LCD Makers’ ‘Cartel’ Fixed Prices, New York Attorney General Charges

An LCD manufacturers’ “cartel” fixed prices and crimped supplies for more than 10 years, “artificially inflating” LCD PC monitor and notebook PC prices, New York Attorney General Andrew Cuomo alleged in an antitrust suit filed Friday.

The 44-page suit alleged that top executives at AU Optronics, Chi Mei, Hitachi, LG Display, Samsung, Sharp, Toshiba and others met regularly between 2001 and 2006 to set pricing and production levels. New York authorities purchased “millions of dollars” worth of LCD-based products, the higher costs of which were born by New York state taxpayers, the suit said. Sharp and Samsung declined to comment. Representatives of others named couldn’t be reached.

The suit’s allegations date to the beginning of the LCD market in 1996, focusing on 14-, 15-, 17- and 18-inch panels. Company executives first met informally, but by 2001, Korean manufacturers were joined in meetings by those from Taiwan and Japan, the suit said. Samsung initially met with Taiwan’s Chunghwa and the ranks of suppliers grew from there, the suit said. The LCDs were built into a range of products sold under the Compaq, Dell, Hewlett-Packard, IBM and other brands, the suit said.

There were three types of meetings including those involving company CEOs, lower-level management and marketing officials, the suit said. The CEO and management meetings typically set price ranges for higher grade LCDs for the months following the gathering, the suit said. The CEO “Crystal” meetings were conducted amid secrecy, with top executives gathering at hotels and arriving and leaving separately “to prevent detection” by customers, the suit said. Only a “limited number” of employees were made aware of the meetings, the suit said.

The CEO gatherings were an extension of those involving marketing officials that began in 2000, the suit said. The so-called Crystal meetings occurred on a monthly basis through 2004 and periodically in 2005-2006, the suit said. Among the decisions made were setting the price in fall 2001 for 14-15-inch panels at $170-$180 and $206-$215, the suit said. The companies also agreed in December 2001 not to have any rebates the following year, the suit said. Specific prices also were set for Compaq and Dell in March 2002, it said. Reports were written about each meeting including one in September 2001, the suit said. The last of the meetings in February 2006, was to set pricing for Hewlett-Packard, the suit said. “Through this exchange session, makers are hoping that orderly pricing can be maintained for the short term, production capacity and demand balance can be achieved for the mid- to long-term, and prices can be stabilized in order to ensure profitability in the TFT industry,” the suit quotes the report as saying.

The companies kept compliance with pricing and production guidelines by “singling out companies that deviated from the illegal agreements and bringing them back into line” the suit said. The companies also forged partnerships and cross-licensed their technologies, further deepening their ties, the suit said.

The New York suit follows a similar antitrust probe of LCDs by the U.S. Justice Department that has resulted in $890 million fines being paid. Many of the same companies named in the New York suit were cited in the federal case, including LG Display, which agreed to pay a $400 million fine in 2008. The smallest fine assessed so far was the $26 million Epson America paid in August 2009.

A fourth Chi Mei executive agreed last week to plead guilty to conspiracy in connection with LCD price fixing. Chen-Lung Kuo, a former Chi Mei vice president of sales, agreed to plead guilty to a one-count felony conspiracy charge in U.S. District Court, San Francisco, the Justice Department said. Kuo, who allegedly participated in the conspiracy from April 2004 to December 2006, will be sentenced to nine months in prison and fined $35,000, the justice department said. Kuo could have gotten up to 10 years in prison and a $1 million fine. Eight companies and 19 executives were charged in the federal LCD price-fixing probe.