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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.
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