WASHINGTON – Samsung, the world's largest maker of memory chips for computers and other gadgets, will pay a $300 million fine to settle accusations it secretly conspired with industry rivals to fix prices and cheat customers, federal officials said Thursday.
Samsung's guilty plea to a felony price-fixing charge caps a three-year investigation by the Justice Department (search) into makers of the chips, a $7.7 billion market in the United States. Two of Samsung's leading rivals earlier paid fines totaling $345 million and pleaded guilty to involvement in a scheme the government said boosted prices consumers paid for computers between 1999 and 2002.
The Justice Department's acting antitrust chief, Thomas O. Barnett (search), said seven Samsung employees are not legally protected from further prosecution under the plea agreement, an indication they may individually face criminal charges.
"That's a decision for us to make moving forward," Barnett said. He added that prosecuting executives in price-fixing cases — not just the companies where they work — is an important deterrent against similar crimes.
The guilty plea by South Korea-based Samsung Electronics Co. Ltd. and its U.S. subsidiary, Samsung Semiconductor Inc. (search), was announced at Justice Department headquarters. The court papers are expected to be filed within 30 days in U.S. District Court in San Francisco.
Samsung said in a statement the company "strongly supports fair competition and ethical practices and forbids anticompetitive behavior." A spokeswoman, Chris Goodhart, declined to identify the seven employees or say whether they still worked for Samsung.
The $300 million penalty is the second-largest criminal antitrust fine ever, behind only the $500 million fine by Hoffmann-La Roche Ltd. (search) in a 1999 vitamins-related case.
"Price-fixing threatens our free market system, stifles innovation and robs American consumers of the benefit of competitive prices," Attorney General Alberto Gonzales said.
Samsung received grand jury subpoenas in connection with the investigation during 2002 and put aside $100 million late last year to pay potential criminal penalties.
Samsung's top competitor — Seoul, South Korea-based Hynix (search) — pleaded guilty this year to price-fixing and paid a $185 million fine. Last September, rival Infineon Technologies AG (search) of Germany agreed to a $160 million fine. Another competitor, Micron Technology Inc. (MU) of Boise, Idaho, has been cooperating with prosecutors and was not expected to face charges.
The government accused the companies of conspiring in e-mails, telephone calls and face-to-face meetings to fix prices of memory chips between April 1999 and June 2002. The chips are used in digital recorders, personal computers, printers, video recorders, mobile phones and many other electronics.
The government said victims of the price-fixing were Dell Inc. (DELL), Compaq Computer Corp., Hewlett-Packard Co. (HPQ), Apple Computer Inc.(AAPL), International Business Machines Corp. (IBM) and Gateway Inc. (GTW)
Barnett said Apple and Dell raised computer prices to compensate, and other companies responded by reducing the amount of memory installed in computers they sold but keeping consumer prices the same. Barnett said he could not say exactly how much prices were affected by the collusion.
The investigation started in 2002, a year after memory chip prices began to climb even though the high-tech industry was in a tailspin. At the time, the hikes were attributed to tight supplies, although then-Dell Computer chief executive Michael Dell blamed them on cartel-like behavior by chip makers.
Samsung Group, of which Samsung Electronics makes up the biggest part, has faced various troubles in South Korea. The country's parliament last month summoned the group's chairman, Lee Keun-hee, over the disposal of its auto unit in the aftermath of the Asian financial crisis. Lee, in the United States for medical treatment, didn't appear.
Also earlier this month, a Seoul court convicted two Samsung executives on charges of selling convertible bonds to Lee's children at prices lower than market value. Samsung has appealed that ruling.