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Nine Chip Makers Fined $400M In EU For Price Fixing 215

Posted by samzenpus
from the collective-swindling dept.
eldavojohn writes "In a disturbing case for average consumers, nine DRAM chip manufacturers have been fined more than $400 million for price fixing. The named companies are Samsung, Hynix, Infineon, NEC, Hitachi, Mitsubishi, Toshiba, Elpida, and Nanya. A tenth company, Micron, avoided fines by reporting the other nine to the authorities. Since all companies cooperated with the probe, they received a 10% reduction in fines, so it could have been worse. The US DoJ has had its own history with chip makers and LCD makers in price fixing scandals."
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Nine Chip Makers Fined $400M In EU For Price Fixing

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  • by DavidRawling (864446) <hulk_.yahoo@com> on Thursday May 20, 2010 @12:44AM (#32274950)
    There are many other cases where pricing appears to be fixed, but it's a deliberate lack of competition (eg in Australia, the weekly fuel price cycles where everyone drops prices at the same time). At least this occurrence will be punished, and yes it will eventually come from the consumer wallet ... but I don't see much else that can be done other than fining (and imprisoning the human culprits if possible).
  • 400M goes to who? (Score:4, Insightful)

    by DigiShaman (671371) on Thursday May 20, 2010 @12:46AM (#32274960) Homepage

    Ya, price fixing sucks. But let's be real honest shall we? Who ends up paying the 400M and where does that money go? Consumers around the world will be paying for it.

    When you think about it, it's like a global tax to feed the coffers of a nation, or a union of them in this case. I'm just saying...

    • Re: (Score:3, Funny)

      by Anonymous Coward

      Consumers around the world will be paying more for their DRAM chips, but EU citizens will be getting more services or paying less in taxes because the coffers of a nation are fed, so it kinda cancels out for consumers (non-EU nations of course should fine these companies too if they haven't already to be in the same situation).

    • by copponex (13876) on Thursday May 20, 2010 @01:06AM (#32275100) Homepage

      Fines are supposed to be a punishment so that companies avoid anti-competitive behavior in the future. You're right, however: the companies either have already made enough money from their unethical behavior, or they will roll it into the cost of future products. The punishment is not nearly severe enough.

      Repeat offenders should be fined in the billions of dollars as a warning to other companies. The only thing that will keep shareholders interested in executives who obey the law are a few cases where companies are fined into bankruptcy and then broken up and sold off.

      • by TheLink (130905)
        > Repeat offenders should be fined in the billions of dollars as a warning to other companies

        That's silly. As the various financial blow ups show: losing other people's money when you gamble with other people's money is not a big deal. Especially when you get big bonuses if you win big. It does not discourage risky/improper behaviour at all.

        If you want to discourage them, send them to prison.

        If a multimillionaire gets sacked because the company got huge fines, what's that to him? Though a multimillionair
      • More importantly I think is the only thing that will keep executives interested in being executives who follow the law is seeing those who don't PERSONALLY fined into bankruptcy and/or sent to prison for appreciable periods of time.

    • by mirix (1649853)

      I can kind of see your point, but what do you suggest? That we don't punish companies for collusion?

      Any of the manufacturers that weren't in on the price fixing should be able to undercut the cheats that have to recoup their $400M fine. - Not that I can think of a RAM manufacturer that isn't in this list, off the top of my head... I suppose collusion works best when everyone is in on it, eh?

    • by mjwx (966435) on Thursday May 20, 2010 @02:49AM (#32275648)

      Ya, price fixing sucks. But let's be real honest shall we?

      Lets

      Who ends up paying the 400M

      The nine companies mentioned in the fine summary.

      where does that money go?

      Towards the services provided by the EU.

      Consumers around the world will be paying for it.

      CORRECTION: Consumers around the world have already paid for it.

      When you think about it, it's like a global tax to feed the coffers of a nation

      No it isn't, it's a punishment for a group of corporations for breaking the law. You clearly haven't thought about it very much and have just been scared by the "T" word, the alternative to fines is to permit them to get away with collusion, and that will just raise prices, no. BTW I like paying the T word as it provides me with many services, not the least of which is a cheap world class medical system (Shamelessly borrowed from Shutdown -p and slightly altered).

      I'm just saying...

      I'm just saying you're an idiot, OK, that's a bit harsh. Perhaps you are a really intelligent person but you've just had a brain failure during that post.

      Please think a bit more critically. This isn't a "tax" (gasp, shock horror) it's punishment for something they've already done. First this will end up coming out of the companies bottom line because 1. after being convicted of collusion they will be watched like a hawk and 2. now their cartel is being broken up actual competition will ensue (with all the price cutting benefits therein). I'm sick of people assuming this is a zero sum game, that prices will rise because it costs them more in fines. This thinking ignores the fact that the market will only pay for what it will bare and ultimately raising prices to cover a loss from a fine will attract more attention from the authorities as well as reduce the amount of product they can sell. The market will not automatically accept the rise of all RAM prices unless they all raise the price at once and well that's collusion, which what got them into trouble in the first place.

      • by ZwJGR (1014973)

        Ya, price fixing sucks. But let's be real honest shall we?

        Lets

        Sorry, but "let's" is correct, "lets" is not.
        It is an abbreviation of "let us".

        I think concluding that this ruling will cause prices to fall due to increased competitiveness is being a bit optimistic. It simply isn't in their best interest to be competitive or seek to outprice each other, seeing as they are essentially all selling the same thing and profit margins need to be maintained.

    • by matt4077 (581118)
      The costs of production (in which this fine will be a factor) only set a lower bound on prices. No company just takes costs+10% or something. They try to maximize profits by finding the sweet spot on the demand curve.

      And before the anti-EU argument comes up again, I'd like to point out that Infineon is European. The US does the same btw, i. e. when they fined Daimler $500 million for corruption.
    • This is where "free markets" are supposed to regulate the prices keeping any one company from raising their prices above the rest. If you raise your prices, you become uncompetitive.

      This fine is not going to raise prices at all, they know perfectly well that the buyers won't accept any increases. I'm not talking about consumers here, the biggest purchasers are likely the PC makers.

      There will be a dip in their profits for this or last financial year.

      Do you consider the US fines to be a tax to fill your empty

    • by zoney_ie (740061)

      The 400 million indirectly goes to us taxpayers in the EU in some form or another. Even net contributors to the EU are also recipients of EU money (e.g. third level research).

      Also it means companies even if they continue these kinds of behaviour, are more likely to pursue it outside the EU (we don't have to be sufficiently tough to stop the behaviour, just tougher than elsewhere, e.g. US).

      Finally, even if these fines don't stop this behaviour in the EU, the fines make for headlines that increase public awar

    • Consumers around the world who are stupid enough to buy stuff from known criminals will be paying for it, and will deserve it.

      There, fixed that for ya.

      You know, natural selection, survival of the fittest, and stuff...

  • Capitalism (Score:4, Insightful)

    by Anonymous Coward on Thursday May 20, 2010 @12:51AM (#32274996)

    Looks like those fine capitalist companies don't like the competition part of capitalism either. They want protected profits too and screw the free market if that's what it takes.

    • by mjwx (966435)

      Looks like those fine capitalist companies don't like the competition part of capitalism either. They want protected profits too and screw the free market if that's what it takes.

      Where is competition mandated in capitalism?

      In true, unrestricted laissez faire capitalism there is no requirement for competition, one company may become ruler of all if they choose to squash all competition and fix prices?

      • by Bert64 (520050)

        Under true unrestricted free market capitalism things like patents and copyrights would not exist, so long as there were people out there with the resources to copy then there would be competition. It would mean software and other trivially copied goods would be completely unprofitable, and would either be community developed or developed as a loss leader to sell other product (eg hardware to run it on)... Hardware obviously couldn't be distributed for free because of the unavoidable costs of manufacturing

  • So what? (Score:5, Insightful)

    by Mark19960 (539856) <Mark@noSPaM.freequest.net> on Thursday May 20, 2010 @01:01AM (#32275052) Homepage Journal

    So they were all fined a combined 402 million.
    They made that, and then some so it's a cost of doing business.
    Corporate fines are laughable... they factor it in these days.

    • Re:So what? (Score:5, Insightful)

      by Pence128 (1389345) on Thursday May 20, 2010 @01:08AM (#32275122)
      This. The fine should be their profits from the affected products from the time they started price fixing to the time they stopped.
      • And then some...

        No, actually, there is just one morally valid punishment: Separation.
        Or in other words: Hey you, chip maker! We don’t allow price fixers in this country! You have one week to leave. If you or any sub-part of you are seen here again, you will be personally assassinated! Now GTFO!
        Of course, as we are nice people, we will forgive them after a couple of years. If they still exist by then. (Considering how pretty much every other country would also throw them out.) But they will definitely

      • by arielCo (995647)
        Yes, that'd might hit them hard enough to get them to care, but we'd have the threat of job loss and thus the "too big to fail" argument (again). Could be a good thing in the long run, but very unpopular.
      • by jameson (54982)

        That's insufficient. Let's say that the probability of getting caught is p. p is = 1. Now, the average cost for unethical behaviour is the same as the profits of this unethical behaviour times p. Hence, it is rational to remain unethical: you can only win.

        Ideally, the penalties for such behaviour would be in a different category than profits, i.e., not money: jail time for executives who made this decision, forced donation of part of their company to a randomly selected competitor, forced public-domain

        • by jameson (54982)

          Sorry, forgot about the HTML. p is <= 1, I meant.

          Also, the downside of this approach is that the government doesn't benefit from attacking these practices directly, which decreases the motivation from enacting it.

    • by Tapewolf (1639955)
      I seem to recall from the Microsoft case that the EU is not generally amused if they check later and find it's still happening. That is, they cartel will start to get a series of considerably larger fines unless they actually stop.
    • by hankwang (413283) *

      So they were all fined a combined 402 million.

      As far as I understand, the EU sets fines proportional to the sales over the duration of the sales, with a proportionality constant dependent on how much the infringement hurt the market. Although not many details are published on the EU website so far (EU case on DRAM [europa.eu]), the EU has published the guidelines for the fine calculation (Guidelines on the method of setting fines [europa.eu]). More details on the settlement decision will follow.

      Unless there are clear indications

      • by Xelios (822510)
        But that's not really a fine then, is it? If I steal $100 out of someone's wallet and then get "fined" $100 then I really wasn't fined anything, I just gave back the money I stole. If that's the only punishment I receive then why not steal money all the time? If I get caught I'm out something I shouldn't have had in the first place, if I don't get caught I get free money.

        They should have to give back the extra profit that they made illegally and then be fined an extra amount for doing something illegal i
        • by hankwang (413283) *

          But that's not really a fine then, is it? If I steal $100 out of someone's wallet and then get "fined" $100 then I really wasn't fined anything,

          Well, the proportionality constant may be larger than 1. The upper limit is 30% of the sales value, which is usually much more than the profit.

    • by chrb (1083577)

      So they were all fined a combined 402 million. They made that,

      Did they? What were the profits of the respective DRAM divisions of these companies in the period that the cartel operated (1998-2002)?

      I'm not disputing your claim - just asking for evidence. Hynix lost $4 billion in 2008; the DRAM market has traditionally been highly competitive and not the huge source of profits that some people think it is.

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      yep. look what one of the fuckers had to say: [elpida.com]

      "Since the fine is within the range of a reserve already fixed for such issue in FY 2008, the company believes that the fine will not have a material impact on its current year (FY 2010) consolidated financial results."

      "for such issue" - gotta love the Japanese.

  • by Anonymous Coward on Thursday May 20, 2010 @01:10AM (#32275132)

    I say rather than fines, we ban one of those companies from the US market forever. We repeat this process ever time there is price fixing incident. Shareholders of those companies will not tolerate the risk and management will be too scared to pull this shit again.

    • by mirix (1649853)

      How would you plan on enforcing that? Customs officials opening every stick of RAM, prebuilt computer, cell phone, router, set top box, et al, and determining if the device in question has Brand X DRAM?

      Seems entirely impossible to me, with the majority of electronics being manufactured outside the US.

      • by NNKK (218503)

        Informants and random inspections. When violations are found, nail the purchasers to the wall. Soon enough there won't be many US businesses buying their chips.

  • by VinylRecords (1292374) on Thursday May 20, 2010 @01:17AM (#32275190)

    All the fines were reduced by 10% because the companies co-operated with the probe.
    The crime was done in the name of money, profits. But the punishment, monetary, was reduced for cooperation. So basically what companies can learn from this is: price fix as much as possible, once caught cooperate as much as possible, then keep more of the profits from the price fixed products.

    A 10th chip maker, Micron, was also part of the price-fixing cartel but escaped a fine in return for alerting the competition authorities.
    And if you blow in the competition you get to keep ALL of your price fixed profits. What kind of a system is this? Am I missing something here? How exactly are these companies being punished so that they won't do this again? Hell they are probably already learning from their mistakes and looking to secure another price fixing scam for the immediate future.

    • Re: (Score:3, Insightful)

      by Arker (91948)
      It actually does make sense to reduce fines if they cooperate. If they didnt it would take more money to convict them. But if the fines, after cooperation discount, are not more than the profit raised by the crime, multiplied by a factor based on a good estimate of the percentage of the time companies do this and get away with it, then it is no deterrent. Sadly, in the western world today, this is exactly the situation with pretty much all regulation of industry. No deterrent. Just a cost of doing busines
    • by Renraku (518261)

      Kind of like game theory.

      Suppose there are several companies. They can either price fix or not price fix. If they're price fixing, they can alert the authorities and keep their 'winnings' while the other price fixers lose a certain amount of money. Whether or not they price fix will be determined by the fine they receive. If extra revenue > fine, then price fix. If extra revenue fine, don't price fix.

      But all of the price fixers should rat each other out. In theory, they'd all get to keep their pro

    • by Aceticon (140883) on Thursday May 20, 2010 @04:46AM (#32276166)

      And if you blow in the competition you get to keep ALL of your price fixed profits. What kind of a system is this? Am I missing something here? How exactly are these companies being punished so that they won't do this again?

      That's how they catch them. It creates a nice Prisioner's Dilema where the first to break ranks get's away with it.

      Countries that have laws for this experience much higher rates of catching price-fixing cartels than those who don't.

      Hell they are probably already learning from their mistakes and looking to secure another price fixing scam for the immediate future.

      After they have proven themselves as snitches, who exactly would trust them and get in a price fixing cartel with them?

    • by Yvanhoe (564877)
      And lawmakers and judge goals is to just make that not profitable.
      IMHO they should make even very small jail time for that. That would be something a bit harder to factor in.
    • by SharpFang (651121)

      By encouraging breaking the conspiracy you make it more short-lived. A price-fixing conspiracy is based on mutual trust shared between all the partners. If you violate the trust, the conspiracy can't exist. If you provide a good incentive to destroy the trust, you fight it efficiently.
      Actually providing the "traitor" with long-term market benefits (say, a tax relief) that give them an upper hand above competition would be even better, breaking up the conspiracies even earlier.

      Also, by setting the fine above

  • EU (Score:2, Funny)

    by Anonymous Coward

    That damn Marxist, communist, fascist EU fines perfectly good companies for no reason.

    Luckily good ole US of A well let companies do their business without intervention. The market will sort out the price fixing.

  • Since all companies cooperated with the probe, they received a 10% reduction in fines, so it could have been worse.

    Surely you mean, it could have been better. Reducing the fines is a negative from where I am sitting.

  • You know what the most disturbing thing is?

    Most DRAM companies have operated at a net loss when taking into account the accumulated earnings of the last decade. There is incredibly fierce price competition within the industry.

    Do you really feel ripped off when you buy a product that is composed of billions of transistors, has tens of billions of R&D costs behind at at a price of $1 ? (That was the price of a 1Gbit chip not long ago) I don't want to sound like an industry advocate here, but I find this

    • by drinkypoo (153816)

      Most DRAM companies have operated at a net loss when taking into account the accumulated earnings of the last decade. There is incredibly fierce price competition within the industry.

      And yet, without price fixing, that competition would allow the incompetent companies to drop out of the market and the players capable of making a profit to operate the market. Instead, what we've got is protectionism for the failures.

  • That's a start... (Score:3, Insightful)

    by dargaud (518470) <slashdot2@nOsPAM.gdargaud.net> on Thursday May 20, 2010 @02:46AM (#32275636) Homepage
    ...but when are they gonna fine the various cell phone carriers who are so obviously price fixing that it's laughable. 30c SMS in most of Europe _unless_ you pay an extra 15E a month, etc... They are all the same crooks with an already paid infrastructure of antenna most always financed directly by the states.
  • by sk11 (1815674) on Thursday May 20, 2010 @04:07AM (#32276002)
    Call me cynical, but semiconductor is one of the few industries where heavy competition happens and prices fall down quickly. I dont mind price-fixing if it saves an industry (and I am talking as someone currently unemployed and having difficulties making a semiconductor start-up mainly due to the current state of the industry). Compared to other professions, when will Lawyers be fined for price fixing??? When will hospitals and medical insurance companies be?? This is mainly the case because it's easier to get into Engineering than it is to get into Law or Medicine. People at the top in Law and Medicine make sure to limit the number of professionals getting into their ecosystem each year so they can justify their high salaries. Then you keep hearing (at least here in the UK) from all of these people/government official the old cliche of: "We need more doctors to solve the health issue!" - and all I see around me is an abundance of people wanting to be medical doctors but not being able to become one.

The unfacts, did we have them, are too imprecisely few to warrant our certitude.

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