Price-Fixing - Bid-Rigging Conspiracy & Ohio Real Estate
Hello all, been taking quite a break to work on tools and technology for our brokerage and haven't posted for some time now, but I came across an article on the Dayton Daily News and just couldn't resist sharing. Ohio's auto parts industry has suffered a lot over the last decade as with many other states with huge job losses, loss of market share and a playing field in desperate need of being leveled in the face of price fixing and bid rigging conspiracies. If you're not angry, you should be.
The Justice Department Takes Action
Jobs mean income, and employment has a direct impact on the real estate industry. We've already won a coveted manufacturing designation for the Dayton-Cincinnati region and one twelfth of $1.3 Billion dollar pie, and have seen many other positive changes that speak to 2015 being an awesome year in real estate. This latest news is potentially another solid step towards a brighter future.
We could see a return of Ohio's once trademark industry due to a wave of Federal prosecutions of price fixing and bid rigging involving mostly Japanese auto parts makers is giving rise to justifiable hopes of new jobs for local manufacturers in the Buckeye State and a more competitive parts market.
According to Staff Writer of the Dayton Daily News, since 2010, 48 individuals have been charged in on-going investigations by the Justice Department and tapped as the largest antitrust criminal case in history. 32 companies thus far have plead guilty or agreed to do so. Companies with operations in 14 states including Ohio have agreed to pay more than $2.4 billion in fines according to Justice Department officials. A poorly policed global economy gave way to price-fixing and bid-rigging conspiracies which devastated Ohio and other state economies which were at one time heavily reliant on manufacturing.
"The government charged that the companies agreed with each other about who would win bids for parts and who would supply certain parts to manufacturers. They would also increase the price of those parts."
"Auto parts manufacturing in Ohio has been hit by some of the state's heaviest job losses up to and during the Great Recession. In 2004, the sector employed 94,200. By October of this year, employment had fallen by 27 percent, to 68,300. Ohio remains the number two state for auto-parts-making after Michigan. Employment in the industry nationwide stands at 734,222."
The total cost to consumers from the multiple conspiracies is difficult to pin down, but the Justice Department said the conspiracies involved $8 billion in parts sold to manufacturers and more than 25 million cars bought by consumers.
Examples of Price Fixing and Bid-Rigging Conspiracy;
An indictment announced by the Cincinnati FBI office last month charged two executives of Japanese automotive parts manufacturers with operations in Kentucky.
It said Hiroya Hirose, an executive at NSK Ltd., and Masakazu Iwami, an executive at Jtekt Corporation, conspired to fix the prices of bearings sold to Toyota beginning at least as early as 2001 and continuing until July 2011. The two were charged with price-fixing and bid-rigging in violation of the Sherman Act, a crime carrying a maximum penalty of 10 years in prison and a $1 million criminal fine for individuals.
In October, Hitachi Metals Ltd., which has a plant in St. Marys, agreed to plead guilty and pay a $1.25 million criminal fine for its role in a conspiracy to fix prices and rig bids for brake hoses installed in cars sold in the U.S. and elsewhere, the department said.
It added that, "Hitachi and its co-conspirators conspired through meetings and conversations in which they discussed and agreed upon bids and price quotations to be submitted to Toyota, and to allocate the supply of automotive brake hose to Toyota."
Other companies with Ohio operations that have agreed to guilty pleas and fines include steering component maker American Showa with a plant in Sunbury, and Yazaki Corp. in Columbus. Yazaki agreed to pay a $470 million criminal fine in 2012. For a more complete list of companies being fined, read the full article on the Dayton Daily News.
The wide-ranging Justice Department probe did not examine anti-competitive practices that directly shut out domestic-based manufacturing companies from winning contracts. It instead focused on how the foreign auto parts makers inflate costs for auto assemblers — and consumers — by rigging bids and carving up the business.
Ultimately, though, attacking market-fixing should create a more competitive market that can benefit job growth and business opportunity, a top Justice Department official told this newspaper under the condition the official not be quoted by name.
"Anytime we eliminate anti-competitive price-fixing and bid-rigging, you have a more robust, truly competitive economy," the official said. "When that happens you will produce more jobs and a better economy. The end of that should be the creation of more jobs."
The Impact on Ohio Real Estate
First of all, I just want to say shame on these people for all the lives they've hurt and destroyed.
To my mind, when the cost of living for the consumer is inflated, that's less money for would-be first time buyers to garner a down payment and closing costs, or worse yet, when jobs are destroyed, renters stay renting, homes go into foreclosure and unjust tactics like these have contributed heavily to the great downturn of real estate markets, not just in Ohio but nationwide. With the actions being taken by the Justice Department, and a more watchful eye on big business practices, it stands to reason that a strong check of such underhanded tactics will naturally lead to more jobs, more buyer and seller confidence, fewer foreclosures and a healthier, more stable real estate market across the board.
Too, even if one had been or was a current homeowner throughout this egregious period of financial heartache, your house value more than likely suffered. So, even if you're not a new first time buyer, or felt shut out as one wanting but unable to buy due to a collapsed manufacturing jobs market, you have every right to be angry.