and elsewhere, according to court documents filed in U.S. District Court for the Eastern District of Michigan in Detroit.

All three conspiracies involved products sold to customers in the United States and elsewhere. Automotive wire harnesses are automotive electrical distribution systems used to direct and control electronic components, wiring and circuit boards in cars. Instrument panel clusters, also known as meters, are the mounted array of instruments and gauges housed in front of the driver of an automobile. Fuel senders reside in the fuel tank of an automobile and measure the amount of fuel in the tank.

DENSO engaged in conspiracies to rig bids for and to fix, stabilize and maintain the prices of electronic control units (ECUs) and heater control panels (HCPs) sold to customers in the United States and elsewhere. An ECU is an embedded system that controls one or more of the electronic systems or subsystems in a motor vehicle. HCPs are located in the center console of an automobile and control the temperature of the interior environment of a vehicle, court documents said.

Hanamura, Kawai, Ogawa and Takada each engaged in a conspiracy to rig bids for and to fix, stabilize and maintain the prices of automotive wire harnesses and related products sold to customers in the United States and elsewhere. Hanamura and Kawai have each agreed to serve two years in a U.S. prison. Each of the four executives has also agreed to pay a $20,000 criminal fine. According to the plea agreements, Yazaki, DENSO, Hanamura, Kawai, Ogawa and Takada have all agreed to assist the department in its ongoing investigation into the automotive parts industry.

Last year, Furukawa Electric Co. Ltd. pleaded guilty and was sentenced to pay a $200 million fine for its role in the wire harnesses price-fixing and bid-rigging conspiracy. Three of Furukawa’s executives also pleaded guilty. The court sentenced two of the executives to 15 and 18 month prison sentences, to be served in the United States. Sentencing of the third executive, who agreed to serve a year and a day in prison in the United States, is scheduled for Feb. 28, 2012.

The federal antitrust investigation into bid rigging, price fixing and other anticompetitive conduct in the automotive parts industry, which is being conducted by the Antitrust Division’s National Criminal Enforcement Section and the FBI’s Detroit Field Office with the assistance of the FBI headquarters’ International Corruption Unit.

In a statement issued after entering its plea agreement, DENSO insisted its policy to comply with all applicable antitrust laws. “Since learning of the investigation in February 2010, DENSO has taken various measures, including implementing even more stringent compliance rules and even more enhanced compliance training to further ensure that its employees comply with all applicable antitrust laws,” the company statement said.

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