Intel's Eurofine

In a fairly long post yesterday, I wrote about antitrust policy and touched on the Intel (INTC) situation with the European Commission. They announced their findings with regard to Intel’s alleged anti-competitive behavior today, so here’s a quick follow-up.

The commission fined Intel $1.45 billion and summed up its findings thusly:

In blunt words, the EU’s steely competition commissioner, Neelie Kroes, pronounced that her agency’s long investigation had “uncovered serious wrongdoing in the x86 processor market,” including proof that Intel had given partially or completely hidden rebates to computer makers on the condition that they buy all or nearly all of their x86 processors from Intel and not its smaller rival, Advanced Micro Devices (AMD).

The allegations against Intel which were brought by their competitor AMD was that Intel gave rebates to its customers on the condition they buy exclusively from Intel or buy a large percentage of their chips from Intel. Though the European Commission says that this activity resulted in harm to consumers, there seems to be some real questions as to whether that is in fact true.

Intel plans to appeal the commission’s findings. They contend that they ignored a substantial amount of evidence that mitigated against their findings.

As I noted yesterday, the Obama administration has signaled that its antitrust policy might align more closely with the European model. That model is one that seeks to regulate activities between firms as much as it seeks to ensure that the consumer is not harmed by monopolistic behavior. It is effectively a back door industrial policy masquerading as antitrust enforcement. It would be unfortunate if the administration takes U.S. policy in that direction.

More: here

Comments

[justinabcsee:]

Oh, puhleeease, Intel has been cheating with under-the-table deal for years. AMD always seemed on the verge of bankruptcy even when its products were ahead of Intel. Now we finally know that Intel was simultaneously bribing/coercing the manufacturers and retailers to maintain a certain percentage of Intel-based sales. Ridiculous and WRONG! Companies are greedy by nature, and that is what makes capitalism work. However, unchecked greed can take on an illegal and unethical form over time; that is where government needs to make sure companies play fair.

May 13 03:35 PM

[Psudo:]

Tom, get real! Bribes (or huge rebates) hurt competition. Less competition hurts consumer.

May 14 09:09 AM

[nyoneway:]

It absolutely harms the consumer. Having healthy and viable competition in the market brings faster and lower cost chips to the consumer. Intel/AMD is considered a duopoly, if you kill off one, the other is free to increase prices which will hurt the consumer.

May 14 09:28 AM

[van Schayk:]

Talk to US lobbyists in Brussels and they will tell you that EU regulations and interpretations are decidedly in favor to EU companies. EU government and state controlled procurement also favors national and EU companies. The Intel fine should not be judged in isolation, but as a larger pattern whereby the EU targets market dominant US firms. What they can't achieve in the market place, the EU hopes to accomplish via government fiat.

May 14 09:28 AM

[R0B50:]

Justin,
I guess you would be opposed to all volume discounts that businesses offer then?
This is a difficult policy for AMD to overcome I admit, but it is hardly a new practice for any business to offer better pricing based on the volume of business you do with them.
It is hardly illegal and certainly not improper.
Intel was just very aggressive in stating it's pricing policies.

May 14 10:13 AM

[User 357705:]

Absolutely justified. Should have been enough to bring intel to the verge of bankruptcy. The only way to change the behavior of companies that value only money is is to take most of it away from them when they get caught.

May 14 11:22 AM

[jigglylizard:]

I`m not so sure. It only makes sense to give purchasers a discount when buying in bulk. However, this does go a bit further than that in only allowing them to buy their purchases, either the bulk or the entire amount, from only themselves.

I could see Intel getting this overturned in court, whether or not that be the fairest conclusion.

May 14 05:22 PM

[Gaucho:]

NOTE that in Korea and Europe and Japan they have found that Intel was using monopolistic practices and fined them. But here in the great USofA we don't do a damn thing. That is because the big bucks call the shots. If you do not believe so then look at the trillions thrown at the banks and not one guilty party is going to jail.

May 14 06:51 PM

[Missing_Link:]

Tom, I am no Obama fan by any means and I am very leery of, as you put it, "back door industrial policy masquerading as antitrust enforcement."

In this case, though, Intel is guilty as sin. The EU has overwhelming evidence of Intel's wrongdoing on many occasions.

May 14 08:07 PM

[Missing_Link:]

Oh, puh-LEEZE. Intel's behavior went FAR beyond volume discounts.

Intel's incentives were specifically aimed to unfairly subvert and undermine AMD and its products, not to push its own products. Look up the actual facts on this case and you'll see that what happened is hardly something that fits into the category of a "volume discount."

On May 14 10:13 AM R0B50 wrote:

> Justin,
> I guess you would be opposed to all volume discounts that businesses
> offer then?
> This is a difficult policy for AMD to overcome I admit, but it is
> hardly a new practice for any business to offer better pricing based
> on the volume of business you do with them.

May 14 08:10 PM

[MattZN:]

I've used both types of cpus for years and I think it has always been fairly clear to everyone that Intel was tightly controlling AMD's market. Frankly, without AMD around to keep Intel honest we would not have the powerful multi-core consumer cpus we have today, let alone 64 bits (which AMD pioneered and Intel originally never intended to supply to consumer computers).

In anycase, I am less concerned about competition then I am removing the monopolistic practices from Intel's arsenal. Monolopies are not figments of our imaginations. They seriously damage both the quality and pricing of goods from the point of view of consumers.

-Matt

May 14 09:34 PM

[Ricard:]

I own INTC stock. I believe this will be at worst a small setback. I see a company with a balance sheet profile similar to MSFT, but with a product mix that will probably be much more robust in the next decade or two. Unlike MSFT, INTC has a sterling track record in product innovation, and in cooperating with other large companies in strategic sectors.

Barriers to entry are huge, and INTC is holding nearly all the keys to the kingdom for this industry, which will be one of the most important in the world for this century. IMHO, of course.

INTC will be for the 21st century what GM and GE were in the 20th century. If anyone thinks they can drill any holes in this argument, I'm all ears.

May 15 01:40 AM

[Ricard:]

LOL, no one has a rebuttal? No one?? I'm still smiling...

May 16 01:50 PM

[Vienna:]

jigglylizard: It's a european court, not US court! Don't count on US practices here. We had one smart US lawyer here, who was in the news daily, but he went bankrupt after 3 years, cause he did not want to understand that we do NOT want US practices here. I think they even braught some callgirls from russia to court for evidence.

Besides that I am pleased to hear that people do approve of the fine. Usually it is typical US whinning about unfair practices towards them.

May 17 10:12 AM