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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ssj4Gogeta - Wednesday, May 13, 2009 - link
So that means as long as you're not doing something wrong, you can have the majority of the market share? This is a bit off-topic, but then why is the EU forcing MS to ship other browsers with its product? While I hate IE (I use FF and Chrome), I don't think what MS is doing is illegal. Apple also ship Safari with their OS and normally all the OS's have commonly used software (paint, media player, ...).joekraska - Monday, May 18, 2009 - link
Correct. As long as you're not doing anything wrong, you can have a majority market share. In fact, as long as you're not doing anything wrong, you can have the entire market. I.e., it is not, in the US, illegal to be a monopoly. What's illegal, rather, is the act of "monopolizing," which is my pithy way of saying various anticompetitive practices. This is an important distinction, because if you happen to find the one mine in the world for an extremely rare element--you're good. But if you set up business practices that aren't designed for your profits, but rather to destroy your competition deliberately--you're going to get into trouble.Part of the difficulty with making this later point clear is that business is obviously competitive, and in the US, it also tends to be RUTHLESS. So diagnosing that illegal bit of ruthlessness can be a bit... tricky.
Joe.
erple2 - Thursday, May 14, 2009 - link
I think that the complaint in that instance was that Microsoft was using it's gigantic O/S market share to push Netscape out of the browser market.I don't know how Apple gets away with it.
plewis00 - Thursday, May 14, 2009 - link
Well, as you said Microsoft has a gigantic OS market share, and... I'm pretty certain the guy who sits opposite me at work with 2 Macs accounts for about 10% of Apple's userbase (you know the guys that think there are things you can't do on PC, you can do on a Mac - apart from looking 'trendy' in Starbucks).mjcutri - Wednesday, May 13, 2009 - link
The fine goes directly to the EUIsn't that a bit of a conflict of interest? The very organization that adjudicates the decision is the direct beneficiary of any fines that may be imposed? It'd be like a police officer receiving the fine for a speeding ticket instead of the city/borough/state.
someone0 - Wednesday, May 13, 2009 - link
Here is how I see it, may be that's how the judge see it also. Intel past action may have harm AMD, but in the end, it harm consumer as the market would lack competition & innovation, even if it seem like customer did get discount early on. So when the fine was imposed, EU get paid, thus the money get use on EU public.Rhino2 - Wednesday, May 13, 2009 - link
No different than when a US federal court levies a fine, and the money goes directly to "the US".npp - Wednesday, May 13, 2009 - link
The court that imposed the fine and "the EU" are not one and the same thing. It is just a matter of terminology that is seen often, especially on US sites - everything that has something to do with the EU is simply abreviated to "EU".Regarding the fine itself, I don't see anything wrong with it. All big players play dirty, Intel just got busted this time.
Khato - Wednesday, May 13, 2009 - link
Do people not realize that the European Commission is by no means a court? Its analogue in the US government is the executive branch...This ruling is merely the opinion of a political body, and now that it's made it will have to undergo actual legal scrutiny in the Court of First Instance.
MrJim - Wednesday, May 13, 2009 - link
As a friend of capitalism i think Adam Smith cries in his coffin, when modern companies does everything it can to brake the golden rules he wrote down many years ago. Intel is trying to be a pro-active monopoly player, it is right to punish them to not play fair in the market.