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Intel insists its innocence as it responds to antitrust allegations from the European Union

Intel revels in the glory of being the CPU industry leader, at least for the time being.  However, like many industry leaders, they have found themselves the primary target of the crosshairs of criticism.  Further, as with any company that is dominating the market, allegations of antitrust violations become a serious threat to the company worldwide. 

AMD said Intel's anti-competitive practices established a monopoly in the microprocessor market.  AMD then sued Intel in U.S. courts in June of 2005.  The company since mounted a long-standing legal battle that included ads in major newspapers and the a website chastising Intel who it portrays as sinister and monopolistic.

AMD received an ally in the form of the European Union.  In July 2007, it announced that based on evidence collected in a multi year investigation, including materials found in a June 2005 raid of European Intel offices, it was filing charges against Intel for engaging in anticompetitive practices.

Intel's senior vice president and general counsel Bruce Sewell issued a carefully worded statement soon after, firmly insisting his belief that Intel was innocent of wrongdoing in the European market.

The charges were supposed to receive a formal response from Intel by October 8, but the EU showed a bit of mercy, extending Intel's window to respond to January 4.

Last week the European Union granted Intel another small measure of leniency, allowing it to file the response to be filed on Monday January 7, instead of Friday, as dictated by the previous extension.

At last Intel issued a response to the European Union and telling the Union to "bring it on."  Intel's formal written response to the EU states not only its innocence, but also challenges EU regulators to hold a hearing to evaluate claims that it illegally used rebates to seize sales from AMD.

Despite Intel's feisty tone, Washington based antitrust lawyer David Balto, a
former U.S. Federal Trade Commission policy director, stated that Intel faces a nearly impossible challenge in proving its innocence to the EU.  He explains, "Intel is going to have a really significant challenge in the proceedings before the EU.  The EU is much more sensitive to the long-term competition effects by dominant firms and much less ready to accept simple snapshots of a company's conduct."

As per EU regulations Intel may be fined up to 10 percent of its annual sales for antitrust violations.   Microsoft initially tried to argue against the EU when it was hit with similar charges and the end result was a painful $690M USD fine.  Intel has even more to lose as it is constantly price cutting to stay competitive and has smaller profit margins, which force it to engage in yearly layoffs.

Intel is also under investigation in South Korea and Japan following raids in these nations. 


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really?
By smitty3268 on 1/8/2008 12:17:56 AM , Rating: 5
quote:
Intel has even more to lose as it is constantly price cutting to stay competitive and has smaller profit margins, which force it to engage in yearly layoffs.


How many billions of dollars did Intel make last year? I'm pretty sure they weren't "forced" to engage in layoffs. It simply made business sense.




RE: really?
By jtemplin on 1/8/2008 1:38:35 AM , Rating: 2
You actually validated or perhaps clarified his point, but you definitely aren't disagreeing with the parent.


RE: really?
By The0ne on 1/8/2008 2:58:05 AM , Rating: 2
Ah no. Due to competition from AND previous to the Core Duo CPUs Intel was losing and were laying off workers, including I believe shutting down factories or rather relocating them. I'm sure many users like myself can remember the switch from potential CPU's from AMD to Intel and back.

Intel's manufacturing process is also unique in that once the process is proven out it stays static. You don't find this in other manufacturing environments simply because many of them can't perfect the process. That doesn't mean that Intel has but it's that Intel is confident they have. There are advantages and disadvantages to this of course.

As far as free market goes, I tend to agree with some experts with the comment "What free market?"


RE: really?
By Ringold on 1/8/2008 4:49:57 PM , Rating: 2
quote:
I tend to agree with some experts with the comment "What free market?"


That's the excuse typically given to further excuse making markets incrementally even less free, but I don't see how it applies here.

I'm not personally aware that any government actively manipulates the CPU market; Intel and AMD both source parts and do assembly all around the globe. The sun probably never sets on Intel-owned facilities. Governments dont cap production, offer price supports or price ceilings to any large degree for either company (though China I thought was trying to develop their own CPU, havent heard anything on that front for years).

It would seem then that the CPU market is as free as free nearly gets, save for the taxes Intel and AMD pay. Intel's aggressive actions could be seen through a foggy pair of moral glasses and be seen as "anti-competitive", but from an economic perspective, they'd be beautiful, brutal competition.

As for any question of monopoly status for Intel, it doesn't meet any of the requirements; there are no barriers to entry, Intel does not provide a unique good that has no close substitutes, Intel cross-licenses technology with AMD and thus can't claim a patent monopoly, and Intel is not a single supplier to the market. Intel also can not set prices in the market freely; AMD's parts are close enough substitutes that should Intel raise price sufficiently, AMD would gobble up market share at a rapid clip.

AMD delivered a product that simply is inferior, at no fault of Intel's, just as Intel screwed up with the P4 at no fault of AMD's. Their market share has responded properly. Sour grapes.


RE: really?
By Oregonian2 on 1/8/2008 9:17:09 PM , Rating: 2
quote:
AMD delivered a product that simply is inferior, at no fault of Intel's, just as Intel screwed up with the P4 at no fault of AMD's. Their market share has responded properly. Sour grapes.


The EU could easily argue against that statement. AMD's parts are inferior directly due to Intel's actions of designing and building better ones. Clearly, and I think can't be argued against.

Now, my previous statement above is also clearly stupid and idiotic, IMO, but it's still a true statement and lawyers can interpret things however they want if the courts decide to agree with it.


RE: really?
By Ringold on 1/9/2008 11:07:31 AM , Rating: 2
quote:
lawyers can interpret things however they want if the courts decide to agree with it.


And so can politicians, and thus here we are.


RE: really?
By lompocus on 1/10/2008 9:26:45 AM , Rating: 1
it's europe. Who cares? Intel can sell them 2million dollar desktop procs for all I care.


RE: really?
By OrSin on 1/16/2008 11:29:17 AM , Rating: 3
The problem with Intel is thier business practice. For long time they offer rebates basiced on not buying other produces. If they offered volume discounts thats fine. But to offer a discount not to get someone else product and you are the market leader then that is wrong. They have already been caught in Japan doing it, and Dell records show they was being paid over 1 billion a year not to use AMD. Thats way dell stockholder was sueing them. DEll never said they got the intel money. So people bought stocks assuming the company was profitable when they was really just making their money in kickbacks.


"Intel is investing heavily (think gazillions of dollars and bazillions of engineering man hours) in resources to create an Intel host controllers spec in order to speed time to market of the USB 3.0 technology." -- Intel blogger Nick Knupffer

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