ATTORNEY GENERAL CURRAN TO FILE MULTI-STATE PRICE-FIXING LAWSUIT AGAINST SEVEN COMPUTER MEMORY CHIP MANUFACTURERS
33 Other States Join Suit to Recover Damages For Consumers, Government

Attorney General J. Joseph Curran, Jr. will file a lawsuit tomorrow, against seven computer memory chip manufacturers alleging the firms violated antitrust laws, and harmed consumers and governmental agencies, by conspiring to fix prices they charged for widely used dynamic random access memory (DRAM) chips.

Curran, joined by 33 other state Attorneys General, will file the antitrust complaint 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, allocate among themselves the markets for DRAM chips, and rig bids for DRAM chip contracts.

The defendant companies named in the antitrust lawsuit include Infineon Technologies AG; Hynix Semiconductor, Inc.; Micron Technology, Inc.; Mosel Vitelic Corp.; Nanya Technology Corp.; Elpida Memory, Inc.; and NEC Electronics America, Inc. The subsidiaries of these companies that sold and distributed DRAM chips in the United States also are named as defendants. Infineon, Hynix, Micron and Samsung control roughly 70 percent of the U.S. market, which in 2003 amounted to about $5 billion of the $17 billion in worldwide sales. Published reports have placed the total nationwide damages at $1 billion or more in overcharges.

Curran, one of the leaders of the multi-state effort, said that the damages suffered by Maryland consumers and governmental entities easily could total in the 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.” After 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.

DRAM chips are semiconductors that hold temporary instructions and data, making it available for quick access when computers, or other electronic devices such as servers or workstations, are in use. The industry has been marked by rapid innovation and consolidation since the 1980s. But from 1998 through June 2002, the complaint alleges, the U.S. market also was marked by a widespread antitrust conspiracy.

“This unlawful, concerted action unjustly enriched the defendants at the expense of the computer manufacturers that bought DRAM chips, and the businesses, schools, governmental entities and Maryland consumers who purchased computers,” said Curran.

As described in the complaint, the defendants started discussing and coordinating the prices they charged to large computer manufacturers in 1998, at a time when the DRAM market had excess supply. In 2001, the defendants agreed to reduce supply in order to artificially raise prices. 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.”