No. 1 cell phone maker Nokia has filed a potentially massive lawsuit this week. The handset maker accuses 11 component manufacturers of price-fixing to artificially drive up the cost of the displays used in mobile devices. It follows a similar action by AT&T Inc.
The Nokia lawsuit includes Chunghwa Picture Tubes, Hitachi, LG, Philips, Samsung, Seiko Epson, Sharp and Toshiba as colluders, and the Nokia portion demands unspecified damages to compensate for the overpayment for the LCDs over the course of 10 years, between 1996 to 2006.
“Nokia has filed suits to recover overcharges it paid as a result of cartel activities which are currently under government investigation,” Nokia said in a statement. “When certain companies and management employees have already admitted participating in, or are indicted for, global price-fixing cartels involving components Nokia has purchased, it is reasonable for Nokia to seek redress.”
In other words, Nokia’s operating under a “where there’s smoke, there’s fire” plan. About a year ago, the U.S. Department of Justice fined several LCD makers for price fixing. Sharp, Chunghwa and LG Display admitted to participating in such cartels and paid $585 million. Samsung was not part of the DoJ’s decision but did cooperate in the investigation. Nokia might indeed be wise to consider that if the industry had a practice of artificially inflating prices, why not grab some recompense for its own lost margin?
The outcome could set a precedent that could be followed by any number of handset manufacturers. Of course, some of those manufacturers, like Samsung and LG, are among the accused, so there might be some interesting wrinkles as the case plays out.
Some have speculated that the cost of handsets will come down if the alleged colluders are found to be liable for damages. However, the alleged price-fixing ended three years ago, so any outcome is unlikely to affect consumer pocketbooks one way or another.