by CIO Staff

Chip Makers Face Price-Fixing Suit from 34 States

Jul 14, 20063 mins
Data Center

California and 33 other U.S. states plan to file a joint antitrust lawsuit against seven dynamic RAM (DRAM) makers over alleged price fixing, adding to industry woes amid an ongoing federal investigation that has already led to US$731 million in fines.

The attorney general for the state of California, Bill Lockyer, will file the lawsuit on Friday in the U.S. District Court for the Northern District of California, he said in a statement.

The multistate suit alleges the companies violated antitrust laws and harmed consumers by conspiring to fix prices through artificial supply restraints, dividing markets among themselves and rigging bids on DRAM contracts during a four-year period between 1998 and 2002.

The alleged price fixing harmed computer makers such as Apple Computer, Dell and Hewlett-Packard, causing them to pay more for DRAM than they would have paid in a free and competitive market, according to Florida Attorney General Charlie Crist. These added costs were then passed on to consumers.

New York Attorney General Eliot Spitzer, who filed an antitrust lawsuit in Manhattan, said the alleged conspiracy added at least $1 billion to the cost of the memory chips.

The size of fines resulting from the lawsuit could be substantial. In California alone, Lockyer estimated damages suffered by consumers could reach tens of millions of dollars. The antitrust complaint asks the court to order defendants to pay three times the amount of damages for which they are found liable.

The California case notably excludes Samsung Electronics, the world’s largest DRAM maker. But it includes Micron Technology and six foreign chip makers: Infineon Technologies of Germany, South Korea’s Hynix Semiconductor, Japan’s Elpida Memory and NEC Electronics America, and Taiwan’s Mosel Vitelic and Nanya Technology as well as their U.S. subsidiaries.

Samsung, which is named as a defendant in the Manhattan suit, declined to comment. The Manhattan suit is part of the coordinated effort by the group of states.

Nanya Technology has not yet received any information from U.S. authorities regarding the matter, said Pai Pei-Lin, a vice president at Nanya Technology. “We believe that we have not violated any regulations,” he said.

The case by the states will likely run as a sideshow to the U.S. Department of Justice (DoJ) investigation, which began in 2002 and has already seen guilty pleas by 12 individuals and four companies, in addition to huge fines. But it will likely mean additional fines above and beyond those already doled out by the DoJ.

Last year, Samsung was ordered to pay a $300 million criminal fine in the case, while South Korean rival Hynix Semiconductor agreed to pay $185 million. Infineon Technologies of Germany was first to pay a fine of $160 million, in late 2004. Earlier this year, Japan’s Elpida Memory agreed to plead guilty and pay a $84 million fine.

“The lawsuits by the states probably won’t hurt DRAM makers, but they will likely face more fines. Since some of them have already pleaded guilty in the [DoJ] suit, it should be easy for the states to win,” said Crystal Lee, memory chip analyst at ABN AMRO Asia in Taipei.

-Dan Nystedt, IDG News Service (Taipei Bureau)

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