SAMSUNG PLEADS GUILTY,PAYS $300MIL FINE
SAMSUNG PLEADS GUILTY,PAYS $300MIL FINE
2005-12-01 at 10:13:00 am #13003
Samsung Pleads Guilty in Chip Price-Fixing Scheme
SAN FRANCISCO (Dec. 1) – 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, boosting the cost to consumers.
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.
Earlier this year, Seoul-based Hynix Semiconductor Inc. agreed to pay a $185 million fine; rival Infineon Technologies AG of Germany agreed to pay $160 million last year. A fourth chip maker, Micron Technology Inc. of Boise, Idaho, has been cooperating with prosecutors and was not expected to face charges.
On Wednesday, Samsung Semiconductor’s chief financial officer, Dahm Huh, spoke on behalf of the company and answered a series of routine questions about the defendant’s ability to pay, the company’s understanding of the deal and the waiving of various rights.
Huh answered “yes” or “no” to the questions but offered no elaboration and did not speak to reporters after the hearing. The company’s spokeswoman, Chris Goodhart, also declined to comment afterward.
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 others are Tom Quinn, senior vice president of sales and marketing for memory products; marketing vice presidents Kim Il-ung and Kang Yeong-ho, and memory chip sales vice presidents Lee Sun-woo and Lee Young-woo. The seventh, Rha Young-bae, is no longer with Samsung.
Niall Lynch, a Justice Department antitrust attorney, declined to comment on the status of the seven people who were “carved out” of the deal. He said the investigation is continuing to look at other companies and people.
He did note that the government will now have Samsung’s assistance in its investigation.
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.
“We’re letting that be the vehicle for victim compensation,” Lynch said outside the courtroom.
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.
The outcome of the investigation also is expected to help fuel a private antitrust case filed by Rambus Inc., which licensed a memory technology that had been embraced by Intel Corp., the world’s largest maker of the microprocessor brains of computers.
In 1996, Intel chose Rambus technology to help speed up systems running its then-upcoming Pentium 4.
But the chip makers did not want to pay Rambus royalties. 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.
In 2004, Rambus filed a private antitrust suit against several chip makers. That litigation is ongoing, as are other cases related to memory prices.
“We are continuing to pursue our own antitrust case, which is based in part on the price fixing now being admitted by key members of the DRAM industry,” said John Danforth, Rambus’ general counsel.
Lynch refused to comment on whether the government believes Rambus was a victim.