IN RE: DYNAMIC RANDOM ACCESS MEMORY (DRAM) INDIRECT PURCHASER LITIGATION (2020)

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTIONS TO DISMISS

Re: Dkt. No. 110

Now before the Court is the motion to dismiss filed by Defendants Micron Technology, Inc.; Micron Semiconductor Products, Inc.; Crucial Technology, Inc. (together, “Micron”); Samsung Electronics Co., Ltd.; Samsung Semiconductor, Inc. (together, “Samsung”); SK Hynix, Inc.; and SK Hynix America, Inc. (together, “Hynix”) (collectively, “Defendants”). The Court has considered the parties’ papers, relevant legal authority, and the record in this case, and it finds the motion suitable for disposition without oral argument. See N.D. Civ. L.R. 7-1(b). For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART Defendants’ motion.

BACKGROUND

A. Factual Allegations

In this putative class action, Plaintiffs allege that Defendants “conspired in plain sight” to restrict output of dynamic random access memory (“DRAM”),¹ in violation of the Sherman Act, the California Cartwright Act, the California Unfair Competition Law, and the laws of California, Florida, Hawaii, Kansas, Michigan, and New Hampshire. The following facts are alleged in the complaint. (Dkt. No. 109 (“CCAC”).)

Defendants are three companies that control 96% of the worldwide DRAM market. (Id. ¶ 2.) Samsung is the dominant player that controls half of the market, while Micron and Hynix each control about a quarter. (Id. ¶ 247.) Defendants sell DRAM to original equipment manufacturers (“OEMs”), such as Apple and Dell, who incorporate the DRAM into a wide variety of electronic devices, including computers and smartphones. (Id. ¶¶ 76, 83.) The OEMs then sell the electronic devices containing DRAM to “indirect purchasers,” such as consumers and retail stores. (Id. ¶ 82.) Defendants also sell a small amount of DRAM to “direct purchasers” (e.g., computer hobbyists building their own computer). (Id. ¶¶ 76-80.)

Prior to 2016, Defendants competed vigorously over market share.² (Id. ¶ 105.) Samsung, in particular, adopted an aggressive strategy of growing market share by increasing supply faster than its competitors in response to demand. (See id. ¶¶ 108-10, 144, 162.) However, that strategy created oversupply in the market, and prices began to fall. (Id. ¶ 105.) Between 2014 and 2016, the price of DRAM dropped from $2.50 per chip to $1.00 per chip. (Id. ¶ 106.) Alarmed by the decreasing prices, Samsung began to unilaterally stockpile DRAM to reduce supply in late 2015. (Id. ¶ 3.) That effort failed—presumably, because other Defendants did not join Samsung. (Id. ¶ 112.) Samsung then leaked its intention to raise prices to an industry analyst in early 2016, with the hope that others will cooperate. (Id. ¶ 113.)

Around the same time, Micron “signaled” to others an invitation to lower supply. (Id. ¶ 124.) In November 2015, Micron forecast that competitors will make “really rational decisions” involving “lower supply growth” because the market involves “closely held technology by a very limited number of producers.” (Id. ¶ 125.) In March 2016, Micron further indicated to investors that “we'd be foolish to be the first ones to take capacity off” or “unilaterally cut[ ] production,” but assured competitors that “[o]ur focus isn't on market share.” (Id. ¶ 129.) Other Defendants began forecasting supply reductions. (Id. ¶¶ 6-7.) When Samsung unilaterally reduced supply in Q3 2016, Micron and Hynix followed the next quarter with their own supply cuts. (Id. ¶¶ 10, 171-72.) DRAM prices began rising. (Id. ¶¶ 132, 173.)

Between June 2016 and December 2017, Defendants continued to maintain low DRAM supply while telling investors that they were focusing on profits over market share. (Id. ¶¶ 134-69.) Samsung, in particular, reversed its earlier strategy of seeking market share and accepted lower growth under the new status quo. (Id. ¶ 184.) The price of DRAM increased by 350% as the result. (Id. ¶ 19.) Each Defendant set record-high revenues at this time. (Id. ¶ 209.) But in early 2018, Chinese antitrust regulators opened an investigation into rising DRAM prices. (Id. ¶ 186.) This was not the first time Defendants were investigated—the U.S. Department of Justice brought a criminal case against Defendants for price fixing in 2005, which resulted in large fines and multiple prison sentences. (Id. ¶ 270-89.) DRAM prices began falling shortly after the Chinese investigation was announced. (Id. ¶¶ 180-91.)

Plaintiffs are indirect purchasers of DRAM who purchased cell phones, computers, and tablets between June 1, 2016 and February 1, 2018 (the “Class Period”). (Id. ¶¶ 44-50.) Plaintiffs allege that they overpaid for the electronic devices because Defendants’ supra-competitive DRAM prices were passed on to consumers and seek recovery on behalf of other indirect purchasers. (Id. ¶¶ 301, 315-16.) The Court shall address additional facts as necessary in this Order.

B. Procedural Background

The Court has previously dismissed Plaintiffs’ complaint without prejudice. (Dkt. No. 53 (“MTD Order”).) As explained in that Order, Plaintiffs failed to plead standing because they failed to allege traceability—i.e., that they actually overpaid for electronic devices as the result of Defendants’ alleged DRAM price fixing. (See id. at 6-8.) Because they did not allege traceability, Plaintiffs also could not show injury for purposes of antitrust standing. (Id. at 12-15.) The Court further dismissed state law claims for states where Plaintiffs did not reside. (Id. at 8-11.)

In addition to dismissing the complaint on standing grounds, the Court found that Plaintiffs failed to allege a conspiracy. Plaintiffs adequately alleged parallel conduct—that Defendants simultaneously reduced DRAM supply—but failed to allege additional facts (“plus factors”) to distinguish “conscious parallelism,” and thus raise the claims of conspiracy above the speculative level. (See id. at 17-28.) However, the Court granted Plaintiffs leave to amend. (Id. at 37.)

ANALYSIS

C. Standing

1. Article III Standing

In the previous motion to dismiss order, the Court found that Plaintiffs failed to allege traceability, or that the “supracompetitively-priced DRAM component and its supracompetitive price wended their way into the DRAM Products Plaintiffs purchased.” (MTD Order at 6.) In response, Plaintiffs narrowed the class definition to include the market for only the six electronic devices they purchased and added additional allegations. To plead that the DRAM in electronic devices purchased by Plaintiffs is traceable to Defendants, Plaintiffs allege that DRAM is a stand-alone and physically traceable component, and that the DRAM and the OEM markets are highly concentrated, such that the OEMs from whom Plaintiffs purchased the devices (Lenovo, Apple, Samsung, and Motorola) likely purchased the DRAM from Defendants.³ (CCAC ¶¶ 44-50, 83-103, 246-47.)

To plead the Defendants’ high DRAM prices led to an overcharge paid by Plaintiffs on the electronic devices, Plaintiffs allege that DRAM makes up 5-25% of the bill of costs in electronic devices; that the markets are “inextricably linked,” as demonstrated by their lack of independent utility and tight historical price correlations; and that OEMs engage in vigorous competition, such that increases in component part prices would be passed on to consumers. (Id. ¶¶ 82-103, 303-04.) These allegations are sufficient to show that Plaintiffs likely overpaid for electronic devices as the result of Defendants’ DRAM prices. See In re Qualcomm Antitrust Litig., 292 F. Supp. 3d 948, 968 (N.D. Cal. 2017) (finding that component prices were likely passed on to plaintiffs where products have no independent use and make up substantial cost of manufacturing); In re TFT-LCD (Flat Panel) Antitrust Litig., 586 F. Supp. 2d 1109, 1123-24 (N.D. Cal. 2008) (finding traceability adequately pled for distinct components that have no independent utility and that are inextricably linked to the market for products purchased by plaintiffs); In re Capacitors Antitrust Litig., 106 F. Supp. 3d 1051, 1071 (N.D. Cal. 2015) (finding traceability for components passed on through distribution chain without alteration).

Defendants seek to require more—they fault Plaintiffs for not quantifying the exact portion of the electronic device price that is attributable to DRAM. Unsurprisingly, Defendants cite no case law to show that such quantification is required. Ultimately, there is no formula for pleading traceability or other Article III requirements. While quantifying the exact correlation between end product and component prices satisfies traceability, so do Plaintiffs’ general allegations that the prices are tightly correlated and likely to be passed on due to market conditions. See Los Gatos Mercantile, Inc. v. E.I. DuPont De Nemours & Co., No. 13-cv-1180-BLF, 2015 WL 4755335, at *14 (N.D. Cal. Aug. 11, 2015) (quantifying damages not required to allege standing). At bottom, the purpose is to show that plaintiffs’ injury is not speculative, not to require an in-depth economic analysis at the pleading stage. The scenario addressed by the Court's previous order, where a component makes up such a trace amount of the final product that any price increase is unlikely to be passed on, does not apply here because Plaintiffs allege that DRAM is a significant component of each electronic device purchased by Plaintiffs.⁴ (MTD Order at 7 n.2; CCAC ¶¶ 86-92.)

Plaintiffs have therefore adequately pled traceability for purposes of Article III standing.

2. Antitrust Injury

To evaluate whether plaintiffs are a “proper party” for a Sherman Act suit, courts consider (i) the nature of the plaintiff's injury, (ii) the directness of the injury, (iii) the speculative measure of the harm, (iv) the risk of duplicative recovery, and (v) the complexity in apportioning damages. Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of California, 190 F.3d 1051, 1054 (9th Cir. 1999). The Court previously found Plaintiffs’ antitrust injury insufficiently pled based primarily on the issues of traceability described above. (MTD Order at 13-14.) Plaintiffs have now addressed those issues. Specifically, Plaintiffs have added allegations that the DRAM and the relevant electronic product markets are inextricably linked, sufficient to satisfy the first factor, because DRAM is incorporated without physical alternation, makes up a substantial portion of end product cost, and experiences price correlation with end product prices.⁵ See In re Lithium Ion Batteries Antitrust Litig., No. 13-MD-2420 YGR, 2014 WL 4955377, at *12 (N.D. Cal. Oct. 2, 2014) (finding similar allegations sufficient). Plaintiffs also allege a relatively direct injury because, as explained for Article III standing, they include allegations that DRAM costs would likely be passed down to the consumers of the specific end products Plaintiffs purchased. Last, Plaintiffs allege that the precise DRAM overcharge passed down to the products they purchased can be measured with regression analysis, without much difficulty because DRAM exists as a stand-alone component, which suffices for the third and fifth factors. (CCAC ¶ 308); see Batteries, 2014 WL 4955377, at *13. Accordingly, the Court does not dismiss on this ground.

3. Unpurchased Products

As the Court explained previously, “standing is claim-and relief-specific, such that a plaintiff must establish Article III standing for each of her claims and for each form of relief sought.” In re Carrier IQ Inc., Consumer Privacy Litig., 78 F. Supp. 3d 1051, 1064-65 (N.D. Cal. 2015) (citations omitted). Defendants now claim that Plaintiffs cannot seek recovery on behalf of a class for products they did not purchase. The argument is meritless. The product that Plaintiffs purchased is DRAM, same as the other purported class members. That the members of the class purchased DRAM through different intermediate products creates neither a different legal claim (antitrust violation) nor a different form of relief (damages and injunction). Defendants’ cited cases are not to the contrary. See Los Gatos, 2015 WL 4755335, at *16 (finding lack of standing due to traceability issues, not claim specific standing requirements); Harrison v. E.I. DuPont De Nemours & Co., No. 13-CV-01180-BLF, 2016 WL 3231535, at *3 (N.D. Cal. June 13, 2016) (acknowledging that “unnamed class members theoretically might assert claims based upon [additional] products”). Accordingly, the Court does not dismiss on this ground.

D. Conspiracy Allegations

4. Legal Standard

Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of trust otherwise, or conspiracy, in restraint of trade or commerce among the several States or with foreign nations.” 15 U.S.C. § 1. To plead a section 1 claim, plaintiff must allege specific facts to show” (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) (citation omitted); see also Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1970 n. 10, 167 L.Ed.2d 929 (2007) (requiring particularized allegations for the conspiracy).

Relevant here is the distinction between a conspiracy and conscious parallelism. Section 1 of the Sherman Act does not prohibit all unreasonable restrains of trade—only those “effected by a contract, combination, or conspiracy.” Twombly, 550 U.S. at 553, 127 S.Ct. 1955 (quoting Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 775, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984)). The “crucial question” in Section 1 cases is “whether the challenged anticompetitive conduct ‘stems from an independent decision or from an agreement, tacit or express.’ ” Id. (quoting Theatre Enters., Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 540, 74 S.Ct. 257, 98 L.Ed. 273 (1954)). The distinction presents a challenge in oligopolistic markets—markets dominated by a few companies—where “companies base their actions in part on the anticipated reactions of their competitors.” In re Musical Instr. & Equip. Antitrust Litig., 798 F.3d 1186, 1193 (9th Cir. 2015). In those markets, competitors often act with “conscious parallelism” where they “share monopoly power, [by] setting their prices at a profit-maximizing, supracompetitive level” using coordination, but not agreement. Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 227, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993). For example, competitors may “follow the leader” by waiting for one firm to “risk being the first to raise prices, confident that if its price is followed, all firms will benefit.” Musical Instruments, 798 F.3d at 1195. Such conscious parallelism is considered unilateral and not illegal under section 1. Id. at 1193; Twombly, 550 U.S. at 553-54, 127 S.Ct. 1955.

That said, the lines between conscious parallelism and conspiracy may blur. See 5 Philip E. Areeda & Herbert Hovenkamp, Antitrust Law § 1410c (5th ed. 2020) (hereinafter “Areeda & Hovenkamp”). For example, the “follow the leader” strategy described above may be construed as an agreement by conduct: “[i]f a firm raises price in the expectation that its competitors will do likewise, and they do, the firm's behavior can be conceptualized as the offer of a unilateral contract that the offerees accept by raising their prices.” In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 654 (7th Cir. 2002). However, because conscious parallelism is practically unavoidable in oligopolistic markets, courts generally require a preexisting or manifest agreement, not simply a “meeting of the minds” through conduct.⁶ See id. at 654; Musical Instruments, 798 F.3d at 1194 (requiring a “preceding agreement” and “explicitly coordinated actions,” not simply tacit collusion through coordination); Twombly, 550 U.S. at 557, 127 S.Ct. 1955 (requiring context to suggest a “preceding agreement”); cf. Prosterman v. Am. Airlines, Inc., 747 F. Appx 458, 460 (9th Cir. 2018) (noting that conscious parallelism is as common as when “prices on two gas stations on opposing corners of a busy intersection ․ move in near unison”).

To allege such an agreement, a plaintiff may rely on either direct evidence (e.g., witnesses who observed the agreement) or circumstantial allegations. Oliver v. SD-3C LLC, No. 11-cv-01260-JSW, 2016 WL 5950345, at *4 (N.D. Cal. Sept. 30, 2016). Circumstantial allegations may rest on parallel conduct—i.e., that defendants undertook some action simultaneously—together with “plus factors” that are “consistent with explicitly coordinated action” but “inconsistent with unilateral conduct.” Musical Instruments, 798 F.3d at 1194. The plus factors are meant to suggest “parallel behavior that would probably not result from chance, coincidence, independent responses to common stimuli, or mere interdependent unaided by an advance understanding among parties.” Twombly, 550 U.S. at 556 n.4, 127 S.Ct. 1955. However, in practice, many plus factors have been found unhelpful as “simply restat[ing] that a market is interdependent.” Musical Instruments, 798 F.3d at 1194-95; In re Flat Glass Antitrust Litig., 385 F.3d 350, 360 (3d Cir. 2004). Nonetheless, plaintiff must still allege facts that place parallel conduct “in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.” Twombly, 550 U.S. at 557, 127 S.Ct. 1955.

Whether through direct or circumstantial evidence, the allegations of a conspiracy must be plausible. Id. Given the expense of antitrust discovery, the Supreme Court has authorized district courts to “insist upon some specificity in pleading before allowing a potentially massive factual controversy to proceed.” Id. at 558, 127 S.Ct. 1955 (quoting Assoc. Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 528 n.17, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983)). The inference of a conspiracy need not be more plausible than an inference of independent conduct. See Evergreen Partnering Grp., Inc. v. Pactiv Corp., 720 F.3d 33, 45-47 (1st Cir. 2013). Moreover, the factual allegations need not exclude the possibility of independent conduct, only to suggest facts inconsistent with such conduct.⁷ See id.; Musical Instruments, 798 F.3d at 1194. But even so, the allegations must be sufficient to “nudge[ ] the[ ] claims” of conspiracy “across the line from conceivable to plausible.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955.

5. Analysis

The Court has previously found that Plaintiffs have adequately alleged parallel conduct. Namely, Plaintiffs allege that Defendants simultaneously reduced DRAM supply during the Class Period, which led prices to increase dramatically. However, the Court found that Plaintiffs failed to allege facts to suggest that this parallelism arose from an agreement, rather than from conscious parallelism inherent in an interdependent market. In response, Plaintiffs allege additional “plus factors” and urge the Court to consider them holistically. The Court considers each factor and then the holistic context of the allegations.

a. Plus Factors

Plaintiffs identify the following plus factors to allege “something more” than parallel conduct arising from conscious parallelism: (1) price signaling for the purpose and effect of coordinating prices, (2) complex, simultaneous, historically unprecedented supply reductions, (3) “perilous” supply cuts that would be irrational absent agreement, (4) public encouragement to restrain supply, followed quickly by responsive assurances, (5) changed conduct at the start and end of the conspiracy, and (6) information exchanges regarding future supply and demand.

i. Price Signaling

The Court has previously found Plaintiffs’ price signaling allegations insufficient because they are “not largely inconsistent with unilateral, lawful conduct.” See Musical Instruments, 798 F.3d at 1194. As explained before, neither the context of the statements—earnings calls and investor presentations, where the statements were made in response to direct questions—nor their substance—observations and forecasts of competitors’ actions and affirmance of own actions—suggest conspiracy because they equally demonstrate interdependence. In response, Plaintiffs add allegations that Samsung “leaked” its intent to increase prices in early 2016, which a confidential witness understood to be intended to encourage other Defendants to raise prices.

There are several problems with Plaintiffs’ new allegation. First, it is not supported by the law. Plaintiffs rely on the summary judgment decision in Petroleum Products to argue that price signaling may be probative of conspiracy. 906 F.2d at 445. In that case, the Ninth Circuit found potential conspiracy where defendants testified that they publicly announced prices for the sole reason of informing competitors of price changes, “in the express hope that these competitors would follow the move,” and that announcements had the desired effect.⁸ Id. at 906 F.2d at 446-47. Here, Plaintiffs allege only that Samsung leaked prices to encourage others to follow suit, but not that the leak was published, that Defendants received the information, or that they followed suit. Even assuming that Samsung disclosed the price increase for the purpose of encouraging competitors to do the same, a unilateral attempt to conspire does not state a claim under section 1.

Second, the new allegation does not make any sense. Plaintiffs allege that Defendants conspired to reduce output, not to fix prices. The Court fails to see how disclosing a price increase would signal to competitors to reduce output. Furthermore, to the extent that the leak constitutes “signaling,” it did not work. Plaintiffs allege that Samsung unilaterally decreased output in Q3 2016, while its competitors did not follow suit until the next quarter. (Id. ¶ 10.) Had there been signaling to create a “meeting of the minds,” Defendants would have presumably acted in unison. Instead, Samsung lost profits by unilaterally decreasing supply, while the other Defendants waited months after the “leak” to follow suit only after seeing Samsung's actions. That is not plausible signaling. See Petroleum Products, 906 F.2d at 446 (explaining that the purpose of signaling is to prevent the price leader from “being ‘hung out to dry’ ” while competitors realize its actions).

Plaintiff's allegation shows, at most, that Samsung desired to compete less vigorously in early 2016. The desire to reduce competition is consistent with “rational, legal” conduct in an interdependent market. See Brooke, 509 U.S. at 227, 113 S.Ct. 2578 (recognizing that oligopolists may forego competition if they “recogniz[e] their shared economic interests” and “share monopoly power”). Accordingly, this plus factor does not support a reasonable inference of conspiracy.

ii. Complex, Historically Unprecedented Changes

“[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[s] a plausible inference of conspiracy.” Twombly, 550 U.S. at 556 n.4, 127 S.Ct. 1955. Plaintiffs contend that this plus factor applies here because, historically, DRAM production cuts only happened when the industry was unprofitable and several Defendants considered unilateral supply increases risky and not easily reversible. (CCAC ¶¶ 7-8, 146, 166.)

Plaintiffs’ argument is not persuasive. As an initial matter, Plaintiffs have not shown that the supply reductions here were “complex.” According to the complaint, the conspiracy involved growing DRAM supply between 15-20%, slightly below the expected demand growth of 20-25%. (Id. ¶ 13.) Defendants allegedly arrived at that number gradually, with Hynix initially setting the rate at “low 20% and the other Defendants promising” sub-20% level. (Id. ¶¶ 14-15, 136.) The relative simplicity of the alleged conspiracy here makes it more consistent with unilateral conduct. Moreover, while Plaintiffs plead facts to show the supply reductions were historically novel, they also allege that the market only became oligopolistic in the last few years. (Id. ¶¶ 245-46.) This provides an “obvious alternative explanation” for the change from historical practice. See Century Aluminum, 729 F.3d at 1108. Finally, Plaintiffs do not plead that the conduct occurred “at the same time by multiple competitors”—they plead that Samsung led the output restrictions in Q3 2016 and that the other two Defendants followed suit the next quarter. They also fail to plead that the supply cuts occurred for “no other discernable reason,” since conscious parallelism provides the other reason, or that the parallel conduct is “anomalous” in an interdependent market.

Nevertheless, the Court considers Plaintiffs’ factual allegations. Plaintiffs allege, for this factor, that Micron's CEO stated that it would be “foolish to be the first one[ ] to take capacity off,” and that several Defendants stated that increasing DRAM supply is difficult. (Id. ¶¶ 5, 146, 166.) However, read in context, the statements do not suggest conspiracy. Micron's statement refers to its role as a non-market leader and essentially restates the “follow the leader” strategy, where market participants have no incentive to reduce supply unless the market leader does the same. While Plaintiffs are correct that difficulty in supply increases makes unilateral decreases risky, the statements here also suggest that trying to meet demand is risky. In particular, Samsung stated that changes in technology migration make “temporary” DRAM increases “not very easy,” and Hynix suggested that “much slower productivity gains from technology migration” means that an “undersupply is likely to continue for some time despite the attempts to increase supply.” (Id. ¶¶ 146, 166.) While the Court does not compare inferences at this stage, it cannot ignore the context that suggest the competitive strategy of trying to meet demand became more difficult at this time.

Accordingly, this plus factor only weakly suggests conspiracy.

iii. Perilous Supply Cuts

Plaintiffs next claim that supply cuts were “so perilous in the absence of an advance agreement that no reasonable firm would make the challenged move without such an agreement.” Musical Instruments, 798 F.3d at 1195. As support, Plaintiffs allege that Samsung made unilateral production cuts that make “little economic sense” because they could not be easily reversed and caused Samsung to lose market share. (CCAC ¶¶ 171, 9.) Plaintiffs then allege that Hynix and Micron followed suit the next quarter, losing millions in potential profits by following Samsung's strategy. (Id. ¶ 172.)

Plaintiff's argument on this plus factor is entirely undercut by its allegations that Samsung unilaterally cut supply prior to any conspiracy. (Id. ¶¶ 3, 112.) Plaintiffs expressly allege that Samsung had cut supply in late 2015 without any conspiracy, which suggests that unilateral supply cuts were neither perilous nor irreversible, since Samsung apparently remained the market leader the next quarter. They also suggest that Samsung, as the market leader, considered reduced supply in its unilateral best interests without any agreement. That the strategy did not become profitable until the other Defendants followed suit does not defeat that Samsung unilaterally wanted to stop competing on market share. Finally, on a basic level, Plaintiffs fail to allege that the economic cuts were “perilous” in the absence of “an advance” agreement; they instead allege that Samsung made its initial supply cuts without Hynix or Micron following suit, even when the conspiracy had allegedly begun.⁹ Accordingly, this plus factor does not support an inference of conspiracy.

iv. Public Invitations and Responsive Assurances

The Court has previously explained that Plaintiffs’ allegations of “public invitations” to conspire and “responsive assurances” of Defendants’ adherence to the alleged agreement are unpersuasive. As explained, “Defendants’ statements amount to no more than descriptions of circumstances of their market,” which is not anomalous in a market where oligopolists “watch each other like hawks.” (MTD Order at 23, 24.) Indeed, the questions by independent analysts here confirm that the supply decisions of each Defendant's competitors held general interest to the industry and to investors. (See, e.g., CCAC ¶¶ 128, 134, 144.) Plaintiffs have now added more allegations regarding invitations and reassurances of reduced supply.

Plaintiff's allegations regarding invitations focus on Micron. In March 2016, Micron stated that it would be “foolish to be the first ones to take capacity off,” but emphasized that Micron's “focus isn't on market share.” (Id. ¶ 5.) Then, in March 2017, Micron stated in response to a specific question about Samsung that Samsung “would [not] intentionally repeat the mistake from last cycle,” in light of their “good margins.” (Id. ¶ 16.) Last, in June 2017, Micron allegedly praised the “good balance between supply and demand as long as capital discipline is exercised.” (Id. ¶ 17.) These statements suggest that Micron considered reduced competition beneficial the industry and wanted its competitors to act accordingly. That said, the statements are also consistent with simple recognition of interdependent market dynamics under unilateral conduct.

In response to these alleged invitations, Samsung and Hynix cut capital expenditures and made observations and predictions about supply growth. For example, Samsung told investors that “supply and demand continued to be solid and price rose strongly due to restrictions of industry supply,” that “we have no plans to add additional capacity,” and that “we will refrain from, for example, increasing market share, fighting on volume.” (Id. ¶¶ 17-18.) These alleged “assurances” are virtually indistinguishable from statements that would have been made without a conspiracy, where Defendants would have presumably also made observations and predictions. They are thus consistent with unilateral behavior in an interdependent market.

Ultimately, the statements here simply do not indicate “the sort of restricted freedom of action and sense of obligation that one generally associates with an agreement.” Twombly, 550 U.S. at 556 n.4, 127 S.Ct. 1955. Even Micron's alleged invitations, while encouraging of supply reductions, do not suggest an expectation that the other Defendants will feel compelled to continue their supply reductions. On the contrary, Micron repeatedly emphasized that it was observing public sources and expressed uncertainty about that information. (See id. ¶¶ 127 (making predictions based on “public commentary”), 131 (emphasizing that “we just have to wait and see”), 134 (stating that “we're always concerned” about potential disruption), 137 (“[W]hile I would love to tell you that our competitors have sent us a memo ․”), 144 (“We don't have a great crystal ball as to what our competitors are doing.”).) Thus, this plus factor does support an inference of conspiracy.

v. Changed Conduct at Start and End of Conspiracy

Plaintiffs next allege that Defendants exhibited different conducts before and after the alleged conspiracy. Specifically, Defendants allegedly competed vigorously over market share before the Class Period and began competing again after Chinese antitrust regulators opened an investigation. (CCAC ¶¶ 108, 191.) The Court has already explained that this allegation amounts to little more than a restatement of parallel conduct. (MTD Order at 25.) The additional context provided by Plaintiffs’ complaint makes this plus factor particularly unconvincing. First, the DRAM market became significantly more concentrated before the Class Period, having eleven DRAM manufacturers in 2012 but only three in 2018. (CCAC ¶¶ 245-46.) The change in market conditions makes the changed behavior far less surprising. Second, Plaintiffs allege that Samsung unilaterally decided to stop competing on market share in 2015, before the Class Period, so it did not change its conduct for the first time during the alleged conspiracy. (Id. ¶ 112.) Third, DRAM prices began to rise after Samsung signed an agreement with Chinese investigators “that would result in moderations to the price increases of DRAM in 2018,” which would presumably occur regardless of whether Samsung was guilty of the charges.¹⁰ (Id. ¶ 189.) This additional context renders the plus factor only weakly suggestive of conspiracy.

vi. Information Exchange

As before, Plaintiffs continue to maintain that Defendants exchanged information at trade industry meetings. As the Court already explained, this plus factor does not support a reasonable inference of conspiracy because Plaintiffs fail to describe particular interactions or any specifics of the meetings. Moreover, as the Court explained, trade associations serve legitimate purposes, and courts are loathe to find them probative of conspiracy without allegations of improper conduct. See, e.g., In re Citric Acid Litig., 191 F.3d 1090, 1097-98 (9th Cir. 1999).

In the amended complaint, Plaintiffs have added allegations of a confidential witness who claims that Defendants sent employees to Joint Electronic Device Engineering Council (“JEDEC”) that occurred six times per year, and that this provided an “ideal setting for Defendants to discuss future business plans. (CCAC ¶ 207.) The confidential witness claims that “at JEDEX, you could talk to competitors about what they were seeing in future volume.” (Id.) These allegations are far too generic and hypothetical to raise a reasonable inference of conspiracy. Simply because Defendants could talk to competitors does not mean that they did. Plaintiffs fail to allege “who, did what, to whom (or with whom), where, and when,” which is required to make the allegation of conspiracy at these meetings non-conclusory and plausible. Kendall, 518 F.3d at 1048; cf. B&R Supermarket, Inc. v. Visa, Inc., No. C 16-01150 WHA, 2016 WL 5725010, at *8 (N.D. Cal. Sept. 30, 2016) (finding allegations of trade meetings probative of conspiracy where plaintiffs alleged a specific panel on a specific conference that included specific employees who conspired). Thus, this plus factor does not support a reasonable inference of conspiracy.

vii. Other Plus Factors

Plaintiffs reallege two plus factors that the Court has already addressed. First, Plaintiffs claim that high levels of industry concentration are probative of conspiracy. However, as the Court explained before, concentrated markets also make parallel unilateral conduct more plausible and thus cannot raise an inference of conspiracy. (MTD Order at 20.) Plaintiffs’ cited cases are entirely consistent with this conclusion. See Musical Instruments, 798 F.3d at 1197 n. 14 (finding conspiracy allegations insufficient notwithstanding high market concentration because they do not allege that changes occurred uniformly or all at once); In re Flash Memory Antitrust Litig., 643 F. Supp. 2d 1133, 1144-45 (N.D. Cal. 2009) (clarifying that allegations of high market concentration may be relied on when considered in tandem with other allegations); In re Static Random Access Memory (SRAM) Antitrust Litig., 580 F. Supp. 2d 896 (N.D. Cal. 2008) (using allegations of market concentration to evaluate allegations of price exchanges).

Second, Defendants continue to rely on allegations that Plaintiffs previously settled price fixing lawsuits and that the employees involved in that scheme remain employed by Defendants. (CCAC ¶¶ 26-27.) The Court has already found that these allegations make conspiracy more likely but that they are insufficient, without more, to plead conspiracy. (MTD Order at 26-28.) Moreover, the Court notes that the prior lawsuits appear to have occurred when the DRAM market was significantly more competitive, which would have rendered an express agreement more useful and necessary to maintain uniform behavior compared to a concentrated market.

b. Holistic Analysis

Having examined Plaintiffs’ plus factors individually, the holistic context provided by the allegations amounts to this: In 2016, the three major DRAM producers switched from ruinous competition to shared monopoly power by keeping supply growth slightly below demand growth. The change began with Samsung, the market leader, who twice cut supply growth in 2015 and 2016. The first supply cut failed to garner followers, but the second supply cut was followed by Hynix and Micron the next quarter. During this time, Defendants made public observations about reduced supply in the industry and its effect on higher profits, and indicated, in response to analyst questions, that they do not intend to expand supply. The industry trend began when the market became more concentrated and ended when Samsung entered into an agreement with Chinese antitrust regulators that, through unspecified terms, resulted in decreased prices.

These allegations state a claim for conscious parallelism, not a conspiracy. A “follow the leader” strategy where the dominant market player increases prices or reduces output with the hope that others follow suit does not become conspirational simply because the other competitors do so. See Musical Instruments, 798 F.3d at 1193, 1195; Citric Acid, 191 F.3d at 1102; Brooke, 509 U.S. at 227, 113 S.Ct. 2578; Prosterman, 747 F. App'x at 461-62. To be sure, the parallel conduct may still harm consumers and produce undesirable effects. Indeed, such conscious parallelism may be virtually indistinguishable from conspiracy. See Wash. Cty. Health Care Auth., Inc. v. Baxter Int'l Inc., 328 F. Supp. 3d 824, 842 (N.D. Ill. 2018). However, the harm is endemic to oligopolistic markets and does not require a conspiracy to maintain. Accordingly, Plaintiffs’ allegations do not raise a reasonable inference of conspiracy in light of the possibility of conscious parallelism to state a violation of Section 1 of the Sherman Act. See Gonzalez v. Planned Parenthood of L.A., 759 F.3d 1112, 1115 (9th Cir. 2014) (an “obvious alternative explanation” renders allegations of illegality implausible); Somers v. Apple, Inc., 729 F.3d 953, 965 (9th Cir. 2013) (same); Century Aluminum, 729 F.3d at 1108 (same).

Because the parties apply the same analysis to the California Cartwright Act claim, and do not dispute that that claim rises and falls with the Sherman Act allegations, the Cartwright Act claim is also dismissed for failure to plead a conspiracy. County of Tuolumne v. Sonora Community Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001); see MTD Order at 28.

E. State Law Claims

Because Plaintiffs fail to plead a conspiracy, the California and Florida state law claims also fail. Specifically, the California Unfair Competition Law (“UCL”) claim fails for lack of a predicate violation of a separate statute or common law regime, Cel–Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 180, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999), and the Florida claim rises and falls with the antitrust claim and thus fails accordingly. See AT&T Mobility LLC v. Phone Card Warehouse, Inc., No. 6:08-cv-1909-ORL-18GJK, 2009 WL 10671270, at *5 (M.D. Fla. June 25, 2009).

As to the claims under California, Hawaii, Kansas, Michigan, and New Hampshire antitrust law, Defendants’ sole ground for dismissal is failure to show antitrust standing under AGC. Defendants have established neither that the standard applies to the state law claims, nor that Plaintiffs failed to meet it. See Los Gatos, 2015 WL 4755335 at *19 (requiring specific analysis to determine if AGC applies to a state law claim); MTD Order at 16 (recognizing same); supra Section C.2 (finding that Plaintiffs’ allegations satisfy AGC). Accordingly, the Court does not dismiss the remaining state law claims.

CONCLUSION

For the foregoing reasons, the Court GRANTS defendants’ motions to dismiss as to the Sherman Act and Cartwright Act claims, as well as the claims under California and Florida unfair competition laws. The Court DENIES the motion as to the remaining state law claims. In light of Plaintiffs’ repeated failure to correct the deficiencies identified in the original complaint, leave to amend appears to be futile. Indeed, Plaintiffs’ amended complaint repleads the same plus factors and allegations the Court has already found insufficient in the last order. Accordingly, leave to amend is DENIED. See Loos v. Immersion Corp., 762 F.3d 880, 890-91 (9th Cir. 2014); Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 1007 (9th Cir. 2009).

IT IS SO ORDERED.

FOOTNOTES

1.   DRAM is a type of memory used to store data and programs in electronic devices. (Id. ¶ 68.)

2.   The industry appears to have grown more concentrated in the last ten years. Plaintiffs allege that there were eleven DRAM manufacturers in 2012, but only three in March 2018. (Id. ¶¶ 245-46.)

3.   Plaintiffs also allege that they purchased electronic devices from resellers, who themselves purchased the devices from one of the few OEMs. (CCAC ¶¶ 47, 103.)

4.   Defendants also attempt to distinguish overall DRAM prices from an “overcharge” stemming from anticompetitive restraints. The Court fails to see the distinction. Prices, by their nature, incorporate overcharges, such that any price increase in DRAM is likely to be passed down regardless of its source.

5.   Defendants argue that the component cost of DRAM is lower than that previously found to satisfy this requirement. Defendants largely miss the point. Components that form a “substantial component cost” are more likely to be intertwined, a fact shown here because, in addition to being 5-50% of end product cost, the prices are historically correlated and DRAM makes up a critical part of most electronic devices. (CCAC ¶¶ 85-96.) For purposes of antitrust standing, Plaintiffs’ claim need only be plausible, not fail-proof. See Los Gatos, 2015 WL 4755335, at *16

6.   That conscious parallelism is permitted does not mean that it causes no harm. As the Ninth Circuit has recognized, “interdependent pricing may often produce economic consequences that are comparable to those of classic cartels,” such as high prices for consumers. In re Coordinated Pretrial Proceedings in Petrol. Prods. Antitrust Litig. (“Petroleum Products”), 906 F.2d 432, 444 (9th Cir. 1990); accord Clamp-All Corp. v. Cast Iron Soil Pipe Inst., 851 F.2d 478 (1st Cir. 1988). However, this problem stems from the nature of oligopoly, not conspiracy as such, which courts cannot remedy short of instituting price controls to require competitive market prices. See Areeda & Hovenkamp § 1432d5. Thus, conscious parallelism is permitted not because there is no harm, and not because there is no agreement, but because there is no remedy. So long as oligopolies are legal, courts can only control express or preexisting conduct.

7.   The parties dispute whether Plaintiffs’ allegations must exclude the possibility of independent conduct to survive. Generally, antitrust claims are subject to the ordinary pleading requirements, which require plaintiff to only allege enough facts to give rise to the “reasonable inference that the defendant is liable for the misconduct alleged.” See Nayab v. Cap. One Bank (USA), N.A., 942 F.3d 480, 496 (9th Cir. 2019). However, in Twombly, the Court found that allegations of parallel conduct and other facts consistent with independent action are “much like a naked assertion of conspiracy” and insufficient to draw a reasonable inference of conspiracy. 550 U.S. at 556-57, 127 S.Ct. 1955. Thus, while Plaintiffs are correct that courts must not compare inferences at the pleading stage, they must still plead enough facts inconsistent with unilateral conduct to make a conspiracy plausible. See id. at 557, 127 S.Ct. 1955 (requiring “allegations plausibly suggesting (not merely consistent with) agreement”); Nayab, 942 F.3d at 497 (interpreting Twombly to require “facts tending to exclude the possibility [defendants] acted independently”).Plaintiffs’ cited cases, which clarify that the standard for dismissal is lower than the one for summary judgment, are not to the contrary. See Evergreen, 720 F.3d at 48 (continuing to rely on fact allegations that are “difficult to explain outside the context of a conspiracy”); In re Text Messaging Antitrust Litig., 630 F.3d 622, 628 (7th Cir. 2010) (same); SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412, 428, 430 (4th Cir. 2015) (citing allegations of conduct that serves “few benign purposes” together with detailed description of the meeting where conspiracy began); Erie Cty., Ohio v. Morton Salt, Inc., 702 F.3d 860, 871 (6th Cir. 2012) (citing conduct that “has no obvious independent justification” and would be difficult to sustain without conspiracy); Starr v. Sony BMG Music Entertainment, 592 F.3d 314, 323-25 (2d Cir. 2010) (clarifying that the motion to dismiss standard is lower than the summary judgment standard but continuing to rely on plus factors); cf. In re Century Aluminum Co. Sec. Litig., 729 F.3d 1104, 1108 (9th Cir. 2013) (explaining the difference between two plausible explanations and an explanation that is not plausible because the facts are equally consistent with a different explanation).

8.   Defendants claim that because the “follow the leader” strategy is permitted, Samsung's price signaling must also be allowed. That is not the case. The very nature of the follow the leader strategy is that competitors act unilaterally, with the price leader incurring risk by being the first to raise prices. If competitors cross the line to an a priori agreement, thereby eliminating that risk, the agreement may violate section 1 of the Sherman Act.

9.   Persian Gulf Inc. v. BP West Coast Products LLC, 324 F. Supp. 3d 1142 (S.D. Cal. 2018) is inapposite because Plaintiffs do not allege any “extreme” action against self-interest, such as a run on the market before a power failure became announced. To the extent that Persian Gulf suggests that supply cuts in the face of rising demand are against self-interest, the Court respectfully disagrees because such actions are rational in an interdependent market, where market participants “share” monopoly power. Indeed, the allegations here confirm that the supply cuts ultimately benefited Defendants in the form of record revenues. (CCAC ¶ 209.)

10.   The Court notes these alternative explanations not to compare inferences, but because they make the inference of conspiracy less plausible. See Ashcroft v. Iqbal, 556 U.S. 662, 681-82, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); Century Aluminum, 729 F.3d at 1108.

JEFFREY S. WHITE, United States District Judge