In Memory Of The Law: The Memory Industry's Legal Problemsby Ryan Smith on October 25, 2007 3:00 AM EST
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In 1890 the United States government passed the Sherman Antitrust Act, a law that formed the bedrock of the United States' policy against monopolies and other unfair forms of competition. In the many years since then, further acts have been passed to amend the law, and the Government has in time made the correction of anti-competitive actions one of its more important roles. What started with the breaking up of truly gigantic corporations like Standard Oil and AT&T has moved on to include dealing with cartels that while not of a single corporation, act at times in manners similar that result in anti-competitive actions taking place.
If we were to take a cursory glance at the computing industry as a whole and try to pinpoint the areas where anti-competitive legal issues were likely to occur, we'd look at areas like CPUs and GPUs, where only a couple of serious competitors exist in each, or operating systems, where Microsoft has and continues to have a de facto monopoly. While these areas do in fact have issues, we would be missing an area that has shown some of the worst behavior. It turns out that the memory industry is one of the greatest offenders.
Generally speaking, it's counter-intuitive to see the memory industry as being a hotbed of legal woes due to the highly competitive nature of the market. With the JEDEC association setting very rigorous standards for RAM, products are quite literally perfectly competitive (from a non-overclocker's point of view): a part specified to meet a certain JEDEC RAM standard should be just as good as any other part that adheres to the same specification. As a result, OEMs can and do switch RAM on a regular basis depending on who can supply it at the lowest cost, and as a result we usually see the memory market operate as it is: a highly competitive market in which multiple companies supply the same good.
But didn't we just say that the memory market is one of the greatest antitrust offenders? Yes, for in spite of the memory market being very cutthroat, it's also an industry that is subject to highly volatile demand. It can be extremely profitable as a result when demand is far outstripping supply and it takes years to bring new fabs online to produce additional memory. It's the profitability of these periods that keeps nearly a dozen major companies in the business. With such volatility however, it also opens the window for manipulation of this volatility - if now is not a boom year, why not make it one?
Over just the last decade, the memory industry has been through no less than three major shakeups. The first is the infamous and now settled Rambus patent case, started in 2000 when Rambus asserted that it held patents on technology used in DDR RAM and wanted royalties as such, only to be found guilty of breaking antitrust and deception laws in acquiring these patents and covertly trying to influence the memory market. The second case involves the "Big 10" memory manufacturers colluding to keep RAM prices artificially high between 1998 and 2002, to which they were found guilty. Finally, a new investigation has opened up as of this year into the flash memory market, where the Justice Department is trying to figure out if there is evidence of collusion and price-fixing there too.
Today we'll be taking a look at the latter two actions, one just wrapping up while another begins. What exactly went on in these cases? How are or potentially were consumers hurt by all of this? What has been done to punish the offenders and to correct the market? Let's find out.