Only We Are Allowed To Practice Price Fixing: Micron Edition

October 14, 2005 10:46 PM by S.M. Oliva (Archive)

Following up on Tim Swanson's post below, Samsung's $300 million fine for "price-fixing" brings the government's haul from the memory industry to $646 million. Hynix Semiconductor, Inc., and Infineon Technologies AG have previously pled guilty to conspiring with Samsung to commit all sorts of heinous antitrust violations.

In his statement on the Samsung plea, Attorney General Gonzales said, "Price fixing threatens our free market system, stifles innovation, and robs American consumers of the benefit of competitive prices." But it's not clear how confiscating over $600 million in capital from the private sector will promote innovation or bring "competitive prices" to the marketplace. All of the confiscated funds are going to the U.S. Treasury. The Justice Department does not maintain even the pretense of compensating Samsung's alleged "victims," as the plea agreement states that said victims--mostly computer manufacturers--have filed their own civil antitrust suit to recover (potentially triple) damages.

And there is another problem with the Attorney General's view of "protecting competition." The DOJ declined to prosecute a fourth alleged co-conspirator, Micron Technology, because that company participated in the Antitrust Division's "Corporate Leniency Program," a scheme hatched by the DOJ to encouage companies (and their lawyers) to run to the government and confess their antitrust sins, thereby acquiring immunity in exchange.

Micron faces private antitrust lawsuits, but the company has still gained a competitive advantage, because in avoiding criminal charges, they don't have to pay the $646 million in fines that Samsung, Hynix, and Infineon did. How this promotes fair competition is a question you should direct to the attorney general.

Incidentally, Micron's immunity has never been formally announced by the Justice Department. The Antitrust Division's policy is to maintain total secrecy regarding the Corporate Leniency Policy--even though Micron publicly announced that it had received amnesty. My organization filed a Freedom of Information Act request to see the amnesty agreement, but the Antitrust Division said no. We recently filed an administrative appeal with the attorney general's office.

And one more item for you conspiracy theorists in the audience: During the early stages of the DOJ's investigation, Republican Congressman Butch Otter of Idaho sent a letter to then-Attorney General Ashcroft asking him to call off the investigation of Micron, because it was the sole U.S.-based memory manufacturer competing against foreign firms:

Micron has also courted the wrath of those would ignore foreign predatory trade practices, and has instead defended the rights of American manufacturers. If this is anti-competitive behavior, it is behavior that should be championed by our government rather than condemned.

Otter wasn't acting simply as a protectionist Republican, however, as my research found:

Otter’s letter [to Ashcroft] did not disclose his own ties to Micron and one of its chief shareholders, the J.R. Simplot Company. The Simplot Company and its founder, J.R. Simplot, were initial investors in Micron, and Mr. Simplot served on Micron’s board until 1999. In 2002 the Simplot Company owned 3% of Micron’s common stock, and four Simplot executives served on Micron’s board.

Otter worked for the Simplot Company for 30 years as an executive and director. In 2000, the year Otter was elected to Congress, he received approximately $237,000 in compensation and benefits from the Simplot Company. And one month before sending his letter to the attorney general, Otter filed a financial disclosure statement with the House of Representative declaring that he owned Micron stock valued between $100,000 and $250,000. Otter had purchased additional Micron stock during 2001, his first year in Congress.

Now, the DOJ says its policy is to grant amnesty to the first company that comes forward and admits it violated the antitrust laws. Maybe that's what happened with Micron. But since the DOJ refuses to acknowledge the amnesty or release any relevant documents, it's impossible to know whether Congressman Otter's letter influenced the government's decision making. If I were a shareholder of Samsung, Hynix, or Infineon, I would certainly like to know what really happened.