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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."
I like Intel's hardware, it's really impressive. But that kind of crap can't go unpunished and it's nice to see a penalty with some teeth, even if it's only potential teeth right now.
It is a practice called "DUMPING" designed to force the competition to either operate at a loss until they die or simply give up in the marketplace. Afterward, of course, the perpetrators jack their prices beyond what it should be, slow R&D so they can sell their old stuff faster and then set about abusing the market as a monopoly unimpeded.
Yes, indeed, it is illegal to "dump" your stuff in order to harm the competition.
Again, unless they're giving these chips away, what's the problem? I'd be inclined to do the same thing, and I'd be shocked and amazed if the OEMs didn't suggest it and perhaps even push the idea themselves. (But honestly, both sides stand to profit from the arrangement. Follow the money...)
Well... this is the Wallmart Syndrome at its finest. Sell at or below cost until your competitors are bankrupt.
Just because Intel has money to burn, doesn't make it right. I don't see why anyone would encourage these practices, because they lead artificially deflated market prices for goods, coupled with monopolization, and sandwiched on top of a liquidity crisis. Does that sound familiar?
Because it should.
The consumers lose... the stockholders lose... Nobody wins here, except whoever got rich in the meanwhile.
In that alternate dimension where governments, not corporations, get to decide what the laws are. If Intel wants to do business in Europe, they have to abide by European law.
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Not an alternate dimension. This dimension. This plane.
Intel had a market-dominating position, with AMD barely sniffing that their knees in the early 2000s. They also had a big fat cash surplus. So, they decided that by selling at a loss, they could keep AMD from breaking into the market; once AMD was bankrupted, or not able to compete, then they could raise their prices back up and begin raking in the cash.
This is a very, very classic example of anti-competitive behavior. It doesn't get much more textbook than this.
No. Because Intel was dominant in the market, they couldn't sell at a loss to drive a much smaller competitor out of the market.
Note that this is illegal in the US as well as in the EU. I suggest before you get your panties in a wad about how this possibly couldn't be illegal, you actually bother finding out why it's illegal.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
Guess who it's going to be passed onto? Intel gets fined and I suspect that by some remarkable coincidence the prices of their chips mysteriously increase.
Yeah that's the point.
Intel have been able to keep their market share artificially high by abusing their dominance. This has made it difficult for other companies to compete. If Intel is forced to raise prices to cover the fines, then this gives other companies the chance to gain market share by competing on price.
In other words, the fine restores some amount of competition, as intended, and serves as a deterrent against continuing to abuse dominance, as intended.
As an european i'd say let the europeans benefit from the fines if the US is not interested in punishing those who broke the law by abusing their monopoly.
How are most of these practices problematic? Why should there be anything wrong with them selling chips for servers at below cost? Yes, it keeps them dominant but the result is cheaper servers for the rest of us. If the point of anti-trust regulations is to benefit the consumer then it isn't clear to me what the problem is with that aspect.
It can be confusing, if you only think about the cheaper servers you get today. If you had been around before AMD was competing with Intel on more than the budget desktop space, or even worse when AMD was nothing more than a second-source supplier of x86 chips, then you'd see the danger inherent in this and be petrified. Do you know how much Intel charged for a server chip before the Opetron came out? A high-end Xeon could cost you $4000 just for the processor. Shortly after the Opetron, that dropped to just over $1k. When they had no competition in the server market, they could charge whatever they wanted, and they used the buckets of money made there to fund price wars with AMD on the desktop. When they had no competition in the desktop market, they simply charged whatever they wanted for all their chips.
So today you get cheap servers, sold below cost and funded by Intel's significant cash reserves and still quite high margins in laptops. Tomorrow, when cash-strapped debt-laden AMD folds because they can't afford to sell chips below cost, Intel once again has the market to itself. And. You. Don't. Want. That.
Whether it should be illegal or not is debatable, but whether it's good for you in anything but the very short term is not.
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Right, so If I have 10 billion in cash, and you have 1 billion in cash, I can drop the price on my product to well below cost, and take the hit. If you try to do the same you will run out of money before I do, and I will win. And THEN i can raise my price back to where I think it should be, ie 2 or three times the cut rate price.
So what you are suggesting is that you want to pay a higher price for what will become a rather mediocre product. (why try to make a better product if you don't have any competition? Research costs a lot of money.)
And your basing the existence on a conflict of interest on what? Money from fines is put into the general budget, which is agreed upon long beforehand. Any extra income does not mean the commision gets to spend more, it just means the member states pay less (and that's not even taking into account that the commission has far less control over the money it does have than most governments). By that logic all financial penalties, including fines and tickets should not go be paid to originating party.