DRAM probe picks up steam

A document released by the Federal Trade Commission could add weight to accusations that some dynamic RAM manufacturers may have conspired to fix prices during 2001.

John G. Spooner Staff Writer, CNET News.com
John Spooner
covers the PC market, chips and automotive technology.
John G. Spooner
4 min read
A document released by the Federal Trade Commission late Wednesday could add weight to accusations that some dynamic RAM manufacturers may have conspired to fix prices during 2001.

The commission made public a November 2001 e-mail from a Micron Technology executive that could suggest that three memory makers were in accord on raising DRAM prices during 2001. DRAM is the most common form of system memory used in PCs.

The e-mail, a portion of which was cited in an FTC administrative judge's 348-page initial decision in a separate case, described efforts by Micron and competitors Infineon and Samsung to boost prices on DDR SDRAM (double data rate synchronous dynamic RAM), the decision surmised. The decision came in the agency's antitrust case against chip designer Rambus, which the judge threw out last week.

"Subsequently, in a November 26, 2001, e-mail, a Micron manager named Kathy Radford described the efforts of Infineon and Samsung to raise DDR prices and stated that Micron intended to try to raise its prices to all of the OEM customers," the decision said. "Radford then reported that '(t)he consensus from all suppliers is that if Micron makes the move, all of them will do the same and make it stick.' Prices did, in fact, increase in the months after Radford's e-mail."

The FTC decision is separate from a price-fixing investigation, now being conducted by the U.S. Department of Justice. The San Francisco field office of the department's antitrust division has been conducting the investigation, with assistance from the FBI.

Although he declined to comment on the specifics of the quote, David Parker, a spokesman at Micron, said the ongoing Justice Department investigation is "completely unrelated" to antitrust claims brought by the FTC against Rambus.

"Rambus has attempted to confuse these issues to take attention from the FTC's charges against Rambus. It appears to be an attempt by Rambus to distract the public and others from their actions," Parker said. "We are very concerned about information like this being taken out of context and being represented as fact."

Meanwhile, he said, "Micron has fully and actively cooperated with the DOJ in an effort to aid them in their investigative process and will continue to do so as appropriate."

The long-running antitrust investigation may soon conclude, with prosecutors expected to seek criminal price-fixing charges against some chipmakers, as other manufacturers consider striking a plea deal, according to a report in Thursday's Wall Street Journal that cited lawyers close to the case.

Officials from the Justice Department declined to comment Thursday morning.

Historically, selling DRAM has been a boom-or-bust business, but some have accused players in the market of trying to alter that historical pattern. The DRAM market was hit hard by the sagging economy and subsequent PC market downturn that began late in 2000. As PC unit shipments decreased, demand for RAM fell, prompting memory manufacturers to slash their prices in order to foster demand.

Then, in late 2001, memory prices began to climb again. Some manufacturers attributed the price hike to tighter supplies of DRAM. But others, including PC industry heavyweight Michael Dell, founder of PC maker Dell, suggested that the price increases were due to "cartel-like behavior by a couple of DRAM suppliers."

The Justice Department opened the investigation into DRAM price fixing in the United States during 2002.

In December, Alfred Censullo, a former regional sales manager in upstate New York for Micron, agreed to plead guilty to attempting to obstruct an investigation.

Censullo, who held that post until the plea bargain was entered, was charged in U.S. District Court in San Francisco with obstructing justice by altering and concealing documents containing competitor pricing information. The documents had been requested from Micron in a June 2002 subpoena by a federal grand jury in Northern California.

After the subpoena was served, Censullo allegedly altered his handwritten notes relating to telephone conversations among Micron sales managers, discussing price recommendations for DRAM used in servers and PCs at the time. The notes also contained reference to how much competitors were charging for DRAM, according to the charges in the plea bargain.

Additionally, the charges state that Censullo removed and initially concealed 14 pages from notebooks that contained competitor pricing information. The Justice Department alleges that these changes were done to disguise the nature, source and accuracy of the information.

The maximum penalty is 10 years and a $250,000 fine. The Justice Department said it is not clear when the final plea bargain deal will be put in writing.

IBM was a customer in Censullo's territory.

Infineon declined to comment on the information revealed by the FTC, a company representative said. However, the chipmaker is cooperating with the DOJ in its DRAM investigation, the representative said.

A representative for Samsung also declined to comment.