International Investigation Launched Into Allegations of Price Fixing by LCD Industry's Top Players

In a rash of investigations spanning three continents and as many as 10 different companies, antitrust officials from multiple countries have begun looking into allegations of "anticompetitive practices" by many of the world's biggest manufacturers of liquid-crystal displays (LCDs).

The United States Department of Justice (DOJ), the Japanese Fair Trade Commission (JFTC), the Korean Fair Trade Commission (KFTC), and the European Commission (EC) have all launched separate investigations to scrutinize the behavior of as many as 10 LCD manufacturing companies, including Samsung ElectronicsLG.Philips LCDNEC LCD Technologies, andSanyo Epson Corp.

LG.Philips LCD (LPL) confirmed in early December it had received visits from KTFC officials at its Seoul office, from the JFTC at its Tokyo office, and from the DOJ at its offices in San Jose, Calif., USA. Samsung said it had been contacted by the DOJ, and both LPL and Samsung have released statements pledging their "full cooperation" in the matter. As of Christmas, NEC and Sanyo Epson have confirmed only that they have been contacted by the JFTC. Various published reports also list Sharp Corp. and Toshiba Matsushita Display Technology Co. as subjects of investigations; however, neither company has confirmed being investigated toInformation Display, and it is not clear which of the four agencies have called their practices into question.

Several reports published in December claimed the "anticompetitive" behavior cited by the antitrust agencies was in fact a price-fixing scheme meant to curb falling LCD prices. The EC verified in a Dec. 12 press release that it is out to determine whether there is evidence of a cartel agreement and related practices concerning price fixing in the LCD industry. However, when contacted on Dec. 12, DOJ spokesperson Gina Talamona would neither comment on nor confirm these allegations.

"The Antitrust Division is investigating the possibility of anticompetitive practices in the LCD industry. Since it's an ongoing investigation, I'm not commenting on a specific company or companies we may be investigating or a general number (of companies under investigation)," Talamona stated. "We are coordinating with a number of foreign competition authorities."

It is still too early to tell what the impact of the antitrust investigations and their possible outcomes may be on the LCD business, according to Sweta Dash, director of projection and LCD research for iSuppli Corp., though there has been some minor fallout already.

"It may take years before any final decision will be made, so generally speaking, this should not have any immediate impact on (LCD) pricing," Dash explained. "Panel prices are already going down in December (2006), and the industry was just starting to be profitable in (the third quarter of) 2006. But price reduction in (the fourth quarter) will make it difficult for some companies to stay profitable. We already see the immediate impact (as) some panel suppliers have cut down utilization rate in December."

The DOJ, KFTC, JFTC, and EC likely are not actually working in concert on a common investigation, according to Eliot Disner, an attorney with Los Angeles law firm McGuire Woods, who specializes in antitrust law and has written extensively on the subject. Disner, who is not involved with the investigations, explained that in today's global economy, it is increasingly common for antitrust agencies from multiple countries to conduct individual investigations. A company does not have to have offices or operations in a country for that country's agency to investigate them, meaning any business can be investigated for violating antitrust laws in any country where its product is sold. And each agency conducts its investigations according to its own rules and with its own set of potential penalties.

"With these investigations, there is no coordinating body, no great referee that tells the various agencies how to get in line about enforcement," Disner said. "They can each bring actions, and they can each get their pound of flesh."

What exactly the penalties would entail varies by country and agency. If any of the companies under investigation are found guilty of price fixing by any agency, a normal trial process would ensue in that agency's country, and each investigating country could impose a fine. Fines can range from as high as 10%-35% of the company's net sales from the preceding financial year under EC rules, to smaller, "prophylactic effect" fines in other countries. These latter fines are meant merely to deter a company convicted of price fixing from repeating the offense, Disner said. In the U.S., however, it's not uncommon for foreign executives convicted of anticompetitive practices to be brought stateside to serve jail sentences.

"We have a cacophony of the international enforcement of the antitrust laws, which makes it really difficult to compete in the international sphere and do something that violates the law," Disner said. "Good citizenship is now kind of a world proposition."

Investigations may take as little as a few months, Disner explained, but he guessed they would likely be completed within about a year. After evidence is compiled, the judicial process can take several years.

According to the EC, "there is no strict deadline to complete cartel inquiries. Their duration is determined largely by the complexity of each case, the exercise of the rights of defense, and by the observance of the Commission's consultation and other procedures."

But for now, the big question is whether any of the companies under fire actually participated in the alleged price-fixing scheme or if prices were simply aligned over the last past several years in the name of healthy competition.

"When it comes to price alignment, I always tell people that competition and conspiracy look the same," Disner explained.

—Jessica Quandt

Epson Buys Sanyo's Stake in Joint LCD Venture

TOKYO, Japan – Liquid-crystal display (LCD) manufacturer Sanyo Epson Imaging Devices Corp., a joint venture betweenSeiko Epson Corp. and Sanyo Electric Co. Ltd., is now a wholly owned subsidiary of Epson after Sanyo signed over its 45% stake in the company to its partner on Dec. 13. The deal was finalized on Dec. 28, and the name of the company changed to Epson Imaging Devices Corp.

Sanyo Epson, which began operations on October 2004, develops, manufactures and sells supertwist-nematic (STN) LCDs, microdisplay (MD) thin-film transistor (TFT) LCDs, amorphous silicon (a-si) TFT-LCDs, and low-temperature polysilicon (LTPS) LCDs.

According to a press release from Epson, Sanyo Epson was created with the goal of becoming the leading supplier of small- and medium-sized LCDs by creating high-performance products and achieving high cost performance.

"Since its establishment, Sanyo Epson has been successful in expanding its business by fusing the technologies and technical knowledge of Epson and Sanyo Electric," a company release stated. "However, intensified competition in the market for small- and medium-sized LCDs has resulted in severe and continued price erosion beyond forecasted levels. As a result, Sanyo Epson has been unable to expand to the desired scale."

Epson spokesperson Jasper Credland said the company could neither disclose the dollar amount of the sale nor comment on Sanyo's decision to get out of this particular market.

"Epson's purchase of Sanyo's stake is the first step in the process of returning the display business to profitability," Credland stated.

Representatives for Sanyo had not responded to requests for comment by press time.

—Jessica Quandt