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European court backs €1.06 fine against Intel

  • Europe's second-highest court has upheld a €1.06B ($1.44B) fine levied in 2009 on Intel (INTC) by the EU's antitrust regulators.
  • Intel was accused five years ago of blocking AMD's (AMD) market share by giving rebates to PC makers. The result led them to buy most of their computer chips from Intel.
  • The company can still appeal the case to Europe’s highest court, the European Court of Justice.
Comments (28)
  • Andreas Hopf
    , contributor
    Comments (10360) | Send Message
     
    €1,06… that's an entire BK cheeseburger ; )

     

    Too bad the proceeds don't end up in AMD's coffers, where they rightfully belong.

     

    Nevertheless, the ruling won't stop the majority of AMD's processors ending up in craptops, and it won't start MSFT or SNE featuring "AMD inside" on their consoles either. But it's a wee prop-up for sentiment.
    12 Jun 2014, 05:01 AM Reply Like
  • King Rat
    , contributor
    Comments (855) | Send Message
     
    I currently have 2 computers with an AMD GPU and Intel CPU. I would love an AMD CPU but don't have one. Why? Is it because of rebates? No. Why then?

     

    Because Intel has cleaned AMD's clock to the core each cycle for the past 8 years. 3 puns in one sentence, not bad.

     

    Did the EU regulators consider that AMD CPUs have run at half the speed while producing twice the heat of Intel CPUs? Did the EU regulators consider that the largest market of CPU chips at time of trial, "mobile" (laptop) chips, are the most heat-sensitive and that that played to Intel's strengths?

     

    I love AMD and I like the progress they've made with Kaveri, but the CPU side of that "APU" is just a thorn in their side. They really need a replacement for Bulldozer.
    12 Jun 2014, 05:07 AM Reply Like
  • linuxlowdown
    , contributor
    Comments (74) | Send Message
     
    Well, if AMD rightly had the sales and profits in the first place, then AMD would have had more money to spend on R&D to design you better chips. Think about it.
    12 Jun 2014, 05:48 AM Reply Like
  • Ashari
    , contributor
    Comments (221) | Send Message
     
    the case refers to a time when AMD was the performance king and Intel's CPUs where slow and overheating (Athlon vs Pentuim 4) and Intel resorted to illigal means to defend its market share, n.b. even including the EU fine and the $1.25 billion settlement with AMD, that's probably still less then AMD has lost due to Intel's illegal market abuse practices.
    12 Jun 2014, 06:02 AM Reply Like
  • Minkoff
    , contributor
    Comments (14) | Send Message
     
    It's the anti competitive practices that are important here, not the performance of various chips. Practices that are somewhat continuing today with the "contra revenue".
    As to the "AMD CPUs have run at half the speed while producing twice the heat of Intel CPUs"...does this mean that if AMD chips are running at the same speed will produce four times the heat? Where do you get those numbers from?
    AMD cpu's generally have lower temperature than Intel, especially when measured correctly. You are free to Google, as there is a lot of information about CPU temps.
    http://bit.ly/1kQwCb3
    Do not confuse AMD TDP with Intel TDP.
    12 Jun 2014, 06:28 AM Reply Like
  • trader_xx
    , contributor
    Comments (1112) | Send Message
     
    You can be sure of one thing, the cabal of INTC management that invented "contra revenue" must have had a frightful time of framing it just the right way...

     

    Funny how a little EU lawsuit has forced INTC to tap dance on a land mine with this CR warthog as a partner....
    12 Jun 2014, 08:19 AM Reply Like
  • Bruce24
    , contributor
    Comments (171) | Send Message
     
    ---> "Practices that are somewhat continuing today with the "contra revenue"."

     

    The rebates themselves were not the problem, it was the conditions Intel put on the rebates that was. Such as limiting the amount of AMD product an OEM could sell to get the rebate. AMD has also, and probably still, provides rebates on some of it's products. Intel certainly now knows the rules for rebates and has agencies from many governments looking over their shoulder.
    12 Jun 2014, 09:39 AM Reply Like
  • Bruce24
    , contributor
    Comments (171) | Send Message
     
    The fine was for what happened between 2002 and 2007. While at the very end of that period Intel has released the original Core based processors, which put regained the performance lead from AMD, for a good many of those years AMD had the Original Hammer based Opteron and Althlon64 kicking the P4 in the butt.
    12 Jun 2014, 09:43 AM Reply Like
  • Minkoff
    , contributor
    Comments (14) | Send Message
     
    @trader_xx - I agree.
    @Bruce24 - I agree with you too and as trader_xx pointed, framing it the right way... is what matters.
    Rebates are now a standard tool and a very complicated matter to assess.
    I do, somewhat, understand new or small companies using this strategy when trying to enter a market, but I'm not convinced for the the big old dogs...
    I'm sure, that Intel does not directly limit the amount of chips that a company can purchase from Qualcomm, AMD etc. The market will do that. All Intel has to do is subsidize OEMs, bring BoM down and flood the market.
    12 Jun 2014, 10:32 AM Reply Like
  • Stock Market Mike
    , contributor
    Comments (2493) | Send Message
     
    "I'm sure, that Intel does not directly limit the amount of chips that a company can purchase from Qualcomm, AMD etc. The market will do that. All Intel has to do is subsidize OEMs, bring BoM down and flood the market."

     

    Now they don't directly limit it. Back then the kickbacks were structured more like...

     

    "9/10 systems sold must be Intel to qualify." - That's at a time when AMD was rapidly approaching 40% market share, and had superior products for several years beyond. It's quite feasible that without the kickbacks, AMD would've emerged as a true equal or superior to Intel. AMD might be like nVidia is to ATI/AMD today. (Top dog) It's scary how much some shrewd/illegal moves can shift the future.

     

    The big problem was, a lot of OEMs decided to JUST sell Intel systems, since it's hardly worth designing separate models for such meagre non-subsidized volume... especially when all your competitors are onboard and getting the kickbacks.

     

    AMD seems to be back to innovation, now. I sense that we're entering another kick-butt generation, once software catches up to their recent hardware advances.

     

    -Mike
    12 Jun 2014, 11:33 AM Reply Like
  • Minkoff
    , contributor
    Comments (14) | Send Message
     
    @Stock Market Mike
    You're correct! My mistake, as I should have pointed that I'm talking about the current contra revenue strategy, which to me is absolutely the same, as to what Intel was doing back then. The outcome is the same.
    Unfortunately, this rebate strategy has been widely adopted.

     

    As to the last sentence...you, I, and a handful of other people (as to the majority) are looking at innovations and most importantly understand the economical importance.
    Professional consumers...follow company rules, which are always influenced by high level executives.
    Regular consumers...well, they just buy what has been suggested to them. I don't need to tell you, how resellers think...when they sell hardware.
    I can only hope that you are right.

     

    BTW, I'm additionally counting on the semi-custom business. There are a lot of opportunities, as it's not easy or worth to assemble and sustain a CPU/GPU design team.
    12 Jun 2014, 12:14 PM Reply Like
  • Realtor_k
    , contributor
    Comments (215) | Send Message
     
    @Minkoff:

     

    Is it anti-competitive to offer rebates or coupons to attract price-sensitive buyers to your product or to your store?

     

    I'm not familiar with EU product-pricing policies -- so it may be different how retail operates in Europe: No discounts? No rebates?
    12 Jun 2014, 01:37 PM Reply Like
  • Minkoff
    , contributor
    Comments (14) | Send Message
     
    @Realtor_k
    If there is no legal limit to a rebate, where and who draws a line between stimulating a market and being anti competitive?

     

    You have two products in the same price bracket and the expenses for one of them is shared between you and the chip supplier:
    - Which one will bring you more profit or less R&D investment and which one will you try to sell more?
    - Would you care about performance, especially if the all of your competitors are on board?

     

    It's a very dangerous, and as I said, very hard to assess matter. Since, in the long run, it may have serious consequences EU is trying to look at those possibilities. Not that we have no rebates, but unfortunately "the rebate strategy has been widely adopted"
    12 Jun 2014, 02:25 PM Reply Like
  • Bruce24
    , contributor
    Comments (171) | Send Message
     
    >>> If there is no legal limit to a rebate, where and who draws a line between stimulating a market and being anti competitive?

     

    Giving rebates was not the problem, it was the conditions put on the rebates allowing them to kick in that was the problem. I included examples from the EU in a previous post.

     

    For a more simple good/bad examples:

     

    Intel offering OEMs buying 1M or more chips a 10% rebate is fine.
    Intel offering OEMs who buys 90% of it's chips from Intel is not.

     

    As far as rebates go, there are plenty of rules/laws around how they can be used. I personally don't like rebates and a consumer or investor. I would rather simply have the company lower it's price. As an investor I think they can mislead you on a companies revenue and profits depending what rebates they give or receive. For example, the SEC found the way Dell reported the rebate money it got from Intel mislead it's investors.
    12 Jun 2014, 03:05 PM Reply Like
  • Roger 36
    , contributor
    Comments (117) | Send Message
     
    Who knows what AMD could have or would have done if Intel had not paid off OEMs,at the time AMD was cleaning Intel's clock with there CPUs so if AMD would have gained lets say 40% to 50% of the market when there CPUs was better witch it should have if Intel had not paid OEM's to keep AMD out then Maybe AMD CPU would be on top now considering that they would have had a much larger R&D budget to work with.I believe AMD has come up with some really nice nice CPUs & Gpus considering how low that R&D budget is now.
    12 Jun 2014, 08:00 PM Reply Like
  • Roger 36
    , contributor
    Comments (117) | Send Message
     
    There is a difference between OK you can buy there chip for $200 or buy my chip for $200 and we give u $50 back nothing wrong with that but when u say OK to get that $50 off you have to buy 10 of are chips to 1 of there that's when it becomes a problem.
    12 Jun 2014, 08:10 PM Reply Like
  • xxavatarxx
    , contributor
    Comments (3044) | Send Message
     
    How much cash does Intel have stuck overseas that they can't re-patriate?
    Isn't this just a drip in the bucket with their overseas cash?
    12 Jun 2014, 05:28 AM Reply Like
  • Bruce24
    , contributor
    Comments (171) | Send Message
     
    Intel paid the fine back in 2009 or 2010, this latest announcement from the EU court is that Intel lost it's appeal.

     

    It will be interesting to see if Intel under their new CEO lets it be or rolls the dice with the one more appeal they are allowed.
    12 Jun 2014, 09:47 AM Reply Like
  • toonies
    , contributor
    Comments (445) | Send Message
     
    Time to create FB party "Intel outside" to show that customers primarily do not like this kind of behavior.
    The fine is very similar to amount what Intel paid directly to AMD to avoid trail in USA.
    12 Jun 2014, 05:58 AM Reply Like
  • toonies
    , contributor
    Comments (445) | Send Message
     
    Typo: trail>>>trial
    12 Jun 2014, 06:16 AM Reply Like
  • toonies
    , contributor
    Comments (445) | Send Message
     
    Judgement here: http://bit.ly/1kQwqIX
    12 Jun 2014, 06:28 AM Reply Like
  • techy46
    , contributor
    Comments (7254) | Send Message
     
    It's amazing how much hypocrisy the EU socialists and US capitalists put forth.

     

    What's the difference between contra revenue and giving volume rebates? Why does the US think it has the right to fine France's BNP for violating US trade sanctions? How can the EU demand that Microsoft allow 3rd party browsers to be installed on Windows? The EU and US regulators and spies are out of control with China, India and Russia looking on and saying just wait until we're equal. Now France says they are thinking, read threatening, about dumping the USD for trade with Asia. Just wait for the carbon trade wars. China's going to say we'll do that when you stop having 3-5 kids and dumping your plastic diapers in landfills. I still like to visit San Diego beaches but feel a lot better when I fill up at Love's with $3.50 gas in Yuma.
    12 Jun 2014, 10:57 AM Reply Like
  • Bruce24
    , contributor
    Comments (171) | Send Message
     
    >>> What's the difference between contra revenue and giving volume rebates?

     

    It's not rebates that are the issue, it's the conditions required to get the rebates that is. toonies provided the link the judgment which provided some examples:

     

    "Accordingly, Intel granted rebates to four major computer manufacturers (Dell, Lenovo, HP and NEC) on the condition that they purchased from Intel all or almost all of their x86 CPUs. Similarly, Intel awarded payments to Media-Saturn, which were conditioned on its selling exclusively computers containing Intel’s x86 CPUs. According to the Commission, those rebates and payments induced the loyalty of the four manufacturers listed above and of Media-Saturn and thus significantly diminished the ability of Intel’s competitors to compete on the merits of their x86 CPUs. Intel’s anti-competitive conduct thereby resulted in a reduction of consumer choice and in lower incentives to innovate. "
    12 Jun 2014, 11:40 AM Reply Like
  • metaforex1947
    , contributor
    Comments (12) | Send Message
     
    Good news for AMD! If they win the settlement money it will eliminate a lot of their debt (+or-) 50% or from 2B to 1B, which is HUGE and will certainly be reflected in their stock price. Really the debt has been the only negative on this company so far, but now I see it as being a good R&D gamble/investment on behalf of AMD. Very bold about them winning a settlement they once lost to Intel. If this doesn't scream, "Come Back!" at you than I don't know what does.
    12 Jun 2014, 01:30 PM Reply Like
  • Andreas Hopf
    , contributor
    Comments (10360) | Send Message
     
    See my comment at the top - the fine, once paid, will not go to AMD.
    12 Jun 2014, 02:00 PM Reply Like
  • Bruce24
    , contributor
    Comments (171) | Send Message
     
    >>> If they win the settlement money

     

    You seem confused.

     

    This is about an EU commission fining Intel for anti-competitive behavior back in 2009. At that time Intel paid the fine, but filed an appeal which they just lost. This means unless Intel tried another appeal, the EU will keep the money.

     

    AMD also sued Intel in 2005, and in 2009 they settled with AMD getting $1.25B and a way more favorable cross licensing agreement.
    12 Jun 2014, 02:08 PM Reply Like
  • metaforex1947
    , contributor
    Comments (12) | Send Message
     
    @Bruce24

     

    Oh, ouch. Yeah ok I can see that now, just got a bit excited with the rising stock price on AMD. It's the most movement I have seen in forever, looking forward to see what happens.
    12 Jun 2014, 02:43 PM Reply Like
  • Mike Bruzzone
    , contributor
    Comments (227) | Send Message
     
    NATIONS HARMS on Economics, Financial, Contracts; 1993 – 2014

     

    Minimally $764,000,000,000 nation’s theft on antitrust 3x Intel known harms.

     

    Intel theft from U.S. General Services Administration up to $2,002,663,035.

     

    Settlement recommendation range $164,160,000 to $328,320,000.
    Likely will require Congressional approval what ever the agreed return.

     

    Range $26,626,000,000 to $50,000,000,000 cartel employee theft from Intel Corp.

     

    Range $26,626,000,000 to $50,000,000,000 consumer price fix charge that conceals theft.

     

    Range $50,048,160,497 industrial development monopoly consumer overcharge.

     

    Range $70,962,798,260 Intel Corp. theft from domestic microprocessor industry.

     

    Stanford Beer, University of Manchester, Decision & Control, 1966

     

    “A monopolistic company may be especially privileged by insisting on longer production runs without incurring loss of large stocks. This can be done by the simple expedient of holding design developers and sales channels to ransom by making them accommodate the unnecessary stocks. It is fortunate for the national economy that few companies are in a position to get away with this, for it ties up unnecessary amounts of capital.”

     

    United States v Masonite 316 US 265 (1942)

     

    “The power of Masonite (Intel) to fix the price of the product which it manufacturers, and which the entire group; Intel design producers, brokers, industry distribution and retail sales channels sell, and with respect to which all have been, or are now actual or potential competitors, paid bilaterally to combine into many Intel vertical dealing channel’s, offers a powerful inducement to abandon competition.

     

    The forces which that influence puts to work are subtle but calculable. Active and vigorous competition then tends to be impaired, not from any preference of the public for Intel products, but the preference of industry development, distribution and retail sales channels for Intel’s explicit price fixing incentives prohibited under Sherman Act Section 1. The explicit guarantee of a sales commission that is minimally 3.8% of the MPU sales price over last four years. And the tacit guarantee of a platform development subsidy, bundled into the retail price of every Intel processor, meaning to tie platform design producers to Intel developments; Docket 9288 Section 2 intent revisited, where ever channels abandon rather than maintain competition.

     

    Intel control over price and margins continues as an actual brake on competition. Intel types of marketing devices; contracts deployed horizontally for vertically integrated channel’s continues to limit trade, supports Intel efforts to restrain channel access, horizontally by vertically, does suppress competing and non-infringing products by placing a premium of 3.8% on price competition, and promises design producers recovery of their Intel platform development cost, bundled as a monopoly margin into retail processor price, when design producers abandon competitive platform development. The power of this type of combination to inflict the kind of public injury which the Sherman Act condemns renders it illegal per se.”

     

    Where Supreme Court “long has held that certain concerted refusals to deal or group boycotts are so likely to restrict competition without any offsetting efficiency gains they should be condemned as per se violations of §1 of the Sherman Act”; Pretz v Holstein Frisian Association of America, 698 F.Supp.1531 (1988). And In Klors’s Inc. v. Broadway-Hale Stores, Inc, 359 U.S. 207 (1959) U.S. Court of Appeals for 9th Circuit found that, “a group boycott is not to be tolerated merely because the victim is only one merchant whose business is so small that his destruction makes little difference to the economy” 359 U.S. 213 and, that “monopoly can surely thrive by the elimination of small businessmen, one at a time, is it can be by driving them out of large groups” 359 U.S. 213. Where the classic “group boycott” is a concerted attempt by a group of competitors at one level to protect themselves from competition by non group members who seek to compete at that level; L.A. Sullivan, Antitrust 230, 232, 244 (1977).

     

    United States v Griffith 334 US 100 (1948)

     

    “From the tying cases a perceptible pattern of illegality emerges. When the seller enjoys a monopolistic position in the market for the tying product, or if a substantial volume of commerce in the tied product is retrained, a tying arrangement violates the narrower standards expressed in the Clayton Act and because of either factor the requisite potential lessening of competition is inferred. And because for even a lawful monopolist it is unreasonable per se to foreclose competitors from any substantial market, a tying arrangement is banned by Section 1 of the Sherman Act when ever both conditions are met. In either case the arrangement transgresses Section 5 of the FTC Act, since minimally that section registers violations of the Clayton and Sherman Acts. Specific to intent it is not necessary to establish purpose or intent are present if the monopoly results as a necessary consequence of what was done.”

     

    12 East 525, 194 Eng. Rep at 206, Kings Bench 1810

     

    Lord Ellenborough held of His Majesties grantee “although in general every man may fix what price he pleases upon his own property or use of it (wine imports), the possessor of a monopoly, if he will take the benefit of the monopoly, must an as equivalent perform from the duty attached to it on reasonable terms.”

     

    International Salt v United States; 328 US 781 (1947)

     

    A tying arrangement violates Section 1 of the Sherman Act when a seller enjoys a monopolistic position in the market for the tying product and a substantial volume of commerce in the tied product is restrained.”

     

    United States v E.C. Knight Sugar Trust 156 US 1 (1895)

     

    “In my judgment, the general government is not placed by the constitution in such a condition of helplessness that it must fold its arms and remain inactive while capital combines, under the name of a corporation, to destroy competition, not only in one state, but throughout the entire world.” Justice Harlan

     

    United States v Nat’ Association of Real Estate Brokers 339 US 495 (1950)

     

    The term labor as used in the Clayton Act is not limited to the work of manual laborers. The government contends that the defendants have combined to fix real estate (Intel Insider) sales incentives to be charged by the real estate brokers; developers, dealers and sales agents. The government urges that this activity constitutes a violation of the Sherman Act. The government contends, however, that irrespective of whether it is reasonable or laudable, the fixing of commission rates is illegal per se and constitutes a violation of the Sherman Act.

     

    The core of the case is a charge that the members of the Nat’l Association of Real Estate Brokers combined in the service of their primary agent to fix the commission for their services acting as brokers in the sales, exchange, lease, management of real property. Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade is illegal.”

     

    Donald B. Rice Tire Co v Michelin Tire Corp 454 US 864 (1981)

     

    “Restraint imposed by conspiracy among dealers and their supplying manufacturer (Intel) for the purpose of retail price maintenance that would benefit dealers (Intel, Computer Suppliers and Media Sales Agents) would be horizontal in nature and is per se illegal.”

     

    Northern Pacific R. Co. v United States 365 US 1 (1958)

     

    “Tying arrangements flout the Sherman Act's policy that competition rules the marts of trade. By conditioning his sale of one commodity or value on the purchase of another, tied to a microprocessor, the seller coerces the abdication of the buyer’s independent judgment as to the tied products merits and insulates it from the competitive stresses of the open market. Thus is the usual case only the prospect of reducing competition would persuade a seller to adopt such a contract.

     

    Conspiracy among dealers and their supplying manufacturer (Intel) for the purpose of development price maintenance that benefits dealers and restrains inter brand competition is horizontal in nature and per se illegal under 15 USCS Section 1.

     

    Per se illegality in relation to an overwhelming proportion of cases where the mechanics of Intel incentives produce the proscribed consequences that violate the Sherman Act in an overwhelming manner.”

     

    American Tobacco v United States 328 US 781 (1946)

     

    “The existence of power to exclude competition when it is desired to do so is itself a violation of Section 2, provided it is coupled with the purpose or intent to exercise that power.”

     

    United States v Paramount 334 US 131 (1948)

     

    “Vertical integration of production, distribution and exhibiting motion pictures is not illegal per se; its legality depends upon (1) the purpose or intent with which it was conceived (2) the power it creates and the attendant purpose or intent:

     

    (a) violates the Sherman Act if the acts are a calculated scheme to gain control over an appreciable segment of the market and to restrain and suppress competition, rather than an expression to meet legitimate business needs.

     

    (b) a vertically integrated enterprise will constitute a monopoly which, though unexercised violates the Sherman Act, if a power to exclude competition is coupled with a purpose and intent to do so.”

     

    President Franklin Roosevelt

     

    “The enforcement of free competition is the least business can expect.”

     

    “The central fact of industrial economics is not profit but loss - not the expectation of ending up with a surplus, its justification, and the legitimacy of the claims to a share in it; but the inevitable and real risk of ending up with an impoverishing deficit, and the need, the absolute need, to avoid this loss by providing against the risks”.

     

    Peter Drucker. The New Society, 1950

     

    Analysis; With three generations of Intel surplus consuming the channel’s financial ability to develop, stock, or sell anything else, only product’s offering end buyer utility, or innovative values, will sell through Intel surplus barrier. Channels will not lose their investment in prior stocks. And will reject new products lacking utility values that contribute to surplus condition

     

    Intel Fun Facts

     

    A bit more than 2,686,906,576 processors produced 1993 to date +150,000,000 Core 2 Merom mobile that was too convoluted to calculate specifically. Like Northridge a lot of tail-end sludge and a month’s project to assess.

     

    $1,217,225,261,760 Intel processor only revenue potential

     

    $564,113,683,760 unadjusted gross profit 1993 through 2013

     

    According to Intel annual financial;

     

    $570,097,000,000 gross revenue 1993 through 2013

     

    Intel lost or gives up one half of its enterprise revenue value to the cartel, unaccounted for stock options, economic inefficiencies, waste and too theft.

     

    $50,048,160,487 consumer monopoly over charge that are dealer values used for tying.

     

    $100,529,323,290 in price fix, fidelity and sales rewards; split approximately 50:50 between Intel and dealer group, although Intel share is known to exceed 60%.

     

    On Intel’s 50%, up to $31,667,000,000 is misrepresented, that is falsely certified across 21 annual Intel Corp. financial statements.

     

    Half is price fix misrepresented as Intel Inside accrual. The other half is slush fund hidden in the corporate advertising line item.

     

    Seems there’s another $19 billion in slush, stashed where?

     

    Between 1993 and now approximately 28% of all Intel processors are priced less than some measure of cost; average total, fixed, variable, marginal, hard manufacturing cost.

     

    Intel industrial financial theft from product prices < measures of cost impacting competitive microprocessor industry is $70,962,798,260 = 17 domestic fabs that are lost.

     

    Intel is the reason America lost its standing as the competitive semiconductor fabrication capital of the world.

     

    At this point I think it's highly likely that Intel will be nationalized and then reprivatized internationally.

     

    Respectfully Submitted,
    Mike Bruzzone
    6 Sep 2014, 11:49 PM Reply Like
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