DOJ Wins AUO Convictions in LCD Price-Fixing Trial, Successfully Defending Its Cartel Program

by Sheppard Mullin Richter & Hampton LLP
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[author: James L. McGinnis]

In a widely followed eight-week trial before the Honorable Susan Illston in the Northern District of California, the Antitrust Division of the United States Department of Justice succeeded in obtaining price-fixing convictions against AU Optronics, a Taiwanese company; AUOA, its US subsidiary; and two senior executives. Two more junior executives were acquitted, and the jury hung as to a third executive. The jury also found that the gain from the conspiracy was at least $500 million, thereby triggering the Alternative Fine statute, 18 U.S.C. § 3571(d), and upping the companies' potential exposure to $1 billion. DOJ has trumpeted the convictions and finding of guilt as vindicating its cartel enforcement program.

The Antitrust Division had alleged that the companies and individuals participated in a five-year-long conspiracy to fix the prices of LCD panels over the course of more than 60 meetings, including monthly meetings of LCD suppliers that the participants termed "Crystal Meetings".

This may have been the most important trial ever conducted in connection with the Antitrust Division's crown jewel, the international cartel enforcement and amnesty program. Its investigation was sparked by an amnesty applicant and lead to numerous pleas and multi-hundred million dollar fines before the AUO trial.

AUO argued that it was too new and too small to enter into agreements with larger, more established companies. Also, it used information from competitors to undercut them, according to its defense, and increase its market share. DOJ countered these defenses with scores of minutes from the meetings, internal AUO emails strongly suggestive of agreements, and the testimony of cooperating witnesses, several of whom had served prison time for their role in the alleged offenses. None of the defendants elected to testify.

Testimony from economists also took center stage. AUO's economist testified that AUO's prices consistently were lower than those discussed at Crystal Meetings. DOJ's economist testified that this was the wrong question. The right question, according to DOJ, was whether AUO's prices were higher than they otherwise would have been because of the conspiracy. To this question, DOJ's economist emphatically testified "yes", and supplied further testimony that the gain from the conspiracy far exceeded $500 million.

The jury deliberated for seven days, with their split verdicts arguably indicating they gave careful individual consideration to the evidence against each defendant.

Sentencing likely will take place in mid-June, 2012. This will be the first time a judge has sentenced a corporation after a price-fixing verdict where the Alternate Fine Statute has been triggered. United States District Judge Susan Illston's decision will be closely watched, to say the least.

AUO has vowed appeals, which could include several very important legal issues in addition to more typical trial evidentiary issues:

  • What sales "count" as commerce that DOJ can reach in its indictments consistent with the Foreign Trade Antitrust Improvement Act ("FTAIA")?
  • What commerce counts for purposes of an alternative fine calculation?
  • What, if any, purely foreign conduct can form the basis of a price-fixing charge?

These questions already are critically important, and their significance will continue to grow as DOJ increases cartel enforcement pressure on international companies and foreign conduct.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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