Investigation deepens in auto parts price-fixing scandal

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Wiring harness

The probe into Furukawa's wire harness price fixing is widening internationally. Photo Credit: Zuzu/Wikimedia Commons/CC-BY-SA

The Furukawa auto parts price-fixing scandal has caused a shakeup in the automotive industry. The ringleaders are facing prison, and the probe into the matter is widening.

Ringleaders to face prison

Years of investigation have led to the recent conviction of several executives of the Furukawa Electric Company for price fixing. According to the Boston Globe, the firm conspired with other companies it has relationships with to set the prices of wiring harnesses, a key part in the electronics system in cars, which may have driven up the price of passenger cars and replacement parts. Furukawa supplies several automakers.

The scheme is said to have been going on for a decade or more. Three executives of Furukawa’s American division, according to AutoBlog, have pleaded guilty to price fixing charges, and the company has settled with the federal government. Furukawa, according to the Boston Globe, settled with the Justice Department for $200 million in fines and two of the three execs that admitted to the scheme have agreed to $20,000 fines and prison sentences of 15 months and one year and one day. However, the probe into Furukawa has shown that the price fixing was international in scope.

20 suppliers across four continents

The probe into the Furukawa price fixing scandal, according to Crain’s Detroit Business, is expanding to more countries beyond Japan and the United States. Raids have been carried out and subpoenas issued to 19 other suppliers across six different sectors of the auto industry in countries on four continents.

The only result so far is the fine against Furukawa in America, plus the conviction of three of its executives. Officials are looking into Furukawa and other companies’ activities in Asia, Europe and Australia as well as the U.S.

Unfortunately common

Though price fixing, where companies collude to keep prices of goods high, is considered among the worst sins in business ethics, it does happen in automotive industry and related services. According to Reuters, officials from Britain’s Office of Fair Trade are investigating the commercial vehicle divisions of Volvo, Scania and Mercedes-Benz. A raid was carried out at Mercedes’ headquarters in the U.K., and European Union authorities are investigating all three.

Gas stations are often cited in textbooks as the classic example of how price fixing occurs. According to The Detroit News, the managers of several gas stations near Madison Heights, Mich., near the beginning of this year conspired to keep prices high in February and March. The two managers plus three others pleaded guilty recently to charges of violating Michigan’s antitrust laws, with sentencing for all five to be imposed in January.

Sources

Boston Globe

AutoBlog

Crain’s Detroit Business

Reuters

The Detroit News


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