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China issues penalties on LCD makers

Publication Date : 05-01-2013

 

The mainland yesterday joined an international crackdown on a price fixing conspiracy involving several suppliers of LCD screens, levying penalties of 353 million yuan (US$56.6 million) on Samsung, LG and four Taiwan companies.

The settlement, though less punitive in the eyes of analysts, was considered a landmark move as it was the first time the country had punished overseas firms for price fixing.

Similar investigations into price fixing between 2001 and 2006 have been carried out in the United States and the European Union.

The US Department of Justice said total fines of $1.4 billion have been imposed by courts while the EU has imposed 1.3 billion euros ($1.7 billion) in penalties.

Envoys from LG Display, Samsung Display and the Taiwan-based suppliers met every quarter in 2001-06 to set prices of screens when supply outstripped demand, pushing down market prices, according to regulators.

Nearly all the world's mobile phones and personal computers are assembled on the Chinese mainland, making it a major market for display screens and other components imported from South Korea, Taiwan and other Asian economies.

The display makers "manipulated market prices and damaged the lawful interests of other companies and consumers," the mainland's major economic policymaking body, the National Development and Reform Commission, said in a statement.

US prosecutors say some $74 billion in global sales of LCDs were affected by the conspiracy. Customers included Apple, Dell and other producers of TVs, notebook computers and other electronics.

The ruling was based on the Price Law, not its newer anti-trust law, because the anti-trust law was issued after that period, the NDRC said.

"If the case was penalised based on the anti-trust law, these companies would face fines of a large percentage of their revenues, which would be much higher," it said.

Lu Renbo, deputy secretary-general of China Electronic Chamber of Commerce, said mainland TV manufacturers were the biggest victims of the price fixing.

"LCD screens account for about 80 per cent of the overall costs of colour television sets. The mainland produced about half of the world's televisions but at that time all screens were imported," said Lu.

The six suppliers were fined for allegedly getting involved in driving up prices for 5.14 million LCD panels sold by the companies between 2001 and 2006, overcharging the flat-screen television manufacturers.

Samsung Electronics will pay 101 million yuan and LG Display will pay 119 million yuan, while Taiwan's AU Optronics, Innolux Corp, Chunghwa Picture Tubes and HannStar Display need to pay their portion.

Samsung stopped related behaviour at the end of 2005, and has established a rigid compliance management system for law-abiding operations, the company said.

"We do not expect this decision to impact our relationship with customers or panel sales," said an LG statement.

Edward Lehman, foreign legal consultant and managing director of Lehman, Lee & Xu Law Firm, said the next step for the mainland is not only to bring these cases to regulatory authorities, but also to civil courts, which was still rare on the mainland.

"It's a very good decision in the right direction, but the penalty is not enough for stopping people," he said.

Taiwan's AU Optronics was ordered to pay $500 million by a US court in September, one of the largest anti-trust settlements. A US court said in December 2011 that Samsung, Sharp and six other makers of panels for TVs and computers agreed to pay $388 million to settle price fixing claims by direct purchasers, according to Bloomberg.

Lehman also suggested mainland companies act more to protect their interests.

It's normal in the West to solve issues through litigation among partners, but mainland companies don't want to get involved because they are afraid that would hurt cooperation.

Suppliers have already been hit by US and European regulators with penalties totaling more than $3 billion for colluding to push up slumping prices of display screens in 2001-06, which raised costs for electronics manufacturers.

A total of 49 price fixing cases have been investigated by the NDRC since the implementation of the anti-monopoly law.

AP, Shen Jingting and Gao Yuan contributed to this story.

*US$1=6.2 yuan

 

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