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Fine is the largest ever levied for antitrust violations in the EU

Intel is the largest CPU maker in the world and dominates the market in many categories. Allegations were made against Intel in Europe that the company was using its dominant market position to reduce competition and prevent AMD from gaining market share.

DailyTech
has been following the EU investigation into Intel closely. This week allegations against Intel were outlined that claimed the chipmaker offered computer makers discounts and incentives to not use AMD products and to cancel AMD products in development.

The New York Times reports that The European Commission has now ruled against Intel and fined the massive chipmaker $1.45 billion. The fine is the largest ever levied against a company by the Commission and eclipses the fine that Microsoft paid to the EU for anticompetitive practices by about two times.

The EU competition commissioner Neelie Kroes says that the massive fine was justified because Intel has denied consumers a choice for CPUs in products. Kroes told the NYT, "[Intel used] used illegal anticompetitive practices to exclude its only competitor and reduce consumers’ choice — and the whole story is about consumers."

Intel CEO Paul Otellini said the firm would appeal the decision. Otellini said, "We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace. There has been absolutely zero harm to consumers."

AMD's Giuliano Meroni, president of European operations said, "[The decision would] shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers."

Kroes also says that Intel went to great lengths to cover up its anticompetitive actions. Part of the ruling against Intel also forces the company to immediately stop offering computer makers rebates that are part of the reason Intel maintains an 80% market share in Europe.

Intel must change these practices immediately pending appeal though it can ask for an injunction. The $1.45 billion fine has to be paid immediately, but will be placed into an account and held until all of Intel's appeals are exhausted. The appeals process could reportedly last for years.

The amount of the fine levied against Intel is certainly massive, but the NYT says it could have been even larger. The European Commission can levy fines as high as 10% of the company's total revenue. With sales of $37.6 billion in 2008, the fine could have reached nearly $4 billion.

Fines collected by the commission are added to its budget, which is around €130 billion reports the NYT. Kroes said, "Now they [Intel] are the sponsors of the European taxpayers."

The huge fine will also serve as a warning to other companies facing investigation by the commission. Regulators in the EU are some of the strictest enforcers of antitrust law in the world. The NYT reports that the EU is so much tougher on antitrust that U.S. firms often file allegations in Europe rather than in America. Intel is also facing inquiries in the U.S. from the FCC over similar allegations.



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I would laugh...
By iFX on 5/13/2009 9:46:03 AM , Rating: -1
... if Intel told the UE to pound sand and pulled out of their market completely. I'm sure Intel generates much more than $1.4 billion/year in that market and would be a considerable economic blow to the region. I think it's funny the socialists can't survive without the capitalists to mooch off of.

"You're too successful! We must punish you! Oh and... the success you earned... we're just going to help ourselves."




RE: I would laugh...
By Eckstein on 5/13/2009 10:05:49 AM , Rating: 5
Intel would loose it's biggest market if they pulled out of the EU (not that this ridicules wish makes any sense).

The reason for this court ruling is based on the believe in free markets where competition is alive and not hindered and has been decided by several evidences delivered that Intel did violate legislations related to this.

Your blind hatred against this action clearly shows that you do not believe or understand what capitalism is about.


RE: I would laugh...
By iFX on 5/13/09, Rating: -1
RE: I would laugh...
By Nathanael349 on 5/13/2009 10:28:33 AM , Rating: 5
You don't really get it. This is not about making the market as unregulated as possible as that would be contra-productive and silly. It is about creating a market where and I stress this fair competition is possible, because only that fosters innovation and benefits the consumer. Clearly, allowing what Intel did leads to monopolies, or near monopolies and I don't think I need to explain how monopolies stall innovation and hurt the consumer.


RE: I would laugh...
By iFX on 5/13/09, Rating: -1
RE: I would laugh...
By Proteusza on 5/13/2009 10:47:09 AM , Rating: 3
Yes, thats what its all about. You got it exactly right, congratulations you must be a genius.

Tell me why your own Federal Trade Commission, you know, in the US and A, is investigating Intel for exactly the same reason? Oh thats right, its because the USA hates capitalism too, and y'all are a bunch of commies. Cos, if the FTC is doing same thing as the EU, and the EU = commies, then logically the US FTC is also full of commies.

And that means both South Korea and Japan are also commies, because they even found Intel guilty already. Guess some commies work faster than others hey?


RE: I would laugh...
By iFX on 5/13/09, Rating: -1
RE: I would laugh...
By Eckstein on 5/13/2009 10:55:26 AM , Rating: 2
I can only speak for myself, but I vote for a libertarian party here.
Too bad that this doesn't fit in your twisted and absolutistic view on the world!


RE: I would laugh...
By Proteusza on 5/13/2009 12:12:34 PM , Rating: 4
Ba ha ha ha! Now you are the victim!

I guarantee you that the majority. DailyTech's readership is made up of 18-30 year old males in the USA. If that makes them "socialist", then so be it.

Intel's actions were in fact anti capitalist, since they harm the free market. Capitalism works on the concept of a free and fair market, Intel isnt so keen on that.


RE: I would laugh...
By Nathanael349 on 5/13/09, Rating: 0
RE: I would laugh...
By iFX on 5/13/2009 10:54:04 AM , Rating: 1
Microsoft and IBM, circa 1980 - aka - David and Goliath.

Point, set, match.

Large corporations to not stifle innovation - this is just a lie perpetuated by those who believe that every success a corporation has created for itself actually should belong to some kid in a basement.


RE: I would laugh...
By Nathanael349 on 5/13/2009 11:01:50 AM , Rating: 2
Yes, but Microsoft only succeeded due to anti-trust regulation. If IBM could pay retailers not to sell microsoft's OS they wouldn't exist and innovation would be stifled. ;)

Go back and re-read my post and you'll see I'm not saying that the existence of large corporations stifles innovation. I'm saying market abuse does.

This is the argumentative fallacy you committed:
http://en.wikipedia.org/wiki/Straw-man_argument


RE: I would laugh...
By iFX on 5/13/2009 11:05:37 AM , Rating: 2
You have never seen me state that anti-trust legislation is bad. You made that assumption though, which is the fallacy of your character.

Microsoft's success was perpetrated primarily through their resourcefulness and ability to offer products people wanted to buy - and no huge corporation could stop them.


RE: I would laugh...
By Nathanael349 on 5/13/2009 11:12:18 AM , Rating: 2
I haven't assumed that. You yourself in your first (or second) post claimed that the best market is an unregulated one - anti-trust regulation is regulation no matter how you look at it. You've just shifted your position by a mile right now ;) (debating 101, don't do that :P ).

You do realize that what Intel did flies in the face of anti-trust regulation right?

This is my last reply, exam season ;) .


RE: I would laugh...
By iFX on 5/13/2009 11:16:42 AM , Rating: 2
You have assumed it, foolishly I may add. Now that you have no argument you are baiting on semantics to move focus away your own failure to bolster your misguided and factually incorrect points. My words are there to read and however you may misquote them the original text of course can't be changed.

Of course this is your last post. Flame and run. Typical.


RE: I would laugh...
By omnicronx on 5/13/2009 11:40:04 AM , Rating: 3
quote:
Now that you have no argument you are baiting on semantics to move focus away your own failure to bolster your misguided and factually incorrect points.
Haha, thats exactly what you are doing by going off on this tangent.


RE: I would laugh...
By iFX on 5/13/2009 12:57:27 PM , Rating: 1
Let me get you back on track then since you have ADHD. This is something I stated a few posts up. Just so there is no confusion.

quote:
Microsoft's success was perpetrated primarily through their resourcefulness and ability to offer products people wanted to buy - and no huge corporation could stop them.


RE: I would laugh...
By omnicronx on 5/13/2009 11:10:13 AM , Rating: 2
quote:
Point, set, match.
Microsoft was found guilty of being anti competitive and stifling competition, try again.

Please do not put IBM in the same boat as either. If not for them Intel would be the ONLY CPU maker in the market. IBM single handedly made competition possible by not allowing Intel to be the only CPU maker for their PC's.

You point does not prove anything, there is no rule set in stone that large corporations stifle competition, but that does not mean it does not happen. Intel has admitted to all the charges (rebates, incentives etc, exclusivity deals), they just don't think it is illegal, because it is the 'nature of the cpu industry'. The problem is this is an industry THEY CREATED so this is not a defense at all.


RE: I would laugh...
By iFX on 5/13/2009 11:20:02 AM , Rating: 1
Please don't expect me to seriously consider that argument.

The original point was offered that large companies stifle competition. Microsoft is the perfect example during their early years. Whatever they may or may not be guilty of later in their history is irrelevant to the fact that they did indeed take on IBM and that IBM was unable to stop them.

Try again please, troll.


RE: I would laugh...
By omnicronx on 5/13/2009 11:48:35 AM , Rating: 2
quote:
Microsoft is the perfect example during their early years. Whatever they may or may not be guilty of later in their history is irrelevant to the fact that they did indeed take on IBM and that IBM was unable to stop them.
Thats the most ridiculous claim ever made. Of course it matters what they did later on in history. The MS antitrust case was at the peak of their dominance, are you really trying to imply that this does not count? When a large company stifles competition is irrelevent, the fact remains that MS was charged with anticompetitive activity and was forced to cease and desist. You have absolutely no argument here.

Furthermore take on IBM? They were partners! They made an OS together (OS/2)! HP and PC clones were the reason for the demise of IBM computers. By the early 90's (i.e well before the end of their partner ship) IBM was no longer THE player in the industry. You are kidding yourself if you think otherwise.


RE: I would laugh...
By iFX on 5/13/2009 12:50:35 PM , Rating: 1
Are you stupid? We aren't talking about 90s MS. We are talking about 80s MS, when they were nothing, when IBM was a billion dollar organization and MS was in the red. The point is that despite IBM being huge and at the time controlling the PC market MS was able to thrive and survive anyway. They are the perfect example of why big business does not stifle innovation and that singular big business won't be in control forever, other companies will form and grow and that they all start small, against the odds.

Yes, MS took on IBM. Learn the history - what was portrayed in the film that you are no doubt remembering isn't accurate. Learn why Windows was a success and OS/2 was a failure for IBM.

Why am I talking to you? Pillock.


RE: I would laugh...
By omnicronx on 5/13/2009 2:34:17 PM , Rating: 2
You are seriously full of yourself. IBM and MS were partners! IBM chose to use DOS and eventually windows, how on earth can you say there were in competition, especially in the 80s?

IBM was never in direct competition with MS until the OS/2 joint venture was done with, and guess what, that was in the 90's. By that time Windows was a powerhouse, and IBM's OS/2warp never went anywhere.

Furthermore IBM is not the 'perfect' example. They attempted to close out the industry by not allowing PC clones. If not for that innovation would have been stifled as they would have completely controlled the PC market.

So take your own advice and learn your history.

P.S The original OS/2 was the IBM/MS joint venture until 1990. Once again proving your statements incorrect.


RE: I would laugh...
By iFX on 5/13/2009 3:12:55 PM , Rating: 2
You can't read or don't read.


RE: I would laugh...
By omnicronx on 5/13/2009 3:48:29 PM , Rating: 2
Don't you get it? I'm disproving your entire theory. Your entire David vs Goliath theory cannot be correct as they were essentially partners throughout the 80's.

It was not until Microsoft was already a giant that they parted their ways (i.e they were not the little guy, they already controlled the OS market).

IBM tried to control the market and failed to stop PC clones.

MS tried to control the market and was slapped with court orders and fines for being anticompetitive.

And finally Intel tried to control the market and here we are today.

Every single one of these companies tried to get rid of their competition, and most likely would have resulting in the stifling of innovation. It happened with MS getting lazy in the late 90's, happened with Intel getting lazy in the p3/p4 years and it quite possibly could have happened had IBM got their way and made PC-clones illegal.


RE: I would laugh...
By xti on 5/13/2009 11:08:54 AM , Rating: 2
is it cold there?


RE: I would laugh...
By VaultDweller on 5/13/2009 11:34:35 AM , Rating: 2
Microsoft didn't compete head to head with IBM, and in fact IBM was one of their most important clients.

Microsoft's success wasn't a story of David beating Goliath - they never had an established dominant player that they had to overcome. David didn't beat Goliath, David seized an emerging market long before Goliath ever realized that market existed, let alone had any potential.


RE: I would laugh...
By mars777 on 5/13/2009 3:58:05 PM , Rating: 2
Well said.


RE: I would laugh...
By omnicronx on 5/13/2009 10:58:21 AM , Rating: 2
Wake up? Apparently you've been asleep for the past 8 years. AMD filed suit against Intel in 2005, and the EU's antitrust case has been going on since 2001. Intel did NOT have winning products, and their business strategy involved paying off companies, and forcing incentives down the throats of OEMS with the threat of taking away these incentives if they use AMD products (or keep them to a certain percentage of their products).

Why on earth would these OEM's make formal complaints if they thought what Intel was doing was legal? All these OEM's had to agree with Intel or face the possibility of their competition having an unfair advantage. They were obviously scared, that is the only reason to complain, if they really thought what Intel was doing was legal, why complain at all? They were receiving lower pricing afterall?

And what about Dell kicks backs and the internal Intel emails that magically disappeared when US courts ordered Intel to make them available? What about the Intel and Dell emails that told them to keep quiet about these kickbacks? What about charges stemming as far back as 2000 that Intel gave IBM discounts, rebates, special funds and who else knows what for exclusivity? Or perhaps how Intel paid several manufacturers to delay AMD product launches? All of this happened before the Core line.

The EU is not the first country to make such judgments either, both Japan and South Korea already have, and they are still under investigation by the FTC, with antitrust cases from AMD in the works in both the EU and the US. I suppose if all these cases side with AMD that Intel is still in the right, and that those damn socialists are still looking for a cash grab?


RE: I would laugh...
By VaultDweller on 5/13/2009 11:00:54 AM , Rating: 2
This has nothing to do with having winning products. These anti-trust investigations started at a time when Intel most certainly did NOT have a winning product in the processor market. AMD had the excellent Athlon 64 and Opteron lines, and the Pentium 4 and Xeon chips of the time were inferior in almost every imaginable way - they were slower, they consumed more power, they ran excessively hot, and in the case of the Xeon they couldn't scale upwards in multi-socket servers.

When you have a superior product that you can deliver at a more competitive price, it's only right that you should be successful. Intel is in this boat now. Five years ago, AMD was. However, when AMD had a superior product against which Intel could not compete, Intel abused their power to stop adoption AMD product by paying OEMs not to use AMD products. They attempted to make it impossible for a competitor with a smaller market capitalization to enter the market. That is just bad business.


RE: I would laugh...
By finalfan on 5/13/2009 2:18:31 PM , Rating: 2
You just stated half of the truth.

Yes, AMD was having a better product. However, they didn't have the capacity to produce enough CPU to meet the requirement of the market. Gateway had always been a good buyer of AMD CPU, but it had to quit buying AMD twice just because AMD failed to deliver the orders in the holiday seasons. Dell alone grabbed a big portion of AMD CPUs when it started to sell AMD systems. Smaller OEMs have no choice but to buy Intels which are always available. AMD virtually had no inventory in its good days. How come it can complain Intel's business strategy is harming its sells? What AMD really want is a higher ASP which it cannot get when Intel is giving out rebates, as it clearly speaked out in its complain. if AMD was able to produce a similar CPU at the same cost and fill the orders in time, I don't see why AMD can't give the same rebate to OEMs. Unless their cost is too high which is the ultimate reason they cannot compete.


RE: I would laugh...
By mars777 on 5/13/2009 4:09:44 PM , Rating: 2
It is not about cost.

Just try this equation:

You have 20% free production capacity.

You have 80% of products in some dominant OEM.
Can you give discount of 20% and gain the other 20% of products in that OEM?
Yes because you cover up the 20% loss with 20% more market share. The worst that happens is you fulfill your capacity.

You have 20% of products in the same dominant OEM.
Can you give 20% discount and gain 80% more products in that OEM?
You would be glad to do it since profits would go UP hugely.
But NO you cant: it equals to 100% up to 400% more capacity (depending on how dominant the OEM is) and you have just 20% :((


RE: I would laugh...
By mars777 on 5/13/2009 4:37:03 PM , Rating: 2
Forgot to mention that:

Production capacity investments are never higher and never increase more than net profit increase estimation for the next fiscal period (if profit returns for the new capacity are estimated in that period).
Commonly asset costs are high and production capacity does not increase brutally, it almost never increases more than a few percents for advanced tech businesses like chip manufacturers. It is direct R&D cost coupled with operating cost and almost never done in a short period because it's advanced technologies.
If it does you loose money even though you aim to sell more.
You can do this only if you have a lot of capital and are willing to post an ugly fiscal report in hope of fulfilling those new capacities, and that is never guaranteed (recession, product failure...), eg. you can do this only if you arefull of money and can stand share price drops.

And that surely isn't AMD :D


RE: I would laugh...
By finalfan on 5/13/2009 6:24:27 PM , Rating: 2
Intel's huge investment into production enable its 1 year lead in die shrink which gives Intel the advantages of much lower cost and higher capacity.

By the way, I didn't see Intel had "ugly fiscal report" but AMD did.


RE: I would laugh...
By finalfan on 5/13/2009 6:15:36 PM , Rating: 2
It is about cost. If your cost is low enough, you can afford to lower your price to get more market share. For any smaller player, it's a joke to catch 100% share. Nobody plans running on 80% in this industry. If it does, there is trouble. You equation doesn't make sense.


RE: I would laugh...
By Eckstein on 5/13/2009 10:32:01 AM , Rating: 2
So on what facts do you base your statements?
After all you (hopefully) should at least accept that antitrust suits are reasonable in their general sense. Right?

So what in particular was not rightful or justified in this trial and conviction in your opinion? What are your facts which make you believe that the evidence delivered are false and do not justify the fine?


RE: I would laugh...
By ZachDontScare on 5/13/2009 2:40:27 PM , Rating: 1
iFX, you're dead on accurate. This is all about EU bureaucrats lining their pockets. As evidence, notice that the money goes to... the EU. So the EU has a hearing and declares that Intel must pay ... the EU... a billion dollars. Thats some fine 'justice' right there.


RE: I would laugh...
By mvpx02 on 5/13/2009 3:53:54 PM , Rating: 3
Intel broke the law! How do you propose companies be punished for breaking the law? Or should they be allowed to do whatever they want?

If you disagree with where the fine is going, where should the money go? EU is protecting EU citizens. They determined that computer buyers IN EUROPE were forced to pay too much for computers IN EUROPE because of Intel's actions IN EUROPE , so they penalized Intel, and now Intel will pay its fines IN EUROPE .

If they really wanted to "scam"/"steal" money from American companies, they'd just make some sort of tax on ALL Non-European companies. They aren't getting rich fining 1 company at a time every couple of years.


RE: I would laugh...
By finalfan on 5/13/2009 6:46:15 PM , Rating: 2
Nobody is saying EU is getting rich by this. A thief steals and a racketeer scam. They don't have to be rich by stealing and scaming.

So Intel paying OEM rebates actually made EU people pay more? So EU companies must be idiots or they just be too greed to pass on part of the money to their customer. EU needs to prove that had Intel not paid OEM the rebates, the consumer would have paid less. Otherwise, it's stealing and scaming. Anti-trust law is to protect consumer not company nor the government. If EU cannot prove, there was no law broken.


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