EU hits Intel with $1.45 billion antitrust fine
Updated at 6:57 a.m. PDT with AMD's response.
Intel has been fined more than 1 billion euros by the European Commission for violating antitrust legislation, following a lengthy investigation prompted by complaints made by its chipmaking rival Advanced Micro Devices.
Intel is being fined 1.06 billion euros ($1.45 billion) for engaging in illegal anticompetitive practices to exclude competitors from the market for computer chips called x86 central processing units (CPUs), the Commission said in a statement Wednesday.
"Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years," competition commissioner Neelie Kroes said in the statement. "Such a serious and sustained violation of the EU's antitrust rules cannot be tolerated."
Between October 2002 and December 2007, Intel held more than 70 percent of the worldwide x86 CPU market. The Commission found that during the period in question, Intel engaged in two illegal practices. The first was that it gave wholly or partially hidden rebates to computer manufacturers on the condition that they buy all or almost all of their x86 CPUs from Intel. This illegal practice also included Intel's making direct payments to a major retailer so that it would stock only computers with Intel x86 CPUs.
The second illegal practice was that Intel made direct payments to computer manufacturers to halt or delay the launch of specific products containing competitors' x86 CPUs and to limit the sales channels available to these products.
The computer manufacturers named by the Commission as being involved in the rebates and payments included Acer, Dell, Hewlett-Packard, Lenovo, and NEC. The retailer was Media Saturn Holding, the parent company of the MediaMarkt chain.
Intel has been ordered by the Commission to stop any of the anticompetitive practices in which it may still be engaged. The EU commissioners said these practices had harmed consumers throughout the European Economic Area and undermined competition and innovation.
The 1.06 billion euro fine is the largest antitrust penalty the Commission has ever imposed, beating the 497 million fine levied on Microsoft in 2004 for abusing its market dominance. In February 2008, Microsoft's failure to pay that fine resulted in a further 899 million euro penalty, a decision that Microsoft is appealing.
However, the Commission noted that at 4.15 percent of Intel's 2008 turnover, the fine was less than half of the allowable maximum of 10 percent of a company's annual turnover. Intel has to pay the fine within three months, the Commission said, adding that the money would go to the EU's central budget, "thus reducing the contributions that Member States pay to the EU."
According to the Commission's statement, Europe accounts for around 30 percent of the 22 billion euro global x86 CPU market. The x86 chip architecture underpins the vast majority of modern PCs.
The rebate game
The Commission acknowledged in its 542-page decision that rebates can lead to lower prices for consumers, but said making rebates conditional on buying less or none of a rival's products was abusive.
"Intel structured its pricing policy to ensure that a computer manufacturer which opted to buy AMD CPUs for that part of its needs that was open to competition would consequently lose the rebate (or a large part of it) that Intel provided for the much greater part of its needs for which the computer manufacturer had no choice but to buy from Intel," the Commission said. "The computer manufacturer would therefore have to pay Intel a higher price for each of the units supplied for which the computer manufacturer had no alternative but to buy from Intel."
The Commission described how AMD had offered an unnamed manufacturer a million free CPUs, but the company had taken only 160,000 CPUs for free because to take more would have meant losing Intel's rebate on many millions of CPUs.
Intel also paid computer makers to postpone or cancel the launch of certain AMD-based products or limit the distribution of AMD-based products, the Commission said. In one case, a company was paid to sell its AMD-based business desktops only to small and medium enterprises and only via direct distribution channels. It was also paid to postpone the launch of its first AMD-based business desktop in Europe by six months.
Although many of Intel's violating conditions were not made explicit in the company's contracts, the Commission found proof of their existence in e-mails obtained through unannounced on-site inspections, formal requests for information and evidence submitted by other companies involved in the case. "In addition, there is evidence that Intel had sought to conceal the conditions associated with its payments," the Commission noted.
Response from Intel, AMD
Intel said in a statement Wednesday that it did not believe its practices had violated European law and that it would appeal the fine.
"Intel takes strong exception to this decision," the chipmaker's chief executive, Paul Otellini, said in the statement. "We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace--characterized by constant innovation, improved product performance and lower prices. There has been absolutely zero harm to consumers. Intel will appeal."
Otellini said it was "the natural result of a competitive market with only two major suppliers...that when one company wins sales, the other does not."
He added that the Commission had ignored or refused to obtain significant evidence that contradicts the assertions it made in its ruling. This evidence would show that "when companies perform well, the market rewards them; when they don't perform, the market acts accordingly," he said.
However, Otellini pledged that Intel would cooperate with the Commission's sanctions while it fights the ruling.
"Despite our strongly held views, as we go through the appeals process, we plan to work with the Commission to ensure we're in compliance with their decision," Otellini said, adding that Intel "never sells products below cost."
AMD, meanwhile, cheered the European action.
"After an exhaustive investigation, the EU came to one conclusion--Intel broke the law and consumers were hurt," Tom McCoy, AMD's executive vice president for legal affairs, said in a statement. "With this ruling, the industry will benefit from an end to Intel's monopoly-inflated pricing and European consumers will enjoy greater choice, value and innovation."
David Meyer of ZDNet UK reported from London.
See also:
• FAQ from the EU on its decision
It's unethical to use kickbacks to lock out a competitor. So get over it.
THINK before you type and forget for a second the blind nationalism- it's not about that.
AMD was doing very well for itself during that time frame. Its market share was creeping up on Intel's because AMD was making better processors for less money. That changed when Intel stepped back into gear and produced a better processor and AMD made (what has so far been) a mistake when they purchased ATI.
Just because one company is doing better than all its competitors doesn't mean that they should be fined outrageous amounts.
On a personal note, it is kind of disturbing how much the EU has stolen from US companies in the past few years because of "antitrust rulings." I especially dislike the argument over FREE (as in beer) web browsers and Microsoft using anticompetitive methods. The browsers are free (as in nobody is making money off of them) and people are not restricted from downloading another one onto their computer.
While you are defending American companies against EU charges of being monopolies, lets remind you of the attitude of Boeing, it has been subsidised with US government orders since the second world war, but when Airbus beats it to an airtanker order, it screams out in rage, claiming it will hurt America buying foreign goods - well, if we all took that head in the sand attitude, no-one would be exporting anything, there would be no competition, and you would still be paying US $3,500 for an 8088 IBM PC with twin 5.5" floppy drives and 640 K of RAM, still only have the choice of a 5.7 litre V8 gas guzzling rust bucket clunker from GM or a 5.7 litre V8 gas guzzling rust bucket clunker from Chrysler or a 5.7 litre V8 gas guzzling rust bucket clunker from Ford.
You choose - fair open competition or a closed market controlled by your "caring concerned friendly" monopoly home grown company.
And I suppose AirBus hasn't been heavily subsidized by the EU?
Having a strong aircraft industry is a strategic military necessity regardless of the commercial implications.
US airlines have bought plenty of AirBus planes.
P.S. I am a happy Intel customer and IMO they are the best in what they do.
This is the saddest day of my life , I have to see the daylight robbery by EU.
Communist jury members of EU want to rob extremely hard earned money by Intel.
Hideous EU want to eliminate US companies.
Wake up people file cases against dirty EU companies like Nokia , BMW , Wolswagon.
Communist EU intention is clear , make American people poor & jobless.
I am going right now in EU member state embassy to protest this hideous act of EU.
You have this big issue with the EU and their "crime" but no problem what-so-ever with Intel and their anti-competitive behavior? Competition leads to innovation... when you have no one to compete with, you essentially become a stale monopoly that can price fix and have no reason to innovate as fast as needed when there is competition.
Intel played dirty and they got caught! I'm sort of glad. This will benefit the smaller chip companies.
I bet you don't. You're all mouth and trousers.
http://www.businessweek.com/technology/content/may2009/tc20090511_348063.htm?chan=top+news_top+news+index+-+temp_top+story
If I was a stockholder, I would be raising hell. They obviously need new management.
"The US is also investigating them for anti-trust violations."
The article states that: "only two major suppliers...that when one company wins sales, the other does not". So, um, when only two companies are making chips, how can the EU or any other entity complain? What's next? Force fines until a third and fourth company can compete? Doesn't sound very productive to me.
The EU, or is it the EC, should consider that over regulation can be just as bad as unfair competition. It stifles and hampers the ability to produce and sell at cheaper prices. Plus, some of it seems silly. Anyone remember when the EC made restrictions on bananas and cucumbers because they weren't "bendy" enough? http://news.bbc.co.uk/1/hi/uk_politics/2066730.stm
The EU should be mindful of the old saying, "Be careful what you wish for". Right now the EU is setting itself up for a perfect place in which companies can play a game of one-upsmanship. Have trouble competing in the marketplace? Just accuse the competition of unfair business and have them fined. Got fined for unfair practices because a competitor complained to the EU, simple... just retaliate. It seems to me that in recent years Opera, Google, IBM, Microsoft, et al have been doing just that. Off the top of my head T3's suit against IBM seems like it had Microsoft underpinnings.
It is even more funny, how you think the EU is a communist organization. You are just another moronic right winger spouting talking points without understanding them.
There are way more than 2 CPU manufacturers. Intel is bribing companies to not buy from others. The discount are contingent on this. It is illegal and Intel rightly got smacked down for it.
What are you idiots going to say when the US slaps Intel for the same thing?
So get off you rocking horse, because you are talking horse feathers.
Are they gonna build Europe on the money laundry from US Corporations?
Reminds me of a proverb: In the fight of 2 cats, The Monkey takes the BOOTY.
A socialistic fork in a free market entity.
http://ec.europa.eu/dgs/budget/budget_glance/index_en.htm
and
http://ec.europa.eu/budget/index_en.htm
That's a nice view on the budget as a whole, although I didn't see much detail. What I am looking for is a detailed accounting of how the EU will use the 1.06 B Euro fine it levied on Intel to increase competition in the micro processor market. How are they going to use this incredible amount of money to help the consumer they proclaim so loudly to care about? To me, that is the missing link here. What stops the EU from fining Intel every year for a billion no matter what is done by Intel to stop their monopolistic behavior?
It seems that the view of the EU is that fining a company is all that is needed to create competition and improve the market for EU consumers. I would argue that although that may help, the money garnered from the fining should be directly used in some way to help level the playing field in that particular market, rather than just pad the budget for the overall EU agenda. Maybe they are doing something like this, but I haven't found any evidence of it. In any case, it certainly appears that the EU is simply fining a different large US company each year in order to help sustain their budget during difficult economic conditions.
> "What I am looking for is a detailed accounting of how the EU will use the 1.06 B Euro fine it levied on Intel to increase competition in the micro processor market"
The fine is not increasing the overall EU budget. It goes into the pot, and reduces (slightly) what the member states pay in. The break-down of the budget is there, but the EU is a complex thing, and so there are many aspects to the budget.
> What stops the EU from fining Intel every year for a billion no matter what is done by Intel to stop their monopolistic behavior?
Well, the law, and due process. The Commission who enforce the competiton laws are separate from the Court of Justice. Intel have to be found guilty, and have the right of appeal (which no doubt they will do in this case). Also note that this isnt a snap decision by the commission, they've been investigating Intel for years.
> It seems that the view of the EU is that fining a company is all that is needed to create competition and improve the market for EU consumers
No, the commission has required Intel to desist from the actions it found illegal. Should Intel continue, future fines will be swift, and much higher. Microsoft discovered this the hard way.
> I would argue that although that may help, the money garnered from the fining should be directly used in some way to help level the playing field in that particular market, rather than just pad the budget for the overall EU agenda
The fine feeds the overal budget. What you are talking about here is really a separate issue, I think. Whether and how much Intel are fined is independent of what the commission does with the money. If you look at the bigger picture, I think if the commission tried to use the market to actively change a market, they would fairly be accused of meddling. Better to stop the illegal behaviour, punish it so it doesnt happen again, and let the market sort it self out.
> it certainly appears that the EU is simply fining a different large US company each year in order to help sustain their budget during difficult economic conditions.
I dont think the facts support that as a theory: The fine is 0.76% of the overall budget. The EU gives significantly more in foreign aid, and the overall contributions from the member states to the EU are a tiny fraction of their own national budgets.
I don't know why so many Americans see this as some kind of anti-American vendetta - after all, the company that stands to benefit the most from curbs on Intel's illegal actions is AMD - another American company.
I don't have any issue with the Intel case really, but it seems that it should be handled via the home country and complaints dealt with via the relevant trade agreements. Laws and due process might control the EU's actions, but other, less scrupulous nations might not be so bound.
I don't understand your point about separating the fine and what it is used for. To me, the two are intimately linked. Give it to the consumers who were harmed by this monopolistic behavior. If the fine amount was calculated based on the harm done, it should go to those harmed...not the EU.
As to why Americans view this as a vendetta...it might have something to do with the fact that we only hear about American companies being hit with "record fines". :)
> I don't understand your point about separating the fine and what it is used for. To me, the two are intimately linked.
The fine is a punishment, not a compensatory claim. Now that Intel have been found guilty, AMD could, I assume, persue there own claim for compensation.
> Laws and due process might control the EU's actions, but other, less scrupulous nations might not be so bound.
On the other hand, few other nations (or blocs) make 30% of the world market. Ultimately, if Intel doesnt like the system, it doesnt need to trade in these places. However, as a European, I will say that I do want access to Intel and AMD products, but I want a fair market too. Same applies to Microsoft - I like their OS, but I also want the benefits of a competitive market place.
> it might have something to do with the fact that we only hear about American companies being hit with "record fines". :)
Lol, good one. Look on the bright side: at least you have tech giants with a monopoly to abuse!
As stated in the article: the money would go to the EU's central budget, "thus reducing the contributions that Member States pay to the EU."
So if someone breaks the law, like say they rob a bank or kill someone, you let them go unpunished because it's now 4-5 years later because there is a 2nd guy doing the same now?
As the EU is the world's largest exporter, I would say we already have found a pretty good business model!
This would really be communist/anti-competitive/unfair to INTEL!
The goal of this fine is not to make Intel a little bit weaker and AMD a little bit stronger. It's real goal is to fix INTEL's management and practices so that from now on INTEL should play according to the rules and allow not only AMD but anyone who has a great chip to take part.
The game(chipset market) has rules people. And the referee was clear. NO cheaters allowed.
With anti-trust legislation there is no black and white...It's all grey! So you can just make up the rules! These fines are going to hurt customers more than help as we will have to pay more for Intel's products. Aaaand Intel has less to invest in R&D, potentially hampering the ability of their future products.
Why should they be punished for being successful? If customers are being taken advantage of, they will stop buying their products...unless the customers are ignorant.
I'll give it to the EU though, in troubled economic times, they definitely know how to raise funds! That's it! Maybe we should start shaking down EU companies so we can give some stability to the US economy. Porches are priced too high for most americans, make them cheaper and pay the US 1 Billion...fair is fair.
You do realize that the US is going to smack Intel for the exact same reason, don't you?
MS and Intel are illegal monopolies. Just because the Bush administration refused to hold them accountable to the law, doesn't change anything. They both will eventually be help accountable in the US as well, for the exact same reasons they got fined in the EU.
If these companies don't want to get fined, the solution is simple. Act in a legal and ethical manner.
The browser market is even less clear. The market is encouraging competition on its own as anyone can see. Just look at the marketshare trends of firefox, opera, and even chrome. Like it or not, the US settled this browser bundling issue years ago. It isn't reasonable for every country on earth to re-open this case and fine a US company. Extrapolate that scenario out a bit and I think even a person who detests MS can understand the dangers there. We have to have some kind of jurisdiction around our companies. I don't know what the answer is, but it does seem a bit broken to me.
As it stands, it isn't clear that any company can act in a legal and ethical manner around the world. Ethics and laws are different in many countries. Should we expect that our companies will simply get fined in certain countries as a cost of doing business? That doesn't seem reasonable at all.
In any case, i would like to understand how the EU uses this money to further competition in these respective industries. Otherwise, it is disingenuous to fine a company to promote competition and then spend the money on other initiatives.
FYI: Apple is also a monopoly by the EU's criteria. Are you ready to throw them to the dogs as well? If you honestly believe in what you posted, then you *must* insist that Apple be fined millions/billions as well, but somehow I don't expect you to see it that way.
> Intel's case seems more clear cut, but MS isn't in my mind.
I partially agree.
> It isn't clear to me that fining MS for bundling media player encourages fair competition.
The EU didnt actually fine MS for that, they just required the Windows N version without Media Player. The fines were related to MSs partice of withholding interoperability information regardins Windows Server. This was important becuase MS used the client OS monopoly to leverage server sales, and within out that interop data, no one could complete with them. The EC saw this a much bigger deal then media player, but the media player stuff made better news.
It will be very interesting to see what happens in regard to the browser stuff. So far, I've thought the commission has basically got it right, but I'm really wondering what's coming next.
How exactly is Apple a monopoly ?
they have a mere 5% market share !
and how has Apple prevented competition in the computer Industry ?
I know you hate Apple and all , but I recommend Stopping before making a fool of yourself !
If you don't, then... well, the term 'hypocrite' comes to mind.
"HAH! When pigs fly."
Well, there is a lot of cases of swine flu going around, so that may indeed be possible. :)
But in all fairness, I didn't really expect you to be impartial or to even acknowledge Apple's status in this situation. The double standard is always in force when it comes to Apple. :)
- by Commander_Spock May 13, 2009 9:42 AM PDT
- Can someone really say what is really going on here the world today!!! if it is - "Intel", the "EU"; or, Commander_Spock and Crew!!!!
- Like this Reply to this comment
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- by sar10538 May 13, 2009 11:20 PM PDT
- Well if we all learned to respect each other and act responsibly then non of this would be news and we would all be better off.
- Like this
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