WASHINGTON – An investigation into price-fixing and bid-rigging in the auto parts industry has mushroomed into the Justice Department’s largest criminal antitrust probe ever, and it is not over yet.
The investigation, made public four years ago with FBI raids in the Detroit area, has led to criminal charges against dozens of people and companies stretched across continents and has reverberated through an industry responsible for supplying critical car components.
“It’s a very, very safe assumption that U.S. consumers paid more, and sometimes significantly more, for their automobiles as a result of this conspiracy,” Brent Snyder, a deputy assistant attorney general in the antitrust division, said during an interview.
So far, 34 individuals have been charged and 27 companies have pleaded guilty or agreed to do so, the Justice Department says. Collectively, they have agreed to pay more than $2.3 billion in fines. New cases have arisen with regularity, with Attorney General Eric Holder promising last September that investigators “would check under every hood and kick every tire.”
The most recent development came Thursday, when an executive from a Japanese company was charged with conspiring to fix the prices of heater control panels sold to Toyota and with persuading workers to destroy evidence.
Officials say the investigation stands out not just for its scope but also for the cooperation the authorities have received from Japan, Australia and other countries.
Despite the challenges of prosecuting foreign nationals, the Justice Department has won guilty pleas from a series of Japanese executives who opted to get their punishment over with rather than remain under indictment in their home country and subject to career-crippling travel restrictions.
Though the techniques and strategies sometimes differed, the executives generally carried out the collusion by trading coded emails, meeting at remote locations and destroying documents to avoid paper trails.
With an eye toward eliminating competition and maximizing profits, they exploited an industry that experts say is in some ways vulnerable to collusion. There are a finite number of purchasers and suppliers, there is steady pressure among companies to cut prices, and car parts are generally standardized and homogeneous.
“The firms will just make more money if they’re able to reach and stick to an agreement to collectively charge higher prices so that customers can’t get them to bid against each other,” said Spencer Weber Waller, director of the Institute for Antitrust Consumer Studies at the Loyola University Chicago law school. “The problem is, of course, it’s a felony in the United States.”
The Justice Department first made aspects of the investigation public when FBI agents in Detroit raided the offices of Denso Corp., Yazaki North America and Tokai Rika. All three companies have pleaded guilty to their roles in price-fixing and bid-rigging schemes.
Since the raids, the probe has broadened to encompass about $5 billion worth of auto parts, including seat belts, ignition coils, steering wheels, air bags, windshield wipers and rubber parts that dampen vibration.
Similar cartels have formed in industries ranging from oil and gas to cement and vitamins, though there is debate among economists about how long they can last, given the constant incentive for one member to cheat the others and the tendency to collapse under their own weight as they keep growing, said Daniel Crane, a University of Michigan law professor.
But the collusion in these cases, which in some instances lasted more than a decade, was “deftly done,” said Joe Wiesenfelder, executive editor of Cars.com, who has followed the auto parts investigation.
“If they get too greedy and they make their prices too high, then someone smells a rat,” he said.
Meanwhile, the Justice Department says it is looking into additional misconduct in an investigation that bears all the hallmarks of classic antitrust law-breaking.
“This one,” Snyder said, “has it all.”