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Dell's Intel Bias Caused By Under the Table Cash?
swschrad writes "There's a story up on Reuters today saying Dell faces a class-action lawsuit for finagling the books to hide under-table money from Intel. The hidden cash, up to a quarter-billion dollars a quarter, is alleged to have been paid to keep competing CPUs out of Dell PCs. Dell, their accountants at PriceWaterhouse, company founder Michael Dell, and former CEO Kevin Rollins are all avoiding comment on the pending litigation."
I could have sworn I've seen Dell selling machines with AMD CPUs.
(IANAL)
I don't understand why "under the table" cash is even necessary. Why do that if they can just get a discount? Do public filings even show which company is getting Dell's money? I don't think they are broken down that far.
A discount will be shown in finacnial records allowing other companies to see. If HP knows what kind of discount Dell gets, they can try to demand a similar discount.
I am a free slashdotter. I will not be modded, blogged, DRM'd, patented, podcasted or RFID'd. My life is my own.
Actually, that's naked insider trading. It's more like "we're investing in a new company X, and we could send them your way as their systems vendor, that is, with our cash. So what about that purchasing deal we were talking about before?"
Done with slashdot, done with nerds, getting a life.
This is the firm that's made a tidy living sueing the hell out of public companies whose stock drops suddenly. Guess the stock market is doing so well that they've decided to sue for prices going in the upward direction as well. Usually the target settles out of court because winning the legal battle would cost them more. A few years back they sued a company whose stock I own. In that case the company fought them off, but it cost me and the other stockholders (in whose names Lerach was sueing, thank you so much) several million. May Lerach and his ilk rot in hell.
What's wrong with paying another company to carry only your products?
If you have a dominant position in the market, it may violate antitrust law.
Selling at a low price is fine, always. But if you have a dominant position in the market, there are things that you aren't allowed to do:
You can't sell below cost, called dumping. The tactic is to bankrupt the competition and raise prices after they're gone.
You can't bundle products together so as to create a monopoly in a new area by tying to products from an existing monopoly.
You can't punish customers for buying from a competitor. Reward them for buying from you, yes. Punish them for buying from the other guy, no.
If you don't have a dominant position in the market, you can do those things. Sell below cost, buy market share, and the competition will have its chance when you run out of money. Sell unpopular products by bundling them with popular products, and watch your popular products become less popular. Require exclusive contracts, and watch customers switch to vendors willing to satisfy customer needs. You can do these things because market forces will correct attempts to manipulate the market. Under normal conditions, the market will reward efforts to compete and punish efforts to inhibit competition.
But a company can have a commanding position in a market, such that they aren't hurt much by tactics which reduce, inhibit, or eliminate competition. That's where antitrust laws come in. If you can get away with actions that stifle competition, then you are a monopoly in the legal sense, if not the pedantic sense beloved by shills. That's how the court determine if you are a monopoly. If you can raise prices without losing sales, you may be a monopoly. If you can afford to sell below cost until the competitors are out of business, then you may be a monopoly. If you can force unfavorable contract terms on your customers without losing them, you may be a monopoly.
Rewarding Dell for buying from Intel is one thing, and rewarding Dell for helping drive AMD out of business is another. The distinction between gaining sales for Intel and punishing sales by AMD can be subtle, and that's what the courts will wrestle with.