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The FTC announced Friday that it will formally examine whether Intel abused its dominant position

Somewhere at the headquarters of AMD, there must have been a cheer that went up on Friday.  After months of losing ground to Intel, employee layoffs, and under the shadow of Intel's looming Nehalem architecture, the company finally had some good news to be happy about.

It’s no small mystery that AMD these days simply seems incapable of outcompeting Intel.  Intel argues that this is due to its superior products.  AMD, however, has long maintained that Intel was deploying anticompetitive processes, which it says are digging it into a hole from which it cannot escape.  However, despite a passionate ad campaign and lengthy discussions with antitrust officials in the U.S., AMD has seemingly had a tough time selling its idea that Intel was cheating in the microprocessor war.

The U.S. Federal Trade Commission (FTC), which supervises free trade in the U.S., announced that it was launching a formal antitrust investigation against Intel.  The stakes are high for both Intel and AMD; the total market for microprocessors racked up $225 billion in sales last year. 

Both Intel and AMD realize what’s at stake and have spent tens of millions in legal expenses and on public relations campaigns.  AMD had previous success in Europe, Korea, and Japan -- all of which have investigated Intel or threatened it with possible fines.  However, the biggest victory -- a U.S. antitrust investigation -- seemed out of reach until this week.

State authorities and federal appointees from the Bush administration have been taking a more lenient approach to antitrust that their European counterparts.  However, the major decision Friday marked a sharp new shift in policy. 

The new investigation originated with the new blood -- William E. Kovacic, the new chairman of the trade commission.  With the backing of his fellow commissioners, he reversed the decision of Deborah P. Majoras, the previous chair, who had been blocking the investigation for months to the frustration of those on Capitol Hill.  Majoras was a more lenient appointee, and helped work out the antitrust settlement in 2001 with Microsoft.

It will take months before formal charges against Intel might be made, so the upcoming administration’s stance will greatly factor into the case.  AMD is relying on the federal case as only one state -- New York, at the behest of attorney general Andrew M. Cuomo -- has agreed to investigate Intel on a state level.  California attorney general Jerry Brown denied AMD's pleas, derisively commenting that he was "not barking at every truck that comes down the street."

D. Bruce Sewell, Intel’s senior vice president and general counsel, says that the U.S. antitrust laws are different than European ones, and it will not be charged.  Intel is planning on racking up its Capitol Hill efforts, though, likely in the form of lobbyist dollars.

The first signs of the upcoming bad news for Intel appeared when chip manufacturers began to get subpoenaed by the FTC.  The FTC is working with Europe and other foreign governments to obtain evidence to use against Intel in a possible case.  Mr. Sewell said that he was working amiably with the FTC on a less formal review since 2006 and that Intel would remain cooperative.

AMD's top executives expressed their pleasure over the Commission's decision.  Tom McCoy, executive vice president for legal affairs at AMD, stated, "Intel must now answer to the Federal Trade Commission, which is the appropriate way to determine the impact of Intel practices on U.S. consumers and technology businesses.  In every country around the world where Intel’s business practices have been investigated, including the decision by South Korea this week, antitrust regulators have taken action."

The largest U.S. antitrust investigation since the Microsoft one of the 90s came the same week as more good news for AMD; Korean officials slammed Intel with a $25 million fine for violating its fair trade laws.  The Korean officials discovered that Intel illegally paid Samsung Electronics and the Trigem Company $37 million in payments between 2002 and 2005 to not buy AMD processors.  The European Union's European Commission (EC), which charged Intel with "the aim of excluding its main rival from the market" is expected to expand its charges this year.

Intel currently owns somewhere between 80 to 90 percent of the worldwide microprocessor market.  Many U.S. citizens do not realize that U.S. laws do allow monopolies, unlike elsewhere, but forbid companies with a monopoly from using its dominance to restrict competition.

With mounting evidence worldwide, Intel faces a tough case before the FTC.  However, it will likely do what it takes, or perhaps more aptly write the lobbyist checks needed to prevent it from becoming the next Microsoft.  Meanwhile, AMD will also likely step up its efforts in hopes that it can stop its downhill slide by a court victory over Intel.



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RE: If this is what it takes, so be it.
By BansheeX on 6/8/2008 5:20:03 AM , Rating: 1
quote:
As much as I am pro free market, Intel cannot be allowed to destroy the competition. It's just bad for consumers.

I don't want Intel's only competition to be Moore's Law.


There are two things that socialists find really hard to understand with truly free markets:

a) The role that government powers (inevitably bribed) currently play in eroding small capital and competition, primarily through subsidies (cumulative and direct transfer of wealth from the people's incomes to a company of the government's choosing), special privilege legislation like 900 page NAFTA managed trade, bans purported to be safety-related (stevia vs aspartame), and taxpayer bailouts under the pretense that allowing bankruptcy would be to the overall economy's detriment.

b) That a legitimate market leader or "monopoly" not created from collusive activity with government is neither self-sustaining nor inherently bad for the consumer. If Intel gets lazy and starts overcharging or delivering crap products relative to their older ones, that will not only hurt their sales and cause shareholders to invest in something else, it will create an opportunity for someone else to come in. But if Intel DOES keep delivering great products and retaining their monopoly based solely on the fear of this happening, how is that bad for the consumer?


RE: If this is what it takes, so be it.
By bpurkapi on 6/8/2008 6:48:37 AM , Rating: 3
C'mon!
Socialists or Libertarians are actually completely aware of the points you bring up, heck the points you bring up are not so much points, but common sense. Now the true difference that we can start to debate is whether or not Intel actually colluded with OEM's to choose their products vs. AMD's. When I first read this article I immediately thought this would turn into fanboy banter, but yet this is far worse... It has turned into free market vs. socialists. Most comments after a Dailytech article I read are completely unrelated to the actual technology and instead are about ideology, or some other biased crap; whether that be religiously affiliated or culturally affiliated. Let's talk Tech not issues which are never going to have an acceptable outcome to all parties. For all those who disagree there is a site called Dailypolitics, or Dailyhumor which you can post your comments on... Its called Dailytech for a reason!


RE: If this is what it takes, so be it.
By BansheeX on 6/8/08, Rating: -1
RE: If this is what it takes, so be it.
By Schrag4 on 6/9/2008 11:17:33 AM , Rating: 3
quote:
Why is it inherently bad for suppliers to make exclusivity payouts with producers?


You're right, this isn't bad, but the article paints a slightly different picture:

quote:
The Korean officials discovered that Intel illegally paid Samsung Electronics and the Trigem Company $37 million in payments between 2002 and 2005 to not buy AMD processors.


It doesn't say that Intel paid those companies to buy Intel only (exclusivity as you mentioned). It says Intel paid those companies to not buy AMD. If the article is worded incorrectly (or incompletely), please change it. Otherwise, this sounds like a horrible thing for Intel to do.


RE: If this is what it takes, so be it.
By therealnickdanger on 6/9/08, Rating: 0
By callmeroy on 6/9/2008 1:34:33 PM , Rating: 5
As one who has read the entire court case that AMD originally filed against INTEL (side-note if your only source of info on this case is the paltry stuff posted here on DT you don't know 1/10th of AMD's whole claim), and AMD claims and reports to have evidence of several shady dealings by Intel of an anticompetitive nature - one including special deals on a per customer basis, another issue in the case file was pretty much Intel's alledged slandering of AMD on false grounds just to cut down their reputation and win over customer and yet another was Intel offering "bribe-like" incentives to customers if they ignored AMD business.

Whatever you think - all those things I just named are illegal to do in business. Now do you know of business that do that sort of thing everyday, maybe -- do I yeah perhaps..but remember the old story "you are only in trouble if you get caught"...pretty much the same with this stuff. Shady business deals or questionable business deals go down every day of the week -- its only the ones who get caught you read about.

Funny how times change -- I remember thinking "so what"...when everyone wanted to burn Microsoft at the stake for making IE part of the OS and I seemed to have been alone then. But now this case comes along and what Intel is accused of doing to AMD is 100 times worse that the Microsoft IE thing IMO, yet people are backing Intel.

Interesting...


By Schrag4 on 6/9/2008 2:20:24 PM , Rating: 2
I think you totally missed my point. I actually agreed with you in my previous post. However, the article, as worded, claims it went down more like this:

"Hi, I'm with Intel and we don't care who you buy CPUs from, but we'll give you large sums of money if you would NOT buy from AMD. Buy from anyone else, just not AMD."

The obvious reason for doing this would be to kill off a much smaller competitor that doesn't have the reserves to survive losing money for several years. If the competition is small enough and dies off quickly enough, you can make up the 'bribe money' after they're gone in the form of higher market share and/or higher prices.

Again, let me stress that according to the law, exclusivity deals are OK. But the article is worded in such a way that suggests that Intel went beyond mere exclusivity deals.


By plinkplonk on 6/9/2008 12:09:58 PM , Rating: 2
quote:
Suppose Intel's chips were half the performance of AMD and they paid Dell the same amount to be exclusive, do you think Dell would have benefited?


Yes, because you forget that the average consumer has no idea and just goes by the brand name.


RE: If this is what it takes, so be it.
By Master Kenobi (blog) on 6/8/08, Rating: -1
RE: If this is what it takes, so be it.
By DeepBlue1975 on 6/8/2008 7:25:49 PM , Rating: 3
Monopolies always fix prices. And they are fixed according to their profit needs, not the consumer's expectations.
And without competitors, almost nothing motivates a company to work on really better products (better <> new) as that implies a higher cost than simply coming up with "simple" product refreshes.

You know this is true no matter if we're talking about Intel or AMD or VIA or Cyrix or whomever. A company with a strong lead kept for many years will try to exploit the acquired reputation and save the higher costs (engineering and R&D) while resorting more to less costly practices (marketing, publicity, etc) so that they can maximize their revenues while adding the lowest possible cost.

That's not good for anyone.


RE: If this is what it takes, so be it.
By BansheeX on 6/9/08, Rating: -1
RE: If this is what it takes, so be it.
By Aloonatic on 6/9/2008 4:55:01 AM , Rating: 2
quote:
And if they do it, it creates so large a disparity between cost and price that someone else will come in and undercut them. Thus the price fixing is UNSUSTAINABLE without extracurricular government help.


You know that people are talking about monopolies here, there is no one else???? That's the point.

If you're talking about new companies coming into the market, you think that the company which has a monopoly to defend will give the newcomer an easy ride?

Maybe this would be possible in the coloured wrist band industry but not the CPU market, where massive investment in R&D and Fabrication facilities would be needed to compete on a level playing field and don't just appear over night.

I admire your rather strange defence of monopolies and I can only assume that you are doing this for fun, but seriously, you know that you are living in a rather odd dream world don't you?


RE: If this is what it takes, so be it.
By BansheeX on 6/9/08, Rating: -1
By Aloonatic on 6/9/2008 12:09:01 PM , Rating: 2
AMD came from IBM demanding that Intel wasn't the only fabricator of chips and had to be given a leg up by Intel in the first place.

If Intel weren't forced to give AMD information then there would not be an AMD like there is now.

The infinite capital argument is a bit silly (as most of these arguments are, granted, i was arguing a total monopoly) and I hoped that my allusion to the arm band manufacturing company may have made it obvious to you that it is more to do with the massive barrier that is the cost of entry to the market.

And if Intel were making these $500 margin chips and IBM and AMD were starting from scratch, just wear would they make their competing chips, who would be designing them and who in their right mind would invest in a company facing a competitor who is able to sell a product happily making those sort of margins?

And then Intel have $500 margin to play with and cut for as long as it takes to see off any upstart.

They could afford to sell them at a loss assuming that they had had the market to themselves for long enough to have built up some serious levels of reserves and stock holders would be happy to invest a little bit more knowing that it as as close to a sure fire winner as you can get.

That is what I meant about defending their market.

I agree that when 1 company has a dominant position it is perfectly reasonable to defend how ever they can within the law, but in the example you set out it is obvious that Intel could just price anyone out of the market very quickly.

Are Intel being punished for Intel/IBM/VIA's incompetence?

Mostly, these arguments are pointless and people are arguing over different things here I think.

The point is, monopolies are rarely any good and there are laws against them for a reason.

have run out oif time at work, haven't had time to proof read, hope it makes sense :-s


By DeepBlue1975 on 6/9/2008 10:30:42 AM , Rating: 2
Please remember the definition of monopoly. It's not the same as "dramatic winner". It's "only supplier".

Intel was never a monopoly, it's being accused of trying to
enforce monopolic practices so they can become a monopoly.

And contrary to what you think, MS could be still selling windows ME if they wanted to. They have pretty closed policies as for compatibility, and no matter how unstable their past products could have been or not, they were always the easiest to use and that's what finally counts for people.
OS/2 Warp v3 was, IMHO, the best OS out there when w95 came out, but it was not advertised as much as Windows, was not as easy to use as windows, and finally, was not completely compatible with many windows products and when win95 came out every single software company developed for it instead of OS/2, to the point that even OS/2 die hards like me had to stop using it and jump into the w95 nightmarewagon.
Much better multitasking, much better memory efficiency (I could do lots of stuff on a 386 with 5mb RAM, a setup that wouldn't even run w95 acceptably well)... But not as easy to use and definitely almost noone kept developing for OS/2 when w95 came out.
The winner is he who can get the better part of the marketshare regardless of how, while keeping profits high enough, and not precisely he who offers the better products.
Remember DEC's Alpha processor? Always light years ahead of any other CPU in performance? Well, there you've got it, DEC bankrupted because best technology does not necessarily equate to best business practices (for the own company, of cuorse). We don't have those speedy Alphas anymore.
And then SGI, those powerful graphic machines which were used to make the fx for terminator 2... Now if you see any nto so old Sillicon Graphics machine, it almost surely has an Intel processor and runs Windows instead of Irix.

Power PC processors were great and gave an edge to Macs over PCs in their territory... Now they have Intel processors, AMD/Nvidia graphics cards, regular memory, and so on. A Mac today is just a PC in a pretty disguise, a huge price and running MacOS instead of windows.

Get the picture? "best products" were easily surpassed in marketshare by great marketing and pubilcity, and sheer mass acceptation. And everybody knows that what most people accept is not always the best there is, and specially if we talk about the mainstream market, in which most people won't be spending several hours browsing the net and reading reviews about the products he'll buy, but instead just listen to a 5 minute reseller talk or ask someone who they think knows better than them about what they should buy.


By rudolphna on 6/9/2008 10:13:53 AM , Rating: 2
So.... We have intel. Intel doesn't have any competition. What motive do they have for producing better parts? Why spend millions of dollars to develop new architectures when noone exists to challenge their position? They don't. Hell, we might even go back to the days of the P-4, because there is no reason for them to spend the money.. Where is everyone going to spend their money? The answer is... Intel.


RE: If this is what it takes, so be it.
By kc77 on 6/8/2008 12:24:22 PM , Rating: 2
Nice to see you again :)

First of all as I said before free market theories while Utopian in it's aspirations can never truly happen.

We do have one area of agreement. Government collusion with business in furthering agendas that directly benefit any company is bad...very bad. But your unicorn, pie in the sky theory that markets will self correct in the event of monopolistic practices which stifle competition in a primordial soup of better products is just shortsighted, and obtuse.

This whole article is in direct conflict with your statement. You have Intel which during 2001 - 2005 had a uncompetitive product bordering horrible. There wasn't government intervention at all and the result is that even though Intel had an inferior product, it had absolutely no effect on them. Why?

Once any company becomes a monopoly, it effectively lives outside of economic forces. It is in fact the definition of monopoly itself which means "exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices" that is so telling. So follow me here, if a company is a monopoly and can control prices, HOW CAN A FREE MARKET APPROACH PROTECT A COMPETITOR WITH A BETTER PRODUCT??? The answer is it can't. We see it all around us... higher and higher gas prices, which from our last conversation, I'm still waiting for your free market theory to kick in and bring down the prices of energy since we have enough alternatives to fossil fuels in existence that something should be kicking in right about now dont'cha think?

In addition, since the last time we talked I said I didn't feel like dissecting and diagramming some of your theories, statements, and misconceptions on definitions, well in light of a $135 dollar barrel of oil I have found new ambitions to set ablaze your market theories which seem to emanate from the ethereal soup emanating from a power source in existence beyond the Thunderdome.

First your frivolous use of "socialism", just because someone on this earth objects when companies use their mind share, market share, and capital within the economic system we call capitalism to control markets and shut out competition does not make them a socialist. I could say that your casual way of throwing out the term socialism makes you an one-dimensional Neanderthal with fleeting aspirations to control the masses through ignorance, imperialistic tendencies, and propagandistic approaches not seen since World War II, and then encapsulate everything you say with a single word....communism. But by doing so would stereotype you and would be no better than shouting the word socialism at someone who has no problem with people making money and just wants it to be done honestly and in adherence with common law. So I won't.

I don't have a problem with capitalism, I just despise it when it operates in a race condition leading to a path of dominance of the population by the few and assures the mutual destruction of the populous as a whole.

Nothing in this world operates without limits, or boundaries.


RE: If this is what it takes, so be it.
By Reclaimer77 on 6/8/08, Rating: -1
RE: If this is what it takes, so be it.
By kc77 on 6/8/2008 4:30:17 PM , Rating: 1
Um, no. AMD bascially survived those years because their products WERE better, Also there several times within this time period were Intel could not supply enough processors to market. The only fact that you have listed is that Intel has a huge advertising campaign / cash reserves.

Actually you should pick your poison and have a better understanding what this suit is about before you list facts that aren't.


RE: If this is what it takes, so be it.
By Reclaimer77 on 6/8/08, Rating: -1
RE: If this is what it takes, so be it.
By OCedHrt on 6/8/2008 8:21:05 PM , Rating: 1
Exactly. "How many people knew that?" Don't you ever wonder why it is like that? Intel paid companies to market itself as better. Manufacturers listed Intel machines as top of the line and listed AMD as value. Retailers were given a payout to push Intel over AMD.

Most "joe smoes buying a Dell or Gateway" didn't know what Intel was either, just that the sales guy on the floor says Intel > AMD because that is what he has been instructed to do.


RE: If this is what it takes, so be it.
By Reclaimer77 on 6/8/08, Rating: -1
RE: If this is what it takes, so be it.
By danrien on 6/8/2008 9:57:14 PM , Rating: 5
When a company pays another company whom buys products from them to not advertise their competitor's products, that's not competing in a free market, but instead closing a market out so your competitor can effectively not compete. Thus, as US law has held for many years, it is violating the rules that apply to a monopoly.

In effect it's like you paying the ref at the basketball game so your team wins. On one side, you could argue that you were just "competing" differently to win the game, but on the other hand, the other team never even stood a chance, and thus the fans (the customers) lost the chance to see a good game.

Basically, AMD has been trying to play catch-up to Intel for a few decades now, and everything they have attempted - having better products, doing large marketing campaigns, etc., have not worked. The question that AMD is asking, entering their fourth decade of existence, is why? And in the end, the talent at AMD doesn't lose, there are plenty of experienced, intelligent individuals there who will find jobs elsewhere; instead it is us, the customers, who lose, from price rigging and unfair market manipulation.


RE: If this is what it takes, so be it.
By BansheeX on 6/9/08, Rating: 0
By adiposity on 6/9/2008 11:56:07 AM , Rating: 4
quote:
What's absolutely hilarious about this analogy is how wrong it is, and how I keep getting rated down trying to explain to people the difference. The referee has powers that a player doesn't. The government has powers that the private industry doesn't. He can eject players, he can deny points, he can give points, and he can also be bribed. The referee is the government, but Intel never colluded with government. They made a legitimate contract with several OEMs, who took a calculated risk to gain more from a payout than prospective losses to other OEMs offering purportedly good AMD chips. In no way could Intel prevent customers from choosing AMD, only under certain brands. It would literally take an infinite amount of capital to not only buy out existing OEMs, but suppress prospective startups.


You're right, a better analogy would be if the Lakers stood outside the Celtics' stadium all next year and paid people not to go in. And continued this practice for a decade until the Celtics were so poor they could only afford d-league players. And then claimed they were beating the Celtics because they had better coaching.

-Dan


By Reclaimer77 on 6/9/2008 12:13:03 AM , Rating: 2
I don't need you to explain the situation to me, thank you. But people are trying to make this bigger than it is. Why do you think the fines have been so low ? 25mil is peanuts.

You can hold Intel accountable for unfair practices. What I'm saying however, is that you cannot heap AMD's current situation and problems on Intel.

quote:
Basically, AMD has been trying to play catch-up to Intel for a few decades now, and everything they have attempted - having better products, doing large marketing campaigns, etc., have not worked.


This perfectly illustrates what I'm saying. Intel has NOT been " cheating " AMD for decades. And you are only listing the things AMD has done right. I notice you left everything they have done WRONG off your list.

Hold Intel accountable, fine. Blaming them for AMD's problems in the market is just petty. The simple fact is the better product does not always win in a free market.

Bose is a perfect example. Their speakers, especially their all in one stereos are pure garbage. Yet they have a huge market share with massive customer retention and loyalty. Why ? The consumer doesn't know any better. Bose has marketed themselves masterfully. Just like Intel marketed the Pentium 4. Do you think the majority of the consumer base knew it was " inferior " to AMD ?


By rudolphna on 6/9/2008 10:15:57 AM , Rating: 2
Do you remember when Intel switched over to 180nm? They had extreme supply shortages. The Pentium III was in short supply for a long time, because intel had issues with its production lines.


RE: If this is what it takes, so be it.
By BansheeX on 6/8/08, Rating: 0
RE: If this is what it takes, so be it.
By kc77 on 6/8/2008 4:57:24 PM , Rating: 1
quote:
A monopoly CAN'T control prices. You CANNOT be forced into a buying a product unless government dictates such with your money (subsidy).
Did you really just say that??? Somewhere in your post you make a comment that one of my statements was idiotic and you say this....WOW....OMG ..LOL LOL LOL LOL I was really going to go toe to toe with you on your post but to say something that refutes the Webster dictionary ....man.... that takes a level of chutzpah that I really haven't seen in ages. Do you lobby for Microsoft or something??? Man...LOL
quote:
A monopoly CAN'T control prices.
..LOL LOL LOL

There really isn't away to have reasonable dialog with you. I understand that now....I can't converse with someone who refutes the dictionary and often times bounces in and out of a metaphoric economic acid trip while eschewing reality only to shout "socialism" and "free market" and expect diminished sensibilities to constitute an acceptable form of reinforcement.

Man I was about to go into hedge markets, Enron and a whole host of things....
quote:
A monopoly CAN'T control prices.
LOL LOL LOL I mean how do you argue with that ??!?


By aebiv on 6/15/2008 6:52:43 PM , Rating: 2
Were you really born that blind to capitalism?

A monopoly will not survive in a free market society, but in this ever more regulated and socialistic economy we are building here in the United States, we keep thinking the government needs to come in and rule every aspect of our lives.

I'm sorry, America was not founded that way, and will face even worse atrophy if this is allowed to proceed.

Your post is about as intelligent as a 5th graders, and even that is a slam to some of the 5th graders I've known.


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