The Business of Tech: Intel Gets Fined For Antitrust Violations
by Ryan Smith on May 13, 2009 12:00 AM EST- Posted in
- Ryan's Ramblings
There are some records you just don't want to set - the EU record for a single fine is one of them.
In our previous business articles we've discussed Intel's legal situation in the European Union. In 2001 AMD went to the EU to file complaints about Intel over anti-competitive actions. This perked the interest of the EU and set into motion a long and slow chain of events, leading up to antitrust charges being filed in 2007 for Intel's actions in the 2002-2007 time frame. In terms of technology, what was being considered were Intel's actions during the late Athlon XP era and most of the Athlon64 era.
After quite some time, the investigation has wrapped up and the European Commission has made it's ruling: Intel has been found guilty of violating EU antitrust laws, and has been fined €1.06bil ($1.45bil) for past actions and ordered to stop any ongoing anti-competitive practices. This gives Intel the unsavory position of the single largest fine in the history of the EU, surpassing Microsoft’s previously lofty fine of nearly €500mil in 2004.
The European Commission has a complete press release up on the charges, but they specifically boil down to two things: Intel was giving OEMs rebates if and only if they sold few-to-no AMD processors, and Intel was paying retailers not to carry computers with AMD processors. The report doesn’t list the specific OEMs, but we know it was NEC, Lenovo (and for some of the time, IBM), HP, Dell, and Acer. The retailer was Media Markt.
Intel has already said that they are going to appeal the fine, and that it “ignores the reality of a highly competitive microprocessor market.” Notably, they aren’t appealing the facts, but rather the conclusion (that it was harmful to consumers) and the fine. It’s likely that any appeal will take just as long as the initial examination, so it’s unlikely that this will be over before 2011, if not later.
As Intel does not talk about their pricing and marketing strategies publicly, there’s no way to know if the order to cease ongoing activities will have any effect. If Intel is still offering any EU OEMs rebates, then they would need to immediately stop. Since the immediate impact of the rebates to OEMs would have been to depress computer prices slightly (at least some of the rebate money would likely have been passed to consumers in pricing due to heavy competition) we’re not ready to throw out the idea that this may drive computer prices in the EU a bit higher if Intel has been continuing to offer rebates.
Meanwhile the fine, while the EU’s largest, is not abnormally large given Intel’s size and that the fine is only computed against Intel’s EU sales. Their net profit for their terrible Q1’09 was $630mil, so while it’s a stiff fine, it’s not one that Intel would be unable to pay off (although it certainly will turn some heads in the process). The fine goes directly to the EU, so AMD will not immediately benefit from this beyond the cessation of any ongoing illegal activities.
It should also be noted that Intel has been facing an investigation in the United States since 2008. While EU decisions are non-binding, this may be an indication of how that investigation will turn out. We’ll undoubtedly have more on that investigation in the coming months as it continues to move along.
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Hrel - Wednesday, May 27, 2009 - link
I always thought it was complete bull when the GOVERNMENT gets the fine money. Shouldn't it go to... oh, I don't know, AMD??? And probably some to the consumers and then a little to the government just because they're greedy bastards.suppliesidejesus - Wednesday, May 20, 2009 - link
I have never purchased an Intel product. Before, it was simply because AMD outperformed their processors clock for clock (weird that I could only really find them on e-tailers and rarely in pre-built machines from OEMs). Clearly, I haven't done a build since before the advent of Core2. However, until they can convince me beyond the shadow of a doubt that they no longer break anti-trust laws, I will continue this practice.hoelder - Wednesday, May 20, 2009 - link
Lately there is talk about "too big to fail". Intel's leadership has for the longest of times ignored these rules and regulation around the world. Where the US should have portrayed leadership, the EU was fed up and not only with Intel or Microsoft. I have been very unhappy about the price structure of Intel and availability of alternatives. I can't say I was unhappy about the EC's fine. The arrogance and hubris was a thorn in my side. Nobody likes a company promoting innovation actually looking to prevent others to innovate. On multiple occasions I ran into Intel's creative prices. Or remember the 486 pricing.Beeb - Friday, May 15, 2009 - link
Very inciteful comments from both sides of the fence.BALANCE is the key both in the business world and in the realm of government.
It is important for the individual involved in either business or government to often evaluate his/her motives. When many individuals with wise and healthy motives come together for a common purpose, together they can impact the world for the betterment of all.
Gannon - Thursday, May 14, 2009 - link
Americans seem to be some of the most FUCKED UP idealogical people on planet earth, that give the sensible americans a bad name.Take a breather from that capitalist ideology hoved so far up you ass you can't think straight.
Barberica, land of the stupid, home of the knave. The free market fairy didn't rescue us from the banking crisis. Good ol american capitalist greed caused that.
Hacp - Thursday, May 14, 2009 - link
SO rather than having intel invest the money to further technology and create jobs, the EU decided to steal it and give it to high school dropouts.suppliesidejesus - Thursday, May 14, 2009 - link
Right, because it makes total sense to fine a company for illegal activities that blocked competition and stifled progress in a competing company and then give them the money back saying, "Now go be innovative!"baba264 - Thursday, May 14, 2009 - link
I admit I'm slightly surprised by the nature of the reactions to this court decision. I guess I just didn't realize hwo much anti EU feelings this could generate or how skeptic some people seem to be concerning a justice descision given by a european body concerning an american company.First, for all those that seem to believe the EU is biased against Intel because it is a US compagny. I think that it's important to point out that Intel is also facing charges for the very same illegal activities in Japan, South Korea, and, incidently, the US.
Second, as some people seem to be surprised that antitrust law exist at all or that business practices are regulated things, I would just like to point this quote :
“This isn’t some radical interventionist approach,” said Andrew I. Gavil, a professor of law at Howard University. “It’s more that the Bush Department of Justice were radical noninterventionists.” (from NYT)
Moreover it seems like the Obama administration will set new guidelines for anti trust commissions, so you should expect to see new investigations for such cases appearing in the US soon.
michal1980 - Thursday, May 14, 2009 - link
^EU hates america. Their socialist goverments are going broke and produce even less then america. They need cash, so they go to the cow.Obama 'The One' Barack, is just trying to import the only thing the EU has, socialism.
JonB - Friday, May 15, 2009 - link
your third entry of the same limbaugh'ish comment still deserves a "bite me."The odd thing is, my comment is just as worthwhile as yours. How sad.