Risk & Compliance

Samsung Fined $300 Million for Price Fix

Including the Korean-based chip maker, three companies and five people have now been charged and fines totaling more than $646 million have been le...
Stephen TaubOctober 14, 2005

Samsung Electronics Co., the big Korean maker of computer memory chips, and its U.S. subsidiary, Samsung Semiconductor Inc., have agreed to plead guilty and to pay a $300 million fine — the second biggest in a criminal antitrust case in U.S. history — for fixing prices, according to the Department of Justice.

Including Samsung Electronics, three companies and five people have now been charged and fines totaling more that $646 million have been levied in connection with the DoJ’s ongoing antitrust investigation into price fixing in the dynamic random access memory (DRAM) industry.

DRAMs provide high-speed storage and retrieval of electronic information for a wide variety of computer, telecommunication, and consumer-electronics products, including personal computers, laptops, servers, printers, hard-disk drives, personal digital assistants, and modems. There were roughly $7.7 billion in DRAM sales in the United States in 2004, according to the DoJ.

The department had charged that from April 1, 1999, to June 15, 2002, the parent company and Samsung Semiconductor conspired with other DRAM makers to fix the prices of DRAMs sold to certain computer and server makers. The computer manufacturers directly affected by the price-fixing conspiracy were Dell, Compaq Computer, Hewlett-Packard, Apple Computer, IBM, and Gateway, according to the department.

As early as 2002, when DRAM prices failed to drop at similar rates as other components, Michael S. Dell, the founder of the company that bears his name, was complaining of “cartel-like” behavior by manufacturers of the technology, according to The Washington Post.

Under the plea arrangement, Samsung has agreed to cooperate with the government in its ongoing investigation of other DRAM producers. According to the DoJ, Samsung was charged with carrying out the conspiracy by:

• Taking part in meetings, conversations, and other communications with competitors in this country and elsewhere to discuss the prices of DRAMs to be sold to certain customers.

• Agreeing, during those communications, to charge prices of DRAMs at certain levels to be sold to specified customers.

• Issuing price quotes in line with the agreements reached.

• Exchanging DRAM sales information to customers as a way of monitoring and enforcing adherence to the prices.

Samsung is the third major semiconductor company — after the Korean-based Hynix Semiconductor Inc. and the German manufacturer Infineon Technologies AG — to agree to plead guilty to fixing DRAM prices.

In May 2005, Hynix pleaded guilty and was sentenced to pay a $185 million criminal fine. In October 2004, Infineon did likewise and was slapped with a $160 million criminal fine.

Further, four Infineon executives — T. Rudd Corwin, Peter Schaefer, Gunter Hefner, and Heinrich Florian — pleaded guilty in December 2004 to taking part in the DRAM price-fixing conspiracy. All four have served prison terms ranging from four to six months and each paid a $250,000 fine. In December 2003, the DoJ charged Alfred Censullo, a regional sales manager for Micron Technology Inc., with obstruction of justice. Censullo pleaded guilty to the charge and admitted to having withheld and altered documents submitted in response to a grand jury subpoena served on Micron in June 2002. He was sentenced to serve six months of home detention.

The largest antitrust criminal fine ever — $100 million — was paid to the DoJ in 1996 by Archer Daniels Midland for its participation in two international cartels in the food and feed additives industry, according to the department.

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