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Intel CEO Paul Otellini arrives at the EC hearing building in Brussels to argue Intel's case.   (Source: REUTERS/Francois Lenoir)
Chipmaker continues to plead its innocence before the EU

The European Commission (EC), the executive arm of the European Union (EU), has already brought one mighty opponent to its knees.  It fined Microsoft almost $2.6B USD overall for antitrust violations, including fines of $690M USD and $1.4B USD.  Microsoft tried to refuse to comply with EC's verdict, but ended up paying for it even more in the end.

Now the EU is pursuing chipmaker Intel for allegedly employing anticompetitive practices such as a price slashing and illegal rebates to drive smaller chipmakers out of business.  The EU issued formal charges against Intel in July.  Intel responded quickly that the charges were nonsense and that AMD was the one complaining, not the customers.  AMD claimed that Intel reaped $60B USD in monopoly profits.

Intel fought back demanding a hearing before the EC where it could argue its viewpoint.  Meanwhile, Intel suffered another loss when its German offices were raided last month by EU agents, who seized documents applicable in the antitrust case.  Germany was one of the countries in which Intel is allegedly to have employed price manipulation and illegal rebates.

Now Intel has finally gotten its way, in effect, as it had a chance to plead its case before an EC hearing.  Intel's chief executive Paul Otellini travelled to Brussels to represent his company at the hearing.  Intel, whose chips are in four out of every five of the world's servers and PCs, has also been accused by the EC of paying off computer manufacturers to pick Intel chips over AMD chips.  Intel has denied these claims saying it competes fiercely and legally.

Mr. Otellini addressed Hearing Officer Karen Williams, arguing that Intel's financial practices were well within the law and that its success was from having a better product, not illegal maneuvers.  Ms. Williams will report to Competition Commissioner Neelie Kroes on the case at the end of the hearing. 

Commissioner Kroes, who recently championed the $1.4B USD fine against Microsoft, will make a final suggestion to the full European Commission about Intel's fate and the amount of a possible fine.  Fines can be up to 10% of a company's global revenue, under EU business law.  Commissioner Kroes previously stated that Intel may be a larger threat to E.U. business then Microsoft.  Following Commissioner Kroes statement, the EC will put the issue to a vote and come to a judgment.

Intel had most of the day yesterday to plead its case.   It discussed proprietary information during the hearing, requiring several participants to have to leave for extended periods.  The U.S. Federal Trade Commission and New York attorney general's office, who are investigating possible Intel antitrust violations within the U.S, were both represented.  It is expected that they may launch similar antitrust campaigns following in the EU's footsteps.

Today several consumer groups will have their chance to speak.  BEUC, a European umbrella group for consumer groups, and individual groups from the Netherlands, Spain and France will all be represented.  The groups so far have not come out with a firm stance on the allegations, but Monique Goyens, BEUC director general assured, "We may do so later."

She further stated that BEUC wants to ensure that consumer issues about pricing and innovation are properly examined and addressed.  AMD and Hewlett Packard are also both going to speak today.  Their accounts and testimony will be critical as their relationships with Intel figures heavily with the charges leveled against the chipmaker.

The EU, in addition to the Intel office raids, raided multiple retailers that sold only Intel chips and not AMD chips.  The materials gathered in these raids cannot be used in the hearing.  However the EC could elect to issue new charges against Intel at any point.  It did so three times during the Microsoft case, so such a result is not unexpected.



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RE: More European = Communist Comments
By Proteusza on 3/12/2008 1:04:20 PM , Rating: 4
First, AMD and Intel are the top two desktop x86 CPU manufacturers.

quote:
absolutely nothing stops Philips or Seimens from bringing out their own CPUs if they really think they can make a product the public will buy.


The cost of entry to the market is so high that it probably wouldnt be possible. Any company thats want to start a desktop CPU division needs to make x86 CPUs, which means licensing lots of technology from Intel, and doing lots of work to ensure compatibility, and get motherboard manufacturers on board. Its daunting - thats why not even IBM computes in that space anymore.

quote:
What we in the USA are seeing is that the EU has a very leftist view of what constitutes anticompetitive behavior. Worse, the EU seems determined to export that view to the rest of the world.


If thats the case, why was Intel found guilty in Japan, and why is the US Department of Justice investigating Intel now? If Intel is being investigated by the US DoJ for the same crime as in the EU, does the US DoJ also have a very leftist view of crime? Should the US DoJ drop its lawsuit?

quote:
AMD's problem is that it was badly managed, in that it failed to advertise massively during the window of time in which it made the superior product. Intel's advertisements were everywhere; AMD didn't advertise at all. Big surprise, consumers bought into the Intel name even when AMD made the better product. And now that AMD products are inferior, the company is bleeding red ink. Again, a big surprise.


Funnily enough, it did advertise - I saw a few AMD adverts. Its problem was that Intel unlawfully forced manufacturers not to stock AMD products, and even tried to force (with some success) motherboard manufacturers to not make AMD compatible motherboards. You can advertise your product as much as you like - if no store is willing to carry it because of your competitor's illegal actions, it is worthless.

quote:
The EU's prosecutions would be OK except that the EU is imposing its questionable concepts of "crime" on the rest of the world, not just on European actors. This is a global economy.


Even if the EU were the only one investigating Intel, and even if the US were not investigating Intel (which alone makes your argument invalid), if a corporation wants to do business in a country, it must abide by the country's laws. I dont see AMD or Intel moaning about Sharia law in the Middle East, yet I'm pretty sure they do busines there. Is the Middle East not politically correct because they have their own laws which they expect individuals and corporations to abide by?


By The Irish Patient on 3/12/2008 3:56:42 PM , Rating: 2
(1) Cost of entry is indeed daunting, but it is not punishable anticompetitive conduct. Costs of entry also apply to companies like AMD that are already in a market, but making a somewhat obsolete product. AMD faces a tough cost of entry to design a product that can equal or better the Core 2 architecture. AMD also faces a multi-billion dollar barrier to begin 45 nm production. That was my point. Barriers like these do more to explain AMD's problems than Intel's conduct.

(2) Japan's Fair Trade Commission merely issued a three page report criticizing Intel's rebate practices. Intel revised the program, and that was the end of the matter. There was never any discussion in Japan about imposing penalties of up to 10% of global revenue. BTW, Intel has also changed its rebate practices in Europe. This is all old news; time to move on as the Japanese have done.

As for the DOJ investigation in the USA, there is no consensus that Intel violated US law. US anticompetition laws generally require collusive action among potential competitors. Rebates offered by a competitor generally aren't enough, as long as the final price after rebate doesn't represent dumping at below cost. More fundamentally, US law doesn't require a competitor to back off on its efforts merely because its market share reaches X percentage.

Oddly, AMD unsuccessfully offered a bride that would have violated US anticompetition law had it been accepted. AMD freely admits that it offered HP one million CPUs in 2002 at zero cost as an "incentive." Unfortunately for AMD, HP liked Intel's rebates better. There is no claim by AMD that Intel's CPUs were priced below cost after rebate. Clearly, one million AMD CPUs for free is well below cost, making AMD's failed effort a clear violation of US law.

(3)
quote:
You can advertise your product as much as you like - if no store is willing to carry it because of your competitor's illegal actions, it is worthless.


Funny, that didn't stop AMD from trouncing Intel during the last quarters of the Netburst era. AMD does well when it has a superior product and poorly when it has an inferior product. US law is not receptive to antitrust lawsuits under these circumstances.

(4)
quote:
if a corporation wants to do business in a country, it must abide by the country's laws.


I agree, and the corporation should be free to price its product accordingly in each country. But the EU isn't content with enforcing EU law within the EU. The EU claims the right to enforce EU law worldwide, by making all global revenue subject to EU penalty.



RE: More European = Communist Comments
By z3R0C00L on 3/14/2008 2:32:05 PM , Rating: 2
quote:
If thats the case, why was Intel found guilty in Japan, and why is the US Department of Justice investigating Intel now? If Intel is being investigated by the US DoJ for the same crime as in the EU, does the US DoJ also have a very leftist view of crime? Should the US DoJ drop its lawsuit?


Answer is simple. The DoJ is investigating Intel's practices due to complaints made by AMD.

As for Japan and other countries, they have differing laws. Intel did not break Anti-trust laws but rather offering discounts to vendors which is not legal in certain countries (but is still widely practiced, if I buy 1,000 CPU's from Ingram Micro (major distributor) I will pay less then if I bought 1). Of course that practice is legal in Canada, the USA and Europe.

quote:
Funnily enough, it did advertise - I saw a few AMD adverts. Its problem was that Intel unlawfully forced manufacturers not to stock AMD products, and even tried to force (with some success) motherboard manufacturers to not make AMD compatible motherboards. You can advertise your product as much as you like - if no store is willing to carry it because of your competitor's illegal actions, it is worthless.


Ahh another false allegation.. you're quite the fanboy there. Intel did not force anyone from not stocking AMD CPU's. Let me explain again.
Dell wants to buy CPU's from Intel. Intel has tiered pricing. Dell wants the better price therefore Dell needs to buy the largest amount of CPUs to get the better price (the more you buy the larger the rebate). Intel does not specifically reward companies from not stocking AMD products but rather gives the OEMs hefty discounts based on the amount of Intel CPUs they purchase. As such OEMs blow all their funds on Intel products (because they know the Intel name will sale). Intel ALSO jointly helps OEM advertise their products (Intel Inside). It's a win/win/win situation for the OEM/Intel and the Consumer. The heftier discounts are passed along to the consumer (notice the lowering of the PC price year after year.. lately being notebooks). Intel sells a ton of CPUs and OEMs get help marketing their products that have Intel Inside (Centrino etc).

AMD doesn't do that practice (which is legal) as such it could be said that Intel is in the position they're in due Intelligent forward looking marketing campaign performance and a more streamlined and consumer/OEM focused business model. You can have a superior product (K8 vs. Netburst), but if you don't market it.. no one will know.

I do apologize for the pWnage.. I stick to facts instead of making allegations. I don't side with Intel or AMD simply the facts.


By z3R0C00L on 3/14/2008 2:42:23 PM , Rating: 2
I should add that I am a member of the IT world. I used to run my own computer business and dealt with distributors such as Tech Data, Ingram Micro, ASI, Extranet, DHS etc.

I know how it works, and you don't and I understand that you don't. I'm not going to judge you simply provide you with the facts.

Intel will be cleared in the USA, as for Microsoft.. they are a Monopoly. There is no denying that Microsoft does practice unfair practices (especially with the inclusion of several sub-products withing their O/S). This is illegal (Including Windows Media Player, with Windows should be viewed as illegal).

Offering a link to download the product after Windows Installation should be the proper practice. Microsoft has started doing that with MSN\Windows Messenger and I applaud them. (as well as ways of changing the default programs used to access the web etc).

Microsoft has taken steps to address much of the allegations made against them. The one allegation I disagree with is that Microsoft must give THEIR source code to the EU.. that is absurd. That is not communism but Fascism. The EU does not own Microsoft Intellectual property.

I would much rather see Microsoft stop selling it's products in Europe for a year to see how negatively it would impact the EU.


"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il














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