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Major Electronics Vendors Accused of Price Fixing 125

Lucas123 writes "After the DOJ launched an investigation last fall into price fixing by major optical disk drive manufacturers, a home electronics retail store filed a class-action lawsuit this week seeking triple damages for what it is claiming to be long-standing collusion among Sony, Samsung, Toshiba, LG Electronics and Hitachi to raise and fix prices on the drives. The suit claims the vendors used trade organization forums as meeting places to discuss the price fixing. 'These are big Asian smoke-stack industries where they're investing in big fabrication plants. You can't have a technology destroy the business,' said the attorney representing the plaintiff. 'If you fire up a big fab plant with CRT tubes, and the next generation technology destroys it, then you have a big fab plant manufacturing buggy whips. So they have to make sure the price points for these [newer] technologies ... don't destroy existing markets.'"
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Major Electronics Vendors Accused of Price Fixing

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  • by russotto ( 537200 ) on Saturday February 27, 2010 @11:26AM (#31296814) Journal

    All I see in the story is innuendo; no hint of any actual evidence.

    It's also somewhat hard to believe that the Korean conglomerates are conspiring with the Japanese ones.

  • by White Shade ( 57215 ) on Saturday February 27, 2010 @11:30AM (#31296838)

    With regards to the Japanese and Korean conglomerates; money doesn't care about history.

  • Sounds Familiar (Score:4, Insightful)

    by Bob9113 ( 14996 ) on Saturday February 27, 2010 @11:33AM (#31296858) Homepage

    "'You can't have a technology destroy the business,' said the attorney representing the plaintiff. 'If you fire up a big fab plant with CRT tubes, and the next generation technology destroys it, then you have a big fab plant manufacturing buggy whips. So they have to make sure the price points for these [newer] technologies ... don't destroy existing markets.'"

    Sounds like the "pro" side of the argument that I constantly hear from my corporatist / protectionist friends. "New technology is destroying the entrenched incumbents! If the existing corporations fail it will mean economic collapse! We must hobble new technology! We must buy more laws to prevent the future from coming! The future requires us to think and adapt! And -- EGADS -- TO HIRE ENGINEERS!"

  • by hellfire ( 86129 ) <deviladv&gmail,com> on Saturday February 27, 2010 @11:33AM (#31296860) Homepage

    All I see in the story is innuendo; no hint of any actual evidence.

    It's also somewhat hard to believe that the Korean conglomerates are conspiring with the Japanese ones.

    I agree with you about your first assertion, but trying to support your assertion with stereotypes is silly.

    Human beings the world over speak the language of money. Supposed "cultural enemies" time and time again over history have colluded to make more money. Don't dismiss this as unlikely simply because Koreans and Japanese don't get along all the time.

    Stereotypically, everyone hates the Americans for being stupid and hateful and Sterotypically Americans are xenophobes, and yet everyone seems to be doing business with us when it's profitable.

  • by adosch ( 1397357 ) on Saturday February 27, 2010 @11:36AM (#31296878)

    Instead of the price fixing to get the most diluted depreciation value out of the plant and an unrealistic ROI based on trying to salvage existing old technology so it takes long to flood the market with new technology, maybe big corporation needs to look at other avenues like recycling their own product. Let's be honest, these big corps already provide us with the end product we want, they should take advantage of recouping some of their manufacturing costs by providing a place we can send in their own product so we can buy their new product. It'll make them cash and keep a customer base.

    I willingly look for places to properly recycle my aging computer equipment and gadgets for free and they make 100% profit off whatever they can scrape off it. I was happy because I made my wife happy getting rid of stuff sitting around and the recyclers was happy they made some cash. Only makes sense instead of stifling the market.

  • by Anonymous Coward on Saturday February 27, 2010 @11:42AM (#31296904)

    I'm sure people have already noticed that the internet hasn't buggy whipped either TV or radio.

    Any good sales on NTSC TV sets and VCR players going on in your hometown? How about Walkmen portable cassete and CD players.

  • Useless (Score:4, Insightful)

    by oldhack ( 1037484 ) on Saturday February 27, 2010 @11:48AM (#31296928)
    Why don't they go after telecom and cable? I know of nobody complaining about dvd players.
  • Really? (Score:2, Insightful)

    by Bluesman ( 104513 ) on Saturday February 27, 2010 @12:04PM (#31297022) Homepage

    If it costs too much, don't buy it. It's not like they're colluding to corner the market on food staples or water.

    This is a money-grab by lawyers, nothing else.

  • Re:ZOMG (Score:3, Insightful)

    by multisync ( 218450 ) on Saturday February 27, 2010 @12:05PM (#31297024) Journal

    You can get a decent DVD burner for 20,- nowadays, and that price is still inflated?

    I didn't read the article either, but I would guess from the summary they are complaining about the prices of Blu-Ray drives and other new technology. They're all tooled to produce CD and DVD drives, and they don't want the new tech to supplant their existing revenue source.

    But, as I said, I didn't read the article so I could be wrong.

  • Re:Exactly. (Score:1, Insightful)

    by Anonymous Coward on Saturday February 27, 2010 @12:10PM (#31297050)

    Price fixing likely wouldn't work if it wasn't for artificial constraints like corporatist IP which is designed to keep the little and medium guys out of the market. IP is what enables them to do these things.

  • by m.ducharme ( 1082683 ) on Saturday February 27, 2010 @12:25PM (#31297154)

    But they don't really hate us; they just dislike us with some odd mixture of contempt and envy.

    This may have been mostly true before the GW Bush presidency, but don't count on it now. Even your strongest allies are getting pretty sick of Pax Americana, and most everyone else has gone from contempt to hatred. There is probably still lots of envy for the Western lifestyle, but don't make the mistake of thinking that it's specifically the American lifestyle that people envy. Many people also feel that this latest economic recession marks the beginning of the end for the American hegemony, and are starting to cast their covetous eyes elsewhere.

    But many Koreans really really hate the Japanese. Something about it not being that many generations ago that the Japanese overran their country and committed terrible war crimes against the civilian population. And I'm not just repeating third-hand stereotypes--I'm speaking from personal experience with Korean friends and their parents.

    Although I'm sure you're right, I think the GP was trying to say that despite how the Koreans and Japanese feel about each other, Korean and Japanese corporations (and the people who run them) are far less concerned about recent history than they are about improving their margins. With South Korea being even more capitalistic than the US, it wouldn't surprise me at all if the Korean corporate culture had put aside their hatred in pursuit of more profit.

  • by sjames ( 1099 ) on Saturday February 27, 2010 @12:28PM (#31297182) Homepage Journal

    How many million dollars would it take to convince one of your Korean friends to cooperate at arms length with a Japanese person?

  • by DarkOx ( 621550 ) on Saturday February 27, 2010 @12:38PM (#31297238) Journal

    This is a stupid argument being made by the lawyer. Its a basic economic problem that all manufactures face not just high tech.

    You want to produce the wonder widgets. You have the facility to produce 100K widgets per year. The widgets could be build more cheaply if you make a capital investment and expand your facility, this will mean a higher percentage of the manufacturing cost would be variable, as you accounting, sales, and other front office remain the same, upkeep costs on a large plant probably don't scale linearly with plant size, etc etc. If you did this you could charge a lower price.

    Ahh but what if someone develops a super wonder widget that makes wonder widgets obsolete and what if you can't easily retool your wonder widget plat to make super wonder widgets? Why you would never be able to recoup the costs! So you have a decision to make! You either invest and expand or sell fewer widgets at a higher price.

    Perhaps your competition decides to expand they are ultimately going to be able to undercut you on price and will take away your market share for the remainder of the product cycle, and you might never get it back. Than again it could turn out to be a very poor investment for them if that super wonder widget is devised early on and you have capital on the sidelines available get your new plant ready. Your copetitor might go bankrupt with a plant they can nologer use, it will have been a poor investment.

    Something has happen this past decade where for some reason investors think they are entitlted to profits when they make good calls but should be protected from losses when they make bad ones; THATS NOT HOW CAPITALISM IS SUPPOSED TO WORK FOLKS! You win some you lose some; if you work hard and smart you should win more than others nore than you loose/.

  • by CAIMLAS ( 41445 ) on Saturday February 27, 2010 @12:46PM (#31297304) Homepage

    I willingly look for places to properly recycle my aging computer equipment and gadgets for free and they make 100% profit off whatever they can scrape off it

    And I want a pony, and a penguin, and ride on a spaceship! For Christmas, please, mommy!

    I hope you realize that the reason why free recycling is not available is because it costs money. A lot of money: it doesn't turn anyone a profit (except for Office Depot, charging people $20 a box to send your computer to a Chinese dump). It's also very dirty business.

    If there was actual money to be made doing recycling, there'd be a lot of people doing it.

  • by blackraven14250 ( 902843 ) * on Saturday February 27, 2010 @02:09PM (#31298076)
    Instead of recycling, maybe we should go with another R, like reuse, and ship the old computers to people who might be able to use them, say, in the third world countries. It's likely cheaper than recycling everything.
  • by Anonymous Coward on Saturday February 27, 2010 @03:53PM (#31299088)

    "The other benefit of price fixing is stability. Firms have a better idea what the future holds in terms of revenue and competition. Without price fixing, firms battle with one another until come firms are forced into bankruptcy or are swallowed up by other firms. Jobs are lost. Again, the same thing happened in the airline industry."

    Price fixing creates overstated and lazy markets; when the price is fixed on a product, there is little incentive for innovation toward lower manufacturing costs or increased quality. Inefficient designs _should_ fail, but they don't because price fixing stagnates the very mechanism that would otherwise cause them to die out. Markets for old, outdated technologies should collapse as new technology comes to the forefront. Do you think that we should still make mechanical calculators or use reels of tape for data storage?

    Economic pricing lets the market forces decide what is important, be it quality, features, or price. New products and designs _are_ the investor opportunity. They are protected by patents which are for the express purpose of encouraging innovation. People create new businesses because they think they can do it better and cheaper than the competition, not because they want to do more of the same shit. This is called competition and it is what drives the global economy. Why do you think PCs are so much cheaper than Apple computers?

  • by Vitriol+Angst ( 458300 ) on Saturday February 27, 2010 @04:20PM (#31299288)

    Price-fixing, might be an issue when a 20 cent CD becomes a $14 Album.

    But when you've got a $20 DVD player, that costs less than just buying the equivalent screws in a bag from Home Depot -- is this really a problem? Without SOME profit, these companies can dry up with the cut-throat market. Maybe PRICE FIXING, is going on, but when the take-home is less than 10% -- I think the Government should make a pass on it.

    We have more of a problem in this nation of DUMPING, of things from other countries being too cheap, so that we can't afford to build anything. Slap a tariff on the cheap electronics until the US is competitive.

    Price-fixing should be looked at more in terms of Monopoly Power and Jobs. All these electronics companies can go broke, and lowering the price on these components wouldn't mean that the market would buy any more DVD players anyway, and it wouldn't mean any more jobs in our country.

    >> I think the ONLY reason this is an issue, is it's an easy target for regulators who don't want to go after anyone with a powerful Lobby. The only take-home lesson to manufacturers will be to spend more on lobbyists than engineers.

  • by Anonymous Coward on Saturday February 27, 2010 @06:15PM (#31300058)

    You toy about with prices like you're god, but really what fixed prices mean is poor people can't afford airline flights. You act like it's up to some disembodied person (you, me?) to make a decision to set prices on moral grounds. But you would get your precious quality airlines, and the poor folks would not be able to afford to fly. These damn poor people keep wanting airlines to compete on price! Give me my on flight movie and meal. Dammit.

  • by hitmark ( 640295 ) on Saturday February 27, 2010 @06:35PM (#31300182) Journal

    mostly that BR will replace DVD as the existing DVD players sold are worn out and replaced, as a BR player can also play DVD.

    thing is, DVD had a practical benefit over VHS, while BR do not have such compared to DVD. With a DVD you had instant fast forward (just select chapter), and no need to rewind. What do BR bring to the table to top that?

    same thing with CD vs cassette. Instant selection of the song wanted, rather then having to FF or RW to find what one was after (later cassette players where more clever in that they looked for a low point to guesstimate where a new song started). With the CD-R one got the mix tapes of the cassette era. And with MP3, either on flash, harddrive or (more rarely) CD-R, one had a personal radio station with no annoying dj or ads.

    the BR is bordering on dead for anyone but mediaphiles, or at least wont see the fast uptake that the dvd had. Instead, there will be the video file, format unknown (tho h264 in a mkv container seems likely) that will act much like a personal tv channel.

  • by Anonymous Coward on Saturday February 27, 2010 @06:39PM (#31300208)

    Price fixing in the electronics industry is necessary to some extent. The manufacturers barely make any money off of raw hardware. The profitability on these devices is around 5% in most cases. Also to achieve large market share billions of dollars must be invested into expanding current clean room facilities and photolithography machines. The market dynamics for the electronics manufacturing simply require too much capital for production of a device with only a lifetime of 1 year before the next big thing comes out. How much cheaper do you want your gadgets? You have to realize if the stuff that you are designing does not sell for a high price, then your salary will go down accordingly because management will always take their share and the engineer will take the pay cut.

  • Re:ZOMG (Score:3, Insightful)

    by dgatwood ( 11270 ) on Saturday February 27, 2010 @10:20PM (#31301702) Homepage Journal

    There haven't been 100 million Bu-Ray players sold yet because they aren't a few dollars more than DVD players.

  • Re:ZOMG (Score:2, Insightful)

    by jvin248 ( 1147821 ) on Sunday February 28, 2010 @09:36AM (#31305090)
    They price at what the market will bear.

    It doesn't cost much more to make a Cadillac than a Chevy, or a Macbook than a Dell - but somehow people demand them and are willing to pay extra.Extra cost for Branding.

    Does Blue-ray give that much better of a picture than standard DVD? How much extra will you pay for that improvement? Extra Cost for utility.

    One person might think it's worth $1000 more than the standard DVD, while more will think it's only worth $300 and wait a few years (I think it's only worth about $10 and get by with DVD). VHS used to be sold as $1000 machines too.

    What's the next 'color' for DVD players? Plaid? I'll bet that will be $1000 for the first adopters.

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