HP Sues Seven Optical Drive Makers Over Price-Fixing

Lucas123 writes "HP has filed a lawsuit against seven makers of optical disk drive technology, claiming the companies engaged in widespread price fixing in order to drive up the cost of Blu-ray, DVD and CD drives for PC and peripheral equipment makers. The suit was filed Thursday at the district court in Houston against Toshiba, Samsung, Sony, Panasonic, NEC, TEAC and Quanta Storage. The lawsuit claims the conspiracy to drive up prices took place from at least Jan. 1, 2004 through Jan. 1, 2010, when "almost all forms of home entertainment and data storage were on optical discs" and the companies controlled 90% of the optical disk market. HP alleges the companies used industry events, such as CES, as cover to communicate competitive information and hammer out anticompetitive agreements."

Comments

Re:oh look

[locopuyo]

It could still be legit though. Weren't a lot of those listed companies found guilty of price fixing CRT displays?
It seems suspicious that optical drives are so expensive despite being such old technology.

Good Luck

[dave562]

Unless they have insiders who are willing to testify, I think they are going to have a very hard time proving their case.

Re:Good Luck

[gnasher719]

Unless they have insiders who are willing to testify, I think they are going to have a very hard time proving their case.

Unless insiders are willing to become criminals and possibly go to jail for the benefit of their companies, this should be no problem. As an insider, you are not really asked whether you want to testify or not.

Re:Good Luck

[dave562]

I am making the assumption that nobody was stupid enough to create a PowerPoint deck labeled "How to price fix optical drives." Given that the article summary says that the accused went so far as to conceal their interactions under the guise of regular industry events like CES, I doubt they are going to find any sort of smoking gun during discovery.

Without information or evidence, there is nothing to compel the testimony or prove perjury.

HP Lawyer, "Did you collude with others to fix the prices on optical drives at CES?"

Sony Executive, "No I did not."

HP Laywer, "Well, in absence of evidence or testimony showing otherwise, I suppose we have to believe you."

Re:oh look

[Crazy Taco]

Not only that, but it has taken an awfully long time for the price of Blu-Ray drives to really drop... maybe there was some fixing going on. I wouldn't be shocked.

Re:Why is HP suing, and not the consumer?

[d33tah]

Because they ship, for example, laptops with these optical drives?

If you can't innovate . . .

[PolygamousRanchKid]

. . . litigate!

Re:If you can't innovate . . .

[Sangui5]

Except that HP did innovate; HP developed core standards essential IP for everything DVD+R and on. You can't build a BluRay burner without using HP's innovations. HP didn't decide to go it alone and build a whole optical drive ecosystem by themselves, but instead licensed their innovations to others.

Of course, since the IP is standards essential, it is 99% certain to be licensed on fixed-fee-per-unit FRAND terms. So if a monopolist or a cartel decide to sell fewer units at a higher price, the people who actually did the hard development work get shafted. Nevermind that the HP is also one of the biggest sellers of optical drives to end users.

So, yeah, if you can't innovate, go ahead and litigate. But if you do innovate, give a fair license, and then get cheated, well, I'd advise litigation in that case as well.

You've gotta be kidding.

[FreonTrip]

Isn't the refrain - borne out by numerous financial statements by the sued companies and others besides - that optical drives are pricing themselves into extinction with razor-thin margins due to fierce competition and decreasing demand? It's possible HP has a valid point or has stumbled onto evidence, but this sounds more like flailing before declaring that optical drives will be an optional feature going forward...

Re:You've gotta be kidding.

[mlts]

The ironic thing is that optical drives, though boring, have their use. For example, I can pay $10 a month for 100 gigs on a cloud storage, or I can pay for a few Blu-Ray blanks, burn the data, and call it done. From there on out, the cost of storing the data is pretty much $0. To boot, it is very difficult for malware to tamper with media finalized on BD-R media.

Yes, a hard disk is cheap and can store a lot, but for small documents, nothing beats burning to WORM media for long term archiving.

It would be nice if the 100GB BD disks came down in price. Next to a modern LTO drive, it would be very useful for backups.

Re:You've gotta be kidding.

[evilviper]

it is very difficult for malware to tamper with media finalized on BD-R media.

...but very easy for a GRAIN OF SAND, or a SMALL AMOUNT OF LIGHT to tamper with your media.

It's a shame disc caddies never took-off... Optical media is immensely easier to handle when you never have to remove it from its protective case.

Re:You've gotta be kidding.

[adolf]

Agreed: Caddies are good. Easy to handle, and protected by default. I wish, especially, that game consoles would adopt them (because game discs are expensive and essentially impossible to usefully duplicate), but that's not going to happen this generation.

Panasonic (aka Matsushita) tries hard to make disc-caddies stick at about every iteration: It was they who made the first CD-ROM drives that required caddies, back in the day, and they were chief proponents of DVD-RAM discs in caddies.

The latter of these is still commonly used for archiving purposes for voice logging recorders. (I'm unaware of any BD-based formats that use caddies as standard-fare.)

Re:You've gotta be kidding.

[adolf]

If your documents are small, just write them to DVD-R.

Appending the archive securely (ie, redundantly) and keeping it fresh is easy and doesn't require any multi-session failure modes:

Copy DVD-R to hard drive, install new documents into the directory structure on the hard drive, and then write the whole mess back to a new DVD-R. Verify the burn.

(Script all of this, if necessary.)

After that, shred the original*.

Next! (Unless I missed something about what "small documents" means.)

*: This seems wasteful, and it is, but have you ever knowingly dropped a quarter on the ground and not chased it? It's about the same problem.

Re:You've gotta be kidding.

[urdak]

Agreed: Caddies are good. Easy to handle, and protected by default. I wish, especially, that game consoles would adopt them (because game discs are expensive and essentially impossible to usefully duplicate)

The problem here is, of course, disks you cannot duplicate. Not the lack of caddies.

After my children's DVDs were often scratched and destroyed I started duplicating them and letting the kids watch the duplicates. The DVD industry would have you think that by duplicating a DVD I'm a pirate. They are idiots - the real pirates don't duplicate CDs they already bought - they download from the 'net, and never bother with DVDs...

Re:You've gotta be kidding.

[evilviper]

The problem here is, of course, disks you cannot duplicate. Not the lack of caddies.

Both are issues, but caddies could be a big part of the solution.

After my children's DVDs were often scratched and destroyed I started duplicating them and letting the kids watch the duplicates.

Now imagine you could make one duplicate, and it would NEVER get scratched, NEVER get dirty, NEVER deteriorate from being left out in the sun, etc.

Making extra copies to compensate is only treating one symptom, while the disease continues merrily along.

Re:You've gotta be kidding.

[jbo5112]

Actually (IIRC), the head of the MPAA thinks that making a backup copy of the DVD you purchased qualifies as fair use. It's the DMCA and the US Federal Government that considers it illegal. The Library of Congress is responsible as the legal authority of what is fair use, and I have yet to see them issue an exemption for making a personal backup. Rules on Blu-Ray are potentially different, as the CSS protection has been given exemptions that don't apply to other DRM. Rules on copying CD's are completely different, as it has no encryption to break before copying, and you are legally entitled to make a personal duplicate of any CD you own.

Re:You've gotta be kidding.

[Reziac]

Then how it it LiteOn stays in business? They've been near the bottom of the price ladder since the beginning, despite having the best longevity outside of maybe Panasonic.

As I say above, I doubt HP's purchasing dept. really looked at the market options; rather, they went with one of the big companies because, well, they're like HP, rather than being some supplier-of-rebadges like LiteOn largely is. Which in my mind is not due diligence, as they could probably have bought 3 LiteOns (and had happier customers) for the price of one of the others... some of which might even have been rebadged LiteOns.

Re:oh look

[fatphil]

Taking a long time to drop is just as indicative of historical price fixing in the downward direction, to keep smaller competitors out of the market, and to push one standard over another, thus guaranteeing a larger future market as the rival standard fades away.

Re:oh look

[drinkmoreyuengling]

Slashdot. The place we go to bitch about legal business practices and celebrate price fixing and anticompetitiveness.

Re:LITEON not good enough for you?

[Anonymous Coward]

If one wants Blu Ray drives, unless one buys the cheapie portable model that only does USB 2.0 and eventually has a door latch failure, you will be paying $150 or more. DVD drives went from expensive to fairly cheap in just a few years. Blu-Ray drives are still expensive almost seven years later after their introduction.

Of course, there is Blu-Ray media. Want 50GB or 100GB media? Be prepared to pay far more than what it is worth.

Re:oh look

[ackthpt]

here we have another dying company trying to sue others to keep themselves afloat.

wouldn't be suprised if HP is dead in 2 years...

Thank Meg.

Maybe she could revive them by rolling out an online auction service. eBay sucks now.

Re:oh look

[Anonymous Coward]

The 405nm blue lasers in Blu-ray drives were covered by Nichia patents until the expired recently, and Nichia does sue to protect it's patents. Single source, patent-protected lasers were part of the reason it took so long for the prices to drop.

Re:Samsung? Samsung???

[Anonymous Coward]

Dude, you forgot to take your meds.

Re:Optical Drive ... Why?

[master_kaos]

maybe because between the period of 2004-2010 it wasn't $15? (heck did a 32gb stick even exist in 2004?)

Re:oh look

[Notabadguy]

FTFA:

There was already a criminal investigation and the folks HP is suing pled guilty in a plea deal. Now HP is making the equivalent of a civil case.

American legal systems allow civil suits to follow criminal suits. And the defenders were already found criminally guilty, although they pled to some unknown settlement.

Re:LITEON not good enough for you?

[ravenscar]

$150 or more? I picked up an ASUS from Newegg around 6 months ago for $35 or so. It's an internal model and has SATA connections. It works great and appears to be as high quality as my other ASUS gear (I've found their components to be very reliable). The software needed to play a Blu-Ray movie was much more expensive than the drive itself.

Re:oh look

[pspahn]

Thank you. I do recall shenanigans about NEC and TEAC price fixing optical drives, but I wasn't sure if that was recently or like 15 years ago.

Tinfoil hats

[themushroom]

[HP] alleges the companies used industry events, such as CES, as cover to communicate competitive information and hammer out anticompetitive agreements.

I can picture coded messages and secret rings in use. Like those in charge couldn't just call each other to make deals, mano a mano, rather than geeks in polos with women in Lara Croft outfits nearby doing the corporate espianage mole work? (I've never been to a CIS, I just assume it's geeks and sexy girls.)

Pulls out the popcorn. This'll be fun to watch...

[bernywork]

Hang on, no groklaw.

Damn

Pass it along

[CanadianMacFan]

I'm sure that HP will pass along anything it wins in the lawsuit on to it's customers that bought those overpriced drives. /s

Re:Optical Drive ... Why?

[Anonymous Coward]

Counterpoint:

1: My 25GB (well, less formatted) BD disk once finalized, is not going to be affected by malware (barring stuff that can flash the drive's ROM and override the laser.)

2: Nothing is 100%, but I have CD-Rs written in 1998 that are perfectly readable today (knock on wood). With decent storage (cool, dry place, in a case, disk stored vertical so it doesn't warp, and stored in a closed case), I get fairly decent shelf life from media. When I burn optical media, I just use WinRAR and have one extra disk as a recovery volume, so if one fails, I still can recover the archive. I also use Nero's SecureDisk so I can check for damage on the disk, repair minor damage with error correction, and have a cryptographic signature. I can also encrypt files, but then I am dependant on the Windows application to decrypt them, so I use an archiving utility for that.

Flash drives are not meant for archive use. Once the electrons leave the gates, the data is gone and completely unrecoverable. A flash drive can fail at anytime, while most bad optical media gets caught on the verify pass from a burner.

3: I can easily label optical media. This is doable with USB flash drives somewhat, but the smaller ones are a no-go. I know when I pull out a folder or drawer what my optical media is for. A USB flash drive, I usually have to plug in and check what is on it.

4: I can spend a buck and have two Blu-Ray disks in my hand.

Re:oh look

[msauve]

Expensive? You can get a CD-R/DVD-R drive for <$20, at retail, shipping included. When you look at the electronics, mechanics, and optics involved, that's amazing.

The first writable optical drive I bought, an HP 4020i, was $400 (about $600, inflation adjusted).

HP got out of the business. If they think that there are huge profits to be made, maybe they should get back in and corner the market.

Re:oh look

[msauve]

Replying to myself, because on further review, HP does still make optical drives. You can get an HP CD-R/DVD-R from Newegg for ~$100, comparable to ones from other manufacturers which cost $20.

And HP is saying the competition is overpriced? WTF?

Or do they just badge engineer theirs these days, and the ~5x markup isn't enough for them?

wouldn't be the first time

[QuasiSteve]

EU's been targeting optical drive makers as well (last year):
http://europa.eu/rapid/press-release_IP-12-830_en.htm?locale=en

Another case was in 2004:
http://bonizack.com/in-re-optical-disk-drive-products-antitrust-litigation-mdl-no-2143

I also think there was one in the late 90's, but google-fu is failing me.

Re:oh look

[achraf52]

At $20 they are still expensive compared to the total production cost, lasers, motors and circuit board components are pretty cheap at today's wholesale prices, and compared to the cost, speed and benefit of Flash Memory and SD Card, we can clearly see that CD/DVD technology should get out of the market, that $20 can get you a blazing fast 32 GB flash drive, which is also solid state, stable, durable and very portable.

Re:Optical Drive ... Why?

[petermgreen]

If I want to give someone (or possiblly copies to a group of people) a piece of media without any expectation of getting it back then optical discs are still an order of magnitude cheaper than USB sticks (about 20p for a DVD-R about $5 for a usb stick . If I buy software then it will most likely come on optical media. If I buy a peice of hardware then the drivers will probablly come on a CD (yes you can often download them too but that is extra hassle, especially if the available internet connection is slow).

It's certainly less of an issue than it used to be with more software available by download and broadband connections delivered over Ethernet/wifi reducing the chicken and egg problem when setting up a new computer but I still wouldn't want my main computer to be without an optical drive even if I only use it occasionally.

Can I sue HP?

[TheSkepticalOptimist]

I mean if they want to be relevant, why not sue Apple, Google and Amazon for price fixing digital content. you know, something fucking relevant.

Re:Can I sue HP?

[darue]

they should be sued. the company has been absolutely ruined. the prices even then were cheap, 7 companies controlled 90% of the market? Fucking hell of a lot better than MOST ANYTHING going on in this country. Choices for internet I have: three. one and a half of which are comcast, the other shitty phone company dsl. This is actually the NEXT BIG THING. American consumers are getting screwed constantly by these middleman companies that just slap a logo on commodity grade goods and sell it for an absurd markup. Price underwear sometimes, it's insane. and surprise surprise, no real price competition. Well, they compete to see who can sell the most expensive. consumer revolt now :)

Re:oh look

[rollingcalf]

Their complaint is about price-fixing from January 2004 to January 2010. You couldn't get a DVD-R drive for under $20 back in 2009.

Re:oh look

[Dogtanian]

Not only that, but it has taken an awfully long time for the price of Blu-Ray drives to really drop... maybe there was some fixing going on. I wouldn't be shocked.

The 405nm blue lasers in Blu-ray drives were covered by Nichia patents until the expired recently, and Nichia does sue to protect it's patents. Single source, patent-protected lasers were part of the reason it took so long for the prices to drop.

If this is true, it might explain a lot.

If it's not true (or not the main reason), then- as the GP suggested- it's the main story that would explain it. I'd been ready to say *exactly*.

Matter of fact, I'd say that the prices- of burners at least- haven't even dropped noticeably in recent years. Some time ago they gradually fell from around UK £150 to circa £70 (maybe £60-something on a good day) for the cheapest- and have been stuck there for several years now.

Looking at EBuyer, they appear to have a couple of slimlines in the £50-something range (why are those cheaper?!) but their cheapest desktop model is still £65 (inc VAT/tax).

Obviously that's burners- readers are cheaper and Blu-Ray video players appear to have become quite affordable a while back (like DVD players did in the early noughties).

But as for burners... while £65 is easily cheap enough for most computer geeks remotely bothered to be able to afford one, it's still nowhere near cheap enough to be a "no brainer" alternative to a DVD writer in a commodity PC for Joe Public (in the way that DVD writers replaced CD drives and DVD readers because the price difference was so minor). And that's what is needed- or *would* have been needed- for it to repeat the success of DVD-R.

To be honest, I already came to the conclusion some time back that BD-R had missed the boat. If it hasn't happened by now, it's not going to. While the DVD-R market is clearly declining, it's not being replaced by BD-R drives and discs, which never seemed to have achieved the same momentum. Solid state, HDD and online storage appear to be taking DVDs' place, not BD-R.

The question is, did the industry ever want it to?

Re:oh look

[Dogtanian]

... the main story that would explain it. I'd been ready to say *exactly*.

Should read; "I'd been ready to say *exactly* the same thing!"

Re:oh look

[msauve]

You sure showed me. They were $22, with free shipping, in 2009.

Re:oh look

[Khyber]

'If this is true, it might explain a lot."

It is true. I've done a lot of work with Nichia. They are absolutely STRICT.

Re:oh look

[slick7]

here we have another dying company trying to sue others to keep themselves afloat. wouldn't be suprised if HP is dead in 2 years...

As if their computers weren't crap.

Re:oh look

[Dogtanian]

Expensive? You can get a CD-R/DVD-R drive for <$20, at retail, shipping included. When you look at the electronics, mechanics, and optics involved, that's amazing.

That's what I thought- DVD writers are ludicrously cheap for the amount of technology they involve, and they've been at that price point for several years now.

Am I the only person who really doesn't feel that they've been ripped off, at least when it comes to DVD writers? How much cheaper would they *really* have been without this alleged price-fixing?!

OTOH, it could be a reference to the stagnation of BD writer prices, and even that's only strange because they didn't follow the path of DVD burners which proved you can do an optical writer at such a low price!

Re:LITEON not good enough for you?

[adolf]

How fast does your $35 ASUS burn a 50GB BD blank?

Re:oh look

[mrmeval]

Sony was involved with bribing several media content creators AND player manufacturers to get bluray adopted as a 'standard'. One encrusted with enough patents and other restrictions to leave only a few players in the beginning.

Sony went from pure bred stallion to a whore for money selling muck to sheep.

Re:oh look

[antifoidulus]

Actually older technology is only cheap if it's still widespread. The more esoteric a technology becomes, the less price pressure there is, largely because fewer and fewer companies are willing to make the investments in the factories necessary to produce the product. Case in point, floppy disks. Floppies are actually more expensive now then they were back in 1994, largely because almost nobody is using them. The few companies still making them can charge more for them because there is no competition. The people that are left with floppies are pretty much left with them out of necessity, because they are tied to legacy equipment that only accepts them etc.

While optical media isn't quite there yet, I wouldn't expect optical drives to fall much farther in price. More and more companies are going to drop out(or barring that, collude with the other manufacturers to fix the prices, as we are seeing here). Eventually causing the price of optical media and drives to bottom out then start creeping upward.

Re:Why is HP suing, and not the consumer?

[cusco]

Jealosy?

Re:oh look

[__aaltlg1547]

Blu-Ray is still under patent.

Wha...?

[thewebdude]

What's an "optical drive?"

Re:Wha...?

[bemymonkey]

An outdated apparatus for getting video off of these entirely impractical plastic media storage "discs" that are wrapped in 3 different kinds of DRM and annoying as fuck to use. Even the BluRays I actually do buy are sitting unopened in a closet somewhere - downloading an HDRip is faster than ripping and encoding myself, even with a 4x4.5Ghz i5...

Long live MKV.

Re:oh look

[sir-gold]

What about Betamax, Minidisc, and MemoryStick? Sony has been trying to force everyone onto a Sony-controlled format for many years, Bluray was merely their first success.

Re:oh look

[puto]

Yes you could, I got a lion dvr burner for 20 bucks in 2002.

From the company that fits tiny ink cartidges

[greggster]

with chips so they cannot be refilled easily... This awdda be gud!

Re:Optical Drive ... Why?

[pupsocket]

It raised a legitimate question. Down rating is wrong. Replying to the question is right.

Down-rating isn't for being wrong. The same question is going to occur in a lot of minds, so it's nice that someone articulated it and lucky that someone else replied to it in substance. This is dialogue in the healthy form.

Smart, well-meaning people ask questions because they don't want to be wrong. The mildly caustic tone merely indicates a lifelong annoyance with being the nominal party-pooper by being right too often.

Re:oh look

[Fnord666]

What about Betamax, Minidisc, and MemoryStick? Sony has been trying to force everyone onto a Sony-controlled format for many years, Bluray was merely their first success.

Let's not forget ATRAC3.
Anyone else have the pleasure of buying a CD player marketed as MP3 compatible, only to find out that you had to transcode to ATRAC3 first?

Re:oh look

[dj245]

Not only that, but it has taken an awfully long time for the price of Blu-Ray drives to really drop... maybe there was some fixing going on. I wouldn't be shocked.

The 405nm blue lasers in Blu-ray drives were covered by Nichia patents until the expired recently, and Nichia does sue to protect it's patents. Single source, patent-protected lasers were part of the reason it took so long for the prices to drop.

If this is true, it might explain a lot. If it's not true (or not the main reason), then- as the GP suggested- it's the main story that would explain it. I'd been ready to say *exactly*. Matter of fact, I'd say that the prices- of burners at least- haven't even dropped noticeably in recent years. Some time ago they gradually fell from around UK £150 to circa £70 (maybe £60-something on a good day) for the cheapest- and have been stuck there for several years now. Looking at EBuyer, they appear to have a couple of slimlines in the £50-something range (why are those cheaper?!) but their cheapest desktop model is still £65 (inc VAT/tax). Obviously that's burners- readers are cheaper and Blu-Ray video players appear to have become quite affordable a while back (like DVD players did in the early noughties). But as for burners... while £65 is easily cheap enough for most computer geeks remotely bothered to be able to afford one, it's still nowhere near cheap enough to be a "no brainer" alternative to a DVD writer in a commodity PC for Joe Public (in the way that DVD writers replaced CD drives and DVD readers because the price difference was so minor). And that's what is needed- or *would* have been needed- for it to repeat the success of DVD-R. To be honest, I already came to the conclusion some time back that BD-R had missed the boat. If it hasn't happened by now, it's not going to. While the DVD-R market is clearly declining, it's not being replaced by BD-R drives and discs, which never seemed to have achieved the same momentum. Solid state, HDD and online storage appear to be taking DVDs' place, not BD-R. The question is, did the industry ever want it to?

My only problem with this situation is archiving.

If you have a good backup strategy, you don't have all your eggs in one basket. But hard drives are a basket that generally dies all at once. I feel a lot better if I have multiple optical disks each with a portion of my backup on it. Sure, a fire might still overcome my safe's fire rating and ruin all the disks, but in that case all bets are off anyway. Also optical disks are invulnerable to water/shock in general. I can be sure that optical disks driven to the bank's safety deposit box will probably be fine with the trip, but sometimes hard drives don't like to be transported. Backing up 500gb to an online backup provider is painful or very expensive- especially if your server is running a server version of Windows, or running something other than Windows entirely.

Re:Optical Drive ... Why?

[master_kaos]

You are right, down-rating isn't for being wrong, however he is down-rated for being off-topic, perhaps a bit harsh and I am guessing if he would have posted early and got first or second post (or even if he would have posted this as a reply to another post) he might have got +5 insightful or informative, however, looking at the post on its own it's off-topic (or irrelevant)
This submission is not discussing the merits of one storage medium over another, it is discussing price fixing for optical drives.

Re:Optical Drive ... Why?

[pupsocket]

Thanks.

Re:Why is HP suing, and not the consumer?

[wiredlogic]

HP is a dying company. This is a SCO type move to bring in some revenue and/or negotiate favorable settlements in the form of discounts and cheap patent licenses.

Re:oh look

[toddestan]

I heard that Sony had some pretty decent success with the 3.5" floppy disk.

Re:LITEON not good enough for you?

[Reziac]

A wise AC says, "Can't say I've ever used the listed companies' optical drives when I can get one for twenty bucks retail."

I did note LiteOn was conspicuously absent from the lawsuit list. Makes me wonder not about the other drive mfgrs, but rather about HP's purchasing department, which clearly did not do due diligence in surveying the total options available. It's not like LiteOn objects to being resold/rebranded, either -- a large chunk of other-brand optical drives (including standalone players) are LiteOns in disguise.

I've been using LiteOn exclusively for ~15 years, not only for the lower price (tho not the cheapest available) but also the durn things LAST longer, often by orders of magnitude. (First one I ever bought still works, despite being worked like a, uh, slave.)

Re:oh look

[Reziac]

A lot of component prices have been "stuck there" for several years now -- we're no longer seeing the precipitous annual price drop in last year's model, in part because some components are already about as cheap as they can get and there's not much room for improvement. Frex, there's nothing commonly available and technically above a Blu-Ray to drive down that price. Unlike DVD drives, which are now in the $20 range (and unlikely to go lower, given there's a certain manufacturing cost that has to be met).