Indirect Purchaser v. Samsung Electronics Co., Ltd. ( 2022 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE DYNAMIC RANDOM ACCESS No. 21-15125
MEMORY (DRAM) INDIRECT
PURCHASER ANTITRUST LITIGATION, D.C. No.
4:18-cv-02518-
JSW
INDIRECT PURCHASER PLAINTIFFS,
Plaintiff-Appellant,
OPINION
v.
SAMSUNG ELECTRONICS CO., LTD.;
SAMSUNG SEMICONDUCTOR, INC.;
MICRON TECHNOLOGY, INC.;
MICRON SEMICONDUCTOR
PRODUCTS, INC.; SK HYNIX, INC.; SK
HYNIX AMERICA, INC.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Jeffrey S. White, District Judge, Presiding
Argued and Submitted December 7, 2021
Pasadena, California
Filed March 7, 2022
2 IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION
Before: William A. Fletcher and Johnnie B. Rawlinson,
Circuit Judges, and Cathy Ann Bencivengo, * District
Judge.
Opinion by Judge Bencivengo
SUMMARY **
Antitrust
The panel affirmed the district court’s dismissal of an
action alleging an antitrust conspiracy under Section 1 of the
Sherman Act by manufacturers of dynamic random access
memory, a type of semiconductor memory used to store data
in digital electronic devices.
The panel held that to state a plausible claim, plaintiffs
bringing a Section 1 claim, particularly those relying on
evidence of parallel business conduct to establish a
conspiracy, must plead “some further factual enhancement”
that places their allegations of parallel conduct in a context
suggesting a preceding agreement. Plaintiffs based their
conspiracy theory on defendants’ parallel business conduct
of contemporaneously reducing their DRAM production, as
well as various “plus factor” allegations that they claimed
further suggested a preceding agreement. Considering eight
plus factors identified by plaintiffs, both in turn and
*
The Honorable Cathy Ann Bencivengo, United States District
Judge for the Southern District of California, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION 3
cumulatively, the panel that plaintiffs’ allegations did not
amount to the “something more” required to make their
claims plausible.
COUNSEL
Steve Berman (argued), Hagens Berman, Seattle,
Washington; Benjamin J. Siegel and Rio Pierce, Hagens
Berman, Berkeley, California; for Plaintiff-Appellant.
Ian Simmons (argued), O’Melveny & Myers LLP,
Washington, D.C.; Stephen McIntyre and Kurt C. Brown,
O’Melveny & Myers LLP, Los Angeles, California; Brian P.
Quinn, O’Melveny & Myers LLP, Washington; for
Defendants-Appellees Samsung Electronics Co., Ltd.; and
Samsung Semiconductor, Inc.
Harrison (Buzz) Frahn, Simpson Thacher & Bartlett LLP,
Palo Alto, California; Abram Ellis and Jonathan D. Porter,
Simpson Thacher & Bartlett LLP, Washington, D.C.; for
Defendants-Appellees Micron Technology, Inc.; and Micron
Semiconductor Products, Inc.
Nathan P. Eimer, Vanessa G. Jacobsen, and Brian Y.Chang,
Eimer Stahl LLP, Chicago, Illinois, for Defendants-
Appellees SK Hynix, Inc.; and SK Hynix America, Inc.
4 IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION
OPINION
BENCIVENGO, District Judge:
The standard for surviving a motion to dismiss under
Rule 12(b)(6) is a familiar one: a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). However, for plaintiffs bringing
a claim under Section 1 of the Sherman Act—particularly
those relying on evidence of parallel business conduct to
establish a conspiracy—stating a plausible claim requires
something more. Such plaintiffs must plead “some further
factual enhancement” that places their allegations of parallel
conduct in a context suggesting a preceding agreement. See
Twombly, 550 U.S. at 557.
Plaintiffs ask us to infer that Defendants, three of the
largest global manufacturers of dynamic random access
memory (“DRAM”), conspired to coordinate their actions
when they contemporaneously reduced their DRAM
production in 2016. Plaintiffs base their theory on
Defendants’ parallel business conduct and various “plus
factor” allegations that they claim further suggest a
preceding agreement. While both parties’ explanations for
Defendants’ actions are conceivable, Plaintiffs do not allege
additional facts that push their theory over “the line between
possibility and plausibility.” Id. Because Plaintiffs’
allegations do not amount to the “something more” required
by our precedent to make their claims plausible, we affirm
the judgment of the district court dismissing Plaintiffs’
amended complaint.
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I. Background
DRAM is a type of semiconductor memory widely used
to store data in digital electronic devices. Defendants
Micron Technology, Inc. and Micron Semiconductor
Products, Inc. (together, “Micron”), Samsung Electronics
Co., Ltd. and Samsung Semiconductor, Inc. (together,
“Samsung”), and SK Hynix, Inc. and SK Hynix America,
Inc. (together, “SK Hynix”) (collectively, “Defendants”)
manufacture and sell DRAM to original equipment
manufacturers (“OEMs”), who then incorporate that DRAM
into various electronic devices. At all relevant times,
Defendants collectively controlled approximately 96% of
the global DRAM market, with Samsung holding
approximately one-half market share and Micron and SK
Hynix each holding approximately one quarter.
Prior to 2016, Defendants competed vigorously to grow
their DRAM supply and capture market share, which led to
oversupply in the market and declining DRAM prices. In
late 2015, Samsung unilaterally attempted to stop this price
erosion by stockpiling DRAM to reduce market supply, but
its new strategy was unsuccessful and DRAM prices
continued to decline. In the third quarter of 2016, Samsung
again unilaterally reduced its DRAM output. However, this
time Micron and SK Hynix followed suit by cutting their
own DRAM production rates the following quarter.
Between June 2016 and December 2017, Defendants
continued to increase their DRAM production, but at a rate
lower than the increase in demand during that period.
Defendants also made various public statements reiterating
that they would restrict their DRAM supply growth in line
with other industry participants. As a result of Defendants’
constraints on supply, DRAM prices soared and Defendants
earned record-high revenues.
6 IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION
In December 2017, China’s antitrust enforcement
agency, the National Development and Reform Commission
(“NDRC”), announced that it was investigating increased
DRAM prices and possible coordinated action among
Defendants. On February 1, 2018, it was reported that the
NDRC and Samsung signed a Memorandum of
Understanding that would moderate DRAM prices,
signaling the end of the class period. Throughout the
remainder of 2018, Defendants began to increase their
DRAM production rate and DRAM prices subsequently fell.
Appellants Indirect Purchaser Plaintiffs (“Plaintiffs”) are
a putative class of consumers who purchased electronic
devices containing DRAM (“DRAM Devices”) from OEMs
or resellers between June 1, 2016 and February 1, 2018.
Plaintiffs allege that they overpaid for their DRAM Devices
because Defendants’ anticompetitive conduct resulted in
supracompetitive DRAM pricing, which was passed on
through the distribution chain to consumers.
Plaintiffs’ amended class action complaint asserts claims
under Section 1 of the Sherman Act, California’s Cartwright
Act, and the laws of six states relating to antitrust, consumer
protection, and unfair competition. Defendants moved to
dismiss the amended complaint under Federal Rule of Civil
Procedure 12(b)(6) for failure to state a conspiracy claim.
The district court dismissed Plaintiffs’ claims brought under
the Sherman Act, the Cartwright Act, and California’s and
Florida’s unfair competition laws with prejudice, finding
that Plaintiffs’ allegations failed to raise a reasonable
inference of conspiracy. The district court allowed
Plaintiffs’ remaining state law claims for antitrust violations
to proceed.
IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION 7
The parties later requested entry of judgment on the
remaining state law claims, arguing that the district court’s
finding that Plaintiffs failed to plead a conspiracy disposed
of those claims as well. The district court agreed, entering
judgment in favor of Defendants and against Plaintiffs on all
remaining claims. Plaintiffs timely filed this appeal.
II. Discussion
We exercise appellate jurisdiction under 28 U.S.C.
§ 1291. We review de novo the district court’s dismissal of
a complaint for failure to state a claim under Rule 12(b)(6).
Dougherty v. City of Covina, 654 F.3d 892, 897 (9th Cir.
2011). In conducting this review, we accept all
nonconclusory facts alleged in the complaint as true and
determine whether those allegations “plausibly give rise to
an entitlement to relief.” Iqbal, 556 U.S. at 679.
Section 1 of the Sherman Act prohibits “[e]very contract,
combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce among the several States,
or with foreign nations.” 15 U.S.C. § 1. To state a claim
under Section 1, a plaintiff must allege facts showing “(1) a
contract, combination or conspiracy among two or more
persons or distinct business entities; (2) by which the persons
or entities intended to harm or restrain trade or commerce
. . . ; (3) which actually injures competition.” Kendall v.
Visa U.S.A., Inc., 518 F.3d 1042, 1047 (9th Cir. 2008). The
“crucial question” prompting Section 1 liability is “whether
the challenged anticompetitive conduct ‘stems from [lawful]
independent decision or from an agreement, tacit or
express.’” Twombly, 550 U.S. at 553 (quoting Theatre
Enter., Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537,
540 (1954)). Therefore, a claim brought under Section 1
must contain sufficient factual matter, taken as true, to
8 IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION
plausibly suggest that an illegal agreement was made. Id.
at 556.
Plaintiffs relying on allegations of parallel conduct to
establish a Section 1 claim face an additional burden when
defending against Rule 12(b)(6) motions. Generally, when
a plaintiff alleges facts consistent with both the plaintiff’s
and the defendant’s explanation, and both explanations are
plausible, the plaintiff survives a motion to dismiss under
Rule 12(b)(6). See Starr v. Baca, 652 F.3d 1202, 1216 (9th
Cir. 2011). However, in the antitrust context, allegations of
conspiracy often arise from parallel conduct among business
competitors “that could just as well be [lawful] independent
action.” Twombly, 550 U.S. at 557. Therefore, to state a
plausible Section 1 claim, plaintiffs must include additional
factual allegations that place that parallel conduct in a
context suggesting a preceding agreement. Id. In other
words, plaintiffs must allege something more than conduct
merely consistent with agreement in order to “nudge[] their
claims across the line from conceivable to plausible.” Id.
at 570. This higher standard is warranted by practical
considerations in antitrust cases, where proceeding to
discovery “frequently causes substantial expenditures and
gives the plaintiff the opportunity to extort large settlements
even where he does not have much of a case.” Kendall,
518 F.3d at 1047.
A. Parallel Conduct
Plaintiffs purport to establish an unlawful conspiracy by
alleging parallel business conduct among Defendants and
additional plus factors discussed below. The district court
found that Plaintiffs adequately established parallel conduct
by alleging that Defendants contemporaneously restricted
their DRAM production during the class period, and neither
party disputes this finding on appeal. Rather, the parties
IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION 9
focus on whether the amended complaint alleges sufficient
plus factors to plausibly suggest that Defendants’ parallel
conduct arose from an agreement rather than independently.
B. Plus Factors
In the absence of direct evidence of an agreement, certain
plus factors may elevate allegations of parallel conduct to
plausibly suggest the existence of a conspiracy. See In re
Musical Instr. and Equip. Antitrust Litig., 798 F.3d 1186,
1194 (9th Cir. 2015). Plus factors are often “economic
actions and outcomes that are largely inconsistent with
unilateral conduct but largely consistent with explicitly
coordinated action.” Id. Under the Twombly standard, plus
factors serve as the “something more” to place parallel
conduct “in a context that raises a suggestion of a preceding
agreement.” Twombly, 550 U.S. at 557.
Plaintiffs identify eight plus factors that they contend
place Defendants’ parallel conduct in a context suggesting
conspiracy: (1) price signaling; (2) complex, simultaneous,
and historically unprecedented decreases in capital
investment; (3) supply cuts against Defendants’ self-interest;
(4) public statements encouraging supply cuts; (5) changed
conduct between the start and end of the class period;
(6) information exchanges between Defendants regarding
future supply and demand; (7) high market concentration;
and (8) prior criminal convictions for price fixing. 1 The
district court found that these allegations suggest
Defendants’ conduct arose not from agreement, but rather
1
At oral argument, Plaintiffs identified four of these purported plus
factors—the second through fifth factors listed here—as being most
indicative of conspiracy.
10 IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION
from lawful conscious parallelism. 2 We consider each
purported plus factor in turn and cumulatively to determine
whether Plaintiffs’ allegations amount to stating a plausible
claim under Section 1.
1. Price Signaling
Plaintiffs allege that in early 2016, Samsung attempted
to signal to the other Defendants that it was raising its prices
on DRAM. Plaintiffs claim that a Samsung executive
instructed another executive to leak that Samsung was
raising DRAM prices, intending that Samsung’s competitors
would learn of its plan and follow suit. Plaintiffs allege that
the information was leaked to an industry analyst, and
DRAM prices began to rise shortly thereafter.
Plaintiffs’ price signaling allegations do not support a
plausible inference of conspiracy. Plaintiffs claim that
Defendants conspired to restrict their DRAM supply growth
(with the eventual effect of higher DRAM prices), not to
increase DRAM prices. Leaked information about raising
prices does not reasonably signal to competitors to reduce
DRAM production. Moreover, Plaintiffs do not allege that
Micron or SK Hynix saw Samsung’s leaked information and
acted on it. Only concerted activity is actionable under
Section 1. 15 U.S.C. § 1. Thus, even if Samsung intended
to signal the other Defendants to raise prices, Samsung’s
unilateral action does not suggest a conspiracy under the
Sherman Act.
2
Conscious parallelism occurs when two or more firms in a
concentrated, interdependent market base their actions in part on the
anticipated reactions of their competitors, and thus “arrive at identical
decisions independently, as they are cognizant of—and reacting to—
similar market pressures.” Musical Instr., 798 F.3d at 1193.
IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION 11
2. Contemporaneous Decreases in Capital
Investment
“[C]omplex and historically unprecedented changes in
pricing structure made at the very same time by multiple
competitors, and made for no other discernible reason . . .
support a plausible inference of conspiracy.” Twombly,
550 U.S. at 556 n.4. Plaintiffs contend that this plus factor
is met because Defendants reduced their capital expenditures
(“capex”) toward DRAM supply growth within a few
months of each other, which was unprecedented amidst high
profitability in the industry. Specifically, Plaintiffs allege
that in April 2016, first Samsung and then SK Hynix stated
on quarterly earnings calls that industry capex would decline
that year. The following month, Micron’s CEO stated that
news of competitors’ decreased capex was “relatively
encouraging” and that he expected “slowing bit growth” in
the industry, implying that Micron, too, would decrease its
DRAM capex.
Defendants’ alleged actions are more consistent with
conscious parallelism than with the plus factor recognized
by the Twombly court. SK Hynix and Micron’s capex cuts
following Samsung’s announcement align with a “follow the
leader” theory of conscious parallelism, 3 as they could have
independently and rationally reached the same decision to
follow market leader Samsung. We have recognized that
“[e]ven assuming that the progressive adoption of similar
policies across an industry constitutes simultaneity, that fact
3
Under a “follow the leader” theory, if one firm in an interdependent
market makes a risky business move and its competitors follow, all firms
will benefit and “supracompetitive prices and other anticompetitive
practices, once initiated, can spread through a market without any prior
agreement.” Musical Instr., 798 F.3d at 1195.
12 IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION
does not reveal anything more than similar reaction to
similar pressures within an interdependent market, or
conscious parallelism.” Musical Instr., 798 F.3d at 1196.
Thus, Plaintiffs have not established that Defendants’ capex
changes were “made for no other discernible reason” than
collusion. Twombly, 550 U.S. at 556 n.4.
Nor have Plaintiffs plausibly alleged that Defendants’
capex changes were “complex” or “historically
unprecedented.” See id. Plaintiffs provide no evidence
showing that capex reductions were complex for Defendants
to implement. The amended complaint only includes
statements from Samsung and SK Hynix indicating that
increasing DRAM supply would be difficult. Further, while
Plaintiffs contend that Samsung and SK Hynix’s capex cuts
were unprecedented because the industry was highly
profitable at the time, this argument is contradicted by their
allegation that DRAM prices “declined steadily and
precipitously” until May 2016.
Plaintiffs’ allegations reflect that Defendants reduced
their capex toward DRAM supply growth independently in
response to market pressures, and Plaintiffs point to nothing
about these reductions suggesting a preceding agreement.
This purported plus factor is more suggestive of lawful
conscious parallelism than conspiracy.
3. Supply Cuts Against Self Interest
Next, Plaintiffs allege that Defendants’ supply cuts were
“so perilous in the absence of advance agreement that no
reasonable firm would make the challenged move without
such an agreement,” which we have previously recognized
as a plus factor. Musical Instr., 798 F.3d at 1195. Plaintiffs
claim that Samsung’s unilateral production cuts in the third
quarter of 2016 “would have been irrational without
IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION 13
knowledge that [Samsung’s] rivals would . . . also decrease
output.” By restricting its production, Samsung allegedly
lost $47 million in immediate profits and five percent of total
market share. Plaintiffs also allege that Micron and SK
Hynix’s subsequent production cuts were against their self-
interest, “as they would have gained market share and
significant profits” if they had maintained or increased their
output following Samsung’s announcement. Plaintiffs state
that “Micron and [SK] Hynix sacrificed respectively
$30 million and $27 million in lost profits by failing to
maintain their output growth rate.”
The plausibility of Plaintiffs’ theory is undercut by other
allegations in the amended complaint. First, Plaintiffs allege
that Samsung unilaterally—without prior agreement—first
restricted its market supply in late 2015. Although this
attempt to stop price erosion was unsuccessful, Samsung still
remained the DRAM market leader, showing that restraining
supply without an agreement was not as perilous as Plaintiffs
claim. Second, Plaintiffs allege that Samsung again
unilaterally restricted supply growth in the third quarter of
2016, but Micron and SK Hynix did not follow suit until the
next quarter. The timing of Micron and SK Hynix’s actions
are more indicative of the “follow the leader” theory than an
advance agreement to restrain production simultaneously.
See Musical Instr., 798 F.3d at 1195. Micron’s CEO’s
comment that it would be “foolish [for Micron] to be the first
ones to take capacity off” further reflects that as a non-leader
in the industry, it would be economically wise for Micron to
follow the market leader’s actions.
Moreover, while Plaintiffs claim that it would have been
in Micron and SK Hynix’s best interest to capture
Samsung’s lost market share, it was also economically
rational for the two smaller manufacturers to follow
14 IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION
Samsung’s lead and focus on profitability. Prior to the class
period, Defendants’ vigorous competition on market share
had caused DRAM supply to exceed demand and prices to
decline, affecting all Defendants’ profitability. However,
once Samsung lowered its DRAM production and the other
Defendants followed suit, market demand for DRAM
exceeded its growth rate. As a result, Plaintiffs allege that
DRAM prices increased and Defendants’ revenue from
DRAM sales “skyrocketed” to record-high levels.
The amended complaint also includes statements from
industry analysts that reflect the economic rationality of
production cuts. For example, in March 2016, an analyst
asked Micron’s CEO: “Pricing is going to continue to be
weak until Micron and the DRAM industry overall cuts
production. So . . . what will it take for that to happen?”
Similarly, in June 2016, an analyst from Deutsche Bank
reported that they were “encouraged” by Defendants’
strategy of decreasing DRAM capex and emphasizing the
“importance of profitability.”
Plaintiffs have not established that Defendants’ supply
cuts were the “extreme action against self-interest”
contemplated by this circuit as a plus factor. See Musical
Instr., 798 F.3d at 1195. Rather, Plaintiffs’ allegations
demonstrate that it was economically rational for Samsung
to reduce its supply growth below demand levels and for
Micron and SK Hynix to maintain production commensurate
with the market leader. Without some further factual
allegations to suggest a preceding agreement, this purported
plus factor does not plausibly support a conspiracy claim.
IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION 15
4. Public Statements Encouraging Supply Cuts
Plaintiffs next allege that Defendants made various
public statements throughout the class period encouraging
each other to restrain DRAM supply and reassuring each
other following supply cuts. Plaintiffs first characterize
Micron’s statement on March 30, 2016, that it would “be
foolish [for Micron] to be the first ones to take capacity off”
as inviting the other Defendants to cut production, coupled
with a “clear reassurance that Micron would not try to take
DRAM market share” if they did. Plaintiffs allege that both
Samsung and SK Hynix responded to this invitation within
a month when they publicly stated that they would decrease
their DRAM capex in 2016. Plaintiffs also point to various
other statements made by Defendants—mostly during
investor calls, presentations to industry groups, and/or in
response to investor and analyst questions—regarding
market predictions and strategies as support for this claimed
plus factor.
Defendants’ statements reproduced in the amended
complaint are largely consistent with unilateral conduct in
an interdependent market. If no conspiracy existed,
Defendants would likely make the same public statements
about their observations, predictions, and strategies for the
future, particularly in response to investor and analyst
questions. For example, Micron’s March 2016 statement
that it would “be foolish [for Micron] to be the first ones to
take capacity off” was made in response to an analyst’s
question about the possibility of supply cuts in the DRAM
industry. 4
4
Micron’s CEO’s statements were made in response to an investor
analyst who asked, “Pricing is going to continue to be weak until Micron
16 IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION
Plaintiffs allege that Micron’s statements in May and
June 2017 about the benefits of exercising “capital
discipline” were intended to encourage its competitors to
continue restraining production. However, Plaintiffs point
to nothing suggesting that Samsung or SK Hynix were
influenced by Micron’s praise. In January 2016—long
before Micron’s statements at issue—Samsung stated that it
would grow its supply “at market growth levels” and that its
main focus for the year would be “on profitability rather than
increasing volume.” Samsung reiterated its intent to follow
this approach in late 2016 and throughout 2017. 5 Samsung’s
supply reductions were thus consistent with its unilateral
statements of intent made both before and after Micron’s
alleged invitation. As for SK Hynix, Plaintiffs merely allege
that SK Hynix made a general observation following
Samsung’s announcement regarding capex reductions that
“DRAM suppliers’ capex execution is projected to decrease”
in 2016. SK Hynix then commented in January 2017 that it
was “planning for a DRAM bit shipment growth that [was]
on par with the market for this year.” These statements are
consistent with participants in an oligopolistic market
employing similar strategies in reaction to the same market
events. See Musical Instr., 798 F.3d at 1196.
Defendants’ public statements are largely consistent
with independent business conduct in a concentrated market,
and the DRAM industry overall cuts production. So . . . what will it take
for that to happen?”
5
For example, Plaintiffs allege that on October 27, 2016, Samsung
executive Sewon Chun stated on a quarterly earnings call: “[W]e are
expecting our growth rates to come down and be in line with market bit
growth in DRAM next year. . . . Once again, as we have always
mentioned, regarding DRAM, our focus is not to increase our market
share but to maximize our profits.”
IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION 17
and Plaintiffs have not alleged facts suggesting otherwise.
This plus factor does not support a plausible inference of
conspiracy.
5. Changed Conduct from Start to End of
Conspiracy Period
Plaintiffs’ fifth purported plus factor claims that
Defendants’ conduct changed between the start and end of
the alleged conspiracy. Plaintiffs allege that before the class
period, Defendants engaged in “vigorous supply and price
competition,” but during the class period they began
coordinating their actions and limiting market supply.
Plaintiffs also assert that Micron repeatedly predicted that
DRAM supply and growth rates would be about equal in
2015, but began forecasting lower supply than demand in
2016. Finally, Plaintiffs claim that DRAM prices drastically
increased once Defendants began coordinating their supply
decisions, but increases “abruptly stopped in early 2018”
after the NDRC announced that it reached an agreement with
Samsung.
Plaintiffs’ allegations regarding Defendants’ behavior at
the start of the class period are consistent with conscious
parallelism in an interdependent market. Samsung
unilaterally announced its intent to stop competing on
market share and begin focusing on profitability prior to the
class period. Samsung then publicly reaffirmed its intent to
focus on profitability over supply growth throughout the
next two years. The other Defendants, as smaller players in
the DRAM market, followed Samsung’s lead and stopped
competing on market share. Micron’s comments regarding
DRAM market conditions only reflect this industry-wide
change in strategy.
18 IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION
Defendants’ alleged change in conduct at the end of the
class period is also consistent with conscious parallelism.
Plaintiffs claim that in February 2018, Samsung agreed to
increase its DRAM manufacturing capacity as part of its
agreement with the NDRC. Two months later, SK Hynix
announced that it was adding six to seven percent wafer
capacity per year to meet demand, and in November 2018, a
third-party firm reported that the “DRAM market has just
entered oversupply.” While Defendants’ change in conduct
could conceivably have resulted from the NDRC uncovering
a conspiracy, it is also consistent with Samsung increasing
its DRAM production either for some business reason or as
required by its agreement with the NDRC, and the other
Defendants again following suit. Mere speculation is not
enough to move Plaintiffs’ theory of preceding agreement
from conceivable to plausible. This purported plus factor,
standing alone, is insufficient to establish a plausible
conspiracy.
6. Information Exchanges Regarding Supply
and Demand
Plaintiffs next allege that Defendants had two
opportunities to exchange information regarding their
supply plans: first through their participation in the same
trade associations, and second through communications with
third-party research firms that produced industry trend
reports. Plaintiffs claim that Defendants each sent
leadership teams to trade organization meetings several
times a year, which “provided an ideal setting for Defendants
to discuss future business plans.” Plaintiffs also allege that
third-party research firms interviewed Defendants’
employees to prepare their industry reports, which were read
by SK Hynix and presumably the other Defendants.
IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION 19
Plaintiffs do not allege facts demonstrating that
Defendants actually communicated or exchanged
information at these trade association meetings, much less
that they entered an agreement to coordinate supply
decisions while there. Further, we have recognized that
“trade associations often serve legitimate functions,” and
courts are reluctant to infer conspiracy from “[g]athering
information about pricing and competition in the industry”
at such meetings. In re Citric Acid Litig., 191 F.3d 1090,
1098 (9th Cir. 1999). As for the research firms, Plaintiffs
have not alleged that Defendants had any control over what
was included in their industry reports or that the other
Defendants read them. Accordingly, this plus factor does
not support a plausible inference of conspiracy.
7. High Market Concentration
Next, Plaintiffs claim that the structure of the DRAM
market makes it conducive to conspiracy. Plaintiffs assert
that the DRAM market is highly concentrated with high
barriers to entry, which makes collusive agreements “easier
to implement and sustain when there are only a few firms
controlling a large portion of the market.”
Extreme market concentration may suggest conspiracy,
particularly when accompanied by other plausible plus
factor allegations. See Musical Instr., 798 F.3d at 1197 n.14
(noting that conspiracy was plausible where top players in
highly concentrated market implemented identical and
complex pricing structures simultaneously). However,
extreme market concentration also makes conscious parallel
behavior more likely, as firms are “cognizant of—and
reacting to—similar market pressures.” Id. at 1193. On
balance, this factual allegation is consistent with both
parties’ explanations. Because “allegations that are merely
consistent with conspiracy are not enough,” Plaintiffs must
20 IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION
allege some factual support in addition to the DRAM
market’s structure to plausibly suggest conspiracy. Id.
at 1197 n.13 (citing Twombly, 550 U.S. at 557).
8. Historic Price Fixing Behavior
Finally, Plaintiffs point to Defendants’ prior criminal
convictions for price fixing as “context that raises a
suggestion of a preceding agreement.” Twombly, 550 U.S.
at 557. Plaintiffs allege that Defendants and other DRAM
manufacturers held a meeting in fall 2001 where they each
agreed to reduce their DRAM production in order to raise
prices. In 2005, the Department of Justice brought criminal
charges against Defendants for participating in the price
fixing conspiracy, resulting in guilty pleas, custodial time,
and large criminal fines for Samsung and SK Hynix.
Plaintiffs also claim that “many of the same executives
involved in the prior conspiracy continue to hold senior
positions” at Defendants’ companies. 6
District courts in this circuit have found prior conspiracy
convictions to support an inference of subsequent
conspiracy, particularly when the prior conspiracy and the
alleged subsequent conspiracy have factual overlap or
involve the same actors. See In re Flash Memory Antitrust
Litig., 643 F. Supp. 2d 1133, 1149 (N.D. Cal. 2009); see also
In re SRAM Antitrust Litig., 580 F. Supp. 2d 896, 903 (N.D.
Cal. 2008). While the prior conspiracy among Defendants
occurred approximately twenty years ago, the present
allegations involve the same alleged coordination and actors.
6
Plaintiffs identify three SK Hynix employees and one Micron
employee who were involved in the 2001 price fixing scheme and were
still employed by their respective employers during the class period.
IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION 21
Accordingly, this plus factor circumstantially supports
Plaintiffs’ theory.
C. Holistic Analysis of Plaintiffs’ Allegations
Plaintiffs’ proffered plus factors must be evaluated
holistically to determine whether they state a conspiracy
claim. See Cont’l Ore Co. v. Union Carbide & Carbon
Corp., 370 U.S. 690, 699 (1962) (“The character and effect
of a conspiracy are not to be judged by dismembering it and
viewing its separate parts, but only by looking at it as a
whole.”). While the factual overlap between Defendants’
prior criminal conduct and the present allegations supports
Plaintiffs’ theory, the totality of Plaintiffs’ allegations does
not suggest anything more than conscious parallelism. The
four plus factors that Plaintiffs contend are most indicative
of conspiracy—simultaneous capex decreases, “perilous”
supply cuts, public statements about the market forecast, and
changed conduct between 2016 and 2018—are all consistent
with Defendants, as competitors in a highly concentrated
market, reacting to the same market pressures and taking
parallel action to serve their interests. Plaintiffs’ remaining
allegations regarding price signaling, information
exchanges, and the DRAM market structure do not provide
convincing support for their claims for the reasons discussed
above.
22 IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION
We recognize that “circumstantial evidence is the
lifeblood of antitrust law.” United States v. Falstaff Brewing
Corp., 410 U.S. 526, 534 n.13 (1973). Plaintiffs bringing a
claim under Section 1 often must rely on such circumstantial
evidence of parallel conduct and plus factors to sustain a case
past the pleading stage. Nevertheless, a single plausible plus
factor allegation that weakly tips in the plaintiffs’ favor,
without some further factual support, is not enough to open
the floodgates to discovery in antitrust cases. See Twombly,
550 U.S. at 559 (“[I]t is only by taking care to require
allegations that reach the level suggesting conspiracy that we
can hope to avoid the potentially enormous expense of
discovery in cases with no ‘reasonably founded hope that the
[discovery] process will reveal relevant evidence’ to support
a § 1 claim.”) (quoting Dura Pharm., Inc. v. Broudo,
544 U.S. 336, 347 (2005)).
Plaintiffs’ allegations of parallel conduct that could just
as well be independent action, combined with Defendants’
criminal history from twenty years ago, do not provide a
context suggesting unlawful agreement. See id. at 557.
Rather, Defendants’ actions are “more likely explained by
lawful, unchoreographed free-market behavior” in a
concentrated industry. Iqbal, 556 U.S. at 680 (citing
Twombly, 550 U.S. at 567). Accordingly, Plaintiffs fail to
state a plausible claim under Section 1 based on a conspiracy
to coordinate DRAM supply decisions.
III. Conclusion
Plaintiffs’ factual allegations do not amount to the
“something more” required to support a plausible inference
of conspiracy. Dismissal of Plaintiffs’ claims premised on
IN RE DRAM INDIRECT PURCHASER ANTITRUST LITIGATION 23
an alleged agreement between Defendants was therefore
proper. 7
AFFIRMED.
7
Plaintiffs’ remaining state law claims were not raised in this appeal
and thus are not reviewed here. See Greenwood v. F.A.A., 28 F.3d 971,
977 (9th Cir. 1994) (“We review only issues which are argued
specifically and distinctly in a party's opening brief.”). Nevertheless,
Plaintiffs’ claims brought under California’s Cartwright Act, Unfair
Competition Law, and the antitrust laws of five other states are all
premised upon the existence of an antitrust conspiracy, and therefore rise
and fall with the Sherman Act claim. Accordingly, the district court
properly dismissed Plaintiffs’ remaining claims for failure to plead an
antitrust conspiracy.