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Intel in Antitrust Trouble in Japan
vincecate writes "The Japan Fair Trade Commission has ruled that
Intel violated antitrust laws in Japan.
Giving customers discounts based on the volume of your products
they purchased is good business.
However, Intel was adjusting customer discounts
based on the volume of competing products they purchased,
which is not legal.
After the ruling,
AMD responded saying, "We encourage governments around the globe to ensure that their markets are not being harmed as well".
While
Intel responded
saying, "Intel continues to believe its business practices are both fair and lawful."
I know very little about law in this area. Is it the same in the U.S. and Europe? I would like to think it is but then considering today's climate I wouldn't be surprised if you it wasn't!
Oh regarding Intel's comment that it "... continues to believe its business practices are both fair and lawful.". It might just be legal in some countries but how is it fair to use your dominant position to prevent other companies from being able to compete with you? A statement like that is just a bare faced lie. If the situation was reversed you can bet Intel would kick up a fuss. I'm not saying I'm surprised it is just irritating.
Intel? Antitrust!? I don't believe it! I'd sooner believe that Linus Torvalds switched to a new OS!
Specialization is for insects. -Heinlein
...see that fine line between shrewd business practices and predatory, monopolistic racketeering?
See how you and Microsoft are on the same side of it?
That's a bad thing.
While Intel responded saying, "Intel continues to believe its business practices are both fair and lawful."
That's how PR hacks are taught to respond. When, for example, your CEO is stealing money, your PRish role is to go out and with a straight face say: "The core Value of our company is Honesty. We will introduce a Business Codex to emphasize our commitment."
but then again, if Intel wants to do business in Japan, I guess they should also abide by the rules. I'm sure AMD are happy.
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Does this mean that we get to start referring to Intel as a "convicted monopolist" in every /. article about the company, just like we do for Micro$oft??
That's awesome!
I think you missed the point slightly, it goes something like this:
Intel: "if you buy 1 chip it costs $500"
Intel: "But if you buy 10 it costs $450 per chip"
Intel: "If company X wants to buy 10 then it will cost them $480 per chip because we found out they bought an athlon chip last week"
THAT is not on!!
Intel in Antitrust trouble... in Japan!
The meme works.
Can someone tell me honestly what's wrong here? Intel are the ones who have control over their product. They get to sell their products and define how much it sells for. Why are governments getting involved?
Obviously if a company is buying more of a competitor's products then they're buying less of yours, so your own are more expensive to them because they are buying in lower quantities. that is simple grade school economics."
The problem arises when somebody tries to use their position as the established leader to keep other companies from establishing a marketshare, thus using their dominance to maintain a monopoly. Not as much of a problem with Intel as it would be with a company like Microsoft (as AMD is a very strong competitor), but still not a good idea to let bad practices get started.
Again, basing your prices off how many of YOUR chips they buy is okay. What this alleges is taht they are also factoring in how many of the competitor's chips they buy, which is not. How many AMD chips a company buys is none of Intel's business, and shouldn't affect prices.
Simple example. Company A makes 100,000 computers, and uses Intel for 50,000 and AMD for 50,000. They should be charged the exact same rate as Company B, which makes only 50,000 computers but uses Intel for all of them. The accusation is that Intel would instead charge Company B a lower rate, because while they purchase the same volume they don't purchase any from AMD.
As somebody else said, the carrot is legal, the stick is not.
They gave their customers lower prices if they guaranteed not to buy their rival's chips. To my mind, that is unfair.
Justin.
You're only jealous cos the little penguins are talking to me.
Okay, I'll try explaining this in easier terms.
Intel to customer: "If you buy 1 of these, it will cost you 100$, if you buy 10, you will get them for 50$ each".
So far, it's fair enough.
Intel to customer: "However, for each product you buy from AMD we will lower our discount. Buy one single item, and our product will cost you 60$, even if you buy 10 of them."
Now, this is unfair, since the customer would buy 10 of whatever it was from Intel nomatter how many he might buy from AMD. See the difference?
-- A good compromise leaves everyone mad. --Calvin and Hobbes
Actually, from the way TFA explained it, it sounded a little more like this:
:P
Company A and Company B buy 500 intel processors.
Intel goes back to those companies and says "Hey, we'll pay you money^H^H^H^H a 'rebate' - if you promise not to buy any AMD chips for a while."
Company A says "ok" and gets the cash, Company B tells them to go to hell, and doesn't get squat.
But who reads TFA around here?
The role of anti-trust legislation is the protection of consumer choice. Intel's discount was directly targeted to prevent an alternative.
Monopolies are bad, irregardless of whether they are owned by the state or privately. People living under communism had no choice, too. All they had was one-two products from one state-owned monopoly.
BTW, I assume that people are able to distinguish between cheese and CPUs on their own.
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Clearly, Intel has been trying to take advantage of the weak dollar to expand its market in Japan, and the ever-watchful Japanese regulatory agencies moved to stymie foreign intrusion into one of their most tightly protected markets.
Looks to me like this could be the opening salvo of a new trade war. I just hope it doesn't affect the price of ramen.
But, if you read the article, that is not what was happening.
Rather, the scheme was that if I was buying 1,000,000 intel chips, and you were buying 1,000,000 intel chips plus 500,000 AMD chips, my intel chips would be cheaper. Ie it is not an issue of bulk discounts, but rather of bribes not to buy anything from AMD.
Now, pure free market theory would say this is fine, evenetually Intel will run out of money and the 10th firm to be built on the ashes of AMD will win out. However, that could take 50 years or perhaps longer than the integrated circuit industry will exist for. Anti-monopoly laws exist on the theory that a small distortion of the free market to speed up that attrition process and maintain some competition now is a general win.
_O_
.|< The named which can be named is not the true named
But if Intel really believes this is "fair and lawful", why is it that Intel does not use written contracts for these deals?
IANAL, but I thought that to be in a antithrust situation, you had to be barring others from market, and also have a significant market share (i.e more than 80%)
In the case of Intel, the consumer has a real choice, in AMD for home pc's, and POWER or AMD for servers. So as long as there is a real choice, there is competition, and IMO, there is very hard competition between Intel and AMD. So I think it's strange that Japan focuses those over Microsoft or other monopoles that is less challenged.
Assembling etherkillers for fun an profit
"Intel continues to believe its business practices are both fair and lawful ,in spite of all evidence to the contrary."
If they keep on going like that, pretty soon we'll have Intel turn into a religion.
Just
More to the point, we don't live in a world where one usually sees the price depend on how few of the competitor's product you bought instead of how many you bought from them.
For what it's worth, there have been rare occasions when buying more of an item might lead to higher per unit prices.
One example involved Sony when they first started out. According to an article in one of the business journals about 20 years ago (I think it was Forbes), when Sony showed their transistor radios to one big chain, the chain asked for many more radios than Sony expected. The price Sony quoted was higher per radio than the price they quoted for a much smaller quantity of radios. The buyer from the chain was very surprised and asked why. Sony said that with an order that big, they would have to build a bigger factory to produce them and they would have to earn enough to help pay for additional production capability.
On the whole this does seem like a rather gross abuse of Intel, a company I have previously supported, well not so much supported but remained indifferent towards. However this pricing scheme seems rather off, not just in fairness, but how in the world would they be aware of the volume of a competing product that a company has purchased? Perhaps there's something simple I'm missing (more than likely) but I don't see any realistic reason why Intel would know extensive information about such things, though I'm sure they'd want to know. Anyone care to enlighten me?
It's a rich and vibrant culture those Japanese have, I tell you.
StupidChildren...the reason jesus is crying
I mean the Intel CEO called Dell's CEO and said: "If you offer a single system with AMD processors we'll raise the prices on our stuff". Of course both will deny.
I strongly suspect something like this: in big business relationships, you can never be paranoid enough. The reality is much worse than anything that most people could start to imagine.
For example, AMD has been the only source for mobile 64 bit processors for quite some time. But Intel can prevent Dell from entering the market until they are ready, and maybe also pressuring Microsoft in the same direction, so that both Dell 64 bit portables and 64 bit Windows will be available only when Intel has all 3 catergories (mobile, desktop and servers) covered.
Intel's actions would be like Microsoft selling you the install CD's which scan you computer for linux. If it finds Linux you would have to enter a 'special' serial number that would of course cost you more than the 'standard' serial you purchased with the install disks.
Simple example. Company A makes 100,000 computers, and uses Intel for 50,000 and AMD for 50,000. They should be charged the exact same rate as Company B, which makes only 50,000 computers but uses Intel for all of them.
Close but no. Intel shouldnt charge Company A the same as Company B for the same 50,000 units. Intel *should* charge Company A the same for those 50,000 units as they would if they didnt know about the 50,000 AMD units. Bit of a difference.
Intel is well within its rights to charge Company A and Company B different prices, but NOT for certain anticompetative reasons. Its the same as Intel refusing someone business - they can refuse anyone business but NOT for reasons like race, gender etc.
...that the itanium is a wildly successful product, too.
in other news, intel continues to believe the f00f and pentium fdiv bugs were really just user error...
After doing what Intel did, I can't believe someone would say this with a straight face. What a world we live in.
I'm not surprised at all that Intel has such practices with its customers.
Two years ago, in the company I worked for, we needed to buy 600 cheap servers from Dell for an embedded application that we had to install at our clients. The price was really very important. If we couldn't get them at the right price, our project was not going to make it.
Dell did everything to lower the price. I remember they went down as much as 50% but it was still not enough.
We were about to cut the project when Dell called us and told us that the only way to reduce the price of the 600 servers further was if we signed some sort of paper saying that we used AMD processors in our previous project and this was a replacement project. This way they could get a big rebate from Intel under a certain program provided by Intel.
I just couldn't believe that Intel was ready to go that far...
A hungry bear does not dance!
No, that's the point, market power costs money to excercise (eg Intel has to pay people not to buy AMD, or keep it's prices below reasonable cost plu margin or whatever), so given a perfectly stable open market etc. etc. eventually the little guys who keep nipping at the monopolist's ankles will bring it down.
Unfortunatly, in the real world, there are barriers to entry, especially international ones and the world changes under us. And, of course, economic theories tend to assume agents in the market behave rationally, which we know is bollocks.
_O_
.|< The named which can be named is not the true named
It's a problem because it's an American company doing business in Japan. Japanese companies do it all the time in foreign countries. NEC especially carved a niche by matching competitive prices (in the form of discounts and rebates) against IBM among large businesses that had a large number of IBM PC's. Once a big company like AMOCO started buying NEC desktops, they moved on to printers, etc. The program where they would give a rebate or discount when a customer traded in a competitive PC was effective for a while in the late '90's.
Of course, this wouldn't happen in Japan. Japanese keiretsu have pretty well divided up the Japanese business market satifactorily. Trying to skate a Japanese business away from an established vendor is considered socially deplorable. It's done, but very subtly, so it doesn't look like the computer company is establishing inroads in the competitor's market. In the US, their "cooperation" would be considered "collusion" and "price fixing".
Wanna read a cool book? "The Asian Mind Game" by Chin-Ning Chu explains a lot about the roots of Asian competitiveness and difference in ethical guidelines vis a vis The US and other occidental cultures. It will change the way you view Asian politics and business.
This attack on Intel may not even be aimed at Intel as much as laying the groundwork for an attack on Apple (which is actually doing OK against Sony in Japan) or the introduction of a Fujitsu replacement for the Intel chips a couple of years from now.
"The mind works quicker than you think!"
Companies set their real prices based on the manufacturing cost of the product and the profit they must make on each to stay in business. Their sell price is NOT supposed to be based on whether the the buyer is also obtaining products from a competitor. Giving rebates or discounts based no that principle is similar to a bribe, and is illegal nearly everywhere [unless you are receiving the bribe ;) ].
A corporation breaks the law, is found liable, and is forced to pay damages. It complies, but it makes public statements that "we did no wrong". It is therefore claiming it is complying solely due to government blackmail, intimidation: "we're complying because otherwise we might get shut down, or maybe be put in a government cage". Justice is dismised as irrelevant. People have the right to criticized the government, to disagree with it. But where does a corporation's "right" to "free speech" end, and sedition, work to undermine the government and its authority, begin? Corporations already get to use the government judicial system, subsidized by taxpayers, to do much of their most difficult negotiation work. And usually settle before judgement, cheating the public of any benefit from a precedent in the settlement. Why do we allow them to use and abuse our expensive justice system - and work steadily to diminish it, in favor of a power vacuum into which corporate power can easily move?
--
make install -not war
This is just priceless:
U.S.-based AMD Not Seeking Orders From PC Seller Dell
Dow Jones Equity News, Thursday, March 10, 2005 at 00:17
TAIPEI (Dow Jones)--U.S.-based Advanced Micro Devices Inc. (AMD) has no plans to supply chips to Dell Inc. (DELL) in the foreseeable future, despite Dell's No.1 position in the global personal computer business."Our plans to successfully grow market share and improve our finances are actually based on not doing business with Dell. We're not going to give away product just to win Dell,"said Hector de J. Ruiz, chairman, president and chief executive of AMD, at a small media gathering in Taipei on Thursday.
The comments come shortly after Dell's chief executive, Kevin Rollins, said the U.S. personal computer giant wouldn't likely add AMD as a supplier of microprocessors, keeping its long Intel Corp. (INTC)-only policy in place.
AMD and Intel compete in the market for computer microprocessors, which act as the brains of a personal computer.
Ruiz also said his company's plans to introduce a new flash memory chip designed to store data in a range of mobile products like cellular phones, digital cameras and music players, will be in production next year.
He said customers will be able to sample the product, called ORNAND, in the second half of this year.
The chips will combine the speed of NOR flash memory, which takes its name from the algebraic expression"not or"and is used mainly in mobile phones, with the greater storage capacity of NAND, or"not and", flash memory chips.
NAND, a chip segment dominated by South Korea's Samsung Electronics Co. (005930.SE is favored in gadgets that require greater memory storage space, like the iPod Shuffle music player.
AMD's flash memory unit, Spansion, is a joint venture with Japan's Fujitsu Ltd. (6702.TO), and is developing the ORNAND chips.
(MORE) Dow Jones Newswires
03-10-05 0017ET
SOURCE Dow Jones Equity News
03/10/2005