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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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Competition
By ZachDontScare on 5/13/2009 2:36:48 PM , Rating: -1
So basically, if you cant compete, go running to the government.

If these rebates were so 'anti-competitive', why wasnt AMD offering the same thing? Intel wasnt putting a gun to anyone's heads - they were just playing hardball. We arent talking a big corp vs a mom-and-pop store. These are two massive companies. It seems AMD just found it more cost effective to 'compete' in the realm of government regulation.

Honestly, I'd love to see Intel just pull out of the EU. And watch what happens to the prices of PCs there when AMD has a defacto monopoly and suddenly chips are in short supply. They wont do that, but they should.




RE: Competition
By mars777 on 5/13/2009 3:47:31 PM , Rating: 4
quote:
If these rebates were so 'anti-competitive', why wasnt AMD offering the same thing? Intel wasnt putting a gun to anyone's heads - they were just playing hardball


Let me give you an example:

- you are an OEM
- a am Intel and have 80% of market share
- John is AMD and has 15% of market share
- You sell roughly the same percentage of products as our marketshare
- I offer you 15% discount if you don't sell Johns stuff
(this is more than the profit from John)
- Do you reject?
(if you dont reject you sell the same amount of stuff because there is demand but you gain 15% more profit, I loose 15% profit but gain 15% marketshare and that covers it)
- If you don't reject, try this in the other way:
- Would you accept the same deal from someone who has 15% market share?
(that 15% from John equals somewhere like 3% of the profit from the other supplier... you loose profit)

Well, you just learned what does anticompetitive monopolistic behavior stand for.

Why is this illegal? Because consumers did not have choice to buy Johns stuff, and less choice means the only supplier can set prices higher. After that consumers loose money, not only choice.


RE: Competition
By mars777 on 5/13/2009 4:54:25 PM , Rating: 2
And if there is no choice, customers will still buy the product offered since they need it, no matter the price.

There is to note that the increased price is only transferred to the customer, not you. Since you gain more margin if the prices increase.


RE: Competition
By foolsgambit11 on 5/13/2009 5:07:05 PM , Rating: 2
quote:
If these rebates were so 'anti-competitive', why wasnt AMD offering the same thing?
Because AMD didn't have the market share to offer the same thing. They couldn't have provided 100% of Dell's chips to begin with, most likely, but more to the point, a company like HP could survive without any AMD in their lineup, but they wouldn't without any Intel. Because of Intel's market position. That's why this is an anti-trust issue. Intel used its market position to engage in anti-competitve business practices. They used their market position to keep other businesses (especially AMD) from gaining market share.

Exclusive contracts aren't by definition illegal. But coupled with a sufficiently large share of the market, they can be, since that position effectively coerces the other party in the contract into entering said contract.


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