South Korea fines Intel $25 million

The South Korea Fair Trade Commission has brought the hammer down on Intel, fining the company 26 billion won ($25.4 million) for alleged anti-competitive behavior. Intel faced the same charge there as in several other nations and the European Union: bribing companies to keep AMD processors out of their product lines.

According to the Korean regulators, Intel provided rebates to Samsung and other South Korean computer makers in exchange for not using AMD processors. Along with the hefty fine, the Fair Trade Commission is ordering Intel to stop using rebates pushing PC makers to shun AMD’s products. Intel vehemently denies this accusation, though. The AP quotes spokesman Nick Jacobs as saying, “To ask us to cease and desist behavior which we are not doing and never have done is odd . . . We don’t use rebates in an anticompetitive fashion.”

Still claiming innocence, Intel went on to say it intends to “consider its options, including a possible appeal.” The chipmaker will also have to prove its candor to the European Commission, which released a report last year saying it believed Intel had “infringed the EC Treaty rules on abuse of a dominant position (Article 82) with the aim of excluding its main rival, AMD, from the x86 Computer Processing Units (CPU) market.”

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    • PoohPall
    • 12 years ago

    Should have been 125 million. Intel’s processors are adequate – I don’t know why they resort to bully tactics.

    • Lans
    • 12 years ago

    There problem is Intel is forcing vendors not to sell any AMD cpus.

    q[< The commission said that Intel provided rebates to Samsung Electronics Co. and other South Korean computer makers to not use central processing units, or CPUs, manufactured by AMD, Intel's main competitor. <]q If Intel is really playing fair, why can't Intel just tell vendors, we'll give you this much of a discount if you ordered this many units? Even if Intel sells their cpu way below what AMD can sell their cpus for (in both case, without ever going below cost), the final decision should still be made by vendors and not forced upon them. AMD can't compete with Intel on the high end consumer space (gaming) but is still quiet competitive in the lower end and the server space. Being realistic, if you are a small/medium sized vendor, you may opt to go all Intel just so you can get the benefit of volume discounts but at some point, you'll want to diversify and minimize the risk and have a larger customer base. That is if Intel didn't threaten to jack up your prices, which if you think about how the rebates are structured, is what it effectively does.

      • Thanato
      • 12 years ago

      That’s what I remember reading, the rebates where possible only if you didn’t sell AMD computers, and there was a strange sliding scale that offered you more rebates based what percentage of Intel computers where sold vs AMD, where 100% vs 0% offered the most in rebates. Many large computer makers became dependent on the rebates to make a profit.

      I wonder if the rebates where paid out quarterly or even yearly forcing company’s with tight budgets to fear voiding there rebate for the time took to get the rebate?

      • PoohPall
      • 12 years ago

      AMD processors are as good or better than Intel in the gaming department. The newer tri cores offer excellent value that the Core 2 can not match.

    • Ryu Connor
    • 12 years ago

    q[http://www.newegg.com/Product/Product.aspx?Item=N82E16819115034<]§ It's 2008 and $1K processors still exist. AMD has a few in the server field too and you can bet your tush that if AMD was on top in desktop performance their black model would also be $1K. The reasons processors are cheaper now has little to do with competion and alot more to do with the economics of silicon.

      • ludi
      • 12 years ago

      If AMD had managed to climb its way to 85% marketshare and was negotiating lockout rebates, and the responsible governments slapped them with a paltry fine as a warning shot,…then I sure wouldn’t be making arguments like yours. Mind you, I’m not anti-corporatist; they’re a marvelous thing. But large corporations number into the thousands and are very adept at discovering how to abuse their enormous power in ways that were formerly limited to a handful of kings. As such, I have no qualms about governments stepping in and making the difficult referee calls when one finds a new way to play dirty pool.

      I have no dog in this fight. I used to, way back in the K6-MMX and K6-2 days, and regularly made a fanboy idiot of myself at CPU-Central. Thankfully, those days are past, and at present, I actually have more Intel systems in service in my collection than AMD, simply because each purchase made sense at the time it was obtained, as opposed to slavish brand loyalty.

      And yes, I realize that semiconductor economics are a major factor in present day /[

    • pogsnet
    • 12 years ago
    • Ryu Connor
    • 12 years ago

    q[

      • ludi
      • 12 years ago

      If your sole method of analyzing the situation is to take one first-order effect (“Intel cannot offer discounts now”) and then extrapolate it as broadly as necessary to confirm your prejudices…completely ignoring the fact that competition, which Intel has effectively worked to supress with said rebates, jacks prices up far higher in the long run…

      I give up. I genuinely hope you find yourself a successful career in politics, or at least political punditry, as this style of argument can make a man tremendously wealthy.

      • grantmeaname
      • 12 years ago

      If you have a specific post you want to reply to, you can click the little “Reply” button in the top right corner of that post and it will post your comment under theirs and bump the whole conversation thread to the top.

    • Ryu Connor
    • 12 years ago

    q[

      • flip-mode
      • 12 years ago

      That’s not true. Intel can still sell at the discount price but the buyers can still purchase AMD products too. There is nothing anti-competitive about that.

      • ludi
      • 12 years ago

      Out of curiosity, which year did you re-awaken from cryogenic stasis?

      For my part, I happen to remember a time period called the “mid-1990s”, when a fast Intel processor was a $1k+ part even in the consumer market and there were perhaps a half-dozen Intel processor offerings to choose from, starting at the bargain-basement price of $300. Lack of competition was great for Intel stockholders, but consumers were paying through the nose to get the latest technology.

        • pogsnet
        • 12 years ago
        • green
        • 12 years ago

        processors were expensive mid 90’s
        ram was expensive in the mid 90’s
        storage was expensive in the mid 90’s
        add-ons were expensive in the mid 90’s
        in fact, all components were expensive in the mid 90’s

        so what happened?

        a) cheap parts from AMD ala duron, which led to intel’s celeron (like 300A)
        b) windows 95 which made everything older than a pentium obsolete
        c) 3d graphics which spurred the whole pc as a gaming platform
        d) .com boom where everyone jumped on the internet (with a pc)
        e) fabs, shrinks and 300mm wafers increasing production all around

        </rant>

        the reality of the $1k processor? same shit, different asshole afaic:
        §[<http://www.techreport.com/articles.x/8482<]§

          • ludi
          • 12 years ago

          Right, manufacturing economics have played a huge role. However, as I commented to Ryu farther down, the original Athlon launch is pretty instructive. Not only did Intel have to cut prices, they suddenly made two very un-Intel-like mistakes because they could not milk Katmai and Coppermine to death like they had evidently been planning: The 600MHz Katmai had a tendency to overheat and the 1.13GHz Coppermine was downright unstable and had to be recalled. They then got in bed with Rambus and…well, we all know how that one turned out; Intel stayed even or slightly behind AMD on both CPUs and platforms all the way through Prescott, and then had to suck down the pill of x86-64 in lieu of their former plans for IA-64. The result of this experience? Core2 Duo/Quad, with several /[

      • todd
      • 12 years ago

      You’ve proven to be quite the fanboy.

    • Ryu Connor
    • 12 years ago

    q[< Yes, that is the whole idea. By limiting what Intel can do, it allows a competitor to survive.<]q That comes at the cost of making vendors and thus consumers pay more. Making the consumer pay more and discouraging competition to keep a company that is being mismanaged afloat is pretty stupid. I have to assume that this news story is short on facts, because right now it's patently absurd.

      • Thanato
      • 12 years ago

      Whats the difference between selling at a loss to kill the competition or offering rebates to block out the competitors?

      Intel can offer there products that directly compete with AMD for much less, and just starve out AMD profits. Since AMD is there only competition (processor wise) why don’t they just kill em, starve em out. Then raise there prices once AMD is gone to make up for the loss. Then in the future spend less on development so save money and make the stocks go up. They should just do that.

    • UberGerbil
    • 12 years ago

    Intel earns about $40B annually. A $25M fine is paid off in about 5.5 hours of their worldwide income.

    But that’s not what Intel worries about. A ruling against them provides a basis for further civil lawsuits, by AMD and possibly by OEMs that didn’t get the best deals, in Korean courts. It also acts as evidence in AMD’s various other court fights with Intel, and for the antirust investigations that are ongoing in other countries.

    Recall that after MS’s loss to the DOJ, it was hit with a raft of civil suits using that outcome to seek damages.

    • imtheunknown176
    • 12 years ago

    Jacobs is right. Intel uses rebates in a competitive fashion.

    • albundy
    • 12 years ago

    now you know how politicians fill their pockets.

    • Usacomp2k3
    • 12 years ago

    Why is that illegal?

      • Meadows
      • 12 years ago

      Because it’s in everyone’s best interests to protect the competition in these parts. It’s in intel’s best interests to get more market share, and the people’s best interests to have competent CPU offerings 5 years from now, too. The latter comes first.

      • BobbinThreadbare
      • 12 years ago

      Because Intel had enough market share to where they were considered a monopoly. Same reason Microsoft can’t include Office with Windows, but Apple can put iLife in OSX.

        • Usacomp2k3
        • 12 years ago

        I still think it’s rather stupid.

          • Anonymous Coward
          • 12 years ago

          I think allowing Intel to shut out AMD is stupid.

          • ludi
          • 12 years ago

          Why is it “rather stupid”?

          The whole point of a supplier’s lockout rebate is that it prevents the competing entities from knowing how much it would cost them to acquire the business of the involved buyers. This is fine when you have many suppliers and many buyers; let them do what they will and if they guess wrong, they’ll pay for it when their business fails. Any particular buyer or supplier has many other options for doing business, so there is still plenty of market pricing information available, and may the best product win.

          When you have only two or three suppliers, however, and one of them controls the marketspace and capital running 85%+ of the market, the calculus changes — especially in consumer computing industries, where margins for the buyers’ own products are typically less than 6% and often less than 3%. “Buy only our products and get a rebate for doing so” is now a business option that only the majority supplier can afford by virtue of having far more resources than the minority supplier. Meanwhile, the buyer that turns down this offer will see his own products outpriced by other buyers who accept it.

          The minority supplier is thus effectively cut out of the market, and has little information on how much it would cost him to re-enter it, because the rebate is a moving target with no permanent impact on the nominal market prices. This is exactly what the majority supplier wants, because if he had to compete on pricing, that would set precedents that the buyers will be able to use against him in future negotiations with the minority supplier.

          At that point, you need a government regulator to step in and say, “Fight this one out on price and products alone, or shove off”.

            • Usacomp2k3
            • 12 years ago

            Because it is limiting what Intel can do to sell its products to a customer.

            • emorgoch
            • 12 years ago

            The entire basis of capitalization is market competition. Society has recognized that monopolies in the end are a negative for society, hence why the government creates laws and policies to help curb them.

            For instance, don’t you think that Intel would like to buyout AMD? Looking at their current financials, AMD currently has a market cap of 4.61 billion. A buyout offer of 5.5 – 6.0 billion should be enough to convince the shareholders to sell. Considering AMD has a total equity of 2.6 billion, the end cost to intel would be < 4 billion, with an initial cost of 5.5 – 6 billion. They currently have 5.8 billion in Cash & short term investments. A hostile take over option is completely possible, and makes reasonable financial sense. However, there is no way that the government would allow it. Is that fair to Intel? Not completely, but it’s how the government ensures market competition.

            Similarly, they’ve stepped and said that intel’s business practices have irreparably harmed the competition. Is it fair to Intel, since they are in a position to be able to afford to do it? No. But it’s what’s best for the consumer. And since the government is suppose to protect it citizens (the consumers), that’s why they are doing this.

            • BobbinThreadbare
            • 12 years ago

            Yes, that is the whole idea. By limiting what Intel can do, it allows a competitor to survive.

            Unless you want to bring back the telephone company and standard oil?

            • tfp
            • 12 years ago

            The telephone company is coming back, the baby bells are remerging.

            • flip-mode
            • 12 years ago

            IIRC, he has previously said he does.

            • ludi
            • 12 years ago

            If that’s a correct interpretation of how he views business and economics, I’ll bet he’s an incredibly good artist.

            • ludi
            • 12 years ago

            So do laws against kneecapping your competitor’s sales personnel.

        • ssidbroadcast
        • 12 years ago

        You mean iWork. Not that iWork is a competent substitute.

          • BobbinThreadbare
          • 12 years ago

          I mean, everything that Apple includes with OSX, most of which would get Microsoft sued to oblivion.

    • nagashi
    • 12 years ago

    Good for Korea! Now if they’d just go after MS there……

      • Krogoth
      • 12 years ago

      $25M is just tap on the skin for Intel.

        • BobbinThreadbare
        • 12 years ago

        Maybe overall, but in relation to just the business they do in Korea?

        • ssidbroadcast
        • 12 years ago

        Yeah srsly. Intel probably spends more on office supplies.

        • Meadows
        • 12 years ago

        And a stab on its reputation.

          • willyolio
          • 12 years ago

          as if anyone other than tech enthusiasts will remember this.

      • asdsa
      • 12 years ago

      Maybe EU does the same thing for intel. Only with a couple more zeroes in front of that Korean figure. Now *that* would hurt.

        • tfp
        • 12 years ago

        Yet not help AMD unless they gave AMD all of the money.

        At the end of the day Intel is still loaded…

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