Sun Strikes Again With DRAM Price-Fixing Suit

Although a federal judge dismissed its lawsuit last Thursday, Sun Microsystems now says it will refile the suit against Hynix Semiconductor and other makers of dynamic random access memory (DRAM) chips for what it says was illegal price-fixing.

Judge Phyllis Hamilton dismissed Sun’s complaint because she said she needed more information on the DRAM market outside the United States, Kathy Tom Engle, a Sun spokesperson, told TechNewsWorld. However, the judge has invited Sun to refile, she added.

“The judge, in effect, invited Sun to file a new version of the complaint with more detail about how DRAM is purchased when the parts are delivered to places outside the United States. Further, the judge acknowledged in her ruling that Sun’s arguments about why the company is entitled to damages for foreign purchases make sense,” Tom Engle said.

Financial Harm

Sun originally filed its case in March 2006. Its complaint is that it was forced to pay artificially inflated prices for memory chips from South Korea-based Hynix as well as several other companies including Mosel Vitelic, Nanya Technology and Japan’s Mitsubishi Electric and Electronics. The period in question was from 1997 to 2002, Tom Engle said.

“During the time we’re talking about, margins were tight,” Rob Enderle, principal analyst for the Enderle Group, told TechNewsWorld. “What happens when you have price-fixing is that the consumer, Sun, is paying more money than would otherwise be the case. By price fixing, these vendors would have conspired to do Sun and other companies financial harm.”

Sun’s deadline to refile the case is May 4. It has not specified the damages it is seeking, but “we purchased a significant amount of memory from these companies,” Tom Engle said. “We are confident that we have a case.”

‘A Slam Dunk’

The case is “a slam dunk,” Enderle said. “The only question is, how much is the damage? It would have to be a significant amount of money.”

Hynix officials could not be reached for comment.

A similar suit was pursued by the U.S. Department of Justice over the past few years, resulting in multimillion-dollar fines for many DRAM manufacturers.

“This is a direct result of that,” Jim McGregor, research director and principal analyst for In-Stat’s semiconductor group, told TechNewsWorld. “Once the federal government finds companies to be violating laws or restrictions, then we see these kinds of lawsuits, where affected companies seek compensation.”

More Suits To Come?

The list of potentially affected companies is long. “In the DRAM market, just about everybody could follow suit,” McGregor said. “It’s just a question of whether they’ll do it.”

Companies that purchased DRAM chips in smaller volumes would be hardest hit by inflated prices, he noted, pointing out that Sun would have purchased in smaller volumes than Dell, for example.

“These companies will have to balance the issue of their relationship with the manufacturer versus what it will cost to get compensation,” McGregor concluded.

Indeed, “You have to wonder what the PC vendors are going to do in this regard as well,” Enderle agreed. “It tends to start a kind of domino effect, where more suits may follow. I can imagine the other companies’ legal departments getting calls asking, ‘What are we going to do about this?'”