HP sues seven optical drive makers over price-fixing

They used CES as cover to coordinate on prices, HP claims

Hewlett-Packard has filed a lawsuit against seven leading optical disk drive makers, claiming they conspired to artificially inflate disk drive prices over a six-year period.

The suit was filed Thursday in the federal southern district court of Houston against seven companies and their optical disk drive (ODD) subsidiaries, including Toshiba, Samsung, Sony, Panasonic, NEC, TEAC and Quanta Storage.

In a statement to Computerworld about the move, HP said it takes "price-fixing very seriously and intends to pursue its rights aggressively in this and in other price-fixing litigation."

None of the companies named in the lawsuit responded to requests for comment.

The lawsuit claims the conspiracy to drive up prices took place from at least Jan. 1, 2004 through Jan. 1, 2010, when "almost all forms of home entertainment and data storage were on optical discs."

"During the conspiracy period, defendants and their co-conspirators controlled more than 90% of the ODD market," the filing said. "Additionally, defendants and their co-conspirators belong to or control patent pools that effectively deter entry into the ODD market by imposing high licensing costs on required technology."

In its court filing, HP named the 3C DVD Patent Group, which covers patents related to the Blu-ray format, and several patent pools related to CD technology.

The lawsuit revolves around the sale of Blu-ray, DVD and CD drives by the various corporations to computer equipment manufacturers, such as desktop, laptop and external device makers, including HP.

HP claims the companies engaged in a series of "integrated and overlapping" anticompetitive acts that included price rigging among equipment manufacturers, and exchanging confidential information from HP related to its prices, sales, disk production and bidding strategies.

The ODD makers also used trade shows and events such as the Consumer Electronics Show (CES) and the Optical Storage Symposium as "cover" to communicate competitive information and hammer out anticompetitive agreements, HP charged. They then used the information to coordinate their drive prices and even entered into agreements to set prices for disk drives sold to computer manufacturers in the U.S.

"HP paid higher prices for [optical disk drives] than it would have paid in a competitive market as a direct result of defendants' and their co-conspirators' unlawful conduct," the suit argues. "HP brings this action to recover for injury to its business and property arising from billions of dollars of purchases of optical disk drives... at artificially inflated prices over several years."

HP is seeking unspecified damages and a court injunction against the companies.

HP cited a plea agreement that arose from a criminal case brought by the U.S. government against a joint venture involving Hitachi and LG Electronics (HLDS). In that agreement, signed Nov. 8, 2011, HLDS admitted that it had engaged in "felonious price-fixing conduct with co-conspirators," between November 2005 and March 2009.

"Many defendants and co-conspirators named in this complaint have a history of engaging in anticompetitive conduct, including price-fixing conduct for electronic component parts used in computers that HP manufactured and sold, such as [DRAM], [LCD displays], and cathode ray tubes," HP wrote in its filing.

HP alleges violations by the optical disk makers of both the Sherman Antitrust Act and the Clayton Act, which regulates industry practices that may be detrimental to fair competition. Additionally, HP said the alleged price fixing also violated the California Cartwright Antitrust Act, which mirrors federal anti-competitive statutes.

Lucas Mearian covers storage, disaster recovery and business continuity, financial services infrastructure and health care IT for Computerworld. Follow Lucas on Twitter at @lucasmearian or subscribe to Lucas's RSS feed. His e-mail address is lmearian@computerworld.com.

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