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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TheeVagabond - Thursday, May 14, 2009 - link
Well said, Jim. Just another case of Frederick Bastiat's legal plunder and a system where "Everyone plunders everyone." No doubt politics of raw emotion and very little common sense will reign unfortunately.shin0bi272 - Wednesday, May 13, 2009 - link
I thought it was a company's job to do all they could to edge out their competitor to become the top brand. If AMD had been the one paying companies to not sell intel cpus would there still have been a court case?BRDiger - Wednesday, May 13, 2009 - link
Does it matter? Fact is: Intel is guilty and has been fined...according to some statements in the german financial times, it was sometimes more of a blackmail than simply giving rebates.
Calin - Wednesday, May 13, 2009 - link
It is a company's job to do all they can to become the top brand (in fact, a company's job is to become more and more valuable for its shareholders).However, they should respect the laws of the place where they do business or face the consequences. And as they are not under EU command, they can only be fined (companies based in EU can be dismantled, and some were dismantled due to concerns of monopolistic abuse or even monopolistic position)
shin0bi272 - Wednesday, May 13, 2009 - link
I thought Intel had contracts with those companies to be exclusive intel customers. Thats what the story was here when AMD pulled this same type of thing in the US. Back then it was AMD complaining of the retailers I think that they didnt carry any systems with their chips in them. So this is slightly different but I would imagine the outcome would be about the same. AMD has always been an enthusiast chip and has thus pigeon holed themselves into a niche market and now they are complaining because they are losing money.Sabresiberian - Friday, May 15, 2009 - link
Uh? AMD pigeon holed themselves? AMD paid people not to use Intel chips? Where did you get your info, I've never heard of AMD doing this kind of thing, and as far as 'pigeon holing' themselves, that's only in your mind. AMD has been a competitor across the board for low-cost to high-end desktop systems ever since the first Athlons came out.What Intel did was illegal, immoral, and bottom line bad for this country and the world. This kind of thing is anti-capitalism, it stifles legitimate competition, the core of free enterprise. They should be slapped down hard, and it's too bad we aren't doing it here as the Europeans are doing it there.
Intel is a fine company producing great products, it doesn't need this kind of chicanery to stay healthy.
knutjb - Thursday, May 14, 2009 - link
AMD didn't pull the same thing. What Intel did was a crime. Just because they had a "contract" doesn't make it legal. It's illegal to force a company to use your product over another. That is what Intel did. They told vendors if they used AMD they wouldn't get the latest chips making the vendors uncompetitive in their markets. AMD complained because Intel used unfair marketing practices in shutting them out. The market must be open to all with the end consumer making the choice, not Intel. Intel gambled they could minimize AMD's market share and with the profits, leap ahead technologically as they have, further minimizing AMD in the market place. Remember this started at a time, 2000, when AMD was putting out a very competitive product but had yet to take a large share of the market. It took several years for Intel to significantly hurt AMD with this tactic and with a severe recession it amplified AMD's woes. Intel's tactics are nothing new. 1.4B to take your competitor out at the knees. How much have they made in profit from doing this? It was cheap if that is all they have to pay.joekraska - Sunday, May 17, 2009 - link
"It's illegal to force a company to use your product over another. That is what Intel did."Force? At gunpoint? Yes. Offer a contract with mutual benefits, predicated on exclusivity? No. It's only illegal for a monopoly company to do this. Or for a company to do so, in an attempt to become a monopoly. This is pretty clearly what was happening here, at least in my mind. Be that as it may, these are the basic facts. At least under US law.
--Joe.
Frallan - Wednesday, May 13, 2009 - link
Intel did have contracts with some firms with exclusivity in them. What was outside the contract is the interesting part tho. The "marketing money" would only be paid out if the firm in question did not use any competitors kit.
Also what i missed in the article was that the EU council fond evidence that Intel even paid firms to delay / postpone introduction of competitor products and even in som case paid to have the product abandoned.
Erica7 - Wednesday, June 20, 2012 - link
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