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Intel Faces $1.3B Fine In Europe
Hugh Pickens writes "European antitrust regulators, who have been aggressively pursuing what they see as anticompetitive practices among technology companies, could impose their largest fine ever in a market-dominance case against Intel. The commission began investigating Intel in 2000 after Advanced Micro Devices, its arch-rival, filed a complaint. In two sets of charges, in 2007 and 2008, the commission accused Intel of abusing its dominant position in chips by giving large rebates to computer makers, by paying computer makers to delay or cancel product lines, and by offering chips for server computers at prices below actual cost. Some legal experts speculate that Intel's fine could reach about a billion euros, or $1.3B. 'I'd be surprised if the fine isn't as high or higher than in the Microsoft case,' said an antitrust and competition lawyer in London. In 2004 Microsoft paid a fine of €497M, or $663M at current exchange rates, after being accused of abusing its dominance; the EU imposed another $1.3B fine in Feb. 2008."
No there is no minimum price in the EU. There is however a rule saying that if you have a majority market share you are not allowed to lower your costs further than your production costs in order to try to kill competition.
The reason for this rule is that companies have in the past manipulated their prices in attempts to kill competition and thereby obtaining a monopoly. The airline SAS-Braathens was convicted of similar wrongdoings after they lowered their prices below their costs in order to kill competition and made up for it by charging multiple times typical airline fairs to destinations where they had a monopoly. The rules are very clear and established. Intel deliberately ignored them and are being punished accordingly. There's nothing strange here and the EU has been consistent about it. Intel and Microsoft got more attention because they are very large companies and the fines are based on your company's revenue. Other than that this is business as usual in the EU.
Oh in what world are dumping, price fixing and exclusive dealing considered anti-competitive? I have no idea, http://en.wikipedia.org/wiki/Anti-competitive_practices
"it isn't clear to me what the problem is with that aspect"
Because once they drove AMD out of business they would have an effective monopoly and prices would have shot right back up and it's illegal to do this kind of below-cost-selling.
Don't worry, he's just trolling.
"The budget also receives other revenue, such as taxes paid by EU staff on their salaries, contributions from non-EU countries to certain EU programmes and fines on companies that breach competition or other laws. These miscellaneous resources add up to around EUR 1.3 billion, i.e. about 1 % of the budget."
Source:
http://ec.europa.eu/budget/budget_glance/where_from_en.htm
It's a rather fucked up moderation system lately. I'm always ashamed of my excellent Karma, because if these kind of posts get modded up, I don't want to be part of it.
The only way to get mod points lately is to be *VERY* quick with replies. Which means that people either know it already (which is fine) or, as in this case, make it up on the spot (which is fucked up). Sometimes I just cannot get mod points because the article is more than a few hours old and I had to wait for day light, and then do some research.
Especially when its about Java or security/cryptography it's annoying. I know a lot about those topics and most of the time I cannot even hope for my replies to be read. It's doubly annoying when there are +5 articles like the GP that are just PLAIN WRONG.
Am i missing something here, or is the world falling apart?
Bob and Jim can both make chips for $10. Bob has $1000 in the bank, while Jim only has $300.
Bob sells chips for $8, losing $2 on each sale. Because of this, Jim can't sell chips for more than $8, so he also has to lose $2 on each sale.
Jim can only sell 150 chips at this price before going broke, while Bob can sell 500. So Jim goes broke first, and Bob raises his price to $20 per chip.
Then some time later Jane wants to start selling chips. She can make chips for $8, but only has $50 in the bank because she's just starting out. Bob cuts his price to $6 per chip for a couple weeks until Jane goes broke, then raises his price back to $20.
No, this is called "Dumping" and it is illegal in the states too.
The EU budget for 2010 is €139 billion. A fine of €980 million ($1.3 billion) would add 0.71% to this budget.
Intel has a huge, locked-in marketshare, and AMD only competes for a fraction of any OEM's buys because they are capacity constrained.
Intel can charge full price for the locked-in bulk of their sales, and then go and subsidize huge rebates for the portion of sales they actually compete for.
This grossly non-linear pricing scheme allows Intel to keep AMD sales in a little box, even while reaping monopoly profits... To counter the rebates Intel offers for the competed-for portion of their sales (subsidized by the profits of their locked-in sales), AMD would have to offer their chips for free.
It's called an abusive loyalty rebate, and when Intel has to actually compete on the merits of their products rather than coercing their customers, we'll have more choice and lower prices.
Brief overview specific to Intel:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1145327
General overview of loyalty rebates: (Read it and count how many times you think to yourself, "that's Intel.")
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1259830
There's only one reason you engage in anti-competitive behavior. That reason would be, you know what you're doing is easy enough that others could do it too, and most likely better than you're doing it, and for less cost.
In this particular case, the reason is that others (AMD) are doing it too, which means that Intel currently has to charge semi-reasonable prices.
Explain to me why I am wrong. If you can.
You seem to be saying that anti-competitive behavior is only used by companies who already have an absolute monopoly and are afraid of losing it. This is incorrect; it's actually used by companies which do have a few competitors, to attempt to kill those competitors and obtain an absolute monopoly. (This is also why a company can be declared a monopoly and be subject to antitrust regulations while having less than 100% market share.)
But Intel isn't dropping prices below cost. AMD is.
Intel is dropping costs and passing the savings on to volume customers.
One of those customers chooses to work only with Intel, and AMD claims that is prima-facie evidence that Intel is abusing AMD.
The fact is, AMD sucks at this whole thing, to the point they got completely out of the chip-making business last month.
The EP is elected.
The council is made up of the ministers of the various governments of Europe. Which are democratic.
Then there is the commission, which is vetted by the EP, and selected by the national governments. (see point 1) You don't vote for ministers, usually.
Actually, the EU structure is more democratic than say, that of the UK! If the national government were held to the standards of the EU, the world would be more democratic indeed.