Bloomberg News

AU Optronics Fined $500 Million in U.S. for Price-Fixing

September 21, 2012

AU Optronics Fined $500 Million for Price-Fixing Conspiracy (2)

AU Optronics Corp., was the only LCD maker charged with price-fixing by the U.S. to take its case to trial. Photographer: Maurice Tsai/Bloomberg

AU Optronics Corp. (2409), Taiwan’s second-largest maker of liquid crystal display screens used in electronic devices, was ordered to pay $500 million for colluding with rivals to fix prices on the screens.

U.S. District Judge Susan Illston in San Francisco sentenced AU Optronics yesterday. A jury in March found the company guilty of a price-fixing conspiracy based on charges filed by the U.S. Justice Department in 2009.

Illston said the $1 billion fine sought by the government was excessive. AUO had said it should pay no more than $285 million. The judge said she would allow the company to pay the fine over three years.

Executives of Hsinchu, Taiwan-based AUO secretly met with counterparts at other panel makers in hotel rooms, karaoke bars and tea rooms at so-called crystal meetings around Taiwan from 2001 to 2006 to set prices as an oversupply was pushing prices down 40 percent, federal prosecutors told jurors during the eight-week trial.

Illston also sentenced AUO Vice Chairman H.B. Chen, formerly the company’s chief executive officer, and former executive Hui Hsiung to three years in prison and ordered each to pay a $200,000 fine.

AUO was the only LCD maker charged with price-fixing by the U.S. to take its case to trial. Since 2008, rivals including LG Display Co. (034220), Chunghwa Picture Tubes (2475), Chi Mei Optoelectronics Corp. and Sharp Corp. (6753) agreed to plead guilty and pay a total of more than $890 million in fines.

Tied for Top

The AUO fine is tied with one by Swiss pharmaceutical company F. Hoffmann-La Roche Ltd. for the highest paid by a company in a Justice Department antitrust case, according to agency data. The drug company pleaded guilty and agreed to pay $500 million for leading a worldwide conspiracy to raise the fix prices for vitamins, the Justice Department said in 1999.

The average prison sentence in Justice Department antitrust cases since 2010 is 24 months, according to agency data.

Seventeen executives involved in the LCD price-fixing probe were charged, the Justice Department said in March. Ten of those defendants pleaded guilty and were sentenced to prison.

Lidia Maher, an assistant U.S. attorney in the Justice Department’s antitrust division, told Illston during yesterday’s hearing that a $500 million fine wasn’t enough to deter such cartels from forming in the future.

‘Pervasive’ Conspiracy

“We have never seen a conspiracy so pervasive,” Maher said. “They took a gamble to go to trial and they lost.”

Illston said during the hearing that, based on sentencing guidelines, AU Optronics faced a range of $936 million to $1.87 billion in fines.

While she found the company was among the “organizers and leaders of criminal activity” in the price-fixing conspiracy, its product was “really, really good” and had changed the industry, the judge said.

Dennis Riordan, a lawyer for AUO, told Illston the company had set aside $277 million to cover potential liability for the case. Illston granted his request to allow AUO to pay in installments.

The company “does not have anything approaching $500 million,” Riordan said.

He also said the company has $6.54 billion in loans that will become payable in full because the loans contain so-called adverse change clauses.

AUO has said in court filings that it will appeal the verdict. Illston rejected AUO’s request to put her sentencing order on hold while the company appeals the case.

Illston also ordered AU Optronics and its AUO America unit to publicize in three trade journals in Taiwan and the U.S. its conviction, the sentences and its ethics-reform plans.

Chen and Hsiung were ordered to surrender by Nov. 30 to begin serving their prison terms. Illston rejected requests to delay their sentences during an appeal.

The case is U.S. v. Lin, 3:09-cr-00110, U.S. District Court, Northern District of California (San Francisco).

To contact the reporter on this story: Pamela MacLean in federal court in San Francisco at pmaclean@pacbell.net; Karen Gullo in San Francisco at kgullo@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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