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Intel Receives Record Fine By the EU
Firefalcon writes "Intel has been fined a record 1.06 billion euros ($1.45 billion / £948 million) by the European Competition Commission after being found guilty of anti-competitive practices. This makes Microsoft's 497 million euro fine in 2004 (which was a record at the time) seem like a slap on the hand. Reports had previously suggested that the fine would be similar to Microsoft's. Intel was charged (among other things) with encouraging manufacturers and retailers to purchase fewer (or even not stock) AMD processors. More details of the ruling are on the European Commission's Competition website. Intel said they will appeal the fine."
Without knowing exactly where it goes I can only speculate, but could this fine by so high to help fix European budgets stretched too thin by a weak economy?
The musings of just another geek and his junk.
Step 1: Find a large wealthy company.
Step 2: Fine them for anti-competitive behaviour.
1.066 GigaEuros - a number Intel can understand?
ccalam - acoustic versions of new songs.
It's still just a slap on the wrist. They've profited an order of magnitude more from the illegal tactics they used, and this just says "It's ok to break the law, as long as you give us a cut of the profits".
They should at least give a part of the fine to AMD to help them fight Intel -- that would hurt Intel a lot more than paying a fine to EU, and make them think twice before doing this again.
Never underestimate the bandwidth of a 747 filled with CD-ROMs.
There's a bit of a difference between offering a volume discount and a discount that specifically hinges on you not purchasing a competitor's products.
I was the Director of Engineering for VLSI Technology's PC Chip set division back in the 80's. Back in those days, there were dozens of companies making chip sets for Intel CPU's and Intel, surprising as it may sound, did not. The chip set business was interesting in that it started with C&T. Zymos was second and VLSI was third. By the time we got into it, and in particular, after we were picked by IBM to be their chip set provider, the bay area VC market must have been swamped with business plans of every dog and his brother wanting to start a chip company making chip sets. If you can remember too, there were hundreds and I do mean hundreds of PC companies. Fast forward a few years. Things are now pretty crazy. VLSI made it to be the top chip set supplier but the competition was intense. The hundreds of PC companies has now fallen to around 10-12. The dozens of chip set companies has fallen to 4 or 5 but still no Intel. This is around the time that the Pentium first made its debut. Now, to make a chip set, you need these very important things called "Yellow Books" ( maybe they were Red.... hmm that was a few years ago) . These are the specifications of the next CPU from a "certain" CPU manufacturer. Without the yellow books, you can't make a chip set because you have no idea what the memory interface is going to look like. If you don't know the memory or peripheral interface you can't make a north bridge for sure and your south bridge is going to be a hack. Soooooo, it was at this time that we were working on our next generation chip set for the Pentium. We were going crazy because, for some very strange reason, we had yet to get the "Yellow Books". We could and did make educated guesses as to what the memory interface should be but we did not know for sure what it would look like. Well you know what? Gee, like magic, Intel announces and samples their Triton chipset. (Which we taught them in large part how to make pursuing a CF called Polar and Draco with Intel, but that is another story.... I digress) And Andy G. tells the press how Intel was just "forced" into making their own chip sets because the external chip set vendors just could not keep up. Oh yea, gee wizzz, we get the specs the same week you sample and yea, we just can't keep up can we. Where it really got interesting is when we got our chipset out and our sales team was trying to sell to our customers, which now as I said is a VERY short list, it seems a certain "I" company was bundling their chip sets with their CPU's. You, as a PC company, "could" buy just CPU's from them for price A or you could buy CPU's + Chip set for price B. I let you guess which was the larger. Oh, yea, and if you selected the A option. They ( the "I" company) could not guarantee delivery.
So, we went from $250M/year in sales to $25M/year in sales in 12 months. Our division was decimated. I have never seen anything, short of last Octobers stock market, fall so hard and so fast.
In retrospect, I don't blame Intel for getting into the chip set business. Hell, I am surprised actually it took them as long as it did but both the tactics they used, and quite frankly, the stupidity of the upper management at VLSI laid waste to an incredible group of people, and at the time, a great place to work. Ah, well. That's competition. It was fun while it lasted.
"TV, a medium as it is neither rare nor well done." Ernie Kovacs
2 Euros (why does Slashdot not display the Euro sign correctly when pretty much every other internet forum does?)...
The AACS key is NOT 0xF606EEFD628B1CA427BEA93A9CA9773F
wow, never saw that coming
I work for the Department of Redundancy Department.
Volume discounting means "buy more and we give you a discount". What they were doing was "don't buy from others and we give you a discount.. you don't even have to buy more from us". There's a very clear difference between that and Sam's Club's discounts.
Never underestimate the bandwidth of a 747 filled with CD-ROMs.
Office max and sams club dont threaten to revoke your rebate if you go down the road and also decide to buy something from another store.
I think the difference here is that Office Max can't give you a bulk discount contingent on you not buy from staples.
Ex (ok):
Office Max: Pens are $1/ea, but if you buy 100,000+, they are $0.75/ea
Ex (not ok):
Office Max: Pens are $1/ea, but if you buy 100,000+ AND no more than 10% of your purchased inventory comes from our competators, they are $0.75/ea
Self proclaimed typo king, and inventor of the bear destroying coffee table (patent not pending).
It's illegal when its anti-competitive and forcing other manufacturers out of the marketplace. In addition, there are things that are illegal for monopolies that are legal for other companies (although I'm not sure if Intel been deemed a monopoly in the Eurozone).
This signature was left intentionally blank.
Office Max and Sam's Club are not in a monopoly position, so the laws on monopoly abuse don't affect them. If they became monopolies, they would indeed have to stop anticompetitive behaviour.
All the EU claims you must not do is leverage a monopoly position to crush your opposition, which is a very sensible law indeed.
A pizza of radius z and thickness a has a volume of pi z z a
Intel's "crime": "'Intel awarded major computer manufacturers rebates on condition that they purchased all or almost all of their supplies, at least in certain defined segments, from Intel.'
This is called "volume discounting". Office Max and Sam's Club are guilty of similar "crimes" and "anticompetitive" behavior, it seems.
You are wrong because a rebate happens after the fact. A volume discount is provided up front. Intel has always provided volume discounts, and still does, and nobody is complaining about that. The complaint is that intel is instead promising to give money if the manufacturer shuns AMD, then delivering the payment. This is similar to Microsoft threatening to raise OEM prices if OEMs bundled certain software or sold machines with other operating systems installed.
The second case is pretty clearly anticompetitive; the first case is, after thinking about it for like two fucking seconds also quite anticompetitive. You're FREE to say "if you buy ten times as many units from me, I'll give you a discount." That's not what's happening here. Instead, it's "I'll give you this great price, but only if you don't buy anything from my competitor." Maybe you think that should be legal, okay. But it's still different from a volume discount.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
It must be really worth it for these big companies to risk millions in fines to making competition suffer.
I always wondered if they really make that much more money (after the fine) or if what they really are after is the destruction of the competitor (AMD in this case)...
Offering discounts and requiring a certain number of units to be sold to get that discount is legal. Limiting the number of units they buy from the competition or not allowing them to sell AMD is not legal.
To follow the OfficeMax example, the more paper I buy from OfficeMax, the better my discount. OfficeMax doesn't revoke my discount if I buy something from Staples - as long as I hit the agreed upon quota to receive the discount.
It was worth it!
I would gladly pay a 1B euro fine every decade or two if that's what it takes to keep the monopoly.
(I'm not expressing an opinion on whether the allegations are true.)
As of Postgres v6.2, time travel is no longer supported.
Intel had paid manufacturers and a retailer to favour its chips.....via rebates...
I suppose this is a kind of encouragement, not what I originally thought when reading the summary however.
Especially when the competition happen to be quite a lot smaller than you are. I good day for AMD, and freedom for real competition. I can put up with straight bananas for this.
It is legal and ethical for a non-monoplistic company to offer volume discounts.
It is NOT legal and NOT legal for the single biggest chip maker to insist you don't buy their competitor's product except in minimalistic amounts.
The differences are
1. Volume discounts are not affected by your purchases from a competitor. They are simple standardized discounts.
2.When you are so big and powerful that your clients literally fill threatened and has no choice but to acccept the terms of your contract, then yes the government DOES get to affect the terms of the contract.
excitingthingstodo.blogspot.com
Sounds like a necessary part of business?...
No. This behaviour is anticompetitive. It deprives consumers of choice and the benefits of healthy competition such as lower prices. It is one thing to severely undercut your competitor...that's basic competition and part of free market trading.
However, preventing the competitor from even being considered at consumer level benefits no one but Intel. OEMs are strongarmed, consumers have less choice, competitors go out of business. This is the Monsanto of chip business.
I never get used to these constant resurrections
No, it's more like... well, imagine I have a fast food joint.
Burger: $ 5.
Special offer: 3 burgers for $ 10.
Now, that is fine. What Intel did was more like:
Burger: $ 5.
Special offer: 3 burgers for $ 10, as long as you swear to not buy anything from that other restaurant across the street.
Circumcision is child abuse.
Yeah. The difference is about a billion Euros
"encouraging manufacturers and retailers to purchase fewer (or even not stock) AMD processors." How could that possibly be illegal?
How about this "In addition to providing rebates to manufacturers that bought almost entirely Intel products, the Commission found that the chipmaker had paid them to postpone or cancel the launch of specific products based on AMD chips."
"I have downloaded hundreds and hundreds of records, why would I care if somebody downloads ours?" Robin Pecknold
Why the odd 60 million tacked on the end? VAT?
I imagine the price of Intel cpus and motherboards will be increasing in the EU very soon.
"The average reporter we talk to is 27 years old......They literally know nothing." - Ben Rhodes
Yes. Just like breaking a few legs is a necessary part of running a protection racket.
With $1.45 billion on the table.
Any law firm would go nuts to have a piece of that action. Even to reduce the fine by 1%, that is still well over million dollars..
From the European Commission press release:
Intel gave rebates to computer manufacturer A from December 2002 to December 2005 conditional on this manufacturer purchasing exclusively Intel CPU
Intel made payments to computer manufacturer E provided that this manufacturer postponed the launch of an AMD-based notebook from September 2003 to January 2004.
and many other examples that no one can deny are illegal. My only complaint is that the fine should have been higher than 4% of Intel's revenues in 2008, and a part of it should be given to AMD.
They offered a discount if customers promised not to use competitor's products.
Seems to me like a perversion of market purity. They should be cast into the flames to be purged, no?
Now witness the final battle between Captain Obvious and the Mighty Sarcasmo!
I see nothing wrong with it... it is already rather appealing.
The action against Microsoft does not seem to have hindered Microsoft's behavior in the slightest and so even though tremendously more aggressive than the action against Microsoft in the U.S., it was clearly not enough.
It remains to be seen if the action against Intel will be at all effective.
Well played, Sir, well played indeed.
Now do you have any suggestions for drying coffee out of a keyboard?
"Total destruction the only solution" - Bob Marley
Err, no? And last I checked, it wasn't the case.
I'm not a big supporter of Intel's practices, and a strong opponent of anything Microsoft does, but come the fuck on! Is that money going to be disbursed to AMD for lost business?
No. Why should it? This isn't a civil suit of Intel vs. AMD. Intel is being punished for breaking the law.
EU anti-trust body has become a sick joke.
Why, because they actually do what they're supposed to be doing? You have an odd definition of "sick joke" there.
Step 1. Let companies profit immensely based on illegal and monopolistic practices ...
Step 2. Let said profits become astronomically high and ignore them for years
Step 3. Wait for EU countries to need money very badly
Step 4. Claim some of the companies' money as a fine but not enough money that it's significant to the company
Step 5. Throw a giant PR campaign around the event saying that the EU 'looks out for the people'
Step 6. ??
Step 7. ??
Step. ? Revolution?
It's not even the maximum amount they could have fined them! The max amount is 10% of annual company revenue, for Intel that would be just below 4 billion Euros., since 2008 revenue was 37 billion
And no, they cannot state that paying that fine would bankrupt them, since they have an estimated 10 billion in cash and securities.
Or so states The Financial Times.
The EU must not like me...they keep fining my stock choices!
Keep moving on, EU. These aren't the droids you're looking for.
the fact that people don't understand where it comes from is more important.
As in, everything sold by intel in effect passes the cost of this judgment to the people buying the product. Since the dollar amount truly is not significant to alter intel's behavior this just becomes and embedded tax.
Really, I see the EU as Dr. Evil making a demand for an amount of money which is meaningless in today's term and Intel's board just laughing it off.
* Winners compare their achievements to their goals, losers compare theirs to that of others.
(European companies will get a free pass, of course).
Like EDF, Groupement des Cartes Bancaires, or Telekomunikacja Polska and Slovak Telekom are then?
Did you know the American companies seem to break the law a lot?
The Anonymous Coward read the article, tears came down his face. "Not my beloved intel!", he cried out loud.
The tears kept coming, he couldn't bare it anymore. The European Union had gone too far this time, the people had to know..
No - it is still tiny compared to the profits Intel makes.
The chip business is dominated by design costs - the manufacturing cost of each chip is relatively small, even for bigh CPUs. So once you have done the design, the return on extra sales is huge. So you don't want to leave out any significant market.
Also, European companies view business in the US as risky because of tort law: if your component is used in something that causes harm, you can get sued to your underwear even if it is misused.
Consciousness is an illusion caused by an excess of self consciousness.
Instead, it's "I'll give you this great price, but only if you don't buy anything from my competitor."
But haven't I heard of people becoming the "exclusive" supplier for companies? Isn't this really just a normal business tactic?
No comprende? Let me type that a little slower for you...
Of course rather then be strong armed, the companies could choose to just threaten to go all AMD.
Do you think intel would risk losing say Dell over pricing? And do you think big PC makers are in any sort of risk for poor profit margins?
Recently we put the screws to dell and got 40% discounts on some large orders (dozens of notebooks and monitors). Obviously they have high profit margins if they are OK with taking those cuts.
The EU is showing it has some balls to deal with anticompetitive practices.
From my perspective this is good ammo against the Euro-skeptics in my own country. Big multinational companies like Intel couldn't care less about what a EU member state says, but if the EU works together it's a heavy hitter.
Yes, but like doping in bicycling, but it is also against the rules. Many European businesses have been fined for doing that. Hopefully the practice will stop soon, or at least stop from being the norm.
From what I understand, the way it was done was subtler than that. "We estimate you need 100k pens, so if you buy 90k+, you buy at discount". "Oh, you need 50k pens? We'll offer a discount starting at 45k purchases". Essentially, they never explicitly say "you can't have more than 10% of your stock in AMD products", but, by tailoring their bulk prices on a per-client base, they effectively achieve the same effect.
It's roughly 1/2 of thier last dividend, which puts it into the "won't even make us report one quarter of loss" category.
Yay!
Yeah I know, intel has been really good to OS development of late - really good. And the free market blah blah blah and stuff and whatever rant.
But this sends a clear message. It says they don't just go for MS, they target all businesses that behave in this way. See I live in, and glean my cultural background from, Australia and here we have a strong understanding of the tall poppy syndrome. While tall poppy syndrome sounds like a disease, and probably is, it can be beneficial on a societal level in that it helps to maintain diversity, which makes us all more adaptable. Nature naturally culls anything that gets too strong in one area and technology improves with diversity.
The old 8086 legacy sucks and licks and covets huge anus [citation needed]. Compare now when PCs are either x86 or .... x86 to the situation in the 80's or 90's. Then I remember "compatible" was the word - "is this compatible with that?", etc etc. Now we have open protocols and formats, everything is nearly compatible, but hardware is still stuck in that one model that was successful for the same reason MS is successful. We can improve, and I welcome this fine judgement and hope it is followed with more.
Of course being in Australia I can welcome another 15 years of government mandating that all CPUs must be intel based. PHBs are a little more backwards over here. Dell still doesn't offer linux except RHEL on servers..... wtf!?!? Even my luddite media friends know what linux is and want it - keeps me busy.
I don't therefore I'm not.
It's one thing to slap a fine on the company, quite another to get them to hand over real cash - did it ever happen?
In this scenario, the EU must take care to ensure that Intel's only other serious competitor, AMD, be given a fair playing field in which to compete. The multi-billion-dollar (trilion-dollar?) computing market ranging from netbooks to tower-stations depends on getting the best processor bang for the Euro.
South korea has already fined intel for the exact same crooked behaviour recently. eu is even late in doing it.
Read radical news here
Now do you have any suggestions for drying coffee out of a keyboard?
And Commander Cliche checks in.
See now that is informative. You should have written the summary. I believe Pepsi does this for Coke products in various place where I live. Always bewildered me that it was legal. Good to see someone getting charge for it then.
for you dont know shit about what you are talking. the fine is not to 'force' anything on anyone, its to punish intel because they have BRIBED computer manufacturers so that they would use intel chips and not amd. BRIBE. mark that word. bribe is something that is not allowed in a free competitive market economy.
Read radical news here
But haven't I heard of people becoming the "exclusive" supplier for companies? Isn't this really just a normal business tactic?
It depends; you can be the exclusive supplier if they're simply not buying from anyone else because they have decided your solution is the one to go with. It's pretty hard to actually get caught acting anticompetitively if you're smart, which is why odds are if you're actually hearing about a violation, it's a major one.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
IBM stopped selling workstations based on the PowerPC
But then IBM started selling chips for playstations based on the PowerPC. Or do those not count because their workstation mode has only 256 MB of RAM and software graphics?
notice that fines like these go into the gov't coffers, and never go to the hands of those that were supposedly wronged.
Imagine the affect it would have on these kinds of practices if AMD was to get a large portion of the fine.
Thanks to file sharing, I purchase more CDs
Thanks to the RIAA, I buy them used...
I don't know much about law but do they ACTUALLY pay this fine?
If they do pay the fine, who does it go to and what do they use it for?
I don't care how evil intel or Microsoft are, if the government is just taking cash and not supplying it to competitors then this is frankly bullshit.
What's to stop the government(s) of countries to start up some kind of frivolous lawsuit against another huge company just because they need big dollars?
When is it apples turn, sony's turn? Etc
Unless this money is put to sensible use then I honestly don't see what right they have to demand the cash.
"...Intel said they will appeal the fine...." Intel PAID a leading OEM Manufacturer to delay sales of a new AMD CPU model and offered kickback payments for units sold with Intel chips. Intel deserves to burn in hell! Just shows that Intel must not have faith in their own silicone if they pay to make sure AMDs dont get released by OEMs. The move was DIRTY and bullshit. If I can help it I won't EVER by an Intel based anything. So I guess no Mac for me
That might be the case. But what Intel did was wrong. They already have a leg up when it comes to AMD. (I am an AMD guy *Because I am poor* but I will admit Intel R&D and hardware rocks). Intel did NOT need to bribe OEMS to Delay the release of AMDs units. The fine was very heavy. Too heavy. But they should still payout.
Now witness the final battle between Captain Obvious and the Mighty Sarcasmo!
...And Commander Cliche checks in.
The three of us together can bring the world to its knees! (With laughter)...
If there is one thing Intel doesn't need to be successful it's PC makers right?
So they have no bargaining power at all.
Yes because a 1 billion Euro fine is going to have a big effect on an economy with a GDP of around 9.5 trillian Euros.
Of course rather then be strong armed, the companies could choose to just threaten to go all AMD.
Why, of course!!! Yes! I'm going to risk my current product line (already designed around Intel chips) and my cash flow to "unavoidable delays in parts shipments" by threatening Intel. Because in the "real business world of FictionPimp" I absorb the costs of back up designs having all configurations of all of my alternate sources (even if I never intend to use them) or I can turn around new designs in thirty minutes - a day, tops!
The reasons that you can put the screws to Dell is that you are dealing with a commodity item - a "standard PC". It takes time to redesign and validate your product line around different components.
That is all.
Don't listen to those morons in the EU, Intel. Come home to the US where we will simply forgive all your sins via nationalization. =)
So it sounds like AMD doesn't get a cut of the EU's Intel fine.
But does the finding of fact in the EU's ruling pave the way for AMD to nail Intel with some kind of civil suit?
There is some evidence that the EU is not, in fact, Communist. You should leave the basement once in a while.
It's about time some laws and penalties were enforced against corporate criminals! Go EU!
you had me at #!
It is usually a retail shop that gets an "exclusive" on a product. Meaning that Target has something Walmart doesn't.
It is not a manufacturer supplying Target and Walmart at the exclusion of all other manufacturers. That hurts competition.
The "exclusive" you describe is like "Metal Gear Solid" on the PS3 which is not on the XBOX or WII. There is nothing wrong with that since they are not stopping the building of competitive products.
1) AMD simply lacks the fab capacity to completely serve the market. It is physically impossible for most PC makers to ditch Intel.
2) For better or worse, right now Intel is ~80% of the market. End users (the customers of the PC makers) still want Intel.
3) Not offering the product that 80% of the market uses, while your competitors do, is deliberately putting yourself at a significant disadvantage. There are companies that have done so successfully, but they have been targeted at hobbyists and high-end gamers. They are by definition niche players.
4) Offering the mainstream product, but at higher costs because you didn't receive as good a discount from Intel is also deliberately putting yourself at a disadvantage. You can either further disadvantage yourself by going route (3), or you can play ball. When playing ball means not selling AMD, that's what they do, which is what this is about -- the market leader abusing their position of power to coerce customers into not offering a competitor's product.
5) Dell is not Intel. There are plenty of other games in town, with largely interchangeable product, which is why you can negotiate better prices from them while you'd be laughed at for trying it with Intel.
6) You made a "joke" earlier about Intel abandoning the EU in response to this fine. A major PC manufacturer dropping Intel is about as smart and funny.
The enemies of Democracy are
I don't think you understand the purpose of the question mark?
As in, everything sold by intel in effect passes the cost of this judgment to the people buying the product. Since the dollar amount truly is not significant to alter intel's behavior this just becomes and embedded tax.
Seems simple in theory, but how exactly do you think that is going to play out? Do you expect Intel to announce that they are increasing their prices by (size of fine)/(expected processor sales)? Do you think they adjust prices on that granularity? Do you think that when the cost of some material used in manufacturing increases by some amount, that this price gets directly folded into the cost of their chips?
And here's the key question: how do you figure it is that Intel could raise their prices without harming their competitive position and thus reducing overall revenue, but hasn't. Are they just nice guys who don't really care about maximizing their income? Something tells me that is not the case!
Here's reality: The cost to produce an item (including amortized costs like R&D and fines) does not directly inform the price that item is sold at. It only tells you the minimum price you can sell at without losing money. In the right (or rather wrong) market conditions even that doesn't mean the company won't charge less. And they are certainly happy to charge much more if they can. Look at Intel's earnings, revenue is down, but they're quite a ways from break-even prices. They're operating at a gross margin of 46%, and have a decent profit margin to boot.
So please explain to me how and why Intel -- whose sales, marketing, and accounting teams have decided that they would make the most money selling at the current prices -- would bump up the price to account for the EU fine when it isn't even close to threatening their profitability and raising prices would probably just reduce overall revenue? Doesn't it seem more likely that they'll just take the hit to their earnings, and continue charging whatever the market will bear as always?
The only way this will affect prices in an upward direction is in the short term if some customers were receiving the "Don't buy AMD" discount, and Intel stops offering it out of fear of future anti-trust action. However this will increase AMD's competitive position, which will drive prices down. And the absence of competition is what will really drive costs up. History is clear on the relationship between what Intel charges, and how much competition they have.
You're right on one thing though, this fine isn't going to do enough to stop Intel's behavior. Hopefully continued monitoring, with the threat of further fines or other penalties will be enough.
The enemies of Democracy are
Not quite.. It's irrelevant if the discount is provided up front or not. The rationale for providing one over the other is for the books. A volume discount reflects transaction price. A rebate maintains the original transaction price, but the rebate can be listed as a separate "expense".
But anyways, from Intel's perspective, they still feel like they did no wrong... How about this twist:
Bob and Jim both make chips.
It costs bob $10 to make a chip, but it costs Jim $14 to make a chip.
Kathy makes a doodad using one of the chips. Kathy posts on her website that she sold 100 doodads in 2008.
Bob tells Kathy he'll sell her chips for $20. Bob tells Kathy that as a bonus if she buys > 50 chips she'll get a $250 rebate by mail. Bob tells Kathy that if she buys > 80 chips, she'll get an additional rebate of $470.
Meanwhile later that day, Jim talks to Kathy and says his firm price is $15 per chip...
That night kathy crunches some numbers, and determines that if she buys 90 chips from Bob, she'll get a total rebate of $720. She figures out that if she subtracts that amount from the $1800 it would cost her to buy the 90 chips, she ends up only paying $12 per chip, which is cheaper than Jim. She talks to her sales team, and they are confident they can sell between 90-100 doodads this next year, so she decides that she'll buy 90 chips from Bob, but will hold off on buying any more chips until halfway through the year to see how sales go...
So the next year, she only sells doodads that use Bob's chips and none that use Jim's chips, until August when she determines she's running low on chips, and decides to buy 10 chips from Jim for $15 each, since she doesn't qualify for a volume rebate from Bob.
At the end of the year, Jim goes to his friend Frank, who is a police officer, and says that Bob used his market dominance on Kathy to give her a rebate if she didn't buy any chips from Jim.
Frank looks at Kathy's purchase orders and notices that Kathy bought only from Bob and none from Jim back in January. He also finds records from Bob's ISP indicating that he looked at Kathy's sales reports for the previous year.
Jim tells franks that he crunched the numbers as said that if he wanted to sell 90 chips to Kathy for the price that Bob did including his rebates, Jim would lose money on each and every chip sold.
Frank determined that since Bob knew that Kathy only sold 100 doodads in 2008, that the rebate offer if she buys > 80 doodads was done on purpose to prevent her from buying chips from Jim because Jim would not be able to match that price, and consequently arrests Bob and throws him in jail for anti-trust...
Point being: Intel's contention is that they never agreed that a term of their rebate was for the receiver to not sell AMD products... Using this above example, it can be quite easy to see how a third party might mis-interpret what happened as being exactly that...
SW€€T! NOW I CAN US€ THIS ALL TH€ TIM€!
Georgia Tech, the leader in Chia(tm) technology.
They offered a discount if customers promised not to use competitor's products.
Actually, from what I understand this isn't directly the case. This verbiage was not in the contract. The EU Commissioner believes that the end-result was that. That's very different.
Intel basically is saying the EU is thinking 1+1=3, because customers that received a rebate may have refrained from buying from AMD, but the contract clause didn't explicitly state this as a requirement. Just because the customer only bought from Intel doesn't mean the rebate was paid BECAUSE they only bought from Intel.
Elsewhere in this thread I made an example to illustrate something similar. Where Bob looked at Kathy's financials to see how many products she sold in the past year, so for the next year Bob offers a rebate if she buys X number of chips (where X = 80% of what she sold the previous year). Kathy determines this rebate will make the chip $2 cheaper than Jim's chips, so she buys enough chips to get the rebate, but doesn't buy any chips from Jim, becuase she doesn't know if she can sell that many products, so she holds off until later in the year, and buys a much smaller amount from Jim.
To an outsider this may look suspicious. Kathy buys all chips for this year from Bob and non from Jim, and later gets a rebate from Bob in the mail....
AMD isn't exactly hurting, they netted a cool $1.177B of revenue in the first quarter of 2009 (ending 3/28) alone. But fair is fair and it is obnoxious, aside from being extremely profitable, to pay companies to use your product or lose their licensing agreements. Tony Soprano would be proud of such tactics. BTW, this sure sounds familiar, doesn't it? Think of one Mr. Bill Gates and his anti-Christ, sorry - I meant anti-trust, adventures that ultimately hurt the consumer via "frustrated innovation" as Neelie Kroes, head of the European commission's competition bureau deftly describes this case.
Because private industry is quite obviously working in favor of the consumer in this instance
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This is why we can't have nice things.
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Don't be ridiculous. It's not going to fill them any more than you can fill the ocean by pissing in it. Nor are they exclusively fining American companies; many based in the EU have been fined for the very same reason.
Somehow I think Intel will be able to spend a billion a bit better than the EU government. They don't have a great track record with the common agricultural policy etc
Can Intel withdraw from the European market to avoid the fine? Then someone can sue the EU for blocking competition and creating a monopoly for AMD. That would be funny!
I don't agree with Intel's sales practices, but I think the fine is too excessive. Seems more like the EU is looking for money rather than justice. I'm not a law guy so I don't know what I'm talking about, but I expect the many people will see it this way.
I think a better punishment is to take the money from Intel's fine and give it to AMD tax free as compensation for all the money AMD has lost over the last couple decades due to Intel bribing companies.
"The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." ~Thomas Jefferson
Seems obvious to me. Jail the people who were responsible.
If you're a CxO or VP of Whatever in a big company, fines come out of the company's wallet. And if the fines are << profit, you might still get a bonus.
However time in prison comes out of _your_ lifespan. While you're in prison you can't go skiing or have a nice cocktail in the Bahamas. Prison hurts billionaires as much as it hurts millionaires.
So go figure which would be a greater deterrent.
I guess you could do fines first, then jail if the fines don't work e.g. same person or company does a similar thing again - this is to make it harder to avoid punishment by swapping in/out companies or people.
Her final words on the official EU statement:
Finally, I would like to draw your attention to Intel's latest global advertising campaign which proposes Intel as the "Sponsors of Tomorrow." Their website invites visitors to add their 'vision of tomorrow'. Well, I can give my vision of tomorrow for Intel here and now: "obey the law".
From: http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/09/241&format=HTML&aged=0&language=EN&guiLanguage=en
Go Neelie!
..and I'm surprised it took so long for the EU commission to reach their conclusion and that the fine was not higher.
For a significant number of years AMD had a cheaper and superior product but could not make headway against Intel's questionable sales tactics. For those who worked in the channel it was blatantly obvious as to what was going on.
For all you who believe that this is some kind of anti-US conspiracy by the EU don't overlook the fact that Intel have already been convicted in two other countries for the same offence and is still under investigation by the DoJ.
For all intensive porpoises your a bunch of rediculous loosers
The practice is probably legal, in a marketplace where there's more than 2 competitors. In this case, Intel has 1 competitor, and has a clearly overwhelming marketshare advantage to begin with, BEFORE you consider anticompetitive practices.
This is really bad for the marketplace - bad for consumers - bad for innovation, it's actually REALLY bad for intel's own long-term interest. Becoming a monopoly is great for short-term profits. But long term, if you've got no incentive to innovate, then you sit around with your thumb up your butt, do nothing, and your best staff leaves to go start their own companies. (which most often, promptly get squashed, if any of you are familiar with the history of the dotcom era).
These are my friends, See how they glisten. See this one shine, how he smiles in the light.
I didn't see any mention of penalties for the other companies involved. If Intel is guilty of offering bribes and kickbacks, doesn't it follow that someone else is guilty of accepting them? Shouldn't they be fined as well?
I am NOT a man!
I am a free number!
In soviet Russia, Commisar Meme enters the fray.
You are trolling and off topic. This thread is for the discussion of Intel's fine and you are trying to open a discussion of whether or not Microsoft's fine was just. That's off topic.
The grandparent is the one who brought up the Microsoft fine, using the argument that Microsoft is still non-compliant, and therefore the fine against against BOTH companies (yes, on-topic) was "not enough".
I was attempting to point out, using something called sarcasm, that this comparison of cases is specious. Intel was apparently paying companies to use their products exclusively. The EU has never claimed anything like this against Microsoft.
The other point is that anti-competition laws are written such that the burden of proof falls on the government to show that the consumer has been injured somehow. That's MISSING from this argument so far, or at least no one has reported how the Commission came to that conclusion. In that respect, this is similar to the recent EU case against Microsoft Internet Explorer.
On a side note, I'm sick and tired of "Microsoft mods" on Slashdot. Apparently conjuring Microsoft in an argument is fine as long as it's in a negative connotation. Otherwise it's a troll. Gotta love Slashdot, where apparently you're either with us, or against us!
It depends on which side is determining the decision to become an exclusive supplier. The vendor looks to its competitors as well and knows it cannot compete, if intel is not an exclusive supplier, since it raises the price.
1. Intel raises chip prices 20% across the board, citing increased operating costs
2. In 3 months, Intel record revenue. Though lower margins to pay fine
3. In 6 months, Intel record record margins as prices are not lowered
4. In 12 months, Intel fined again.
5. goto 1
This may be a really dumb question, but I'll ask anyway. Can it be reasoned that the other parties on the receiving end (mostly pc/laptop manufacturers) are acting complicit? No one really would blame them for accepting lucrative deals like those mentioned, but they surely *must* have seen what's going on. I just wonder if they can (or need to) play the "but we had no idea!" card and pull it off.
On the other hand, it's a darn sight easier to just go after the common denominator and, in theory, the desired effect (discouraging the anti-competitive behaviour) should follow. Obviously that's unlikely to happen in practice, which is too bad.
In that same joke I suggested that it would be impossible for AMD to ramp up production and intel could simply control the EU by refusing to sell CPU's to the EU.
I was told I was wrong and AMD could ramp up production no problem and intel would take huge losses.
I can't win either way.
2) For better or worse, right now Intel is ~80% of the market. End users (the customers of the PC makers) still want Intel.
That has very little to do with people specifically WANTING Intel. Most of it has to do with people not knowing what Intel or AMD are and they just buy whatever computer the person at Best Buy / Wal-Mart tells them is the computer that fits their needs.
"The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." ~Thomas Jefferson
They're not trying to fill them up completely, nor to stop taxing people by fining foreign companies.
Nevertheless, 3-4 billions here and there never harmed the EU! They could be used to finance the movement of the EuroMPs between Strasbourg and Brussels! :p
"Sum Ergo Cogito"
Funny, I thought we were leeching our high-tech goods from Asia. I must take a new look on those stickers.
Ezekiel 23:20
Volume discounting means "buy more and we give you a discount". What they were doing was "don't buy from others and we give you a discount.. you don't even have to buy more from us".
What is not clear is whether that is actually what they did. It has certainly been inferred that they said "we give you the volume discount if you don't buy from AMD", but what is not clear is if they actually said that to their buyers or not.
Afterall, a buyer has a fixed number of CPUs that they are going to buy. period. it is determined by the number that they think they can sell to customers. If Intel says "we'll give you a discount if you buy more from us", because it is a zero sum game, that MEANS that the buyer will buy less from AMD whether Intel asked them to or not.
What is not clear is if the lawyers for the other side are arguing that the fact that Intel selling more chips means AMD sells less means that offering volume discounts to increase sales is equivalent to telling the buyer not to buy from the competitor. It sounds like this is the game the game the EU and AMD's lawyers are playing.
Intel would gain nothing by explicitely telling its buyers not to buy from AMD. Convincing the buyer to buy more from Intel automatically means AMD sells less anyway. That is the very nature of competition in a market where two companies are competing for a percentage of a fixed amount of sales.
In a minute there is time For decisions and revisions which a minute will reverse. -T.S. Eliot
Is there no american company the EU has not brought litigation against?
IBM, Boeing, Microsoft and now Intel
Since you only listed four, I'm sure there are plenty they haven't brought litigation against.
If you can read this, it means that I bothered to log in.
Quit trying to argue with Dick Cheney, you won't make an impact, and people will laugh at you when they constantly see you near Dick.
who prays for Satan? Who in 18 centuries has had the humanity to pray for the 1 sinner that needed it most? ~Mark Twain
Is the practice of given money to a consumer to not buy a competitors product only illegal if you are deemed a monopoly?
If AMD did this would it be legal?
In that same joke I suggested that it would be impossible for AMD to ramp up production and intel could simply control the EU by refusing to sell CPU's to the EU.
I was told I was wrong and AMD could ramp up production no problem and intel would take huge losses.
Yes, because while the EU is a large market segment, it is still just a segment of the global market. Servicing 100% of that market, but only their current ~15% of other global markets, would probably be almost doable. If Intel seriously looked like they might follow through on your proposed "threat", then the huge influx of new investment in AMD would easily enable them to make up any difference with new fabs in their own spun off foundry company and deals with other foundries.
Whereas a few individual companies brave/foolish enough to ditch Intel on their own would not cause such an influx because in the global market the rebels simply aren't going to be both competitive and large. It would take Intel doing something monumentally stupid, like deliberately handing a huge segment of the market into AMDs lap, to break this dynamic. Get it?
I can't win either way.
Yeah, I can't fathom why.
The enemies of Democracy are
Certainly true, but in this case practically *Every* business is the exclusive supplier.
I would imagine Intel's market position plays a role in this--what may be ok for some companies is NOT ok for a dominant market player.
Um No to severely undercut your competitor means that you are selling a product below value. To undercut (a competitor) by underselling or setting prices below actual cost. Not a smart move as most governments look unkindly on it .
Mr. Bruce Sewell (Intel general counsel) was shown on The News Hour With Jim Lehrer, denying that Intel is guilty of anything at all. That it NEVER asks retail or OEM partners to exclude competitors.
From the segment:
Officials said their case is largely based on e-mails and statements from businesses, some seized during surprise raids, according to the AP.
Intel general counsel Bruce Sewell told news agencies the case is built on "weak evidence" and regulators were drawing unfair inferences from a small number of documents.
That being said, instead of fining Intel, what they should do, is remove the Eurozone-wide VAT and import tariffs for AMD and VIA CPUs, while Intel CPUs still have VAT and import tariffs applied.
Leave it this way for the same amount of time that Intel was investigated for, and has been found guilty of anti-trust violations (Formal complaint filed by AMD in 2001).
Also, according to The News Hour segment mentioned above, Intel has 60 days to formally file an appeal, and according to Mr. Sewell, they will be filing an appeal by the end of May. Intel President and CEO Paul Otellini said the company would appeal at the Court of First Instance, the EU's second-highest court.
From the segment:
By EU law, the fine for Intel could have been much higher -- 10% of the company's annual income times the number of years the company had been abusing the policy. Intel posted first-quarter sales of $7.1 billion.
Hypothetically, if Intel posted that $7.1 billion as the final tally of income for the year, they could have been fined $5.68 billion.
@Mindless Drivel: 100% of Twitter posts ever Tweeted.
So how much of that money goes to AMD? None? Well ok then, we'll just carry on doing it until they go out of business. Then all of a sudden it won't be illegal anymore.
Starbucks, Harbuckle of Breath.
Of course rather then be strong armed, the companies could choose to just threaten to go all AMD.
/quote>
This would be suicide for the OEM because they would be making a product their customers don't want any more.
The strong-arm with the OEMs didn't have teeth until AMD lagged a bit.... then it was on...
All it took was a little bit of something that Intel had that AMD didn't.... like maybe volume delivery dates.... who knows....
That's all it would have taken to get this ball swinging against AMD.
Since Pepsi and Coke fight tooth and nail for dominance and neither can hold it for long..... and occasionally they both get blind sided by "Crisp and Clean no caffine.... never had it never will"
I have enjoyed watching those two Neanderthals slugging it out with sticks and stones my whole.
And you know why they get away with it? Because NEITHER of them has monopoly position!
FCS read for comprehension peeps!!!
Lol....
You do a risk analysis and it doesn't look like such a bad deal....
Oh but what happens if we get caught?
We cut some 'dead-wood'.... trim a few budgets and move on....
Business as usual....
You are right. The European Union has, in fact, fined all four American companies. However, it's still very much possible that an enterprising American might start a fifth company and finally push America's GDP past 2.5 dollars per capita (roughly estimated by adding up the last stated revenues of all four American companies and dividing by the number of citizens).
USE HOT GRITS WITH STATUE OF NATALIE PORTMAN (NAKED AND PETRIFIED)
Or does he!
Yes. Just like breaking a few legs is a necessary part of running a protection racket.
Nononono, Toni. You don break deir leeegs, you break de neecaps. Or as de natives say
"Yo dawg; I heard you like your money, so I put a cap in your cap so you can limp while you walk."
(for all of you who play Magic: The Gathering)
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Wow. nice strawman. There's more than two opinions on any topic, you know.
You buy Intel product and a fraction of the cost of buying those products ends up in a war chest for marketing. You can spend these funds by doing things like co-marketing activities or putting a logo on an advert (they would pay x% of your advert cost then) and so on and so forth. This is more common than just Intel, Microsoft does just the same. That's why there's a Microsoft slogan on every print advert. By the time you do both, you end up paying less than half the actual cost of the advert.
Now this is on one hand a reasonable system. Just like manufacturers have chucked in cash to co-fund ads with distributors since the beginning of time... On the other hand, that war chest is only there if you're buying their products. This makes the business case of buying stuff from the other guy all the more difficult. It means really you're advertising Intel stuff because, honestly, AMD isn't going to write any cheques. The fact that Intel's business is larger than just the CPU itself means you get economies of scale here too.
Is this anti competetive. Well, I think some aspect of it is. However most of it is just a symptom of the fact that it becomes easier to work with the really big guy. It has always been more pleasant to work with them than AMD. You get samples of stuff when you ask, you get marketing help, they run cool events, they actively assign a dude to look after your account who is a genuinely helpful human being. You get precisely none of that with AMD. In fact AMD, as a point of order, probably has the worst marketing set up I have ever encountered in my career. It was amusing when they bought ATI because they were probably the 2nd worst...
What's the solution here? It feels like it's a business that is having trouble with scale. AMD isn't big enough to 'compete' just because they make a CPU. They aren't anything near big enough. They need to consolidate into solutions (buying ATI was part of that obviously) and be able to offer manufacturers the same sort of product range and attractive business proposition as Intel does. It's not anti competetive, it just makes doing business with you more attractive.
What all of this really boils down to, and why I wont shed a tear for a huge fine such as the EU fine, is that the reason Intel is in the position is because of distinctly anti-competetive behavior in the past. I never experienced that myself but if you've become the dominent player through dirty tricks then cleaning your act up in recent times isn't realy good enough is it? Unfortunately even a billion euros is kind of shutting the door after the horse is bolted.
Can someone post a link to the full-text of the European Commission's report against Intel? It would be interesting to see the actual evidence that they found proving that intel did these things. Are there emails, cancelled checks, or what? If the payments were "hidden" how did they find them? All I can find on the EC website is the press release.
you are right. you proved your point. the ENTIRE eu machine, thousands of bureaucrats, thousands of regulators, the most transparent social machine in the world, fined intel just because they wanted to, despite there was nothing illegal ........ get real. drop that fuckin greenspanism.
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