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LG Electronics Wins 2nd Round of Damages Lawsuit Against Taiwanese LCD Manufacturers for 'Price Fixing'

[비즈한국] LG Electronics066570 has won the second round of a damages lawsuit filed against Taiwanese LCD (Liquid Crystal Display) panel manufacturers, involving tens of billions of won. This result comes 12 years after the initial lawsuit was filed in 2014 and about two years after the first-instance ruling. The court acknowledged the damages incurred by LG Electronics due to the price-fixing activities (cartel) of the Taiwanese firms, ruling that they must pay approximately 28.2 billion won in principal damages plus 26.6 billion won in accumulated interest over more than 10 years.

12-Year Damages Lawsuit, Second Trial Reaffirms "Liability of Taiwanese Firms"

The Seoul High Court ruled partially in favor of the plaintiffs on the 14th in an appeal filed by LG Electronics and its six overseas subsidiaries (Nanjing, China; Mlawa, Poland; U.S.; Indonesia; Wroclaw, Poland; and Russia) against Taiwanese LCD manufacturers AU Optronics (AUO) and HannStar Display.

The court calculated the damages to be paid to LG Electronics at 24.944 billion won for AUO and 3.25 billion won for HannStar, excluding interest accrued since around 2007. Including the delay interest, the total amount the two companies must pay is approximately 54.8 billion won—the principal of 28.2 billion won plus about 26.6 billion won in interest.

However, the scope of the recognized damages was slightly reduced compared to the first trial. In November 2023, the first-instance court attributed 70% of the damages to the defendants' liability, but this was lowered to 60% in the second trial. Consequently, the principal damages are lower than those awarded in the first trial (approximately 29.1 billion won and 3.79 billion won, respectively).

The origins of this lawsuit date back to the early 2000s. From 2001 to 2006, major TFT-LCD manufacturers from South Korea, Taiwan, and Japan held monthly "Crystal Meetings" in Taiwan, where they conducted bilateral and multilateral meetings to agree on prices and supply volumes for LCD panel products.

According to investigations by the Fair Trade Commission (FTC), the Taiwanese firms engaged in price fixing by setting price floors for LCD panels or controlling supply. At the time, the market was led by Korean companies like Samsung Electronics005930 and LG Electronics, while late-comer Taiwanese firms were expanding their market share by leveraging supply networks and price competitiveness.

In December 2011, the Korea Fair Trade Commission uncovered the collusion, issued a corrective order, and imposed total fines of 194 billion won. Subsequently, LG Electronics filed a damages lawsuit against five Taiwanese companies, claiming that it had "suffered losses from purchasing panels at high prices due to unfair joint activities." The argument was that the winning bids were formed at high prices due to collusion, and the company suffered damages equal to the difference between the actual price and the expected price in the absence of collusion. During the litigation process, the case was withdrawn against firms other than AUO and HannStar.

AUO and HannStar appealed immediately after the first-instance ruling in December 2023, and LG Electronics also filed a cross-appeal.

Court Rejects "Statute of Limitations Has Expired" Argument

Citing the first-instance ruling, the Seoul High Court stated, "The defendants engaged in joint activities such as discussing the maintenance and increase of prices for major TFT-LCD products, agreeing on minimum target prices for key products, and exchanging sales quantity and price information through continuous meetings, thereby unfairly reducing or restricting competition," concluding it was a "violation of the Fair Trade Act."

One of the key issues in this appeal was the statute of limitations. Under civil law, the right to claim damages from an illegal act must be exercised within three years from the date the victim becomes aware of the damage and the perpetrator, and within 10 years from the date the illegal act occurred.

The Taiwanese firms argued that the statute of limitations had already expired, claiming that "the plaintiffs could have sufficiently known of the illegality around 2009, when guilty verdicts were confirmed in U.S. courts, or around 2010, when the European Union (EU) issued sanctions." They argued it was unfair to hold them accountable for an incident that happened over 10 years ago.

However, the second-instance court rejected this argument, stating, "AUO refused to enter a guilty plea in U.S. criminal proceedings, claimed innocence, and continued legal disputes, and consistently denied the existence of an agreement and its competition-restricting nature even during the domestic FTC investigation and administrative litigation stages." The court pointed out that it is difficult to consider LG Electronics as having specifically recognized the occurrence of damages while the companies were disputing their illegality.

The court added, "The statute of limitations should be considered to begin only when the uncertainty regarding the legal assessment of the joint act is resolved, i.e., when the domestic administrative litigation ruling becomes final." This clearly states that in global cartel cases, if the perpetrator continues to deny the allegations and pursue legal disputes, the limitation period for the victim's damages claim can be extended accordingly.

The two Taiwanese companies also argued that because they are Taiwanese entities and the evidence is in Taiwan, the trial should be held in their home country, or that LG Electronics is not a victim but a perpetrator because it is a major shareholder and parent company of LG Display, one of the colluding firms.

The court dismissed these arguments based on the Private International Law provisions regarding international jurisdiction, stating, "Because the disputed matters and the parties have a substantial connection to South Korea, the Korean court has international jurisdiction over this case." Furthermore, it added, "The circumstances presented by the defendants alone do not support the conclusion that LG Electronics, which operates as an independent entity from LG Display, should be viewed as the same subject of the collusion."

This case took nine years and 10 months to reach a first-instance ruling after the complaint was filed in January 2014, and 12 years to reach the second-instance result. The court previously explained that the proceedings were prolonged due to issues of international jurisdiction, the analysis of extensive evidence, and procedural objections raised by the defendants.

This ruling is a case where a domestic buyer successfully held companies accountable and received damages for collusion that occurred in the global supply chain. While the damage ratio was slightly reduced in the second trial, it is considered significant as it reaffirmed the liability of the Taiwanese manufacturers for their illegal activities. Attention is now focused on whether AUO and HannStar will challenge the ruling and appeal to the Supreme Court.

An LG Electronics official commented on the ruling, stating, "This is a matter where we filed for damages in 2014 because our export competitiveness in monitors and TVs was hit by the price-fixing of Taiwanese panel makers. As the litigation process is not yet completely finished, it is difficult to express a specific position."