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July 18, 2006

States Allege Price-Fixing by Computer Memory ChipMakers

DES MOINES.   Iowa and 33 other states have filed an antitrust lawsuit alleging that eight computer memory chip manufacturers engaged in an illegal conspiracy to fix prices, artificially restrain supply, allocate production and markets among themselves, and rig bids for memory chip contracts.

"We allege the defendants conspired to fix prices for memory chips, which are a crucial component of computers and other high-tech devices," said Attorney General Tom Miller. "We allege that consumers and state agencies paid more for computers because of the illegal conspiracy."

The lawsuit concerns "DRAM chips" - dynamic random access memory chips, pronounced "D-RAM" - the main system memory used in home and office PCs, servers and other electronic devices. The suit alleges an illegal conspiracy from 1998 through June 2002, when the U.S. Dept. of Justice launched a criminal antitrust investigation of the matter. The federal case resulted in guilty pleas to criminal price-fixing by several individuals and companies, who collectively paid more than $730 million in fines.

Defendant memory-chip maker companies named in the States' civil lawsuit are Elpida, Hynix, Infineon, Micron, Mosel Vitelic, Nanya, and NEC. The lawsuit was filed last Friday in U.S. District Court in San Francisco. The suit seeks damages, civil penalties, and an injunction prohibiting future illegal conduct.

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Details on the allegations and the lawsuit:

The States' lawsuit alleged that in 1998 the memory chip makers started discussing and coordinating prices they charged to large computer manufacturers, including Apple, Compaq, Dell, Gateway, Hewlett-Packard, and IBM.

"The [memory chip] manufacturers did not limit this pricing coordination to isolated or occasional conversations," the States' suit said. "On the contrary, during a roughly four-year period, there were frequent pricing communications among the conspiring manufacturers." According to the suit, the exchanges intensified immediately preceding times when the memory chip makers submitted bids to the computer makers, their most important customers. The suit alleged that the memory chip makers in 2001 "agreed to reduce supply in order to artificially raise prices."

The lawsuit alleged that the unlawful, concerted action by the memory chip makers unjustly enriched the defendants at the expense of the computer manufacturers that bought DRAM chips, and of the government entities and consumers who purchased computers.

Worldwide sales of "DRAM" totaled about $17 billion in 2003, with the U.S. accounting for a significant share of the market.

The suit was filed in the U.S. District Court for the Northern District of California, in San Francisco. A substantial amount of the illegal conduct allegedly occurred in California.

States participating in the lawsuit are: AK, AZ, AR, CA, CO, DE, FL, HI, ID, IL, IA, LA, MA, MD, MI, MN, MS, NE, NV, NM, ND, OH, OK, OR, PA, SC, TN, TX, UT, VT, VA, WA, WV, and WI.


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