backtop


Print 71 comment(s) - last by ceefka.. on Jan 16 at 2:46 PM

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. 


Comments     Threshold


This article is over a month old, voting and posting comments is disabled

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.


"It seems as though my state-funded math degree has failed me. Let the lashings commence." -- DailyTech Editor-in-Chief Kristopher Kubicki

Related Articles













botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki