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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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RE: Backwards
By Ringold on 1/8/2008 4:26:45 PM , Rating: 2
No, it's about funding the European Union.

If the EU were interested in investigating criminal activity by Intel, fines would not be on the table; jail time would be.

If the EU were interested in protecting the interests of EU residents (almost said citizens -- that's coming soon enough), then fines would not be on the table there either. They'd locate and identify any ongoing practices they think are done to the detriment of "competition", order Intel to stop, and if Intel did not, then the criminal charges against individuals again.

Fines hurt Intel, and a hurt Intel can't help but pass that on to the end consumers in the form of higher prices if the market will allow them to raise prices or, in the longer term, a delayed expansion of production or delayed new technology from the loss of money that otherwise would've remained in their coffers for investment.

Punishing Intel serves no economic purpose going forward; there are a few possible sources of this desire I can think of off hand-
a) The human need for revenge
b) Typical ignorance of the concept of sunk cost
c) Politicians desiring to exercise their power
d) A desire to fund the European Union by milking an "evil" corporation

Assuming these politicians don't feel personally offended by Intel, and that they really are semi-educated and know full well what they're doing, then c and d seem to be the answer.


RE: Backwards
By ghost101 on 1/9/2008 10:51:10 AM , Rating: 2
When was the last time the FTC jailed someone for an anti-trust violation? What you're debating about is whether something like this should have criminal or civil penalties. You could argue either way.

As for big evil corporations, the most of the cases the eu competition commission. It took the eu commission to get rid of the Bermuda II agreement, which created a legal cartel amogst 2 countries which view cartels as illegal.

Simply going on the website

http://ec.europa.eu/comm/competition/index_en.html

you can see it does not discrimaate against US companies as such. Obviously there are political influences over certain cases just as there are in the USA. Boeing vs Airbus for example.


RE: Backwards
By ghost101 on 1/9/2008 10:53:09 AM , Rating: 2
*most of the cases the eu competition commission looks at are entirely within the EU.


RE: Backwards
By Ringold on 1/9/2008 11:18:56 AM , Rating: 2
quote:
When was the last time the FTC jailed someone for an anti-trust violation?


I was suggesting what would be a better alternative than damaging the market for damage done previously. It's entirely illogical. Your idea of civil penalties, against individuals, is better then my criminal jail time idea, I just didn't think of it.

quote:
you can see it does not discrimaate against US companies as such.


Is it just me or does a European government website that says "Competition: making markets work better" make one hurt with laughter? Hmm.. might just be me.

At any rate, they note there on their own website they haven't come close yet to properly liberalizing their utilities sector, for example. Assuming they don't have unlimited resources, I would imagine they'd generate significantly larger gains for the European Union members economies by focusing their energy there.. However, that wouldn't generate much revenue for the EU though, would it? It would also ruffle many political feathers along the way. Easier, then, for everybody to try to pick on Intel, Apple, Mr. Softie, and whatever other cash-rich multinational they can find with little local political support. I'm glad Intel is willing to fight back.


RE: Backwards
By ghost101 on 1/9/2008 11:17:11 AM , Rating: 2
As for whether fines are justified. If indeed it is passed onto consumers then it would help AMD compete. Small justice for AMD if Intel did engage in these practices.

We dont know what the burden Intel will have from this possible fine and what the burden on consumers will be. But it will reduce intel's profits. Therefore, they will always have an incentive to stop doing whatever the commission has an issue with. They may also consider lost profits because of the increase in competition. It seems Intel have stopped such practices but the fine serves as a reminder that it wont be accepted.

You also seem to be saying that it reduces investment and hurts consumers in the long run. Now you are debating whether profits through monopoly pricing is a bad thing. I think you are mistaken to think that shareholders would want investment in expanding beyond the profit maximising level of output when they can simply control sales in the market (ensurung profits) as they supposedly did in AMDs complaint.


RE: Backwards
By Ringold on 1/9/2008 11:34:09 AM , Rating: 2
quote:
think you are mistaken to think that shareholders would want investment in expanding beyond the profit maximising level of output when they can simply control sales in the market (ensurung profits) as they supposedly did in AMDs complaint.


That is not quite my argument. I don't know that Intel, or anybody, sits down in a board meeting and actively cuts back investment across the board if they're advancing too rapidly -- though Intel in fact may reach that point eventually in order to avoid annihilating AMD. At any rate, if a sufficiently large pile of cash evaporates, then Intel would simply not have that cash available to make as many investments across any time frame moving forward, short term or long term. Just like interest on a bond or interest on debt, that opportunity cost of taking a pound of flesh out of Intel simply grows the further out in the future one looks. From a shareholder perspective, even if Intel planned zero further R&D or cap-ex, they'd much rather have a share buy-back program or dividend then to fund the expansion of a pan-European superstate.

Of course, I am talking about substantial amounts, as in hundreds of millions. I doubt anything less would even move the stock. Not that it needs help falling lately...

Also, defending Intel now does not necessarily mean I'm pro-monopoly, I simply view it as appropriate to consider the past actions and resulting damage as sunk cost. Instead of being punitive, whatever needs to be done should be, IMHO, should be done to stop future anti-competitive behavior. They did not take the money they stole from Microsoft and donate it to Apple or Linux development projects, so the precedent of taking from Intel and giving to AMD isn't there. Plus, it also edges toward some fuzzy idea of income redistribution for the "less able" corporations -- pardon while I run away from the mere idea screaming.


RE: Backwards
By nofranchise on 1/10/2008 10:27:44 AM , Rating: 2
LOL again. You truly believe the EU uses a lawsuit like this to fund itself? You clearly have no idea what the EU is.

Punishing Intel has no purpose? What about justice and uphoolding the law?

I guess you and the other chumps from the milita just string people up when they steal out in the open. Corporate crime? I ain't never heard of it?


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