Slashdot Mirror
DRAM Price Fixing Investigations
An anonymous reader writes "A few days ago after FTC antitrust charges against Rambus were thrown out, the U.S. Department of Justice and EU have both begun probes against the 4 largest memory makers in accusation of price fixing during 2001/2002. News.com.com has information regarding the pending EU investigation. Anandtech and Silcon.com both have primers on the U.S. investigation. If you thought you paid too much for RAM in 2002, chances are you may have been more right than you originally thought."
myself and my compeptitors agree to keep the price of widgets artificially high.
That is where you cross the line
Price Fixing? Are they sure? In 2002, they where practically giving them away.
If you all independently arrived at price X as being the point you can reasonably profit when taken against manufacturing costs, it's legal.
Bush: He's Liberal in all the wrong ways.
When you agree with another company to both keep the prices high. This stops one of the companies in the agreement from undercutting the other to achieve more sells, and keeps the profit margins for both in the agreement (artificially) high.
What you choose to do within your own company (razors, cartridges) is entirely up to you...
We have since gone to Dell, which are admittedly more expensive, but they work properly and have good support (though lately G'nesh Singh Bhudanaramading keeps answering the phone when we call- we never know what he is talking about, but when a new network card appears the next day, it usually fixes the problem...)
Ceci n'est pas une sig.
:wq!
No, because in both cases, the company supplies both the product (razor, printer) and the refill (blades, ink cratridges). There's no collusion, since it's one company doing it to their own product, and therefore not illegal since there's no cartel or monopoly abuse, since there are plenty of razor and printer manufacturers to choose from.
It doesn't mean much now, it's built for the future.
IANAL, I am an economist who enjoyed industrial organization a bit too much for my own good. It is only when you have meetings or evidence of collusion that you begin breaking the price fixing portions of anti-trust law in such a way as to invite prosecution. As long as your monopoly arises as a result of a competitive market (for handles and printers) you are not violating the law.
The justice department generally tries to avoid procecutions for anti-trust violations, which are very expensive and prefers to regulate the market by barring mergers which would reduce competition. However there was a ton of case law generated on these subjects from the turn of the century through the 1970s when suits were more common.
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
So I can go sue Gillette for price fixing on razor blade refills?
I see only one company in this question so the answer is no.
Or the printer manufacturers for price fixing on toner cartriges?
If you found out that Epson, HP, Lexmark, etc. all agreed on the price of toner cartriges you would have a case. HP could charge $1000 for toner and it would not be illegal unless they had a deal with Epson, Lexmark, etc. to keep the price high.
Onward to the Aether Sphere!
If you price your product BELOW COST, you can be accused of predatory pricing. Without this rule, no small manufacturer could ever reasonable compete against an established one. The one with the large market share would simply undercut the competition by selling at a loss and ride on its existing resources until the competition went under. If you set a price higer than a competitor, it is used as evidence of an "abusive monopoly position" Only if coupled with other factors, such as anti-competitive \ exclusive contracts with related parties. Case in point, Microsoft's contracts with computer OEMs preventing them from bundling other OSes on the same computer as Windows. BeOS - overall, a superior product - went under because of precisely this. They had no chance to compete and prove themselves on an open market because of Microsoft's restrictive contracts. (which, in turn, no OEM would break because of Microsoft's ownership of the home market)
If you set the same price as a competitor, it is evidence of "price fixing"
CAN be, but only very rarely. As was pointed out in another post above, price-fixing \ cartel cases are spectacularly difficult to prove and usually require a "smoking gun" as evidence. The government even launching such a case is itself evidence that they have a load of proof on their side. Otherwise, it's assumed to be the result of normal market pressures. (why, for example, all the major computer brands cost about the same - prices have trended downwards since the 80s until it's hit a point that it's extremely difficult to get any cheaper and still profit. That's not price-fixing, it's the Free Market actually working as it's supposed to.)
Bush: He's Liberal in all the wrong ways.
Commodity DRAM memory has been around $0.10 / megabyte since 2002. I remember slashdot stories about $100 gigabytes at that time. Until Wintel breaks the 2GB/32-bit limit the core memory cost is not a major factor in personal computing. in contrast, flash memory has fallen from $1.00 to $0.25 that time period.
The price plateaus when a chip generation matures. The next 4x generation seems a bit delayed.
It's because that's how they make their money. They sell the printers at cost or even a loss, and then make you pay out your nose for proprietary ink. Much, much more profitable in the long run (i.e., one-time greater profit of $100 from one printer versus greater yearly profit of $100-$200 from ink for that printer).
The bigotry of the nonbeliever is for me nearly as funny as the bigotry of the believer. - Albert Einstein
companies are given patents or copyrights for products that involve huge costs to develop. If it wasn't for copyrights, these companies would not make the initial investment because it would be significantly harder to earn back the cost if everyone could just copy your product.
you mean these guys?
It's hardly surprising to hear there's an investigation going on. I got RAM cheaper two years ago than it is today. I've wanted to buy 500Meg modules for several years now, but the prices never seem to come down.
Usual disclaimer - IANACL (I Am Not A Competition Lawyer.
.
However, I have been involved in training and training others on competition and competition law.
You're not quite right in saying the same laws are being used - it's the same overall competition legislation, but the three cases you've mentioned relate to very different clauses and laws within that legislation.
I can't speak for the US, but in the UK it's basically like this. .
1. You can only be accused of predatory pricing in a specific circumstance - namely when you are in a monopoly position and therefore able to sell your product or service at such a low price as to force competitors out of business. For example, a software monopoly would be breaching this if they sold their office suite for next to nothing. Often, the key is whether the company has sold for below their cost.
2. You already said it. You can only abuse a monopoly position when you are IN a monopoly. That can't be said to be the case here, realistically.
3. Evidence of 'price fixing' is not just a matter of "your price is the same as your competitor, you're nicked chummy!".
In the UK, an in inquiry would be started by the OFT after complaints had been made regarding potential collusion or cartelling. The OFT then has the power to raid the offices of any company being investigated, and remove anything - anything at all - that they deem pertinent to their enquiry. I've seen case studies where the diaries of sales management were used to prove that there had been a meeting to agree price fixing.
So in summary, the first two instances can only be invoked when you are in a dominant position in the market while the third can apply to any company.
It's worth reading the UK Competition Act - it mirrors EU legislation on the subject and may expand on precisely what the EU are going to investigate and how. Apologies for the lack of a link, but I hope this clarifies things a bit.
"This is your life - and it's ending one minute at a time" - Narrator, Fight Club
My G4 is 3 years old and uses PC100. Thankfully, I managed to hit the price points for PC100 RAM each time I bought it, starting with a 128M stick that I bought 3 months before I picked up the machine.
Try a search around, PC100 is not nearly as cheap as it used to be, due to diminished supply and demand for faster stuff. Of course, used is another matter altogether, YMMV.
It doesn't mean much now, it's built for the future.
Other gas stations make their money from maintenence and parts, or cigarettes, or deluxe car washes... you get the idea. Ever notice how few gas stations that only sell gas are left? That's because there's no money in retailing the gas itself anymore.
The prices are almost always within a penny or two of each other in a given neighborhood because the fuel itself costs them all about the same ammount. Also, they look up and down the road each morning to make sure nobody is undercutting them too drastically.
Information wants to be anthropomorphized.
According to allegations made during the antitrust suit, Rambus memory was only expensive because the DRAM manufacturers conspired to make it so. Apparently they wanted to drive Rambus out of business in order to get its IP cheap. Hence the price fixing investigation.
If I remember my economics correctly, this is not true.
The competition between various economic entities just lower the prices, until reaching in perfect competition the cost of the last unit you will produce (marginal cost). But a monopoly can just fix the price, then swallowing a part of the customer saving, and wasting a part of the overall income (because fixing the price higher is just taking away some money the customer would have saved otherwise, and because raising the price automatically lower the quantities sold, thus triggering what has been called the Dead Weight Loss). It's really hard, actually, to determine how a price is fixed. From a neo-classissist point of view, which is probably one of the wrongest one, but probably the less disturbing one too, it is the value of how much work you put to produce that unit (FIXME if I'm wrong).
So, indeed, competition is good for pricing, but monopolies and oligopolies (?) are present, and sometimes justified when they are selling public goods with strong scale savings, in economic sectors that require huge investments (plane construction, water, electricity, etc.).
Monopoly isn't, as far as I know, forbidden in itself. This is preventing other companies from entering your market that is strictly forbidden (such as lowering the price so that new companies just can't bear the investment costs at such rates, or fusionning, or agreeing to keep prices high, or...)
And the original question is well valid, because when examining the legislations, you just notice that public goods monopolies aside, trials were intented when companies infringed on the very interest of the government, and when the government *could* have a chance to make those suits become effective.
Just to add my 0.002$, didn't you wonder why you just can't know how much you will pay your plane ticket, depending on when you buy it, from where (internet, phone, cashier) you buy it, and from which social class you belong ? It's just because those companies make their best to make you pay the max price for your ticket. Some very precise microeconomics studies are made to understand how much you are ready to pay for this seat on this plane. And this why, when you discuss, you can find people next seat who paid 30-50% more than you. For just the same crappy food, and tight seat...
This is the power of business ! :)
My economics english is bad, I know it. I never used such terms. Sorry...
Regards,
jdif
Let's overcome our weakness.
Wrongo. They are given patents because they apply for them, regardless of what it costs to make said product. Even if there IS no product. Or if it is just an idea.
Copyrights are something inherent, you don't have to be assigned a copyright.
Tell me, what happens once that initial investment has been recouped? Nothing.
Damn, this slope is getting very slippery....
My beliefs do not require that you agree with them.
Price fixing is a specific legal term where an oligopoly (>=2 competitors) agree to set prices rather than compete for business.
"Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
Stations have looked at it. Turns out the people who use the pay at the pump are the people who would only buy gas anyway (often with the same credit /debit card that skims ~3% off the sale price), while those who buy the stuff inside go inside and buy it anyway.
With pay at the pump the don't need a clerk ($) to ring up sales for those who are only buying gas. Clerks costs money, if you can get by on one less clerk because of pay at the pump you are saving 5 bucks and hour. That adds up fast.
Ironically, price fixing is quite common in industries that have huge fixed cost requirements that are generating losses because of overcapacity (which is the normal condition in memory manufacture). The issue is not how much money was made or lost, but the difference between what you charged and what a competitive market would have charged.
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.