Price-fixing conspiracies in the auto industry may have inflated the cost of your new car, according to the FBI. Nine Japan-based auto parts makers and two executives pled guilty in September to brazenly colluding to rig the prices of more than 30 car parts including, seat belts, radiators, and windshield wipers sold to U.S. car makers. These costs most likely were translated into higher prices, so that the carmaker could make a profit. The conspiracies lasted for a decade or more and affected $5 billion in parts and more than 25 million cars purchased by Americans.
“The scheme directly impacted your bank account,” said FBI Criminal Investigative Division Assistant Director Ronald Hosko at a press conference, where he was joined by U.S. Attorney General Eric Holder and head of the Criminal Enforcement Program in the Justice Department’s Antitrust Division, Scott Hammond, “These individuals and companies drove up costs for both vehicle makers and buyers, which caused you to spend more.”
The false inflation of prices affected Ford, General Motors, and Chrysler as well as Honda, Mazda, Mitsubishi, Nissan, Subaru, and Toyota. Auto plants in Detroit and 13 other states were the victims. FBI agents in 11 field offices investigated the cases. Charges were filed in Detroit, Cincinnati, and Toledo.
In phone calls and secret meetings, sometimes using code names, the conspirator companies agreed to rig bids, set prices, and manipulate the supply of parts to the U.S. Carmakers were victimized along with consumers. When a carmaker put out a request for bids, “What they didn’t realize is that in back rooms and secret meetings in the United States and Japan, their suppliers were getting together and allocating business and fixing the prices,” said Hammond.
The guilty pleas brought the total number of companies to 20 charged by the Justice Department in their multi-year investigation into the auto industry. 17 of the 21 executives have also been charged, with most facing prison time or already serving it. Additionally, heavy fines are expected to be imposed, somewhere close to $740 million since the investigation began in 2011. Recent charges could raise the total to over $1 billion in fines.
As an example, one case involved, Gary Walker, an American executive with a Japanese company operating in Michigan. He rigged bids between 2003 and 2010 to fix the prices of seat belts sold to Toyota, Nissan, Honda, and Mazda manufacturers. Other defendants including, Hitachi Automotive Systems Ltd., Mitsubishi Electric Corporation, and Jtekt Corporation, all accused of rigging starter motors, alternators, ignition coils, bearings, and other essential vehicle parts.
The FBI and the DOJ’s Antitrust Division worked closely with the Japan Fair Trade Commission and all search warrants were coordinated between both countries. “Today’s events and the last few years of investigation should send a clear message to companies that suffer from the notion that they don’t need to follow the rules,” Hosko said.
“If you violate the laws of this country, the FBI and the Justice Department will investigate and stop the threat you pose to our economy and to hardworking Americans.”