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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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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
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
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.

"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer
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