AU Optronics Vows to Appeal $500 Million LCD Price-Fixing Fine
AU Optronics pledged to appeal a $500 million fine imposed for its role in a global LCD price-fixing conspiracy. U.S. District Judge Susan Illston in San Jose rejected the Justice Department’s demand for a $1 billion fine. But AU Optronics, in an SEC filing Friday, “expressed its regret” at the ruling that requires it pay the fine over three years. While it plans to appeal the fine, AU said it will be recognized in Q3. Minus provisions already made, AU will recognize an additional $223 million in Q3 charges, the company said.
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"The trial demonstrated that there were certain important, yet unresolved, legal questions surrounding this matter,” AU Optronics said in a statement. In an appeal, AU “hopes that the appellate court will clarify these important legal issues, with a hope that other international businesses will have some bases and grounds when confronted with a similar antitrust allegation,” the company said.
In turning aside the government’s request for a bigger fine, Illston said AU has already paid millions of dollars to settle a class-action lawsuit and still faced other lawsuits in the U.S. and around the world. Illston also rejected the DOJ request that two AU executives -- Hsuan Bin Chen and Hui Hsiung -- be sentenced to 10-year prison terms. Illston sentenced the executives to three-year prison terms, arguing they didn’t act for personal gain, but rather out of a belief that they were helping an industry hampered by oversupply and plunging prices.
"There were a lot of business pressures they responded to,” Illston said in her decision. “There was relatively little personal motivation,” Illston said. But Chen and Hsiung “did know” the pricing-fixing was illegal, she said. Chen and Hsiung are free on bond and scheduled to report to prison Dec. 20. A federal jury in March convicted AU along with Chen and Hsiung. Two other AU executives were acquitted.
AU Optronics and seven other companies who previously pleaded guilty were convicted of sending executives to quarterly meetings between 2001 and 2006 to set LCD production levels and pricing, according to court documents. The meetings artificially inflated LCD costs for consumers and one-third of the $74 billion in LCD sales implicated in the scheme was made by U.S. companies, including Dell, Hewlett-Packard and others, the DoJ has said. AU Optronics was the only company to refuse a plea bargain and take the case to trial.
AU had only $80 million in cash on hand and an order to pay the fine immediately would have caused lenders to demand repayment of $6.5 billion worth of loans, Dennis Riordan, an attorney for the company, told the Associated Press. Such a scenario would have “killed” the company, Riordan said. In addition to the fine, Illston ordered AU Optronics publish in trade journals that it had been convicted of price-fixing and describe the measures it was taking to avoid breaking the law in the future.
"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,” federal prosecutors wrote, arguing for the criminal penalties against AU Optronics.
AU Optronics, along with Toshiba and LG, agreed in July to pay a combined $571 million to settle a separate class-action suit. Other manufacturers, including Hitachi, Samsung and Sharp, agreed in December to pay $538 million to settle. Seven other Asian manufacturers and 22 of their executives have previously pleaded guilty and agreed to pay a combined $890 million in fines. The 10 executives who have been sentenced so far were given prison terms of six months to a little more than a year.