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Dec 25, 2023

Avnet Inc. awarded $268 million in antitrust lawsuit against suppliers

Avnet Inc. was awarded millions of dollars in an antitrust lawsuit that accused

Avnet Inc. was awarded millions of dollars in an antitrust lawsuit that accused a Japanese technology manufacturer of artificially inflating prices of electronic components.

A San Francisco federal jury on May 22 awarded Phoenix-based Avnet (Nasdaq: AVT) $268 million in damages in a case against Nippon Chemi-Con Corp and its Illinois-based subsidiary, United Chemi-Con Inc. The verdict followed two days of deliberation, Reuters reported.

Avnet, a global distributor of electronics components, had alleged that the two companies were overcharging for aluminum, tantalum and film capacitors from 2001 to 2014. Capacitors are used in electronic devices, including household appliances, mobile phones and computers. Capacitors store electrical energy and help regulate the flow of the electrical current as it moves through a circuit.

Avnet said it's one of the top five distributors nationwide for capacitors and purchased more than $500 million worth from the defendants over a 12-year period, according to the lawsuit filed in U.S. District Court in the Northern District of California.

The jury awarded Avnet $89.2 million in damages, which will be tripled under U.S. antitrust law to $267.7 million, Reuters reported. Avnet was initially seeking $274 million, according to a pretrial brief.

Avnet filed its initial complaint against the two companies in 2016.

Attorneys for Nippon Chemi-Con and United Chemi-Con disputed their liability, arguing that only $1.5 million out of Avnet's claimed damages was tied to capacitor purchases from the two companies, according to Reuters.

In the lawsuit, Avnet attorneys alleged that the two companies carried out a "12-plus year market-wide conspiracy to fix the prices of aluminum, tantalum, and film capacitors" that were billed or shipped to the U.S.

Avnet's attorneys said defendants regularly exchanged confidential information on production, prices, customers and allocation issues as well as discussing when and how to slow production in order to raise prices, according to the lawsuit.

"The information exchanged was remarkably specific, and often extended to precise strategies to increase prices both generally and for specific customers, as well as to address exchange rates and supply costs," Avnet's attorneys wrote in the lawsuit. "The price agreements the conspirators reached ranged from general promises to resist customers’ requests for price reductions to explicit agreements on raising prices of capacitors."

Avnet's legal victory comes as the company reported its third fiscal quarter financial results earlier this month that exceeded Wall Street expectations.

Avnet reported net income of $187.4 million, or $2.03 a share, for the three-month period ended April 1, compared to $183.4 million, or $1.84 a share, in the third fiscal quarter of 2023. Analysts surveyed by Zacks Investment Research estimated earnings of $1.78 per share.

Avnet generated $6.51 billion in revenue in the third fiscal quarter, exceeding an estimate of $6.27 billion by Zacks Investment Research.

During the second fiscal quarter, Avnet reported a $61.7 million gain in connection with legal settlements filed against capacitor manufacturers. As of April 1, the company received $51.2 million in cash related to the settlements, according to a filing with the U.S. Securities and Exchange Commission.

Avnet's stock closed at $45.31 per share on Friday, up 2.9%. Track the stock here.

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