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If anything, the appeals court concluded, the fine was appropriate in light of Intel's antitrust offenses

Intel Corp. (INTC) today was greeted by a major loss in one of Europe's top courts, and was ordered to pay a massive fine for abusive, illegal behavior that harmed consumers and drove up CPU prices over a decade ago.  While the abuses in question have long since passed, the effects are still being felt in the form of less competition today in the PC CPU market, in which Intel owns a roughly 90 percent market share.
 
I. Anticompetitive
 
A little over a decade ago the CPU industry was locked in the closing stretch of clock speed wars.  Intel Corp.'s (INTC) Pentium processors had long towered over its underdog competitor Advanced Micro Devices, Inc.'s (AMD) designs in performance.  But something funny happened: AMD's Athlon project saw success and quite unexpectedly Intel's aging Pentium 4 found itself trailing the second-generation K8 Sledgehammer core (which was inside Athlon 64 and Opteron chip lines).
 
But the feisty, unheralded AMD chip saw little OEM pickup.  And with the switch from a focus on clock speeds to a focus on multicore computing (the so-called "core war" era), Intel's Core-branded chips largely left AMD behind in terms of process, computing speeds, power efficiency, and process.  AMD has remained a competitive minority player, but only in the mid-to-low end where it can occasionally beat Intel on account of competitive pricing.

Intel Penryn
AMD never recovered fully as Intel seized a sizeable performance lead in the core war era.
[Image Source: Intel]

History might have played out quite differently had AMD had a fair shot at selling its chips and cashing in on its rare, hard-fought win over Intel.  But court records would later show that Intel wrote its own fate by showing little hesitation in using anticompetitive tactics to stifle its smaller competitor's sales prospects and ensure that its dominant market position was maintained.

A decade later, the court fallout of those tactics are finally coming to a close.  This week the European Union's Luxembourg-based General Court ruled that Intel must pay the €1.06B ($1.44B USD) fine levied against it by the European Commission, which in 2009 found Intel guilty of corporate crimes.

The 300-page ruling by the appeals court asserted:

The Commission demonstrated to the requisite legal standard that Intel attempted to conceal the anti-competitive nature of its practices and implemented a long term comprehensive strategy to foreclose AMD from the strategically most important sales channels.
...
The General Court considers that none of the arguments raised by Intel supports the conclusion that the fine imposed is disproportionate. On the contrary, it must be considered that that fine is appropriate in the light of the facts of the case.

In other words, the EU's highest appeals court -- after reviewing the evidence -- felt that Intel's violations of antitrust laws were so egregious that it was appropriate to fine the chipmaker 4.18 percent (1/25th) of its 2008 revenue.

Intel antitrust
 

Intel's well-documented violations in Europe mirror its tactics in other regions and were largely a two fold effort:
  • At the retail level
    • Pay retailers to only stock products contain Intel chips
    • The EC and EU General Court found that Intel paid off Media Saturn Holding not to carry AMD products
  • At the OEM level
    • Pay OEMs discounts if they bought the majority of their chips from Intel
    • The EC and EU General Court found Intel made these kinds of rebate payments to multiple PC OEMs, including:
The EU's fine came roughly five years after the alleged offenses occured, the appeal took another five years.  In total the process consumed nearly a decade.

II. Reaction

The BEUC ("Bureau Européen des Unions de Consommateurs"/"European Consumers' Bureau") -- a European nonprofit consumer advocacy group funded by an EU grant -- lauded the decision.  Its director-general Monique Goyens opined:

When large companies abuse their dominance of the market, it causes direct harm to consumers. The court's ruling issued a strong reminder that such behaviour is illegal and unacceptable.

The European Commission also praised the confirmation of its ruling in the case, which it spent substantial effort investigating.

Intel sign
[Image Source: etechmag]

Intel bitterly denies wrongdoing in the case, saying its discounts to OEMs benefited European consumers and didn't harm competition.  Intel spokeswoman Sophie Jacobs released a downbeat statement, commenting:

We are very disappointed about the decision. It's a complex case which is reflected in the decision. We will begin evaluating the decision.

Intel has no viable route to appeal.  Its only possible appeal route is to challenge the antitrust rules and laws behind the ruling, in an appeal to the Court of Justice of the European Union.  Such an appeal would be incredible complex, expensive, and unlikely to succeed.

Microsoft Corp. (MSFT) largely lost a similar battle over its own massive antitrust fine and after facing the General Court's ruling agreed to settle up.  After being fined 1.6B ($2.1B USD) in 2008 by the EC, Microsoft appealed the fine.  The outcome for Microsoft was only marginally better than Intel.  Its fine was reduced, but only by €39M (~$48M USD in 2012 dollars) -- an almost meaningless concession compared to the fine's overall magnitude.

McDermott Will & Emery partner Martina Maier told Reuters that the ruling could discourage other top U.S., Canadian, and Asian firms from appealing antitrust case rulings in the EU, particularly if their case is weak and focused on the "fairness" of the fine amount rather than the finding of guilt.

Comments Ms. Maier:

Companies under investigation by the Commission should not count on winning in court with the argument that the Commission would not have properly assessed the economic effects of an abuse of dominance.

This might well lead to a supplementary incentive for a company under investigation for an alleged abuse of dominance to settle with the Commission or to offer commitments in order to motivate the Commission to end its investigation.

Intel was also forced to pay major settlements in the U.S. under threat of fines.  In 2009 it paid AMD a settlement $1.25B USD and pledged to avoid certain business tactics, in order to lay to rest civil litigation and potential government fines over its actions.  It paid NVIDIA Corp. (NVDA) -- a top PC graphics maker -- $1.5B USD in 2009, as well, over similar tactics Intel used to gain dominance in the PC integrated graphics market.

Intel monopoly
Intel's dominant position delivered it twelve times as much profit as the fines and settlements cumulatively add to.

With the latest fine tacked on, in the last half decade Intel has paid over four billion dollars stemming from accusations of breaking antitrust laws and abusing its dominant position.  However, it's unclear if the old aphorism "crime doesn't pay" holds true in these cases, as in the last half decade Intel has made $49B+ USD in profit (according to its 2013 10K filing, thanks to its dominant position in the PC market.  That profit is roughly twelve times the cost of settlements and fines for the illegal tactics it allegedly used to maintain its position.

Sources: European Commission, BEUC, Reuters



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Th fine is too small...
By Peter-B on 6/13/2014 3:55:52 AM , Rating: 3
... and the cost will be passed to the consumer because they can do that being the only player on the high end CPU market. A more suitable punishment would be for them to give AMD all their profits over two years (a minimum of 10% of their income). I know it's not possible to implement this but I think it would be fair.




RE: Th fine is too small...
By maugrimtr on 6/13/2014 7:01:34 AM , Rating: 2
AMD already settled their lawsuit in the US for 1.25B. http://en.wikipedia.org/wiki/AMD_v._Intel


RE: Th fine is too small...
By Peter-B on 6/13/2014 7:58:22 AM , Rating: 2
I know, but the punishment for Intel is small comparing to the gains of their practices. And you also need to consider that AMD could have improved it's brand even more if it's products would have received broader distribution. My guess is that AMD settled for this sum only because the lawyers knew they wouldn't get much more in the court room and a trial would have been long and they needed the money then. But the true damage was far greater. Also, if one is using unlawful practices, one should be fined more than the damage itself. Several times more, or it won't have any effect.


F@#k the EU
By coburn_c on 6/13/2014 2:16:54 PM , Rating: 4
Does AMD get the money? Do the consumers? Nooo.. the EU stuffs the billions into their own coffers. Intel customers suffer.

I am so damn sick of the EU.




RE: F@#k the EU
By Cloudie on 6/15/2014 1:49:41 PM , Rating: 3
Long live the EU! The fine is completely justified and the only thing wrong with it, as Jason Mick correctly points out, is that it's far too small! It should be tripled.

If you don't want the time, don't do the crime!


Arrogance
By roykahn on 6/13/2014 5:21:10 AM , Rating: 2
Don't you just love the arrogance of Intel when responding about the ruling? They don't say that they will pay the fine, but they will "begin evaluating the decision." Maybe that could hint at government lobbying or trying to weasel their way out of paying most of the fine. If I had the power, I'd fine them again just for that remark.




RE: Arrogance
By maugrimtr on 6/13/2014 7:08:07 AM , Rating: 2
Unfortunately, the lobbying in Europe IS pretty bad. US companies are using US law firms as lobbyists (it allows them to circumvent lobbying disclosure rules by claiming attorney/client privilege). It's actually gotten really hard to distinguish genuine submissions from lobbying as a result.

In Europe this is seriously irritating and hurts trust in the EU and the US companies doing it - nobody there wants to end up like the US (no offense to the average citizen!) where companies spend a fortune on lobbying and can legally, through various means, spend countless millions on political campaigns unchallenged. Not to mention, a lot of the lobbying is doing its best to undermine EU privacy law so that EU peoples' data can be shifted to the US for the NSA to riffle though without a simple warrant from a PUBLIC court.


"was perhaps overly lenient."
By futrtrubl on 6/12/2014 4:29:10 PM , Rating: 2
Where does it state or imply that? All it said was that the fine was not disproportionate and that it was appropriate.




By cityuser on 6/16/2014 8:10:12 AM , Rating: 2
The fine is a small cost when compared to 10 billions profit !!!

nVidia adopt similar approach and in some area , they are much more aggressive than intel (I guess nvidia learnt from intel), why nvidia can escape from lawsuit ???




More Money
By Reclaimer77 on 6/12/14, Rating: -1
RE: More Money
By bug77 on 6/12/2014 5:09:58 PM , Rating: 3
Neah, intel really messed up the market back then.
They basically went to the suppliers and asked them: how many of the systems you make use AMD chips? 20%! We'll give you a 20% discount if you use 100% intel chips instead. Basically, as a manufacturer you were paying whatever you paid before for 80% intel chips, only now you were getting 100% quantity if you got rid of AMD. You can't really compete with that, especially if you're the newcomer, with less than 10% the income or your rival.


RE: More Money
By sixteenornumber on 6/12/2014 5:42:17 PM , Rating: 2
i do agree that intel was playing a dirty game but after watching the endless fines against Microsoft, I cant help but feel this is a bs charge.


RE: More Money
By maugrimtr on 6/13/2014 5:10:34 AM , Rating: 3
They paid companies NOT to buy AMD chips. What would happen if General Motors paid all dealers NOT to stock Ford cars? Would you consider that "a bs charge"?

It is anticompetitive and illegal to manipulate the market to avoid the competition which serves consumers interests best. If you break a sane law, you should be punished.


RE: More Money
By michael67 on 6/13/2014 1:06:57 PM , Rating: 2

Correct people don't get it, mostly because the media dose not explain it correctly.

If i trow a rock true someones window, the police police gives me a fine, that fine dose not go the the victim, but to the state.

As the fine is for destruction of property, a criminal act.

If the victim wants money for replacing the window, he/she has to go to civil court and get the money here.
(Just like AMD did in the lawsuit and settled for +3b dollar)

In this case the money actually, it sorta got back back to the 3th victim, the EU citizens, as the money that they payed to much because of Intel's practices could no really be reimbursed, it went in to the budget and people payed less tax.

But if people wanted money back for what they paid too much they should start a class action suit.

/on-offtopic
The same go's to MS, the EU said to MS we have different laws in the EU and we want you to follow them, MS put up the middle finger to the EU, and said your silly EU laws don't apply to us, just to find out that the EU really had laws that they had to follow.

If a EU company dose business in the US, and broke the law, and repeatably broke US laws, would not the fines go up also, or would you expect the government on some point to put the foot down?

Also the notion that the EU just fined MS is just silly, the fine came after talks broke down between MS and the EU, ware MS was thinking it not bound by local laws and regulations.

Its not the EU fault the fines went up that high, but just MSes own arrogant behavior of feeling to be above the law, that may be true in the US, that corporations can be above the law, but in the EU corporations also have to follow the law, tho sadly its getting more like the US every year to. :(


RE: More Money
By Motoman on 6/13/2014 6:30:10 PM , Rating: 2
You're a moron then.

By all standards of logic and merit, AMD should have taken Intel to the cleaners during the P4 era. The AMD product was clearly superior to the Intel product, and was offered at much lower prices too.

Intel's crimes caused AMD's greatest achievement to go to waste - they gained no marketshare, made no extra money that they could continue to reinvest in R&D. Intel's blackmail and payola schemes worked long enough for them to respond, product-wise...knowing full well that by the time the courts got done with them, AMD's opportunity to make hay would be long gone.

They were right. The few billion dollars Intel has had to pay in fines for being a criminal enterprise are irrelevant. They staved off a vastly better product, protecting their marketshare and preventing their competition from capitalizing on their achievements.

History would absolutely have been *very* different if Intel either hadn't engaged in it's global crime wave and/or if they'd been caught immediately. AMD might very well be the majority player by now, had Intel behaved legally.

The only thing that's BS about this (and the other mentioned) fines against Intel is the fact that they're a pittance. Intel doesn't give 2 sh1ts about 4 or 5 billion dollars.

What this proves is that crime *does* pay. For that ~$5 billion "investment" Intel has reaped, and will continue to reap, massive returns that dwarf the actual cost of the "investment."

If we wanted to be "fair" to AMD, Nvidia, et al, we'd probably force Intel to pay them half their revenue each year for like ten years. That *might* counteract the *actual* damage done to those corporations. Might.


RE: More Money
By Reclaimer77 on 6/12/2014 6:10:05 PM , Rating: 1
quote:
We'll give you a 20% discount if you use 100% intel chips instead.


That's called an "Exclusive deal". And it happens EVERY DAY in business. It's neither wrong or illegal or even unethical.


RE: More Money
By hpglow on 6/13/2014 12:32:34 AM , Rating: 2
It is illegal to abuse your position as a market leader when it negatively impacts the customer. That is what antitrust laws are about. Intels dealings did not benefit anyone other than intel and the large scale PC maker. The consumer got no discount, and they got an inferior chip (the p4 net burst).

If you weren't so busy listening to news outlets that suck corporate penis all day you would know better. Fox News and talk radio will always spin this in a manner that makes it look like intel did nothing wrong. Because they don't have to report who pays to corrupt their news stream. Now take Pages salami out of your mouth and think for yourself for once.


RE: More Money
By Sundervine on 6/13/2014 4:53:10 PM , Rating: 2
Like CNN, MSNBC and others media do not have their own agendas they push. Quit acting like what you listen to is somehow better than other media.
Also Inhofe you do not drink a coke or Pepsi product since they do this at every location on earth to a large extent.
Better yet i hope you do not get your internet from Comcast, time Warner, Verizon, etc. Since every one of them is trying to do the same thing. Insure hope you are not on an Intel machine.


RE: More Money
By TheJian on 6/13/2014 6:41:38 PM , Rating: 2
What does fox have to do with Intel breaking the law here? If anything they'd be complaining about the EU getting money from USA, not the breaking of the law itself which everyone knows happened. The problem would be that the money didn't go to AMD who it hurt. Nothing wrong with an american based new site claiming that is wrong.

Link to foxnews saying Intel never broke the law by shafting AMD and everyone is lying they are not a monopoly back then and didn't abuse power. I'd like to see that link. I'm not sure they've ever said a thing, just another fox troll/hater I'd guess. 80%+ of the media is liberal dems and registered as dems, so if you're not watching fox all you get is Obama/Clinton etc free rides. Even if you don't like them you have to watch to get both sides. You won't see a single good word about republicans on the other channels. How can you get any sense of the truth from one sided reporting?

But if they did have an issue with this ruling it would be about EU getting our money, not about AMD NOT deserving it. Intel should have had to pay AMD 50% for 5yrs as they made $60B+ during the 10yrs they pulled this crap. Which might add up to around 25B, then a company like Intel learns to play fair ;) At anything under $20B they just laugh making 60B and do it again and again. Well duh.


RE: More Money
By michael67 on 6/14/2014 7:16:41 AM , Rating: 2
quote:
What does fox have to do with Intel breaking the law here?

So you think that a dysfunctional bias news organization has noting to do whit the making of bad laws and poor oversight?

p.s. its not only Fox news, but they are thee worse!


RE: More Money
By Samus on 6/13/2014 12:33:00 AM , Rating: 2
Exclusivity is generally considered monopolistic behavior when there are only two competitors in a market.

This hurt AMD when they had exhausted all their resources and incurred great debt to make a superior product to Intel under the presumption it would sell. It didn't sell because Intel paid OEMs not to buy it.

And that in turn hurt the consumer, because people buying Dell, for instance, were stuck with some Pentium 4 crap instead of a future-proof 64-bit chip that was generally considered faster and less expensive.

Dell was the last major OEM (and the largest manufacture of pc's in the world at the time) to not carry AMD products. Look where those decisions got them.

The problem with this ruling, like all EC/EU fines, is that the payout doesn't go directly to the consumer or even the affected party. At least in the United States AMD was awarded some damages, not nearly what would have been leveled by a fair market in the 2004-era, but it was at least something. In the end, Intel crippled AMD to the point they couldn't even afford to operate their own fab.


RE: More Money
By maugrimtr on 6/13/2014 6:42:38 AM , Rating: 2
The EU isn't a judicial court - it has no authority to award damages. If AMD wants redress, they can sue Intel at their own expense and discretion.

As it happened, in the US, AMD sued Intel through the courts and Intel settled the case, and other legal disputes, for 1.25B. AMD agreed to that settlement.

So pointing at two different things (a legislated fine vs law suit), pretending they are in any way similar, and then complaining that one did not benefit AMD is ridiculous. They already successfully sued and settled with Intel! Do you now expect your driving speed tickets to be paid to passing pedestians? Fines are nearly always retained by the authorities, generally in the hope that they fund public services for the good of their citizens.


RE: More Money
By Samus on 6/15/2014 4:50:36 PM , Rating: 2
I didn't single out AMD as being a sole beneficiary of a 'fine' I simply stated these fines from the DU don't benefit AMD or consumers. its a bit hypocritical of the EU to act in the interest of consumer protection when the consumers are hurt then 10 years later they collect money into their own pockets.


RE: More Money
By bug77 on 6/13/2014 5:59:02 AM , Rating: 2
It's one thing when a bar decides to sell Bud or Miller exclusively. But if one of those started walking from bar to bar and all of a sudden your choice would be gone, that would be wrong, illegal and unethical.
And in this particular case, the opponent would at least have a fighting chance, because their revenue is comparable. AMD doesn't even begin to compare to intel.


RE: More Money
By Motoman on 6/14/2014 2:30:48 PM , Rating: 3
Imagine the righteous hellfire the "it's not a big deal" people would be spewing if it was AMD doing the blackmail and payola to get OEMs to not buy Intel product.

Everything's OK with these morons so long as their chosen company is the one committing the crimes. But if someone else committed the same crimes against their favored company...now they're going to be mad.

There's a reason why blackmail, extortion, and payola are illegal. And don't get fooled by the whitewashed terms above like "discounts." Intel wasn't giving discounts. They were blackmailing OEMs to not use AMD products. Period.


RE: More Money
By Da W on 6/13/2014 6:55:50 AM , Rating: 2
Apparenty it is!
This was done at the tim of Athlon and Athon 64, when AMD dominated the benchmarks against P4. Yet the sales did not progress, as they should have in a really free market.
May be they wouldn't suck as they do now if they had access to this extra money back then.


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