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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 6/9/2008 12:38:44 AM , Rating: -1
Monopolies always fix prices. And they are fixed according to their profit needs, not the consumer's expectations.

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.

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.

False. It is not simply competition, but the fear of competition. The difference is that you can be in a position with no competition and still want to offer the best quality and price knowing that if you didn't, someone else could more easily come in and undercut you. I fail to see how a Microsoft could offer perpetual Windows MEs and not lose marketshare to someone else. I mean this is absurd thinking.

And add to your list the fear of bankruptcy. Every business wants to stay solvent.

Where we differ is your assumption that a "monopoly" or dramatic winner in a market that lends itself to such must be the result of some type of "unfair" behavior, and that it can never be legitimate. I believe that the only unfair practices are when companies collude with extra-ordinary powers in government that the private industry lacks. And you are essentially not drawing a disparity between the two, implying unfair gain in all monopolistic cases, and then rationalizing that subsidize the losers losses with the winner's gains, by definition penalizing the winner. This creates an enormous disincentive. And if government keeps pulling Intel back because they think they're too large, eventually AMD is going to surmount them despite all that Intel did. And the roles will be reversed.

RE: If this is what it takes, so be it.
By Aloonatic on 6/9/2008 4:55:01 AM , Rating: 2
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.

"I want people to see my movies in the best formats possible. For [Paramount] to deny people who have Blu-ray sucks!" -- Movie Director Michael Bay

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