Four Infineon executives agreed to plead
guilty to charges they conspired to fix prices in the
computer memory sector, officials said Thursday.
The U.S. Department of Justice said each of the executives with the German-based chipmaker has agreed to pay a $250,000 criminal fine and serve prison terms ranging from four to six months for their
participation.
The charges in the case stem from the DoJ’s ongoing investigation of price fixing in the $5 billion a year Dynamic Random Access Memory
(DRAM) market.
In the one-count felony charge filed today in the U.S. District Court in San Francisco, Heinrich Florian, Gunter Hefner, Peter Schaefer, and T. Rudd Corwin said they participated in a conspiracy to fix the prices of DRAM sold to Dell, HP, Compaq (prior to its HP merger), Apple, IBM
and Gateway. The executives were charged with violating Section 1 of the
Sherman Antitrust Act, which carries a maximum penalty of three years
imprisonment and a $350,000 fine for individuals for violations
occurring before June 22, 2004.
“These four executives are the first to plead guilty to a charge of
fixing prices in what is still a very active and far-reaching
investigation into antitrust violations in the DRAM industry,” Scott D.
Hammond, the Antitrust Division’s Director of Criminal Enforcement said
in a statement. “We will continue in our efforts to bring to justice
other domestic and foreign-based executives who were involved with
fixing DRAM prices.”
In a statement, Infineon said it is fully cooperating with the
ongoing DoJ investigation and has already taken steps such as clarifying
its policies and retraining staff to make sure that “issues like these
do not arise again.”
“Two of these four individuals have already left the company or are
in the process of leaving,” Infineon said in its statement. “The two
other individuals have been removed form their former jobs and work in
other assignments. Please understand that we do not comment on personal
matters of these individuals.”
In a five page legal brief, the DoJ said the executives conspired
through a series of meetings, conversations, and communications in the
United States and elsewhere to discuss and agree on the prices of DRAM
to be sold to certain customers. The inner circle then exchanged the
information on sales of DRAM to certain customers, for the purpose of
monitoring and enforcing adherence to the agreed-upon prices; and then
authorized and in some cases ordered subordinate employees to
participate in the conspiracy.
“This case reinforces our commitment to investigate and hold
accountable all conspirators, whether domestic or foreign, that harm
American consumers through their collusive conduct,” R. Hewett Pate,
Assistant Attorney General in charge of the Department’s Antitrust
Division said in a statement. “True deterrence occurs when individuals
serve jail terms, and not just when corporations pay substantial
criminal fines.”
This is not the first time that Infineon has been in trouble for
price fixing. On October 20, 2004, the company pleaded
guilty to a charge of participating in the same conspiracy between
July 1, 1999 and June 15, 2002 and was sentenced to pay a $160 million
criminal fine – the third largest fine in antitrust history.
Although the DRAM market is one of the most volatile industries, a
historical check of prices in the years in question does show huge
market swings. 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, according to the
Semiconductor Industry Association (SIA). The trade group said the DRAM
marketplace started off as a $20.7 billion industry in 1999 and
skyrocketed to $28.8 billion in 2000. That number dropped to $ 11.2
billion in 2001 and started to bounce back in 2002 to $15.3 billion.
The DoJ’s investigation has also flushed out collusion charges in
other DRAM companies. The Justice Department and Commerce Department
have also contacted Samsung and Micron Technologies as
part of a broader investigation. Both companies have repeatedly denied
participation in any broader collusion scheme.
On January 21, 2004, Micron Regional Sales Manager Alfred Censullo
pleaded guilty to obstruction of justice in connection with the DoJ’s
investigation.
The European Commission is also conducting its own investigation.
