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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 isn't? I wish I could kick that much ass by accident...
As much as I like to see anti-competitive practices punished, I'd rather the US regulators would do their job on occasion, not just the EU. Many of the companies who have been accused of anti-competitive practices are US companies, so the PR hit of being fined by their own side would perhaps hit home more than outsiders. That aside, is there any point to these huge fines? 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.
It's a good thing that there is someone keeping these giant companies accountable, since the US system isn't going to enforce anything. Remember the DOJ's anti trust case against Microsoft? Microsoft technically lost that one, but it didn't seem to cost them anything.
We need to enforce a fair playing ground where companies can legitimately compete. AMD has been the biggest impetus keeping Intel's chips moving forward and keeping their prices lower.
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.
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.
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
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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Governments need someone to pay for the huge debt they're accumulating. Hey Intel, these guys, they have money. We can take it and spend it on programs that will make us look good, potentially reelected.
Sickening.
Please. It is a government. It can just print money if it wants to. As painful as the resulting inflation would be, that would be preferable to damaging the reputation of the rule of law on the continent.
Cue the brainwashed anti-trust crowd.
I think you misspelled "believers free economies"
weirdest thing I ever saw: scientology advertising on slashdot.
The term 'anti-competitive' is what most companies desire to some degree or another; to reduce the effectiveness of or marginalize the competition. I'm against monopolistic behavior. And although MSFT and Intel may have raised the ire of the EU on this front, I'm waiting for the day the EU fines a business so much they simply stop doing business in the EU.
Someday, the irony might be that the EU's actions result in reduced competition when a company simply packs up their products and leaves.
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.
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You have no idea what anti-trust is all about, do you?
First of all, the rebates were not to all computer makers, they were to computer makers who would not carry AMD. So, if you were a computer maker that wanted to carry Intel, and you WOULD want to carry Intel since they were a near monopoly and for one reason or the other many of your clients would ask for Intel, then you would be at a price disadvantage if you also wanted to carry AMD.
Secondly, Intel was making enough money having most of the desktop market, yet AMD was gaining server market share with superior server products, so Intel tried to remove the competition from that market by going below cost until the competition was done.
So, it is not "illegal" when there are two companies on fair competition, size (actually market penetration) is indeed a factor and that is why there are anti-trust laws, which try to protect the consumer.
Let me give you an example in the US. I have heard cases where small ISP's started offering better/faster service than the large Cable providers in some areas. The Cable provider would suddenly undercut the small ISP by pricing at a loss at that specific area of service (which was only a fraction of the provider's total service so no real financial harm), which would force the small ISP close down. After that the prices were restored to even higher levels than before. So there are similar below-cost anti-trust laws like the EU, but sometimes companies get around them by claiming "limited time special deals" etc
So, do you think that Intel would keep selling below cost after AMD was done for? I am old enough to remember very well how much Intel CPU's used to cost before AMD started being competitive. Do you?
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This is not new, Walmart has been doing this for years. After you drive out competition, slow down R&D, and raise your prices, you get fat and slow. And when a nice lean company comes in and challenges you, you die of a heart attack.
Please. Nobody prints money to create money any more... that's old school. They just make more loans and then sell the "paper" to some sucker as if it's tangible. The mortgage on your house effectively "printed" some more money.
In what alternate dimension does the EU exist where the above are illegal?
I think the "rebates" one depends on what the rebates are for. If it's something like a volume discount, it's probably ok. If it's something like "discount for not using AMD chips", it's probably not. I think something like the latter was one of the complaints in the US antitrust case against Microsoft.
Selling your main product below cost as standard practice (ie, not just for getting rid of outdated inventory) only makes sense to try to starve out a competitor who doesn't have enough cash reserves, and so I understand is generally considered predatory pricing which tends to be illegal.
Consumers were already paying more for Intel's anti-competitive behavior. The costs of corruption were being factored into the cost of their products already.
What disappoints me more is the moral turpitude that is rewarded and clearly condoned at Intel. http://en.wikipedia.org/wiki/Moral_turpitude
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html
It's not just about Intel and AMD, it's about the whole market. This kind of behaviour hampers competition, which in the long run hurts users. If some little company comes in with a wonder chip, we all want it to be in a market where it can succeed, not where it is unfairly squashed by this kind of behaviour.
"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.
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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Seems like if you're making tens of billions of dollars annually due to your dominance of the market, a piddly little couple billion dollar fine every few years is a small price to pay. The accusation against Microsoft, similarly, is that they just see the fine as a business expense. When the fine is a drop in the bucket, why not just pay the fine and keep doing what you're doing?
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
Also, it is true that fines are a significant portion of the EU's small budget.
If so, doesn't this make it rather difficult for the EU to be a disinterested, fair, regulator?
It seems like they would have an incentive to invent corporate crimes and then impose fines for them, regardless of the targeted behaviors effect on consumers.
(Not withstanding TFA, which I haven't read.)
Alcohol, Tobacco and Firearms should be the name of a store, not a government agency.
Remember that little crisis we are in. No not the war on terror. No not swine-flu. Or the bird-flu. No not the high oil-price that one is over. No it ain't the low oil price either. The credit CRISIS! Geez pay attention will you!
Anyway, the cause of it all is big american companies who got so big they also fell under EU regulation convincing the EU that the US regulation was though enough. The EU swallowed that ONCE and look what happened. Dead, misery, war, starvation!... well okay, a suicide, some fat cats moaning, just the same old wars as before and call girls making less money (newsoutlets in holland are so desperate for a desperate story they are now running how the sex industry is collapsing... in germany. Because all the ones in holland say they are doing fine, just a bit less trade because fewer americans are visiting (and doesn't that just say a lot about the good old US of A)).
Anyway, US has no regulation and won't be having any either. That is what you get when you elect between Wall Street Front guy #1 and Wall Street Front guy #2. You only pick really is wether they are more strongly tied to the hollywood lobby or the gun lobby.
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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.
It wasn't just 'dumping' that they are being investigated for. They were preventing AMD from entering markets through condition-based incentives; i.e. 'I will give you {discounts,rebates} if you don't sell product from {AMD,other competition}.' It is fairly hard to compete in a market that refuses to let you in.
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Shoot, coward. You are only going to kill a man.
The EU budget for 2010 is €139 billion. A fine of €980 million ($1.3 billion) would add 0.71% to this budget.
I don't think it's just a guise. Intel really appears to be guilty here, and are being punished legitimately. However, you're right that the EU is also motivated by the money, and the judgment is likely to be skewed by a conflict of interest.
I think a much better plan would be to use the money to fund a coupon program under which EU members can get discounts on competitors' products. That would be the most fair because the EU regulators would not have a conflict of interest. It would also really help those companies (ok, AMD) who were hurt by Intel's practices to regain ground that they lost.
The EU does not have the ability to raise or levy taxes. And they fine EU corporations too.
You're just one of those whiny Americans throwing a tantrum because your precious corporations can't ignore all the laws like they do at home.
I give your post a 3/5. You didn't use the word "corporations" in a pejorative sentence. You didn't say "fat cats". You failed to mention Evil Monsanto.
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.
But to do so after the financial collapse and the current crisis it must take a either a superhuman level of irony special kind of lobotomy.
OK, you call me when that happens. After all the regulated banking systems of Canada and Australia are in such turmoil at the moment in stark contrast to the stable and unshakable US banking system.
Calling someone a "hater" only means you can not rationally rebut their argument.
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.