Ninth Circuit Green Lights Flextronics’ Antitrust Suit Against Panasonic
08/01/2023On July 21, 2023, the United States Court of Appeals for the Ninth Circuit reversed an order from the U.S. District Court for the Northern District of California dismissing Flextronics International USA Inc.’s (“Flextronics”) antitrust lawsuit alleging that Panasonic and other Japanese electrical inductor companies conspired to fix and stabilize inductor prices.
The original putative class action complaint filed in 2018 alleged that defendants formed a cartel in which members shared price and volume data in an effort to protect profits. Plaintiffs alleged that defendants utilized industry groups to exchange competitively sensitive information and reach agreements to artificially inflate prices.
In 2019, Flextronics opted out of the putative class and filed suit alleging defendants conspired to fix prices at supracompetitive levels between 2003 and 2017. Like the original class action, Flextronics alleged defendants did so through trade association meetings, formal and informal dinners, and social events. In addition, Flextronics alleged that defendants exchanged detailed information to monitor compliance, coordinate price and production as well as avoid price competition or overproduction. To support its allegations, Flextronics used its own purchase data between 2003 and 2017 purportedly showing that three defendants’ prices consistently moved in parallel over time. Although Flextronics acknowledged that it did not purchase enough comparable products from certain defendants to conduct a separate statistical analysis for those defendants, Flextronics alleged that the other defendants’ prices likewise moved in parallel.
In February 2022, Judge Edward J. Davila of the Northern District of California dismissed Flextronics’ complaint, holding that Flextronics relied solely on circumstantial evidence and failed to plead evidence of parallel pricing that demonstrated any trends, patterns, or relationships among all defendants over time. Additionally, the court emphasized that because Flextronics acknowledged it did not purchase enough products from certain defendants to conduct an independent analysis for those defendants, Flextronics failed to plausibly allege parallel pricing trends among those defendants. Finally, the court held that Flextronics failed to plausibly allege how some defendants were involved in the cartel, apart from mere participation in trade association meetings.
On appeal, the Ninth Circuit reversed the Northern District of California’s decision, holding that Flextronics adequately alleged parallel pricing. In finding that Flextronics plead sufficient factual detail to support an inference of parallel pricing, the Ninth Circuit emphasized that parallel pricing “need not be identical so long as it is similarly and reasonably contemporaneous.” The Ninth Circuit likewise noted that the district court failed to adequately credit Flextronics’ alleged plus factors, including statements made during trade association meetings cautioning members not to reduce prices, statements about alleged consciousness of guilt, and defendants’ alleged participation in similar conspiracies to fix the prices of capacitors and resistors. Therefore, the Ninth Circuit held that Flextronics’ allegations were sufficient to nudge its price fixing claims “across the line from conceivable to plausible.”
The Flextronics opinion presents a cautionary tale for companies participating in trade association meetings, either formal or informal. All participants in trade association meetings should be vigilant against sharing proprietary business data or pricing information. Before participating in such meetings, it is advisable to seek antitrust counsel to provide compliance training and review agendas or prepared remarks.