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Samsung to pay $300M in price-fixing scheme

The chipmaker's plea deal caps a three-year investigation. Seven employees may face criminal charges.

WASHINGTON - Samsung, the world's largest maker of memory chips for computers and other gadgets, will pay a $300-million fine to settle accusations it secretly conspired with industry rivals to fix prices and cheat customers, federal officials said Thursday.

Samsung's guilty plea to a felony price-fixing charge caps a three-year investigation by the Justice Department into makers of the chips, a $7.7-billion market in the United States. Two of Samsung's leading rivals have paid fines totaling $345-million and pleaded guilty to involvement in a scheme the government said boosted prices consumers paid for computers from 1999 to 2002.

The Justice Department's acting antitrust chief, Thomas Barnett, said seven Samsung employees are not legally protected from further prosecution under the plea agreement, an indication they may face criminal charges.

"That's a decision for us to make moving forward," Barnett said. Prosecuting executives in price-fixing cases - not just the companies where they work - is an important deterrent against similar crimes, he said.

The guilty plea by South Korea-based Samsung Electronics Co. Ltd. and its U.S. subsidiary, Samsung Semiconductor Inc., was announced at Justice Department headquarters. The court papers are expected to be filed within 30 days in U.S. District Court in San Francisco.

Samsung said the company "strongly supports fair competition and ethical practices and forbids anticompetitive behavior." A spokeswoman, Chris Goodhart, declined to identify the seven employees or say whether they still work for Samsung.

The $300-million penalty is the second-largest criminal antitrust fine ever, behind only the $500-million fine by Hoffmann-La Roche Ltd. in a 1999 vitamins-related case.

"Price-fixing threatens our free market system, stifles innovation and robs American consumers of the benefit of competitive prices," Attorney General Alberto Gonzales said.

Samsung received grand jury subpoenas in connection with the investigation during 2002 and put aside $100-million late last year to pay potential criminal penalties.

Samsung's top competitor, South Korea-based Hynix, pleaded guilty this year to price-fixing and paid a $185-million fine. Last September, rival Infineon Technologies AG of Germany agreed to a $160-million fine. Another competitor, Micron Technology Inc. of Boise, Idaho, has been cooperating with prosecutors and was not expected to face charges.

The government accused the companies of conspiring in e-mails, telephone calls and face-to-face meetings to fix prices of memory chips from April 1999 to June 2002. The chips are used in digital recorders, personal computers, printers, video recorders, mobile phones and many other electronics.

The government said victims of the price-fixing scheme were Dell Inc., Compaq Computer Corp., Hewlett-Packard Co., Apple Computer Inc., International Business Machines Corp. and Gateway Inc.

Apple and Dell raised computer prices to compensate, Barnett said, and other companies responded by reducing the amount of memory installed in computers they sold but keeping consumer prices the same. Barnett said he could not say how much prices were affected by the collusion.

The investigation started in 2002, a year after memory chip prices began to climb even though the high-tech industry was in a tailspin. At the time, the increases were attributed to tight supplies, although then-Dell Computer chief executive Michael Dell blamed them on cartellike behavior by chipmakers.

[Last modified October 14, 2005, 01:40:20]