The Business of Tech: Intel Gets Fined For Antitrust Violations
by Ryan Smith on May 13, 2009 12:00 AM EST- Posted in
- Ryan's Ramblings
There are some records you just don't want to set - the EU record for a single fine is one of them.
In our previous business articles we've discussed Intel's legal situation in the European Union. In 2001 AMD went to the EU to file complaints about Intel over anti-competitive actions. This perked the interest of the EU and set into motion a long and slow chain of events, leading up to antitrust charges being filed in 2007 for Intel's actions in the 2002-2007 time frame. In terms of technology, what was being considered were Intel's actions during the late Athlon XP era and most of the Athlon64 era.
After quite some time, the investigation has wrapped up and the European Commission has made it's ruling: Intel has been found guilty of violating EU antitrust laws, and has been fined €1.06bil ($1.45bil) for past actions and ordered to stop any ongoing anti-competitive practices. This gives Intel the unsavory position of the single largest fine in the history of the EU, surpassing Microsoft’s previously lofty fine of nearly €500mil in 2004.
The European Commission has a complete press release up on the charges, but they specifically boil down to two things: Intel was giving OEMs rebates if and only if they sold few-to-no AMD processors, and Intel was paying retailers not to carry computers with AMD processors. The report doesn’t list the specific OEMs, but we know it was NEC, Lenovo (and for some of the time, IBM), HP, Dell, and Acer. The retailer was Media Markt.
Intel has already said that they are going to appeal the fine, and that it “ignores the reality of a highly competitive microprocessor market.” Notably, they aren’t appealing the facts, but rather the conclusion (that it was harmful to consumers) and the fine. It’s likely that any appeal will take just as long as the initial examination, so it’s unlikely that this will be over before 2011, if not later.
As Intel does not talk about their pricing and marketing strategies publicly, there’s no way to know if the order to cease ongoing activities will have any effect. If Intel is still offering any EU OEMs rebates, then they would need to immediately stop. Since the immediate impact of the rebates to OEMs would have been to depress computer prices slightly (at least some of the rebate money would likely have been passed to consumers in pricing due to heavy competition) we’re not ready to throw out the idea that this may drive computer prices in the EU a bit higher if Intel has been continuing to offer rebates.
Meanwhile the fine, while the EU’s largest, is not abnormally large given Intel’s size and that the fine is only computed against Intel’s EU sales. Their net profit for their terrible Q1’09 was $630mil, so while it’s a stiff fine, it’s not one that Intel would be unable to pay off (although it certainly will turn some heads in the process). The fine goes directly to the EU, so AMD will not immediately benefit from this beyond the cessation of any ongoing illegal activities.
It should also be noted that Intel has been facing an investigation in the United States since 2008. While EU decisions are non-binding, this may be an indication of how that investigation will turn out. We’ll undoubtedly have more on that investigation in the coming months as it continues to move along.
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kuraegomon - Friday, May 15, 2009 - link
But at least you have the self-awareness to acknowledge that fact. This puts you a long leg up on the parent.michal1980 - Thursday, May 14, 2009 - link
^EU hates america. Their socialist goverments are going broke and produce even less then america. They need cash, so they go to the cow.Obama 'The One' Barack, is just trying to import the only thing the EU has, socialism.
michal1980 - Thursday, May 14, 2009 - link
^EU hates america. Their socialist goverments are going broke and produce even less then america. They need cash, so they go to the cow.Obama 'The One' Barack, is just trying to import the only thing the EU has, socialism.
Hyperion1400 - Thursday, May 14, 2009 - link
Which is why the EU's GDP is 30 percent higher than the US's?B3an - Thursday, May 14, 2009 - link
Congratulations on the most retarded comment of the week.ssj4Gogeta - Wednesday, May 13, 2009 - link
What right does EU have to keep that money? If they're going to fine Intel because it hurt AMD's sale, they should give all of it to AMD. If they don't, it's just EU's tactic to extract money for itself in recession.BRDiger - Thursday, May 14, 2009 - link
I guess, formally it is because Intel not only hurt AMD, but in doing so, they are also hurting the people by preventing competition and tecnological advancements as it would be a good guess that amd would have spent more on RnD, if they had earned more. Therefore the money goes to the EU as (more or less) representatives for the people.AMD, with Intel prooven guilty, can start a civil lawsuit in order to get their bucks...
RagingDragon - Wednesday, May 13, 2009 - link
The fine was punitive for breaking EU law, it has nothing to do with compensating AMD. If AMD wanted compensation they'd have to sue Intel for damages inflicted by Intel illegal actions.However, now that an EU court have found Intel broke EU monopoly laws it would be alot easier for AMD to win such a suit in the EU - AMD would no longer have to prove Intel broke EU law, after this ruling (and assuming it isn't appealled and overruled...) Intel's violation of competetion EU laws would be an indisputable legal fact. So if AMD sued Intel, the suit would now be limited to determining how much (if any) damage Intel did to AMD, and thus how much money Intel owed AMD.
This is akin to US criminal and civil courts. A murder victim's family do not automatically recieve compensation when the murder is convicted by a criminal court. However, the family can sue for wrongful death in a civil court, and the murder conviction will obviously help their civil case.
Khato - Wednesday, May 13, 2009 - link
So, which court exactly was it that has now found Intel in breach of European Union law?erple2 - Wednesday, May 13, 2009 - link
That's not how it works in the US either. If a company is fined for illegal monopolistic practices, then the fees don't necessarily go to the people who were damaged by the fees. I think that the justification is that the ones that were hurt by this was "the market in general", including "the public" as a result. So the money goes to "the people" which means "the government".They're fining because Intel used illegal means to hurt AMD's sales. Winning because you're better marketed (within legal means) or better performing is certainly not illegal. Just because you appear to be a monopoly doesn't mean you are guilty of monopolistic practices. That's why Microsoft is still in business. Clearly, they have the vast majority of the market in certain segments (90%+), but they aren't considered a monopoly (under the law) if they don't use illegal means to keep themselves at the top by unfairly killing competition. Note that having a better product (technically superior) or better marketing (fair marketing, that is) is an example of a fair way of killing the competition :)