Wednesday, May 13th 2009

Statement by Intel President and CEO Paul Otellini on EC Ruling

Paul Otellini, Intel Corporation president and CEO today issued the following statement regarding the European Commission decision on Intel's business practices:

"Intel takes strong exception to this decision. We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace – characterized by constant innovation, improved product performance and lower prices. There has been absolutely zero harm to consumers. Intel will appeal."

"We do not believe our practices violated European law. The natural result of a competitive market with only two major suppliers is that when one company wins sales, the other does not. The Directorate General for Competition of the Commission ignored or refused to obtain significant evidence that contradicts the assertions in this decision. We believe this evidence shows that when companies perform well the market rewards them, when they don't perform the market acts accordingly."

"Intel never sells products below cost. We have however, consistently invested in innovation, in manufacturing and in developing leadership technology. The result is that we can discount our products to compete in a highly competitive marketplace, passing along to consumers everywhere the efficiencies of being the world's leading volume manufacturer of microprocessors."

"Despite our strongly held views, as we go through the appeals process we plan to work with the Commission to ensure we're in compliance with their decision. Finally, there should be no doubt whatsoever that Intel will continue to invest in the products and technologies that provide Europe and the rest of the world the industry's best performing processors at lower prices."

Intel's Position on the AMD Antitrust Case
Since the 1990s Intel's principal competitor has been on a concerted campaign to get regulators and courts around the world to prevent Intel from competing aggressively in the market. The aggressive marketing campaign by Advanced Micro Devices (AMD) has included numerous complaints to regulators in multiple jurisdictions which all stem from the same set of allegations and source. It has included a private lawsuit in the U.S. and two in Japan. By all accounts the U.S. lawsuit could become one of largest antitrust cases in the history of U.S. Courts.

AMD's objectives are clear; it is seeking price protection and wants to become more successful by deterring Intel from aggressive competition. Stripped of hyperbole AMD's complaints around the world accuse Intel of competing too aggressively by offering customers attractive prices and marketing, and technical support to win their business.

The microprocessor market is fiercely competitive. That competition has resulted in tremendous benefits to consumers worldwide by providing continuous improvement in technology innovation, performance and capability at consistently lower prices. Intel believes in competition and has never shied away from it. As you will see from information contained on this site Intel believes it operates well within the law.

More information about Intel and "Competition in the Innovation Economy" is available here.Source: Intel
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128 Comments on Statement by Intel President and CEO Paul Otellini on EC Ruling

#1
erocker
aGeoM said:
Guys! This have nothing to do with EU, USA, or any Region in the world, have to do with a business practice done by one company, in this case Intel, could be any other one with the same practices, there have been other similar cases, with other company's from different areas of economy, all over the globe, so please, be rational.
So what bad business practice did Intel do to deserve a fine? Specifically.
Posted on Reply
#2
TheMailMan78
Big Member
aGeoM said:
ya, sure... on an Monopoly market, yes... I guest they can...

Man open your eyes, if you don't see it it's because you don't want to see.
Welcome to Capitalism.

erocker said:
So what bad business practice did Intel do to deserve a fine? Specifically.
They are guilty of being an "Evil" American company making money off the poor innocent EU citizens. In other words.......absolutely nothing.
Posted on Reply
#3
aGeoM
erocker said:
So what bad business practice did Intel do to deserve a fine? Specifically.
Who said that?... bad business practice , i didn't...

Anyway, specifically speaking you should ask to all court judge's all over the globe, the reason and facts, why they decided what they decided.

I'm not an judge or lawyer, to be specific.
Posted on Reply
#4
WhiteLotus
TheMailMan78 said:
Welcome to Capitalism.
And even capitalism doesn't work. Just look at the American automobile industry. Falling left right and center.
Posted on Reply
#5
aGeoM
TheMailMan78 said:
Welcome to Capitalism.
Capitalism should be only possible in Democracy, freedom of choice, free market, that kind of stuff, Monopoply is more a kind of proper an aceptable business practice on an Totalitary regime, don't you think so?
They are guilty of being an "Evil" American company making money off the poor innocent EU citizens. In other words.......absolutely nothing.
AMD is an American company and... really I don't mind to spend every spare euros I have in AMD products. :banghead:

You should be older than what looks like from you post.
Posted on Reply
#6
ghost101
W1zzard said:
why was it wrong what intel did? they used their power to do the best for their company, knowing that there would most probably be an investigation and a ruling. yet they did it, and you can bet, they did it because they ran the numbers and realized that even with a big fine it would be worth it.
I knew my game theory courses could be used in real life situations one day. :laugh:

Heres the actual press release by the commission.

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/745&format=HTML&aged=0&language=EN&guiLanguage=en

I want those complaining to explain how this is competition. A lovely example of the ridiculous distortions created by Intel's practices raised in the link above.
Intel structured its pricing policy to ensure that a computer manufacturer which opted to buy AMD CPUs for that part of its needs that was open to competition would consequently lose the rebate (or a large part of it) that Intel provided for the much greater part of its needs for which the computer manufacturer had no choice but to buy from Intel. The computer manufacturer would therefore have to pay Intel a higher price for each of the units supplied for which the computer manufacturer had no alternative but to buy from Intel. In other words, should a computer manufacturer fail to purchase virtually all its x86 CPU requirements from Intel, it would forego the possibility of obtaining a significant rebate on any of its very high volumes of Intel purchases.

Moreover, in order to be able to compete with the Intel rebates, for the part of the computer manufacturers' supplies that was up for grabs, a competitor that was just as efficient as Intel would have had to offer a price for its CPUs lower than its costs of producing those CPUs, even if the average price of its CPUs was lower than that of Intel.

For example, rival chip manufacturer AMD offered one million free CPUs to one particular computer manufacturer. If the computer manufacturer had accepted all of these, it would have lost Intel's rebate on its many millions of remaining CPU purchases, and would have been worse off overall simply for having accepted this highly competitive offer. In the end, the computer manufacturer took only 160,000 CPUs for free.

As a result of Intel's rebates, the ability of rival manufacturers to compete and innovate was impaired, and this led to reduced choice for consumers.
The conditions were such that firms werent allowed to even take free processors.
Posted on Reply
#7
Wile E
Power User
WhiteLotus said:
And even capitalism doesn't work. Just look at the American automobile industry. Falling left right and center.
That's part of capitalism. It is one of the defining features of capitalism. The companies that make bad business decisions go under. I wouldn't have it any other way. Our govt is a bunch of asshats for bailing them out.
Posted on Reply
#8
TheMailMan78
Big Member
WhiteLotus said:
And even capitalism doesn't work. Just look at the American automobile industry. Falling left right and center.
Thats capitalism at its finest. Bailing them out isn't.

aGeoM said:
You should be older than what looks like from you post.
Don't make this personal. You'll lose.
Posted on Reply
#9
Wile E
Power User
ghost101 said:
I knew my game theory courses could be used in real life situations one day. :laugh:

Heres the actual press release by the commission.

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/745&format=HTML&aged=0&language=EN&guiLanguage=en

I want those complaining to explain how this is competition. A lovely example of the ridiculous distortions created by Intel's practices raised in the link above.



The conditions were such that firms werent allowed to even take free processors.
Did you read everything in the ruling by chance? Did they list any proof of this happening?
Posted on Reply
#10
ghost101
Wile E said:
Did you read everything in the ruling by chance? Did they list any proof of this happening?
Well this isnt a legally binding ruling. Intel will appeal and it will go to the courts. I'm guessing the commission knew that Intel would appeal and so there will be evidence.

http://en.wikipedia.org/wiki/Court_of_First_Instance
Posted on Reply
#11
aGeoM
TheMailMan78 said:
Thats capitalism at its finest. Bailing them out isn't.



Don't make this personal. You'll lose.
yah sure, already lose my time, sorry. Bye.

EDIT: my quote:
Guys! This have nothing to do with EU, USA, or any Region in the world, have to do with a business practice done by one company, in this case Intel, could be any other one with the same practices, there have been other similar cases, with other company's from different areas of economy, all over the globe, so please, be rational.
your quote:
They are guilty of being an "Evil" American company making money off the poor innocent EU citizens. In other words.......absolutely nothing.
Again, sorry I didn't wanted to sound personal, just to make you read what you wrote and thought about it. That's all. I'm editing because I thought twice in what I wrote, I thought you deserved a better apologize.;)
Posted on Reply
#12
ghost101
http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/09/235&format=HTML&aged=0&language=EN&guiLanguage=en

Simple Q&A here which covers most of people's questions be that on this forum or anywhere on the web atm.

What must Intel do to comply with EU law?

The Decision sets out how Intel has breached EU antitrust law by engaging in two types of practices which have harmed competition. First, Intel gave wholly or partially hidden rebates to computer manufacturers on condition that they bought all, or almost all, their x86 central processing units (CPUs) from Intel. Intel also made direct payments to a major retailer on condition it stock only computers with Intel x86 CPUs. Second, Intel made direct payments to computer manufacturers to halt or delay the launch of specific products containing a competitor's x86 CPUs and to limit the sales channels available to these products. Intel is obliged desist from the specific practices identified in this case and not to engage in these or equivalent practices in the future.

What is the geographic scope of the remedy?

This is a worldwide market. Within this context, Intel is obliged not to engage in any abusive practices that have an effect within the European Economic Area (EEA).

How will this Decision help innovation in the market?

Intel limited consumer choice and stifled innovation by preventing innovative products for which there was a consumer demand from reaching end customers. Such practices deter innovative companies which might otherwise wish to enter and compete in the market. By ordering Intel to end its abusive practices, competition on the x86 CPU market will play out on the merits with the effect that innovation to the benefit of the consumer can flourish.

Does the Commission seek to limit companies' ability to provide customers with discounts?

No. This case is about the conditions associated with Intel's rebates and payments, not the rebates and payments themselves. What is at stake here are loyalty or fidelity rebates, granted on condition that a customer buys all or most of its requirements from the dominant undertaking, thereby preventing that customer from purchasing from competitors. Intel also paid clients to delay or not launch computers incorporating a competitor's CPUs, a conduct which is not linked at all to a company's ability to provide customers with discounts.

Does the Commission’s Decision seek to protect competitors?

No, the Commission acts in the interests of consumers. The Commission does not look at the specific interests of individual companies, but is charged with ensuring that competition on the merits is safeguarded. This creates an environment where consumers can benefit and where innovation can flourish.

What is the case-law underpinning the Commission’s case?

The legal underpinning of the Commission’s case is based on a consistent pattern of Court jurisprudence, including Case 85/76 Hoffmann-La Roche v Commission, Case T-203/01 Michelin v Commission, Case C-95/04 British Airways v Commission, Joined Cases T-24/93 and others, Compagnie Maritime Belge v Commission and Case T-228/97, Irish Sugar.

Has the Commission applied its Guidance Paper on its enforcement priorities in applying Article 82?

Formally, the Guidance Paper does not apply to this case since proceedings were initiated before it was issued. The Decision is nevertheless in line with the orientations set out in the guidance paper, and includes a rigorous, effects-based analysis which has demonstrated that Intel's conduct has reduced consumer choice and limited innovation in the market.

Intel is a US company. What gives the European Commission authority to decide whether its behaviour is legal or not?

Intel sells its products inter alia in the European Union, which is one of its main markets in the world. It must therefore respect EU antitrust rules in the same way that European companies must respect US law when operating on the other side of the Atlantic.

Did the Commission co-operate with the United States on this case?

The Commission and the United States Federal Trade Commission have kept each other regularly and closely informed on the state of play of their respective Intel investigations. These discussions have been held in a co-operative and friendly atmosphere, and have been substantively fruitful in terms of sharing experiences on issues of common interest.

Does Intel have to pay the fine immediately?

The fine must be paid within three months of the date of notification of the Decision.

Where does the money go?

Once final judgment has been delivered in any appeals before the Court of First Instance (CFI) and the Court of Justice, the money goes into the EU’s central budget, thus reducing the contributions that Member States pay to the EU.

Does Intel have to pay the fine if it appeals to the European Court of First Instance (CFI)?

Yes. In case of appeals to the CFI, it is normal practice that the fine is paid into a blocked bank account pending the final outcome of the appeals process. Any fine that is provisionally paid will produce interest based on the interest rate applied by the European Central Bank to its main refinancing operations. In exceptional circumstances, companies may be allowed to cover the amount of the fine by a bank guarantee at a higher interest rate.

What percentage of Intel's turnover does the fine represent?

The fine represents 4.15 % of Intel's turnover in 2008. This is less than half the allowable maximum, which is 10% of a company's annual turnover.

How was Intel able to exercise its rights of defence?

Intel has been provided full access to the Commission's file, with the exception of legitimate claims relating to business secrets of other companies and internal Commission documents. Intel has been able to fully comment on the evidence on which the Commission has based its Decision. The file in this case comprises several hundred thousand pages and the Decision is based on a broad range of contemporaneous evidence from a variety of sources.

How long is the Decision?

The Decision is 542 pages long.

When is the Decision going to be published?

The Decision in English (the official language version of the Decision) will be made available as soon as possible on DG Competition’s website (once relevant business secrets have been taken out). French and German translations will also be made available on DG Competition’s website in due course. A summary of the Decision will be published in the EU's Official Journal L series in all languages (once the translations are available).
Posted on Reply
#13
snakeoil
intel horrors surface

intel horrors surface:

The EU antitrust commission reveals terrible details surrounding intel business practices during the last years.

at that time AMD was so desperate finding all the manufacturers doors closed that had to resort to offer its processors for free but...

''For example, rival chip manufacturer AMD offered one million free CPUs to one particular computer manufacturer. If the computer manufacturer had accepted all of these, it would have lost Intel's rebate on its many millions of remaining CPU purchases, and would have been worse off overall simply for having accepted this highly competitive offer. In the end, the computer manufacturer took only 160,000 CPUs for free.''

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/745&format=HTML&aged=0&language=EN&guiLanguage=en
Posted on Reply
#14
tkpenalty
I reiterate, being competetive is one thing, but bribery is a totally different story. Competetiveness of a firm means that they put loads of money into R&D and try to produce the better product with more desireable aspects. Competetiveness does not mean anything to do with exclusive business deals, by preventing your competitor from selling their products, and thus its not the fact that the consumer is not satisfied with AMD's products, but its the fact that Intel has prevented AMD from selling any in the first place.

For those who STILL oppose this ruling, no offense, but PLEASE realise that BRIBERY IS AN ILLEGAL MARKET PRACTISE.


Wile E said:
Because AMD couldn't afford to sell their cpus at the low prices Intel could offer OEMs.

Again, I think this ruling is BS. There is no evidence that Intel bribed OEMs to NOT sell AMD. It just appears that they offered better deals that AMD couldn't match. AKA: they undercut AMD. How is that illegal?
* Intel gave rebates to computer manufacturer A from December 2002 to December 2005 conditional on this manufacturer purchasing exclusively Intel CPUs
* Intel gave rebates to computer manufacturer B from November 2002 to May 2005 conditional on this manufacturer purchasing no less than 95% of its CPU needs for its business desktop computers from Intel (the remaining 5% that computer manufacturer B could purchase from rival chip maker AMD was then subject to further restrictive conditions set out below)
* Intel gave rebates to computer manufacturer C from October 2002 to November 2005 conditional on this manufacturer purchasing no less than 80% of its CPU needs for its desktop and notebook computers from Intel
* Intel gave rebates to computer manufacturer D in 2007 conditional on this manufacturer purchasing its CPU needs for its notebook computers exclusively from Intel.


If you dont understand, rebates for SECONDARY INDUSTRIES to NOT use your competitor's products is very uncompetetive. The Secondary Industry does NOT serve the consumer (i.e. Intel, AMD, any graphics card companies, basically component manufacturers). Competition is defined as a consumer response to the final product, avaliable from Tertiary firms, such as the OEM's retail branches. This applies to everything. Basically in order for AMD and Intel just to sell products, they need the use of Retailers. Anti-competetive behavior is defined as not allowing/limiting consumer response of your competitor's product. By using rebates, it is equivalent to a bribe, as the OEM gets funds returned; its "we pay you $XXXXXXX if you dont use AMD" reworded to "if you dont use AMD we will offer $XXX rebates" In any case they are still considered as bribes. Learn to accept someone else's opinion for once. It will improve you.

Have a think. Thanks to Intel, the poor performance of netbust architecture CPUs has caused some pretty bad damage to the market. You may go "as if", but its pretty clear. Take Windows vista for example. If AMD had a 50/50 market share with intel without these henious practises, the majority of users would be better off. I mean, users of slightly older K8 CPUs didn't have to bear the heartache that the majority, the consumer had, and if the majority used it, Vista wouldn't have been shunned so much. AMD would have had more money for R&D, and so would Intel, as Vista would have sold better thus a demand for more computers, and software, leading onto much more demand from the CPU market.

Instead Intel decided to take the easy and sleasy way out, and bribed manufacturers to kill off any competition.
Posted on Reply
#15
Yukikaze
snakeoil said:
intel horrors surface:

The EU antitrust commission reveals terrible details surrounding intel business practices during the last years.

at that time AMD was so desperate finding all the manufacturers doors closed that had to resort to offer its processors for free but...

''For example, rival chip manufacturer AMD offered one million free CPUs to one particular computer manufacturer. If the computer manufacturer had accepted all of these, it would have lost Intel's rebate on its many millions of remaining CPU purchases, and would have been worse off overall simply for having accepted this highly competitive offer. In the end, the computer manufacturer took only 160,000 CPUs for free.''

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/745&format=HTML&aged=0&language=EN&guiLanguage=en
In other words, if they accepted the 1,000,000 CPUs for free, they would have lost Intel rebates worth more than that money. In other words, the Intel offer was still better money wise. I bet that if AMD offered 10,000,000 free CPUs said OEM wouldn't have mulled over it as long, or made the same decision as it did.

In short, they didn't make a better offer, end of story.

The whole issue at hand, as I see it, is the fact that the EU gets to decide when a company is big enough to get nailed down, but the law itself is not clear. If the law stated: "Once above X % of the market share for Y months according to EU data, you're no longer allowed to do A,B,C and/or D", this is one thing. However, nailing a company for practices completely okay for smaller companies (Imagine the uproar if Intel would be giving out 1,000,000 free CPUs - Effectively "selling" them under-cost, or the lack of any care over the exclusive deals for selling Coke or Pepsi) is penalizing a company for success - This is discrimination, not law.

Either fix the law (And not retroactively, of course), or stop the BS. Finally, if AMD is the one so harmed by this, they are the ones that should be reimbursed by the decision, with a much smaller amount of the fine going into the EU coffers.
Posted on Reply
#16
ghost101
Yukikaze said:
In other words, if they accepted the 1,000,000 CPUs for free, they would have lost Intel rebates worth more than that money. In other words, the Intel offer was still better money wise. I bet that if AMD offered 10,000,000 free CPUs said OEM wouldn't have mulled over it as long, or made the same decision as it did.

In short, they didn't make a better offer, end of story.
How does it make sense not to take free CPUs? There should be absolutely no cost to the OEM. Remember that giving away CPUs is basically paying an OEM to use your CPU. Of course if AMD offered monetary value greater than Intel's discount they would accept. but can't you see that it is unsustainable for AMD to give away CPUs? Should they begin to just give away CPUs to everyone? How long will such a business last? That is why this is uncompetitive if this happens. No one can startup a business in this environment. Intel increase their monopoly power and you end up with welfare losses.
The whole issue at hand, as I see it, is the fact that the EU gets to decide when a company is big enough to get nailed down, but the law itself is not clear. If the law stated: "Once above X % of the market share for Y months according to EU data, you're no longer allowed to do A,B,C and/or D", this is one thing. However, nailing a company for practices completely okay for smaller companies (Imagine the uproar if Intel would be giving out 1,000,000 free CPUs - Effectively "selling" them under-cost, or the lack of any care over the exclusive deals for selling Coke or Pepsi) is penalizing a company for success - This is discrimination, not law.
Yes selling them undercost is illegal. But it was a reaction by AMD to ridiculous behaviour by Intel. AMD had produced CPUs which they couldn't sell because of Intel's practices. Any firm will sell them at whatever price they can rather than end up with rapidly depreciating stock. In this case, they couldn't even give them away.

As for size of a company. It is very clear the size of Intel allows it to practice such uncompetitive behaviour. Whenever a firm is large enough to get away with such behaviour in open markets, they then should be monitored.
Either fix the law (And not retroactively, of course), or stop the BS. Finally, if AMD is the one so harmed by this, they are the ones that should be reimbursed by the decision, with a much smaller amount of the fine going into the EU coffers.
If AMD are harmed, it is upto them to file a suit. The commission is paid for by taxpayers money and represents the consumer. It also attempts to correct the market for optimality so that in the future, consumers do not suffer.

The other role of the fine is to act as a deterrent. To tell other companies and Intel, that financially it isn't worthwhile using uncompetitive practices.

The funny thing is, even with perfect hindsight and this 1bn EUR fine, Intel would do the exact same thing. Look at where AMD are now compared to where they could have been. The extra profits Intel will recieve in the decades to come due to their practices will net them much more than the 1bn EUR fine.
Posted on Reply
#17
WhiteLotus
Wile E said:
That's part of capitalism. It is one of the defining features of capitalism. The companies that make bad business decisions go under. I wouldn't have it any other way. Our govt is a bunch of asshats for bailing them out.
TheMailMan78 said:
Thats capitalism at its finest. Bailing them out isn't.
Why did i never state that. Gay. stupid me:shadedshu
Posted on Reply
#18
W1zzard
imagine what would happen if intel pulled all their products from the eu market. companies would go broke left and right, the eu would beg intel to come back after half a year
Posted on Reply
#19
WhiteLotus
Intel wouldn't. It would lose too much of a market. If it did, AMD would be raking it in and that is something that Intel simply wont allow.
Posted on Reply
#20
W1zzard
intel makes a lot more than just cpus, i'm not even sure if amd has the capacity to satisfy intel's EU demand. does anyone use amd cpus in servers?
Posted on Reply
#21
WhiteLotus
I thought they can use opterons? or something. Besides if you have a server why upgrade it. And if they did need to then AMD would fill the gap with a rebranded Server athlon chip or something.

Intel wont leave the EU market. Why would it? It makes no business sense. It'll lose too much money and other countries wont be happy paying the difference so Intels shareholders remain happy. If and IF it does, it'll be the shareholders demanding that Intel expand their operations back into the EU.
Posted on Reply
#22
FordGT90Concept
"I go fast!1!11!1!"
W1zzard said:
intel makes a lot more than just cpus, i'm not even sure if amd has the capacity to satisfy intel's EU demand. does anyone use amd cpus in servers?
It crossed my mind, but no. I have an one-way Opteron in a desktop, and Xeons in my two-way server.

The Kentsfield-based Xeons are just much higher performance than the 65nm Opterons they were offering at the time.
Posted on Reply
#23
W1zzard
WhiteLotus said:
Intel wont leave the EU market. Why would it? It makes no business sense. It'll lose too much money and other countries wont be happy paying the difference so Intels shareholders remain happy. If and IF it does, it'll be the shareholders demanding that Intel expand their operations back into the EU.
yes, you are correct. i wasn't saying that they are going to, was just thinking about possible consequences if they did in a hypothetical scenario
Posted on Reply
#24
WhiteLotus
W1zzard said:
yes, you are correct. i wasn't saying that they are going to, was just thinking about possible consequences if they did in a hypothetical scenario
Well that hypothetical scenario is AMDs wet dream.
Posted on Reply
#25
allen337
W1zzard said:
imagine what would happen if intel pulled all their products from the eu market. companies would go broke left and right, the eu would beg intel to come back after half a year
Intel needs to make this move I would love it. How do you bribe someone not to buy someone elses product? If amd had a better deal any OEM would go for it and tell Intel to go pound sand. Amd needs their mommie:laugh: sniff sniff
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