Topic: EU slaps a record fine on Intel

[Nemesis]

Link to full article

Computer chipmaker Intel has been fined a record 1.06bn euros ($1.45bn; £948m) by the European Commission for anti-competitive practices.

"We would never pay for any kind of obligation," Mr Sewell said. "We provide incentives to customers to buy our products."

The Commission said that personal computer makers Acer, Dell, HP, Lenovo and NEC had all been given hidden rebates if they only used Intel chips.

"Intel will pay its fine and carefully inspect its sales relationships to protect against risky influence. AMD does not receive any money from the fine, which accrues to the EU tax budget. And Intel's greatest challenge will remain market growth, not market share."

[toasty0]

I never thought I would say this, but I'm starting to consider the possibility that EU commision is more about limiting *Unfair American* competition than it about fair business practices.

[Nemesis]

I never thought I would say this, but I'm starting to consider the possibility that EU commision is more about limiting *Unfair American* competition than it about fair business practices.

Remember the conviction is for unfair practices against AMD - another American company.  Intel is also under anti trust investigations in other countries including the U.S..

The logic seems to be that if you are so dominant that a company MUST deal with you that you cannot make deals designed to prevent those companies from dealing with competitors (which is the same under U.S. anti trust law).  Intel seem to have set things up so that OEMs who dealt also with AMD in any significant way were charged enough extra for Intel chips that they were not able to compete with those who used only Intel thereby violating the law. 

[marstone]

I never thought I would say this, but I'm starting to consider the possibility that EU commision is more about limiting *Unfair American* competition than it about fair business practices.

Remember the conviction is for unfair practices against AMD - another American company.  Intel is also under anti trust investigations in other countries including the U.S..

The logic seems to be that if you are so dominant that a company MUST deal with you that you cannot make deals designed to prevent those companies from dealing with competitors (which is the same under U.S. anti trust law).  Intel seem to have set things up so that OEMs who dealt also with AMD in any significant way were charged enough extra for Intel chips that they were not able to compete with those who used only Intel thereby violating the law.

If the punishment was imposed because of unfair practices against AMD, why do they not any of the fine?  Where does that money go to?

[Nemesis]

Link to the full EU press release

Intel awarded major computer manufacturers rebates on condition that they purchased all or almost all of their supplies, at least in certain defined segments, from Intel:

    * Intel gave rebates to computer manufacturer A from December 2002 to December 2005 conditional on this manufacturer purchasing exclusively Intel CPUs

    * Intel gave rebates to computer manufacturer B from November 2002 to May 2005 conditional on this manufacturer purchasing no less than 95% of its CPU needs for its business desktop computers from Intel (the remaining 5% that computer manufacturer B could purchase from rival chip maker AMD was then subject to further restrictive conditions set out below)

    * Intel gave rebates to computer manufacturer C from October 2002 to November 2005 conditional on this manufacturer purchasing no less than 80% of its CPU needs for its desktop and notebook computers from Intel

    * Intel gave rebates to computer manufacturer D in 2007 conditional on this manufacturer purchasing its CPU needs for its notebook computers exclusively from Intel.

Furthermore, Intel made payments to major retailer Media Saturn Holding from October 2002 to December 2007 on condition that it exclusively sold Intel-based PCs in all countries in which Media Saturn Holding is active.

[KBF-Crim]

Oh...that's gonna leave a mark...

[marstone]

quick scan of the article doesn't say where the fine money actually goes.  I can see the practices are wrong (same thing Microsoft had done for years, probably still does).

[Nemesis]

If the punishment was imposed because of unfair practices against AMD, why do they not any of the fine?  Where does that money go to?

The government anti trust case is supposed to punish the companies overall behaviour, THEN the private cases against them based on that conviction provides restitution to the companies that were harmed and who choose to bring suit.

It is the same as in U.S. anti trust cases once they have been convicted those harmed can use the conviction as a basis to sue for damages.  In the U.S. for example after MS was convicted they were sued over their practices against DR-DOS and had to pay out hundreds of millions in damages. 

When a U.S. court fines a person or company does the fine ever get paid to the victim?  As I understand it the fine always goes to the government.  When it is paid to the victim(s) it is not considered a fine.  As an example of this a former employer of mine was once fined for illegal dumping (they used an unlicensed disposal company who just dumped the stuff in a farmers field) then had to repair the damage and pay restitution.  The fine was punishment and did not go to the victim.

[Nemesis]

quick scan of the article doesn't say where the fine money actually goes.  I can see the practices are wrong (same thing Microsoft had done for years, probably still does).

Indications are that Microsoft has offered such deals to companies (Creative for example) but has had to back off when it gets exposed.  I suspect that they have mostly stopped in the U.S. at least because getting a conviction against them is much easier with the prior court rulings.

[Nemesis]

The response from Intels President and CEO

[Nemesis]

From the EU press release:

Intel also interfered directly in the relations between computer manufacturers and AMD. Intel awarded computer manufacturers payments - unrelated to any particular purchases from Intel - on condition that these computer manufacturers postponed or cancelled the launch of specific AMD-based products and/or put restrictions on the distribution of specific AMD-based products. The Commission found that these payments had the potential effect of preventing products for which there was a consumer demand from coming to the market. The Commission found the following specific cases:

# postponed the launch of its first AMD-based business desktop in Europe by 6 months.
# Intel made payments to computer manufacturer E provided that this manufacturer postponed the launch of an AMD-based notebook from September 2003 to January 2004.
# Before the conditional rebate to computer manufacturer D outlined above, Intel made payments to this manufacturer provided that it postponed the launch of AMD-based notebooks from September 2006 to the end of 2006.

The early part of a chip coming to market is when it is sold with the best profit margins.  Paying to keep AMD from getting those early profits might well be enough to change AMD from profitable to losing money.

Back when the first Athlon was released for about a year you couldn't get a motherboard from a major manufacturer.  The rumour at the time was that Intel was threatening the motherboard makers with loss of access to Intel chipsets and licenses if they sold Athlon motherboards.  It was only after it came out that ASUS was shipping a "white box" motherboard under a non ASUS manufacturers name that the big motherboard companies started to ship them. 

[Nemesis]

Link to full article

"We believe the types of conduct that appear to have been found unlawful by the European Commission would also be unlawful under U.S. antitrust laws," said David Beddow, a partner at O'Melveny & Myers' Washington, D.C., office.

Intel is under investigation by the Federal Trade Commission on similar complaints that its contracts with computer makers unfairly quashed competition. The chip giant, which controls 80 percent of the microprocessor market, is accused of offering discounts to manufacturers who agreed not to do business with AMD, its only competition. The Silicon Valley rivals have been fighting with each other over the issue for years.

Intel also faces scrutiny by multiple attorneys general, class actions filed in Delaware, as well as private litigation filed by AMD in Delaware, which is slated to go to trial early next year.

Last year, South Korea's Fair Trade Commission slammed Intel with a $25 million fine for similar practices. In 2005, the Japan Fair Trade Commission ruled Intel had violated its anti-monopoly laws.

Ricardo Celli, who led the O'Melveny team from Brussels, said the New York AG is investigating the same business practices that the European Commission ruled were illegal.

"This is a worldwide market, so the computer manufacturers are global companies. I believe the Intel practices are similar everywhere in the world," Celli said.

It isn't just the EU.

Some may remember the deal Intel had with Skype to limit how it scaled on non Intel chips so for example if you had a conference call you couldn't have 10+ people if you used AMD.  The software COULD do it on AMD but refused to.

Link to first article

Link to second article

[Sirgod]

It is a reverse Bailout for the EU.

Stephen

[Nemesis]

It is a reverse Bailout for the EU.

Stephen

$2.88 for each EU citizen, that will really make a difference.

[Sirgod]

lol, Well, it's not that far away from the $13.00 we made.

I should have put a wink up there so peeps new it was a joke.

Stephen

[Rod ONeal]

This will keep the price of Intel CPU up for a while.

[Bonk]

I maintain that government anti-trust suits against software/hardware manufacturers is a volume licensing bargaining tool. (clawback) Think of them as mail-in rebates.  The EU saw the financial returns on the US DOJ suit against MS and has applied the same formula a number of times since.

[Sirgod]

I maintain that government anti-trust suits against software/hardware manufacturers is a volume licensing bargaining tool. (clawback) Think of them as mail-in rebates.  The EU saw the financial returns on the US DOJ suit against MS and has applied the same formula a number of times since.

I agree Bonk.

The coca-cola company (pepsico as well) have exclusivity contracts at ALL major concert venues and many restaurants. these exclusivity contracts give the vendor a discount for the exclusivity.

this has been going on since the 1930's. even in the day of the soviet socialist oligarchy, coca-cola had an exclusive agreement with the USSR.

that a company is too big and other companies need "protection" goes against the grain of the American spirit.

Long read, but interesting. http://en.wikipedia.org/wiki/United_States_antitrust_law#History_of_anti-trust

Stephen

[Rod ONeal]

Here's a good one. According to Nvidea, Intel sells it's Atom processor OEM for $45.00. They sell the same processor paired with their own motherboard chipset complete for $25.00. This makes it impossible for Nvidea, or anyone else, to sell their own competing motherboard chipset for the Atom, locking them out of that market. This is unfair business practice.

[Sirgod]

Unfair shouldn't mean Illegal though, is my point. Why penalize a company for being successful? Imagine if the super bowl winners, where told, here you go, here is your super bowl ring, but we are going to take away your salaries, because you won.

Stephen