EC reveals details of Intel antitrust breaches

EC reveals details of Intel antitrust breaches

Summary: The EC releases evidence that allegedly shows how the chipmaker used rebates and direct payments to dissuade PC manufacturers from using AMD products.

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The European Commission has released the evidence it gathered in its antitrust case against Intel, showing how the chipmaker used rebates and direct payments to dissuade PC manufacturers from using AMD products.

The EU's Competition Commission levied a €1.06bn (£959m) ($1.56bn - based on Monday's exchange rate) fine on Intel in May, after finding the company had given rebates to PC manufacturers and a European retail giant on condition they only or mostly sold Intel processors, rather than chips from rival AMD.

The regulators also found that Intel had made direct payments to manufacturers to delay or cancel their launch of systems using AMD chips. By engaging in these practices, the chipmaker broke EC Treaty antitrust rules, the commission decided.

The European Commission's full 518-page decision, published on Monday, includes evidence it gathered against Intel using unannounced on-site inspections, formal requests for information and submissions by other companies involved in the case.

"The evidence in the decision indicates the growing threat that AMD's products represented to Intel, and that Intel's customers were actively considering switching part of their x86 CPU supplies to AMD," the Commission said in a statement.

The decision quotes an October 2004 email from a Dell executive to Intel, which stated: "AMD is a great threat to our business. Intel is increasingly uncompetitive to AMD, which results in Dell being uncompetitive to [Dell competitors]. We have slower, hotter products that cost more across the board in the enterprise with no hope of closing the performance gap for one to two years."

Intel used illegal practices with Dell, according to the Commission. Between December 2002 and December 2005, Intel gave Dell conditional rebates based on the company buying only Intel CPUs. The evidence for this includes an internal Dell presentation in February 2003, which noted that if the PC manufacturer bought AMD processors, it could result in "severe and prolonged [retaliation] with impact to all LOBs [lines of business]".

In addition, an internal Dell email from February 2004 warned that selling AMD-based systems would result in Intel withholding its rebate for at least one quarter.

With HP, Intel gave rebates based on the PC maker buying at least 95 percent of its CPUs from the chipmaker, an arrangement that lasted from November 2002 to May 2005, the Commission found. In an internal email from July 2002, HP urged discretion over the terms of the deal, stating: "PLEASE DO NOT… communicate to the regions, your team members or AMD that we are constrained to five percent AMD by pursuing the Intel agreement."

During the same period, Intel constrained HP from selling AMD-based business desktops to any customers other than small and medium-sized enterprises. In addition, it put financial pressure on the PC maker to stop it from offering such desktops through any channel other than direct distribution.

"You can NOT use the commercial AMD line in the channel in any country, it must be done direct," an internal HP email from September 2004 read. "If you do and we get caught (and we will) the Intel moneys (each month) is gone (they would terminate the deal). The risk is too high."

NEC, meanwhile, received rebates between October 2002 and November 2005 for buying no less than 80 percent of its processors from Intel, according to the antitrust case decision.

In 2007, Lenovo bought its laptop CPUs exclusively from Intel. The evidence quotes a December 2006 email sent by a Lenovo executive which reads, in part: "Late last week Lenovo cut a lucrative deal with Intel. As a result of this, we will not be introducing AMD-based products in 2007 for our notebook products."

Lenovo also postponed the launch of AMD-based notebooks from June 2006 to the end of that year, in order to receive payments from Intel. Similarly, the chipmaker made payments to Acer on condition that the manufacturer delayed the introduction of an AMD-based laptop from September 2003 to January 2004.

Media Saturn Holding (MSH), owners of the German MediaMarkt retail chain, told the Commission in a submission that "the sale of AMD-equipped computers would result at least in a reduction of the amount of Intel's contribution payments per Intel CPU under the contribution agreements… although MSH never actually tested the issue with Intel".

The regulators' evidence also suggested that Intel had tried to conceal its rebate and payment deals with the manufacturers and MSH. In a submission to the Commission's investigators, Dell said its rebate arrangement was based entirely on verbal agreements. HP had a written agreement with Intel, but certain conditions remained unwritten.

MSH and Intel had a written agreement that contained a non-exclusivity provision, but the retail company told the Commission that "it was clear to MSH that despite the non-exclusivity clause, the exclusive nature of the relationship remained, for Intel, an essential element of the relationship between Intel and MSH".

"In fact, [an MSH executive] recalls that Intel representatives made it clear to him that the changes in the wording of the agreement had been requested by Intel's legal department, but that in reality the relationship was to continue as before, including the requirement that MSH sell essentially only Intel-based computers," MSH said in its written submission.

In late July, Intel launched an appeal against the Commission's decision, claiming that evidence had been "ignored or misinterpreted", and that the Commission had " ignored the realities of the microprocessor market, which is highly competitive".

This article was originally posted on ZDNet UK.

Topics: Enterprise Software, Intel, Processors, Security

David Meyer

About David Meyer

David Meyer is a freelance technology journalist. He fell into journalism when he realised his musical career wouldn't pay the bills. David's main focus is on communications, as well as internet technologies, regulation and mobile devices.

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22 comments
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  • investigation should be expanded

    This does not surprises anyone since Inhell had M$ as a mentor.
    I'm wondering if M$ had sabotaged AMD too, through delays and poor code quality on AMD systems.
    Linux Geek
    • here we go aggain

      Once aggain MS haters launch another crusade aggainst their percived devil.... regardless of the fact that the article has no link to MS...
      Ceridan
    • Those meanie faces!

      Yes, I'm sure Ballmer and Gates got together and decided that they hate AMD. Then they decided to write broken code to be installed on AMD machines.
      Lester Young
      • yes, and they also propagated the broken code to other OSs

        Don't they? Sh... that is not the end of the story. Did you know that there is a very powerful secret organization that (your choice here)?
        pupkin_z
    • Indeed

      I know of at least one other company that doesn't use AMD CPUs and GPUs in their laptops. Must be part of the plan.
      Earthling2
  • RE: EC reveals details of Intel antitrust breaches

    Please read the report before rendering your opinion and
    confirming that you are a fool to vote against your own
    consumer protection. This is how US companies do
    business, it is the training we receive at business school,
    colleges and universities. Intels objective is to have you
    vote against your own interest and pocketbook because
    they believe you are stupid, are you?
    Appreciate-Tech
  • Intel Brech of Ethics == I'LL NEVER BUY INTEL AGAIN

    I'LL NEVER BUY INTEL AGAIN!!!!!!
    reedmb@...
    • Oh no!!!!

      I am sure they'll miss your business.



      Not.
      Hallowed are the Ori
      • Nope, but

        probably won't miss one sale. But, what if that poster represents several thousand buyers? or worse, several thousand vendors, who have been told by several thousand buyers they refuse to buy intel?
        btw; where does a million start? To get to a million, or any number, it has to start at one.
        LegendsOfBatman
        • I agree

          That's right. I too won't buy Intel products (and
          I have not been doing so for years). I'm also
          telling my family, my friends, my coworkers and
          even my managers to avoid it. I hope the EC
          investigation will make AMD-based products more
          available.
          hosamaly6@...
  • RE: EC reveals details of Intel antitrust breaches

    I would think that willing participation in an anti-competitive activity on the part of Dell, etc, would be criminal in itself. Reminds me of the Lockheed Bribery case.
    johannk
  • The guilty exposed always disrespect and attack their exposers

    Whenever snakes, hiding under a rock, are exposed,
    they disrespect and attack their exposers. In the same
    way, corporate snakes hide under lies and evade any facts that expose their criminal activities. Moreover,
    it is obvious to everyone else that the exposed guilty are in denial.

    Intel did not address the discovered facts. Instead,
    they called the Commission inept, sloppy, low in
    intelligence, ignorant of sound business practices,
    fools for not accepting criminal acts as "the way we
    do business," and completely incapable of doing their
    job. For example:

    "In late July, Intel launched an appeal against the
    Commission's decision, claiming that evidence had been
    'ignored or misinterpreted', and that the Commission
    had ' ignored the realities of the microprocessor
    market, which is highly competitive'."

    This is the same tactic Microsoft has used throughout
    its existence and that Bill Gates has used since he
    first stole from Gary Kildall, creator of the first
    operating system, CP/M, and Steves Jobs and Wozniak,
    founders of Apple Computers.

    Intel, imitating its mentor, Microsoft, constantly
    engages in unethical behaviors and practices. It is
    apparent they are protecting their excessive prices
    and high profit margins, and attempting to eliminate
    competition that challenges their communistic
    behaviors. This behavior is confusing because Intel is
    at the leading edge of technological development and
    design of multi-threading, multi-core, temperature-
    and process-responsive CPUs with their controlled over-clocking and sleep cycles (i7 & i5 series).

    This also is the same tactic used by fanboys of both Microsoft and Intel above and throughout these forums.
    What makes no sense is why they do so when those they
    belittle and attack personally were addressing neither them nor, personally, their beloved criminal
    purveyors. It is obvious to everyone else that the exposed guilty are in denial.
    Isocrates
  • EU's Competition Commission biggest Organized Criminals to every exist

    Their country is in a bigger financial mess then we are, so, they have to steal money in order to make money. Big Government kills competition. What this? Rebates? Is not that what makes the business market drop in prices. In the end, the consumers get a cheaper product that they purchase. Aw, poor AMD cannot compete with Intel. Boo-Woo. These government officials think they know what is best. However, in the end they destroy everything and then blame it on someone else. Get a real job EU's Competition Commission.
    NeoZon@...
    • Go crawl back in your hole troll

      You know nothing! When a company gives rebates to consumers, that is fine, but when they pay companies to only use their products, then that is dirty and unfair competition. They should win their market share by having better products with reasonable prices, not by paying people off behind the scenes! I have never bought an Intel product and probably never will because of practices like this.
      PcJunkie
      • What ABout "Exclusives"

        Such as what Mac did with I-Phone and AS&S? Why are these legal? Or, even considered as "Not a problem"?
        While I don't disagree with what you said; calling that guy a troll wasn't cool. They shared their opinion (even if i disagree with them; on this one. But, I do agree the EC is somewhat odd, and not fair).
        LegendsOfBatman
    • Rebates

      Actually Intel charges more for their chips to pay for the rebates. As for AMD competing, if you had any business knowledge, you would know they do build a competitive chip. Ask Dell or did you miss that part of the article? If AMD is not able to compete, why would Intel need to conduct business in a criminal manner?
      GhengisKhan
    • Really?

      Okaay.., firstly the EU isn't a country.

      Secondly the current financial crisis is basically due to a total lack of government regulation in one particular industry (high finance).

      Thirdly, if you believe one company effectively bribing another to use only its components is acceptable, your either brain-dead, mafia, or both.
      AndyPagin
      • Ever worked in sales?

        If you had you would know there are bribes (more commonly referred to as incentives or spiffs) to sell one product over another all the time.
        edgehead
  • How Should Intel PAY?

    This should be very interesting.
    Comparing Microsoft's antitrust problems with Intel's; while similiar are not an exact apples to apples comparision.

    My point is fining Intel will take some of their treasure but it doesn't help AMD or the consumer immediately.

    Rather than just take money from Intel, I would like to see Intel be forced to cross-license their new i7 and i5 CPUs with AMD.

    That would certainly spur real competition again right now. The consumer would be a beneficiary rather than just the EU coffers. This would be a perfect punishment for Intel in that it would help put AMD back in the thick of things when Intel's underhanded practices put AMD behind the 8 ball in many ways.
    tonyman262
    • How about

      http://talkback.zdnet.com/5208-10532-0.html?forumID=1&threadID=71237&messageID=1373204&tag=content;col1

      or

      http://talkback.zdnet.com/5208-10532-0.html?forumID=1&threadID=71237&messageID=1373454&tag=content;col1

      One isn't entirely serious ;-)
      jacksonjohn