DOJ Wants to Make an Example of AU Optronics

Capping off its antitrust prosecution of LCD panel makers, the US Department of Justice is throwing the book at AU Optronics Corp. It's clear from its sentencing memorandum that the department wants to make an example of a company that the government says violated the law willfully, repeatedly, and without remorse.

The memo recommends a $1 billion fine for the company. For each of the two executives convicted in March of colluding with competitors to fix prices — H.B. Chen, AUO's president and COO, and Hui Hsiung, executive vice president of the company and president of its AUO America — the department recommends a $1 million fine and 10 years in prison.

Of the LCD makers charged in the San Francisco case, AUO was the only one to go to trial. The others, including LG Display Co., Chunghwa Picture Tubes, Chi Mei Optoelectronics Corp., and Sharp Corp., agreed to plead guilty and pay more than $890 million in fines, Bloomberg reported. AUO has said it will appeal.

The DOJ said the companies involved in the case sold at least $23.5 billion of price-fixed panels to the US market, including $2.34 billion of goods sold by AUO. This was “the most serious price-fixing cartel ever prosecuted by the United States,” the memo said. “The conspiracy affected every family, school, business, charity, and government agency that paid more to purchase notebook computers, computer monitors, and LCD televisions during the conspiracy.”

Unlike the other companies, AUO and its executives “have refused to cooperate, assist the investigation, or accept responsibility after the government discovered the cartel or even after the jury convicted them,” the department said. AUO has not disciplined the executives responsible. “Indeed, it continues to employ convicted felons and indicted fugitives. H.B. Chen continues to serve as AUO's Vice-Chairman. AUO also employs indicted fugitives who continue to have a sales function with the company.” The memo did not name these individuals.

But large fines and long prison terms aren't enough to deter the bad behavior, the memo said. The government also recommended that the court require AUO to hire a monitor to develop and implement an antitrust compliance program.

The DOJ argued that the corporate culture at AUO was bad from the get-go. “The company has been engaged in felonious conduct from its inception.” In September 2001 — the month the company was founded — its representatives and executives started meeting with competitors and conspiring to “stabilize prices in the LCD market,” according to the memo.

AUO has never known any other way of doing business and has never willingly operated lawfully. That being the case, one cannot expect AUO to reinvent itself and begin to operate legitimately for the first time in its existence on its own, especially when it maintains to this day that it has done nothing wrong… There is no reason to assume that its conviction and the imposition of a criminal fine, alone, will cause AUO to cease engaging in collusive practices.

Finally, the DOJ wants the court to require the company to run full-page ads in three trade publications in the US and three in Taiwan publicly acknowledging its conviction, its punishment, and the remedial steps it is taking as a result of the case.

Sentencing is scheduled for Thursday, Sep. 20. If you were the judge, would you punish the company so severely? Is such punishment likely to serve as a deterrent to other companies and executives?

7 comments on “DOJ Wants to Make an Example of AU Optronics

  1. Barbara Jorgensen
    September 20, 2012

    How likely is it that the DOJ will be able to extract this fine and puinsh these individuals? Are they based in the US?

    September 20, 2012

    I had a chuckle to myself when you said “hire a monitor” to police the display manufacturers 😉  I, like Barb, wonder what will actually come out of this case.  Mind you, if the other companies already agreed to $890 in fines then maybe this one will be pretty severe and extractable.

  3. bolaji ojo
    September 20, 2012

    The judge fined the company $500 million and sentenced the two executives to 3-year jail terms each. (See: AU Optronics fined $500 mln in U.S. for price fixing). They were both in the courthouse in the U.S.

  4. Houngbo_Hospice
    September 20, 2012

    That will certainly set an example to companies that break the law willfully. I wonder how many other price-fixing schemes are hidden and are not yet discovered.

  5. Barbara Jorgensen
    September 21, 2012

    Thanks Bolaji! I hope they serve their time and more importantly this sets an example for other companies. I was surprised to see the names of the other vendors on this list, but at least they cooperated. AU was blatant.

  6. bolaji ojo
    September 21, 2012

    The problem in this kind of situation is for the government to try to figure out the truth and then gather enough fact to go to court. This is extremely difficult. In the example of AU Optronics, other companies involved chose to cooperate with the government and pay a fine. AU Optronics chose to fight. They lost.

  7. elctrnx_lyf
    September 23, 2012

    Are the AUO officers really going to spend any time the jail or they can go free with just fine. The price fix happens manier times with LCDs alone, is it because they really have problem to run business financially in better ways.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.