Out-Law News 2 min. read

Chip companies pay out €331m in EU cartel settlement

Nine microchip producers have paid fines totalling €331 million to the European Commission in the first settlement under a new EU fast-track scheme to deal with cartels. A tenth company paid no fines because it blew the whistle on the illegal activity.

The European Commission, which enforces competition law, found that a price-fixing cartel was in operation between 1998 and 2002 which distorted the market for DRAM memory chips, which are used in PCs and servers.

"[The cartel] 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," said a Commission statement.

Micron, Samsung, Hynix, Infineon, NEC, Hitachi, Mitsubishi, Toshiba, Elpida and Nanya were the companies involved in the illegal activity. Micron received immunity from the fines because it brought the cartel to the attention of the Commission.

The other nine companies all received a 10% reduction in their fines because of their willingness to admit their wrongdoing and participate in the fast-track settlement procedure.

This involves submitting acknowledgments of their behaviour and liability for infringements to the Commission, which allows the Commission to process a competition case more quickly and cheaply than if the companies contested the Commission's allegations.

In the early years of the investigation five of the companies under scrutiny offered to co-operate and received additional discounts on their fines.

"The Commission took account of their cooperation in the investigation and granted a reduction of respectively 45% (Infineon), 27% (Hynix) and 18% (Samsung, Elpida, NEC). Due to mitigating circumstances, the fine of Hynix was further reduced by 5% for Hynix and by 10% for Toshiba and Mitsubishi," said the Commission.

Infineon and Hynix were each fined around €50m but by far the largest fine was levied on Samsung which had to pay €146m even after a 10% settlement discount and an 18% leniency discount.

The size of the fines related to the amount of business carried out by the companies in the European Economic Area (EEA), the Commission said. "The reduction of the fine rewarding the companies for settling the case with the Commission is the same for every party, namely 10%. However, the actual fine they will receive will still reflect the size of their relevant sales, any aggravating or mitigating factors, and the fact of whether or not they obtain a reduction under the Commission's Leniency Notice," it said.

The settlement process is begun by the Commission, which outlines the case against companies; the evidence supporting it; and the likely fines. It then sets a time limit within which companies can opt to settle or not.

"This first settlement decision is another milestone in the Commission's anti-cartel enforcement," said Competition Commissioner Joaquín Almunia. "By acknowledging their participation in a cartel the companies have allowed the Commission to bring this long-running investigation to a close and to free up resources to investigate other suspected cartels. As the procedure is applied to new cases it is expected to speed up investigations significantly."

Though companies can still take legal action disputing the result of a settlement, the Commission said it did not expect this to happen often.

"Decisions adopted under the settlement procedure can still be appealed by the parties before the General Court," said a Commission statement. "However, parties having expressly and unequivocally acknowledged their involvement in the cartel, it is expected that the number of appeals would be limited."

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