How much is that retina display, you say?

Just last month, a federal judge fined AU Optronics $500 million for its role in a massive price-fixing scheme to raise the prices of LCD screens sold in the US.  Judge Susan Illston of the Northern District of California also sentenced two executives of the company to three years in prison for their roles in the conspiracy.  The penalties are some of the harshest in antitrust history, though they fell short of the $1 billion and ten years of prison that the Department of Justice requested.

The conspiracy was vast and included some of the biggest electronic manufacturers in the world: LG, Samsung, Sharp, Hitachi, Toshiba, Epson, and several other electronics producers.  The group’s meetings took place in various locales that ranged from luxury hotels, to tearooms, to karaoke bars, according to company documents revealed in discovery.  The upshot of these meetings was a vast conspiracy to fix the production levels (and, thereby, the prices)  of LCD screens used in most consumer electronic display devices throughout the world.  According to prosecutors and Judge Illston, American consumers paid inflated prices on computer monitors, laptops, smart phones, and other electronics.  In terms of scale, one-third of the $74 billion made by the cartel was attributable to sales made to US companies, such as Apple, HP, Dell, and others.

American consumers may be tempted to react viscerally, demanding fines that would put these companies out of business.  Consumer groups fear that a penalty of $500 million is no more than a “cost-of-doing-business fine.”  But Judge Illston noted that AU Optronics and others in the cartel had already paid hundreds of millions of dollars to settle civil lawsuits.  And given the fact that the defendants in these civil suits and criminal proceedings are some of the world’s leading electronics manufacturers, they are arguably an indispensable part of our global economy (Apple fans would agree, considering AU Optronics’s displays were an indispensable part of the iPad Mini).  Perhaps the best solution is to place more emphasis on criminal sanctions to deter company executives, rather than increasing already stiff fines, the cost of which may ultimately be passed on to consumers (next time, via legal means).

 

Niels Melius

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