EU Slaps Intel With Formal Antitrust Charges

castrox writes "Intel is now facing a prolonged legal battle in the European Union for engaging in anti-competitive practices. The courts allege that Intel made at least one arrangement in Germany to ensure that PC manufacturers could only use their products. From the article: 'The investigation in Europe has been going on for a long time. Intel's European offices were raided by EU investigators in 2005. Last year, AMD filed a formal complaint with the Bundeskartellamt, the German Federal Cartel Office, accusing a German and Intel of entering into an agreement under which the German retailer would only sell Intel PCs in exchange for undisclosed payments from Intel. The EC quickly took over that investigation from the Bundeskartellamt.'"

Comments

AMD..

[ilovegeorgebush]

Seems like this is a blessing indisguise for AMD...or not? From TFA:

AMD can use some good news, as the company has fallen from its glory days in early 2006, when the chip maker had passed 20 percent market share. Strong competition from Intel's Core Duo and newer Xeon lines of CPUs have hit AMD hard, and the company continues to lose money despite rising sales: the company reported a $600 million loss last quarter. AMD has high hopes that its purchase of graphics card maker ATI, combined with upcoming Barcelona CPU technology, will be enough to turn the company around.

Will this have any affect on Intel's stranglehold on the market though? This whole situation is reminiscent of Microsoft and the EU a few years back. Even that barely stopped them. I doubt this'll do much for AMD...much like it didn't do much for Netscape in the browser wars (MS forced to remove IE as the default browser from new Windows installs).

Re:AMD..

[ShamrawkNRoll88]

See, therein lies the issue. The UPCOMING Barcelona CPU technology. Intel is already producing, and is getting ready to move to a 45nm manufacturing process in the first half of next year. Barcelona hasn't even hit shelves.

And another issue, how much will a Barcelona processor cost when it is released. In my opinion, Intel is fighting tooth and nail to stay on top in this one, including dropping their prices drastically when they release newer processors. And the older processors that are having their prices dropped are more likely to find their way into lower-end and mid-range pre-built consumer systems.

Punishments.

[ushering05401]

The punishments for such infractions are obviously not high enough. It's not like Intel execs sat down and said "Hey, let's potentially bankrupt our company so we can make a couple extra percentage points."

It is more likely they looked at previous (MS) antitrust settlements and decided that an anti-competitive strategy was an attractive move for execs and shareholders alike.

Regards.

Re:Punishments.

[Handbrewer]

The worst thing is, you're probably right. The really make it hurt for these multibillion dollar companies, you need to strike with either excessive fines, or - demand responsibility from the management, and ship them to jail. You cant enjoy the money you gained unrightfully if you're in prison. But, this is the whitest of white collar crimes. But the bloke on the street who cheats for 500 euro in taxes, gets punished very hard in comparison.

Re:Punishments.

[ttnb]

The punishments for such infractions are obviously not high enough.

Yes.. if fact maybe the main problem is a lack of conherence and predictability in antitrust presecution and antitrust judgements. See the paper "The Incoherence of Punishment in Antitrust" by S. W. Waller, Chicago-Kent Law Review, Vol. 78, p. 207, 2003.

It is more likely they looked at previous (MS) antitrust settlements and decided that an anti-competitive strategy was an attractive move for execs and shareholders alike.

Yes :-(

FYI: "Market Development Funds"

[asphaltjesus]

Depending on how you do it, it's not illegal. But most of the time there is a mixture of legal and illegal MDF usage pretty much everywhere in the world.

These kinds of market development funds are used to take valued decision makers on vacations, the usual wine and dine and some more unusual things, some of which are legal in Las Vegas. It's a very cozy relationship. So cozy that any hint of a competitor would **really** disrupt the good times.

Think about it this way. Either Intel keeping you in wine and roses or the MDF goes to your competitor while you have both Intel and AMD's sales people whining in your office once a quarter with less MDF coming in the door overall and fewer perks overall.

what is fundamentally wrong about it?

[nwanua]

Would someone please enlighten me? Is there something legally or morally wrong with two independent companies agreeing to what seems to amount to a partnership? The retailer obviously benefits from the agreement, otherwise they wouldn't have signed up; so does Intel. The argument is that Intel paid kickbacks of sorts, but what if these had simply been in the form of discounted CPUs?

Back in the day, there were stores that would sell only Apple equipment and related peripherals. I don't know if they signed any exclusive deals, but I don't recall any noise about that. Yes Intel is huge, making it vunerable to charges of monopolistic tendencies, but what is it about this case that makes it fundamentally different from any sort of exclusive agreements?

Consider: I might want to sell only cheese from a certain company, and discounts (kickbacks if you like) might make that choice even sweeter. What's wrong with that? Why do I have to sell anybody else's cheese? And why do the cheese manufacturer and I have to be punished?

Re:what is fundamentally wrong about it?

[tomstdenis]

Nothing, if you're not a monopoly. Monopolies are also not illegal. Abusing them to squeeze out legitimate competition is though.

Intel abused their position to bully/pay off companies to not sell AMD gear, not because the AMD gear was inferior, or less desirable. That's counter what a free market should look like and is bad for everyone. It lets Intel slack off [re: Pentium 4] and sell things for ridiculous prices [re: Pentium 4].

Nowadays though things seem to be better, Intel has better tech than before and they're selling them at fairly competitive prices. But that doesn't excuse their behaviour earlier. Who knows where AMD would be today if they had more funding for research from sales that were denied them?

Tom

Re:what is fundamentally wrong about it?

[ObsessiveMathsFreak]

Capitalism is a force. Used wisely, it can be of great benefit. Left to its own devices, capitalism can trample the very society that supports it. It needs to have limits.

Left alone, agreements like this can erode the supposed free market in which they exists, leading to monopoly, reduced quality and higher prices. We have anti-trust agreements to protect consumers and producers. You may believe in some pure and unadulterated laissez faire market system, but the fact is that has been proven to be unworkable, no matter how many poor excuses are thrown up.

Re:what is fundamentally wrong about it?

[Zero Degrez]

Part of having a free market is that the CONSUMER is the one that gets to make the choice. That is, per your example, Apple were extremely popular amongst the consumers, then stores would stock more apple equipment to meet the demand made by the consumers. However, if per your example, Apple offers kickbacks to the store to only stock their equipment so that consumers are forced to purchase the Apple brand, then it is no longer a free market where the consumer makes the decision on what products will succeed. This is BAD. And yes, there is something legally wrong with two independent companies agreeing to divide up a geographic area to only allow a certain product to be purchased there. The difference between this and a partnership though from my point of view, is simply scale. It's a thin line to walk, but when a single store or a few stores control nearly all of a particular market of items, then those stores might be breaking the anti-trust laws that have been put in place if they agree with another company to only allow product X to be sold in their stores.

And while for whatever reason you may think this is good in the short term, it extinguishes new competition from rising to the surface to compete on an even playing field. Thus leading to the end or at the very least, the slowing with which new ideas, new products, new widgets make it to the market for you to buy.

All anti-trust laws are in place to keep YOU safe, so that YOU get to decide if you want to buy Intel or AMD...or Sun.

Re:what is fundamentally wrong about it?

[Zero Degrez]

Because they aren't the same. A franchise Apple store says, "Hi, I'm a Mac...err Apple store." These stores have, and will always be dedicated to selling one brand. However, when you take a general store and make a secret agreement to only stock Apple gear. Then it's a Mac of a different color. Because now customers don't know it's actually an Apple store, and now these poor customers are being forced to buy Apple's because that's all they see.

You may say, "but why don't they just go online and buy something else", well that's all well and good...but most people don't do that. They go into their favorite retail stores, like, best buy, look around, find something they like and buy it. Especially when it's a component like Intel, you think people care if they get an Intel or AMD? No, they just want it to work and be cheap. But, if that store only sells computers with Intel chips, then AMD gets squeezed out of the market, even if their product is superior.

Official links

[Dekortage]

Read 'em yourselves: EU's official statement and Intel's official response.

Intel says its actions actually benefit consumers

[thefickler]

Intel's senior counsel has responded to the EC's preliminary finding by saying that the Intel's actions in Europe actually benefit consumers. http://tech.blorge.com/Structure:%20/2007/07/27/in tel-were-not-abusing-our-market-position-in-europe / But then, of course, they would say that.

Monopoly: AMD can't even give chips away.

[Visaris]

Comments by AMD's Hector Ruiz really struck a cord with me:

www.cbronline.com

In the case of HP, he said, AMD could not even give away a million processors for free, due to the fear of the potential of Intel punishing the PC maker.

If you trust Ruiz, this comment should be all you need to know. If Intel is being such a monopolistic bitch that AMD can't even give away chips to HP, I wonder what other cases are going undocumented. I really hope AMD gets the monetary compensation they deserver, as I promise you that Intel's anti-competitive tactics aren't helping the consumer any.

Re:FYI: "Market Development Funds"

[Red Flayer]

and some more unusual things, some of which are legal in Las Vegas.

Hmm. Just so you're aware, you need to leave the Vegas city limits for some of those things to be legal. Or so I've heard.

Just a friendly bit of advice from someone who wouldn't want any Slashdotters to end up in the klink in Vegas.

Re:US Companies

[Anonymous Coward]

"Does it do this for European-based companies as well?"

YES, for god sake. It is not our fault that some of you don't know what happens arround the world.

* European companies are getting fined when doing anti competiveve practices
* European companies are getting investiged about monopolistic practices (recent I hear more and more about the telecom sector)
* European companies are getting fined when they are forming a cartel
* European companies must follow the same rules as foreign companies between "our" borders
* Etc

It's not one big European conspiracy against the good "old USA". Some of you people are really stuck in the "they are all against us" mantra aren't you ?

Re:US Companies

[mean pun]

Why does the EU always seem to come down on US-based companies that control a large portion of specific markets?

Because

• US media, including /., rarely report on cartels involving no US-based companies: for example, for some reason people in the US don't seem to be well-informed about the beer, paper, banana, gas switchgear, and rubber cartels (from just the first two Google pages on 'european commission cartel').
• US-based companies sell lots of stuff in Europe, and therefore have plenty of opportunity to do illegal or suspect things: there is a reason North-Korean companies are rarely sued.

Re:We all know litigation...

[KarmaMB84]

If Intel paid someone not to sell a competitor's product, it's not about competition.

Re:US Companies

[rajafarian]

Maybe European companies don't think they're above the law. Maybe there's something [my emphasis] in the American corporate mentality that makes them think they're special and can do anything without any consequences.

I think it's called experience.