DENSO: Secret Meetings Behind the Component Prices

The DENSO antitrust case concerned price fixing and bid rigging for electronic control units and heater control panels sold to Toyota, according to the Justice Department’s criminal-case announcement. The company pleaded guilty. Separate charges reached into its Toyota Sales Division, where prosecutors alleged that executives joined pricing discussions or directed employees to take part. The people selling parts to Toyota were, prosecutors alleged, helping competitors decide what Toyota would pay.

Electronic Control Units and Heater Control Panels Sold to Toyota

DENSO’s case concerned parts that control a car’s electrical systems and cabin temperature. The Justice Department described electronic control units as small computers embedded throughout a vehicle. A body control unit, for example, operates power windows, locks and other electronic door components. The heater control panel sits in the center console and controls the temperature inside the car.

The criminal charges against the executives identified Toyota Motor Corporation and Toyota Motor Engineering and Manufacturing North America Inc. as the customers, with sales in the United States and elsewhere. These were prices for components bought by an automaker and installed in cars. The government’s account put the harm on both sides of the finished vehicle: manufacturers and vehicle buyers paid higher prices.

Secret Meetings and Instructions to Employees

The charges against the DENSO executives described pricing coordination carried out through meetings and conversations. Prosecutors alleged that the executives participated themselves or directed subordinate employees to participate. The Justice Department also described code names and secret meetings used to conceal agreements to fix prices and allocate bids.

The sales team facing the customer was also, prosecutors alleged, a means of coordinating with competitors. An employee asked to join a discussion could know both the competitor contact and the instruction that brought them into it.

An instruction about pricing can look quite different to the employee who knows which competitor conversation preceded it. Our interest is in that connection: the component being sold, the agreement behind its price and the people who carried it into the customer relationship.

The Company Plea and the Toyota Sales Roles

DENSO pleaded guilty in March 2012 to its role in the electronic-control-unit and heater-control-panel conspiracies. The separate executive charges show how prosecutors traced the conduct through particular sales roles.

In its May 21, 2013 announcement, the department said a senior manager in the Toyota Sales Division had agreed to plead guilty. The criminal charges alleged that the manager participated in both component conspiracies from at least 2005 through at least 2008.

A group leader in the same division separately agreed to plead guilty. The charge against that executive concerned heater control panels, with alleged participation from at least 2008 through at least 2010.

For an employee who worked on that account, the product and the reporting relationship make the account much more recognizable than the broad label of an auto-parts cartel.

What Is an Example of Bid Rigging?

In its criminal plea agreement, Yazaki described an auto-parts bid-rigging arrangement in which suppliers allocated business by vehicle model and coordinated the bids quoted to automakers. Yazaki was another supplier in the Justice Department’s international auto-parts investigation.

Yazaki’s agreement covered wire harnesses, instrument-panel clusters and fuel senders in separate counts. Wire harnesses distribute electrical connections through a car. Instrument-panel clusters are the gauges in front of the driver. Fuel senders sit in the tank and measure its contents.

For wire harnesses and instrument-panel clusters, the plea agreement described meetings and conversations that produced model-by-model supply allocations, rigged bids and coordinated prices. The coordination also covered price adjustments requested by automakers. The fuel-sender account likewise described agreements on prices and customer-requested adjustments.

The buyer’s request to change a price became another subject for competitors to discuss among themselves. The suppliers agreed who would supply each model, then coordinated their answers when the automaker asked for a price adjustment. For an automotive purchasing or sales employee, that distinction connects the initial quote with later pricing decisions on the same business.

Private Auto-Parts Settlements Followed the Purchases

The wider private automotive-parts settlements addressed claims by injured purchasers over alleged price fixing across multiple components. That is a different reason for receiving money from supplying inside information about an agreement.

The distinction matters for a sales employee reading about an auto-parts settlement. A buyer’s claim follows the purchase and alleged overcharge. A whistleblower’s information may instead explain who coordinated the price before the buyer ever saw it. Those are different contributions, and we assess the reporting opportunity around the information the insider actually has.

How Is Bid Rigging Detected?

In DENSO’s executive cases, the alleged link was participation in, or direction of, pricing discussions. In Yazaki’s plea agreement, it included model allocations and coordinated responses to automaker price requests. An insider may be able to explain why a particular quote changed, what instruction reached the sales team, or how a competitor contact related to the customer account. We work with that knowledge to connect the commercial decision to the agreement behind it.

How Much of a Settlement Does a Whistleblower Get?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. In a bid-rigging case, that means false claims for government payment.

The Antitrust Division and Postal Service also have a separate whistleblower rewards program. We work through whether it fits your information with you.

You Know How the Quote Was Set

Our whistleblower experts can connect a DENSO competitor meeting with the component price and account decision that followed.