Want CNET to notify you of price drops and the latest stories?

Hynix to plead guilty to memory price fixing

South Korean memory maker settles antitrust charges with DOJ and agrees to pay $185 million fine--the third-largest in agency history.

Declan McCullagh Former Senior Writer
Declan McCullagh is the chief political correspondent for CNET. You can e-mail him or follow him on Twitter as declanm. Declan previously was a reporter for Time and the Washington bureau chief for Wired and wrote the Taking Liberties section and Other People's Money column for CBS News' Web site.
Declan McCullagh
3 min read
WASHINGTON--The U.S. Department of Justice announced Thursday that Hynix Semiconductor has agreed to plead guilty to criminal antitrust violations over DRAM price fixing and pay a $185 million fine.

Hynix is the latest DRAM maker to reach a settlement with the Justice Department, as part of its ongoing investigation into price fixing in the dynamic random access memory industry. Hynix's fine also marks the third-largest monetary penalty assessed in the Justice Department's history and the largest during the Bush administration.

Hynix had been charged with conspiring to eliminate competition via price fixing of DRAM between July 1999 and June 2002. The Justice Department pointed to Dell, Hewlett-Packard, Apple Computer, IBM and Gateway as customers hurt by Hynix's actions.

"DRAM is a key component in the price of computers," Scott Hammond, a deputy assistant attorney general, told reporters. "By conspiring to drive up the price of DRAM, consumers necessarily paid more."

A spokesman in Hynix's San Jose, Calif., office said that the company had no comment.

PC makers began to question a spike in memory prices during late 2001. The spike was a rarity in the industry, and large memory makers had struggled with profitability for several years previously. Sales of PCs declined during that period, yet prices for DRAM and DDR DRAM, a type of memory commonly found in most PCs, rose--and in some cases, tripled over a few months.

The Justice Department began its investigation into price fixing in 2002, sending out subpoenas to such DRAM makers as Micron and Elpida Memory of Japan, according to statements by those companies.

The DRAM makers conspired to fix prices as regularly as every few days through e-mail, phone conversations and in-person meetings, Hammond said. Details of the plea agreement will be made public a few days in advance of a court hearing before U.S. District Judge Phyllis Hamilton in San Francisco, which could take place as early as next month.

No individuals were charged in the documents that the department made public on Thursday. But Hammond said "there are a number of individuals we carved out of the plea agreement and are not protected by the plea agreement."

In addition, Hynix is trying to fight off class-action charges that are pending in federal court.

"I think we saw cartel-like behavior by a couple of DRAM suppliers," Dell Computer CEO Michael Dell said in April 2002. "It appears to have been successful for a very short period of time."

Samsung Semiconductor and Infineon are also involved in the

Justice Department's investigation into DRAM price fixing.

In December 2003, a former Micron sales manager pleaded guilty to obstructing justice in the department's investigation. The regional sales manager admitted he altered and concealed documents pertaining to competitors' pricing information.

The European Commission also began its investigation into DRAM price fixing in 2003.

Infineon pleaded guilty to participating in an international DRAM price-fixing conspiracy last September and agreed to pay a $160 million fine. That fine was among the largest that the Justice Department has issued in connection with a price fixing case.

Four Infineon executives later agreed to plead guilty to criminal charges in connection with the DRAM price-fixing case in December. They were ordered to serve time in jail and pay a fine of about $250,000 each.

In preparation for possible action by the Justice Department, some of the DRAM makers have been setting aside money in a reserve.

Samsung Electronics, for example, announced in December that it would put $100 million into a reserve to guard against possible losses from the department's antitrust investigation.

And earlier this month, Elpida Memory announced it would set aside nearly $17.8 million for potential liabilities stemming from the investigation.

The Justice Department has issued a total of approximately $346 million in fines between the Hynix and Infineon cases, the agency said.

Hynix's plea agreement still awaits approval from the district court in San Francisco.