In 1890 the United States government passed the Sherman Antitrust Act, a law that formed the bedrock of the United States' policy against monopolies and other unfair forms of competition. In the many years since then, further acts have been passed to amend the law, and the Government has in time made the correction of anti-competitive actions one of its more important roles. What started with the breaking up of truly gigantic corporations like Standard Oil and AT&T has moved on to include dealing with cartels that while not of a single corporation, act at times in manners similar that result in anti-competitive actions taking place.

If we were to take a cursory glance at the computing industry as a whole and try to pinpoint the areas where anti-competitive legal issues were likely to occur, we'd look at areas like CPUs and GPUs, where only a couple of serious competitors exist in each, or operating systems, where Microsoft has and continues to have a de facto monopoly. While these areas do in fact have issues, we would be missing an area that has shown some of the worst behavior. It turns out that the memory industry is one of the greatest offenders.

Generally speaking, it's counter-intuitive to see the memory industry as being a hotbed of legal woes due to the highly competitive nature of the market. With the JEDEC association setting very rigorous standards for RAM, products are quite literally perfectly competitive (from a non-overclocker's point of view): a part specified to meet a certain JEDEC RAM standard should be just as good as any other part that adheres to the same specification. As a result, OEMs can and do switch RAM on a regular basis depending on who can supply it at the lowest cost, and as a result we usually see the memory market operate as it is: a highly competitive market in which multiple companies supply the same good.

But didn't we just say that the memory market is one of the greatest antitrust offenders? Yes, for in spite of the memory market being very cutthroat, it's also an industry that is subject to highly volatile demand. It can be extremely profitable as a result when demand is far outstripping supply and it takes years to bring new fabs online to produce additional memory. It's the profitability of these periods that keeps nearly a dozen major companies in the business. With such volatility however, it also opens the window for manipulation of this volatility - if now is not a boom year, why not make it one?

Over just the last decade, the memory industry has been through no less than three major shakeups. The first is the infamous and now settled Rambus patent case, started in 2000 when Rambus asserted that it held patents on technology used in DDR RAM and wanted royalties as such, only to be found guilty of breaking antitrust and deception laws in acquiring these patents and covertly trying to influence the memory market. The second case involves the "Big 10" memory manufacturers colluding to keep RAM prices artificially high between 1998 and 2002, to which they were found guilty. Finally, a new investigation has opened up as of this year into the flash memory market, where the Justice Department is trying to figure out if there is evidence of collusion and price-fixing there too.

Today we'll be taking a look at the latter two actions, one just wrapping up while another begins. What exactly went on in these cases? How are or potentially were consumers hurt by all of this? What has been done to punish the offenders and to correct the market? Let's find out.

DRAM Price Fixing
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  • Ryan Smith - Thursday, October 25, 2007 - link

    It's the belief of the OEMs that this overcharging came solely out of their profits. I agree it's not completely logical, since I too would assume they'd just end up driving down the cost of computers, but throughout the case this is what the OEMs have been claiming and why they're getting the lion's share of the settlement (and it isn't something I can immediately disprove). Reply
  • Sunrise089 - Thursday, October 25, 2007 - link

    Ok, well put, but in that case the consumers still didn't loose (except those that bought memory directly). If the OEM's ate the additional cost by lowering profits to maintain sales, then it's fine for them to make up for it now. The article however makes the claim the OEMs passed the cost onto the consumers (implying their profits stayed essentially the same) and are now taking in a windfall. Reply
  • PandaBear - Thursday, October 25, 2007 - link

    This is what I hate about these "price fixing" lawsuit. The OEM charge more when the price goes up, and then sue the DRAM manufactures and keep all the money. The DRAM manufactures raise the price (or cut back on R&D or capacity improvement due to higher risk/lower profit) to pay it.

    With all these different DRAM manufactures around the world (Korea, Japan, US, Taiwan, and all the low end stuff in China now), and the market being commodity with spot and contract market trading, I would imagine it is almost impossible to price fix if the profit is there, because someone will break the deal and grab the profit in that case.

    When the lost is high (like right now), you can really sue them to cut back production to reduce loss or cut back in investment right? So how do you call that price fixing?






    DOJ should be suing the OPEC for price fixing oil instead, and ban all oil import until they break that price fixing scheme.
    Reply
  • Zoomer - Saturday, October 27, 2007 - link

    Actually, with a majority of the market with Taiwanese, Korean, and mainland chinese, I wouldn't rule out price fixing in the future. They just have to figure out how to better hide it.

    Perhaps they knew they would get caught, but decided to do it anyway to drive RAMBUS out of the market, once and for all. < / conspiracy theory>
    Reply
  • ZetaEpyon - Thursday, October 25, 2007 - link

    That's not in reference to lower prices that might result, it's in reference to a direct cash payout as a result of the class-action lawsuits. I've already received a couple notices in the mail about the lawsuits, as I purchased memory directly from Micron a couple of times during those years. Reply
  • Olaf van der Spek - Thursday, October 25, 2007 - link

    quote:

    However a second reason that has been proposed has been that the price-fixing was done to force RAMBUS's RDRAM out of the market at a time when they were beginning their patent suits.

    Why would price-fixing force RDRAM out?
    Wouldn't it affect all memory types equally?
    Reply
  • leexgx - Thursday, October 25, 2007 - link

    R-DRAM was all ways overprced more the DDR ram and you needed to put them in pairs as well where as DDR only needed 1 slot

    only ever seen Dell pcs use (about 10 heh) it and some servers
    Reply
  • magreen - Thursday, October 25, 2007 - link

    Interesting article but grammar and spelling were not up to par. Reply
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