Marginal Utility

by Tom Bozzo

Because criminal price-fixing conspiracies do happen. This one involved efforts to fix the prices for computer memory (DRAM) chips, and three conspirators have paid $645 million in fines:

Samsung Pleads Guilty in Price-Fixing Case (AP):

SAN FRANCISCO -- Samsung, the world's largest maker of computer memory chips, has pleaded guilty to a charge it conspired with other companies to fix the price of chips used in personal computers and other electronic devices...

After accepting the plea and a previously arranged deal with prosecutors on Wednesday, U.S. District Judge Phyllis J. Hamilton ordered Samsung Electronics Co. Ltd. and its U.S. subsidiary, Samsung Semiconductor Inc., to pay $300 million — the second-largest fine in a criminal antitrust case.

It was the culmination of a three-year investigation into price fluctuations in the dynamic random access memory market from April 1999 to June 2002. Prosecutors said Samsung, which is based in Seoul, South Korea, and other companies engaged in price fixing through e-mails, telephone calls and in-person meetings...

The plea deal, which was announced in October, requires the company to pay $300 million, plus interest, in installments over the next five years. The government agreed to not pursue additional prosecutions against Samsung or most its officers and employees.

Seven people, including Samsung Semiconductor President Y.H. Park, are specifically excluded from such protection and could still face prosecution...

The deal also did not seek restitution from Samsung. Instead, victims — ranging from other chip makers and computer makers to private individuals — can sue for damages...

Victims, according to federal prosecutors, included Dell Inc., Compaq Computer Corp., Hewlett-Packard Co., Apple Computer Inc., International Business Machines Corp. and Gateway Inc.

Apple and Dell raised PC prices to compensate while others reduced the amount of memory installed on their systems to compensate.

The Justice Department investigation began in 2002, a year after memory chip prices began to climb even though the rest of the tech industry was suffering its worst downturn in history. At the time, then Dell CEO Michael Dell blamed the high prices on cartel-like behavior.

...DRAM prices fell sharply — so much so that Intel agreed to support non-Rambus technology in the fall of 2001.

Shortly after that, DRAM prices nearly quadrupled.