Intel responds to EU's anti-trust statement

The European Commission today issued its statement of objections against chip giant Intel, accusing it of anti-competitive behaviour. As we reported earlier, the world's number one maker of processor chips had been awaiting the verdict of a long-running investigation into the firm's alleged anti-trust business practice against …

[Brett Brennan]

And what exactly is wrong with this behavior?

Points one and three seem to me a bit out of line on the EC's part. It is not uncommon for companies to negotiate with a single supplier for a part or set of parts in order to minimize their costs for inventory. This is actually a central premise to improving manufacturing efficiency through the consolidation of Bill of Materials (BOM) items into families of parts, and single-sourcing allows complete control of the supply chain to support Just In Time (JIT) inventory management. Such contracts are usually negotiated on both cost and Quality conformance: a substantial discount as well as a Service Level Agreement (SLA) for quantities and delivery schedules. This could be difficult to ding Intel with if they can demonstrate that this was done in collaboration with the customer.

Point three is similarly vague. Look at the airline industry: if Southwest or Ryan Air offer a discount fare, other airlines will match it even if they lose money in the deal. The deal is usually off-set with higher costs for other inventory items; ie, higher prices for other routes or on other parts ordered by the customer. Often this is incorporated into a blanket agreement under point one, again to simplify the inventory and provide a customer the ability to manage their margins over their entire product line rather than on an item by item basis.

On the other hand, point two is "fishy" at best. "Bribes" are supposed to be illegal, especially if they do not contribute to shareholder value in either company. On the other hand, it is not unusual for companies to offer financial "assistance" to customers, through grants, loans and "payment in kind' (PIK) trade to benefit both organizations. Boeing is big on leasing its aircraft for very reasonable rates to beat off Airbus in customers looking to make a large purchase, and it is tough to decide if the financial assistance is illegal, especially if shareholders of both companies benefit from the transaction.

Now, I'm not an Intel fan-boy, nor do I condone using monopolistic market position to pressure competitors out of business. However, so long as the company committing the "crime" does not use its influence to actually institute monopolistic behavior (ie, once a competitor is no longer able to address a market it raises prices and abbrogates contracts to unilateral advantage) and the competition retains an opportunity to re-enter the customer at a later time, I can't see this as inherently "evil".

Besides, blindly sticking your nose up another company's arse is a good way to fail spectacularly if they stumble - what happened to Intel lock-in customers with Itanium and the failure of Intel to address AMD's competitiveness over the past two years.

Oh, yes: a fart in the face certainly leave a lasting "air" around a stupid customer...

[Don Mitchell]

Two Cases

It's intersting to compare the two US antitrust cases a few years ago. Intel got off with a light slap on the wrist, while Microsoft got raked over the coal. Both companies abused their strong market position and strong armed their business partners. I believe it demonstrated the need to lobby and make political donations, which Microsoft had completely failed to do.

I do hope that Intel does not push AMD completely out of business. It's going to be tough for many reasons, especially since Intel has the cash to build 45 nm fab lines, and AMD does not. But AMD has done some good work on things like memory subsystems and the x64 standard. I would hate to see Intel become the only CPU maker or nVidia become the only GPU maker.

[Morely Dotes]

Apparently I'm not reading the same article everyone else is

@ Brett Brennan: "Points one and three seem to me a bit out of line on the EC's part. It is not uncommon for companies to negotiate with a single supplier for a part or set of parts in order to minimize their costs for inventory."

Common or not, it's *unlawful* for a supplier in a dominant position (e.g., with more than a third of the total market share) to sell their current product below cost as an inducement to avoid another supplier's product.

@ Don Mitchell: "Intel got off with a light slap on the wrist, while Microsoft got raked over the coal."

Excuse me? The original judgment handed down in the Microsoft case was a breakup of the company; the Bush Administration maneuvered behind the scenes to have that sentence commuted to simply a fine which was pocket change to Microsoft, and an order that the behave lawfully in the future.

I do agree that an unregulated monopoly - such as Microsoft, Intel, or the current state of telephone companies in the USA - is a bad thing. Competition is good for the consumer, and good for innovation.

[Anonymous Coward]

Pricing Irregularities

One of a few things has to be true:

1. Intel is a monopoly and can set its price without argument.

2. Intel is not a monopoly and is trying to undercut its own announced price per 1,000 units because the company said AMD was offering a better deal.

3. Intel is acting in a monopolistic manner to undercut its own announced price per 1,000 units in order to premeditatedly damage its only real competitor.

4. Maybe AMD was trying to offer a lower price to certain large OEM's trying to get more business to hurt Intel????

There are a couple other competitors like IBM and Via but their market share is not as large as AMD.

So what is the EU planning on doing? If Intel comes out and announced their Price per 1,000 units is the EU going to make them offer that price to every single customer? This is what I think they should do. Let the little guy get the same price per 1,000. This should be the best possible price available to anyone anywhere. Also make it illegal to make a customer exclude other vendors. Also make them publish their deals with all of their customers to show proof of what they sold and to whom and for how much.

This of course would go against hundreds of years of haggling in the town square over the price of goods. If you are going to announce an official price per 1,000 units, then you should have to stick to it.

[Anonymous Coward]

Price VS AMD?

I'm a tad lost. I just paid $700 ish for my Intel CPU, because I like Intel. The "equil" cpu by AMD is $250. How is Intel not being fair?

From a "buy our stuff and we'll give you cash", has no one not dealth with Coca-cola before?

[Alan Donaly]

if you can't play with the big dogs get off the porch.

Yeah AMD was ruined put out of business...

no they weren't they ate Intel market share for 12 solid quarters WTF,

if they could continue to

innovate and keep cost down they can win someone

sold them this legal remedy it doesn't help anyone.

Intel makes good hot chips so can AMD why don't

they just do it and stop this ridiculous legal show.

[pondscum]

It's funny...

Here I was thinking that when you have a business in the capitalist society, you keep your customers with "sales incentives" , ie: discounts, rebates, exclusivity deals etc. The governments want to promote successful business, as long as it's not too successful. Make up your minds.

[Tom]

Let's get a few things straight ...

to Don Mitchell: Agreed ... And it should be considered common knowledge that MS Internet Explorer as we know it today was born in the courtroom, not from quality or even legal programming. It is, in point of fact, and by design, a security risk because it had do be integrated into the Windows OS to comply with the guilty anti-trust verdict. (Firefox is better by FACT). Anyone who argues otherwise is biased and stubborn as a mule.

Alan Donaly: I don't entirely disagree with your statement but WTF are you trying to say?? Are you anti-punctuation or just sloppy? And as to what I *did* gather from your gobbltygook ... "Intel makes good hot chips so can AMD" -- Allow me to clarify: Intel *made* good chips, now they only reverse engineer and deceptively miss-market inferior technology. Case in point: There is no such thing on the market as a "Quad-Core" Intel CPU, that would be a "Double Dual-Core CPU" or a Multi-Chip Module. "so can AMD" -- you might have at least said "so *does* AMD... where do you think Intel gets all it's good ideas?

Intel's entire roadmap certainly wasn't born from inside Intel. They avoid innovation and are driving down AMD's roadmap and cutting every hair-pin corner they can, in an effort to win the race at any cost. Make no mistake, Intel's current roadmap was born from AMD's innovation. Intel had to entirely restructure and abandon their previous plans just to compete and avoid hemorrhaging money. Intel has been bullying their OEM buyers for years and it's no secret. I'm not sure how it exactly went down, but Dell finally found a way to dislodge their brown nose out of Intel's blue ass and mix in some green.

And for anyone that thinks Intel has no reason to play dirty in the global market, read this: "Intel’s revenue decline will leave the company with its lowest share of the market since before 2000, at 12.1 percent" -- http://www.isuppli.com/news/default.asp?id=7061&m=12&y=2006

[Pascal Monett]

Microsoft got raked over the coal ?

Oh did it ? Is that actually the impression that is left from all the frothing and hot air around the DoD vs MS case ?

Well it's a sad thing if it is, because as far as raking is concerned, Microsoft probably feels it mostly got a nice little back-scratch. I'll bet a lot of companies would have liked to get the treatment MS got from such a high-profile case which dwindled to not much after the DoD emasculated itself in its decisions.

With all the posturing, FUD and outright lies that MS lawyers gave at the proceedings, one would have thought that the judge would have ordered 50 lashings for everyone and a total breakdown of the company. Instead, MS was ordered to set up an internal review department and was left to its own devices while pretending to listen to the DoD.

Raked over the coals ? I think not.

[Robert Henry Sullivan]

Anti Trust

Kinda reminds me of the anti trust against General Electric of the 1950's, Only in this case the Big Bad Guy gets away

[Andrew]

Re: Antitrust and IE

Tom said: "... And it should be considered common knowledge that MS Internet Explorer as we know it today was born in the courtroom, not from quality or even legal programming. It is, in point of fact, and by design, a security risk because it had do be integrated into the Windows OS to comply with the guilty anti-trust verdict.

<snip>.

Anyone who argues otherwise is biased and stubborn as a mule."

IE integration into Win95 was touted as one of the "great features" of the OS BEFORE the antitrust suits saw light, you numpty.