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Samsung Video Wall

By Hwang Ye-rang　

Samsung Electronics, LG Display and other manufacturers and retailers within and outside South Korea of TFT-LCD panels, which display video images on computer monitors and televisions, have been fined 194.05 billion ($175.8 million) by the Fair Trade Commission for conspiring to fix prices and delivery quantities.

The FTC stated on Sunday that it had exposed the fact that 10 firms in South Korea and Taiwan had held several bilateral and multilateral liaisons, known as “crystal meetings,” between September 2001 and December 2006, at which they agreed upon the timings of product price increases and price differences. When prices fell sharply due to excess supply, the firms sometimes ceased manufacturing or fed false information to media about “insufficient supply.” They threatened to “exclude from meetings” any firms that did not stick to the agreement.

“Conspiracy among businesses that occupy at least 80% of the global LCD market also affected household appliance prices, damaging the interests of consumers,” the FTC stated. In terms of individual firms, fines levied included 97.29 billion won from Samsung Electronics (including its Japanese and Taiwanese branches), 65.52 billion from LG Display (including Japanese and Taiwanese branches), and 31.24 billion from four Taiwanese firms including AU Optronics. This is the largest ever fine levied by the FTC when dealing with an international cartel case, and the third case worldwide of sanctions being imposed by competition authorities for LCD panel price fixing, following those in the United States and EU.

The commission is praising itself for breaking its own record in terms of the size of fine levied from an international cartel. The reality, however, is different: big businesses have taken advantage of a system of leniency in case of voluntary reporting to avoid much higher fines.

On the surface, it appears that the 194 billion won in fines imposed on 10 LCD firms by the FTC on October 30 is much higher than the 124.3 billion that it levied when dealing with last year’s air freight charges incident. It appears, however, that the actual amount paid by the firms will come to no more than around 64 billion won. This is because Samsung Electronics and LG Display, which received the highest and second highest fines, will be exempted from 100% and 50% of these fines, respectively, after voluntary reporting their actions. This amount is less even than the actual 80 billion won sum paid in fines in the air freight charges case. This is what makes the FTC’s “adding of significance” embarrassing.

This incident has once again confirmed the dilemma posed by the leniency system, which was introduced in 1997 in order to effectively expose secret conspiracies among firms. The FTC’s investigation was made significantly easier thanks to the shrewd firms that came forward first and second in order to avoid fines. In this case, too, the firms were careful, leaving no documentary evidence and leaving the meeting venues and staggered intervals, but the testimonies from their voluntary reports alone constituted evidence. The problem is that firms are abusing the leniency system. In a situation where reliance on “confessions from businesses” to the extent that the leniency system applied to 68% of cases involving fines last year, the ringleaders in such conspiracies are frequently escaping punishment.

“Using voluntary reporting to increase the rate of exposure of cartels is something that is also done by foreign competition authorities in places such as the US and the EU,” said Kim Sun-jong, head of the FTC’s Cartel Investigation Bureau. “Some criticize it, saying that exemption for ringleaders should be limited, but it is difficult to judge who the ringleaders are, and there are concerns that this would lead to a sharp decrease in voluntary reports.”

Firms other than Samsung objected to the FTC’s decision. Samsung Electronics has previously avoided paying any actual fines whatsoever in cases where competition authorities in the U.S. and E.U. imposed fines regarding international LCD panel cartels, thanks to exemptions due to voluntary reporting.

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