Pascual, Isis Normagne

Economics 161
The DRAM Antitrust Litigation
Price-fixing by cartels, the easiest and least controversial antitrust violation, is an
agreement among horizontal competitiors that set price above competitive price. The
DRAM antitrust litigation is a number of lawsuits against an international cartel of
semiconductor manufacturers that fixed prices. The Department of Justice obtained
guilty pleas from most of its lawsuits as defendants admitted their participation in the
conspiracy. Micron, Elpida, Hynix, Infineon and Samsung all admitted their engagement
in price fixing. They, except go Micron which was exempted, all pled guilty and paid fines
of $729 million. DOJs investigation revealed evidences from internal communications.
While the guilty pleas proved the conspiracy against six mentioned companies, it proved
to be a barrier for other companies. Another fundamental barrier was the fact that only
direct purchasers can file suit against the defendants. However, the Illinois Brick
Repealer laws gave leeway for some of them to file case against defendants. Forty-two
states filed lawsuit against the DRAM manufacturers which was turned into a
consolidated case.
DRAM manufacturers argues that price collusion will be hard due to coordination
problems such as substitution, rapidly changing technology and heterogenous
relationship between manufacturers and customers. Effective collusion can only happen
if price fixing leads to more market power. Cartel members should be able to sell
competitive substitutes and profit from higher prices without undermining competitive
substitutes. It was proven that DRAM has a unique market niche which implies that
other technologies cannot affect the DRAM conspiracy. Despite product differentiation,
plaintiffs atill argues that conspiracy was possible. Differences in speed, design, quality
and capacity does not imply that the DRAM products are not competitive subsitutes
then. Antidumping policy has made collusion possible in three ways. First, because
foreign firms cannot undercut domestic prices, they ask a domestic firm to reveal its
prices. Second, firms have an incentive to exchange information to circumvent laws and
policies. Third, because of the fact that domestic firms have less constraint, they can
have the ability to facilitate collusion through higher concentration and prices.
 The next issue was about the scope of affected customers. DRAM manufacturers
only pled guilty to price fixing against seven firms which denies their guilt towards a
greater numbers of buyers. The price of DRAM went up and down during the dot.com
boom and bust. The conspiracy was proven to have operated with huge amounts of
communicatio ang huge cost for cheating. The operation included price negotiations and
agreements. Economic model confirm the idea that prices were higher for all products
during the conspiracy theory. These factors imply that price fixing is still feasible even in
a fast-paced technological advancement and product differentitation.