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Computer chipmaker Intel has been fined a record 1.06bn euros ($1.45bn; £948m) by the European Commission for anti-competitive practices. It dwarfs the 497m euro fine levied on Microsoft in 2004 for abusing its dominant market position. The Commission found that between 2002 and 2007, Intel had paid manufacturers and a retailer to favour its chips over those of Advanced Micro Devices (AMD). Intel has announced that it will appeal against the verdict. Intel's senior vice president Bruce Sewell told BBC Five Live that Intel contested the findings and was seeking a chance to "clear our name and exonerate the company." He denied "categorically" that it had paid manufacturers to favour its products over those of rivals. "We would never pay for any kind of obligation," Mr Sewell said. "We provide incentives to customers to buy our products." He added that there had been no harm to customers and that prices in the microprocessor market had fallen sharply in recent years. The fine was welcomed by AMD, which had lodged complaints in 2000, 2003 and 2006. "The EU decision will shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers," said Giuliano Meroni, AMD's European president. 'Sustained violation'The Commission said that personal computer makers Acer, Dell, HP, Lenovo and NEC had all been given hidden rebates if they only used Intel chips. It is a major decision that shows the Commission is serious about curtailing abusive behaviour of dominant companies. It also found that Media Saturn, which owns Europe's biggest consumer electronics retailer Media Markt, had been given money so that it would only sell computers containing Intel chips. "Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years," said Competition Commissioner Neelie Kroes. "Such a serious and sustained violation of the EU's antitrust rules cannot be tolerated." A Commission spokesman said there was no question of action being taken against the firms who accepted the rebates. "They were not the ones abusing their dominant position in the market," he added. Last year, Intel made 80.5% of all the microprocessors in PCs, while AMD made 12%. The Commission has also ordered Intel "to cease the illegal practices immediately to the extent that they are still ongoing". In addition to providing rebates to manufacturers that bought almost entirely Intel products, the Commission found that the chipmaker had paid them to postpone or cancel the launch of specific products based on AMD chips. EU Competition Commissioner Neelie Kroes says Intel 'took advantage of their position'. Ms Kroes joked in her own news conference that Intel would now have to change its latest advertising slogan from "sponsors of tomorrow" to "the sponsor of the European taxpayer". "Despite its strong defence, Intel is facing a wall of regulatory resistance to its business practices around the world, with antitrust infringement decisions against it now in Japan, Korea, and the EU, while the US authorities are investigating Intel as well," said David Anderson, a lawyer at Berwin Leighton Paisner. "It is a major decision that shows the Commission is serious about curtailing abusive behaviour of dominant companies, especially in the high-tech sector." Technology analysts Gartner said the decision was unlikely to have any significant impact on market conditions. "The Intel-AMD market share is likely to remain roughly aligned with manufacturing capacity, adjusted for technology capabilities," said Gartner managing vice-president Martin Reynolds. "Intel will pay its fine and carefully inspect its sales relationships to protect against risky influence. AMD does not receive any money from the fine, which accrues to the EU tax budget. And Intel's greatest challenge will remain market growth, not market share."
Intel are getting as bad as the Mafia.
In a conference call this morning, Intel CEO Paul Otellini responded aggressively to the allegations attached to the $1.45 billion fine levied by the European Union.The fine was levied because EU regulators determined that Intel had violated antitrust legislation and engaged in anticompetitive practices to exclude competitors from the market for x86 (Intel-compatible) processors, the Commission said in a statement Wednesday.Otellini began with an opening statement, citing the Commission's allegations of the chipmaker "granting conditional rebates, where the conditions just weren't just volume-based but allegations about exclusive dealings or in one case exclusivity on retail shelves."Intel CEO Paul Otellini(Credit: Intel)"Intel strongly disagrees with this decision. We do not have those kinds of conditions in our contracts. Our contracts are straightforward. They're consistent worldwide and they're volume-based: the more you buy, the less you pay," he said.Otellini said Intel will appeal the decision. "We intend to appeal this decision to the (EU) Court of First Instance. We believe a significant amount of evidence was either ignored or disregarded or both by the case team that would refute the allegations," he said, adding: "We intend to abide by whatever was written in the decision as we go through the appeal process."Responding to a question about the evidence that Intel showed to the EU, Otellini said that OEMs (that is, PC and system suppliers) have stated they were no exclusive deals. "There are a number of documents that refute what was claimed here. In some cases, OEMs made statements that they were not exclusive deals and they were not under conditional terms and those documents were not allowed either into the case file or used properly by the case team in making a determination," he said.He continued: "The process is originating from a single complainant--AMD. None of the customers complained as part of it or joined the complaint," Otellini said. "I don't see any consumer or competitor harm happening here."Answering a question about how will this affect Intel business practices, Otellini said he hasn't seen the more than 500-page document yet. "The two-and-a-half page summary released to us did not include what the specific remedies they're asking for are. If it is about 'don't do conditional rebates based on exclusive terms,' that one's easy: we don't do conditional rebates," he said, referring to special rebates alleged by the EU.Responding to questions about what the U.S. federal regulators may do, he said: "There is an investigation at the FTC. There's also one in the United States at the New York Attorney General's office. Intel is fully cooperating with both of those. We've produced evidence, testimony and so forth. The FTC has had a position on antitrust which is very much comparable to the EU's so we're actually being looked at under the same lens today by both parties.""The dynamics of competition"A question was posed about Intel and AMD competition and how that may change as a result of the EU decision. "It's hard to imagine that the dynamics of competition would change," Otellini said. "Most customers buy from both suppliers today. Most customers buy more or less from each supplier depending on the quality of the product, the competitiveness of the product, and the pricing. That dynamic hasn't changed in my career at Intel, which is 35 years. I don't expect it to change. I don't think a customer is going to put him or herself at a disadvantage by buying an inferior or more costly products, just to try to walk the lines that may be artificial."And in response to a question about past government actions in other countries and the size of the fine,Otellini said, "Korea imposed a fine of $23 million dollars and Korea is not 1/1000th the size of Europe. There seems to be no correlation between the number and the process."Answering another question about alleged wrongdoing: "In Japan there was no admission of (Intel doing) wrong and there was no fine. What they asked us to do was something we were already doing in terms of the way we write our contracts. Essentially no change to our business practice. In Japan, three years of subsequent audits in Japan with no violations or no additional comments." About past U.S. investigations, Otellini said: "We were investigated before and we came out just fine."In response to question about Intel's European operations, Otellini said, "Intel has something north of 5 billion euros invested in Europe, 6,000 employees--the majority of those employees are in Ireland--the fourth largest manufacturing site in the world and the largest outside of the U.S. That site produces some of our most advanced products. We see no change to that or to that investment. We have labs and engineering sites spread throughout Europe. No change to that."Otellini said the sales and marketing team in Europe may be affected, however. "The sales and marketing team may be impacted by whatever is buried inside that 500 pages in terms of procedures that they have to follow and so forth but that's to be determined."A question was asked of whether customers are afraid of Intel. "As to our customer's fear: It's absurd to think that we would not sell product to someone who happened to not like a particular comment or term. This is a very competitive business. Our customers are in most cases larger than Intel. Our customers have incredible buying power and are excellent negotiators. So, on the face of it, (the) scenario is absurd."Finally, a question about why Intel doesn't release more documents. "Our customers don't want to it be released, I think. My understanding is that we'd be OK on that but our customers have said no." Otellini continued: in the EU summary statement, "The EU alleged that we had exclusive deals. They further alleged that they couldn't find any evidence of those exclusive deals, therefore they must be either oral or unwritten or hidden from them. I view it as being that they affirmed the fact that in fact there were no terms and conditions associated with exclusivity," he said.Otellini continued: "These people (EU) picked up tens of millions of documents. They got everything they wanted to, it's hard to imagine that we would have terms that they wouldn't have found that exist. I am really baffled by that statement. I think it's actually helpful to us as we look through this thing that there are no documents that show what they're alleging."
Hutcheson said that many companies have tried to take on Intel over the years and failed--but not necessarily because Intel behaved in an illegal manner. "Transmeta said they were going to knock Intel out with the foundry (factory) model. And then there was Cyrix," Hutcheson said. "We've just had dozens of companies over the years that said they would be more cost effective (than Intel). AMD is the only one that's come close."AMD's struggle to gain market share isn't rooted so much in Intel's behavior but AMD's own strategies. "I'm not quite sure how much of AMD's bad luck over the last few years can really be traced to Intel's behavior," said Charles King, Pund-IT's president and principal analyst. "They've largely missed the burgeoning market in mobile computing because of decisions that they've made. Whatever injury AMD may have suffered due to Intel's rebate and discount programs, the company has really injured itself more severely over that same period of time."
There's no question that the European Commission's $1.45 billion antitrust fine against Intel is a lot of money. But don't expect Wednesday's antitrust enforcement move to radically change what you see when it's time to buy your next PC.Antitrust actions can have a dramatic effect when a decision breaks a company into pieces, but the biggest factors in the rivalry between Intel and AMD--and increasingly Nvidia, too--is technology. So while AMD can be pleased with the European Commission's conclusion, it's got bigger worries.AMD investors cheered the European Commission's antitrust fine against Intel on Wednesday.(Credit: Google)"They have a marketing problem. They need to increase size of their voice," said Technology Business Research analyst John Spooner. "And they've got to run faster than Intel. They've got to have products that really are better and provide more value."AMD has been tirelessly agitating for antitrust actions against its larger rival, and it's made some headway. Japan and South Korea have come down against Intel, and the Federal Trade Commission in the United States is involved in its own Intel investigation--not its first. AMD also has its own private antitrust suit under way in Delaware.But when it comes to taking on Intel, a far bigger factor has been technology--not just processor designs, but also manufacturing skill and capacity that means chips can be priced competitively while still being profitable.Market share changesIndeed, AMD made its biggest recent inroads against Intel when AMD's Opteron and Athlon processors could outgun Intel's Xeon and Pentium models, which used an outdated architecture. But Intel reclaimed that share once it modernized its designs at the same time AMD stumbled with its own manufacturing problems.AMD CEO Dirk Meyer(Credit: AMD)AMD's troubles continued into 2008, when it installed Dirk Meyer as the new CEO and undertook a plan to spin off its manufacturing business.But Wednesday's decision gave AMD a new cause for optimism, including the hope it will materially improve sales."We are hopeful that it will. When we have products people want to buy we won't be in position that's artificially constrained by payments competitors are making to exclude us," said Harry Wolin, AMD's senior vice president of legal affairs. He did add, though, that technology and business practices remain important: "We still have to deliver fine products to our customers and treat our customers and partners well. We have to manufacture products with our partners."Antitrust actions can change behavior, to be sure. Microsoft was largely unscathed by the U.S. Justice Department's antitrust suit that began in the 1990s. But its legacy arguably lives on: the company is exercising some self-restraint when it comes to how strongly it promotes its online services through dominant widely used products such as Windows and Internet Explorer, and it's not because Microsoft doesn't fiercely want a stronger online presence.But in a conference call with reporters, Intel Chief Executive Paul Otellini argued that the overall market dynamic isn't changing: technology still is king when computer makers decide whether to buy AMD or Intel chips."Most customers buy from both suppliers today. Most customers buy more or less from each supplier depending on the quality of the product, the competitiveness of the product, and the pricing...that dynamic hasn't changed in my career at Intel, which is 35 years. I don't expect it to change," Otellini said. "I don't think a customer is going to put him or herself at a disadvantage by buying an inferior or more costly products, just to try to walk a line that may be artificial."Intel CEO Paul Otellini(Credit: Intel)Antitrust headachesThe European Commission's Wednesday conclusions and fine certainly didn't make life any easier for Intel's sales force, though. It concluded that Intel used partially or completely hidden rebates to ensure computer makers would use Intel chips exclusively or nearly so. It also concluded Intel paid computer makers to cancel or delay the introduction of products using rival chips."My experience with salespeople is they'll say anything to get a sale. Intel now has to put some constraints on sales reps that would not be there if they had less than 70 percent market share in the European Union," said Gartner analyst Martin Reynolds. But that won't be enough to hobble Intel. "Intel's biggest challenge is not getting rid of competition, it's making sure of market growth."The European Commission's move could further other actions against Intel, too, Reynolds said.AMD's private antitrust case also alleges Intel rebates conditioned on exclusivity or near exclusivity and Intel payments conditioned on delaying AMD-based products, Wolin said--and any settlement awards or damages that Intel might end up paying in that case would go to AMD, not wronged taxpayers. That case is scheduled to go to trial in March 2010.Though AMD's Wolin wouldn't comment on it, the Justice Department's new antitrust leader, Christine Varney, promised tougher enforcement of antitrust regulations, too.Intel strongly denied any wrongdoing and is appealing the European Commission ruling. Otellini said the EU wouldn't accept some contrary evidence and suggested that its lack of written proof was lack of evidence, not of Intel operating in secret.
Advanced Micro Devices is flying the European Union flag on its home page. A little gloating going on?And if the image doesn't convey the message, the caption does: "European Commission finds Intel guilty of breaking antitrust laws, harming consumers."AMD's current home page flies the EU flag(Credit: AMD)That's not all. AMD's Break Free page is a treasure trove of information on the EU case and Intel's alleged bad behavior. "Read the European Commission's Press Release Detailing its Ruling Against Intel" and "Read the European Commission's Questions and Answers Detailing its Ruling Against Intel"--are a few of the selected readings.AMD likes to say that it spearheaded the movement to dual-core processors (quoth AMD: "without AMD there would be no price pressure on Intel, dual-core processors would still be a year away"--quoting a 2006 media report on its Break Free site) and out-innovated Intel in the server market in the 2004 to 2006 time frame.So, the first AMD 32-nanometer processor is due when exactly?
