Auto parts maker fined $13.4 million for bid-rigging offenses

In the second-largest fine ever ordered by a court in Canada for bid-rigging offenses, the Ontario Superior Court of Justice fined Mitsubishi Electric Corp. $13.4 million after it plead guilty to three counts of bid-rigging for participating in an international conspiracy, capping a fine week by the Competition Bureau.

A Competition Bureau investigation determined that Mitsubishi Electric entered into illegal agreements with a competing Japanese car parts manufacturer. The companies conspired to determine who would win certain calls for bids issued by Honda and Ford for the supply of alternators, and by General Motors for the supply of ignition coils. The calls for bids occurred between 2003 and 2006.

Bureau investigations involving car parts have resulted in over $84 million in fines imposed by the courts in Canada since April 2013. The largest fine to date under the bureau’s campaign was $30 million levied in 2013 on Yazaki Corp. for rigging bids on wire harnesses for Honda and Toyota. All told, ten car parts manufacturers have been fined.

“Today’s resolution including this significant fine sends a clear message to the international marketplace that no matter where illegal agreements are conducted, if they affect Canadian consumers, the Bureau will not hesitate to take action,” said Matthew Boswell, senior deputy commissioner of the Competition Bureau.

According to Steve Szentesi, a Toronto competition lawyer, the “auto parts matter is the most recent in a long series of successful criminal settlements negotiated by the Competition Bureau. The case also shows that bid-rigging remains a top Bureau enforcement priority, including enhanced enforcement in relation to federal government infrastructure spending.”

The auto parts case is part of a long series of settlements tied to the U.S. auto parts price fixing investigation that has been going on for years, added Szentesi.

On July 2016, Japanese auto parts manufacturer Nishikawa Rubber Co., Ltd. was charged in the U.S., and agreed to plead guilty and pay a fine of US$130 million, for its participation in an international bid‑rigging conspiracy affecting Canada and the U.S. Between January 2000 and September 2012, Nishikawa engaged in secret illegal arrangements with other suppliers of body sealing products. These products were sold to car makers in the U.S. for cars manufactured there, and cars manufactured in Canada by Toyota and Honda that were then sent to the U.S. for sale.

The cartel in the auto parts industry came to light through the Competition Bureau’s Immunity Program. The investigation also benefitted from the cooperation of numerous companies under the Leniency Program.

The Competition Bureau relies heavily on these two complimentary programs to detect and investigate activities prohibited by the Competition Act. Under the immunity program, the first party to disclose an offence not yet detected, or to provide evidence leading to the filing of charges, may receive immunity from prosecution from the Director of Public Prosecutions (DPP) as long as the party co-operates with the independent law enforcement agency.

Companies who balk at being first in line to blow the whistle on a conspiracy may nevertheless be eligible for leniency in sentencing. In general, applicants must end their participation in the cartel, agree to co-operate fully and in a timely manner, and agree to plead guilty. The first leniency applicant is eligible to receive a 50-per-cent reduction of the fine that would have otherwise been recommended to the DPP, while the second would be entitled to receive a 30-per-cent reduction. Subsequent applicants could possibly receive a reduction as well.

In 2016, the Cartels Directorate of the Competition Bureau secured a total of approximately $13.4 million in fines for cartel and bid-rigging offences, in contrast to $2.9 million in fines in 2015.

In related news, the Competition Bureau also reached a consent agreement this week with Hertz Canada Limited and Dollar Thrifty Automotive Group Canada Inc. Both companies will pay a total of $1.25 million in administrative monetary penalties, ensure their advertising complies with the law and implement new procedures aimed at preventing advertising issues in the future.

The consent agreement was reached after the Competition Bureau determined that Hertz and Dollar Thrifty were advertising enticing low prices to attract consumers. But “those low prices were unattainable because mandatory fees were systematically added to those prices,” said the Competition Bureau. Additional mandatory fees could increase consumers’ final price from 10 per cent to 57 per cent, leading the Bureau to conclude that the companies’ price representations were misleading.

The Bureau concluded that some of these fees were described in a way that implied that they were mandatory taxes or surcharges imposed by various governments. That was not true. Hertz and Dollar Thrifty chose to impose the additional mandatory fees to recover part of their own cost of doing business. The companies will revise the description of their fees to ensure the descriptions are not misleading.

The Bureau also concluded that Hertz and Dollar Thrifty advertised discounts that led consumers to believe that they would get a percentage off of their total bill. In fact, the discount was not applied to the total bill and the additional mandatory fees still had to be paid in full.

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