Thursday, July 23rd 2009

Intel Appeals Against EU Antitrust Verdict

Earlier this year in May, the European Commission for anti-competitive practices found Intel guilty of various antitrust practices. The company was then slapped with a massive 1.06 billion Euro (US $1.45 billion) fine, the single largest antitrust fine it has ever meted out to a company. On Wednesday, Intel explored its legal option of appealing against the fine with Court of First Instance in Luxembourg, Europe's second highest judicial body. The company argues that the EC regulator failed to consider the evidence that supported Intel's contention during the trial.

In a telephone interview with ComputerWorld, Robert Manetta, an Intel spokesperson said "We believe the Commission misinterpreted some evidence and ignored other pieces of evidence." Meanwhile, apart from the fine Intel is expected to pay within three months of the verdict, the ruling also puts a stop to Intel's rebates to PC manufacturers and retailers on condition of near or total exclusivity, among several other deemed malpractices. Authorities in South Korea and Japan found similar irregularities in Intel's marketing methods, while the U.S. Federal Trade Commission and New York Attorney General's office are investigating the company for abuse of its monopoly position.Source: ComputerWorld
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307 Comments on Intel Appeals Against EU Antitrust Verdict

#1
DareD
"Antitrust: Commission imposes fine of €1.06 bn on Intel for abuse of dominant position; orders Intel to cease illegal practices

The European Commission has imposed a fine of €1 060 000 000 on Intel Corporation for violating EC Treaty antitrust rules on the abuse of a dominant market position (Article 82) by engaging in illegal anticompetitive practices to exclude competitors from the market for computer chips called x86 central processing units (CPUs). The Commission has also ordered Intel to cease the illegal practices immediately to the extent that they are still ongoing. Throughout the period October 2002-December 2007, Intel had a dominant position in the worldwide x86 CPU market (at least 70% market share). The Commission found that Intel engaged in two specific forms of illegal practice. First, Intel gave wholly or partially hidden rebates to computer manufacturers on condition that they bought all, or almost all, their x86 CPUs from Intel. Intel also made direct payments to a major retailer on condition it stock only computers with Intel x86 CPUs. Such rebates and payments effectively prevented customers - and ultimately consumers - from choosing alternative products. Second, Intel made direct payments to computer manufacturers to halt or delay the launch of specific products containing competitors’ x86 CPUs and to limit the sales channels available to these products. The Commission found that these practices constituted abuses of Intel’s dominant position on the x86 CPU market that harmed consumers throughout the EEA. By undermining its competitors’ ability to compete on the merits of their products, Intel’s actions undermined competition and innovation. The Commission will actively monitor Intel’s compliance with this decision. The world market for x86 CPUs is currently worth approximately €22 billion (US$ 30 billion) per year, with Europe accounting for approximately 30% of that.

Competition Commissioner Neelie Kroes said: "Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years. Such a serious and sustained violation of the EU's antitrust rules cannot be tolerated".

The computer manufacturers concerned by Intel's conduct in the Commission’s decision are: Acer, Dell, HP, Lenovo and NEC. The retailer concerned is Media Saturn Holding, owner of the MediaMarkt chain

Conditional rebates and payments

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:

* 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.

Furthermore, Intel made payments to major retailer Media Saturn Holding from October 2002 to December 2007 on condition that it exclusively sold Intel-based PCs in all countries in which Media Saturn Holding is active.

Certain rebates can lead to lower prices for consumers. However, where a company is in a dominant position on a market, rebates that are conditional on buying less of a rival's products, or not buying them at all, are abusive according to settled case-law of the Community Courts unless the dominant company can put forward specific reasons to justify their application in the individual case.

In its decision, the Commission does not object to rebates in themselves but to the conditions Intel attached to those rebates. Because computer manufacturers are dependent on Intel for a majority of their x86 CPU supplies, only a limited part of a computer manufacturer's x86 CPU requirements is open to competition at any given time.


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.

Rebates such as those applied by Intel are recognised in many jurisdictions around the world as anti-competitive and unlawful because the effect in practice is to deny consumers a choice of products.

Payments to prevent sales of specific rival products

Intel also interfered directly in the relations between computer manufacturers and AMD. Intel awarded computer manufacturers payments - unrelated to any particular purchases from Intel - on condition that these computer manufacturers postponed or cancelled the launch of specific AMD-based products and/or put restrictions on the distribution of specific AMD-based products. The Commission found that these payments had the potential effect of preventing products for which there was a consumer demand from coming to the market. The Commission found the following specific cases:

* For the 5% of computer manufacturer B’s business that was not subject to the conditional rebate outlined above, Intel made further payments to computer manufacturer B provided that this manufacturer :

* sold AMD-based business desktops only to small and medium enterprises
* sold AMD-based business desktops only via direct distribution channels (as opposed to through distributors) and
* postponed the launch of its first AMD-based business desktop in Europe by 6 months.

* 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.
* Before the conditional rebate to computer manufacturer D outlined above, Intel made payments to this manufacturer provided that it postponed the launch of AMD-based notebooks from September 2006 to the end of 2006.

The Commission obtained proof of the existence of many of the conditions found to be illegal in the antitrust decision even though they were not made explicit in Intel’s contracts. Such proof is based on a broad range of contemporaneous evidence such as e-mails obtained inter alia from unannounced on-site inspections, in responses to formal requests for information and in a number of formal statements made to the Commission by the other companies concerned. In addition, there is evidence that Intel had sought to conceal the conditions associated with its payments.

x86 CPUs are the main hardware component of a computer. The decision contains a broad range of contemporaneous evidence that shows that AMD, essentially Intel's only competitor in the market, was generally perceived, by computer manufacturers and by Intel itself, to have improved its product range, to be a viable competitor, and to be a growing competitive threat. The decision finds that Intel's practices did not constitute competition on the merits of the respective Intel and AMD products, but rather were part of a strategy designed to exploit Intel's existing entrenched position in the market.

Intel’s worldwide turnover in 2007 was €27 972 million (US$ 38 834 million). The fine in this case takes account of the duration and gravity of the infringement. In accordance with the Commission's 2006 Guidelines on Fines (see IP/06/857 and MEMO/06/256 ) the fine has been calculated on the basis of the value of Intel's x86 CPU sales in the European Economic Area (EEA). The duration of the infringement established in the decision is five years and three months.

The Commission’s investigation followed complaints from AMD in 2000, 2003 and 2006 (the last having been sent to the German competition authority and subsequently examined by the European Commission). The Commission's decision follows a Statement of Objections sent in July 2007 (see MEMO/07/314 ), a Supplementary Statement of Objections sent in July 2008 (see MEMO/08/517 ) and a letter sent to Intel in December 2008 setting out additional factual elements relevant to the final decision. Intel's rights of defence have been fully respected in this case."

LINK!

HammerON said:
I would be curious as to where that 1.45 billion will go. Anyone know?
It's not really hard to find out!

"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."
Posted on Reply
#2
HammerON
The Watchful Moderator
Found this article on:
http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/09/235&format=HTML&aged=0&language=EN&guiLanguage=en

And it states the money will go to:
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.

Very strange :wtf:

sorry DareD didn't catch your post before I replied~
Posted on Reply
#3
HalfAHertz
From what I've read so far in this thread, I get the impression that the fine they recieved is actually too small and insignificant for the damage they've caused on AMD's public image and sales for a period of around 3 years! Two companies that make bilions yearly and the fine is less than 10% of that. Dunno if I'm correct, but isn't it that when you break the law and proffit illegaly, all the funds that you made in that period should be taken away? Now I'm not saying that the EU or anyone else should fine Intel for 15 bilion or something. I would in no way wish for intel to be forced into bancruptcy, but they should at least be penalized for a longer period of time, like for example limit the ammount of their sales for a similar period of time or something, the same way AMD was forced to.
Posted on Reply
#4
mtosev
I think that there are 2 different systems of doing buissness. The US and EU. what's accepted in the US is not in the EU.
And that Intel is just in the crossfire.
Posted on Reply
#5
vega22
i love the way most americans were slating intle for this last year and now it seems they are getting all patriotic over that fact that they will have to pay somthing for the crimes they (intel) committed to another government.

i said back then the fine was too small and still think that today, i hope the appeal board ptsl and double it. are you going to tell me that they cant pay 25% of their profits without needing to harm the end user? let alone the 12.5% of their profit that the $1b fine is, this is how much profit they made during the biggest global economic downturn in a century.

fuck em, let them pull out of europe, its cheaper for us to buy from the states and impoprt it anyway ffs.

@halfahertz
yea, if i was selling crack and made $8billion a year they would take it all not just a measly 12.5% but they wont do that to intel.
Posted on Reply
#6
HalfAHertz
marsey99 said:
i love the way most americans were slating intle for this last year and now it seems they are getting all patriotic over that fact that they will have to pay somthing for the crimes they (intel) committed to another government.

i said back then the fine was too small and still think that today, i hope the appeal board ptsl and double it. are you going to tell me that they cant pay 25% of their profits without needing to harm the end user? let alone the 12.5% of their profit that the $1b fine is, this is how much profit they made during the biggest global economic downturn in a century.

fuck em, let them pull out of europe, its cheaper for us to buy from the states and impoprt it anyway ffs.
That would be even worse and completely unnacceptable! As an EU citizen I demand to have the right of choice I was promised to! I want to be able to choose from at least two products with similar prices and abilities! And it's up to the goverment( every goverment in the world for that matter) to protect the rights of its citizens!

If I cannot buy an AMD product because of intel Intel should be pennalized. The same goes for AMD or anyone else that would prohibit the sales of Intel products or any product for that matter...

Edit:
And please don't think of the EU as a single goverment. It's combination of all of the 27 member states. We the citizens ellect the commisioners and the parlament yes, but I don't understand how some people state that they hate the EU...How can you hate an organization represented by the individuals of every nation? Stating that you hate the EU is pretty much the same as stating that you hate each nattionality in that union. all have aggreed to the same criterias, etc. but each nationality has kept its cultural differences and uniqueness. For example you cannot tell me that the scandinavian people are the same as the mediteranians because they are just not... How can you hate all these nationalities without first having to know them and having the chance to understand their point of view?

In my understanding, that's pretty much like stating that you support gennocide...they are different, not like us - so they must be worse than us, they don't deserve to have rights, they are nothing don't deserve anything.

Why, just why?

It's not that anyone stated they hate the EU but there is alot of negativity towards it and I don't think that the EU deserves it
Posted on Reply
#7
TheMailMan78
Big Member
HalfAHertz said:
That would be even worse and completely unnacceptable! As an EU citizen I demand to have the right of choice I was promised to! I want to be able to choose from at least two products with similar prices and abilities! And it's up to the goverment( every goverment in the world for that matter) to protect the rights of its citizens!

If I cannot buy an AMD product because of intel Intel should be pennalized. The same goes for AMD or anyone else that would prohibit the sales of Intel products or any product for that matter...

Edit:
And please don't think of the EU as a single goverment. It's combination of all of the 27 member states. We the citizens ellect the commisioners and the parlament yes, but I don't understand how some people state that they hate the EU...How can you hate an organization represented by the individuals of every nation? Stating that you hate the EU is pretty much the same as stating that you hate each nattionality in that union. all have aggreed to the same criterias, etc. but each nationality has kept its cultural differences and uniqueness. For example you cannot tell me that the scandinavian people are the same as the mediteranians because they are just not... How can you hate all these nationalities without first having to know them and having the chance to understand their point of view?

In my understanding, that's pretty much like stating that you support gennocide...they are different, not like us - so they must be worse than us, they don't deserve to have rights, they are nothing don't deserve anything.

Why, just why?

It's not that anyone stated they hate the EU but there is alot of negativity towards it and I don't think that the EU deserves it
Getting a little dramatic are we? Genocide? Really? The fine is going to the EU's "budget". This is nothing more than a payday and has nothing to do with justice.
Posted on Reply
#8
HalfAHertz
TheMailMan78 said:
Getting a little dramatic are we? Genocide? Really? The fine is going to the EU's "budget". This is nothing more than a payday and has nothing to do with justice.
Just stating my point of view. I think the fine is justified and that the EU is not the big bad evil Socialist(read communist) goverment, and is in fact just doing what's necessary to protect the right of its citizens.

The genocide part was a bit over the top I admit, but at least gets the message through
Posted on Reply
#9
Sugarush
So here we go again: Intel/US/Capitalism fanboys bitching about the greedy/socialist EU, which just made up the accusations against Intel to get some cash.

Never mind that Intel was found guilty of the same things in Japan and South Korea, another two greedy and socialist strongholds ;)

Basically only the US laws are to be considered, even if you do business somewhere else in the world. Yeah! Screw them funny foreign laws, them dodgy anyways! :roll:
Posted on Reply
#10
Frederik S
Staff
This is a borderline funny thread. Keep it up!
I do not see the problem here rebates like that happen all the time. Whether you are buying grain, salt, or CPUs. The more business you move to one source the better prices you get. Only thing Intel is guilty of is being less than good at covering it up.

Socialism is fun here in Denmark people with the lowest income pay 45% in tax and the ones who actually cared and got an education, hence making real money get fined whoop-di-dooh with a tax level of 65%. Now that is socialism :cry:
Posted on Reply
#11
TheMailMan78
Big Member
HalfAHertz said:
I think the fine is justified and that the EU is not the big bad evil Socialist(read communist) goverment, and is in fact just doing what's necessary to protect the right of its citizens.
So by fining/stealing from foreign companies and lining bureaucrats pockets is the way the EU is protecting its citizens? Wow what a concept.
Posted on Reply
#12
Frederik S
Staff
TheMailMan78 said:
So by fining/stealing from foreign companies and lining bureaucrats pockets is the way the EU is protecting its citizens? Wow what a concept.
Yeah it rocks or not. But do not be surprised the EU is extremely odd and very bureaucratic take for instance the parlament which gets moved back and forth between Bruxelles and Strasbourg 12 times a year because they cannot agree on who "has the most right" to house it :P

They are idiots, pure and simple.
Posted on Reply
#13
3870x2
erocker said:
Fight corrupt, greedy, and ignorant governments! Yay! If the fine does go through who do you think will pay for it? Intel's customers. Prices will go up. I would love to see Intel just pull out selling anything in the EU all together. They would probablly save money in the end by not selling to greedy, money hungry countries. It's sad the US is becoming one of them. At least India is getting it right.
I entirely agree with that, pull out of europe entirely, punish europe for their money hungry ways. Always trying to attack american companies...
Posted on Reply
#14
mdm-adph
TheMailMan78 said:
If they are acquitted that means they are Innocent. In the U.S. you are Innocent until proven guilty.
On Klingon, you are guilty until proven innocent. Intel should count their blessings that their trial wasn't held in the court of General Chang!
Posted on Reply
#15
El Fiendo
Refraining from correcting a Star Trek reference.

I like how earlier in the thread one member wishes the EU to limit how much Intel is allowed to sell. And in the very next post demands he be allowed free choice.



To elaborate in case you don't see the issue:
What happens when Intel reaches that limit? You're forced to buy AMD or you wait until the limit resets itself? Do they do a yearly limit? Perhaps a 5 year limit. If Intel hits that limit in the 1st year of the 5 year period, well then I guess SOL for you. So much for free choice.

Governments should most definitely NOT be allowed to 'limit sales' to control the economy. Fine them as they may for whatever reason they choose or figure they can justify.

If people really don't like Intel? Don't buy them. Go AMD for all that it matters. It (should be) your word that controls a product. I rarely go to a store and purchase whatever they have. If I want a Toshiba TV I'm not walking out with a 'Cloneshiba' because I was told that was all that was available.
Posted on Reply
#16
TheMailMan78
Big Member
El Fiendo said:
Refraining from correcting a Star Trek reference.

I like how earlier in the thread one member wishes the EU to limit how much Intel is allowed to sell. And in the very next post demands he be allowed free choice.



To elaborate in case you don't see the issue:
What happens when Intel reaches that limit? You're forced to buy AMD or you wait until the limit resets itself? Do they do a yearly limit? Perhaps a 5 year limit. If Intel hits that limit in the 1st year of the 5 year period, well then I guess SOL for you. So much for free choice.

Governments should most definitely NOT be allowed to 'limit sales' to control the economy. Fine them as they may for whatever reason they choose or figure they can justify.

If people really don't like Intel? Don't buy them. Go AMD for all that it matters. It (should be) your word that controls a product. I rarely go to a store and purchase whatever they have. If I want a Toshiba TV I'm not walking out with a 'Cloneshiba' because I was told that was all that was available.
Damn you and your free thought.
Posted on Reply
#17
El Fiendo
I freely think that I should be damned as well.
Posted on Reply
#18
tastegw
If I want a Toshiba TV I'm not walking out with a 'Cloneshiba' because I was told that was all that was available.
could not have said it better myself.

if i really want a big mac, why on earth would i go to burger king?
but i dont want the big mac nor the whopper, so i think i will go to taco bell ;)
Posted on Reply
#19
TheMailMan78
Big Member
tastegw said:
could not have said it better myself.

if i really want a big mac, why on earth would i go to burger king?
Because the Whopper pawns the Big Mac.
Posted on Reply
#20
mdm-adph
TheMailMan78 said:
Because the Whopper pawns the Big Mac.
Or you own Burger King stock.
Posted on Reply
#21
TheMailMan78
Big Member
mdm-adph said:
Or you own Burger King stock.
Mmmmmm Burger King.

Posted on Reply
#22
Meecrob
way i see it, this is karma for all the crap intels pulled over the years, hope it bites them good and they learn a lesson
Posted on Reply
#23
TheMailMan78
Big Member
Meecrob said:
way i see it, this is karma for all the crap intels pulled over the years, hope it bites them good and they learn a lesson
I agree. If it wasn't for Intel we would all be living in cloud castles and have rainbow slides to our unicorn stables. Damn those murderous bastards.
Posted on Reply
#24
El Fiendo
Wait, so Intel is No Heart, Shreeky and Beastly? And AMD is the Carebears?

VS.
Posted on Reply
#25
TheMailMan78
Big Member
El Fiendo said:
Wait, so Intel is No Heart, Shreeky and Beastly? And AMD is the Carebears?
Ether you have kids or your F*%ked up level just went up two notches.
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