RealTime IT News

Antitrust Case Fuels DRAM Price Fixing Probe

Rambus may be out of the legal woods with the dismissal of an anti-trust lawsuit against the memory chipmaker, but evidence in the case released this week does not bode well for other DRAM makers.

A settlement decision filed by a federal judge in a separate case the Federal Trust Commission brought against Rambus contains e-mails and other evidence that could help bolster the Department of Justice's price-fixing probe of companies that make dynamic random-access memory.

In the process, it has shed light on a two-year old investigation by the DoJ that centers on charges of industry price-fixing and collusion by companies such as South Korea-based Samsung and Hynix, Germany-based Infineon and Boise, Idaho-based Micron Technologies .

The Wall Street Journal reported Thursday that prosecutors are expected to seek criminal price-fixing charges against some chip makers, while others are weighing whether to enter plea deals and risk heavy fines, according to lawyers close to the case.

Representatives with the DOJ were not immediately available to comment on the probe. Micron spokesman Dave Parker told internetnews.com that for the last two years, the company has "fully and actively cooperated with the Justice Department and will continue to cooperate with them." Samsung, Hynix and Infineon have confirmed the probes.

The potentially damaging information about alleged price-fixing behavior is contained in a 348-page summary written by FTC Chief Administrative Law Judge Stephen McGuire, who dismissed a separate FTC's case against memory chipmaker Rambus on February 18.

At the center of the collusion argument is a November 26 2001 e-mail conversation between an executive at Micron and other DRAM manufacturers.

According to the decision released by Judge McGuire, "a Micron manager named Kathy Radford described the efforts of Infineon and Samsung to raise DDR prices, and stated that Micron intended to try to raise its prices to all of the OEM customers. Radford then reported that, "'the consensus from all suppliers is that if Micron makes the move all of them will do the same and make it stick.' Prices did, in fact, increase in the months after Radford's e-mail."

Although the $16 billion-a-year DRAM market is one of the most volatile industries, a check of prices in the years in question does show marked consistencies. Between November 2001 and the first few months of 2002, memory prices spiked to an estimated three times their normal levels after a two-year plunge but then dropped back down.

Also being called into question is a push by other memory manufacturers to squelch Rambus' version of DRAM -- known as RDRM -- in favor of the now industry standard double data rate (DDR) SDRAM .

As part of the Rambus case, Compaq computer (now owned by HP) testified that because the price of RDRM did not decrease and because Compaq did not believe that it would decrease in the future, Compaq decided to abandon its plans and to shift to DDR. AMD told the courts it shelved plans to adopt RDRAM because, based on what they were told by DRAM manufacturers, it was clear that DDR, not RDRAM would become a commodity product.

Dell was also getting frustrated and considering moving into a low-key Rambus mode by May 2000. According to The Wall Street Journal, company CEO Michael Dell was weary of the memory chipmakers and their "cartel-like behavior."

Judge McGuire's decision revealed that Dell purchased Rambus chips on the assumption that RDRAM prices would decline and close on SDRAM and in turn help create demand. However, Dell claimed the memory vendors showed no desire to drop prices forcing it to reevaluate its strategies.

"So the message to them is drop prices or we will continue to decrease our RDRAM forecasts and we will architect next generation systems around DDR," according to the decision in the Rambus case. "If they still have no desire to drop prices, we should push ahead re-architecting chipsets around DDR."

While not directly related to the Rambus case, any such charges against its rivals could bolster Rambus' contention that the major DRAM manufacturers also colluded to deliberately undermine its RDRAM technology -- the focus of the FTC's anti-trust accusations.

American Technology Research analyst Erach Desai said this "perfect storm" scenario might open the door for settlement with Infineon or Hynix, or Micron.

"The precedent for establishing collusion may be all that Rambus needs to bring the 'holdout' DRAM manufacturers to the settlement table," Desai told internetnews.com. "Rambus is now on the offensive with two comprehensive court decisions in hand -- the CAFC and the FTC."

In June of 2002, the FTC claimed that the Los Altos, Calif.-based Rambus violated federal antitrust laws by "deliberately engaging in a pattern of anti-competitive acts and practices that served to deceive an industry-wide standard-setting organization, specifically, not disclosing that it was in the process of seeking patents related to the proposed standards."

In its case, the FTC attempted to invalidate Rambus' synchronous memory patents obtained during its membership on the Joint Electron Devices Engineering Council (JEDEC), a non-profit organization that promotes technological standards. Rambus participated in the standard-setting process between 1991-95.

During Rambus' membership, JEDEC developed and adopted a standard for synchronous dynamic random access memory (SDRAM) . When Rambus joined the group, it had applied for a patent on RDRAM, a competing technology. The FTC produced documents in May that showed before, during, and after Rambus dropped its JEDEC membership, the company made repeated filings to ensure intellectual property rights to the SDRAM standard.

In addition, FTC attorneys produced confidential notes from Rambus' outside legal counsel advising the company to resign from JEDEC and cease applying for patents on SDRAM. Once the SDRAM standard was adopted, Rambus made moves to either collect on royalties or sue those companies that refused to comply, which included Infineon, Samsung, Hitachi, Hyundai, and Micron.