News broke last week of Sharp, CPT and LGD pleading guilty to LCD panel price fixing over a six-year period (2001 to 2006). The three agreed to pay record fines (over $500M) and "to cooperate fully" with authorities in the ongoing US Department of Justice (DOJ) investigation.

Steve Sechrist
Senior Analyst and Editor

Given the recent history of LCD-TV price drops, some in the industry think the DOJ action is a bit overblown. For example, in the New York Times piece that broke the story they said:
"The LCD business is a $100-billion-a-year market and growing, but prices
are falling relentlessly. Recently, panel prices have often been cut in half each year, a downward trajectory even steeper than in other technology markets known for steady price pressure… In the last six months alone, the price of a 15.4-inch panel for a notebook PC has dropped to $63, from $97, and a 32-inch LCD for a television has gone to $223, from $321, according to iSuppli, a market research firm."

Some initial responses floating around the display blogs used phrases like "worst price fixing cartel in history." But this recent action by the DOJ and admission of guilt by these three LCD makers is not the end of the story by a long shot.

First consider the action of this "cartel" is from 2001 to 2006. Anyone here remember buying an LCD monitor during that CRT to LCD transition time? Even a modest 15-inch display was selling in the +$500 price range and some of the high-end (+20-inch and larger) models went for as much as $3000. During that same time, mobile products using LCDs (from laptops to mobile phones), were selling much higher as well–and the cost of the panels represented from 10 to 20% of the total component cost in these products.

Here in the US we were somewhat insulated from high mobile device costs by subsidies from the wireless carriers for cell phones. Also, many of us were "issued" laptops from companies looking to empower employees on the road. Laptops began taking off as a consumer product when prices went below the $1000 mark.

Next, conspicuously absent from this price fixing troika, was Samsung, the big dog on the LCD panel scene. In the blogs last week the question came up, how can you have a price fixing cartel that doesn’t include the largest producer? The answer: you usually don’t. And this is why the DOJ announcement may just be the tip of the iceberg. You can bet that "cooperation" from the guilty three means spilling the dirt on the rest.

Sadly, Samsung has a history of price fixing and up until this past week, paid the second highest fines to DOJ ($300M) for conspiring to fix prices from 1999 to 2002 for DRAMs (memory chip) sold in the US.

So did the company learn their lesson from that experience, or did they succumb to the pressures of the back room deal? Only time will tell, but if Samsung is implicated, chances are it will be big, and here’s why. Anti-Trust law dictates that a company can be fined up to twice the gain it derived from its misconduct. So LGD’s $400M fine could represent up to $200M in ill-gotten gains from price fixing, with Sharp getting another $60M and CPT $32.5M. But these numbers should just be a starting point, as DOJ can offer "reduced fines" if companies cooperate, subject to approval from the court.

So if Samsung, as the largest LCD panel maker, is found to have participated and gained from price collusion, chances are they will have significant exposure, perhaps beyond that of LGD. One other theory is that competitive pressure in the industry was so tough that LG, Sharp and CPT found it necessary to collude in order to compete with rival Samsung. Samsung may be totally innocent (and is assumed so until proved otherwise.)

It is ironic that over the years the rivalry between these big display companies has become renown. It seemed like every year at CES, the big question was, who would have the bragging rights to the world’s largest LCD? Now it looks like LG has a different sort of bragging right, in topping Samsung for the second largest DOJ settlement for price fixing, $100M under the current record holder, Swiss pharmaceutical giant F. Hoffmann-La Roche at $500M paid in 1999. For Samsung’s sake, let’s hope this is one LG record the company does not top, as this investigation continues and the wheels of justice turn slowly but surely.