European Commission reaches first settlement in chip cartel

Between 1998 and 2002 Micron, Samsung, Hynix, Infineon, NEC, Hitachi, Mitsubishi, Toshiba, Elpida and Nanya cooperated to restrict competition.

By ARI SYRQUIN
Europe flag (photo credit: DR)
Europe flag
(photo credit: DR)
The European Commission adopted its first settlement decision in a cartel case involving 10 producers of memory chips or DRAMS used in computers and servers.
As part of the decision, which came into effect at the end of May, the producers were fined with a total €331,273,800 million including a reduction of 10 percent for the companies’ acknowledgement of the facts.
The companies involved in the decision are: Micron, Samsung, Hynix, Infineon, NEC, Hitachi, Mitsubishi, Toshiba, Elpida and Nanya. Micron, however, was not fined because it unveiled the existence of the cartel to the Commission. The case was also investigated in the United States.
The settlement procedure is based on the anti-trust modernization regulation. The procedure allows the Commission to settle a cartel case with the companies involved under a simplified procedure. Under this procedure after having accessed the evidence against them and they had the opportunity to express their observations, the companies choose to acknowledge their involvement in the cartel and their liability for it. The Commission created the procedure in June 2008 to optimize the enforcement of anti-cartel rules by freeing up resources to deal with more cases, thereby increasing the detection rate and the deterrence of the EU Treaty.
Interestingly almost all of the companies are non-European except for one Germany’s Infineon. However, they sell their products in the European Economic Area (EEA) and therefore must also abide by EU law, in this case of the EU Treaty , which bans practices restrictive of competition.
The overall cartel was in operation between July 1st, 1998 and June 15th, 2002. It involved a network of contacts and sharing of secret information, mostly on a bilateral basis, through which they coordinated the price levels and quotations for DRAMs (Dynamic Random Access Memory), sold to major PC or server original equipment manufacturers (OEMs) in the EEA. DRAMs are a common model for “dynamic” semiconductor memories for personal computers (PCs), servers and workstations.
The settlement procedure allows the Commission to settle cases through a simplified procedure. It was created in 2008 with the objective to reduce the length of administrative proceedings. This is perceived as good for consumers and for taxpayers as it reduces investigative costs; good for anti-trust enforcement as it frees up resources to tackle other suspected cases; and good for the companies themselves that benefit from quicker decisions and a 10% reduction in fines. With experience and as the procedure applies to new cases, the Commission will deal with investigations more expediently.
The settlement discussions in the DRAMS cartel case took place during 2009 after the companies indicated that they were prepared to engage in discussions with a view to a settlement. Subsequently, they all introduced formal settlement submissions in which they clearly and unequivocally acknowledged their respective liability for an infringement. A Statement of Objections reflecting the parties’ submissions was notified to them in February this year and they all confirmed that its content reflected their submissions and they remained interested in the settlement procedure.
Companies that are first to reveal cartels to the Commission enjoyimmunity from fines under the Commission’s 2002 Leniency Notice.Companies that cooperate in the investigation can receive significantreductions. The calculation of fines is based on the “finesguidelines”, which were last updated in 2006. The settlement does notaffect the beginning of a cartel investigation, which is triggered by aleniency application, complaints or on the Commission’s own initiative.
The bilateral settlement discussions take place between theformal opening of the proceedings, once the Commission has gathered andanalyzed the evidence, and the issuing of a formal SO at theCommission’s initiative. The Commission informs the parties of theobjections envisaged against them, makes available the evidencesupporting those objections and discloses the applicable fine rangecalculated on the basis of the relevant turnover in application of thefines guidelines. Thus, parties have full opportunity to express theirviews on the objections and evidence presented to them.
The maindifference between the EU settlement procedure and the US pleabargaining agreements is that under the US system, a company orindividual admits an infringement and accepts a sanction in the courseof a negotiation process that results in an agreement to make a pleabefore a judge and to waive their right to appeal. Unlike USsettlements, which are also an investigative tool, the EU settlementprocedure is not used to gather evidence, but rather as a tool tosimplify the procedure and make better use of the Commission’sresources. The Commission’s settlement decisions may still be appealedto the EU courts.
syrquin@013.net
The author is the head of the International Department at GSCB Law Firm.