Executives met more than 60 times at luxury hotels to fix prices of LCD panels, a conspiracy which illegally cost the US economy billions of dollars, a US prosecutor said in court on Tuesday.
The US government embarked on a rare criminal trial against a publicly traded company, AU Optronics Corp (AUO, 友達光電), as lawyers delivered opening statements in a San Francisco federal court.
“Instead of competing, these executives and these corporations were conspiring,” Peter Huston, an attorney with the US Department of Justice, told jurors.
However, Christopher Nedeau, an attorney for AU Optronics, said the Taiwanese company “competed fiercely.” The exchange of information between companies is not illegal, Nedeau said, and is necessary to survive in the industry.
AU Optronics was indicted in 2010 in Northern California for allegedly fixing prices of LCD panels. Several other companies, including LG Electronics Co, have already pleaded guilty in the LCD probe, while Samsung Electronics Co cut an early deal to avoid prosecution.
However, AU Optronics and five of its current and former executives — including Chen Lai-juh (陳來助), the former chief executive who is still a top executive at the company — pleaded not guilty. If convicted, the executives could face prison, while the company could be subject to hundreds of millions of US dollars in fines.
Executives kept notes of their secret meetings, Huston said, and AU Optronics personnel attended almost all of those sessions. In addition to fixing prices, executives also set production targets at those meetings, he said, in order to manage global supply.
“Ladies and gentlemen, the documents don’t lie,” Huston said.
AU’s profits were 300 percent higher when the executives were meeting, he said, compared with when they were not.
Yet Nedeau maintained that customers like Hewlett-Packard Co (HP), Dell Inc and Apple Inc, actually drove pricing, not competitors. Nedeau showed jurors an e-mail exchange between AU Optronics and HP employees, in which HP demanded a US$5 price cut on 15-inch display panels. The AU Optronics employee agreed. Additionally, Nedeau argued that the US Department of Justice is relying on witnesses who are cooperating to avoid severe punishment.
“Every deal has its price,” Nedeau said. “These deals were conditioned on giving testimony favorable to the government’s version of the case.”
AU Optronics closed up 4.38 percent at NT$14.30 in Taipei trading yesterday as investors were more optimistic about its earnings outlook for this year, while the benchmark TAIEX was up 0.13 percent.
Shares of rival Chimei Innolux Corp (奇美電子) fell 0.78 percent to NT$12.65.
Signs that flat panel prices are stabilizing after slumping last year and speculation that the companies had received rush orders, in particular from China, to meet a Lunar New Year holiday buying spree, gave investors confidence, analysts said.
In a recent research note, HSBC Securities upgraded its forecast for global LCD TV shipments for this year by 4 percent to 228 million units, and it expected flat panel prices would rebound by more than 20 percent during the year after the recent slump.
“To my knowledge, TV panel prices have stabilized and it is an encouraging sign for AUO and Chimei Innolux,” Horizon Securities (宏遠證券) analyst Benson Huang (黃重善) said. “I think the speculated rush orders placed to the two companies could be among the factors behind the improving market conditions.”