Government finds witness in RAM price-fixing probe

An appeals court ruling shows that the Justice Department has at least one witness in its developing antitrust case.

John G. Spooner
John G. Spooner Staff Writer, CNET News.com
John Spooner
covers the PC market, chips and automotive technology.
3 min read
A U.S. Department of Justice investigation into the alleged price fixing of computer RAM in 2001 has identified several potential witnesses, though not all have been cooperative, according to information made public this week.

The Court of Appeals decision, issued Thursday, revealed that the government has located a witness who willingly testified about at least two manufacturers conspiring to set RAM prices.

The ongoing Justice Department probe focuses on whether memory manufacturers such as Micron, Samsung and Infineon worked together to drive up random-access memory prices in late 2001. The European Union is conducting a similar investigation.

Thursday's ruling found that an unnamed former salesman of an unnamed major RAM manufacturer did not have to turn over notes and other documents related to his activities at the company. A lower court had stated that the salesman did have to comply with a subpoena to produce such documents and had held him in contempt for not doing so.

More significantly, the ruling reveals that the government's investigation has located a cooperative witness from one DRAM manufacturer. That witness detailed meetings and telephone conversations during which the witness and the unnamed salesman, identified as John Doe in the ruling, allegedly discussed the price at which the two companies would sell RAM to computer manufacturers.

After the government gained information from the witness, FBI agents visited Doe at his home in April 2003.

"During the (FBI) interview, Doe indicated that he had shared DRAM pricing information with competitors, including the government's cooperating witness. Doe further stated that he had memorialized these conversations in e-mails to his supervisors," the ruling said. The ruling does not name the witness.

During their visit, the FBI agents also served Doe with a subpoena for documents such as notes he made while working for the company. Doe challenged that subpoena, saying that to comply would violate his Fifth Amendment right against self-incrimination. A series of maneuvers ensued, ultimately leading to Thursday's decision, which found that the lower court erred on one aspect of the ruling.

Thursday's decision reversed the lower court's denial of the motion to quash the subpoena. It also wiped away the subsequent contempt charge against Doe. The appellate court didn't rule on another aspect of the request to quash the subpoena, leaving that decision to a lower court and probably to further proceedings.

But however the case unfolds, Thursday's decision sheds more light on the Justice Department investigation, showing that the agency has at least one witness willing to cooperate and provide information regarding the price-fixing activities alleged to have taken place in late 2001.

During that time, PC sales were on the wane, but prices for DRAM and DDR DRAM--the type of memory found in most PCs--were increasing. Some types of memory tripled in price in a few months, raising eyebrows among PC makers.

Prices increased to the point where, during April 2002, Michael Dell said his company, PC maker Dell, began to buy memory from second-tier manufacturers. The company did so to avoid what Dell described as "cartel-like behavior" by certain memory makers. He did not name them, however.

The memory price jumps began reversing themselves in 2002, but by then, the Justice Department had already taken notice. The San Francisco field office of its antitrust division began conducting the investigation with assistance from the FBI. A grand jury was convened, and subpoenas were sent to major memory makers.

Information about the Justice Department investigation began coming out in December 2003, when Alfred Censullo, Micron Technology's former regional sales manager for upstate New York, pleaded guilty to trying to obstruct the probe, after Micron received its subpoena.

Then, in February 2004, an e-mail written in November 2001 by a Micron executive that appears to describe efforts by Micron, Infineon and Samsung to boost prices on DDR SDRAM (double data rate synchronous dynamic RAM) came out in an Federal Trade Commission administrative judge's initial decision in an unrelated antitrust case against memory designer Rambus. The judge threw out that case.

CNET News.com's Declan McCullagh contributed to this report.