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Investigators crack down on illegal tactics against AMD

South Korean antitrust investigators fined Intel Corp. 26 billion won ($25 million), for illegal rebates and parts discounts to manufacturers on condition that they not buy from rival manufacturer AMD.

The fine, which closely mirrors the outcome of a similar antitrust investigation in Japan in 2005, makes Intel the second major global technology company to be disciplined by South Korea’s Fair Trade Commission, after Microsoft in December 2005.

Intel said it was displeased with the outcome of the order, and is considering appeal.

“We're disappointed and we completely disagree with the findings,” said Intel’s senior VP and general counsel Bruce Sewell.

South Korean officials hit Intel with antitrust charges last year, working from findings of a two-year investigation wrapped up last September.

Forbes called the rebates a “time-honored practice in the personal computer industry;” identical practices in Europe, the United States, and Japan have since landed the company in considerable hot water. Both European and American investigations are still pending.

In Europe, rumors of a “provisional decision” at the end of last month proved to be false, after European Commission officials dismissed a report that it had gathered sufficient evidence to enter a ruling. Despite that, the Commission promised an antitrust ruling against Intel “as soon as possible,” but refused to provide a specific timeline.

If antitrust rulings against Microsoft are any indication, Korea’s ruling against Intel will be a pittance against the kind of money that European investigators might fine. Antitrust investigations against Microsoft hit the company with a whopping $1.4 billion fine last February – compared to $32 million in South Korea – and EU antitrust rules allow for fines of up to 10 percent of annual sales.

Intel will wait for the dust to settle before it acts, it said, as the official outcome could take between 30 and 60 days and may change significantly during that time. The company can also opt to request reconsideration from the KFTC, or choose to seek a court ruling.

Regardless, Intel denied any wrongdoing with respect to its rebate practices.

“To ask us to cease and desist behavior which we are not doing and never have done is odd,” said Intel representative Nick Jacobs. “We don't use rebates in an anticompetitive fashion.”



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Rebates are perfectly acceptable
By DallasTexas on 6/5/2008 5:26:56 PM , Rating: -1
Samsung Example:
If Samsung buy 30 million chips they get a rebate when they reach that threshold. In effect, getting a discount. What is wrong with that? Nothing - Perfectly legal, a contract completely out for regulator inspection. No harm, no foul.

AMD's complaint -
If Samsung can only sell or build 30 million PC's, then they buy nothing from AMD. Simple math. AMD's complaint is that Samsung does not buy from AMD because of the rebate. Well, duh. Where is AMD's better offer? Nothing. They got none. In fact , they couldn't produce any.

What to do? Put tax dollars to work for you - get government regulators all over the world to hunt for big American company game - Microsoft and Intel. Welcome to the new competitive world.




By JLL55 on 6/5/2008 6:10:43 PM , Rating: 5
That is a poor analogy, It would be more like, I will give you a rebate on any future order or any current order if you won't buy any chips from company B. It is not about market saturation, it is about, I will give you money so you don't buy their equipment, not that you will only buy my equipment. Or even a better one which was in the brief, I have given you a rebate, if you buy from company B, I will not give you another one and since all of your systems require support from us, that would be a bad idea. I didn't say AMD is correct, but please make sure to put the right analogy :)


RE: Rebates are perfectly acceptable
By Yawgm0th on 6/5/2008 7:05:12 PM , Rating: 2
I think you have a misconception of what AMD has accused Intel of. It is not the practice of using rebates or giving volume discounts that is considered anti-competitive. It is the way Intel is using rebates.

Intel allegedly offered better rebates to companies with the requirement that they not use AMD processors at all or that a certain percentage of their processors used Intel. In most industrialized nations, effectively offering discounts for not purchasing a competitor's product is illegal. In this case, rebates were Intel's mechanism for this particular practice.

To recap, the lawsuit is not about rebates. It's about offering lower prices in exchange for exclusive sales.


RE: Rebates are perfectly acceptable
By Reclaimer77 on 6/5/08, Rating: -1
RE: Rebates are perfectly acceptable
By dsx724 on 6/5/2008 9:10:37 PM , Rating: 2
AMD made the fatal mistake of not taking the market share when it was offered to them. If they aggressively priced their processors during K8 like they do now, they would have captured a larger portion of the pie and boosted their reputation for reliable, fast computers. Instead they opted to maximize profit and limit their own market share. Shareholders are often blinded by short term profit and now they suffer the long term consequences.

Intel, however, is guity as sin and should be fined for their P3 and P4 rebate tactics. It's obvious as daylight for everyone that Intel was hindering competition instead of trying to compete. I don't think they fined Intel enough.


RE: Rebates are perfectly acceptable
By Ringold on 6/5/2008 9:35:32 PM , Rating: 3
If I'm not mistaken, their chips did sell like hotcakes, but they were capacity constrained.

That's possibly too simple of a way to look at it, but I don't think they had huge inventories sitting around. Maybe they should've sold less retail and tried to get more OEM customers? Don't know, but capacity was some degree of restraint.


RE: Rebates are perfectly acceptable
By Viditor on 6/6/2008 12:19:08 PM , Rating: 2
Some corrections here...

1. AMD was selling their chips much cheaper than they are now (relative to Intel) during that period, even though they were faster.

2. AMD sold every chip they made, but they were not capacity constrained. The reason for low inventories was that their APM system was and is so efficient.


RE: Rebates are perfectly acceptable
By Viditor on 6/6/2008 12:29:08 PM , Rating: 2
Also, as to the argument that rebates are acceptable...
That is a true statement, but what is incorrect is calling them (in this case) rebates.

A rebate can be offered to the market in general as certain sales targets are hit, that's quite legitamate...

What Intel did is to set a different target for each customer so that the target represented the majority of their sales. In this way, Intel was in essence paying the customer a kickback to keep 90% of their sales as Intel instead of AMD.
If they had kept to a static rebate target that was the same for all the market, then the law of averages would have balanced it out between the percentages.

This decision makes Intel 0 for 2 on the "our rebates are legal" argument (Japan and Korea have both said no).


RE: Rebates are perfectly acceptable
By Khato on 6/7/2008 4:40:26 AM , Rating: 1
And what about if you call them what they were - marketing funds. Let's see, how many people buy processors? Now how many people buy computers? So let's see, do you want to spend your advertising budget trying to educate consumers to buy your product, when the majority don't have a clue what it is? Or do you want to help have the manufacturer that actually sells what the majority of the end-users buy advertise your product? And in that case, would you want to help them out as much if they have as many systems based upon a competing product when you believe that the average buyer is clueless?

Heh, AMD just whines because it can't compete. And the commissions listen because it's an oppurtunity. Why don't they go and do something about the -real- anti-competitive monopoly in the computer industry?


By Ringold on 6/7/2008 4:38:24 PM , Rating: 2
quote:
Heh, AMD just whines because it can't compete. And the commissions listen because it's an oppurtunity. Why don't they go and do something about the -real- anti-competitive monopoly in the computer industry?


Let me guess, Microsoft?

Setting aside the Kool-Aid, I don't see how that situation is at all different. Linux is free, though simply not as refined. OSX is considered by many people to be superior to Vista.

So, you think AMD is just whining and governments shouldn't punish Intel for fact AMD isn't up to par, but when we move to a very similar situation on the software side, you think Microsoft should be punished because people think Linux isn't worth free and Apple intentionally constrains their OS to their hardware, thus refusing to compete with MS directly?

Somewhere, your logic doesn't line up. Both have competitors that are trying and those competitors, if they had a decent product, have nothing to stand in their way of capturing huge chunks of market share. Hell, Linux distros can distribute themselves at zero cost via torrents. Either Intel and MSFT are both anti-competitive monopolies, or neither of them are, by your own criteria.


By Ringold on 6/6/2008 3:26:46 PM , Rating: 2
Okay, so AMD had spare manufacturing capacity?

If so, I stand corrected! I was under the (false?) impression their fabs were running flat-out, and thus couldn't of captured much more market share if they'd wanted.


By just4U on 6/6/2008 12:48:31 PM , Rating: 2
quote:
If they aggressively priced their processors during K8


Adding to what other's have stated. Amd did accually have substantially lower prices on their cpu's as compared to intel. Even their highest end offering was still priced lower (on average) except at the last stages of their dominance.

I remember seeing Amd's top end CPU at $600 when Intel's highest offering was selling for $1800 at one point back 4-5 years ago.


RE: Rebates are perfectly acceptable
By Crank the Planet on 6/5/2008 7:41:18 PM , Rating: 2
Intel has been practicing these strong arm tactics for several years now. Ever wonder how they managed to stay afloat after AMD's K8 just dominated everywhere? It's right here baby! Intel has used these tactics world wide to keep people from buying AMD. Yes you heard me right. It is illegal for a company to offer any type of incentive not to buy a competitor's product. Intel didn't have a good product so they did this and worse so that companies wouldn't sell AMD. It is well documented that companies like Dell were "told" not to sell AMD, and if they did they just might be skipped on future shipments of CPU's, motherboards etc. That would effectively cut the throat of any PC retailer and drive them out of business literally overnight. On the other hand if they played ball nicely with Intel they would be offered "incentives" and "rebates."
I don't care if some or all of intel's product line is faster, I will never buy from them and will continue to discourage everyone I can from buying their products because of their severe lack of moral fiber. If you can't stay competitive or keep innovating for your customers then you are in the wrong business.

You give AMD some time. It might be 2 years, it might be 5. When Fusion comes out and it's iterations intel will tremble you just wait and see. Then all of their deep pockets and strong arm tactics wont be able to save them.


RE: Rebates are perfectly acceptable
By tdktank59 on 6/6/08, Rating: 0
RE: Rebates are perfectly acceptable
By plinkplonk on 6/6/2008 7:14:58 AM , Rating: 2
ever since P4 intel have pissed me off... any advert on tv for a computer shop would be like "check out this awesome PC with an Intel Pentium 4 Processor *cue the music and the splash screen*" i mean seriously that had to be the most annoying ad campaign in history (donno if it was outside the UK or not) because it was so painful to see all these companies plugging intel (cash incetives) when AMD at the time were offering much better performance.

seems petty but im not too bothered about a couple of herz here n there so i go amd for not pissing me off :P


By Reclaimer77 on 6/6/2008 5:53:45 PM , Rating: 2
Yes but what you AMD guys refuse to realize is that in the eyes of the consumer, even during AMD's heydays, Intel was better. In the eyes of the consumer.

I was rocking an Athlon Xp and bashing the P4 too back then. But lets face it, the P4 had a great marketing platform and it wowed the consumer with high MHz numbers and good benchmarks.

To claim Intel is where they are at today just because of " unfair practices " is a bit biased. Intel is a giant thats highly diversified. They have had the hottest CPU brand in over a year now, and AMD is showing no signs of repeating their previous glory when they were able to topple Goliath in the eyes of PC techies.

The broad PC consumer base aren't tuners and builders like us who always know the hottest CPU-o-the-month. In the eyes of the consumer, Intel WAS/IS better.


RE: Rebates are perfectly acceptable
By Regs on 6/6/2008 8:08:38 AM , Rating: 2
Intel would not stop selling processors to Dell. Hah. No manufacture would cut off their number one supplier and vendor. One simply won't work without the other. Dell was just as guilty as Intel, or at least in AMD's point of view.

I also agree with others is that AMD missed their opportunities time and again. All AMD has to show for it is a native quad core getting "spanked" by two dual cores "taped" together. Their manufacturing process is slow and costly, their native quad core has lower than expected yields, and of course, Intel now holds the performance crown not only for enthusiast, but for most of the value segments.

And the more I read and gather, "Fusion" is starting to turn into another AMD Live! gimmick. If and when AMD can ever incorporate a GPU on a CPU and can give me more performance than a stand-a-lone, is likely when the market has changed from other developing and upcoming tech which will lead Fusion obsolete.


RE: Rebates are perfectly acceptable
By Regs on 6/6/2008 9:39:37 AM , Rating: 2
Though let me be clear that I'm not expunge Intel for being conniving. This was a important victory for AMD now that Intel has officially been labeled as a company that was involved in unfair business practices.


By frobizzle on 6/6/2008 12:46:33 PM , Rating: 2
quote:
Intel would not stop selling processors to Dell. Hah. No manufacture would cut off their number one supplier and vendor.

First, Michael Dell was so deep in Intel's pocket that he nearly suffocated from asphyxiation being submerged in pocket lint!

To address your point, no, Intel would never cut an OEM off outright as that would be the proverbail smoking gun. More likely, if you did not play nice with Intel (in other words sell little or no AMD CPUs) then strangely, your next shipment might be delayed for weeks or even months. That was their modus operandi.


RE: Rebates are perfectly acceptable
By just4U on 6/6/2008 1:08:31 PM , Rating: 2
quote:
All AMD has to show for ..


While they are not posting profits right now they accually do have some excellent products.

Their 780G chipset is by far the best on the market and even Intel's next offering supposedly wont come close to touching it. From the ATI standpoint, that 3X lineup was extremely good as well. They are quite competitive in the value side of the cpu market. Plus for a HTPC setup, those tri-core phenom's on a 780G setup would probably be a fairly dominant setup.

So it's not all bad for amd. Just no performance crown and still operating in the red (as they have thru-out much of their existance)


RE: Rebates are perfectly acceptable
By Regs on 6/6/2008 3:53:11 PM , Rating: 2
Their mobile platforms look terrific and most phenoms look reasonable. They have a solid line, but just not good enough. Simply said of course.


By Cheesew1z69 on 6/6/2008 1:23:04 PM , Rating: 2
Intel has been doing this for more than just the last few years....


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