Thirty-four U.S. states will sue seven computer memory chip makers on Friday, including Micron Technology and Infineon Technologies, over charges they conspired to rig the U.S. market to keep prices artificially high.
California Attorney General Bill Lockyer said on Thursday 33 other states would join a lawsuit alleging the chip makers violated state and federal antitrust laws during a conspiracy to fix prices for dynamic random access memory, or DRAM, chips, from 1998 through June 2002, when there was a glut in the market.
The complaint, to be filed in U.S. District Court for the Northern District of California, charges the companies with fixing DRAM chip prices, artificially restraining supply and rigging bids for contracts.
Those actions caused computer makers such as Apple Computer, Compaq Computer, Dell, Gateway, Hewlett-Packard Co. and International Business Machines Corp. to pay more for chips and then pass those costs on to consumers, said Florida Attorney General Charlie Crist, another lead plaintiff in the case.
The largest four of the DRAM makers — Samsung, Hynix, Micron and Infineon — and their U.S. units control roughly 70 percent of the U.S. market, which in 2003 represented about $5 billion of the $17 billion in worldwide sales.
No matter where in the production and marketing cycle you find it, price-fixing always ends up screwing the consumer the most.
BTW, the only reason the world’s largest DRAM chip manufacturer isn’t officially listed in the suit — Samsung Electronics — is because they’re already negotiating a settlement out of court.
A free market _would_ prevent this sort of thing. Too bad we still don’t live in one.
They’d have to have a really large market share to manage this. Seventy percent isn’t enough to really be an anti-trust case. And most of these companies were headed towards bankruptcy. They’re suing companies for avoiding bankruptcy? How isd that better for consumers to have less sellers?
Suppliers are still the ones who set the initial price for the products they sell. So as long as they are able to manage a fairly tight control over their inventories and there is no large unexpected change in demand, there really is no pressure to lower prices, if the demand is there and they are making acceptable profits. Markets standardize on price all the time.
I’d like to know who exactly these states are claiming was hurt here? Consumers still got the products they wanted at a price they were willing to pay.
AB CD, There are two forms of business that like to call themselves “free market” but are really anathema to the whole concept.
The first is called Monopoly. That is where one company owns such a large slice of a specific market that they control the market. A couple of examples would be MicroSoft Windows operating system or DeBeers diamond cartel.
The second type of anti-free market is the oligopoly. That is where a few companies have the market and collude among themselves to set prices, control the entry of other companies, control output, etc, all to their advantage. These chip manufactures are accused of this. It is illegal to conspire to set prices.
Mr. H. Fusion –
Actually, your second definition for oligopoly is the correct definition of a cartel. An oligopoly is where a few producers effect, but do not control, the market. In a cartel, a few key players collude to keep prices artifically high.
They did this wrong. If they’d applied for a government bailout, or maybe greased a few strategically placed palms they’d be home free with no yapping puppy-like, upwardly mobile DA political operant snapping at their hocks and disrupting their dreams of Oriental bliss.
My poiint is that the government actually pays farmers not to plant crops to keep prices from dropping too low. I don’t see how companies going into bankruptcy makes things better for the consumer. They’d better have solid evidence and not just that their market share is too high and they raised their prices.