Major DRAM Makers Sued for Price-Fixing
Published: 14 July 2006
by Mike Buetow
The defendants include Infineon Technologies, Hynix Semiconductor, Micron Technology, Mosel Vitelic, Nanya Technology, Elpida Memory and NEC Electronics America. Also named as defendants were certain subsidiaries that sold and distributed DRAM chips in the U.S.
Infineon, Hynix, Micron, along with Samsung, control roughly 70% of the U.S. market.
“The defendants in this case conspired to rig the U.S. market for this essential computer product, working together to keep prices artificially high," California Attorney General Bill Lockyer said in a statement. "In the process, they victimized individual consumers, governmental agencies, schools and taxpayers."
The antitrust complaint was filed in U.S. District Court for the Northern District of California. The complaint alleges the defendants violated state and federal antitrust laws through a four-year conspiracy (from 1998 through June 2002) to fix DRAM chip prices, artificially restrain supply, allocate among themselves the production of DRAM chips and markets for the chips, and rig bids for DRAM chip contracts.
In 2003, the United States was home to about $5 billion of the $17 billion in worldwide sales.
"This lawsuit seeks compensation for those victims and to ensure the defendants never again violate fundamental tenets that make our economy work properly," Lockyer said.
He said that means the damages suffered by California consumers and governmental entities easily could total in the tens of millions of dollars. As permitted under antitrust laws, the complaint asks the court to order the defendants to pay three times the amount of damages for which the court finds them liable.
The lawsuit grows out of a criminal antitrust case brought by the U.S. Department of Justice (DOJ) against what officials called “one of the largest cartels ever discovered.” Afer DOJ launched its investigation in June 2002, Micron agreed to cooperate with investigators in exchange for amnesty from federal criminal charges. Subsequently, Samsung, Hynix, Infineon, Elpida, along with 12 individuals, pled guilty to criminal price-fixing and collectively paid more than $730 million in fines.
From 1998 through June 2002, the complaint alleges, the U.S. market also was marked by a widespread antitrust conspiracy. The unlawful, concerted action unjustly enriched the defendants at the expense of the computer manufacturers that bought DRAM chips, and the schools, governmental entities and individual consumers who purchased computers, according to the complaint.
As described in the complaint, the defendants started discussing and coordinating the prices they charged to large computer OEMs in 1998, at a time when the DRAM market had excess supply. The OEMs included Apple Computer, Compaq Computer, Dell, Gateway, Hewlett-Packard and IBM.
“The manufacturers did not limit this pricing coordination to isolated or occasional conversations,” the complaint alleges. “On the contrary, during a roughly four-year period, there were frequent pricing communications among the conspiring manufacturers, exchanges that intensified in the days immediately preceding the dates on which they submitted bids to supply DRAM to the (computer makers), their largest and most important customers. In 2001, according to the complaint, the defendants “agreed to reduce supply in order to artificially raise prices.”
The complaint cites a Fall 2001 meeting of DRAM manufacturers during which a Mosel Vitelic executive said “a basis for understanding had been reached ... to “trim some production starting in September.” The defendants’ unlawful conduct, the complaint alleges, harmed computer makers and buyers of computers because they were unable to purchase DRAM or DRAM-containing products at competitive prices and paid more for such products than they would have paid “in a free and open competitive market.”
