Wednesday, December 14th 2011

Scamming A Good Days' Work: Data Storage Cartel Busted, Slaps On The Wrist All Round

Optical disc drives have been pretty cheap for years now, yet there is enough money in the business, that three executives managed to collude in price fixing of these devices, scamming HP, Dell and Microsoft in the process – and in the end the consumer, who foots the higher prices. The three are from Hitachi-LG Data Storage Inc. (HLDS) and have reached a plea agreement with the U.S. Department of Justice on price fixing charges for optical disc drives during the 2005-2009 timeframe. According to Security Week, the three executives, Sang Hun Kim, Young Keun Park, and Sik Hur, will each pay $25,000 USD in fines and serve little sentences of seven to eight months in prison at a "correctional facility" aka prison, that is yet to be decided.

The scams worked by fixing the bidding for contracts with HP, Dell, and Microsoft, with the Hitachi / LG joint venture eliminating as much competitive bidding as possible for orders of CD-ROM, CD-RW, DVD-ROM and DVD-RW drives. There were different procurement events held for HP, Dell and Microsoft and the quantity of drives awarded depended on where their pricing ranked. To effect this, the executives did the usual thing of holding secret meetings and sharing information such as sales, market share and pricing to monitor and enforce adherence to these agreements. The whole point of the scams of course, was to keep the bidding prices very close to each other and crucially, at high levels, thus making the scammers a tidy profit.

And why are those sentences so 'little'? Because each of these honest Joe's were charged with multiple violations of the Sherman Act, with each violation carrying a maximum fine of $1M and up to 10 years in prison; a hefty price to pay. These executives are extremely wealthy people, so it does make you wonder what under the table deals they may have brokered to have such light slaps on the wrists handed out to them. It would not be surprising if they each end up in some minimum security prison with all mod cons and generous visiting hours. Certainly a very small price to pay for the amount of money they scammed from these companies and effectively the common man. The FBI investigation continues and remains open.
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15 Comments on Scamming A Good Days' Work: Data Storage Cartel Busted, Slaps On The Wrist All Round

#1
Delta6326
... Fixed prices? You can buy a fast OD for like $20 thats cheap. Strange that they got such a small fine.:shadedshu
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#2
erocker
So paying $22 bucks shipped of an optical drive for the past few years is too much? Unless this is just for OEM/prebuilts.. Don't really care about those. Either way, optical drives have been pretty cheap for a while even though they are a dying medium.
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#3
InnocentCriminal
Resident Grammar Amender
Read about this ages ago. Plus, I haven't used my ODD in months.
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#4
DarkOCean
Had to wonder if the dudes from hdd companies are doing the same thing whith the floods thing.
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#5
Completely Bonkers
Double standards. Now let's look at the military supply industry... oh quick look the other way... :pimp:
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#6
erocker
Lol, let's look at pretty much any industry.
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#7
qubit
Overclocked quantum bit
by: erocker
So paying $22 bucks shipped of an optical drive for the past few years is too much? Unless this is just for OEM/prebuilts.. Don't really care about those. Either way, optical drives have been pretty cheap for a while even though they are a dying medium.
Well, from the looks of it, this didn't affect purchases of single drives, just those purchased with pre-built systems, so likely the drives enthusiasts bought weren't affected, or not much.
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#8
Dj-ElectriC
Im reading the title of this and cannot belive what im reading. So i read it again
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#9
n-ster
So instead of selling the drives at 6~8$ a piece they could sell them at 12~15$... Just 100~150K of these make 1M$
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#10
erocker
by: n-ster
So instead of selling the drives at 6~8$ a piece they could sell them at 12~15$... Just 100~150K of these make 1M$
I'm sure you can find your slave labor parts somewhere...
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#11
tehehe
What a load of bullshit.
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#12
mlee49
It's not a Federal-pound-me-in-the-ass Prison, they'll be fine.
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#13
Wile E
Power User
Nice Office Space reference. lol
Posted on Reply
#14
qubit
Overclocked quantum bit
by: Dj-ElectriC
Im reading the title of this and cannot belive what im reading. So i read it again
Yeah, it's shocking how these crims get away with it, isn't it? So, how many times have you read that addictive title now? 10, 20 times? More? ;)
Posted on Reply
#15
Completely Bonkers
GE and the incandescent electric light bulb? Well overpriced. You telling me, a complex electrical and mechanical component like the DVD drive has only the price-value of 10 old fashioned electric light bulbs? What a double standard.

From now on, all Asian companies in NA *must* walk the Apple route. It means, design and register some patent. Cross license it between yourselves, at $10 per optical drive build, and then continue as usual. Just make sure the "patent owner" is a US company... even if the stock of the company is jointly shared by the Asian OEM community.
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