Nine Chip Makers Fined $400M In EU For Price Fixing 215
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."
Comment removed (Score:4, Insightful)
Re:Disturbing? (Score:5, Insightful)
Is it the fine that is disturbing?
The thing that was disturbing to me is that the consumer lost out here and the government is pulling in $400 million. When will the actual victim (people who made DRAM purchases) receive restitution? Never.
Capitalism (Score:4, Insightful)
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.
Yo Micron! (Score:0, Insightful)
So what? (Score:5, Insightful)
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:Disturbing? (Score:1, Insightful)
Certainly everyone in Europe was looking forward to their tax reduction of less than one dollar per person.
Re:Not really that disturbing (Score:4, Insightful)
Re:Disturbing? (Score:4, Insightful)
Re:400M goes to who? (Score:5, Insightful)
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.
Re:So what? (Score:5, Insightful)
They even got a discount on the fines... (Score:4, Insightful)
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:They even got a discount on the fines... (Score:3, Insightful)
Re:Disturbing? (Score:5, Insightful)
What I found interesting was the amount: an average of about $44 million per corporation ($400M / 9). Contrast that with the profits each one made on this scheme.
What annoys me is that a lot of this stuff is so pervasive that I cannot in anyway knowingly boycott any purchases of DRAM from these companies. There's probably DRAM in any piece of electronics you buy whether it be Sony, Nintendo or an actual Samsung product.
And then what happens to the companies who take a $44 million hit? You think their CEOs just sit down and eat that? They don't take their medicine, they slightly markup their product and again the consumer loses! This sort of price fixing fixed by fining model is just not working.
What I think should happen is that all the products that were price fixed should be entered into the public domain in the country where the price fixing was conducted and the company was found guilty. Meaning all patents and designs of those products are now owned by the public. The public overpaid for them so force the companies to give something back to the public. The manufacturing processes and techniques can be kept secret but all the chip design and patents should be open for competitors to step in and make a better cheaper product. I know a lot of people will think that's overly harsh but frankly the DRAM manufacturers should have thought of that before they started price fixing. You think times were tough when you tried to turn some illegal profit? Try now when everyone knows everything about your product. Really, that's the only way to 1) make them think twice about price fixing and 2) actually give something valuable to the victim that has a positive result instead of a negative result.
If that's the way business works in Korea, Taiwan and China then I don't care. But they need to learn that price fixing is not acceptable when they do business in the US and the EU. It blows my mind but it seems to happen everywhere in the world of circuitry and electronics. Since the companies just seem to be taking these fines in step and repeating or continuing with their practices, you have only one option: up the stakes.
Comment removed (Score:2, Insightful)
That's a start... (Score:3, Insightful)
Re:400M goes to who? (Score:5, Insightful)
Lets
The nine companies mentioned in the fine summary.
Towards the services provided by the EU.
CORRECTION: Consumers around the world have already paid for it.
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 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.
Mod parent -1 SPAM (Score:3, Insightful)
Ummm.... You do know that consumers around the world have already paid for it don't you. Now it's the colluding companies turn.
/. (which I'll put good money on the fact you're not paying Geeknet.inc for).
Unless you are proposing we let them get away with Collusion, because that will lower prices for sure. You're clearly OK with spamming your crappy business on
Prices will actually lower out of this and the paltry US $400 million will come out of the companies bottom line because they have to compete with Micron, the company who wasn't fined so Micron can charge lower prices while having a higher profit margin. If RAM prices were to rise out of this mess then it could only happen if the companies got together and decided they would all raise prices at once. Hang on, isn't that what got them into trouble in the first place.
This is not a zero sum game, if they raise prices they will either lose business to competitors who didn't raise prices or lower demand. That's how the free market works.
Re:Disturbing? (Score:5, Insightful)
price fixing is not free market, nub.
Say what ? Price fixing is *absolutely* "free market". Huge cartels (if not just one big monopoly) is exactly where the "free market" would end up without this sort of regulation.
Re:Disturbing? (Score:3, Insightful)
And what evidence do you base that on?
How much it already happens even with regulation in place, plus a reasonable helping of rational thought.
How would your big monopoly stop competitors from emerging?
Often they wouldn't need to - the simple costs of market entry would be sufficient. If that was not, then some loss-leader products would hammer the last few nails into the coffin.
Care to provide any examples of where such huge monopolies did happen and survived for any length of time?
Monopolies are typically broken up by government intervention. I'm not sure I can think of any examples of them being broken up any other way.
What would _stop_ a cartel or monopoly from forming ? Once a few companies have gotten together, or a single one has gotten large enough, how is a new competitor going to enter the market when the established ones can either buy it out, or just undercut it until it runs out of cash ?
Re:Disturbing? (Score:4, Insightful)
What would _stop_ a cartel or monopoly from forming ?
Cartels are inherently unstable and rarely form at all. What is the advantage to the most efficient company in a particular market in joining a cartel with less efficient ones when it can beat them in the competition and take their market share? Even when a cartel does form (say to fix the price to a higher level) a strong incentive is always there for each of its members to undercut the others and take their market share.
Once a few companies have gotten together, or a single one has gotten large enough, how is a new competitor going to enter the market when the established ones can either buy it out, or just undercut it until it runs out of cash ?
If the monopoly is setting the price to high (say 30% profit margin) then it is presenting an incentive for every investor, every company in a similar industry which might already have infrastructure in place, and every foreign company in the same industry to enter into the market and set its margin to 20% and steal much it the monopoly's market share while still raking in a large profit. At some point pretty soon the monopoly will not be able to buy them all out. If the monopoly is setting the price very low in order to discourage competition then where is the problem? The free market is working through the possibility of competition if not actual competition.
What's so wrong about it? Everyone does it. (Score:4, Insightful)
Backwards (Score:5, Insightful)
You have it backwards. The European markets are "golden geese" to the chip makers! There will always be yet another competitor that would happily sell and profit in the European market(s) should the competition die off. This is basic economics, but I don't expect more on Slashdot.
And what tax revenue are you referring to? These companies sell their products in Europe, but the profits are sent back home. The majority of the companies mentioned are not European. The only tax revenue Europe sees in this case is sales tax on the items and a limited tax on the profits, after deductions, of the European branches.
The real issue is abusing the markets you operate in, if you want do business in Europe or the US you have to follow the local rules. I really hate the way ignorant Slashdotters rant when they talk about the EU and fines! Never mind that the US does exactly the same thing, however when Europe and the EU decides to act according to our identical laws "you" dare criticize and pass judgment on matters you have no understanding of!
The EU is acting to regulate markets in accordance with law, the motive is clearly to keep markets healthy for producers and buyers alike. The guilty parties are the chip makers!
I don't think most Americans understand how fervently nationalist they sound on the web.
Re:They even got a discount on the fines... (Score:5, Insightful)
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.
After they have proven themselves as snitches, who exactly would trust them and get in a price fixing cartel with them?
Re:Disturbing? (Score:4, Insightful)
Re:Backwards (Score:4, Insightful)
There will always be yet another competitor that would happily sell and profit in the European market(s) should the competition die off. This is basic economics, but I don't expect more on Slashdot.
Actually, it is one of the assumptions of quite a few economic theories. One that, if you ask me, is stretched all too often. For example chip markets are far from ideal, lots of government involvement (subsidies), institutionalized cartels (patents), and sky-high entry barriers.
Go ahead, 'just' start another competitor. After all, if the others are fixing the prices it shouldn't be too hard to compete.
Re:Backwards (Score:4, Insightful)
The only tax revenue Europe sees in this case is sales tax on the items and a limited tax on the profits, after deductions, of the European branches.
Given that VAT is 15% or more in pretty much all of the EU (over 20% in some places), and the typical margin for memory chip makers is under 10%, the various governments probably make more per sale than the chip makers.
The EU is acting to regulate markets in accordance with law, the motive is clearly to keep markets healthy for producers and buyers alike. The guilty parties are the chip makers!
As a parent poster pointed out, a fine of $44m per company is probably significantly less than the profits that the company made from participating in the scheme. That means that it's not going to deter this kind of behaviour significantly, it's just going to reduce the total profits by a little bit. This looks more like the EU taking its cut from the scam than actually trying to prevent it. If they really want to prevent price fixing, they should take the fine and invest it in a new competitor for these companies. $400m is enough to build a chip fab, and I'm sure some companies like Intel and IBM would be interested in licensing them the required designs...